2012
EMPOWERING PEOPLE THROUGH INFORMATION Revenue
2012
2011
Adjusted operating profit*
Adjusted profit before tax*
2012
2011
2012
2011
Statutory profit before tax
Adjusted earnings per share*
Dividend per share
2012
2011
2012
2011
2012
2011
% of digital revenue
Total number of employees
Profit split by B2B and B2C*
2012
2011
Global reach
2012
2011
2012
B2B
B2C
2011
B2B
B2C
27%
26%†
73%
74%†
55+ countries
* Before exceptional items, impairment and amortisation
of intangible assets arising on business contributions; see
Consolidated Income Statement on page 82 and the
reconciliation in Note 13 to the Accounts.
† Restated to reflect a refinement of Hobsons’
approach to revenue recognition. See Notes to the
Accounts.
# From continuing and discontinued operations.
Contents
Strategic Report
Business at a glance
Marketplace
Chairman’s Statement
Chief Executive’s Review
KPIs
Risk Management Solutions
dmg::information
dmg::events
Euromoney Institutional
Investor
A&N Media
02
02
06
08
10
20
22
24
26
27
29
Financial and Treasury Review 38
Corporate Responsibility
Directors’ Report
Chairman’s Overview
44
48
48
Board of Directors and Secretary 50
Governance
Corporate Governance
Remuneration Report
Chairman of the Remuneration
Committee’s Overview
Financial Statements
Independent Auditor’s Report
Consolidated income
statement
Consolidated statement of
comprehensive income
Consolidated statement of
changes in equity
Consolidated statement of
financial position
Consolidated cash flow
statement
58
58
66
66
81
81
82
83
84
85
87
Significant accounting policies 89
Notes to the consolidated
financial statements
Principal Subsidiaries
Five Year Financial Summary
Independent Auditors’ Report
– Company
Company Balance Sheet
Shareholder Information
99
175
176
178
179
187
Find out more at dmgt.com
Visit dmgt.com to see what is happening across our
business and the marketplaces in which we
operate. Scan the QR code below to see how we
are empowering people through information.
Corporate brochure
Take a look at our corporate
brochure for a snapshot of our core
strategic messages and key success
stories from around our business.
Companies
Investors
CR
Careers
News
Annual Report 2012
02
WhO WE ARE
DMGT is an international group quoted on
the London Stock Exchange with a portfolio
of market-leading digital, information, media
and events businesses.
The growing business-to-business (B2B)
element of the Group comprises:
• Risk Management Solutions
• dmg::information
• dmg::events
• Euromoney Institutional Investor
The consumer media element, A&N Media,
comprises:
• Mail newspapers
• MailOnline
• Northcliffe regional newspapers*
• Metro free newspaper
It also has interests in digital businesses,
including the Evenbase group, owner
of Jobsite and Jobrapido, and the Zoopla
Property Group.
DMGT exists to seek out innovative solutions to
customers’ demands for information and to
nurture and support a diverse group of high
quality, entrepreneurial, media and
information assets.
DMGT’s ambition is to provide the highest
quality content and services, across the most
attractive growth markets in innovative,
responsible and sustainable ways, building
on its track record of earnings and
dividend growth.
Our world
6
5
3
1
2
4
5
7
RMS
1 Newark, CA
13 Bloomington
14 Peoria, US
23 Hoboken
27 Bermuda
33 London
35 Zurich
48 Noida
52 Beijing
56 Tokyo
DMGT
headquarters
London
13
21
32
30
33 34
31
2426
25
23
27
16
20
15
19
8
14
11
10
12
9
17
18
24
22
29
28
39
35
36
38
37
40
42
44
43
41
46
48
45
47
52
55
56
51
53
54
49
50
dmg::information
2 Oakland
8 Boulder
11 Oklahoma City
15 Louisville
16 Cincinnati
20 Washington
23 New York
24 Massachusetts
25 Milford
26 Boston
33 London
34 Amsterdam
36 Dortmund
39 Prague
49 Kuala Lumpur
57 Melbourne
58 Sydney
dmg::events
3 Portland
4 Los Angeles
5 Laguna Hills
6 Calgary
9 Puerto Vallarta
10 Dallas
23 New York
33 London
41 Jeddah
42 Kuwait City
43 Abu Dhabi
44 Dubai
45 Mumbai
46 New Delhi
47 Bangalore
50 Singapore
52 Beijing
55 Seoul
56 Tokyo
58 Sydney
Euromoney
12 Houston
17 Miami
18 Venice
19 Pittsburgh
21 Montreal
22 Bogota
23 New York
26 Boston
29 São Paulo
33 London
52 Beijing
50 Singapore
51 Hong Kong
53 Shanghai
54 Manila
59
58
57
A&N Media
4 Los Angeles
6 Calgary
7 Newport Beach
23 New York
28 Buenos Aires
30 Dublin
31 Hampshire
32 Aberdeenshire
33 London
37 Milan
38 Frankfurt
40 Gyor
44 Dubai
48 Noida
58 Sydney
59 Brisbane
*On 21st November, 2012, the company announced it had exchanged contracts for the disposal of its Northcliffe Media division to Local World.
Daily Mail and General Trust Plc 03
Strategic Report
Directors’ Report
Governance
Financial Statements
Our heritage
1896 Daily Mail founded
Brothers Alfred and Harold
Harmsworth launch the Daily Mail.
1902 Record circulation
Daily Mail becomes the first
newspaper with a circulation of
over a million.
1922 DMGT founded
DMGT is re-established to manage
the family’s publishing interests.
1929 Esmond harmsworth appointed
DMGT Chairman.
1932 London Stock Exchange
flotation
DMGT is listed on the London Stock
Exchange.
1969 Euromoney founded
Euromoney Magazine is launched
as a business-to-business magazine
focused primarily on the
international finance sector.
1978 The third viscount Rothermere
appointed DMGT Chairman.
1988 dmg::events established
dmg::events is formed (under a
different name) to manage and
develop a portfolio of events assets.
1990 dmg::information founded
dmg::information is formed (under
a different name) to manage and
develop a portfolio of business-to-
business information companies.
1998 The fourth viscount Rothermere
appointed DMGT Chairman.
1998 RMS joins DMGT
DMGT acquires Risk Management
Solutions, a fast-growing business
in the emerging catastrophe
risk-modelling sector.
2006 Euromoney acquires
Metal Bulletin Euromoney acquires
Metal Bulletin, the industry-leading
intelligence service for metals and
steel professionals.
2012 MailOnline overtakes
New york Times
MailOnline overtakes New York
Times as the most visited newspaper
website in the world.
MARKET OvERvIEW
Market developments globally and at the
local level are opening up tremendous
opportunities for all our businesses.
Geopolitical forces and changing
demographics are shifting the economic axis
towards Asia and emerging markets. New
patterns of consumer behaviour are creating
different challenges for digital content
delivery and feeding demand for precisely
targeted information.
Technology is reshaping the competitive
arena. Nearly half a billion smartphones are
already in the hands of consumers. Big data,
mobile connectivity, cloud services and
social networking are combining to deliver
on the promise of rich, detailed information
to every individual no matter where they are.
With a third of the world now online
compared with just 8% a decade ago, we
now have many more potential customers.
They are more engaged and more
demanding about the services they expect.
Increasingly, tailored and insightful content is
at a premium. Our challenge as content
providers is to get high quality, relevant
information to the right people, where and
when they want it.
STRATEGy AND PERFORMANCE OvERvIEW
DMGT’s strategic ambition is to become
a global-growth company with increasing
exposure to emerging economies and
high-growth markets. We aim to achieve
that by growing our business-to-business
operations, developing our consumer media
franchise and diversifying internationally into
high-growth markets.
The Group delivered a solid set of results in 2012,
with underlying revenue and operating profit
up 3% and 7% respectively. More than half of
operating profits were earned outside the UK.
Our international B2B companies increased
both revenue and profits.
RMS delivered another solid year of revenue
and profit growth. The company continues
to have strong growth prospects. It now
offers a broad portfolio of products and
data solutions. It is also seeing many more
international opportunities.
dmg::information contributed healthy
increases in revenue and operating profit.
Each of its four sectors – property, education,
energy and finance – contributed.
dmg::events registered 13% underlying
growth in a year in which just one of its three
marquee biennial events was staged.
Euromoney Institutional Investor maintained
its impressive history of profits growth. Its
business has been transformed in recent
years. Subscriptions now account for just
over half of total revenues.
The UK consumer business performed well in
challenging trading conditions.
At A&N Media, underlying revenues were up
slightly, and operating profit rose strongly. This
pleasing result demonstrates the success of
our strategy of combining the best traditional
and new media content in ways that make
sense for our consumers.
The Mail titles continued to outperform the
market. Our free newspaper, Metro, also
performed strongly. Our regional newspaper
group, Northcliffe, improved profitability
despite the secular decline in its revenue
base.
MailOnline had an excellent year, becoming
the world’s most popular English language
newspaper website in 2012. Our recruitment
portal Evenbase acquired Jobrapido to
extend its international footprint. Digital
Property Group’s (DPG) merger with Zoopla
has created a formidable new UK property
search portal.
PRIORITIES FOR ThE COMING yEAR
The strategic priority for RMS remains its new
platform, RMS (one), scheduled for a
mid-2014 launch. It continues to develop
supporting programmes, which are
expected to yield additional revenue in 2013.
dmg::information’s ambition to invest in
must-have, high-growth, innovative business
information companies remains unchanged,
as does its remit to diversify DMGT by sector,
by business model and by geography.
dmg::events is expanding its significant
footprint in the Middle East into Saudi Arabia,
and on to Asia. It will continue to extend its
successful global energy division. It is also
developing digital solutions to complement
its live events portfolio.
Euromoney continues to pursue its strategy
of growing international, digital and
subscription-based revenues.
A&N Media’s new print facility in Thurrock
will yield significant cost reductions and
environmental benefits. It will invest to drive
even faster growth in its core digital
businesses, particularly MailOnline.
Mail Newspapers will launch paid-for
tablet editions.
At Evenbase international expansion remains
a key priority. Our online discount business
Wowcher is continuing to build up its
database of affluent young female
subscribers. Zoopla Property Group is
implementing its integration plan following
its recent merger with DPG.
Annual Report 2012 04
Business activity
Principal brands and products
Capabilities and overview
7575 Gateway Boulevard
Newark
CA 94560, US
Tel +1 510 505 2500
http://www.dmgt.com/companies/RMS
3 Stamford Landing
Suite 400, 46 Southfield Ave
Stamford, Connecticut
CT 06902, US
Tel +1 203 973 2940
http://www.dmgt.com/companies/dmginformation
3 Stamford Landing
Suite 400, 46 Southfield Ave
Stamford, Connecticut
CT 06902, US
Tel +1 203 973 2940
http://www.dmgt.com/companies/dmgevents
Nestor House
Playhouse Yard
London EC4V 5EX
England
Tel +44 20 7779 8888
http://www.dmgt.com/companies/Euromoney
Northcliffe House
2 Derry Street
London W8 5TT
England
Tel +44 20 3615 0000
http://www.dmgt.com/companies/ANMedia
Targeting the global property and casualty
re-insurance industry, a world-leading
producer of risk analysis models, services,
expertise and data solutions for the
quantification and management of
catastrophe risks.
A global, market-leading provider of B2B
information for the property, education,
energy and finance sectors.
A global supplier of B2B exhibitions and
associated conferences focusing on the
energy, construction, interiors and digital
marketing sectors.
A B2B media group focused primarily on
the international finance, metals and
commodities sectors. A leading provider
of electronic research and data, a trade
publisher, both online and print, as well
as running conferences, seminars and
training courses.
An international publisher with a market-
leading print and digital portfolio. Assets
include two of the UK’s most influential
paid-for newspapers, the world’s most
visited newspaper website, the world’s
fourth largest digital recruitment business
and a majority stake in the UK’s largest
digital property businesses.
In 2012, RMS generated solid revenue and
profit growth and increased its investment
programme on its strategically important
RMS(one) platform. It continued to extend
its presence in the global property and
casualty re/insurance industry. It also built
on its capabilities in the capital markets and
life insurance industries.
Strong organic growth and bolt-on
acquisitions combined to generate
double-digit revenue and profits increases
in 2012. A strategic investment in US
commercial property-listing business
Xceligent grew its US footprint. Acquiring
Intelliworks and PrepMe strengthened the
education offering. The real-time energy
information supplier, Genscape, continued
to develop new products and services,
grew revenue and gathered momentum
with an increased order book.
dmg::events achieved strong growth in a
year featuring just one of its three biennial
shows. Underlying revenues increased by
13% and underlying profit rose 21%. It
focused resources on the global energy
and digital marketing sectors and its
fast-growing businesses in the Middle East
and Asia. It completed the disposal of
leadership networking and events business,
Evanta, during the year.
Euromoney continued to develop its global
online financial information business. It
strengthened its presence in emerging
markets, increased the proportion of
subscription-based revenues and
continued to invest in technology and
content delivery platforms, particularly for
mobile users. Its acquisition of Global Grain
added the world’s leading event for
international grain traders to its portfolio.
The business sharpened its focus on
market-leading assets in profitable sectors.
It sold non-core assets, including Teletext
Holidays and motors.co.uk. Its merger of
Digital Property Group with Zoopla has
created a strong competitor in the online
property market. Jobrapido’s acquisition
adds the number two global job search
engine in the world to its Evenbase
recruitment business.
Revenue
(2011 £159m)
Operating profit*
(2011 £47m)
Margin†
(2011 30% )
Revenue
(2011 £232m†)
Operating profit*
(2011 £42m†)
Margin*
(2011 18%†)
Revenue
(2011 £132m)
Operating profit*
(2011 £39m)
Margin*
(2011 29%)
Revenue
(2011 £363m)
Operating profit*
(2011 £93m)
Margin*
(2011 26%)
Revenue#
(2011 £1,098m)
Operating profit*#
(2011 £93m)
Margin*#
(2011 8% )
RMS(one) provides enterprise-wide
re-insurance solutions in the cloud for
measuring and managing risk. It remains
a key strategic priority for the business.
RMS will continue to serve its existing client
base while devoting increasing resources
to RMS(one) platform development in
the run-up to the mid-2014 scheduled
release date.
dmg::information will continue to invest in
innovation to broaden its range of products
and services. It will deepen its relationships
with business professionals by delivering
mission-critical information in its four
key sectors.
The business benefits from strong brands in
growing sectors and high-growth markets.
It will build on successes to increase the
frequency and quality of its events. It will
continue its successful strategy of geo-
cloning its most popular events, particularly
in the Middle East and Asia. It is developing
associated products, including conferences
and online services.
Subscription and emerging markets
revenue streams afford some protection
from the strong headwinds facing
international financial market participants.
The group will continue to invest in digital
publishing and in improving the quality of
its products. It will maintain tight control of
operating costs and, where relevant,
deploy its strong balance sheet to fund
attractive acquisitions.
A&N Media will continue to focus on
increasing operational effectiveness in all
of its businesses. Transferring operations to its
new Thurrock printing facility will drive down
costs and reduce waste. It will continue to
develop Metro’s digital strategy and invest
to accelerate the already rapid growth in
core digital businesses, particularly
MailOnline, Evenbase and Wowcher.
Daily Mail and General Trust Plc
05
Strategic Report
Directors’ Report
Governance
Financial Statements
7575 Gateway Boulevard
Newark
CA 94560, US
Tel +1 510 505 2500
http://www.dmgt.com/companies/RMS
3 Stamford Landing
Suite 400, 46 Southfield Ave
Stamford, Connecticut
CT 06902, US
Tel +1 203 973 2940
http://www.dmgt.com/companies/dmginformation
3 Stamford Landing
Suite 400, 46 Southfield Ave
Stamford, Connecticut
CT 06902, US
Tel +1 203 973 2940
http://www.dmgt.com/companies/dmgevents
Nestor House
Playhouse Yard
London EC4V 5EX
England
Tel +44 20 7779 8888
http://www.dmgt.com/companies/Euromoney
Northcliffe House
2 Derry Street
London W8 5TT
England
Tel +44 20 3615 0000
http://www.dmgt.com/companies/ANMedia
Capabilities and overview
Key activities in 2012
Financial highlights
Priorities in 2013
Targeting the global property and casualty
re-insurance industry, a world-leading
producer of risk analysis models, services,
expertise and data solutions for the
quantification and management of
catastrophe risks.
A global, market-leading provider of B2B
information for the property, education,
energy and finance sectors.
A global supplier of B2B exhibitions and
associated conferences focusing on the
energy, construction, interiors and digital
marketing sectors.
A B2B media group focused primarily on
the international finance, metals and
commodities sectors. A leading provider
of electronic research and data, a trade
publisher, both online and print, as well
as running conferences, seminars and
training courses.
An international publisher with a market-
leading print and digital portfolio. Assets
include two of the UK’s most influential
paid-for newspapers, the world’s most
visited newspaper website, the world’s
fourth largest digital recruitment business
and a majority stake in the UK’s largest
digital property businesses.
In 2012, RMS generated solid revenue and
profit growth and increased its investment
programme on its strategically important
RMS(one) platform. It continued to extend
its presence in the global property and
casualty re/insurance industry. It also built
on its capabilities in the capital markets and
life insurance industries.
Strong organic growth and bolt-on
acquisitions combined to generate
double-digit revenue and profits increases
in 2012. A strategic investment in US
commercial property-listing business
Xceligent grew its US footprint. Acquiring
Intelliworks and PrepMe strengthened the
education offering. The real-time energy
information supplier, Genscape, continued
to develop new products and services,
grew revenue and gathered momentum
with an increased order book.
dmg::events achieved strong growth in a
year featuring just one of its three biennial
shows. Underlying revenues increased by
13% and underlying profit rose 21%. It
focused resources on the global energy
and digital marketing sectors and its
fast-growing businesses in the Middle East
and Asia. It completed the disposal of
leadership networking and events business,
Evanta, during the year.
Euromoney continued to develop its global
online financial information business. It
strengthened its presence in emerging
markets, increased the proportion of
subscription-based revenues and
continued to invest in technology and
content delivery platforms, particularly for
mobile users. Its acquisition of Global Grain
added the world’s leading event for
international grain traders to its portfolio.
The business sharpened its focus on
market-leading assets in profitable sectors.
It sold non-core assets, including Teletext
Holidays and motors.co.uk. Its merger of
Digital Property Group with Zoopla has
created a strong competitor in the online
property market. Jobrapido’s acquisition
adds the number two global job search
engine in the world to its Evenbase
recruitment business.
Revenue
(2011 £159m)
Operating profit*
(2011 £47m)
Margin†
(2011 30% )
Revenue
(2011 £232m†)
Operating profit*
(2011 £42m†)
Margin*
(2011 18%†)
Revenue
(2011 £132m)
Operating profit*
(2011 £39m)
Margin*
(2011 29%)
Revenue
(2011 £363m)
Operating profit*
(2011 £93m)
Margin*
(2011 26%)
Revenue#
(2011 £1,098m)
Operating profit*#
(2011 £93m)
Margin*#
(2011 8% )
Percentage of
Group revenue
RMS(one) provides enterprise-wide
re-insurance solutions in the cloud for
measuring and managing risk. It remains
a key strategic priority for the business.
RMS will continue to serve its existing client
base while devoting increasing resources
to RMS(one) platform development in
the run-up to the mid-2014 scheduled
release date.
Percentage of
Group revenue
dmg::information will continue to invest in
innovation to broaden its range of products
and services. It will deepen its relationships
with business professionals by delivering
mission-critical information in its four
key sectors.
Percentage of
Group revenue
Percentage of
Group revenue
Percentage of
Group revenue
The business benefits from strong brands in
growing sectors and high-growth markets.
It will build on successes to increase the
frequency and quality of its events. It will
continue its successful strategy of geo-
cloning its most popular events, particularly
in the Middle East and Asia. It is developing
associated products, including conferences
and online services.
Subscription and emerging markets
revenue streams afford some protection
from the strong headwinds facing
international financial market participants.
The group will continue to invest in digital
publishing and in improving the quality of
its products. It will maintain tight control of
operating costs and, where relevant,
deploy its strong balance sheet to fund
attractive acquisitions.
A&N Media will continue to focus on
increasing operational effectiveness in all
of its businesses. Transferring operations to its
new Thurrock printing facility will drive down
costs and reduce waste. It will continue to
develop Metro’s digital strategy and invest
to accelerate the already rapid growth in
core digital businesses, particularly
MailOnline, Evenbase and Wowcher.
Annual Report 2012
06
ThE IMPACT OF TEChNOLOGy
The IT industry is on the cusp of a generational
shift. The new computing paradigm is being
built on four enabling technologies – cloud
services, mobile connectivity, big data and
social networking.
These technologies are reshaping the
competitive landscape. Big data is forecast
to drive rapid changes in infrastructure and
$232 billion in IT spending through 2016.
Spending on mobile networks exceeded
fixed data networks for the first time in 2012.
By 2015, Wi-Fi and mobile devices will
account for over half of IP traffic. By 2016,
global mobile data traffic will top 10 exabytes
per month, a sixteen-fold increase, and
mobile video will constitute over two-thirds
of all mobile data traffic.
The trend is for tailored content, getting the
right information to the right person at the
right time.
In our own markets we are witnessing a
proliferation of artificial intelligence and
machine-learning applications processing
large quantities of data to generate
knowledge and insight in real-time.
Applications connect with social networking
services as a matter of course. Customisation
and visualisation tools are becoming
more important.
The cloud is bringing cost-effective, scalable,
tailored services to businesses and individuals
in an unparalleled way. Analysts estimate
that 80% of new commercial enterprise apps
will be deployed on cloud platforms.
Cloud-based services are revolutionising
the way businesses operate. Instead of
developing expensive proprietary software,
businesses are sharing open-source
applications. This is driving greater
efficiencies and fomenting new business
ecosystems.
Our businesses compete in international
markets by providing valuable content in
the consumer media and business sectors.
Market developments globally and at the
local level are opening up tremendous
opportunities. Data traffic levels continue
to scale new heights.
There are more customers in more territories
with different expectations and better access
to digital content. Adapting to changing
customer behaviour and keeping pace
with the technology they are using is a key
challenge for content providers.
ThE ExPLOSION IN DATA TRAFFIC
Global IP traffic increased eightfold over the
past five years and is expected to quadruple
over the next five years, as sharing video
and other rich-data forms becomes
commonplace. Annual global IP data centre
traffic is expected to reach 6.6 zettabytes by
2016. Globally, cloud traffic is expected to
grow from 39% of total data centre traffic in
2011 to 64% of total data centre traffic in 2016.
CuSTOMER BEhAvIOuR IS ChANGING
Over a third of the world’s population is now
online. That compares with just 8% a decade
ago. Ten billion devices connect to the
internet. By 2016, forecasts suggest that there
may be as many as 19 billion internet-
enabled devices.
Mobile connectivity has entered the
mainstream. Sales and shipments of mobile,
smartphone and tablets outstripped PCs this
year. Mobile-connected tablets will be the
fastest-growing consumer mobile device,
increasing from 25 million devices globally in
2011 to 200 million in 2016
People accessing content on the move
have different requirements. They want
contextually sensitive content for their
devices. If they are on a smartphone they
want to use capabilities like mapping and
one-click calling. They expect touch-screen
navigation and screen-responsive
page design.
More of our customers are becoming better
connected. In 2011, over 679 million used
social network services via mobile devices.
That will reach 2.4 billion by 2016. There are
great opportunities for high value content
providers. High value, relevant and
hard-to-replicate content will be at
a premium.
Daily Mail and General Trust Plc 07
Strategic Report
Directors’ Report
Governance
Financial Statements
The growth of the world’s middle class is
coming almost exclusively from developing
countries. In advanced countries, where
population and incomes are halting, the
number of people in the middle classes may
even be declining.
Age demographics are changing. Advances
in healthcare are triggering a rise in older
populations. By 2050, more than one in three
people in developed economies will be
over 60.
These trends raise important issues for public
policy. We are evolving and adapting our
information services to meet changing
customer requirements, demographic
change and the new opportunities in
high-growth markets.
ThE ShIFTING ECONOMIC CENTRE
OF GRAvITy
According to IMF forecasts, the total GDP
of emerging economies could overtake
the developed economies as early as 2014.
Estimates indicate that 70% of world growth
over the next few years will come from
emerging markets, with as much as 40% from
China and India.
Leading emerging markets’ businesses will
build on their domestic successes to
compete internationally. These challenger
brands have prospered without institutional
backing and have strong entrepreneurial
cultures. They have the potential to be a
powerful disruptive force in the global
competitive arena.
The BRIC countries’ growing economic
strength is leading to greater power to
influence world economic policy. Emerging
economies now have significant voting
shares in the IMF.
POPuLATION GROWTh
The global population is expected to top
nine billion by 2050. Over the same period
there will be a near doubling in the urban
population, to over six billion. Currently, urban
migration adds up to a new city the size of
Barcelona every 10 days. Meeting this
additional capacity will require major
infrastructure investment and radical new
approaches to urban planning.
Population growth will be matched by
growing prosperity. A global middle class is
emerging. By 2030, it is expected to more
than double, from two billion today to 4.9
billion. The European and American middle
classes, currently 50% of the total, will
account for just 22%. Asia will provide 64% of
the global middle class and 40% of global
middle-class consumption.
Annual Report 2012 08
The viscount Rothermere
Chairman
CORPORATE GOvERNANCE
As Chairman I have always been committed
to ensuring that DMGT maintains the highest
standards of corporate governance and our
Corporate Governance Report highlights
how we continue to incorporate these
principles into the delivery of our strategy.
Last year I also highlighted the importance of
diversity on our Board which is about ensuring
that there is an appropriate range and
balance of skills. I am pleased to now
welcome Heidi Roizen onto the Board
bringing invaluable experience, insight and
skills from her career in Silicon Valley.
Likewise, I would like to personally thank Nick
Jennings who stood down as Company
Secretary after 24 years of service over a time
of immense change and progress for the
Group. We welcome Claire Chapman, who
joined us in September, as DMGT’s first
General Counsel and Company Secretary.
Read more about Corporate
Governance on page 48
PADRAIC FALLON
It is with great sadness that we say goodbye
to Padraic Fallon who passed away on
13th October, 2012. A creative force, a genius
journalist and a talented businessman,
Padraic worked with the Group for over 40
years. Aged 28 he moved from his role as a
financial journalist for the Daily Mail to
become Editor and then Executive Director,
Managing Director and finally Chairman of
Euromoney, building a phenomenally
successful brand that defined and set the
pace, globally, for financial publishing. A
gifted writer and a much-loved friend, his
approach to life was underpinned by his
inimitable Irish character and flair. He will be
sorely missed by us all. Our thoughts are with
his wife and four children.
BuSINESS hIGhLIGhTS
I am pleased to report another set of strong
results in what remains a challenging global
economy, again testament to the robust
structure and dynamic nature of the Group.
The world continues to change and grow at
a staggering rate. The way consumers and
businesses access and utilise information now
underpins how people around the world
interact, behave, even think. With that comes
opportunity: to utilise the best technology; to
innovate and develop new products; and to
expand across geographies and sectors.
As a Group we have a responsibility to ensure
that we maximise that opportunity to the
best of our ability. Technology is the tool, but
our people are the ones who harness it to
push new boundaries and build more value.
That ingenuity is why we have been able to
grow revenue and profits year on year and
increase the proportion of revenues and
profits coming from outside the UK, as well as
our digital activities which are considerable
and continue apace.
The Group is well placed to capitalise on the
significant changes we are seeing in our
markets, from consumer behaviour to
business-to-business needs in an increasingly
volatile environment. People expect more
and demand more, to which our response is
to continue to challenge the status quo and
to create outstanding products that answer
those growing aspirations. We aim to set the
agenda. Others follow.
On 18 April 2012, FTSE announced that
DMGT’s ‘A’ Ordinary Non-Voting Shares
would no longer be eligible for inclusion in
the UK Index Series. The Board of DMGT has
considered at length, with the assistance of
its advisors, the options available to it and the
suitability of such options to meet the needs
of its stakeholders to make the ‘A’ Ordinary
Non-Voting Shares eligible for inclusion in the
UK Index Series but no solution has to date
been found. The FSA’s recently issued
consultation paper on ‘Enhancing the
effectiveness of the Listing Regime and
feedback on CP12/2’ makes it more difficult
to envisage how the Company can regain its
premium listing. It is unlikely, therefore, that
the ‘A’ Ordinary Non-Voting Shares will
become eligible for inclusion in the index in
the foreseeable future. However, DMGT’s ‘A’
Ordinary Non-Voting Shares will continue to
be standard listed and traded on the London
Stock Exchange and to be a member of
other important indices such as MSCI,
STOXX, S&P and the FTSE Global Equity Index
Series and DMGT will continue to maintain
the highest standard of governance
and disclosure.
Daily Mail and General Trust Plc 09
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Financial Statements
REMuNERATION
Earlier this year, we discussed some changes
to our executive reward policy with our
shareholders. These are set out in detail in our
Remuneration Report. It is vitally important
that the incentives offered to our senior
leadership team are clearly aligned with the
interests of our shareholders in promoting our
long-term success, stability and growth.
At an individual business level our long-term
incentive plans are designed to share the
value created by the leaders of those
businesses in a way that supports our
innovative and entrepreneurial culture by
promoting an ownership mindset within
the business.
Read our full Remuneration Report
on page 66
RISK MANAGEMENT
We continue to apply a proactive approach
to risk management across the Group,
applying appropriate criteria and risk
management best practices for the various
areas in which we operate. Our Risk
Committee has oversight and management
of significant risks around the Group and
regularly reports to the Board.
See page 52 of the Corporate
Governance report for further
information on risk management
NORThCLIFFE MEDIA
At the end of November 2012 we announced
an historic transaction. After more than 90
years of regional newspaper ownership, we
agreed to sell Northcliffe Media to a powerful
new group – Local World – to ensure a
sustainable future for our 77 regional titles
and numerous local websites. This transaction
will enable management to focus resources
on our world-class national newspapers, our
expanding digital media operations and our
important B2B and consumers businesses.
TEChNOLOGy AND INNOvATION
Over the past decade we have seen an
astonishing pace of change, in consumer
habits and business focus. At the heart of
this is technology: offering businesses and
consumers ever-increasing choice, speed
and flexibility. That pace of change is only
going to increase.
I believe that DMGT’s future lies in its ability
to respond to this opportunity, investing in
products and services that harness the
potential of the very best technological
advances. We are committed to embracing
innovative solutions to the treatment and
sharing of data that is vital, live and
personally relevant, whether in a business-to-
business or a consumer capacity.
The single fastest-growing medium in the
world is mobile. That is why it will remain
a key focus in every step of our strategic
development and we will continue to invest
time and resources to maximise its potential.
Its effect on how people connect with each
other and with the world around them, will
revolutionise how we lead our lives. The
opportunity it gives us to deepen and
enhance the relationships we have with our
customers is unprecedented. This is
something that I am personally keen to
promote across the Group so that the free
flow and sharing of ideas underpins how
we embrace change and the pace at which
we progress. We have already had some
significant successes with mobile, heralding
much more to come.
PEOPLE AND CuLTuRE
In February we took senior management
from across the Group to Bangalore to
discuss and shape the future. I would like to
thank so many of our non-executive directors
for attending and for their active involvement
in the debate about our future strategy.
Personally, I found seeing the wealth and
depth of talent, the creativity and potential of
the ideas, and the quality and relevance of
the discussions deeply inspiring. The event set
a very clear vision for DMGT as a global
growth company, driven by pride in our
products and services, belief in the people
who work in the Group and the courage
to think innovatively and entrepreneurially.
A crucial part of our culture is rooted in
personal responsibility: each and every
person in the Group has an individual role
to play in our future success. Our organic
growth, our ability to innovate internally and
our proactive approach all testify to the
entrepreneurial spirit that sits at the heart of
DMGT. This strength also drives our ability to
endure and prosper despite intense global
pressures and I would like to applaud and
congratulate staff across DMGT on the past
year’s growing profits.
It is a great source of pride for me that DMGT
is defined by the high calibre of its talent.
As a Group we will continue to champion
and nurture that talent, bringing on the next
generation of exceptional business leaders
with the skills and experience to deliver our
strategy. We have the momentum, the
knowledge and the hunger to achieve
great things.
The viscount Rothermere
Chairman
Annual Report 2012 10
Martin Morgan
Chief Executive
Our strategic ambition is to become a
global growth company, focused on three
key areas:
1. Growing our business-to-business (B2B)
companies
2. Developing our consumer media franchise
3. Diversifying internationally into high-
growth markets
INTRODuCTION
My Chief Executive’s Review sets out our
philosophy, strategy and progress made over
the past year, as well as outlining the main
operational and financial factors which
underpin our ongoing development
and performance.
A Business Review of the performance of
each of our operating divisions follows on
pages 22 to 37.
A Financial and Treasury Review is given on
pages 38 to 43 and the principal risks and
uncertainties the Group faces are set out
on pages 52 to 55 of the Directors’ Report.
STRATEGIC PRIORITIES
Our overall ambition is to develop DMGT into
a truly global growth company with an
increasing exposure to emerging economies
and high-growth markets.
We have identified five strategic priorities to
help us realise our objective:
The first is rigorous and active portfolio
management. We have brought a sharper
focus to our portfolio so as to concentrate
talent and resources on businesses and
brands where we see the greatest potential
for profitable growth.
Every part of the DMGT portfolio is regularly
scrutinised. We undertake periodic,
disciplined assessments of all current
businesses. All new investment and
acquisition proposals are carefully but
rapidly evaluated within a predetermined
framework of capital allocation priorities
and against our strict investment criteria.
Second, we pursue organic growth through
innovation. We encourage our business
leaders to create ambitious long-term
growth plans.
OuR PuRPOSE
Our core purpose is to seek out, invest in and
grow a diverse group of high quality,
entrepreneurially run businesses. The key to
our long-term success is a culture where
people are given the freedom to innovate in
order to create outstanding products and
services to meet customer needs.
International growth is our third strategic
priority. We are consciously diversifying
internationally, with a special emphasis on
growing our presence in high-growth
markets. Our existing companies are looking
for new international markets and are
investing in bolt-on acquisitions that extend
their geographic footprint.
Throughout our long history, being controlled
by the founding family has proved highly
successful and well suited to the media and
information industry. Our ownership structure
allows us to take a longer-term perspective
and gives us a competitive advantage.
We are committed to remaining a diversified
Group with exposure to both the B2B and
consumer media sectors in a variety of
geographies serving a variety of industry
sectors. This approach provides us with a
breadth of opportunities and the ability to
spread risk.
Our B2B arm is made up of Risk Management
Solutions (RMS), dmg::information,
dmg::events and Euromoney Institutional
Investor. We manage our consumer media
activities through A&N Media, comprising the
Daily Mail, The Mail On Sunday, MailOnline,
Metro, Evenbase (our digital jobs search
business), Zoopla Property Group (our interest
in digital property search) and our local
media business, Northcliffe Media. During the
year, we disposed of our remaining interest
in dmg Radio Australia Pty Ltd. Since the
financial end we announced an agreement
for the sale of Northcliffe Media to a new
company called Local World.
Our fourth priority is technology. If we are
to remain competitive we have to continue
to embrace and harness new technologies.
Owning both consumer media and business-
to-business organisations gives us a special
opportunity to grow and cross-fertilise
technological developments. We have
stepped up the rate of technological
change right across the Group.
Our fifth priority, developing entrepreneurial
talent, is becoming increasingly important.
In creative businesses, ideas – and the
people that have them – are what matter
most. So we have been raising the bar on
talent. We are committed to attracting and
retaining the best people to optimise
our decentralised operating approach and
meet our global growth ambitions. Ensuring
we have the right technical capabilities is a
particular priority.
Financial discipline is the common factor
underpinning all we do. Strong cash flows
and a strengthened balance sheet give us
the financial flexibility to take advantage of
new opportunities and to weather adverse
external events. Our capital allocation
strategy prioritises organic growth supported
by bolt-on acquisitions and investment in
Daily Mail and General Trust Plc 11
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Financial Statements
Group strategy
Growing our
business-to-business
companies
Developing our
consumer media
franchise
A global
growth
company
Diversifying
internationally
into
high-growth
markets
industry segment clusters. Post financial
end we announced a share buy back
programme of up to £100 million over
the coming year.
processes. We clearly recognise that if we are
to compete with new start-up companies we
need to move away from expensive legacy
systems and become more agile.
PROGRESS IN ThE yEAR
We made a great deal of progress in the
pursuit of our strategic priorities over the last
twelve months. As a way of measuring our
success we monitor a series of key
performance indicators (KPIs) covering both
financial returns and strategic objectives.
As can be seen on page 17 of this review, we
have continued to derive the majority of our
operating profit from our B2B companies and
expanded our digital revenues.
We completed several bolt-on acquisitions
and selective disposals to ensure our capital
is effectively utilised. All our acquisitions met
our strict investment criteria. We invested
additional resources to execute against our
long-term plan for international growth.
There has been an increased focus on
technology and digital transformation both
in terms of adapting existing products and
services to the changing way in which our
customers access information, but also in
terms of modernising our internal systems and
We have completed the second DMGT
Technology Summer School which focused
on the implications of social networking,
mobile technology and cloud computing.
A&N Media created an Ideas Factory.
A cross Group Council of Chief Technology
Officers was set up, which I chair.
We remain very much committed to
reducing operational costs wherever
possible. One significant example of the
latter is the impending move of our London
print operation to a new site in Essex.
As mentioned before, we have elevated the
priority given to talent and continued to
refine and develop our leadership
programme, which is now in its third year.
This year saw the holding of a Chairman’s
Conference for executives drawn from across
the Group. It provided an outstanding
opportunity to harness the depth and
breadth of talent we have throughout our
organisation. It was held in Bangalore to
emphasise the seriousness of our intent to
become a more global company.
Annual Report 2012 12
Delivering our strategy
Our strategy: three components
Our five strategic priorities
Growing our
business-to-
business
companies
Developing our
consumer media
franchise
Diversifying
internationally
into high-
growth markets
Active portfolio
management
Fostering greater innovation
to deliver organic growth
Driving international growth
Ensuring we have the
technology to adapt to the
changing market place
Identifying, cultivating and
developing entrepreneurial
talent
Daily Mail and General Trust Plc Delivering our strategy
13
Strategic Report
Directors’ Report
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Financial Statements
Strategy in action
Acquisitions v disposals 2012
Jobrapido, Intelliworks, Xceligent
Global Grain, Geneva and Asia,
PrepMe, Spring Rock
Praedicat, BuilderRadius,
Topper Newspapers
50% dmg radio Australia,
Evanta, Teletext, Motors.co.uk
Top-Consultant.com
Fy2012 – £75m
Fy2012 – £117m
Zoopla Property Group
The merger of our online property business
The Digital Property Group with Zoopla has
created a world-class property search
company. DMGT retains a 52.25% share
in the Zoopla Property Group.
RMS LifeRisks
LifeRisks is a licensable model to manage
risks from longevity and excess mortality for
the life insurance and pension risk industry. It
enables companies to assess their life and
annuity portfolios and is underpinned by
detailed medical research and social
change projections.
Genscape Biofuel Monitoring
The RIN Integrity Network was
launched to insure greater market
transparency in tracking the volume
of renewable fuel produced in or
imported into the United States. The
Genscape product serves biodiesel
producers, marketers and blenders.
Asia Risk Centre
Asia Risk Centre (ARC) is based in
Singapore and is a spin-off from RMS.
ARC’s risk analytics are designed to help
emerging market populations manage
catastrophe risk for the infrastructure,
property and agriculture sectors. ARC
is already active in India and China.
Operating profit
UK*
North
America
Other
29%
56%
15%
2012
*Post Northcliffe disposal
Big 5 Saudi Arabia
In 2011 dmg::events
launched their successful
Big 5 construction show
into Saudi Arabia. This year
the show doubled in size
enabling dmg::events to
unlock the dynamic
Saudi market.
Technology Summer School
The second DMGT Technology
Summer School was held and
focused on the implications of social
networking, mobile technology and
cloud computing. The event also saw
the first meeting of the cross Group
Council of Chief Technology Officers
Chairman’s Conference 2012
At the second Chairman’s Conference
in March, 100 delegates from all of
DMGT’s businesses spent a week in
Bangalore, India to learn about entering
and investing in new geographies, to
discuss strategy and to agree on big
priorities for the Group.
Revenue by type
31%
55%
14%
Digital
Print
Other
Revenue by type
39%
48%
13%
Digital
Print
Other
2011
2012
*Figures exclude Northcliffe
*Figures exclude Northcliffe
Bolt-on acquisitions
DMGT has a preference to bolt-on
acquisitions where we can invest in
businesses that complement our existing
portfolio. We look for those led by
entrepreneurial leaders who we can retain
and support. Examples this year are the
dmg:information acquisitions of Springrock,
Intelliworks and PrepMe.
Annual Report 2012 14
We continued to review the incentives and
rewards we have in place at each operating
company to ensure that they match our
expectations for growth by encouraging and
nurturing successful entrepreneurial
leadership, so vital to raising performance
over the longer term.
On compensation, we do not apply a ‘one
size fits all’ policy. This is a major strength,
reflecting the value of the decentralised
model and diversified nature of our portfolio
of businesses. The Remuneration Committee
ensures that compensation is aligned with
the strategies and particular circumstances
of each operating company.
We continued to exercise financial discipline
with strong cash flow conversion and active
portfolio management resulting in a reduced
level of net debt. This has been the fourth
consecutive year when disposal proceeds
have exceeded acquisition costs. In addition,
the new pension guarantee structure,
established in July 2012, is expected to
reduce the near-term cash payments
to the defined benefit pension fund.
As a result we are increasingly able to
finance the wealth of opportunities we
see in front of us.
OPERATIONAL MODEL
We take a considerable amount of comfort
in the fact that we know all our companies
are run by chief executives with expert
knowledge of the markets in which they
operate. Autonomous management keeps
decision making close to the customer,
as real innovation comes from having
a genuine customer focus.
We deliberately strive to run DMGT in a
manner which provides a fertile environment
for our people to produce innovative ideas
by adopting a decentralised structure.
Maintaining this approach is of the utmost
importance to me and my colleagues
because we realise that to survive in a
rapidly changing media world, you must
be able to react quickly and effectively.
We build value by creating conditions
where diverse businesses can prosper and
experience sustained growth. We give our
businesses freedom to operate within
a broad framework.
The benefits are numerous. For example,
it enabled us to respond rapidly to the
economic downturn and to digital
opportunities.
At Group level, the Investment and Finance
Committee of the Board oversees Group
strategy development. It makes decisions
on investment and capital allocation acting
independently from the operating
companies. The DMGT Leadership Team
comprises the operating company leaders,
together with the DMGT executive team.
Its remit is to focus on furthering cross-Group
co-operation when and where this makes
sense, for example Group leadership courses,
communications and international
expansion. It complements the decision
making and accountability structures in
place through our decentralised
operating structure.
CORPORATE RESPONSIBILITy
Across the Group we take corporate
responsibility (CR) seriously and it permeates
our outlook on the environment, the way we
treat our employees, our customers and
suppliers, as well as on local community
issues.
We recognise that our businesses have an
impact on the environment, be that through
our printing operations, offices, transport or
other activities. We are truly committed to
ensuring that, where possible, our impact on
the environment is minimised.
The greatest impact we make on the
environment arises from our printing
operations. Here, I am pleased to say that
we have been diligent in measuring and
reducing waste in our usage of materials,
and through our analysis of our carbon
footprint, monitoring and improving our
efficiency in the use of energy.
We started to measure our footprint in 2006
and the Group’s emissions have fallen
steadily since then. This year we are
announcing that we have set a new target
for reducing carbon emissions over the next
three years.
At Harmsworth Quays, our largest printing
plant, and Northcliffe House, the Company’s
headquarters and the London base of
Associated Newspapers, Northcliffe Media
and dmg::events, we maintained the key
international environmental standard ISO
14001. We also hold this standard at our
Landmark office in Exeter.
Community involvement is integral to the way
we run our company, as is its importance to
the personal motivation of our employees.
We donate money, time and in-kind
donations such as advertising space, and
staff participate in a huge range of activities,
including fund-raising, organising events and
acting as trustees to charitable initiatives.
Daily Mail and General Trust Plc 15
Strategic Report
Directors’ Report
Governance
Financial Statements
remaining stake in DMG Radio Australia and
the sale of dmg::event’s Evanta leadership
and conference business. Total disposal
proceeds amounted to £125 million.
Post year-end on 21st November, 2012 we
announced we had reached agreement to
sell Northcliffe Media, to Local World, a newly
formed media group. DMGT will receive
consideration of £52.5 million in cash and
a 38.7% shareholding in Local World, which
will allow us to benefit from the potential
upside from the evolution of the regional
newspaper industry.
This portfolio management activity has
further improved the overall quality of the
DMGT portfolio and reduced debt. We
succeeded in our long-term goal of
increasing exposure to international markets.
ShARE PRICE PERFORMANCE
Our share performance remains important
to us as an indicator as to whether our
strategy is understood and appreciated
by institutional investors.
The price of our widely traded ‘A’ Ordinary
Non-Voting Shares has risen by 37% over the
year, outperforming both the UK Media
sector and the FTSE All-share index which
provided returns of 18% and 14% respectively.
As explained in last year’s Business Review,
the decision by FTSE to adopt listing
classifications for determining the weighting
of share classes in their indices, resulted in
DMGT’s weighting in the UK Index Series
falling from 75% to 0%. The FTSE rules on
standard listings means that DMGT ‘A’ shares
are now no longer included in the FTSE UK
Index Series. However, DMGT continues to be
a member of a number of other important
indices such as MSCI, STOXX and S&P.
This change has made no impact on the
approach DMGT takes to its obligations as
a listed company. We will continue to adopt
the obligations and practices of the UK
Listing Rules as they have applied to DMGT
historically, maintaining the highest standard
of governance and disclosure including the
application of the UK Corporate
Governance Code.
ACTIvE PORTFOLIO MANAGEMENT
When I became Chief Executive in 2008,
I recognised the need for us to focus on
a narrower range of activities in order to
concentrate human resources and financial
capital where the most potential for
long-term growth and value creation existed.
I stated that we would be active managers
of our portfolio of businesses and apply our
investment criteria vigorously in determining
where to allocate capital. At the same time
we would maintain our long-term
perspective and a high rate of internal
investment to drive organic growth.
The investment criteria that I identified then
has encouraged investing in businesses
which operate in attractive growth markets.
Such businesses need to have products or
services which are highly innovative and
highly valued, ones which customers repeat
buy. We prefer to invest in businesses that are
either in international markets or offer scope
to expand internationally, especially into
high-growth economies. We have a strong
bias towards market leaders and businesses
with high-margin, cash-generative
characteristics expected to produce a high
return on capital. We are also focused on
gaining access to and retaining
entrepreneurial management and we give
preference to businesses which can benefit
from DMGT’s long-term perspective.
In keeping with this approach, we have
further refocused the portfolio with a range
of disposals, acquisitions and selective
investments throughout the year. We
announced a series of bolt-on acquisitions
at dmg::information including Intelliworks,
PrepMe and SpringRock. Euromoney
acquired Global Grain Geneva and Global
Grain Asia and A&N Media acquired
Jobrapido. We also announced the merger
of our online property portal, The Digital
Property Group, with Zoopla to create a
world-class property search business.
dmg::information also made a series of
investments in the US property market
through Xceligent, Real Capital Analytics
and BuildFax. In total, acquisitions, including
a slight increase in our shareholding in
Euromoney to offset dilution from incentive
plans, utilised £75 million of cash.
Following the year-end we made a further
bolt-on investment at Hobsons with their
acquisition of the US website Beat the GMAT.
We also made a number of disposals of
non-core businesses. Disposals in the early
part of the year were primarily focused in
Associated (Top Consultant, motors.co.uk
and Teletext) whilst in the second half of the
year we announced the disposal of our
Annual Report 2012 16
Because of continued strong cash flow
generation, representing a 113% conversion
rate of operating profits, and the proceeds
from disposals, our financial strength
improved. We continue to have a
comfortable level of longer-term funding
through £678 million of outstanding bonds,
with maturities ranging from December, 2018
through to June, 2027. At the year-end, we
also had unused bank facilities of £298
million. Given surplus cash of £107 million at
the year end, we will consider buying back
any bonds which become available, at the
right price.
Throughout the year, we have stayed well
within our own internal net debt to EBITDA
limit of 2.4 times with our year-end net debt
to EBITDA ratio standing at 1.6 times.
Whilst we can comfortably run the Group
without having to raise new finance, we
may want to do so in order to sustain the
Group’s long-term growth ambitions.
Regaining investment grade status remains
an objective.
We anticipate that capital allocation in the
forthcoming year will continue to be funded
from our existing capital structure and will be
directed towards supporting the Group’s
long-term growth ambitions as well as our
continued commitment to growing the
dividend in real terms.
We believe that the creation of shareholder
value over the long term requires a balanced
approach to investing in growth and
returning excess capital to shareholders,
whilst maintaining a strong balance sheet.
In reviewing our capital management
programme the Board has decided to utilise
part of its authority to make on market
purchase of ‘A’ Ordinary Non-Voting Shares
of up to £100 million over the coming year.
Containing and eventually eliminating
significant liability risk and volatility from our
pension schemes remains a high priority.
The recently announced pension guarantee
structure is a significant step in that direction.
WEIGhTING OF DMGT’S ‘A’ ShARES
IN ThE FTSE INDICES
On 18th April, 2012, FTSE announced that
DMGT’s ‘A’ Ordinary Non-Voting Shares
would no longer be eligible for inclusion in
the UK Series Index. The Board of DMGT has
considered at length, with the assistance of
its advisors, the options available to it and the
suitability of such options to meet the needs
of its stakeholders to make the ‘A’ Ordinary
Non-Voting Shares eligible for inclusion in the
UK Series Index but no solution has to date
been found. The FSA’s recently issued
consultation paper on ‘Enhancing the
effectiveness of the Listing Regime and
feedback on CP12/2’ makes it more difficult
to envisage how we can regain our premium
listing. It is unlikely, therefore, that the ‘A’
Ordinary Non-Voting Shares will become
eligible for inclusion in the index in the
foreseeable future. However, DMGT’s ‘A’
Ordinary Non-Voting shares will continue to
be standard listed and traded on the London
Stock Exchange and to be a member of
other important indices such as MSCI, STOXX,
S&P and the FTSE Global Equity Index Series
and DMGT will continue to maintain the
highest standard of governance and
disclosure.
CAPITAL STRuCTuRE
The Company has not made a capital call
on its shareholders since 1933. Growth is
funded by long-term debt and by retained
earnings. Since the late 1980s, our strategy
has been to seek to raise the dividend in real
terms over the economic cycle. Since 2002,
the Board’s policy has been to target a real
rate of growth in the dividend in the region
of 5% to 7% on the basis of the Directors’
confidence in the Group’s long-term
financial health.
Subject to shareholder approval, the Board
is recommending payment on the issued
Ordinary and ‘A’ Ordinary Non-Voting Shares,
a final dividend of 12.4 pence per share for
the year ended 30th September, 2012 (2011
11.7 pence). This will make a total of 18.0
pence (2011 17.0 pence per share). The final
dividend will be paid on 8th February, 2013
to shareholders on the register at close of
business on 30th November, 2012. This is an
increase of 6% for the year. The compound
dividend growth over the last 20 years is 8.9%
in nominal terms, which is an increase of 6.1%
in real terms.
Daily Mail and General Trust Plc 17
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REvIEW OF ThE yEAR
DMGT has delivered a solid set of results, with
Group underlying revenue and operating
profit up 3% and 7% respectively and our
operating margin increasing to 15%.
Our international B2B companies have
continued to grow underlying revenues, up
7%, and profits, up 8%, reflecting the strength
of their market positions as well as the success
of new product launches and organic
growth initiatives.
We are pleased to report that our UK
consumer business’s underlying revenue
was flat overall in the face of continued
challenging trading conditions, with
circulation and digital revenue growth
offsetting print advertising weakness. A strong
focus on operational efficiency helped
consumer underlying profits to grow by 7%.
73% of this year’s operating profit was
generated from the Group’s B2B operations
and 27% from Consumer, compared to 74%
and 26% in 2011 and more than half of the
Group’s operating profits were again derived
from outside the UK, demonstrating the
benefits of our international diversification.
Adjusted PBT grew by 10%, and after a higher
tax rate compared to the prior year, adjusted
EPS was up 7% to 49.4p. The increase in the full
year dividend per share of 6% reflects the
pleasing Group results and our confidence in
the future of DMGT and its ability to generate
sustainable earnings growth.
BuSINESS-TO-BuSINESS SuMMARy
Our B2B operations achieved another year
of good growth, with combined revenues of
£899 million, 1% higher than last year, but up
7% on an underlying basis. Reported revenue
growth was lower than underlying growth,
reflecting the disposal of George Little
Management (GLM) within dmg::events and
Sanborn within dmg::information. Combined
B2B operating profit increased by 7%, or 8%
on an underlying basis, with an overall B2B
margin of 26%.
RISK MANAGEMENT SOLuTIONS
RMS delivered a solid year of revenue and
profit growth. Revenues increased by 3% on
a reported basis, with an underlying increase
of 6% reflecting the disposal of the third-party
part of RMS’s Indian operation (RMSI).
Operating profit rose by 18%, with underlying
profits up 7%, the difference due to the
absence of RMSI losses in the year compared
to the prior year’s inclusion.
Subscriptions continued to grow well, with
a renewal rate of approximately 95%.
RMS enjoys multiple drivers of growth. While
continuing to focus on its core catastrophe-
modelling business, growth is increasingly
being driven by new products and solutions
such as Data Management Services and
mortality risk analysis. Opportunities are also
presenting themselves with new customers
in new geographies as RMS expands
globally. A key part of RMS’s development
is the significant investment programme in
a new software platform which is now firmly
under way and is expected to generate high
levels of future revenue growth. As a result,
RMS increased headcount, consulting and
hosting costs.
RMS spun off two development initiatives
during the year. The Asia Risk Centre (ARC)
was set up in Singapore under DMGT
oversight. ARC is developing models for the
agricultural insurance markets in Asia. The
second spin-off was Praedicat which in
partnership with the Rand Corporation is in
the early stages of developing models for
the liability insurance market.
The minority shareholding in RMS Japan was
acquired from the OYO Corporation.
DMG INFORMATION
dmg::information had a good year, with
reported revenue up 9%, or 11% on an
underlying basis. Operating profit grew by a
healthy 14%, with underlying operating profit
up 19%.
dmg::information’s four sectors of education,
property, finance and energy all contributed
to growth, with a particularly strong
performance from Hobsons serving the
education market, and Landmark, serving
the UK, and more recently German property
markets with the acquisition of On-Geo.
A series of bolt-on and adjacent sector
investments were made.
Its ambition to invest in must-have, high-
growth, innovative business information
companies remains unchanged, as does its
remit to diversify DMGT by sector, by business
model and increasingly by geography.
Annual Report 2012 18
CONSuMER MEDIA
At A&N Media, underlying revenues were
in line with the prior year at £1,060 million,
a decrease of 3% on a reported basis.
Operating profit increased by 12%, with an
operating margin of 10%. This was a very
pleasing result in the context of continued
challenging trading conditions in the UK, and
is a testament to the success of our strategy
to exploit the very best of traditional and new
media, and bring them together in a way
that meets the constant and rapidly
changing demands of our consumers.
Digitalisation and advances in technology
have given A&N Media the ability to be more
productive and efficient. Introducing less
labour-intensive processes has enabled
costs to be taken out of the business without
sacrificing quality. This drive for efficiency
has delivered a leaner and more robust
foundation on which to grow, with
headcount at A&N Media reducing
by 855 (12%) in the year.
ASSOCIATED NEWSPAPERS
The Mail titles continued to outperform the
market, with circulation revenues growing
by 3% due to the benefit of cover price
increases. Market share increased to 21.6%
and 20.8% for the Daily Mail and The Mail
on Sunday respectively. Content has been
at the heart of the Group’s success at
Associated and we continue to invest
in editorial quality. Metro, the Group’s
free newspaper, also continued to
perform strongly.
MailOnline had an excellent year, becoming
the world’s most visited newspaper website,
with 106 million global unique browsers in
August, 2012. Revenues grew by 74% and the
business was profitable in the second half of
the year. The international expansion of
MailOnline continued apace, and will
be a key aspect driving its long-term
growth potential.
Other digital initiatives, such as Wowcher,
our consumer daily deals voucher business,
saw strong growth and attracted additional
investment in marketing and promotion.
DMG EvENTS
dmg::events delivered highly satisfactory
results in a year which included only one
of the three major biennial events which,
alongside the sale of GLM, resulted in
reported revenue being down 33%. Adjusting
for these factors, underlying revenue
increased by 13%, reflecting good organic
growth across the portfolio. Reported
operating profit decreased by 46%, but
underlying growth of 21% was achieved.
dmg::events continued to refine its structure,
with the disposal of Evanta, a conference
business, announced in September, 2012.
dmg::events is now focused on the growth
verticals of Energy and Digital Marketing and
in expanding its significant footprint in the
Middle East into new countries such as Saudi
Arabia, and into Asia.
EuROMONEy INSTITuTIONAL INvESTOR
Euromoney’s record operating profit was
up 9%, before its capital appreciation plan
(CAP) expense, maintaining its impressive
recent history of profits growth.
These results confirm the value of
Euromoney’s strategy to build a more resilient
and better-focused business by increasing
the proportion of revenues derived from
subscription products, with subscriptions now
accounting for nearly half of total revenues.
A predominantly publishing-driven business
has been transformed to one with significant
activities in electronic information and
database services.
Euromoney has outperformed expectations,
allowing management to shift its focus to
positioning the business for growth, both
from existing products as markets recover,
and from investment in technology and
new products.
Euromoney’s performance and its shift into
more subscription and digital activity and its
global reach mean that the Board regards
it as core to DMGT’s own strategic global
growth ambitions.
Euromoney’s separate listing on the London
Stock Exchange has enabled it to introduce
incentive plans which have motivated
management to grow the company
significantly over recent years. We remain
a supportive shareholder, fully backing its
management’s expansion strategy. We
have slightly increased our equity interest
to around 68%.
Daily Mail and General Trust Plc 19
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A&N Media’s recruitment and property
online portals both had an exciting year.
Evenbase, our online recruitment businesses,
acquired Jobrapido to establish an
international footprint for expansion. At the
end of May, The Digital Property Group
merged with Zoopla to create a world-class
property search platform and a genuine
contender to challenge the dominant UK
market leader. Our consumer digital
revenues across all our consumer digital
platforms including MailOnline, metro.co.uk,
Evenbase, Zoopla Property Group and
Wowcher were in the region of £140 million
on a pro forma basis in 2012.
As a result of circulation revenue growth and
strong progress in digital revenues, overall
underlying revenues at Associated were up
2% in the year, despite another challenging
year for print advertising.
NORThCLIFFE MEDIA
Northcliffe’s revenue performance, down
10% on a reported basis, reflects another
difficult year for the UK regional press and
continued advertising pressure. The lower
underlying revenue decline of 6% reflects
our efforts to transition the portfolio of titles,
including the conversion of several titles from
a daily to weekly basis. The transformation of
the cost base continued rapidly, with costs
down a further 15% in the year. This resulted in
Northcliffe’s operating profit increasing by an
impressive 54%, achieving a margin of 12%.
OuTLOOK
We have entered our new financial year
with our companies performing well and
in line with our expectations. All of our
B2B businesses are expected to deliver
underlying revenue and profit growth in
the year ahead. On the consumer side,
we expect stable revenues and margins,
reflecting an uncertain advertising
environment balanced against continued
growth in digital areas.
RMS has started the year as expected, with a
solid sales pipeline and a range of significant
development programmes in place. RMS
expects to achieve revenue growth in the
high to mid-single digits, a slight decline from
the trend of recent years, as it focuses its sales
efforts on preparing for the new generation
of products. RMS is expected to deliver a
slightly reduced margin of around 30% as
investment increases ahead of the launch
in 2014.
dmg::information expects to drive double-
digit organic growth as the portfolio of
businesses continues to benefit from new
product initiatives and stronger customer
demand. The Education and Property
businesses will continue to be key drivers
of overall growth, with Energy expected
to gather further momentum during the
year. We expect operating margins to
be maintained.
At dmg::events, our refocused portfolio is
expected to deliver double-digit underlying
growth and it will also benefit from two of the
three major biennial events taking place this
financial year. Margins are anticipated to be
around 25%.
Euromoney’s first quarter trading has started
in line with expectations. The uncertainty
over Europe remains, as does a solution to
the pending US fiscal cliff. Meanwhile global
financial institutions face the combined
challenges of difficult markets, increased
capital requirements and a tougher
regulatory environment. Inevitably they
have responded by cutting costs, particularly
people, and exiting some parts of their
business. The Euromoney board expects this
challenging trading background to continue
at least into the early part of 2013.
Subscriptions account for half of Euromoney’s
revenues and therefore provide some
protection against weak markets in 2013,
as does Euromoney’s reliance on emerging
markets for more than a third of its revenues.
However, the negative trends in advertising
and delegate revenues in the last quarter are
expected to continue into the first quarter of
financial year 2013, although the outlook for
event sponsorship is more positive.
Within A&N Media, national advertising
revenue at Associated in the first seven weeks
of the year was down 5% on last year, with
digital continuing to grow strongly, but
visibility remaining limited on print advertising.
Overall, Associated expects to achieve
broadly stable revenues in the year, with
cost efficiency helping to maintain operating
margins at around 9%.
For the Group as a whole, we will continue
to invest in order to secure future growth and
ensure that our financial and talent resources
are appropriately managed. My colleagues
and I remain confident that DMGT is well
placed for 2013 and beyond.
Martin Morgan
Chief Executive
Annual Report 2012 20
Description
Relevance
Performance
Narrative
underlying
revenue
growth#
Our underlying revenue
growth (after adjusting for
M&A activity) is an important
indicator of the health and
trajectory of our businesses.
Group
adjusted
profit before
tax*#
As a portfolio-based Group,
DMGT periodically buys and
sells businesses. This KPI
monitors the Group’s adjusted
profit before tax.
Operating
margin %*#
DMGT’s investment criteria
emphasises profitable,
high-growth sectors. In
the long term, increasing
adjusted operating margin
indicates an improvement
in the quality of its business
assets.
1,865
1,920
underlying revenue growth
2011 +3%†
Our businesses grew their revenue by 3%
on average during the year. B2B grew by
7% while Consumer remained stable.
2011
2012
248.4
255.4
Group adjusted profit before tax
227.7
232.1
185.6
2011 £232m†
Group adjusted profit before tax grew by an
impressive 10% helped by good profit growth
across almost all of our businesses.
2008
2009
2010
2011
2012
Operating margin
15.2%
15.3%
14.2%
13.4%
12.3%
2008
2009
2010
2011
2012
2011 14%†
Our Group operating margin improved from
14% to 15% as we improved the efficiency of
our businesses and either sold or closed down
several businesses that were operating at
margins below the Group average.
Net debt: EBITDA
Net debt:
EBITDA#
Management aims to regain
DMGT’s investment-grade
status by reducing net debt
and targets a net debt:
EBITDA ratio of between
1.5 and 2.0 times.
3.1
2.7
2.3
2.0
1.6
2011 2.0 times
Through strong operational cashflows,
continued portfolio management and tight
control of working capital, we have brought
our net debt: EBITDA level down to its lowest
level in years.
2008
2009
2010
2011
2012
Earnings per
share*#
Management seeks above-
average growth in adjusted
earnings per share to
maximise overall returns for
its owners.
46.2
46.0
46.1
49.4
Earnings per share
33.9
2008
2009
2010
2011
2012
2011 46.1p†
Our earnings per share grew by 7% helped by
the 10% growth in profit before tax offset by
the small increase in our effective tax rate
(up from 14.4% to 15.2%)
Dividend per
share
The Board’s policy is to
maintain dividend growth
in real terms over the
economic cycle.
14.7p
14.7p
16.0p
17.0p
18.0p
Dividend per share
2008
2009
2010
2011
2012
2011 17.0p
We were able to continue our strong track
record of dividend growth and have
proposed a full year dividend of 18.0p,
up by 5.9% from last year.
Daily Mail and General Trust Plc 21
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Description
Relevance
Performance
Narrative
Performance
of DMGT ‘A’
and FTSE All
Share Index
relative to
values at
30th
September,
1992 (£)
B2B share of
total
operating
profit
Share price vs. FTSE All-Share
Index Management monitors
the DMGT share price against
the FTSE All-Share Index to
assess the Group’s relative
performance against other
UK companies.
8
6
4
2
0
The growth and profitability
of its business divisions are key
components of DMGT’s
strategy. This KPI tracks the
proportion of operating profit
attributable to B2B activities.
North
American
share of total
operating
profit
DMGT is committed to
maintaining a significant,
sustainable presence in North
American markets. This KPI
allows management to
monitor the relative
profitability of its North
American units.
International
share of total
revenues
This measures the proportion
of revenue generated outside
the UK. DMGT’s long-term
strategic objective is to
develop into a global growth
company. The KPI measures
DMGT’s success in
internationalising the business.
Digital share
of total
revenues
We expect digital activities
to account for the majority
of DMGT’s future growth. This
KPI tracks the rate at which
the Group is monetising its
digital content.
Subscription
share of total
revenues
Subscription-based B2B
revenue is a more stable and
less cyclical revenue source
than advertising. It is also a
good proxy for monitoring
growth in B2B digital revenues.
This KPI tracks the Group’s
ability to generate high
quality, digital B2B earnings.
DMGT A
FT All Share
Performance of DMGT ‘A’ and FTSE All Share
Index relative to values at 30th September,
1992 (£)
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2012
73%
(74% 2011)
(2011 74%)
51%
(51% 2011)
(2011 51%)
37%
(35% 2011)
(2011 35%)
35%
(29% 2011)
(2011 29%)
53%
(48% 2011)
(2011 48%)
2011 +4.4% pa
Our share price has largely tracked the
FTSE All-Share Index over the last 20 years.
B2B share of operating profit
2011 74%†
North American share of operating profit
2011 51%†
International share of revenues
2011 29%
Digital share of revenues 2012
2011 29%
Subscription share of B2B revenues
2011 48%
Annual Report 2012 22
hemant Shah
President and Chief Executive
Officer
Revenue
2011 £159m
Operating profit*
2011 £47
Operating margin*
2011 30%
BuSINESS DESCRIPTION
RMS continues to focus primarily on the
commercial catastrophe-modelling business,
which includes modelling of natural hazards
risks such as earthquake, hurricane and
flood, as well as terrorism risk and risk from
pandemic diseases. Its primary market is the
global property and casualty re/insurance
industry, where it currently serves hundreds
of customers around the world. Products
and services are developed and delivered
through the activity of more than 1,000 RMS
employees in North America, Europe, India,
Japan and China. RMS models are deeply
embedded in risk decision-making processes
throughout the re/insurance vertical,
including insurance companies, insurance
and reinsurance brokers, reinsurers and the
capital markets. In addition, RMS also
provides models and solutions in the capital
markets and life insurance industries.
STRATEGy
RMS’s primary strategic focus continues to be
its new platform, now branded as RMS(one),
which is designed to provide complete
solutions in the cloud for its clients across the
re/insurance value chain, including access to
sophisticated models, an ability to integrate
those models into enterprise-wide business
processes, and analytics to help clients make
better decisions. Clients seek upstream
capability to acquire and manage high
quality exposure data, and downstream
capability to open and interpret the models,
and then apply these insights to deliver
targeted decision support for underwriting,
pricing and managing their business. RMS
has undertaken a significant development
effort of its new software platform, RMS(one),
and is working towards a release in mid 2014
to deliver the full range of new capabilities
and solutions to its global client base. In the
meantime, RMS continues to pursue selected
growth areas in its Core modelling franchise,
as well as in its Capital Markets and
LifeRisks initiatives.
ACTIvITy WIThIN ThE REPORTING yEAR
RMS had a solid year of revenue and profit
growth, while increasing its investment
programme that is expected to be a key
driver of future, multi-year growth. On a
reported basis, revenues increased by 3%
and operating profits by 18%, which includes
the benefit of capitalising software
development expenses related to RMS(one),
a program that is expected to continue
through to the launch in 2014.
BuSINESS MODEL
RMS leads the market for delivering
scientifically-based catastrophe models that
have become the standard in the industry for
quantifying and managing catastrophe risk.
The main revenue streams are from licensing
the models through an annual subscription
model, but RMS also provides a range of
professional services that are complementary
to the core modelling business. RMS’s client
relationships are characterised by their
longevity and high renewal rates. Over the
past 10 years, RMS has invested over $200
million in developing and updating its
products to incorporate the latest in scientific
research and enhance model resolution,
which is delivered to clients through the
release of annual updates.
MARKET ENvIRONMENT
The re-insurance industry experienced
slow growth in 2012 as a result of poor
global economic decisions, and the
lingering financial effects of the worldwide
catastrophes in 2011. Many in the industry
are experiencing pressure to cut costs and
exit lines of business perceived to be too risky.
In addition, there was greater M&A activity
in 2012 as weaker performing companies
became acquisition targets.
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SEGMENT BuSINESS PERFORMANCE
Core business
RMS’s core business, which includes natural
catastrophe and terrorism modelling,
was impacted by slower growth in the
re-insurance industry. The core business relies
heavily upon existing clients expanding their
relationship with RMS by licensing additional
models and services. In a year where many
clients were tightening their budgets, this
proved to be a challenge. In an effort to seize
new opportunities for growth, RMS continued
to invest in new markets for its core suite
of models.
Capital Markets
The insurance-linked securities market
rebounded in 2012, with strong demand and
an influx of new capital driving a forecast
$6 billion of issuance for the year. RMS
participated in a number of transactions,
particularly related to the transfer of life and
health risk (excess mortality and longevity).
The capital markets business continued to
face headwinds from the adoption of the
version 11 models, but RMS was able to
establish itself as the leading portfolio risk
management platform provider amongst ILS
funds, with the vast majority of the dedicated
ILS funds now RMS users. RMS continues to
see major growth opportunities in the capital
markets space, especially around longevity
risk transfer.
LifeRisks
RMS’s LifeRisks business has developed
innovative models for the life insurance
industry to manage the risk of excess
mortality and the longevity risk associated
with pensions and annuities. RMS tools have
been instrumental in helping companies
aggressively grow through risk swaps and
acquisitions. The power and transparency of
RMS’s model methodologies is leading many
insurers to adopt RMS technology for use in
their response to Solvency II capital adequacy
tests. In 2012, LifeRisks’ growth trajectory
was modestly slower than planned due
to the complexity of model and software
development, along with regulator delays in
implementing Solvency II, but RMS remains
bullish on the prospects for the initiative.
PRIORITIES FOR ThE COMING yEAR
2013 represents a key pre-launch period for
RMS in advance of the release of RMS(one),
scheduled for mid 2014. The investment
programmes established in support of all its
new initiatives will continue throughout 2013
and are expected to result in similar growth
characteristics as in 2012.
Annual Report 2012 24
Suresh Kavan
Chief Executive Officer
Revenue
2011 £232m†
Operating profit*
2011 £42m†
Operating margin*
2011 18%†
PROPERTy INFORMATION
Underlying revenues from the property
information businesses grew by 11% while
underlying profits grew by 25%. Revenues
and profits were £106 million and £24 million
respectively, representing the largest of our
business sectors and accounting for 42%
of revenues.
The market conditions have remained
relatively benign in both the UK housing
market, served by Landmark, and the
commercial real estate market in the UK
and US, served by Landmark and EDR
respectively. Our revenues are influenced by
transaction volumes which have grown only
marginally year on year. Underlying revenues
in the UK and US grew by 6% in aggregate.
In 2011 we acquired On-Geo in Germany,
complementing our existing German
business, and we have enjoyed a highly
successful year with underlying revenues
growing strongly and integration plans
ahead of schedule.
BuildFax, a provider of planning consent
(building permits) and related property
information to the US insurance and financial
services markets, is an early-stage business
that continues to develop well.
In April, we made a strategic investment in
Xceligent, one of only two companies in the
US that provides fully researched property
and listing information to the commercial real
estate community. Since our initial investment
the business has developed in line with
expectations and we are supporting the
expansion of its strategy to increase the
number of major US locations covered.
BuSINESS DESCRIPTION
dmg::information operates B2B information
companies in four sectors, namely Property
Information (Environmental Data Resources,
Landmark Information Group and BuildFax),
Educational Information (Hobsons), Energy
Information (Genscape) and Financial
Information (Trepp and Lewtan). We also
have a number of strategic investments in
the property information sector, including
Xceligent, Real Capital Analytics and
TreppPort.
dmg::information’s business model prioritises
annual subscriptions and highly repetitive
transactions, which account for 85% of the
total revenue, and all our businesses are
market leaders providing their clients with
crucial, mission-critical information.
ACTIvITy WIThIN ThE REPORTING yEAR
dmg::information’s underlying revenues and
profits both grew strongly in the year at 11%
and 19% respectively, largely driven by strong
organic growth and complemented by the
performance of small bolt-on acquisitions.
Reported revenue increased by 9% to £253
million and reported operating profits
increased by 14% to £48 million, with margins
up to 19% from 18%.
BuSINESS MODEL
As a portfolio of B2B information businesses,
dmg::information has a variety of business
models. The majority of our revenue is made
up of high renewal rate, recurring subscription
fees and high-repeat transactions.
MARKET ENvIRONMENT
The markets we serve are large and
complex. Information volumes grow
exponentially and our professional customers
look to our portfolio companies to provide
them with unique, must-have content,
incisive and timely analyses and powerful,
flexible analytics. In many cases, our datasets
are proprietary and extremely difficult to
replicate and we are seen as class leaders
in the markets we serve.
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EDuCATION INFORMATION
Hobsons, our educational information
business, enjoyed a very successful year.
Underlying revenues increased by 20%
and reported revenues by 27% as we
also completed two important bolt-on
acquisitions.
In February we acquired PrepMe, providing
sophisticated software to guide students in
college preparation tests, and in December
acquired Intelliworks, providing subscription-
based software services to higher education
institutions that are highly complementary
with Hobsons’ existing business.
Hobsons is growing strongly in both its K-12
division, serving US high schools, and its HE
division, serving higher education institutions
in both the US and internationally. Our
strategy is to continue to develop must-have
products in both these divisions and to
extend our footprint internationally.
FINANCIAL INFORMATION
The fragility that has existed in the financial
information market for the last couple of
years continued to prevail through 2012. In
these challenging market conditions we are
pleased that our businesses serving this
sector. Trepp and Lewtan, grew underlying
revenues by 2%.
Trepp, the market leader of information
about Commercial Mortgage-Backed
Securities (CMBS), provides information that
is mission critical to participants in the CMBS
marketplace and has also successfully
expanded its product offerings with new
products targeted at banks and other
loan providers.
Lewtan, offering products to both investors
and issuers in the asset-backed securities
market, continued to improve their market
position with the delivery of several important
new product enhancements.
ENERGy INFORMATION
Genscape, the market-leading provider of
real-time ‘supply-side’ energy information,
has continued to grow. Underlying revenues
grew by 7% but this underplays the increasing
momentum in the business which grew
net bookings by 13% in the second half
of the year and launched some exciting
new initiatives.
We have invested significantly in both
products and people. As a result, the
business is well positioned for the future,
with a strengthened management team,
an expanded sales force and a number
of newly launched products, with more
in the pipeline.
PRIORITIES FOR ThE COMING yEAR
Our property and financial information
businesses are exposed to the cyclicality of
the UK and US property and financial markets
which remain subdued. Despite this
headwind, our continuous investment in
innovation has resulted in a strong and
continuing pipeline of new products and
services that continue to propel our growth.
Furthermore, individual market issues are
attenuated through the portfolio effect
of our businesses.
Overall we operate in long-term, attractive
grow markets that are global in scope such
as education, energy and property. These
markets have extended runways for growth.
Genscape is a thought-leader and innovator
in its market. During the year we launched
a compliance and information service that
will provide physical verification of biodiesel
production in the US and, in addition to this
organic growth initiative, have also added
modelling and forecasting capabilities with
a small bolt-on acquisition of a company
called SpringRock.
The explosive growth of information and
technology in these areas means a strong
and steady demand for support and insight
from specialist businesses such as ours. We
enjoy deep relationships with our customers
which help us to identify and then deliver
innovative new products and services that
help our customers find the ‘signal’ amongst
the ‘noise’.
Annual Report 2012 26
Suresh Kavan
Chairman and Chief Executive
Officer
Revenue
2011 £132m
Operating profit*
2011 £39m
Operating margin*
2011 29%
High energy prices drive continued
investment in energy development and
technology, which along with deep market
connection, drive the growth of our events.
Gastech, held in London in November 2012
is a market-leading brand that is extending
its reach through the launch of a series of
complementary regional satellite events.
The digital marketing-focused business is
centred around the ad:tech shows and
conferences, with significant events held
annually in New York, San Francisco and
London and recent new launches in Tokyo,
New Delhi and Singapore. Overall,
underlying revenues grew by 5%.
dmg::events operates a number of market-
leading events in the Middle East, organised
by our operations based in Dubai. The largest
events are the annual Big 5 show, serving the
construction sector, and the biennial Adipec
show, serving the Energy sector.
In 2012, Big 5 continued to grow despite
difficult economic conditions through the
continued success of its geo-cloning
programme in Saudi Arabia. Overall we
enjoyed a very satisfactory 15% underlying
revenue growth in the Middle East region,
fuelled by an aggressive launch programme.
Additionally, we are pleased to have
reached an agreement to hold the large
Adipec event in Abu Dhabi annually with
effect from 2014.
PRIORITIES FOR ThE COMING yEAR
Our events in the United Arab Emirates
have traditionally enjoyed a high degree
of participation from European delegations
and exhibitors. The recent economic
downturn has proved challenging for those
exhibitors. However, our brands are big,
strong, class-leaders and thus have proved
remarkably resilient and have responded by
forging deeper relationships with emerging
Asian and intra-regional exhibitors.
Strong brands in growing sectors allied to
powerful relationships position dmg::events
well for the future. Our brands lend
themselves to geo-cloning. Our sector
expertise lends itself to the creation of
adjacent products such as conferences and
online services and our relationships facilitate
a high velocity of new show launches.
BuSINESS DESCRIPTION
dmg::events organises B2B exhibitions with
associated conferences focusing on the
energy, construction and digital marketing
sectors. Events are held across 12 countries
including the US, UK, Canada and the United
Arab Emirates.
ACTIvITy WIThIN ThE yEAR
dmg::events enjoyed a strong year with
growth in underlying revenues of 13% and
underlying profits increasing by 21%.
Reported revenue reduced by 33% to £89
million and reported operating profits
reduced by 46% to £21 million, due to the
disposal of GLM in September, 2011 and the
cycle of biennial shows which meant only
one of dmg::events’ large biennials occurred
in 2012 compared with two in the prior year.
At the end of the financial year dmg::events
completed the disposal of Evanta,
a leadership and conferences business,
as we continue to focus our capital and
talent resources towards further expanding
our fast-growing businesses operating in the
Middle East and Asia region, and energy
and digital marketing sectors.
BuSINESS MODEL
dmg::events organises B2B events with the
majority of revenue derived from trade
show exhibitors, conference attendees
and corporate sponsors. Unlike consumer
trade shows, admittance is a nominal
revenue stream.
Following the disposal of Evanta in
September, 2012 our exposure to sponsorship
revenues has been significantly reduced.
MARKET ENvIRONMENT
dmg::events organises B2B events serving the
energy and digital marketing sectors as well
as the geographical Middle East market. Our
brands are class leaders in their respective
arenas and include the Big 5, Adipec,
Gastech, the Global Petroleum Show and
ad::tech to name a few. Our exhibitors and
attendees are the professionals in these fast-
changing markets for whom face-to-face
meeting opportunities are a critical part of
their annual calendars.
PERFORMANCE
In the Energy sector, underlying revenue
growth was impressive at 22%, with a
particularly good performance from the
Global Petroleum Show (GPS), held biennially
in Calgary, Canada and supplemented
by a number of successful new launches.
Daily Mail and General Trust Plc 27
Strategic Report
Directors’ Report
Governance
Financial Statements
Richard Ensor
Executive Chairman
Revenue
2011 £363m
Operating profit*
2011 £93m
Operating margin*
2011 26%
BuSINESS DESCRIPTION
Euromoney is a leading international
B2B media group focused primarily
on the international finance, metals and
commodities sectors. It publishes more than
70 titles in both print and online formats and
is a leading provider of electronic research
and data. It also runs an extensive portfolio
of conferences, seminars and training
courses for financial markets.
STRATEGy
Euromoney’s strategy remains focused
on the building of a robust and tightly
focused global online information business
with an emphasis on emerging markets. This
strategy is being executed through
increasing the proportion of revenues
derived from electronic subscription
products; using technology efficiently to assist
the online migration of print products as well
as developing new electronic information
services; investing in products of the highest
quality; eliminating products with a low
margin or too high a dependence on print
advertising; maintaining tight cost control
at all times, and retaining and fostering
an entrepreneurial culture.
Driving revenue growth from existing as well
as new products is a key part of Euromoney’s
strategy. Since 2010, the business has been
investing heavily in technology and content
delivery platforms, particularly for the mobile
user, and in new digital products as part of its
transition to an online information business.
In 2012, as in 2011, Euromoney spent
approximately £10 million on this transition,
which is expected to continue in 2013. In
addition, work has commenced to build
a new platform for authoring, storing and
presenting content, with a view to both
improving the quality of existing subscription
products and increasing the speed to market
of new online information services. This
project is expected to have a capital cost
of approximately £6 million in 2013.
ACTIvITy IN ThE REPORTING yEAR
Acquisitions remain a key part of the
Euromoney strategy. In February, Euromoney
purchased Global Grain for £6 million. Global
Grain’s main asset, Global Grain Geneva,
is the world’s leading event for international
grain traders. The event is held in November
each year and is on track to exceed last
year’s attendance by at least 10%, while
an event for the Asia-Pacific region was
launched successfully in March and two
further new events are planned for 2013.
BuSINESS MODEL
Financial publishing
Financial publishing includes an extensive
portfolio of magazines, newsletters, journals,
surveys and research, directories, and books
covering the international capital markets as
well as a number of specialist financial titles.
Business publishing
The business publishing division produces
specialist magazines and other publications
covering the metals and mining, legal,
telecoms and energy sectors.
Training
The training division runs a comprehensive
range of banking, finance, legal and audit,
and information security market courses,
both public and in-house. Courses are run
all over the world for both financial institutions
and corporates.
Conferences and seminars
Euromoney runs a large number of
sponsored conferences and seminars for the
international financial markets, energy sector,
telecoms and information security markets.
Research and data
The business provides a number of
subscription-based research and data
services for financial markets.
MARKET ENvIRONMENT
The outlook for financial markets remains
challenging. The continuing uncertainty
over the future of the Eurozone, along with
increasing political instability in the region, is
holding back growth and causing European
financial institutions to implement tough
cost measures. In contrast, sentiment for US
markets is improving, and emerging markets
remain in reasonable health as measures to
control inflation in key markets such as China
appear to be working.
PERFORMANCE
Total revenues for the year increased by 9% to
£394 million. Underlying revenues, excluding
acquisitions, increased by 2%. The acquisition
of Ned Davis Research (NDR) in August 2011
has helped increase the proportion of
revenues generated from subscriptions
to more than 50% for the first time. Headline
subscription revenues increased by 17% to
£200 million and underlying subscriptions,
excluding NDR, by 5%, with growth driven
largely by electronic information services
industry BCA Research and CEIC Data.
Annual Report 2012 28
PRIORITIES FOR ThE COMING yEAR
The uncertainty over Europe remains, as
does a solution to the pending US fiscal cliff.
Meanwhile global financial institutions face
the combined challenges of difficult markets,
increased capital requirements and a
tougher regulatory environment. Inevitably
they have responded by cutting costs,
particularly people, and exiting some parts
of their business. The board expects this
challenging trading background to continue
at least into the early part of 2013.
Subscriptions account for half of Euromoney’s
revenues and therefore provide some
protection against weak markets in 2013, as
does the group’s reliance on emerging
markets for more than a third of its revenues.
However, the negative trends in advertising
and delegate revenues in the last quarter are
expected to continue into the first quarter of
financial year 2013, although the outlook for
event sponsorship is more positive. First-
quarter trading has started in line with the
board’s expectations but as usual at this time,
forward revenue visibility beyond the first
quarter is limited, other than for subscriptions.
For 2013, Euromoney plans to continue its
programme of investing in the digital
transformation of its publishing businesses
and in improving the quality of its products.
The board is confident its strategy for investing
in new products and digital publishing and
using its strong balance sheet to fund
acquisitions, its exposure to emerging
markets, and its tight control of operating
costs will continue to sustain it through these
difficult market conditions. As the world
economy begins an albeit slow recovery,
financial and other markets will also
gradually improve, enhancing our prospects.
A 7% fall in advertising revenues reflects two
very different trends. Financial titles have
experienced falls of as much as 20% in the
face of deep cuts by global financial
institutions. But this has been partly offset
by increases in online advertising, a greater
appetite for print advertising from emerging
markets and growth in advertising from
sectors outside finance, particularly energy.
Event revenues broadly comprise an equal
mix of sponsorship and paying delegates.
Event sponsorship, which is heavily financial
market focused, has suffered in a similar way
to advertising, although to a lesser degree.
Events, particularly those outside the financial
sector which tend to be more delegate
driven, performed well in the first half but
growth has been more difficult to achieve
in the second and some smaller events
were cut.
The adjusted operating margin was 28%,
up 2% on the prior year. Costs, particularly
headcount, have remained tightly controlled
throughout the year. At the same time, the
group has increased its investment in
technology and new products as part
of its online growth strategy.
Euromoney derives nearly two-thirds of its
total revenue in US dollars and movements
in the sterling-US dollar rate can have
a significant impact on reported revenues.
However, this was not the case in 2012 and
headline revenue growth rates are similar
to those at constant currency.
BuSINESS REvIEW
Financial Publishing: revenues fell by 8%
to £77 million and adjusted operating profits
by 12% to £25 million. Advertising, which
accounts for approximately half the division’s
revenues, has been under pressure all year
from cuts in spend by global financial
institutions as well as a gradual shift away
from print advertising across the sector.
As a result, financial advertising fell by 13%,
although the impact of more severe cuts
by Wall Street banks was offset by a stronger
performance from emerging markets which
helped sustain titles such as Euromoney
and Asiamoney. Revenues from subscription
products were flat, helped by the launch
of new products.
Business Publishing: Euromoney’s activities
outside finance cover a number of sectors
including metals, commodities, energy,
telecoms and law, and provide a strong
counterbalance to the more volatile
financial publishing division. Revenues
increased by 9% to £65 million and adjusted
operating profits by 5% to £25 million, with
growth achieved from both advertising,
particularly in the energy sector, and
subscriptions, for which Metal Bulletin is the
biggest driver. This year is the first that profits
from Business Publishing have been similar
to those from Financial Publishing.
Training: Euromoney’s training division
predominantly serves the global financial
sector. However, more than half its revenues
are derived from emerging markets, and this
has helped mitigate the impact of cuts in
bank headcount and training budgets.
Training revenues fell by 4% to £31 million and
adjusted operating profits by 11% to £7 million.
The decline in operating margin from 24% to
22% was largely due to the completion at the
end of 2011 of a long-term training contract
in Asia, and the margin in the second half
recovered to 25%.
Conferences and Seminars: revenues
comprise both sponsorship and paying
delegates and increased by 7% to £92
million, with adjusted operating profits up 9%
to £29 million. After a strong first half, markets
became more challenging during the third
quarter, the most important of the year for
the events businesses. Financial market
events, with a heavy emphasis on
sponsorship revenues, have been under
pressure from cost cutting among global
financial institutions. In contrast, events in
sectors outside finance, particularly in the
commodities and energy sectors, have
performed better. The division also generates
nearly 20% of its revenues from subscriptions
to membership organisations for the
asset management industry. These have
continued to grow, helped by a significant
investment in Institutional Investor’s
Investor Intelligence Network, a private
online community for senior executives
from institutional investors and asset
owners worldwide.
Research and Data: revenues are derived
predominantly from subscriptions and
increased by 25% to £130 million. Underlying
growth, excluding NDR, was 6%. The trends
seen in the first half have continued, with
the main drivers of growth being BCA, the
group’s independent macroeconomic
research house, CEIC, the emerging market
data provider, and the capital market
databases run as a joint venture with
Dealogic. Renewal rates for all these
products have held up well, although
new sales have been harder to generate.
Adjusted operating profits increased
by 30% to £55 million including a £9 million
contribution from NDR.
Daily Mail and General Trust Plc Annual Report 2012
29
Strategic Report
Directors’ Report
Governance
Financial Statements
BuSINESS DESCRIPTION
A&N Media, the consumer media company
of DMGT plc, is a leading international
multi-channel media company comprising
Associated Newspapers and Northcliffe
Media. The portfolio includes iconic
newspaper titles such as the Daily Mail, The
Mail on Sunday, Metro, over 70 local
newspapers, an extensive network of local
web portals, MailOnline, Evenbase (an
international digital recruitment business),
Wowcher (a daily deals business) and a
52.3% interest in the Zoopla Property Group.
STRATEGy
A&N Media has transitioned in recent years
to focus on market-leading assets which will
be the material profit generators of the
future. Over the next three years, the business
will continue its transformation, investing
in its digital businesses in order to rebalance
revenues from print towards digital to evolve
the business to reflect broader changes in
consumer media consumption.
Over the last 12 months, the business has
streamlined its portfolio, exiting assets that
are non-core or unable to deliver sizeable
profits. This has resulted in the sale of motors.
co.uk, Teletext Holidays, and the merger of
the Digital Property Group with Zoopla to
create a strong business in the online
property market. In April 2012, Jobrapido, the
number two global job search engine in the
world, was acquired. Jobrapido delivers over
850 million visits per year in more than 50
countries. The A&N Media portfolio is now
simpler with a focus on a smaller number of
objectives for growth aligned to its core assets.
On 21st November, 2012, the company
announced it had exchanged contracts for
the disposal of its Northcliffe Media division
to Local World in return for £52.5 million cash
and a 38.7% holding in Local World.
MARKET ENvIRONMENT
The boundaries of where A&N Media’s
businesses operate and compete have
extended over recent years as it enters new
adjacent markets, utilises new channels such
as mobile and tablet, and deploys different
business models. As the competitive silos
between media channels are broken down,
the business faces competition from a
growing range of competitors for advertising
revenues and customer engagement.
By developing and extending products and
services into these high-growth advertising
areas and expanding internationally, the
business is positioning itself well for the
changing market environment, whilst the
enduring strength of its newspaper assets
will ensure it outperforms the broader
newspaper market and provides the strong
support to enable this transition.
PERFORMANCE
Reported revenues# for the year were £1,060
million, an underlying increase of £1 million
or 0.1%, though 3% lower on a reported basis,
mainly reflecting the disposal of Motors,
Property and Travel digital businesses during
the year and the loss of low-margin printing
contracts. The testing economic conditions
adversely affected both Northcliffe’s
classified revenues and the Mail titles’ display
advertising revenues, although the latter
showed a marked improvement in the last
four months of the year.
Although investment continues to be made
(headcount and promotional activity mainly)
in the digital businesses, a reduction in the
price of newsprint, headcount reducing by
855 (12%) during the year and continued
tight control over all expenditure, led to
a 5% reduction in costs.
Operating profits#* increased by £11 million
(+12%) to £104 million, with margins increasing
from 8% to 10%. Including a significantly
improved performance from associate
companies (principally Zoopla and Mail
Today in India), operating profits* of £107
million this year were £17 million (19%) better
than last year. All underlying year-on-year
comparisons are on a like-for-like basis,
excluding disposed and acquired businesses.
PRIORITIES FOR ThE COMING yEAR
A&N Media will continue to focus on driving
operational effectiveness and efficiency
across all of its businesses whilst investing to
drive even faster growth in the core digital
businesses, particularly MailOnline, Evenbase
and Wowcher, together with Metro’s
digital strategy.
Kevin Beatty
Chief Executive, A&N Media
Revenue#
2011 £1,098m
Operating profit*
2011 £93m
Operating margin*
2011 8%
#Continuing and discontinued operations.
30
Lord Rothermere
Chairman,
Associated Newspapers
Paul Dacre
Editor-in-Chief,
Associated Newspapers
Revenue
2011 £862m
Operating profit*
2011 £76m
Operating margin*
2011 9%
BuSINESS DESCRIPTION
Associated Newspapers is one of the UK’s
largest publishers of national newspapers
and consumer websites. In the Daily Mail
and The Mail on Sunday, the business
publishes two of the UK’s most influential
paid-for newspapers. The urban daily Metro,
the third most-read national newspaper.
The portfolio also includes MailOnline, the
world’s largest online newspaper site,
Evenbase, the world’s fourth largest digital
recruitment business, Wowcher (the UK’s
second largest daily deals business) and
a 52.3% stake in the Zoopla Property Group.
KEy hIGhLIGhTS
• Circulation market share of both Mail
newspaper titles increased again.
• Record revenues for Metro driven
by continued outperformance
of the advertising market.
• Strong growth in MailOnline visitors and
revenue. MailOnline unique browsers
102 million in September, 51% year-on-year
growth, revenues up 74% for the year.
• Continued portfolio and asset
management. Disposals of motors.co.uk,
Top Consultant, Production Base and 50%
of Teletext Holidays.
• Merger of Digital Property Group with
Zoopla. Associated retains 52.3% of the
combined business.
• Acquisition of world’s second largest jobs
search business, Jobrapido, into the
renamed Evenbase digital recruitment
division.
• Successful development of Wowcher
into the UK’s second largest daily
deals business.
• Despite lower print advertising revenues,
increased circulation and digital revenues
alongside reduced costs delivers strong
growth in operating profit.
• Costs £16 million or 2% lower than last year
– headcount 530 (12%) lower, Derby press
closed in first half of the year.
DIvISIONAL PERFORMANCE REvIEW
After a difficult first half, which saw profits
significantly lower than last year (in part due
to lower display revenues at the two Mail
print titles and to increased investment
in our digital businesses, headcount and
promotional activity) the second half of the
year has seen a marked improvement with
better performances from print display
advertising, non-repeated net costs incurred
last year following The News of the World
closure and a reduction in newsprint prices
from July, 2012.
Total revenues were down £15 million
or 2%, due mainly to the impact of disposed
businesses, printing contracts ending and
lower display revenues from the two Mail
titles. Improved revenues were seen from
the Daily Mail cover price increases, Metro,
MailOnline, Wowcher and the Evenbase
digital recruitment businesses, resulting in
total underlying revenues of £834 million, 2%
ahead of last year. Total advertising revenues
of £389 million, excluding acquisitions and
disposals, were unchanged from last year.
The reported fall in national print revenues,
the growth of digital, the reduced price of
newsprint and cost-savings following the
closure of the press at Derby in the first half
of the year resulted in operating profit for the
year increasing by £2 million (+3%) to £78
million. Operating margins rose by 0.4% to
9.2%. Including a significantly improved
performance from associate companies
(principally Zoopla and Mail Today in India),
profits of £81 million this year were £8 million
(11%) better than last year.
An exceptional operating charge of £60
million (£35 million of which was non-cash)
was made for restructuring and closure costs,
the largest portion relating to print site
restructuring and closures and to severance
costs relating to the reduction in headcount
as reported above.
uK NEWSPAPER-RELATED OPERATIONS
Circulation revenues grew by £10 million (3%)
to £353 million. Lower copy sales were offset
by the full-year benefit of cover prices
increases in the final quarter of the 2011
financial year and from the temporary price
discounting by The Mail on Sunday last year,
in an initiative to attract new readers
following the closure of The News of the
World in July 2011.
Advertising revenues were 2% lower at £332
million, a strong performance by Metro and
MailOnline in particular offset lower revenues
on both Mail titles. Our three largest
categories, retail, travel and financial saw
revenues decline by 7%, 16% and 10%
respectively, but there was a 6% growth in
total from other categories. Overall trends
have improved, with a 6% decline in the
first half of the year but 2% growth in the
second half.
Print advertising revenues declined by 6% this
year, but digital revenue from the newspaper
titles’ companion sites increased by 72% to
£31 million.
Daily Mail and General Trust Plc 31
Strategic Report
Directors’ Report
Governance
Financial Statements
Operating profits (excluding associates) can
be analysed as follows:
2012
£m
101
11
(8)
-
4
4
(34)
78
2011
£m
94
5
(2)
1
4
1
(27)
76
OuTLOOK
For 2012/13, Associated expects revenues to
be broadly in line with the current year, with
continued print advertising and circulation
declines offset by growth in digital activities.
The positive revenue impact of the Olympics
this year will not be repeatable in 2013.
Newsprint prices expected to be similar
to this year.
REvENuE AND PROFIT ANALySIS
Revenues can be analysed by division as
follows:
Newspaper operations
Digital-only UK businesses
Evenbase
Wowcher
Other
International
Disposed operations (net)
2011
£m Change
608
(3%)
Other costs
Total
2012
£m
590
89
27
44
27
25
802
14
32
+8%
+74%
+14%
(7%)
+39%
+1%
82
16
39
30
18
793
–
69
Daily Mail/The
Mail on Sunday
Metro
MailOnline
Evenbase
International
Other
Acquisitions
Disposals, print
contracts
Total
REvIEW OF KEy BuSINESSES
Mail Newspapers
BuSINESS DESCRIPTION
Mail Newspapers comprises the UK’s biggest
selling mid-market newspapers, the Daily
Mail and The Mail on Sunday.
STRATEGy AND ACTIvITy
Mail Newspapers has defined its vision for
the next three years as ‘More women, More
engaged with More Mail’. Whilst women
are not the only audience, the Mail titles are
uniquely placed with this audience to have
a bias and scale that other newspapers
can’t replicate.
Working cohesively with the existing and
emerging digital businesses, Mail
Newspapers is targeting revenue growth
from both direct-to-business and direct-to-
consumer channels, including offering
broader marketing solutions for clients.
There has been a continued drive to reduce
the cost base of both titles, yielding significant
annual savings, which has included further
rationalisation of production facilities,
de-manning, lower newsprint usage, greater
promotional efficiency and reduced
distribution charges.
This year has seen the successful
development of the Mail Rewards Club, now
rolled out to seven days, and grown to
750,000 members, to help support circulation
whilst opening up a range of new direct-to-
consumer revenue opportunities.
848
862
(2%)
Excluding acquisitions and disposals,
revenues can be further analysed by type
of revenue as follows:
2012
total
46%
32%
6%
4%
2%
3%
92%
7%
1%
2012
£m
362
259
46
31
13
24
735
60
7
2011
£m Change
352
276
51
18
10
26
733
50
10
+3%
(6%)
(10%)
+72%
+29%
(8%)
–
+20%
(26%)
100%
802
793
0%
Circulation
Advertising –
display
Advertising –
classified
Digital
Commercial
enterprise
Other
Newspaper
operations
Digital-only
businesses
UK contract
print
Total –
underlying
Annual Report 2012 32
MARKET ENvIRONMENT
Print advertising continues to face
a challenging market environment.
Technology changes such as the rise
of tablets and eReaders and increasing
non-traditional entertainment and news
sources continue to pose a challenge to the
traditional print products. Mail Newspapers
aims to tackle and capitalise upon these
changes by increasing distribution through
digital devices and by strengthening
engagement with the brand outside
of the traditional newspaper environment.
PERFORMANCE
Over the year, the Daily Mail increased
its circulation revenue by 4% to £257 million,
benefiting from the full-year impact of the
July, 2011 5 pence weekday cover price
increase and also 10 pence Saturday edition
increase in October, 2011. Its share of the
national daily newspaper market rose by
0.6% to 21.6%, a new record. Average daily
circulation declined by 5.4% to 1.96 million
copies, but outperformed the rest of the
daily market which declined by 8.5%.
The Mail on Sunday’s circulation revenue
remained broadly stable at £96 million. The
title continued to grow its share of the total
market, increasing share by 0.2% to 20.8%,
despite the launch of Sun on Sunday in
February. Average daily circulation declined
by 6.7% to 1.85 million, against a market that
contracted by 7.7%.
Print advertising revenues declined by 10%,
after allowing for one fewer issue of The Mail
on Sunday. There was, however, a marked
improvement in revenue during the second
half of the year, and particularly the final
quarter when advertising declined by
a more modest 5%.
PRIORITIES FOR ThE COMING yEAR
Further cost savings are planned next
year, most notably the transfer of Mail
Newspapers’ main print facilities from Surrey
Quays to Thurrock in the summer of 2013,
which will yield material reductions in the
underlying cost base and create greater
efficiency of internal resources.
A paid-for tablet version of the Daily Mail
and The Mail on Sunday, Mail Plus, will be
launched in the first quarter of the new
financial year.
MailOnline
BuSINESS DESCRIPTION AND STRATEGy
MailOnline grew its audience significantly
during the year to become the world’s
largest online news site, surpassing The New
York Times and reaching a new high of 106
million browsers during August 2012, a 41%
year-on-year increase. Daily unique browsers
leapt by more than 50% to 6.4 million in
September, 2012, of which 2.8 million were
in the in UK and 1.7 million in the US. During
the year, an Indian version of the site was
launched supported by content from
Mail Today.
ACTIvITy
The number of users accessing MailOnline
on a mobile device has grown to now
account for 34% of daily visits to MailOnline,
in addition our iPhone, iPad and Android
apps have gained UK market-leading levels
of engagement with more than 445,000
users every day.
Advertising revenue is growing more rapidly
than our audience, up 74% year on year to
reach £27 million. This growth comes from
strong demand for premium advertising in
the UK market, as well as increasing demand
for MailOnline advertising inventory in other
parts of the world, such as the USA, Canada
and Australia. Mobile and video revenues
are also showing strong growth. MailOnline
was profitable in the UK in the second half
of the year
PRIORITIES FOR ThE COMING yEAR
Over the next year MailOnline will continue
to increase investment to expand the
editorial bureaus opened in New York and
Los Angeles where our content is already well
received. The existing team of video editors
in the UK and US will be built upon to match
the commercial appetite for video inventory
as well as starting to test longer-term
video-creation strategies.
Commercially the US sales team will be
expanded to capitalise on increasing traffic
and awareness in the US market. In the UK
delivering even deeper partnerships with
larger advertisers coupled with innovative
advertising formats are expected to support
MailOnline in continuing to outperform the
market, with strong revenue growth
expected to continue.
Daily Mail and General Trust Plc 33
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Key developments
Market share of national titles
increased again.
Strong growth in MailOnline
visitors and revenue.
Profit higher due to digital
growth, cover price benefits
and cost efficiencies.
Continued portfolio
management:
– Disposal of motors and
Teletext business and
acquisition of Jobrapido.
– Merger of Digital Property
Group with Zoopla.
Wowcher developed into
UK’s second largest daily
deals business.
MARKET ENvIRONMENT AND PERFORMANCE
Despite the challenging economic
conditions, Metro continued to outperform
the market. Unique access to distribution
through its contracts with transport providers
delivers a significant competitive advantage.
The opportunity now is for Metro to convert
this strong print position and consumer
relationship onto mobile devices and to
retain this advantage. Daily mobile audience
grew 213% in the last 12 months to over 319
thousand whilst the proportion of mobile
traffic to metro.co.uk has increased from
20% to 41%. Downloads of the digital edition
products are now in excess of 1.2 million.
Metro grew its revenues +8% (print +8%
and digital +39%) and its profits +14%
(on a like-for-like basis excluding strategy
investment of £2.1 million).
PRIORITIES FOR ThE COMING yEAR
Metro will pursue its focus on further mobile
product development, the mobilisation of
content across all platforms, the launch of
Metro Play and marketing activity to drive
customer acquisition, frequency and
brand engagement.
The expectation for FY13 is that a general
decline in the national press advertising
market coupled with the absence of the
Olympics will negatively impact on Metro’s
print revenues but this will be offset by
growing digital revenues. Metro will continue
to invest in its strategic digital priorities
during the year.
Evenbase
BuSINESS DESCRIPTION AND STRATEGy
The digital recruitment business was renamed
Evenbase during the year, reflecting the
wider scope and international reach of the
enlarged group. The business now includes
the flagship job board brands Jobsite and
OilCareers; the leading candidate-sourcing
provider Broadbean; recruitment
partnerships with brands such as the UK’s
National Health Service (NHS) and
Jobrapido, the number two global job
search engine in the world. Acquired in April,
Jobrapido delivers over 850 million visits per
year in more than 50 countries.
Metro
BuSINESS DESCRIPTION
Metro is a consumer media brand targeting
urbanites, a segment of hard-to-reach,
on-the-move, attitudinally young urban
professionals. The newspaper is the UK’s third
largest daily, read by 3.6 million commuters
every weekday, while metro.co.uk has
7.5 million unique browsers per month
(September, 2012).
STRATEGy
‘Urbanites on the move get more from
the city with Metro.’ Addressing changing
consumption habits, Metro is investing in
reaching more urbanites on the move,
through new mobile platforms, on a more
frequent basis. Four key products underpin
this:
• Metro editions – interactive edition-based
products designed for tablets and
smartphones
• metro.co.uk – optimised responsive and
adaptive experience for smartphone,
tablet and web consumption
• Metro Play – gaming offerings with
compelling gameplay and social
interaction
• Metro unEdited – a content-sharing
platform for urbanites
This investment will shift Metro to being a
mobile-led, urbanite lifestyle business,
focused on driving audience engagement,
loyalty and brand strength.
ACTIvITy
Building new mobile and digital products
and capabilities has been a key focus over
the last six months. The successful launch of
Metro’s tablet edition, which won Newspaper
App of the Year, was built upon with the
launch of further digital editions. A redesign
of the print product alongside a detailed
review of logistics processes for delivery of the
newspapers, allowed Metro to deliver record
readership levels (+11% year on year).
Metro’s focus on the Olympics helped deliver
the most successful newspaper operation in
the market, expanding its product suite
across both print and digital platforms and
carrying the two largest newspaper deals
for the Olympics in the UK. The Games
exceeded all revenue and profit targets
for Metro, while taking the greatest share
of revenue and volume in the national
newspaper market.
Annual Report 2012 34
The Evenbase vision is to transform from
a network of UK-based jobs’ boards, to
an international recruitment business. The
acquisition of Jobrapido is a key step in this
strategy, while OilCareers and Broadbean
continue to make successful progress in their
international expansion into the Middle East,
North America and AsiaPac. This strategy
moves Evenbase beyond the UK online
recruitment listings sector into the broader
global recruitment market, which offers
a range of high-growth opportunities.
The fast adoption of mobile by consumers
is impacting the recruitment industry,
presenting both opportunities and
challenges. The key Evenbase brands
experience 20–25% of site traffic coming
from mobile devices – and Jobsite holds the
UK’s number-two position for mobile traffic.
MARKET ENvIRONMENT
Competition for Evenbase includes job
boards and international aggregators as
well as country-specific players. Through
the combination of its assets, Evenbase
is positioned as the fourth largest digital
recruitment group in the world with c.41
million monthly unique users. The key Jobsite
brand is positioned as one of the UK’s
largest job boards.
ACTIvITy AND PERFORMANCE
During the year the job board portfolio was
rationalised, exiting non-core job boards,
allowing investment and management time
to be focused on those brands which have
greater growth prospects.
Evenbase launched a pay-per-download
model for CV access and ‘Jobsite White’, a
simple-to-use white label job board aimed
at SMEs, trade publications and associations.
This year saw 11% growth in client numbers
and 7% growth in candidates on a like-for-like
basis excluding Jobrapido. Underlying
revenues have grown 14% year on year to
£44 million, driven by product innovation and
international expansion. Jobrapido revenues
for the six months post acquisition were an
additional £14 million.
PRIORITIES FOR ThE COMING yEAR
International expansion remains a key
priority for the coming year. The acquisition
of Jobrapido delivers an opportunity to
accelerate global expansion and investment
continues in expanding OilCareers and
Broadbean in other countries. For candidates
and clients there will be more new products
to make the recruitment process more
straightforward and efficient, enabling
greater choice for candidates and providing
clients with the tools to most easily match
talent with opportunities.
Wowcher
BuSINESS DESCRIPTION AND STRATEGy
Wowcher is A&N Media’s daily deals and
online discounts business offering a wide
range of both local and national deals, now
sending an average of 3.3 million emails per
day. Wowcher.co.uk was launched by A&N
Media in April, 2011 and since that time has
grown rapidly to become the number two
in the UK market (source: Comscore,
September, 2012). Wowcher targets affluent,
urban female customers largely between
the ages of 18–44 and focuses on delivering
deals that appeal to this audience base.
This affluent, differentiated and attractive
demographic allows Wowcher to compete
effectively on the basis of consumer quality,
which has seen high levels of merchant
satisfaction, 76% of all merchants choosing
to run repeat deals with the business.
There is strong synergy between Wowcher
and the wider set of A&N Media assets. The
business is able to leverage the existing A&N
Media customer database assets to extend
the reach of its deals. At the same time the
ability to offer additional media support
to deals through both online and in printed
promotion of deals acts as a strong brand
differentiator to prospective merchants.
Wowcher was launched during 2011
and has been a focus point for investment,
particularly in marketing, over this year.
On the back of this investment Wowcher
has had a very strong first full year of operation,
growing the subscriber database to more
than 1.3 million at a low cost of acquisition
and is now operational in 14 areas across
the UK.
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Central and Eastern Europe
A&N International Media’s operating profits
(excluding associates) grew by £0.2 million
(5%) to £3.9 million on revenues down 8% to
£27 million. On an underlying basis revenues
grew by 5%, with print advertising revenues
declining by 7%, but circulation and digital
revenues growing by 2% and 14%
respectively. Contract printing revenues have
also grown strongly. Digital advertising now
represents 58% of total advertising, up from
52% last year. Headcount has been reduced
by 5% and significant cost savings were
made, profit margins improving by 2% to 14%.
Subsequent event
Since the year-end A&N International Media
has disposed of its digital operations in
central Europe.
PRIORITIES FOR ThE COMING yEAR
Looking forward, Wowcher intends to
extend its offering of discounted products
and services to its subscriber base both
broadening the breadth and quality of daily
deals offered and the range of additional
discount services that the platform provides.
Wowcher is also building tools to encourage
site loyalty and stickiness. These investments
include the building of a market-leading
rewards and points programme to incentivise
repeat engagement and purchase.
Alongside this, Wowcher is developing
a suite of tools to improve personalisation
and relevancy of deals to drive increased
engagement and purchase propensity.
The business will continue to invest in growing
the database through a marketing strategy
that seeks to attract this affluent female
subscriber base through a blend of online
and offline media channels.
Zoopla Property Group (ZPG)
BuSINESS DESCRIPTION
This year we merged our Digital Property
Group assets with Zoopla to form the Zoopla
Property Group in which A&N Media holds a
52.3% stake. The combined business is aiming
to emerge as a leader in the digital property
space, delivering high volumes of leads to its
estate agent and developer members.
PRIORITIES FOR ThE COMING yEAR
The technical and people integration of
the business was completed at the end
of the year. Over the next year there will be
significant efficiency savings from bringing
the businesses together, as well as building
on the opportunity that the strong platform,
combined customer reach and lead
generation creates for revenue growth.
Revenue growth in the period since merger
has been 22% and we expect to see this
increase as the combined strength of the
Group’s assets are brought to full effect.
Profits from our share of ZPG were £4 million
for the four months post completion.
Annual Report 2012 36
Steve Auckland
Chief Executive Officer,
Northcliffe Media
Revenue
2011 £236m
Operating profit*
2011 £17m
Operating margin*
2011 7%
BuSINESS DESCRIPTION
Northcliffe is one of the largest local media
publishers in the UK, publishing local
newspapers and hosting local websites.
Encompassing a portfolio of 77 print titles
across the United Kingdom, including titles
such as the Leicester Mercury, the
Cornishman, the Western Morning News, and
the Hull Daily Mail, Northcliffe Media has an
average issue readership (Source JICREG) of
5.8 million readers across the UK. The business
also has 26 local news, information and
classified websites under the ‘thisis’ banner
and more than 160 local community sites
under the ‘localpeople’ brand, covering
counties, cities and smaller local
communities.
KEy FIGuRES
Advertising
– print
Circulation
Digital
Other
Revenue
Costs
Operating
profit
Profit
margin
2012
£m
132
2011
£m
151
57
18
6
213
187
26
60
18
7
236
219
17
12%
7%
Reported
%
Underlying
%
-9%
1%
6%
-7%
-6%
-13%
-6%
2%
-8%
-10%
-15%
54%
ACTIvITy AND PERFORMANCE REvIEW
Northcliffe’s print portfolio continued to
attract significant management focus in
a year challenged by sluggish advertising
markets and a change of national sales
house. Advertising performances continue
to be in line or slightly better than
comparable local media businesses. Four
daily paid-for titles in Exeter, Torquay, Lincoln
and Scunthorpe have been converted
to a weekly format over the past 15 months.
During the financial year, Northcliffe sold the
Chew Valley Gazette, closed a further
10 non core-free titles and purchased
‘The Topper’ free title in Nottingham.
Digital revenues
Northcliffe digital revenues grew by an
underlying 6% and now represent 9% of total
revenues. Revenues not associated with a
print sale grew to account for 30% of digital
income, up from 11% last year. The strength
of the digital offering and continued
audience growth has enabled revenue
increases in key categories.
The Northcliffe Digital audience has
continued to grow with unique users across
the thisis and localpeople networks reaching
seven million in September, a growth of 30%
versus last year. Currently 30% of all visits are
by mobile.
Newspaper sales
Reported newspaper sales revenues fell
by 6% or £3.4 million. On a like-for-like basis
(excluding a change in accounting
treatment for distribution costs, daily to
weekly switches and divestments), revenues
were up 1%. Cover price increases were
implemented across the majority of titles
where prices had historically been below
the industry average.
For the January to June, 2012 ABC period,
circulation of the dailies was down 8.8% in
line with the average decline experienced
by the top four regional publishers. The
weekly paid-for portfolio continued to
perform ahead of the industry average.
For the January to June, 2012 ABC period,
circulation was down 7.1%, outperforming
the average of the top four regional
publishers, which were down 7.6%.
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Financial Statements
Key developments
Underlying decline in UK
revenues of £13 million (6%).
Restructuring activities helped
to deliver year-on-year cost
savings of £32 million or 15%.
Headcount reduces by a
further 325 (or 13%) during
the year.
Sale to Local World announced
21st November, 2012.
MARKET ENvIRONMENT
As noted above, both the print advertising
and circulation market places remain very
challenging, but Northcliffe’s performance
remains in line or slightly better than its peers.
Subsequent event
On 21st November, 2012, A&N Media
announced the exchange of contracts
for the disposal of the division to Local World
in exchange for cash of £52.5 million and
a 38.7% holding in Local World.
Print advertising
Excluding the title disposals, divestments
and acquisitions noted above, advertising
revenues are down 9% for the year
(compared with a headline reported
decline of 13%).
Print revenue performance represents
a mix of fortunes, stronger underlying local
performance (-5%), offset by a weak national
performance (-20%). In the first quarter of the
year Northcliffe gave notice to change its
national advertising sales house which
resulted in some performance disruption
during the period. Total recruitment category
revenues declined by an underlying 19%
(compared with a 31% decline in the prior
year). Northcliffe’s rate and advertising
package restructure mitigated the impact
of continued low private sector demand
and volume growth. Weak national property,
motors and retail market performance has
been compounded by national sales house
disruption and underlying declines were
-9%, -14% and -12% respectively.
Costs
The company continued its restructuring
and process innovation and delivered
year-on-year cost savings of £32 million or
15%. Restructuring costs of c. £10 million are
treated as exceptional items this year. Total
headcount reduced by a further 13%,
or 325 people.
Staff costs fell by £9.4 million as the benefits
of last year’s structural changes took effect
in addition to further headcount reductions
during the year. Production costs have
reduced by £6.7 million or 16% and distribution
costs by £6.8 million or 32%. Some savings
were as a consequence of lower activity
levels, however, more significant reductions
have been made through the changes to
the product portfolio, distribution changes
and lower newsprint costs.
Annual Report 2012 38
KEy hIGhLIGhTS
• Good year of performance.
• Good growth from B2B with underlying
revenues up 7% and profits up 8%.
• Underlying revenue up 2% at Associated.
• Underlying Group operating profit up
7% and operating margin increased from
14% to 15%.
• Continued active portfolio management.
• Net debt to EBITDA ratio of 1.6 times, with
net debt down £107 million to £613 million.
• Dividend increased by 6%.
ACCOuNTS
This Financial and Treasury Review focuses
principally on the adjusted results* to give
a more comparable indication of the
Group’s underlying business performance.
All year-on-year comparisons are on a
like-for-like basis.
A discussion of restructuring and impairment
charges and other items included in the
statutory results is set out after the divisional
performance review and in the segmental
note. The adjusted results are summarised
as follows:
Adjusted results*
Revenue
Operating profit
Income from
joint ventures
and associates
Net finance costs
Profit before tax
Tax charge
Minority interest
Group profit
Adjusted earnings
per share
2012
£m
2011
£m Change
1,960
1,985
300
13
(58)
255
(39)
(27)
189
281
5
(54)
232
(34)
(22)
177
49.4p
46.1p
-1%
+7%
+10%
+7%
+7%
Underlying revenue growth was 3%.
Adjusted profit before tax rose by 10% to £255
million following the 7% increase in operating
profit and the benefit of increased income
from joint ventures and associates.
Stephen Daintith
Finance Director
Revenue#
2011 £1,985m†
Operating profit#*
2011 £281m†
Earnings per share#*
2011 46.1p†
#Continuing and discontinued operations.
Daily Mail and General Trust Plc 39
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Financial Statements
REvENuE
Group revenue# for the year was £1,960
million compared with £1,985† million for the
prior year, a decrease of 1% on a reported
basis but an underlying increase of 3%.
Revenues from the B2B segments totalled
£899 million, 1% higher than last year, with
an underlying increase of 7%.
RMS delivered continued growth driven
by its core modelling business.
Strong growth at dmg::information with
reported revenue up 9% at £253 million
reflecting the execution of organic growth
plans, complemented by bolt-on
acquisitions. Underlying revenues grew by
11% following last year’s disposal of Sanborn.
dmg::events performed as expected
delivering an underlying revenue increase of
13%. Reported revenues declined following
the sale of George Little Management (GLM)
in September, 2011 and the cycle of biennial
shows which meant that one of the three
large biennial events took place during the
year compared with two last year.
Euromoney reported underlying revenue
growth of 2% driven by a 5% increase in
subscriptions revenue.
Consumer revenues# of £1,060 million were
3% down on £1,098 million in the prior year,
but in line with last year on an underlying
basis. Within Consumer, Associated’s
underlying revenues were up 2% due to
improved revenues from digital, as well
as the benefit of cover price increases
on circulation revenues.
Testing economic conditions continued to
adversely affect Northcliffe’s revenues which
were down 6% on an underlying basis.
An analysis of revenue is illustrated on the
following charts, which show that the
percentage of total revenue from print-
based products has fallen by 6% this year and
is now 53% of total revenues, reflecting both
digital growth and print decline. These also
demonstrate that 63% of total revenue by
source was generated by UK businesses,
down 4% on the prior year.
Revenue by type (%)#
Set out below is a split of revenue
by type.
Subscriptions and circulation print
Advertising print
Subscriptions non print
Events, training and conferences
Other non print
Advertising non print
Other print
2012
2008
£649m
£501m
£245m
£204m
£147m
£133m
£81m
£1,960m
£864m
£578m
£318m
£211m
£82m
£102m
£98m
£2,253m†
Revenue by geographical area (%)#
Set out below is a split of revenue by
geographic location.
UK
North America
Rest of the world
Rest of Europe
Australia
2012
2008
£1,235m
£560m
£83m
£68m
£14m
£1,960m
£1,614m
£482m
£71m
£16m
£70m
£2,253m†
33%
26%
12%
10%
8%
7%
4%
38%
26%
14%
9%
4%
5%
4%
63%
29%
4%
3%
1%
72%
21%
3%
1%
3%
Annual Report 2012 40
OperAtiNG prOfit*#
Operating profit of £300 million was up £19
million or 7% on the equivalent figure for
the prior year. Overall operating margin
increased from 14% to 15% following margin
improvement from both the B2B and
consumer businesses.
Operating profit is stated before charging
£86 million of exceptional operating costs,
principally within Associated. This charge
includes reorganisation costs of £40 million,
accelerated depreciation of property, plant
and equipment of £39 million, principally
relating to the proposed move to Thurrock
and impairments of fixed assets of £7 million.
The charge for amortisation of intangible
assets fell by £7 million to £39 million.
The Group also made a charge for the
impairment of intangible assets of £21 million,
largely relating to a business in the financial
sector of the business information segment.
73% of this year’s operating profit was
generated from the Group’s B2B operations
and 27% from Consumer, compared to 58%
and 42% in 2008. These percentages have
been calculated after allocating Head
Office costs on the basis of revenues. More
than half of the Group’s operating profits
were again derived from outside the UK,
with 51% coming from the US.
The Group’s B2B companies increased their
overall profit by £11 million or 6%. The average
sterling:US dollar exchange rate for the year
was £1:$1.58 (against £1:$1.61 last year).
Within Consumer, profits increased by £6
million or 10%. At Associated Newspapers,
operating profit increased by £2 million
or 3% to £78 million following a range
of cost efficiencies.
Northcliffe’s profits increased by £9 million
or 54% following year-on-year cost savings
and growth in digital revenues.
NET FINANCING COSTS
As the table below shows, net interest
payable and similar charges (including
deemed finance charges and interest
receivable) fell by £8 million to £61 million due
to lower average debt and management of
the debt portfolio. Net finance costs included
a £6 million charge for the premium on early
redemption of £110 million of 7.5% bonds
due 2013.
Operating profit by activity*#
Set out below is a split of operating profit
by activity.
Euromoney
National media
RMS
Business information
Local media
Events
Corporate costs
2012
2008
£112m
£78m
£56m
£48m
£26m
£21m
(£41m)
£300m
£33m
£31m
£38m
£76m
£75m
£60m
(£15m)
£298m†
37%
26%
19%
16%
9%
7%
(14%)
11%
10%
13%
26%
25%
20%
(5%)
There was a £3 million reduction in pension
finance due to the lower pension fund deficit
as at 2nd October, 2011. Other investment
revenue fell by £2 million due largely to a
one-off dividend from an internet investment
fund in the prior year.
Net interest
payable and
similar charges
Premium on
bond buy back
Pension finance
Investment
Income
Total
2012
£m
(61)
2011
£m
(69)
Change
(13%)
(6)
-
9
1
12
3
(57)
(54)
6%
Daily Mail and General Trust Plc 41
Strategic Report
Directors’ Report
Governance
Financial Statements
PENSIONS
The Group’s defined benefit pension
schemes provide retirement benefits for UK
staff, largely in A&N Media. The deficit in
these schemes has fallen from £336 million
at the beginning of the year to £324 million
at 30th September, 2012 (calculated in
accordance with IAS 19). Corporate bond
yields continued to fall over the period, (from
5.2% to 4.4%) which resulted in a higher value
of the defined benefit obligation. However,
this has been more than offset by an increase
in the schemes’ assets and funding payments
into the main schemes of £64 million, in
accordance with the funding agreements
with the Trustees, which included £24 million of
surplus properties, previously solely used by the
regional newspapers. The property transfer,
in combination with a £12 million funding
payment made in October, 2012 satisfies the
£36 million October, 2012 funding payment
requirement previously agreed with the
Trustees under the payment recovery plan.
In July, 2012 DMGT created a guarantee
structure in collaboration with its principal
defined benefit pension scheme,
Harmsworth Pension Scheme (HPS). The
structure provides HPS with a valuable
contingent asset, a £150 million guaranteed
loan note, and will reduce the need for
additional cash contributions to HPS in the
medium term. Whilst the loan note is treated
as an asset of the scheme and reduces the
actuarial deficit within the scheme, under
IAS 19 it is not included as an asset and is
excluded from the calculation of the £324
million year-end deficit.
The defined benefit pension schemes are
closed to new entrants, and measures were
introduced in April 2011 to reduce costs and
risks, in particular to eliminate longevity risk
on accrued pensions since that date, and
help secure the schemes’ and employers’
financial health into the future. All new
employees of A&N Media are now being
offered a defined contribution pension plan,
in line with our other newer and more
internationally focused divisions where we
have long considered this type of pension
plan to be the most appropriate.
JOINT vENTuRES AND ASSOCIATES
The Group’s share of the adjusted results
of its joint ventures and associates rose by
£8 million to £13 million. It includes income
from dmg Radio Australia Pty Ltd and the
Zoopla Property Group.
OThER INCOME STATEMENT ITEMS
The Group recorded other net gains on
disposal of businesses and investments of
£158 million, compared to £15 million last
year. These include the sales of Evanta,
the Group’s digital property businesses
and the Group’s remaining 50% stake in
dmg Radio Australia Pty Ltd.
Northcliffe Media was held for sale at 30th
September, 2012 and is therefore treated
as a discontinued operation together with
the result from the Group’s investment in
dmg radio Australia. Profit attributable
to operations treated as discontinued
amounted to £55 million (2011 loss of
£5 million).
RESuLT BEFORE TAx
The statutory profit before tax for the year was
£206 million, after charging £57 million of
amortisation charges and impairment losses
and £41 million of net exceptional charges.
TAxATION
The adjusted tax charge of £39 million (2011
£34† million) is stated after adjusting for the
effect of exceptional items. The adjusted tax
rate for the year rose to 15.2% from 14.4% in
2011, largely due to a change in the mix of
chargeable profits. The continued low rate
reflects tax reductions from tax-efficient
financing and tax-deductible amortisation
in the USA that are expected to be in place
for the next few years although the mix of
chargeable profits is expected to continue
to change.
There were net exceptional tax credits of
£49 million, arising on disposals, assets held
for sale, operating exceptional costs, the
accelerated depreciation of property and
equipment and the recognition of tax losses.
PROFIT AFTER TAx
Adjusted Group profit* after tax and minority
interests was up 7% to £189 million. Statutory
profit after was £225 million, up from £130†
million, due to increased other gains and
losses in the current year.
Annual Report 2012 42
Net debt
2011 £719m
undrawn committed bank
facilities
2011 £328m
Net Debt:EBITDA
2011 2.0 times
CASh FLOW AND NET DEBT
Net debt has fallen by £106 million during the
year from £719 million to £613 million and by
£196 million since the half year. The Group
generated operating cash flows of £339
million, a 113% conversion rate of operating
profits*. These funded capital costs at
Thurrock of £39 million, capitalised software
development of RMS’s Next Generation
product of £18 million, taxation of £34 million,
interest of £70 million, pension funding of £40
million and dividends totalling £76 million.
Operating cash flows are stated after capital
expenditure of £42 million, excluding that on
Thurrock and RMS’s Next Generation
product, and exceptional operating items
of £37 million. Net proceeds from disposals
and acquisitions were £42 million.
Acquisitions totalled £75 million and included
Jobrapido for closing consideration of £29
million; Intelliworks, Xceligent, PrepMe and
Spring Rock within the dmg::information
portfolio; Praedicat by RMS, and Global
Grain Geneva and Global Grain Asia by
Euromoney. Business disposals totalled £117
million and included the sale of Evanta and
the remaining 50% stake in dmg radio
Australia in September.
The Group’s principal debt remains in
long-term bonds. At the year end, the Group
had £725 million of bonds with repayments
due in 2013 (£47 million), 2018 (£308 million),
2021 (£171 million) and 2027 (£199 million).
In December 2011, the Group acquired £110
million of the 7.5% bonds, due 2013, and will
consider acquiring further bonds where
financially sensible.
The Group’s ratio of year-end net debt to
adjusted profits* before interest, depreciation
and amortisation (EBITDA) was 1.6 times,
comfortably below the Group’s internal limit
of 2.4 times and preferred level of around
2.0 times, and well within the requirements of
the Group’s bank covenants. The Group’s
Cash flow and net debt
corporate credit ratings are BBB- from Fitch,
and BB+ from Standard & Poor’s.
During the year the Group cancelled surplus
bank facilities of £90 million maturing in
December, 2012 and March, 2013. The Group
continues to maintain sufficient committed
debt facilities to meet its foreseeable
requirements. It had unutilised committed
facilities of £298 million at the year end and
surplus cash of £107 million.
OThER FINANCING
The Company acquired 7.5 million ‘A’
Ordinary Shares in Treasury for £30 million,
using seven million of them, valued at £32
million, to provide shares under various
incentive plans. Following these transfers,
DMGT has 382.8 million shares in issue,
including 19.9 million ordinary shares together
with 10.2 million ‘A’ Ordinary Shares held in
Treasury to meet further obligations that
may arise.
TREASuRy POLICIES
DMGT aims to have sufficient liquidity to meet
both operational and capital cash flows and
to impose the minimum cash constraints on
the management and operation of the
Group. Financial instruments, including
derivatives, are used by the Group in order
to manage the principal financial risks that
arise in the course of business. These risks are
liquidity or funding risk, foreign exchange risk,
interest rate risk and counterparty risk. The
instruments are used within the parameters
set by the Investment & Finance Committee
of the Board, and are not traded for a profit.
The Group’s priority is to address the
economic impact of financial risks using
the most efficient or appropriate approach.
This may result in IFRS accounting volatility.
Full details of treasury policies are on
pages 14 to 144.
)
m
£
(
t
b
e
d
t
e
N
800
700
600
500
400
300
200
100
0
719
339
76
70
39
18
51
7
613
40
34
Opening
net debt
Operating
cashflows
Taxation
Pensions
Interest Dividends
Thurrock
Next
Gen
M&A
Debt
revaluation
Closing
net debt
Daily Mail and General Trust Plc
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Financial Statements
SALE OF NORThCLIFFE MEDIA
The announcement that the Group has
reached agreement to sell Northcliffe Media
will improve the strength of our portfolio and
the shape of our business.
The following table summarises the shape of
the Group excluding Northcliffe Media:
Key metrics post Northcliffe
B2B share of revenue
B2B share of operating
profit
Print advertising share
of total revenue
Digital share of total
revenues
Subscription share
of revenues
Non-UK share of operating
profit
Operating margin
Underlying revenue
growth rate
Before
46%
73%
After
51%
79%
25%
20%
35%
39%
25%
28%
65%
71%
15%
3%
16%
4%
OvERvIEW
The Group has adequate committed
debt finance to meet current trading
requirements. The Group aims to have 70% to
80% of its debt at fixed interest rates to reduce
the impact of interest rate fluctuations.
Foreign exchange risk on transactions is not a
large issue for the Group as the majority of its
businesses operate in the country in which
they are located. In principle, the underlying
currency of net debt after taking account of
derivatives is managed in proportion to the
EBITDA in each currency. More than half of
the Group’s profits are expected to be
earned from revenue billed in US dollars
outside the UK. The Group’s foreign assets are
only partially hedged by its foreign currency
debt and economically its earnings are most
exposed to movements in value of the
US dollar.
CAPITAL RISK MANAGEMENT
The Group’s strategy for capital risk
management is set out in note 33 to the
Accounts.
GOING CONCERN
The Directors have continued to adopt the
going concern basis for the preparation of
the accounts. This has been done since, after
considering relevant information, they have
a reasonable expectation that the Company
and the Group have adequate resources to
continue in operational existence for the
foreseeable future (note 1).
ShARE Buy BACK
DMGT’s strong operational cash flow and
disciplined business portfolio management
has resulted in a net debt to EBITDA ratio of
1.6, falling to well below our stated internal
limit of 2.4 times. The Board remains confident
in the overall outlook for the Group and the
operating cash flow that our businesses will
generate. We believe that the creation of
shareholder value over the long term requires
a balanced approach to investing in growth
and returning excess capital to shareholders
whilst maintaining a strong balance sheet.
We will therefore continue to look for
attractive acquisitions and actively manage
our business portfolio while maintaining our
dividend policy of growing dividends by
between 5% and 7% in real terms over the
economic cycle. In reviewing our capital
management programme, the Board has
also decided to utilise part of its authority
to make on market purchases of the ‘A’
Ordinary Non-Voting Shares. We anticipate
spending up to approximately £100 million
over the coming year.
Annual Report 2012 44
l
l
i
e
N
c
M
c
a
n
o
r
B
©
:
e
g
a
m
I
David Dutton
Chairman, Corporate
Responsibility Committee
Getting behind Team GB
A&N Media’s donation to the
Team 2012 appeal contributed
to some outstanding
performances by British
athletes at London 2012. It also
fired the starting gun for 18
months of events and activities.
Staff met distinguished
Olympians and Olympic and
Paralympic hopefuls. Some
tried their hands at goalball,
judo and handball. They
toured the Olympic Park and
attended preview events.
VIP access to Team GB House
during the Games and to the
celebratory parade afterwards
capped a memorable
summer of sport.
Target reduction in tCO2/£ million
revenue
We try not to be prescriptive. Instead, we
empower our businesses. We focus on
equipping them with the knowledge, skills
and, crucially, the permission to take
effective action.
A centre of excellence
The Group’s diversity is a key source of
strength. We identify the best transferable
approaches by comparing our different
CR programmes.
We exchange experiences and record
performance. We act as a sounding board
and a forum for ideas. We find ways to
improve and build on what’s already been
achieved and we share our knowledge.
Acting responsibly supports our objectives
Our CR activities and responsible attitudes
have a positive impact on long-term
performance in at least three important
respects:
• By consistently acting responsibly
we help the Group to stay relevant in
a changing world.
• They help us attract and retain talent. Most
people want more than money from their
working lives. They want to enjoy their work,
meet challenges and make a difference.
Our CR activities engage and motivate
our people.
• In a networked world, content providers
succeed by staying at the heart of their
communities. CR initiatives, particularly
those that engage supply chain partners,
instil a sense of common purpose.
In the future, we will continue to share best
practice across the Group and build on our
strengths as a centre of excellence.
David Dutton
Chairman, Corporate Responsibility
Committee
www.dmgt.com has additional
information about our CR initiatives.
DMGT’s emissions per revenue
50.9
50.3
48.0
47.8
47.2
46.7
46.3
by 2015
e
u
n
e
v
e
r
m
£
/
2
O
C
t
2006
2007
2008
2009
2010
2011
2012
OuR APPROACh
The Corporate Responsibility (CR) Committee
reports, through me, directly to the Board.
Committee members include interested
parties with relevant Group-wide
responsibilities and senior nominees from
our five business units. We act in an advisory
rather than an executive capacity.
We aim:
• To minimise our negative impact on the
environment.
• To promote employee health and welfare.
• To build civilised relationships with
customers and suppliers.
• To engage with local communities and
wider society.
• To target 10% reduction in CO2 emissions
per £m of revenue over the next three years
• To give over £1.6 million in charitable
donations
CR drives long-term performance
We start from the proposition that acting
responsibly is first and foremost about
securing the long-term future of our own
company.
This way of thinking comes naturally to us.
With our heritage as a family-run business we
have always evaluated performance in
generational terms.
As a group we are committed to sustainable,
long-term performance. Managing our
businesses and brands responsibly, valuing
our own people, suppliers and customers
and respecting the communities we
serve are essential prerequisites for our
own success.
We believe that responsibility and
performance are intimately interconnected.
Embracing our responsibilities to society and
the environment advances our own interests.
Multiple programmes are more effective
We manage a diverse portfolio of businesses
and brands. As such, a one-size-fits-all CR
policy would be counter-productive.
Smart, highly skilled people run our
companies. They are used to acting
independently. They understand their
own markets.
Our various businesses have evolved distinct
CR strategies to fit their cultures and
underlying objectives. At group level we
typically help them most by backing their
judgement and providing resources.
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Financial Statements
Speed dating at Northcliffe
house
Media Trust helps charities
get their voices heard. DMGT
supported local charity The
K&C Foundation hosted
a speed dating evening for
Media Trust at our London
headquarters.
The evening matched
nine media personnel with
nine charities. Abi Slater,
Communications Manager
at DMGT, was one who found
a match: “It was great to use
my network of contacts to
help a small charity.”
helping hands
In 2006, a group of RMSers
decided to help out for a day
at their local Food Bank.
The idea has caught on. In
2012, more than 90 RMS staffers
helped out with the American
Red Cross, at the local Food
Bank, gardening, making
lunch and dancing with
carehome residents.
“Helping Hands is a highlight
of my year,” said one, “we’re
doing simple things, but it’s
always so appreciated. I get
back to my desk energised
and uplifted.”
ENvIRONMENT
We are progressively reducing our impact
on the environment by lowering emissions,
using energy more efficiently and minimising
waste. Doing the right thing for the
environment is saving us money and
increasing our efficiency.
CO2 reporting
We are committed to comprehensive,
transparent reporting of our environmental
performance.
For the sixth year in succession we have
collected CO2 emissions data from each
of our five business units. This data is collated
and independently reviewed by the
environmental consultancy, ICF International.
DMGT has been a signatory to the
international Carbon Disclosure Project (CDP)
since 2008. We have now integrated our
carbon data collection process with our
financial reporting. This has streamlined
administration and improved data reliability.
Our emissions are calculated following the
Greenhouse Gas Protocol (GHG Protocol)
methodology which was developed by the
World Resources Institute and the World
Business Council for Sustainable
Development. As per the methodology’s
principles, we have updated this year the
emission factors used in the calculations and
used the most up-to-date figures. This
resulted in a slight adjustment of previous
years’ emissions.
Our carbon footprint is expressed in the
tonnes of Carbon Dioxide equivalent and
includes all the Kyoto Protocol gases that are
of relevance to our business. Our footprint
covers emissions from all our global
operations and the following emission
sources: Scope 1 and 2 (as defined by the
GHG Protocol), business travel and
outsourced delivery activities.
Our carbon footprint continued to shrink in
2012. CO2 emissions stood at 91,600 tCO2
(92,100 tCO2 in 2011), a 20% decrease against
our 2007 baseline (113,800 tCO2).
This year we have set a challenging new
target for the Group. We plan to reduce our
emissions per £ of revenue over the next three
years by 10% against the 2012 baseline. The
2012 amount is 46.7 tCO2 /£million revenue
targetting a 10% reduction to 42.0 tCO2
/£million revenue by 2015.
Reducing environmental impacts
DMGT’s headquarters at Northcliffe House,
also the London base of A&N Media and
dmg::events, retains the prized ISO 14001
international environmental standard.
The transfer of our London printing
production to a green field site in Thurrock
will take place in the summer of 2013 and
will transform performance, environmental
efficiency and waste minimisation. This plant
has been built to exacting environmental
specifications. It has been designed to meet
a BREEAM1 rating of Very Good.
Promoting the green agenda
As a content-led business, perhaps the
biggest environmental contribution we can
make is to promote the green agenda.
Big 5 has hosted the Gaia awards,
celebrating environmental excellence
in construction since 2008.
EDR was recognised at the 2012
Environmental Business Achievement awards
with two honours. Commonground, its social
network for environmental and commercial
real estate professionals, won the Industry
Leadership Award. PARCEL, a web-based
platform for due diligence reporting won the
Business Achievement Award for IT. At the UK
National Business Awards, Landmark was
shortlisted for the prestigious ICAEW
Sustainability Award.
Minimising waste
The three areas where we generate most
waste are paper, water and ink. In each area
we continue to make progress across the
supply chain.
Carpets are the largest disposable items at
trade shows. dmg::events recycles carpets
at all its trade events. AdTech USA, digital
marketing’s largest trade show, negotiated
an agreement with Freeman to supply and
collect recycled carpets at our New York
and San Francisco shows.
At RMS a Green Team meets bi-monthly to
coordinate recycling initiatives. Simple
measures can be surprisingly effective. By
introducing mugs for hot drinks it halved
paper cup consumption, from 10,000 cups
monthly, in just four months.
Our office-based divisions have limited direct
environmental impact.
We recycle paper in all our global offices.
1 Building Research Establishment Environmental Assessment Method
Annual Report 2012 46
At school in Cambodia
In February, Sheena Pabari
from A&N Media’s London HQ
and Nicky Burton from the
Tunbridge Wells office set off
for Cambodia with United
World Schools (UWS). They
blogged their experiences:
11.02.12
For the last couple of days
we’ve been visiting Ol’ Tuch
and the school being built
here with the help of A&N
Media’s donation. It is
incredible to see how much
this has changed the lives of
these people. Activities today
included Khamer – the
Cambodian version of head,
shoulders, knees and toes!
Chaos, but very fun to watch!
18.02.12
Our final day of teaching. We
introduced them to Play Doh!
The boys made buffalos and
mopeds, the girls made pots
and tables.
Championing inclusiveness
In August, dmg::events
launched AbilitiesME in the
United Arab Emirates. The show
builds awareness of special
needs and disabilities across
the Pan-Arabian Gulf.
members from Kensington to California took
up the challenge. One brave soul even
agreed to a wax removal in exchange
for a £100 donation.
Talent and engagement
We want all our people to feel a sense of
connection between their values and their
work with us. DMGT businesses support
employee-led initiatives with matched
funding and by encouraging volunteering
and pro bono work.
We have always promoted entrepreneurial
activity. We nurture talent internally by
encouraging individuals to develop their
ideas into profitable opportunities.
There was a step-change in our approach
to encouraging entrepreneurs in 2012.
A&N Media launched The Ideas Factory,
a monthly contest to find the best business
ideas. Staff with the best suggestions win
cash prizes and professional support. They
present business plans to a team led by the
DMGT Chairman. Winning ideas may be
adopted and brought to market. There
is a separate budget for the professional
development of successful participants.
We communicate with our employees
through multiple channels, including
a group intranet, DMGT Chatter, our
business- collaborative working platform,
and a blog from the CEO. These channels
keep employees informed about business
developments that affect them both directly
and indirectly. Specifically in the area of
CR, there is a community of CR Champions
who meet every quarter to share
experiences and knowledge.
Where the infrastructure supports it we
embrace other waste management
initiatives. Plastic, glass, metals, toner
cartridges, mobile phones and IT equipment
are all being recycled.
We have extended our recycling
programme for redundant office furniture
to other businesses across the Group. Once
again this year, this resulted in zero landfill.
PEOPLE
Our employees define who we are as a
company. We pursue policies and practices
to recruit and retain the best. We expect high
standards of performance and behaviour.
In return, everyone is entitled to respect
and support.
Policies and practices
Employees sign up to the Group Code of
Conduct. In addition, we require our
journalists to comply with the Editor’s Code as
set out in the Press Complaints Commission.
We aim to promote an inspiring, healthy and
inclusive work environment in all our
businesses. We support equality, diversity and
inclusion, and have published our Code of
Conduct on our website, DMGT.com.
We have set up a 24/7 Speak-Up service
where employees can share grievances and
concerns about misconduct. The service is
managed independently by an external
consultancy so they can be confident that
their identities will be protected.
This year A&N Media produced a video
explanation of its equality, diversity and
inclusion policy. This short feature won two
awards at the 2012 International Visual
Communication Association (IVCA) awards.
It won gold for best animation, graphics and
special effects and won silver for best script.2
health and wellbeing
Landmark’s adoption of the World Health
Organisation’s Global Corporate Challenge
is promoting a healthy workforce.
Health was at the forefront too as life got
a little hairier in November. Employees
from across the Group joined the global
Movember event, raising £25,000 for testicular
and prostate cancer charities. The ‘Mo Bros’
gathered sponsorship and sprouted facial
hair. Their ‘Mo Sista’ supporters organised
fund-raising activities. Over 100 staff
2 http://player.ivca.org/ivca/2012/graphics/1099/#top
Daily Mail and General Trust Plc 47
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Financial Statements
Taking on trachoma in Africa
Trachoma is endemic in
Ethiopia, over nine million
children between one and
nine suffer from the condition.
It thrives in hot, dry and dusty
areas where there is limited
access to clean water.
Repeated infection can cause
blindness.
Euromoney Institutional
Investor is working with the
African Medical and Research
Foundation and the blindness
treatment charity ORBIS on a
£1.5 million five-year project to
eliminate trachoma in the
Ethiopia’s South Omo region.
The project will benefit over
half a million people, mostly
women and children.
The campaign got off to a
flying start. The Euromoney
Awards dinner raised £482,000
in a single evening.
COMMuNITIES
We invest in communities as a Group and as
individuals. We encourage all our people to
engage with society and get involved with
charitable projects.
Charitable giving
Engagement starts at the top. We worked
with the Leaders’ Quest social enterprise
at our Chairman’s conference in Bangalore.
Delegates visited seven charities in the area
and a number of them elected to offer
financial support. DMGT matched every
pound donated.
Total donations in 2012 reached over £1.6
million (2011 £1.4 million). Although each
business has its own mechanism for selecting
good causes, they frequently support similar
projects, reflecting our shared values. Group
businesses support projects that tackle basic
needs, youth and education, and talent and
self-reliance.
Tackling basic needs
Euromoney Institutional Investor has
supported a series of projects in Africa
that tackle poor sanitation and lack of
clean water.
A £100,000 central donation, client support
and fund raising have raised well over
£200,000 to bring clean water and sanitation
to Ethiopia’s slum dwellings in Kechene.
In Kenya, Euromoney and DMGT have joined
forces with the Haller Foundation to build
water wells and rain-fed dams for hard-
pressed farmers and families in Mombasa.
Landmark Information Group is applying its
data management skills to water resourcing
in a partnership with the international charity
WaterAid. It has donated £22,000 alongside
DMGT to develop the Water Point Mapper,
a free application which pinpoints water
supply services in rural and urban locations
across Sub-Saharan Africa and Asia.
Genscape employees raised over US$50,000
and teamed up with Plan International in
2010 to bring clean drinking water to Asiento
Viejo, Nicaragua. The village water supply
was contaminated with toxic levels of
arsenic. Local people learnt how to make
and maintain arsenic filters from local
materials. A mini aqueduct was created.
The project was completed in 2012.
In London, Euro Week clients raised over
£175,000 for Anchor House, a residential
centre with workshops, training facilities
and studio flats for homeless people.
youth and education
Funds raised last year by Euromoney for the
Little Rock School in Nairobi’s Kibera slum
bore fruit in 2012 as construction of its new
school building and accompanying
orphanage got underway. On top of the
£597,000 raised in 2011 DMGT donated a
further £10,000 in 2012 to sponsor a classroom
there for a year.
Hobsons has worked with Plan International
for seven years to build schools in some of the
world’s poorest countries. In 2012, employees
visited the latest in the Dominican Republic.
DMGT supports youth through its membership
of the Prince’s Trust. In October, 2011 25 DMGT
head office employees cycled the 45 miles
from London to Windsor Castle on the Trust’s
Palace to Palace bike ride, raising nearly
£6,000 for the cause.
Talent and self-reliance
Metro launched the Government-endorsed
Creative Pioneers initiative in March as a joint
venture with the Institute of Practitioners in
Advertising (IPA). The scheme aims to find
digital talent and creative entrepreneurs.
A panel of experts placed the best entrants
in three categories to work as paid interns
and apprentices at participating businesses.
For London 2012, Landmark provided
financial support for Olympic cyclist Jess
Varnish and GB swimmer Jazz Carlin.
Now in its second year, the Scottish Daily Mail
Drama Award helped three winning
post-graduate productions appear at this
years Edinburgh Fringe Drama Festival, two
of which then made it to the London stage.
Financial Mail on Sunday has been working
with East Sutton Park open prison. It has taken
on two recruits for work experience. It also
supported the ‘Dress for Success’ initiative,
which has helped people adjust to life out
of prison.
PRIORITIES FOR 2013
Over the next financial year the CR
Committee will focus on strengthening its
capabilities as a centre of excellence. It is
already putting in place a more formal
process for capturing CR data and activities.
This will enhance its ability to register and
share best practice across the Group.
Annual Report 2012 48
The Viscount Rothermere
Chairman
in This secTion
chairman’s overview
Board of Directors
Principal Risks and Uncertainties
external Risks to the Business
Forward Looking statements
Responsibility statements
corporate Governance
committees
48
50
52
54
56
57
58
60
In this section of the
report we set out how
governance works
at DMGT. It is
embedded into the
way we organise our
Group, with each of
our businesses having
responsibility for the
areas in which they
operate, brought
together through our
codes of conduct
and standards of
ethical behaviour.
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Financial statements
49
inTRoDUcTion
The Board remains committed to ensuring
that we are aligned to best practice as it
is appropriate to our strategy and Group,
as well as ensuring that we continue to
operate in the right way for our businesses,
recognising the expertise that our Board
members deliver and the importance of
having a longer-term view. Looking ahead,
we will continue to maintain our high
standard of corporate governance as it is a
key factor in our continued success.
We ensure that the use of time in our Board
and committee meetings, at both the Group
level and in our businesses is balanced
between discussion of strategy, financial and
operational performance, oversight of risk
management and internal controls, ensuring
the safeguarding of our assets and keeping
our Board and executive succession
plans refreshed.
key acTiViTy oF The BoaRD
During 2012, strategy has been central to
Board discussion. Each year, one Board
meeting is dedicated entirely to the
discussion of Group strategy and clarifying
the framework for its strategic decisions. It is
an opportunity for Directors to concentrate
on strategy exclusively. The session is held in
the locality of one of our businesses and
between sessions Directors can visit specific
companies, meet management and get
greater insight into how they operate.
Outside of this dedicated strategy session,
the Board considers strategic matters in
addition to operational reviews at each
Board meeting.
comPosiTion oF The BoaRD
Prompted by the Board we have focused
on ensuring that the skills in the boardroom
represents the profile of our businesses. Given
that now over 50% of our profits are
generated in the US and that we increasingly
provide digital solutions, this has been
reflected in recent Board appointments.
During the year we appointed Silicon Valley
based Heidi Roizen, who has unrivalled
experience in the technology arena and
who will give the Board insight and
experience of an area that is key to the
Group’s long-term success. Detailed
biographies of each Director are included in
the Report on pages 50 and 51.
comPLiance
The UK Corporate Governance Code
(‘Code’) applies a ‘comply or explain’
approach to the principles set out in the
Code. The Board adopts a long-term
approach to governance, which underlies
how the Group operates and takes account
of the Group’s heritage. Explanations in
respect of areas where the Company does
not fully comply with Code provisions are in
the table on page 58.
LonG-TeRm oVeRView
By focusing on strategy, succession planning,
risk monitoring and evaluating the
performance of Directors, the Board’s work
supports the long-term performance of the
Group. The Board will continue to maintain its
high standard of corporate governance as
it is integral to the long-term success of
the Group.
Annual Report 2012 50
The Viscount Rothermere †‡x
Chairman
appointed to the Board: 1995
skills and experience:
Lord Rothermere has been
Chairman of DMGT and a
Non-Executive Director of
Euromoney Institutional Investor
PLC since 1998.
He worked at the International
Herald Tribune in Paris and the
Mirror Group before moving to
Northcliffe Newspapers Group in
1995. In 1997 he became
Managing Director of the Evening
Standard.
m w h morgan x §
Chief Executive
appointed to the Board: 2008
skills and experience:
Martin was appointed Chief
Executive of DMGT in
October 2008. He sits on a number
of DMGT subsidiary company
boards, including Euromoney
Institutional Investor and is the
Chairman of RMS.
Prior to joining DMGT, Martin held
various senior positions at Reed
International both in the UK and
the US. He joined DMGT in 1989 and
became CEO of dmg::information
in 2000. He joined City of London
Investment Trust as a Non-
Executive Director in March 2012.
s w Daintith x §
Finance Director
appointed to the Board: 2011
skills and experience:
Stephen was appointed Finance
Director of DMGT, to the Board and
the Audit Committee of
Euromoney Institutional Investor
PLC in March 2011.
Prior to that, Stephen was COO
and CFO of Dow Jones and
previously CFO at News
International. Before these roles he
held several senior positions at
British American Tobacco,
including CEO of their Switzerland
and Bangladesh businesses and
CFO at their Pakistan and South
Africa operations. Stephen trained
and qualified as a chartered
accountant at the London offices
of Price Waterhouse (now PwC).
J G hemingway *†‡x
Non-Executive Director
appointed to the Board: 1978
skills and experience:
John has recently surrendered the
practising certificate as a solicitor
for which he qualified in 1953. After
national service in the RAF, John
then joined Freshfields in the City of
London where he was a partner
from 1960 to 1974. For more than
the last forty years John has
specialised in advising a limited
number of families on the
structuring and management of
their family resources. This remains
his principal activity.
D m m Dutton x §
Executive Director
appointed to the Board: 1997
skills and experience:
David joined the Group in 1970.
He is Chairman of dmg::information
and serves on the boards of RMS,
Evenbase, Hobsons and Landmark
Information Group. He also serves
as the Non-Executive Chairman of
Zoopla Ltd., Artirix Ltd., and Ecctis
Ltd.
David founded Pizzaland in 1970.
He was a founder and Managing
Director of Trevian Holdings Plc, a
property development company.
P m Dacre
Executive Director
appointed to the Board: 1998
skills and experience:
Paul Dacre joined the Group as US
Bureau Chief in 1979. Appointed
Editor of the Evening Standard in
1990, he has been Editor of the
Daily Mail since 1992 and
Editor-in-Chief of Associated
Newspapers since 1998, years
which saw the launches of Metro
and MailOnline.
F P Balsemão †
Independent Non-Executive
Director (Portuguese)
appointed to the Board: 2002
skills and experience:
Francisco serves as the President at
Impresa Group and Chairman of
IMPRESA, SGPS. He was formerly
Prime Minister of Portugal and in
2005 elected member of the State
Council. He serves as Chairman of
the European Publishers Council
and sits on the board for the
International Advisory Board of
Santander International Group.
T s Gillespie
Non-Executive Director
(Canadian)
appointed to the Board: 2004
skills and experience:
Tom has advised DMGT on
legal matters in Canada over
many years.
He serves as the President of
Tyringham Investments Limited, a
Canadian investment and holding
corporation and as Chairman of
Tyringham Investments Limited.
He served as Senior Partner of
Canadian law firm, Ogilvy Renault,
and now runs his own business. He
serves as Chairman of Imperial
Tobacco Canada Limited.
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D J Verey, cBe *§
Independent Non-Executive
Director
appointed to the Board: 2004
skills and experience:
David is Chairman of the Audit
Committee.
David is an Investment Adviser and
Corporate Finance Adviser. He is
currently Senior Advisor at Lazard,
lead Non-Executive Director of the
Department of Culture, Media and
Sport, Non-Executive Director of
Sofina SA, a Member of the
Supervisory Board of Bank Gutmann
and Chairman of The Art Fund. He
was at Lazard for 30 years and
served as Chairman and Chief
Executive for the last 10. He then
moved to Cazenove Group plc
as Deputy Chairman and from
there to Blackstone Group UK
as Chairman.
k J Beatty
Executive Director
appointed to the Board: 2004
skills and experience:
Kevin is Chief Executive of A&N
Media.
He was Managing Director of the
Scottish Daily Record and Sunday
Mail Ltd. Kevin has been Managing
Director of The Mail on Sunday, the
Evening Standard and London
Metro; COO of Associated New
Media; and Managing Director of
Northcliffe Newspapers. He is a
board member of the Newspaper
Publishers Association and a
Non-Executive Director of
PA Group.
n w Berry * † ‡
Independent Non-Executive
Director
appointed to the Board: 2007
skills and experience:
Nicholas is owner of Mintel
International, Intersport Switzerland
Psc and Chairman of Stancroft
Trust. He has wide ownership
experience in business-to-business
media and in emerging markets.
D h nelson, Fca * † ‡ x
Non-Executive Director
appointed to the Board: 2009
skills and experience:
David is Senior Partner at Dixon
Wilson, Chartered Accountants,
and a Non-Executive Director of a
number of family companies. He is
an advisor to UK-based families
and their businesses, advising on
financial and tax matters in the UK
and overseas. He is a trustee of a
number of substantial UK Trusts.
D Trempont *
Independent Non-Executive
Director (American)
appointed to the Board: 2011
skills and experience:
Based in California, Dominique
has been an executive and board
member in large multinational high
tech companies and start ups. He
is currently on the boards of three
US public companies, focusing on
disruptive technologies, emerging
markets and Asia. He is also on the
board of on24, the emerging
leader in webcasting and virtual
shows, and Trion Worlds, the
leading publisher and developer
of premium multi-user games.
Dominique was also on the board
of 3Com, a global networking
solution company.
h Roizen §
Independent Non-Executive
Director (American)
appointed to the Board: 2012
skills and experience:
Based in Silicon Valley, Heidi has
experience including digital media,
entrepreneurial growth, and
business development in both
public and private Companies in the
US. She teaches Entrepreneurship
at Stanford University. Heidi serves
on the boards of TiVo Inc and
numerous venture-backed
technology companies. She is a
Venture Partner with global
investment firm DFJ and was Vice
President of Worldwide Developer
Relations for Apple Computer, as
well as being CEO and co-founder
of pioneering consumer software
company T Maker.
c chapman §
General Counsel & Company
Secretary
appointed to the Board: 2012
skills and experience:
Claire was appointed as General
Counsel and Company Secretary
on 20th September and as
Secretary from 1st October, 2012.
Claire is responsible for DMGT’s
legal and regulatory, M&A
programmes, contracts, corporate
projects, effective governance
and Board management.
She was formerly a solicitor at
Freshfields Bruckhaus Derringer
before joining Reuters Group PLC.
Claire was General Counsel and
Group Company Secretary at
Inchcape plc.
n Jennings
Nicholas Jennings stood down
as Secretary to the Board on
1st October, 2012.
* member of the audit committee
† member of the nominations
committee
‡ member of the Remuneration
committee
x member of the investment
and Finance committee
§ member of the Risk
committee
Annual Report 2012 52
acTiViTies
The principal activities of the Group are set
out on pages 6 and 7 of this Annual Report
and Accounts.
The analysis of revenue and operating profit
for the years ended 30th September, 2012
and 2nd October, 2011 are included as Note
3 to the Consolidated Income Statement.
BUsiness ReView
The information that fulfils the Companies Act
requirements of the business review is included
in the Strategic Report on pages 10 to 43. This
includes a review of the development of the
business of the Group during the year, of its
position at the end of the year and of likely
future developments in its business. Details of
the principal risks and uncertainties facing the
Group are set out below.
martin morgan
Chairman, Risk Committee
Risk
Potential impact
mitigation
1) changes in our key markets
The information provided to our customers
and the ways in which our businesses deliver
this information are subject to constant
change. This can result in structural market
changes that have the potential to redefine
or eliminate current markets served by our
businesses. Technological innovations such
as tablets and other mobile devices, cloud
computing and the proliferation of social
media impact all of our businesses. Our
products and services, and their means of
delivery, are also affected by competitor
activity and changing customer behaviour.
2) exposure to a downturn in the
global economy
A significant although decreasing proportion
of the Group’s revenue (especially in the UK
newspaper divisions) is derived from
advertising which is impacted by
fluctuations in the wider economy. A similar,
although reduced, effect has been seen in
Group businesses that rely on non-
advertising revenues, especially in the
financial and property markets.
The impact is both positive and negative.
Failure to identify and respond to changes in
the key markets in which the Group operates
increases the risk of being left behind by both
competitors and our customers with a
resultant direct impact on Group results.
The transition from traditional publishing and
print advertising to online and mobile has
affected a number of businesses including
Euromoney and Associated Newspapers.
Conversely, new technologies present
opportunities for the Group. An example of
this is the success of the mobile and tablet
apps by MailOnline and Metro. Both have
proved successful in driving traffic and
engagement. MailOnline has five times more
UK app users than any other newspaper and
Metro’s iPad app was named Newspaper
App of the Year at the 2012 Newspaper
Awards.
Advertising revenues have been heavily
affected by the downturn in the global
economy.
A continued recession, or a further downturn
in the economy or market sectors served by
the Group, gives rise to a risk of not achieving
forecast results.
The Group’s strategy of diversification reduces
the impact of technological and market
changes to some degree. However, a number
of recent global trends have impacted several
of our businesses.
The DMGT Leadership Team constantly
monitor the markets in which DMGT businesses
operate, the competitive landscape and
technological developments. The
autonomous culture of the Group encourages
an entrepreneurial approach to the
development of organic growth opportunities
and new products.
Experience has demonstrated that the
long-term strategy of diversifying the Group’s
portfolio into business information and
subscription revenue streams, along with
investment in strong brands, makes the
Group’s results both more strategically and
commercially robust.
We continue to manage costs around the
Group to minimise our cost base.
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Risk
Potential impact
mitigation
3) acquisition and disposal risk
As well as launching and building new
businesses, an integral part of the Group’s
strategy has, and will continue to be, the
acquisition (and successful integration) of
businesses that expand expertise whilst
supporting existing products. The strategy
also results in the disposal of businesses that
no longer fit the Group’s investment criteria.
Failure to identify acquisition targets could
result in an opportunity cost to the business.
Equally, an unsuccessful integration of
acquired subsidiaries, or an acquired business
that fails to generate the expected returns,
could result in the underperformance of the
Group or impairment losses. This could also
divert management time from other
operational matters.
Our ability to achieve optimal value from
disposals, as well as the failure to realise other
anticipated benefits of a disposal could also
impact financial results.
4) Pension scheme shortfalls
Our defined benefit pension schemes are
now closed to new entrants, although
existing members still employed by the
Group can continue to accrue benefits on a
cash basis. Deficits identified by actuarial
valuations completed in 2011 are being
addressed by means of a funding
arrangement agreed with the trustees which
will reduce the deficits over a period of
13 years to 2023.
Reported earnings may be adversely
affected by changes in our pension costs and
funding requirements due to lower than
expected investment returns or changes
made to the risk profile of our investment
portfolio.
5) successfully managing change projects
At any given time, a number of active
capital and IT projects are underway around
the Group. The two most significant change
projects continue to be RMS’s new software
solution project, RMS (one), and A&N
Media’s new print site at Thurrock.
A successful project delivers improvements in
product offerings, efficiency gains and cost
savings. There is however, a risk of increased
costs or lost revenues as a result of delays,
unforeseen problems, loss of access to
systems and data or production and
delivery issues.
The majority of acquisitions are in related
markets and are smaller businesses with a high
potential for growth. This reduces the risk from
any one acquisition.
Acquisitions are approved by the Investment
& Finance Committee, and managed by
divisional and local management with
oversight from the centre. Detailed due
diligence is performed by internal teams and
external advisors on all potential acquisitions.
The retention of key employees in the
acquired business is often required as part of
the purchase. Board level monitoring is
performed post-acquisition.
Disposals, including the decision to divest, are
overseen by the Board and the Group
Finance Director.
Measures to mitigate the risks that impact the
company’s balance sheet are under
continuous review. Recent examples include:
– benefits in the schemes are now accrued
on a cash basis which reduces the risk of an
increase to pension liabilities arising from
improving longevity;
– the Group provided the principal scheme
with a £150 million guaranteed loan note to
reduce the need for additional cash
contributions; and
– the Group has transferred a portfolio of
properties to the schemes, valued at £24
million, reducing the net cash required to be
transferred to the schemes during the year.
In addition, a Joint Working Party assesses and
monitors de-risking options available to the
schemes.
Every active capital project around the Group
is subject to a rigorous planning process
involving all key stakeholders. Significant
capital projects are approved by the
Investment and Finance Committee.
Ongoing project management is in place to
ensure that plans are delivered to timetable
and specification.
All key projects are monitored by the local
board to ensure that risks and opportunities
are managed throughout the process. The
Group’s most significant projects are
monitored by the Risk Committee.
Annual Report 2012 54
Risk
Potential impact
mitigation
6) Data integrity, availability and security
The quality and availability of the
information products that DMGT businesses
provide to their clients are key to their
success. This is true for many businesses in the
Group, most notable within dmg::information
and Euromoney.
Information security has always been a key
focus across DMGT. However, changing
technology, mobile working, cloud-based
systems, the consumerisation of IT and the
growing use of social media create
opportunities but also threats to information
security and the protection of our data, and
that of our customers. The threat of cyber-
attack from organised crime increases this
risk further.
Any challenge to the integrity of information
within a DMGT product could damage the
reputation of that business, potentially
resulting in lost revenues remediation costs.
A similar impact would be felt if a product
was unavailable for a time.
An information security incident or cyber-
attack resulting in the loss, theft, corruption or
unavailability of sensitive information held by
the Group could lead to operational and
regulatory challenges, and could impact on
financial results.
Information security breaches could have a
reputational impact on the Group.
A major incident particularly in a key location
could affect operation of the business at that
location and impacts their ability to produce
or deliver its products, which could reduce
the demand for them or increase costs.
Any disaster which significantly affects the
wider environment or the infrastructure in an
area in which the Group operates could
adversely impact Group results.
Significant disruptions to, or reductions in,
international travel for any reason could lead
to events and training courses being
postponed or cancelled and could have an
impact on the Group’s performance.
7) impact of a major disaster or outbreak
of disease
There is a risk of disruption of Group
operations as a result of a major disaster,
outbreak of disease or other external threat.
The Group’s operations are geographically
diversified which limits the impact of any
given incident. The largest locations are
Northcliffe House and Harmsworth Quays in
London, Euromoney’s offices in London and
New York, and RMS’s headquarters in
California. Northcliffe House is the Group’s
headquarters as well as housing A&NM and
some businesses within dmg::events.
Harmsworth Quays is A&N Media’s main
printing centre and a contingency location
for Northcliffe House.
The success of the events and training
businesses within dmg::events and
Euromoney relies heavily on the confidence
in, and ability of, delegates and speakers to
travel internationally.
Every DMGT business understands that quality
of data is key to the reputation and ongoing
success of the Group. Quality controls
including rigorous checks, review and
restricted access to amend and publish exist
in every business with information products.
Availability is managed through detailed and
tested business continuity plans.
Information security risks are managed locally
by the individual businesses, with support from
divisional management and DMGT Risk and
Assurance. The Risk Committee monitors and
oversees information security, data protection
and cyber risks and controls around
the Group.
Businesses are expected to comply with the
published information security policy and
minimum baseline standards.
Business continuity plans, which are tested
regularly, are in place across all businesses.
Contingency planning is in place in the events
businesses and virtual events alternatives are
being developed. Where appropriate,
cancellation insurance is taken out.
Recently the Group’s business continuity
planning helped its offices in North East
America to recover quickly and effectively
from the significant disruption caused by
Superstorm Sandy.
8) Reliance on key management and
staff retention
DMGT is reliant on the talented and
successful management and staff across all
of its businesses. Many businesses and
products are dependent upon specialist,
technical expertise.
The inability to recruit and retain talented
people could impact the Group’s ability to
maintain its performance and deliver growth.
When key staff leave or retire, there is a risk
that knowledge or competitive advantage
is lost.
The DMGT Human Resources Director works
with divisional and executive management
across the Group on a formal approach to
talent management and succession planning.
This includes payment of competitive rewards,
employee performance and turnover
monitoring and a variety of approaches to
staff communication.
Succession planning and long-term incentive
plans are in place for senior management.
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Risk
Potential impact
mitigation
9) commercial relationships, including
volatility of newsprint prices
The Group is reliant on a number of
commercial relationships with key customers,
suppliers and third parties. Examples include
large advertising agencies and major
retailers in A&N Media, key venues and
agents in dmg::events and Euromoney, and
data providers in dmg::information and RMS.
Additionally, newsprint continues to
represent a significant proportion of our
costs. Newsprint prices are subject to
volatility arising from variations in supply and
demand.
10) compliance with laws and regulations
Group businesses are subject to legislation
and regulation in the jurisdictions in which
they operate. The key laws and regulations
that impact the Group cover areas such as
bribery and corruption, competition, data
protection, privacy (including e-privacy),
health and safety and employment law.
Additionally, specific regulations from the
Press Complaints Commission and the Audit
Bureau of Circulation apply to the
newspaper divisions.
The Group generates a significant
amount of its revenue from publishing, be
it newspapers, magazines, trade journals or
information and data published online. As a
result, there is an inherent risk of error which,
in some instances, may give rise to legal
claims (e.g. for libel).
On 29th November Lord Justice Leveson
released his report from the inquiry into
culture, practices and ethics of the press.
11) Treasury operations
The Group Treasury function is responsible for
executing treasury policy which seeks to
manage the Group’s funding, liquidity and
treasury derivatives risks. More specifically,
these include currency exchange rate
fluctuations, interest rate risks, counterparty
risk and liquidity and debt levels. These risks
are described in more detail in Note 33 to
the financial statements.
12) Unforeseen tax liabilities
The Group’s operations are global and
therefore earnings are subject to taxation at
differing rates across a number of
jurisdictions. Whilst endeavouring to manage
the Group’s tax affairs in an efficient manner,
there will always be a certain level of
uncertainty when provisioning for tax
liabilities due to an ever more complex
international tax environment.
The loss of, or damage to, any key
commercial relationship could have a
material impact on the Group’s ability to
produce and deliver its products.
Significant time and resources are dedicated
to managing and developing these
relationships to ensure they continue to
operate satisfactorily.
An increase in newsprint prices would impact
the cost base of A&N Media.
The Group’s newsprint requirements are
managed by a dedicated newsprint buying
team and monitored by the board of
Harmsworth Printing. Where possible,
long-term arrangements are agreed with
suppliers to limit the potential for volatility.
A breach of legislation or regulations could
have a significant impact on the Group both
in terms of additional costs, management
time and reputational damage. Equally, the
management time and cost of defending
legal cases can be significant.
Increasing regulation of the newspaper
industry could limit our editorial output and
have a corresponding commercial impact
on the business.
Compliance with laws and regulations is taken
seriously throughout the Group. The DMGT
Code of Conduct (and supporting policies)
sets out appropriate standards of business
behaviour and highlights the key legal and
regulatory issues affecting Group businesses.
Divisional and local management are
responsible for compliance with applicable
local laws and regulations, with oversight from
the Risk Committee.
All of our publications have controls in place,
including legal review, to approve content
that may carry a libel/legal risk. Journalists
receive regular training on the PCC Code,
Data Protection and the Bribery Act.
Controls are also in place surrounding
compliance with the Audit Bureau of
Circulation’s regulations and other regulatory
bodies to which we adhere.
If the treasury policy does not adequately
mitigate the financial risks summarised above,
or is not correctly executed, it could result in
unforeseen derivative losses or higher than
expected finance costs.
The Investment & Finance Committee is
responsible for reviewing and approving
Group Treasury policies which are executed
by the Group Treasury function, overseen by
the Deputy Finance Director.
The Group Treasury function undertakes high
value transactions, hence, there is an inherent
risk of payment fraud or error.
Segregation of duties and authorisation limits
are in place for all payments made. The
Treasury function is subject to an annual
internal audit.
Changing tax laws could increase tax
liabilities and have an adverse impact on
financial results.
Due to the diverse and global nature of the
Group, internal or external factors could give
rise to unplanned tax liabilities.
The team of in-house specialists, in
conjunction with divisional management and
external experts, review all tax arrangements
within the Group and keep abreast of
changing legislation.
Annual Report 2012
56
FoRwaRD LookinG sTaTemenTs
This annual report contains certain forward-
looking statements with respect to the
principal risks and uncertainties facing the
Group. By their nature, these statements
involve risk and uncertainty because
they relate to events and depend on
circumstances that may or may not occur in
the future. There are a number of factors that
could cause actual results or developments
to differ materially from those expressed or
implied by these forward-looking statements.
No assurances can be given that the
forward-looking statements are reasonable
as they can be affected by a wide range of
variables. The forward-looking statements
reflect the knowledge and information
available at the date of preparation of this
annual report, and will not be updated
during the year. Nothing in this annual report
should be construed as a profit forecast.
ResULTs anD DiViDenDs
The profit after taxation of the Group
amounted to £280 million. After charging
minority interests of £23 million, the Group
profit for the year amounted to £257 million.
An interim dividend of 5.6 pence per share
was paid on the Ordinary and ‘A’ Ordinary
Non-Voting Shares and the Directors
recommend that a final dividend of 12.4
pence per share be paid on 8th February,
2013 making 18.0 pence per share for the
year (2011 17.0 pence).
DiRecToRs
Biographical details of the Directors of the
Company at 30th September, 2012 are set
out on pages 50 and 51. Sir Charles Dunstone
retired from the Board on 8th February, 2012
and Heidi Roizen was appointed to the Board
on 26th September, 2012. All other Directors
remained unchanged during the year. Mr
Tom Gillespie will not stand for re-election
at the 2013 AGM.
The number of shares of the Company and
of securities of other Group companies, in
which the Directors or their families had an
interest at the year end, are stated in the
Remuneration Report on page 66.
In accordance with the UK Corporate
Governance Code, each Director offers
himself for re-election at the AGM on
6th February, 2013.
chanGe oF comPany secReTaRy
On 1st October, 2012 Claire Chapman was
appointed Company Secretary in succession
to Mr Nicholas Jennings, Secretary since
October, 1999.
TanGiBLe FixeD asseTs anD inVesTmenTs
The Company’s principal subsidiaries are set
out on page 175.
Changes in the Group’s tangible fixed assets
and investments during the year are set out
in Notes 22 to 25. There was no material
difference between the book value and
market value of the Group’s land and buildings.
PosT BaLance sheeT eVenTs
Following the year end the Group disposed
of its central European online recruitment
business and its Hungarian joint venture
online motors businesses. Additionally on
22 November, the Company announced it
had exchanged contracts to dispose of the
Northcliffe Media business to a new venture,
Local World. Details are provided in Note 44.
Following a review of the Group’s capital
management programme, the Board has
decided to utilise part of its authority to make
or market purchases of its ‘A’ Ordinary
Non-Voting Shares. The Company anticipates
spending up to approximately £100.0 million
over the coming year.
shaRe caPiTaL
Details of allotments of share capital during
the year, which arose solely from the exercise
of options, are given in Note 37.
At the Annual General Meeting on 8th
February, 2012, the Company was granted
the authority to purchase up to 10% of its
own shares.
During the year, the Company transferred
7,018,953 shares out of Treasury, representing
1.88% of called up ‘A’ Ordinary Non-Voting
Shares, in order to satisfy incentive schemes.
The Company holds 10,188,174 shares in
Treasury, with a nominal value of £1.3 million.
The maximum number of shares held in
Treasury during the year was 10,228,174 which
had a nominal value of £1.3 million.
The Company also purchased 7,478,953 ‘A’
Ordinary Non-Voting Shares for holding in
Treasury, having a nominal value of £934,869
in order to match obligations under various
incentive plans. The consideration paid for
these shares was £30.1 million. Shares
purchased during the year represented 2% of
the called up ‘A’ Ordinary Non-Voting Share
capital at 30th September, 2012.
The Company has two classes of share
capital. Its total share capital comprises 5%
of Ordinary Shares and 95% of ‘A’ Ordinary
Non-Voting Shares. Full details of the
Company’s share capital are given in
Note 37.
emPLoyees
Under the Group’s general policy of
decentralised management, it is the
responsibility of the management in each
subsidiary to encourage the involvement
and participation of employees in their
company. The methods used vary company
by company, but the linking to performance
targets of a significant portion of
remuneration is one widely used means.
The Group gives full and fair consideration to
suitable applications from disabled persons
for employment. If existing employees
become disabled they will continue to be
employed, wherever practicable, in the
same job or, if this is not practicable, every
effort will be made to find suitable alternative
employment and to provide appropriate
training.
maTeRiaL conTRacTs
Group companies undertake business with a
range of customers and suppliers. There is no
dependence on any particular contractual
arrangement, other than those disclosed in
Note 40 to the Accounts as regards ink and
printing, where arrangements are in place
until 2018 and 2022 respectively to obtain
competitive prices and to secure supplies.
As regards the Group’s principal commodity,
newsprint, arrangements are made annually
with a range of suppliers to ensure the
security of supply at the best available prices,
having regard to the need for the necessary
quality. Particularly in the light of its strategy to
create a diversified international portfolio of
media businesses, the Group is not
dependent on any suppliers of other
commodities, nor for its revenue on any
particular customer. Distribution
arrangements are in place to ensure the
delivery of newspapers to retail outlets.
PoLicy on PaymenT oF sUPPLieRs
The Group’s policy on supplier payments
varies across its subsidiaries. These companies
have no formal code or standard which
deals specifically with the payment of
suppliers. However, their policy is to ensure
that the terms of payment, as specified by,
and agreed with the supplier at the outset,
are not exceeded.
The Company had no trade creditors at the
year-end date. See page 183.
The Group’s average payment period,
calculated on the basis of year-end trade
creditors, is 74 days (2011 70 days), although
this is dependent on the year-end date and
cannot therefore be regarded as meaningful.
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DonaTions
Charitable donations made by the Group
in the year amounted to £1,608,200 (2011
£1,392,000). This excludes the cost of publicity,
often provided free of charge or various
charities by the Group’s titles, and funds
raised by them, further details on which are
given in the Corporate Responsibility Report
on pages 44 to 47 of this annual report. No
political donations were made by the Group.
sUBsTanTiaL shaRehoLDinGs
On 30th November, 2012 the following were
interested in more than 3% of the issued
Ordinary Shares:
Rothermere Continuation Limited
59.9%
Codan Trust Company Ltd and
Codan Trustees (BVI) Ltd (trustees of
the Esmond Harmsworth 1998
Family Settlement)
29.3%
The Board regards holdings in the Company’s
securities of greater than 15% as being
significant. There are no significant holdings in
the Company’s ‘A’ Ordinary Non-Voting
Shares, other than those shown in the
Remuneration Report on page 80.
DiRecToRs’ ResPonsiBiLiTies sTaTemenT
The Directors are responsible for preparing
the Annual Report and the financial
statements in accordance with applicable
laws and regulations.
Company law requires the Directors to
prepare financial statements for each
financial year. Under that law the Directors
are required to prepare the Group financial
statements in accordance with International
Financial Reporting Standards (IFRSs) as
adopted by the European Union and Article
4 of the IAS Regulation and have elected to
prepare the parent Company financial
statements in accordance with United
Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting
Standards and applicable law). Under
Company law the Directors must not approve
the accounts unless they are satisfied that
they give a true and fair view of the state of
affairs of the Company and of the profit or
loss of the Company for that period.
In preparing the parent Company financial
statements, the Directors are required to:
• select suitable accounting policies and
then apply them consistently;
• make judgements and accounting
estimates that are reasonable and prudent;
• state whether applicable UK Accounting
Standards have been followed, subject to
any material departures disclosed and
explained in the financial statements; and
• prepare the financial statements on the
going concern basis unless it is
inappropriate to presume that the
Company will continue in business.
In preparing the Group financial statements,
International Accounting Standard 1 requires
that Directors:
• properly select and apply accounting
policies;
• present information, including accounting
policies, in a manner that provides relevant,
reliable, comparable and understandable
information;
• provide additional disclosures when
compliance with the specific requirements
in IFRSs are insufficient to enable users to
understand the impact of particular
transactions, other events and conditions
on the entity’s financial position and
financial performance; and
• make an assessment of the Company’s
ability to continue as a going concern.
The Directors are responsible for keeping
adequate accounting records that are
sufficient to show and explain the Company’s
transactions and disclose with reasonable
accuracy at any time the financial position
of the Company and enable them to ensure
that the financial statements comply with
the Companies Act 2006. They are also
responsible for safeguarding the assets of the
Company and hence for taking reasonable
steps for the prevention and detection of
fraud and other irregularities.
The Directors are responsible for the
maintenance and integrity of the corporate
and financial information included on the
Company’s website. Legislation in the United
Kingdom governing the preparation and
dissemination of financial statements may
differ from legislation in other jurisdictions.
ResPonsiBiLiTy sTaTemenT
We confirm that to the best of
our knowledge:
• 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
• the Business Review, which is incorporated
into the Directors’ Report, includes a fair
review of the development and
performance of the business and the
position of the Company and the
undertakings included in the consolidation
taken as a whole, together with a
description of the principal risks and
uncertainties that they face.
aUDiToRs
Each of the persons who is a Director at the
date of approval of this Annual Report
confirms that:
• so far as the Director is aware, there is no
relevant audit information of which the
Company’s auditors are unaware; and
• the Director has taken all the steps that he
ought to have taken as a Director in order
to make himself aware of any relevant
audit information and to establish that the
Company’s auditors are aware of that
information.
This confirmation is given and should be
interpreted in accordance with the provisions
of section 418 of the Companies Act 2006.
The Company’s auditors, Deloitte LLP, have
indicated their willingness to continue in
office and, in accordance with section 489 of
the Companies Act 2006, a resolution
proposing their reappointment will be put to
the AGM.
annUaL GeneRaL meeTinG
The AGM of the Company will be held on
6th February, 2013 at 9.00am at the
Kensington Roof Gardens, 99 Kensington High
Street, London W8. Details of all resolutions,
including those to be put as special business,
are set out in the enclosed circular to
shareholders.
coRPoRaTe GoVeRnance
The following pages 58 to 80 on Corporate
Governance including the Remuneration
Report also form part of this Directors’ Report.
By Order of the Board
c chapman
Company Secretary
30th November, 2012
Annual Report 2012 58
management structure
d it
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mitt
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Group
Board
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it
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orate
nsibility
mittee
R is k
C o m m itte e
In addition, the Chairman was not
independent on appointment (Code
provision A3.1). A formal review of each
Director’s training requirements was not
undertaken, however training requirements
were addressed informally, by Director.
Directors are encouraged to keep up to date
and are provided with regular
communications and regulatory updates to
enable them to do so. The Company’s
auditors, Deloitte LLP, has received the
Company’s statement of compliance with
the Code as required by the Listing Rules.
comPLiance
The Company is committed to high
standards of corporate governance. The
paragraphs below and in the Remuneration
Report on pages 66 to 80 describe how the
Board has applied the principles set out in the
UK Corporate Governance Code (‘the Code’).
The Code, issued by the Financial Reporting
Council in June, 2010 is part of the Listing
Rules and applied to the Company
throughout the year and an updated version
of the Code was released in September, 2012
for subsequent reporting periods, which the
Company will take into account for the
forthcoming year.
The Company has substantially complied
with the provisions of the Code throughout
the year, except where the Board has
determined that any provision is inappropriate
to the particular circumstances of the
Company. The areas in which the Company
has not applied the Code during the year
are explained below in summary and noted
within the Report, as appropriate, and
primarily arise from the composition
of the Board.
Uk corporate Governance code compliance
Provision
A4.1
Composition of the Board
Area
Details of non-compliance and mitigating circumstances
A4.2
Non-executive Directors
B1.1
Composition of the Board
B2.1
Composition of the
Nominations Committee
B6.2
Board Evaluation
C3.1
D1.5
D2.1
Composition of the Audit
Committee
Service contracts and
compensation
Composition of the
Remuneration Committee
The Board has not identified a senior independent non-executive Director since it believes
that to identify such an individual is potentially divisive to a unitary body, as this Board is,
and disruptive to the role of the Chairman.
The non-executive Directors did not meet as a group without the Chairman since his
performance was assessed by the Remuneration Committee (without the Chairman
being present).
Less than half of the Board are independent non-executive Directors. The Board believes
that its current composition is appropriate taking account of the heritage of the Group, and
that a good balance is achieved from its non-executive Directors in terms of skill and
independence. However, the Board keeps this under review. Heidi Roizen joined the Board
on 26th September, 2012 and is independent.
Independent non-executive Directors do not comprise a majority of the Committee’s
members since Mr Balsemão is the only independent non-executive Director appointed.
Nevertheless, the Board believes that the Committee operates well.
The Board has determined to continue to conduct its evaluation internally by means of a
questionnaire, rather than through contracting external consultants every three years. The
process is refreshed regularly and has proved valuable in driving the Board’s agenda.
The Committee included two independent non-executive Directors rather than three
during 2012. The Board believes that the Committee operated independently and benefits
from the skill and experience of its then current composition. From November, 2012 there will
be three independent non-executive Directors on the Committee as a result of Dominique
Trempont’s appointment to the Committee.
The service contracts of Messrs Morgan and Dacre exceeded the one-year recommended
in the Code during the year. However, both have now reduced to one year as explained in
the Remuneration Report on page 76.
The Committee comprises one independent non-executive Director, rather than two as set
out in the Code, as explained on page 70 of the Remuneration Report.
Daily Mail and General Trust Plc strategic Report
Directors’ Report
Governance
Financial statements
59
Board meeting attendance
Number of
meetings
eligible
to attend
Number of
meetings
attended
executive Directors
The Viscount
Rothermere
M W H
Morgan
S W Daintith
D M M Dutton
P M Dacre
P M Fallon
K J Beatty
6
6
6
6
6
6
6
non-executive Directors
(non-independent)
J G
Hemingway
T S Gillespie
D H Nelson
6
6
6
non-executive Directors
(independent)
F P Balsemão
D J Verey
N W Berry
D Trempont
H Roizen
C W
Dunstone
6
6
6
6
1
2
6
6
6
6
6
2
6
6
6
6
6
6
6
6
1
2
The BoaRD
The Company is headed by a Board which
comprised during the reporting period seven
executive directors, including the Chairman
and Chef Executive and seven non-
executive Directors, with Heidi Roizen joining
at the end of the period on 26th September,
2012 (as noted on page 49). Biographical
details of each of the Directors are set out
on page 50 and 51.
BoaRD meeTinGs
The Board normally meets five times a year
and at such other times as are necessary. It
discusses and approves the Group’s strategy.
In addition, the Board receives reports and
recommendations from time to time on any
matter, which it considers significant to the
Group. Most meetings include a presentation
on one of the Group’s divisions or on specific
topics. During the year, these included
presentations on the development of RMS’s
new software platform, RMS (one),
dmg::events, Metro, dmg::information, on
communications and a talent review.
The Board met six times during the 2011/12
financial year, meetings were attended by all
Directors, except that Mr Fallon was unable
to attend four of them because of illness.
Individual attendance by Directors is set out
to the right.
maTTeRs ReseRVeD FoR The BoaRD
The Board’s specific responsibilities are set out
in a schedule of matters reserved to the
Board which is published on the Company’s
website at www.dmgt.com.
These are summarised below:
• Board and Committee appointments;
• the approval of financial statements and all
information sent to shareholders;
• the setting of dividends;
• the setting of fees payable to Directors;
• approval of major acquisitions and
disposals and capital expenditure; and
• review of Group pension schemes.
Other matters addressed by the Board are:
• approval of the Group’s strategy;
• approval of the Group’s annual budget;
and
• ensuring maintenance of a sound system
of internal controls and risk management.
chaiRman anD chieF execUTiVe
The division of responsibilities between the
Executive Chairman and the Chief Executive
is understood and works well. The Chairman’s
role is to lead the Board and oversee the
Company’s operations and strategy
including at a specific annual strategy
meeting and is updated on progress at each
meeting by the Chief Executive. The Chief
Executive’s role is to manage the Company,
develop strategy and ensure its successful
implementation.
The Board believes that five non-executive
Directors may be considered to be
independent under the Code, namely
Messrs Balsemão, Verey, Berry and Trempont
and Ms Roizen. Each of Mr Balsemão and
Mr Verey have been on the Board for 10
and 9 years respectively and the Board
has reviewed the independence of each,
recognising that longevity of service is one of
a number of factors to take into account. The
Board is satisfied that each has continued to
demonstrate independence in terms of
character and judgement.
Messrs Hemingway and Gillespie are not
regarded by the Board as independent
under the Code because they have advised
the Company over many years; nor is
Mr Nelson because he is an advisor to the
Chairman. Nevertheless, the Board believes
that these non-executive Directors make an
important contribution to its deliberations
and have invaluable experience of the
Company, its business and its staff.
inFoRmaTion anD
PRoFessionaL DeVeLoPmenT
Procedures have been established to
ensure that the Board receives timely and
appropriate information both for its meetings
and regularly between meetings. All
Directors are offered such training as is
considered necessary, both on appointment
and at any subsequent time. Heidi Roizen
was appointed in late September. She has
been provided with induction on
appointment, including meetings with senior
management across the Group and in
respect of the Group’s business operations
and with the General Counsel and
Company Secretary in respect of
governance matters. There is an agreed
procedure for Directors to take independent
professional advice at the Company’s
expense, if necessary.
Annual Report 2012 60
nominations committee
attendance
Number of
meetings
eligible
to attend
Number of
meetings
attended
The Viscount
Rothermere
J G
Hemingway
F P Balsemão
4
4
4
3
4
4
investment and Finance
committee attendance
Number of
meetings
eligible
to attend
Number of
meetings
attended
The Viscount
Rothermere
M W H
Morgan
S W Daintith
D M M Dutton
J G
Hemingway
D Nelson
11
11
11
11
11
11
11
11
11
11
10
11
eLecTion anD Re-eLecTion
The Company’s Articles of Association require
that a Director appointed by the Board
must stand for election at the next AGM
Notwithstanding the Company’s Articles of
Association that all Directors are subject to
re-election at least every three years, the
Board has adopted the provision in the
Code that all Directors should seek
annual re-election.
The Company’s Articles were last
amended by a special resolution of
Ordinary shareholders in February 2010 in
accordance with the Companies Act 2006.
The terms and conditions of appointment of
the non-executive Directors are available for
inspection at the Registered Office of the
Company during usual business hours.
BoaRD eVaLUaTion
The Board has undertaken its annual
evaluation of its own performance and
that of its individual Directors. It reviewed its
performance by reference to the schedule of
matters reserved for it. The evaluation process
took the form of a questionnaire sent to each
Director, seeking his views on the Board’s
mandate, membership, motivation,
methods, monitoring and measurement. The
Chairman reported the consensus view on
performance to the Board at its meeting in
September, enabling it to conclude that it
had been effective in the year under
review. No material changes to procedures
were considered necessary although the
Board remains concerned to ensure that it
maintains a high standard of governance
in all of its proceedings.
VaLUe cReaTion anD sTRaTeGy
The basis on which the Company generates
value over the longer term and the strategy
for delivering its objectives are set out in the
Chief Executive’s Review on pages 10 to 19.
comPany secReTaRy
The Company Secretary, Ms Chapman who
succeeded Mr Jennings on 1st October, 2012
is responsible for advising the Board through
the Chairman on all governance issues. All
Directors have access to the advice and
services of the Company Secretary. Ms
Chapman is additionally the Company’s
General Counsel.
conFLicTs oF inTeResT
The Company’s Articles of Association permit
the Board to authorise Director’s conflicts of
interest. The Company has adapted the
GC100 guidelines, and its approach is for
conflicts to be renewed annually and at such
other times as may be appropriate.
BoaRD commiTTees
The Board has established Nominations,
Remuneration, Audit, Risk, Investment and
Finance and Corporate Responsibility
Committees with mandates to deal with
specific aspects of its business. The remits
of these committees are published on the
Company’s website at www.dmgt.com.
Details of the membership of these
committees are given on pages 50 and
51 and pages 60, 62-64 and 70. Each
committee reports to the Board at every
regular meeting. In October, 2011, the Board
carried out a review of the performance of
its committees and concluded that each
had complied with its respective terms
of reference and had been effective
in the year.
inVesTmenT anD Finance commiTTee
Operating decisions are delegated to the
Investment and Finance Committee which
determines matters relating to the Group’s
financial affairs in accordance with specific
terms of reference. The Investment and
Finance Committee works alongside the
DMGT Leadership Team with the objective
of improving investment decision making
and Group strategy development. The
Committee comprises the Viscount
Rothermere (its Chairman) and Messrs
Morgan, Daintith, Dutton, Hemingway and
Nelson. During the reporting period the
Deputy Finance Director, Mr Perry, has acted
as Secretary to the Committee but Ms
Chapman replaced Mr Perry as Secretary
from autumn 2012. Mr Perry will continue to
attend as an invitee. The Director of Strategy
Development, Ms FitzGerald, attends
meetings at the invitation of the Committee.
It held 11 meetings during the year which
were attended by all of its members, except
by Mr Hemingway in March 2012.
nominaTions commiTTee
The Nominations Committee comprises
three Directors: the Viscount Rothermere
(its Chairman), Mr Hemingway and Mr
Balsemão. During the reporting period, Mr
Perry was Secretary to the Committee but Ms
Chapman succeeded Mr Perry as secretary
from autumn 2012. Mr Nelson and Mr Berry
joined the Committee on 21st November,
2012. The Chief Executive, the HR Director
and since her appointment in May,
Jane Allen, the Group Reward Director,
attend most meetings at the invitation
of the Committee.
The Committee met four times during the
year and all meetings were attended by
all serving members, with the exception of
the one meeting, when Lord Rothermere
communicated his views to the Committee
but did not attend.
Daily Mail and General Trust Plc strategic Report
Directors’ Report
Governance
Financial statements
61
The Committee reviews the structure, size
and composition of the Board and makes
recommendations to the Board on any
changes. During the year it nominated Heidi
Roizen to the Board as a new independent
non-executive Director. It determined from its
search of international candidates centred in
the US with a strong technology background,
that Ms Roizen’s experience made her the
preferred candidate. Heidi Roizen is based
in Silicon Valley, California.
Her appointment has added to the
technology and international experience
represented on the Board, widening further
the range of insights and perspectives
brought to its deliberations.
External advice was taken, but advertising
was not required in this instance.
The Committee considered the benefits of
diversity, including gender, during this search
as recommended by the Code.
Whilst supportive of the Davies
recommendation, which is a focused
aspiration, the Committee’s view is that the
diversity discussion is broader than gender. It
is about ensuring that there is an appropriate
range and balance of skills, experience and
background on the Board. Achieving this
balance is a key determinant of any new
Board appointment we make.
The Committee continued to review
succession planning for both executive and
non-executive Directors.
ReLaTions wiTh shaRehoLDeRs
The Company maintains a regular
programme of contact with its institutional
shareholders. In the past year, this has
included meetings in London, Scotland, and
the USA.
Non-executive Directors are kept informed of
the views of institutional shareholders by the
regular distribution of analysts’ reports and
feedback is provided from institutional
meetings.
All shareholders are welcome to attend the
AGM, of which 21 clear days’ notice is given,
where they have the opportunity to speak to
Directors.
In the interests of transparency and to assist
private shareholders, the Company posts all
announcements and general presentations
given to analysts and institutions on its
corporate website. Shareholders and others
interested in the Group are encouraged to
use the site and to email questions which
they might have to investor.relations@dmgt.
com. Questions to particular Directors
should be addressed through the
Company Secretary.
inTeRnaL conTRoLs anD
manaGemenT oF Risk
The Board has overall responsibility for the
Group’s system of internal controls. This system
is designed to provide reasonable assurance
over the safeguarding of assets and
shareholders’ investment and the reliability of
financial information. Any such system can,
however, provide only reasonable, and not
absolute, assurance of these matters. The
Group operates on a divisional basis with
each of the businesses described on pages
22 to 37 of the Annual Report having
autonomy as regards its operation and
establishment of control systems. Overseeing
the divisional structure is a central
management team responsible to the Board.
Certain functions are undertaken centrally,
notably newsprint buying, insurance, treasury,
tax, pensions, and risk and assurance
(including internal audit).
The Directors confirm that they have
reviewed the effectiveness of the Group’s
system of internal controls for the period up to
the date of the approval of the Accounts.
The Board has not identified any significant
failings or weaknesses during this reporting
period.
The Directors have excluded joint ventures
and associates, principally Zoopla, from their
assessment of internal controls over financial
reporting because the Group does not have
the ability to dictate or modify controls at
these entities. Controls over the recording of
amounts in the Group’s consolidated
financial statements relating to the
investments has been assessed.
In reviewing the effectiveness of the system of
internal controls, the Board has considered
material controls (including those undertaken
through its committees), including financial,
operational and compliance controls and
risk management systems as follows:
1) operations of the audit committee
The Audit Committee, on behalf of the Board,
has responsibility for the review of internal
financial controls. It fulfils this by:
• by receiving regular reports summarising
the results of internal audit reviews and
management controls assurance work
from the Head of Risk & Assurance. These
include management’s response to any
recommendations and the progress of any
required actions;
• being made aware of the results of the Key
Internal Controls certifications and reviews
performed by Risk and Assurance;
Annual Report 2012 62
Risk committee attendance
Number of
meetings
eligible
to attend
Number of
meetings
attended
M W H
Morgan
S W Daintith
D M M Dutton
D J Verey
M J Page
H Kass
4
4
4
4
4
1
4
4
4
4
4
1
The Head of Risk and Assurance meets
regularly with the Audit Committee chairman
and, at each Audit Committee meeting,
reports on the internal audit activity across
the Group, including progress against
completion of the annual plan, a summary of
the findings of assurance reviews undertaken
both by internal audit and by divisional teams
and the results of follow-up reviews.
3) Confirmation of key internal controls
Each year operating businesses within the
Group are required to confirm the operation
of key internal financial controls to the Group
Accounting department which, in turn,
reports to the Finance Director. Risk and
Assurance review these submissions and
follow up on exceptions as appropriate.
4) Risk committee
The Risk Committee oversees the quality
and formality of risk management processes
across the Group. The remit and operation
of the Risk Committee is described in more
detail below.
5) Review of relevant and timely financial
information
Divisional and executive Boards regularly
review relevant and timely financial
information that is produced from the
management information systems operated
across the Group. This is supported by a
framework of rolling 12-month forecasts as
well as annual budgets that are approved
at a divisional level by the Investment &
Finance Committee.
6) operations of the investment and Finance
committee
The evaluation of the benefits and risks of
investment opportunities and financing
proposals is undertaken by the Investment
and Finance Committee. Above certain
defined levels, however, the Board approves
programmes relating to acquisition and
divestment proposals and capital
expenditure.
7) Senior Accounting Officer sign-off
The HMRC Senior Accounting Officer (SAO)
rules require the SAO of qualifying companies
(for DMGT this is the Group Finance Director)
to certify that the Company (and its
subsidiaries) have established and
maintained appropriate arrangements to
ensure that tax liabilities are calculated
accurately in all material respects. As a result,
Group Tax implemented a controls
questionnaire and performed a series of
controls reviews of UK businesses.
• reviewing a summary of letters to
management prepared by the Group’s
external auditors following their audit
procedures; and
• considering significant financial reporting
issues and approving any changes to
Group accounting policies, which are
set centrally.
2) Risk and assurance
Risk and Assurance carries out internal audit
activities for the Audit Committee across the
Group. It has a direct reporting line to the
Audit Committee and operates under its
internal audit charter which covers: its
purpose and objective; its authority and
scope; independence issues; standards of
professional practice; performance
monitoring; planning; and reporting.
An annual plan is developed each year
which considers every part of the Group’s
operations. Input is received from divisional
and executive management, the Audit
Committee, external auditors, and with
reference to past reviews and key risks. The
Audit Committee approves the internal audit
plan for the forthcoming year in September.
Any necessary changes to the plan during
the year are agreed with the Chairman of
the Audit Committee.
Risk and Assurance schedule, plan and
complete internal audit reviews in
accordance with the annual plan across the
year; working closely with local and divisional
management to determine a detailed scope
for each review. Audit findings are
categorised according to their significance
and the overall control environment is rated
for each review. Audit findings are cleared at
the completion of the fieldwork and a formal
report is issued which includes agreed actions
and the timescale for remediation of control
weaknesses identified. Regular follow-up of
audit points is completed by Risk and
Assurance to ensure that management
actions are completed within the
timeframes agreed.
The department also coordinates with a
number of the divisions who undertake
internal controls assurance reviews within
their respective business.
In addition to the schedule of reviews set out
in the annual plan, an annual bribery and
fraud risk assessment is completed by each
key business in the Group detailing bribery
and fraud risks and mitigating controls. Risk
and Assurance follow up with divisional
management to ensure that these controls
are satisfactorily implemented. All divisions
are adequate and are required to notify Risk
and Assurance of any bribery or fraud issues
identified. This allows action to be taken
where it is felt that control weaknesses
may exist.
Daily Mail and General Trust Plc strategic Report
Directors’ Report
Governance
Financial statements
63
audit committee attendance
Number of
meetings
eligible
to attend
Number of
meetings
attended
D J Verey
J G
Hemingway
N W Berry
D H Nelson
4
4
4
4
4
4
4
4
maintain direct links with each of the main
divisions through attendance at divisional
board meetings as Directors of these boards.
The Committee reports to the Board after
each of its meetings to assist the Board in its
determination of the overall effectiveness of
the system of internal control and risk
management.
aUDiT commiTTee
The Audit Committee, on behalf of the Board,
has responsibility for the review of financial
risk management and of internal financial
controls, as these directly relate to the quality
of financial reporting. In addition, the
Committee is mandated to:
• review all public financial statements of the
Company and of the Group, including the
half year and annual financial statements,
before such statements are submitted to
the Board;
• consider any appointment of external
auditors to Group companies, to review
audit fees and to consider any questions of
resignation or dismissal of external auditors;
• monitor and review the resources and
effectiveness of internal audit (including
approval of the appointment and removal
of the Head of Risk and Assurance);
• agree the internal audit programme for the
forthcoming year; and
• to consider a summary of Group internal
audit reports and such individual reports as
the Committee sees fit and corresponding
management responses to any
recommendations, and to monitor the
progress of any required actions.
The Committee monitors the financial
reporting process and the Group’s statutory
annual audit. It also considers significant
financial reporting issues, approves any
changes to Group accounting policies and
reviews a summary of recommendation
letters to management prepared by the
Group’s external auditors following their audit
procedures.
Risk commiTTee
The oversight and management of significant
risks around the Group is undertaken by the
Risk Committee and it accords with the FRC
Guidance and the Turnbull Guidance on
internal controls, as updated, appended
to the Code.
The Committee comprises Messrs Morgan
(its Chairman), Daintith, Dutton, Verey and
Page, Deputy Finance Director of A&N
Media. Mr Kass, the legal director of A&N
Media, retired in December, 2011. Ms Roizen
and Ms Chapman, the General Counsel
and Company Secretary, joined the Risk
Committee from November, 2012. Mr Verey
provides a non-executive perspective to the
review of risk management processes within
the Group, as well as providing a direct link to
the Audit Committee.
The Committee met four times during the
year and all meetings were attended by all
serving members. Individual attendance
by members is set out on page 62.
The Head of Risk and Assurance, Mr Ashby
is Secretary to the Committee.
The Group adopts a prudent risk strategy,
weighing opportunities for potential gain
against threats to overall business objectives
and profitability. Senior management
addresses the opportunities and
uncertainties relating to the business activities
of the Group. The risk management process
consists of the identification, evaluation and
control of risks, which could threaten the
achievement of the Group’s strategic,
operational and financial objectives, as well
as the active management of opportunities.
The processes described below were in
place throughout the year.
The Committee oversees the quality and
formality of risk management processes
across the Group. The Committee considers
the Group risk register (a consolidation of
divisional and central function risk registers
with Group-wide risks overlaid) annually. In
addition, the Committee reviews specific risks
and monitors developments in relevant
legislation and regulation to consider the
impact these might have on the Group
including on its system of internal controls. This
year the Committee has focused on
cyber-attack; the EU Privacy and Electronic
Communications Regulations; risks from the
use of social media; Bribery Act compliance;
health and safety; fraud (as part of the
annual fraud risk assessment); and business
continuity planning. The Committee also
followed up on the recommendations from
the Editorial Process Review completed in
2011. Members of the Risk Committee
Annual Report 2012 64
The Committee comprises four non-
executive Directors: Messrs Verey (its
Chairman), Hemingway, Berry and Nelson.
The Code recommends that an audit
committee should comprise at least
three members, all of whom should be
independent non-executive Directors. Only
Messrs Verey and Berry are considered to be
independent under the Code. Nevertheless,
the Board believes that the Committee
operated independently during the period.
Mr Trempont joined the Committee with
effect from 21st November, 2012 and is
independent. Members’ qualifications are
set out in their biographies on pages 50 and
51. The Board is satisfied that Mr Nelson, senior
partner of a firm of chartered accountants
and Mr Verey, the Committee Chairman,
have recent and relevant financial
experience. Ms Chapman succeeded Mr
Jennings as Secretary to the Committee from
its November, 2012 meeting.
The Audit Committee met four times during
the year and all meetings were attended by
all serving members. Individual attendance
by members is set out on page 63.
The Finance Director attended all meetings
and the Chief Executive two meetings, each
by invitation.
The Committee has implemented the
procedures set out in the updated Guidance
on Audit Committees, published by the
Financial Reporting Council in December,
2010, and updated September, 2012 which
are within its control. It reviews the Group’s
policy on whistleblowing.
As noted, the Committee has primary
responsibility for making a recommendation
to the Board on the appointment,
reappointment and removal of the external
auditors, together with approval of their
remuneration. As part of its role in ensuring
the effectiveness of the audit process, the
Committee also undertakes an annual
assessment of the qualifications, expertise
and resources of the external auditors.
The appointment of Deloitte LLP as the
Group’s external auditors (incumbents since
the last audit tender in 2001) is kept under
annual review, and, if satisfactory, the
Committee will recommend the
reappointment of the audit firm. The
appointment of Deloitte followed a formal
tender process undertaken in 2001 and,
rather than adopting a policy on tendering
frequency, the annual review of the
effectiveness of the external audit is
supplemented by a periodic comprehensive
reassessment by the Committee. The last
such reassessment was performed in 2008/09,
as with many suppliers, when having
received assurances on the continued
quality of the audit, the Committee
determined to recommend the
reappointment of the incumbent firm. As the
appointment of the auditors is for one year
only, being subject to annual approval at the
Company’s AGM, there is no year-on-year
contractual commitment to the current audit
firm and, as such, the Committee may
undertake an audit tender at any time at its
discretion.
Procedures exist to monitor the
independence of the external auditors
and include a policy on employment of
former audit principals.
In performing its review, the Committee
evaluated the adequacy of the audit firm’s
key processes and controls in certain key
areas including, but not limited to:
• arrangements for ensuring independence
and objectivity, including the rotation of
key audit partners;
• appropriateness of the planned audit
scope and its execution;
• the robustness and perceptiveness of the
auditors in their handling of the key
accounting and audit judgements; and
• the quality of their reporting.
During the year, the Committee received
reports from management on litigation
matters, investor relations messages,
correspondence with institutional
shareholders, analyst and media reaction to
the Group’s 2011 preliminary announcement
and half year and Annual Report, changes in
the FTSE composition, going concern and on
developments in international financial
reporting standards.
The Committee also reviewed the annual
internal audit plan, summaries of reports
received and reviewed the effectiveness
and resources of the Group’s internal audit
function. In September, it carried out an
annual review of its terms of reference and
of its effectiveness and concluded that it did
not need to recommend to the Board any
substantive changes to its remit or operations.
In September, the Board conducted its own
review of the Committee’s performance and
confirmed that the Committee had fulfilled its
obligations and been effective in the year
under review.
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Euromoney Institutional Investor plc is subject
to the requirements of the Code in its own
right. As disclosed in its latest annual report, it
has in place its own system of internal control
and risk management processes which forms
part of the Group’s overall framework of
control. The joint ventures and associates of
the Group are not included in the Group’s
system of internal control described above.
On 18 April 2012, FTSE announced that
DMGT’s ‘A’ Ordinary Non-Voting Shares
would no longer be eligible for inclusion in
the UK Index Series. The Board of DMGT has
considered at length, with the assistance of
its advisors, the options available to it and the
suitability of such options to meet the needs
of its stakeholders to make the ‘A’ Ordinary
Non-Voting Shares eligible for inclusion in the
UK Index Series but no solution has to date
been found. The FSA’s recently issued
consultation paper on ‘Enhancing the
effectiveness of the Listing Regime and
feedback on CP12/2’ makes it more difficult
to envisage how the Company can regain its
premium listing. It is unlikely, therefore, that
the ‘A’ Ordinary Non-Voting Shares will
become eligible for inclusion in the index in
the foreseeable future. However, DMGT’s ‘A’
Ordinary Non-Voting Shares will continue to
be standard listed and traded on the London
Stock Exchange and to be a member of
other important indices such as MSCI,
STOXX, S&P and the FTSE Global Equity Index
Series and DMGT will continue to maintain
the highest standard of governance
and disclosure.
PoLicy on non-aUDiT Fees
During 2011 the Committee reviewed its
policy on the provision of non-audit services
in light of the Ethical Standard, issued by the
Auditing Practices Board in December, 2010.
The Audit Committee considers services
under the three headings, set out in the
Ethical Standard. The Committee determined
that the policy continued to apply during the
reporting period.
services where threats to Deloitte’s
independence are considered low
The first category comprises pre-approved
services where threats to Deloitte’s
independence are considered low, typically
where the engagement is routine in nature
and the fee immaterial in the context of the
total annual Group audit fee. In addition
such pre-approved services include those
which are audit related, as defined by the
APB Ethical Standard. Services which may fall
in this category include the review of the Half
Yearly Report, reporting on regulatory returns
and accountancy advice.
services where there could be a perceived
threat to independence
The second category is services where there
could be a perceived threat to independence
for which approval is required before they are
undertaken. Non-audit services in these
areas are considered by the Committee on
an individual basis and are put out to tender
where the amounts in question are
significant. Non-audit services in this category
would include those with a contingent fee
arrangement. In these areas, the choice of
firm is determined on the basis of professional
expertise and competitiveness.
services where there is a real threat to
independence
The third category is services where there is a
real threat to independence and from which
the external auditors are therefore excluded.
These services are specifically prohibited by
the APB Ethical Standard and comprise:
• internal audit and IT services where the
external auditor would place significant
reliance as part of its audit work;
• valuation and tax services and litigation
support where the respective valuation,
calculations or estimation of the likely
outcome would have a material effect on
the financial statements;
• any services where the auditor would
undertake the role of management or
take on the role of advocate; and
• contingent fee arrangements where
the outcome is dependent on a future or
contemporary audit judgement relating
to a material matter in the financial
statements or on a new or uncertain
tax law interpretation.
In addition to considering the non-audit fees
to be incurred, the Committee also considers
both the nature of the services to be
performed and the safeguards required to
maintain independence.
Non-audit fees payable to Deloitte LLP in the
year amounted to £0.8 million, compared to
£0.8 million in the previous year (note 5).
D J Verey
Audit Committee Chairman
On behalf of the Board
c chapman
Secretary
30th November, 2012
Annual Report 2012 66
The Viscount Rothermere
Chairman, Remuneration
Committee
key activities
The following changes were
implemented:
• an increase in the LTIP
performance measurement
period from three to five
years;
• simpler set of LTIP
performance measures
linked to the achievement of
strategic objectives;
• a reduction in annual LTIP
award from 187.5% of salary
to 100% of salary;
• a portion of bonus depends
on achievement or progress
towards key strategic
objectives. For 2012 this was
20% of bonus; and
• actual bonus outcomes for
2012 were just above target,
reflecting good corporate
performance.
in This secTion
overview and key activities
Remuneration at a glance
Performance and outcomes in 2012
The Remuneration committee
Remuneration components
Previous LTiP plans
Previous option plans
Graphs
Deferred bonus scheme
Pensions
service contracts
Directors’ interests in shares
66
68
69
70
71
72
73
74
76
77
78
79
Over the last year or so widespread concern
has been expressed on the topic of
executive compensation generally and
particularly in relation to schemes which
reward short-term thinking. Much of this
concern is valid.
It is more important than ever that the
Remuneration Policy is fully aligned with the
interests of long-term shareholders who want
to see sustainable growth, businesses that
respond to technological change and a
policy of investing for the medium to long
term and not for short-term returns at the
expense of creation of long-term value.
As the Company’s largest shareholder, my
interests are fully aligned with other
shareholders. Given this, it’s disappointing
that the Company has received some
criticism for the composition of its
Remuneration Committee. The Committee is
confident that its make-up ensures that it
carries out all aspects of its role with proper
and appropriate regard to long-term
shareholders’ interests and that this
alignment is, in fact, stronger as a direct
consequence of its membership.
Following a detailed review of reward policy
in 2011, the Committee decided to further
strengthen the alignment between the
interests of the executives and shareholders,
whilst ensuring that executive compensation
is fair and easily understood.
Our objective was to combine the necessary
attention to short-term performance by the
addition of key business objectives into the
annual bonus plan, with a stronger focus on
the fundamentals that drive long-term
growth, by lengthening the performance
period to five years and creating a set of
objectives against which to measure
progress towards our strategic goals.
My remuneration continues to follow the
approach adopted in 2009, as set out in the
key elements of remuneration table on
page 70.
The Committee continued its practice of
setting stretching annual bonus performance
targets, thus ensuring pay is firmly linked to
performance. When determining the annual
pay review for Executive Directors, the
Committee was mindful of pay elsewhere in
the Group and shareholder feedback.
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contents of the Report
This report has been prepared
in accordance with the
relevant requirements of the
Large and Medium-Sized
Companies and Groups
(Accounts and Reports)
Regulations 2008 (the
Regulations) and of the Listing
Rules of the Financial Services
Authority. As required by the
Regulations, a resolution to
approve the report will be
proposed at the Company’s
AGM.
This report on Directors’
remuneration includes the
following:
• a description of DMGT’s
policy on executive
remuneration for 2013 and
subsequent years;
• details of each Director’s
remuneration earned in 2012
and awards under long-
term incentive plans;
• graphs illustrating DMGT’s
total shareholder return (TSR)
performance;
• information regarding the
constitution and duties of the
Remuneration Committee
(the Committee) and its
activities during 2012;
• a summary of the terms of
executive Directors’
contracts and non-executive
Directors’ appointments;
• Directors’ interests in DMGT
shares; and
• audited disclosures of
Remuneration.
Other activities of the Committee in 2012
included:
• agreeing pay increases for the Executive
Directors for the coming year with effect
from 1st October, 2012 of 3%, except for
Paul Dacre who has a contractual increase
of the higher of RPI or 5%;
sUBsiDiaRy PLans
The Committee also spends considerable
time reviewing the incentive plans of our
main subsidiaries. Developing the right
incentives is a key part of ensuring that we
have the right entrepreneurial culture and
growth strategies in our various businesses.
• agreeing an annual bonus payment for
the year. The Board considers the
performance of the Group
in 2012 to be good and annual bonus
payments for 2012 were slightly above
target level;
• agreeing the vesting of the December,
2009 LTIP award at 52.5% of maximum.
The award vests in December 2012 based
on results over the three-year period:
1st October, 2009 to 30th September, 2012;
• noting the latest forecast outcomes for the
previous LTIP awards, the December, 2010
award is currently estimated to be 20% and
the 2006 and 2007 awards are estimated to
be below threshold. A summary of previous
awards and their estimated vesting can be
found on page 75; and
• introducing a new provision, so that the
Committee may decide to reduce or
eliminate bonus awards, or require
repayment of a bonus already received in
the event of material misstatement of
information or misconduct of the
participant.
This year we have tried to improve the clarity
and transparency of the report. Specifically,
we have introduced a section which covers
key outcomes for the year at a glance. In
addition we have commented on the link
between reward and the performance of
the business in 2012.
sUPPoRT FoR The RemUneRaTion
commiTTee
Given the increasing importance of the role
of remuneration and the Group’s desire to
operate a variety of plans focused on the
performance and needs of the individual
businesses. We have recently appointed
a new Group Reward Director Jane Allen
who will provide additional internal
resource to support the Committee and
the wider management team. The Group
Reward Director will also be Secretary
to the Committee with effect from
21st November, 2012.
The Committee receives regular updates on
corporate governance as well as pay
increase budgets and incentive plan payouts
in our local markets.
consULTaTion wiTh shaRehoLDeRs
As in previous years, the Committee takes
account of the views of shareholders and the
largest shareholders were invited to meet
with David Nelson in December 2011 to
discuss the proposed changes. The
Remuneration Report received a majority
vote in favour as did the new LTIP at the AGM.
We sincerely hope to receive your continued
support at the AGM on 6th February, 2013, for
our approach that combines the necessary
attention to short-term performance with a
focus on the fundamentals that drive
long-term value.
All of our work is aimed at ensuring the
sustainability and long-term success of
the Group.
The Viscount Rothermere
Chairman
Annual Report 2012 68
RemUneRaTion aT a GLance
Business performance
• EPS – 49.4p (up 7%)
• Profit before tax* – £255 million (up 10%)
• Dividend – 18p (up 6%)
• Share price increased in the year from £3.57 on 3rd October, 2011 to £4.82 on 30th September, 2012 an increase of 35% and had increased by
a further 8% by the date of this report.
2012 Remuneration outcomes for the executive Directors
Fees and salary 2012
Increase with effect 1st October, 2012
Cash bonus/profit share1
Benefits in kind
Car allowance
Pension/cash allowance
Gain on LTIP/share option awards that
become exercisable in the year
The Viscount
Rothermere
£000
751
(3%)
228
3
34
267
–
M W H Morgan
£000
S W Daintith
£000
D M M Dutton
£000
P M Dacre
£000
P M Fallon
£000
K J Beatty
£000
902
(3%)
451
3
18
323
–
640
(3%)
320
3
14
192
–
328
(3%)
91
1
–
–
–
1,7502
(5%)
–
26
10
–
–
222
(0%)
5,6363
2
–
–
28
666
(3%)
200
5
16
246
–
Total
1,283
1,697
1,169
420
1,786
5,888
1,133
1 75% of the Viscount Rothermere’s bonus is deferred into shares for three years. For Messrs Morgan and Daintith the bonus up to 50% of salary will be paid in cash,
for Mr Beatty the bonus up to 30% will be paid in cash. The remaining amount for Messrs Morgan, Daintith and Beatty will be deferred into shares for two years.
2 Mr Dacre’s services have been retained in his current role. The Committee decided in 2010 that Mr Dacre would be paid an additional £500,000 for each full year
that he continues working until he is 65. Mr Dacre does not participate in any bonus or other LTIP.
3 The level of Mr Fallon’s bonus/profit share was determined by the Euromoney Remuneration Committee, details of which are set out in Euromoney’s annual
report.
what are the key elements of remuneration for the executive Directors?
The remuneration policy for the Executive Directors over the 2013 financial year will remain the same as that which applied
for the 2012 financial year.
Fixed
Base salary
Pension
The Viscount Rothermere, Messrs
Morgan, Daintith and Beatty receive a
cash allowance in lieu of pension.
Variable remuneration
short term – annual bonus
The Viscount Rothermere: on target bonus is
100%, maximum is 200% of salary, normally 75%
of any bonuses deferred into shares for 3 years.
Messrs Morgan and Daintith: on target bonus is
50%, maximum is 100% of salary with any
amount above target deferred into shares for
two years.
Mr Beatty: on target bonus is 30%, maximum is
60% of salary with any amount above target
deferred into shares for two years.
Long-term incentive – 5 years
The Viscount Rothermere: no awards from
1st October, 2009.
Messrs Morgan, Daintith and Beatty: standard
award of shares equivalent to 100% of salary.
Vesting is after 5 years, conditional upon
achievement of performance conditions.
Messrs Dutton and Dacre: do not participate
in a long-term incentive plan.
Clawback provision is included in the 2012
LTIP rules.
Benefits in kind
ie car, fuel allowance, private medical
Mr Dutton: bonus is discretionary. No deferral
applies.
Mr Dacre: does not participate in a bonus
scheme.
Clawback of bonus in the event of material
misstatement of information or misconduct.
Recommended shareholding 1.5 times base salary achieved over suitable period
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LTiP awards vesting in 2011
The LTIP awards made in 2007 did not meet
the performance criteria in the period up to
31st December, 2011. Therefore the LTIP
award did not vest. There was no LTIP award
in December, 2008.
LTiP awards vesting in 2012
The 2006 LTIP award, the extended
performance period of which ends on
31st December, 2012, is unlikely to meet the
threshold for vesting. See page 74 for further
details.
The LTIP awarded in December, 2009 which
will vest in December, 2012 for which the
performance period ended on 30th
September, 2012 will vest as follows:
Weighting
% that
vests
Actual
outcome
Actual %
that vests
EBITA (2011/12)
25%
below
threshold
above
threshold
0%
10%
25%
Cumulative
free cash
Net debt:
EBITDA
(average)
Performance
against the
Strategic Plan
Total
25% maximum
25%
25%
above
target
17.5%
52.5%
The 2009 awards will not be realisable until
December, 2015. The value of the award uses
a closing share price of £4.82 on 30th
September, 2012. The final value will not
be known until the award vests in
December, 2015.
LTIP shares
Total value of LTIP
awards £000
Martin
Morgan
2012
Kevin
Beatty
2012
69,053
51,042
332,835 246,022
In addition to the core awards in the table
above, matching shares will be awarded, to
the extent to which the core award vested,
on 14th December, 2012, 2013, 2014 and 2015,
so long as none of the shares from the core
award are sold and the executive is still
employed in the Group.
PeRFoRmance anD oUTcomes in 2012
2012 annual bonus outcomes
The table below sets out the performance
criteria and the level of achievement against
each measure.
Performance measures for 2012
B2B
Adjusted
pre-tax profits
Actual
Outcome
%
achieved
above
target
132%
Consumer adjusted
pre-tax profits
above
target
Overall DMGT adjusted
pre-tax profits
above
target
110%
123%
strategic objectives
For Messrs Morgan, Daintith and Beatty, 20%
of the bonus is measured against
achievement of strategic targets. For 2012,
examples of the progress during the year
against these targets are set out below:
• divestment of Northcliffe Media;
• ensuring that we have the right skills and
talent to deliver against our strategic
priorities; and
• increasing focus on technology and digital
transformation supported by a cross-
divisional council of Chief Technology
Officers.
outcomes
The Committee agreed a bonus award of
121.3% for the Viscount Rothermere, 62.6% of
salary for Mr Morgan and 68.6% of salary for
Mr Daintith.
The Committee also agreed a bonus award
for Mr Beatty of 45.4% of salary. The award for
Mr Dutton was £90,750.
Bonus deferral
In accordance with revised deferral levels,
75% of the Viscount Rothermere’s bonus will
be deferred into shares for three years. For
Messrs Morgan, Daintith and Beatty, any
amounts above on target bonus are
deferred into shares for two years. There is no
deferral applied to the bonus for Mr Dutton.
Annual Report 2012 70
Remuneration committee
attendance
Number of
meetings
eligible
to attend
Number of
meetings
attended
The Viscount
Rothermere
N W Berry
D H Nelson
5
5
5
5
5
5
The RemUneRaTion commiTTee:
RoLe anD acTiViTies
The Remuneration Committee responsibilities
include Group remuneration policy and for
setting the remuneration, benefits and terms
and conditions of employment of the
Company’s executive Directors and other
senior executives. The Committee’s terms of
reference are available on the Company’s
website.
The members of the Committee are
the Viscount Rothermere, its Chairman,
Messrs Berry and Nelson. The UK Corporate
Governance Code (‘the Code’)
recommends that a remuneration
committee should be composed entirely of
independent non-executive Directors. The
Board considers it appropriate that the
Viscount Rothermere, as the Company’s
largest shareholder, is a member of the
Committee. He always leaves meetings in
advance of any discussion of his own
remuneration. While Mr Nelson is not
considered to be independent under the
Code, the Board does consider him to act
independently as regards remuneration
issues.
The Committee also reviews the Chief
Executive’s recommendations for the
remuneration packages of other senior
executives, except those in Euromoney, and
oversees the bonus arrangements which are
reviewed by the Euromoney Remuneration
Committee and long-term incentive
arrangements. These are designed
individually to reflect the targets and
objectives of each division.
The Committee met five times during the
year all of which were regular meetings. The
meetings were attended by all serving
members, except that the Viscount
Rothermere did not attend part of one
meeting, when matters affecting his own
remuneration were discussed. Individual
attendance by members is set out below.
During the year, the Board approved that the
Secretary to the Committee would now be
the Group Reward Director.
The Committee seeks the recommendations
of the Chief Executive, with regards to the
remuneration of the other executive Directors
and of other senior executives. He usually
attends meetings of the Committee by
invitation. It also seeks input from the Finance
Director regarding financial performance
and other issues, from the HR Director, Group
Reward Director and from the Company
Secretary. No executive is present when his
own remuneration is being discussed.
During 2012, the Committee was advised by
MM&K, a specialist remuneration advisor,
who were appointed by the Committee.
MM&K also provided the Company with
advice on share schemes, provided market
data of remuneration levels for other
companies, particularly in the media field
and advice on best practice.
Phil Wills Associates were separately
appointed by management and provided
remuneration advice to the Committee.
Neither advisers provided services to any
other part of the Group. Freshfields, which are
the Company’s legal advisor, also provided
advice to the Committee.
In September 2012, the Committee
conducted a formal review of its
effectiveness and concluded that it had
fulfilled its remit and been effective in
the year.
DmGT’s execUTiVe DiRecToR
RemUneRaTion PoLicy
The Committee seeks to structure
remuneration packages on an individual
basis appropriate to the level of responsibility
that is generally designed to motivate and
retain the individual.
The Committee considers that a successful
remuneration policy needs to be sufficiently
flexible to take account of commercial
demands, changing market practice and
shareholder expectations. Ordinary
shareholders are provided with the
opportunity to endorse the Company’s
remuneration policy on a regular basis
through the annual vote on the
Remuneration Report.
A significant proportion of each executive
Director’s remuneration is performance
related.
Risk and reward
During the year the Committee reviewed
and confirmed that the plans in operation
throughout the Group did not incentivise
excessive risk and in particular that the
remuneration incentives the Company are
compatible with its risk policies and systems.
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Remuneration components
The Committee makes reference, where
appropriate, to pay and employment
conditions elsewhere in the Group, especially
when determining annual salary increases,
and to external evidence of remuneration
levels in other companies, particularly in the
media field. It also makes reference to
advice sought from external advisors.
Basic Fees anD saLaRy
Basic salaries are set by the Committee and
reviewed annually.
BonUses
Executive Directors are eligible for an annual
bonus dependent on the achievement of
targets which take account of corporate
performance as well as key strategic
objectives. These targets are reviewed
annually and new objectives are set by the
Committee for each Director at the start of
the financial year. Details of the target and
maximum bonus levels for each of the
executives can be found on page 70. Details
of the bonus awards for 2012 can be found
on page 71 of this report.
LTiP
The 2012 plan was approved by shareholders
at the 2012 AGM and has a standard award
of 100% of salary, for those Executive Directors
who participate in the plan, although the
plan rules approved by shareholders
provides for maximum awards in exceptional
circumstances of up to 300% of salary.
2012 schedule of LTiP awards
Performance conditions
The Committee recognises the difficulty of
setting formula-driven financial goals at a
Group level over an extended five-year
period, as well as to the challenges of the
overall economic environment in general
and the print businesses in particular.
The following criteria apply to the LTIP awards
made in March, 2012, which will be assessed
by the Committee at the end of 2016, who
will then decide on the extent to which the
LTIP awards will vest:
• growing the B2B businesses;
• continue to grow and invest in strong
brands of digital consumer media –
particularly MailOnline;
• growing sustainable earnings and
dividends; and
• increasing the Company’s exposure to
growth economies and to international
opportunities.
The performance criteria reflect the priority
of increasing shareholder value by driving
long-term sustainable profit growth, whilst
continuing with our investment in a
digital business.
The performance conditions for awards to be
made in December, 2012 follow the same
principles for the awards that were made in
March, 2012.
Awards that have been made under the
2012 LTIP scheme are shown below.
‘A’ Ordinary Non-Voting Shares
in award
Held at
2 Oct 11
Awarded
during year
Vested
during year
Lapsed
during year
M W H Morgan
S W Daintith
K J Beatty
Total
–
–
–
–
–
–
–
206,350
146,453
152,494
505,297
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Held at
30 Sep 12
206,350
Award
price
£ Date of award
End of
performance
period
4.370
13 Feb 12
2 Oct 16
146,453
4.370
13 Feb 12
2 Oct 16
152,494
4.370
13 Feb 12
2 Oct 16
505,297
Annual Report 2012 72
sUmmaRy oF LTiP awaRDs anD VesTinG
FRom 2006 To 2012
The table on the right summarises the awards
that have been made each year and the
actual level of vesting of the award or the
estimated level for future vesting.
Full details of previous plans can be found in
the Remuneration Report in the 2011 Annual
Report and Accounts.
oUTsTanDinG awaRDs FoR The yeaR
2006 To 2007 LTiP awaRDs
All participating Directors elected to delay
the realisation of their 2006 awards for a
further two years until 31st December, 2012
and of their 2007 awards until 31st December,
2013. Having received agreements to
commit shares, the Trustee made the awards
set out in the table on the right.
summary of LTiP awards and vesting from 2006 to 2012
Year of
Award
Normal
date of
vesting
Actual
date of
vesting
Standard
award
as % of
salary
Percentage
of award
realised
(estimatede)
Award
price
Performance conditions
Jul 06
Dec 10 Dec 12 187.5%
7.880
0% Relative performance of TSR against
comparator group.
Jul 07
Dec 11 Dec 13 187.5%
7.170
0% Relative performance of TSR against
Mar 08 Mar 11 Mar 11 187.5%
Mar 08 Mar 11 Mar 11
30%
4.265
4.265
Dec 09 Sep 12 Sep 12 187.5%
4.039
comparator group.
0% Core award: EPS growth.
100% Transition award:
no additional conditions.
52.5% EBITDA; Cumulative free cash;
Net debt: EBITDA average and
Performance against strategic plan.
Dec 10 Sep 13 Sep 13 187.5%
5.585
20%e
EBITDA; Cumulative Free Cash;
Net debt: EBITDA investment grade
rating and performance against
strategic plan.
Feb 12 Oct 16
100%
4.370
100%e
Extent to which strategic goals are met.
2006–2007 schedule of LTiP awards
‘A’ Ordinary
Non-Voting
Shares
in award
The
Viscount
Rothermere
Subtotal
M W H
Morgan
Subtotal
D M M
Dutton
Subtotal
Total
Held at
2 Oct 11
36,250
43,926
80,176
17,766
17,500
35,266
16,142
18,807
34,949
150,391
Awarded
during
year
Vested
during
year
Lapsed
during
year
Held at
30 Sep12
Award
price
£
Percentage
of award
realised
(estimatede)
End of
extended
performance
period
Date of
award
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
36,250
7.88
0%e
28 Jul 06
31 Dec 12
–
–
–
–
–
–
–
43,926
7.17
0%e
4 Jul 07
31 Dec 13
80,176
17,766
7.88
0%e 28 Aug 06
31 Dec 12
17,500
7.17
0%e 26 Feb 07
31 Dec 13
35,266
16,142
7.88
0%e 26 Sep 06
31 Dec 12
18,807
7.17
0%e 20 Jun 07
31 Dec 13
34,949
– 150,391
PeRFoRmance conDiTions
The Company’s TSR ranking for the 2006 and
2007 awards are shown in the table below.
The company’s Relative TsR Performance
to date
Year of
award
2006
2007
Extended
performance
period
1 Jan 2006 to
31 Dec 2012
1 Jan 2007 to
31 Dec 2013
Position
at 30th
September
2012
Ninth
Seventh
Vesting if
position
maintained
0%
0%
Graphs
Graphs of the Company’s performance
against each of its comparators for each
of these periods are set out on page 75.
These graphs have been plotted using the
relative rankings of each comparator at
the end of each month. As such, they are
approximations to the actual rankings under
the rules, which are calculated using a
two-month average for the starting point
and for each subsequent month. This can
give different results between the table
above and the graphs.
The graphs on page 74 compare the
Company’s total shareholder return with
that of the FTSE 100 index over a period of
five years, as required by the Regulations.
As a constituent of the FTSE 100 from 1999 to
2006 and during 2007 and as a constituent
of the media index throughout the period,
the Directors regard both indices as the
most appropriate indices for purposes of
comparison of the Group’s performance.
Additional graphs on that page illustrate
performance over a 26-year period for
which data is available.
The graphs on pages 74 and 75 are
unaudited.
Daily Mail and General Trust Plc strategic Report
Directors’ Report
Governance
Financial statements
73
oUTsTanDinG awaRDs FRom 2008 To 2011
The table below shows unvested awards that were made under the 2008 LTIP scheme.
2008–2011 schedule of LTiP awards
‘A’ Ordinary Non-Voting Shares
in Core awards
Held at
2 Oct 11
Awarded
during year
Vested
during year
Lapsed
during year
Held at
30 Sep 12
M W H Morgan
Subtotal
K J Beatty
Subtotal
Total shares awarded
Recruitment award
131,530
97,974
229,504
97,224
72,403
169,627
399,131
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
131,530
97,974
229,504
97,224
72,403
169,627
399,131
Award
price
£
4.039
5.585
4.039
5.585
Percentage of
award realised
(estimatede) Date of award
End of
performance
period
52.5%
20%e
52.5%
20%e
14 Dec 09
30 Sep 12
20 Dec 10
29 Sep 13
14 Dec 09
30 Sep 12
20 Dec 10
29 Sep 13
‘A’ Ordinary Non-Voting Shares
in Transition awards
S W Daintith
Held at
2 Oct 11
17,421
Awarded
during year
Vested
during year
Lapsed
during year
Held at
30 Sep 12
–
–
–
17,421
Award
price
£
5.74
Percentage of
award realised Date of award
End of
performance
period
100%
1 Jan 11
1 Jan 14
1997 executive share option scheme
Options were granted under this Scheme prior
to 2006. Options granted do not normally vest
until three years after the award and unless
both performance conditions have been met.
The first condition is that, in respect of four
out of six consecutive monthly calculation
dates (which start in the 30th month
following the date of grant of a particular
option), the total shareholder return (TSR)
of the Company must exceed that of the
FTSE 100 index. Secondly, there must be
real growth in earnings per share (‘eps’)
over a period of three consecutive
financial years.
option awards 2001–2004
Unvested awards that were made under the
1997 share option scheme are shown below.
outstanding options
There were 4,929,968 outstanding options
under all the schemes at the end of the year.
This represents 1.29% of the Company’s total
issued share capital (excluding treasury shares).
The mid-market price of the ‘A’ Ordinary Non-
Voting Shares was £4.82 at 30th September,
2012 and £3.631 at 2nd October, 2011. It
ranged from £3.479 to £5.015 during the year.
awards of options made in the years 2001–2004
‘A’ Ordinary Non-Voting Shares
in the Company
Held at
2 Oct 11
Awarded
during year
Exercised
during year
The Viscount Rothermere
Subtotal
M W H Morgan
Subtotal
D M M Dutton
Subtotal
P M Dacre
Subtotal
K J Beatty
Subtotal
Total
30,000
50,000
40,000
60,000
180,000
10,000
20,000
20,000
20,000
70,000
25,000
35,000
40,000
100,000
60,000
100,000
50,000
80,000
290,000
15,000
20,000
20,000
30,000
85,000
725,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Expired/
lapsed
during year
(30,000)
–
–
–
(30,000)
(10,000)
–
–
–
(10,000)
–
–
–
–
(60,000)
–
–
–
(60,000)
(15,000)
–
–
–
Held at
30 Sep 12
–
50,000
40,000
60,000
150,000
–
20,000
20,000
20,000
60,000
25,000
35,000
40,000
100,000
–
100,000
50,000
80,000
230,000
–
20,000
20,000
30,000
(15,000)
70,000
(115,000)
610,000
Exercise
price
£
Likely vesting
Normal date
from which
exercisable
Expiry date
6.45
5.73
6.08
7.24
6.45
5.73
6.08
7.24
5.73
6.08
7.24
6.45
5.73
6.08
7.24
6.45
5.73
6.08
7.24
not vested
14 Dec 04
14 Dec 11
unlikely
unlikely
unlikely
16 Dec 05
16 Dec 12
8 Dec 06
6 Dec 07
8 Dec 13
6 Dec 14
not vested
14 Dec 04
14 Dec 11
unlikely
unlikely
unlikely
unlikely
unlikely
unlikely
16 Dec 05
16 Dec 12
8 Dec 06
6 Dec 07
8 Dec 13
6 Dec 14
16 Dec 05
16 Dec 12
8 Dec 06
6 Dec 07
8 Dec 13
6 Dec 14
not vested
14 Dec 04
14 Dec 11
unlikely
unlikely
unlikely
16 Dec 05
16 Dec 12
8 Dec 06
6 Dec 07
8 Dec 13
6 Dec 14
not vested
14 Dec 04
14 Dec 11
unlikely
unlikely
unlikely
16 Dec 05
16 Dec 12
8 Dec 06
6 Dec 07
8 Dec 13
6 Dec 14
Annual Report 2012
74
Total shareholder Return: DMGT vs FTSE and Media Sector 100 2007–2012
-14%
150%
120%
90%
60%
30%
0%
Key
Se p 07
Se p 08
Se p 09
Se p 10
Se p 11
Se p 12
DMGT ‘A’ TSR
FTSE 100 TSR
Media Sector TSR
Total shareholder Return: DMGT vs FTSE and Media Sector 100 1986–2012
+91%
4000%
3000%
2000%
1000%
0%
Se p 86
Se p 87
Se p 88
Se p 89
Se p 90
Se p 91
Se p 92
Se p 93
Se p 94
Se p 95
Se p 96
Se p 97
Se p 98
Se p 99
Se p 00
Se p 01
Se p 02
Se p 03
Se p 04
Se p 05
Se p 06
Se p 07
Se p 08
Se p 09
Se p 10
Se p 11
Se p 12
Key
DMGT ‘A’ TSR
FTSE 100 TSR
Media Sector TSR
Daily Mail and General Trust Plc strategic Report
Directors’ Report
Governance
Financial statements
75
Total shareholder Return: DMGT vs Media Comparators 2006–2012
9th position
D e c 05
M ar 06
Ju n 06
Se p 06
D e c 06
M ar 07
Ju n 07
Se p 07
D e c 07
M ar 08
Ju n 08
Se p 08
D e c 08
M ar 09
Ju n 09
Se p 09
D e c 09
240%
220%
200%
180%
160%
140%
120%
100%
80%
60%
40%
20%
0%
D e c 05
M ar 06
Ju n 06
Se p 06
D e c 06
M ar 07
240%
220%
200%
180%
160%
140%
120%
100%
80%
60%
40%
20%
0%
D e c 05
M ar 06
Ju n 06
Se p 06
D e c 06
M ar 07
Ju n 07
Se p 07
D e c 07
M ar 08
Ju n 08
Se p 08
D e c 08
M ar 09
Ju n 09
Se p 09
D e c 09
M ar 10
Ju n 10
Se p 10
D e c 10
M ar 11
Ju n 11
Se p 11
D e c 11
160%
140%
120%
100%
80%
60%
40%
20%
0%
160%
140%
120%
100%
80%
60%
40%
20%
0%
240%
220%
200%
180%
160%
140%
120%
100%
80%
60%
40%
20%
0%
160%
140%
120%
100%
80%
60%
40%
20%
0%
D e c 06
M ar 07
Ju n 07
Se p 07
D e c 07
M ar 08
Ju n 08
Se p 08
D e c 08
M ar 09
Ju n 09
Se p 09
D e c 09
M ar 10
Ju n 10
Se p 10
D e c 06
M ar 07
Ju n 07
Se p 07
D e c 07
M ar 08
Ju n 08
Se p 08
D e c 08
M ar 09
Ju n 09
Se p 09
D e c 09
M ar 10
Ju n 10
Se p 10
D e c 10
M ar 11
Ju n 11
Se p 11
D e c 11
M ar 12
Ju n 12
Se p 12
240%
220%
200%
180%
160%
140%
120%
100%
80%
60%
40%
20%
0%
Key
D e c 05
M ar 06
Ju n 06
Se p 06
D e c 06
M ar 07
Se p 08
Ju n 10
M ar 10
M ar 09
Ju n 09
Se p 09
D e c 08
D e c 09
Pearson
Pearson
Reed Elsevier
Reed Elsevier
News Corporation
News Corporation
Informa plc
Informa plc
Thomson Corporation
Thomson Corporation
McGraw-Hill Companies Inc
McGraw-Hill Companies Inc
United Business Media
United Business Media
New York Times Co /ex-Reuters
New York Times Co/ex-Reuters
DMGT ‘A’
DMGT ‘A’
Washington Post Co
Washington Post Co
Trinity Mirror
Trinity Mirror
Johnston Press/ex-EMAP
Johnston Press/ex-EMAP
Independent News & Media
Independent News & Media
D e c 11
A u g 12
Se p 11
Ju n 11
Ju n 12
M ar 12
Ju n 07
Se p 07
D e c 07
M ar 08
Ju n 08
M ar 10
Ju n 10
Se p 10
D e c 10
M ar 11
M ar 12
Ju n 12
A u g 12
160%
140%
120%
100%
80%
60%
40%
20%
0%
Key
D e c 06
M ar 07
Ju n 07
Se p 07
D e c 07
M ar 08
Ju n 08
M ar 10
M ar 09
Ju n 10
Ju n 09
Se p 09
D e c 09
D e c 08
Reuters Group plc
Reed Elsevier
News Corporation
Informa plc
Reuters Group plc
Thomson Reuters (ex Corporation)
Reed Elsevier
McGraw-Hill Companies Inc
News Corporation
United Business Media
Informa plc
New York Times Co/ex-EMAP
Thomson Reuters (ex Corporation)
DMGT ‘A’
McGraw-Hill Companies Inc
Washington Post Co
United Business Media
Trinity Mirror
New York Times Co/ex-EMAP
Johnston Press
DMGT ‘A’
Independent News & Media
Washington Post Co
Trinity Mirror
D e c 10
D e c 11
Se p 11
Ju n 11
Ju n 12
M ar 11
M ar 12
Johnston Press
Independent News & Media
Se p 12
D e c 06
M ar 07
Ju n 07
Se p 07
D e c 07
M ar 08
Ju n 08
Se p 08
Se p 10
D e c 10
M ar 11
D e c 08
M ar 09
Ju n 09
Se p 09
D e c 09
Pearson
Reed Elsevier
News Corporation
Informa plc
Thomson Corporation
McGraw-Hill Companies Inc
United Business Media
New York Times Co /ex-Reuters
DMGT ‘A’
Washington Post Co
Trinity Mirror
Johnston Press/ex-EMAP
Independent News & Media
Ju n 10
M ar 10
Se p 10
D e c 10
M ar 11
Ju n 11
Se p 11
D e c 11
M ar 12
Ju n 12
A u g 12
Ju n 07
Se p 07
M ar 08
D e c 07
Ju n 08
Se p 08
Pearson
Reed Elsevier
News Corporation
Informa plc
Thomson Corporation
McGraw-Hill Companies Inc
United Business Media
New York Times Co/ex-Reuters
DMGT ‘A’
Washington Post Co
Trinity Mirror
Johnston Press/ex-EMAP
Independent News & Media
D e c 11
D e c 10
Se p 11
Ju n 11
M ar 12
M ar 11
Ju n 12
Se p 10
A u g 12
7th position
Ju n 11
Se p 11
D e c 11
M ar 12
Ju n 12
Se p 12
D e c 09
M ar 10
Ju n 10
Se p 10
Reuters Group plc
Reed Elsevier
News Corporation
Informa plc
Thomson Reuters (ex Corporation)
McGraw-Hill Companies Inc
United Business Media
New York Times Co/ex-EMAP
DMGT ‘A’
Washington Post Co
Trinity Mirror
Johnston Press
Independent News & Media
D e c 10
M ar 11
Se p 08
D e c 08
M ar 09
Ju n 09
Se p 09
Reuters Group plc
Reed Elsevier
News Corporation
Informa plc
Thomson Reuters (ex Corporation)
McGraw-Hill Companies Inc
United Business Media
New York Times Co/ex-EMAP
DMGT ‘A’
Washington Post Co
Trinity Mirror
Johnston Press
Independent News & Media
D e c 11
Se p 12
Se p 11
Ju n 12
Ju n 11
M ar 12
Total shareholder Return: DMGT vs Media Comparators 2007–2012
Annual Report 2012 76
Expiry date
7 Dec 16
6 Dec 17
5 Dec 18
7 Dec 16
6 Dec 17
5 Dec 18
Deferred Bonus scheme
Under the deferred bonus plan, an element
of executive Directors’ bonuses are deferred
into ‘nil’ cost options. The awards shown
below were granted as part of this plan.
The ‘nil’-cost options granted during the year
were derived from the Directors’ bonus in the
prior year. After the date of approval of this
Report, the ‘nil’-cost options earned in the
current year will be granted.
Deferred Bonus scheme
‘A’ Ordinary Non-
Voting Shares
in the Company
The Viscount
Rothermere
Subtotal
M W H Morgan
Subtotal
S W Daintith
K J Beatty
Subtotal
Total options held
Held at
2 Oct 11
Awarded
during year
Exercised
during year
Lapsed
during year
Held at
30 Sep 12
Exercise
price
£
Date
of grant
Normal date
from which
exercisable
105,306
187,581
–
292,887
130,140
77,272
–
207,412
–
96,196
34,970
–
131,166
631,465
–
–
110,464
110,464
–
–
44,215
44,215
24,201
–
–
17,069
17,069
195,949
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
105,306
187,581
110,464
403,351
130,140
77,272
44,215
251,627
24,201
96,196
34,970
17,069
148,235
827,414
7 Dec 09
6 Dec 10
5 Dec 11
7 Dec 09
6 Dec 10
5 Dec 11
5 Dec 11
7 Dec 09
6 Dec 10
5 Dec 11
–
–
–
–
–
–
–
–
–
–
–
–
–
–
7 Dec 12
6 Dec 13
5 Dec 14
7 Dec 12
6 Dec 13
5 Dec 14
5 Dec 14
7 Dec 12
6 Dec 13
5 Dec 14
5 Dec 18
7 Dec 16
6 Dec 17
5 Dec 18
Pensions entitlements and cash allowances
The Group operates a two-tier defined
benefit pension scheme for senior
employees. It is the Company’s policy
that annual bonuses, payments under
the Executive Bonus Scheme and benefits
in kind are not pensionable.
Prior to 6th April, 2006 the Committee
reviewed in detail the impact of the pension’s
tax regime operating from that date. It
developed a new policy, designed to be
neutral in terms of cost compared to existing
expenditure on pensions. This new policy
incorporated the removal of the pensionable
earnings cap for pension accruing after
6th April, 2006.
Individual Executive Directors were affected
very differently by these changes and for
some it was not tax-efficient to accrue further
pension for service from 6th April, 2006.
However, it was for individual Directors to
decide when to opt out of the scheme, in
which case a cash allowance is paid.
Annual cash allowances of 37% of salary are
paid to each of the Viscount Rothermere, Mr
Morgan and Mr Beatty, in lieu of continued
membership of the DMGT Senior Executives’
Pension Fund. Mr Dacre was paid a similar
allowance until December, 2009.
Mr Daintith is paid an allowance of 30% of
basic salary in lieu of membership of a
Company pension scheme.
The Company does not make any pension
contributions on behalf of Mr Dutton.
No Executive Directors are now accruing
further pension in the DMGT Senior
Executives’ Pension Fund. The normal
retirement age under the Fund for this group
is 60.
Accrued entitlements under the DMGT Senior
Executives’ Pension Fund are shown in the
table opposite.
Daily Mail and General Trust Plc strategic Report
Directors’ Report
Governance
Financial statements
77
accrued entitlements under the DmGT senior executives’ Pension Fund
Accrued
pension
entitlement
at 2 Oct 11
£000
Age at
30 Sep 12
Years
Inflationary
increase
£000
Real
increase in
accrued
pension
£000
Accrued
entitlement at
30 Sep 12
Transfer
value as at
2 Oct 11
£000
Member’s
contributions
Transfer
value of real
increase in
accrued
pension net
of member’s
contributions
£000
Other
changes to
transfer value
£000
Transfer
value as at
30 Sep 12
£000
44
62
63
54
70
78
605
93
3
4
30
4
–
–
–
–
73
82
635
97
905
2,038
14,879
1,880
–
–
–
–
–
–
–
–
72
(10)
(70)
134
977
2,028
14,809
2,014
Director
The Viscount
Rothermere
M W H Morgan3
P M Dacre4
K J Beatty
1 For each Director, the accrued entitlement at 30th September, 2012 represents the annual pension that is expected to be payable on eventual retirement,
based on the salary of each Director at this date and pensionable service accrued to 5th April, 2006 or subsequent date of opting out of the Fund. A spouse’s/
dependant’s pension equal to two-thirds of the Director’s pension is incorporated and the Director can elect to receive the pension from age 50, subject to a
discount if retirement takes place before 60. The pension, when in payment, will receive annual increases in line with inflation, which may be limited when inflation
exceeds 3% per annum.
2 All transfer values have been calculated on the basis of actuarial advice in accordance with UK legislation. The transfer values of the accrued entitlement
represent the value of assets that the pension scheme would need to transfer to another pension provider on transferring the scheme’s liability in respect of the
Directors’ pension benefits.
3 Mr Morgan began to take his pension benefits in March, 2010. Mr Morgan’s pension benefit in the above table relates to a pension in the DMGT Senior Executives’
Pension Fund for pensionable service between 8th May, 1989 and 31st August, 2000, when he transferred to the US. In addition, Mr Morgan has the following
pension arrangements:
• a US-deferred compensation plan, which is held in a Rabbi Trust. This provides a defined contribution cash benefit, with a defined benefit pension underpin in
respect of the period 1st September, 2000 to 30th September, 2008.
• an employer-financed retirement benefits scheme (EFRBS) in respect of service from 1st October, 2008 operated on behalf of the Company under an offshore
trust located in Jersey. With effect from 1st April, 2012 contributions to the EFRBS ceased and the pension allowance is now paid entirely in cash.
4 Mr Dacre began to take his pension benefits in November 2008.
Accrued benefits under the Harmsworth Pension Scheme
Accrued
pension
entitlement
at 2 Oct 11
£000
Age at
30 Sep 12
Years
Inflationary
increase
£000
Real
increase in
accrued
pension
£000
Accrued
entitlement at
30 Sep 12
Transfer
value as at
2 Oct 11
£000
Member’s
contributions
Transfer
value of real
increase in
accrued
pension net
of member’s
contributions
£000
Other
changes to
transfer value
£000
Transfer
value as at
30 Sep 12
£000
66
11
1
–
12
202
–
–
6
208
Director
P M Fallon1
1 Mr Fallon died on 14th October, 2012 and the widow’s pension is now payable to his spouse.
execUTiVe DiRecToRs’ seRVice conTRacTs
Mr Dacre had a rolling contract which
reduced to one year on 14th November, 2011
and reduced further on 14th November, 2012
to the residual term until his sixty-fifth birthday
on 14th November, 2013.
Details of these service contracts are set out
in the table below.
Leaver provisions
In the event of earlier termination of their
contracts, each Director is entitled to
compensation equal to his basic salary,
benefits, pension entitlement and, as
appropriate, bonus or profit share for their
notice period.
The contracts of Mr Morgan and Mr Daintith
are subject to mitigation and, in the event of
service contracts
Date of contract
Notice period
to/from the
Company
Company
with whom
contracted
The Viscount Rothermere
17 Oct 94
1 month
M W H Morgan
S W Daintith
D M M Dutton
P M Dacre
K J Beatty
1 Oct 08
1 Jan 11
27 Nov 02
1 year
1 year
1 year
13 July 98
11½ months
DMGT
DMGT
DMGT
DMGT
DMGT
19 May 02
1 year
Associated
the Director obtaining alternative
employment during the notice period, do
not provide for further payment after such
event. This mitigation does not apply to their
pension benefit. Share options and LTIPs
would be treated as for any member of the
scheme, depending on the reason for
termination of the contract.
Policy on external appointments
The Company allows its Executive Directors
to take a very limited number of outside
directorships. Individuals retain the payments
received from such services since these
appointments are not expected to impinge
on their principal employment.
Mr Morgan was appointed to the Board of
the City of London Investment Trust on 1st
March, 2012 and receives a fee of £25,00 p.a.
(£14,583 for the reporting period).
Annual Report 2012 78
non-execUTiVe DiRecToRs
Policy on non-executive
Directors’ remuneration
The Board’s policy on non-executive
Directors’ remuneration is to pay fees which
reflect their responsibilities, are competitive
with other companies and which align
Directors’ interests with those of shareholders.
The Board as a whole considers and
approves the fees of the non-executive
Directors with the exception of the Chairman
whose fees are approved by the Committee.
The fees for the Chairman and non-executive
Directors are paid at the annual rates shown
in the table below:
Board Member
Audit Committee Chairman
Audit Committee Member
Remuneration Committee
Member
Risk Committee Member
Investment and Finance
Committee Member
Fees 1 Oct 11
35,000 1
25,000
10,000
12,000
8,000
25,000
1 An increase in the base fee from £30,000 to
£35,000 per annum was made from 1st October,
2011 the first such increase for five years.
During the year, the Directors reviewed the
travel allowances to reflect the greater level
of international travel required. Directors
received travel allowance in 2012 of £4,000
paid in respect of attendance at Board
meetings involving more than 10 hours’
travel. With effect from 1st October, 2012
the Committee agreed a travel allowance
of £4,000 will be paid for travel involving
between 5 and 10 hours and £10,000 for
Board meetings involving more than
10 hours’ travel.
In addition the following fees were increased
effective 1st October, 2012. Mr Nelson’s fee for
his work in relation to the Remuneration
Committee increased to £25,000; the fee for
members of the Audit Committee increased
to £14,000 and for the Audit Committee
Chairman to £30,000.
non-executive Directors’ terms of
appointment
Non-executive Directors are appointed for
specified terms and under the Company’s
Articles of Association are subject to
re-election by Ordinary shareholders at
the Annual General Meeting following
appointment, and thereafter at least every
three years. The Board has adopted the
provision in the Code that they be subject to
annual re-election. Each appointment can
be terminated before the end of the one
year period, with no notice or fees due. The
dates of the appointment or subsequent
re-appointment of the non-executive
Directors are set out in the next column.
J G Hemingway
F P Balsemão
N W Berry
T S Gillespie
D H Nelson
D J Verey
D Trempont
H Roizen
Date of
appointment/
re-appointment
8 Feb 2012
8 Feb 2012
8 Feb 2012
8 Feb 2012
8 Feb 2012
8 Feb 2012
8 Feb 2012
26 Sept 2012
appointments and re-election
All Directors will be standing for re-election at
the forthcoming AGM except for Tom
Gillespie who will retire from the Board with
effect from the AGM.
other related party transactions
No Director of the Company has, or had,
a disclosable interest in any contract of
significance existing during or at the end
of the year.
aUDiTeD inFoRmaTion
The following information in this report has
been audited.
Directors’ aggregate remuneration
The total amounts of the remuneration
and other benefits of the Directors of the
Company for the years ended 30th
September, 2012 and 2nd October, 2011
are shown in the table below.
Aggregate
emoluments
Gains on exercise of
share options
Amounts receivable*
under long-term
incentive schemes
Sums paid to third**
parties for Directors’
services
2012
£000
2011
£000
13,453
13,243
28
–
567
1,825
169
146
13,622
15,781
* The amounts receivable under long-term
incentive schemes were in respect of realisations
of awards made in 2004, 2008 and 2009 and
reflect performance over those periods to 2011.
** Relates to fees paid to Messrs Hemingway and
Nelson.
Daily Mail and General Trust Plc strategic Report
Directors’ Report
Governance
Financial statements
79
Total
in 2012
£000
1,283
1,535
1,169
420
1,786
5,860
1,133
74
39
35
68
57
95
51
13
–
4
13,622
Total
in 2011
£000
1,171
1,082
732
394
1,725
5,382
976
69
34
30
63
52
77
43
30
1,529
–
–
–
13,389
2012 pension
contributions
£000
2011 pension
contributions
£000
–
161
–
315
–
–
–
–
–
–
–
–
–
–
–
–
_
–
–
161
–
–
–
–
–
–
–
–
–
–
–
–
–
_
–
–
–
315
Directors’ emoluments
The emoluments of the Directors from
1st October, 2011 to 30th September, 2012 are
shown in the table below.
Directors’ interests in shares
The Company encourages Directors to
own shares in the Company and executive
Directors have a target of a minimum
shareholding of 1.5 times their salary, to be
built up over a suitable period. The design of
the incentive plans encourages executive
Directors to achieve this goal which aligns
their interests with those of shareholders.
The shares held and valued at
30th September, 2012 as a multiple
of salary were:
Value of shares1
held at 30th
September,
2012
£m
Salary multiple
at 30th
September,
2012
421.5
560.0
22.8
4.7
–
1.3
0.2
0.3
25.0
5.2
–
3.9
0.1
0.4
The Viscount
Rothermere
P M Fallon
M W H Morgan
S W Daintith
D M M Dutton
P M Dacre
K J Beatty
1 Does not include shares which have been
awarded subject to deferral or satisfaction of
conditions other than performance conditions
e.g. nil-cost options.
2 In the case of Mr Fallon, who was an executive
Director of Euromoney, shares in Euromoney
are included.
Directors’ emoluments
The Viscount Rothermere
M W H Morgan
S W Daintith
D M M Dutton
P M Dacre
P M Fallon
K J Beatty
J G Hemingway
F P Balsemão
T S Gillespie
D J Verey
N W Berry
D H Nelson
D Trempont
C W Dunstone
J P Williams
H Roizen
Fees and
salary1
£000
Cash Bonus/
Profit share2
£0001
Benefits in
kind3
£000
Car
allowance
Pension/cash
allowances
£000
751
902
640
328
1,750
222
666
74
39
35
68
57
95
35
13
–
–
228
451
320
91
–
5,636
200
–
–
–
–
–
–
–
_
–
–
3
3
3
1
26
2
5
–
–
–
–
–
–
–
_
–
–
43
58
34
18
14
–
10
–
16
–
–
–
–
–
–
–
–
–
–
92
–
267
161
192
–
–
–
246
–
–
–
–
–
–
164
_
–
4
886
941
2012 total emoluments
2011 total emoluments
5,675
5,869
6,926
6,521
1 Figures for the Viscount Rothermere and Messrs Morgan and Fallon include fees as Directors of Euromoney. Mr Daintith’s remuneration for the prior year was for
the nine months from 1st January, 2011 when he joined the Company. For non-executive Directors they also include Committee fees, where applicable.
2 75% of the Viscount Rothermere’s bonus is deferred into shares for three years. For Messrs Morgan & Daintith the bonus up to 50% of salary will be paid in cash, for
Mr Beatty the bonus up to 30% will be paid in cash, the remaining amount will be deferred into shares for two years.
3 Benefits in kind include the taxable value of company cars, fuel allowances and company contributions to medical insurance plans in 2011. In 2012, taxable
value of company cars is shown separately.
4 Mr Trempont received a travel allowance of £16,000.
Annual Report 2012 80
Directors’ interests in DmGT
The number of shares of the Company and
of securities of other Group companies in
which current Directors or their families had
an interest at the dates shown are stated in
the table below.
(i) The figures in the table below include ‘A’
shares committed by executives under
the LTIP, details of which are set out on
page 72.
(ii) For the Viscount Rothermere, Mr Morgan
and Mr Dutton 80,176, 35,266 and 34,949
respectively of the ‘A’ shares were subject
to restrictions.
(iii) The Company has been notified that,
under sections 793 and 824 of the
Companies Act 2006, each of the
Viscount Rothermere, Mr Hemingway and
Mr Gillespie was deemed to have been
interested as shareholders in 11,903,132
Ordinary shares at 30th September, 2012.
(iv) At 30th September, 2012 and at 2nd
October, 2011, the Viscount Rothermere
was beneficially interested in 756,700
Ordinary shares of Rothermere
Continuation Limited, the Company’s
ultimate holding company.
(v) The Viscount Rothermere was beneficially
interested in 68 ordinary shares in
Associated Newspapers North America
Inc. at 30th September, 2012 and at 2nd
October, 2011, representing 3% of that
company’s share capital.
Directors’ interests in DmGT
Holdings of 12.5 pence
Ordinary and ‘A’ Ordinary
Non-Voting Shares in Daily
Mail and General Trust plc
Beneficial
At 30th September, 2012
At 2nd October, 2011
Note
Ordinary
‘A’ Ordinary
Non-Voting
Ordinary
‘A’ Ordinary
Non-Voting
The Viscount Rothermere
11,903,132
75,134,502
11,903,132
75,134,502
M W H Morgan
S W Daintith
J G Hemingway
D M M Dutton
P M Dacre
P M Fallon
F P Balsemão
T S Gillespie
D J Verey
K J Beatty
N W Berry
D H Nelson
D Trempont
H Roizen
764
–
–
–
–
4,000
–
–
6,500
–
–
–
–
–
978,104
2,711
200,000
269,681
37,861
42,234
–
7,500
15,000
54,581
–
–
–
–
764
–
–
–
–
4,000
–
–
6,500
–
–
–
–
–
927,731
2,346
200,000
269,305
138,068
41,860
–
7,500
15,000
54,205
–
–
–
–
Non-beneficial
The Viscount Rothermere
J G Hemingway
D H Nelson
11,914,396
76,742,174
11,914,396
76,790,517
756,700
4,000
–
5,540,000
5,550,000
212,611
639,208
4,000
–
5,540,000
5,540,000
212,611
760,700
11,302,611
643,208
11,302,611
Directors’ interests in euromoney
Directors’ beneficial shareholdings in
Euromoney were as follows:
The Viscount
Rothermere
M W H Morgan
P M Fallon
At 30th
September
2012
24,248
7,532
630,383
662,163
At 2nd
October
2011
23,899
7,532
625,250
656,681
In addition, Mr Fallon held options to
subscribe for new shares in Euromoney issued
under Euromoney’s Save as You Earn
Scheme 2009 as follows:
At 30th
September
2012
–
At 2nd
October
2011
5,133
At £1.87 between
1st February, and
1st August, 2012
The mid-market price of Euromoney’s shares
was £7.70 at 30th September, 2012 and £6.15
at 2nd October, 2011. It ranged from £5.90 to
£8.28 during the year.
The gain made by Mr Fallon on the exercise
of 5,133 share options in the year was £28,194
The figures in the table on page 82 include ‘A’
shares purchased by participants in the
DMGT 2010 Share Incentive Plan. For Messrs
Morgan, Daintith, Dutton and Beatty,
purchases of shares were made between
30th September, 2012 and 30th November,
2012. These purchases increased the
beneficial holdings of these Directors by 52
shares and for Mr Fallon 26 shares.
All other shareholdings were unchanged at
the date of this report.
Disclosable transactions by the Group under
IAS 24, Related Party Disclosures, are set out
in Note 42. There have been no other
disclosable transactions by the Company
and its subsidiaries with Directors of Group
companies and with substantial shareholders
since the publication of the last annual report.
On behalf of the Board
Total Directors’ interests
12,675,096
88,044,659
12,557,604
88,093,128
Less: duplications
–
(5,752,611)
(4,000)
(5,752,611)
12,675,096
82,292,048
12,553,604
82,340,517
The Viscount Rothermere
Chairman
30th November, 2012
Daily Mail and General Trust Plc
Strategic Report
Directors’ Report
Governance
Financial Statements
81
81
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF DAILY MAIL AND GENERAL TRUST PLC
We have audited the Group financial statements of Daily Mail and General Trust plc for the year ended 30th September, 2012 which comprise
the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Changes in
Equity, the Consolidated Statement of Financial Position, the Consolidated Cash Flow Statement, and the related Notes 1 to 44. The financial
reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as
adopted by the European Union.
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our
audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an
auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other
than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement, the Directors are responsible for the preparation of the Group financial
statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the Group financial
statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply
with the Auditing Practices Board’s Ethical Standards for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance
that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the
accounting policies are appropriate to the Group’s circumstances and have been consistently applied and adequately disclosed; the
reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the financial statements. In addition,
we read all the financial and non-financial information in the annual report to identify material inconsistencies with the audited financial
statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.
Opinion on financial statements
In our opinion the Group financial statements:
• give a true and fair view of the state of the Group’s affairs as at 30th September, 2012 and of its profit for the year then ended;
• have been properly prepared in accordance with IFRSs as adopted by the European Union; and
• have been prepared in accordance with the requirements of the Companies Act 2006 and Article 4 of the IAS Regulation.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Directors’ Report for the financial year for which the Group financial statements are prepared is
consistent with the Group financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following:
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• certain disclosures of Directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Under the Listing Rules we are required to review:
• the Directors’ statement, contained within the Financial and Treasury review, in relation to going concern; and
• the part of the Corporate Governance Statement relating to the Company’s compliance with the nine provisions of the UK Corporate
Governance Code specified for our review;
• certain elements of the report to shareholders by the Board on Directors’ remuneration.
Other matter
We have reported separately on the parent Company financial statements of Daily Mail and General Trust plc for the year ended
30th September, 2012 and on the information in the Directors’ Remuneration Report that is described as having been audited.
Simon Letts
(Senior statutory auditor)
for and on behalf of Deloitte LLP
Chartered Accountants and Statutory Auditor
London, United Kingdom
4th December, 2012
Annual Report 2012 82
52 weeks
ending 30th
September,
2012
£m
52 weeks
ending 2nd
October,
2011
Restated
(Note 2)
£m
1,746.8
1,748.5
273.7
264.4
(73.1)
(41.9)
Note
3
3
3
FOR THE 52 wEEkS ENDING 30TH SEPTEMBER, 2012
CONTINUING OPERATIONS
Revenue
Operating profit before exceptional operating costs and amortisation and impairment of goodwill and
acquired intangible assets
Exceptional operating costs, impairment of internally generated and acquired computer software,
investment property and property, plant and equipment
Amortisation and impairment of goodwill and acquired intangible assets arising on business combinations
3, 20, 21
(53.6)
(52.4)
Operating profit before share of results of joint ventures and associates
Share of results of joint ventures and associates
Total operating profit
Other gains and losses
Profit before net finance costs and tax
Investment revenue
Finance costs
Net finance costs
Profit before tax
Tax
Profit after tax from continuing operations
DISCONTINUED OPERATIONS
Profit/(loss) from discontinued operations
PROFIT FOR THE PERIOD
Attributable to:
Owners of the Company
Non-controlling interests*
Profit for the period
Earnings/(loss) per share
From continuing operations
Basic
Diluted
From discontinued operations
Basic
Diluted
From continuing and discontinued operations
Basic
Diluted
Adjusted earnings per share
Basic
Diluted
*All attributable to continuing operations
3, 4
3, 7
8
9
10
11
18
38
39
14
147.0
(1.8)
145.2
114.4
259.6
10.8
(64.1)
(53.3)
206.3
18.8
225.1
170.1
(2.7)
167.4
13.1
180.5
17.1
(71.7)
(54.6)
125.9
3.7
129.6
54.8
279.9
(5.2)
124.4
257.2
22.7
279.9
108.5
15.9
124.4
52.9p
51.4p
14.3p
13.9p
67.2p
65.1p
49.4p
47.9p
29.7p
29.3p
(1.4)p
(1.3)p
28.3p
27.7p
46.1p
45.3p
Daily Mail and General Trust Plc Strategic Report
Directors’ Report
Governance
Financial Statements
83
83
52 weeks
ending 30th
September,
2012
£m
279.9
–
–
Note
38
38
38, 39
31.3
38, 39
38, 39
17, 38
38, 39
34, 38, 39
3.1
3.6
(0.9)
(26.4)
(61.8)
52 weeks
ending 2nd
October,
2011
Restated
(Note 2)
£m
124.4
4.6
(8.5)
(17.1)
(1.2)
6.8
(21.6)
10.4
(89.6)
(51.1)
(116.2)
38, 39
5.6
15.8
(45.5)
(100.4)
234.4
24.0
211.8
22.6
234.4
4.9
19.1
24.0
FOR THE 52 wEEkS ENDING 30TH SEPTEMBER, 2012
Profit for the period
Fair value movements on available-for-sale investments
Revaluation reserves recycled to Consolidated Income Statement on disposals
Gains/(losses) on hedges of net investments in foreign operations
Cash flow hedges:
Gains/(losses) arising during the period
Transfer of loss on cash flow hedges from translation reserve to Consolidated Income Statement
Translation reserves recycled to Consolidated Income Statement on disposals
Foreign exchange differences on translation of foreign operations
Actuarial loss on defined benefit pension schemes
Other comprehensive expense before tax
Tax relating to components of other comprehensive expense
Other comprehensive expense for the period
Total comprehensive income for the period
Attributable to:
Owners of the Company
Non-controlling interests
Annual Report 2012 84
FOR THE 52 wEEkS ENDING 30TH SEPTEMBER, 2012
Called
up share
capital
£m
Share
premium
account
£m
Capital
redemption
reserve
£m
Revaluation
reserve
£m
Shares
held in
treasury
£m
Translation
reserve
£m
Retained
earnings
Restated
(Note 2)
£m
Total
Restated
(Note 2)
£m
Non-
controlling
interests
£m
Total
equity
Restated
(Note 2)
£m
At 3rd October, 2010
49.1
12.5
1.1
7.0
(45.0)
(16.3)
84.4
92.8
Profit for the period restated (Note 2)
Other comprehensive income for the period
Total comprehensive income for the period
Issue of share capital
Dividends
Own shares acquired in the period
Own shares released on vesting of share options
Fair value adjustment to contingent consideration
Adjustment to equity following increased stake in
controlled entity
Adjustment to equity following decreased stake in
controlled entity
Credit to equity for share-based payments
Settlement of exercised share options of subsidiaries
Initial recording of put options granted to non-
controlling interests in subsidiaries
Non-controlling interest recognised on acquisition
Deferred tax on other items recognised in equity
At 2nd October, 2011
Profit for the period
Other comprehensive income for the period
Total comprehensive income for the period
Issue of share capital
Dividends
Own shares acquired in the period
Own shares released on vesting of share options
Transfer to retained earnings on disposal of
revalued properties
Other transactions with non-controlling interests
Adjustment to equity following increased stake in
controlled entity
Adjustment to equity following decreased stake in
controlled entity
Credit to equity for share-based payments
Settlement of exercised share options of subsidiaries
Corporation tax on share-based payments
Deferred tax on other items recognised in equity
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(3.9)
(3.9)
–
–
–
–
0.2
–
–
–
–
–
–
–
–
–
–
–
–
(11.7)
10.4
–
–
–
–
–
–
–
–
–
108.5
108.5
57.4
15.9
150.2
124.4
(26.2)
(26.2)
–
–
–
–
–
–
–
–
–
–
–
–
(73.5)
(103.6)
3.2
(100.4)
35.0
–
(62.4)
–
–
–
(5.5)
4.9
0.2
(62.4)
(11.7)
10.4
0.2
(5.5)
19.1
1.9
(7.8)
–
–
–
4.3
24.0
2.1
(70.2)
(11.7)
10.4
0.2
(1.2)
0.5
0.5
(0.5)
–
16.9
16.9
(12.7)
(12.7)
2.7
–
(7.1)
(7.1)
(3.2)
19.6
(12.7)
(10.3)
–
1.4
50.5
–
1.4
27.9
6.0
0.4
6.0
1.8
80.3
108.2
49.1
12.7
1.1
3.3
(46.3)
(42.5)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.8
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(3.3)
–
–
–
–
–
–
–
–
–
–
–
–
–
(30.1)
32.6
–
–
–
–
–
–
–
–
–
257.2
257.2
22.7
279.9
9.9
9.9
(55.3)
(45.4)
(0.1)
(45.5)
201.9
211.8
22.6
234.4
–
–
–
–
–
–
–
–
–
–
–
–
–
0.8
1.5
2.3
(66.2)
(66.2)
(9.6)
(75.8)
–
–
3.3
–
(30.1)
32.6
–
–
–
–
–
(30.1)
32.6
–
0.9
0.9
(13.5)
(13.5)
(0.6)
(14.1)
0.1
0.1
(0.1)
–
12.5
12.5
(15.6)
(15.6)
0.4
–
0.4
–
0.7
–
0.2
13.2
(15.6)
0.6
(0.6)
(0.6)
(43.8)
(32.6)
173.4
160.7
95.3
256.0
At 30th September, 2012
49.1
13.5
1.1
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Financial Statements
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85
At 30th
September,
2012
£m
Note
At 2nd
October,
2011
Restated
(Note 2)
£m
At 3rd
October,
2010
Restated
(Note 2)
£m
20
21
22
23
24
24
25
27
33
36
26
27
30
33
28
19
29
30
31
32
33
35
19
29
31
32
33
34
35
36
704.6
281.4
238.1
6.8
137.3
11.5
1.5
14.6
24.6
747.0
288.2
305.4
21.6
16.3
13.0
4.2
30.7
8.6
735.8
377.9
366.2
11.6
20.4
12.7
23.2
17.2
8.7
204.7
200.6
158.9
1,625.1
1,635.6
1,732.6
28.3
328.7
3.6
8.9
104.7
71.7
545.9
23.1
347.4
9.1
1.1
174.3
–
27.5
359.0
0.9
2.3
65.7
–
555.0
455.4
2,171.0
2,190.6
2,188.0
(655.1)
(654.2)
(632.1)
(20.8)
(4.5)
(49.9)
(14.1)
(34.2)
(33.6)
(53.2)
(1.1)
(29.3)
(5.9)
(49.7)
–
(69.4)
(1.1)
(14.3)
(6.6)
(37.7)
–
(812.2)
(793.4)
(761.2)
(8.1)
(4.1)
(678.1)
(34.9)
(324.4)
(29.3)
(23.9)
(11.9)
(10.7)
(832.0)
(60.9)
(336.2)
(13.5)
(23.8)
(1.5)
–
(870.6)
(79.8)
(271.4)
(27.6)
(25.7)
(1,102.8)
(1,289.0)
(1,276.6)
(1,915.0)
(2,082.4)
(2,037.8)
256.0
108.2
150.2
AS AT 30TH SEPTEMBER, 2012
ASSETS
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Investment property
Investments in joint ventures
Investments in associates
Available-for-sale investments
Trade and other receivables
Derivative financial assets
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Current tax receivable
Derivative financial assets
Cash and cash equivalents
Total assets of businesses held-for-sale
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Current tax payable
Acquisition put option commitments
Borrowings
Derivative financial liabilities
Provisions
Total liabilities of businesses held-for-sale
Non-current liabilities
Trade and other payables
Acquisition put option commitments
Borrowings
Derivative financial liabilities
Retirement benefit obligations
Provisions
Deferred tax liabilities
Total liabilities
Net assets
Annual Report 2012 86
At 30th
September,
2012
£m
Note
At 2nd
October,
2011
Restated
(Note 2)
£m
At 3rd
October,
2010
Restated
(Note 2)
£m
37
38
38
38
38
38
38
39
49.1
13.5
62.6
1.1
–
(43.8)
(32.6)
173.4
160.7
95.3
256.0
49.1
12.7
61.8
1.1
3.3
(46.3)
(42.5)
50.5
27.9
80.3
108.2
49.1
12.5
61.6
1.1
7.0
(45.0)
(16.3)
84.4
92.8
57.4
150.2
AS AT 30TH SEPTEMBER, 2012
SHAREHOLDERS’ EQUITY
Called-up share capital
Share premium account
Share capital
Capital redemption reserve
Revaluation reserve
Shares held in treasury
Translation reserve
Retained earnings
Equity attributable to owners of the company
Non-controlling interests
The financial statements of DMGT plc (Company number 184594) on pages 82 to 175 were approved by the Directors and authorised for issue
on 4th December, 2012. They were signed on their behalf by:
Rothermere
M.W.H. Morgan
Directors
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Financial Statements
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87
52 weeks
ending 30th
September,
2012
£m
52 weeks
ending 2nd
October,
2011
Restated
(Note 2)
£m
147.0
15.3
13.2
(1.3)
83.4
7.2
19.4
20.4
34.5
339.1
(7.6)
(9.6)
39.3
(9.9)
(63.8)
287.5
(37.8)
4.3
254.0
1.5
4.3
0.8
(60.2)
(37.8)
(0.2)
33.1
2.0
(48.8)
(7.3)
(11.5)
57.6
54.4
170.1
(8.4)
19.7
(1.9)
62.7
8.6
24.4
18.4
42.5
336.1
2.0
(18.0)
52.7
4.1
(11.0)
365.9
(48.6)
1.9
319.2
2.0
15.6
2.9
(33.0)
(23.2)
(0.1)
3.2
23.0
(81.3)
(25.3)
(10.1)
94.8
0.1
Note
3
18
41
34
4, 22, 23
4, 22, 23
4, 20, 21
4, 21
4, 20, 21
24
21
25
16
24
17
FOR THE 52 wEEkS ENDING 30TH SEPTEMBER, 2012
Operating profit before share of results of joint ventures and associates – continuing operations
Operating profit before share of results of joint ventures and associates – discontinued operations
Adjustments for:
Share-based payments
Pension charge less than cash contributions
Depreciation
Impairment of property, plant and equipment and investment property
Impairment of goodwill and impairment charge of intangible assets
arising on business combinations
Amortisation of intangible assets not arising on business combinations
Amortisation of intangible assets arising on business combinations
Operating cash flows before movements in working capital
(Increase)/decrease in inventories
Increase in trade and other receivables
Increase in trade and other payables
(Decrease)/increase in provisions
Additional payment into pension schemes
Cash generated by operations
Taxation paid
Taxation received
Net cash from operating activities
Investing activities
Interest received
Dividends received from joint ventures and associates
Dividends received from available-for-sale investments
Purchase of property, plant and equipment
Expenditure on internally generated intangible fixed assets
Purchase of available-for-sale investments
Proceeds on disposal of property, plant and equipment
Proceeds on disposal of available-for-sale investments
Purchase of subsidiaries
Treasury derivative activities
Investment in joint ventures and associates
Proceeds on disposal of businesses
Proceeds on disposal of joint ventures and associates
Net cash used in investing activities
(12.1)
(31.4)
Annual Report 2012 88
52 weeks
ending 30th
September,
2012
£m
52 weeks
ending 2nd
October,
2011
£m
(14.8)
(66.2)
(9.6)
0.8
1.5
1.8
(30.1)
16.1
(64.0)
(6.1)
(110.0)
(0.7)
–
(23.4)
(2.7)
(62.4)
(7.8)
0.2
1.9
–
(11.7)
(2.0)
(68.5)
–
–
(4.0)
(20.3)
(3.1)
(304.7)
(180.4)
(62.8)
171.7
(1.6)
107.3
107.4
64.3
–
171.7
Notes
16
12, 38
39
37, 38
39
38
10
15
15
15
15
15
28
15
28
FOR THE 52 wEEkS ENDING 30TH SEPTEMBER, 2012
Financing activities
Purchase of additional interest in controlled entities
Equity dividends paid
Dividends paid to non-controlling interests
Issue of share capital
Issue of shares by Group companies to non-controlling interests
Receipt from non-controlling interests
Purchase of own shares
Net receipt/(payment) on exercise/settlement of subsidiary share options
Interest paid
Premium on redemption of bonds
Bonds redeemed
Loan notes repaid
Repayments of obligations under hire purchase agreements
Decrease in bank borrowings
Net cash used in financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Exchange loss on cash and cash equivalents
Net cash and cash equivalents at end of period
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89
1) BASIS OF PREPARATION
DMGT is a company incorporated in the United Kingdom. The address of the registered office is given on page 187.
These financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) issued by the
International Accounting Standards Board as adopted by the European Union and with those parts of the Companies Act 2006 applicable to
companies preparing their accounts under IFRS.
These financial statements have been prepared for the 52 weeks ending 30th September, 2012 (2011 52 weeks ending 2nd October, 2011).
The Group and its national and local media divisions prepare financial statements for a 52- or 53-week financial period ending on a Sunday near
to the end of September. The Group’s remaining divisions prepare financial statements for a financial year to 30th 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 the other divisions and
the end of the Group’s financial year and makes any material adjustments as appropriate. For the current period, the Group’s national and local
media divisions’ financial period end coincided with that of the Group’s remaining divisions and consequently no adjustments were necessary.
The significant accounting policies used in preparing this information are set out in Note 2.
These financial statements have been prepared in accordance with the accounting policies set out in the 2011 Annual Report and Accounts,
with the exception of a restatement of results, described below and as amended by the new accounting standards described below.
The Group 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 the
revaluation of financial instruments.
Going concern
The Group’s business activities, together with the factors likely to affect its future development, performance and position are set out in
the Financial and Treasury Review on pages 38 to 43, the Strategic Report on pages 10 to 37 and the Directos’ report on pages 52 to 57.
The Group’s funding arrangements, together with details of undrawn bank facilities, are disclosed in notes 32 and 33.
As highlighted in notes 32 and 33 to the financial statements, the company has long-term financing in the form of bonds and meets its day-to-
day working capital requirements through bank facilities which expire in April 2016. The current economic conditions create uncertainty
particularly over the future performance of those parts of the business that derive a significant proportion of revenue from advertising. The
Board’s forecasts and projections, after taking account of reasonably possible changes in trading performance, show that the Group 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 existence for the foreseeable future. Accordingly, they continue to adopt the
going concern basis in preparing the financial statements.
2) SIGNIFICANT ACCOUNTING POLICIES
Restatement of results
The adjusted and reported results of the Group have been restated to reflect a refinement of Hobsons’ approach to revenue recognition. Hobsons’
business model has evolved such that the provision of its Enrolment Management Technology (EMT) software services (currently around 47% of its
annual revenues of approximately £64 million) is now predominantly provided in conjunction with a hosting service. To better reflect the underlying
nature of the revenue contracts, software services provided in conjunction with a hosting service will now be recognised over the contract service
period, rather than at the contract date of sale of the software licence. The recognition of revenue from existing hosting services will continue to be
recognised over the contract service period. This change of accounting treatment has been reflected in the Group’s Consolidated Financial
Statements retrospectively and the impact on the Consolidated Income Statement and Consolidated Statement of Financial Position is as follows:
Impact on Consolidated Income Statement
Reduction in revenue
Reduction in operating profit
Reduction in profit after tax
Reduction in earnings per share from continuing operations
Basic
Diluted
Adjusted
Impact on Consolidated Statement of Financial Position
Reduction in accrued income assets
Increase in prepaid commission assets
Increase in deferred tax asset
52 weeks
ending 30th
September,
2012
£m
52 weeks
ending 2nd
October,
2011
£m
52 weeks
ending 3rd
October
2010
£m
(0.8)
(0.8)
(0.5)
p
(0.1)
(0.1)
(0.1)
£m
(26.5)
1.3
10.2
(5.2)
(5.0)
(3.1)
p
(0.8)
(0.8)
(0.8)
£m
(27.3)
1.3
9.7
(2.5)
(2.4)
(1.5)
p
(0.4)
(0.4)
(0.4)
£m
(21.7)
1.1
7.6
Annual Report 2012 90
2) SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
The reported results of the Group’s share of results of joint ventures and associates have also been restated to reflect the Group’s share of results
from the joint venture DMG Radio Investments Ltd as discontinued, following its disposal in August 2012. In addition the Group’s local media
operations have been reclassified as discontinued operations following the transfer of the net assets of this business to assets held-for -sale.
Further details are included in note 18.
Impact of new accounting standards
Standards not affecting the reported results or the financial position:
The following new and revised Standards and Interpretations have been adopted in the current year. Their adoption has not had any significant
impact on the amounts reported in the financial statements but may impact the accounting for future transactions and arrangements:
• IAS 24 (2009) related party disclosures
The revised Standard has a new, clearer definition of a related party, with inconsistencies under the previous definition having been removed.
This interpretation does not affect the reported results nor the financial position.
• Amendments to IFRIC 14 prepayments of a minimum funding requirement
The amendments now enable recognition of an asset in the form of a prepaid minimum funding contribution.
• Annual improvements
– IFRS 7: Encourages qualitative disclosures in the context of the quantitative disclosures required to help users to form an overall picture of the
nature and extent of risks arising from financial instruments. This improvement does not affect the Group’s reported results, financial position nor
any of the Group’s disclosures at the year end.
– IAS 1: Clarifies that an entity may present the analysis of other comprehensive income by item in the statement of changes in equity or in the
notes to the financial statements. The Group currently reflects this analysis in the notes to the financial statements.
At the date of authorisation of the consolidated financial information the following Standards and Interpretations, which have not been
applied in the consolidated financial statements, were in issue but not yet effective (and in some cases had not yet been adopted by the EU).
Other than IAS 19 (Revised) Employee Benefits, their adoption is not expected to have a significant impact on the amounts reported in the
financial statements but may impact the accounting for future transactions and arrangements.
IAS 19 (Revised) Employee Benefits, will impact the measurement of various components in the defined benefit pension obligation and
associated disclosures, but not the Group’s total obligation. It is likely that following the replacement of expected returns on plan assets with a
net finance cost in the Consolidated Income Statement, the profit for the period will be reduced and accordingly other comprehensive
income increased.
• Amendments to IAS 1 Presentation of Items of Other Comprehensive Income
• IFRS 13 Fair Value Measurement
• IFRS 12 Disclosures of Interests in other entities
• IFRS 11 joint Arrangements
• IFRS 10 Consolidated Financial Statements
• IAS 28 (Revised) Investments in Associates and Joint Ventures
• IAS 27 (Revised) Separate Financial Statements
• Amendments to IAS 12 Deferred Tax: Recovery of Underlying Assets
• IFRS 9 Financial Instruments
• Improvements to IFRSs 2011
• Amendments to IFRS 7 and IAS 32 – Offsetting financial assets and financial liabilities
Business combinations
The acquisition of subsidiaries and businesses are 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 applicable, the consideration for the acquisition includes any asset or liability resulting from a contingent arrangement, measured at its
acquisition date fair value. Subsequent changes in such fair values are adjusted through the Consolidated Income Statement. All other
changes in the fair value of contingent consideration classified as an asset or liability are accounted for in accordance with relevant IFRSs.
Changes in the fair value of contingent consideration classified as equity are not recognised.
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 of the date of the acquisition that, if known, would have affected the amounts recognised as of 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 of the acquisition date and is a maximum of one year.
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91
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 interest. 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 available-for-sale asset at fair value on initial recognition. On disposal
of a subsidiary all amounts deferred in equity are recycled to the Consolidated Income Statement.
Business combinations occurring prior to 4th October, 2009
The acquisition of subsidiaries is accounted for using the purchase method. The cost of the acquisition is measured as the aggregate of the fair
values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of
the acquiree, plus any costs directly attributable to the business combination. The acquiree’s identifiable assets, liabilities and contingent liabilities
are recognised at their fair values at the acquisition date, other than non-current assets and liabilities of disposal groups which are recognised at
fair value less costs to sell. Where an adjustment to fair values relating to previously held interests (including interests which were equity accounted
under IAS 28, Investments in associates) is required on achieving control, this is accounted for as an adjustment directly in equity.
Goodwill arising on acquisitions is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination
over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. Where control is achieved
in more than one exchange transaction, goodwill is calculated separately for each transaction based on the cost of each transaction and the
appropriate share of the acquiree’s net assets based on net fair values at the time of each transaction.
The interest of non-controlling interest in the acquiree is initially measured at the non-controlling interest’s proportion of the net fair value of the
assets, liabilities and contingent liabilities recognised.
Purchase and sale of shares in a controlled entity occurring prior to 4th October, 2009
Where the Group’s interest in a controlled entity increases, no adjustments are recorded to the fair values of the assets already held on the
Consolidated Statement of Financial Position. The Group calculates the goodwill arising as the difference between the cost of the additional
interest acquired and the increase in the Group’s interest in the fair value of the subsidiary’s net assets at the date of the exchange transaction.
Any difference between the cost of the additional interest, goodwill arising and the existing carrying value of the non-controlling interest’s
share of net assets is adjusted directly in equity.
Where the Group’s interest in a controlled entity decreases, which does not result in a change of control, the Group increases the non-
controlling interest’s share of net assets by the book value of the share of net assets disposed. Any profit or loss on disposal of the share of net
assets to the non-controlling interest is calculated by reference to the consideration received, the book value of the share of net assets
disposed and a proportion of any relevant goodwill in the Consolidated Statement of Financial Position relating to the subsidiary.
Accounting for subsidiaries
A subsidiary is an entity controlled by the Group. Control is achieved where the Group has the power to govern the financial and operating
policies of an entity so as to obtain benefits from its activities.
The results of subsidiaries acquired or disposed of during the year 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. Non-controlling
interests consist of the amount of those interests at the date of the original business combination and for acquisitions post 3rd October, 2010
following adoption of IAS 27 (revised 2008), the non-controlling interest’s share of changes in equity since the date of the combination.
Prior to the adoption of IAS 27 (revised 2008) losses attributable to non-controlling interests in excess of the non-controlling interest’s share in
equity were allocated against the interests of the Group except to the extent that the non-controlling interest has a binding obligation and is
able to make an additional investment to cover such losses. When the subsidiary subsequently reports profits, the non-controlling interest does
not participate until the Group has recovered all of the losses of the non-controlling interest it previously reported.
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.
Annual Report 2012 92
2) SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
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 to 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 at 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 4th 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.
Goodwill arising before the date of transition to IFRS, on 4th October, 2004, has been retained at the previous UK GAAP amounts subject to being
tested for impairment at that date.
On disposal of a subsidiary 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. Goodwill written off to reserves under UK GAAP prior to 1998 has not been
reinstated and is not included in determining any subsequent profit or loss on disposal.
Impairment of goodwill
The Group tests goodwill annually for impairment, or more frequently if there are indicators that goodwill might be impaired. Intangible assets
are tested separately from goodwill only where impairment indicators exist. The Group has no intangible assets with indefinite lives.
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 cash-generating unit 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, pro-rated on
the basis of the carrying amount of each asset in the unit, but subject to not reducing any asset below its recoverable amount. An impairment
loss recognised for goodwill is not reversed in a subsequent period.
When testing for impairment, the recoverable amounts for all of the Group’s CGUs are measured at the higher of value in use and 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
management approved budgets and projections which reflect management’s current experience and future expectations of the markets in
which the CGU operates. Risk adjusted discount rates used by the Group in its impairment tests range from 8.5% to 23% post tax (11.3% to 30.7%
pre-tax) (2011 8.5 % to 10.0 % post tax 9.2 % to 10.7 % pre tax, 2010 8.5 % to 11.5 % post tax, 9.3 % to 12.3 % pre-tax), the choice of rates depending
on the market and maturity of the CGU. The Group’s estimate of the weighted average cost of capital has not changed significantly from the
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previous year. The projections consist of Board approved budgets for the following year, three year plans and growth rates beyond this period.
The long-term growth rates range between -3.0% and +3.0% (2011 -3.0 % and +3.0 %, 2010 0.0 % and +3.0 %) and vary with management’s view of
the CGU’s market position, maturity of the relevant market and do not exceed the long-term average growth rate for the market in which it operates.
Any impairment is recognised 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, development expenditure is charged
to the Consolidated Income Statement in the period in which it incurred.
Licences
Radio licences are stated at cost less accumulated amortisation. Amortisation is charged to the Consolidated Income Statement on a straight-
line basis over the estimated useful lives from the commencement of service of the network, estimated by management to be 20 years.
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 intangibles.
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 programmes are recognised as an expense as incurred.
At each period end date, the Group reviews the carrying amounts of its tangible and 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 of the asset is estimated in order to
determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the
Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.
An intangible asset with an indefinite useful life is tested for impairment annually and whenever there is an indication that the asset may be impaired.
Other intangible assets
Other intangible assets with finite lives are stated at cost less accumulated amortisation and impairment losses. Amortisation is charged to 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, titles and exhibitions
Radio licences
Brands
Market and customer related databases
Customer relationships
Computer software licences
5 – 30 years
20 years
3 – 20 years
3 – 20 years
3 – 20 years
2 – 5 years
Impairment of intangible assets
At each period end date, reviews are carried out of the carrying amounts of tangible and intangible assets and goodwill 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
cash generating unit to which the asset belongs.
If the recoverable amount of an asset or cash generating unit is estimated to be less than its net carrying amount, the net carrying amount of the asset
or cash generating unit is reduced to its recoverable amount. Impairment losses are recognised immediately in the Consolidated Income Statement.
The Group assesses at the end of each reporting period 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:
(a) Whether the asset’s market value has increased significantly during the period;
(b) 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
(c) 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.
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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.
Fixtures 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
Short leasehold premises
Plant and equipment
Depreciation is not provided on freehold land
50 years
the term of the lease
3 – 25 years
Investment property
The Group transfers property from property, plant and equipment to investment property when owner occupation ends. Investment properties
are stated in the Consolidated Statement of Financial Position at their cost, less any subsequent accumulated depreciation and subsequent
accumulated impairment losses.
Depreciation is charged so as to write off the cost of these assets, using the straight-line method, over their estimated useful lives as follows:
Freehold buildings and long leasehold properties
Depreciation is not provided on freehold land
50 years
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
(AVCO) method in the national and local media divisions and the First In First Out (FIFO) method in the remaining divisions.
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.
Marketing costs
Marketing and promotional costs are charged to the Consolidated Income Statement in the period in which they are incurred.
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. For the purpose of the Consolidated Cash Flow Statement, cash and
cash equivalents are as defined above, net of bank overdrafts.
Revenue
Group revenue comprises revenue of the Company and its subsidiary undertakings. 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, hostings and support), the Company considers
all aspects of the transaction 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 principal revenue recognition policies, as applied by the Group’s major businesses, are as follows:
• 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 publication or report.
• Advertising revenue is recognised on issue of publication, over the period of the online campaign or on the date of broadcast.
• 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 licence revenue is recognised on delivery of the software licence or over the period of the licence if support is unable to be
separately identified from hosting and revenue allocated on a fair and reliable basis.
• Support revenue associated with software licences and subscriptions is recognised over the term of the support contract.
• Long-term contract revenue is recognised under the percentage of completion method according to the percentage of work
completed at the period end date.
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Operating profit before exceptional operating costs and amortisation and impairment of goodwill and acquired intangible assets
The Group discloses as operating profit, profit before exceptional operating costs, impairment of goodwill and intangible assets, amortisation of
acquired intangible assets arising on business combinations, share of results from associates and joint ventures, other gains and losses, investment
income and finance costs, but after amortisation of internally generated and acquired computer software. The Directors believe that this measure
is useful to readers as it shows the results of the Group’s operations before contribution from joint ventures and associates and because it excludes
one-off gains and losses on disposal of businesses, properties and similar items of a non-recurring nature.
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 profit or loss on sale of joint ventures and associates.
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 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
As permitted by IFRS 1, First-time adoption of International Financial Reporting Standards, the Group elected to recognise all cumulative actuarial
gains and losses in the pension schemes operated by the Group at 4th October, 2004 the date of transition to IFRS. 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 Statement of Consolidated 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 interest cost less the expected return on assets is also charged to the Consolidated
Income Statement within net finance costs.
Since the assets and liabilities of the Group’s defined benefit plans cannot be allocated to individual entities on a fair and reasonable basis, the
scheme’s assets and liabilities are not attributed to reporting segments and the pension charge in each segment in the segmental analysis
represents the contributions payable for the period.
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 the current tax payable 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 offset 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.
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Deferred tax liabilities are recognised for taxable temporary differences arising in investments in subsidiaries and associates, and interests in joint
ventures, 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 reduced 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.
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 offset 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 also recognised directly in equity.
Financial instruments
Financial assets and financial liabilities are recognised on the Statement of Consolidated 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 any interest and are stated at their nominal value as reduced by appropriate allowances for estimated
irrecoverable amounts.
AvAILABLE-FOR-SALE INvESTMENTS
Investments and financial assets are recognised and de-recognised 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 timeframe established by the market concerned, and are measured at fair value,
including transaction costs.
Investments are classified as either fair value through profit or loss or available-for-sale. Where securities are held-for-trading purposes, gains and
losses arising from changes in fair value are included in net profit or loss for the period. For available-for-sale investments, gains and losses arising
from changes in fair value are recognised directly in equity, until the security 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 securities is determined based on quoted market prices, and of unlisted securities on management’s estimate of fair value
determined by discounting future cash flows to net present value using market interest rates prevailing at the period end.
Financial liabilities and equity instruments
TRADE PAYABLES
Trade payables are not 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.
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.
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Share-based payments
The Group issues equity-settled and cash-settled share-based payments to certain 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.
The Group has applied the requirements of IFRS 2, Share-based Payments to all equity instruments granted after 7th September, 2002 but not
fully vested at 4th October, 2004 the date of transition to IFRS.
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 consolidated financial statements:
Forecasting
The Group prepares medium-term forecasts based on Board approved budgets and three year outlooks. These are used to support judgements
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 assets are impaired or whether a reversal of an impairment of intangible assets should be recorded
requires an estimation of the value in use of the relevant cash generating units. The value in use calculation requires management to estimate
the future cash flows expected to arise from the cash generating unit and compare the net present value of these cash flows using a suitable
discount rate to determine if any impairment has occurred. A key area of judgement is deciding the long-term growth rate of the applicable
businesses and the discount rate applied to those cash flows (note 20). The carrying amount of goodwill and intangible assets at the period end
date was £986.0 million (2011 £1,035.2 million, 2010 £1,113.7 million) after a net impairment charge of £19.4 million (2011 charge of £24.4 million, 2010
reversal of £19.9 million) was recognised during the year (Notes 20 and 21).
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, are often used. The Group recognises intangible assets acquired as part of a business combination at
fair values at the date of the acquisition. The determination of these fair values is based upon management’s judgement 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.
Contingent consideration payable
Estimates are required in respect of the amount of contingent consideration payable on acquisitions, which is determined according to formulae
agreed at the time of the business combination, and normally related to the future earnings of the acquired business. The Directors review the
amount of contingent consideration likely to become payable at each period end date, the major assumption being the level of future profits of the
acquired business. The Group has outstanding contingent consideration payable amounting to £24.2 million (2011 £11.8 million, 2010 £17.8 million).
Contingent consideration payable is discounted to its fair value in accordance with applicable International Financial Reporting Standards. For
acquisitions completed prior to 4th October, 2009, the difference between the fair value of these liabilities and the actual amounts payable is
charged to the Consolidated Income Statement as notional finance costs with remeasurement of the liability being recorded against goodwill.
For acquisitions completed in the current period, movements in the fair value of these liabilities are recorded in the Consolidated Income
Statement in Financing.
Contingent consideration receivable
Estimates are required in respect of the amount of contingent consideration receivable on disposals, which is determined according to formulae
agreed at the time of the disposal and is normally related to the future earnings of the disposed business. The Directors review the amount of
contingent consideration likely to be receivable at each period end date, the major assumption being the level of future profits of the disposed
business. The Group has outstanding contingent consideration receivable amounting to £1.2 million (2011 £1.6 million, 2010 £4.9 million).
Contingent consideration receivable is discounted to its fair value in accordance with applicable International Financial Reporting Standards.
For disposals completed prior to 4th October, 2009, the difference between the fair value of these liabilities and the actual amounts payable is
charged to the Consolidated Income Statement as notional finance costs with remeasurement of the liability being recorded against goodwill.
For acquisitions completed in the current period, movements in the fair value of these liabilities are recorded in the Consolidated Income
Statement in Financing.
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Adjusted profit
The Group presents adjusted earnings by making adjustments for costs and profits which management believe to be exceptional in nature by virtue
of their size or incidence or have a distortive effect on current year earnings. Such items would include costs associated with business combinations,
one-off gains and losses on disposal of businesses, properties and similar items of a non-recurring nature together with reorganisation costs and
similar charges, tax and by adding back impairment of goodwill and amortisation and impairment of intangible assets arising on business
combinations. See Note 13 for a reconciliation of profit before tax to adjusted profit.
Share-based payments
The Group makes share-based payments to certain employees. These payments are measured at their estimated fair value at the date of grant,
calculated using an appropriate option pricing model. The fair value determined at the grant date is expensed on a straight-line basis over the
vesting period, based on the estimate of the number of shares that will eventually vest. The key assumptions used in calculating the fair value of
the options are the discount rate, the Group’s share price volatility, dividend yield, risk free rate of return, and expected option lives. Management
regularly perform a true-up of the estimate of the number of shares that are expected to vest; this is dependent on the anticipated number of
leavers. See Note 41 for further detail.
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 and judgement more challenging. The resolution of issues is not always within the control of the Group and is often
dependent on the efficiency of legal processes. 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. As described above, 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 benefit obligations
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, expected rates of return on assets, future salary increases, mortality rates and future pension
increases. 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 carrying amount of the retirement benefit obligation at 30th September, 2012 was a deficit
of £324.4 million (2011 £336.2 million, 2010 £271.4 million). Further details are given in Note 34.
3) SEGMENT ANALYSIS
The Group’s business activities are split into seven operating divisions: RMS, business information, events, Euromoney, national media, local media
and radio. These divisions are the basis on which information is reported to 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 and impairment charges, other gains and losses, net finance costs and taxation.
Details of the types of products and services from which each segment derives its revenues are included within the Strategic Report on pages
22 to 37.
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.
Inter-segment sales are charged at prevailing market prices other than the sale of newsprint and related services from the national media to the
local media division which is at cost to the Group plus a margin where relevant. The amount of newsprint sold between segments during the
period amounted to £20.7 million (2011 £23.6 million).
Daily Mail and General Trust Plc Strategic Report
Directors’ Report
Governance
Financial Statements
99
99
Operating
profit before
exceptional
operating
costs and
amortisation
and
impairment
of goodwill
and acquired
intangible
assets
£m
Less
operating
profit/(loss)
of joint
ventures and
associates
£m
External
revenue
£m
Inter-segment
revenue
£m
Total revenue
£m
Segment
result
£m
Note
0.3
–
–
0.1
33.4
0.1
–
33.9
163.5
253.2
88.8
394.2
880.9
212.8
–
55.9
47.1
21.2
112.5
81.3
26.0
9.5
1,993.4
353.5
(0.2)
(0.8)
0.1
0.6
3.8
–
9.5
13.0
163.2
253.2
88.8
394.1
847.5
212.7
–
1,959.5
(212.7)
1,746.8
18
20, 21
21
7
8
9
10
11
18
56.1
47.9
21.1
111.9
77.5
26.0
–
340.5
(40.8)
(26.0)
273.7
(73.1)
(19.4)
(34.2)
147.0
(1.8)
145.2
114.4
259.6
10.8
(64.1)
206.3
18.8
54.8
279.9
3) SEGMENT ANALYSIS
52 weeks ending 30th September, 2012
RMS
Business information
Events
Euromoney
National media
Local media
Radio
Corporate costs
Discontinued operations
Operating profit before exceptional operating costs and
amortisation and impairment of goodwill and acquired
intangible assets
Exceptional operating costs, impairment of internally
generated and acquired computer software, investment
property and property, plant and equipment
Impairment of goodwill and intangible assets
Amortisation of acquired intangible assets arising on
business combinations
Operating profit before share of results of joint ventures
and associates
Share of result of joint ventures and associates
Total operating profit
Other gains and losses
Profit before net finance costs and tax
Investment revenue
Finance costs
Profit before tax
Tax
Profit from discontinued operations
Profit for the period
Operating profit before exceptional operating costs and amortisation and impairment of goodwill and intangible assets within the national
media division comprised £106.8 million from newspapers, £6.4 million from digital and unallocated divisional central costs of £35.7 million.
Included within corporate costs is a credit of £1.3 million which adjusts the pensions charge recorded in each operating segment from a cash
rate to the net service cost in accordance with IAS 19, Employee benefits.
Annual Report 2012
100
3) SEGMENT ANALYSIS – CONTINUED
An analysis of the amortisation and impairment of goodwill and intangible assets, depreciation and impairment of investment property,
property, plant and equipment, exceptional operating costs, investment income and finance costs by segment is as follows:
Amortisation
of intangible
assets not
arising on
business
combinations
(Note 21)
£m
Amortisation
of intangible
assets arising
on business
combinations
(Note 21)
£m
Impairment
of goodwill
and
intangible
assets
(Note 20, 21)
£m
Exceptional
operating
costs,
impairment
of investment
property and
impairment
of property,
plant and
equipment
£m
Exceptional
depreciation
of property,
plant and
equipment
(Note 22)
£m
Depreciation
of property,
plant and
equipment
(Note 22, 23)
£m
Investment
revenue
(Note 9)
£m
Finance costs
(Note 10)
£m
(1.2)
(8.2)
–
(0.3)
(10.7)
–
–
(8.8)
(5.5)
(15.7)
(4.2)
(0.3)
–
(16.0)
–
–
(3.4)
–
(20.4)
(34.5)
(19.4)
–
–
–
(20.4)
(34.5)
(19.4)
–
0.3
–
(20.4)
(34.2)
(19.4)
–
(0.7)
(0.9)
(1.6)
(22.5)
(9.9)
(35.6)
(8.9)
(44.5)
10.4
(34.1)
–
–
–
(0.1)
(38.4)
(0.5)
(39.0)
–
(39.0)
–
(39.0)
(5.2)
(5.9)
(0.5)
(3.3)
(22.0)
(1.8)
(38.7)
(5.7)
(44.4)
11.1
(33.3)
–
0.1
1.2
0.2
0.1
–
1.6
9.2
10.8
–
10.8
–
(0.1)
–
1.0
–
–
0.9
(65.0)
(64.1)
–
(64.1)
52 weeks ending 30th September, 2012
RMS
Business information
Events
Euromoney
National media
Local media
Corporate costs
Relating to discontinued operations
Group total
The Group’s exceptional operating costs represent closure and reorganisation costs in the national and local media segments amounting to
£25.6 million and an impairment charge of £6.5 million on the closure of a print site. In Euromoney, restructuring costs amount to £1.6 million
following the reorganisation of certain group functions and recently acquired businesses. Included in corporate costs is a charge of £8.2 million
relating to consultancy services and an impairment charge of £0.7 million relating to investment property. The Group’s tax charge includes a
related credit of £19.4 million in relation to these items.
Daily Mail and General Trust Plc Strategic Report
101
Directors’ Report
Governance
Financial Statements
101
3) SEGMENT ANALYSIS – CONTINUED
52 weeks ending 2nd October, 2011
Note
RMS
Business information
Events
Euromoney
National media
Local media
Radio
Corporate costs
Discontinued operations
External
revenue
Restated
(Note 2)
£m
158.7
232.3
132.1
363.1
862.3
236.1
–
Inter-segment
revenue
£m
Total revenue
Restated
(Note 2)
£m
Less
operating
profit/(loss)
of joint
ventures and
associates
£m
Segment
result
Restated
(Note 2)
£m
1.2
0.3
–
–
38.8
0.2
–
159.9
232.6
132.1
363.1
901.1
236.3
–
47.5
42.0
38.8
93.4
73.4
16.9
6.7
–
0.1
–
0.5
(2.4)
–
6.7
4.9
1,984.6
40.5
2,025.1
318.7
18
(236.1)
1,748.5
Operating profit before exceptional operating costs and
amortisation and impairment of goodwill and acquired
intangible assets
Exceptional operating costs, impairment of internally
generated and acquired computer software, investment
property and property, plant and equipment
Impairment of goodwill and intangible assets
Amortisation of acquired intangible assets arising on
business combinations
Operating profit before share of results of joint ventures
and associates
Share of result of joint ventures and associates
Total operating profit
Other gains and losses
Profit before net finance costs and tax
Investment revenue
Finance costs
Profit before tax
Tax
Profit from discontinued operations
Profit for the period
20, 21
21
7
8
9
10
11
18
Operating
profit before
exceptional
operating
costs and
amortisation
and
impairment
of goodwill
and acquired
intangible
assets
Restated
(Note 2)
£m
47.5
41.9
38.8
92.9
75.8
16.9
–
313.8
(32.5)
(16.9)
264.4
(41.9)
(10.7)
(41.7)
170.1
(2.7)
167.4
13.1
180.5
17.1
(71.7)
125.9
3.7
(5.2)
124.4
Operating profit before exceptional operating costs and amortisation and impairment of goodwill and intangible assets within the national media
division comprised £103.7 million from newspapers, a loss of £0.9 million from digital and unallocated divisional central costs of £27.0 million.
Included within corporate costs is a credit of £1.9 million which adjusts the pensions charge recorded in each operating segment from a cash
rate to the net service cost in accordance with IAS 19, Employee benefits.
Annual Report 2012 102
3) SEGMENT ANALYSIS – CONTINUED
An analysis of the amortisation and impairment of goodwill and intangible assets, depreciation and impairment of investment property,
property, plant and equipment, exceptional operating costs, investment income and finance costs by segment is as follows:
Amortisation
of intangible
assets not
arising on
business
combinations
(Note 21)
£m
Amortisation
of intangible
assets arising
on business
combinations
(Note 21)
£m
Impairment
of goodwill
and
intangible
assets
(Note 20, 21)
£m
(1.9)
(7.0)
–
(0.3)
(9.2)
–
(18.4)
–
(18.4)
–
(18.4)
–
(7.5)
(11.7)
(13.1)
(9.4)
(0.8)
(42.5)
–
(42.5)
0.8
(41.7)
–
–
–
(0.1)
(10.6)
(13.7)
(24.4)
–
(24.4)
13.7
(10.7)
Exceptional
operating
costs,
impairment
of investment
property and
impairment
of property,
plant and
equipment
£m
–
(1.3)
0.9
(3.2)
(16.9)
(10.4)
(30.9)
(6.7)
(37.6)
10.5
(27.1)
Exceptional
depreciation
of property,
plant and
equipment
(Note 22)
£m
Depreciation
of property,
plant and
equipment
(Note 22, 23)
£m
Investment
revenue
(Note 9)
£m
Finance costs
(Note 10)
£m
–
–
–
–
(14.8)
(0.3)
(15.1)
–
(15.1)
0.3
(14.8)
(5.3)
(6.8)
(0.7)
(2.7)
(23.9)
(3.5)
(42.9)
(4.7)
(47.6)
3.5
(44.1)
0.2
–
1.3
0.3
0.2
–
2.0
15.1
17.1
–
17.1
–
(0.2)
–
(2.9)
(2.2)
–
(5.3)
(66.4)
(71.7)
–
(71.7)
52 weeks ending 2nd October, 2011
RMS
Business information
Events
Euromoney
National media
Local media
Corporate costs
Relating to discontinued operations
Group total
The Group’s exceptional operating costs represent closure and reorganisation costs in the national and local media segments amounting to
£24.9 million. In Euromoney, restructuring costs amount to £2.6 million following the closure and reorganisation of underperforming businesses,
£1.0 million relates to the acquisition of Ned Davis Research Group offset by an exceptional credit of £0.4 million following resolution of a US legal
dispute. Included in corporate costs is an impairment charge of £6.7 million relating to investment property. The Group’s tax charge includes a
related credit of £12.2 million in relation to these items.
The Group’s revenue comprises sales excluding value added tax, less discounts and commission where applicable and is analysed as follows:
Sale of goods
Rendering of services
52 weeks
ending 30th
September,
2012
Discontinued
operations
(Note 18)
£m
–
(212.7)
(212.7)
52 weeks
ending 30th
September,
2012
Inter-segment
£m
–
(33.9)
(33.9)
52 weeks
ending 30th
September,
2012
Continuing
operations
£m
786.0
960.8
1,746.8
52 weeks
ending 2nd
October,
2011
Total
Restated
(Note 2)
£m
52 weeks
ending 2nd
October,
2011
Discontinued
operations
(Note 18)
£m
576.7
1,448.4
2,025.1
–
(236.1)
(236.1)
52 weeks
ending 2nd
October,
2011
Inter-segment
£m
–
(40.5)
(40.5)
52 weeks
ending 30th
September,
2012
Total
£m
786.0
1,207.4
1,993.4
52 weeks
ending 2nd
October,
2011
Continuing
operations
Restated
(Note 2)
£m
576.7
1,171.8
1,748.5
The Group includes circulation and subscriptions revenue within sales of goods, the remainder of the Group’s revenue, excluding investment
revenue is included within rendering of services. Investment revenue is shown in Note 9.
By geographic area
The majority of the Group’s operations are located in the United Kingdom, the rest of Europe, North America and Australia.
The geographic analysis below is based on the location of companies in these regions. Export sales and related profits are included in the areas
from which those sales are made. Revenue in each geographic market in which customers are located is not disclosed as there is no material
difference between the two.
Daily Mail and General Trust Plc Strategic Report
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Directors’ Report
Governance
Financial Statements
103
3) SEGMENT ANALYSIS – CONTINUED
Revenue is analysed by geographic area as follows:
UK
Rest of Europe
North America
Australia
Rest of the World
52 weeks
ending 30th
September,
2012
Discontinued
operations
(Note 18)
£m
52 weeks
ending 30th
September,
2012
Continuing
operations
£m
52 weeks
ending 2nd
October,
2011
Total
Restated
(Note 2)
£m
52 weeks
ending 2nd
October,
2011
Discontinued
operations
(Note 18)
£m
52 weeks
ending 30th
September,
2012
Total
£m
52 weeks
ending 2nd
October,
2011
Continuing
operations
Restated
(Note 2)
£m
1,234.9
(212.7)
1,022.2
1,288.6
(236.1)
1,052.5
68.2
556.4
13.5
86.5
–
–
–
–
68.2
556.4
13.5
86.5
42.6
550.1
11.9
91.4
–
–
–
–
42.6
550.1
11.9
91.4
1,959.5
(212.7)
1,746.8
1,984.6
(236.1)
1,748.5
The closing net book value of goodwill, intangible assets, plant and equipment and investment property is analysed by geographic area as follows:
UK
Rest of Europe
North America
Australia
Rest of the World
UK
Rest of Europe
North America
Australia
Rest of the World
Closing net
book value
of goodwill
(Note 20)
2012
£m
Closing net
book value
of goodwill
(Note 20)
2011
£m
Closing net
book value
of goodwill
(Note 20)
2010
£m
Closing net
book value
of intangible
assets
(Note 21)
2012
£m
Closing net
book value
of intangible
assets
(Note 21)
2011
£m
Closing net
book value
of intangible
assets
(Note 21)
2010
£m
212.2
32.8
439.8
1.5
18.3
704.6
259.0
10.5
457.2
1.5
18.8
747.0
275.2
7.1
433.4
1.5
18.6
735.8
57.8
26.7
191.2
0.7
5.0
76.3
4.7
199.8
0.8
6.6
96.6
4.8
267.1
0.8
8.6
281.4
288.2
377.9
Closing net
book value
of property,
plant and
equipment
(Note 22)
2012
£m
Closing net
book value
of property,
plant and
equipment
(Note 22)
2011
£m
Closing net
book value
of property,
plant and
equipment
(Note 22)
2010
£m
Closing net
book value
of investment
property
(Note 23)
2012
£m
Closing net
book value
of investment
property
(Note 23)
2011
£m
Closing net
book value
of investment
property
(Note 23)
2010
£m
207.1
258.3
311.8
6.8
21.6
11.6
1.1
27.7
0.3
1.9
14.8
30.1
0.2
2.0
17.3
31.2
0.3
5.6
–
–
–
–
–
–
–
–
–
–
–
–
238.1
305.4
366.2
6.8
21.6
11.6
Annual Report 2012
104
3) SEGMENT ANALYSIS – CONTINUED
The additions to non-current assets are analysed as follows:
RMS
Business information
Events
Euromoney
National media
Local media
Radio
The additions to non-current assets are analysed as follows:
RMS
Business information
Events
Euromoney
National media
Local media
Radio
Centrally held
Goodwill
52 weeks
ending 30th
September,
2012
(Note 20)
£m
Goodwill
52 weeks
ending 2nd
October,
2011
(Note 20)
£m
Goodwill
52 weeks
ending 3rd
October,
2010
(Note 20)
£m
Intangible
assets
52 weeks
ending 30th
September,
2012
(Note 21)
£m
Intangible
assets
52 weeks
ending 2nd
October,
2011
(Note 21)
£m
Intangible
assets
52 weeks
ending 3rd
October,
2010
(Note 21)
£m
–
17.2
–
5.8
24.3
0.1
–
47.4
–
6.6
–
34.8
–
–
–
–
2.1
0.2
4.3
5.4
–
–
41.4
12.0
17.6
22.5
–
2.1
32.9
0.5
–
75.7
5.2
11.3
0.3
38.2
9.4
–
–
64.4
0.5
8.2
0.4
3.7
12.2
–
0.1
25.1
Property,
plant and
equipment
52 weeks
ending 30th
September,
2012
(Note 22)
£m
Property,
plant and
equipment 52
weeks ending
2nd October,
2011
(Note 22)
£m
3.5
6.9
0.6
1.7
45.1
0.1
–
1.4
59.3
9.7
7.4
0.6
3.5
10.7
1.4
–
1.1
34.4
Property,
plant and
equipment
52 weeks
ending 3rd
October,
2010
(Note 22)
£m
11.7
7.2
0.5
3.2
8.1
3.2
0.7
1.5
36.1
Investment
property
52 weeks
ending 30th
September,
2012
(Note 23)
£m
Investment
property
52 weeks
ending 2nd
October,
2011
(Note 23)
£m
Investment
property
52 weeks
ending 3rd
October,
2010
(Note 23)
£m
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2.2
2.2
31.2
31.2
18.9
18.9
Daily Mail and General Trust Plc Strategic Report
105
Directors’ Report
Governance
Financial Statements
105
4) OPERATING PROFIT ANALYSIS
Operating profit before the share of results of joint ventures and associates is further analysed as follows:
Revenue
Decrease in stocks of finished goods and work
in progress
Raw materials and consumables
Inventories recognised as an expense in the
period
Staff costs
Impairment of goodwill and impairment
charge of intangible assets
Amortisation of intangible assets
Amortisation of internally generated and
acquired computer software
Promotion and marketing costs
Venue and delegate costs
Editorial and production costs
Distribution and transportation costs
Royalties and similar charges
Depreciation of property, plant and
equipment
Impairment of property, plant and equipment
and investment property
Rental of property
Other property costs
Rental of plant and equipment
Foreign exchange translation differences
Other expenses
Operating profit/(loss)
52 weeks
ending 30th
September,
2012
Discontinued
operations
(Note 18)
£m
52 weeks
ending 30th
September,
2012
Continuing
operations
£m
52 weeks
ending 2nd
October,
2011
Total
Restated
(Note 2)
£m
52 weeks
ending 2nd
October,
2011
Discontinued
operations
(Note 18)
£m
52 weeks
ending 30th
September,
2012
Total
£m
Note
52 weeks
ending 2nd
October,
2011
Continuing
operations
Restated
(Note 2)
£m
1,959.6
212.7
1,746.9
1,984.6
236.1
1,748.5
(6.0)
–
(6.0)
(3.7)
–
(3.7)
(207.7)
(213.7)
(681.6)
(19.4)
(34.5)
(20.4)
(96.4)
(60.1)
(165.6)
(63.9)
(62.3)
(83.4)
(60.8)
(60.8)
(83.0)
–
(0.3)
–
(5.4)
–
(8.3)
(13.6)
–
(11.1)
(146.9)
(152.9)
(598.6)
(19.4)
(34.2)
(20.4)
(91.0)
(60.1)
(157.3)
(50.3)
(62.3)
(72.3)
(236.2)
(239.9)
(716.9)
(24.4)
(42.5)
(18.4)
(105.6)
(78.3)
(149.4)
(70.5)
(54.2)
(62.7)
(74.9)
(74.9)
(91.2)
(13.7)
(0.8)
–
(6.2)
–
(8.6)
(20.9)
–
(3.8)
(161.3)
(165.0)
(625.7)
(10.7)
(41.7)
(18.4)
(99.4)
(78.3)
(140.8)
(49.6)
(54.2)
(58.9)
6
20, 21
21
21
22, 23
22, 23
(7.2)
–
(7.2)
(8.6)
–
(8.6)
(24.2)
(42.1)
(17.2)
0.9
(206.2)
162.3
(2.5)
(4.5)
(3.1)
–
(4.8)
15.3
(21.7)
(37.6)
(14.1)
0.9
(201.4)
147.0
(22.4)
(41.5)
(12.5)
1.4
(176.5)
161.7
(1.8)
(6.5)
(3.8)
–
(12.3)
(8.4)
(20.6)
(35.0)
(8.7)
1.4
(164.2)
170.1
Annual Report 2012 106
52 weeks
ending 30th
September,
2012
£m
52 weeks
ending 2nd
October,
2011
£m
0.4
2.0
2.4
0.3
0.2
–
0.1
0.2
0.8
3.2
0.5
1.9
2.4
0.3
0.1
0.2
0.1
0.1
0.8
3.2
5) AUDITOR’S REMUNERATION
The total remuneration of the Group’s auditor, Deloitte, and its associates is analysed as follows:
Fees payable to the Company's auditor for the audit of the Company's annual accounts
Fees payable to the Company's auditor and their associates for the audit of the Company's subsidiaries pursuant to
legislation
Audit services provided to all Group companies
Other services pursuant to legislation
Services relating to taxation
Services relating to corporate finance transactions
Information technology services
Other non-audit services
Total remuneration
Fees payable to the Company’s auditor and its associates for non-audit services to the Company are not required to be disclosed because the
consolidated financial statements are required to disclose such fees on a consolidated basis.
6) EMPLOYEES
The average number of persons employed by the Group including Directors is analysed as follows:
RMS
Business information
Events
Euromoney
National media
Local media
Group operations
Total staff costs comprised:
Wages and salaries
Share-based payment
Social security costs
Pension costs
52 weeks
ending 30th
September,
2012
Number
52 weeks
ending 2nd
October,
2011
Number
1,064
1,675
410
2,263
4,235
2,395
88
3,594
1,733
401
2,199
4,378
2,787
65
12,130
15,157
52 weeks
ending 30th
September,
2012
£m
52 weeks
ending 2nd
October,
2011
£m
590.2
618.3
13.2
57.9
20.3
19.4
51.3
27.9
681.6
716.9
Note
41
34, (i)
(i) Pension costs are stated before curtailment gains and expected return on pension scheme assets less interest on pension scheme liabilities.
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Directors’ Report
Governance
Financial Statements
107
52 weeks
ending 30th
September,
2012
£m
Note
52 weeks
ending 2nd
October,
2011
Restated
(Note 2)
£m
3.2
0.3
3.5
(1.9)
(0.5)
(1.2)
(0.3)
(0.1)
–
–
(1.3)
(1.8)
0.1
(0.6)
–
–
(1.3)
(2.3)
0.5
(1.8)
–
–
–
(0.3)
–
3.0
(3.2)
(0.4)
(2.7)
(2.3)
0.2
3.0
(3.2)
(0.4)
24, (i)
24, (ii)
24, (i)
24, (ii)
7) SHARE OF RESULTS OF JOINT vENTURES AND ASSOCIATES
Share of profits from operations of joint ventures
Share of profits from operations of associates
Operating profits from joint ventures and associates
Share of exceptional operating costs of joint ventures
Share of exceptional operating costs of associates
Share of amortisation of intangibles of joint ventures
Share of amortisation of intangibles of associates
Share of associates interest payable
Adjustment to the carrying value of joint venture on acquisition
Impairment of carrying value of joint ventures
Impairment of carrying value of associates
Share of results of joint ventures and associates
Share of results from operations of joint ventures
Share of results from operations of associates
Adjustment to the carrying value of joint venture on acquisition
Impairment of carrying value of joint ventures
Impairment of carrying value of associates
Share of results of joint ventures and associates
(1.8)
(2.7)
(i)
In the prior year represents a £0.2 million write down in the carrying value of the Group’s investment in Mail Today Newspapers Pvt. Limited
in the national media segment and a £3.0 million write down in value of the Sanborn Map Company in the business information segment.
(ii) Represents a write down in the carrying value of the Group’s investment in Social Metrix in the national media segment. In the prior year
represents a write down in the carrying value of the Group’s investment in Posvanete AD in the local media segment.
Annual Report 2012
108
Note
(i)
25
17, (ii)
52 weeks
ending 30th
September,
2012
£m
52 weeks
ending 2nd
October,
2011
£m
(0.6)
(0.3)
2.0
113.3
–
114.4
8.6
(0.2)
0.6
4.0
0.1
13.1
8) OTHER GAINS AND LOSSES
(Loss)/profit on disposal of available-for-sale investments
Impairment of available-for-sale assets
Profit on disposal of property, plant and equipment
Profit on disposal of businesses
Profit on disposal of joint ventures and associates
(i) Represents the loss on disposal of the Group’s investment in Herald Ventures. In the prior year represents the profit on disposal of the Group’s
interest in CoStar, Inc.
(ii) Largely represented by the £78.2 million profit on sale of The Digital Property Group in the National media segment and £34.6 million profit
on sale of Evanta in the Business information segment. In the prior year the profit on disposal of businesses mainly comprises the profit on
disposal of various exhibition businesses in the events segment and various assets in the local media segment.
There is a tax charge of £11.8 million (2011 £3.1 million) in relation to these items.
9) INvESTMENT REvENUE
Expected return on defined benefit pension scheme assets less interest on defined benefit pension
scheme liabilities
Dividend income
Interest receivable from short-term deposits
10) FINANCE COSTS
Interest, arrangement and commitment fees payable on bonds, bank loans and loan notes
Premium on bond redemption
Change in fair value of derivative hedge of bond
Change in fair value of hedged portion of bond
Profit on derivatives, or portions thereof, not designated for hedge accounting
Finance charge on discounting of contingent consideration
Fair value movement of contingent consideration
Change in fair value of acquisition put options
52 weeks
ending 30th
September,
2012
£m
52 weeks
ending 2nd
October,
2011
£m
34
8.5
12.3
0.8
1.5
10.8
2.9
1.9
17.1
52 weeks
ending 30th
September,
2012
£m
52 weeks
ending 2nd
October,
2011
£m
(59.5)
(70.8)
(6.1)
2.2
(2.2)
(0.4)
(0.3)
0.2
2.0
–
0.1
(0.1)
1.7
(0.4)
(1.7)
(0.5)
(64.1)
(71.7)
Note
(i)
35
35
33
The finance charge on the discounting of contingent consideration arises from the requirement under IFRS 3 (2008), Business Combinations, to
record contingent consideration at fair value using a discounted cash flow approach.
(i) During the year the Group bought back £110.0 million of its 7.5% bonds due 2013 incurring a premium of £6.1 million.
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Directors’ Report
Governance
Financial Statements
109
52 weeks
ending 30th
September,
2012
£m
Note
52 weeks
ending 2nd
October,
2011
Restated
(Note 2)
£m
(4.3)
43.0
38.7
(31.9)
(12.4)
(5.6)
(24.0)
39.1
15.1
9.5
9.3
18.8
(2.4)
0.4
(2.0)
(19.3)
(0.9)
(22.2)
20.1
7.0
27.1
4.9
(1.2)
3.7
36
18
11) TAX
The credit on the profit for the year consists of:
Uk tax
Corporation tax at 25.0% (2011 27.0%)
Adjustments in respect of prior periods
Overseas tax
Corporation tax
Adjustments in respect of prior periods
Total current tax
Deferred tax
Origination and reversals of temporary differences
Adjustments in respect of prior periods
Total deferred tax
Discontinued operations
Being a multinational Group with tax affairs in many geographic locations inherently leads to a highly complex tax structure. The tax charge is
reviewed and measured on a Group total basis only.
A current tax credit of £0.6 million (2011 £nil) and a deferred tax credit of £5.0 million (2011 £17.7 million) was recognised directly in equity (Note
38 and 39).
The tax charge for the year is lower than the standard rate of corporation tax in the UK of 25.0% (2011 27.0%) representing the weighted average
annual corporate tax rate for the full financial year. The differences are explained below:
Profit on ordinary activities before tax – continuing operations
Profit/(loss) before tax – discontinued operations
Total profit before tax
Tax on profit on ordinary activities at the standard rate
Effect of:
Amortisation and Impairment of goodwill and intangible assets
Other expenses not deductible for tax purposes
Additional items deductible for tax purposes
Recognition of previously unrecognised deferred tax assets
Effect of overseas tax rates
Effect of associates tax
Tax losses unrelieved
Write off/disposal of subsidiaries
Effect of change in tax rate
Adjustment in respect of prior years
Other
Total tax credit on the profit for the year
52 weeks
ending 30th
September,
2012
£m
206.3
64.1
270.4
(67.6)
52 weeks
ending 2nd
October,
2011
Restated
(Note 2)
£m
125.9
(6.4)
119.5
(32.3)
(6.3)
(6.3)
23.5
0.4
(14.6)
1.4
(15.2)
31.3
(6.3)
69.7
(0.5)
9.5
(3.0)
(8.2)
22.8
18.6
8.1
(0.5)
(9.0)
1.6
(2.8)
6.5
3.1
4.9
The net prior year credit of £69.7 million (2011 £6.5 million), arose largely from the agreement of certain prior year issues with tax authorities and a
reassessment of the level of tax provisions required.
Annual Report 2012
110
11) TAX – CONTINUED
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 £39.0 million (2011 £33.7 million) and the resulting rate is 15.2% (2011 14.4%). The differences between the tax credit and
the adjusted tax charge are shown in the reconciliation below:
Total tax credit on the profit for the year
Deferred tax on intangible assets and goodwill
Agreement of open issues with tax authorities
Tax on other exceptional items
Adjusted tax charge on the profit for the year
52 weeks
ending 30th
September,
2012
£m
52 weeks
ending 2nd
October,
2011
£m
9.5
(2.8)
(41.6)
(4.1)
(39.0)
4.9
(0.9)
1.0
(38.7)
(33.7)
In calculating the adjusted tax rate, the Group excludes the potential future deferred tax effects of intangible assets and goodwill (other than
internally generated and acquired computer software) as it prefers to give the users of its accounts a view of the tax charge based on the
current status of such items.
Tax on other exceptional items includes a charge of £1.9 million (2011 £29.6 million) relating to the recognition of further tax losses and other
temporary differences which are treated as exceptional due to their material impact on the Group’s adjusted tax charge.
12) DIvIDENDS PAID
Amounts recognisable as distributions to equity holders in the period
Ordinary shares – final dividend for the year ended 2nd October, 2011
‘A’ Ordinary Non-Voting Shares – final dividend for the year ended 2nd October, 2011
Ordinary shares – final dividend for the year ended 3rd October, 2010
‘A’ Ordinary Non-Voting shares – final dividend for the year ended 3rd October, 2010
Ordinary shares – interim dividend for the year ended 30th September, 2012
‘A’ Ordinary Non-Voting shares – interim dividend for the year ended 30th September, 2012
Ordinary shares – interim dividend for the year ended 2nd October, 2011
‘A’ Ordinary Non-Voting shares – interim dividend for the year ended 2nd October, 2011
52 weeks
ending 30th
September,
2012
Pence per
share
52 weeks
ending 30th
September,
2012
£m
52 weeks
ending 2nd
October,
2011
Pence per
share
52 weeks
ending 2nd
October,
2011
£m
11.7
11.7
–
–
5.6
5.6
–
–
17.3
2.5
42.3
–
–
44.8
1.1
20.3
–
–
21.4
66.2
–
–
11.0
11.0
–
–
5.3
5.3
16.3
–
–
2.0
40.1
42.1
–
–
1.1
19.2
20.3
62.4
The Board has declared a final dividend of 12.4 p per Ordinary/‘A’ Ordinary Non-Voting Share (2011 11.7p) which will absorb an estimated
£47.5 million (£44.8 million) of shareholders’ funds for which no liability has been recognised in these financial statements. It will be paid on
10th February, 2013 to shareholders on the register at the close of business on 30th November, 2012.
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Strategic Report
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Directors’ Report
Governance
Financial Statements
111
52 weeks
ending 30th
September,
2012
£m
Note
52 weeks
ending 2nd
October,
2011
Restated
(note 2)
£m
206.3
21.1
43.0
34.2
0.3
1.5
125.9
(6.4)
–
41.7
0.8
0.3
3.2
3.4
19.4
73.1
24.4
41.9
10.4
10.8
1.9
0.5
–
1.3
0.3
0.6
(2.0)
(113.3)
0.3
–
0.1
(2.0)
(0.2)
–
–
0.2
0.4
–
(8.6)
(0.6)
(4.0)
0.2
(0.1)
(1.7)
0.5
1.7
18
18
3
18
7
18
3
3
18
7
7
18
8
8
8
8
8
18
10
10
13) ADJUSTED PROFIT
Profit before tax – continuing operations
Profit/(loss) before tax – discontinued operations
Profit on disposal of discontinued operations
Add back:
Amortisation of intangible assets arising on business combinations – continuing operations
Amortisation of intangible assets arising on business combinations – discontinued operations
Amortisation of intangible assets in joint ventures and associates arising on business combinations –
continuing operations
Amortisation of intangible assets in joint ventures and associates arising on business combinations –
discontinued operations
Impairment of goodwill and intangible assets arising on business combinations
Exceptional operating costs, impairment of internally generated and acquired computer software,
investment property and property, plant and equipment – continuing operations
Exceptional operating costs, impairment of internally generated and acquired computer software,
investment property and property, plant and equipment – discontinued operations
Share of exceptional operating costs of joint ventures
Share of exceptional operating costs of associates
Impairment of carrying value of joint venture net of fair value adjustment on acquisition
Impairment of carrying value of associate – continued operations
Impairment of carrying value of associate – discontinued operations
Other gains and losses:
Loss/(profit) on disposal of available-for-sale investments
Profit on disposal of property, plant and equipment
Profit on disposal of businesses
Impairment of available-for-sale assets
Profit on disposal of joint ventures and associates
Loss/(profit) on disposal of businesses within discontinued operations
Finance costs:
Change in fair value of acquisition put options
Fair value movement on contingent consideration
Tax:
Share of tax in joint ventures and associates – discontinued operations
18
(1.6)
1.3
Profit from discontinued operations:
Profit on disposal of discontinued operations
Adjusted profit before tax and non-controlling interests
Total tax credit on the profit for the period
Adjust for:
Deferred tax on intangible assets and goodwill
Agreed open issues with tax authorities
Tax on other exceptional items
Non-controlling interests
Adjusted profit after taxation and non-controlling interests
18
11
11
11
11
(43.0)
255.4
9.5
(2.8)
(41.6)
(4.1)
(27.3)
189.1
–
232.1
4.9
(0.9)
1.0
(38.7)
(21.8)
176.6
The adjusted non-controlling interests share of profits for the period of £27.3 million (2011 £21.8 million) is stated after eliminating a credit of £4.6
million (2011 £6.0 million), being the non-controlling interests share of adjusting items.
Annual Report 2012 112
14) EARNINGS PER SHARE
Basic earnings per share of 67.2 p (2011 28.3 p) and diluted earnings per share of 65.1 p (2011 27.7 p) are calculated, in accordance with IAS 33,
Earnings per share, on Group profit for the financial period of £202.4 million (2011 £113.7 million) as adjusted for the effect of dilutive ordinary shares
of £0.6 million (2011 £1.0 million) and earnings from discontinued operations of £54.8 million (2011 loss £5.2 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 49.4 p (2011 46.1 p) 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 £189.1 million (2011 £176.6 million), as set out in Note 13 above, and on the basic weighted average
number of ordinary shares in issue during the year.
Basic and diluted earnings per share
Earnings from continuing operations
Effect of dilutive ordinary shares
Earnings from discontinued operations
Earnings per share from continuing operations
Effect of dilutive ordinary shares
Earnings per share from discontinued operations
Basic earnings per share from continuing and discontinued operations
52 weeks
ending 30th
September,
2012
Diluted
earnings
£m
52 weeks
ending 2nd
October,
2011
Diluted
earnings
Restated
(Note 2)
£m
52 weeks
ending 30th
September,
2012
Basic
earnings
£m
52 weeks
ending 2nd
October,
2011
Basic
earnings
Restated
(Note 2)
£m
202.4
113.7
202.4
113.7
(0.6)
54.8
(1.0)
(5.2)
256.6
107.5
–
54.8
257.2
–
(5.2)
108.5
52 weeks
ending 30th
September,
2012
Diluted
pence
per share
51.4
(0.2)
13.9
65.1
52 weeks
ending 2nd
October,
2011
Diluted
pence
per share
Restated
(Note 2)
29.3
(0.3)
(1.3)
27.7
52 weeks
ending 30th
September,
2012
Basic
pence
per share
52.9
–
14.3
67.2
52 weeks
ending 2nd
October,
2011
Basic
pence
per share
Restated
(Note 2)
29.7
–
(1.4)
28.3
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Directors’ Report
Governance
Financial Statements
113
14) EARNINGS PER SHARE – CONTINUED
Adjusted earnings per share
Profit before tax – continuing operations
Effect of dilutive ordinary shares
Profit/(loss) before tax – discontinued operations
Profit on disposal of discontinued operations
Add back:
Amortisation of intangible assets arising on business combinations – continuing operations
Amortisation of intangible assets arising business combinations – discontinued operations
Amortisation of intangible assets in joint ventures and associates arising on business
combinations – continuing operations
Amortisation of intangible assets in joint ventures and associates arising on business
combinations – discontinued operations
Impairment of goodwill and intangible assets arising on business combinations – continuing
operations
Exceptional operating costs, impairment of internally generated and acquired computer
software, investment property and property, plant and equipment – continuing operations
Exceptional operating costs, impairment of internally generated and acquired computer
software, investment property and property, plant and equipment – discontinued operations
Share of exceptional operating costs of joint ventures
Share of exceptional operating costs of associates
Impairment of carrying value of joint venture net of fair value adjustment on acquisition
Impairment of carrying value of associate – continued operations
Impairment of carrying value of associate – discontinued operations
Other gains and losses:
Loss/(profit) on disposal of available-for-sale investments
Profit on disposal of property, plant and equipment
Profit on disposal of businesses
Impairment of available-for-sale assets
Profit on disposal of businesses within discontinued operations
Finance costs:
Change in fair value of acquisition put options
Fair value movement on contingent consideration
Tax:
Share of tax in joint ventures and associates – discontinued operations
Profit from discontinued operations:
Profit on disposal of discontinued operations
Adjusted profit before tax and non-controlling interests
Total tax credit on the profit for the period
Adjust for:
Deferred tax on intangible assets and goodwill
Agreed open issues with tax authorities
Tax on other exceptional items
Non-controlling interests
Adjusted profit after taxation and non-controlling interests
52 weeks
ending 30th
September,
2012
Diluted
pence
per share
52 weeks
ending 2nd
October,
2011
Diluted
pence
per share
Restated
(Note 2)
52 weeks
ending 30th
September,
2012
Basic
pence
per share
52 weeks
ending 2nd
October,
2011
Basic
pence
per share
Restated
(Note 2)
52.4
(0.2)
5.4
10.9
8.7
0.1
0.4
0.8
4.9
32.5
(0.3)
(1.7)
–
10.8
0.2
0.1
0.9
6.3
53.9
–
5.5
11.2
8.9
0.1
0.4
0.8
5.1
32.9
–
(1.7)
–
10.9
0.2
0.1
0.9
6.4
18.6
10.8
19.1
10.9
2.6
0.5
0.1
–
0.3
0.1
0.2
(0.5)
(28.8)
0.1
–
(0.5)
(0.1)
(0.4)
(10.9)
64.7
2.4
(0.7)
(10.6)
(1.0)
(6.9)
47.9
2.8
–
–
0.1
0.1
–
(2.2)
(0.2)
(1.0)
0.1
(0.4)
0.1
0.4
0.3
–
59.7
1.3
(0.2)
0.3
(10.1)
(5.7)
45.3
2.7
0.5
0.1
–
0.3
0.1
0.2
(0.5)
(29.6)
0.1
–
(0.5)
(0.1)
(0.4)
(11.2)
66.7
2.5
(0.7)
(10.9)
(1.1)
(7.1)
49.4
2.8
–
–
0.1
0.1
–
(2.2)
(0.2)
(1.0)
0.1
(0.4)
0.1
0.4
0.3
–
60.7
1.3
(0.2)
0.3
(10.2)
(5.8)
46.1
Annual Report 2012 114
14) EARNINGS PER SHARE – CONTINUED
The weighted average number of ordinary shares in issue during the period for the purpose of these calculations is as follows:
Number of ordinary shares in issue
Shares held in Treasury
Basic earnings per share denominator
Effect of dilutive share options
Dilutive earnings per share denominator
15) ANALYSIS OF NET DEBT
Cash and cash equivalents
Bank overdrafts
Net cash and cash equivalents
Debt due within one year
Bonds
Other financial liabilities
Loan notes
Debt due after one year
Bonds
Net debt before effect of derivatives
Effect of derivatives on debt
Net debt
52 weeks
ending 30th
September,
2012
Number
m
52 weeks
ending 2nd
October,
2011
Number
m
392.7
(9.9)
382.8
10.9
393.7
392.6
(9.8)
382.8
5.0
387.8
Note
28
32
32
32
32
(i)
At 2nd
October,
2011
£m
174.3
(2.6)
171.7
–
(23.4)
(3.3)
(832.0)
(687.0)
(32.6)
(719.6)
Fair value
hedging
adjustments
£m
Foreign
exchange
movements
£m
Other
non-cash
movements
£m
At 30th
September,
2012
£m
Cash flow
£m
(65.3)
2.5
(62.8)
(50.1)
23.4
0.7
160.0
71.2
(7.8)
63.4
–
–
–
1.0
–
–
(3.1)
(2.1)
2.1
–
(1.7)
0.1
(1.6)
–
–
–
(1.6)
46.0
44.4
–
–
–
1.8
–
–
(3.0)
(1.2)
–
(1.2)
107.3
–
107.3
(47.3)
–
(2.6)
(678.1)
(620.7)
7.7
(613.0)
(i) The effect of derivatives on bank debt is the net currency gain or loss on derivatives entered into with the intention of economically
converting the currency of drawn debt to an alternative currency.
Other non-cash movements in respect of bonds comprises the unwinding of premium of £1.4 million (2011 £1.6 million) offset by the amortisation
of issue costs of £0.2 million (2011 £0.5 million).
The net cash outflow of £62.8 million (2011 £107.4 million) includes a cash outflow of £40.5 million (2011 £16.5 million) in respect of operating
exceptional items.
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Directors’ Report
Governance
Financial Statements
115
Provisional
fair value
adjustments
£m
Provisional
fair value
£m
Book value
£m
–
0.1
0.1
3.1
6.1
(5.0)
–
4.4
24.3
22.9
–
–
–
–
(6.3)
40.9
Non-cash
£m
16.1
–
16.1
Cash paid
in current
period
£m
–
29.2
29.2
24.3
23.0
0.1
3.1
6.1
(5.0)
(6.3)
45.3
Total
£m
16.1
29.2
45.3
16) SUMMARY OF THE EFFECTS OF ACQUISITIONS
In April, 2012 the Group acquired Jobrapido, provider of one of the world’s largest job search engines.
Provisional fair value of net assets acquired with Jobrapido:
Goodwill
Intangible assets
Property, plant and equipment
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Deferred tax
Net assets acquired
Cost of acquisition:
Contingent consideration
Cash
Total consideration at fair value
Jobrapido contributed £14.0 million to the Group’s revenue, £2.0 million to the Group’s operating profit and £2.0 million to the Group’s profit before
tax for the period between the date of acquisition and 30th September, 2012. If the above acquisition had been completed on the first day of
the financial year, Jobrapido would have contributed £26.2 million to the Group’s revenue for the year and £4.6 million to the Group’s profit
before tax for the year.
Annual Report 2012 116
16) SUMMARY OF THE EFFECTS OF ACQUISITIONS – CONTINUED
A summary of notable acquisitions completed during the period were as follows:
Name of acquisition
Segment
% voting
rights
acquired
Date of acquisition
Business description
BUILDERadius
Business information
57.80% November, 2011
Intelliworks
Business information
100.00% December, 2011
Global Grain
Euromoney
50.00%
February, 2012
PrepMe
Business information
100.00%
February, 2012
Jobrapido
Springrock
National media
100.00%
Business information
100.00%
April, 2012
April, 2012
Navitas
Business information
100.00%
August, 2012
Provisional fair value of net assets acquired with all acquisitions:
Provider of building safety and
code enforcement software
and services
Provider of marketing,
recruiting, enrolment & CRM
solutions for higher education
colleges
Provider of International grain
conferences
Provider of adaptive learning
services
Job search engine
Provider of North American
natural gas and crude oil
production forecasts
Provider of renewable fuels
consultancy services
Consideration
paid
£m
Intangible
fixed assets
acquired
£m
5.7
3.2
Goodwill
arising
£m
6.9
8.5
3.7
7.2
5.2
2.5
45.3
4.7
1.3
1.8
23.0
2.9
4.4
1.4
24.3
1.8
1.5
1.5
–
Goodwill
Intangible assets
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Deferred tax
Net assets acquired
Note
20, (i)
21
36
Provisional
fair value
adjustments
£m
Provisional
fair value
£m
Book value
£m
–
–
4.5
6.6
(12.5)
1.1
(0.3)
46.3
37.9
–
–
–
(9.8)
74.4
46.3
37.9
4.5
6.6
(12.5)
(8.7)
74.1
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16) SUMMARY OF THE EFFECTS OF ACQUISITIONS – CONTINUED
Cost of acquisitions:
Contingent consideration
Reclassification of investment in associate
Cash
Total consideration at fair value
Note
35, (ii)
Non-cash
£m
20.7
5.7
–
26.4
Cash paid
in current
period
£m
–
–
47.7
47.7
Total
£m
20.7
5.7
47.7
74.1
(i) The amount of goodwill which is deductible for the purposes of calculating the Group’s tax charge amounts to £nil.
(ii) The contingent consideration is based on future business valuations and profit multiples and has been estimated on an acquisition by acquisition
basis using available data forecasts. The range of undiscounted outcomes for contingent consideration relating to acquisitions in the year
is £nil to £42.9 million. Certain contingent consideration arrangements are not capped since they are based on future business performance
(Note 35).
Directly attributable costs in relation to the above acquisitions amounted to £0.1 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.
If all acquisitions had been completed on the first day of the financial period, Group revenues for the period would have been £1,761.1 million and
Group profit attributable to equity holders of the parent would have been £258.8 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 financial period.
Total losses attributable to equity holders of the parent since the date of acquisition for companies acquired during the period amounted to
£1.0 million.
Goodwill arising on the 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.
Purchase of additional shares in controlled entities
Cash consideration excluding acquisition expenses
52 weeks
ending 30th
September,
2012
£m
52 weeks
ending 2nd
October,
2011
£m
14.8
2.7
During the period, the Group acquired additional shares in controlled entities amounting to £14.8 million (2011 £2.7 million). In addition, the Group
opted to receive a scrip dividend from Euromoney Institutional Investor PLC (Euromoney) amounting to £16.0 million (2011 £14.2 million) thereby
acquiring a further 0.6 % (2011 0.5 %) of the issued ordinary share capital of Euromoney. Under the Group’s accounting policy for the acquisition of
shares in controlled entities, no adjustment has been recorded to the fair value of assets and liabilities already held on the Consolidated Statement
of Financial Position. The difference between the cost of the additional shares and the carrying value of the non-controlling interests share of
net assets is adjusted in retained earnings. The adjustment to retained earnings in the period was a charge of £13.5 million (2011 £4.3 million).
Reconciliation to purchase of subsidiaries as shown in the Consolidated Cash Flow Statement:
Cash consideration excluding acquisition expenses
Cash paid to settle contingent consideration in respect of acquisitions
Cash and cash equivalents acquired with subsidiaries
Purchase of subsidiaries
52 weeks
ending 30th
September,
2012
£m
52 weeks
ending 2nd
October,
2011
£m
47.7
7.7
(6.6)
48.8
74.1
12.0
(4.8)
81.3
Note
16
35
16
Cash paid in respect of contingent consideration relating to prior year acquisitions includes £3.3 million within Business information, £0.7 million
within Euromoney and £3.7 million within national media.
The businesses acquired during the year absorbed £0.5 million of the Group’s net operating cash flows, £nil attributable to investing and £nil
attributable to financing activities.
Annual Report 2012 118
17) SUMMARY OF THE EFFECTS OF DISPOSALS
On October 14th, 2011 the Group announced that it had agreed to merge the online property business of its Digital Property Group (‘DPG’), which
includes FindaProperty.com and Primelocation.com, with those of Zoopla Limited (Zoopla) operator of Zoopla.co.uk. Zoopla is a privately owned
company which has venture capital interests as its largest shareholders. Following the transaction, the Group retained a 52.25% interest in the newly
merged entity; however since the Group has joint management control the investment in Zoopla has been equity accounted as a joint venture.
The net assets disposed were as follows:
Goodwill
Intangible assets
Trade and other receivables
Cash at bank and in hand
Trade and other payables
Deferred tax
Net assets disposed
Profit on sale of businesses
Satisfied by:
Fair value of 52.25% holding in Zoopla
Directly attributable costs
£m
39.6
1.6
4.1
0.1
(1.9)
0.4
43.9
78.2
122.1
125.4
(3.3)
122.1
During the period DPG absorbed £1.0 million of the Group’s net operating cash flows, paid £nil in respect of investing activities and paid £nil in
respect of financing activities.
In addition in September, 2012 the Group disposed of Evanta Ventures, Inc. a business within the events segment.
The net assets disposed were as follows:
Goodwill
Intangible assets
Property, plant and equipment
Inventories
Trade and other receivables
Trade and other payables
Deferred tax
Net assets disposed
Profit on sale of businesses
Satisfied by:
Cash received
Recycled cumulative translation differences
Directly attributable costs
£m
7.2
10.1
0.2
1.3
2.7
(7.2)
0.2
14.5
34.6
49.1
59.5
0.9
(11.3)
49.1
During the period Evanta generated £3.5 million of the Group’s net operating cash flows, paid £nil in respect of investing activities and paid £nil
in respect of financing activities.
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17) SUMMARY OF THE EFFECTS OF DISPOSALS – CONTINUED
A summary of notable disposals is as follows:
Name of disposal
Teletext
Zambeasy.co.uk
Chew Valley
Motors.co.uk
Digital Property Group
Evanta
The impact of all disposals of businesses on net assets was:
Segment
National Media
National Media
Regional Media
National Media
National Media
Date of disposal
December, 2011
January, 2012
January, 2012
March, 2012
May, 2012
Events
September, 2012
Goodwill
Intangible assets
Property, plant and equipment
Inventories
Trade and other receivables
Cash at bank and in hand
Trade and other payables
Corporation tax
Deferred tax
Net assets disposed
Profit on disposal of businesses
Satisfied by:
Cash received
Fair value of 52.25% holding in Zoopla
Amounts receivable
Provision against amounts receivable
Recycled cumulative translation differences
Directly attributable costs
Fair value of consideration
£m
2.0
0.5
0.3
0.9
125.4
57.0
£m
47.9
12.4
0.3
1.2
10.1
0.6
(13.4)
0.1
1.7
60.9
113.3
174.2
63.2
125.4
6.0
(4.0)
0.9
(17.3)
174.2
Note
20
21
22
36
8
38
Annual Report 2012 120
17) SUMMARY OF THE EFFECTS OF DISPOSALS – CONTINUED
Reconciliation to disposal of businesses as shown in the Consolidated Cash Flow Statement:
Cash consideration net of disposal costs
Cash received in the current year relating to businesses sold in the prior year
Cash and cash equivalents disposed with subsidiaries
Proceeds on disposal of businesses
52 weeks
ending 30th
September,
2012
£m
52 weeks
ending 2nd
October,
2011
£m
45.9
12.3
(0.6)
57.6
98.2
(3.4)
94.8
Note
17
17
The Group’s tax charge includes a charge of £11.8 million (2011 £3.1 million) in relation to these disposals.
In addition, the Group’s interest in Euromoney was diluted during the period by 0.1 % (2011 0.3 %). Under the Group’s accounting policy for the
disposal of shares in controlled entities, no adjustment has been recorded to the fair value of assets and liabilities already held on the Condensed
Consolidated Statement of Financial Position. The difference between the Group’s share of net assets before and after this dilution is adjusted in
retained earnings. The adjustment to retained earnings in the period was a credit of £0.1 million (2011 £0.5 million).
All of the businesses disposed of during the year absorbed £2.6 million of the Group’s net operating cash flows, had £nil attributable to investing
and £nil attributable to financing activities.
18) DISCONTINUED OPERATIONS
In August 2012 the Group disposed of its 50.0 % joint venture investment in dmg Radio Investments Pty Ltd for proceeds amounting to A$86.2 million
(£56.1 million). This business is one of the Group’s operating segments and represented the only operation in the radio segment.
In November 2012 the Group announced it had reached agreement to sell its local media segment to Local World, a newly formed media group
that will combine the Group’s local media titles with those of the Northcliffe News and Media Limited. The Group will receive consideration of
£52.5 million and a 38.7% share in Local World.
The Group’s Consolidated Income Statement includes the following results from discontinued operations:
Revenue
Expenses
Depreciation
Operating profit before exceptional operating costs and amortisation and impairment of goodwill and
intangible assets
Exceptional operating costs
Impairment of goodwill and intangible assets
Amortisation of intangible assets
Operating profit/(loss) before share of results of joint ventures and associates
Share of profits from operations of joint ventures
Share of amortisation of intangibles of joint ventures
Share of joint ventures' interest payable
Share of joint ventures' tax
Impairment of carrying value of associate
Total operating profit/(loss)
Other gains and losses
Profit/(loss) before tax
Tax (charge)/credit
Profit/(loss) after tax attributable to discontinued operations
Profit on disposal of discontinued operations
Profit/(loss) attributable to discontinued operations
Tax charged with the profit on disposal of discontinued operations amounted to £nil (2011 £nil).
Note
3
3
3
3
13
11
52 weeks
ending 30th
September,
2012
£m
52 weeks
ending 2nd
October,
2011
£m
212.7
(175.6)
(11.1)
26.0
(10.4)
–
(0.3)
15.3
9.5
(3.2)
(1.7)
1.6
(0.3)
21.2
(0.1)
21.1
(9.3)
11.8
43.0
54.8
236.1
(215.7)
(3.5)
16.9
(10.8)
(13.7)
(0.8)
(8.4)
6.7
(3.4)
(1.7)
(1.3)
–
(8.1)
1.7
(6.4)
1.2
(5.2)
–
(5.2)
Cash flows associated with discontinued operations comprises operating cash flows of £27.8 million (2011 £20.4 million), investing cash flows of
£nil (2011 £0.7 million) and financing cash flows of £nil (2011 £nil).
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19) TOTAL ASSETS AND LIABILITIES OF BUSINESSES HELD-FOR-SALE
In November 2012 the Group announced it had reached agreement to sell its local media segment to Local World, a newly formed media group
that will combine the Group’s local media titles with those of Illiffe News and Media Limited. DMGT will receive consideration of £52.5 million and a
38.7% share in Local World. The transaction is expected to complete in early 2013. In addition, several of the Group’s Central European businesses
were sold following the year end. Accordingly the assets and liabilities of these businesses have been disclosed separately on the face of the
Consolidated Statement of Financial Position.
The main classes of assets and liabilities comprising the operations classified as held-for-sale are set out in the table below. These assets and
liabilities are recorded at their fair values with all losses taken to the Consolidated Income Statement.
Goodwill
Intangible assets
Deferred tax
Property, plant and equipment
Interests in joint ventures
Interests associates
Inventories
Trade and other receivables
Cash at bank and in hand
Total assets associated with businesses held-for-sale
Trade and other payables
Provisions
Total liabilities associated with businesses held-for-sale
Net assets of the disposal group
52 weeks
ending 30th
September,
2012
£m
Note
20
21
36
22
24
24
26
27
28
29
35
12.2
3.8
6.4
17.7
1.1
0.4
0.6
26.9
2.6
71.7
31.4
2.2
33.6
38.1
Annual Report 2012 122
Note
Goodwill
£m
35
16
16
35
17
19
1,059.5
41.4
0.8
(105.3)
3.5
999.9
46.3
1.1
0.6
(121.7)
(142.4)
(14.3)
769.5
Note
Goodwill
£m
3
3
17
19
323.7
18.3
(86.4)
(2.7)
252.9
16.4
(73.8)
(130.2)
(0.4)
64.9
735.8
747.0
704.6
20) GOODwILL
Cost
At 3rd October, 2010
Additions
Adjustment to previous year estimate of contingent consideration
Disposals
Exchange adjustment
At 2nd October, 2011
Additions
Additions in relation to purchase of additional interests in controlled entities
Adjustment to previous year estimate of contingent consideration
Disposals
Classified as held-for-sale
Exchange adjustment
At 30th September, 2012
Accumulated impairment losses
At 3rd October, 2010
Impairment
Disposals
Exchange adjustment
At 2nd October, 2011
Impairment
Disposals
Classified as held-for-sale
Exchange adjustment
At 30th September, 2012
Net book value – 2010
Net book value – 2011
Net book value – 2012
Goodwill impairment losses recognised in the year were £16.4 million (2011 £18.3 million).
The Group’s policy on impairment of goodwill is set out in Note 2.
Further disclosures in accordance with paragraph 134 of IAS 36, Impairment of assets, are provided where the Group holds an individual goodwill
item relating to a CGU that is significant, which the Group considers to be 15.0 % of the total net book value, in comparison with the Group’s total
carrying value of goodwill.
The only significant items of goodwill included in the net book value above relate to BCA, a business within Metal Bulletin in the Euromoney
segment and Genscape Inc., in the business information segment.
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20) GOODwILL – CONTINUED
Genscape has a carrying value of £72.6 million (2011 £72.9 million, 2010 £73.1 million) together with intangible assets with a carrying value of
£25.6 million (2011 £24.3 million, 2010 £25.9 million). The carrying value of Genscape has been determined using a value in use calculation in line
with IAS 36. The methodology applied to the value in use calculations reflects past experience and external sources of information including;
(i) Forecasts by the business based on cash flows derived from budgets for 2012. The Directors believe these to be reasonably achievable.
(ii) Subsequent cash flows for one additional year increased in line with growth expectations of the business.
(iii) A discount rate of 10.0%, and
(iv) Long-term nominal growth rates of 3.0%.
Using the above methodology the recoverable amount exceeded the total carrying value by £22.9 million. For this business the Directors
performed a sensitivity analysis on the total carrying value of the CGU. For the recoverable amount to be equal to the carrying value then the
discount rate would need to be increased by 1.6 % or the long-term growth rate would need to be reduced by 2.3%.
BCA has a carrying value of £143.2 million (2011 £148.4 million, 2010 £146.7 million) together with intangible assets with a carrying value of £62.8
million (2011 £71.8 million, 2010 £78.0 million). The carrying value of BCA has been determined using a value in use calculation in line with IAS 36.
The methodology applied to the value in use calculations reflects past experience and external sources of information including;
(i) Forecasts by the business based on cash flows derived from budgets for 2012. The Directors believe these to be reasonably achievable.
(ii) Subsequent cash flows for one additional year increased in line with growth expectations of the business.
(iii) A discount rate of 8.5%, and
(iv) Long-term nominal growth rates of 3.0%.
Using the above methodology the recoverable amount exceeded the total carrying value by £176.2 million. For this business the Directors
performed a sensitivity analysis on the total carrying value of the CGU. For the recoverable amount to be equal to the carrying value then the
discount rate would need to be increased by 10.2% or the long-term growth rate would need to be reduced by 12.7%.
The carrying values of the Group’s significant items of goodwill in relation to material business combinations, which the Group considers to be
those which have a purchase consideration in excess of £100.0 million, are further analysed as follows:
Cost
At 3rd October, 2010
Exchange adjustment
At 2nd October, 2011
Exchange adjustment
At 30th September, 2012
Accumulated impairment losses
At 3rd October, 2010, 2nd October, 2011 and 30th September, 2012
Net book value – 2010
Net book value – 2011
Net book value – 2012
Metal Bulletin
plc
£m
202.6
1.7
204.3
(5.2)
199.1
Metal Bulletin
plc
£m
2.8
199.8
201.5
196.3
Annual Report 2012 124
20) GOODwILL – CONTINUED
The impairment charge is analysed by major CGU as follows:
CGU
Segment
Goodwill
impairment
Intangible
asset
impairment
£m
2012
Discount
rate
£m
2011
Discount
rate
%
Lewtan Technologies Inc
Business Information
16.0
–
23.0%
10.0%
Associated Mediabase
National Media
–
3.0
N/A
N/A
Reason for impairment charge
%
Performing below expectations due to poor
market conditions
Computer software and related IT assets
no longer in use
Other
Total
0.4
16.4
–
3.0
–
Recoverable amounts have been determined using value in use calculations for all of the above CGUs.
21) OTHER INTANGIBLE ASSETS
Cost
At 3rd October, 2010
Analysis reclassifications
Additions
Internally generated
Disposals
Exchange adjustment
At 2nd October, 2011
Additions
Internally generated
Disposals
Classified as held-for-sale
Exchange adjustment
At 30th September, 2012
Accumulated amortisation
At 3rd October, 2010
Charge for the year
Impairment
Disposals
Exchange adjustment
At 2nd October, 2011
Charge for the year
Impairment
Disposals
Classified as held-for-sale
Exchange adjustment
At 30th September, 2012
Net book value – 2010
Net book value – 2011
Net book value – 2012
Publishing
rights and
titles
£m
Customer
related
databases
£m
Computer
software
(note i)
£m
Brands
£m
Note
Other
£m
Total
£m
425.3
276.4
139.2
–
7.3
–
–
0.7
433.3
–
–
–
(137.6)
(5.5)
290.2
294.5
13.5
3.1
–
(0.1)
311.0
12.6
–
–
(137.2)
(2.5)
183.9
130.8
122.3
106.3
(8.5)
0.5
–
(114.5)
(0.5)
153.4
3.6
–
(64.9)
(0.3)
(3.1)
88.7
121.7
16.2
–
(27.2)
0.4
109.4
7.5
–
(54.8)
(0.3)
(1.6)
60.2
154.7
44.0
28.5
(0.5)
29.1
–
(0.2)
2.2
169.8
22.6
–
(17.7)
(37.6)
(3.5)
133.6
90.0
10.4
2.4
(0.2)
0.1
102.4
11.9
–
(16.2)
(34.3)
(1.2)
62.6
49.2
67.4
71.0
88.6
13.2
4.3
23.2
(5.1)
0.7
124.9
7.4
37.8
(10.6)
–
(2.8)
156.7
46.9
19.8
0.6
(4.9)
0.5
72.0
22.5
3.0
(9.7)
–
(1.3)
86.5
41.7
52.9
70.2
16
(i)
17
19
3
3
3
17
19
12.0
(4.2)
–
–
(4.5)
–
3.3
4.3
–
–
(0.5)
(0.2)
6.9
10.5
1.0
–
(2.6)
(0.1)
1.7
0.4
–
(0.1)
(0.4)
(0.1)
1.5
1.5
1.6
5.4
941.5
–
41.2
23.2
(124.3)
3.1
884.7
37.9
37.8
(93.2)
(176.0)
(15.1)
676.1
563.6
60.9
6.1
(34.9)
0.8
596.5
54.9
3.0
(80.8)
(172.2)
(6.7)
394.7
377.9
288.2
281.4
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21) OTHER INTANGIBLE ASSETS – CONTINUED
(i) Computer software includes internally generated intangible assets, not forming part of a business combination, as follows:
Note
£m
Cost
At 3rd October, 2010
Additions
Disposals
Analysis reclassifications
Exchange adjustment
At 2nd October, 2011
Additions
Disposals
Exchange adjustment
At 30th September, 2012
Accumulated amortisation
At 3rd October, 2010
Analysis reclassifications
Charge for the year
Impairment
Disposals
Exchange adjustment
At 2nd October, 2011
Charge for the year
Impairment
Disposals
Exchange adjustment
At 30th September, 2012
Net book value – 2010
Net book value – 2011
Net book value – 2012
86.4
23.2
(5.1)
(0.6)
0.8
104.7
37.8
(5.5)
(2.3)
134.7
42.5
(0.1)
18.4
0.6
(4.8)
0.4
57.0
20.4
3.0
(4.6)
(1.4)
74.4
43.9
47.7
60.3
The following table analyses intangible assets in the course of construction included in the internally generated intangibles above, on which no
amortisation has been charged in the period.
Cost
At 3rd October, 2010
Additions
Exchange adjustment
At 2nd October, 2011
Additions
Exchange adjustment
At 30th September, 2012
£m
–
5.0
0.2
5.2
17.5
(0.7)
22.0
Annual Report 2012 126
21) OTHER INTANGIBLE ASSETS – CONTINUED
The methodologies applied to the Group’s cash-generating units (CGUs) when testing for impairment and details of the above impairment
charge, are set out in Note 2.
The carrying values of the Group’s larger intangible assets are further analysed as follows:
At 30th
September,
2012
Carrying
value
£m
52.9
23.4
20.9
19.6
15.1
10.3
9.8
–
7.4
–
At 2nd
October,
2011
Carrying
value
£m
59.4
25.6
22.8
21.9
20.7
10.0
12.2
11.4
8.9
–
Segment
Euromoney
Euromoney
Euromoney
Business information
National media
Business Information
Euromoney
Events
Business information
Events
At 3rd
October,
2010
Carrying
value
£m
At 30th
September,
2012
Remaining
amortisation
period
Years
At 2nd
October,
2011
Remaining
amortisation
period
Years
At 3rd
October,
2010
Remaining
amortisation
period
Years
63.9
–
24.5
23.1
21.4
10.0
13.9
12.3
13.9
86.6
23.8
10.8
23.8
13.5
4.7
1.0
9.4
–
5.0
–
24.8
11.8
24.8
14.5
4.9
1.0
10.4
9.8
6.0
–
25.8
–
25.8
15.5
3.8
1.0
11.4
10.8
7.0
17.0
Total
£m
851.8
1.6
32.8
(71.1)
(25.6)
(31.2)
–
(1.2)
757.1
59.3
(134.6)
(89.2)
(1.1)
(2.2)
–
(5.7)
583.6
Freehold
properties
£m
Note
Long
leasehold
properties
£m
Short
leasehold
properties
£m
Plant and
equipment
£m
112.5
–
0.7
(2.3)
–
(31.2)
(0.5)
(0.5)
78.7
16.8
(9.7)
(9.6)
–
(2.2)
6.3
–
80.3
70.7
0.5
–
–
(2.3)
–
(0.1)
–
68.8
–
(0.2)
(0.2)
–
–
(35.0)
(0.3)
33.1
59.0
–
4.3
(2.9)
(0.4)
–
(0.4)
0.3
59.9
1.1
(25.1)
–
–
–
(1.0)
34.9
609.6
1.1
27.8
(65.9)
(22.9)
–
1.0
(1.0)
549.7
41.4
(99.6)
(79.4)
(1.1)
–
28.7
(4.4)
435.3
23
19
17
23
BCA mastheads
Ned Davis Research Group customer
relationships
Metal Bulletin mastheads
Genscape intellectual property
Associated Mediabase software
Hobsons
BCA customer relationships
Evanta brand
Quest customer relationships
New York International Gift Fair brand
22) PROPERTY, PLANT AND EQUIPMENT
Cost
At 3rd October, 2010
Owned by subsidiaries acquired
Additions
Disposals
Owned by subsidiaries disposed
Transfers to investment property
Reclassifications
Exchange adjustment
At 2nd October, 2011
Additions
Disposals
Classified as held-for-sale
Owned by subsidiaries disposed
Transfers to investment property
Reclassifications
Exchange adjustment
At 30th September, 2012
Daily Mail and General Trust Plc Strategic Report
127
Directors’ Report
Governance
Financial Statements
127
22) PROPERTY, PLANT AND EQUIPMENT – CONTINUED
Accumulated depreciation and impairment
At 3rd October, 2010
Charge for the year
Accelerated charge
Impairment
Disposals
Owned by subsidiaries disposed
Transfers to investment property
Reclassifications
Exchange adjustment
At 2nd October, 2011
Charge for the year
Accelerated charge
Impairment
Classified as held-for-sale
Disposals
Owned by subsidiaries disposed
Transfers to investment property
Reclassifications
Exchange adjustment
At 30th September, 2012
Net book value – 2010
Net book value – 2011
Net book value – 2012
Freehold
properties
£m
Note
Long
leasehold
properties
£m
Short
leasehold
properties
£m
Plant and
equipment
£m
Total
£m
3
(i)
(ii)
23
3
(i)
(ii)
19
17
23
25.5
2.5
–
5.4
(1.0)
–
(19.4)
(0.1)
(0.1)
12.8
2.4
–
–
(5.4)
(2.1)
–
(1.3)
12.2
(0.1)
18.5
87.0
65.9
61.8
33.7
1.2
–
–
–
(0.6)
–
–
–
34.3
0.7
–
–
–
(0.2)
–
–
(20.6)
–
14.2
37.0
34.5
18.9
38.9
3.8
–
–
(2.9)
(0.4)
–
–
0.1
39.5
3.6
–
–
–
(24.9)
–
–
–
(0.3)
17.9
20.1
20.4
17.0
387.5
485.6
39.7
15.1
1.9
(64.7)
(14.3)
–
0.1
(0.2)
47.2
15.1
7.3
(68.6)
(15.3)
(19.4)
–
(0.2)
365.1
451.7
36.2
39.0
6.5
(66.1)
(89.8)
(0.8)
–
8.4
(3.6)
294.9
222.1
184.6
140.4
42.9
39.0
6.5
(71.5)
(117.0)
(0.8)
(1.3)
–
(4.0)
345.5
366.2
305.4
238.1
(i) Mainly represents a reduction in the useful economic life of print assets in the national media segment following the Group’s decision to
relocate its Surrey Quays South London print facility to a new site in Thurrock, Essex, together with the closure of the Derby and Stoke printing
facilities. The change in estimate of the useful economic life will also result in accelerated depreciation estimated to be £12.4 million in the
period to 29th September, 2013.
(ii) Included within exceptional operating costs in the current year is an impairment charge of £6.5 million in relation to property, plant and
equipment. This relates to press equipment in the national media segment. Included within exceptional operating costs in the prior year is
an impairment charge of £7.3 million. £1.9 million relates to computer equipment in the national media segment and £5.4 million relates
to properties held by the head office segment following an annual review of the Group’s property portfolio.
In July 2012 the Group announced the conditional sale of a part leasehold part freehold interest in its 14.57 acre Harmsworth Quays
printing works site at Canada Water in South East London to British Land. All conditions are expected to be met well in advance of the
proposed completion date in late 2013 when British Land will take possession of the site following the relocation of DMGT’s printing operations
from Harmsworth Quays to Thurrock. No asset has been recognised for the excess of proceeds over carrying value on sale of this asset as
this represents a contingent asset.
Annual Report 2012 128
Total
£m
3.0
(0.1)
(0.4)
2.5
(0.2)
37.1
39.4
22) PROPERTY, PLANT AND EQUIPMENT – CONTINUED
The following table analyses assets in the course of construction included in property, plant and equipment above:
Assets in the course of construction
Cost and net book value
At 3rd October, 2010
Owned by subsidiaries disposed
Disposals
At 2nd October, 2011
Projects completed
Additions
At 30th September, 2012
Freehold
properties
£m
Note
Long
leasehold
properties
£m
Short
leasehold
properties
£m
Plant and
equipment
£m
–
–
–
–
–
15.1
15.1
0.2
(0.1)
–
0.1
–
–
0.1
1.2
–
–
1.2
–
–
1.2
1.6
–
(0.4)
1.2
(0.2)
22.0
23.0
(i)
(i) Additions during the year relate mainly to the construction of the Group’s new printing operation in Thurrock, Essex.
23) INvESTMENT PROPERTY
Cost
At 3rd October, 2010
Transfers from property, plant and equipment
Disposals
At 2nd October, 2011
Transfers from property, plant and equipment
Disposals
At 30th September, 2012
Accumulated depreciation and impairment
At 3rd October, 2010
Transfers from property, plant and equipment
Charge for the year
Disposals
Impairment
At 2nd October, 2011
Transfers from property, plant and equipment
Disposals
Charge for the year
Impairment
At 30th September, 2012
Net book value – 2010
Net book value – 2011
Net book value – 2012
Freehold
properties
£m
Note
22
22
18.9
31.2
(0.3)
49.8
2.2
(24.8)
27.2
Freehold
properties
£m
Note
22
3
22
3
3
7.3
19.4
0.4
(0.2)
1.3
28.2
1.3
(11.3)
1.5
0.7
20.4
11.6
21.6
6.8
During the year a number of the Group’s freehold properties ceased to be owner occupied and became subject to letting activity. In accordance
with the Group’s accounting policy these properties have been transferred out of property, plant and equipment and into investment property
at net book value.
The fair value of the Group’s investment properties as at 30th September, 2012 was £7.6 million (2011 £25.0 million). This was arrived at by reference
to market evidence for similar properties and was carried out by an officer of the Group’s property department. Property rental income earned
by the Group from its investment properties amounted to £0.8 million (2011 £0.5 million). Direct operating expenses arising on the investment
properties in the period amounted to £0.4 million (2011 £0.1 million). The leases have an expiry date of between one and five years.
Daily Mail and General Trust Plc Strategic Report
129
Directors’ Report
Governance
Financial Statements
129
Cost of shares
£m
Note
Share of post-
acquisition
retained
reserves
£m
32.6
6.4
5.9
–
–
–
(0.2)
–
0.6
45.3
4.0
125.4
(25.4)
(0.1)
–
–
1.5
150.7
7
(i)
19
(12.2)
–
–
3.0
(2.0)
(14.9)
(3.0)
(0.1)
0.2
(29.0)
–
–
13.9
(1.0)
6.3
(3.9)
0.3
Total
£m
20.4
6.4
5.9
3.0
(2.0)
(14.9)
(3.2)
(0.1)
0.8
16.3
4.0
125.4
(11.5)
(1.1)
6.3
(3.9)
1.8
(13.4)
137.3
24) INvESTMENTS IN JOINT vENTURES AND ASSOCIATES
Joint ventures
At 3rd October, 2010
Additions – cash
Additions – non cash
Adjustment to carrying value on acquisition
Share of retained reserves
Dividends received
Provision against carrying value
Transfer to investment in subsidiaries
Exchange adjustment
At 2nd October, 2011
Additions – cash
Additions – non cash
Disposals
Classified as held-for-sale
Share of retained reserves
Dividends received
Exchange adjustment
At 30th September, 2012
(i)
In August 2012 the Group disposed of its 50.0% joint venture investment in dmg Radio Investments Pty Ltd for proceeds amounting to
A$86.2 million (£56.1 million).
Annual Report 2012 130
24) INvESTMENTS IN JOINT vENTURES AND ASSOCIATES – CONTINUED
Summary aggregated financial information for the Group’s joint ventures, extracted on a 100% basis from the joint ventures’ own financial
information as at 30th September, 2012 is set out below:
Business information
National media
Business information
National media
Business information
National media
Radio
52 weeks
ending 30th
September,
2012
Revenue
£m
52 weeks
ending 30th
September,
2012
Operating
profit/(loss)
£m
52 weeks
ending 30th
September,
2012
Total
expenses
£m
52 weeks
ending 30th
September,
2012
Profit/(loss) for
the period
£m
12.5
61.3
73.8
(0.2)
11.3
11.1
(12.7)
(54.9)
(67.6)
(0.2)
6.4
6.2
At 30th
September,
2012
Non-current
assets
£m
At 30th
September,
2012
Current
assets
£m
At 30th
September,
2012
Current
liabilities
£m
At 30th
September,
2012
Non-current
liabilities
£m
At 30th
September,
2012
Net assets
£m
8.5
71.3
79.8
5.8
18.6
24.4
(2.0)
(8.2)
(10.2)
(0.2)
–
(0.2)
12.1
81.7
93.8
52 weeks
ending 2nd
October,
2011
Revenue
£m
52 weeks
ending 2nd
October,
2011
Operating
profit/(loss)
£m
52 weeks
ending 2nd
October,
2011
Total
expenses
£m
52 weeks
ending 2nd
October,
2011
Profit/(loss) for
the period
£m
2.6
7.3
74.8
84.7
0.4
(8.9)
0.8
(7.7)
(2.1)
(16.3)
(76.6)
(95.0)
0.5
(9.0)
(1.8)
(10.3)
Daily Mail and General Trust Plc Strategic Report
131
Directors’ Report
Governance
Financial Statements
131
As at 2nd
October,
2011
Non-current
assets
£m
1.5
0.6
89.3
91.4
As at 2nd
October,
2011
Current
assets
£m
2.7
5.4
21.3
29.4
As at 2nd
October,
2011
Current
liabilities
£m
As at 2nd
October,
2011
Non-current
liabilities
£m
As at 2nd
October,
2011
Net assets/
(liabilities)
£m
(0.3)
(4.8)
(75.3)
(80.4)
(0.8)
(6.5)
(12.5)
(19.8)
3.1
(5.3)
22.8
20.6
52 weeks
ending 3rd
October,
2010
Revenue
£m
52 weeks
ending 3rd
October,
2010
Operating
profit/(loss)
£m
52 weeks
ending 3rd
October,
2010
Total
expenses
£m
52 weeks
ending 3rd
October,
2010
Profit/(loss) for
the period
£m
1.1
4.9
54.3
60.3
As at 3rd
October,
2010
Current
assets
£m
1.0
4.5
23.4
28.9
0.3
(7.2)
2.6
(4.3)
(0.8)
(13.0)
(58.0)
(71.8)
0.3
(8.1)
(3.7)
(11.5)
As at 3rd
October,
2010
Current
liabilities
£m
As at 3rd
October,
2010
Non-current
liabilities
£m
As at 3rd
October,
2010
Net assets/
(liabilities)
£m
(0.3)
(4.7)
(15.6)
(20.6)
(1.4)
(7.1)
(55.5)
(64.0)
(0.7)
(7.1)
48.4
40.6
As at 3rd
October,
2010
Non-current
assets
£m
–
0.2
96.1
96.3
24) INvESTMENTS IN JOINT vENTURES AND ASSOCIATES – CONTINUED
Business information
National media
Radio
Business information
National media
Radio
Business information
National media
Radio
At 30th September, 2012 the Group’s joint ventures had capital commitments amounting to £1.0 million (2011 £0.1 million, 2010 £0.9 million). There
were no material contingent liabilities (2011 none, 2010 none). Net liabilities amounting to £1.0 million within the national media segment are
held-for-sale.
Information on principal joint ventures from the latest available accounts:
Unlisted
Zoopla Property Group Limited
(incorporated and operating in the UK)
Mail Today Newspapers Pvt. Limited
(incorporated and operating in India)
Principal activity
Year ended
Description
of holding
Group
interest %
Online property
portal
30th September,
2012
Publisher of
classified
publications
30th September,
2012
Ordinary
52.25%
Ordinary
26.00%
The Sanborn Map Company, Inc
(incorporated and operating in the US) Photogrammetric
mapping and GIS
data conversion
30th September,
2012
Preferred
Stock
49.00%
TreppPort
(incorporated and operating in the US)
Data analysis for
CRE-related
exposure
30th September,
2012
Ordinary
50.00%
The Group has joint management control of the Zoopla Property Group Limited and therefore the investment has been treated as a
joint venture.
Annual Report 2012 132
Total
£m
12.7
0.9
0.1
(0.7)
(0.3)
0.3
13.0
7.5
(0.6)
(0.4)
(1.6)
(5.6)
(0.4)
(0.4)
11.5
Cost of shares
£m
Note
Share of post
acquisition
retained
reserves
£m
32.2
0.9
–
(0.4)
0.1
32.8
7.5
–
–
(1.6)
(5.7)
(0.5)
(1.0)
31.5
(19.5)
–
0.1
(0.7)
0.1
0.2
(19.8)
–
(0.6)
(0.4)
–
0.1
0.1
0.6
(20.0)
7, 18
19
24) INvESTMENTS IN JOINT vENTURES AND ASSOCIATES – CONTINUED
Associates
At 3rd October, 2010
Additions – cash
Share of retained reserves
Dividends received
Provision against carrying value
Exchange adjustment
At 2nd October, 2011
Additions – cash
Share of retained reserves
Dividends received
Provision against carrying value
Disposals
Classified as held-for-sale
Exchange adjustment
At 30th September, 2012
The unrecognised share of losses of the Group’s associates principally comprises £10.4 million (2011 £5.8 million) in relation to ITN and £13.4 million
(2011 £6.3 million) in relation to Evening Standard of which £nil (2011 £1.3 million ) arose in the year.
Summary aggregated financial information for the Group’s associates, extracted on a 100% basis from the associates’ own financial information
is set out below:
RMS
Business information
Euromoney
National media
52 weeks
ending 30th
September,
2012
Revenue
£m
52 weeks
ending 30th
September,
2012
Operating
profit/(loss)
£m
52 weeks
ending 30th
September,
2012
Profit/(loss) for
the period
£m
1.2
1.5
2.4
176.9
182.0
(0.8)
(3.0)
1.1
4.5
1.8
(0.7)
(2.9)
0.9
2.8
0.1
Daily Mail and General Trust Plc Strategic Report
133
Directors’ Report
Governance
Financial Statements
133
52 weeks
ending 2nd
October,
2011
Revenue
£m
52 weeks
ending 2nd
October,
2011
Operating
profit/(loss)
£m
52 weeks
ending 2nd
October,
2011
Profit/(loss) for
the period
£m
1.1
8.4
1.9
103.5
114.9
0.1
(1.0)
0.8
(5.6)
(5.7)
–
(1.0)
0.6
(2.8)
(3.2)
52 weeks
ending 3rd
October,
2010
Revenue
£m
52 weeks
ending 3rd
October,
2010
Operating
profit/(loss)
£m
52 weeks
ending 3rd
October,
2010
Profit/(loss) for
the period
£m
0.9
6.4
2.0
69.7
3.7
82.7
(17.2)
(3.7)
0.8
(15.2)
0.2
(35.1)
(0.2)
(3.7)
0.6
(21.9)
0.2
(25.0)
24) INvESTMENTS IN JOINT vENTURES AND ASSOCIATES – CONTINUED
RMS
Business information
Euromoney
National media
RMS
Business information
Euromoney
National media
Local media
Summary aggregated financial information for the Group’s associates, extracted on a 100% basis from the associates’ own financial accounts
is set out below:
At 30th September, 2012
RMS
Business information
Euromoney
National media
At 2nd October, 2011
RMS
Business information
Euromoney
National media
Non-current
assets
£m
Current assets
£m
Total assets
£m
Current
liabilities
£m
Non-current
liabilities
£m
Total liabilities
£m
Net assets/
(liabilities)
£m
2.6
10.0
–
0.4
13.0
5.6
0.5
0.8
1.1
8.0
8.2
10.5
0.8
1.5
21.0
(0.3)
(7.5)
(0.3)
(0.3)
(8.4)
–
(3.5)
–
–
(3.5)
(0.3)
(11.0)
(0.3)
(0.3)
(11.9)
7.9
(0.5)
0.5
1.2
9.1
Non-current
assets
£m
Current assets
£m
Total assets
£m
Current
liabilities
£m
Non-current
liabilities
£m
Total liabilities
£m
Net assets/
(liabilities)
£m
0.1
1.8
–
15.5
17.4
3.9
6.4
0.6
42.4
53.3
4.0
8.2
0.6
57.9
70.7
(0.1)
(8.1)
(0.2)
(42.9)
(51.3)
–
(7.4)
–
(91.4)
(98.8)
(0.1)
(15.5)
(0.2)
(134.3)
(150.1)
3.9
(7.3)
0.4
(76.4)
(79.4)
Annual Report 2012 134
24) INvESTMENTS IN JOINT vENTURES AND ASSOCIATES – CONTINUED
At 3rd October, 2010
RMS
Business information
Euromoney
National media
Local media
Non-current
assets
£m
Current assets
£m
Total assets
£m
Current
liabilities
£m
Non-current
liabilities
£m
Total liabilities
£m
Net assets/
(liabilities)
£m
0.1
1.1
–
16.1
1.0
18.3
3.6
4.1
0.6
43.7
0.7
52.7
3.7
5.2
0.6
59.8
1.7
71.0
(0.1)
(5.3)
(0.1)
(39.4)
(0.2)
(45.1)
–
–
–
(0.1)
(5.3)
(0.1)
(96.6)
(136.0)
–
(0.2)
(96.6)
(141.7)
3.6
(0.1)
0.5
(76.2)
1.5
(70.7)
At 30th September, 2012 the Group’s associates had capital commitments amounting to £nil (2011 £3.8 million, 2010 £3.0 million). There were no
material contingent liabilities (2011 none, 2010 none).
Information on principal associates from the latest available accounts:
Unlisted
Independent Television News Limited (incorporated and operating in the UK)
Real Capital Analytics, Inc.
(incorporated and operating in the US)
Praedicat
(incorporated and operating in the US)
Principal activity
Year ended
Description of
holding
Group
interest %
Independent TV
news provider
31st December,
2011
Provider of real
estate information
30th September,
2012
Provision of
catastrophe risk
analytics
30th September,
2012
Ordinary
20.0%
Preferred
stock
Preferred
stock
30.0%
29.6%
Joint ventures and associates have been accounted for under the equity method using unaudited financial information to 30th September,
2012.
25) NON-CURRENT ASSETS – AvAILABLE-FOR-SALE INvESTMENTS
At 3rd October, 2010
Additions
Disposals
Impairment charge
Fair value movement in the year
Exchange adjustment
At 2nd October, 2011
Additions
Disposals
Impairment charge
At 30th September, 2012
Note
8
38
8
Listed
£m
18.0
–
(22.1)
–
4.5
(0.4)
–
–
–
–
–
Unlisted
£m
5.2
0.1
(1.2)
(0.2)
0.1
0.2
4.2
0.2
(2.6)
(0.3)
1.5
Total
£m
23.2
0.1
(23.3)
(0.2)
4.6
(0.2)
4.2
0.2
(2.6)
(0.3)
1.5
The investments above represent listed equity securities and unlisted securities, which are recorded as non-current assets unless they are expected
to be sold within one year, in which case they are recorded as current assets. The investments in listed securities have no fixed maturity or coupon
rate and the fair value of these investments is based on quoted market prices. Since there is no active market upon which they are traded, other
unlisted equity securities are recorded at cost less provision for impairment, as their fair values cannot be reliably measured.
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At 30th
September,
2012
£m
As at 2nd
October,
2011
£m
As at At 3rd
October,
2010
£m
–
–
–
1.5
1.5
–
–
–
4.2
4.2
17.7
0.3
18.0
5.2
5.2
25) NON-CURRENT ASSETS – AvAILABLE-FOR-SALE INvESTMENTS – CONTINUED
Available-for-sale investments are analysed as follows:
Listed
CoStar, Inc.
Other
Unlisted
Other
Information on principal available-for-sale investments, taken from the latest published accounts is as follows:
The Press Association Limited (incorporated and operating in the UK)
Spot Runner, Inc. (incorporated and operating in the US)
Currency analysis of available-for-sale investments:
Sterling
US dollar
Australian dollar
Canadian dollar
Euro
Other
Interest analysis of available-for-sale investments:
Non-interest bearing
26) INvENTORIES
Raw materials and consumables
Work in progress
Classified as held-for-sale
Class of holding
Group interest %
Ordinary
Common stock
15.6%
5.3%
At 30th
September,
2012
£m
As at 2nd
October,
2011
£m
As at At 3rd
October,
2010
£m
0.3
0.9
–
–
0.2
0.1
1.5
1.4
2.5
0.1
–
0.2
–
4.2
1.5
21.0
0.2
0.3
–
0.2
23.2
At 30th
September,
2012
£m
As at 2nd
October,
2011
£m
As at At 3rd
October,
2010
£m
1.5
4.2
23.2
At 30th
September,
2012
£m
As at 2nd
October,
2011
£m
As at At 3rd
October, 2010
£m
Note
10.9
18.0
29.0
(0.6)
28.3
11.7
11.4
23.1
–
23.1
19
13.9
13.6
27.5
–
27.5
Annual Report 2012 136
At 30th
September,
2012
£m
Note
At 2nd
October,
2011
Restated
(note 2)
£m
At 3rd
October,
2010
Restated
(note 2)
£m
255.7
(24.5)
231.2
109.9
14.5
355.6
(26.9)
328.7
–
6.0
8.6
14.6
343.3
254.9
(27.6)
227.3
103.8
16.3
347.4
–
262.7
(29.1)
233.6
96.9
28.5
359.0
–
347.4
359.0
–
4.7
26.0
30.7
0.5
3.4
13.3
17.2
378.1
376.2
At 30th
September,
2012
£m
(27.6)
(8.2)
7.0
3.7
0.2
0.4
At 2nd
October,
2011
£m
(29.1)
(7.4)
5.1
3.6
0.4
(0.2)
At 3rd
October,
2010
£m
(33.1)
(8.6)
6.2
4.2
2.0
0.2
(24.5)
(27.6)
(29.1)
27) TRADE AND OTHER RECEIvABLES
Current assets
Trade receivables
Allowance for doubtful debts
Prepayments and accrued income
Other debtors
Classified as held for sale
19
Non-current assets
Trade receivables
Prepayments and accrued income
Other debtors
Movement in the allowance for doubtful debts:
At start of period
Impairment losses recognised
Amounts written off as uncollectible
Amounts recovered during the year
Owned by subsidiaries disposed
Exchange adjustment
At end of period
In determining the allowance for doubtful debts the Group considers any change in the credit quality of the trade receivable from the date
credit was initially granted up to the period end date.
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At 30th
September,
2012
£m
At 2nd
October,
2011
£m
At 3rd
October,
2010
£m
0.5
0.5
0.7
18.2
19.9
0.4
2.1
1.0
22.0
25.5
1.7
2.0
2.1
20.7
26.5
27) TRADE AND OTHER RECEIvABLES – CONTINUED
Ageing of impaired trade receivables:
31 – 60 days
61 – 90 days
91 – 120 days
121+ days
Total
Included in the Group’s trade receivables are debtors with a carrying value of £80.0 million (2011 £77.2 million, 2010 £59.8 million) which are past
due as at 30th September, 2012 for which no allowance has been made. The Group is not aware of any deterioration in the credit quality of
these customers and considers that the amounts are still recoverable.
Ageing of past due but not impaired receivables:
1 – 30 days overdue
31 – 60 days overdue
61 – 90 days overdue
91+ days overdue
Total
The carrying amount of trade and other receivables approximates their fair value.
28) CASH AND CASH EQUIvALENTS
Cash and cash equivalents
Unsecured bank overdrafts
Cash and cash equivalents in the cash flow statement
Cash and cash equivalents
Classified as held-for-sale
Analysis of cash and cash equivalents by currency:
Sterling
US dollar
Australian dollar
Canadian dollar
Euro
Other
Analysis of cash and cash equivalents by interest type:
Floating rate
The fair values of cash and cash equivalents equate to their book values.
At 30th
September,
2012
£m
At 2nd
October,
2011
£m
At 3rd
October,
2010
£m
36.9
19.6
9.8
13.7
80.0
36.0
18.8
7.8
14.6
77.2
29.4
11.7
9.0
9.7
59.8
Note
32
15
19
At 30th
September,
2012
£m
At 2nd
October,
2011
£m
At 3rd
October,
2010
£m
107.3
–
107.3
107.3
(2.6)
104.7
47.5
23.1
0.6
0.9
15.2
17.4
104.7
174.3
(2.6)
171.7
174.3
–
174.3
65.7
(1.4)
64.3
65.7
–
65.7
152.7
41.1
6.8
–
1.2
5.4
8.2
174.3
9.3
–
1.6
0.3
13.4
65.7
104.7
174.3
65.7
Annual Report 2012 138
At 30th
September,
2012
£m
At 2nd
October,
2011
£m
At 3rd
October,
2010
£m
Note
54.4
28.3
29.9
45.7
257.2
271.0
(31.4)
655.1
8.1
663.2
66.4
33.9
32.6
31.2
234.9
255.2
70.1
34.2
29.0
46.0
212.4
240.4
–
–
654.2
632.1
11.9
666.1
1.5
633.6
19
At 30th
September,
2012
£m
20.8
(3.6)
17.2
At 30th
September,
2012
£m
4.5
4.1
8.6
At 2nd
October,
2011
Restated
(note 2)
£m
53.2
(9.1)
44.1
At 2nd
October,
2011
£m
1.1
10.7
11.8
At 3rd
October,
2010
Restated
(note 2)
£m
69.4
(0.9)
68.5
At 3rd
October,
2010
£m
1.1
–
1.1
29) TRADE AND OTHER PAYABLES
Current liabilities
Trade payables
Interest payable
Other taxation and social security
Other creditors
Accruals
Deferred income
Classified as held-for-sale
Non-current liabilities
Other creditors
The carrying amount of trade and other payables approximates their fair value.
30) CURRENT TAX
Corporation tax payable
Corporation tax receivable
31) ACQUISITION PUT OPTION COMMITMENTS
Current
Non-current
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32) BORROwINGS
The Group’s borrowings are unsecured and are analysed as follows:
Other
borrowings
£m
Overdrafts
£m
Bank loans
£m
Bonds
£m
Loan notes
£m
Hire purchase
£m
At 30th September, 2012
Within one year
Over five years
At 2nd October, 2011
Within one year
Between two and five years
Over five years
At 3rd October, 2010
Within one year
Between one and two years
Between two and five years
Over five years
–
–
–
–
–
–
23.4
2.6
–
–
23.4
–
–
2.6
–
–
–
–
–
–
–
–
–
–
–
–
–
1.4
0.5
–
–
–
–
1.4
–
2.2
–
2.2
2.7
The Group’s borrowings are analysed by currency and interest rate type as follows:
47.3
2.6
678.1
725.4
–
2.6
–
3.3
–
–
3.3
158.3
673.7
832.0
–
–
159.9
693.3
853.2
853.2
Total
£m
49.9
678.1
728.0
29.3
158.3
673.7
861.3
–
–
–
–
–
–
–
7.3
5.1
14.3
–
–
–
–
7.3
8.3
6.9
–
15.2
20.3
8.3
169.0
693.3
870.6
884.9
At 30th September, 2012
Fixed rate interest
Floating rate interest
At 2nd October, 2011
Fixed rate interest
Floating rate interest
At 3rd October, 2010
Fixed rate interest
Floating rate interest
Sterling
£m
US dollar
£m
Australian
dollar
£m
Euro
£m
Other
£m
Total
£m
725.4
2.6
728.0
832.0
28.4
860.4
873.5
7.3
880.8
–
–
–
–
0.1
0.1
–
3.1
3.1
–
–
–
–
0.8
0.8
–
0.5
0.5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.5
0.5
725.4
2.6
728.0
832.0
29.3
861.3
873.5
11.4
884.9
Annual Report 2012 140
32) BORROwINGS – CONTINUED
The Group’s borrowings, analysed by currency and interest rate type, adjusting the principal borrowed and interest rate type by the notional
amount of interest rate swaps and by the notional amount of currency derivatives, are as follows:
At 30th September, 2012
Analysed as:
Fixed rate interest
Floating rate interest
At 2nd October, 2011
Analysed as:
Fixed rate interest
Floating rate interest
At 3rd October, 2010
Analysed as:
Fixed rate interest
Floating rate interest
Sterling
£m
US dollar
£m
Australian
dollar
£m
Euro
£m
Other
£m
Total
£m
458.1
(181.3)
276.8
178.7
266.9
445.6
556.2
(195.2)
361.0
256.5
234.5
491.0
–
–
–
8.5
0.8
9.3
562.4
(121.8)
440.6
338.4
143.8
482.2
12.3
0.5
12.8
–
5.6
5.6
–
–
–
–
–
–
–
–
–
–
–
–
636.8
91.2
728.0
821.2
40.1
861.3
–
0.5
0.5
913.1
23.0
936.1
Committed Borrowing Facilities
The Group’s bank loans bear interest charged at LIBOR plus a margin based on the Group’s ratio of net debt to EBITDA. Additionally each facility
contains a covenant based on a minimum interest cover ratio. EBITDA for these purposes is defined as the aggregate of the Group’s consolidated
operating profit before 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. These covenants were met at the relevant
test dates during the period.
During the period the Group cancelled certain of its committed borrowing facilities amounting to £90.0 million which were surplus to the
Group’s requirements.
The Group’s facilities and their maturity dates are as follows:
Expiring in one year or less
Expiring in more than one year but not more than two years
Expiring in more than two years but not more than three years
Expiring in more than three years but not more than four years
Expiring in more than four years but not more than five years
Total bank facilities
At 30th
September,
2012
£m
–
–
–
300.7
–
300.7
At 2nd
October,
2011
£m
–
90.0
–
–
300.0
390.0
At 3rd
October,
2010
£m
180.0
–
240.0
–
–
420.0
The following undrawn committed borrowing facilities were available to the Group in respect of which all conditions precedent had been met:
Expiring in one year or less
Expiring in more than one year but not more than two years
Expiring in more than two years but not more than three years
Expiring in more than three years but not more than four years
Expiring in more than four years but not more than five years
Total undrawn committed bank facilities
At 30th
September,
2012
£m
–
–
–
298.3
–
298.3
At 2nd
October,
2011
£m
–
36.4
–
–
291.1
327.5
At 3rd
October,
2010
£m
153.6
–
201.6
–
–
355.2
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32) BORROwINGS – CONTINUED
The Group has issued standby letters of credit in favour of the Trustees of the Group’s defined benefit pension fund amounting to £nil (2011 £53.6
million, 2010 £54.5 million) together with other guarantees of £2.4 million (2011 £9.3 million, 2010 £8.1 million).
Bonds
The nominal, carrying and fair values of the Group’s bonds and the coupons payable are as follows:
Maturity
Coupon %
2013
2018
2021
2027
7.50
5.75
10.00
6.375
At 30th
September,
2012
Fair value
£m
At 2nd
October,
2011
Fair value
£m
At 3rd
October,
2010
Fair value
£m
47.4
344.2
195.3
193.2
780.1
162.3
307.6
188.0
177.5
166.0
337.1
197.1
180.2
835.4
880.4
At 30th
September,
2012
Carrying
value
£m
47.3
307.4
171.4
199.3
725.4
At 2nd
October,
2011
Carrying
value
£m
158.3
304.1
171.1
198.5
832.0
At 3rd
October,
2010
Carrying
value
£m
At 30th
September,
2012
Nominal
value
£m
159.9
324.4
170.9
198.0
853.2
46.4
324.7
156.4
200.0
727.5
At 2nd
October,
2011
Nominal
value
£m
156.5
324.7
156.4
200.0
837.6
At 3rd
October,
2010
Nominal
value
£m
156.5
349.7
156.4
200.0
862.6
The Group’s bonds have been adjusted from their nominal values to take account of the premia, direct issue costs, discounts and movements
in hedged risks. The issue costs, premia and discounts are being amortised over the expected lives of the bonds using the effective interest
method. The unamortised issue costs amount to £3.5 million (2011 £3.8 million, 2010 £4.5 million), the unamortised premia £9.2 million (2011 £10.5
million, 2010 £13.6 million).
The fair value of the Group’s bonds have been calculated on the basis of quoted market rates.
Further details of the Group’s borrowing arrangements are set out in the Financial and Treasury Report on page 42.
Loan notes
The Group has issued loan notes which attract interest at rates of approximately LIBID to LIBID minus 1%. The loan notes are repayable at the
option of the loan note holders with a six-month notice period and are treated as current liabilities.
33) FINANCIAL INSTRUMENTS AND RISk MANAGEMENT
The Group is exposed to credit, interest rate and currency risks arising in the normal course of business. Derivative financial instruments are used
to manage exposures to fluctuations in foreign currency exchange rates and interest rates but are not employed for speculative purposes. Full
details of the Group’s treasury policies are set out in the Financial and Treasury Review on pages 42 and 43.
Capital risk management
The Group manages its capital, defined as equity shareholders’ funds and net borrowings, to ensure that entities in the Group are able to
continue as going concerns for the foreseeable future.
Debt management
The Group borrows on an unsecured basis and arranges its debt to ensure an appropriate maturity profile. The Group’s principal sources of
funding are the long-term sterling bond market and committed bank facilities. The Group is mindful of its credit rating, currently BB and ensures it
has sufficient committed bank facilities in order to meet short-term business requirements, after taking into account the Group’s holding of cash
and cash equivalents together with any distribution restrictions which exist. The Group aims to maximise the term and flexibility of indebtedness
and retain headroom in the form of undrawn committed bank facilities of approximately £100.0 million. Additionally, the Group arranges its
currency borrowings in order that they are in proportion to the ratio of earnings in that particular currency to total Group earnings.
The Directors consider that the Group’s bond issuances together with its bank facilities will be sufficient to cover the likely medium-term cash
requirements of the Group.
Associates, joint ventures and other investments in general arrange and maintain their own financing and funding requirements. In all cases such
financing is non-recourse to the Company.
The Group’s interim internal target of Net Debt to EBITDA cover is 2.0 to 2.5 times whilst the limit imposed by its bank covenants is no greater than
3.75 times. On a bank covenant basis the ratio uses the average exchange rate in the calculation of net debt. The resultant Net Debt to EBITDA
ratio is 1.65 times (2011 1.96 times, 2010 2.33 times). Using a closing rate basis for the valuation of net debt, the ratio was 1.62 times.
Cash and liquidity risk management
The Group monitors cash balances and ensures that sufficient resources are available to meet entities operational requirements. Short-term money
market deposits are used to manage liquidity whilst maximising the rate of return on cash resources, giving due consideration to credit risk.
Market risk management
The Group’s primary market risks are interest rate fluctuations and exchange rate movements.
Annual Report 2012 142
33) FINANCIAL INSTRUMENTS AND RISk MANAGEMENT – CONTINUED
Interest rate risk management
The limit imposed by the Group’s bank covenants is at least 3 times EBITDA to net interest. The actual ratio for the year was 6.54 times (2011 6.36
times, 2010 4.91 times).
The Group’s interest rate exposure management policy is aimed at reducing the exposure of the consolidated businesses to changes in interest
rates. Group policy is to have 70% to 80% of interest exposures fixed with the balance floating. This is achieved by issuing fixed rate sterling bond
debt and entering into derivative contracts that economically swap fixed rate interest into floating rate. Derivatives are used to hedge or reduce
the risks of interest rate and exchange rate movements and are not entered into unless such risks exist. The derivatives in place to meet Group
policy are as follows:
(i) Fixed to floating interest rate swaps hedging a portion of the Group’s bonds. Changes in the fair value of the swaps are recognised in the
income statement and at the same time the carrying value of the hedged bonds is adjusted for movements in the hedged risk to the extent
effective and those adjustments are also recognised in the income statement. These interest rate swaps amount to £108.9 million (2011 £75.0
million, 2010 £75.0 million) with the Group paying floating rates of between 0.63% and 1.86% (2011 1.24% and 1.61%, 2010 1.24% and 3.60%).
(ii) Fixed to floating interest rate swaps which are not designated as hedging instruments; Changes in the fair value of the swaps are recognised
in the income statement. These interest rate swaps amount to US$67.0 million (2011 US$nil, 2010 US$nil) with the Group receiving floating US dollar
interest at rates of between 0.38% and 0.47%.
(iii) Cross currency fixed to fixed interest rate swaps. These amount to £158.4 million/US$288.0 million (2011 £192.3 million/US$355.0 million, 2010
£227.6 million/US$ 435.0 million) resulting in the Group paying fixed US dollar interest at rates of between 4.40% and 6.07% (2011 4.40% and
6.07 %, 2010 4.40% and 6.07%), £nil/AUS$nil (2011 £8.5 million/AUS$20.0 million, 2010 £8.5 million/AUS$20.0 million) with the Group paying fixed
Australian dollar interest at nil% (2011 6.22%, 2010 6.15% and 6.22%).
(iv) The Group also had a number of outstanding interest rate caps. These amounted to US$100.0 million notional (2011 US$100.0 million, 2010
US$100.0 million) at a rate of 6.00% (2011 6.00%, 2010 6.00%).
The fair values of interest rate swaps, interest rate caps and forward foreign exchange contracts represent the replacement costs calculated
using market rates of interest and exchange at 30th September, 2012. The fair value of long-term borrowings has been calculated by discounting
expected future cash flows at market rates.
Foreign exchange rate risk management
Translation exposures arise on the earnings and net assets of business operations in entities with functional currencies other than that of the parent
company. The net asset exposures are economically hedged, to a significant extent, by a policy of denominating borrowings in currencies where
significant translation exposures exist, most notably US dollars.
The Group also designates currency swaps and forward contracts as net investment hedges, hedging the Group’s overseas investments.
Credit risk management
The Group’s principal credit risk relates to its trade and other receivables and non-performance by counterparties to financial instrument contracts.
Trade and other receivables
The Group’s customer base is diversified geographically and by division with customers generally of a good financial standing. Before accepting
any new customers, the Group assesses the potential customers’ credit quality and sets credit limits by customer. The average credit period is
43 days (2011 42 days, 2010 44 days). The Group considers the credit risk of trade receivables to be low, although the Group remains vigilant in the
current economic climate. The Group reserves the right to charge interest on overdue receivables, although the Group does not hold collateral
over any trade receivable balances. The Group makes an allowance for bad and doubtful debts specific to individual debts. This provision is
reviewed regularly in conjunction with a detailed analysis of historic payment profiles and past default experience.
The Group’s receivables are stated net of allowances for doubtful debts and allowances for impairment are made where appropriate.
Institutional counterparty risk
The Group seeks to limit interest rate and foreign exchange risks, described above, by the use of financial instruments. As a result, credit risk arises
from the potential non-performance by the counterparties to those financial instruments, which are unsecured. The amount of this credit risk is
normally restricted to the amounts of any hedge gain and not the principal amount being hedged. The Group also has a credit exposure to
counterparties for the full principal amount of cash and cash equivalents. Group policy is to have no more than £20.0 million deposited (or at
risk) with any ‘AA’ counterparty, £10.0 million for ‘A’ rated counterparties.
Credit risk is controlled by monitoring the credit quality of these counterparties, principally licensed commercial banks and investment banks
with strong long-term credit ratings, and of the amounts outstanding with each of them. The Group has no significant concentration of risk with
exposure spread over a large number of counterparties and customers.
The credit risk on short-term deposits and derivative financial instruments is considered low since the counterparties are banks with high credit
ratings. Group policy is to have no more than £20.0 million deposited (or at risk) with any “AA” counterparty, £10.0 million for “A” rated counterparties.
The Group has no significant concentration of risk with exposure spread over a large number of counterparties and customers.
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Financial Statements
143
33) FINANCIAL INSTRUMENTS AND RISk MANAGEMENT – CONTINUED
Derivative financial instruments and hedge accounting
Derivative financial instruments are measured at fair value at the date the derivatives are entered into and are subsequently re-measured to
fair value at each reporting date. The fair value is determined by using market data and the use of established estimation techniques such as
discounted cash flow and option valuation models. The Group designates certain derivatives as:
(i) Hedges of the change of fair value of recognised assets and liabilities (‘fair value hedges’); or
(ii) Hedges of highly probable forecast transactions (‘cash flow hedges’); or
(iii) Hedges of net investment in foreign operations (‘net investment hedges’)
To qualify for hedge accounting, each individual hedging relationship must be expected to be effective, be designated and documented at
its inception and throughout the life of the hedge relationship.
Fair value hedges
The Group’s policy is to use interest rate swaps to convert a proportion of its fixed rate debt to floating rates in order to hedge the interest rate risk
with changes in fair value of the hedging instrument recognised in the income statement for the period 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.
Gains and losses on the borrowings and related derivatives designated as fair value hedges included in the Consolidated Income Statement
for the year ended 30th September, 2012 were:
Sterling interest rate swaps
Sterling debt
Total
At 3rd
October,
2010
£m
Fair value
movement
gain/(loss)
£m
At 2nd
October,
2011
£m
Fair value
movement
gain/(loss)
£m
At 30th
September,
2012
£m
8.2
(8.2)
–
0.1
(0.1)
–
8.3
(8.3)
–
2.2
(2.2)
–
10.5
(10.5)
–
Cash flow hedges
The Group’s policy is to use certain derivative financial instruments in order to hedge the foreign exchange risk arising from certain firm commitments
or forecast highly probable transactions in currencies other than the functional currency of the relevant Group entity.
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.
All cash flow hedges were effective throughout the year ended 30th September, 2012. All amounts deferred in equity at the year end are
expected to impact the Consolidated Income Statement in the next 18 months when the related cash flows are expected to occur.
Net investment hedges
The Group seeks to manage the foreign currency exposure arising on retranslation of the reporting entity’s share of net assets of foreign operations
at each reporting date by designating certain derivative financial instruments and foreign currency borrowings as net investment hedging instruments.
Exchange differences arising from the translation of the net investment in foreign operations are recognised directly in equity 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.
All net investment hedges were effective throughout the year ended 30th September, 2012.
Annual Report 2012
144
33) FINANCIAL INSTRUMENTS AND RISk MANAGEMENT – CONTINUED
Derivatives not qualifying for hedge accounting
Derivatives not qualifying for hedge accounting represent forward contracts which provide a gain or loss equivalent to income tax payable or
receivable on foreign exchange gains or losses incurred when intra group balances are translated to the closing rate at the year end. These
contracts (‘Tax Equalisation Swaps’) are marked to market with the movement in fair value taken to income. Tax Equalisation Swaps are not
capable of being designated as hedging instruments under IAS 39.
The Group’s derivative financial instruments, other than acquisition option commitments, and their maturity profiles are summarised as follows:
Derivative financial assets:
At 30th September, 2012
Within one year
Between one and two years
Over five years
At 2nd October, 2011
Within one year
Between one and two years
Over five years
At 3rd October, 2010
Within one year
Between one and two years
Between two and five years
More than five years
Fair value
hedges
£m
Cash flow
hedges
£m
Net
investment
hedges
£m
Derivatives
not qualifying
for hedge
accounting
£m
Derivative
financial
assets
£m
0.8
–
22.9
22.9
23.7
–
1.9
6.5
8.4
8.4
–
–
2.8
5.4
8.2
8.2
2.7
0.3
–
0.3
3.0
1.1
0.2
–
0.2
1.3
1.8
0.4
–
–
0.4
2.2
5.4
–
1.4
1.4
6.8
–
–
–
–
–
0.3
–
–
–
–
0.3
–
–
–
–
–
–
–
–
–
–
0.2
–
0.1
–
0.1
0.3
8.9
0.3
24.3
24.6
33.5
1.1
2.1
6.5
8.6
9.7
2.3
0.4
2.9
5.4
8.7
11.0
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Financial Statements
145
Net
investment
hedges
£m
Derivatives
not qualifying
for hedge
accounting
£m
Derivative
financial
assets
£m
Cash flow
hedges
£m
(0.3)
(21.7)
(22.0)
(4.7)
(0.7)
–
(0.7)
(5.4)
(6.4)
(3.7)
–
–
(3.7)
(10.1)
(13.8)
(13.2)
(27.0)
(0.8)
(22.8)
(37.4)
(60.2)
(61.0)
(0.1)
–
(30.4)
(45.7)
(76.1)
(76.2)
–
–
–
(0.4)
–
–
–
(0.4)
(0.1)
–
–
–
–
(0.1)
(14.1)
(34.9)
(49.0)
(5.9)
(23.5)
(37.4)
(60.9)
(66.8)
(6.6)
(3.7)
(30.4)
(45.7)
(79.8)
(86.4)
33) FINANCIAL INSTRUMENTS AND RISk MANAGEMENT – CONTINUED
Derivative financial liabilities:
At 30th September, 2012
Within one year
Over five years
At 2nd October 2011
Within one year
Between one and two years
Over five years
At 3rd October 2010
Within one year
Between one and two years
Between two and five years
Over five years
In managing the Group’s interest rate and currency risks, the Group aims to reduce the impact of short-term fluctuations. However, changes in
foreign exchange rates and interest rates may have an impact on the Group’s results.
At 30th September, 2012, it is estimated that an increase of 1.0% in interest rates would have increased the Group’s finance costs by £1.2 million
(2011 £1.1 million, 2010 £1.0 million). There would have been no effect on amounts recognised directly in equity. This sensitivity has been calculated
by applying the interest rate change to the Group’s variable rate borrowings, net of any interest rate swaps, at the year end date.
At 30th September, 2012, it is estimated that a decrease of 1.0% in interest rates would have decreased the Group’s finance costs by £1.1 million
(2011 £1.3 million, 2010 £1.0 million). There would have been no effect on amounts recognised directly in equity. This sensitivity has been calculated
by applying the interest rate change to the Group’s variable rate borrowings, net of any interest rate swaps, as at the year end date.
At 30th September, 2012, it is estimated that a 10.0% strengthening of sterling against the US dollar would have reduced the net loss taken to equity
by £49.1 million (2011 £55.6 million, 2010 £51.1 million) and increased the net loss taken to income by £nil (2011 £nil, 2010 £nil). A 10.0% weakening
of sterling against the US dollar would have increased the net loss taken to equity by £53.6 million (2011 £64.0 million, 2010 £62.4 million) and
decreased the net loss taken to income by £nil (2011 £nil, 2010 £nil). This sensitivity has been calculated by applying the foreign exchange
change to the Group’s financial instruments which are affected by changes in foreign exchange rates.
At 30th September, 2012, it is estimated that an increase of 1.0% in the rate used to discount the expected gross value of payments would lead
to a decrease in the fair value of acquisition put option commitments of £nil (2011 £0.2 million, 2010 £nil).
At 30th September, 2012, it is estimated that a decrease of 1.0% in the rate used to discount the expected gross value of payments would lead
to an increase in the fair value of acquisition put option commitments of £nil (2011 £0.2 million, 2010 £nil).
Annual Report 2012 146
33) FINANCIAL INSTRUMENTS AND RISk MANAGEMENT – CONTINUED
The carrying amounts and gains and losses on financial instruments are as follows:
At 30th
September,
2012
Carrying
amount
£m
52 weeks
ending 30th
September,
2012
Gain/(loss) to
income
£m
52 weeks
ending 30th
September,
2012
Gain/(loss) to
equity
£m
At 2nd
October,
2011
Carrying
amount
£m
52 weeks
ending 2nd
October,
2011
Gain/(loss) to
income
£m
52 weeks
ending 2nd
October,
2011
Gain/(loss) to
equity
£m
At 3rd
October,
2010
Carrying
amount
£m
52 weeks
ending 3rd
October,
2010
Gain/(loss) to
income
£m
52 weeks
ending 3rd
October,
2010
Gain/(loss) to
equity
£m
Available-for-sale investments
1.5
0.5
(0.1)
4.2
4.4
23.2
Trade receivables
Other debtors
Cash and deposits
Loans and receivables
Interest rate swaps
Fixed to fixed cross currency swaps
Forward foreign currency contracts
Derivative assets in effective
hedging relationships
Interest rate caps
Derivative assets not designated
as hedging instruments
Trade payables
Bank overdrafts
Bonds
Bank loans
Loan notes
Amounts payable under hire
purchase contracts
Liabilities at amortised cost
Fixed to fixed cross currency swaps
Forward foreign currency contracts
Derivative liabilities in effective
hedging relationships
Acquisition put option commitments
Interest rate swaps
Forward foreign currency contracts
Interest rate caps
Derivative liabilities not designated
as hedging instruments
Total for financial instruments
231.2
23.1
107.3
361.6
23.7
1.4
8.4
33.5
–
–
(54.4)
–
(725.4)
–
(2.6)
–
3.1
–
1.5
4.6
4.5
–
(0.2)
4.3
–
–
–
0.1
(61.7)
(5.9)
–
–
(3.1)
–
(1.7)
(4.8)
–
–
19.8
19.8
–
–
8.4
0.1
–
–
–
–
227.3
42.3
174.3
443.9
8.4
–
1.3
9.7
–
–
(66.4)
(2.6)
(832.0)
–
(3.3)
–
2.7
1.5
–
1.9
3.4
2.3
–
0.2
2.5
–
–
–
–
(63.4)
(5.3)
(0.1)
(1.7)
0.6
1.8
–
0.8
2.6
5.9
–
–
5.9
234.1
41.8
65.7
341.6
8.2
–
2.5
10.7
0.3
0.3
(0.3)
(0.3)
(70.1)
(1.4)
(853.2)
(2.7)
(7.3)
(20.3)
–
(0.2)
(66.8)
(6.1)
(0.2)
(1.6)
1.1
–
–
1.1
–
–
2.0
2.0
–
–
(3.6)
–
–
–
–
–
(782.4)
(67.5)
8.5
(904.3)
(70.5)
(3.6)
(955.0)
(74.9)
(27.0)
(0.3)
(27.3)
(8.6)
(21.7)
–
–
(30.3)
(2.3)
(0.2)
(2.5)
2.0
(0.3)
–
–
1.7
12.8
5.4
18.2
(60.3)
(6.1)
(66.4)
(2.6)
1.5
(1.1)
(6.0)
(7.5)
(13.5)
(76.2)
(10.1)
(86.3)
0.3
(11.8)
(0.5)
–
–
–
–
(0.4)
–
0.3
(12.2)
–
–
–
(0.5)
–
–
–
–
–
(1.1)
–
(0.1)
–
(1.2)
(3.8)
–
(3.8)
(1.3)
–
(0.1)
–
(1.4)
2.9
2.4
–
2.1
4.5
–
–
5.2
5.2
–
–
(2.8)
(1.4)
–
0.3
–
–
(3.9)
(2.6)
(1.2)
(3.8)
–
–
–
–
–
(443.4)
(58.9)
41.9
(525.1)
(63.5)
(9.6)
(666.7)
(71.3)
4.9
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Directors’ Report
Governance
Financial Statements
147
52 weeks
ending 30th
September,
2012
£m
52 weeks
ending 2nd
October,
2011
£m
52 weeks
ending 3rd
October,
2010
£m
34.4
–
3.9
3.6
(18.3)
4.6
(2.7)
6.8
41.9
(9.6)
(2.9)
2.9
0.6
4.3
4.9
52 weeks
ending 30th
September,
2012
£m
52 weeks
ending 2nd
October,
2011
£m
52 weeks
ending 3rd
October,
2010
£m
(58.9)
(63.5)
(71.3)
(3.1)
0.3
(0.8)
(1.5)
(0.3)
0.2
(64.1)
(1.5)
0.2
(2.9)
(1.9)
(0.4)
(1.7)
(71.7)
(1.8)
–
(0.6)
(0.8)
(0.7)
(2.2)
(77.4)
Due in less
than one
year
£m
Due between
one and five
years
£m
Due in more
than 5 years
£m
–
–
–
–
–
–
–
–
–
Due in less
than one
year
£m
Due between
one and five
years
£m
Due in more
than 5 years
£m
–
–
–
–
–
–
–
–
–
Note
38
38
38
Note
27
8
9
9
10
10
10
Total
£m
–
–
–
Total
£m
–
–
–
Due in less
than one
year
£m
Due between
one and five
years
£m
Due in more
than 5 years
£m
(6.3)
1.2
(5.1)
(12.9)
2.4
(10.5)
(5.1)
0.4
(4.7)
Total
£m
(24.3)
4.0
(20.3)
33) FINANCIAL INSTRUMENTS AND RISk MANAGEMENT – CONTINUED
Reconciliation of net gain or loss taken to equity:
Change in fair value of hedging derivatives
Fair value movement in available-for-sale assets
Translation of financial instruments of overseas operations
Transfer of gain on cash flow hedges from fair value reserves to Consolidated Income
Statement
Total loss on financial instruments to equity
Reconciliation of net gain or loss taken through income to net finance costs:
Total loss on financial instruments to income
Add back:
Impairment of trade receivables
Impairment of available-for-sale assets
Divided income
Interest receivable from short-term deposits
Finance charge on discounting of contingent consideration
Fair value movement of contingent consideration
Net finance costs
Reconciliation of amounts due under hire purchase agreements:
At 30th September, 2012
Future minimum lease payments
Future finance charges
Present value of minimum lease payments
At 2nd October, 2011
Future minimum lease payments
Future finance charges
Present value of minimum lease payments
At 3rd October, 2010
Future minimum lease payments
Future finance charges
Present value of minimum lease payments
The hire purchase agreements in the prior periods related to certain of the Group’s colour print assets.
Annual Report 2012 148
Bank
loans and
overdrafts
£m
Loan notes
£m
TOTAL
£m
–
–
–
–
–
–
–
(2.6)
–
–
–
–
–
(317.9)
(59.7)
(155.5)
(646.0)
(430.4)
(1,291.6)
(2.6)
(1,609.5)
(2.6)
(3.3)
–
–
–
–
–
–
(2.6)
(1.9)
–
(2.3)
–
–
–
(2.3)
(4.2)
(511.6)
(351.5)
(163.9)
(694.2)
(101.6)
(340.0)
–
–
–
–
–
–
(1,651.2)
(3.3)
(2,162.8)
(7.4)
–
–
–
–
–
–
(267.0)
(122.3)
(507.2)
(598.1)
(265.6)
(358.4)
(1,851.6)
(7.4)
(2,118.6)
Currency
swaps
£m
Forward
contracts
£m
33) FINANCIAL INSTRUMENTS AND RISk MANAGEMENT – CONTINUED
The remaining undiscounted contractual liabilities and their maturities are as follows:
At 30th September, 2012
Within one year
Between one and two years
Between two and five years
Between five and 10 years
Between 10 and 15 years
At 2nd October, 2011
Within one year
Between one and two years
Between two and five years
Between five and 10 years
Between 10 and 15 years
Between fifteen and twenty
years
At 3rd October, 2010
Within one year
Between one and two years
Between two and five years
Between five and 10 years
Between 10 and 15 years
Between 15 and 20 years
Trade
payables
£m
Hire
purchase
£m
(54.4)
–
–
–
–
–
(54.4)
(66.4)
–
–
–
–
–
–
(66.4)
(70.1)
–
–
–
–
–
–
(70.1)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(6.3)
(6.3)
(6.6)
(5.1)
–
–
(18.0)
(24.3)
Interest
rate
swaps
£m
–
–
–
–
(68.5)
(68.5)
(68.5)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(106.0)
(4.8)
(14.3)
(23.9)
(101.7)
(144.7)
(250.7)
(13.4)
(126.0)
(22.7)
(37.8)
(37.8)
(130.8)
(355.1)
(368.5)
(15.5)
(15.5)
(190.5)
(37.3)
(37.3)
(136.4)
(417.0)
(432.5)
Bonds
£m
(95.2)
(47.1)
(141.2)
(622.1)
(260.2)
(59.7)
(7.8)
–
–
–
(7.8)
(1,070.6)
(67.5)
(1,165.8)
(367.5)
(16.2)
–
–
–
–
(58.4)
(209.3)
(141.2)
(656.4)
(63.8)
(209.2)
(16.2)
(1,279.9)
(383.7)
(1,338.3)
(105.6)
(40.3)
–
–
–
–
(60.2)
(60.2)
(307.8)
(555.7)
(228.3)
(222.0)
(40.3)
(1,374.0)
(145.9)
(1,434.2)
Daily Mail and General Trust Plc Strategic Report
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Directors’ Report
Governance
Financial Statements
149
33) FINANCIAL INSTRUMENTS AND RISk MANAGEMENT – CONTINUED
Reconciliation of undiscounted liabilities to amounts on the Statement of Consolidated Financial Position:
At 30th September, 2012
Within one year
Between one and two years
Between two and five years
Between five and 10 years
Between 10 and 15 years
Analysed as follows:
Trade payables
Loan notes
Bonds
Interest rate swaps
Fixed to fixed cross currency swaps
Forward foreign currency contracts
Undiscounted
value of
financial
liabilities
£m
Interest
£m
Unamortised
issue costs
£m
Discount/
Premium on
issue
£m
Mark to
market
adjustments
£m
Effect of
discounting
£m
Undiscounted
value of
financial
asset
£m
TOTAL
£m
(317.9)
(59.7)
(155.5)
(646.0)
(430.4)
(1,291.6)
(1,609.5)
(54.4)
(2.6)
(1,165.8)
(68.5)
(250.7)
(67.5)
48.8
47.1
141.2
141.0
94.3
423.6
472.4
–
–
438.2
34.2
–
–
(1,609.5)
472.4
0.4
0.4
1.3
1.1
0.3
3.1
3.5
–
–
3.5
–
–
–
3.5
1.6
1.7
6.1
(0.6)
0.4
7.6
9.2
–
–
9.2
–
–
–
9.2
(10.5)
–
–
–
–
–
(10.5)
–
–
(10.5)
–
–
–
(10.5)
(0.3)
0.4
1.5
2.5
8.7
13.1
12.8
–
–
–
12.6
0.4
(0.2)
12.8
151.8
(126.1)
12.1
12.8
21.4
92.6
138.9
290.7
–
–
–
–
223.3
67.4
290.7
2.0
7.4
(480.6)
(234.1)
(705.3)
(831.4)
(54.4)
(2.6)
(725.4)
(21.7)
(27.0)
(0.3)
(831.4)
Annual Report 2012 150
Total
£m
(84.8)
(177.8)
7.5
(479.5)
0.7
(237.2)
(886.3)
(971.1)
(66.4)
(2.6)
(3.3)
(832.0)
(60.3)
(6.5)
(971.1)
(97.5)
(6.8)
(186.6)
(348.5)
(156.5)
(245.5)
(943.9)
(1,041.4)
(70.1)
(1.4)
(7.3)
(2.7)
(20.3)
(853.2)
(76.2)
(10.2)
(1,041.4)
33) FINANCIAL INSTRUMENTS AND RISk MANAGEMENT – CONTINUED
Undiscounted
value of
financial
liabilities
£m
Interest
£m
Unamortised
issue costs
£m
Discount/
Premium on
issue
£m
Mark to
market
adjustments
£m
Effect of
discounting
£m
Undiscounted
value of
financial
asset
£m
At 2nd October, 2011
Within one year
Between one and two years
Between two and five years
Between five and 10 years
Between 10 and 15 years
Between 15 and 20 years
Analysed as follows:
Trade payables
Cash flow
Loan notes
Bonds
Fixed to fixed cross currency swaps
Forward foreign currency contracts
At 3rd October, 2010
Within one year
Between one and two years
Between two and five years
Between five and 10 years
Between 10 and 15 years
Between 15 and 20 years
Analysed as follows:
Trade payables
Bank overdrafts
Loan notes
Bank loans
Hire purchase
Bonds
Fixed to fixed cross currency swaps
Forward foreign currency contracts
(511.6)
(351.5)
(163.9)
(694.2)
(101.6)
(340.0)
(1,651.2)
(2,162.8)
(66.4)
(2.6)
(3.3)
58.4
52.8
141.2
175.3
63.8
9.2
442.3
500.7
–
–
–
(1,338.3)
500.7
(368.5)
(383.7)
–
–
(2,162.8)
500.7
(267.0)
(122.3)
(507.2)
(598.1)
(265.6)
(358.4)
(1,851.6)
(2,118.6)
(70.1)
(1.4)
(7.4)
(2.8)
(24.3)
(1,434.2)
(432.5)
(145.9)
61.6
61.1
152.9
206.4
71.9
22.0
514.3
575.9
–
–
0.1
0.1
4.0
571.7
–
–
(2,118.6)
575.9
0.5
0.4
1.3
1.3
0.2
0.1
3.3
3.8
–
–
–
3.8
–
–
3.8
0.5
0.5
1.3
1.8
0.3
0.1
4.0
4.5
–
–
–
–
–
4.5
–
–
4.5
1.6
1.7
6.3
0.4
0.5
0.1
9.0
(8.8)
–
–
–
–
–
–
10.6
(8.8)
–
–
–
10.6
–
–
10.6
1.6
1.8
6.3
4.1
(0.4)
0.2
12.0
13.6
–
–
–
–
–
13.6
–
–
13.6
–
–
–
(8.8)
–
–
(8.8)
(8.8)
–
–
–
–
–
–
(8.8)
–
–
–
–
–
(8.8)
–
–
(8.8)
3.2
0.2
4.2
7.0
7.0
(17.5)
0.9
4.1
–
–
–
–
3.6
0.5
4.1
3.1
3.2
3.2
10.1
10.1
(17.8)
8.8
11.9
–
–
–
–
–
–
12.4
(0.5)
11.9
371.9
118.6
18.4
30.7
30.8
110.9
309.4
681.3
–
–
–
–
304.6
376.7
681.3
111.5
48.9
156.9
27.2
27.2
108.4
368.6
480.1
–
–
–
–
–
–
343.9
136.2
480.1
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Financial Statements
151
33) FINANCIAL INSTRUMENTS AND RISk MANAGEMENT – CONTINUED
valuation techniques and assumptions applied for the purpose of measuring fair value
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 process (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 (ie as prices) or indirectly (ie 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).
At 30th September, 2012
Financial assets
Available-for-sale financial assets
Derivative instruments in designated hedge accounting relationships
Financial liabilities
Fair value through profit and loss
Acquisition put options
Derivative instruments not designated in hedge accounting relationships
Derivative instruments in designated hedge accounting relationships
At 2nd October, 2011
Financial assets
Available-for-sale financial assets
Derivative instruments in designated hedge accounting relationships
Financial liabilities
Fair value through profit and loss
Acquisition put options
Derivative instruments in designated hedge accounting relationships
There were no transfers between categories in the period.
Reconciliation of level 3 fair value measurement of financial liabilities:
At 2nd October, 2011
Change in fair value of acquisition put option commitments in income
Settlements
Exchange adjustment
At 30th September, 2012
Note
Level 1
£m
Level 2
£m
Level 3
£m
25
33
31
33
33
0.7
–
0.7
–
–
–
–
–
33.5
33.5
–
(21.7)
(27.3)
(49.0)
0.8
–
0.8
(8.6)
–
–
(8.6)
Level 1
£m
Level 2
£m
Level 3
£m
2.0
–
2.0
–
–
–
–
9.7
9.7
–
(66.8)
(66.8)
2.2
–
2.2
(11.8)
–
(11.8)
Note
10
31
Total
£m
1.5
33.5
35.0
(8.6)
(21.7)
(27.3)
(57.6)
Total
£m
4.2
9.7
13.9
(11.8)
(66.8)
(78.6)
£m
(11.8)
2.0
0.8
0.4
(8.6)
The key input into the significant level 3 financial liabilities is the future profitability of the businesses to which the acquisition put options relate.
The range of possible outcomes for the fair value of these options is £nil to £37.5 million (2011 £nil to £39.2 million).
Annual Report 2012 152
34) RETIREMENT BENEFITS
The Group operates a number of pension schemes under which contributions are paid by the employer and employees. The total net pension
costs of the Group for the year ended 30th September 2012 were £11.7 million (2011 £16.5 million, 2010 £27.7 million).
The schemes include funded defined benefit pension arrangements, providing service-related benefits, in addition to a number of defined
contribution pension arrangements. The defined benefit schemes in the UK, together with some defined contribution plans, are administered
by trustees or trustee companies.
In compliance with recent legislation the Group is making arrangements for relevant employees to be automatically enrolled into the defined
contribution pension plans. The first staging date for the Group for automatic enrolment is expected to be July 2013.
For reporting years beginning on or after 1st January, 2013, a revision to the International Accounting Standard 19 – Employee Benefits (IAS19 R)
will become effective. IAS19 R will first apply to the Group for the year ending 28th September, 2014. Had IAS19 R been applied at the year ended
30th September, 2012, Finance Costs reported in the Consolidated Income Statement would have increased by £23.5 million (2011 £25.1 million,
2010 £22.5 million) with a corresponding decrease in the actuarial loss reported within Cumulative actuarial (loss)/gain in the Consolidated
Statement of Comprehensive Income (SOCI).
Defined Benefit Schemes
(a) Background
The Company operates two main defined benefit schemes, the Harmsworth Pension Scheme (HPS) and the Senior Executive Pension Scheme
(SEPF), both of which are now closed to new entrants. Existing members still in employment can continue to accrue benefits in the scheme on
a cash basis, with members using this cash account to purchase an annuity at retirement.
Full actuarial valuations of the defined benefit schemes are carried out triennially by the Scheme Actuary. The latest valuations of the main
schemes were completed as at 31st March, 2010. As a result of these valuations, the Company agreed to make annual contributions of 10.0% or
15.0% of members’ basic pay (depending on membership section) for HPS and 27.0% of pensionable pay for SEPF. In addition, the Company
has agreed Recovery Plans involving a series of annual funding payments amounting to £265.9 million over a period to end on 5th October,
2023. In accordance with these agreements, a payment of £36.7 million was made on 5th October, 2011 and a payment of £24.0 million was
made on 28th September, 2012. A further payment of £11.6 million was made post year end on 5th October, 2012. The Company considers that
these contribution rates are sufficient to eliminate the deficit over the agreed period. Both the ongoing contributions and Recovery Plan will be
reviewed at the next triennial funding valuation of the main schemes due to be completed with an effective date 31st March, 2013.
The Company also has a defined benefit obligation relating to the DMGT AVC Plan (the Plan) which is closed to further member contributions.
The most recent actuarial funding valuation of the Plan, carried out with an effective date of 31st March, 2011, showed a funding deficit of £5.6
million. The trustees and the Company have agreed that this funding shortfall will be removed through the expected investment returns, with
no further contributions required from the Company.
(b) Limited Partnership investment vehicle
The Company has enabled the trustee of the HPS to acquire a beneficial interest in a Limited Partnership investment vehicle (LP). The LP has been
designed to facilitate payment of part of the deficit funding payments described above to the scheme over the next 15 years. In addition, the LP
is required to make a final payment to the scheme of £150.0 million or the funding deficit within the scheme on an ongoing actuarial valuation
basis at the end of the 15-year period if this is less. For funding purposes, the interest held by the trustee in the LP will be treated as an asset of the
scheme and reduce the actuarial deficit within the scheme. However, under IAS19 the LP is not included as an asset of the scheme and therefore
is not included in the disclosures below. In exchange for its interest in the LP, the trustee has allowed the standby letters of credit previously
provided by the Company to be cancelled.
The figures in this note are based on calculations using membership data as at 30th September 2012 along with asset valuations and cash flow
information from the schemes for the year to 30th September, 2012.
Daily Mail and General Trust Plc Strategic Report
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Financial Statements
153
34) RETIREMENT BENEFITS – CONTINUED
A reconciliation of the net pension obligation reported in the Consolidated Statement of Financial Position is shown in the following table:
Present value of defined benefit obligation
Assets at fair value
Deficit reported in the Consolidated Statement of Financial Position
At 30th
September,
2012
Schemes in
deficit
£m
At 2nd
October,
2011
Schemes in
deficit
£m
At 3rd
October,
2010
Schemes in
deficit
£m
(2,089.0)
(1,921.1)
(1,878.2)
1,764.6
1,584.9
1,606.8
(324.4)
(336.2)
(271.4)
The International Financial Reporting Interpretations Committee, in its document IFRIC 14, has interpreted the extent to which a company can
recognise a pension surplus on its Statement of Financial Position. Having taken account of the rules of the schemes, the fact that the schemes
remain open to new accrual, and the current and anticipated levels of service cost and cash contributions, the Company considers that
recognition of surpluses in the schemes on its Statement of Financial Position is in accordance with the interpretations of IFRIC 14. In 2012, 2011
and 2010 all schemes were in deficit.
The deficit for the year, set out above, excludes a related deferred tax asset of £74.6 million (2011 £83.6 million, 2010 £73.3 million).
A reconciliation of the present value of the defined benefit obligation is shown in the following table:
Defined benefit obligation at start of year
Service cost
Service cost in respect of salary sacrifice
Interest cost
Settlement/curtailment
Member contributions
Benefit payments
Actuarial (gain)/loss as a result of:
– changes in assumptions
– membership experience
Defined benefit obligation at the end of year
A reconciliation of the fair value of assets is shown in the following table:
Fair value of assets at start of year
Expected return on assets
Company contributions
Member contributions
Benefit payments
Actuarial movement
Fair value of assets at end of year
Note
9
52 weeks
ending 30th
September,
2012
£m
52 weeks
ending 2nd
October,
2011
£m
52 weeks
ending 3rd
October,
2010
£m
(1,921.1)
(1,878.2)
(1,901.8)
(12.0)
(4.9)
(97.7)
–
(0.5)
85.0
(17.2)
(5.5)
(91.7)
–
(0.2)
87.1
32.5
(47.9)
(23.8)
(6.4)
(101.4)
9.5
(1.2)
89.4
(104.0)
161.5
38, 39
38, 39
(116.7)
(21.1)
(2,089.0)
(1,921.1)
(1,878.2)
At 30th
September,
2012
£m
At 2nd
October,
2011
£m
At 3rd
October,
2010
£m
1,584.9
1,606.8
1,471.4
Note
9
106.2
104.1
82.0
0.5
(85.0)
76.0
35.2
0.2
(87.1)
(74.3)
38, 39
99.2
35.0
1.2
(89.4)
89.4
1,764.6
1,584.9
1,606.8
Annual Report 2012 154
34) RETIREMENT BENEFITS – CONTINUED
The fair value of the assets held by the pension schemes and the long-term expected rate of return on each class of assets are shown in the
following table:
At 30th September, 2012
Value at 30th September, 2012 (£ million)
% of assets held
Long-term rate of return expected at 30th September, 2012 (%)
At 2nd October, 2011
Value at 2nd October, 2011 (£ million)
% of assets held
Long-term rate of return expected at 2nd October, 2011 (%)
At 3rd October, 2010
Value at 3rd October, 2010 (£ million)
% of assets held
Long-term rate of return expected at 3rd October, 2010 (%)
Equities
Bonds
Property Other assets
Total
981.7
55.63
7.60
849.2
53.60
8.30
883.6
55.00
7.90
581.6
32.96
3.40
562.3
35.50
4.30
519.7
32.30
4.40
172.6
9.78
6.00
157.3
9.90
6.80
156.1
9.70
7.00
28.7
1.63
3.40
1,764.6
100.00
6.00
16.1
1.00
4.30
1,584.9
100.00
6.70
47.4
3.00
4.40
1,606.8
100.00
6.60
Equities include hedge funds and infrastructure funds that have the same long-term expected rate of return.
The value of employer-related assets held on behalf of the schemes at 30th September, 2012 was £18.2 million (1.03% of assets), (2011 £0.1 million
– 0.00% of assets, 2010 £0.1 million – 0.00% of assets).
The assumption for the expected overall rate of return on assets is a weighted average of the expected returns for each asset class based on
the proportion of assets held in each class at the beginning of the year. The expected return on bonds has been selected having regard to
gross redemption yields at the start of the year. The expected returns on equities and property are based on a combination of estimated risk
premiums over Government bond yields, the gross redemption yields on bonds, and consensus economic forecasts for future returns.
The actual return on plan assets was £182.2 million (2011 £29.7 million, 2010 £188.6 million) representing the expected return plus the associated
actuarial gain or loss during the year.
The main financial assumptions are shown in the following table:
Price inflation
Salary increases
Pension increases
Discount rate for scheme liabilities
Expected overall rate of return on assets
52 weeks
ending 30th
September,
2012
%
52 weeks
ending 2nd
October,
2011
%
52 weeks
ending 3rd
October,
2010
%
2.40
2.40
2.40
4.40
6.00
3.00
2.90
2.90
5.20
6.70
3.10
2.90
2.90
5.00
6.60
The discount rate for scheme liabilities reflects yields at the period end date on high quality corporate bonds. All assumptions were selected
after taking actuarial advice.
Mortality assumptions take account of scheme experience, and also allow for further improvements in life expectancy based on ‘long cohort’
projections but with a minimum rate of improvement in future mortality rates of 1.5% per annum. Allowance is made for the extent to which
employees have chosen to commute part of their pension for cash at retirement.
Daily Mail and General Trust Plc Strategic Report
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Financial Statements
155
34) RETIREMENT BENEFITS – CONTINUED
The table below illustrates examples of the assumed average life expectancies from age 60 for the principal schemes:
For a current 60-year old male member of the scheme
For a current 60-year old female member of the scheme
For a current 50-year old male member of the scheme
For a current 50-year old female member of the scheme
52 weeks
ending 30th
September,
2012
Future life
expectancy
from age 60
(years)
52 weeks
ending 2nd
October,
2011
Future life
expectancy
from age 60
(years)
52 weeks
ending 3rd
October,
2010
Future life
expectancy
from age 60
(years)
27.2
29.0
28.7
30.5
27.0
28.8
28.6
30.3
25.8
27.7
26.9
28.3
The amounts charged to the Consolidated Income Statement based on the above assumptions are shown in the following table:
Service cost
Service cost in respect of salary sacrifice
Charge to operating profit
Interest cost
Expected return on assets
Credit to net Finance costs
Total net charge to the Consolidated Income Statement
52 weeks
ending 30th
September,
2012
£m
52 weeks
ending 2nd
October,
2011
£m
Note
(12.0)
(4.9)
(16.9)
(97.7)
106.2
8.5
(8.4)
(17.2)
(5.5)
(22.7)
(91.8)
104.1
12.3
(10.4)
9
Pension costs and the size of any pension surplus or deficit are sensitive to the assumptions adopted. The table below indicates the effect from
changes in the principal assumptions used above:
Mortality
Change in pension obligation at 30th September, 2012 from a one year change
in life expectancy
Change in pension cost from a one year change
Inflation rate
Change in pension obligation at 30th September, 2012 from a 0.1% per annum change
Change in pension cost from a 0.1% per annum change
Discount Rate
Change in pension obligation at 30th September, 2012 from a 0.1% per annum change
Change in pension cost from a 0.1% per annum change
52 weeks
ending 30th
September,
2012
£m
52 weeks
ending 2nd
October,
2011
£m
52 weeks
ending 3rd
October,
2010
£m
77.2
71.0
57.6
3.7
4.1
3.9
30.4
0.1
27.7
0.2
25.5
0.6
33.8
0.1
31.0
0.1
31.9
0.7
+/-
+/-
+/-
+/-
+/-
+/-
Annual Report 2012 156
34) RETIREMENT BENEFITS – CONTINUED
Amounts recognised in the Consolidated Statement of Comprehensive Income (SOCI) are shown in the following table:
Actuarial (loss)/gain recognised in SOCI
Cumulative actuarial loss recognised in SOCI at beginning of period
Cumulative actuarial loss recognised in SOCI at end of period
A history of experience gains and losses is shown in the following table:
Present value of defined benefit obligation
Fair value of scheme assets
Impact of asset ceiling in AVC Plan (from 2006)
Combined deficit in schemes
Experience adjustments on defined benefit obligation
Experience adjustments on fair value of scheme assets
52 weeks
ending 30th
September,
2012
£m
52 weeks
ending 2nd
October,
2011
£m
52 weeks
ending 3rd
October,
2010
£m
(61.8)
(220.8)
(282.6)
(89.6)
(131.2)
(220.8)
146.9
(278.1)
(131.2)
At 30th
September,
2012
£m
At 2nd
October,
2011
£m
At 3rd
October,
2010
£m
As at 4th
October,
2009
£m
As at 28th
September,
2008
£m
(2,089.0)
(1,921.1)
(1,878.2)
(1,901.8)
(1,621.0)
1,764.6
1,584.9
1,606.8
1,471.4
1,582.7
–
(324.4)
(137.7)
76.0
–
–
(336.2)
(271.4)
(15.4)
(74.3)
57.5
89.4
–
(430.4)
(256.6)
(167.9)
(2.9)
(41.2)
233.2
(351.0)
The Group expects to contribute approximately £25.8 million to the schemes during the 2013 financial year including the deficit funding
payments described above.
UK defined contribution plans
The Group has introduced a number of PensionSaver group personal pension plans that have replaced the trust-based defined contribution
pension plans previously offered to employees. These plans create a consistent pensions savings vehicle across all Group divisions.
The aggregate value of the group personal pension plans and the remaining trust-based defined contribution pension plans was £50.3 million
(2011 £39.8 million, 2010 £39.1 million) at the year end. The pension cost attributable to these plans during the year amounted to £1.9 million (2011
£3.4 million, 2010 £2.6 million).
Overseas pension plans
Overseas subsidiaries of certain Group divisions operate defined contribution retirement benefit plans, primarily in North America and Australia.
The pension cost attributable to these plans during the year amounts to £1.4 million (2011 £2.7 million, 2010 £2.2 million).
Pension arrangements for executives
The Group operates a contributory defined benefit scheme for senior executives (including some executive Directors), details of which are
included in the above disclosures. However, no executive Directors accrued further pension during the year.
Stakeholder pension
DMGT provides access to a stakeholder pension plan for relevant employees who are not eligible for the other pension schemes operated by
the Group. These arrangements will be superseded when automatic enrolment begins in 2013.
Daily Mail and General Trust Plc Strategic Report
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Directors’ Report
Governance
Financial Statements
157
35) PROvISIONS
Current liabilities
At 3rd October, 2010
Additions
Charged during year
Utilised during year
Transfer from non-current liabilities
Contingent consideration paid
Notional interest on contingent consideration
Adjustment to goodwill/contingent
consideration
Fair value adjustment to contingent
consideration
Exchange adjustment
At 2nd October, 2011
Additions
Charged during year
Utilised during year
Reclassification between categories
Transfer from non-current liabilities
Contingent consideration paid
Notional interest on contingent consideration
Adjustment to goodwill/contingent
consideration
Classified as held-for-sale
Exchange adjustment
At 30th September, 2012
Contract
discount
£m
Coupon
discount
£m
Onerous
leases
£m
Note
Reorgan-
isation
costs
£m
Contingent
consideration
£m
Legal
£m
Other
(Note (ii))
£m
11.6
–
3.7
(2.4)
–
–
–
–
–
–
12.9
–
8.8
(9.3)
–
–
–
–
–
(0.2)
–
12.2
1.9
–
1.4
(1.5)
–
–
–
–
–
–
1.8
–
8.3
(8.4)
–
–
–
–
–
–
0.1
1.8
4.2
–
0.1
(3.8)
0.8
–
–
–
–
–
1.3
–
0.2
(0.4)
–
0.3
–
–
–
–
(0.1)
1.3
7.3
–
12.7
(4.4)
–
–
–
–
–
–
15.6
–
9.5
(14.2)
(1.4)
–
–
–
–
(1.4)
0.1
8.2
3.3
1.1
–
–
10.3
(8.4)
0.3
(0.1)
1.8
(0.1)
8.2
0.2
–
–
–
0.2
(7.7)
0.1
(0.3)
–
–
0.7
5.0
–
0.4
–
–
–
–
–
–
–
5.4
–
5.4
(7.6)
–
–
–
–
–
(0.3)
(0.1)
2.8
16
16
10
20, (i)
19
Total
£m
37.7
1.1
19.8
4.4
–
1.5
(1.4)
(13.5)
–
–
–
–
–
–
4.5
–
5.6
(4.9)
1.4
1.2
–
–
–
(0.3)
(0.3)
7.2
11.1
(8.4)
0.3
(0.1)
1.8
(0.1)
49.7
0.2
37.8
(44.8)
–
1.7
(7.7)
0.1
(0.3)
(2.2)
(0.3)
34.2
Annual Report 2012 158
Total
£m
27.6
2.1
1.4
(3.8)
(11.1)
(3.6)
0.1
0.9
(0.1)
13.5
20.5
(2.6)
(0.1)
(1.8)
0.2
(0.3)
(0.2)
0.1
29.3
35) PROvISIONS – CONTINUED
Non-current liabilities
At 3rd October, 2010
Additions
Charged during year
Utilised during year
Transfer to current liabilities
Contingent consideration paid
Notional interest on contingent consideration
Adjustment to goodwill/contingent consideration
Fair value adjustment to contingent consideration
At 2nd October, 2011
Additions
Charged during year
Utilised during year
Transfer to current liabilities
Notional interest on contingent consideration
Adjustment to goodwill/contingent consideration
Fair value adjustment to contingent consideration
Exchange adjustment
At 30th September, 2012
Onerous
leases
£m
Note
Reorgan-
isation
costs
£m
Contingent
consideration
£m
Other
(Note (ii))
£m
3.6
–
0.3
(0.2)
(0.8)
–
–
–
–
2.9
–
0.2
(0.1)
(0.3)
–
–
–
0.1
2.8
7.5
–
–
(3.6)
–
–
–
–
–
3.9
–
(3.9)
–
–
–
–
–
–
–
14.5
2.1
–
–
(10.3)
(3.6)
0.1
0.9
(0.1)
3.6
20.5
–
–
(0.3)
0.2
(0.3)
(0.2)
–
23.5
2.0
–
1.1
–
–
–
–
–
–
3.1
–
1.1
–
(1.2)
–
–
–
–
3.0
16
10
20, (i)
10
(i) The adjustment to goodwill/contingent consideration relates to prior period acquisitions only.
(ii) Other current provisions principally of dilapidation provisions of £0.7 million (2011 £0.4 million, 2010 £0.3 million) and provisions for national
insurance of £1.4 million (2011 £0.4 million, 2010 £0.7 million).
Other non-current provisions principally of dilapidation provisions of £1.7 million (2011 £1.6 million, 2010 £1.6 million) and provisions for national
insurance of £1.1 million (2011 £1.1 million, 2010 £nil).
The uncertainties surrounding and the nature of the Group’s contingent consideration provisions are disclosed in critical accounting judgements
and key sources of estimation uncertainty (note 2). The maturity profile of the Group’s contingent consideration provision is as follows:
Expiring in one year or less
Expiring between one and two years
Expiring between two and five years
At 30th
September,
2012
£m
At 2nd
October,
2011
£m
At 3rd
October,
2010
£m
0.7
0.8
22.7
24.2
8.2
0.4
3.2
11.8
3.3
11.9
2.6
17.8
The contingent consideration is based on future business valuations and profit multiples and has been estimated on an acquisition by
acquisition basis using available data forecasts. The range of undiscounted outcomes for contingent consideration is £4.1 million to £59.1 million.
Certain contingent consideration arrangements are not capped since they are based on future business performance.
Daily Mail and General Trust Plc Strategic Report
159
Directors’ Report
Governance
Financial Statements
159
36) DEFERRED TAXATION
Disclosed within non-current liabilities
Disclosed within non-current assets
At 3rd October, 2010
(Credit)/charge to income
(Credit)/charge to income due to change
in tax rate
Credit to equity
Charge to equity due to change in tax rate
Owned by subsidiaries acquired
Owned by subsidiaries sold
Exchange adjustment
At 2nd October, 2011
Disclosed within non-current liabilities
Disclosed within non-current assets
(Credit)/charge to income
Charge/(credit) to income due to change
in tax rate
Credit to equity
Charge to equity due to change in tax rate
Owned by subsidiaries acquired
Owned by subsidiaries sold
Classified as held-for-sale
Exchange adjustment
At 30th September, 2012
Disclosed within non-current liabilities
Disclosed within non-current assets
At 30th September, 2012
Accelerated
capital
allowances
£m
Note
Goodwill
and
intangible
assets
£m
Share-
based
payments
£m
Deferred
interest
£m
Trading
losses and
tax credits
£m
Pension
scheme
deficit
£m
–
22.9
22.9
(11.5)
(1.7)
–
–
–
(2.1)
–
7.6
–
7.6
(29.8)
(0.8)
–
–
–
1.3
3.1
0.1
(18.5)
0.5
(19.0)
(18.5)
25.4
39.3
64.7
2.5
(0.5)
–
–
0.8
1.9
0.6
70.0
27.8
42.2
4.9
(3.0)
–
–
8.6
(1.0)
(0.2)
(1.3)
78.0
30.4
47.6
78.0
–
(8.9)
(8.9)
(7.1)
0.1
(0.2)
–
–
–
–
(16.1)
(3.5)
(12.6)
(0.5)
–
(1.2)
–
–
–
–
–
(17.8)
(4.1)
(13.7)
(17.8)
–
(25.7)
(25.7)
(13.0)
1.9
–
–
–
–
–
(36.8)
–
(36.8)
(74.9)
3.0
–
–
–
–
–
1.5
–
(89.9)
(89.9)
–
2.3
–
–
–
–
(1.0)
(88.6)
(0.8)
(87.8)
72.1
1.5
–
–
–
0.2
1.5
0.5
(107.2)
(12.8)
–
(107.2)
(107.2)
–
(12.8)
(12.8)
11
11
38, 39
38, 39
16
17
19
Other
£m
0.3
(23.3)
(23.0)
(5.8)
0.2
Total
£m
25.7
(158.9)
(133.2)
(28.2)
1.1
–
(73.3)
(73.3)
6.7
(1.2)
(22.4)
(1.6)
(24.2)
6.6
–
–
–
–
–
–
0.9
6.6
0.8
(0.2)
0.5
(83.6)
(29.3)
(176.8)
–
0.3
23.8
(83.6)
(29.6)
(200.6)
7.9
(1.7)
(14.1)
8.5
–
–
2.0
–
(81.0)
(0.6)
(80.4)
(81.0)
6.0
0.2
1.8
–
0.1
1.2
–
(1.5)
(21.5)
(2.3)
(19.2)
(21.5)
(14.3)
(0.8)
(13.5)
8.5
8.7
1.7
6.4
(0.7)
(180.8)
23.9
(204.7)
(180.8)
The deferred tax assets disclosed in the Consolidated Statement of Financial Position in respect of deferred interest, tax losses and tax credits are
analysed as follows:
UK
North America
Australia
At 30th
September,
2012
£m
At 2nd
October,
2011
£m
At 3rd
October,
2010
£m
39.6
75.0
5.4
56.2
62.4
6.8
56.8
55.1
3.7
120.0
125.4
115.6
These losses have been recognised on the basis that the Directors are of the opinion based on recent and forecast trading, that sufficient suitable
taxable profits will be generated in the relevant territories in future accounting periods, such that it is considered probable that these assets will
be recovered. Of these assets none have an expiry date.
Included in the credit to income of £15.1 million (2011 £27.2 million, 2010 £31.2 million) is a charge of £9.3 million (2011 credit £1.2 million, 2010 credit
£0.5 million) relating to discontinued operations.
Included in Other deferred tax are deferred tax assets of £1.7 million (2011 £3.2 million, 2010 £3.4 million) in respect of capital losses and deferred tax
liabilities of £1.7 million (2010 £3.2 million, 2010 £6.6 million) in respect of revaluations and rolled over gains and £0.4 million (2011 asset £5.3 million,
2010 asset £3.6 million) in respect of financial instruments. The £1.9 million charge to equity (2011 credit of £1.7 million, 2010 £nil) relates entirely to
financial instruments.
Annual Report 2012
160
36) DEFERRED TAXATION – CONTINUED
There is an unrecognised deferred tax asset of £79.1 million (2011 £72.9 million, 2010 £89.2 million) which relates to revenue losses where there is
insufficient certainty that these losses will be utilised in the foreseeable future. Of these assets none have an expiry date. There is an additional
unprovided deferred tax asset relating to capital losses carried forward of £62.4 million (2011 £63.1 million, 2010 £42.2 million).
No deferred tax liability is recognised on temporary differences of £117.2 million (2011 £79.8 million, 2010 £68.2 million) relating to the unremitted
earnings of overseas subsidiaries as the Group is able to control the timing of the reversal of these temporary differences and it is probable that
they will not reverse in the foreseeable future. The temporary differences at 30th September, 2012 represent only the unremitted earnings of
those overseas subsidiaries where remittance to the UK of those earnings may still result in a tax liability, principally as a result of a dividend
withholding taxes levied by the overseas tax jurisdictions in which these subsidiaries operate.
37) CALLED UP SHARE CAPITAL
Ordinary shares of 12.5 pence each
‘A’ Ordinary Non-Voting Shares of 12.5 pence each
Ordinary shares
‘A’ Ordinary Non-Voting shares
Allotted, issued
and fully paid
At 30th
September,
2012
£m
Allotted, issued
and fully paid
At 2nd
October, 2011
£m
Allotted, issued
and fully paid
At 3rd
October, 2010
£m
2.5
46.6
49.1
2.5
46.6
49.1
2.5
46.6
49.1
Allotted, issued
and fully paid
At 30th
September,
2012
Number of
shares
Allotted, issued
and fully paid
As at 2nd
October, 2011
Number of
shares
Allotted, issued
and fully paid
As at 3rd
October, 2010
Number of
shares
19,886,472
19,886,472
19,886,472
373,073,648
372,774,648
372,696,648
392,960,120
392,661,120
392,583,120
The two classes of shares are equal in all respects, except that the ‘A’ Ordinary Non-Voting shares do not have voting rights and hence their
holders are not entitled to vote at general meetings of the Company.
During the year the Company disposed of 7,018,953 ‘A’ Ordinary Non-Voting shares, in order to satisfy incentive schemes. This represented 1.88%
of the called up ‘A’ Ordinary Non-Voting share capital at 30th September, 2012.
The Company also purchased 7,478,953 ‘A’ Ordinary Non-Voting shares having a nominal value of £934,869 to match obligations under
incentive plans. The consideration paid for these shares was £30.1 million. Shares repurchased during the period represented 2.0% of the called
up ‘A’ Ordinary Non-Voting share capital at 30th September, 2012.
At 30th September, 2012 options were outstanding under the terms of the Company’s 1997 and 2006 Executive Share Option Schemes,
together with nil cost options, over a total of 4,929,968 (2011 5,399,633, 2010 5,557,567) ‘A’ Ordinary Non-Voting shares.
Daily Mail and General Trust Plc Strategic Report
161
Directors’ Report
Governance
Financial Statements
161
52 weeks
ending 30th
September,
2012
£m
52 weeks
ending 2nd
October,
2011
£m
Note
12.7
0.8
13.5
12.5
0.2
12.7
1.1
1.1
3.3
(3.3)
–
–
–
–
7.0
–
4.6
0.2
(8.5)
3.3
43, (i)
25
38) RESERvES
Share premium account
At beginning of period
Issue of shares
At end of period
Capital redemption reserve
At beginning and end of period
Revaluation reserve
At beginning of period
Transfer to retained earnings
Fair value movement in available-for-sale assets
Fair value adjustment to contingent consideration
Transfer to Consolidated Income Statement on sale of Sanborn
At end of period
The revaluation reserve arose on the revaluation of the group’s available-for-sale investments. It includes £nil (2011 £3.3 million, 2010 £3.7 million)
in relation to historic property valuations originally recorded under UK GAAP. These properties are no longer held at fair value but the historic
revaluation amount will remain in the revaluation reserve until the properties are sold.
(i) During the year the Group transferred several of its investment properties to its pension scheme in an arm’s length transaction resulting in a
transfer of associated revaluation reserves of £3.3 million to retained earnings.
Shares held in treasury
At beginning of period
Purchase of own shares
Own shares released on vesting of share options
At end of period
52 weeks
ending 30th
September,
2012
£m
52 weeks
ending 2nd
October,
2011
£m
(46.3)
(30.1)
32.6
(43.8)
(45.0)
(11.7)
10.4
(46.3)
The Group’s investment in its own shares is classified within shareholders’ funds as shares held in treasury. At 30th September, 2012, this investment
comprised the cost of 10,188,174 ‘A’ Ordinary Non-Voting shares (2011 9,728,174 shares, 2010 9,577,814 shares). The market value of these shares at
30th September, 2012 was £49.1 million (2011 £35.3 million, 2010 £50.3 million).
Translation reserve
At beginning of period
Foreign exchange differences on translation of foreign operations
Translation reserves recycled to Consolidated Income Statement on disposals
Transfer of loss on cash flow hedges from translation reserve to Consolidated Income Statement
Change in fair value of cash flow hedges
Gain/(loss) on hedges of net investments in foreign operations
At end of period
Note
17
52 weeks
ending 30th
September,
2012
£m
52 weeks
ending 2nd
October,
2011
£m
(42.5)
(22.6)
(0.9)
2.1
1.9
29.4
(32.6)
(16.3)
7.3
(21.6)
4.1
(0.8)
(15.2)
(42.5)
The translation reserve arises on the translation into Sterling of the net assets of the Group’s foreign operations, offset by changes in fair value of
financial instruments used to hedge this exposure.
Annual Report 2012
162
52 weeks
ending 30th
September,
2012
£m
Note
52 weeks
ending 2nd
October,
2011
Restated
(note 2)
£m
50.5
257.2
(66.2)
(60.7)
12.5
(15.6)
–
3.3
(13.5)
0.1
0.4
5.4
–
173.4
84.4
108.5
(62.4)
(89.3)
16.9
(12.7)
(7.1)
–
(5.5)
0.5
–
15.8
1.4
50.5
12
34
41
(i)
36
36
38) RESERvES – CONTINUED
Retained earnings
At beginning of period
Net profit for the period
Dividends paid
Actuarial loss on defined benefit pension schemes
Credit to equity for share-based payments
Settlement of exercised share options of subsidiaries
Initial recording of put options granted to non-controlling interests in subsidiaries
Transfer from revaluation reserves following disposal of properties previously revalued
Adjustment to equity following increased stake in controlled entity
Adjustment to equity following decreased stake in controlled entity
Corporation tax on share based payments
Deferred tax on actuarial movement
Deferred tax on other items recognised directly in equity
At end of period
At end of period – Total Reserves
111.6
(21.2)
(i) £nil (2011 £7.1 million, 2010 £nil) representing the fair value of written put options granted to non-controlling interests in the year has been
recorded as a reduction in equity on initial recognition, as the arrangement represents a transaction with equity holders. Changes in fair
value after initial recognition are recorded in the Consolidated Income Statement.
39) NON-CONTROLLING INTERESTS
At beginning of period
Share of profit for the period
Dividends paid
Shares issued
Non-controlling interests arising from business combinations
Gain/(loss) on hedges of net investments in foreign operations
Transfer of loss on cash flow hedges to Consolidated Income Statement
Change in fair value of cash flow hedges
Foreign exchange differences on translation of foreign operations
Actuarial loss on defined benefit pension schemes
Credit to equity for share-based payments
Deferred tax on actuarial movement
Deferred tax on other items recognised directly in equity
Current tax on items recognised in equity
Adjustment to non-controlling interest following decreased stake in controlled entity
Adjustment to non-controlling interest following increased stake in controlled entity
Other transactions with non-controlling interests
Initial recording of put options granted to non-controlling interests in subsidiaries
At end of period
52 weeks
ending 30th
September,
2012
£m
52 weeks
ending 2nd
October,
2011
£m
Note
16
34
41
36
36
80.3
22.7
(9.6)
1.5
–
1.9
1.5
1.2
(3.8)
(1.1)
0.7
0.2
(0.6)
0.2
(0.1)
(0.6)
0.9
–
95.3
57.4
15.9
(7.8)
1.9
6.0
(1.9)
2.7
(0.4)
3.1
(0.3)
2.7
–
0.4
(0.5)
4.3
–
(3.2)
80.3
Daily Mail and General Trust Plc Strategic Report
163
Directors’ Report
Governance
Financial Statements
163
40) COMMITMENTS AND CONTINGENT LIABILITIES
Commitments
Property, plant and equipment
Contracted but not provided in the financial statements
At 30th
September,
2012
£m
At 2nd
October,
2011
£m
At 3rd
October,
2010
£m
0.7
17.4
–
At 30th September, 2012 the Group had outstanding capital commitments relating to the construction of a new printing operation in Thurrock, Essex.
At 30th September, 2012 the Group had outstanding commitments for future minimum lease payments under non-cancellable operating
leases, which fall due as follows:
Within one year
Between one and two years
Between two and five years
After five years
At 30th
September,
2012
Properties
£m
At 2nd
October,
2011
Properties
£m
At 3rd
October,
2010
Properties
£m
At 30th
September,
2012
Plant and
equipment
£m
At 2nd
October,
2011
Plant and
equipment
£m
At 3rd
October,
2010
Plant and
equipment
£m
20.1
16.9
33.8
26.7
97.5
28.2
24.8
59.7
74.9
187.6
25.6
22.3
55.7
71.5
175.1
5.9
5.1
3.4
–
14.4
7.3
5.8
7.1
–
20.2
3.7
2.4
2.7
–
8.8
The Group’s most significant leasing arrangements relate to rented properties. The Group negotiates lease contracts according to the Group’s
needs with a view to balancing stability and security of tenure and lease terms with the risk of entering into excessively long or onerous
arrangements. Of the Group’s rented properties, the most significant commitment relates to the head office premises at 2 Derry Street, London
W8 5TT. This lease expires on 25th December, 2022.
Commitments in relation to properties as at 30th September, 2012 have been restated to exclude future payments under non-cancellable
agreements made to secure venues for future events and exhibitions which are separately disclosed below.
Within one year
Between one and two years
Between two and five years
After five years
At 30th
September,
2012
£m
At 2nd
October,
2011
£m
At 3rd
October,
2010
£m
12.6
1.3
0.8
–
14.7
10.3
2.4
0.2
–
12.9
9.7
2.6
1.7
0.1
14.1
The Group entered into arrangements with its ink suppliers to obtain ink for the period to September 2018 at competitive prices and to secure
supply. At the year end, the commitment to purchase ink over this period was £76.8 million (2011 £91.2 million, 2010 £109.6 million).
The Group has entered into agreements with certain printers for periods up to 2022 at competitive prices and to secure supply. At the year end,
the commitment to purchase printing capacity over this period was £68.6 million (2011 £100.5 million, 2010 £130.8 million).
Contingent liabilities
As set out in note 34 the Group has issued standby letters of credit in favour of the Trustees of the Group’s defined benefit pension fund
amounting to £nil (2011 £53.6 million, 2010 £54.5 million) together with other guarantees of £2.4 million (2011 £9.3 million, 2010 £8.1 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 when incurred and provides for any settlement costs when such an outcome is judged
probable.
Four writs claiming damages for libel were issued in Malaysia against the company and three of its employees in respect of an article published
in one of the company’s magazines, International Commercial Litigation, in November 1995. The writs were served on Euromoney Institutional
Investor PLC (Euromoney) on 22nd October, 1996. Two of these writs have been discontinued. The total outstanding amount claimed on the
two remaining writs is Malaysian Ringgits 82.3 million (£16.6 million) (2011 Malaysian Ringgits 82.0 million (£16.5 million)). No provision has been
made for these claims in these financial statements as the Directors do not believe Euromoney has any material liability in respect of these writs.
Annual Report 2012 164
41) SHARE-BASED PAYMENTS
The Group offers a number of share-based remuneration schemes to Directors and certain employees. The principal schemes comprise share
options under the DMGT, Euromoney and within DMG Information, Risk Management Solutions (RMS), Genscape and Trepp Executive Share
Option Schemes (ESOS), the Euromoney Capital Appreciation Plan and the Company’s LTIP. Share options are exercisable after three years,
subject in some cases to the satisfaction of performance conditions, and up to 10 years from the date of grant at a price equivalent to the
market value of the respective shares at the date of grant at a price equivalent to the market value of the respective shares at the date of
grant. Details of the performance conditions relating to the DMGT schemes are explained in the Remuneration Report on pages 71 and 76.
For equity-settled share-based payment transactions, IFRS 2 applies to grants of shares, share options or other equity instruments made after
7th November, 2002 that had not vested by 1st January, 2005.
The charge to the Consolidated Income Statement is as follows:
Division
DMGT
RMS
Euromoney
Others – principally Business information
Scheme
Executive Share Option Scheme
Executive Bonuses
Long-Term Incentive Plan
Capital Appreciation Plan
52 weeks
ending 30th
September,
2012
£m
52 weeks
ending 2nd
October,
2011
£m
52 weeks
ending 3rd
October,
2010
£m
0.3
0.5
1.9
6.6
2.3
1.6
–
0.9
1.2
7.3
8.1
1.9
0.6
1.9
1.5
6.9
2.0
2.8
13.2
19.4
15.7
The fair value of share options for each of these schemes was determined using a Black-Scholes model. Full details of inputs to the models,
particular to each scheme, are set out below. With respect to all schemes, the share price volatility has been estimated, based upon relevant
historic data in respect of the DMGT ‘A’ Ordinary share prices.
Expected volatility has been estimated, based upon relevant historic data in respect of the DMGT ‘A’ Ordinary share price. The expected life
used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability.
The Group did not re-price any of its outstanding options during the year.
Further details of the Group’s schemes are set out below:
DMGT 1997 Executive Share Option Scheme
Details of the terms and conditions relating to this scheme are set out in the Remuneration Report on page 73.
Outstanding at 2nd October, 2011
Forfeited during the year
Outstanding at 30th September, 2012
Exercisable at 30th September, 2012
Exercisable at 2nd October, 2011
52 weeks
ending 30th
September,
2012
Weighted
average
exercise
price
£
6.43
6.42
6.44
–
–
52 weeks
ending 2nd
October,
2011
Number of
share options
1,815,807
(78,062)
1,737,745
–
–
52 weeks
ending 2nd
October,
2011
Weighted
average
exercise
price
£
6.43
6.38
6.43
–
–
52 weeks
ending 3rd
October,
2010
Number of
share options
2,172,807
(357,000)
1,815,807
–
–
52 weeks
ending 3rd
October,
2010
Weighted
average
exercise
price
£
6.43
6.43
6.43
–
–
52 weeks
ending 30th
September,
2012
Number of
share options
1,737,745
(336,265)
1,401,480
–
–
No share options were granted or exercised during the year.
The options outstanding at 30 September, 2012 had a weighted average remaining contractual life of 1.3 years (2011 2.3 years, 2010 3.3 years).
Daily Mail and General Trust Plc Strategic Report
165
Directors’ Report
Governance
Financial Statements
165
41) SHARE-BASED PAYMENTS – CONTINUED
Options under the DMGT 1997 Executive Share Option Scheme Continued
The inputs into the Black-Scholes model for options, granted since 7th November 2002, are as follows:
Date of Grant
Market value of shares at date of grant (£)
Option price (£)
Number of share options outstanding
Term of option (years)
Assumed period of exercise after vesting (years)
Exercise price (£)
Risk-free rate (%)
Change in fair value of cash flow hedges
Volatility (%)
Fair value per option (£)
16th
December,
2002
2nd January,
2003
8th
December,
2003
6th
December,
2004
5.73
5.73
5.82
5.82
6.08
6.08
7.24
7.24
378,530
32,000
434,242
556,708
10.00
6.50
5.73
5.00
1.61
20.00
1.35
10.00
6.50
5.82
5.00
1.58
20.00
1.37
10.00
6.50
6.08
4.80
1.65
20.00
1.43
10.00
6.50
7.24
4.50
1.52
20.00
1.70
DMGT 2006 Executive Share Option Scheme
Details of the terms and conditions relating to this scheme are set out in the Remuneration Report on page 72.
Outstanding at 2nd October, 2011
Granted during the year
Forfeited during the year
Exercised during the year
Expired during the year
Outstanding at 30th September, 2012
Exercisable at 30th September, 2012
Exercisable at 2nd October, 2011
52 weeks
ending 30th
September,
2012
Weighted
average
exercise
price
£
4.73
3.96
5.91
2.96
52 weeks
ending 30th
September,
2012
Number of
share options
2,394,074
370,000
(164,000)
(299,000)
266,000
(48,000)
(221,703)
–
–
(174,183)
2,301,074
1,183,647
1,100,647
4.59
5.15
5.97
2,394,074
1,100,647
838,579
52 weeks
ending 2nd
October,
2011
Weighted
average
exercise
price
£
52 weeks
ending 3rd
October,
2010
Number of
share options
52 weeks
ending 3rd
October,
2010
Weighted
average
exercise
price
£
52 weeks
ending 2nd
October,
2011
Number of
share options
2,571,960
4.74
2,931,954
5.39
3.56
5.62
5.05
491,427
(30,000)
(333,500)
(487,921)
4.73
2,571,960
5.97
6.47
838,579
551,000
5.43
4.04
2.50
6.80
6.88
4.74
6.47
6.83
Options were forfeited by leavers during the period.
The options outstanding at 30th September, 2012 had a weighted average remaining contractual life of 6.5 years (2011 6.8 years, 2010 7.4 years).
The aggregate of the estimated fair values of the options granted during the year is £0.3 million (2011 £0.3 million, 2010 £0.6 million).
The inputs into the Black-Scholes model are as follows:
Date of grant
Market value of shares at date of grant (£)
Option price (£)
Number of share options outstanding
Term of option (years)
Assumed period of exercise after vesting (years)
Exercise price (£)
Risk-free rate (%)
Expected dividend yield (%)
Volatility (%)
Fair value per option (£)
31st March,
2006 5th July, 2006
27th
November,
2006
17th
December,
2007
6.98
6.98
6.11
6.11
6.88
6.88
5.05
5.05
27th May,
2008
4.02
4.02
24th
November,
2008
2.50
2.50
246,376
52,000
249,500
275,771
35,000
205,000
10.00
10.00
10.00
10.00
10.00
10.00
7.00
6.98
4.50
1.72
20.00
1.53
7.00
6.11
4.80
2.01
20.00
1.44
7.00
6.88
4.30
1.90
20.00
1.51
7.00
5.05
4.30
2.84
20.00
1.18
7.00
4.02
4.30
3.66
20.00
0.92
7.00
2.50
3.00
5.89
40.00
0.56
Annual Report 2012 166
41) SHARE-BASED PAYMENTS – CONTINUED
Date of grant
Market value of shares at date of grant (£)
Option price (£)
Number of share options outstanding
Term of option (years)
Assumed period of exercise after vesting (years)
Exercise price (£)
Risk-free rate (%)
Expected dividend yield (%)
Volatility (%)
Fair value per option (£)
26th January,
2009
14th
December,
2009
6th
December,
2010
5th
December,
2011
2.53
2.53
4.04
4.04
5.39
5.39
3.98
3.98
27th June
2012
3.91
3.91
120,000
481,427
266,000
270,000
100,000
10.00
10.00
10.00
10.00
10.00
7.00
2.53
3.00
5.81
40.00
0.56
7.00
4.04
3.00
3.64
40.00
1.13
7.00
5.39
2.00
2.97
30.00
1.22
7.00
3.98
1.50
4.27
30.00
0.71
7.00
3.91
1.00
4.43
30.00
0.70
Nil-Cost Options under the DMGT Executive Bonus Scheme
Since December 2009, half of the Executive Bonus paid to the executive Directors has been deferred into shares in the form of nil-cost options
which cannot be exercised for at least three years. These options are to the value of the equity portion of the bonus and are fully expensed in
the year in which they are earned. A portion of the bonus earned by Directors under the Scheme in the current year will also be deferred into
shares in the form of nil-cost options. The cash portion of the bonus is included in the remuneration table on page 79 of the Remuneration
Report. The total bonus is calculated in accordance with the scheme rules, as set out on page 76 of the Remuneration Report.
Outstanding at 2nd October, 2011
Granted during the year
Exercised during the year
Outstanding at 30th September, 2012
Exercisable at 30th September, 2012
Exercisable at 2nd October, 2011
52 weeks
ending 30th
September,
2012
Weighted
average
exercise
price
£
–
–
–
–
–
–
52 weeks
ending 2nd
October,
2011
Number of
share options
429,625
678,013
(156,193)
951,445
–
–
52 weeks
ending 2nd
October,
2011
Weighted
average
exercise
price
£
–
–
–
–
–
–
52 weeks
ending 3rd
October,
2010
Number of
share options
–
429,625
–
429,625
–
–
52 weeks
ending 3rd
October,
2010
Weighted
average
exercise
price
£
–
–
–
–
–
–
52 weeks
ending 30th
September,
2012
Number of
share options
951,445
275,949
–
1,227,394
–
–
No share options expired or were forfeited during the year.
827,414 of these outstanding options are grants to Directors, as shown in the Remuneration Report. A further 400,000 options are outstanding to
a former senior executive, other than a Director, including a grant of 80,000 options during the year which will vest in February 2013.
DMGT Long-Term Incentive Plan
Details of the terms and conditions relating to this scheme are set out in the Remuneration Report on pages 71 to 73.
Outstanding at 2nd October, 2011
Granted during the year
Exercised during the year
Expired during the year
Outstanding at 30th September, 2012
Exercisable at 30th September, 2012
Exercisable at 2nd October, 2011
No share awards were forfeited during the year.
52 weeks
ending 30th
September,
2012
Weighted
average
exercise
price
£
52 weeks
ending 2nd
October,
2011
Number of
share options
52 weeks
ending 2nd
October,
2011
Weighted
average
exercise
price
£
5.14
4.37
1,637,225
595,695
52 weeks
ending 30th
September,
2012
Number of
share options
1,555,853
643,614
–
–
(356,890)
(73,202)
2,126,265
7.06
4.84
(320,177)
1,555,853
–
–
–
–
–
–
52 weeks
ending 3rd
October,
2010
Weighted
average
exercise
price
£
5.76
4.04
6.52
4.70
4.92
–
–
52 weeks
ending 3rd
October,
2010
Number of
share options
1,200,516
1,031,709
(131,493)
(463,507)
1,637,225
–
–
4.92
5.59
5.17
4.81
5.14
–
–
Daily Mail and General Trust Plc Strategic Report
167
Directors’ Report
Governance
Financial Statements
167
41) SHARE-BASED PAYMENTS – CONTINUED
The awards outstanding at 30th September, 2012 had a weighted average remaining contractual life of 2.2 years (2011 2.3 years, 2010 2.6 years).
The aggregate of the estimated fair values of the awards made during the year is £2.8 million (2011 £3.3 million, 2010 £4.2 million).
Options under the DMGT Long-Term Incentive Scheme
The inputs into the Black-Scholes model are as follows:
Date of grant
Market value of shares at date of grant (£)
Option price (£)
Number of share options outstanding
Term of option (years)
Assumed period of exercise after vesting (years)
Exercise price (£)
Risk-free rate (%)
Expected dividend yield (%)
Volatility (%)
Fair value per option (£)
Date of grant
Market value of shares at date of grant (£)
Option price (£)
Number of share options outstanding
Term of option (years)
Assumed period of exercise after vesting (years)
Exercise price (£)
Risk-free rate (%)
Expected dividend yield (%)
Volatility (%)
Fair value per option (£)
Date of grant
Market value of shares at date of grant (£)
Option price (£)
Number of share options outstanding
Term of option (years)
Assumed period of exercise after vesting (years)
Exercise price (£)
Risk-free rate (%)
Expected dividend yield (%)
Volatility (%)
Fair value per option (£)
1st January,
2006
1st January,
2007
19th
December,
2009
19th
December,
2009
19th
December,
2009
7.88
7.88
7.17
7.17
4.04
4.04
4.04
4.04
4.04
4.04
77,137
89,101
244,853
122,427
122,425
5.00
–
Nil
4.50
1.52
20.00
5.99
5.00
–
Nil
4.30
1.82
20.00
5.45
2.80
–
Nil
3.00
3.64
40.00
4.04
3.00
–
Nil
3.00
3.64
40.00
4.04
4.00
–
Nil
3.00
3.64
40.00
4.04
19th
December,
2009
19th
December,
2009
20th
December,
2010
20th
December,
2010
20th
December,
2010
4.04
4.04
4.04
4.04
5.59
5.59
5.59
5.59
5.59
5.59
119,159
119,159
192,758
96,379
93,944
5.00
–
Nil
3.00
3.64
40.00
4.04
6.00
–
Nil
3.00
3.64
40.00
4.04
2.78
–
Nil
3.00
2.86
30.00
5.59
3.00
–
Nil
3.00
2.86
30.00
5.59
4.00
–
Nil
3.00
2.86
30.00
5.59
20th
December,
2010
20th
December,
2010
1st January,
2011
5.59
5.59
5.59
5.59
5.74
5.74
13th
February,
2012
4.37
4.37
93,944
93,944
17,421
643,614
5.00
–
Nil
3.00
2.86
30.00
5.59
6.01
–
Nil
2.00
2.86
30.00
5.59
3.00
–
Nil
1.50
2.97
30.00
5.74
5.00
–
Nil
1.00
3.89
30.00
4.37
Annual Report 2012 168
41) SHARE-BASED PAYMENTS – CONTINUED
RMS options plan
RMS options were granted at market value. The options become exercisable after a four-year vesting period and lapse 10 years and five years
from grant date under the 2001 and 2005 option plan respectively. Previously, the stock issued under the plan was subject to a nine-month
holding period, which has been subsequently removed during 2007. The stock issued under the plan is subject to put or call options where DMGT
has the right to settle in DMGT ‘A’ Ordinary Shares or cash. The options plan classification changed from a cash-settled plan in June 2005 to an
equity-settled plan following this change of settlement feature of stock issued under the plan. After 30th September, 2011 options under the
2001 and 2005 plan will no longer be awarded.
During fiscal year 2011 RMS introduced the Executive Incentive Plan (EIP) and the Long-Term Incentive Plan (LTIP). Under the EIP options and
Restricted Stock Units (RSU) were awarded to Senior Management. Under the LTIP RSUs were awarded to key employees. The options and RSUs
were granted at market value under both plans. The options vest based on the conditions of time and company performance at three and
five years from date of grant. The options lapse after seven years from grant date. The RSUs under both plans vest annually over three years.
RSU expense is determined by the fair market value of RMS stock at the date of grant. The expense is amortised using an accelerated method.
Under this method the RSUs are equally allocated to each of the three annual vesting components and the related expense is amortised over
12, 24, and 36 months respectively.
Outstanding at 2nd October, 2011
Granted during the year
Forfeited during the year
Exercised during the year
Expired during the year
Outstanding at 30th September, 2012
Exercisable at 30th September, 2012
Exercisable at 2nd October, 2011
52 weeks
ending 30th
September,
2012
Weighted
average
exercise
price
US$
45.67
52.27
46.59
44.17
36.39
46.59
45.86
44.71
52 weeks
ending 2nd
October,
2011
Number of
share options
3,878,417
1,569,073
(244,079)
(633,121)
–
4,570,290
2,265,976
1,763,341
52 weeks
ending 2nd
October,
2011
Weighted
average
exercise
price
US$
43.52
46.89
46.66
36.89
–
45.67
44.71
40.78
52 weeks
ending 3rd
October,
2010
Number of
share options
3,003,397
1,156,877
(81,521)
(200,336)
–
3,878,417
1,763,341
1,015,951
52 weeks
ending 3rd
October,
2010
Weighted
average
exercise
price
US$
42.12
45.25
45.87
29.63
43.52
40.78
35.64
52 weeks
ending 30th
September,
2012
Number of
share options
4,570,290
132,682
(420,694)
(1,383,549)
(8,167)
2,890,562
1,134,841
2,265,976
The weighted average share price at the date of exercise for share options exercised during the year was US$52.27 (2011 US$46.89, 2010 US$45.25).
The options outstanding at 30th September, 2012 had a weighted average exercise price of US$45.86 (2011 US$45.67, 2010 US$43.52) and a
weighted average remaining contractual life of 3.27 years (2011 4.06 years, 2010 5.05 years).
The aggregate of the estimated fair values of the options granted during the year is US$18.2 million (2011 US$15.3 million, 2010 US$11.6 million).
The inputs into the Black-Scholes model are as follows:
Date of grant
Market value of shares at date of grant (US$)
Option price (US$)
Number of share options outstanding
Term of option (years)
Assumed period of exercise after vesting (years)
Exercise price (US$)
Risk-free rate (%)
Expected dividend yield (%)
Volatility (%)
Fair value per option (US$)
During 2003
During 2004
During 2005
During 2007
During 2008
5.56
5.56
2,075
1.67
6-9
5.56
4.00
2.00
35.00
21.38
9.13
9.13
5,939
2.67
6-9
9.13
4.00
2.00
35.00
17.91
16.61
16.61
8,938
3.67
6-9
16.61
4.00
2.00
35.00
12.53
36.39
36.39
2,500
3.80
6-9
36.39
4.67
2.00
35.00
10.29
45.43
45.43
264,728
3.80
6-9
45.43
4.10
2.00
29.00
10.69
Daily Mail and General Trust Plc Strategic Report
169
Directors’ Report
Governance
Financial Statements
169
41) SHARE-BASED PAYMENTS – CONTINUED
Date of grant
Market value of shares at date of grant (US$)
Option price (US$)
Number of share options outstanding
Term of option (years)
Assumed period of exercise after vesting (years)
Exercise price (US$)
Risk-free rate (%)
Expected dividend yield (%)
Volatility (%)
Fair value per option (US$)
During 2009
During 2010
During 2011
During 2012
47.81
47.81
45.25
45.25
46.89
46.89
52.27
52.27
504,839
645,257
1,324,004
132,282
3.80
6-9
47.81
2.20
2.50
29.32
9.59
3.80
6-9
45.25
1.78
2.63
36.58
10.93
4.30
6-9
46.89
2.27
3.05
33.00
10.08
4.75
6-9
52.27
1.25
3.05
35.15
10.08
Expected volatility was determined by calculating the historical volatility of comparable companies.
Euromoney Capital Appreciation Plan 2010 (CAP 2010)
The CAP 2010 executive share option scheme was approved by shareholders on 21st January, 2010. Each CAP 2010 award comprises two equal
elements – an option to subscribe for ordinary shares of 0.25p each in the company at an exercise price of 0.25p per ordinary share, and a right
to receive a cash payment. The awards will vest in two equal tranches. The first tranche of awards will become exercisable on satisfaction of the
primary performance condition, but no earlier than February 2013 and lapse to the extent unexercised by 30th September, 2020. The second
tranche of awards becomes exercisable in the February following a subsequent financial year in which adjusted pre-tax profits of the Euromoney
Group again equal or exceed £100.0 million (increased to £105.0 million following the acquisition of NDR), but no earlier than February, 2014.
The second tranche only vests on satisfaction of the primary performance condition and an additional performance condition. The number of
options received under the share award of the CAP 2010 is reduced by the number of options vesting with participants from the 2010 Company
Share Option Plan (see below). The primary performance condition was achieved in the 2011 financial year, two years earlier than expected,
when adjusted pre-tax profits were £101.3 million. However, the internal rules of the plan prevent the awards vesting more than one year early so
although the primary condition has been achieved the award pool will be allocated between the holders of outstanding awards by reference
to their contribution to the growth in profits of the Group from the 2009 base year to the profits achieved in the 2012 financial year and these
awards are expected to become exercisable in February, 2013.
The CAP 2010 options were valued using a fair value model that adjusted the share price at the date of grant for the net present value of expected
future dividend streams up to the date of expected exercise. The expected term of the option used in the models has been adjusted, based on
management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.
Outstanding at 2nd October, 2011
Granted during the year
Outstanding at 30th September, 2012
Exercisable at 30th September, 2012
Exercisable at 2nd October, 2011
52 weeks
ending 30th
September,
2012
Weighted
average
exercise
price
£
52 weeks
ending 2nd
October,
2011
Number of
share options
52 weeks
ending 2nd
October,
2011
Weighted
average
exercise
price
£
52 weeks
ending 3rd
October,
2010
Number of
share options
52 weeks
ending 30th
September,
2012
Number of
share options
2,719,801
0.0025
2,719,801
0.0025
–
–
–
–
–
2,719,801
2,719,801
0.0025
2,719,801
0.0025
2,719,801
–
–
–
–
–
–
–
–
–
–
52 weeks
ending 3rd
October,
2010
Weighted
average
exercise
price
£
–
0.0025
0.0025
–
–
The weighted average share price at the date of exercise for share options exercised during the year was £nil (2011 £nil, 2010 £nil).
The options outstanding at 30 September, 2012 had a weighted average exercise price of £0.0025 (2011 £0.0025, 2010 £0.0025) and a weighted
average remaining contractual life of 8.0 years (2011 9.0 years, 2010 10.0 years).
The aggregate of the estimated fair values of the options granted during the year is £nil (2011 £nil, 2010 £11.6 million).
Annual Report 2012 170
30th March,
2010
30th March,
2010
501.00
0.25
501.00
0.25
969,305
1,750,496
10.00
10.00
4.00
0.25
2.28
7.00
4.37
5.00
0.25
2.75
7.00
4.20
41) SHARE-BASED PAYMENTS – CONTINUED
The inputs into the Black-Scholes model are as follows:
Date of grant
Market value of shares at date of grant (p)
Option price (p)
Number of share options outstanding
Term of option (years)
Assumed period of exercise after vesting (years)
Exercise price (p)
Risk-free rate (%)
Expected dividend yield (%)
Fair value per option (p)
Company Share Option Plan (CSOP 2010)
In parallel with the CAP 2010, the shareholders approved the CSOP 2010 UK and Canada at the AGM on 21st January, 2010. The CSOP 2010 UK
was approved by HM Revenue and Customs on 21st June, 2010 and granted on 28th June, 2010. The CSOP 2010 UK option enables each
participant to purchase up to 4,972 shares in the company at a price of £6.03 per share, the market value at the date of grant. The options will
vest and become exercisable at the same time as the corresponding share award under the CAP 2010 providing the CSOP option is in the
money at that time and does not vest before 28th June, 2013. The CSOP 2010 Canada, granted on 30th March, 2010, enables each participant
to purchase up to 19,960 shares in the company at a price of £5.01 per share, the market value at the date of grant. No option may vest after
the date falling three months after the preliminary announcement of the results for the financial year ended 30th September, 2019 and the
option shall lapse to the extent unvested at the time. The CSOP has the same performance criteria as that of the CAP 2010 as set out above.
The number of CSOP 2010 awards that vest proportionally reduce the number of shares that vest under the CAP 2010, the CSOP effectively a
delivery mechanism for part of the CAP 2010 award. The CSOP 2010 option exercise price of £6.03 (UK) and £5.01 (Canada) will be satisfied by
a funding award mechanism and results in the same net gain on the CSOP options (calculated as the market price of the company’s shares at
the date of exercise less the exercise price multiplied by the number of options exercised) delivered in the equivalent number of shares to
participants as if the award had been delivered using £0.0025 CAP options.
Outstanding at 2nd October, 2011
Granted during the year
Outstanding at 30th September, 2012
Exercisable at 30th September, 2012
Exercisable at 2nd October, 2011
52 weeks
ending 30th
September,
2012
Weighted
average
exercise
price
£
52 weeks
ending 2nd
October,
2011
Number of
share options
52 weeks
ending 2nd
October,
2011
Weighted
average
exercise
price
£
52 weeks
ending 3rd
October,
2010
Number of
share options
52 weeks
ending 30th
September,
2012
Number of
share options
781,191
5.7200
781,191
5.7200
–
–
–
–
–
781,191
5.7200
781,191
5.7200
–
–
–
–
–
–
–
–
781,191
781,191
–
–
52 weeks
ending 3rd
October,
2010
Weighted
average
exercise
price
£
–
5.7200
5.7200
–
–
The weighted average share price at the date of exercise for share options exercised during the year was £nil (2011 £nil, 2010 £nil).
The options outstanding at 30th September, 2012 had a weighted average exercise price of £5.72 (2011 £5.72, 2010 £5.72) and a weighted
average remaining contractual life of 7.38 years (2011 8.38 years, 2010 9.38 years).
The aggregate of the estimated fair values of the options granted during the year is £nil (2010 £nil, 2010 £3.4 million).
Daily Mail and General Trust Plc Strategic Report
171
Directors’ Report
Governance
Financial Statements
171
28th June,
2010
30th March,
2010
603.34
603.34
501.00
501.00
541,671
239,520
9.38
3.00
10.00
3.00
603.34
501.00
2.28
7.00
2.28
7.00
437.00
437.00
41) SHARE-BASED PAYMENTS – CONTINUED
The inputs into the Black-Scholes model are as follows:
Date of grant
Market value of shares at date of grant (p)
Option price (p) *
Number of share options outstanding
Term of option (years)
Assumed period of exercise after vesting (years)
Exercise price (p)
Risk-free rate (%)
Expected dividend yield (%)
Fair value per option (p)
The number of CSOP 2010 awards that vest proportionally reduce the number of shares that vest under the CAP 2010, the CSOP effectively a
delivery mechanism for part of the CAP 2010 award. The CSOP 2010 options have an exercise price of £6.03 (1), which will be satisfied by a
funding award mechanism which results in the same net gain (2) on these options delivered in the equivalent number of shares to participants
as if the same award had been delivered using £0.0025 CAP options. The amount of the funding award will depend on the company’s share
price at the date of exercise. Because of the above and the other direct links between the CSOP 2010 and the CAP 2010, including the
identical performance criteria, IFRS 2 ‘Share-based payments’ combines the two plans and treats them as one plan (vesting in two tranches).
As such the long-term incentive expense recognised in the year for the CSOP 2010 and CAP 2010 options (including the charge in relation to
the cash element) was £8.1 million (2011 £15.9 million).
1. Exercise price of Canadian CSOP is £5.01.
2. Net gain on the CSOP options is the market price of the company’s shares at the date of exercise less the exercise price (£6.031) multiplied by
the number of options exercised.
* Exercise price excludes the effect of the funding award.
Cash-settled options
Euromoney has liabilities in respect of three share option schemes that are classified by IFRS 2 ‘Share-based payments’ as cash-settled. These
consist of the cash element of the CAP 2010 scheme, options held by employees over new equity shares in Internet Securities Inc., a subsidiary
of the Group, and, from 2011, options held by employees over equity shares in Structured Retail Products Limited (previously Arete Consulting
Limited), a subsidiary of the Group. The total carrying value at 30th September, 2012 included in the Statement of Financial Position is a liability of
£14.6 million (2011 £10.3 million). Of these schemes, options with an intrinsic value of £3,000 (2011 £7,000) had vested but are not yet exercised.
The Euromoney Capital Appreciation Plan 2004 (CAP 2004)
The CAP 2004 executive share option scheme was approved by shareholders on 1st February, 2005. Each of the CAP awards comprises an
option to subscribe for ordinary shares of 0.25p each in the company for an exercise price of 0.25p per ordinary share. The awards become
exercisable on satisfaction of certain performance conditions and lapse to the extent unexercised on 30th September, 2014. The initial
performance condition was achieved in the financial year 2007 and the option pool (a maximum of 7.5 million shares) was allocated between
the holders of outstanding awards. One third of the awards vested immediately. The primary performance target was achieved again in 2008
and, after applying the additional performance condition, 2,241,269 options from the second tranche of options vested in February 2009. The
primary performance target was also achieved in 2009 and 1,527,152 options (including a true-up adjustment of 5,654) for the third (final)
tranche of options in 2009 vested in February 2010. The additional performance condition was applied again to profits for the 2010 financial
year for those individual participants where the additional performance conditions for the second and final tranches had not been met
303,321 and 244,152 options vested in February, 2011 and February, 2012 respectively. For individual participants’ businesses where the
additional performance conditions for the second and final tranche have not been met, the vesting is deferred until the profits are at least 75%
of that achieved in 2007 but no later than by reference to the year ending 30th September, 2012. The Directors estimate 54,599 of options will
vest in February 2013 following satisfaction of the additional performance test.
Annual Report 2012
172
41) SHARE-BASED PAYMENTS – CONTINUED
The CAP options were valued using a fair value model that adjusted the share price at the date of the grant for the net present value of
expected future dividend streams up to the date of the expected exercise.
Outstanding at 2nd October, 2011
Granted during the year
Forfeited during the year
Exercised during the year
Expired during the year
Outstanding at 30th September, 2012
Exercisable at 30th September, 2012
Exercisable at 2nd October, 2011
52 weeks
ending 30th
September,
2012
Weighted
average
exercise
price
£
0.0025
0.0025
0.0025
7.3300
0.0025
0.0025
0.0025
0.0025
52 weeks
ending 30th
September,
2012
Number of
share options
351,828
–
–
(245,469)
(36,245)
70,114
70,114
351,828
52 weeks
ending 2nd
October,
2011
Weighted
average
exercise
price
£
52 weeks
ending 3rd
October,
2010
Number of
share options
0.0025
1,754,937
0.0025
0.0025
308,975
(815)
52 weeks
ending 2nd
October,
2011
Number of
share options
335,606
334,997
–
(313,765)
7.2700
(1,727,491)
52 weeks
ending 3rd
October,
2010
Weighted
average
exercise
price
£
0.0025
0.0025
0.0025
4.7300
(5,010)
351,828
351,828
335,606
0.0025
0.0025
0.0025
335,606
335,606
0.0025
1,754,937
0.0025
0.0025
0.0025
–
–
The weighted average share price at the date of exercise for share options exercised during the year was £7.33 (2011 £7.27, 2010 £4.73).
The options outstanding at 30th September, 2012 had a weighted average exercise price of £0.0025 (2011 £0.0025, 2010 £0.0025) and a
weighted average remaining contractual life of 2.0 years (2011 3.0 years, 2010 4.0 years).
The aggregate of the estimated fair values of the options granted during the year is £0.2 million (2011 £1.0 million, 2010 £0.9 million).
The inputs into the Black-Scholes model are as follows:
Date of grant
Market value of shares at date of grant (p)
Option price (p)
Number of share options outstanding
Term of option (years)
Assumed period of exercise after vesting (years)
Exercise price (p)
Risk-free rate (%)
Dividend growth (%)
Fair value per option (p)
Tranche 1
20th June,
2005
401.00
0.25
421
10.00
3.28
0.25
5.00
8.44
Tranche 3
20th June,
2005
401.00
0.25
69,693
10.00
5.53
0.25
5.00
8.44
328.00
282.00
42) ULTIMATE HOLDING COMPANY
The Company’s ultimate holding company and immediate parent company is Rothermere Continuation Limited, a company incorporated
in Bermuda.
43) 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.
The following transactions and arrangements are those which are considered to have had a material effect on the financial performance and
position of the Group for the period.
Ultimate Controlling Party
The Company’s ultimate controlling party is the Viscount Rothermere, the Company’s Chairman. Transactions relating to the remuneration and
shareholdings of the Viscount Rothermere are given in the Remuneration Report.
Transactions with Directors
There were no material transactions with Directors of the Company during the year, except for those relating to remuneration and
shareholdings, disclosed in the Remuneration Report.
For the purposes of IAS 24, Related Party Disclosures, Executives below the level of the Company’s Board are not regarded as related parties.
Daily Mail and General Trust Plc Strategic Report
173
Directors’ Report
Governance
Financial Statements
173
43) RELATED PARTY TRANSACTIONS – CONTINUED
The remuneration of the Directors at the year end, who are the key management personnel of the Group, is set out below in aggregate for
each of the categories specified in IAS 24. Further information about the individual Directors’ remuneration is provided in the audited part of
the Directors’ Remuneration Report on pages 78 to 80.
Short-term employee benefits
Other long-term benefits
Share-based payments
Post employment benefits
52 weeks
ending 30th
September,
2012
£m
52 weeks
ending 2nd
October,
2011
£m
6.7
6.9
1.6
0.2
6.9
6.5
2.0
0.3
15.4
15.7
There were no termination charges in 2012 or 2011.
Transactions with joint ventures and associates
Associated Newspapers Limited has a 33.3% (2011 33.3%, 2010 33.3%) shareholding in Fortune Green Limited. During the period the Group received
revenue for newsprint, computer and office services of £0.6 million (2011 £0.5 million, 2010 £0.5 million). The amount due from Fortune Green
Limited at 30th September, 2012 was £0.2 million (2011 £0.2 million, 2010 £0.1 million).
Associated Newspapers Limited has a 12.5% (2011 12.5%, 2010 12.5%) share in the Newspapers Licensing Agency (NLA) from which royalty revenue
of £3.8 million was received (2011 £3.1 million, 2010 £2.9 million), and £0.4 million due at the year end (2011 £0.4 million, 2010 £nil). Commissions paid
on this revenue total £0.7 million (2011 £0.6 million, 2010 £0.6 million). The amount due to the NLA at 30th September, 2012 was £0.1 million (2011 £nil,
2010 £0.1 million). Interest bearing loans of £0.4 million are due to Associated Newspapers from NLA at 30th September, 2012 (2011 £0.4 million, 2010 £nil).
Daily Mail and General Holdings Limited has a 15.6% (2011 15.6%, 2010 15.6%) shareholding in The Press Association. During the period the
Group received dividends of £0.1 million, services amounting to £3.8 million (2011 £3.7 million, 2010 £3.5 million) and the net amount due from
the Press Association as at 30th September, 2012 was £0.2 million (2011 £0.1 million, 2010 £0.2 million).
The Group has a 24.9% (2011 24.9%, 2010 24.9%) shareholding in the Evening Standard. During the year, the Group has received revenue of £18.1
million (2011 £28.0 million, 2010 £25.6 million) and incurred charges of £10.0 million (2011 £9.4 million, 2010 £9.3 million). The net amount due to the
Group at 30th September, 2012 was £2.0 million (2011 £8.1 million, 2010 £2.3 million).
During the period the Group received a dividend of £0.4 million (2011 £0.3 million, 2010 £0.3 million) from Hasznaltauto kft a joint venture.
During the period, Landmark Information Group Limited (Landmark) charged management fees of £0.3 million (2011 £0.3 million, 2010 £0.3
million) to Point X Limited, a joint venture and recharged costs of £0.1 million (2011 £0.1 million, 2010 £0.1 million). Point X Limited received royalty
income from Landmark of £0.1 million (2011 £0.1 million, 2010 £0.1 million) and the amount from Landmark at 30th September, 2012 was £0.1
million (2011 owed to Landmark £0.3 million, 2010 owed to Landmark £5,200).
During the period, Trepp and Rockport made no cash contributions (2011 £0.6 million and £0.1 million, 2010 £nil and £nil respectively) to
TreppPort LLC a joint venture.
During the period, DMG Information made investments of £2.5 million in Real Capital Analytics, Inc. an associate and £2.4 million in Xcelligent,
Inc. an associate.
Associated Newspapers Limited has a 100% shareholding (50.0% to January 2012) in Globrix Limited (Globrix) and a 50.0% shareholding in Artirix
Limited (Artirix). During the period, the Group recharged £nil staff costs to Globrix (2011 £0.2 million, 2010 £nil) and Globrix recharged the Group
£0.5 million (2011 £0.6 million, 2010 £nil) for website development costs. The Group provided services totalling £0.1 million to Artirix, with £nil
remaining due at 30th September, 2012. At 30th September, 2012 Globrix owed £nil to Artirix (2011 £1.1 million, 2010 £nil) and £1.3 million to
various Group companies (2011 £0.2 million, 2010 £31,000), and £nil was due from Artirix (2011 £nil, 2010 £18,000) to Globrix.
During the period, Artirix received revenues of £0.5 million from Globrix (2011 £0.6 million, 2010 £nil). At 30th September, 2012 Artirix owed £1.3
million to various A&N Media companies (2011 £1.9 million, 2010 £nil) and £nil to Globrix (2011 £nil, 2010 £18,000). Artirix provided staff and other
services to Teletext Holdings Limited (an associate company) totalling £0.2 million, with £0.1 million remaining due from Teletext Holdings Limited
at 30th September, 2012.
Associated Newspapers Limited had a 50.0% interest in Teletext Holdings Limited (Teletext). The Group provided services (under the Transitional
Services Agreement) amounting to £0.3 million (2011 £nil, 2010 £nil) for the period, and £0.1 million (2011 £nil, 2010 £nil) due from Teletext Holdings
at 30th September, 2012. VAT of £0.5 million (2011 £nil, 2010 £nil) was paid by Associated Newspapers Limited on behalf of Teletext and £nil was
due from Teletext at 30th September, 2012 (2011 £nil, 2010 £nil).
Artirix provided staff and other services to Teletext totalling £0.2 million (2011 £nil, 2010 £nil), with £0.1 million (2011 £nil, 2010 £nil) remaining due
from Teletext at 30th September, 2012.
Proceeds on the sale of Teletext Ltd to Teletext Holdings Ltd of £6.0 million is due to Associated Newspapers as at 30th September, 2012 (2011 £nil,
2010 £nil).
Annual Report 2012 174
43) RELATED PARTY TRANSACTIONS – CONTINUED
From June, 2012 Associated Newspapers Limited has a 52.25% shareholding in Zoopla Limited. During the year, listing services amounting to
£1.0 million were provided by Zoopla to A&N Media as part of a revenue share agreement, with £0.2 million remaining due to Zoopla at 30th
September, 2012. Net services (under the Transitional Services Agreement) provided by A&N Media totalled £0.2 million for the period, £5.4
million of other transactional payments were made by A&N Media on behalf of Zoopla, with a balance of £0.9 million being due from Zoopla
at 30th September, 2012.
Associated Newspapers Limited has a 26.0% interest in Mail Today (Dubai). During the year, additional share capital of £2.3 million (2011 £2.8
million, 2010 £nil) was invested in Mail Today, by AN Mauritius Limited.
Associated Newspapers Limited has a 30.0% interest in Social Metrix SA (Argentina). During the year, £0.4 million (2011 £0.9 million, 2010 £nil)
additional share capital was invested by A&N International Media Limited.
Associated Newspapers Limited has a 50.0% shareholding in Northprint Manchester Limited. The net amount due to Associated Newspapers
Limited for £5.8 million (2011 £5.8 million, 2010 £nil) has been fully provided.
Associated Newspapers Limited has a 25.0% shareholding in Extra Newspapers Limited to which it provided £0.3 million of funding during the
period. This amount is due to Associated Newspapers Limited at 30th September, 2012, with repayments commencing June 2014.
During the period, the Group received a dividend of £3.5 million (2011 £14.6 million, 2010 £1.3 million) from dmg Radio Investments Pty Limited,
a joint venture.
The Group received a dividend of £0.3 million (2011 £0.7 million, 2010 £0.2 million) from Capital Net, an associate.
Other related party disclosures
At 30th September, 2012 the Group owed £1.5 million (2011 £1.2 million, 2010 £3.3 million) to the pension schemes which it operates. This amount
comprised employees’ and employer’s contributions in respect of September 2012 payrolls which were paid to the pension schemes by 9th
October, 2012.
The Group recharges its principal pension schemes with costs of investment management fees. The total amount recharged during the year
was £0.2 million (2011 £1.7 million, 2010 £0.7 million).
In September 2012 the Group transferred several of its properties to its pension scheme in an arm’s length transaction. These properties had a
carrying value of £20.5 million and were transferred at an open market valuation of £24.0 million.
In July 2012, the Group entered into a new contingent asset partnership whereby a £150.0 million loan note, guaranteed by the Group, has
been used to commit £10.8 million of interest funding per annum to the Harmsworth Pension Scheme. Interest payable to DMG Pension
Partnership Limited Liability Partnership totalled £2.8 million for the current period. As a result of this new partnership, letters of credit totalling
£45.2 million were released by the trustees of Harmsworth Pension Scheme.
44) POST BALANCE SHEET EvENTS
Following the year end the Group disposed of its central European online recruitment businesses for a cash consideration of €25.4 million and its
Hungarian joint venture online motors business for cash consideration of €8.4 million. Additionally, in November 2012 the Group announced it
had reached agreement to sell its local media segment to Local World, a newly formed media group that will combine the Group’s local
media titles with those of Iliffe News and Media Limited. The Group will receive consideration of £52.5 million and a 38.7% share in Local World.
In addition, following a review of the Group’s capital management programme, the Board has decided to utilise part of its authority to make
on market purchases of its ‘A’ Ordinary Non-Voting Shares. The Company anticipates spending up to approximately £100.0 million over the
coming year.
Daily Mail and General Trust Plc Strategic Report
175
Directors’ Report
Governance
Financial Statements
175
Principal Subsidiary
Central activities
Daily Mail and General Holdings Limited*
RMS
Risk Management Solutions, Inc (98.0%)
(Incorporated and operating in the USA)
dmg information
DMG Information, Inc
(Incorporated in the USA)
Trepp, LLC
(Incorporated and operating in the USA)
Lewtan Technologies, Inc
(Incorporated and operating in the USA)
Environmental Data Resources, Inc
(Incorporated and operating in the USA)
Landmark Information Group Limited
Genscape, Inc. (98.1%)
(Incorporated and operating in the USA)
Hobsons Australia Pty Ltd
(Incorporated and operating in Australia)
Hobsons, Inc
(Incorporated and operating in the USA)
dmg events
dmg events (UK) Limited
dmg events (Abu Dhabi) Ltd
(Incorporated and operating in Abu Dhabi)
Ad:Tech Expositions LLC
(Incorporated and operating in the USA)
DMG World Media Dubai (2006) Limited
(Incorporated in Jersey; managed and operating in
Dubai)
Euromoney
Euromoney Institutional Investor PLC (68.1%)
BCA Research, Inc (68.1%)
(Incorporated and operating in Canada)
Information Management Network, Inc (68.1%)
(Incorporated and operating in the USA)
Institutional Investor, Inc (68.1%)
(Incorporated and operating in the USA)
Internet Securities, Inc (68.0%)
(Incorporated and operating in the USA)
Metal Bulletin Limited (68.1%)
A&N Media
Associated Newspapers Limited
Lapcom Kft
(Managed, incorporated and operating in Hungary)
Northcliffe Media Limited
Activity
Holding company
Provider of risk management information on natural and other related perils
Holding company
Provider of commercial mortgage-backed securities and real estate information
Provider of asset-backed securities information
Provider of geographic based real estate information services
Provider of property and mapping information
Provider of real time power supply and other energy information
Careers and education information publishing and services
Careers and education information publishing and services
Trade publishing and exhibition management
Organisers of trade exhibitions and events
Organisers of trade exhibitions and events
Organisers of trade exhibitions and events
Publishing, training and events
Information Services
Conferences
Publishing
Information Services
Publishing and event management
Publication of the Daily Mail, The Mail on Sunday and Metro
Publication of newspapers in Gyor and Szeged, Hungary
Holding company of local media group
The company has taken advantage of the exemption under Section 410(2) of the Companies Act 2006 by providing information only in relation
to subsidiary undertakings whose results or financial position, in the opinion of the directors, principally affected the financial statements.
(i) Unless stated otherwise the whole of the Ordinary share capital of subsidiary undertakings is held directly by Daily Mail and General Trust
plc (where marked *) or indirectly by one of the Company’s subsidiaries.
(ii) All subsidiaries, except where indicated, operate principally within the United Kingdom.
(iii) All principal subsidiaries have been included in the Group accounts.
Annual Report 2012 176
CONSOLIDATED INCOME STATEMENT
Revenue
Operating profit before exceptional operating costs and amortisation and
impairment of goodwill and acquired intangible assets
Exceptional operating costs, impairment of internally generated and acquired
computer software, investment property and property, plant and equipment and
amortisation and impairment of goodwill and acquired intangible assets arising
on business combinations
Operating profit/(loss) before share of results from joint ventures and associates
Share of results of joint ventures and associates
Total operating profit/(loss)
Other gains and losses
Profit/(loss) before net finance costs and tax
Net finance costs
Profit/(loss) before tax
Tax
Profit/(loss) for the year after tax
Discontinued operations
Equity interests of minority shareholders
Profit/(loss) for the year
Adjusted profit before tax and non-controlling interests
Basic loss/earnings per share
Adjusted earnings per share (before amortisation and impairment of intangible
assets and exceptional items)
2008
Restated
(Note 2)
£m
2009
Restated
(Note 2)
£m
2010
Restated
(Note 2)
£m
2011
Restated
(Note 2)
£m
2012
£m
1,932.6
1,772.9
1,703.4
1,748.5
1,746.8
215.9
234.0
271.8
264.4
273.7
(189.2)
(316.0)
(57.2)
(94.3)
(126.7)
26.7
2.8
29.5
25.8
55.3
(99.3)
(44.0)
78.5
34.5
(20.0)
(16.8)
(2.3)
248.4
(0.6)p
46.2p
(82.0)
(9.7)
(91.7)
(26.7)
(118.4)
(106.8)
(225.2)
64.5
(160.7)
(146.6)
2.0
(305.3)
185.6
(80.6)p
33.9p
214.6
(5.2)
209.4
0.4
209.8
(76.0)
133.8
41.1
174.9
42.6
(19.2)
198.3
227.7
51.8p
46.0p
170.1
(2.7)
167.4
13.1
180.5
(54.6)
125.9
3.7
129.6
(5.2)
(15.9)
108.5
232.1
28.3p
46.1p
147.0
(1.8)
145.2
114.4
259.6
(53.3)
206.3
18.8
225.1
54.8
(22.7)
257.2
255.4
67.2p
49.4p
Earnings before interest, taxation, depreciation and amortisation (EBITDA)
Adjusted profit after taxation and non-controlling interests
376.8
174.5
335.5
128.3
371.3
176.3
355.1
176.6
378.3
189.1
Daily Mail and General Trust Plc Strategic Report
177
Directors’ Report
Governance
Financial Statements
177
CONSOLIDATED CASH FLOw STATEMENT
Net cash inflow from operating activities
Investing activities
Financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Exchange (loss)/gain on cash and cash equivalents
2008
£m
354.9
(144.4)
(235.4)
(24.9)
64.0
5.2
2009
£m
283.8
(140.0)
(147.3)
(3.5)
44.3
6.1
2010
£m
334.4
2.1
(319.8)
16.7
46.9
0.7
2011
£m
318.6
(33.5)
(177.7)
107.4
2012
£m
261.4
(17.8)
(306.4)
(62.8)
64.3
–
171.7
(1.6)
Cash and cash equivalents at end of year
44.3
46.9
64.3
171.7
107.3
Net (decrease)/increase in cash and cash equivalents
Cash outflow/(inflow) from change in debt and hire purchase finance
Change in net debt from cash flows
Loan notes issued and loans arising from acquisitions
Other non-cash items
Decrease/(increase) in net debt in the year
Net debt at beginning of year
Net debt at end of year
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Goodwill and intangible assets
Tangible assets
Fixed asset investments
Other non current assets
Fixed assets
Net current liabilities
Long-term liabilities
Net assets
Shareholders' equity
Called-up share capital
Share premium account
Revaluation reserve
Other reserves
Minority interests
Retained earnings
Total equity
Shareholder information
Dividend per share *
Price of 'A' Ordinary Non-Voting shares:
Lowest
Highest
* Represents the dividends declared by the Directors in respect of the above years.
(24.9)
(20.6)
(45.5)
–
(18.7)
(64.2)
(3.5)
23.5
20.0
–
(54.0)
(34.0)
16.7
174.2
190.9
(1.0)
(3.3)
186.6
107.4
1.9
109.3
–
33.1
142.4
(62.8)
126.2
63.4
–
43.2
106.6
(950.4)
(1,014.6)
(1,048.6)
(1,014.6)
(1,048.6)
(862.0)
(862.0)
(719.6)
(719.6)
(613.0)
2008
Restated
(Note 2)
£m
2009
Restated
(Note 2)
£m
2010
Restated
(Note 2)
£m
2011
Restated
(Note 2)
£m
1,503.5
1,195.1
1,113.7
1,035.2
501.9
37.7
29.4
440.4
46.2
159.8
377.8
56.3
174.1
327.0
33.5
239.9
2012
£m
986.0
244.9
150.3
243.9
2,072.5
1,841.5
1,721.9
1,635.6
1,625.1
(349.4)
(352.1)
(315.7)
(238.4)
(266.3)
(1,191.2)
(1,599.8)
(1,269.0)
(1,289.0)
(1,102.8)
531.9
(110.4)
137.2
108.2
256.0
49.1
12.4
39.5
(70.2)
38.7
462.4
531.9
49.1
12.4
4.1
(35.9)
46.8
(186.9)
(110.4)
49.1
12.5
7.0
(60.2)
57.4
71.4
137.2
49.1
12.7
3.3
(87.7)
80.3
50.5
108.2
49.1
13.5
–
(75.3)
95.3
173.4
256.0
2008
14.70p
2009
14.70p
2010
16.00p
2011
17.00p
2012
18.00p
£2.59
£6.77
£2.11
£4.61
£3.90
£5.33
£3.47
£5.95
£3.48
£4.97
Annual Report 2012 178
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF DAILY MAIL AND GENERAL TRUST PLC
We have audited the parent Company financial statements of Daily Mail and General Trust plc for the year ended 30th September, 2012 which
comprise the Balance Sheet, and the related Notes 1 to 16. The financial reporting framework that has been applied in their preparation is
applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our
audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an
auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other
than the company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement, the directors are responsible for the preparation of the parent Company
financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the parent
Company financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards
require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance
that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the
accounting policies are appropriate to the company’s circumstances and have been consistently applied and adequately disclosed; the
reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition,
we read all the financial and non-financial information in the annual report to identify material inconsistencies with the audited financial
statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.
Opinion on financial statements
In our opinion the financial statements:
• give a true and fair view of the state of the parent Company’s affairs as at 30th September, 2012 and of its profit for the year then ended;
• have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
• have been prepared in accordance with the requirements of the Companies Act 2006.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion:
• the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006; and
• the information given in the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the
parent Company financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:
• adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by
us; or
• the financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the accounting records
and returns; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Other matter
We have reported separately on the Group financial statements of Daily Mail and General Trust plc for the year ended 30th September, 2012.
Simon Letts
(Senior statutory auditor)
for and on behalf of Deloitte LLP
Chartered Accountants and Statutory Auditor
London, United Kingdom
4th December, 2012
Daily Mail and General Trust Plc Strategic Report
179
Directors’ Report
Governance
Financial Statements
179
As at 30th
September,
2012
£m
At 2nd
October,
2011
£m
Note
4
5
6
7
11
0.5
0.5
2,024.6
2,016.5
90.1
25.3
3.1
37.9
120.1
2.8
8
(597.1)
(661.1)
(478.6)
(500.3)
1,546.5
1,516.7
9
10
(750.8)
(892.3)
(0.5)
(0.5)
795.2
623.9
49.1
13.4
(43.8)
1.1
775.4
49.1
12.7
(46.3)
1.1
607.3
795.2
623.9
12
12
13
14
AS AT 30TH SEPTEMBER, 2012
FIXED ASSETS
Tangible fixed assets
Investments in group undertakings
CURRENT ASSETS
Debtors – amounts falling due within one year
Cash and cash equivalents
Deferred tax assets
CREDITORS
Amounts falling due within one year
Net current liabilities
Total assets less current liabilities
CREDITORS
Amounts falling due after more than one year
Provisions for liabilities
NET ASSETS
CAPITAL AND RESERvES
Called-up share capital
Share premium account
Shares held in treasury
Capital redemption reserve
Profit and loss account
EQUITY SHAREHOLDERS’ FUNDS
The accounts on pages 179 to 186 were approved by the Directors and authorised for issue on 4th December, 2012. They were signed on their
behalf by:
Rothermere
M.w.H. Morgan
Directors
Annual Report 2012 180
1) BASIS OF PREPARATION
The separate financial statements of the Company are prepared under the historical cost convention, modified to include the revaluation to
fair value of certain financial instruments as described below, in accordance with the Companies Act 2006 and UK Generally Accepted
Accounting Principles (UK GAAP). The following paragraphs describe the main accounting policies under UK GAAP, which have been applied
consistently in both the current and prior year.
Profit for the financial year
As permitted by section 408 of the Companies Act 2006, a separate profit and loss account for the Company has not been included in these
accounts. The Company’s profit after tax for the year, calculated on a UK GAAP basis, was £236.3 million (2011 loss £108.8 million).
Impact of amendments to accounting standards
In the current year certain minor amendments to UK financial reporting standards were issued by the UK Accounting Standards Board. The
adoption of these amendments has not had any impact on the Company’s accounting policies.
2) SIGNIFICANT ACCOUNTING POLICIES
Intangible fixed assets
Intangible assets principally comprise purchased trademarks and are capitalised and amortised through the profit and loss account over the
lower of their useful economic lives and a period of 20 years.
The Company tests intangible assets at the end of the first financial year after acquisition and where there is any indication of impairment, or
more frequently if there are indicators that the intangible assets might be impaired. When testing for impairment, the recoverable amounts for
all the Company’s income generating units (IGUs) are measured at their value in use by discounting future expected cash flows. These
calculations use cash flow projections based on management approved budgets and projections which reflect management’s current
experience and future expectations of the markets in which the IGU operates.
Tangible fixed assets
Depreciation is provided on all tangible fixed assets at rates calculated to write off the cost, less estimated residual value, of each asset on a
straight line basis over its expected useful life. Some of the Company’s tangible fixed assets are artworks with a residual value at least equal to
cost and therefore no depreciation has been applied in either the current or prior period on the basis that any change would not be material.
Foreign exchange
Transactions in currencies other than the entity’s reporting currency are recorded at the exchange rate prevailing on the date of the
transaction. At each balance sheet date, monetary items denominated in foreign currencies are retranslated at the rates prevailing on the
balance sheet 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 income statement for the period.
Investments
Investments in subsidiaries are stated at cost, less any provision for impairment, where appropriate.
Other investments are classified as either held for trading or available-for-sale and are measured at either fair value or at cost less provision for
impairment where fair value cannot be reliably determined.
Where investments are classified as held for trading, gains and losses arising from changes in fair value are included in net profit or loss for the
period. For available-for-sale investments, gains and losses arising from changes in fair value are 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. Impairment charges are recorded in the profit and loss account when they occur.
Investments and financial assets are recognised and de-recognised 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.
Taxation
Current tax, including UK corporation tax and foreign tax, is provided at amounts expected to be paid (or recovered) using the tax rates and
laws that have been enacted or substantively enacted by the balance sheet date. Deferred tax is provided in full on timing differences that
result in an obligation at the balance sheet date to pay more tax, or a right to pay less tax, at a future date, at rates expected to apply when
they crystallise based on current tax rates and law. Timing differences arise from the inclusion of items of income and expenditure in taxation
computations in periods different from those in which they are included in financial statements. Deferred tax is not provided on timing
differences arising from the revaluation of fixed assets where there is no commitment to sell the asset, or on unremitted earnings of subsidiaries
and associates where there is no commitment to remit these earnings. Deferred tax assets are recognised to the extent that it is regarded as
more likely than not that they will be recovered. Deferred tax is not discounted.
Daily Mail and General Trust Plc Strategic Report
181
Directors’ Report
Governance
Financial Statements
181
Financial instruments disclosures
FINANCIAL ASSETS
Trade debtors
Trade debtors do not carry any interest and are stated at their nominal value as reduced by appropriate allowances for estimated
irrecoverable amounts.
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand, short-term deposits and other short-term highly liquid investments that are readily
convertible to a known amount of cash and are subject to an insignificant risk of changes in value.
Financial liabilities and equity instruments
Financial liabilities and equity instruments issued by the Company are classified according to the substance of the contractual arrangements
entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities.
Trade creditors
Trade creditors are not interest bearing and are stated at their nominal value.
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 Company’s bonds are subject to fair value hedge accounting
and this portion of the carrying value 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 direct issue costs.
Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to settle on
a net basis, or realise the asset and liability simultaneously.
Derivative financial instruments and hedge accounting
The Company’s activities expose it to the financial risks of changes in foreign exchange rates and interest rates. The Company uses various
derivative financial instruments to manage its exposure to these risks.
The use of financial derivatives is governed by the Group’s closed line integral policies, which are set out on pages 42 and 43 of the Financial
and Treasury Review and approved by the Board of Directors, which provide written principles on the use of financial derivatives consistent with
the Company’s risk management strategy. The Company does not use derivative financial instruments for speculative purposes.
The Company does not apply hedge accounting except for fair value hedges. Gains and losses arising on derivatives that form part of net investment
hedge or cash flow hedge relationships in the consolidated financial statements are recorded in the profit and loss account in the Company.
Financial instruments – disclosures
The Company has taken advantage of the exemption provided in FRS 29, Financial Instruments: Disclosures which states that disclosure in respect
of financial instruments is not required in parent company financial statements where such disclosures are included in publicly available
consolidated financial statements.
Cash flow statement
The Company has utilised the exemptions provided under FRS 1 (Revised) and has not presented a cash flow statement. A consolidated cash
flow statement has been presented in the Group’s Annual Report.
Related party transactions
The Company has taken advantage of the exemptions of FRS 8 which states that disclosure of related party transactions is not required in the
parent company financial statements when those statements are presented together with its consolidated financial statements.
Share-based payments
The Company operates the Group’s LTIP and other Group share based payment schemes, details of which can be found in note 41 of the
Group’s Annual Report.
Retirement benefits
The Company contributes to defined benefit and defined contribution pension schemes on behalf of its employees. These are managed on a
Group basis and so the Company is unable to identify its share of the underlying assets and liabilities in the defined benefit scheme in which it
participates on a consistent and reasonable basis. The scheme is operated on an aggregate basis with no segregation of the assets to
individual participating employers and, therefore, the same contribution rate is charged to all participating employers; the contribution rate
charged to each employer being affected by the experience of the scheme as a whole. The scheme is therefore accounted for as a defined
contribution scheme by the Company. This means that the pension charge reported in these financial statements is the same as the cash
contributions due in the period.
Details of the financial position and key valuation assumptions of these schemes can be found in note 34 of the Group’s Annual Report.
Annual Report 2012 182
2012
Number
18
2011
Number
10
2012
£m
8.0
2.1
1.5
0.2
11.8
2011
£m
4.7
1.7
1.0
0.3
7.7
3) EMPLOYEES
Average number of persons employed by the Company including Directors:
Total staff costs comprised:
Wages and salaries
Share-based payments
Social security costs
Pension costs
The remuneration of the Directors of Company during the year are disclosed in the Remuneration Report on pages 66 to 80 of the Group
Annual Report and Accounts.
4) TANGIBLE FIXED ASSETS
Cost
At 2nd October, 2011 and at 30th September, 2012
Accumulated depreciation
At 2nd October, 2011 and at 30th September, 2012
Net book value – 2011
Net book value – 2012
Fixtures,
fittings and
artwork
£m
0.7
0.2
0.5
0.5
Daily Mail and General Trust Plc Strategic Report
183
Directors’ Report
Governance
Financial Statements
183
Cost
£m
Provision
£m
Net book
value
£m
2,119.1
(102.6)
2,016.5
1.1
–
–
7.0
1.1
7.0
2,120.2
(95.6)
2,024.6
2012
£m
44.6
1.2
–
20.4
23.9
90.1
2011
£m
7.9
–
0.2
20.6
9.2
37.9
2012
£m
25.3
2011
£m
120.1
2012
£m
6.4
1.2
28.5
534.6
4.8
–
21.6
597.1
2011
£m
1.9
1.5
34.1
594.5
4.2
24.5
0.4
661.1
5) INvESTMENTS IN GROUP UNDERTAkINGS (AS LISTED ON PAGE 175)
At 2nd October, 2011
Additions
Write back of provision
At 30th September, 2013
6) DEBTORS
Amounts falling due within one year
Amounts owed by Group undertakings
Prepayments and accrued income
Other debtors
Corporation tax
Derivative financial assets
The Company’s corporation tax debtor represents amounts due from subsidiaries for Group relief.
7) CASH AND CASH EQUIvALENTS
Cash and cash equivalents
8) CREDITORS – DUE wITHIN ONE YEAR
Bank overdrafts
Loan notes
Interest payable
Amounts owing to Group undertakings
Accruals and deferred income
Other borrowings
Derivative financial liabilities
Loan notes attract interest at approximately LIBOR minus 0.5% and were issued as part of the consideration for various acquisitions. The loan
notes are repayable at the option of the loan note holder.
Amounts owing to subsidiary undertakings are repayable on demand and bear interest of UK bank base rate plus 0.5%.
Annual Report 2012 184
2012
£m
47.3
307.4
171.4
199.2
25.5
750.8
2012
£m
46.4
324.7
156.4
200.0
727.5
2011
£m
158.3
304.1
171.1
198.5
60.3
892.3
2011
£m
156.5
349.7
156.4
200.0
862.6
9) CREDITORS – DUE AFTER MORE THAN ONE YEAR
7.50% Bonds 2013
5.75% Bonds 2018
10.00% Bonds 2021
6.375% Bonds 2027
Derivative financial liabilities
The nominal values of the bonds are as follows:
7.50% Bonds 2013
5.75% Bonds 2018
10.00% Bonds 2021
6.375% Bonds 2027
The Company’s bonds have been adjusted from their nominal values to offset the premia paid on settlement or redemption, direct issue costs
and discounts. The issue costs, premia and discounts are being amortised over the expected lives of the bonds using the effective interest
method. The unamortised issue costs amount to £3.5 million (2011 £3.8 million), the unamortised premia £9.2 million (2011 £10.5 million).
Details of the fair value of the Company’s bonds are set out in note 32 of the Group’s Annual Report and Accounts.
The bonds are subject to fair value hedging using derivatives as set out in note 33 of the Group’s Annual Report and Accounts. Consequently,
their carrying value is also adjusted to take into account the affects of this hedging activity.
The book value of the Company’s other borrowings equates to fair value.
The interest rate charged on the Company’s borrowings during the year ranged as follows:
Sterling
US dollar
The maturity profile of the Company’s borrowings is as follows:
2012
Within one year
Over five years
2011
Within one year
Between two and five years
Over five years
2012
High
2.66%
2.10%
2012
Low
1.54%
1.23%
2011
High
2.17%
1.78%
2011
Low
1.38%
1.05%
Overdrafts
£m
Other
borrowings
£m
Bonds
£m
Loan notes
£m
Total
£m
6.4
–
–
6.4
–
–
–
–
47.3
1.2
54.9
678.1
678.1
725.4
–
–
1.2
678.1
678.1
733.0
1.9
23.4
–
1.5
26.8
–
–
–
–
–
–
1.9
23.4
160.0
672.0
832.0
832.0
–
–
–
1.5
160.0
672.0
832.0
858.8
Daily Mail and General Trust Plc Strategic Report
185
Directors’ Report
Governance
Financial Statements
185
2012
£m
0.5
0.5
–
0.5
2012
£m
3.1
2012
£m
2.8
0.5
(0.2)
3.1
2011
£m
0.5
0.6
(0.1)
0.5
2011
£m
2.8
2011
£m
1.9
0.5
0.4
2.8
10) PROvISIONS FOR LIABILITIES
Other provisions
Movements on other provisions were as follows:
At 2nd October, 2011
Utilised during year
At 30th September, 2012
11) DEFERRED TAXATION
Other timing differences
Movements on the deferred taxation asset were as follows:
At 2nd October, 2011
LTIP credit to reserves
Net credit to profit and loss account
At 30th September, 2012
In the opinion of the Directors it is more likely than not that the Company will be able to recover the deferred tax asset against suitable future
taxable profits generated by its subsidiary undertakings.
12) RESERvES
Share premium account
At 2nd October, 2011
Issued on shares
At 30th September, 2012
Shares held in treasury
At 2nd October, 2011
Additions
Own shares released on vesting of share options
At 30th September, 2012
2012
£m
12.7
0.7
13.4
2012
£m
(46.3)
(30.1)
32.6
(43.8)
2011
£m
12.5
0.2
12.7
2011
£m
(45.0)
(11.7)
10.4
(46.3)
The Group’s investment in its own shares is classified within shareholders’ funds as shares held in treasury. At 30th September, 2012, this investment
comprised the cost of 10,188 174 ‘A’ Ordinary Non-Voting shares (2011 9,728,174 shares). The market value of these shares at 30th September, 2012
was £49.1 million (2011 £35.3 million). The treasury shares are considered to be a realised loss for the purposes of calculating distributable reserves.
Details of the Company’s share capital can be found within note 37 of the Group’s Annual Report and Accounts.
Annual Report 2012 186
£m
1.1
£m
607.3
235.5
(66.2)
(1.2)
775.4
574.8
746.1
13) CAPITAL REDEMPTION RESERvE
At 2nd October, 2011 and at 30th September 2012
14) PROFIT AND LOSS ACCOUNT
At 2nd October, 2011
Net profit for the year
Dividends paid
Other movements on share option schemes
At 30th September, 2012
Total reserves – 2011
Total reserves – 2012
The Company estimates that £583.6 million of the Company’s profit and loss account reserve is not distributable (2011 £607.3 million).
15) CONTINGENT LIABILITIES
At 30th September, 2012 the Company had guaranteed a subsidiary’s outstanding derivatives which have a mark to market asset valuation of
£7.2 million (2011 liability £3.9 million) and letters of credit with a principal value of £2.4 million (2011 £9.3 million). The Company has also issued
standby letters of credit in favour of the Trustees of the Group’s defined benefit pension fund amounting to £nil (2011 £53.6 million).
16) CONTROLLING PARTY
The Company’s ultimate controlling party is the Viscount Rothermere, the Company’s Chairman. Transactions relating to the remuneration and
shareholdings of the Viscount Rothermere are given in the Remuneration Report.
Daily Mail and General Trust Plc Strategic Report
187
Directors’ Report
Governance
Financial Statements
187
COMPANY SECRETARY AND REGISTERED OFFICE
C. Chapman
Northcliffe House
2 Derry Street
London
W8 5TT
England
Registered Number: 184594
wEBSITE
The Group has an internet website which gives information on the Company and its operating businesses and provides details of significant
Group announcements.
THE ADDRESS IS:
www.dmgt.com
FINANCIAL CALENDAR 2013 (PROvISIONAL)
10th January
6th February
6th February
8th February
31st March
31st March
23rd May
5th June
7th June
5th July
25th July
29th September
30th September
21st November
27th November
29th November
Annual Report and Corporate Brochure published
Interim Management Statement
Annual General Meeting
Payment of final dividend
Payment of interest on loan notes
Half year end
Half Yearly Financial Report released
Interim ex-dividend date
Interim record date
Payment of interim dividend
Interim Management Statement
Year End
Payment of interest on loan notes
Preliminary announcement of annual results
Ex-dividend date
Record date
CAPITAL GAINS TAX
The market value of both the Ordinary and ‘A’ Ordinary Non-Voting Shares in the Company on 31st March, 1982 (adjusted for the 1994 bonus
issue of ‘A’ Ordinary Non-Voting Shares and for the four–for–one share split in 2000) was 9.75 pence.
REGISTRARS
All enquiries regarding shareholdings, dividends, lost share certificates, loan notes in the Company and in Daily Mail and General Investments
plc, or changes of address should be directed to Equiniti, the Company’s Registrars, at the address set out on page 190.
ELECTRONIC COMMUNICATIONS
Equiniti operate Shareview, a free online service which enables shareholders with internet access to check their shareholdings and other related
information and to register to receive notification by email of the release of the Annual Report. It also offers practical help on matters such as
transferring shares or updating your own details. Shareholders may register for the service at www.shareview.co.uk. This report is available
electronically on the Company’s website which contains a link to Shareview to enable shareholders to register for electronic mailings. Notification
by email has been given of the availability of this Annual Report on the Company’s website to those shareholders who have registered.
LOw COST SHARE DEALING SERvICE
Equiniti provide a simple low cost dealing service for Ordinary and ‘A’ Ordinary Non-Voting Shares details of which are available at www.
shareview.co.uk/dealing or by calling 08456 037 037. Details of this and other low cost dealing services can be found on the Company’s website
at www.dmgt.com/investors.
LOAN NOTES
Loan notes issued by the Company are repayable in whole or in part at the option of loan note holders every six months. Loan note holders
requiring repayment should complete the redemption section on the back of their loan note and send it to reach the Registrars by 28th
February or 31st August for repayments on 31st March or 30th September respectively.
Annual Report 2012 188
SHARE PRICE INFORMATION
The current price of the Company’s Ordinary and ‘A’ Ordinary Non-Voting Shares can be found on the homepage of the Company’s website
at www.dmgt.com. A graph, illustrating the historical performance of the ‘A’ shares, is shown on page 21.
EUROBOND PAYING AGENT
The principal paying agent for the Company’s 7.5% Bonds due 2013, 10% Bonds due 2021 and the 6.375% Bonds due 2027 is Deutsche Bank AG
London, Winchester House, 1 Great Winchester St, London EC2N 2DB. The principal paying agent for the Company’s 5.75% Bonds due 2018 is
HSBC Bank plc, Corporate Trust and Loan Agency, 8 Canada Square, London E14 5HQ. Enquiries should be directed to John Donegan, Group
Financial Controller, who can be contacted on 020 3615 2917, and whose email address is john.donegan@dmgt.com.
CREST
Shareholders have the choice either of holding their shares in electronic form in an account on the CREST system or in the physical form of share
certificates.
INvESTOR RELATIONS
Investor relations are the responsibility of Adam Webster. The investor relations’ email address is investor.relations@dmgt.com.
SHAREGIFT
In the UK, DMGT supports ShareGift, which is administered by the Orr Mackintosh Foundation (registered charity number 1052686) and which
operates a charity share donation scheme for shareholders wishing to give small holdings of shares to benefit charitable causes. It may be
especially useful for those who wish to dispose of a small parcel of shares which would cost more to sell than they are worth. There are no
capital gains tax implications (i.e. no gain or loss) on gifts of shares to charity and it is also possible to obtain income tax relief. If you would like to
use ShareGift or receive more information about the scheme, they can be contacted by visiting their website at www.sharegift.org or by writing
to ShareGift, 17 Carlton House Terrace, London, SW1Y 5AH.
SHAREHOLDINGS AT 30 SEPTEMBER, 2012
Ordinary Shares
Range of holdings
1–1,000
1,001–5,000
5,001–10,000
10,001–20,000
20,001–50,000
50,001–100,000
100,001–500,000
500,001 & over
Number of shareholders
%
457
126
10
10
6
5
5
3
622
73.48
20.26
1.61
1.61
0.96
0.80
0.80
0.48
100.00
‘A’ Ordinary Non-voting Shares
Range of holdings
1–1,000
1,001–5,000
5,001–10,000
10,001–20,000
20,001–50,000
50,001–100,000
100,001–500,000
500,001 & over
Number of shareholders
%
888
535
239
151
106
37
95
84
2,135
41.59
25.08
11.19
7.07
4.96
1.73
4.45
3.93
100.00
Shares
161,756
282,239
72,369
139,743
182,460
379,060
930,682
17,738,163
19,886,472
Shares
334,787
1,394,495
1,744,528
2,112,189
3,269,747
2,531,241
22,528,489
339,158,172
373,073,648
%
0.81
1.42
0.36
0.70
0.92
1.91
4.68
89.20
100.00
%
0.09
0.37
0.47
0.57
0.88
0.68
6.04
90.90
100.00
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Directors’ Report
Governance
Financial Statements
189
RECONCILIATION OF REPORTED RESULTS TO UNDERLYING PERFORMANCE
Underlying Analysis – Adjusted profit before tax*
%
Underlying
£m
2012
M&A
£m
Other
£m
Reported
£m
Underlying
£m
M&A
£m
Exchange
£m
Other
£m
Reported
£m
2011
B2B
RMS
dmg::information
dmg::events
Euromoney
Consumer
Associated Newspapers
Northcliffe Media
Head office costs
Operating profit
Joint ventures and associates
Net finance charges
Adjusted profit before tax*
+7%
+19%
+21%
+2%
+8%
+3%
+54%
+12%
(26%)
+7%
+11%
56
49
21
103
229
76
26
102
(41)
289
8
(66)
232
–
–
–
(8)
(8)
(2)
–
(2)
–
(10)
(5)
–
(15)
–
1
–
(1)
–
–
–
–
–
–
–
(9)
(9)
56
48
21
112
237
78
26
104
(41)
300
13
(57)
255
52
42
17
101
212
74
17
91
(33)
270
5
(66)
208
4
(1)
(16)
–
(14)
(2)
–
(2)
–
(16)
–
–
(16)
1
1
–
1
3
–
–
–
–
3
–
–
3
–
–
(6)
7
1
–
–
–
–
1
–
(12)
(11)
47
42
39
93
221
76
17
93
(33)
281
5
(54)
232
Note: M&A includes the disposals of Sanborn, RMSI, GLM, Teletext Retail, Teletext Holidays and various regional newspapers; the acquisition
of Ned Davis Research, Jobrapido, Intelliworks and various other bolt-on acquisitions, and the disposal of The Digital Property Group to form
Zoopla Property Group.
Figures, including totals, are rounded to the nearest million pounds whilst percentages are calculated on actual numbers to one decimal place.
Underlying Analysis – Revenues
%
Underlying
£m
2012
M&A
£m
Other
£m
Reported
£m
Underlying
£m
M&A
£m
Exchange
£m
Other
£m
Reported
£m
2011
B2B
RMS
dmg::information
dmg::events
Euromoney
Consumer
Associated Newspapers
Northcliffe Media
Total
+6%
+11%
+13%
+2%
+7%
+2%
(6%)
0%
+3%
163
256
85
374
879
834
207
1,041
1,920
–
1
–
(20)
(19)
(14)
(5)
(19)
(38)
–
2
(4)
–
(2)
–
–
–
(2)
163
253
89
394
899
848
213
1,060
1,960
154
230
75
366
825
820
220
1,040
1,865
(8)
(5)
(45)
–
(58)
(25)
(16)
(41)
(99)
3
3
1
3
10
(4)
–
(4)
6
–
–
(13)
–
(13)
(14)
–
(14)
(27)
159
232
132
363
886
862
236
1,098
1,985
Note: M&A includes the disposals of Sanborn, RMSI, GLM, Teletext Retail, Teletext Holidays & various regional newspapers; the acquisition of Ned
Davis Research, Jobrapido, Intelliworks and various other bolt-on acquisitions, and the disposal of The Digital Property Group to form Zoopla
Property Group.
Figures, including totals, are rounded to the nearest million pounds whilst percentages are calculated on actual numbers to one decimal place.
Annual Report 2012 190
RECONCILIATION OF REPORTED RESULTS TO UNDERLYING PERFORMANCE – CONTINUED
Underlying analysis – operating margin*
2012
2011
Adjusted
results
including
discontinued
operations
£m
Discontinued
operations
£m
Adjusted
results
excluding
discontinued
operations
£m
Adjusted
results
including
discontinued
operations
£m
Discontinued
operations
£m
Adjusted
results
excluding
discontinued
operations
£m
1,747
213
1,960
274
26
300
15%
–
213
213
–
26
26
12%
1,747
–
1,747
274
–
274
16%
1,749
236
1,985
264
17
281
14%
–
236
236
–
17
17
7%
1,749
–
1,749
264
–
264
15%
Revenues
Continuing operations
Discontinued operations
Total Revenue
Operating Profit
Continuing operations
Discontinued operations
Total Operating Profit
Operating margin %
ADvISERS
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Daily Mail and General Trust Plc Strategic Report
191
Directors’ Report
Governance
Financial Statements
191
Annual Report 2012 192
Daily Mail and General Trust Plc Annual Report 2012
DMGT HQ
Northcliffe House
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2012
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