Daily Mail and General Trust plc
Annual Report
30 September 2013
Annual Report 2013
Annual Report 2013
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Annual Report 2013
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Annual Report 2013
Financial
Highlights
Business
Highlights
Revenue#
2013
£1,802m
£1,960m
2012
Adjusted profit before tax#*
2013
£282m
£255m
2012
Adjusted operating profit#*
2013
£300m
£300m
2012
Statutory profit before tax†
2013
£203m
£203m
2012
Adjusted earnings per share#*
Dividend per share
2013
53.0p
49.4p
2012
2013
19.2p
18.0p
2012
Digital share of revenues#
International share of revenues#
2013
42%
35%
2012
2013
42%
37%
2012
Profit split by B2B and Consumer#*
Subscriptions share of total revenues#
2013
B2B 77%
2012
B2B 73%
Consumer 23%
Consumer 27%
2013
29%
25%
2012
Operating margin#*
Operating profit per employee*
2013
17%
15%
2012
2013
£31k
£28k
2012
* Before exceptional items, other gains and losses, impairment and amortisation of intangible
assets arising on business combinations; see Consolidated Income Statement on page 74
and the reconciliation in Note 13 to the Accounts.
# From continuing and discontinued operations.
† Statutory profit before tax is for continuing operations only (excluding the disposed of Northcliffe
Media and dmg radio Australia joint venture).
Overview
DMGT at a glance
Chairman’s Statement
Strategic Report
Chief Executive’s
Strategy Review
Business Reviews
Risk Management Solutions
dmg information
dmg events
1
1
2–5
6–7
8–11
12
12–13
14–15
16–17
Euromoney Institutional Investor
18–19
dmg media
20–21
Key Performance Indicators
22–23
Financial and Treasury Review
24–27
Principal Risks
28–29
Corporate Responsibility Review 30–35
Directors’ Report
Board of Directors
Chairman’s Statement
AGM 2014 Resolutions
Corporate Governance
Audit Committee Report
Statutory Information
Remuneration Report
Financial Statements
Shareholder Information
36–37
38
39
40–43
44–47
48–50
51–70
71–178
179–180
Annual Report 2013
Introduction
DMGT is an international portfolio
of information, media and events
businesses. The common thread that
unites us is providing our customers
with live, relevant and vital information
more easily.
DMGT businesses are increasingly
digital. Our customers operate within
a rapidly increasing global footprint.
DMGT is in a unique position to offer
valued data across multiple and
complex disciplines.
DMGT’s management style –
open, accessible, ethical and
entrepreneurial – encourages the
achievement of challenging goals.
DMGT has delivered another
year of strong performance,
consolidating our position as
a majority B2B, increasingly
digital and international Group.
Annual Report 2013 Annual Report 2013
Overview
DMGT at a glance
2
DMGT is an international portfolio
of digital, information, media and
events businesses. The common
thread that unites our businesses
is providing our customers with
live, relevant and vital information.
Our Business Model
What we do
How we work
DMGT is an international business built
on entrepreneurship and innovation.
We bring together leading companies
and talented people to provide
businesses and consumers with
high-quality analysis and insight,
information, news and entertainment.
We create the environment for diverse
strengths to flourish:
Entrepreneurial heart that fosters
constant innovation, growth and talent
development across our international
businesses.
Active portfolio management which
reflects our investment philosophy and
is sensitive to market opportunities.
Devolved and diversified group structure
which gives our businesses freedom
within a framework and ensures that
they remain close to their customers.
Family ownership which ensures that
the Company continually adapts and
innovates for the long term.
Trusted expertise in providing customers
with the vital news and entertainment,
analysis, data and information they
need in the form that they want it.
How we
create value
The quality of our content is critical
in driving DMGT’s diverse range
of revenue streams.
ndance
ts atte
n
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v
E
S
p
o
n
s
o
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s
h
i
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i o n s
s a c t
n
Tr a
Subscriptio
ns
n a l y s i s and insight
A
s
w
e
N
E
n
t
e
r
t
i
a
n
m
e
nt
Informat i o n
A
dvertising
n
r c u l a ti o
C i
M
e
m
b
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r
s
h
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p
g
Trainin
Why do shareholders
want to invest in us?
• Good organic growth opportunities
Dividend chart
• Highly cash generative
• Reinvestment of strong cash flow and active portfolio
management to drive sustainable earnings growth
• Track record of real dividend growth
20
18
16
14
12
10
8
6
4
2
0
3.7p
1993
Dividend
Inflation
19.2p
6.6p
2013
Diversified portfolio of market leading companies
B2B
Primarily targeting the global
property and casualty
reinsurance industry, producing
risk analysis models, services,
expertise and data solutions
for use in the quantification
and management of
catastrophic risks.
A global provider of business
-to-business (B2B) information
and analysis for the property,
education, energy and
finance sectors.
An organiser 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. It provides data and
research, produces trade
publications – both online and
print – and runs conferences,
seminars and training courses.
Consumer
An international publisher with a
print and digital portfolio. Assets
include two of the UK’s most read
paid-for newspapers, the world’s
most visited English language
newspaper website and digital
recruitment businesses.
Joint ventures and associates
Zoopla
One of the UK’s leading
property websites.
Local World
UK local media business.
Xceligent
US property information business.
3
Revenues
£175m
2012 | £163m
Operating Margin
32%
2012 | 34%
Growth highlights
Development of
RMS(one) – 2014 launch
Employees
1,197
2012 | 1,064
Operating profit
£57m
2012 | £56m
Revenues
£293m
2012 | £253m
Operating Margin
20%
2012 | 19%
Growth highlights
Investment in
organic growth
complemented
by acquisitions.
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Employees
2,052
2012 | 1,795
Revenues
£87m
2012 | £89m
Employees
357
2012 | 326
Operating profit
£58m
2012 | £48m
Operating Margin
24%
2012 | 24%
Operating profit
£21m
2012 | £21m
Growth highlights
New launches
combined with
geographic
expansion in Middle
East, Asia and Africa.
Revenues
£405m
2012 | £394m
Operating Margin
29%
2012 | 28%
Employees
2,351
2012 | 2,292
Operating profit
£119m
2012 | £112m
Growth highlights
Growth from
emerging markets
and digital products
and services with
an emphasis on
subscription revenues
and acquisitions.
Revenues
£793m
2012 | £848m
Operating Margin
10%
2012 | 9%
Employees
3,353
2012 | 3,842
Operating profit
£80m
2012 | £78m
Growth highlights
Capitalising on
growing audience
reach, investing in
digital opportunities,
MailOnline, Mail Plus,
Wowcher and
Evenbase. Extracting
cost efficiencies.
DMGT’s share of operating profits/(loss)
Local World
£11m
2012 | N/A
Zoopla
£15m
2012 | £4m
Xceligent
(£3m)
2012 | (£1m)
Growth highlights
Smaller holdings
in companies
with compelling
commercial
opportunities run
by entrepreneurs
enables us to enjoy
rapid value creation.
Directors’ ReportSharerholder InformationFinancial StatementsAnnual Report 2013
Annual Report 2013
Overview
DMGT at a glance
Continued
Where we operate and our international opportunity
DMGT operates in over 40 countries.
We are an international Group,
well positioned for further growth.
Silicon Valley
head office
North America
Revenue
£574 million (up 4%)*
Revenue by business
North America
North America
3
3
3
1
2013
%
3 3
3
0
3
3
2
9
1
2012
%
8
9
2
RMS
dmg information
dmg events
Euromoney
dmg media
4
UK
Revenue
£1,048 million (0%)*
Revenue by business
UK
UK
8
1
5
1
3
2012
%
64
6
6 1
1
6
2013
%
71
dmg information
dmg events
Euromoney
dmg media
Northcliffe Media
Stamford
head office
* Revenue by source and underlying growth rate.
Key
Key
Key
Head office
Head office
Head office
Office locations
Office locations
Office locations
5
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Where we operate and our international opportunity
London
head office
head office
head office
Dubai
head office
Key
Head office
Office locations
Rest of the world
Revenue
£180 million (up 11%)*
Revenue
Rest of the world
3
1
9
2 4
2013
%
2
4
30
RMS
dmg information
dmg events
Euromoney
dmg media
3
1
8
28
2012
%
4
2
27
Employees
RMS
dmg information
2013 | 1,197
2012 | 1,064
2013 | 2,052
2012 | 1,795
dmg events
Euromoney
2013 | 357
2012 | 326
2013 | 2,351
2012 | 2,292
dmg media
DMGT Board
and Head Office
2013 | 3,353
2012 | 3,842
2013 | 101
2012 | 98
Directors’ ReportShareholder InformationFinancial StatementsAnnual Report 2013
Annual Report 2013
Overview
Chairman’s Statement
6
DMGT has consolidated its global
position as a leading provider of media
content and business-to-business
services. An outstanding management
team, supported by an entrepreneurial
workforce, has continued to innovate
across our portfolio.
The Viscount Rothermere
Chairman
In the financial year, DMGT has reaffirmed its
position as an innovative Group combining
business-to-business (B2B) data, analysis,
insight and events, alongside a powerful
consumer media operation while delivering
solid returns to shareholders.
Business highlights
Our strategy of organic investment and
targeted acquisitions has continued to
pay off, with expansion in most major
markets and strong financial results. The
Group’s portfolio remains focused around
its twin growth engines of B2B, comprising
RMS, dmg information, dmg events and
Euromoney, and a consumer media
business stretching from the Mail titles
to Evenbase, Metro and Wowcher and
our stake in Zoopla Property Group.
Our consumer media operations were
renamed dmg media following the 2012
disposal of Northcliffe Media to Local World,
the regional newspaper group in which
DMGT holds a 39% stake.
In both consumer media and B2B, digital
technologies have been harnessed to meet
rapidly changing demands for business
services and content. We made a number
of bolt-on acquisitions, including FirstSearch
and Vessel Tracker by dmg information
and Insider Publishing by Euromoney.
A strong financial performance enabled
DMGT to maintain its enviable record
for dividend growth (page 2). Our
underlying growth prospects and
continued financial discipline ensure
that the Company is well positioned
despite uncertain conditions in the media
industry and wider global economy.
Global footprint and diversification
Over 60% of the Group’s operating
profits were generated outside of the UK
as DMGT continued to expand globally.
North America has been a particularly
strong performer, accounting for 50%
of profits. International growth has been
impressive at RMS, dmg information and
Euromoney. dmg events has consolidated
its international position, particularly
strengthening its presence in the Middle
East. The global appeal of MailOnline,
especially in the US, reaffirms that our
content crosses borders. The Group enjoys
a similarly diverse mix of revenue by type
with sales from subscriptions, events and
transactions nearly matched by those from
digital advertising, circulation and print
advertising. This balanced portfolio
remains a core strength of the Group.
Content marketplace
Content is the lifeblood of our business.
The market leading Mail titles produce
news, features and analysis that their
audiences depend on. Our editorial
team, led by editor-in-chief and DMGT
Executive Director Paul Dacre, has played
a pivotal role in continuing to protect
vital press freedoms within the UK’s
evolving framework for independent
press regulation.
MailOnline is the world’s most visited English
language newspaper website, while Mail
Plus has created a subscription model for
tablet users. Our successful offerings
in recruitment and daily deals underline
the potential of multi-platform content
distribution. Such distribution systems
are also being deployed across our B2B
operations, where customers relying
on DMGT’s specialist information and
analysis in catastrophe risk insurance,
property, education, energy and
financial information, value the quality
of content provided.
Entrepreneurialism and creativity
DMGT champions entrepreneurial freedom
throughout its workforce, enabling business
innovation to flourish. The Group relies on
talented individuals who embrace our
entrepreneurial culture, which is defined
by constant innovation, a commitment
to great content creation and the pursuit
of long-term growth. As Chairman of
the Board, I am committed to a culture
of management autonomy – within a
framework of financial discipline – that
delivers value growth. Whether it’s the
impending 2014 deployment of RMS(one)
or the US expansion of MailOnline, we have
created the conditions where talented
individuals can implement great ideas.
The Group provides the resources and
the incentives to ensure that we retain a
competitive edge, ensuring that creativity
leads to a positive return on investment.
Share structure
In July of this year, the Harmsworth family
moved to simplify the ownership structure
of the Company’s Ordinary Shares.
Rothermere Continuation Limited (RCL)
increased its holding of Ordinary Shares
to 89.2% from 59.9% by acquiring the entire
shareholding of The Esmond Harmsworth
1998 Settlement. In August, the Directors
of RCL and the Independent Directors
of DMGT recommended a scheme for
the reorganisation of the share capital
of DMGT, in which other holders of the
illiquid Ordinary Shares were offered
more liquid A Ordinary Non-Voting Shares
(A Shares) on the basis of 112.5 A Shares
for every 100 Ordinary Shares.
Following the successful acceptance of
the scheme, the Ordinary Shares have
been delisted and the Company retains
its listed status through its A Shares.
As explained in detail in the Corporate
Governance Report (page 38), the
changed shareholder structure will not alter
the way in which DMGT currently runs its
portfolio of businesses. Throughout the
history of DMGT, the Group’s founding
family shareholders have fully supported
the evolution of the Company. This will
continue to be the case under the revised
ownership structure.
Governance
DMGT continues to maintain high
standards of governance. Our Corporate
Governance Report (pages 40 to 50)
outlines these standards that shape
our strategic delivery.
The composition of our Board reflects
the business and geographic mix of our
different operations, ensuring that we
have the right skills and experience to
advise on our international growth strategy.
In February 2013 we appointed Andrew
Lane as a Non-Executive Director. Andrew’s
7
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Of those 15 years, the last five have seen
considerable changes through a global
economic downturn and the slow and
varied return to growth across the world’s
markets. Our balanced portfolio has
allowed us to manage through this period
delivering robust results. As illustrated, digital
technology is now embedded in every part
of the Group. We reach more audiences
and customers in more countries than
ever before. DMGT has invested heavily
in growth opportunities and managed
its portfolio to minimise risk. We have
embarked on the current financial year
from a position of strength.
During this period, DMGT has become
a digital media champion and pioneer
of valuable business services. We can
look ahead with confidence. The best
is yet to come.
The Viscount Rothermere
Chairman
Revenue by type: 2013 VS. 2008
1 1
2
0
12
2013
8
2
9
2 0
14
1
3
2
1 0
3
7
2008
4
20
Print advertising
Digital advertising
Circulation
Broadcasting
Subscriptions
Events, conferences and training
Transactions and other
Total Shareholder Returns 2008 to 2013
Our balanced portfolio and geographical spread positions us well for the future.
300
250
200
150
100
50
0
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
D e c 12
M ar 13
Ju n 13
Se p 13
DMGT
Pearson
Informa
Gannet
Reed Elsevier
UBM
Thomson Reuters
Trinity Mirror
New York Times
Johnston Press
appointment reinforces the Board’s legal
and regulatory skills. We announced in
September 2013 that the Hon. Lady Keswick
had joined the Board as an Independent
Non-Executive Director. She will contribute
particular experience and knowledge
of the marketplace in Asia, where DMGT
has significant growth ambitions.
The Board and management retain
a strong commitment to diversity,
international experience and adherence
to governance standards throughout
the Group. Again, this is explained in
the Corporate Governance sections
of this report.
Remuneration
The Group aligns the remuneration
of management with the interests
of shareholders and stakeholders.
Our leadership team is incentivised to
deliver organic growth, market-leading
returns and long-term success. Our
Remuneration Report (pages 51–70)
sets out the detail of our rewards for
the past financial year as well as our
Remuneration Policies.
People, culture and corporate responsibility
Integrity remains a core part of DMGT’s
culture. Corporate Responsibility is shared
by everyone in the organisation. This was
highlighted by the inaugural Community
Champions Awards which celebrated
the exceptional lengths that the Group’s
employees go to support community
initiatives. DMGT will not be judged by
financial returns or growth rates alone.
Each person in the Group makes a
contribution to our performance and
must comply with the high standards we
aspire to. This is a quality we value highly.
Our Corporate Responsibility Review on
pages 30 to 35 explains our approach
and achievements in more detail.
Performance
The financial results in this report are
testament to the hard work of the entire
DMGT team, led by Martin Morgan,
Chief Executive. I would like to congratulate
all staff for their continued dedication
to our ongoing business development.
Their commitment has been recognised
in numerous awards, reflecting the depth
of talent in the Group. We have continued
to invest in quality journalism, in new
technologies and enhanced business
services. I commend everyone for
contributing to this success story.
Year ahead
Fifteen years ago I was privileged to
become Chairman succeeding my father,
the third Viscount Rothermere. Over that
period, DMGT has seen greater change
than any other time in its history.
Directors’ ReportShareholder InformationFinancial StatementsAnnual Report 2013
Annual Report 2013
8
Strategic Report
Chief Executive’s Strategy Review
Martin Morgan
Chief Executive
Group Strategy
Growing our
B2B
companies
Developing our
consumer media
franchise
A global
growth
company
Diversifying
internationally
into
high-growth
markets
Introduction and Strategy
In this section:
p.8
p.12 Operating Business Reviews
p.22 KPIs
p.24 Financial and Treasury Review
p.28 Principal Risks
p.30 Corporate Responsibility Review
DMGT has delivered another year of strong
performance, demonstrating its progress
as an entrepreneurial, international and
increasingly digital provider of high quality
business information, news and
entertainment to multiple audiences.
Our success, measured by demanding
Key Performance Indicators (KPIs), reflects
DMGT’s five year transformation into
becoming a focused business-to-business
(B2B) information and consumer media
Group, generating growing revenues and
sustainable profits.
We have continued to expand our B2B
operations, to accelerate the digital
transition across the Group, and to
extend our global presence.
This Strategic Report sets out our strategy
and objectives and includes reviews of
each of our operating businesses.
In the Financial and Treasury Review
(pages 24–27), Stephen Daintith,
Finance Director, describes our earnings
performance in detail, the principal risks we
face and the steps taken to mitigate them.
Social, environmental and community
information is set out in our Corporate
Responsibility Review on pages 30–35.
We have set out our approach to
governance in our Directors’ Report
commencing on page 36.
This is the remit of our five operating
businesses: Risk Management Solutions
(RMS), dmg information, dmg events,
Euromoney Institutional Investor
(Euromoney) and dmg media.
It has been gratifying to lead, alongside
our Chairman, a Group which is achieving
its primary goals.
We invest in companies which will generate
value through sustained growth over the
long term.
Strategic ambition
DMGT has evolved from a business focusing
on newspaper publishing into one which
now creates and distributes media content
and specialist business information, in
multiple ways, for customers in multiple
markets around the world. We measure
our progress against KPIs. These
demonstrate how we are performing
according to our three core objectives:
• Growing our B2B companies
• Developing our consumer media business
• Diversifying internationally into high
growth markets
We aim to deliver relevant, reliable and
topical information and analysis that is hard
to find elsewhere and which is vital to our
readers and clients in either their personal
or business lives.
Our decentralised operating structure
ensures that the people making the
important decisions are close to their
markets and customers. We encourage
our companies to be thought leaders and
to challenge the status quo. We strive for
agility and see change as an opportunity.
We are also ready to pursue the benefits
of intra Group cooperation by sharing
best practice when that makes sense.
DMGT derives significant advantage
from its long-term family ownership
which enables its management to take
entrepreneurial risks and make long-term
investment decisions. When coupled with
active portfolio management and financial
discipline, it has been a powerful enabler
of DMGT’s expansion during a time of deep
structural change affecting the industries
in which we operate.
The share capital of DMGT (page 38)
has been reorganised during the
year following the offer by Rothermere
Continuation Limited (RCL), representing
the interests of the Chairman and his
immediate family, to acquire 100% of
the Ordinary Shares.
Shareholders in DMGT can be assured that
the entire management team is committed
to maintaining the Group’s strategic
direction and commitment to good
governance.
9
Strategic priorities
We have five strategic priorities to deliver
our three core objectives:
• Fostering innovation to deliver
organic growth
• Maintaining rigorous and active
portfolio management
• Driving international growth
• Applying state-of-the-art technology
• Attracting and developing
entrepreneurial talent
Fostering innovation to deliver
organic growth
DMGT has maintained its disciplined
approach to capital allocation. As shown
by the investment preferences diagram,
we give top priority to organic growth
investment supported by contributions from
newly acquired bolt-on businesses.
During the year we have made a number
of major organic investments. These include
investment in RMS(one), a new product to
be rolled out by RMS in 2014, which will
deliver open, real-time risk management
in the Cloud. We have also made an
investment in Delphi, the new Euromoney
digital content, MailOnline, Mail Plus,
Wowcher and in a wide variety of dmg
information initiatives.
Maintaining rigorous and active
portfolio management
DMGT’s active management of its portfolio
of businesses is an important element of
the Group’s strategy. Our existing businesses
and potential new investments are
evaluated against clearly laid out criteria,
which are summarised below.
Meeting DMGT’s investment criteria:
Have potential for high rates of organic
growth and maintain our balanced
global portfolio
Are international and have the potential
for cross-border activity
Have innovative products, quality content
and deep customer insight
Are market leaders
Have entrepreneurial and creative leaders
Benefit from DMGT’s long-term perspective
Meet our financial criteria
As evidence of this strategy being
implemented, over the past five years more
than 40 businesses have been sold or closed
while 30 businesses have been acquired.
As a result, our Group is more agile than
it was five years ago, with a better
deployment of capital represented by
increased profitability per employee.
A tighter focus on a narrower range of
businesses has enabled us to deploy
management talent more effectively.
DMGT investment preferences
Organic
Bolt-on
Adjacent
New
Sector
In the financial year, the Group spent
£93 million on acquisitions and they were
all B2B businesses. The disposals during
the reporting period raised £88 million
and comprised Northcliffe Media and
our media operations in Central and
Eastern Europe.
The portfolio at dmg information was
strengthened by a number of acquisitions
including Vessel Tracker by Genscape, while
Hobsons bought Edumate, Beat the GMAT
and the National Transcript Centre. dmg
information’s property information business,
EDR, acquired FirstSearch. Euromoney
also made a number of acquisitions in
complementary businesses such as TTI/
Vanguard, Centre for Investor Education
Insider Publishing and HSBC’s Quantitative
Techniques.
Complementing our preference for making
bolt-on acquisitions to support organic
growth, we favour making investments
in markets which are adjacent to those
we already operate in successfully. For
example, Cougar in property information.
On the back of an improving trading
performance and lower debt we are
now looking to enter new sectors in the
years ahead.
Driving international growth
Our entrepreneurial culture enables us
to look for opportunities to make the
Group ever more international in its reach.
This year has seen us expand our MailOnline
operations in the US. Additionally, we have
sought to lay the groundwork for expansion
in Asia by relocating some of our most
talented executives to the region.
Applying state-of-the-art technology
The Group has continued to invest in digital
innovation and in new technologies to
serve a rapidly changing marketplace.
In the past financial year, we have seen
a further increase in the digital share of
Group revenues to 42%. The proportion
of revenues from digital is expected to
continue growing with the deployment
of innovative new products such as
RMS(one), Investor Management
Network at Euromoney, MailOnline,
Wowcher and all the fast growing
dmg information businesses.
There are a number of transformative
initiatives in both our B2B and consumer
businesses which demonstrate these
developments. More detail on these
can be found in the operating business
reviews on pages 12–21.
Attracting and developing
entrepreneurial talent
In order to deliver on our strategic
objectives, we rely on talented individuals
throughout the organisation. Business
leaders in DMGT are encouraged to be
entrepreneurial, and to retain and recruit
innovative people.
We launched a new Leadership
Development Programme and have
continued to invest in the Technology
Summer School, which brings together
our leading technology experts. We have
deepened the reach of talent review
and succession planning into our operating
businesses. Details of our approach to
training, management and remuneration
are set out in detail in the Corporate
Responsibility Review (pages 30–35) and
in the Remuneration Report (pages 51–70).
Trends affecting DMGT
Although DMGT has made significant
progress in the past financial year, markets
remain challenging in several parts of our
business. For example, budgets continue
to be constrained in the banking industry.
However, recent signs of improving
economic growth in the UK and notably
in North America, indicate that external
conditions may be becoming more
favourable than at any time since the
onset of the financial crisis five years ago.
The shift to digital consumption continues
to create new content and distribution
models. This requires DMGT to innovate
ahead of the market, adapt to the
increasing use of mobile devices and
move operations to the Cloud.
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10
Strategic Report
Chief Executive’s Strategy Review
Continued
Major Trends
Continuous innovation
Global shifts
The growing importance of data
A dwindling talent pool
Technological innovation will
continue to transform the world
and how people live and do
business in it. It is impacting the
global economy.
The economic balance of
power is shifting from North
America and Europe to
BRIC nations.
China is projected to overtake
the US as the largest economy
by 2017 in purchasing power
parity terms.
Source: PWC
The amount of data available
will continue to grow at a rapid
rate as will demand for this data,
delivered how, when and where
the customer wants. This will
lead to new technologies,
new solutions and new risks.
A global talent crisis looms.
Mature economies will struggle
to replace retiring baby
boomers and developing
economies will seek the better
educated workers needed to
power emerging markets.
Privacy concerns will grow
as an issue.
Austria, Poland, Russia and
Japan are projected to lose
more workers than they gain
between 2011 and 2020.
Source: Boston Consulting Group
Those of our businesses most exposed to
declining markets for print publications have
made considerable strides to adapt. Sharply
increased digital advertising volumes, higher
traffic to specialist sites such as Jobsite,
Zoopla and Wowcher and the success
of titles such as Institutional Investor, in
creating new and growing digital products
and services, demonstrate progress.
Financial performance
DMGT delivered a good performance
during the financial year. As discussed in
greater detail in the Financial and Treasury
Review (pages 24–27), Group underlying
revenues rose by 2% and underlying
operating profit increased by 6%, at an
operating margin of 17%.
Our performance in the year continued to
demonstrate the benefits of our investment
approach which helped generate rising
productivity and profitability.
Given the solid performance in the financial
year, we have continued to review carefully
the incentives and rewards in place at
each of our operating businesses. Our
Remuneration Report (pages 51–70)
explains our compensation approach,
overseen by the Remuneration Committee
of the Board, in more detail.
Review of the operating businesses
As highlighted before, a more detailed
report on each of the operating businesses
is set out from page 12.
RMS
RMS continues to perform strongly. As an
entrepreneurial, innovative and technology
driven business, it supports many of our
strategic priorities, including that of being
a truly global business deploying the latest
technology. RMS is a thought leader in
the market which it serves.
It is now preparing to launch RMS(one),
a cloud-based platform which promises
to make available real time risk information
and models.
dmg information
dmg information, which runs a portfolio of
B2B information companies in the property,
education, energy and finance sectors,
delivered double digit revenue and
profit growth.
Increased transaction volumes and the
growth of new products generated
strong growth at Landmark and EDR in
the commercial and residential real estate
markets. Increased demand for information
and software services serving universities
and high schools, primarily in the US,
lifted the performance at Hobsons,
our education information business.
dmg events
Growth has been strong, particularly in
the Middle East and in the energy sector.
We are increasing the frequency of some
of our large biennial shows. We were
successful in maintaining our impressive
rate of new event launches.
Euromoney
Euromoney has delivered solid profits in
spite of challenging markets, particularly
in the financial services industry where
budgets have been constrained.
Demand for print advertising has held
up better than anticipated for specialist
print publications focused primarily
on international finance, metals and
commodities. Subscription growth has
come from introducing new digital
information products and interactive
analytical tools. The deployment of the
Delphi platform to modernise content
creation for digital media is expected
to lead to further growth.
dmg media
Following the sale of Northcliffe Media
in December 2012, our consumer media
business was renamed dmg media.
MailOnline, the world’s most visited
English language newspaper website,
has continued to grow strongly. We are
now well placed to build even larger online
audiences and related advertising and
eCommerce revenues.
11
That transformation has led to a re-rating
of DMGT, reflected by the share price
performance in the past year and our
underlying growth prospects. We now
anticipate that our B2B businesses in an
improving external environment, will be
able to deliver a higher rate of growth.
Our consumer media operations are well
positioned to navigate and monetise
the digital transition sweeping the sector.
With our stronger balance sheet, we are
better placed to sustain investment in
organic growth initiatives, make more
bolt-on acquisitions and to carefully
consider entering new sectors. Conditions
in many of the markets remain challenging
but our prudent approach to our finances
and active portfolio management enable
us to deal with the unexpected.
DMGT can approach the coming financial
year with confidence.
“With our stronger
balance sheet, we
are better placed
to sustain investment
in organic growth
initiatives, make
more bolt-on
acquisitions and to
carefully consider
entering new sectors.”
Martin Morgan
Chief Executive
The business, which includes print
and online media, produced a highly
commendable performance with
underlying digital revenues, growth
largely offsetting declining print
circulation and advertising revenues.
Joint ventures and associates
One aspect of being active portfolio
managers is that we will, on occasion,
undertake a merger or invest by taking
less than a controlling stake in companies
where there is a compelling commercial
reason for doing so. It is an approach which
enables us to maximise potential growth
opportunities and work in a collaborative
way with entrepreneurs and other
stakeholders. During the year we were
active in the creation of Local World, into
which we merged Northcliffe Media.
Additionally, in 2012, we merged the
Digital Property Group into Zoopla and
made an investment in the early stage
property information business, Xceligent.
All these businesses performed well.
Share price performance
The price of DMGT’s A Ordinary Non-Voting
Shares (A Shares) has increased by almost
58% from £4.83 on 1 October 2012 to £7.62
on 30 September 2013. The shares have
once again out-performed both the UK
media sector and the FTSE All-Share Index.
DMGT is a member of important indices
including MSCI, STOXX and S&P. As a
standard listed stock, the A Shares are
not included in the FTSE UK Index Series.
This follows changes to the FTSE listing
classifications that first impacted DMGT
in 2012.
These changes have had no impact on
the obligations and procedures adopted
by DMGT as a listed company. The Group
continues to be regulated as a publicly
quoted company under the Listing Rules
and to adopt the practices of the UK
Listing Principles, and maintains high
standards of governance and disclosure,
including the application of the UK
Corporate Governance Code.
Outlook
During my time as Chief Executive,
the management team with the full
support of the Board, has built on the
solid foundations of the Group, to react
to not only the changes presented by
the global economic downturn, but
also to the trends in our markets. Over
that time, the management team has
reshaped DMGT into a leaner, more
international, increasingly digital and
more profitable business.
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12
Risk
Management
Solutions
RMS, acquired by DMGT in 1998,
is still run by its entrepreneurial
founders. The business has a
track record of innovation within
the B2B information sector.
Hemant Shah
President and CEO
Business review
Revenue
Operating profit*
Operating margin*
2013
£m
175
57
32%
2012
£m
163
56
34%
Movement
%
+7%
+1%
Underlying
%
+6%
0%
* Before exceptional items, impairment and amortisation of intangible assets arising on business combinations;
see Consolidated Income Statement on page 74 and the reconciliation in Note 13 to the Accounts.
In line with our strategic objectives, RMS
is developing new technologies which
will change the face of the insurance
risk management market.
Business Model
RMS is a world leader in catastrophe
modelling, providing critical risk
management solutions to hundreds of
financial institutions around the world.
RMS revenues are derived mainly from
annual subscriptions, with recurring revenue
renewal rates exceeding 95%. It has a
strong position in the risk management
marketplace and is well positioned for
growth through its existing modelling
operations as well as the forthcoming
launch of RMS(one).
Performance Highlights
Demand for RMS modelling and related
subscription services helped lift underlying
revenues by 6% to £175 million, in spite of
softening market conditions in many parts
of the reinsurance marketplace.
The improvement was driven mainly by
increased annual subscription renewal rates
and the deployment of additional risk
services in RMS’ core catastrophe business.
There has been continued investment in
new insurance tools and risk models.
In the period, underlying operating profits
were constant at £57 million, representing
a healthy margin of 32% for the year.
The company remains on track for the
2014 launch of RMS(one), and has been
encouraged by client interest in the
new technology, which stimulated record
attendance at its annual client conference
when it demonstrated the platform’s
capabilities.
RMS also enjoyed improved market share
and solid adoption rates in its Capital
Markets and LifeRisks businesses.
In Capital Markets, RMS has continued
to build its profile as the leading portfolio
risk management platform for the
insurance-linked securities market.
The LifeRisks business provides solutions
to measure mortality and longevity risk
for the pensions and annuities sectors,
an area where RMS also offers advice
on longevity risk bonds.
Strategic Priorities
In this financial year, the strategic focus
has continued to be on the further
development and testing of RMS(one),
a transformative technology platform
for catastrophe risk analysis and data
solutions. During the period, RMS invested
c. £31 million in developing RMS(one).
Support for RMS(one) is demonstrated by
the significant number of RMS customers
who have played an active role in the early
adopter programme and are part of the
fast cycle beta testing approach RMS has
implemented to ensure a successful launch.
In parallel, RMS has continued to pursue
selected growth opportunities in its
core modelling activities including
a new Asian typhoon model.
Fostering innovation to deliver
organic growth
RMS(one) will deliver significant benefits in
terms of next generation technologies for risk
modelling. It offers a single platform for all
models and risk exposures, combined with
the efficiency of cloud-based systems
enabling significantly more powerful analysis.
The platform is being deployed following
several years of development and intense
beta-testing over the past financial year.
It promises improvements in model run
times and data query latency. Clients
will be able to access a rich ecosystem
of value adding applications and
functionality, utilising portfolios of differing
risk models and stress tests.
Once deployed, the platform promises
to create growth opportunities in other
insurance and financial sectors.
13
rms.com
Priorities in the year ahead
2014 will be a pivotal year for RMS as it
brings RMS(one) to market. The business
anticipates mid single digit revenue growth
from the existing core model business and
£15-25 million of revenue from RMS(one).
Revenues from RMS(one) have significant
long-term potential but will take time to
build, particularly given the usage based
fee model in place. As planned, the
development of the RMS(one) platform has
been a significant capital investment for
the business and there will be associated
amortisation costs following the launch.
The robust infrastructure underpinning
the hybrid cloud environment must meet
clients’ expectations of security and data
integrity standards, and these new data
centre costs will also be a significant
operating expense. The costs associated
with RMS(one) will therefore impact RMS’
profitability in FY2014, with the overall profit
margin expected to be approximately 25%.
Application of state-of-the-art technology
With the ability to return answers 100 times
faster than existing catastrophic risk
modelling systems, RMS(one) will deliver
open, real time risk management at speeds
feasible only with cloud-based technology.
This will enable clients to use simulator type
analytics to measure any number of
possible risk outcomes.
Driving international growth
RMS’ highly sophisticated models for
the perils of hurricane and earthquakes
were originally developed for the USA.
The US market accounts for just over 50% of
revenues. Since then new models utilising
the intellectual property and expertise
of RMS scientists and engineers have been
utilised to create a range of models for
other perils not only for the USA but for other
geographies around the world. RMS has
extensive coverage of the UK, Europe
and Japan and is gaining traction in
China, South East Asia and South America.
As a result its models now cover more than
50 countries and more than 90% of global
property insurance premiums.
Attracting and developing
entrepreneurial talent
Given the demands created by RMS(one),
the business has been actively recruiting
new talent with a background in cloud-
based systems and software. RMS is also
investing in its client facing teams and
support staff to meet the launch schedule
and encourage rapid adoption of the
new platform. Recruiting and retaining
high calibre people in a highly competitive
environment is an ongoing priority. It has
required an innovative approach to
recruitment which is proving increasingly
successful. The Group’s approach to
remuneration, which allows flexibility to
match the needs of particular businesses,
has been a key element to achieving this.
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14
dmg information
dmg information brings together
a portfolio of entrepreneurially
run innovative businesses, which
thrive under the DMGT light touch
management approach.
Suresh Kavan
Chief Executive
Business review
Revenue
Operating profit*
Operating margin*
2013
£m
293
58
20%
2012
£m
253
48
19%
Movement
%
+16%
+21%
Underlying
%
+12%
+14%
* Before exceptional items, impairment and amortisation of intangible assets arising on business combinations;
see Consolidated Income Statement on page 74 and the reconciliation in Note 13 to the Accounts.
dmg information’s companies are notable
for growing off the back of a deep
understanding of their markets and
customers. They provide innovative
solutions which are highly valued.
Business Model
dmg information has a proven track record
in identifying and developing young
companies into strong performers in specific
niche markets. It leverages the long term
perspective and financial backing of the
Group. It is a provider of B2B information
for the property, education, energy and
finance sectors (see chart on page 27 for
sector revenue split). dmg information
operates under the Landmark, EDR,
Hobsons, Genscape and Trepp brands
among others. DMGT highly values the
subscription or transaction revenue
models of these businesses with their
high renewal rates.
Performance Highlights
High underlying double digit revenue
growth and increased profitability has
characterised another strong performance.
This is due to a combination of product
expansion and improving demand with
particularly impressive growth in its property,
education and energy businesses.
Revenues reached £293 million,
while operating profits increased
by an underlying 14% to £58 million.
In property, EDR experienced a gentle
recovery in the US commercial property
sector and Landmark an improvement
in overall transaction volumes in both the
residential and commercial property
sectors in the UK. On-Geo, which is part
of Landmark, grew strongly and gives
dmg information exposure to the important
German market.
In education Hobsons, which is
predominantly based in the US, increased
underlying revenues by 12% amid rising
demand from high schools for information
which enables them to help students select
colleges and universities. More than 6,500
US high schools rely on Hobsons’ Naviance
product. There was also continued growth in
Hobsons’ higher education business, which
offers software and systems to universities
and colleges to recruit students and
manage student information throughout
the enquiry and application process, and
increasingly once students have started
attending their chosen institution.
During the year Hobsons invested in a new
service offering for universities to completely
outsource the marketing, enrolment
and administration of their online tuition
programmes. This had a negative impact
on margin.
Growth in energy, where Genscape is a
leading provider of real time ‘supply-side’
information, has benefited from increased
demand for its rich array of analytics and
proprietary data. Genscape increased
its product range to cover the additional
oil, gas and bio-fuels sectors. Underlying
revenues rose by 17%.
The financial information businesses, where
Trepp is the market leader in providing
information on commercial mortgage
backed securities (CMBS), delivered
creditable single digit growth benefiting
from higher issuance of new CMBS albeit
in conditions which remained uncertain.
Lewtan continued to offer innovative
products to lenders and traders as well
as investors and issuers of other classes
of asset backed securities.
15
Strategic Priorities
dmg information is giving priority to organic
growth complemented by bolt-on
acquisitions, with a preference for businesses
which have subscription based revenues.
dmg information has also been increasingly
active in investing in young companies –
recent examples being Xceligent and
Cougar, in property information.
Driving international growth
dmg information has historically given
priority to growing in the USA. From its new
Asian headquarters in Singapore, it is now
exploring further expansion in South and
East Asia. In parallel it has been researching
opportunities in South America. Priority is
being given to the property, education
and energy sectors.
dmginfo.com
Revenue by sector
10
1
7
3
4
2013
%
0
3
Energy information
Financial information
Education
Property information
Active Portfolio Management
Other acquisitions include FirstSearch, also
in property information, which provides
environmental information and analysis
for commercial property due diligence in
the USA and which became part of EDR.
Vessel Tracker, located in Germany allows
Genscape to monitor the movement of
vessels around the world, thereby providing
vital new information which impacts supply
and demand estimates for energy markets.
These bolt-on acquisitions are highly
complementary, adding additional
products and talent, as well as delivering
useful synergies. This was true of Edumate,
Beat the GMAT and the National Transcript
Center, three growing businesses which
have enhanced Hobsons’ product portfolio.
In October 2013, dmg information’s stake
in Xceligent increased to 52% from c. 49%.
It is now treated as a subsidiary. Also in
October 2013, dmg information acquired
Decision Insight Information Group
which provides property searches through
SearchFlow in England and Wales, Millar
& Bryce in Scotland and Rochford Brady
in Ireland.
Application of state-of-the-art technology
Clients are increasingly demanding
interactive and real time data which
enables them to improve decision making.
A growing priority is on providing platforms
based on up to date technology.
Hobsons is currently working on an
integrated platform strategy for its range
of higher education products by applying
experience learnt at Naviance, the K-12
high school platform.
Genscape continues to consolidate the
current variety of its existing infrastructure
onto one system. This will improve business
continuity and enable further rapid
product innovation.
In education, advances in technology
have enabled Hobsons to provide
more international student access.
Genscape is extending its presence beyond
existing markets to include Eastern Europe,
and is looking at opportunities in Japan
and Australia.
Attracting and developing
entrepreneurial talent
Recruiting and developing talent continues
to be a key priority for all dmg information
companies. Its decentralised structure
has been vital to its successful track record
in retaining the founders of acquired
businesses and supporting the next stages
of innovation and growth. It nurtures an
environment which fosters the sharing of
best practice combined with a strong sense
of individual accountability and ownership,
supported by the skills and experience of
the dmg information parent organisation.
By ensuring each company is led by an
entrepreneurial leader, the culture is one
which in turn attracts highly motivated
and innovative employees. Due to the
increasing importance and changing
nature of technology, dmg information
companies are placing greater emphasis
on recruiting and developing top quality
technology talent.
Priorities in year ahead
International expansion will continue to
be a key priority, combined with additional
investment in technology. Moving to
unified platforms enables the businesses
to deliver superior products.
In addition to Hobsons and Genscape
similar initiatives are being considered by
EDR and Landmark. dmg information
anticipates that these strategic priorities
coupled to improving market conditions
will contribute to another year of double
digit revenue and operating profit growth.
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dmg events
16
dmg events is an important part of
our portfolio with its international
footprint and strong brands which
lend themselves to being replicated
in high-growth geographies.
Geoff Dickinson
Chief Executive Officer
Business review
Revenue
Operating profit*
Operating margin*
2013
£m
87
21
24%
2012
£m
89
21
24%
Movement
%
-2%
+1%
Underlying
%
+12%
+14%
* Before exceptional items, impairment and amortisation of intangible assets arising on business combinations;
see Consolidated Income Statement on page 74 and the reconciliation in Note 13 to the Accounts.
With event teams working across the globe,
dmg events’ decentralised and light touch
management style allows entrepreneurial
behaviour to flourish with agile execution
of ambitious growth plans.
Business Model
dmg events produces B2B exhibitions and
conferences in the energy, construction,
interiors and digital marketing sectors.
Its events attract more than half a million
visitors annually.
The events market is large, diverse and
growing. dmg events has a proven track
record of establishing strong cooperation
arrangements with local partners to
facilitate expansion into new markets
and geographies.
Performance Highlights
dmg events delivered strong underlying
revenue growth of 12% and underlying
profit growth of 14%.
Reported results were impacted by the
disposal of Evanta in September 2012.
Margins are among the highest in
the industry.
Strategic Priorities
The current priorities are for new launches
and continued geo-cloning. Harnessing
technology to extend the event experience
is also an objective. To deliver these priorities
the development of existing talent
combined with the ability to attract new
talent is also of critical importance.
Fostering innovation to deliver
organic growth
Customer demand and content innovation
has led to a number of biennial events
being moved to annual frequently
as shown in the table on page 17.
For example, ADIPEC and the Global
Petroleum Show will both be held annually
from 2014 and 2015 respectively. Gastech
is moving to an 18-month frequency.
Driving international growth
New events are being launched in new
geographies notably off the back of the
company’s established presence in the
Middle East, with successful new events
launched in Saudi Arabia and Kuwait
and a planned entry into Qatar. A new
construction show was launched
in India. New events are being planned
for Singapore and China in 2014.
Application of state-of-the-art technology
Delegates and exhibitors today expect
a greater degree of interactivity and
digital engagement. dmg events is
making information and conference
details compatible for smartphones,
tablets and other internet enabled devices.
Attracting and developing
entrepreneurial talent
The light touch management style allows
entrepreneurial behaviour to flourish.
dmg events continues to attract talent,
with entrepreneurial flair and the ability
to operate in a range of geographies
and sectors which is critical to its
continued success.
Priorities in the year ahead
Attention will be paid to ensuring the
new annual frequency of ADIPEC and
the Global Petroleum Show are successfully
executed alongside further geographic
and geo-cloning initiatives.
dmg events remains confident about the
outlook. It should continue to deliver healthy
double digit revenue and profit growth
next year.
17
Event frequency table
Creating a smoother cycle
dmgevents.com
Big 5 Dubai
ADIPEC
Global Petroleum Show
Gastech
INDEX
FY11
FY12
FY13
FY14
FY15
H1
A
B
B
A
H2
H2
H1
A
H1
A
B
H2
H1
A
A
B
18
18
A A
A
H1
A
A
H2
B
A
H2
A
A
Revenue
Total for major events
FY11 FY12 FY13
18 Months
£m £m £m
38
31
43
Biennial
Annual
OverviewStrategic ReportDirectors’ ReportShareholder InformationFinancial StatementsAnnual Report 2013 Annual Report 2013
Euromoney
Institutional
Investor
18
Euromoney has been part of
DMGT since 1969. As the Group’s
first investment in B2B publishing,
it has continued to demonstrate
the benefits of a diversified portfolio.
Christopher Fordham
Managing Director
Business review
Revenue
Operating profit*
Operating margin*
2013
£m
405
119
29%
2012
£m
394
112
28%
Movement
%
+3%
+6%
Underlying
%
+1%
+1%
* Before exceptional items, impairment and amortisation of intangible assets arising on business combinations;
see Consolidated Income Statement on page 74 and the reconciliation in Note 13 to the Accounts.
The business is a major contributor of our B2B
strategy of achieving international growth,
particularly in emerging markets. The
business is publicly listed on the London
Stock Exchange and DMGT holds a
c.68% stake.
Business Model
The business is focused on the international
finance, metals and commodities sectors.
It provides digital research and data,
publishes both online and print journals,
as well as running conferences, seminars
and training courses. More than half of its
revenues derive from subscriptions and
more than a third derive from emerging
markets. Euromoney continues to show itself
to be a resilient business achieving growth
despite tough conditions in the financial
markets, by being able to respond quickly
to changing markets.
Performance Highlights
Euromoney delivered a solid performance
in spite of challenging conditions in several
of its markets.
The company generated revenues of
£405 million and modestly improved
operating profits to £119 million.
An unchanged operating margin of
close to 30% reflects tight management
of costs and increased investment in
new products and technology.
The performance reflects steady demand
for digitally delivered research and data,
along with a return to subscription growth.
This offset advertising weakness in print titles
serving the international finance sectors.
Euromoney’s events businesses contributed
robust revenues and earnings growth
amid positive trends for conferences
and seminars aimed at international
finance, energy and telecoms markets,
particularly in the US.
By division, turnover improved in business
publishing and conferences and seminars,
compensating for weaker sales in financial
publishing and training. Recent bolt-on
acquisitions also contributed to earnings,
such as the Centre for Investor Education
(CIE), the Australian provider of investment
forums for the asset management industry.
The benefits from technology investment,
a reduction in funding costs and lower
central overheads, is positioning Euromoney
to deliver further improvements as market
demand strengthens.
Strategic Priorities
The company is committed to building a
robust and tightly focused global online
information business with an emphasis on
emerging markets. This strategy involves
increasing the proportion of revenues from
subscription products and using technology
to develop new information services.
It also involves moving print products online,
and phasing out products with low margins
or an over reliance on advertising.
In addition, Euromoney is making selective
acquisitions as part of accelerating its
growth strategy.
Active Portfolio Management
Euromoney has maintained a track record
of significant growth which has been
derived from acquisitions and synergies
extracted from combining new and existing
businesses.
In the financial year Euromoney has made
a number of acquisitions for a total cost of
£32 million. These bolt-ons included:
• TTI/Vanguard, the US private membership
organisation for technology executives in
global organisations;
• The Insurance Insider, the publisher
and events organiser for international
insurance and reinsurance markets;
• CIE, an Australian company that hosts
investment forums for the asset
management industry; and
• Quantitative Techniques, the
benchmarking and calculation agency
arm of HSBC which creates and maintains
indices for HSBC’s global markets division
and more than 60 external clients.
19
euromoneyplc.com
In order to attract and motivate high
potential individuals suited to Euromoney’s
growth aspirations, Euromoney has a
Capital Appreciation Plan, which is a
share option scheme operated to reward
executives for long-term profit growth
and the delivery of higher shareholder
returns. A new capital appreciation plan
has been proposed and is designed to
incentivise growth and retention in the
years to come.
The organisation has also been investing in
digital training to ensure that all members
of staff are equipped to work with the
Delphi content management system,
where relevant, and to keep pace with
the technology demands of clients.
Priorities in the year ahead
In the year ahead, Euromoney will
continue with investment in digital
technologies, a focus on emerging market
growth, extracting synergies from recent
acquisitions whilst making new acquisitions.
Maintaining a high rate of new product
development will continue to be a priority.
This will underpin revenues and profitability,
in spite of continued Eurozone uncertainty
and volatile demand in some commodity
sectors. Internally, the main priority will be
to deploy the Delphi platform across the
company.
The Delphi deployment is expected to
coincide with improving market trends in
the US and the first signs of advertising
sales moving in a more positive direction.
These businesses complement existing
operations, while also offering a
springboard into new information
areas or markets.
Fostering innovation to deliver
organic growth
The company continues to invest for growth
in a challenging market, where the
provision of specialist information, data
and events has become increasingly digital.
The investment in technology has focused
on richer data content for subscription
customers at the same time as stimulating
online traffic that is attractive to advertisers.
Euromoney has invested in new online
data and research products, as well as
technology to accelerate the transition
from print to online consumption.
Application of state-of-the-art technology
The single largest organic investment is
Delphi. This will provide a common content
production management and distribution
system. This will enable the business to
manage and deliver content to more
subscribers on more platforms with granular
discovery and aggregation, the removal of
existing barriers to product segmentation,
increased speed to market and an
additional focus on digital output.
It will include semantic and technical
search categorisation to be deployed first
at BCA Research, and then EuroWeek in
2014. All of Euromoney’s editorial products
should be on the new platform by the end
of 2015.
Delivering international growth
The group’s main offices are in London,
New York, Montreal and Hong Kong and
more than a third of its revenues are derived
from emerging markets.
Emerging markets continue to be a key
part of Euromoney’s international growth
strategy, with the products proving resilient
in these challenging markets.
The business is also well positioned to benefit
from the growth of US markets and US
financial institutions.
Attracting and developing
entrepreneurial talent
Following the death of Padraic Fallon in
October 2012, there has been a transition
to a new leadership team led by
Richard Ensor, Executive Chairman,
Christopher Fordham, Managing Director,
and Colin Jones, Finance Director.
OverviewStrategic ReportDirectors’ ReportShareholder InformationFinancial StatementsAnnual Report 2013 Annual Report 2013
dmg media
20
dmg media operates in the
fast moving consumer market.
The opportunity to innovate and
the ability to move quickly to adapt
to trends is a key feature of our
consumer media business.
Kevin Beatty
Chief Executive
Business review
Revenue
Operating profit*
Operating margin*
Figures exclude Northcliffe Media.
2013
£m
793
80
10%
2012
£m
848
78
9%
Movement
%
-6%
+4%
Underlying
%
-1%
+10%
* Before exceptional items, impairment and amortisation of intangible assets arising on business combinations;
see Consolidated Income Statement on page 74 and the reconciliation in Note 13 to the Accounts.
dmg media (formerly known as A&N
Media) has undergone a significant
transformation. Whilst its print businesses
continue to generate a significant
proportion of the profits, an increasing
proportion of the division’s revenue is
derived from its growing digital businesses.
It is now focused on national print and
driving digital revenues from a smaller
number of high potential businesses.
Business Model
dmg media’s portfolio of print and digital
consumer media assets include two of
the UK’s most read paid-for newspapers,
the Daily Mail and The Mail on Sunday,
and the world’s most visited English
language newspaper website, MailOnline.
The portfolio also includes Metro, Evenbase
and Wowcher. Revenues are generated
from advertising and circulation, with
an increasing proportion from digital
revenue streams.
Performance Highlights
dmg media delivered a resilient
performance. Revenues were £793 million,
an underlying decrease of 1%. It was a
creditable result given the wider upheavals
sweeping the media industry. Operating
profits of £80 million were achieved at a
margin of 10%.
Last December the Group completed the
disposal of the Northcliffe Media regional
newspaper business to Local World for cash
proceeds of £52.5 million. As part of that
transaction, DMGT also received a 38.7%
stake in the newly formed Local World
publishing group.
The remaining consumer media operations
are focused on print and digital assets
that are increasingly interactive and
international in audience appeal. Healthy
returns were generated by the core print
assets and Evenbase, while we continue
to invest in Mail Online and Wowcher
to drive their long term growth.
During the year, commercial and financial
changes to the terms and conditions
of some of dmg media’s trade debtors
resulted in a one-off reduction in working
capital of c. £60 million.
Mail titles
The Daily Mail and The Mail on Sunday,
increased their share of the UK national
newspaper market to 22% and 21%
respectively.
There was a weekday cover price increase
at the Daily Mail in February 2013. Total
circulation revenues declined by an
underlying 3% to £341 million. Print
advertising revenues were down by 8%
at £200 million, reflecting weakness
in categories such as retail, travel and
financial, in part due to the absence
of the benefit from the Jubilee and
Olympics which took place in 2012.
Combined digital and print advertising
remained constant on an underlying basis,
with the growth in digital advertising
offsetting the decline in print advertising.
MailOnline has consolidated its position
as the largest English speaking newspaper
website in the world. The audience
reach and global appeal of MailOnline
contributed to a 48% increase in revenues
to £41 million.
The Mail titles are committed to further
digital innovation, including securing new
subscription income from Mail Plus, the
paid-for online version of the Daily Mail,
designed for tablet use, which was fully
launched in February 2013 and was
extended to include The Mail on Sunday
in July 2013.
Operating profits for dmg media reflected
cost savings and efficiencies from the
consolidation of the UK print plants,
particularly the transfer of Mail Newspapers’
main print facilities from Surrey Quays in
London to Thurrock in Essex, in summer 2013.
21
dmgmedia.co.uk
Joint ventures and associates
Two of DMGT’s major joint ventures are
consumer businesses. The results for these
businesses are consolidated separately and
are excluded from the table on page 20.
Zoopla Property Group
Zoopla Property Group, in which DMGT
holds a c. 51% stake, delivered a very strong
performance. Product innovation, effective
selling and improving conditions in the
residential property market contributed
to a significant growth in revenues.
Local World
Local World, in which DMGT holds a c.
39% stake following the sale of the Group’s
Northcliffe Media assets in late 2012,
reported a revenue performance that
was in line with expectations but with
greater than expected cost efficiencies,
resulted in a stronger than expected
profit performance.
Metro
The free morning newspaper targeting
urban commuters has consolidated its
position as the UK’s third largest daily and
the world’s biggest free newspaper. It
captured an increasingly mobile digital
audience in addition to its average print
readership of 3.4 million. Metro’s website
attracted 17 million monthly unique
browsers in September 2013, more than
double September 2012, with 49% of its
audience now accessing via a mobile
device. Revenues (including 7 Days in the
UAE) declined 10% to £80 million for the
financial year, reflecting the benefit the
Olympics had on last year’s results.
Evenbase
Following the acquisition of Jobrapido in
2012, overall revenues improved by 35% to
£78 million, an underlying increase of 11%.
Profits remained flat due to investment
in technology.
Wowcher
The daily deals and online discounts
business achieved rapid growth,
consolidating its position as the UK’s second
largest provider of voucher deals. Revenues
rose by 184% to £14 million.
Strategic Priorities
The business remains focused on reducing
its reliance on print advertising and investing
in digital growth. dmg media remains
committed to the highest editorial
standards and has increased its newspaper
market share whilst expanding the
proportion of digital revenues.
Active Portfolio Management
The sale of its Central European print and
digital businesses and Northcliffe Media,
its UK regional newspaper business were
completed. Our c. 39% holding in Local
World, Northcliffe’s new parent company,
further offers a potential upside from any
consolidation of the regional media
marketplace.
Fostering innovation to deliver
organic growth
dmg media launched Mail Plus. It is a fully
interactive online version of the Daily Mail
and The Mail on Sunday, available to
subscribers as an app. It includes innovative
content including 360-degree photography
and interactive puzzles. Subscribers to
Mail Plus are enhancing the overall ABC
readership of Mail Newspapers.
Daily traffic to MailOnline continued
to grow, September’s level of 9.5 million
being 48% higher than in September 2012.
More than 43% of this traffic was generated
from the UK and 26% from the US.
During the summer, Metro launched
Metro Play, a gaming website, initially
offering casino games. Wowcher revenue
continued to benefit from a growing
subscription base, driving strong
merchant retention.
A £53 million investment in the Thurrock print
plant in Essex is expected to generate
annualised savings of about £20 million from
2014, compared to the running costs of
the Surrey Quays site it replaced, due to its
efficient state of the art and environmentally
advanced production facilities.
Fostering international growth
Most of the international growth in
consumer media in the financial year
has been generated in the US, where
MailOnline, now employs over 100 people
in editorial and commercial activities.
Of the £41 million annual revenue at
MailOnline, a growing proportion was
generated from the US, 85% higher than last
year. US demand has also driven increased
international revenue contributions at
Evenbase and has helped the job
recruitment business to attract nearly
1.2 billion visits per year from more than
50 countries.
Attracting and developing
entrepreneurial talent
This year dmg media launched its own
leadership development programme,
complementing DMGT’s scheme. This,
coupled with a new Graduate Recruitment
Programme, reflects a renewed emphasis
on talent development.
Editorial talent was recognised in the past
year with over 25 industry awards, a result
of its quality journalism.
Priorities in the year ahead
Pressure on print circulation and advertising
is expected to continue. dmg media will
counter such pressures by further efficiency
measures and growing digital revenues.
Lower net investment is expected in the
coming year. DMGT believes its digital
businesses are well placed to benefit from
increased digital consumption and a trend
by advertisers to target online audiences.
Combined with cost discipline and targeted
investments, these priorities should deliver
a solid performance in the coming year.
OverviewStrategic ReportDirectors’ ReportShareholder InformationFinancial StatementsAnnual Report 2013 Annual Report 2013
22
Strategic Report
Key Performance Indicators
Description
Relevance
Underlying revenue growth
Performance
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.
+2%
+3%
+3%
+2%
-8%
reported
2009
2010
2011
2012
2013
Narrative
Underlying
revenue growth
+2%
2012 | +3%
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 (shown in £m’s).
Adj profit before tax
228
232
186
282
255
Group adjusted profit
before tax#
Operating
margin
DMGT’s investment criteria
emphasise profitable,
high-growth sectors.
In the long term, increasing
adjusted operating margin
indicates an improvement
in the quality of its business
assets.
Net debt: EBITDA
ratio
Management aims
to regain DMGT’s
investment-grade status.
This includes maintaining
a low net debt and targets
a net debt: EBITDA ratio
of below 2.0 times.
2009
2010
2011
2012
2013
Operating margin
16%
15%
15%
17%
13%
2009
2010
2011
2012
2013
Net debt: EBITDA ratio
3.1
2.3
2.0
1.6
1.5
2009
2010
2011
2012
2013
Earnings per share
£282m
2012 | £255m
Group adjusted profit before tax
grew by 10% helped by increased
income from joint ventures and
associates and reduced net
finance costs.
Operating margin#
17%
2012 | 15%
Net debt: EBITDA
1.5 times
2012 | 1.6 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.
Strategic priority
• Fostering innovation to
deliver organic growth.
• Applying state-of-the-
art technology.
• Driving international
growth.
• Maintaining active
and rigorous portfolio
management.
• Fostering innovation to
deliver organic growth.
• Maintaining active
and rigorous portfolio
management.
• Driving international
growth.
• Applying state-of-the-
art technology.
• Maintaining active
and rigorous portfolio
management.
Earnings
per share
Management seeks
above average growth
in adjusted earnings per
share to maximise overall
returns for its owners
(shown in pence).
46.0
46.1
49.4
53.0
33.9
Earnings per share#
53.0p
2012 | 49.4p
• Fostering innovation to
deliver organic growth.
• Maintaining active
and rigorous portfolio
management.
Dividend
per share
The Board’s policy is
to maintain dividend
growth in real terms
over the long term.
20
15
10
5
0
2009
2010
2011
2012
2013
Dividend
Inflation
Dividend per share
3.7p
1993
19.2p
19.2p
2012 | 18.0p
6.6p
2013
We were able to continue our
strong track record of dividend
growth and have proposed
a full year dividend of 19.2p,
up by 7% from last year.
• Fostering innovation to
deliver organic growth.
• Maintaining active
and rigorous portfolio
management.
23
Description
Relevance
Performance
B2B share
of total
revenues
The growth of its business
divisions are key
components of DMGT’s
strategy. This KPI tracks
the proportion of total
revenues attributable
to B2B activities.
Narrative
B2B share of
total revenues#
53%
2012 | 46%
Strategic priority
• Maintaining active
and rigorous portfolio
management.
• Driving international
growth.
2013
%
5
3
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 revenue
is a more stable and less
cyclical revenue source
than advertising and is
largely derived from digital
B2B products. This KPI tracks,
relative to the rest of the
portfolio, the Group’s ability
to generate high quality,
digital B2B earnings.
Organic
Investment as a
% of total
revenues
Investing back into the
businesses, to continue
DMGT’s tradition of product
innovation and effective
use of technology, is key
to delivering sustained
long-term profitable growth.
4
2
2013
%
International share
of total revenues#
42%
2012 | 37%
• Driving international
growth.
• Attracting and
developing
entrepreneurial talent.
4
2
2013
%
2
9
2013
%
Digital share of
total revenues#
42%
2012 | 35%
• Applying state-of-
the-art technology.
• Attracting and
developing
entrepreneurial talent.
Subscription share
of total revenues#
29%
2012 | 25%
• Driving international
growth.
• Applying state-of-
the-art technology.
• Attracting and
developing
entrepreneurial talent.
Organic investment
as a % of total revenues
• Fostering innovation to
deliver organic growth.
7%
Carbon footprint DMGT understands the
importance of acting
responsibly. We are
targeting a 10% reduction
in our carbon emissions
to 37.3 tCO2/£m revenue,
over three years from 2012
to 2015.
Carbon footprint
43.3
41.6
40.9
41.5
38.6
2009
2010
2011
2012
2013
2013
38.6 tCO2/
£m revenue
2012 | 41.5 tCO2/£m revenue
• Attracting and
developing
entrepreneurial talent.
# From continuing and discontinued operations.
OverviewStrategic ReportDirectors’ ReportShareholder InformationFinancial StatementsAnnual Report 2013 Annual Report 2013
24
Strategic Report
Financial and Treasury Review
This Financial and Treasury Review
demonstrates the strong revenue and profit
performance from DMGT’s diversified portfolio
of market leading businesses. It also reflects
the share of revenues and profit derived from
different business sectors, including the rising
proportion of revenues from subscriptions,
digital and international operations.
Stephen Daintith
Finance Director
Key financial highlights
Underlying Revenue
+2%
2012 | +3%
EPS
+7%
2012 | +7%
Operating Margin
Dividend increase
17%
2012 | 15%
+7%
2012 | +6%
Underlying Operating Profit
Net debt ratio
+6%
2012 | +7%
Adjusted PBT
+10%
2012 | +10%
1.5 times
2012 | 1.6 times
Dividend
19.2p
2012 | 18.0p
In this report, underlying revenue or profit* is revenue or profit* on a like-for-like basis, adjusted for constant exchange rates, disposals, closures, acquisitions and, with the
exception of Euromoney, non-annual events occurring in the current and prior year. For dmg information the underlying results include the post-acquisition organic
growth from acquisitions. For dmg events, the comparisons are between events held in the year and the same events held the previous time, and exclude Evanta
which was disposed of in September 2012. For Euromoney, underlying comparisons exclude current year acquisitions and underlying profit* excludes the benefit in
both FY2012 and FY2013 of the historic acceleration of its CAP charge. For dmg media, underlying comparisons exclude low margin contract printing revenue,
which ceased during the year, the effects of the sale of Teletext Holidays and motors.co.uk last year, the disposal of the Central and Eastern European businesses
this year, and the merger of the Digital Property Group and Zoopla at the end of May 2012, and include the organic growth from Jobrapido. Northcliffe Media is
excluded from the DMGT Group underlying comparisons.
Accounts
This Financial and Treasury Review focuses
on the adjusted earnings of DMGT, which
enables shareholders to make a like-for-like
comparison of the Group’s underlying
performance. The statutory results, including
restructuring and impairment charges, are
set out in the Financial Statements later in
this Annual Report. The adjusted earnings
are summarised above.
Adjusted profit before tax rose by 10%
to £282 million, reflecting the 6% growth
in underlying operating profits and
contributions from joint ventures
and associates.
Revenues
Group revenues in the financial year,
increased by 2% on an underlying basis.
On a reported basis, revenues fell by 8%,
reflecting the impact of discontinued
businesses compared with the prior
year figures.
Revenues from B2B businesses, Risk
Management Solutions (RMS), dmg
information, dmg events and Euromoney
Institutional Investor (Euromoney), were £960
million, an underlying increase of 6%. RMS
delivered underlying growth of 6% to £175
million reflecting continued demand for its
risk analysis models, services, expertise and
data solutions for the quantification and
management of risk for the reinsurance
industry. Accelerated growth is anticipated
with the launch of the new RMS(one)
software platform in 2014.
dmg information’s revenues increased by
an underlying 12% to £293 million in the year,
underpinned by double-digit growth in its
property, education and energy businesses.
dmg events’ revenues of £87 million grew
by an underlying 12%, though they declined
on a reported basis following the disposal
of Evanta in 2012.
Euromoney generated revenues of £405
million, up by an underlying 1%. More than
half of Euromoney’s revenues are derived
from subscriptions and more than a third
are derived from emerging markets.
Total revenues from consumer businesses
(including £49 million from Northcliffe
Media in the three months prior to sale),
were £842 million, down 1% on an
underlying basis. The digital businesses,
including MailOnline, delivered strong
growth, offsetting the impact of declining
print advertising revenues.
Underlying advertising revenues at dmg
media were in line with last year, as the
continued sharp growth in digital
advertising, which increased by 28%,
offset the 9% decline in print advertising.
The comparative growth rates in the final
quarter were adversely impacted by the
2012 Olympics in the previous year and,
for the first nine months of the year,
underlying advertising revenues were
up 2%, which marks a significant inflection
point for dmg media.
25
The charts on page 27, illustrate the
breakdown of DMGT revenues, showing
the changing profile of our sales by business
segment and by geographic region.
This demonstrates the reduced reliance
on print based revenues, while total
revenues generated outside the UK
increased to £754 million.
Operating profit
In the financial year operating profit of £300
million was up by 6% on an underlying basis,
and constant on a reported basis. The
overall operating margin improved to 17%,
reflecting strong growth at dmg information
and dmg events, and a solid underlying
performance at dmg media which
improved margins despite the underlying
decline in revenues and investments in the
digital businesses.
Operating profit is stated before charging
£41 million for exceptional operating items,
principally associated with reorganisation
and redundancy costs at dmg media and
amortisation of intangible assets.
The operating profit by activity is shown
in the chart on page 27. It shows that 77%
of operating profit was generated from
the Group’s B2B operations and 23% from
consumer media. The profit split includes
corporate costs allocated on a revenue
basis. Almost two thirds of our profits come
from outside the UK.
The Group’s B2B operations increased
overall profit by an underlying 4% to £232
million, whilst the profit from consumer
media was £68 million, an underlying
increase of 13%. Northcliffe Media
contributed £7 million of operating profit
during the quarter prior to its disposal and
is excluded from DMGT’s underlying growth
rate. Encouragingly, DMGT continues to
evolve towards a higher proportion of
revenues from subscription based and
digital activities. Operating margins
also remain healthy, particularly in the
B2B business areas. The average sterling-
to-US dollar exchange rate for the year
was £1:$1.56.
The operating profit performance reflects
DMGT’s continued success in growing
its B2B activities, while also diversifying
internationally into high growth markets
and continuing to develop the Group’s
consumer media businesses.
Financing costs
Net finance costs fell to £40 million, largely
due to the redemption and repayment of
DMGT’s 7.5% Bonds during FY12 and FY13,
the increased pension credit and lower
average net debt. The pension credit
increase largely reflects changing rates.
Other investment income increased to
£2 million.
Joint ventures and associates
DMGT’s share of the adjusted results of joint
ventures and associates increased from
£13 million to £22 million, reflecting a £15
million contribution from Zoopla Property
Group, in which DMGT holds a 51% stake,
and £11 million from Local World. The
previous year’s £13 million included £10
million from DMG Radio Australia, which
was sold in August 2012.
Results before taxation
The statutory pre-tax profit for the financial
year was £203 million after charging
£35 million of exceptional items.
Taxation
The adjusted tax charge of £52 million (2012
£39 million) is stated after adjusting for the
impact of exceptional items. The adjusted
tax rate increased from 15.2% to 18.4% for
the year, primarily due to an increasing level
of profits in the US and other higher tax rate
jurisdictions. The continued relatively low
rate reflects tax reductions from tax-efficient
financing and tax deductible amortisation
in the US. Given the current mix of growing
US based businesses and existing tax rates,
the effective tax rate is expected to
increase to around 22% over the next three
years, as a greater proportion of profits will
be subject to the higher US tax rate.
Profit after tax
Adjusted Group profit after tax and minority
interests increased by 6% to £200 million.
Statutory post tax profit was £213 million,
compared with £277 million in the prior year.
Earnings per share
Adjusted basic earnings per share
increased by 7% to 53.0 pence, compared
with 49.4 pence in the prior year. The
weighted average number of shares in issue
during the year was 377.5 million, down from
382.8 million in the previous year, as a result
of the share buy-back programme.
Exceptional items
Exceptional operating costs were £41
million, compared to £89 million in the prior
year. Total exceptional costs, including
amortisation of intangible assets and profits
and losses on disposals, were £35 million,
compared to an exceptional gain of £12
million in 2012.
Cash flow and net debt
Net debt has decreased by £40 million to
£573 million, and is down from £724 million
at the half year, reflecting seasonality of
cash flows.
The Group generated operating cash flow
of £376 million, a conversion rate of 125%
of operating profits.
During the year, the commercial and
financial changes to the terms and
collection of some of dmg media’s trade
debtors resulted in a one-off reduction in
working capital of c. £60 million.
There were net interest payments of
£57 million in the period and £69 million
was spent on the DMGT share buy-back
programme.
Active portfolio management continued
throughout the year with acquisitions
totalling £93 million and disposals totalling
£88 million. Notable acquisitions included
Insider Publishing, FirstSearch, Vessel Tracker,
the Centre for Investor Education and
Euromoney shares. Disposals included dmg
media’s Central and Eastern European
business as well as Northcliffe Media.
DMGT’s principal net debt remains in
long-term bonds. At the year end, the
Group had £674 million of bonds with
£309 million of December 2018, £169 million
of April 2021 and £196 million of June 2027
bonds. The Group also held £2 million of
other debt, £88 million of cash and £15
million of derivatives. DMGT’s ratio of year
end net debt to adjusted profits before
interest, depreciation and amortisation
(EBITDA) was 1.5 times, well within the
Group’s preferred level of 2.0 times.
DMGT’s corporate credit ratings are BBB-
from Fitch and BB+ from Standard & Poor’s.
The Group has bank facilities of c. £300
million that were undrawn at year end and
expire in April 2016.
Treasury and currency
DMGT maintains sufficient liquidity to meet
its operational requirements and to
maintain adequate capital cash flows.
Financial instruments, including derivatives,
are used by DMGT in order to manage
the principal financial risks that arise in the
course of business. These risks are liquidity
or funding risks, foreign exchange risk,
interest rate risks and counterparty risks.
The instruments are used within the
parameters set by the Investment and
Finance Committee and approved by
the Board. The Group’s priority is to address
the economic impact of financial risks using
the most efficient or appropriate approach.
OverviewStrategic ReportDirectors’ ReportSharerholder InformationFinancial StatementsAnnual Report 2013 Annual Report 2013
26
Strategic Report
Financial and Treasury Review
Continued
Pensions
The Group’s defined benefit pension
schemes provide retirement benefits for UK
staff, largely in dmg media. These schemes
are closed to new entrants.
The deficit in the defined benefit schemes
has fallen from £324 million at the beginning
of the year to £208 million at the financial
year end (calculated in accordance
with IAS 19). Corporate bond yields were
volatile over the year but ended slightly
up (from 4.4% to 4.6%) which resulted in
a reduction of the calculated defined
benefit obligation. The deficit was further
reduced by an increase in the value of
the schemes’ assets and funding payments
into the main schemes.
Funding payments included £12 million in
accordance with the funding agreement
with the Trustees. Additional funding
payments were made of £2 million as a
result of the Group’s share buy-back
programme and £17 million resulting from
the disposal of Northcliffe Media with a
further £13 million due to be paid in January
2014. Additional funding payments of
£23 million were made after the year-end
in October 2013 in accordance with the
funding agreements with the Trustees.
These additional funding payments include
a distribution made from the guarantee
structure, provided to the principal defined
benefit pension scheme, Harmsworth
Pension Scheme (HPS). This helps reduce
the need for additional cash contributions
to HPS. 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
£208 million year-end deficit.
The main defined benefit schemes are
undergoing a triennial valuation by the
Scheme Actuary as at 31 March 2013. The
preliminary results of the valuations indicate
Cash flow and net debt
an increase in funding levels compared
with the position at 31 March 2010. Since the
year end the Group has agreed in principle
to a revised schedule of additional funding
payments to the main schemes totalling
c. £30 million p.a. to 2020 and £24 million
p.a. thereafter until 2026, or until the
schemes’ actuary agrees the schemes are
no longer in deficit if shorter. The defined
benefit pension schemes are closed to new
entrants. There has been no significant
change in the allocation of the scheme’s
investments.
All new UK employees are now offered
defined contribution pension plans. These
plans are used to fulfil the Group’s
obligations under auto-enrolment.
Capital risk management
The Group’s strategy for capital risk
management is set out in note 33 to
the Accounts.
Share buy-back
DMGT announced a £100 million share
buy-back programme in November 2012.
DMGT acquired shares to the value of
£69 million in the period. The programme
reflects the confidence of the Board in the
growth prospects of DMGT. The Board
remains confident in the outlook for the
year ahead, reflected by the current
trading performance, the prudent level
of debt and the cash-generative nature
of our operations. The Group’s senior
management continues to 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. We will therefore,
as in recent years, continue to look for
attractive acquisitions and actively
manage our business portfolio while
maintaining our dividend policy and
growing dividends by between 5% and
7%, in real terms, over the long term.
)
m
£
(
t
b
e
d
t
e
N
700
650
600
550
500
450
400
350
300
250
200
613
376
93
88
69
16
573
43
79
57
31
37
Opening
net debt
Operating
cashflows
Taxation Pensions
Interest Dividends
Thurrock
& RMS(one)
Share
Buyback
Acquisitions
Disposals
Debt
revaluation
Closing
net debt
Subject to the share price, the Board has
decided to complete the remaining £31
million of the £100 million share buy-back
programme announced in November 2012,
although DMGT’s M&A requirements will
remain the priority for investment. The Board
will review further share repurchase
programmes on an ongoing basis, in
the context of its balanced approach
to investing for growth and returning capital
to shareholders.
Financial KPIs
As part of how we measure success against
our strategic priorities, we have a number
of KPIs which are designed to provide key
measures of performance that are most
relevant to the Group. These are detailed
on pages 22 and 23.
DMGT and its businesses adopted
demanding financial KPIs to ensure that
the Group delivers continued good organic
growth; remains highly cash generative;
reinvests strong cash flow in active portfolio
management; and offers real dividend
growth.
To maintain this performance, the Board
and management undertake to:
• generate underlying revenue growth over
the course of the business cycle;
• increase Group adjusted profit before tax;
• maintain healthy double digit operating
margins;
• prudently manage net debt;
• seek above average earnings per share
growth; and
• maintain dividend growth in real terms.
DMGT aims to deliver sustained long-term
profitable growth and understands the
importance of reinvesting in the businesses
to support product innovation and the
effective use of technology. The amount
spent on organic investment initiatives in
the year was 7% of revenues and DMGT
considers this to be an appropriate rate
for the Group to maintain.
DMGT’s success in increasing the proportion
of profits derived from B2B operations has
enabled the Group to meet its financial
KPIs, as has the growing share of non-UK
revenues and profits, the rising digital share
of total revenues and the contribution
to revenues from subscription activities.
Summary
Our strong cash flow and flexible capital
allocation, along with the ability to secure
both organic investment opportunities and
bolt-on acquisitions in new sectors should
further help DMGT to meet its financial
objectives in future.
Revenue#
£1,802m
2012 | £1,960m
Operating profit #*
£300m
2012 | £300m
Earnings per share#*
53.0p
2012 | 49.4p
Net debt
£573m
2012 | £613m
Undrawn committed
bank facilities
c.£300m
2012 | £298m
Net debt:EBITDA
1.5 times
2012 | 1.6 times
27
Revenue by type (%)#
Set out below is a split of revenue by type.
Subscriptions and circulation print
Subscriptions non print
Other non print
Advertising non print
Advertising print
Events, training and conferences
Other print
£427m
£357m
£453m
£216m
£150m
£154m
£45m
£1,802m
24%
20%
25%
12%
8%
9%
2%
2013
£488m
£490m
£413m
£219m
£126m
£157m
£67m
£1,960m
25%
25%
21%
11%
6%
8%
3%
2012
Revenue by geographical area (%)#
Set out below is a split of revenue by geographical type.
UK
North America
Rest of the world
Rest of Europe
Australia
£1,048m
£574m
£98m
£66m
£16m
£1,802m
58%
32%
5%
4%
1%
£1,235m
£560m
£83m
£68m
£14m
£1,960m
63%
29%
4%
3%
1%
2012
2013
Operating profit by activity #*
Set out below is a split of operating profit by activity.
Euromoney
Local media
National media
RMS
Business information
Events
Corporate costs
£119m
£80m
£57m
£58m
£7m
£21m
(£42m)
£300m
40%
27%
19%
19%
2%
7%
(14%)
2013
£112m
£78m
£56m
£48m
£26m
£21m
(£41m)
£300m
37%
26%
19%
16%
9%
7%
(14%)
2012
* Before exceptional items, impairment and amortisation of intangible assets arising on business
combinations; see Consolidated Income Statement on page 74 and the reconciliation in
Note 13 to the Accounts.
# From continuing and discontinued operations.
OverviewStrategic ReportDirectors’ ReportShareholder InformationFinancial StatementsAnnual Report 2013 Annual Report 2013
28
Strategic Report
Principal Risks
We understand that risk is a part of doing business. Understanding the risks and, just as importantly, the opportunities that impact DMGT
businesses is vital. Effective risk and opportunity management saves time and money, and gives assurance to management, the DMGT
Executive team, Risk Committee and the Board. The Group’s risks are categorised as either strategic or operational. Strategic risks are linked
to the Group’s strategic priorities and impact the whole Group. Operational risks are those arising from the execution of the business
functions and typically impact on one or more of the operating businesses. Further details of the Group’s risk management process
and the Risk Committee can be found in the Directors’ Report on page 42.
Strategic risks
Description
New or disruptive
technologies or competitors
and changing behaviour
• The impact of new
technology and
competitors e.g. mobile,
tablet, cloud and big data
• Changing behaviours e.g.
online adoption and social
media usage
• Falling newspaper
readership and advertising
spend
Management of portfolio and
allocation of capital
• Failure to identify or
successfully develop
organic growth
opportunities
• Failure to identify acquisition
targets
• Acquisitions fail to yield
expected value
• Failure to dispose of
non-core businesses early
enough
Securing and retaining the
right people for senior and
business critical roles
Impact
Strategic priority
Mitigation
Change
New technologies or
competitor products can
impact the demand for our
products with a resultant direct
impact on Group results
• Application of
state-of-the-art
technology
• The Group’s diverse portfolio of
businesses and products reduces the
overall Group impact
• Fostering innovation
to deliver organic
growth
• The Leadership team, with the
Executive teams and functional
heads, monitor markets, 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
• Rigorous and active
portfolio
management
• Adherence to our investment criteria
and approval by the Investment and
Finance Committee
Underperformance of the
Group and/or impairment
losses. Potential synergies and
growth opportunities lost by
failure to identify acquisition
targets. Diversion of
management time from other
operational matters. Optimal
value from disposals is not
realised
• Fostering innovation
to deliver organic
growth
• Driving international
growth
• Attracting and
developing
entrepreneurial
talent
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
• Acquisitions in related markets with a
high potential for growth
• Detailed due diligence performed
• Retention of key employees in the
acquired business
• Board level monitoring is performed
post acquisition
• Disposals overseen by the Board
and the Director of Strategy
Development
• Formal approach to talent
management and succession
planning
• Investment in Leadership
Development Programme and
related programmes
• Payment of competitive rewards
• Employee performance and turnover
monitoring
• Staff communication/engagement
• Diversifying into business information
and subscription revenue streams
• Investment in strong brands
• Cross geography and sector
approach
Economic downturn
• UK advertising revenue is
impacted by fluctuations
in the wider economy
• Property and financial
markets in the UK and US
are similarly affected
• Lack of growth in key
markets, including financial
markets
Advertising revenues have
been heavily affected by the
downturn in the UK economy
• Fostering innovation
to deliver organic
growth
Risk of not achieving revenue
and profit targets
• Driving international
growth
Certain sectors, including
financial and property sectors
have experienced slow
growth rates impacting
growth prospects and revenue
generation
29
Impact
Strategic priority
Mitigation
Change
A weakening of the dollar
could directly impact on the
value of US dollar earnings
when translated into Sterling
• Driving international
growth
• The Investment and Finance
Committee approves Group
Treasury policies
• Debt is held in proportion to currency
of earnings as far as possible
Impact
Divisions most affected
Physical protection/implementation of technology
Change
Strategic risks continued
Description
US dollar earnings
• An increasing portion
of Group profits arise
in US dollars
• The Group’s functional
currency is Sterling
• See note 33 for more
information
Operational risks
Description
Information security breach or
cyber attack
• Loss of confidential or
personal information
• Unavailability or corruption
of key data
Challenge to the integrity of a
DMGT product resulting in
reputational damage
All
Unavailability of online
products leading to loss of
revenue and reputational
damage
Operational and regulatory
challenges, fines, reputational
damage and costs of
remediation
Failure of a major change
project
• The most significant change
project is currently RMS(one)
Increased costs or lost
revenues as a result of delays,
unforeseen problems, loss of
access to systems and data or
production and delivery issues
RMS
dmg media
RMS, dmg media,
dmg information,
dmg events
Pension scheme deficit
• The UK newspaper business
operates defined benefit
pensions schemes
• Deficits in the schemes are
ultimately funded by the
sponsoring company
Reliance on third parties –
Key commercial relationships
Key third parties include:
• Data centre and cloud
software and service
providers
• Data providers
• Event venues
• Newsprint suppliers
• Newspaper distributors
and wholesalers
Reported earnings may
be affected by funding
requirements that result from
pension deficits as a result of
lower than expected
investment returns or changes
made to the risk profile of
our investment portfolio
An operational or financial
failure of a key supplier could
affect the ability of DMGT to
deliver products, services or
events with a direct impact on
financial results and
management time
Newsprint represents a
significant cost and prices are
subject to volatility arising from
variations in supply and
demand
• Group information security policy
and detailed security standards
• Group policy on business continuity
planning including IT system disaster
recovery
• Regular reviews by the Risk
Committee and Risk & Assurance
• Security is reviewed as part of every
internal audit
• Approval by the Investment and
Finance Committee for significant
projects
• Rigorous planning process
• Ongoing project management
• Monitoring by the local board
• Significant projects are monitored by
the Risk Committee
• The Pensions Sub-Committee reviews
proposals to reduce volatility and
overall cost
• Significant time dedicated to
managing relationships
• Operational and financial due
diligence is undertaken for key
suppliers
• Newsprint requirements are
managed by a dedicated team.
Where possible, long-term
arrangements are agreed with
suppliers to limit the potential for
volatility
OverviewStrategic ReportDirectors’ ReportSharerholder InformationFinancial StatementsAnnual Report 2013 Annual Report 2013
30
Strategic Report
Corporate Responsibility Review
We believe in acting responsibly
in everything we do. In doing so,
we prefer to choose the long-term
and most sustainable approach.
We believe that responsibility and
performance are inextricably linked.
David Dutton
Chairman, Corporate
Responsibility Committee
Our approach
Our values and our CR approach are inextricably linked. We apply our values to
our CR activities and consider these in the decisions we make. This strategy has been
in place for many years and is why we place CR at the heart of how we operate.
Our values
CR approach
With our heritage as a family owned
business we have always evaluated
performance in generational terms, taking
the long-term approach to how we
operate. This is reflected in our commitment
to acting responsibly.
We apply DMGT’s company values to our
Corporate Responsibility (CR) activities and
consider these in the decisions we make.
We support, encourage and monitor these
activities ensuring best practice is
championed and shared.
Our Group wide CR philosophy is
embraced by each of our businesses.
We are dedicated to demonstrating
good corporate citizenship.
Our open and decentralised culture
means that we empower the CEOs of
our businesses to develop CR strategies
appropriate to their communities, but that
fit within our overall framework. This allows us
to have a direct impact on the communities
in which we operate. This means that we
deliver performance with progress.
CR Committee
Our commitment to CR is led by the Board.
Management of CR is delegated to the CR
Committee, which defines and implements
our CR agenda and activities. This
Committee was chaired by David Dutton,
an Executive Director, during the financial
year. Each operating business is represented
on the CR Committee. This enables us to
consider and recommend the Group’s CR
strategy and to evaluate risk exposure,
monitor progress, share best practice and
provide guidance. The DMGT Assistant
Company Secretary is Secretary to the
Committee.
From 1 October 2013, the Committee’s
membership consists of Claire Chapman
(Chairman), David Dutton, Stephen Daintith,
Rebecca Beistman (Risk Management
Solutions (RMS)), Annemarie DiCola
(dmg information), Galen Poss (dmg events),
Colin Jones (Euromoney) and Paul Collins
(dmg media).
31
CR Committee – Membership
Membership of the CR Committee is shown in the table below:
CR Committee member
David Dutton
Stephen Daintith
Kathrina FitzGerald
Peter Duffy
Claire Chapman
Robert Muir-Wood
Stephen Stout
Business
DMGT
DMGT
DMGT
DMGT
DMGT
RMS
Job titles
Executive Director
Finance Director
Strategy Development Director
HR Director
Meetings attended
4
4
3
1
General Counsel & Company Secretary
3 (Joined 29/10/2012)
Chief Research Officer
3
dmg information
CEO, Landmark Information Group
2 (Left 02/05/2013)
Annemarie DiCola
dmg information
CEO, Trepp
Galen Poss
Gerard Strahan
Paul Collins
Ian Hanson
Rick Stunt
Paul Phelan
dmg events
Euromoney
dmg media
dmg media
dmg media
dmg media
COO
Director
Group Financial Controller
4
CEO, Evenbase
Group Paper Director
Group Facilities Manager
1 (Left 17/09/2013)
2
4
1 (Joined 02/05/2013)
3 (Joined 24/01/2013)
4 (Left 17/09/2013)
Attendance
There were four CR Committee meetings
held in the reporting period. All meetings
were held at Northcliffe House.
Key responsibilities
The Committee’s key responsibilities are
to set the Group’s CR strategy, to have
an overview of CR issues, to develop and
protect the reputation of DMGT as an
ethical and responsible corporate citizen,
and to ensure that the Company has a
positive social impact on its stakeholders
and the community at large. To this end
its remit, which can be found on the DMGT
website, is divided into three areas:
Environment
• To make recommendations on issues such
as carbon offsetting and manage carbon
credit initiatives.
• To monitor areas where significant waste
occurs within the Group and identify
improvements.
• To monitor and report on the companies’
purchasing procedures in areas where
sustainability is a major consideration
(principally newsprint).
• To monitor and review legislative,
regulatory, governmental or similar
developments (including proposals
for participation in non-mandatory
third party initiatives) relating to
environmental issues.
• To recommend and set environmental
targets (including the Group’s Carbon
Footprint target), to report on and monitor
carbon/energy usage abatement
measures taken by DMGT businesses.
Our people
• To monitor and assist the spread of best
practice across the Group on company
employee matters and make
recommendations in the areas of
engagement, communication, Health
and Safety, diversity, learning,
development, training and careers.
Stakeholders
• To monitor and assist the spread of best
practice across DMGT businesses to
achieve a fulfilled and engaged
workforce and an honest, reliable and
trusted relationship with our employees,
suppliers and customers.
• To encourage an exchange of ideas
between Group companies.
• To promote involvement of our businesses/
employees within their local communities
including the promotion of relevant and
allied charitable activities.
• To oversee the preparation of the
Corporate Responsibility Review in the
DMGT Annual Report.
1. Environment
We recognise, and are progressively
reducing, our impact on the environment
by lowering emissions, using energy more
efficiently and minimising waste. This
behaviour has business, as well as
environmental, benefits.
The most significant environmental impact
comes from the printing plants in our
consumer media businesses. Over the last
three years we have reduced the number
of plants from eight to two. Our newest
plant, Thurrock, has been designed to be
as efficient as possible, to produce more
newspapers using less energy and is
therefore less harmful to the environment.
While the majority of DMGT’s environmental
impact resides at the consumer media
business, we are not complacent at our
other businesses. We encourage the
businesses to be responsible through the
CR Committee. The CR Committee also
provides a forum to share experiences of
initiatives that have been successful and
that can be replicated at another business.
For example, the DMGT Polar Bear, an
initiative to encourage employees to
consider their impact on the Group’s
carbon footprint. Beginning at DMGT level,
this initiative is now being embraced at
each of the businesses. An example of
how this works in reverse is ‘RMS Green
Week’, a week of environmentally focused
activities that encouraged staff to be
aware of their impact. Following action
proposed by the CR Champions network
and approved by the CR Committee,
the Group will run a Group wide version
of RMS’ Green Week in 2014.
OverviewStrategic ReportDirectors’ ReportShareholder InformationFinancial StatementsAnnual Report 2013 Annual Report 2013
32
Strategic Report
Corporate Responsibility Review
Continued
Key activities
The Committee’s key activities are summarised in the table below, over the last five years, during 2013 and our aims for the year ahead.
Last five
years
Environment
Aim:
To reduce our
carbon footprint by
10% between 2007
and 2012
Result:
Reduced our
footprint by 10%
(by 2010) two years
earlier than target
Result:
Relevant data
gathered and
reported
Aim:
Ensuring we have
the tools in place
to collect and
report our GHG
emissions in line
with new
guidelines
2013
2014
Our people
Aim:
Establish a network
of individuals
actively involved in
CR on a day-to-
day basis and
which represent
each operating
company
Aim:
Launch an awards
scheme to
recognise the
community
minded initiatives
DMGT staff have
been involved with
Result:
CR Champions
network
established and
flourishing
Result:
• Awards launched
• Nearly 100
nominations
received across
the Group
Aim:
To continue to
encourage DMGT
employees to be
aware of their
impact on the
Group’s carbon
footprint
Green Week to
be implemented
across our business
Success factors:
• Polar Bear
awareness
campaign
continued to be
rolled out across
the Group; and
• Green Week
implemented
Group-wide
Success factors:
• Nominations in
excess of 100
received
• Nominations
from all Group
businesses
• Enhanced
promotion of
CCA activities
Aim:
Community
Champions
Awards (CCA) to
be refined with
more focused
categories
(Personal
Achievement,
Team and Green).
More nominations
at each DMGT
Group business to
be encouraged
Stakeholders
Aim:
Maintain place in
FTSE4Good index
Result:
Place maintained
Result:
Revised data
collated and
reported for FY2013
Success factors:
• Prepare and
implement review
Aim:
Alter how we
collect and report
charitable
donations (amount
raised as well as
amount donated)
to give the
businesses and
staff well deserved
recognition
Aim:
Review of suppliers’
CR credentials
and how they
are evaluated
at the operating
businesses
Carbon footprint
The DMGT Chairman, Lord Rothermere,
started a project to measure the Group’s
global carbon footprint in 2007, long before
it became a requirement to do so. Since
then we have published two specific
reduction targets. We met the first, two years
early, and we are a year into the second.
Combined, these targets aim to see our
Footprint reduced by more than 20% in
eight years.
We are, and have for many years been,
committed to comprehensive and
transparent reporting of our environmental
performance. We have adapted how we
report on all of the emission sources
required under the Companies Act 2006
(Strategic Report and Directors’ Reports)
Regulations 2013. These sources fall within
our consolidated financial statements
with the exception of associates, Zoopla
Property Group, Local World, Xcelligent
and ARC, as we do not have responsibility
for their emissions.
For the seventh year in succession we
have collected CO2 emissions data from
each of our five businesses. This data is
collated and independently reviewed
by the environmental consultancy, ICF
International.
In 2012 we integrated our carbon data
collection process with our financial
reporting systems. This is now well
established and administration of quarterly
reporting of emissions data has been
streamlined and data reliability has been
improved. Our emissions are calculated
following the Greenhouse Gas Protocol.
Under a targeted approach, 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.
Under a targeted approach, our Carbon
Footprint continued to fall in 2013. Total
CO2 emissions (Scope 1, 2 and 3) stood
at 67,600 tCO2e (72,400 tCO2e in 2012),
a 7% decrease year-on-year.
Our Carbon Footprint has been restated
for all years in order to account for material
changes to the conversion factors provided
by Defra. It has also been recalculated to
take into account the sale of Northcliffe
Media using the ‘all-year’ option defined
by the GHG Protocol for a ‘fixed base year’
approach. Under the GHG Protocol, the
Footprint does not have to be restated for
closures of printing plants.
In 2012 we set a challenging new target
for the Group. We stated that we planned
to reduce our emissions per £million of
revenue over three years by 10%, using 2012
as the baseline. The 2012 amount was 41.5
tCO2e /£million revenue (based on the
restated emissions) therefore targeting
a 10% reduction to 37.3 tCO2e /£million
revenue by 2015. The 2013 amount was
38.6 tCO2e/£million revenue, a 7% reduction
on 2012 levels.
33
Community Champions Awards
Lord Rothermere hailed the winners
of the inaugural DMGT Community
Champions Awards at a celebratory
dinner in London in April 2013.
He presented prizes for personal
achievement (Orson Francescone and
Catherine Ngai, both from Euromoney),
fundraising (Jeff Partridge, dmg media),
team (dmg media Movember network)
and innovation (Yvette Cooper,
dmg media).
The DMGT Chairman praised the
exceptional lengths the winners
had gone to, to support community
initiatives and raise money for their
chosen charities:
“I am full of admiration for you as winners
of these awards. It is great that there
are so many people across DMGT who
care about good causes and are
participating in their communities
beyond work”, Lord Rothermere said.
US winner for whom a dinner in New York
was held). The Awards were presented
by Lord Rothermere. A donation was
made to the winners’ charities and their
achievements were publicised throughout
the Group. The scheme was such a success
the CR Committee decided that it should
become an annual event.
This Awards scheme shows how we
celebrate and reward individuals that share
our common values of being close to our
markets, knowing and understanding their
communities and giving back. For the 2013
scheme we have added a category to
encourage employees to promote our
green agenda (see KPIs on pages 22 and
23 and the environment section on pages
31 and 32.
The table below shows the evolution of
our Carbon Footprint since 2007.
2. Our people
We recognise that only by empowering
our people will we succeed in delivering
on our strategy. We understand that having
a well balanced and diversified group
of people is key to meeting our goals.
We uphold equal opportunities and also
do not discriminate. Our businesses are
required to follow DMGT policies that
safeguard the welfare of our employees.
More information about our people can
be found on pages 34 and 35.
3. Stakeholders
We recognise that stakeholders increasingly
choose to work with companies which share
their values and which act responsibly.
Our businesses play a huge part in their
local communities and have a direct and
immediate impact. Last year the Group
donated £1.3 million and raised over
£1.1 million for charity. There are countless
examples of how our employees have
been involved in charitable initiatives,
too many to list.
Last year we recognised that these good
deeds deserved to be celebrated and
rewarded by DMGT. We started a scheme
called the DMGT Community Champions
Awards. The aim was to highlight the big
hearted actions of our employees and
fittingly, the scheme was represented by
a big heart logo. On Valentine’s Day 2013
we announced the winners and they were
invited to a dinner at DMGT HQ (except a
Carbon Footprint
Scope 1:
Combustion of fuel
and operation
of facilities
Tonnes of CO2e
Scope 2:
Electricity, heat, steam
and cooling purchased
for own use
7,500
7,500
7,700
6,900
7,400
7,400
7,000
54,500
53,800
48,100
42,900
41,800
40,100
33,800
Year
2007
2008
2009
2010
2011
2012
2013
Scope 3:
Business travel
and outsourced
delivery
22,800
21,800
21,000
21,100
22,300
24,900
26,800
* Emissions from Northcliffe have been removed for all years.
Note: The figures in this table are rounded, therefore the total may differ to the sum of the rounded sub totals.
tCO2e/£million revenue*
Total scope
1 & 2
emissions / revenue
47.5
44.2
43.3
41.6
40.9
41.5
38.6
OverviewStrategic ReportDirectors’ ReportShareholder InformationFinancial StatementsAnnual Report 2013 Annual Report 2013
34
Strategic Report
Corporate Responsibility Review
Continued
DMGT Polar Bear
To support our efforts to reduce
the Group’s Carbon Footprint,
we developed the DMGT Polar Bear:
People
One of our five strategic priorities is to
attract, motivate and, importantly, develop
our employees. They are encouraged to
think creatively, be entrepreneurial and
innovative, to deliver organic growth and
ensure we are always at the forefront of
technological development. By being a
decentralised business we empower our
people, not only to deliver the best for
their business, but also to give back to
the communities in which they live and
work, and therefore to the greater benefit
of the Group as a whole.
Training and development
We understand that to deliver our strategic
ambitions (see pages 8 and 9), we need
to develop our employees and reward
them accordingly.
There is a large and varied number of
training initiatives in operation around
the Group. A selection of these are
highlighted below.
• Leadership Development Programme.
This is a 10-day course, split into two
offsite sessions held at the University
of Cambridge and run jointly by the
Company and the Moller Executive
Education Centre. There are additional
follow-up initiatives. This is designed to
enhance the leadership skills of our senior
executives with a particular emphasis on
driving the right behaviours and culture
of our leaders throughout the Group.
• Technology summer school. This is a
forum for ‘technologists’ around the
Group to come together to share ideas,
collaborate and hear talks from external
experts and senior DMGT Executives.
• Hackathon: this brings together groups of
people from our businesses to collaborate
on creative technical solutions.
• Graduate programmes at each business.
• CR Champions network. These are
individuals who have been recognised
as championing CR initiatives at their
businesses. They are tasked with coming
together to share best practice, to
communicate DMGT’s CR campaigns
and are recognised for their efforts.
Communications/engaging
with our people
We have focused on communicating,
concentrating on employee engagement
to ensure that despite our decentralised
approach, we have a common culture
and can share the experiences that are
important to us all. Key channels DMGT
has in place and that are used to inform,
enthuse and inspire our people are:
• Coffee with Martin – a blog from DMGT
Chief Executive Martin Morgan.
• DMGT Home – the Group intranet/app
that displays Group policies, news stories,
awards won and CR information.
• Chatter – a business networking tool for
sharing ideas, notices and best-practice.
• DMGT Daily – a daily digital newsletter
containing news relating to the sectors
in which our businesses operate as well
as significant Group news.
Culture
As with our strategic ambition to be a well
diversified Group, each of our businesses
has a distinct culture consistent with the
Group’s overall values. We encourage and
support their different approaches and
back the leaders of each business with
an agreed framework of financial and
other controls. We appreciate that they
understand and know what is best for
their businesses, their people and their
communities. Our diversified nature means
that our employees are located throughout
the world. At Group level we have a small
head office team, based in London, that
provides the businesses with expertise and
experience. We encourage synergies
between our businesses and relationships
between our people but do not seek them
out where they are not relevant. In this way,
we adopt an approach that shares best
practice across our businesses and at
the centre.
Running through the Group is a sense
of belonging that stems from our distinct
ownership structure (see Governance
section on pages 40 to 43). The strong sense
of family heritage, coupled with DMGT’s
commitment to the long-term success of
the Company, creates a unique working
environment which reaches each and
every one of our businesses.
35
CR Champions
Our CR Champions
lead and drive the CR
agenda within their
own organisations
A group of over 35 individuals called
CR Champions represent Group
businesses and meet by conference
call each quarter to discuss CR at a
grassroots level.
The Champions share ideas, lessons
learnt from CR initiatives they have
carried out collaborate and share
best practice. The discussions feed
into the CR Committee.
The network also provides an
opportunity for some of our most
talented employees to develop
their leadership skills.
Gender diversity
We have collected information regarding
the diversity of our employees on a Group
wide basis for the first time this year.
The table below sets out the gender
breakdown of our employees.
Gender diversity
Male
Female
13
46
2
13
5,599
3,747
Number of Board
Directors
Number of Senior
Executives (excluding
Board Directors)
Number of employees
(excluding Senior
Executives and
Executive Board
Directors)
Total
5,658
3,762
The Senior Executives consist of our Strategy
Development Director, Group Director of
HR, Deputy Finance Director, General
Counsel & Company Secretary, Group
Reward Director and Head of Management
Information & Investor Relations. These
individuals are all part of DMGT’s small head
office team. This category also includes the
CEOs of the Group’s operating businesses
and their direct reports.
Collectively, men make up 60% and women
40% of the total DMGT Group.
DMGT’s Equal Opportunities policy explicitly
states that DMGT is an equal opportunity
employer. Decisions made at our businesses
must be based on merit irrespective
of gender.
Social and community
We strive to maintain the highest standards
and expect each employee to adhere to
our Group policies, codes and principles.
These are all available on our internal staff
website, DMGT Home, and include policies
on equal opportunities, anti-bribery, our
Code of Conduct, entertainment and gifts,
information security and health and safety.
We have an active and rolling training
programme to reinforce compliance and
to ensure there is a high level of awareness
of our standards.
Human rights
We are aware of the human rights
frameworks such as the UN Convention
on human rights and the Human Rights
Measurement Framework. We have carried
out a high level review of our businesses in
the context of these frameworks and
believe that our exposure to the associated
risks are minimal. To formalise this process
in 2014, we are aiming to carry out a review
of supplier policies at Group businesses
(see key activities table on page 32)
to ensure that our suppliers operations
reflect the practices that we adhere to.
Employees
The Company is committed to a policy
of treating all its colleagues and job
applicants equally and to increasing
the involvement of colleagues through
engagement activities.
In keeping with the Group’s decentralised
management approach, it is the
responsibility of the management in each
business to encourage the involvement
and participation of employees in their
company. The methods used vary from
company to company, but the linking of
performance targets of a significant portion
of remuneration is one widely used means.
We are committed to the employment of
people with disabilities and will interview
those candidates who meet the minimum
selection criteria. We provide training and
career development for our employees,
tailored where appropriate to their specific
needs, to ensure they achieve their
potential. If an individual becomes disabled
while in our employment, we will do our best
to ensure continued development in their
role, including consulting them about their
requirements, making appropriate
adjustments and providing suitable
alternative positions.
Supporting entrepreneurialism –
Chairman’s Fund for Innovation and Growth
To strengthen the culture of innovation,
product development and
entrepreneurialism across the Group
and to provide access to, and exposure
to, talented individuals outside the Group,
under the direction of the Chairman, a
special fund has been established. This
enables the investment in innovative
commercial opportunities in the digital
media and information space, supportive
of the Group’s overall strategy. Several
investments ranging from £500,000 to
£2 million have been made.
OverviewStrategic ReportDirectors’ ReportShareholder InformationFinancial StatementsAnnual Report 2013 Annual Report 2013
Board of
Directors
36
4.
3.
6.
1.
2.
8.
7.
5.
1. The Viscount Rothermere †‡x
Chairman
4. J G Hemingway*†x
Non-Executive Director
7. Lady Keswick
Independent Non-Executive Director
Appointed to the Board: 1995
Appointed to the Board: 1978
Appointed to the Board: 2013
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 in 1995.
In 1997 he became Managing Director
of the Evening Standard.
2. M W H Morgan x §
Chief Executive
Appointed to the Board: 2008
Skills and experience:
Martin Morgan was appointed Chief
Executive of DMGT in 2008. He sits on DMGT
subsidiary company boards, including
Euromoney Institutional Investor.
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.
He joined the City of London Investment
Trust as a Non-Executive Director in 2012.
3. S W Daintith x §
Finance Director
Appointed to the Board: 2011
Skills and experience:
Stephen Daintith was appointed Finance
Director of DMGT in 2011. He was also
appointed to the Audit Committee of
Euromoney Institutional Investor PLC.
In 2013 he was made a Director of
Zoopla Property Group.
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 PwC.
Skills and experience:
John Hemingway has recently surrendered
the practising certificate as a solicitor for
which he qualified in 1953. After national
service in the RAF, John joined Freshfields in
the City of London where he was a partner
from 1960 to 1974. For more than 40 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.
5. D J Verey, CBE*§
Independent Non-Executive Director
Appointed to the Board: 2004
Skills and experience:
David Verey is Chairman of the Audit
Committee. David is an Investment Adviser
and Corporate Finance Adviser. He is
currently Senior Adviser 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.
6. K J Beatty
Executive Director
Appointed to the Board: 2004
Skills and experience:
Kevin Beatty is Chief Executive of dmg
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.
Kevin also serves on the Board of Zoopla
Property Group and Local World.
Skills and experience:
Lady Keswick has a background in
public policy and international affairs,
particularly in Asia.
Tessa Keswick is Deputy Chairman of the
Centre of Policy Studies. She was a Special
Policy Adviser to the Rt. Hon. Kenneth
Clarke QC MP working at the Departments
for Health and Education and Science
and the Home Office and HM Treasury.
She had previously worked in advertising
and journalism.
She has contributed to, commissioned and
published over 100 public policy pamphlets
on the European Union, the Constitution,
law and order, education, health, tax and
regulatory affairs and women’s issues.
She has an interest in foreign affairs and
now travels extensively, particularly in
China and the Far East.
8. D H Nelson, FCA* † ‡ x
Non-Executive Director
Appointed to the Board: 2009
Skills and experience:
David Nelson is Senior Partner at Dixon
Wilson, Chartered Accountants, and a
Non-Executive Director of a number of
family companies. He is an adviser 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.
9. N W Berry* † ‡
Independent Non-Executive Director
Appointed to the Board: 2007
Skills and experience:
Nicholas Berry is owner of Mintel
International, Intersport Switzerland
Psc and Chairman of Stancroft Trust.
He has wide ownership experience
in B2B media and in emerging markets.
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10.
11.
12.
13.
14.
15.
10. A H Lane
Non-Executive Director
Appointed to the Board: 2013
Skills and experience:
Andrew Lane is a partner at Forsters LLP
and specialises in private client law.
He brings a range of experience of dealing
in complex legal and regulatory matters.
He is additionally a Trustee of the
Pension Fund of the Royal Agricultural
Society of England.
11. D M M Dutton x §
Executive Director
Appointed to the Board: 1997
Skills and experience:
David Dutton 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 Property Group,
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.
12. 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.
13. H Roizen §
Independent Non-Executive Director
(American)
15. D Trempont*
Independent Non-Executive Director
(American)
Appointed to the Board: 2012
Appointed to the Board: 2011
Skills and experience:
Based in Silicon Valley, Heidi Roizen’s
experience includes 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 Computers, as well as being
CEO and co-founder of pioneering
consumer software company T Maker.
She was appointed to the advisory board
of MailOnline in 2013.
Skills and experience:
Based in California, Dominique Trempont
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.
He was appointed to the RMS operating
Board in 2013.
14. F P Balsemão †
Independent Non-Executive Director
(Portuguese)
C Chapman §
General Counsel & Company Secretary
Claire acts as Secretary to the Board.
Appointed to the Board: 2002
Skills and experience:
Based in Portugal, Francisco Balsemão
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
International Advisory Board of Santander
International Group.
Key of DMGT committees
* 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
T S Gillespie
Mr Gillespie retired from the Board at the
AGM on 6 February 2013.
D J Verey
Mr Verey will retire from the Board with
effect from the AGM on 5 February 2014.
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Annual Report 2013
Annual Report 2013
38
Directors’ Report
Chairman’s Statement on Governance
In this section:
p.38 Chairman’s Statement on Governance
p.39 Annual General Meeting 2014: Resolutions
p.40 Corporate Governance
p.44 Audit Committee Report
p.48 Statutory Information
p.51 Remuneration Report
Chairman’s Statement on Governance
Good governance remains core to the
way we operate throughout the Group.
It is an essential factor in our ability to
achieve growth in a profitable and
sustainable manner and in how we
maximise Shareholder value over the long
term. In practice this means that we have
established parameters and frameworks
within which our businesses operate.
Share structure and shareholding
The Company has two classes of share
capital:
• Ordinary Shares (representing
approximately 5% of the total issued
share capital of the Company), which
were tightly held, illiquid and had a
limited free float.
• A Shares (representing approximately
95% of the total issued share capital of
the Company), which are widely held
and traded.
As announced by the Company on
1 July 2013, Rothermere Continuation
Limited (RCL) entered into an agreement
with The Esmond Harmsworth Settlement
1998 (EH) pursuant to which EH agreed
to transfer all of its 5,835,031 Company’s
Ordinary Shares to RCL in exchange for
6,564,409 of the Company’s A Ordinary
Non-Voting Shares (A Shares) owned by
RCL. The exchange was at a ratio of 112.5
A Shares for every 100 Ordinary Shares.
That exchange was completed on
12 July 2013 and resulted in RCL owning
89.2% of the Ordinary Shares.
Prior to this transaction, both the Ordinary
Shares and the A Shares were listed on the
London Stock Exchange. The A Shares had
a standard listing and the Ordinary Shares
had a premium listing. The Ordinary Shares
and the A Shares rank pari passu in all
respects, save that only the Ordinary Shares
carry the right to receive notice of, or
attend, or vote at any general meeting.
Following the Financial Conduct Authority
(FCA) consultation paper (CP 12/25) issued
in October 2012, the Independent Directors
of the Company and the directors of RCL
considered that there was a risk that the
FCA would downgrade the listing status
of the Ordinary Shares from premium to
standard or cancel the listing of the
Ordinary Shares altogether. Consequently,
RCL, pursuant to a Court Approved Scheme
of Arrangement (Scheme), offered to
acquire from the remaining c.11% DMGT
Ordinary shareholders their Ordinary
Shares in order to provide them with
the opportunity to hold the significantly
more liquid DMGT A Shares. This Offer was
accepted by the Ordinary shareholders
on 3 October 2013 and approved by
the Court on 28 October 2013. RCL now
owns 100% of the Ordinary Shares.
Consequently, the Company applied to
delist the Ordinary Shares. This became
effective on 29 October 2013. The Company
therefore maintains a standard listing in
respect of its A Shares.
RCL is a holding company incorporated
in Bermuda. The main asset of RCL is its
holding of DMGT Ordinary Shares. RCL is
owned by a trust (Trust) which is held for
the benefit of the Lord Rothermere and
his immediate family. Both RCL and the
Trust are administered in Jersey, in the
Channel Islands. The directors of RCL,
of which there are seven, include
two directors of DMGT, namely Lord
Rothermere and John Hemingway.
RCL has held more than 50% of the
Company’s Ordinary Shares, and has
therefore controlled the Company, for
many years. RCL’s holding of 100% of the
Company’s Ordinary Shares pursuant to
the Scheme will not affect its intention
that the Company should continue to be
managed in accordance with the best
corporate governance practice for the
benefit of all shareholders, as has been the
case throughout the period of RCL’s control.
In particular, it is RCL’s intention that the
Company will:
• continue to observe the Listing Principles
in their current form;
• continue to maintain a securities dealing
code for certain of its employees in the
form of the Model Code in its current form;
• continue to observe the UK Corporate
Governance Code on a ‘comply or
explain’ basis; and
• have an appropriate number of
independent Non-Executive Directors
on its Board.
It is also intended by RCL that the
Company’s independent directors at
the time will take decisions on behalf of
the Company in relation to any proposed
transaction between the Company and
RCL, or between the Company and an
associate of RCL, where any such proposed
transaction would have been a related
party transaction under Chapter 11 of the
Listing Rules in its current form.
RCL has indicated to the Company that its
intentions for the Company’s governance
are long term in nature and that it would
discuss with the Board of the Company
any material change in its intentions.
Details of how we have applied the
standards of corporate governance
throughout the year are set out in the
remainder of this Report. Details of our
Board members are set out on pages
36 and 37, including membership details
of each of our Board Committees.
The Viscount Rothermere
Chairman
Directors’ Report
Annual General Meeting 2014: Resolutions
The Company’s Annual General Meeting
(AGM), will be held at 9.00 am on
5 February 2014.
Only the holders of Ordinary Shares
are entitled to attend and vote.
For information, below are the resolutions
that will be put to the Ordinary Shareholders
at the AGM. The results will be posted on the
Company’s website following the meeting
in the usual way.
As ordinary business
Report and Accounts
1. To receive the Directors’ Report, the
Accounts and the Auditor’s Report
for the financial year ended
30 September 2013.
Remuneration Report
2. (a) To receive and approve the Directors’
Remuneration Report
(other than the part containing
the Directors’ Remuneration Policy
referred to in Resolution 2(b) below)
contained within the Annual Report
and Accounts for the financial year
ended 30 September 2013.
As special business
10. That the Company be and is hereby
generally and unconditionally
authorised to make market purchases
(within the meaning of section 693(3)
of the Act) on the London Stock
Exchange of up to:
(a) aggregate of 37,384,334 A Shares
of 12.5 pence each in its share capital
at not more than the lower of 5%
above the average of the middle
market quotation taken from the
London Stock Exchange Daily
Official List for the five business days
immediately preceding the date of
purchase and £18.75 per share and
at not less than 12.5 pence per share
(in each case exclusive of expenses);
(b) and that the authority conferred
by this Resolution shall expire on the
date of the AGM next held after the
passing of this Resolution (except in
relation to the purchase of shares the
contract for which was concluded
before such date and which would
or might be executed wholly or partly
after such date);
(b) To receive and approve the Directors’
Remuneration Policy set out on
pages 60 to 66 of the Directors’
Remuneration Report contained
within the Annual Report and
Accounts for the financial year ended
30 September 2013, such Directors’
Remuneration Policy to take effect
from the date of its adoption.
(c) and that upon the passing of this
Resolution, the Resolution passed
as Resolution 20 at the AGM on
6 February 2013 shall be of no
further force or effect.
11. That the Directors be generally and
unconditionally authorised pursuant
to section 551 of the Act to:
(a) allot A Shares in the Company, and
to grant rights to subscribe for or to
convert any security into A Shares
in the Company up to an aggregate
nominal amount of £2,336,521 for
a period expiring (unless previously
renewed, varied or revoked by the
Company in a general meeting) at
the next AGM of the Company after
the date on which this Resolution is
passed or on 7 May 2014 whichever
is the earlier; and
Dividend
3. To declare a final dividend on the
Ordinary and A Ordinary Non-Voting
Shares (A Shares).
Directors
4. That a motion for the appointment of
two or more persons as Directors of the
Company may be made by a single
resolution.
5. To re-elect the Viscount Rothermere,
Mr Morgan, Mr Daintith, Mr Hemingway,
Mr Dutton, Mr Dacre, Mr Balsemão,
Mr Beatty, Mr Berry, Mr Nelson, Ms Roizen,
and Mr Trempont, as Directors.
6. To elect Mr Lane and Lady Keswick
as Directors.
Auditor
7. To re-appoint Deloitte LLP as Auditor.
8. To authorise the Directors to determine
the Auditor’s remuneration.
Article 138
9. That the amount of ordinary
remuneration that the Company
may pay to Directors who do not hold
executive office pursuant to Article
138 of the Company’s Articles of
Association be amended such that it
shall not exceed £1 million per annum.
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(b) make an offer or agreement which
would or might require A Shares to
be allotted, or rights to subscribe for
or convert any security into A Shares
to be granted, after expiry of this
authority and the Directors may
allot A Shares and grant rights in
pursuance of that offer or agreement
as if this authority had not expired.
12. That the Directors be generally
empowered pursuant to section 570
and section 573 of the Act to allot A
Shares or grant rights to subscribe for
or to convert any security into A Shares,
for cash, pursuant to the authority
conferred by Resolution 11 and/or where
the allotment is treated as an allotment
of such securities under section 560(3) of
the Act, as if section 561(1) of the Act did
not apply to the allotment. This power:
(a) expires (unless previously renewed,
varied or revoked by the Company in
a general meeting) at the next AGM
of the Company after the date on
which this Resolution is passed or on
7 May 2014, whichever is the earlier,
but the Company may make an offer
or agreement which would or might
require such securities to be allotted
after expiry of this power and the
Directors may allot such securities
in pursuance of that offer or
agreement as if this power had
not expired; and
(b) shall be limited to the allotment
of such securities for cash up to
an aggregate nominal amount
of £2,336,521.
Notice
13. That, a general meeting other than
an AGM may be called on not less
than 14 clear days’ notice.
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Annual Report 2013
Annual Report 2013
40
Directors’ Report
Corporate Governance
Governance in action
During 2013 strategy has remained a key
focus for Board discussions, building on
the strategy session held in July 2012, with
follow up reviews and Board discussions
on each topic identified and subsequent
further in depth reviews on each of our
operating businesses.
Board
The Chairman, alongside the Executive
Directors, has established Board processes
designed to maximise the Board’s
performance. Key aspects of these are:
• Meetings are scheduled to ensure
adequate time for discussion of each
agenda item for that particular meeting;
• Reporting packs are distributed in
advance of each meeting;
• Board discussions are held in a
collaborative atmosphere of mutual
respect and open discussion allowing
for questions, scrutiny and constructive
challenge;
• Full debates on key matters allow
decisions to be taken by consensus
(dissenting views would be minuted);
• There is a process for regular updates
on decisions taken;
• Presentations are made to the Board from
the operating businesses and functional
areas at each Board meeting on a rolling
programme;
• All Directors have access to the
Company’s advisers as well as
management;
• Directors have access to the advice and
services of the Company Secretary; and
• Each Director is entitled to seek
independent professional advice
at the Company’s expense
(none was taken in this period).
Board composition and diversity
We have continued to focus on the
composition of the Board during 2013
to ensure that we have the right mix of
members to contribute effectively to the
development of our strategy and how
we operate. I was pleased to welcome
Andrew Lane as a new Non-Executive
Director in February 2013. Andrew brings
a range of experience of dealing in
complex legal and regulatory matters.
On 23 September 2013, the Hon.
Lady Keswick joined the Board as an
Independent Non-Executive Director.
She brings particular experience and
knowledge of Asia to the Board.
The Board remains supportive of the
principles stated in the Davies Report. Our
view remains that diversity is broader than
just gender and considers diversity in its
broadest sense in reviewing how the Board
operates and its composition. We do not
see this as solely a compliance issue and
consider that there is a risk that it becomes
seen as such. The split of the Group’s profits
between our US and other businesses, the
global nature of our operations and the
range of activities undertaken across the
Group has been reflected over recent years
in our Board appointments. Maintaining
this broad range of appropriate skills and
experience will continue to be a factor
in our Board succession planning.
Further details on our approach is in
the Nominations Committee review
on page 47.
UK Corporate Governance Code (Code)
The Code remains an important part of
how we operate. The Code allows a
‘comply or explain’ approach to achieving
best governance practice. Whilst we
comply with the majority of Code
requirements, we have chosen to deviate
from the Code in some areas.
These are detailed below. This allows us
to recognise the benefits that we continue
to derive from our heritage, and to take a
long-term view of our operations. I remain
satisfied that we continue to operate in
accordance with the highest standards
of governance.
We have kept, and we will continue to keep,
compliance with the Code under review
and to adapt our position as needed.
Since our last report, the composition of the
Audit Committee and the service contracts
of the Executive Directors are now Code
compliant.
Information required under DTR 7.2.6 is
provided on pages 48 to 50 and forms part
of this Report.
Leadership
The Board has a duty to promote the
long-term success of the Company for its
shareholders. This includes the review and
monitoring of strategic objectives, approval
of major acquisitions, disposals and capital
UK Corporate Governance Code compliance
Provision
Code principle
Explanation
A4.1
Composition of the Board The Board has not appointed a Senior Independent Director. It considers that identifying such
A4.2
Non-Executive Directors
an individual is potentially divisive to a unitary Board and disruptive to the role of the
Chairman. Not withstanding this, David Verey acted as Chairman of the Independent
Directors of the Board during the process to successfully conclude our Scheme of
Arrangement permitting RCL to acquire the remaining Ordinary Shares not owned by RCL.
The Non-Executive Directors did not meet as a group without the Chairman since his
performance is evaluated by the Remuneration Committee (without the Chairman being
present).
B1.1
Composition of the Board Less than half of the Board are independent Non-Executive Directors. The Board believes that
B2.1
D2.1
Composition of the
Nominations Committee
Composition of the
Remuneration
Committee
its current composition is appropriate taking into account the heritage of the Group, the
interests of our operating businesses represented on the Board and that a good balance is
achieved from its Non-Executive Directors in terms of skill and independence. The Board keeps
this under review.
Independent Non-Executive Directors do not comprise the majority of members of the
Nominations Committee. The Board considers that given the heritage of the organisation and
the global nature of its business, the members of the Nominations Committee are best suited
to make recommendations to the Board on all aspects under the Nominations Committee’s
terms of reference.
The Committee comprises one independent Non-Executive Director, rather than two. More
details are set out in the Remuneration Report on page 68.
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expenditure, performance, overseeing
the Group’s systems of internal controls,
governance and risk management and
information, training and development.
More detail on how this happens in practice
is described in the remainder of this Report.
How the Board operates
There is a schedule of matters reserved to
the Board. This details key matters of the
Company’s management that the Board
does not delegate. This can be seen
on www.dmgt.com/governance.
If any Director had any concerns about
the way the Board was operating these
would be recorded in the minutes. No such
concerns were raised during the reporting
period. Day-to-day management is the
responsibility of the Executive Directors
and of the Executive management of
the operating businesses.
Delegation of authority
The Board has delegated certain activities,
under formal terms of reference to Board
Committees, details of which are set out
on pages 44 to 47.
Leadership Team
The Leadership Team is led by the Chief
Executive and meetings are attended by
the CEOs of the operating businesses, the
Finance Director, the Group Head of HR,
the Strategy Development Director and
the Chairman. The Leadership Team meets
regularly throughout the year to discuss
key issues of common interest with all the
operating businesses across the Group.
In this reporting period talent development
across the Group was a key area of focus.
Board attendance
There were five scheduled Board meetings
held in the reporting period. All meetings
were held at Northcliffe House. Each year
the Board holds a meeting where the
specific focus is on our strategy. This was
held in July 2013.
In addition, the Committee of Independent
Directors met regularly whilst considering
the execution and implementation of the
Scheme of Arrangement discussed on
page 38.
Division of Chairman and
CEO responsibilities
There is a clear division of responsibilities
between the Chairman and the Chief
Executive. The Chairman is responsible for
leading the Board and its effectiveness and
overseeing the operations and strategy.
The Chief Executive is responsible for the
execution of the strategy and the day-to-
day management of the Group, supported
by the Finance Director and the Executive
management team.
Non-Executive Directors
The Non-Executive Directors, as members
of the Board and its Committees, are
responsible for ensuring the Company
has sound systems of internal controls,
an effective risk management process
and additionally, for monitoring financial
performance. All Committee Chairmen
report to the Board on the Committee’s
activities at each Board meeting.
Independence
The Board has determined that
Mr Balsemão, Mr Verey, Mr Berry,
Mr Trempont, Ms Roizen and Lady Keswick
are independent within the meaning of the
Code. Mr Balsemão has been on the Board
for 11 years. The Board has reviewed his
independence, recognising that longevity
of service is only one factor to be taken into
account. The Board is satisfied that he has
continued to demonstrate independence
in terms of character and judgement.
Mr Verey, who will have served for 10 years
on the Board at the time of the 2014 AGM,
has announced his decision not to seek
re-election. The Board recognises the
significant contribution that he has made,
bringing a unique perspective on a range
of matters.
Mr Hemingway is not considered
independent as he is a director of RCL.
Mr Nelson and Mr Lane are similarly not
considered to be independent as they are
each advisers to the Chairman and to RCL.
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.
Effectiveness
The Board reviewed its effectiveness within
the context of the principles and provisions
of Section B of the Code. In addition to its
review of independence and the Board
evaluation process noted separately in
this Report:
• Appointments: the Nominations
Committee is responsible for referring
potential appointments to the Board for
approval and is assisted by the Chief
Executive and the Group HR Director.
Andrew Lane and Lady Keswick were
appointed to the Board on 6 February
2013 and 23 September 2013 respectively.
Further details are in the Nominations
Committee report on page 47.
• Time: the time commitment of each
Non-Executive Director is set out in his/her
Letter of Engagement. Each Letter of
Engagement is renewed annually both
following the shareholder vote at the
AGM and following a review by the
Nominations Committee to ensure
it remains in line with best practice.
• Multiple commitments: the Nominations
Committee recognises that its Board
members may be directors of other
companies and that additional
experience is likely to enhance discussions
at the Board. Details of any additional
directorships are on pages 36 to 37.
In addition, we recognise that the
experience of our Non-Executive
Directors is important across our activities.
For this reason, Dominique Trempont was
appointed as a Non-Executive Director to
the RMS Operating Board with effect from
1 January 2013 and Heidi Roizen to the
MailOnline Advisory Board with effect
from 1 March 2013. Executive Directors
are generally permitted to hold Non-
Executive directorships as long as it does
not lead to conflicts of interest or time.
• Development and information: on joining,
Directors receive a comprehensive,
tailored induction programme, which
includes time with the General Counsel
& Company Secretary, the Executive
Directors and a range of senior managers
across the Group. During the year, the
Board has received updates on key
areas of finance and governance
as well as areas of the business.
• Re-election: in line with the Code, all
Directors stand for re-election annually
and will do so at the February 2014 AGM.
• Board members have visited operating
businesses during the year, as part
of Directors’ ongoing development.
In particular, certain Non-Executive
Directors attended dmg information’s
Senior Executive conference, held in
Arizona, as well as visiting individual
companies, such as EDR, Hobsons
and Genscape, in the US.
Evaluation
In 2013, the Board undertook a review
of its own performance and those of its
Committees, which built on the results of
the 2012 review. The review was conducted
through an internal process facilitated by
the Company Secretary. It was determined
that an internal review was appropriate for
2013 given the corporate structure changes
page 38. A questionnaire was completed
by all Board members covering the
following areas:
• Mandate;
• Membership;
• Mission;
• Motivation;
• Methods;
• Monitoring; and
• Measurement.
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Annual Report 2013
Annual Report 2013
42
Directors’ Report
Corporate Governance
Continued
Completed questionnaires were submitted
and reviewed by the Chairman. A summary
of findings was presented to the Board in
a manner that did not identify individual
specific responses ensuring that the
follow-up discussion with the entire Board
was open. The responses showed that the
Board welcomed the process and that
overall the Board was happy with the
progress during the year and that the
Board and its Committees continue
to function well.
The R&A team also coordinates with a
number of the operating businesses which
undertake internal controls assurance
reviews within their respective businesses.
In addition to the regular reviews in the
annual R&A plan:
• an annual bribery and fraud risk
assessment review is completed by each
operating business, detailing risks and
mitigating controls which are reviewed
by the R&A team; and
Accountability
Finance and business reporting
The Board has delegated day-to-day
responsibility for internal controls to the
Audit Committee and for risk management
to the Risk Committee. Further details on
the activities of these Committees are
on pages 44 to 46 respectively.
Internal controls
The Board has overall responsibility for
establishing and maintaining the standards
for the Group’s system of internal controls.
This system provides reasonable rather than
absolute assurance that the Group’s
business objectives will be achieved within
the risk tolerance levels defined by the
Board. The Group operates on a divisional
basis with each of the operating businesses
described on pages 12 to 21 having
autonomy as regards its operation and
establishment of internal controls
appropriate to their business. Oversight
is provided by the central management
team reportable to the Board. Certain
functions are undertaken centrally, notably
newsprint buying, insurance, treasury, tax,
pensions and risk and assurance (including
internal audit).
The chief financial officers, or equivalent,
of the operating businesses certify annually
the operation of the key financial controls.
The Board also receives assurance from
the Audit Committee, which derives its
information, in part, from regular internal
audit reports and external reporting and
from the Risk Committee, which receives
regular risk and assurance updates.
Internal Audit
The Group’s internal Risk and Assurance
(R&A) function reports centrally with
responsibility for reviewing and providing
assurance on the operation and adequacy
of the internal controls environment
across the Group’s operating businesses.
The Head of Risk and Assurance reports on
the R&A reviews, and the follow-up on past
reviews, to both the operating business
management and the Audit Committee,
on a regular basis. The Head of Risk and
Assurance also reports to the Audit
Committee on the progress against the
agreed internal audit plan. R&A works
cooperatively with the external auditor
(Auditor) to ensure that there is efficient
coverage of internal controls.
• each operating business confirms
the operation of key internal financial
controls to the Group Accounting
department, which in turn reports
to the Finance Director.
In each case, the R&A team review and
follow-up these submissions, as appropriate.
Financial information
Operating businesses’ executive
management regularly review relevant
and timely financial information that is
produced from a management information
system operated across the Group. This is
supported by a framework of quarterly
forecasts, as well as annual budgets, that
are approved at a business level by the
Investment and Finance Committee.
Senior Accounting Officer sign off
The HMRC Senior Accounting Officer (SAO)
is required 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 has implemented a
controls questionnaire and performed
a series of controls reviews across the UK
businesses. The Finance Director is the SAO.
Euromoney Institutional Investor plc is
subject to the requirements of the Code
in its own right. As disclosed in its latest
report, it has in place its own system of
internal controls and risk management
processes which form part of the
Group’s overall framework of control.
The Directors have excluded joint ventures
and associates, principally Zoopla Property
Group and Local World from their
assessment of internal controls over financial
reporting as 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 investments
has been assessed and are considered
to be appropriate.
The Directors confirm that they have
reviewed the effectiveness of the Group’s
system of internal controls for the period
to the sign off of the Accounts and the
Board confirms that it has not identified
any material weaknesses or failings during
this time.
Risk and Assurance
The Board considers all significant business
risks to the Group including financial risk,
operational risk and compliance risk that
could undermine achieving the Group’s
strategy and business objectives.
Given the Group’s divisional structure,
a flexible approach to risk management
systems has been implemented so that
each operating business can tailor and
adapt its risk management processes to
its specific circumstances. This approach,
which provides an overarching framework
for acceptable risk parameters, has the
commitment of the Leadership Team
and the executive management of the
operating businesses. Oversight is provided
by the Risk Committee and the requisite risk
and control capability is assured through
the Risk Committee and Board challenge.
A Group-wide risk assessment process is
managed annually by the R&A team,
reviewing risk in operating businesses and
risks to achieving business plans. The results
are collated and presented to the Risk
Committee and an overall Group-wide
risk plan is derived. This process assists
managers to identify internal and external
threats and to prioritise responses to those
risks. This Group-wide risk assessment is
aimed at providing the Risk Committee
with insight into any material changes and
trends in the risk profile and to evaluate
whether the system, including reporting
and controls, adequately supports the
Board in overseeing key risks.
Principal risks and mitigating actions are
set out on pages 28 and 29.
Investment opportunities
and financing proposals
Investment and operating decisions are
delegated under formal terms of reference
to the Investment and Finance Committee.
This Committee works alongside executive
management to ensure that investment
decision making and Group strategy
development operates in accordance
with best practice. The Committee
evaluates the benefits and risks of
investment opportunities and financial
proposals up to an agreed level, above
which the Board approves programmes
relating to acquisition and divestment
proposals and capital expenditure. Details
in respects of the Investment and Finance
Committee’s activities are on page 46.
Fair, balanced and understandable
One of the key governance requirements
of a group’s financial statements is for
the reports to be fair, balanced and
understandable. The coordination and
review of the Group wide input into the
Annual Report and Accounts is a specific
project, with defined timeframes, which
runs alongside the formal audit process
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undertaken by the Auditor. The Audit
Committee’s and the Board’s confirmation
of satisfaction with the process and the
statements being made is underpinned by:
• comprehensive guidance being provided
to the operating businesses in respect of
each of the requirements for, and each
of their contributions to, the Annual
Report and Accounts;
• a verification process in respect of
the factual context of the submissions
made; and
• comprehensive reviews undertaken
at different levels of the Group with
the aim of ensuring consistency and
overall balance.
As a result of this process, the Audit
Committee and the Board are satisfied
with the overall fairness, balance and
clarity of the Annual Report and Accounts.
Relations with shareholders
Any concerns raised by shareholders in
relation to the Company and its affairs
are communicated to the Board through
regular briefings. Analysts’ reports are
circulated to the Board. Feedback from
meetings held with the executive
management or the Investor Relations
team and institutional shareholders,
are also communicated to the Board.
During the year there were regular
meetings with and presentations to
institutional shareholders in the UK, US and
Canada to communicate the strategy and
performance of the Group. Two investor
days were held, where the focus was on our
consumer media business, dmg media in
April, and our B2B businesses, dmg
information, RMS, and dmg events in
September. The Chief Executive, Finance
Director and senior management from the
operating businesses led the presentations
which gave an in depth view of the
respective operating businesses and their
performance. The Company’s website
provides the latest news and historic
financial information, details about
forthcoming events for shareholders and
analysts and other information regarding
the Group. Please see www.dmgt.com.
Private shareholders are given the
opportunity to raise queries with the
Company Secretary.
The Group is committed to reducing its
impact on the environment in line with its
Environment Policy and encourages
shareholders to receive communications
electronically in order to reduce printing
and paper usage. Shareholders can register
to receive electronic communications
through the Company’s Registrars, Equiniti,
at www.shareview.co.uk. Shareholders
can additionally register for email alerts
at www.dmgt.com.
Board Committees
The Board has delegated certain activities
to its Committees, as described in the
following pages. During the year, the
following people acted as Secretary
to the stated Committees:
• the General Counsel & Company
Secretary to the Audit, Nominations and
Investment and Finance Committees;
• the Head of Reward to the Remuneration
Committee;
• the Head of Risk and Assurance to the
Risk Committee; and
• the Assistant Company Secretary to the
CR Committee.
Corporate Responsibility (CR) Committee
Details in respect of the CR Committee
are set out in the CR Review on pages
30 to 35.
Remuneration Committee
Details in respect of the Remuneration
Committee are set out in the Remuneration
Report on pages 51 to 70.
DMGT Board – Membership
Member
Chairman
The Viscount Rothermere
Chief Executive
MWH Morgan
Finance Director
SW Daintith
Executive Directors
KJ Beatty
PM Dacre
DMM Dutton
Non-Executive Directors
FP Balsemão
NW Berry
TS Gillespie
JG Hemingway
Lady Keswick
AH Lane
DH Nelson
H Roizen
D Trempont
DJ Verey
Member for the period
Meetings held
Meetings attended
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Left 06/02/2013
Yes
Joined 23/09/2013
Joined 06/02/2013
Yes
Yes
Yes
Yes
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Annual Report 2013
Annual Report 2013
44
Directors’ Report
Corporate Governance
Continued
Audit Committee Report
Audit Committee – Membership
The Committee has been supported in its activities during the year by the Chief Executive, Finance Director, Financial Controller,
Head of Risk and Assurance and the General Counsel & Company Secretary. Membership and meetings are shown below.
Member
D J Verey (Chairman)
N W Berry
J G Hemingway
D H Nelson
D Trempont
Audit Committee Report
The integrity of the Group’s financial results
and internal control systems are important
to both Directors and to shareholders. They
are also important to the way that the
Group’s businesses are operated as they
are required to measure and to sustain
achievement of its strategic objectives.
The Committee assists the Board in its
oversight and monitoring of financial
reporting and internal controls. It tests and
challenges these areas in conjunction with
management and internal and external
auditors, as appropriate.
A summary of the key responsibilities,
activities and governance steps is below.
Key responsibilities
• Monitoring the integrity of the annual and
interim financial statements, reports to
shareholders and corporate governance
statements
• Making recommendations to the
Board regarding the annual and
interim financial statements
• Overseeing the Group’s relationship with
the external auditor, Deloitte LLP (Auditor)
• Making recommendations to the
Board on the appointment, retention
and replacement of the Auditor
• Reviewing financial risks and monitoring
the effectiveness of the Group’s internal
controls
• Approving the internal and external
audit plans
• Reviewing regular reports from the Head
of Risk and Assurance on the effectiveness
of the internal controls, the progress
against the internal audit plan and
issues arising
• Monitoring the compliance with the
policy on the balance of non-audit to
audit work performed by the Auditor
Member for period
Meetings held
Meetings attended
Yes
Yes
Yes
Yes
Joined 21/11/2012
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4
4
4
4
4
4
4
4
3
Key activities during the period
• The Committee reviewed the financial
statements released by the Company,
including the full year and half year results
and interim management statements
• The Committee reviewed the financial
trading updates, risks and financial
controls, including, the key internal
controls checklist report prepared by
internal audit and considered actions
arising and mitigating steps
Governance
• The Company has determined to
conduct a tender process for its Auditor
following the full year 2014 audit. The
Auditor has been providing audit services
since 2001. The current audit partner was
appointed in 2011 following the rotation
of the previous audit partner
• The Committee confirmed that it had
complied with its terms of reference
throughout the year
• The Committee reviewed actions against
• The Committee reviewed its membership
the assurance plan and monitored
management actions recommended.
Additionally, the Committee approved
the plan for the forthcoming year
• The Auditor, as part of its assurance
process confirmed that it is considered
to be independent and objective. The
Committee agreed with this assessment
and no matters of concern were raised.
During the year, the Auditor presented
its plans for the interim review and the
year-end audit and the Committee
approved the scope of work to be
undertaken. During the year, the Auditor
presented its report on internal controls
which provided a benchmark for
additional improvements
• During the course of the year, the
Committee met with the Auditor and the
Head of Risk and Assurance without the
presence of management
• The Committee received regular updates
on the status of any litigation matters and
trends across the Group
and confirmed that it complied with
the Code
• The Auditor’s effectiveness review of the
external audit process was carried out
through a Client Satisfaction Survey,
to obtain views of senior finance
management and certain Committee
members. This included a review of
the planning, execution and reporting
activities along with the assessment of
the quality and leadership of the external
audit teams involved in any audit. The
results were presented to the Committee
to assist in the review of the effectiveness
of the audit process for prior year. No
material issues were raised. As with any
review process areas for improvement
were agreed for future audits
• The Committee commissioned an
external review of the Risk and Assurance
department, which concluded that it was
effective. It was agreed to more clearly
delineate the boundaries of each of the
audit and risk annual plans adopted
by the Risk and Assurance function, to
minimise the potential for overlap or gaps
• The Committee confirmed that in
accordance with the provisions of
the Code, each of David Verey and
David Nelson had recent and relevant
financial experience
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The Committee has primary responsibility
for making recommendations to the Board
on the independence and reappointment
of the Auditor.
The Auditor is required to adhere to audit
partner rotation requirements, with the next
review of the current audit partner being
due no later than the end of the 2015
audit process.
The Committee has discussed with the
Auditor the areas of significant risk identified
by the Auditor (see pages 71 to 73) and has
satisfied itself that such risks are being
appropriately managed.
In addition, the Committee has considered
a number of other risks, as part of
discharging a best practice approach,
which have included:
The Committee has satisfied itself that the
UK professional and regulatory requirements
for audit partner rotation has been complied
with. In light of the reviews undertaken
and the satisfactory conclusions reached,
the Committee has recommended that
Deloitte LLP be reappointed for a further
year at the 2014 AGM.
Significant and material issues
The Committee has considered a number
of material issues during the year, including:
• Policy and practice in respect of internally
generated assets, including RMS(one).
The RMS(one) project is the largest such
project undertaken by the Group where
internal costs have been capitalised.
As such, specific attention has been
warranted to the treatment of costs
incurred;
• Impairment considerations of goodwill
and intangible assets. Whilst this is
undertaken each year, the Committee
considers that it is important to ensure
that a consistent and robust approach
is taken;
• Categorisation of items as exceptional.
The Committee has paid specific
attention to this area to ensure that
treatment of such items remains consistent
with the Group’s accounting policy and
that a consistent year-on-year approach
has been taken;
• Application of internal controls and
how these were managed, trends and
areas of potential financial risk. Whilst the
Committee does not consider there to be
any material weaknesses in the internal
controls process, it considers that its
review of internal controls is a priority
item ensuring that a high standard is
maintained and that improvements
are made incrementally as best
practice evolves; and
• The impact of changes to regulation
on the Company and how any
changes would be implemented
and communicated. The Committee
recognises that applicable regulations
change and that there should be a
process for ensuring that these changes
are monitored and appropriate practices
adopted in a timely manner.
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• acquisition accounting;
• revenue recognition;
• valuation, completeness and accounting
for financial instruments;
• accounting for remuneration schemes;
• defined benefit pensions schemes
measurements; and
• deferred tax recognition.
The Committee is satisfied that all issues
and significant risks have been managed
appropriately and in accordance
with the relevant accounting standards
and principles.
David Verey
Audit Committee Chairman
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Looking ahead, the Committee believes
that it is important to remain focused on
the audit and assurance processes within
our business. The key activities for the
forthcoming year are:
• strategic review of our internal audit
and assurance plan to ensure alignment
and support of the Group’s plan;
• ensuring that there is a clear plan for the
remit and work of each of the Audit and
Risk Committees and how these activities
will interrelate and accountability;
• continue the progress made to date
around internal controls, assessment
and audit follow up plans; and
• continue to ensure that accounting
developments are communicated to,
and applied by, the Committee in line
with best practice.
Auditor’s independence, objectivity
and non-audit services
The Company’s policy on the auditor’s
independence is consistent with the
ethical Standards set out in the Audit
Practices Board in the UK. The Committee
reviews independence on a regular basis.
This is designed to ensure that:
• the Auditor does not act as a manager
or employee of the Group;
• there is separation between the interests
of the Auditor and the Group; and
• the Auditor is not required to act
as an advocate for the Group.
The independence review is conducted
by a review of compliance with policies in
place in the Group and within the Auditor
to maintain independence and objectivity.
The findings are shared with the Committee.
The Committee, having reviewed the report
prepared by the Auditor on its relationships
within the Group and the review by
management, is satisfied that the Auditor’s
objectivity has not been impaired.
The Auditor is required to assess periodically
that it, in its professional judgement consider
themselves to be independent. This has
been done at each Committee meeting.
In particular, the Committee requires that
details in respect of audit and non-audit
services are provided to it to ensure that
the Group’s policy on the provisions of
non-audit services by the Auditor has
been followed. The definition of non-audit
services adopted by the Committee
complies with the ethical standards issued
by the Audit Practices Board in the UK. The
Committee, having reviewed the activities
during the reporting period is satisfied that
the policy remains appropriate, has been
complied with and that the Auditor remains
independent. Details in respect of the
non-audit fees paid are in note 5.
Annual Report 2013
Annual Report 2013
46
Directors’ Report
Corporate Governance
Continued
Investment and Finance Committee – Membership
The Committee has been supported in its activities during the year by the Deputy Finance Director, Director of Strategy Development
and the General Counsel & Company Secretary. Membership and meetings are shown below.
Member
The Viscount Rothermere (Chairman)
S W Daintith
D MM Dutton
J G Hemingway
A H Lane
M WH Morgan
D H Nelson
Key responsibilities
• Reviewing all acquisitions, disposals
and capital expenditure within its remit
• Authorisation of the purchase by
the Company of its own shares
• Review of matters pertaining to the
financial affairs of the Company and its
subsidiaries, including loans made to
the Company, giving of any guarantee,
approval of capital programmes
• Reviewing pension scheme
management, and in particular oversight
of the Pensions Sub-Committee activities
Member for period
Meetings held
Meetings attended
Yes
Yes
Yes
Yes
Yes
Yes
Yes
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• Review, and approval, of the Company’s
tax strategy
• Oversight of the Chairman’s Fund for
Innovation and Growth (see page 35)
• Oversight of the Company’s share
buy-back programme
Governance
• The Committee reviewed its membership
and approved the recommendation that
Lord Rothermere continue as its Chairman
• The Committee confirmed that it had
complied with its terms of reference
throughout the year
Key activities
• Reviewing all acquisitions, disposals
and capital expenditure within its remit,
including presentations made by
operating businesses for support in line
with strategic objectives
• Reviewing performance against budget
and plan including reviewing debt position
• Oversight of the Company’s pension
scheme planning, including discussions
with the various Scheme trustees and
their advisers
• Review of the Company’s dividend
planning activities
• Review, and approval, of the Company’s
investment criteria
Risk Committee – Membership
The Committee has been supported in its activities during the year by the Head of Risk and Assurance. Membership and meetings
are shown below.
Member
M WH Morgan (Chairman)
C Chapman
S W Daintith
D MM Dutton
M Page
H Roizen
D J Verey
Key responsibilities
• Consider and review the key risks
pertinent to the Group
• Review the management and
consequences, including mitigating
factors, of those risks
• Recommend and oversee controls
necessary to manage and mitigate
such risks
Key activities
• Reviewing the Group’s risk management
processes, including reviews of the
Group’s risk register and providing
updates on the same to the Board
Member for period
Meetings held
Meetings attended
Yes
Joined 21/11/2012
Yes
Yes
Yes
Joined 21/11/2012
Yes
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4
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• Reviewing operating businesses’
information security and cyber resilience
and overseeing development and
implementation of the Group’s information
security policy and standards
• Reviewing the Group’s business continuity
and incident management processes
• Oversight and review of the Group’s
anti-bribery and fraud management
and reporting processes
• Reviewing the results from the Group’s
health and safety review
• Specific project-related reviews including
intellectual property and patents, data
protection, changes to relevant legislation
and analysing the Group impact,
including media regulation
Governance
• Report to the Board on the Group’s
annual compliance position necessary
for inclusion in the Annual Report
including preparation of the Group’s
principal risks statement
• The Committee reviewed its membership
and approved the recommendation that
Martin Morgan continue as its Chairman
• The Committee confirmed that it had
complied with its terms of reference
throughout the year
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Nominations Committee – Membership
The Committee has been supported in its activities during the year by the Chief Executive, Group HR Director, and the General Counsel
& Company Secretary. Membership and meetings are shown below.
Member
The Viscount Rothermere (Chairman)
F P Balsamão
N W Berry
J G Hemingway
D H Nelson
Role and responsibilities
• Defining the core skills and experience
and diversity for potential new Board
members, identifying and reviewing
potential candidates. Interviewing
shortlisted candidates and making
recommendations based on the
same to the Board
• Making recommendations on Board
composition and committees
• Reviewing the diversity position
of the Board in light of best practice
recommendations and the needs
of the Group
Succession planning
Given the importance of succession
planning, in addition to the general
Board planning undertaken by the
Nominations Committee, as in the previous
year, the Non-Executive Directors held a
separate session on succession planning
in November 2012, which was facilitated
by the Group HR Director.
Member for period
Meetings held
Meetings attended
Yes
Yes
Joined 21/11/2012
Yes
Joined 21/11/2013
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Key activities
• Reviewing potential candidates for
Board appointments. Andrew Lane
was appointed on 6 February 2013 and
Lady Keswick on 23 September 2013
• Discussing Board composition and
longevity of service and Board
independence
• Reviewing governance activities against
best practice
• Reviewing the letter of engagement with
each Non-Executive Director to ensure
the provisions remained in line with best
practice. Following shareholder approval
at the AGM, re-engaged the service of
Non-Executive Directors for a further
period of a minimum of one year
• Reviewing time commitments required
by Non-Executives and confirmed that it
was satisfied that the Directors had met or
exceeded the time commitment required
• In line with the Code, recommended
that all Directors stand for re-election
at the AGM
Governance
• The Committee reviewed its membership
and confirmed the explanatory
statement in respect of the Code
• The Committee confirmed that it had
complied with its terms of reference
throughout the year
• The Committee paid particular
attention to extending the term of
any Non-Executive Director that has
served a term in excess of six years
• The Committee reviewed the
independence of the Non-Executive
Directors and agreed to recommend
that Mr Balsemão, Mr Berry, Mr Trempont,
Ms Roizen and Lady Keswick remained
independent in accordance with the
Code provisions
• Reviewed the Report to Shareholders
contained in the Annual Report
and recommended it for approval
by the Board
Other Committees
In addition, in recognition of the importance
of a number of activities, the Group
operates the following sub-committees:
Disclosure Committee
The Disclosure Committee was established
on 5 July 2005 and its terms of reference
were updated on 22 May 2013, to reflect
best practice. It is a sub-committee of
the Board.
The Disclosure Committee is responsible
for determining when information is price
sensitive and, if so, how and when the
Company discloses it. In particular, for:
• managing and approving the Group’s
obligations in respect of disclosure
of information, financial and other
information;
• monitoring analysts’ expectations
and ensuring that there is alignment
in the reported position;
• supervising the verification process
• significant changes to benefit policy,
for all announcements;
• monitoring the Group’s performance
against its own forecasts; and
• recommending appropriate training
in respect of the handling of inside
information and the Group’s
disclosure policy.
Pensions Sub-Committee (PSC)
On 17 December 2012, the Board
approved the formation of the Pensions
Sub-Committee of the Investment
and Finance Committee.
The PSC is responsible for making
recommendations to the Investment
and Finance Committee regarding:
• the Company’s policy on the investment
and funding strategies for the Group’s
UK Defined Benefit Pension Schemes;
for example ceasing accrual of
defined benefits;
• any proposal for de-risking of liabilities;
and
• such other matters as may be delegated
to it by the Board or the Investment and
Finance Committee.
The Viscount Rothermere
Chairman
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Annual Report 2013
Annual Report 2013
48
Directors’ Report
Statutory Information
Other statutory information
Required information can be found in
the Strategic Report and Accounts on
pages 8 to 35, which is incorporated into
this Report by reference. Information on
the environment, employees, community
and social issues is given in the Corporate
Responsibility Review on pages 30 to 35.
Forward-looking statements
This Annual Report and Accounts contains
certain forward-looking statements with
respect to 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 those
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 Accounts and will not be
updated during the year. Nothing in this
Annual Report and Accounts should be
construed as a profit forecast.
Tangible fixed assets and investments
The Company’s principal subsidiaries are set
out on page 168. Changes to the Group’s
tangible fixed assets and investments
during the year are set out in Notes 22 to 25.
There was no material difference in value
between the book value and the market
value of the Group’s land and buildings.
Fair balanced and understandable
Each of the Directors considers that the
Annual Report, taken as a whole, is fair,
balanced and understandable and
provides the information necessary for
shareholders to assess the Company’s
performance, business model and strategy.
Directors
The names of the Directors, plus brief
biographical details are given on pages 36
and 37. Each Director held office throughout
the year except Andrew Lane who was
appointed to the Board on 6 February
2013 and Lady Keswick who was appointed
to the Board on 23 September 2013.
Tom Gillespie retired from the Board at
the 2013 AGM. Padraic Fallon passed
away on 13 October 2012.
In accordance with the UK Corporate
Governance Code, all of the Directors will
stand for re-election at the Annual General
Meeting (AGM) on 5 February 2014.
Principal activities
A description of the principal activities of
the Group and likely future developments
and important events occurring since the
end of the year are given in the Strategic
Report on pages 8 to 35.
Results and dividends
The Group’s Financial Statements for
the year ended 30 September 2013
are shown on pages 71 to 178. The profit
after taxation of the Group amounted to
£212 million. After charging non-controlling
interests of £23 million, the Group profit for
the year amounted to £189 million. The
Board recommends a final dividend of
13.30p per share. If approved at the 2014
AGM, the final dividend will be paid on
7 February 2014 to shareholders registered
in the books of the Company at the close
of business on 29 November 2013.
Together with the interim dividend of
5.900p per share paid on 5 July 2013,
this makes a total dividend for the year
of 19.20p per share (2012 – 18.000p).
Directors’ interests
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 67.
There have been no changes to the
number of shares held by Directors
between 30 September 2013 and
4 December 2013.
Employee Benefit Trust
The Executive Directors of the Company,
together with other employees of the
Group, are potential beneficiaries of the
DMGT Employee Benefit Trust (Trust) and,
as such, are deemed to be interested
in any Ordinary Shares held by the
Trust. At 30 September 2013, the Trust’s
shareholding totalled 275 A Shares.
Between 30 September 2013 and
4 December 2013 the Trust transferred
no A Shares to satisfy the exercise of
awards under employee share plans.
Significant shareholdings
As at 4 December 2013, the Company had
been notified of the following significant
interests of the issued Ordinary Shares:
Rothermere Continuation Limited
100%
The Board regards holdings in the
Company’s securities of greater than 15%
to be 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 67.
Share capital
The Company has two classes of shares. Its
total share capital comprises 5% of Ordinary
Shares and 95% of A Shares. Full details of
the Company’s share capital are given in
Note 37. Holders of Ordinary Shares are
entitled to receive the Company’s Report
and Accounts, to attend and speak at
General Meetings and to appoint proxies
and exercise voting rights.
During the year, the Company transferred
4.8 million shares out of Treasury, representing
1.3% of called up A Shares, in order to satisfy
incentive schemes. The Company holds
20,412,954 shares in Treasury with a nominal
value of £2.6 million. The maximum number
of shares held in Treasury during the year
was 20,412,954 which had a nominal value
of £2.6 million.
The Company also purchased 4.7 million
A Ordinary Non-Voting Shares for holding
in Treasury having a nominal value of
£0.6 million in order to match obligations
under various incentive plans. The
consideration paid for these shares was
£31 million. Excluding the share buy-back
programme, shares purchased during the
year represented 1.3% of the called up
A Share capital as at 30 September 2013.
Details of allotments of share capital which
arose solely from the exercise of options
are given at Note 37.
As described on page 38, with effect
from 29 October 2013, Rothermere
Continuation Limited (RCL) owns 100%
of the Ordinary Shares.
Authority to purchase shares
At the Company’s AGM on 6 February
2013, the Company was authorised
to make market purchases of up to
1,988,000 Ordinary Shares (representing
approximately 10.0% of the Ordinary
Shares in issue.
In addition, also at the Company’s AGM
on 6 February 2013, the Company was
authorised to make market purchases
of up to 37,308,365 A Shares (representing
approximately 10% of the total number
of A Shares in issue.
During the period, 29 November 2012 to
28 June 2013, under the share buy-back
programme the Company purchased
10,357,391 Shares into Treasury, at a total
cost of £68.5 million (see note 37).
Auditor and disclosure of information
to the Auditor
So far as the Directors are aware, there
is no relevant audit information of which
the Company’s Auditor is unaware.
The Directors have taken all the steps that
they ought to have taken as Directors in
order to make themselves aware of any
relevant audit information and to establish
that the Company’s Auditor is aware
of that information.
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The Company’s Auditor, Deloitte LLP, has
indicated its willingness to continue in office
and, in accordance with section 489 of the
Companies Act 2006, a resolution proposing
the reappointment of Deloitte LLP will
be put to the AGM on 5 February 2014.
Directors’ indemnity
A qualifying third party indemnity (QTPI),
as permitted by the Company’s Articles of
Association and sections 232 and 234 of the
Companies Act 2006, has been granted by
the Company to each of the Directors of
the Company. Under the provisions of the
QTPI the Company undertakes to indemnify
each Director against liability to third
parties (excluding criminal and regulatory
penalties) and to pay Directors’ costs as
incurred, provided that they are reimbursed
to the Company if the Director is found
guilty or, in an action brought by the
Company, judgment is given against
the Director.
Going concern
A full description of the Group’s business
activities, financial position, cash flows,
liquidity position, committed facilities and
borrowing position, together with the factors
likely to affect its future development and
performance, is set out in the Strategic
Report, particularly the Treasury and
Finance Review on pages 24 to 27 and in
the notes to the accounts on page 81.
The Group has significant financial
resources and the Directors, having
reviewed the Group’s operating budgets,
investment plans and financing
arrangements, have assessed the future
funding requirements of the Group and
compared this to the level of committed
facilities and cash resources. The Directors
have a reasonable expectation that the
Company and the Group have adequate
resources to continue in operation for
the foreseeable future. Accordingly, the
Directors are satisfied that it is appropriate
to adopt the going concern basis in
preparing the Annual Report and Accounts.
Directors’ responsibilities
The Directors are responsible for preparing
the Annual Report, the Directors’ report
on remuneration and the Financial
Statements in accordance with applicable
law and regulations.
Company law requires the Directors to
prepare Financial Statements for each
financial year. Under that law, the Directors
have prepared the Group Financial
Statements in accordance with
International Financial Reporting Standards
(IFRSs) as adopted by the European Union,
and the parent Company Financial
Statements in accordance with applicable
law and United Kingdom Accounting
Standards (United Kingdom Generally
Accepted Accounting Practice).
Under company law, the Directors must not
approve the Financial Statements unless
they are satisfied that they give a true and
fair view of the state of affairs of the Group
and the Company and of the profit or loss
of the Group for that period. In preparing
these 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 IFRSs as adopted by the
European Union and applicable United
Kingdom Accounting Standards have
been followed, subject to any material
departures disclosed and explained
in the Group and parent Company
Financial Statements respectively; and
• prepare the Financial Statements on
the going concern basis unless it is
inappropriate to presume that the
Company will continue in business.
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
the Group and enable them to ensure that
the Financial Statements and the Directors’
report on remuneration comply with the
Companies Act 2006 and, as regards the
Group Financial Statements, Article 4 of the
IAS Regulation. They are also responsible
for safeguarding the assets of the Company
and the Group 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
Company’s website. Legislation in the
United Kingdom governing the preparation
and dissemination of Financial Statements
may differ from legislation in other
jurisdictions.
Each of the Directors confirms that,
to the best of his/her knowledge:
• The Group Financial Statements, which
have been prepared in accordance
with IFRSs as adopted by the EU, give a
true and fair view of the assets, liabilities,
financial position and profit of the
Group; and
• The Strategic Report contained on
pages 8 to 35 includes a fair review of
the development and performance
of the business and the position of the
Group, together with a description of
the principal risks and uncertainties
that it faces.
Charitable and Political donations
The Company made charitable donations
of £1.3 million during the period. In the prior
year, the Company donated over £1.6
million. No political donations were made
during the period.
Principal risk factors
These risks are shown on pages 28 and 29.
Events after the balance sheet date
On 28 October, the Group announced
that it has acquired the entire share
capital of DIIG Europe from Decision Insight
Information Group (DIIG). DIIG Europe is the
UK and Ireland’s leading property search
group, primarily delivering residential and
commercial property searches to legal
professionals. Details are provided in
note 44.
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 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
light of its strategy to create a diversified
international portfolio of businesses, the
Group is not dependent on any supplier
of other commodities for its revenue
on any particular customer. Distribution
arrangements are in place to ensure the
delivery of newspapers to retail outlets.
Creditor payment policy
The Company has no trade creditors (2012
– nil). The Group is responsible for agreeing
the terms and conditions including terms of
payment under which business transactions
with the Group’s suppliers are conducted.
Whilst the Group does not follow any single
external code or standard, in line with
Group policy, payments to suppliers are
made in accordance with agreed terms
and conditions.
Employees
Details in respect of employees are in the
CR Review on pages 30 to 35.
Articles of Association
The appointment and replacement of
Directors are governed by the Company’s
Articles of Association. Any changes to the
Articles of Association must be approved by
the shareholders in accordance with the
legislation in force from time to time.
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Annual Report 2013
Annual Report 2013
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Directors’ Report
Statutory Information
Continued
Annual General Meeting
The AGM will be held at 9.00 am on
Wednesday 5 February 2014, Northcliffe
House, 2 Derry Street, London W8 5TT. The
resolutions to be put to the meeting are set
out on page 39. A notice of meeting will
be issued to the holders of Ordinary Shares
and their nominees only. Only ordinary
shareholders will be entitled to attend.
The auditor, Deloitte LLP, have indicated
their willingness to continue in office.
A resolution to reappoint them as auditor
will be proposed at the AGM.
By order of the Board
General Counsel & Company Secretary
The Directors have authority to issue and
allot A Ordinary Non-Voting Shares pursuant
to article 9 of the Articles of Association and
shareholder authority is requested at each
AGM. The Directors have authority to make
market purchases of A Ordinary Non-Voting
Shares. This authority is also renewed
annually at the AGM.
Conflicts of interest
The Articles of Association permit the
Board to authorise any matter which
would otherwise involve a Director
breaching his duty under the Companies
Act 2006 to avoid conflicts of interest.
When authorising a conflict of interest the
Board must do so without the conflicting
Director counting as part of the quorum.
In the event that the Board considers it
appropriate, the conflicted Director may be
permitted to participate in the debate, but
will neither be permitted to vote nor count
in the quorum when the decision is being
agreed. The Directors are aware that it is
their responsibility to inform the Board of
any potential conflicts as soon as possible
and procedures are in place to facilitate
disclosure.
The Board reviews its position on conflicts
of interest annually and at such other times
as are appropriate.
Change of control
The Company is not party to any significant
agreements that would take effect, alter or
terminate upon a change of control of the
Company following a takeover bid.
However, certain of the Group’s third party
funding arrangements would terminate
upon a change of control of the Company.
The Company does not have agreements
with any Director or employee providing
compensation for loss of office or
employment that occurs because of a
takeover bid, except for provisions in the
rules of the Company’s share schemes
which may result in options or awards
granted to employees to vest on a takeover.
Transactions with Directors
No transaction, arrangement or agreement
required to be disclosed in terms of the
Companies Act 2006 and IAS 24 ‘Related
Parties’ was outstanding at 30 September
2013, or was entered into during the year for
any Director and/or connected person
except as detailed in Note 43 (2012 – none).
Annual Report 2013
51
Directors’ Report
Remuneration Report
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In this section:
p.51 Chairman’s statement on remuneration
p.52 Executive Directors: remuneration at a glance
p.53 Executive Directors: annual report on remuneration
p.60 Executive Directors: remuneration policy
p.66 Non-Executive Directors: annual report on remuneration
p.66 Non-Executive Directors: remuneration policy
p.67 Annual report on remuneration: Directors’ Shareholdings
p.69 Annual report on remuneration: Remuneration Committee activities
3. Bonus payments FY2013
Under the bonus plan, awards of up to
88% of the maximum potential have
been made. Further details of financial
performance in the year and the bonus
outcomes are shown on tables 2.1–2.3
on pages 53 and 54. The Committee
considers the levels of these bonuses to
be appropriate in light of the strong results.
4. Vesting of the 2010 LTIP
Vesting of the 2010 LTIP was agreed
at 53.9% of maximum for Mr Beatty.
The Committee has not yet determined
the final vesting of the award for
Mr Morgan. An estimate of 35% of
maximum has been used throughout
this report.
Bonus plan for Lord Rothermere
The Committee, without Lord Rothermere
present, considered his current bonus
arrangement.
As Lord Rothermere is a beneficiary of the
largest shareholder of DMGT plc (RCL),
he is already in complete alignment with
shareholders’ interests. In recognition of
this, he has not participated in a Long-Term
Incentive Plan since 2009. Furthermore,
and continuing in this direction, it has been
agreed that with effect from October 2012,
his bonus should be paid fully in cash.
The Committee considered that the
requirement to defer part of the bonus
into nil cost options was unnecessary
and achieved no incentive purpose.
The level at which the award vests is based
on results over the three year period from
1 October 2010 to 30 September 2013.
Further details of the 2010 LTIP outcomes
are shown on pages 54 and 55.
Correspondingly, as there is no deferral,
the maximum bonus opportunity has been
reduced from 200% to 180% of salary, with
the on-target bonus reduced from 100%
to 90% of salary.
5. Clear and transparent reporting
This is the first year of the new disclosure
requirements for remuneration reporting.
We have fully met these requirements in
our report.
The Executive Director’s remuneration at
a glance remains a feature at the front
of this report which clearly demonstrates
the link between Corporate performance
and reward.
As required, this year we have included
two new sections to cover policy and
implementation.
The Viscount Rothermere
Chairman
Chairman’s statement on remuneration
We recognise that our incentive
arrangements are critical to the
management of our businesses.
We have therefore set out below
our three key principles:
• Reward sustainable growth
Incentives are designed to promote
the achievement of strategic goals
and to engender the long-term
sustainable growth of our businesses.
• Accountability
Our plans are designed to reward
employees for the performance of
the business for which they are
accountable and can directly influence.
• Simplicity and transparency
We aim for clarity of objectives
and relative simplicity of design.
Adhering to these principles has
contributed towards another successful
year and continues to enable us to build a
strong foundation for future performance.
Key areas of activity over the year
There have been five key areas of
activity for the Remuneration Committee
(the Committee) this past year:
1. Divisional incentive schemes
The Committee spends much of its time
reviewing the remuneration and incentive
plans of subsidiaries and divisions, which
are diverse both in geography and market.
In the year ahead, we will be considering
the most effective incentive plan designs
for a number of the businesses including:
Euromoney, RMS and dmg information.
The focus will be, as always, on ensuring
a close alignment between performance
and reward.
2. Pay review FY2013
For 2013, base salary increases for the
Executive Directors are in line with the
general salary review budgets across
the Group. An increase of 3% was agreed
with effect from 1 October 2013, with
the exception of Mr Dacre who has
a contractual increase of the higher
of RPI or 5%.
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Annual Report 2013
52
Directors’ Report
Remuneration Report
Continued
Executive Directors: remuneration at a glance
Corporate performance in FY2013
Adjusted profit before tax
Dividend per share
Earnings per share
Share price
FY2013 Remuneration outcomes for the Executive Directors
2013
£282m
19.2p
53.0p
£7.62
Movement
+10%
+7%
+7%
+58%
Salary 2013
Increase with effect from October 2013
Bonus (including deferred amounts)
As a % of salary
Taxable benefits
Pension benefits
LTIP awards vesting in year
Total remuneration
The Viscount
Rothermere
£000
774
3%
1,207
156%
37
286
–
2,304
M W H
Morgan
£000
929
3%
815
88%
21
344
784
2,893
S W
Daintith
£000
D M M
Dutton
£000
659
3%
543
82%
17
198
–
1,417
337
3%
146
43%
1
–
–
484
P M
Dacre
£000
1,812
5%
–
n/a
35
–
–
1,847
K J
Beatty
£000
686
3%
360
52%
26
254
892
2,218
P M
Fallon
£000
9
–
246
n/a
2
–
–
257
Total
£000
5,206
3,317
139
1,082
1,676
11,420
The key elements of remuneration for the Executive Directors
The key elements of remuneration applicable for each Executive Director in FY2013 are described below:
The Viscount Rothermere
Salary of £773,500 (including Euromoney Board fees); annual bonus opportunity of 180% of salary maximum, 90% of salary on-target,
no deferral applies; pension allowance of 37% of salary; car allowance and family medical insurance.
M W H Morgan
Salary of £928,800 (including Euromoney Board fees); annual bonus opportunity of 100% of salary maximum, 50% of salary on-target,
any amount above target deferred into nil cost options for two years; standard LTIP award of 100% of salary vesting in full after five years;
pension allowance of 37% of salary; car allowance and family medical insurance.
S W Daintith
Salary of £659,200; annual bonus opportunity of 100% of salary maximum, 50% of salary on-target, any amount above target deferred
into nil cost options for two years; standard LTIP award of 100% of salary vesting in full after five years; pension allowance of 30% of salary;
car allowance and family medical insurance.
D M M Dutton
Salary of £337,400; annual bonus opportunity of 50% of salary maximum, 25% of salary on-target, no deferral applies; personal medical
insurance.
P M Dacre
Salary of £1,311,975 and salary supplement of £500,000; company car and car allowance, fuel benefit and family medical insurance.
K J Beatty
Salary of £686,400; annual bonus opportunity of 60% of salary maximum, 30% of salary on-target, any amount above target deferred
into nil cost options for two years; standard LTIP award of 100% of salary vesting in full after five years; pension allowance of 37% of salary;
company car and family medical insurance.
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Executive Directors: annual report on remuneration
Annual report on remuneration table 1: Single figure of remuneration paid to Executive Directors – Audited
The table below sets out the single total figure of remuneration and breakdown for each Executive Director in FY2013 and FY2012.
For details on the key elements of compensation for each of the Executive Directors, see the key elements of remuneration table
on page 52. Details of the calculation of the annual bonus figure for FY2013 can be found under the Variable pay awards vesting
in FY2013 section on pages 53 and 54. Details of the calculation of the LTIP figure for 2013 can be found under the Outcome of LTIP
awards section on pages 54 and 55.
The Viscount Rothermere
M W H Morgan
S W Daintith
D M M Dutton
P M Dacre
K J Beatty
P M Fallon6
Total
Salary
and Fees1
£000
774
751
929
902
659
640
337
328
1,812
1,750
686
666
9
222
5,206
5,259
Year
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
Taxable
Benefits7
£000
37
37
21
21
17
17
1
1
35
36
26
21
2
1
139
134
Pension
Benefits
£000
286
267
344
323
198
192
–
–
–
–
254
247
–
–
1,082
1,029
Total
Fixed
£000
1,097
1,055
1,294
1,246
874
849
338
329
1,847
1,786
966
934
11
223
6,427
6,422
Annual
Bonus5
£000
1,207
911
815
564
543
439
146
91
–
–
360
303
246
5,637
3,317
7,945
Total
Annual
Remuneration
£000
2,304
1,966
2,109
1,810
1,417
1,288
484
420
1,847
1,786
1,326
1,237
257
5,860
9,744
14,367
LTIP2,3,4
£000
–
–
784
999
–
–
–
–
–
–
892
738
–
–
1,676
1,737
Total
Remuneration
£000
2,304
1,966
2,893
2,809
1,417
1,288
484
420
1,847
1,786
2,218
1,975
257
5,860
11,420
16,104
Notes
1. Salary shown for The Viscount Rothermere and Mr Morgan include fees as Directors of Euromoney.
2. Value of LTIP in 2012 relates to the 2009 award, the core award of which vested at 52.5% on 30 September 2012 and includes the value of all subsequent
matching shares. Details of the core award are shown in table 7 on page 57 and details of the matching award are shown in table 5.2 on page 55.
The share price when the core award vested on 30 September 2012 of £4.82 has been used to provide a value for the shares. The awards are not
realisable until December 2015 when all of the matching shares have vested.
3. The 2006 LTIP award lapsed in full in December 2012 and had no value.
4. Value of LTIP in 2013 relates to the current estimate of the vesting of the 2010 award, at 35% for Mr Morgan and 53.9% for Mr Beatty on 30 September 2013
and includes the value of all subsequent matching shares. Details of the core award are shown in table 7 on page 57 and details of the matching award
are shown in table 5.1 on page 55. The share price when the core award vested on 30 September 2013 of £7.62 has been used to provide a value for the
shares. The awards are not realisable until December 2016 when all of the matching shares have vested.
5. The bonuses shown include amounts that will be deferred into shares but do not have any further performance conditions attached, the calculation
of which is detailed in tables 2.1–2.3 on pages 53 and 54. The amounts deferred are shown in table 3 on page 54.
6. Mr Fallon died on 13 October 2012.
7. Taxable benefits comprise car/or equivalent allowances which are £34,000 for the Viscount Rothermere; £18,000 for Mr Morgan and £14,000 for Mr Daintith.
Mr Beatty has a company car with a taxable value of £23,000 and Mr Dacre has a company car with a taxable value of £15,000 plus a car allowance of
£10,000. Mr Dacre also received a fuel benefit of £6,500. All of the Directors received a medical benefit with a cost to the Company of approximately £3,000
with the exception of Mr Dutton’s medical benefit which was at a cost of £1,351.
Executive Directors: Variable pay awards vesting in FY2013
Annual report on remuneration table 2.1: Annual bonus weightings, opportunity and outcomes – Audited
The details of the weightings and opportunity relating to the annual bonus paid to Directors for the year ended 30 September 2013
and included in the single figure table are shown below. The performance measures are either adjusted pre-tax profits or strategic.
The Viscount Rothermere
M W H Morgan
S W Daintith
K J Beatty
D M M Dutton
Weightings
Opportunity as a % of salary
B2B
40%
30%
30%
–
40%
Consumer
Overall
DMGT
Strategic
Measures
20%
20%
20%
80%
20%
40%
30%
30%
–
40%
–
20%
20%
20%
–
Total
100%
100%
100%
100%
100%
Threshold
Target
Maximum
0%
0%
0%
0%
0%
90%
50%
50%
30%
25%
180%
100%
100%
60%
50%
Actual
Outcome
% of salary
Actual
Outcome
£000
156%
88%
82%
52%
43%
1,207
815
543
360
146
Notes
There was no discretion applied when calculating the bonus outcome.
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Annual Report 2013
54
Directors’ Report
Remuneration Report
Continued
Executive Directors
Annual report on remuneration table 2.2: Profit measures – Audited
The profit measure is split into three categories and weighted appropriately to the role of the executive. The following illustrates
performance against targets for the profit measures:
Profit targets
B2B
Consumer
Overall DMGT
Below
0%
Threshold
0%
Target
100%
Maximum
200%
Outcome
as % of target
167%
193%
170%
Annual report on remuneration table 2.3: Strategic measures – Audited
For Executive Directors with strategic measures forming part of their bonus, each had two objectives which were equally weighted. The
following illustrates performance against targets for the strategic measures:
Strategic targets
M W H Morgan
SW Daintith
K J Beatty
RMS and MailOnline objectives
Capital allocation and performance reporting
Digital and MailOnline objectives
Annual report on remuneration table 3: Deferred annual bonus – Audited
Below
0%
Threshold
0%
Target
100%
Maximum
200%
Outcome
as % of target
180%
125%
100%
The Committee agreed the following deferral requirements would apply to the annual bonus with no further performance conditions:
The Viscount Rothermere
D M M Dutton
M W H Morgan
S W Daintith
K J Beatty
None
None
Amounts above target bonus deferred for 2 years Nil cost options
Amounts above target bonus deferred for 2 years Nil cost options
Amounts above target bonus deferred for 2 years Nil cost options
Nil
Nil
–
–
£351,086
£212,922
£153,754
–
–
43%
39%
43%
Deferral requirement
Type of deferral
Amount deferred
FY2013
Amount deferred
as % of FY2013 bonus
Annual report on remuneration table 4.1: Outcome of LTIP awards in FY2013 – Audited
The vesting of the LTIP awarded to Mr Morgan in FY2010, for which the performance period ended on 30 September 2013, has not yet
been determined. There is no LTIP value for performance at or below threshold, maximum value is 100%. The award is not realisable
until the matching awards have vested in December 2016, no dividends accrue on this award.
Performance measures
EBITDA
Cumulative free cash
Investment grade rating
Strategic measures
Total
Weighting
25%
25%
25%
25%
100%
Notes
1. The measures were chosen to reflect the strategic aims of DMGT set in 2010. The Committee considers the strategic measures to be commercially sensitive.
2. The Committee has not yet determined the final vesting of the award. An estimate of 35% is included in table 1 on page 53 as an indication of the
estimated vesting.
3. The value of core and the matching awards is £783,890 as detailed in table 7 on page 57 and table 5.1 on page 55; this represents 84% of FY2013 salary
for Mr Morgan and is shown in the 2013 LTIP column in table 1 on page 53.
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Executive Directors
Annual report on remuneration table 4.2: Outcome of LTIP awards in FY2013 – Audited
The LTIP awarded to Mr Beatty in FY2010, for which the performance period ended on 30 September 2013, will vest to the level set out
below. There is no LTIP value for performance at or below threshold, maximum value is 100%. The award is not realisable until the
matching awards have vested in December 2016, no dividends accrue on this award.
Performance measures
dmg media cumulative profit FY2010–FY2013
Below
0%
Threshold
0%
Target
50%
Maximum
100%
Weighting
100%
Actual
Outcome
53.9%
Notes
1. The measures were chosen to reflect the strategic aims of dmg media set in 2010. In accordance with the outcome against target shown in the table
above, the Committee agreed that the LTIP would vest to the extent of 53.9%.
2. The value of core and the matching awards is £891,913 as detailed in table 7 on page 57 and table 5.1 on page 55, this represents 130% of FY2013 salary
for Mr Beatty and is shown in the 2013 LTIP column in table 1 on page 53.
Executive Directors: Awards made under share schemes
The tables below set out the details of the matching shares which vest in the year and also those that are due to vest (to the extent that
the core award vested) in subsequent years in accordance with the 2001 Plan rules. See table 7 on page 57 for details of core awards.
Annual report on remuneration table 5.1: 2010 LTIP Award matching shares – Audited
Award date
Award Type
Relating to
Vests
Realisable in
Status of awards
Outstanding awards
M W H Morgan
K J Beatty
Dec 2010
Dec 2010
Dec 2010
Dec 2010
Matching
2010 LTIP
Dec 2013
Dec 2016
Outstanding
Matching
2010 LTIP
Dec 2014
Dec 2016
Outstanding
Matching
2010 LTIP
Dec 2015
Dec 2016
Outstanding
Matching
2010 LTIP
Dec 2016
Dec 2016
Outstanding
17,145e
19,508
17,145e
19,508
17,145e
19,508
17,145e
19,508
Total Outstanding
68,580e
78,032
Value at 30 Sep 2013
(£7.62 per share)
£522,580e
£594,604
Annual report on remuneration table 5.2: 2009 LTIP Award matching shares – Audited
Award date
Award Type
Relating to
Vests
Realisable in
Status of awards
Outstanding awards
M W H Morgan
K J Beatty
Dec 2009
Matching
2009 LTIP
Dec 2012
Dec 2015
Restricted until
Dec 2015
Dec 2009
Dec 2009
Dec 2009
Matching
Matching
2009 LTIP
Dec 2013
Dec 2015
Outstanding
2009 LTIP
Dec 2014
Dec 2015
Outstanding
Matching
shares
2009 LTIP
Dec 2015
Dec 2015
Outstanding
34,527
25,521
34,527
25,521
34,527
25,521
34,527
25,521
Total Outstanding
138,108
102,084
Value at 30 Sep 2012
(£4.82 per share)
£665,680
£492,045
Notes
1. No further performance conditions apply, except that the core award and none of the matching awards are realisable until the full award vests.
2. Total values for core and matching awards are shown in the single figure on table 1 on page 53 against 2012 for the 2009 award and 2013 for the
2010 award.
Estimated = e.
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Directors’ Report
Remuneration Report
Continued
Executive Directors
Executive Directors: Awards made under share schemes
Annual report on remuneration table 6: Nil Cost Options – Audited
The table below sets out the details of all awards of nil cost options as part of the deferred bonus plan, including those derived from
the Directors’ bonuses for FY2012 that were granted in December 2012 at the closing price on 30 November 2012 of £5.27.
Award date
Award Type
Relating to
Exercisable from
Expiry date
Status of awards
Award Price
Outstanding Awards
The Viscount Rothermere
M W H Morgan
S W Daintith
K J Beatty
Total Outstanding
Exercised during year
M W H Morgan
Dec 2009
Dec 2010
Dec 2011
Dec 2012
Dec 2012
Nil Cost Options Nil Cost Options Nil Cost Options Nil Cost Options Nil Cost Options
2012 Bonus
Dec 2015
Dec 2019
Outstanding
£5.27
2012 Bonus
Dec 2014
Dec 2019
Outstanding
£5.27
2011 Bonus
Dec 2014
Dec 2018
Outstanding
£3.98
2010 Bonus
Dec 2013
Dec 2017
Outstanding
£5.39
2009 Bonus
Dec 2012
Dec 2016
Vested
£4.10
105,306
–
–
96,196
201,502
187,581
77,272
–
34,970
299,823
110,464
44,215
24,201
17,069
195,949
–
21,560
22,588
19,473
63,621
129,635
–
–
–
129,635
Total Outstanding
532,986
143,047
46,789
167,708
890,530
130,140
–
–
–
–
–
Notes
1. The value of December 2012 awards at issue were: £683,176 for the Viscount Rothermere; £113,621 for Mr Morgan; £119,040 for Mr Daintith and £102,626
for Mr Beatty.
2. Awards will be made in December 2013 in respect of bonuses for FY2013, to the value of £351,086 for Mr Morgan; £212,922 for Mr Daintith and £153,754
for Mr Beatty.
Executive Directors
Annual report on remuneration table 7: Long-Term Incentive Plans (LTIP)
All of the outstanding awards subject to performance conditions are summarised in the table below, including those awarded in
December 2012 under the 2012 LTIP. Awards are made annually in line with policy. Further information about LTI policy can be found
in table 6 on page 62 of this report.
Award Name
Award date
Performance
period ends
Standard award
as % of salary
Award price
Performance
Measures
2007 LTIP
Award
Jul 2007
Dec 2013
2009 LTIP
Core Award
Dec 2009
Sep 2012
2010 LTIP
Core Award
Dec 2010
Sep 2013
2011 LTIP
Award
Feb 2012
Oct 2016
2012 LTIP
Award
Dec 2012
Oct 2017
Recruitment
Award
Jan 2011
Jan 2014
n/a
£5.72
none
187.5%
187.5%
187.5%
100%
100%
£7.17
Relative
performance of
TSR against
comparator
group
£4.04
EBITDA;
cumulative free
cash;
£5.59
EBITDA;
cumulative free
cash;
Net debt;
EBITDA
average; and
performance
against
strategic plan
Net debt;
EBITDA
investment
grade rating;
and
performance
against
strategic plan
£4.37
Growing B2B
business;
£5.27
Growing B2B
business;
Continue to
grow and invest
in strong brands
of digital
consumer
media
– particularly
MailOnline;
Growing
sustainable
earnings and
dividends;
Increasing the
Company’s
exposure to
growth
economies and
to international
opportunities
Continue to
grow and invest
in strong brands
of digital
consumer
media
– particularly
MailOnline;
Growing
sustainable
earnings and
dividends;
Increasing the
Company’s
exposure to
growth
economies and
to international
opportunities
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Outstanding
Vested but
restricted until
Dec 2015
100%
Vested but
restricted until
Dec 2016
100%
Outstanding
Outstanding
Outstanding
100%
100%
100%
300%
Maximum
percentage of
face value that
could vest
Likely vesting
(Estimated)
Outstanding Awards
The Viscount
Rothermere
M W H Morgan
S W Daintith
D M M Dutton
K J Beatty
Total Outstanding
90.0%e
52.5%
35.0%e
100.0%e
100.0%e
100.0%
(5th against TSR
comparator
group 30 Sep
2013)
K. J. Beatty
53.9%
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a
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S
t
43,926
17,500
–
18,807
–
80,233
–
–
–
–
69,053
–
–
51,042
120,095
34,291e
–
–
39,017
73,308
206,350
146,453
–
152,494
505,297
176,243
125,085
–
130,246
431,574
Total
Outstanding
43,926
503,437
288,959
18,807
372,799
1,227,928
–
–
17,421
–
–
17,421
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Notes
1. In all cases, there is no payout at threshold performance.
2. The value of the 2012 LTIP awards at issue were: £928,803 for Mr Morgan; £659,200 for Mr Daintith and £686,400 for Mr Beatty.
3. The value of the vested 2009 LTIP core award at the 30 September 2012 share price of £4.82 is £332,835 for Mr Morgan and £246,022 for Mr Beatty.
The total value of the core and matching awards are shown against 2012 in table 1 on page 53.
4. The total value of the core and matching awards for the 2010 LTIP are shown against 2013 in table 1 on page 53.
5. The Committee considers that the specific targets relating to the measures for the LTIPs are commercially sensitive and will disclose performance against
targets at the time the awards vest.
Estimated = e.
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Annual Report 2013
58
Directors’ Report
Remuneration Report
Continued
Executive Directors
Annual report on remuneration table 8: Share options subject to performance conditions – Audited
A summary of the outstanding options which were granted under the 1997 Executive Option Scheme is shown below.
The 225,000 options granted to Directors in 2002 lapsed in full in December 2012.
Award date
Date from which exercisable
Expiry date
Exercise price
Status of awards
Likely vesting
Performance conditions
Dec 2003
Dec 2006
Dec 2013
£6.08
Dec 2004
Dec 2007
Dec 2014
£7.24
Performance conditions not met
Performance conditions not yet met
Will lapse
Unlikely
TSR must exceed that of the FTSE 100
index for 4 out of 6 consecutive monthly
calculation dates. EPS real growth
over a period of three consecutive
financial years.
TSR must exceed that of the FTSE 100
index for 4 out of 6 consecutive monthly
calculation dates. EPS real growth
over a period of three consecutive
financial years.
Outstanding awards
The Viscount Rothermere
M W H Morgan
D M M Dutton
K J Beatty
P M Dacre
40,000
20,000
35,000
20,000
50,000
60,000
20,000
40,000
30,000
80,000
Total Outstanding
100,000
40,000
75,000
50,000
130,000
Annual report on remuneration table 9: Executive Directors’ accrued entitlements under the DMGT Senior Executives’ Pension Fund – Audited
The Group operates a two-tier defined benefit 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.
The Company does not make any pension contributions on behalf of Mr Dutton or Mr Dacre. 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.
The Viscount Rothermere
M W H Morgan
P M Dacre
K J Beatty
Defined Benefit:
Accrued annual
benefit as at
30 September 2013
based on normal
retirement age
£75,000
£84,000
£652,000
£99,000
Defined Benefit: Normal
retirement date
3 Dec 2027
16 Feb 2010
14 Nov 2008
01 Nov 2017
Defined Benefit:
Additional value of
benefits if early
retirement taken
–
n/a
n/a
–
Weighting of pension benefit value as
shown in single figure table
Cash allowance: 100%
Cash allowance: 100%
Cash allowance: 100%
Cash allowance: 100%
Payments to past Directors
There were no payments made to past Directors during the year.
Payments for loss of office
There were no payments made to any Directors relating to loss of office during the year.
Annual report on remuneration table 10: Percentage change in remuneration of the Chief Executive – Audited
The table below sets out the remuneration delivered to the Chief Executive compared to total employee remuneration
Chief Executive remuneration (excluding LTIP)
Total employee remuneration
Average number of employees
Average remuneration
FY2012 Total
£000
1,810
593,600
12,130
£48,936
FY2013 Total
£000
2,109
543,600
10,205
£53,268
% increase/(decrease)
17.2%
(8.4%)
(15.9%)
8.8%
Notes
1. The increase shown for the Chief Executive is due in large to the bonus outcome in FY2013 being significantly higher than the outcome in FY2012.
2. Average headcount during the year has reduced, however, average remuneration has increased as a result of corporate restructuring, in particular,
the disposal of Northcliffe Media in December 2012.
3. Total employee remuneration includes salaries, wages and incentives, but excludes pension benefits.
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Executive Directors
Annual report on remuneration chart 1: Comparison of overall performance and remuneration of the CEO
DMGT A
Media Sector Total Return Index
The chart compares the Company’s
TSR with the Media Sector Total Return
Index over the past five financial years,
assuming an initial investment of £100.
The Company is a constituent of the
Media Sector Total Return Index and,
accordingly, this is considered to be
an appropriate comparison to
demonstrate the Company’s
relative performance.
350
300
250
200
150
100
50
0
FY2009
FY2010
FY2011
FY2012
FY2013
Annual report on remuneration table 11: Chief Executive remuneration outcomes FY2009 to FY2013 – Audited
Financial Year Ending
Total Remuneration (single figure)
Annual variable pay (% maximum)
LTIP achieved (% maximum)
FY2009
£000
2,312
63%1
0%
FY2010
£000
2,961
98%
25%2
FY2011
£000
1,722
40%
25%/100%3
FY2012
£000
2,809
63%
52.5%4
FY2013
£000
2,893
88%
35%5
Notes
1. In FY2009 maximum bonus opportunity was 200% of salary. No LTIP awards were made in that year or vested in that year. Maximum bonus opportunity was
100% of salary in all other years.
2. In FY2010 the price on 31 December 2009 (£4.14) is used for the 2003 LTIP award which vested 75% out of a maximum 300% in December 2009.
3. Two awards vested in FY2011. The price on 31 December 2010 (£5.72) is used for the 2004 award which vested 75% out of a maximum 300% in December
2010. The price on 30 September 2011 (£3.68) is used for the 2008 transition award which vested 100% in September 2011.
4. In FY2012 the price on 30 September 2012 (£4.82) is used for the 2009 award which vested 52.5% out of a maximum 100% in September 2012.
5. In FY2013 the price on 30 September 2013 (£7.62) is used for the 2010 award which will vest at an estimated 35% of maximum 100% and the 2006 award lapsed.
Annual report on remuneration chart 2: Relative importance of spend on pay
The chart below sets out the relative importance of spend on pay in the financial year.
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600
400
200
0
255
282
FY2012
FY2013
Adjusted profit before tax
685
632
66
139
69
70
FY2012
FY2013
Dividend
Buy-back
Dividend
FY2012
FY2013
Total employment pay
Notes
1. The decrease in total employee pay over the year is largely due to the sale of Northcliffe in December 2012.
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Annual Report 2013
Annual Report 2013
60
Directors’ Report
Remuneration Report
Continued
Executive Directors’ remuneration policy
Introduction
In accordance with the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2013, Shareholders are
provided with the opportunity to endorse the Company’s remuneration policy through a binding vote. The first binding vote on our
intended Directors’ remuneration policy will be put to Shareholders at the AGM on 5 February 2014 (see page 39) and the policy will
be operated, as described, from that date.
Policy applied to Executive Directors
The Committee aims to structure remuneration packages which motivate and retain executives and are appropriate to their level
of responsibility. 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.
Policy report table 1: Executive Directors’ basic fees and salary
Purpose
Operation
Levels
To recruit, retain and reflect responsibilities of the Executive Directors and be competitive with peer companies.
Reviewed annually for the following year taking into account contractual agreements, general economic and market
conditions and the level of increases made across the Group as a whole.
Benchmarking is performed periodically and our intention is to apply judgement in evaluating market data.
Annual increases are in line with average UK based employees, subject to particular circumstances such as changes in roles,
responsibilities or organisation, or as the Committee determines otherwise based on factors listed under operation.
Performance
framework
Implementation
Other employees
Mr Dacre receives a salary increase of the higher of RPI or 5%.
Maximum is set at a level the Committee considers appropriate taking account of the individual’s skills, experience, performance
and external environment.
Subject to satisfactory performance throughout the year.
Increases to base salaries for Executive Directors in FY2013 were in line with average levels of increase for UK employees across
the Group at 3%, except for Mr Dacre, whose current contractual terms are an increase of the higher of RPI or 5%.
Base salary increases elsewhere in the Group are set at a business level, taking into account economic factors, competitive
market rates, roles, skills, experience and individual performance. The change in wages and salaries for the Company as
a whole is reported in chart 2 on page 59.
Policy report table 2: Executive Directors’ pension
Purpose
Operation
Levels
Performance
framework
Implementation
Other employees
To recruit, retain and reflect responsibilities of the Executive Directors and be competitive with peer companies.
No Executive Directors accrues final salary pension benefits.
Pension benefits are provided in the form of a cash allowance only.
In lieu of membership of a Company pension scheme, The Viscount Rothermere, Mr Morgan and Mr Beatty receive a cash
allowance of 37% of salary; Mr Daintith receives a cash allowance of 30% of salary.
The Company does not make any pension contributions on behalf of Mr Dutton or Mr Dacre.
The current maximum cash allowance is 37% of salary.
Subject to continued employment.
No change to prior year. Pension allowances are reported in table 1 on page 53 with further details in the Pensions entitlements
and cash allowances section on page 58.
Employees in the UK are invited to join the Company defined contribution pension scheme. There are a number of schemes in
operation, all of which offer levels of employer matching contributions. Over the course of the next 12–18 months, all new joiners
will be auto-enrolled into the appropriate scheme. Employees in the US are offered 401(k) plans.
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Policy report table 3: Executive Directors’ benefits in kind
Purpose
Operation
Levels
Performance
framework
Implementation
To recruit, retain and reflect responsibilities of the Executive Directors and be competitive with peer companies.
Cash allowances and non-cash benefits such as medical and car benefits.
Allowances do not form part of pensionable earnings.
Mr Dacre and Mr Beatty may choose either a company car (the value of which will change from time to time) and/or a car
allowance. The Viscount Rothermere, Mr Morgan and Mr Daintith receive a cash allowance.
Taxable benefits comprise car and/or equivalent car allowances. Currently car allowances are £34,000 for the Viscount
Rothermere; £18,000 for Mr Morgan and £14,000 for Mr Daintith. Mr Beatty has a Company car with a taxable value of £23,000
and Mr Dacre has a Company car with a taxable value of £15,000 and a £10,000 additional car allowance. Mr Dacre also
received a fuel benefit of £6,500. All of the Directors receive a medical benefit with a cost to the Company of approximately
£3,000, with the exception of Mr Dutton’s medical benefit which was at a cost of £1,351. The cost of benefits changes periodically
and may be determined by outside providers. There has been no increase in car allowances since 2008.
Non-taxable benefits comprise access to chauffeur driven cars for each of the Executive Directors.
Subject to continued employment.
No change to policy since prior year. Mr Beatty opted to receive a Company car rather than a car allowance in FY2013.
Allowances and benefits for FY2013 are reported in detail in the notes to table 1 on page 53.
Other employees
Allowances and benefits for employees reflect the local labour market in which they are based.
Policy report table 4: Executive Directors’ annual bonus
Purpose
To focus Executives on the delivery of strategic objectives creating value for the Company and Shareholders.
To reward individual contribution to the success of the Company.
Operation
Up to 100% of total bonus opportunity is based on financial performance at corporate and business unit level. Up to 50% of total
bonus opportunity is based on performance against personal non-financial objectives. The bonus weightings applied for each
of the Directors may vary from time to time and may include financial targets relating to their specific business. The bonus
weightings for FY2013 are detailed in table 2.1 on page 53. The weightings that apply for the bonus may vary if the Committee
determine that it is appropriate in order to achieve the strategic aims of the business.
Performance is measured separately for each item as shown in tables 2.1 and 2.3 on pages 53 and 54.
Annual incentive payments do not form part of pensionable earnings.
Annual bonus plans are discretionary and the Committee reserves the right to make adjustments to payments up or down if it
believes that exceptional circumstances warrant doing so. No such adjustments were made for the FY2013 bonus.
Mr Dacre receives a salary supplement of £500,000. The Company considered that offering Mr Dacre a bonus scheme linked to
financial targets would be inconsistent with the objective of maintaining editorial independence.
Levels
For The Viscount Rothermere, maximum opportunity is 180% of salary; for Mr Morgan and Mr Daintith, maximum opportunity
is 100% of salary; for Mr Beatty maximum opportunity is 60% of salary and for Mr Dutton maximum opportunity is 50% of salary.
On-target bonus is 50% of maximum in all cases.
There is normally no pay out for performance at threshold.
The performance range sets a balance between upside opportunity and downside risk and is normally based on targets in
accordance with the annual budget.
Performance
framework
Bonuses are subject to the achievement of profit targets for B2B; Consumer and DMGT overall. Outcome against strategic
personal objectives also contributes towards the bonus for Mr Morgan, Mr Daintith and Mr Beatty.
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The selection and weighting of performance measures takes into account the strategic objectives and business priorities for the
year. The weightings that are applied to the FY2013 bonus targets are as reported on page 53.
The financial measures and weightings for each measure for the FY2014 bonuses will be the same as FY2013 (as shown in table
2.1 on page 53), except for Mr Beatty who will have 50% of his bonus determined by the outcome of Consumer financial targets
and 50% determined by the outcome of agreed strategic targets.
Personal objectives are agreed by the Committee and may be strategic and non-financial.
The Committee considers the specific targets for each measure to be commercially sensitive and will disclose performance
against targets in the year that bonus awards are made.
Implementation
Annual bonus payments for FY2013 are reported in detail in tables 2.1–2.3 on pages 53 and 54.
The maximum opportunity for the Viscount Rothermere was amended to 180%. For Mr Dutton, his bonus outcome is determined
by the targets detailed on page 54 rather than discretionary. There were no other changes.
Other employees
Many other employees participate in some form of cash-based annual incentive, bonus or commission plan.
The annual incentive plan for the Executive Directors forms the basis of the annual incentive plan for the Head Office Executives.
Plans across the Group are designed and tailored for each business, with the purpose of incentivising the achievement of their
annual targets.
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Annual Report 2013
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Directors’ Report
Remuneration Report
Continued
Executive Directors
Policy report table 5: Executive Directors’ bonus deferral
Purpose
Operation
Levels
Performance
framework
Implementation
To provide an element of retention and align Executive Director’s interests with those of Shareholders.
The current plan was adopted by the Board in November 2012. Awards are delivered through a grant of nil cost options.
A proportion of some Executives’ annual bonus is deferred for a period of two years. Annual bonus deferrals requirements are
reported in detail in table 6 on page 56.
Following the exercise of an award, a cash payment with a value equivalent to the sum of all of the dividends declared for the
award between the grant date and the date of delivery of the Shares will be made.
Under the rules of the bonus deferral plan adopted in 2012, clawback of vested and unvested awards is possible in the event
of material misstatement of information or misconduct.
Mr Morgan, Mr Daintith and Mr Beatty are required to defer any above target annual bonus into nil cost options for two years.
The Viscount Rothermere and Mr Dutton are not required to defer any part of their bonus.
No further performance conditions are imposed. This is reflective of market practice.
The nil cost option awards made under the plan for FY2012 are shown in table 6 on page 56. The cash amounts that apply for
the FY2013 bonus are shown in the notes below table 6 on page 56. The Viscount Rothermere is not required to defer any part
of his bonus. All other bonus deferrals remain as stated in table 3 on page 56.
Other employees
Most annual incentive plans around the Group do not include a requirement for deferral.
Policy report table 6: Executive Directors’ Long-Term Incentives
Purpose
To focus Executives on the delivery of strategic priorities creating long-term value for the Company and Shareholders.
To encourage long-term shareholding and commitment to the Company.
To link corporate performance to management’s reward, drive long-term earnings and Share price growth.
Operation
The current plan was approved by Shareholders on 6 February 2012. Awards are delivered through a grant of restricted Shares.
Awards have a five year vesting period. The extent of vesting at the end of the performance period is determined by the
measurement of the extent to which performance targets have been met.
The Committee has discretion within the Plan rules, to make adjustments taking into account exceptional factors that distort
underlying business performance. No adjustments were made for performance periods ending in 2013.
Following the realisation of an award, a cash payment with a value equivalent to the sum of all of the dividends declared for
the award between the grant date and the date of delivery of the Shares will be made.
Under the rules of the 2012 LTIP, clawback of vested and unvested awards is possible in the event of material misstatement
of information or misconduct.
Levels
Mr Morgan, Mr Daintith and Mr Beatty are eligible to receive a standard award of 100% of salary annually. The Viscount
Rothermere, Mr Dutton and Mr Dacre do not participate in the LTIP.
The plan rules allow for a maximum award to be made of up to 300% of salary in exceptional circumstances. As detailed
during Shareholder consultation when the plan was adopted, a 100% payout at target performance (which is above threshold)
is envisaged.
Performance
framework
In accordance with the Plan rules, the Committee may set different performance measures, in terms of type of measure and
the weighting given to each measure, for awards granted on different dates, provided that such measures are aligned with
the Company’s strategic goals and with the interests of its Shareholders.
The performance measures for the 2013 award fall under the following categories and are equally weighted:
• Growing B2B business.
• Continue to grow and invest in strong brands of digital consumer media – particularly MailOnline.
• Growing sustainable earnings and dividends.
• Increasing the Company’s exposure to growth economies and to international opportunities.
The Committee sets targets in accordance with its strategic planning and considers the specific targets for each measure
to be commercially sensitive. Performance against targets will be disclosed at the time the awards vest.
Implementation
The award made under the LTIP in 2012 is reported in detail in table 7 on page 57. No changes were made to the awards made
under the LTIP policy in 2013.
Awards made in 2007 and 2010 which vest in 2013 were made under the 2001 LTIP. Performance measures vary significantly
from the current plan. The award made in 2007 will be fully realisable in January 2013. Details of the performance measures
and the outcomes against targets for the 2010 award are shown in tables 4.1 and 4.2 on pages 54 and 55. Outstanding awards
will continue to vest according to the Rules of the Plans and will not be fully realisable until December 2015 and December 2016
respectively. Details of outstanding awards and their status are shown in detail in table 7 on page 57.
The award made to Mr Daintith on recruitment was a transition award made under the 2001 plan which will vest in 2014. There
are no performance conditions except that he continues to be employed. Details of the award are shown in table 7 on page 57.
Other employees
The Long-Term Incentive Plan for the Executive Directors forms the basis of annual awards for the Head Office Executives.
Plans for Executives in other businesses across the Group are considered and approved by the Committee. Plans are designed to
be appropriate to the stage of development of the business and to incentivise the achievement of the mid to long-term strategic
aims of the business in which they operate.
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Policy report chart 1: Illustrations of application of Executive Directors’ remuneration policy
The elements of remuneration have been categorised into three components: (i) Fixed; (ii) Annual variable; and (iii) Multiple reporting
period variable, which are set out in the future policy table below.
3,500
3,000
2,500
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0
0
£
2,000
1,500
1,000
2,767
35%
16%
14%
1,332
28%
3,245
29%
29%
13%
500
72%
35%
29%
1,918
35%
18%
12%
35%
2,258
30%
30%
10%
30%
900
25%
75%
1,908
37%
11%
15%
37%
2,121
33%
21%
13%
33%
989
29%
71%
0
3,000
2,500
2,000
1,500
1,000
500
0
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’
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0
0
£
Minimum On-target Maximum
M W Morgan
Minimum On-target Maximum
S W Daintith
Minimum On-target Maximum
K J Beatty
2,563
56%
13%
31%
1,846
39%
18%
43%
1,129
29%
71%
1,913
2%
1,913
2%
1,913
2%
98%
98%
98%
349
100%
436
20%
80%
523
33%
67%
Minimum On-target Maximum
The Viscount Rothermere
Minimum On-target Maximum
D M M Dutton
Minimum On-target Maximum
P M Dacre
Fixed (Salary)
Fixed (Benefits)
Annual variable (Bonus incl deferral)
Multiple reporting variable (LTIP)
Notes
1. Minimum in the graphs above is fixed remuneration only (salary, pension and benefits). On-target assumes that the standard Long-Term Incentive (LTI)
award and target bonus have been awarded as stated in the policy table.
2. Maximum assumes that the standard LTI award and the maximum bonus have been awarded as stated in the policy table.
3. Graphs illustrate remuneration policy that will be voted on 5 February 2014 for the period 1 October 2013 to 30 September 2014. Share awards valued at
share price at date of award. No allowance is made for potential share price changes. Future share price changes form a key part of the remuneration
linkage to performance and alignment of long-term shareholder returns
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Annual Report 2013
64
Directors’ Report
Remuneration Report
Continued
Executive Directors
Policy report table 7: Executive Directors’ service contracts
A summary of the notice periods and any obligation under the Executive Directors’ service contracts is outlined in the table below:
Date of
contract
Notice
period
Company with which
contracted
Compensation on termination of employment
by Company without notice or cause
The Viscount
Rothermere
17 Oct 1994
3 months
M W H Morgan
1 Oct 2008
1 year
Daily Mail and
General Trust plc
Daily Mail and
General Trust plc
S W Daintith
1 Jan 2011
1 year
Daily Mail and
General Trust plc
Entitled to compensation equal to basic salary, benefits, pension entitlement
and, as appropriate, a prorated bonus payment for the notice period.
Entitled to compensation equal to basic salary, benefits, pension entitlement
and, as appropriate, bonus for the notice period calculated as the average
of the annual bonuses (if any) awarded in respect of the three complete
financial years of the Company immediately preceding the financial year
in which the employment terminates. LTIP will be treated in accordance
with the Plan rules. Contract is subject to mitigation and, in the event of the
Director obtaining alternative employment during the notice period, does
not provide for further payment after such event.
Entitled to compensation equal to basic salary, benefits, pension entitlement
and, as appropriate, bonus for the notice period calculated as the average
of the annual bonuses (if any) awarded in respect of the three complete
financial years of the Company immediately preceding the financial year
in which the employment terminates. LTIP will be treated in accordance
with the Plan rules. Contract is subject to mitigation and, in the event of the
Director obtaining alternative employment during the notice period, does
not provide for further payment after such event.
D M M Dutton
27 Nov 2002
1 year
Daily Mail and
General Trust plc
Entitled to compensation equal to basic salary, benefits, pension entitlement
and, as appropriate, a prorated bonus payment for the notice period.
P M Dacre
13 July 1998
1 year
Associated Newspapers
Limited
Entitled to compensation equal to basic salary, benefits, pension entitlement
and as appropriate, a prorated bonus for the notice period.
K J Beatty
19 May 2002
1 year
Associated Newspapers
Limited
Entitled to compensation equal to basic salary, benefits, pension entitlement
and, as appropriate, a prorated bonus payment for the notice period.
Policy report table 8: Executive Directors’ policy on payment for loss of office
Policy on setting
of notice periods
The Company normally sets the notice period of Executive Directors as 12 months, but may decide to vary this in circumstances
it deems appropriate.
How termination
payments are determined
On termination, the Company will normally make a payment in lieu of notice (PILON) which is equal to the aggregate of:
the basic salary at the date of termination for the applicable notice period; the pension allowance over the relevant
period; the cost to the Company of providing all other benefits (excluding pension allowance and bonus) or a sum equal
to the amount of benefits as specified in the Company’s most recent Annual Report and a bonus payment calculated
in accordance with the service contract of the Director. The treatment of the Long-Term Incentive Plan on termination
will be in accordance with the rules of the Plan and, where appropriate at the discretion of the Committee.
The Company may pay the PILON either as a lump sum or in equal monthly instalments from the date on which the
employment terminates until the end of the Relevant Period. If alternative employment (paid above a pre-agreed rate)
is commenced, for each month that instalments of the PILON remain payable, the amounts, in aggregate (excluding
the pension payment), may be reduced by half of one month’s basic salary in excess of the pre-agreed rate.
All leavers have to exit DMGT SharePurchase+ and either sell or transfer their Shares. If identified as a ‘Good Leaver’,
under the rules of DMGT SharePurchase+, no tax or NICs are paid.
Discretion
If identified as a ‘Good Leaver’, for the purposes of the bonus, the Committee may determine that the leaver’s contribution
was significant in early or high achievement of targets, in which case, it may decide to make a payment which is equivalent
of up to a full year bonus.
If identified as a ‘Good Leaver’ under the deferred bonus Plan rules (including those identified at the discretion of the
Committee), outstanding awards shall vest in full on the normal vesting date or on such earlier date as the Committee may
determine.
If identified as a ‘Good Leaver’ under the LTIP rules, (including those identified at the discretion of the Committee), outstanding
awards may be exercised, either on the normal vesting date or on such earlier date as the Committee may determine, to the
extent that they have vested. If, in the judgement of the Committee, greater progress towards achievement of targets has
been made as a result of the performance of the Leaver, it may, at its absolute discretion, decide to vest up to 100% of the
outstanding award.
The Committee may also agree to make payments in respect of statutory employment claims, legal fees, outplacement
and accrued holiday or sick leave.
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Executive Directors
Policy report table 9: Executive Director’s recruitment policy
Principles
Details
Maximum
When appointing or recruiting Directors, the Company will normally aim to set remuneration at a level which
is consistent with the remuneration policy in place for other Directors and the previous incumbent of the role.
The main components of remuneration will be salary, bonus, long-term incentives, pension (or cash pension
allowance), benefits (which may include those relating to relocation such as: flights; immigration costs;
relocation allowance; shipping and storage; temporary living accommodation; housing allowances; annual
leave travel; international medical insurance cover; legal and tax services; school fees; school search;
movement of pets; termination of car leases and costs of replacement goods) and compensation for loss
of earnings from his/her previous employment that are forfeited in order to take up the role.
The approach for each component will be to try to set each in line with the remuneration policy for Directors,
except that the approach in respect of compensation for forfeit of remuneration in respect of a previous
employer will be considered on a case by case basis taking into account all relevant factors such as
performance achieved or likely to be achieved, the proportion of the performance period remaining
and the form of the award.
In order to secure the best candidate for the role, the Company may need to pay more than its existing
Directors. The maximum level of variable remuneration that may be granted will be 200% of salary under
the bonus plan and 300% under the LTIP (these limits already apply to the existing bonus and LTIP plans).
Pre-existing contractual agreements for internal candidates may be maintained on recruitment to an
Executive Director role.
Policy report table 10: Executive Director’s shareholding guidelines
Purpose
Operation
Levels
Implementation
Other employees
To align the interests of Executives and Shareholders.
Executive Directors are encouraged to build up a substantial shareholding in the Company.
Shares which have been awarded subject to deferral or satisfaction of performance measures are not
included in the calculation of the value of the Executive Director’s shareholding.
The Committee recommends a minimum shareholding of 1.5x (150%) salary, there is no time-frame over
which the guideline should be met.
No change in the policy on shareholder guidelines in the year.
Directors’ interests are reported in detail on page 67.
There are no share ownership guidelines below Executive Director level, although UK employees are
encouraged to become Shareholders in the Company by participating in the DMGT Sharepurchase+,
the HMRC approved Share Incentive Plan.
Policy report table 11: Policy on external appointments for Executive Directors
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 1 March 2012 and receives a fee of £25,000 p.a.
Policy report table 12: Consideration of Shareholder views
The Committee receives annual updates on the views and best practices of Shareholders and their representative bodies and
notwithstanding the Company Shareholder structure, takes these into account. The Committee seeks the views of Shareholders on
matters of remuneration that it thinks Shareholders are interested in. A good example of this was the adoption of the 2012 Long-Term
Incentive Plan, where Shareholders were consulted. The Committee considers the 98% vote in favour of the Remuneration Report
in 2012 (table 17 on page 70) to demonstrate strong Shareholder support for the Group’s remuneration arrangements.
Policy report table 13: Consideration of conditions elsewhere in the Company
Pay and employment
conditions elsewhere
in the Company
Employee consultation
and comparison
metrics used
The Committee considers conditions elsewhere in the Group when making decisions on Remuneration
matters affecting the Executive Directors. The Committee receives a report annually on the salary budget
for each business. The Committee makes reference, where appropriate, to pay and employment conditions
elsewhere in the Group, (whilst remaining aware of the variety of jurisdictions and markets in which it
operates) when determining annual salary increases and to external evidence of remuneration levels
in other companies.
The Committee makes reference to data provided by and advice sought from external advisers when
making decisions on Remuneration matters affecting the Executive Directors.
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Annual Report 2013
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Directors’ Report
Remuneration Report
Continued
Non-Executive Directors: annual report on remuneration
Annual report on remuneration table 12: Single total figure of remuneration paid to Non-Executive Directors – Audited
The table below sets out the single total figure of remuneration for each Non-Executive Director in 2013 and 2012
J G Hemingway
F P Balsemão
D J Verey
N W Berry
D H Nelson
D Trempont
H Roizen
A Lane
T Keswick
T S Gillespie
Total
2013
Travel
Allowance
£000
–
–
15
5
10
50
50
–
–
5
135
Fees
£000
78
39
73
74
102
114
72
41
1
12
606
Total
£000
78
39
88
79
112
164
122
41
1
17
741
2012
Travel
Fees
Allowance
£000
74
39
68
57
95
35
–
–
–
35
403
£000
–
–
–
–
–
16
4
–
–
–
20
Total
£000
74
39
68
57
95
51
4
–
–
35
423
Notes
1. There is a basic NED fee of £35,000. Additional fees are paid for membership and chairmanship of sub-committees and subsidiary boards.
2. Heidi Roizen was appointed to the MailOnline Advisory Board in March 2013 and Dominique Trempont joined the RMS Board in January 2013.
Fees shown above include the fees for their participation on these Boards.
3. Travel allowances of £4,000 are paid for travel involving between 5 and 10 hours and £10,000 for meetings involving more than 10 hours travel.
4. Tom Gillespie retired from the Board on 6 February 2013.
Non-Executive Directors: remuneration policy
Policy report table 14: Non-Executive Directors’ fees
Purpose
Operation
Levels
The Board’s policy is to pay Non-Executive Director fees which are reflective of responsibilities and competitive
with peer companies.
Non-Executive Director’s fees are reviewed regularly.
The Board as a whole considers and approves the fees of the Non-Executive Directors.
The current fees for the Chairman and Non-Executive Directors are paid at the annual rates as shown below:
Board Member £35,000; Audit Committee Chairman £30,000; Audit Committee Member £14,000;
Risk Committee Member 8,000; Investment and Finance Committee Member £25,000. Mr Nelson and
Mr Berry receive £25,000 and £22,000 respectively for their work in relation to the Remuneration Committee.
In addition a travel allowance is payable of £4,000 for travel involving between 5 and 10 hours and £10,000
for travel involving more than 10 hours.
Performance
framework
Continued appointment.
Implementation
The actual fees paid to the Non-Executive Directors in FY2013 are shown in table 12 above.
Other employees
NA
Policy report table 15: Policy applied to 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.
Dates of appointment/
re-appointment
J G Hemingway
F P Balsemão
D J Verey
N W Berry
D H Nelson
6 Feb 2013
6 Feb 2013
6 Feb 2013
6 Feb 2013
6 Feb 2013
D Trempont
H Roizen
A Lane
T Keswick
6 Feb 2013
6 Feb 2013
6 Feb 2013
23 Sep 2013
Appointments and
re-election
All Directors will be standing for re-election at the forthcoming AGM.
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Annual report on remuneration: Directors’ Shareholdings
Annual report on remuneration table 13: Statement of Directors’ shareholding and share interests – Audited
The number of shares of the Company in which current Directors or their families had a beneficial interest and details of long-term
incentive interests as at 30 September 2013 are set out in the table below.
Guideline
met
Conditional shares
LTI interests
subject to
performance
conditions1
43,926
LTI interests not
subject to
performance
conditions2
532,986
Options subject to
performance
conditions3
100,000
710,125
143,047
40,000
271,538
64,210
–
18,807
–
75,000
552,915
167,708
50,000
–
–
130,000
–
–
–
–
–
–
–
Value (as
a multiple
of salary)
876
560
9.7
5.2
–
–
6.3
3.9
0.6
0.4
0.2
0.2
–
25
1,597,311
907,951
395,000
Beneficial
The Viscount Rothermere
M W H Morgan
S W Daintith
D M M Dutton
K J Beatty
P M Dacre
P M Fallon
J G Hemingway
T S Gillespie
D J Verey
D H Nelson
Non-Beneficial
The Viscount Rothermere
J G Hemingway
D H Nelson
Total Directors’ interests
Less duplications
As at
30 Sep 2013
1 Oct 2012
30 Sep 2013
1 Oct 2012
30 Sep 2013
1 Oct 2012
30 Sep 2013
1 Oct 2012
30 Sep 2013
1 Oct 2012
30 Sep 2013
1 Oct 2012
30 Sep 2013
1 Oct 2012
30 Sep 2013
1 Oct 2012
30 Sep 2013
1 Oct 2012
30 Sep 2013
1 Oct 2012
30 Sep 2013
1 Oct 2012
30 Sep 2013
1 Oct 2012
30 Sep 2013
1 Oct 2012
30 Sep 2013
1 Oct 2012
30 Sep 2013
1 Oct 2012
30 Sep 2013
1 Oct 2012
30 Sep 2013
1 Oct 2012
30 Sep 2013
1 Oct 2012
30 Sep 2013
1 Oct 2012
Ordinary
17,738,163
11,903,132
764
764
–
–
–
–
–
–
–
–
–
4,000
–
–
–
–
6,500
6,500
–
–
17,745,427
11,914,396
756,700
756,700
4,000
4,000
–
–
760,700
760,700
18,506,127
12,675,096
–
–
18,506,127
12,657,096
A Ordinary
Non-Voting
68,570,093
75,134,502
1,149,826
978,104
2,959
2,711
269,938
269,681
54,838
54,581
37,861
37,861
–
42,234
200,000
200,000
7,500
7,500
15,000
15,000
–
–
70,072,515
76,742,174
5,540,000
5,540,000
5,550,000
5,550,000
212,611
212,611
11,302,611
11,302,611
81,611,346
88,044,659
–
(5,752,611)
81,611,346
82,292,048
Notes
1. The figures in the table above include A shares committed by executives under the 2007 LTIP award, details of which are set out in table 7 on page 57.
For the Viscount Rothermere, Mr Morgan and Mr Dutton 43,926; 17,500 and 18,807 respectively of the A shares were subject to restrictions.
2. The LTI interests subject to performance conditions are detailed on in the table 7 on page 57 and include those shares which have vested but are not
realisable as well as those that are outstanding. The figure also includes all of the matching shares that were awarded under the 2009 and 2010 LTIP
awards. Details of these awards are in tables 5.1 and 5.2 on page 55.
3. The LTI interests not subject to performance conditions include the nil cost options awarded as the bonus deferral and Mr Daintith’s recruitment award.
The Options subject to performance conditions are Options granted under the 1997 Executive Share Option Scheme detailed in table 8 on page 58.
4. 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 17,738,163 Ordinary shares at 30 September 2013 and 11,903,132 at the 1 October 2012.
5. At 30 September 2013 and at 1 October 2012, the Viscount Rothermere was beneficially interested in 756,700 Ordinary shares of Rothermere Continuation
Limited, the Company’s ultimate holding company.
6. The Viscount Rothermere was beneficially interested in nil Ordinary Shares in Associated Newspapers North America Inc at 30 September 2013 and 68 at
1 October 2012,
7. There is no shareholding for Mr Balsemão, Mr Berry, Mr Trempant and Ms Roizen.
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Annual Report 2013
Annual Report 2013
68
Directors’ Report
Remuneration Report
Continued
Annual report on remuneration: Directors’ shareholdings
Annual report on remuneration table 14: Directors’ Interests in Euromoney – Audited
Directors’ beneficial shareholdings in Euromoney were as follows:
The Viscount Rothermere
M W H Morgan
P M Fallon
Total Directors’ interests
30 Sep 2013
24,248
7,532
–
31,780
1 Oct 2012
24,248
7,532
630,383
662,163
Disclosable transactions by the Group under IAS 24, Related Party Disclosures, are set out in Note 43 on pages 164 to 165. 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.
Annual report on remuneration: Remuneration Committee activities
The Remuneration Committee role and activities
The Committee’s responsibilities include Group remuneration policy; 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 Committee is chaired by the Viscount Rothermere with Committee members Mr Berry and Mr 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 that, as the beneficiary of the Company’s largest Shareholder, the Viscount Rothermere’s interests are fully aligned
with other Shareholders. 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.
The Committee spends a large portion of its time reviewing the remuneration and incentive plans of subsidiaries and divisions which are
diverse both in geography and market. There are a variety of incentive plans requiring significant consideration and oversight, which are
designed to reflect business type and stage of development, the market it operates in and aims to incentivise the delivery of its strategic
plan.
The Committee’s objective is to combine the necessary attention to short-term financial performance, through annual bonus plans,
with a stronger focus on the fundamentals that drive long-term growth, through Long-Term Incentive Schemes.
In September 2013, the Committee conducted a formal review of its effectiveness and concluded that it had fulfilled its remit and had
been effective in the year.
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 in the Company are compatible with its risk policies and systems.
Annual report on remuneration table 15: Remuneration Committee attendance
Individual attendance at meetings is set out below.
The Viscount Rothermere
N W Berry
D H Nelson
Number of meetings
eligible to attend
Number of meetings
attended
4
4
4
4
4
4
Note
The Viscount Rothermere did not attend part of two meetings while matters affecting his own remuneration were discussed.
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Remuneration Committee activities
Annual report on remuneration table 16: Details on matters discussed by the Committee during the course of the year
Details are given below on matters discussed by the Committee during the course of FY2013.
Meeting
Regular standing agenda items
Other agenda items
November
2012
Approved FY2012 Outcome of Executive Bonus Scheme
Approved revised bonus deferral plan
Approved FY2013 Targets for Executive Bonus Scheme
Approved new conditional share award plan
Approved FY2009 LTIP vesting outcome
Approved December 2012 LTIP participants and
performance conditions
Approved December 2012 Option grants under
2006 ESOS
Approved Remuneration Report
Approved RMS salary reviews and review of FY2012
divisional bonuses awarded
Approved Packages for recruitment of divisional executives
February 2013 Confirmed FY2012 Executive bonuses and deferrals
The Viscount Rothermere’s bonus deferral discussed
Confirmed FY2013 Executive Bonus Scheme targets
Update on status of previous LTIP awards
Confirmed December 2012 LTIP awards
Development of reward communication in 2013
Confirmed 2006 ESOS awards made December 2012
Review of divisional incentive plans
Shareholder feedback on annual report disclosures
Review of proposals relating to divisional LTIPs
Update on the latest views of the ABI and NAPF
Other divisional compensation issues
July 2013
Forecast of FY2013 Executive bonus outcome
Initial discussion on FY2014 bonus structure
Updates on likely outcomes of LTIPs vesting in 2013
Implications for the Remuneration Report under new
legislation
Review of the remuneration advisers
Approved The Viscount Rothermere and Mr Dutton’s
bonus structure
Guidance note on objective setting for Executives
Executive Directors’ remuneration arrangements discussed
Pay out for divisional LTIPs discussed
A review of salary review budgets across the Group
Proposed new divisional incentive plans discussed
Revised approach to senior recruitment approved
Review of divisional incentive valuation methodology
Divisional Senior Executive appointments and packages
approved
Outcome of remuneration advisers review
September
2013
Forecast of FY2013 Executive bonus outcome
Mr Dacre’s remuneration arrangements approved
Discussion on FY2014 bonus financial targets
Divisional plans for approval
Draft personal objectives reviewed
Updates on likely outcomes of LTIPs vesting in 2013
Performance review of the Remuneration Committee
Salary review of the Executive Directors and Head
Office Executives
Divisional Senior Executive Salary review (excluding RMS)
Divisional Senior Executive appointments and packages
approved
Comparator group amendment for 2007 LTIP following
News Corp split approved
Draft Remuneration Report reviewed
Recruitment and Exit policy approved
Retirement policy and age discrimination discussed
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Annual Report 2013
Annual Report 2013
70
Directors’ Report
Remuneration Report
Continued
Remuneration Committee activities
Annual report on remuneration table 17: Voting at General Meeting
The table below shows the advisory vote on the 2012 Remuneration Report at the February 2013 AGM. The Committee considers the 98%
vote in favour of the Remuneration Report to demonstrate strong Shareholder support for the Group’s remuneration arrangements. The
Committee consults with key investors prior to any major changes.
Votes for
18,112,033
%
98%
Votes Against
421,402
%
2%
Abstentions
4
%
0%
Annual report on remuneration table 18: Advice to the Remuneration Committee
During 2013, the Committee was advised by MM&K, a specialist remuneration adviser, who was 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. Greenhill Associates also provided advice in relation to valuation of
subsidiaries for the purpose of long-term incentive schemes.
The Committee evaluated the contribution of its advisers and reviewed the scope of arrangements for its external advisers in July 2013.
It concluded that the advice that it received from MM&K and Greenhill was independent and re-appointed MM&K as its adviser.
Fees paid to advisers to the Committee in relation to remuneration advice are shown below.
Adviser
MM&K
Greenhill
Fees in relation to remuneration advice (£’000)
61
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This report covers the reporting period to 30 September 2013 and has been prepared in accordance with the relevant requirements of the
Large and Medium-Sized Companies and Groups (Accounts and Reports) Regulations 2013 (‘the Regulations’) and of the Listing Rules of
the Financial Services Authority. As required by the Regulations, a separate resolution to approve the policy and implementation reports
will be proposed at the Company’s AGM.
Audited Information
Those tables in the Annual Report on Remuneration that have been subject to audit are clearly identified.
Financial Statements
Independent Auditor’s Report
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INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF DAILY MAIL AND GENERAL TRUST PLC
Opinion on financial statements of Daily Mail and General Trust plc
In our opinion:
• the financial statements give a true and fair view of the state of the Group’s and of the parent Company’s affairs as at 30 September
2013 and of the Group’s and the parent Company’s profit for the year then ended;
• the Group financial statements have been properly prepared in accordance with International Financial Reporting Standards (IFRSs)
as adopted by the European Union;
• the parent Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted
Accounting Practice; and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the
Group financial statements, Article 4 of the IAS Regulation.
The financial statements 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,
the related notes 1 to 45, the parent Company Balance Sheet and the related notes 1 to 17. The financial reporting framework that has
been applied in the preparation of the Group financial statements is applicable law and IFRSs as adopted by the European Union.
The financial reporting framework that has been applied in the preparation of the parent Company financial statements is applicable
law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).
Separate opinion in relation to IFRSs as issued by the IASB
As explained in note 1 to the financial statements, the Group in addition to applying IFRSs as adopted by the European Union, has also
applied IFRSs as issued by the International Accounting Standards Board (IASB). In our opinion the consolidated financial statements
comply with IFRSs as issued by the IASB.
Going concern
As required by the Listing Rules we have reviewed the directors’ statement on page 81 that the Group is a going concern. We confirm that:
• we have not identified material uncertainties related to events or conditions that may cast significant doubt on the Group’s ability to
continue as a going concern which we believe would need to be disclosed in accordance with IFRSs as adopted by the European
Union; and
• we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the financial statements
is appropriate.
However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the Group’s ability
to continue as a going concern.
Our assessment of risks of material misstatement
The assessed risks of material misstatement described below are those that had the greatest effect on our audit strategy, the allocation
of resources in the audit and directing the efforts of the engagement team:
• impairment reviews of goodwill, intangible assets, property plant and equipment, joint ventures and associates;
• accounting for acquisitions and disposals;
• revenue recognition, including timing of recognition and identification of new revenue streams;
• presentation of adjusted earnings measures;
• capitalisation of internally generated IT costs; and
• the recognition and measurement of deferred tax assets.
Our audit procedures relating to these matters were designed in the context of our audit of the financial statements as a whole, and not
to express an opinion on individual accounts or disclosures. Our opinion on the financial statements is not modified with respect to any
of the risks described above, and we do not express an opinion on these individual matters.
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Annual Report 2013
Annual Report 2013
72
Financial Statements
Independent Auditor’s Report
Continued
Our application of materiality
When establishing our overall audit strategy, we determined a magnitude of uncorrected misstatements that we judged would be
material for the financial statements as a whole. We determined planning materiality for the Group to be £10.0 million, which is below
5% of adjusted profit before tax and non-controlling interests as defined in note 13.
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £200,000, as well as
differences below that threshold that, in our view, warranted reporting on qualitative grounds.
An overview of the scope of our audit
Our Group audit scope included audit work in all five divisions of the Group. Within these five divisions we have identified 24 locations of
audit interest. Twelve of these were subject to full audit procedures, and six were subject to specified audit procedures where the extent
of our testing was based on our assessment of the risks of material misstatement and of the materiality of the Group’s business operations
at those locations. These 18 locations represent the principal business units within the Group’s five reportable segments and account for
88% of the Group’s total assets, 95% of the Group’s revenue and 98% of the Group’s adjusted profit before tax. They were also selected to
provide an appropriate basis for undertaking audit work to address the risks of material misstatement identified above.
The Group audit team follows a programme of planned site visits that is designed to ensure that the Senior Statutory Auditor or another
senior member of the Group audit team visits each of the 12 full scope locations at least once a year. This year, the Group audit team
visited all 12 of the full scope locations.
The way in which we scoped our response to the significant risks identified above was as follows:
• we challenged management’s assumptions used in the impairment model for goodwill and intangible assets, described in note 20
to the financial statements, specifically including the cash flow projections, discount rates, long-term growth rates and sensitivities used,
particularly in respect of the Group’s interests in Genscape and BCA Research;
• we carried out testing of significant acquisitions and disposals made in the year. We have tested the valuation of intangible assets
identified by management on acquisitions. For disposals, in particular of Northcliffe Media as set out in note 17, we tested the calculation
of the gain arising;
• we carried out testing relating to controls over revenue recognition, including the timing of revenue recognition, the recognition of
revenue on a gross or net basis, the treatment of discounts, as well as substantive testing, analytical procedures and assessing whether
the revenue recognition policies adopted complied with IFRS;
• we considered appropriateness of the adjustments made to derive the adjusted profit measures set out in note 13;
• we carried out testing relating to the internal costs capitalised in respect of the internally generated intangible assets set out in the
note 21; and
• we considered the appropriateness of management’s assumptions and estimates in relation to the likelihood of generating suitable
future taxable profits to support the recognition of deferred tax assets described in note 36, challenging those assumptions and
considering supporting forecasts and estimates.
The Audit Committee’s consideration of these risks is set out on page 45.
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 Strategic Report and the Directors’ Report for the financial year for which the financial statements are
prepared is consistent with the financial statements.
Matters on which we are required to report by exception
Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not received all the information and explanations we require for our audit; or
• 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 are not in agreement with the accounting records and returns.
We have nothing to report in respect of these matters.
73
Directors’ remuneration
Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of directors’ remuneration have not
been made or the part of the Directors’ Remuneration Report to be audited is not in agreement with the accounting records and returns.
Under the Listing Rules we are required to review certain elements of the Directors’ Remuneration Report. We have nothing to report
arising from these matters or our review.
Corporate Governance Statement
Under the Listing Rules we are also required to review the part of the Corporate Governance Statement relating to the Company’s
compliance with nine provisions of the UK Corporate Governance Code. We have nothing to report arising from our review.
Our duty to read other information in the Annual Report
Under the ISAs (UK and Ireland), we are required to report to you if, in our opinion, information in the annual report is:
• materially inconsistent with the information in the audited financial statements; or
• apparently materially incorrect based on, or materially inconsistent with, our knowledge of the Group acquired in the course
of performing our audit; or
• is otherwise misleading.
In particular, we are required to consider whether we have identified any inconsistencies between our knowledge acquired during the
audit and the directors’ statement that they consider the annual report is fair, balanced and understandable and whether the annual
report appropriately discloses those matters that we communicated to the audit committee which we consider should have been
disclosed. We confirm that we have not identified any such inconsistencies or misleading statements.
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement, the directors are responsible for the preparation of the 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 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.
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.
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 Group’s and the parent 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 and to identify any information that is apparently materially incorrect based on,
or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent
material misstatements or inconsistencies we consider the implications for our report.
Simon Letts (Senior statutory auditor)
for and on behalf of Deloitte LLP
Chartered Accountants and Statutory Auditor
London, UK
4 December 2013
OverviewStrategic ReportDirectors’ ReportShareholder InformationFinancial StatementsAnnual Report 2013 Annual Report 2013
74
Financial Statements
Consolidated income statement
For the year ending 30 September 2013
CONTINUING OPERATIONS
Revenue
Operating profit before exceptional operating costs, 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
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 from discontinued operations
PROFIT FOR THE YEAR
Attributable to:
Owners of the Company
Non-controlling interests*
Profit for the year
Earnings 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
Year ending
30 September
2013
£m
Note
Year ending
30 September
2012
Restated
(Note 2)
£m
3
3
3
1,752.6
1,746.8
292.5
273.7
(40.3)
(76.5)
3, 20,21
(42.5)
(53.6)
3, 4
3, 7
8
9
10
11
18
38
39
14
209.7
5.3
215.0
27.6
242.6
18.0
(58.1)
(40.1)
202.5
(37.8)
164.7
143.6
(1.8)
141.8
114.4
256.2
10.8
(64.1)
(53.3)
202.9
18.8
221.7
47.9
212.6
54.8
276.5
189.2
23.4
212.6
253.8
22.7
276.5
37.4p
36.5p
12.7p
12.4p
50.1p
48.8p
53.0p
51.7p
52.0p
50.5p
14.3p
13.9p
66.3p
64.2p
49.4p
47.9p
Financial Statements
Consolidated statement
of comprehensive income
For the year ending 30 September 2013
Profit for the year
75
Year ending
30 September
2013
£m
Note
Year ending
30 September
2012
Restated
(Note 2)
£m
212.6
276.5
Items that will not be reclassified to Consolidated Income Statement
Actuarial gain/(loss) on defined benefit pension schemes
Tax relating to items that will not be reclassified to Consolidated Income Statement
34, 38, 39
66.5
(27.6)
(61.8)
5.6
Total items that will not be reclassified to Consolidated Income Statement
38.9
(56.2)
Items that may be reclassified subsequently to Consolidated Income Statement
Gains on hedges of net investments in foreign operations
Cash flow hedges:
38, 39
2.4
31.3
(Losses)/gains arising during the year
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
38, 39
38, 39
17, 38
38, 39
Total items that may be reclassified subsequently to Consolidated Income Statement
Other comprehensive income/(expense) for the year
Total comprehensive income for the year
Attributable to:
Owners of the Company
Non-controlling interests
(3.4)
2.2
(2.5)
(4.4)
3.1
3.6
(0.9)
(26.4)
(5.7)
10.7
33.2
(45.5)
245.8
231.0
223.3
22.5
208.4
22.6
245.8
231.0
OverviewStrategic ReportDirectors’ ReportShareholder InformationFinancial StatementsAnnual Report 2013
Annual Report 2013
76
Financial Statements
Consolidated statement of changes in equity
For the year ending 30 September 2013
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
£m
At 2 October 2011 Restated (Note 2)
49.1
12.7
1.1
3.3
(46.3)
(42.5)
Profit for the year Restated (Note 2)
Other comprehensive income for the year Restated
(Note 2)
Total comprehensive income for the year Restated
(Note 2)
Issue of share capital
Dividends
Own shares acquired in the year
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
At 30 September 2012
Profit for the year
Other comprehensive income for the year
Total comprehensive income for the year
Issue of share capital
Expenses incurred in relation to scheme of
arrangement (Note 44)
Dividends
Own shares acquired in the year
Own shares released on vesting of share options
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
Initial recording of put options granted to
non-controlling interests in subsidiaries
Corporation tax on share-based payments
Deferred tax on other items recognised in equity
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.8
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
49.1
13.5
1.1
–
–
–
–
–
–
0.1
2.8
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
At 30 September 2013
49.2
16.3
1.1
–
–
–
–
–
–
–
(3.3)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(30.1)
32.6
–
–
–
–
–
–
–
–
–
–
–
–
–
(94.6)
21.8
–
–
–
–
–
–
–
–
Non-
controlling
interests
£m
80.3
22.7
Total
£m
27.0
253.8
Total
equity
£m
107.3
276.5
49.6
253.8
9.9
(55.3)
(45.4)
(0.1)
(45.5)
9.9
198.5
208.4
22.6
231.0
–
(66.2)
–
–
3.3
–
0.8
(66.2)
(30.1)
32.6
–
–
1.5
(9.6)
–
–
–
2.3
(75.8)
(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
–
–
(1.5)
2.9
(1.5)
(69.6)
–
–
–
(69.6)
(94.6)
21.8
–
(16.1)
(16.1)
0.7
–
0.2
(0.6)
95.3
23.4
(0.9)
22.5
2.3
–
(9.1)
–
–
1.4
0.6
13.2
(15.6)
0.6
(0.6)
251.7
212.6
33.2
245.8
5.2
(1.5)
(78.7)
(94.6)
21.8
1.4
(15.5)
(0.7)
(0.7)
0.7
–
12.5
(11.0)
(3.0)
12.5
(11.0)
(3.0)
1.4
1.3
1.4
1.3
0.3
–
(1.3)
0.7
0.2
12.8
(11.0)
(4.3)
2.1
1.5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(43.8)
(32.6)
169.1
156.4
–
189.2
189.2
(4.4)
(4.4)
38.5
34.1
227.7
223.3
(116.6)
(37.0)
310.1
223.1
113.6
336.7
Financial Statements
Consolidated statement of financial position
77
At 30 September 2013
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
At
30 September
2013
£m
Note
At
30 September
2012
Restated
(Note 2)
£m
At
2 October
2011
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
731.5
325.3
208.6
5.4
134.9
50.7
2.7
11.2
21.2
170.9
1,662.4
25.2
302.8
9.5
18.9
87.9
9.1
453.4
687.1
281.4
238.1
6.8
137.3
11.5
1.5
14.6
24.6
204.7
1,607.6
28.3
328.7
3.6
8.9
104.7
71.7
545.9
746.1
288.2
305.4
21.6
16.3
13.0
4.2
30.7
8.6
200.6
1,634.7
23.1
347.4
9.1
1.1
174.3
–
555.0
2,115.8
2,153.5
2,189.7
(711.9)
(17.2)
(0.8)
(2.0)
(0.9)
(55.3)
(4.2)
(792.3)
(4.1)
(15.0)
(674.3)
(23.9)
(207.7)
(40.0)
(21.8)
(986.8)
(656.8)
(20.8)
(4.5)
(49.9)
(14.1)
(34.2)
(33.6)
(813.9)
(8.1)
(4.1)
(678.1)
(34.9)
(324.4)
(14.4)
(23.9)
(1,087.9)
(655.2)
(53.2)
(1.1)
(29.3)
(5.9)
(49.7)
–
(794.4)
(11.9)
(10.7)
(832.0)
(60.9)
(336.2)
(12.5)
(23.8)
(1,288.0)
(1,779.1)
(1,901.8)
(2,082.4)
336.7
251.7
107.3
OverviewStrategic ReportDirectors’ ReportShareholder InformationFinancial StatementsAnnual Report 2013 Annual Report 2013
78
Financial Statements
Consolidated statement of financial position
Continued
As 30 September 2013
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
At
30 September
2013
£m
Note
At
30 September
2012
Restated
(Note 2)
£m
At
2 October
2011
Restated
(Note 2)
£m
37
38
38
38
38
38
38
39
49.2
16.3
65.5
1.1
–
(116.6)
(37.0)
310.1
223.1
113.6
336.7
49.1
13.5
62.6
1.1
–
(43.8)
(32.6)
169.1
156.4
95.3
251.7
49.1
12.7
61.8
1.1
3.3
(46.3)
(42.5)
49.6
27.0
80.3
107.3
The financial statements of DMGT plc (Company number 184594) on pages 74 to 168 were approved by the Directors and authorised for
issue on 4 December 2013. They were signed on their behalf by:
Rothermere
M.W.H. Morgan
Directors
Financial Statements
Consolidated cash flow statement
For the year ending 30 September 2013
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
Negative goodwill
Loss on disposal of fixed assets
Pension curtailment
Pension charge less than cash contributions
Depreciation
Impairment of property, plant and equipment and investment property
Impairment of goodwill and intangible assets
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
Decrease/(increase) in inventories
Decrease/(increase) in trade and other receivables
Increase in trade and other payables
Increase/(decrease) in provisions
Additional payments 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
Loans advanced to joint ventures and associates
Proceeds on disposal of businesses
Proceeds on disposal of joint ventures and associates
79
Year ending
30 September
2013
£m
Year ending
30 September
2012
Restated
(Note 2)
£m
209.7
10.8
143.6
15.3
13.3
(4.4)
1.0
(3.8)
(0.4)
49.4
1.5
8.3
16.9
34.2
13.2
–
–
–
(1.3)
83.4
7.2
19.4
20.4
34.5
336.5
335.7
Note
3
18
16
4, 34
3
4, 22, 23
4, 22, 23
4, 20, 21
4, 21
4, 21
3.1
36.3
31.0
8.7
(31.1)
384.5
(38.0)
0.7
347.2
2.2
5.6
1.8
(27.7)
(66.7)
(2.1)
6.3
0.7
(64.9)
(28.7)
(4.9)
(5.7)
96.4
–
(7.6)
(9.6)
40.0
(7.2)
(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
24
9
22
21
25
16
24
17
Net cash used in investing activities
(87.7)
(12.1)
OverviewStrategic ReportDirectors’ ReportShareholder InformationFinancial StatementsAnnual Report 2013
Annual Report 2013
80
Financial Statements
Consolidated cash flow statement
Continued
For the year ending 30 September 2013
Financing activities
Purchase of additional interests 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 on exercise/settlement of subsidiary share options
Interest paid
Premium on redemption of bonds
Bonds redeemed
Loan notes repaid
Decrease in bank borrowings
Net cash used in financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Exchange loss on cash and cash equivalents
Net cash and cash equivalents at end of year
Year ending
30 September
2013
£m
Year ending
30 September
2012
Restated
(Note 2)
£m
16
12, 38
39
37, 38
39
38
10
15
15
15
15
28
15
28
(15.8)
(69.6)
(9.1)
2.9
2.3
–
(94.6)
10.9
(57.5)
–
(46.4)
(0.6)
–
(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)
(277.5)
(304.7)
(18.0)
107.3
(0.8)
88.5
(62.8)
171.7
(1.6)
107.3
Financial Statements
Notes to the accounts
81
1. Basis of preparation
DMGT is a company incorporated in the United Kingdom. The address of the registered office is given on page 179.
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 year ending 30 September 2013 (2012 year ending 30 September 2012).
Other than the Daily Mail, The Mail on Sunday, Metro and Wowcher businesses, the Group prepares accounts for a 52 week period ending
30 September. The Daily Mail, The Mail on Sunday, Metro and Wowcher businesses prepare financial statements for a 52 or 53 week
financial period ending on a Sunday near to the end of September and do not prepare additional financial statements corresponding
to the Group’s financial year for consolidation purposes as it would be impracticable to do so. The Group considers whether there have
been any significant transactions or events between the end of the financial year of these businesses and the end of the Group’s financial
year and makes any material adjustments as appropriate.
The 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 2012 Annual Report and
Accounts, with the exception of a restatement of results, described below and as amended, where appropriate, by the new accounting
standards described below.
The Group’s financial statements incorporate the financial statements of the Company and all of its subsidiaries together with the Group’s
share of all of its interests in joint ventures and associates. The financial statements have been prepared on the historical cost basis, except
for 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 24 to 27, the Strategic Report on pages 8 to 23 and pages 28 to 29.
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
In January 2013, the International Financial Reporting Standards Interpretations Committee (IFRIC) clarified the accounting treatment of
contingent consideration contained within IFRS 3, Business Combinations. Following this clarification, contingent consideration for acquired
subsidiaries, where the selling shareholders continue to be employed by the Group, but which is automatically forfeited upon termination
of employment, is now required to be classified as remuneration for post-combination services. Prior to this revised guidance, the
contingent consideration could be treated for accounting purposes as either consideration or remuneration depending on the substance
of the transaction. The Group reached an overall conclusion based on a balanced assessment of all indicators, including whether
payments were dependent on continuing employment and in two such instances determined that these amounts were consideration in
nature rather than remuneration. Nevertheless the Group has now changed its accounting policy to conform with the revised guidance,
and the full year comparatives have been restated. Since the Group considers these payments in substance to be an element of the cost
of the investment they are excluded from adjusted profit.
This change of accounting treatment has been reflected in the Group’s Consolidated Financial Statements retrospectively and the impact
on the Consolidated Income Statement for the 52 weeks ending 30 September 2012 and 2 October 2011 and Consolidated Statement
of Financial Position at 30 September 2012 and at 2 October 2011 is as follows:
OverviewStrategic ReportDirectors’ ReportShareholder InformationFinancial StatementsAnnual Report 2013 Annual Report 2013
82
Financial Statements
Notes to the accounts
Continued
2. Significant accounting policies continued
Impact on Consolidated Income Statement
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 goodwill
Increase in creditors due in less than one year
Decrease in provisions due in more than one year
Year ending
30 September
2012
£m
Year ending
2 October
2011
£m
(3.4)
(3.4)
p
(0.9)
(0.9)
–
£m
(17.5)
1.7
(14.9)
(0.7)
(0.7)
p
(0.2)
(0.2)
–
£m
(0.9)
1.0
(1.0)
Change to year end date
Following the disposal of its local media segment the Group has changed the period end date to which it prepares consolidated financial
statements from a 52 or 53 week financial period ending on a Sunday near to the end of September to a 52 week period ending on
30 September. Only the weekly cyclical businesses of the Daily Mail, The Mail on Sunday, Metro and Wowcher report to the Sunday
closest to the end of September.
For the prior period, the Daily Mail, The Mail on Sunday, Metro and Wowcher businesses financial period end coincided with that of
the Group’s remaining businesses and consequently no adjustments were necessary.
Impact of new accounting standards
Standards not affecting the reported results or the financial position:
IAS 1, Presentation of Financial Statements 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.
Standards affecting the reported results or the financial position:
IAS 19, (Revised) Employee Benefits has not been applied in these consolidated financial statements, since it is not yet effective. IAS 19
(Revised), 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 year will be reduced and accordingly other comprehensive income increased.
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
the relevant IFRS. 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.
83
Business combinations achieved in stages
Where a business combination is achieved in stages, the Group’s previously held interests in the acquired entity are remeasured to fair
value at the date the Group attains control and the resulting gain or loss is recognised in the Consolidated Income Statement. Amounts
arising from interests in the acquiree prior to the acquisition date that were recognised in other comprehensive income are reclassified
to the Consolidated Income Statement where such treatment would be appropriate if the interest were disposed of.
Purchases and sales of shares in a controlled entity
Where the Group’s interest in a controlled entity increases, the non-controlling interests’ share of net assets, excluding any allocation of
goodwill, is transferred to retained earnings. Any difference between the cost of the additional interest and the existing carrying value of
the non-controlling interests’ share of net assets is recorded in retained earnings.
Where the Group’s interest in a controlled entity decreases, but the Group retains control, the share of net assets disposed, excluding any
allocation of goodwill, is transferred to the non-controlling interests. Any difference between the proceeds of the disposal and the existing
carrying value of the net assets or liabilities transferred to the non-controlling interests is recorded in retained earnings.
Disposal of controlling interests where non-controlling interest retained
Where the Group disposes of a controlling interest but retains a non-controlling interest in the business, the Group accounts for the disposal
of a subsidiary and the subsequent acquisition of a joint venture, associate or available-for-sale investment 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 4 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 interests in the acquiree is initially measured at the non-controlling interests’ 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 4 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 interests’ 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 interests’ 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 interests 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.
OverviewStrategic ReportDirectors’ ReportShareholder InformationFinancial StatementsAnnual Report 2013 Annual Report 2013
84
Financial Statements
Notes to the accounts
Continued
2. Significant accounting policies continued
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 3
October 2010 following adoption of IAS 27, Consolidated and Separate Financial Statements (Revised 2008), the non-controlling interests’
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 interests’ share
in equity were allocated against the interests of the Group except to the extent that the non-controlling interests have a binding obligation
and is able to make an additional investment to cover such losses. When the subsidiary subsequently reports profits, the non-controlling
interests do not participate until the Group has recovered all of the losses of the non-controlling interests 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.
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 a 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 Group’s interest in that joint venture or associate are not
recognised. Additional losses are provided for, and a liability is recognised, only to the extent that the Group has incurred legal or
constructive obligations or made payments on behalf of the joint venture or associate.
Any excess of the cost of acquisition over the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities
of the joint venture or associate recognised at the date of acquisition is recognised as goodwill. The goodwill is included within the carrying
amount of the investment.
Foreign currencies
For the purpose of presenting consolidated financial statements, the assets and liabilities of entities with a functional currency other than
Sterling are translated into Sterling using exchange rates prevailing on the period end date. Income and expense items and cash flows are
translated at the average exchange rates for the period and exchange differences arising are recognised directly in equity. On disposal of
a foreign operation, the cumulative amount recognised in equity relating to that operation is recognised in the Consolidated Income
Statement as part of the gain or loss on sale.
The Group records foreign exchange differences arising on retranslation of foreign operations within the translation reserve in equity.
In preparing the financial statements of the individual entities, transactions in currencies other than the entity’s functional currency are
recorded at the exchange rate prevailing on the date of the transaction. At each period end date, monetary items denominated in
foreign currencies are retranslated at the rates prevailing on the period end date.
Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rate prevailing on the date
when fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not
retranslated.
Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are included in the
Consolidated Income Statement for the period.
Goodwill, intangible assets and fair value adjustments arising on the acquisition of foreign operations after transition to IFRS are treated as
part of the assets and liabilities of the foreign operation and are translated at the closing rate. Goodwill which arose pre-transition to IFRS is
not translated.
In respect of all foreign operations, any cumulative exchange differences that have arisen before 4 October 2004, the date of transition
to IFRS, were reset to £nil and will be excluded from the determination of any subsequent profit or loss on disposal.
85
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 4 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 CGU is less than its carrying amount, 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.
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 pre-tax discount rates used by the Group in its impairment tests range from 7.4% to 15.0%
(2012 11.3% to 30.7%), 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 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 0% and 3.0% (2012 -3.0%
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.
An impairment loss recognised for goodwill is charged immediately in the Consolidated Income Statement and is not subsequently
reversed.
Research and development expenditure
Expenditure on research activities is recognised as an expense in the period in which it is incurred. An internally-generated intangible
asset arising from the Group’s development activity, including software for internal use, is recognised only if the asset can be separately
identified, it is probable the asset will generate future economic benefits, the development cost can be measured reliably, the project is
technically feasible and the project will be completed with a view to sell or use the asset. Additionally, guidance in Standing Interpretations
Committee (SIC) 32 has been applied in accounting for internally developed website development costs.
Internally-generated intangible assets are amortised on a straight-line basis over their estimated useful lives, when the asset is available
for use, and are reported net of impairment losses. Where no internally-generated intangible asset can be recognised, development
expenditure is charged to the Consolidated Income Statement in the period in which it incurred.
Licences
Computer software licences are capitalised on the basis of the costs incurred to acquire and bring into use the specific software. These
costs are amortised over their estimated useful lives, being three to five years.
Costs that are directly associated with the production of identifiable and unique software products controlled by the Group, and that
are expected to generate economic benefits exceeding costs and directly attributable overheads are capitalised as intangible assets.
Computer software which is integral to a related item of hardware equipment is accounted for as property, plant and equipment.
Costs associated with maintaining computer software 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.
OverviewStrategic ReportDirectors’ ReportShareholder InformationFinancial StatementsAnnual Report 2013 Annual Report 2013
86
Financial Statements
Notes to the accounts
Continued
2. Significant accounting policies continued
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
Brands
Market and customer related databases
Customer relationships
Computer software licences
5 – 30 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 CGU to which the asset belongs.
If the recoverable amount of an asset or CGU is estimated to be less than its net carrying amount, the net carrying amount of the asset
or CGU is reduced to its recoverable amount. Impairment losses are recognised immediately in the Consolidated Income Statement.
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.
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
87
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 method in the national and local media divisions and the First In First Out 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 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 or over the period of the online campaign.
• Contract print revenue is recognised on completion of the print contract.
• Exhibitions, training and events revenues are recognised over the period of the event.
• Software 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.
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.
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88
Financial Statements
Notes to the accounts
Continued
2. Significant accounting policies continued
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, Borrowing Costs, all borrowing costs are recognised in the Consolidated Income Statement in the period
in which they are incurred. Finance charges, including premiums paid on settlement or redemption and direct issue costs and discounts
related to borrowings, are accounted for on an accruals basis and charged to the Consolidated Income Statement using the effective
interest method.
Retirement benefits
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 4 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 Consolidated Statement of Financial Position. Actuarial gains and losses arising in the year are
taken to the Consolidated Statement of Comprehensive Income. For this purpose, actuarial gains and losses comprise both the effects of
changes in actuarial assumptions and experience adjustments arising because of differences between the previous actuarial assumptions
and what has actually occurred. For defined benefit schemes, the cost of providing benefits is determined using the projected unit credit
method, with actuarial valuations being carried out triennially. In accordance with the advice of independent qualified actuaries in
assessing whether to recognise a surplus, the Group has regard to the principles set out in IFRIC 14.
Other movements in the net surplus or deficit are recognised in the Consolidated Income Statement, including the current service cost,
any past service cost and the effect of any curtailment or settlements. The 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.
89
Taxation
Income tax expense represents the sum of current tax and deferred tax for the year.
The current tax payable or recoverable is based on the taxable profit for the year. Taxable profit differs from profit as reported in the
Consolidated Income Statement because some items of income or expense are taxable or deductible in different years or may never
be taxable or deductible. The Group’s liability for current tax is calculated using the UK and foreign tax rates that have been enacted or
substantively enacted by the period end date.
Current tax assets and liabilities are set off and stated net in the Consolidated Statement of Financial Position when there is a legally
enforceable right to set off current tax assets against current tax liabilities and when they either relate to income taxes levied by the same
taxation authority or on the same taxable entity or on different taxable entities which intend to settle the current tax assets and liabilities
on a net basis.
Deferred tax is the tax expected to be payable or recoverable in the future arising from temporary differences between the carrying
amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit.
It is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary
differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which
deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary differences arise from the
initial recognition of goodwill or from the initial recognition other than in a business combination of other assets and liabilities in a transaction
that affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising in investments in subsidiaries, joint ventures and associates,
except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not
reverse in the foreseeable future.
Goodwill arising on business combinations also includes amounts corresponding to deferred tax liabilities recognised in respect of acquired
intangible assets. A deferred tax liability is recognised to the extent that the fair value of the assets for accounting purposes exceeds the
value of those assets for tax purposes and will form part of the associated goodwill on acquisition.
The carrying amount of deferred tax assets is reviewed at each period end date and 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 set off when there is a legally enforceable right to set off current tax assets against current tax liabilities
and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current assets and liabilities
on a net basis.
Tax is charged or credited to the Consolidated Income Statement, except when it relates to items charged or credited directly to equity,
in which case the tax is also recognised directly in equity.
Financial instruments
Financial assets and financial liabilities are recognised on the Consolidated Statement of Financial Position when the Group becomes
a party to the contractual provisions of the instrument.
Financial assets and liabilities are offset and the net amount reported in the Consolidated Statement of Financial Position when there is a
legally enforceable right to settle on a net basis, or realise the asset and liability simultaneously and where the Group intends to net settle.
Financial assets
Trade receivables
Trade receivables do not carry 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.
OverviewStrategic ReportDirectors’ ReportShareholder InformationFinancial StatementsAnnual Report 2013 Annual Report 2013
90
Financial Statements
Notes to the accounts
Continued
2. Significant accounting policies continued
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.
Onerous contract provisions are recognised for losses on contracts where the forecast costs of fulfilling the contract throughout the
contract period exceed the forecast income receivable. The provision is calculated based on cash flows to the end of the contract.
Vacant property provisions are recognised when the Group has committed to a course of action that will result in the property becoming
vacant.
Share-based payments
The Group issues equity-settled and cash-settled share-based payments to certain Directors and employees. Equity-settled share-based
payments are measured at fair value (excluding the effect of non-market based vesting conditions) at the date of grant. The fair value
determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period,
based on the Group’s estimate of the shares that will eventually vest and adjusted for the effect of non-market based vesting conditions.
Fair value is measured using a binomial pricing model which is calibrated using a Black-Scholes framework. The expected life used in the
models has been adjusted, based on management’s best estimate, for the effect of non-transferability, exercise restrictions and
behavioural considerations.
A liability equal to the portion of the goods or services received is recognised at the current fair value determined at each period end date
for cash-settled share-based payments.
The Group has applied the requirements of IFRS 2, Share-based Payments to all equity instruments granted after 7 September 2002 but not
fully vested at 4 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 CGU. The value in use calculation requires management to estimate
the future cash flows expected to arise from the CGU 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 £1,056.8 million (2012 £968.5 million, 2011 £1,034.3 million) after a net impairment charge of £8.3 million (2012 £19.4 million,
2011 £24.4 million) was recognised during the year (Notes 20 and 21).
91
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 £26.2 million
(2012 £6.6 million, 2011 £10.8 million).
Contingent consideration payable is discounted to its fair value in accordance with applicable International Financial Reporting
Standards. For acquisitions completed prior to 4 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 £0.9 million (2012 £1.2 million,
2011 £1.6 million). During the year the Group has received £6.1 million of previously unrecognised contingent consideration.
Contingent consideration receivable is discounted to its fair value in accordance with applicable International Financial Reporting
Standards.
Adjusted profit
The Group presents adjusted earnings by making adjustments for costs and profits which management believes 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 performs 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
30 September 2013 was a deficit of £207.7 million (2012 £324.4 million, 2011 £336.2 million). Further details are given in Note 34.
OverviewStrategic ReportDirectors’ ReportShareholder InformationFinancial StatementsAnnual Report 2013 Annual Report 2013
92
Financial Statements
Notes to the accounts
Continued
3. Segment analysis
The Group’s business activities are split into six operating divisions: RMS, business information, events, Euromoney, national media and local
media. These divisions are the basis on which information is reported to the Group’s Chief Operating Decision Maker, which has been
determined to be the Group Board. The segment result is the measure used for the purposes of resource allocation and assessment and
represents profit earned by each segment, including share of results from joint ventures and associates but before exceptional operating
costs, amortisation 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 12 to 21.
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 year amounted to £4.3 million (2012 £20.7 million).
Year ending 30 September 2013
External
revenue
£m
Inter-segment
revenue
£m
Note
Total revenue
£m
Segment result
£m
Operating profit
before
exceptional
operating costs,
amortisation
and impairment
of goodwill and
acquired
intangible
assets
£m
Less operating
profit/(loss) of
joint ventures
and associates
£m
1.1
0.1
–
–
9.0
–
10.2
176.5
292.6
87.0
404.7
802.0
48.9
1,811.7
56.5
54.6
21.3
119.4
94.3
18.0
364.1
(0.2)
(3.2)
–
0.4
14.0
10.8
21.8
175.4
292.5
87.0
404.7
793.0
48.9
1,801.5
(48.9)
1,752.6
RMS
Business information
Events
Euromoney
National media
Local media
Corporate costs
Discontinued operations
18
Operating profit before exceptional
operating costs, 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 results 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 year
20, 21
21
7
8
9
10
11
18
56.7
57.8
21.3
119.0
80.3
7.2
342.3
(42.6)
(7.2)
292.5
(40.3)
(8.3)
(34.2)
209.7
5.3
215.0
27.6
242.6
18.0
(58.1)
202.5
(37.8)
47.9
212.6
93
Operating profit before exceptional operating costs and amortisation and impairment of goodwill and intangible assets within the national
media division comprised £111.7 million from newspapers, a loss of £12.0 million from digital assets and unallocated divisional central costs of
£19.4 million.
Operating profit before exceptional operating costs and amortisation and impairment of goodwill and intangible assets within the national
media division included £1.2 million from operations in central Europe.
Included within corporate costs is a credit of £0.4 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.
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:
Year ending 30 September 2013
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
Note
(1.1)
(8.3)
–
(0.3)
(7.2)
–
(16.9)
–
(16.9)
–
–
(10.4)
(3.8)
(16.8)
(3.2)
–
(34.2)
–
(34.2)
–
–
–
–
–
(8.3)
–
(8.3)
–
(8.3)
–
Exceptional
operating
costs,
impairment of
investment
property and
impairment of
property,
plant and
equipment
£m
–
(0.8)
–
2.2
(25.0)
3.6
(20.0)
(1.5)
(21.5)
(3.6)
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
–
–
–
–
(14.2)
–
(14.2)
(1.0)
(15.2)
–
(5.7)
(5.9)
(0.4)
(3.9)
(17.2)
–
(33.1)
(1.1)
(34.2)
–
0.1
0.9
0.3
0.2
0.0
–
1.5
16.5
18.0
–
–
(1.4)
–
(8.3)
(0.4)
–
(10.1)
(48.0)
(58.1)
–
(16.9)
(34.2)
(8.3)
(25.1)
(15.2)
(34.2)
18.0
(58.1)
RMS
Business information
Events
Euromoney
National media
Local media
Corporate costs
Relating to discontinued
operations
Continuing operations
18
The Group’s exceptional operating costs in the business information segment of £0.8 million relate to contingent consideration required
to be treated as remuneration.
In Euromoney, exceptional charges comprise acquisition costs of £1.5 million and redundancy costs of £1.0 million offset by a credit of
£0.3 million following the release of previously accrued restructuring costs and an exceptional credit for negative goodwill of £4.4 million
the result of a gain on the bargain purchase of Quantitative Techniques following the valuation of the acquired intangibles.
In the national media segment reorganisation and restructuring charges of £19.6 million together with a charge amounting to £5.4 million
relating to contingent consideration required to be treated as remuneration.
In the local media segment the £3.6 million credit largely relates to a pension curtailment gain following the disposal of Northcliffe Media.
The Group’s tax charge includes a related credit of £3.7 million in relation to these items.
OverviewStrategic ReportDirectors’ ReportShareholder InformationFinancial StatementsAnnual Report 2013 Annual Report 2013
94
Financial Statements
Notes to the accounts
Continued
3. Segment analysis continued
Year ending 30 September 2012
RMS
Business information
Events
Euromoney
National media
Local media
Radio
Corporate costs
Discontinued operations
Operating profit before exceptional operating costs,
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 results 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 year
20, 21
21
7
8
9
10
11
18
Operating
profit before
exceptional
operating
costs,
amortisation
and
impairment of
goodwill and
acquired
intangible
assets
Restated
(Note 2)
£m
Less operating
profit/(loss)
of joint
ventures and
associates
£m
External
revenue
Inter-segment
revenue
£m
Total revenue
£m
Segment
result
£m
Note
163.2
253.2
88.8
394.1
847.5
212.7
–
1,959.5
0.3
–
–
0.1
33.4
0.1
–
33.9
163.5
253.2
88.8
394.2
880.9
212.8
–
1,993.4
55.9
47.1
21.2
112.5
81.3
26.0
9.5
353.5
(0.2)
(0.8)
0.1
0.6
3.8
–
9.5
13.0
18
(212.7)
1,746.8
56.1
47.9
21.1
111.9
77.5
26.0
–
340.5
(40.8)
(26.0)
273.7
(76.5)
(19.4)
(34.2)
143.6
(1.8)
141.8
114.4
256.2
10.8
(64.1)
202.9
18.8
54.8
276.5
Operating profit before exceptional operating costs and amortisation and impairment of goodwill and intangible assets within the national
media division comprised £109.8 million from newspapers, £3.2 million from digital and unallocated divisional central costs of £35.5 million.
Operating profit before exceptional operating costs and amortisation and impairment of goodwill and intangible assets within the national
media division included £3.9 million from operations in central Europe.
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.
95
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:
Year ending 30 September 2012
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
Note
(1.2)
(8.2)
–
(0.3)
(10.7)
–
(20.4)
–
(20.4)
–
–
(8.8)
(5.5)
(15.7)
(4.2)
(0.3)
(34.5)
–
(34.5)
0.3
–
(16.0)
–
–
(3.4)
–
(19.4)
–
(19.4)
–
Exceptional
operating
costs,
impairment of
investment
property and
impairment of
property,
plant and
equipment
Restated
(Note 2)
£m
–
(1.4)
(0.9)
(1.6)
(25.2)
(9.9)
(39.0)
(8.9)
(47.9)
9.9
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
–
–
–
(0.1)
(38.4)
(0.5)
(39.0)
–
(39.0)
0.5
(5.2)
(5.9)
(0.5)
(3.3)
(22.0)
(1.8)
(38.7)
(5.7)
(44.4)
1.8
–
0.1
1.2
0.2
0.1
–
1.6
9.2
10.8
–
–
(0.1)
–
1.0
–
–
0.9
(65.0)
(64.1)
–
(20.4)
(34.2)
(19.4)
(38.0)
(38.5)
(42.6)
10.8
(64.1)
RMS
Business information
Events
Euromoney
National media
Local media
Corporate costs
Relating to discontinued
operations
Continuing operations
18
The Group’s exceptional operating costs represent closure and reorganisation costs in the national and local media segments amounting
to £25.6 million, £2.7 million relating to contingent consideration required to be treated as remuneration 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.
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
Year ending
30 September
2013
Total
£m
740.0
1,071.7
1,811.7
Year ending
30 September
2013
Discontinued
operations
(Note 18)
£m
Year ending
30 September
2013
Inter-segment
£m
Year ending
30 September
2013
Continuing
operations
£m
Year ending
30 September
2012
Total
£m
(48.9)
–
(48.9)
–
(10.2)
(10.2)
691.1
1061.5
1,752.6
786.0
1,207.4
1,993.4
Year ending
30 September
2012
Discontinued
operations
(Note 18)
£m
(212.7)
–
(212.7)
Year ending
30 September
2012
Inter-segment
£m
Year ending
30 September
2012
Continuing
operations
£m
–
(33.9)
(33.9)
573.3
1,173.5
1,746.8
The Group includes circulation and subscriptions revenue within Sale 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.
OverviewStrategic ReportDirectors’ ReportShareholder InformationFinancial StatementsAnnual Report 2013
Annual Report 2013
96
Financial Statements
Notes to the accounts
Continued
3. Segment analysis continued
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.
Revenue is analysed by geographic area as follows:
UK
Rest of Europe
North America
Australia
Rest of the World
Year ending
30 September
2013
Total
£m
Year ending
30 September
2013
Discontinued
operations
(Note 18)
£m
Year ending
30 September
2013
Continuing
operations
£m
Year ending
30 September
2012
Total
£m
Year ending
30 September
2012
Discontinued
operations
(Note 18)
£m
Year ending
30 September
2012
Continuing
operations
£m
1,047.3
66.1
573.7
15.6
98.8
1,801.5
(48.9)
–
–
–
–
(48.9)
998.4
66.1
573.7
15.6
98.8
1,752.6
1,234.9
68.2
556.4
13.5
86.5
1,959.5
(212.7)
–
–
–
–
(212.7)
1,022.2
68.2
556.4
13.5
86.5
1,746.8
The closing net book value of goodwill, intangible assets, property, 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)
2013
£m
Closing net
book value of
goodwill
(Note 20)
Restated
(Note 2)
2012
£m
Closing net
book value of
goodwill
(Note 20)
Restated
(Note 2)
2011
£m
Closing net
book value of
intangible
assets
(Note 21)
2013
£m
Closing net
book value of
intangible
assets
(Note 21)
2012
£m
Closing net
book value of
intangible
assets
(Note 21)
2011
£m
230.3
13.2
460.2
9.6
18.2
731.5
212.2
15.3
439.8
1.5
18.3
687.1
258.1
10.5
457.2
1.5
18.8
746.1
70.9
27.0
221.5
2.0
3.9
325.3
57.8
26.7
191.2
0.7
5.0
281.4
76.3
4.7
199.8
0.8
6.6
288.2
Closing net
book value of
property,
plant and
equipment
(Note 22)
2013
£m
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
investment
property
(Note 23)
2013
£m
Closing net
book value of
investment
property
(Note 23)
2012
£m
Closing net
book value of
investment
property
(Note 23)
2011
£m
178.2
1.6
26.9
0.3
1.6
208.6
207.1
1.1
27.7
0.3
1.9
238.1
258.3
14.8
30.1
0.2
2.0
305.4
5.4
–
–
–
–
5.4
6.8
–
–
–
–
6.8
21.6
–
–
–
–
21.6
97
Goodwill
(Note 20)
Year ending
30 September
2013
£m
Goodwill
(Note 20)
Year ending
30 September
2012
Restated
(Note 2)
£m
Goodwill
(Note 20)
Year ending
2 October
2011
Restated
(Note 2)
£m
Intangible
assets
(Note 21)
Year ending
30 September
2013
£m
Intangible
assets
(Note 21)
Year ending
30 September
2012
£m
Intangible
assets
(Note 21)
Year ending
2 October
2011
£m
–
26.6
–
25.3
0.3
–
52.2
–
16.0
–
5.8
7.8
0.1
29.7
–
6.6
–
34.8
–
–
41.4
34.6
30.7
–
29.7
10.3
–
105.3
17.6
22.5
–
2.1
33.0
0.5
75.7
5.2
11.3
0.3
38.2
9.4
–
64.4
Property,
plant and
equipment
(Note 22)
Year ending
30 September
2013
£m
Property,
plant and
equipment
(Note 22)
Year ending
30 September
2012
£m
Property,
plant and
equipment
(Note 22)
Year ending
2 October
2011
£m
Investment
property
(Note 23)
Year ending
30 September
2013
£m
Investment
property
(Note 23)
Year ending
30 September
2012
£m
Investment
property
(Note 23)
Year ending
2 October
2011
£m
4.2
7.3
0.6
2.7
12.7
0.1
0.1
27.7
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
–
–
–
–
–
–
19.0
19.0
–
–
–
–
–
–
2.2
2.2
–
–
–
–
–
–
31.2
31.2
The additions to non-current assets are analysed as follows:
RMS
Business information
Events
Euromoney
National media
Local media
RMS
Business information
Events
Euromoney
National media
Local media
Centrally held
OverviewStrategic ReportDirectors’ ReportShareholder InformationFinancial StatementsAnnual Report 2013
Annual Report 2013
98
Financial Statements
Notes to the accounts
Continued
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 year
Staff costs
Pension scheme curtailments
Impairment of goodwill and 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
Note
Year ending
30 September
2013
Total
£m
1,801.5
(9.9)
6
34
20, 21
21
21
22, 23
22, 23
(141.2)
(151.1)
(632.0)
3.8
(8.3)
(34.2)
(16.9)
(87.0)
(63.5)
(159.3)
(50.6)
(68.4)
(49.4)
(1.5)
(19.9)
(36.3)
(15.2)
(1.1)
(190.1)
220.5
Year ending
30 September
2013
Discontinued
operations
(Note 18)
£m
Year ending
30 September
2013
Continuing
operations
£m
Year ending
30 September
2012
Total
Restated
(Note 2)
£m
Year ending
30 September
2012
Discontinued
operations
(Note 18)
£m
Year ending
30 September
2012
Continuing
operations
Restated
(Note 2)
£m
48.9
–
(9.2)
(9.2)
(17.7)
3.8
–
–
–
(1.3)
–
(2.1)
(3.1)
–
–
–
(0.2)
(0.9)
(0.7)
–
(6.7)
10.8
1,752.6
(9.9)
1,959.6
(6.0)
212.7
–
1,746.9
(6.0)
(132.0)
(141.9)
(614.3)
–
(8.3)
(34.2)
(16.9)
(85.7)
(63.5)
(157.2)
(47.5)
(68.4)
(49.4)
(1.5)
(19.7)
(35.4)
(14.5)
(1.1)
(183.4)
209.7
(207.7)
(213.7)
(685.0)
–
(19.4)
(34.5)
(20.4)
(96.4)
(60.1)
(165.6)
(63.9)
(62.3)
(83.4)
(7.2)
(24.2)
(42.1)
(17.2)
0.9
(206.2)
158.9
(60.8)
(60.8)
(83.0)
–
–
(0.3)
–
(5.4)
–
(8.3)
(13.6)
–
(11.1)
–
(2.5)
(4.5)
(3.1)
–
(4.8)
15.3
(146.9)
(152.9)
(602.0)
–
(19.4)
(34.2)
(20.4)
(91.0)
(60.1)
(157.3)
(50.3)
(62.3)
(72.3)
(7.2)
(21.7)
(37.6)
(14.1)
0.9
(201.4)
143.6
99
Year ending
30 September
2013
£m
Year ending
30 September
2012
£m
0.4
2.2
2.6
0.2
0.3
–
0.3
0.8
3.4
0.4
2.0
2.4
0.3
0.2
0.1
0.2
0.8
3.2
5. Auditor’s remuneration
Fees payable to the Company’s auditor for the audit of the Company’s annual accounts
Fees payable to the Company’s auditor and its 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
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
DMGT Board and head office
Total staff costs comprised:
Wages and salaries
Share-based payments
Social security costs
Pension costs
Year ending
30 September
2013
Number
Year ending
30 September
2012
Number
1,197
1,971
339
2,324
3,542
735
97
10,205
1,064
1,675
410
2,263
4,235
2,395
88
12,130
Year ending
30 September
2013
£m
Year ending
30 September
2012
£m
543.6
13.9
56.3
18.2
632.0
593.6
13.2
57.9
20.3
685.0
Note
41
34, (i)
(i)
Pension costs are stated before curtailment gains and the expected return on pension scheme assets less interest on pension scheme
liabilities.
OverviewStrategic ReportDirectors’ ReportShareholder InformationFinancial StatementsAnnual Report 2013 Annual Report 2013
100
Financial Statements
Notes to the accounts
Continued
7. Share of results of joint ventures and associates
Share of profits from operations of joint ventures
Share of profits from operations of associates
Share of operating profits from joint ventures and associates (before exceptional operating costs,
amortisation, impairment of goodwill, interest and tax)
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 joint ventures’ interest receivable
Share of associates’ interest payable
Share of joint ventures’ tax
Share of associates’ tax
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
Impairment of carrying value of joint venture
Impairment of carrying value of associates
Share of results of joint ventures and associates
Year ending
30 September
2013
£m
Note
Year ending
30 September
2012
Restated
(Note 2)
£m
13.6
8.2
21.8
–
(0.6)
(3.2)
(2.4)
0.2
(0.6)
(1.5)
(0.9)
(7.2)
(0.3)
5.3
9.1
3.7
(7.2)
(0.3)
5.3
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)
(1.8)
13, 24, (i)
13, 24, (ii)
13, 24, (i)
13, 24, (ii)
(i) Represents a £5.5 million write down in the carrying value of The Sanborn Map Company in the business information segment together
with a £1.7 million write down in the value of Mail Today in the national media segment.
(ii) Represents a write down in the carrying value of the Group’s investment in Posvanete AD in the national media segment. In the prior
year represents a write down in the carrying value of Social Metrix in the national media segment.
8. Other gains and losses
Loss 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
Recycled cumulative translation differences
Note
(i)
25
13
13, 17, (ii)
13, 17, 38, (ii)
Year ending
30 September
2013
£m
Year ending
30 September
2012
£m
–
–
1.4
23.7
2.5
27.6
(0.6)
(0.3)
2.0
113.3
–
114.4
(i)
In the prior year represents the loss on disposal of the Group’s investment in Herald Ventures.
(ii) Largely represented by the profit on sale of Central and Eastern European print and digital assets by the national media segment
amounting to £14.5 million together with proceeds from previously unrecognised deferred consideration following the sale of North
American home shows of £6.2 million in the events segment. In the prior year 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.
There is a tax charge of £nil (2012 £11.8 million) in relation to these items.
101
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
Fair value movement of undesignated financial instruments
Change in fair value of acquisition put options
Note
34
Year ending
30 September
2013
£m
Year ending
30 September
2012
£m
14.9
1.8
1.3
18.0
8.5
0.8
1.5
10.8
Year ending
30 September
2013
£m
Year ending
30 September
2012
£m
(57.1)
–
(6.6)
6.6
0.6
(1.1)
(5.0)
7.4
(2.9)
(58.1)
(59.5)
(6.1)
2.2
(2.2)
(0.4)
(0.3)
0.2
–
2.0
(64.1)
Note
(i)
35
13, 35
13
13, 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)
In the prior year the Group bought back £110.0 million of its 7.5% bonds due 2013, incurring a premium of £6.1 million.
11. Tax
The (charge)/credit on the profit for the year consists of:
UK tax
Corporation tax at 23.5% (2012 25.0%)
Adjustments in respect of prior years
Overseas tax
Corporation tax
Adjustments in respect of prior years
Total current tax
Deferred tax
Origination and reversals of temporary differences
Adjustments in respect of prior years
Total deferred tax
Total tax (charge)/credit
Relating to discontinued operations
Year ending
30 September
2013
£m
Year ending
30 September
2012
£m
Note
(7.2)
(1.5)
(8.7)
(19.7)
(0.6)
(20.3)
(29.0)
(3.2)
(2.2)
(5.4)
(34.4)
(3.4)
(37.8)
(4.3)
43.0
38.7
(31.9)
(12.4)
(44.3)
(5.6)
(24.0)
39.1
15.1
9.5
9.3
18.8
36
18
OverviewStrategic ReportDirectors’ ReportShareholder InformationFinancial StatementsAnnual Report 2013 Annual Report 2013
102
Financial Statements
Notes to the accounts
Continued
11. Tax continued
A deferred tax charge of £27.6 million (2012 credit £5.6 million) was recognised directly in the Consolidated Statement of Comprehensive
Income. A deferred tax credit of £1.5 million (2012 charge £0.6 million) and a current tax credit of £2.1 million (2012 credit £0.6 million) was
recognised directly in equity.
The tax charge for the year is lower than the standard rate of corporation tax in the UK of 23.5% (2012 25.0%) 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 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 (charge)/credit on the profit for the year
Year ending
30 September
2013
£m
Note
Year ending
30 September
2012
Restated
(Note 2)
£m
202.5
44.5
247.0
(58.0)
(4.7)
(4.2)
20.3
10.8
(8.0)
3.0
(8.2)
22.8
(5.0)
(4.3)
1.1
(34.4)
202.9
64.1
267.0
(67.6)
(6.3)
(6.3)
23.5
0.4
(14.6)
1.4
(15.2)
31.3
(6.3)
69.7
(0.5)
9.5
13
The net prior year charge of £4.3 million (2012 credit £69.7 million), arose largely from the agreement of certain prior year issues with tax
authorities and a reassessment of the level of tax provisions required, and a reassessment of temporary differences.
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 £51.8 million (2012 £39.0 million) and the resulting rate is 18.4% (2012 15.2%). The differences between the
tax credit and the adjusted tax charge are shown in the reconciliation below:
Total tax (charge)/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
Year ending
30 September
2013
£m
Year ending
30 September
2012
£m
Note
(34.4)
(6.9)
–
(10.5)
(51.8)
9.5
(2.8)
(41.6)
(4.1)
(39.0)
13
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 net charge of £0.8 million (2012 £1.9 million) relating to the derecognition of further tax losses and
the reassessment of other temporary differences which are treated as exceptional due to their material impact on the Group’s adjusted
tax charge.
103
12. Dividends paid
Amounts recognisable as distributions to equity holders in the year
Ordinary shares – final dividend for the year ended 30 September 2012
A Ordinary Non-Voting Shares – final dividend for the year ended 30 September 2012
Ordinary shares – final dividend for the year ended 2 October 2011
A Ordinary Non-Voting Shares – final dividend for the year ended 2 October 2011
Ordinary shares – interim dividend for the year ended 30 September 2013
A Ordinary Non-Voting Shares – interim dividend for the year ended 30 September 2013
Ordinary shares – interim dividend for the year ended 30 September 2012
A Ordinary Non-Voting Shares – interim dividend for the year ended 30 September 2012
Year ending
30 September
2013
Pence per
share
Year ending
30 September
2013
£m
Year ending
30 September
2012
Pence per
share
Year ending
30 September
2012
£m
12.4
12.4
–
–
5.9
5.9
–
–
2.5
45.0
–
–
47.5
1.2
20.9
–
–
22.1
69.6
–
–
11.7
11.7
–
–
5.6
5.6
–
–
2.5
42.3
44.8
–
–
1.1
20.3
21.4
66.2
The Board has declared a final dividend of 13.3p per Ordinary/A Ordinary Non-Voting Share (2012 12.4p) which will absorb an estimated
£49.6 million (£47.5 million) of Shareholders’ funds for which no liability has been recognised in these financial statements. It will be paid on
7 February 2014 to Shareholders on the register at the close of business on 29 November 2013.
OverviewStrategic ReportDirectors’ ReportShareholder InformationFinancial StatementsAnnual Report 2013 Annual Report 2013
104
Financial Statements
Notes to the accounts
Continued
13. Adjusted profit and adjusted earnings before interest, tax, depreciation and amortisation (EBITDA)
Year ending
30 September
2013
£m
Note
Year ending
30 September
2012
Restated
(Note 2)
£m
Profit before tax – continuing operations
Profit before tax – discontinued operations
Profit on disposal of discontinued operations
Add back:
Amortisation of intangible assets in Group profit from operations arising on business combinations
– continuing operations
Amortisation of intangible assets in Group profit from operations 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 – continuing operations
Exceptional operating costs, impairment of internally generated and acquired computer software, investment
property and property, plant and equipment – continuing operations
Exceptional operating (gains)/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
Impairment of carrying value of associate – continuing operations
Impairment of carrying value of associate – discontinued operations
Other gains and losses:
Loss on disposal of available-for-sale investments
Profit on disposal of property, plant and equipment
Amounts provided against contingent consideration receivable on disposal
Profit on disposal of businesses and recycled cumulative translation differences
Impairment of available-for-sale assets
Loss on disposal of businesses – discontinued operations
Finance costs:
Fair value movement of undesignated financial instruments
Change in fair value of acquisition put options
Fair value movement of contingent consideration
Tax:
Share of tax in joint ventures and associates – continuing operations
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 (charge)/credit on the profit for the year
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
3
18
18
3
18
7
18
3
3
18
7
7
18
8
8
8
8
8
18
10
10
10
18
18
11
11
11
11
202.5
10.8
33.7
202.9
21.1
43.0
34.2
34.2
–
5.6
–
8.3
40.3
0.3
1.5
3.2
19.4
76.5
(3.6)
10.4
–
0.6
7.2
0.3
–
–
(1.4)
–
(26.2)
–
–
(7.4)
2.9
5.0
2.4
–
(33.7)
281.5
(34.4)
(6.9)
–
(10.5)
(29.6)
200.1
1.9
0.5
–
1.3
0.3
0.6
(2.0)
–
(113.3)
0.3
0.1
–
(2.0)
(0.2)
–
(1.6)
(43.0)
255.4
9.5
(2.8)
(41.6)
(4.1)
(27.3)
189.1
The adjusted non-controlling interests’ share of profits for the year of £29.6 million (2012 £27.3 million) is stated after eliminating a credit of
£6.2 million (2012 £4.6 million), being the non-controlling interests’ share of adjusting items.
105
Earnings before interest, depreciation, amortisation and exceptional items (EBITDA)
The Group defines EBITDA as adjusted operating profit before exceptional operating costs, amortisation and impairment of goodwill and
acquired intangible assets, depreciation and impairment of property, plant and equipment. EBITDA is broadly used by analysts, rating
agencies, investors and the Group’s banks to assess the Group’s performance. A reconciliation of EBITDA from operating profit is shown
below and the ratio of net debt to EBITDA is disclosed in Note 33:
Continuing operations
Operating profit before exceptional operating costs and amortisation and impairment
of goodwill and acquired intangible assets
Non exceptional depreciation charge
Amortisation of internally generated and acquired computer software
Operating profits from joint ventures and associates
Dividend income
Discontinued operations
Operating profit before exceptional operating costs and amortisation and impairment
of goodwill and acquired intangible assets
Non exceptional depreciation charge
Share of profits from operations of joint ventures
EBITDA
Year ending
30 September
2013
£m
Year ending
30 September
2012
£m
292.5
273.7
34.2
16.9
21.8
1.8
42.6
20.4
3.5
0.8
7.2
26.0
–
–
374.4
1.8
9.5
378.3
14. Earnings per share
Basic earnings per share of 50.1p (2012 66.3p) and diluted earnings per share of 48.8p (2012 64.2p) are calculated, in accordance with
IAS 33, Earnings per share, on Group profit for the financial year of £141.3 million (2012 £199.0 million) as adjusted for the effect of dilutive
Ordinary Shares of £0.3 million (2012 £0.6 million) and earnings from discontinued operations of £47.9 million (2012 £54.8 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 53.0p (2012 49.4p)
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 £200.1 million (2012 £189.1 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
Year ending
30 September
2013
Diluted
earnings
£m
Year ending
30 September
2012
Diluted
earnings
Restated
(Note 2)
£m
Year ending
30 September
2013
Basic earnings
£m
Year ending
30 September
2012
Basic earnings
Restated
(Note 2)
£m
141.3
(0.3)
47.9
188.9
199.0
(0.6)
54.8
253.2
141.3
–
47.9
189.2
199.0
–
54.8
253.8
Year ending
30 September
2013
Diluted
pence
per share
Year ending
30 September
2012
Diluted
pence
per share
Restated
(Note 2)
Year ending
30 September
2013
Basic
pence
per share
Year ending
30 September
2012
Basic
pence
per share
Restated
(Note 2)
36.5
(0.1)
12.4
48.8
50.5
(0.2)
13.9
64.2
37.4
–
12.7
50.1
52.0
–
14.3
66.3
OverviewStrategic ReportDirectors’ ReportShareholder InformationFinancial StatementsAnnual Report 2013 Annual Report 2013
106
Financial Statements
Notes to the accounts
Continued
14. Earnings per share continued
Adjusted earnings per share
Profit before tax – continuing operations
Effect of dilutive Ordinary Shares
Profit before tax – discontinued operations
Profit on disposal of discontinued operations
Add back:
Amortisation of intangible assets in Group profit from operations arising on business
combinations – continuing operations
Amortisation of intangible assets in Group profit from operations 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
– continuing operations
Exceptional operating costs, impairment of internally generated and acquired computer
software, investment property and property, plant and equipment – continuing operations
Exceptional operating (gains)/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
Impairment of carrying value of associate – continuing operations
Impairment of carrying value of associate – discontinued operations
Other gains and losses:
Loss on disposal of available-for-sale investments
Profit on disposal of property, plant and equipment
Profit on disposal of businesses and recycled cumulative translation differences
Impairment of available-for-sale assets
Finance costs:
Fair value movement of undesignated financial instruments
Change in fair value of acquisition put options
Fair value movement of contingent consideration
Tax:
Share of tax in joint ventures and associates – continuing operations
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 (charge)/credit on the profit for the year
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
Year ending
30 September
2013
Diluted
pence
per share
Year ending
30 September
2012
Diluted
pence
per share
Restated
(Note 2)
Year ending
30 September
2013
Basic
pence
per share
Year ending
30 September
2012
Basic
pence
per share
Restated
(Note 2)
52.4
(0.1)
2.8
8.7
8.8
–
1.4
–
2.2
51.5
(0.2)
5.4
10.9
8.7
0.1
0.4
0.8
4.9
53.6
–
2.9
8.9
9.1
–
1.5
–
2.2
53.0
–
5.5
11.2
8.9
0.1
0.4
0.8
5.1
10.4
19.5
10.7
20.0
(0.9)
2.6
(1.0)
2.7
–
0.2
1.9
0.1
–
–
(0.4)
(6.8)
–
(1.9)
0.7
1.3
0.6
–
(8.6)
72.8
(8.9)
(1.8)
–
(2.7)
(7.7)
51.7
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
–
0.2
1.9
0.1
–
–
(0.4)
(6.9)
–
(2.0)
0.8
1.3
0.6
–
(8.9)
74.6
(9.1)
(1.8)
–
(2.8)
(7.9)
53.0
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
107
The weighted average number of Ordinary Shares in issue during the year 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
Debt due within one year
Bonds
Loan notes
Debt due after one year
Bonds
Net debt before effect of derivatives
Effect of derivatives on debt
Net debt
Year ending
30 September
2013
Number
m
Year ending
30 September
2012
Number
m
393.3
(15.8)
377.5
9.3
386.8
392.7
(9.9)
382.8
10.9
393.7
At
30 September
2012
£m
Fair value
hedging
adjustments
£m
Foreign
exchange
movements
£m
Cash flow
£m
Other
non-cash
movements
(ii)
£m
At
30 September
2013
£m
107.3
(18.0)
(47.3)
(2.6)
(678.1)
(620.7)
7.7
(613.0)
46.4
0.6
–
29.0
(29.2)
(0.2)
–
–
–
6.6
6.6
(6.6)
–
(0.8)
–
88.5
–
–
–
(0.8)
42.9
42.1
0.9
–
(2.8)
(1.9)
–
(1.9)
–
(2.0)
(674.3)
(587.8)
14.8
(573.0)
Note
28
32
32
32
(i)
(i) The effect of derivatives on debt is the net currency gain or loss on derivatives entered into with the intention of economically converting
the currency of borrowings into an alternative currency.
(ii) Other non-cash movements comprise the unwinding of the issue discount amounting to £1.6 million (2012 £1.4 million) and amortisation
of issue costs of £0.3 million (2012 £0.2 million).
The net cash outflow of £18.0 million (2012 £62.8 million) includes a cash outflow of £21.5 million (2012 £40.5 million) in respect of operating
exceptional items.
16. Summary of the effects of acquisitions
In December 2012, the business information segment acquired FirstSearch, a provider of environmental reports.
Provisional fair value of net assets acquired with FirstSearch:
Goodwill
Intangible assets
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Deferred tax
Net assets acquired
Provisional fair
value
adjustments
£m
Provisional fair
value
£m
Book value
£m
–
–
0.7
0.1
(0.2)
–
0.6
16.1
7.6
–
–
–
(1.8)
21.9
16.1
7.6
0.7
0.1
(0.2)
(1.8)
22.5
OverviewStrategic ReportDirectors’ ReportShareholder InformationFinancial StatementsAnnual Report 2013 Annual Report 2013
108
Financial Statements
Notes to the accounts
Continued
16. Summary of the effects of acquisitions continued
Cost of acquisition:
Cash
Total consideration at fair value
Cash paid in
current period
£m
22.5
22.5
FirstSearch contributed £3.8 million to the Group’s revenue, £3.0 million to the Group’s operating profit and £3.0 million to the Group’s profit
before tax for the year between the date of acquisition and 30 September 2013.
If the above acquisition had been completed on the first day of the financial year, FirstSearch would have contributed £5.1 million to the
Group’s revenue for the year and £3.4 million to the Group’s profit before tax for the year.
In March 2013, Euromoney acquired Insider Publishing Limited, a provider of international insurance and reinsurance.
Provisional fair value of net assets acquired with Insider Publishing Limited:
Goodwill
Intangible assets
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
Provisional fair
value
adjustments
£m
Provisional fair
value
£m
Book value
£m
–
–
0.6
3.5
(2.8)
–
1.3
15.3
10.7
–
–
–
(2.3)
23.7
15.3
10.7
0.6
3.5
(2.8)
(2.3)
25.0
Cash paid in
current period
£m
8.3
16.7
25.0
Insider Publishing Limited contributed £3.1 million to the Group’s revenue, £1.5 million to the Group’s operating profit and £2.4 million to the
Group’s profit before tax for the period between the date of acquisition and 30 September 2013.
If the above acquisition had been completed on the first day of the financial year, Insider Publishing Limited would have contributed
£5.3 million to the Group’s revenue for the year and £2.1 million to the Group’s adjusted profit before tax for the year.
109
Goodwill
arising
£m
2.9
A summary of notable acquisitions completed during the year is as follows:
Name of acquisition
Segment
TTI Technologies, LLC
Euromoney
Insider Publishing Limited Euromoney 100.00%
Centre for Investor
Education Pty
Euromoney
Beat the GMAT, LLC
Renaissance
Environment Limited
Excido Pty Limited
(Edumate)
FirstSearch
Vessel Tracker
Business
information
Business
information
Business
information
Business
information
Business
information
% voting
rights
acquired
Date of acquisition
Business description
Consideration
£m
Intangible
fixed assets
acquired
£m
75.00%
April 2013
March 2013
87.20% December 2012 Private membership organisation for
executives leading technology
innovation in global businesses
International insurance and
reinsurance
Provider of strategic investment
forums for the pension and
investment industry
Forum for on line business school
applicants
Environmental risk management
service provider
Provider of an on line student
learning and management system
Provider of environmental reports
February 2013
100.00% October 2012
100.00% November 2012
100.00% December 2012
100.00%
100.00%
April 2013
Provider of marine vessel tracking
data
5.1
2.9
25.0
10.7
15.3
10.3
5.2
7.1
1.6
0.9
3.8
22.5
6.1
0.6
0.3
2.0
7.6
2.5
1.2
0.6
2.4
16.1
4.1
Provisional fair value of net assets acquired with all acquisitions:
Goodwill
Intangible assets
Property, plant and equipment
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Corporation tax
Deferred tax
Net assets acquired
Non-controlling interest share of net assets acquired
Group share of net assets acquired
Note
20, (i)
21
22
36
39
Provisional fair
value
adjustments
£m
Provisional fair
value
£m
Book value
£m
–
–
0.1
4.1
7.0
(10.6)
(0.3)
–
0.3
52.2
38.6
–
–
–
–
–
(5.5)
85.3
52.2
38.6
0.1
4.1
7.0
(10.6)
(0.3)
(5.5)
85.6
(1.4)
84.2
OverviewStrategic ReportDirectors’ ReportShareholder InformationFinancial StatementsAnnual Report 2013 Annual Report 2013
110
Financial Statements
Notes to the accounts
Continued
16. Summary of the effects of acquisitions continued
Cost of acquisitions:
Contingent consideration
Cash
Negative goodwill
Total consideration at fair value
Note
35, (ii)
Non-cash
£m
Cash paid in
current period
£m
14.8
–
4.4
19.2
–
65.0
–
65.0
Total
£m
14.8
65.0
4.4
84.2
(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 £26.8 million. Certain contingent consideration arrangements are not capped since they are based on
future business performance (Note 35).
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 year, Group revenues for the year would have been £1,760.3 million
and Group profit attributable to equity holders of the parent would have been £192.9 million. This information takes into account the
amortisation of acquired intangible assets together with related income tax effects but excludes any pre-acquisition finance costs and
should not be viewed as indicative of the results of operations that would have occurred if the acquisitions had actually been completed
on the first day of the financial year.
Total profits attributable to equity holders of the parent since the date of acquisition for companies acquired during the year amounted to
£3.3 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
Year ending
30 September
2013
£m
Year ending
30 September
2012
£m
15.8
14.8
During the year, the Group acquired additional shares in controlled entities amounting to £15.8 million (2012 £14.8 million). In addition,
the Group opted to receive a scrip dividend from Euromoney Institutional Investor PLC (Euromoney) amounting to £nil (2012 £16.0 million)
thereby acquiring a further 0% (2012 0.6%) 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 year was a charge
of £16.1 million (2012 £13.5 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
Note
35
Year ending
30 September
2013
£m
Year ending
30 September
2012
£m
65.0
6.9
(7.0)
64.9
47.7
7.7
(6.6)
48.8
Cash paid in respect of contingent consideration relating to prior year acquisitions includes £1.4 million within business information and
£2.6 million within Euromoney.
The businesses acquired during the year absorbed £5.6 million of the Group’s net operating cash flows, £nil attributable to investing and
£nil attributable to financing activities.
111
17. Summary of the effects of disposals
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 combined the Group’s local media titles with those of Iliffe News and Media Limited. The Group received consideration of
£52.5 million and a 38.7% share in Local World together with a working capital adjustment of £16.4 million.
The net assets disposed were as follows:
Goodwill
Intangible assets
Property, plant and equipment
Trade and other receivables
Trade and other payables
Deferred tax
Net assets disposed
Profit on sale of businesses
Satisfied by:
Cash received
Cash received re working capital adjustment
Fair value of 38.7% investment in Local World
Provision for directly attributable costs
Directly attributable costs paid
£m
6.0
3.5
6.5
23.7
(8.7)
(0.2)
30.8
33.7
64.5
52.5
16.4
27.5
(18.1)
(13.8)
64.5
During the year the local media segment absorbed £7.9 million of the Group’s net operating cash flows, paid £nil in respect of investing
activities and paid £nil in respect of financing activities.
A summary of other notable disposals completed during the year were as follows:
Name of disposal
Segment
Central and Eastern European print and digital businesses
National media
Date of disposal
November 2012
Fair value of consideration
£m
37.2
OverviewStrategic ReportDirectors’ ReportShareholder InformationFinancial StatementsAnnual Report 2013 Annual Report 2013
112
Financial Statements
Notes to the accounts
Continued
17. Summary of the effects of disposals continued
The impact of all disposals of businesses on net assets was:
Goodwill
Intangible assets
Property, plant and equipment
Interests in joint ventures
Interests in associates
Inventories
Trade and other receivables
Cash at bank and in hand
Trade and other payables
Provisions
Deferred tax
Net assets disposed
Profit on disposal of discontinued operations
Profit on disposal of businesses
Satisfied by:
Cash received
Cash received re working capital adjustment
Directly attributable costs paid
Fair value of 38.7% investment in Local World
Recycled cumulative translation differences
Provision for directly attributable costs
Prior year
assets held for
sale disposed
in current year
Adjustment on
sale
Other current
year disposals
12.2
3.8
17.7
1.1
0.4
0.6
26.9
2.6
(31.4)
(2.2)
6.4
38.1
–
–
–
–
–
–
–
–
16.4
2.2
–
18.6
0.4
0.2
0.3
–
0.1
0.2
–
(1.4)
(0.4)
–
(6.5)
(7.1)
Note
19, 20
19, 21
19, 22
19, 24
19, 24
19, 36
18
8
38
Total
12.6
4.0
18.0
1.1
0.5
0.8
26.9
1.2
(15.4)
–
(0.1)
49.6
33.7
26.2
109.5
97.2
16.4
(16.0)
27.5
2.5
(18.1)
109.5
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
Year ending
30 September
2013
£m
Year ending
30 September
2012
£m
97.6
–
(1.2)
96.4
45.9
12.3
(0.6)
57.6
The Group’s tax charge includes £0.2 million (2012 £11.8 million) in relation to these disposals.
In addition, the Group’s interest in Euromoney was diluted during the year by 0.2% (2012 0.1%). 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 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 year was a charge of £0.7 million (2012 credit £0.1 million).
All of the businesses disposed of during the year absorbed £9.2 million of the Group’s net operating cash flows, had £nil attributable
to investing and £nil attributable to financing activities.
113
18. Discontinued operations
In August 2012 the Group disposed of its 50.0% joint venture investment in dmg Radio Investments Pty Ltd for proceeds of A$86.2 million
(£56.1 million). This business was one of the Group’s operating segments and represented the only operation in the radio segment.
In November 2012 the Group announced that it had reached an 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 received consideration
of £52.5 million and a 38.7% share in Local World together with a working capital adjustment of £16.4 million.
The Group’s Consolidated Income Statement includes the following results from these discontinued operations:
Revenue
Expenses
Depreciation
Operating profit before exceptional operating costs and amortisation and impairment of goodwill and
intangible assets
Exceptional operating income/(costs)
Amortisation of intangible assets
Operating profit 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
Other gains and losses
Profit before tax
Tax charge
Profit after tax attributable to discontinued operations
Profit on disposal of discontinued operations
Tax credit on profit on disposal of discontinued operations
Profit attributable to discontinued operations
Year ending
30 September
2013
£m
Year ending
30 September
2012
£m
48.9
(41.7)
–
7.2
3.6
–
10.8
–
–
–
–
–
10.8
–
10.8
(1.5)
9.3
33.7
4.9
47.9
212.7
(184.9)
(1.8)
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
Note
3
3
3, 13
13
13
13
13
13
11
13, 17
11
Cash flows associated with discontinued operations comprises operating cash flows of £7.9 million (2012 £27.8 million), investing cash flows of
£nil (2012 £nil) and financing cash flows of £nil (2012 £nil).
OverviewStrategic ReportDirectors’ ReportShareholder InformationFinancial StatementsAnnual Report 2013
Annual Report 2013
114
Financial Statements
Notes to the accounts
Continued
19. Total assets and liabilities of businesses held-for-sale
The Group has agreed to dispose certain businesses in the national newspaper segment. 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.
In November 2012 the Group announced it had reached an 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. In addition, several of the
Group’s Central European businesses were sold following 30 September 2012. Accordingly the assets and liabilities of these businesses
were disclosed separately on the face of the Consolidated Statement of Financial Position in the prior year.
Goodwill
Intangible assets
Deferred tax
Property, plant and equipment
Interests in joint ventures
Interests in associates
Inventories
Trade and other receivables
Cash and cash equivalents
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
Year ending
30 September
2013
£m
Year ending
30 September
2012
£m
Note
20
21
36
22
24
24
26
27
28
29
35
4.6
–
–
1.9
–
–
–
2.0
0.6
12.2
3.8
6.4
17.7
1.1
0.4
0.6
26.9
2.6
9.1
71.7
4.0
0.2
31.4
2.2
4.2
33.6
4.9
38.1
20. Goodwill
Cost
At 2 October 2011 Restated (Note 2)
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 30 September 2012 Restated (Note 2)
Additions
Adjustment to previous year estimate of contingent consideration
Disposals
Classified as held-for-sale
Exchange adjustment
At 30 September 2013
Accumulated impairment losses
At 2 October 2011 Restated (Note 2)
Impairment
Disposals
Classified as held-for-sale
Exchange adjustment
At 30 September 2012 Restated (Note 2)
Impairment
Disposals
Classified as held-for-sale
At 30 September 2013
Net book value – 2011 Restated (Note 2)
Net book value – 2012 Restated (Note 2)
Net book value – 2013
115
Note
£m
999.0
29.7
1.1
0.6
(121.7)
(142.4)
(14.3)
752.0
52.2
0.4
(0.5)
(5.0)
(2.8)
796.3
35
19
16
35
17
19
Note
£m
3
19
3
17
19
252.9
16.4
(73.8)
(130.2)
(0.4)
64.9
0.4
(0.1)
(0.4)
64.8
746.1
687.1
731.5
OverviewStrategic ReportDirectors’ ReportShareholder InformationFinancial StatementsAnnual Report 2013
Annual Report 2013
116
Financial Statements
Notes to the accounts
Continued
20. Goodwill continued
Goodwill impairment losses recognised in the year amounted to £0.4 million (2012 £16.4 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.
Genscape has a carrying value of £76.2 million (2012 £72.6 million) together with intangible assets with a carrying value of £28.5 million
(2012 £25.6 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 2013. The Directors believe these to be reasonably achievable.
(i) Subsequent cash flows for one additional year increased in line with growth expectations of the business.
(iii) A discount rate of 12.5%.
(iv) Long-term nominal growth rates of 3.0%.
Using the above methodology the recoverable amount exceeded the total carrying value by £75.6 million (2012 £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 the discount rate would need to be increased by 5.36% (2012 1.60%) or the long-term growth rate would need to be
reduced by 6.82% (2012 2.30%).
BCA has a carrying value of £142.8 million (2012 £143.2 million) together with intangible assets with a carrying value of £57.3 million (2012
£62.8 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 2013. 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 7.6%.
(iv) Long-term nominal growth rates of 0%.
Using the above methodology the recoverable amount exceeded the total carrying value by £109.0 million (2012 £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 the discount rate would need to be increased by 9.3% (2012 10.2%) or the long-term growth rate would need to be
reduced by 24.8% (2012 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 2 October 2011
Exchange adjustment
At 30 September 2012
Exchange adjustment
At 30 September 2013
Metal Bulletin
plc
£m
204.3
(5.2)
199.1
(0.4)
198.7
117
Metal Bulletin
plc
£m
2.8
201.5
196.3
195.9
Accumulated impairment losses
At 2 October 2011, 30 September 2012 and 30 September 2013
Net book value – 2011
Net book value – 2012
Net book value – 2013
The impairment charge is analysed by major CGU as follows:
CGU
Villarenters
Various
Total
Segment
National
media
National
media
Goodwill
impairment
£m
Intangible
asset
impairment
£m
0.4
–
0.4
–
7.9
7.9
2013
Discount
rate
%
9.5%
2012
Discount
rate
%
Reason for impairment charge
9.5%
Transferred to assets held for sale
n/a
n/a
Computer software and related IT
assets no longer in use
Recoverable amounts have been determined using value in use calculations for all of the above CGUs.
21. Other intangible assets
Cost
At 2 October 2011
Additions
Internally generated
Disposals
Classified as held-for-sale
Exchange adjustment
At 30 September 2012
Analysis reclassifications
Additions
Internally generated
Disposals
Exchange adjustment
At 30 September 2013
Publishing
rights,
mastheads
and titles
£m
Note
433.3
–
–
–
(137.6)
(5.5)
290.2
(39.1)
0.2
–
(0.4)
(0.3)
250.6
19
(i)
16
(ii)
17
Customer
related
databases
£m
Computer
software
(Note i)
£m
Other
£m
Total
£m
169.8
22.6
–
(17.7)
(37.6)
(3.5)
133.6
42.7
23.3
–
(3.2)
(0.5)
195.9
124.9
7.4
37.8
(10.6)
–
(2.8)
156.7
1.2
4.5
66.7
(16.0)
(5.9)
207.2
3.3
4.3
–
–
(0.5)
(0.2)
6.9
0.1
–
–
(0.2)
0.1
6.9
884.7
37.9
37.8
(93.2)
(176.0)
(15.1)
676.1
–
38.6
66.7
(20.0)
(7.5)
753.9
Brands
£m
153.4
3.6
–
(64.9)
(0.3)
(3.1)
88.7
(4.9)
10.6
–
(0.2)
(0.9)
93.3
OverviewStrategic ReportDirectors’ ReportShareholder InformationFinancial StatementsAnnual Report 2013 Annual Report 2013
118
Financial Statements
Notes to the accounts
Continued
21. Other intangible assets continued
Accumulated amortisation
At 2 October 2011
Charge for the year
Impairment
Disposals
Classified as held-for-sale
Exchange adjustment
At 30 September 2012
Analysis reclassifications
Charge for the year
Impairment
Disposals
Exchange adjustment
At 30 September 2013
Net book value – 2011
Net book value – 2012
Net book value – 2013
Publishing
rights,
mastheads
and titles
£m
Note
3
19
(i)
3
3
17
311.0
12.6
–
–
(137.2)
(2.5)
183.9
(25.5)
2.3
–
(0.4)
(0.2)
160.1
122.3
106.3
90.5
Customer
related
databases
£m
Computer
software
(Note i)
£m
Other
£m
Total
£m
102.4
11.9
–
(16.2)
(34.3)
(1.2)
62.6
31.5
15.6
–
(3.1)
(0.2)
106.4
67.4
71.0
89.5
72.0
22.5
3.0
(9.7)
–
(1.3)
86.5
1.1
20.0
7.9
(15.9)
(4.4)
95.2
52.9
70.2
112.0
1.7
0.4
–
(0.1)
(0.4)
(0.1)
1.5
–
0.7
–
(0.2)
0.1
2.1
1.6
5.4
4.8
596.5
54.9
3.0
(80.8)
(172.2)
(6.7)
394.7
–
51.1
7.9
(19.8)
(5.3)
428.6
288.2
281.4
325.3
Brands
£m
109.4
7.5
–
(54.8)
(0.3)
(1.6)
60.2
(7.1)
12.5
–
(0.2)
(0.6)
64.8
44.0
28.5
28.5
(i) The Group has reanalysed the analysis of other intangible assets following a review of underlying data.
(ii) Computer software includes internally generated intangible assets, not forming part of a business combination, as follows:
Note
£m
Cost
At 2 October 2011
Additions
Disposals
Exchange adjustment
At 30 September 2012
Analysis reclassifications
Additions
Disposals
Exchange adjustment
At 30 September 2013
Accumulated amortisation
At 2 October 2011
Charge for the year
Impairment
Disposals
Exchange adjustment
At 30 September 2012
Analysis reclassifications
Charge for the year
Impairment
Disposals
Exchange adjustment
At 30 September 2013
Net book value – 2011
Net book value – 2012
Net book value – 2013
104.7
37.8
(5.5)
(2.3)
134.7
3.0
66.7
(16.0)
(1.8)
186.6
57.0
20.4
3.0
(4.6)
(1.4)
74.4
2.9
16.9
7.9
(15.9)
(0.2)
86.0
47.7
60.3
100.6
19
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 year.
Cost
At 2 October 2011
Additions
Exchange adjustment
At 30 September 2012
Additions
Exchange adjustment
At 30 September 2013
119
£m
5.2
17.5
(0.7)
22.0
46.3
(1.3)
67.0
The methodologies applied to the Group’s 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
30 September
2013
Remaining
amortisation
period
Years
At
30 September
2012
Remaining
amortisation
period
Years
At
2 October
2011
Remaining
amortisation
period
Years
At
30 September
2013
Carrying
value
£m
At
30 September
2012
Carrying
value
£m
48.5
21.1
16.0
11.9
12.8
8.0
–
13.6
5.8
52.9
23.4
20.9
12.8
15.1
9.8
–
10.3
7.4
At
2 October
2011
Carrying
value
£m
59.4
25.6
22.8
14.3
20.7
12.2
11.4
10.0
8.9
Segment
Euromoney
Euromoney
Euromoney
Business information
National media
Euromoney
Events
Business information
Business information
22.8
9.8
22.8
12.5
3.7
8.4
–
–
4.0
23.8
10.8
23.8
13.5
4.7
9.4
–
1.0
5.0
BCA mastheads
Ned Davis Research Group customer
relationships
Metal Bulletin mastheads
Genscape intellectual property
Associated Mediabase software
BCA customer relationships
Evanta brand
Hobsons
Quest customer relationships
22. Property, plant and equipment
Cost
At 2 October 2011
Additions
Disposals
Classified as held-for-sale
Owned by subsidiaries disposed
Transfers to investment property
Reclassifications
Exchange adjustment
At 30 September 2012
Owned by subsidiaries acquired
Additions
Disposals
Classified as held-for-sale
Owned by subsidiaries disposed
Transfers to investment property
Reclassifications
Exchange adjustment
At 30 September 2013
24.8
11.8
24.8
14.5
4.9
10.4
9.8
1.0
6.0
Total
£m
757.1
59.3
(134.6)
(89.2)
(1.1)
(2.2)
–
(5.7)
583.6
0.1
27.7
(176.4)
(2.8)
(0.3)
(19.0)
(0.2)
0.2
412.9
Freehold
properties
£m
Note
Long
leasehold
properties
£m
Short
leasehold
properties
£m
Plant and
equipment
£m
19
23
16
19
17
23
78.7
16.8
(9.7)
(9.6)
–
(2.2)
6.3
–
80.3
–
2.0
(0.2)
–
–
(19.0)
–
0.2
63.3
68.8
–
(0.2)
(0.2)
–
–
(35.0)
(0.3)
33.1
–
–
(27.5)
–
–
–
–
–
5.6
59.9
1.1
(25.1)
–
–
–
–
(1.0)
34.9
–
1.9
(0.3)
–
–
–
(0.7)
–
35.8
549.7
41.4
(99.6)
(79.4)
(1.1)
–
28.7
(4.4)
435.3
0.1
23.8
(148.4)
(2.8)
(0.3)
–
0.5
–
308.2
OverviewStrategic ReportDirectors’ ReportShareholder InformationFinancial StatementsAnnual Report 2013 Annual Report 2013
120
Financial Statements
Notes to the accounts
Continued
22. Property, plant and equipment continued
Accumulated depreciation and impairment
At 2 October 2011
Charge for the year
Accelerated charge
Impairment
Disposals
Classified as held-for-sale
Owned by subsidiaries disposed
Transfers to investment property
Reclassifications
Exchange adjustment
At 30 September 2012
Charge for the year
Accelerated charge
Disposals
Classified as held-for-sale
Transfers to investment property
Reclassifications
Exchange adjustment
At 30 September 2013
Net book value – 2011
Net book value – 2012
Net book value – 2013
Freehold
properties
£m
Note
Long
leasehold
properties
£m
Short
leasehold
properties
£m
Plant and
equipment
£m
3
19
23
3
3, (i)
19
23
12.8
2.4
–
–
(2.1)
(5.4)
–
(1.3)
12.2
(0.1)
18.5
2.5
–
(0.2)
–
(14.4)
–
–
6.4
65.9
61.8
56.9
34.3
0.7
–
–
(0.2)
–
–
–
(20.6)
–
14.2
0.3
–
(27.5)
–
–
14.1
–
1.1
34.5
18.9
4.5
39.5
3.6
–
–
(24.9)
–
–
–
–
(0.3)
17.9
3.3
–
(0.3)
–
–
(0.4)
(0.1)
20.4
20.4
17.0
15.4
365.1
36.2
39.0
6.5
(89.8)
(66.1)
(0.8)
–
8.4
(3.6)
294.9
27.8
15.2
(146.8)
(0.9)
–
(13.9)
0.1
176.4
184.6
140.4
131.8
Total
£m
451.7
42.9
39.0
6.5
(117.0)
(71.5)
(0.8)
(1.3)
–
(4.0)
345.5
33.9
15.2
(174.8)
(0.9)
(14.4)
(0.2)
–
204.3
305.4
238.1
208.6
(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.
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 2 October 2011
Projects completed
Additions
At 30 September 2012
Additions
Projects completed
Disposals
At 30 September 2013
Freehold
properties
£m
Note
Long
leasehold
properties
£m
Short
leasehold
properties
£m
Plant and
equipment
£m
–
–
15.1
15.1
–
(15.1)
–
–
0.1
–
–
0.1
–
(0.1)
–
–
1.2
–
–
1.2
0.2
(1.4)
–
–
1.2
(0.2)
22.0
23.0
–
(21.8)
(1.2)
–
(i)
(i) Projects completed in the year relate mainly to the Group’s printing operation in Thurrock, Essex.
121
Total
£m
2.5
(0.2)
37.1
39.4
0.2
(38.4)
(1.2)
–
23. Investment property
Cost
At 2 October 2011
Transfers from property, plant and equipment
Disposals
At 30 September 2012
Transfers from property, plant and equipment
Disposals
At 30 September 2013
Accumulated depreciation and impairment
At 2 October 2011
Transfers from property, plant and equipment
Disposals
Charge for the year
Impairment
At 30 September 2012
Transfers from property, plant and equipment
Disposals
Charge for the year
Impairment
At 30 September 2013
Net book value – 2011
Net book value – 2012
Net book value – 2013
Freehold
properties
£m
Note
22
22
49.8
2.2
(24.8)
27.2
19.0
(18.8)
27.4
Freehold
properties
£m
Note
22
3
3
22
3
3
28.2
1.3
(11.3)
1.5
0.7
20.4
14.4
(14.6)
0.3
1.5
22.0
21.6
6.8
5.4
OverviewStrategic ReportDirectors’ ReportShareholder InformationFinancial StatementsAnnual Report 2013 Annual Report 2013
122
Financial Statements
Notes to the accounts
Continued
23. Investment property continued
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 with a net book value of £4.6 million have been transferred out of
property, plant and equipment and into investment property.
The fair value of the Group’s investment properties as at 30 September 2013 was £6.3 million (2012 £7.6 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 £0.7 million (2012 £0.8 million). Direct operating expenses
arising on the investment properties in the year amounted to £0.3 million (2012 £0.4 million). The leases have an expiry date of between
one and five years.
24. Investments in joint ventures and associates
Joint Ventures
At 2 October 2011
Additions – cash
Additions – non-cash
Disposals
Classified as held-for-sale
Share of retained reserves
Dividends received
Exchange adjustment
At 30 September 2012
Additions – cash
Disposals
Share of retained reserves
Dividends received
Impairment
Exchange adjustment
At 30 September 2013
Note
(i)
19
7
Share of
post-
acquisition
retained
reserves
£m
(29.0)
–
–
13.9
(1.0)
6.3
(3.9)
0.3
(13.4)
–
(0.1)
9.1
(5.3)
–
2.1
(7.6)
Cost of
shares
£m
45.3
4.0
125.4
(25.4)
(0.1)
–
–
1.5
150.7
1.2
0.1
–
–
(7.2)
(2.3)
142.5
Total
£m
16.3
4.0
125.4
(11.5)
(1.1)
6.3
(3.9)
1.8
137.3
1.2
–
9.1
(5.3)
(7.2)
(0.2)
134.9
123
Summary aggregated financial information for the Group’s joint ventures, extracted on a 100% basis from the joint ventures’ own financial
information as at 30 September 2013 is set out below:
Business information
National media
Business information
National media
Business information
National media
Business information
National media
Year ending
30 September
2013
Revenue
£m
Year ending
30 September
2013
Operating
profit/(loss)
£m
Year ending
30 September
2013
Total
expenses
£m
Year ending
30 September
2013
profit/(loss) for
the year
£m
14.5
70.8
85.3
(0.7)
27.1
26.4
(15.4)
(46.7)
(62.1)
(0.9)
24.1
23.2
At
30 September
2013
Non-current
assets
£m
At
30 September
2013
Current assets
£m
At
30 September
2013
Current
liabilities
£m
At
30 September
2013
Non-current
liabilities
£m
At
30 September
2013
Net assets
£m
6.7
76.8
83.5
9.5
36.3
45.8
(3.8)
(14.9)
(18.7)
(1.4)
(2.0)
(3.4)
11.0
96.2
107.2
Year ending
30 September
2012
Revenue
£m
Year ending
30 September
2012
Operating
profit/(loss)
£m
Year ending
30 September
2012
Total
expenses
£m
Year ending
30 September
2012
profit/(loss) for
the year
£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
30 September
2012
Non-current
assets
£m
At
30 September
2012
Current
assets
£m
At
30 September
2012
Current
liabilities
£m
At
30 September
2012
Non-current
liabilities
£m
At
30 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
OverviewStrategic ReportDirectors’ ReportShareholder InformationFinancial StatementsAnnual Report 2013 Annual Report 2013
124
Financial Statements
Notes to the accounts
Continued
24. Investments in joint ventures and associates continued
Business information
National media
Radio
Business information
National media
Radio
Year ending
2 October
2011
Revenue
£m
Year ending
2 October
2011
Operating
(loss)/profit
£m
Year ending
2 October
2011
Total
expenses
£m
Year ending
2 October
2011
(loss)/profit for
the year
£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)
At 2 October
2011
Non-current
assets
£m
At 2 October
2011
Current
assets
£m
At 2 October
2011
Current
liabilities
£m
At 2 October
2011
Non-current
liabilities
£m
At 2 October
2011
Net assets/
(liabilities)
£m
1.5
0.6
89.3
91.4
2.7
5.4
21.3
29.4
(0.3)
(4.8)
(75.3)
(80.4)
(0.8)
(6.5)
(12.5)
(19.8)
3.1
(5.3)
22.8
20.6
At 30 September 2013 the Group’s joint ventures had capital commitments amounting to £nil (2012 £1.0 million, 2011 £0.1 million). There were
no material contingent assets (2012 none, 2011 none). Net liabilities amounting to £nil (2012 £1.0 million, 2011 £nil) within the national media
segment are held-for-sale.
Information on principal joint ventures from the latest available accounts:
Principal activity
Year ended
Description of
holding
Group
interest%
Unlisted
Zoopla Property Group Limited
Mail Today Newspapers Pvt. Limited
The Sanborn Map Company, Inc.
TreppPort, Inc.
(incorporated and
operating in the UK)
(incorporated and
operating in India)
(incorporated and
operating in the US)
(incorporated and
operating in the US)
Online property portal
30 September 2013
Ordinary
51.45%
Publisher of classified
publications
Photogrammetric mapping
and GIS data conversion
Data analysis for CRE
related exposure
30 September 2013
Ordinary
26.00%
30 September 2013
30 September 2013
Preferred
stock
Ordinary
49.00%
50.00%
The Group has joint management control of Zoopla Property Group Limited and this investment has therefore been treated
as a joint venture.
125
Total
£m
13.0
7.5
(0.6)
(0.4)
(1.6)
(5.6)
(0.4)
(0.4)
11.5
3.7
27.5
5.1
3.8
(0.3)
(0.3)
(0.1)
(0.2)
50.7
Share of post
acquisition
retained
reserves
Cost of shares
Note
£m
£m
32.8
7.5
–
–
(1.6)
(5.7)
(0.5)
(1.0)
31.5
3.7
27.5
5.1
–
–
(0.3)
(0.1)
(0.6)
66.8
(19.8)
–
(0.6)
(0.4)
–
0.1
0.1
0.6
(20.0)
–
–
–
3.8
(0.3)
–
–
0.4
(16.1)
19
17
7
Associates
At 2 October 2011
Additions – cash
Share of retained reserves
Dividends received
Provision against carrying value
Disposals
Classified as held-for-sale
Exchange adjustment
At 30 September 2012
Additions – cash
Additions – non-cash
Loans capitalised
Share of retained reserves
Dividends received
Impairment
Disposals
Exchange adjustment
At 30 September 2013
The unrecognised share of losses of the Group’s associates principally comprises £11.8 million (2012 £10.4 million) in relation to ITN.
Summary aggregated financial information for the Group’s associates, extracted on a 100.0% basis from the associates’ own financial
information is set out below:
RMS
Business information
Euromoney
National media
Local media
Year ending
30 September
2013
Revenue
£m
Year ending
30 September
2013
Operating
profit/(loss)
£m
Year ending
30 September
2013
Total
expenses
£m
Year ending
30 September
2013
Profit/(loss) for
the year
£m
1.8
17.6
2.4
109.5
175.6
306.9
(0.7)
(5.8)
1.1
4.3
27.9
26.8
(0.6)
(24.3)
(1.6)
(106.3)
(166.3)
(299.1)
1.2
(6.7)
0.8
3.2
9.3
7.8
OverviewStrategic ReportDirectors’ ReportShareholder InformationFinancial StatementsAnnual Report 2013 Annual Report 2013
126
Financial Statements
Notes to the accounts
Continued
24. Investments in joint ventures and associates continued
RMS
Business information
Euromoney
National media
RMS
Business information
Euromoney
National media
Year ending
30 September
2012
Revenue
£m
Year ending
30 September
2012
Operating
profit/(loss)
£m
Year ending
30 September
2012
Total
expenses
£m
Year ending
30 September
2012
Profit/(loss) for
the year
£m
1.2
1.5
2.4
176.9
182.0
(0.8)
(3.0)
1.1
4.5
1.8
(1.9)
(4.4)
(1.5)
(174.1)
(181.9)
(0.7)
(2.9)
0.9
2.8
0.1
Year ending
2 October
2011
Revenue
£m
Year ending
2 October
2011
Operating
(loss)/profit
£m
Year ending
2 October
2011
Total
expenses
£m
Year ending
2 October
2011
(Loss)/profit
for the year
£m
1.1
8.4
1.9
103.5
114.9
0.1
(1.0)
0.8
(5.6)
(5.7)
(1.1)
(9.4)
(1.3)
(106.3)
(118.1)
–
(1.0)
0.6
(2.8)
(3.2)
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 30 September 2013
RMS
Business information
Events
Euromoney
National media
Local media
At 30 September 2012
RMS
Business information
Euromoney
National media
At 2 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
3.3
14.8
–
–
16.0
82.8
116.9
6.0
14.7
0.5
0.9
30.5
55.7
108.3
9.3
29.5
0.5
0.9
46.5
138.5
225.2
(0.1)
(19.5)
(0.4)
(0.3)
(31.3)
(36.1)
(87.7)
–
(3.7)
–
–
(68.8)
(25.3)
(97.8)
(0.1)
(23.2)
(0.4)
(0.3)
(100.1)
(61.4)
(185.5)
9.2
6.3
0.1
0.6
(53.6)
77.1
39.7
Non-current
assets
£m
Current assets
£m
Total assets
£m
Current
liabilities
£m
Non-current
liabilities
£m
Total
liabilities
£m
Net (liabilities)
/assets
£m
2.6
10.0
–
15.0
27.6
5.6
0.5
0.8
47.6
54.5
8.2
10.5
0.8
62.6
82.1
(0.3)
(7.5)
(0.3)
(40.7)
(48.8)
–
(3.5)
–
(118.2)
(121.7)
(0.3)
(11.0)
(0.3)
(158.9)
(170.5)
7.9
(0.5)
0.5
(96.3)
(88.4)
Non-current
assets
£m
Current assets
£m
Total assets
£m
Current
liabilities
£m
Non-current
liabilities
£m
Total
liabilities
£m
Net (liabilities)
/assets
£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)
127
At 30 September 2013 the Group’s associates had capital commitments amounting to £nil (2012 £nil, 2011 £3.8 million). There were no
material contingent liabilities (2012 none, 2011 none).
Information on principal associates from the latest available accounts:
Principal activity
Year ended
Description
of holding
Group
interest%
Unlisted
Local World
Real Capital Analytics, Inc.
Xceligent, Inc.
Independent Television News Limited
Praedicat
(incorporated and
operating in the UK)
(incorporated and
operating in the US)
(i) (incorporated and
operating in the UK)
(incorporated and
operating in the UK)
(incorporated and
operating in the US)
Publisher of local news
30 September 2013
Ordinary
38.70%
Provider of real estate
information
Provider of real estate
information
Independent TV news
provider
Provision of catastrophe
risk analytics
30 September 2013
30 September 2013
31 December 2012
30 September 2013
Preferred
stock
Preferred
stock
Ordinary
Preferred
stock
39.73%
50.64%
20.00%
29.60%
(i)
The Group does not have the power to control the majority of shareholder voting rights nor the Board of Directors. With an effective
interest of 33.0% the Group has treated this investment as an associated undertaking.
Joint ventures and associates have been accounted for under the equity method using unaudited financial information to 30 September
2013. Net assets amounting to £nil ( 2012 £1.1 million) within the national media segment are held-for-sale.
25. Non-current assets – available-for-sale investments
At 2 October 2011
Additions
Disposals
Impairment charge
At 30 September 2012
Additions
Disposals
Exchange adjustment
At 30 September 2013
Note
Unlisted
£m
8
4.2
0.2
(2.6)
(0.3)
1.5
2.1
(0.7)
(0.2)
2.7
The investments above represent 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. Since there is no active market upon which they are traded. Unlisted equity
securities are recorded at cost less provision for impairment, as their fair values cannot be reliably measured.
OverviewStrategic ReportDirectors’ ReportShareholder InformationFinancial StatementsAnnual Report 2013 Annual Report 2013
128
Financial Statements
Notes to the accounts
Continued
25. Non-current assets – available-for-sale investments continued
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)
Chemd Holdings Limited (incorporated and operating in the UK)
Cue Ball Capital LP (incorporated and operating in the US)
Evening Standard Limited (incorporated and operating in the UK)
(i)
Class of holding
Group interest %
Ordinary
Common stock
Ordinary
Limited
Partnership
Ordinary
15.6%
5.3%
5.0%
3.0%
24.9%
(i)
The Group has no Board representation and no influence over the day-to-day management of the Evening Standard Limited.
Accordingly, the Group has treated this investment as an available-for-sale investment.
Currency analysis of available-for-sale investments:
Sterling
US dollar
Australian 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
At
30 September
2013
£m
At
30 September
2012
£m
At
2 October
2011
£m
2.2
0.5
–
–
–
2.7
0.3
0.9
–
0.2
0.1
1.5
1.4
2.5
0.1
0.2
–
4.2
At
30 September
2013
£m
At
30 September
2012
£m
At
2 October
2011
£m
2.7
1.5
4.2
At
30 September
2013
£m
At
30 September
2012
£m
At
2 October
2011
£m
Note
9.2
16.0
25.2
–
25.2
10.9
18.0
28.9
(0.6)
28.3
11.7
11.4
23.1
–
23.1
19
129
At
30 September
2013
£m
Note
At
30 September
2012
Restated
(Note 2)
£m
At
2 October
2011
Restated
(Note 2)
£m
217.6
(22.2)
195.4
89.8
19.6
304.8
(2.0)
302.8
2.4
8.8
11.2
314.0
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
–
347.4
4.7
26.0
30.7
378.1
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
Prepayments and accrued income
Other debtors
During the year commercial and financial changes to terms and collections of certain national media newspaper’s trade debtors, resulted
in a one off reduction in year on year working capital of approximately £60.0 million.
Movement in the allowance for doubtful debts:
At start of year
Impairment losses recognised
Amounts written off as uncollectable
Amounts recovered during the year
Owned by subsidiaries disposed
Exchange adjustment
At end of year
At
30 September
2013
£m
At
30 September
2012
£m
At
2 October
2011
£m
(24.5)
(5.5)
1.6
4.6
1.5
0.1
(22.2)
(27.6)
(8.2)
7.0
3.7
0.2
0.4
(24.5)
(29.1)
(7.4)
5.1
3.6
0.4
(0.2)
(27.6)
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.
Ageing of impaired trade receivables:
31 – 60 days
61 – 90 days
91 – 120 days
121 + days
Total
At
30 September
2013
£m
At
30 September
2012
£m
At
2 October
2011
£m
0.8
0.4
0.5
16.4
18.1
0.5
0.5
0.7
18.2
19.9
0.4
2.1
1.0
22.0
25.5
Included in the Group’s trade receivables are debtors with a carrying value of £73.4 million (2012 £80.0 million, 2011 £77.2 million) which
are past due at 30 September 2013 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.
OverviewStrategic ReportDirectors’ ReportShareholder InformationFinancial StatementsAnnual Report 2013 Annual Report 2013
130
Financial Statements
Notes to the accounts
Continued
27. Trade and other receivables continued
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
Classified as held-for-sale
Cash and cash equivalents
Unsecured bank overdrafts
Cash and cash equivalents in the cash flow statement
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 interest
The fair values of cash and cash equivalents equate to their book values.
At
30 September
2013
£m
At
30 September
2012
£m
At
2 October
2011
£m
36.2
15.6
11.2
10.4
73.4
36.9
19.6
9.8
13.7
80.0
36.0
18.8
7.8
14.6
77.2
Note
19
32
15
At
30 September
2013
£m
At
30 September
2012
£m
At
2 October
2011
£m
88.5
(0.6)
87.9
88.5
–
88.5
61.4
4.6
1.1
0.3
7.5
13.0
87.9
107.3
(2.6)
104.7
107.3
–
107.3
47.5
23.1
0.6
0.9
15.2
17.4
104.7
174.3
–
174.3
174.3
(2.6)
171.7
152.7
6.8
–
1.2
5.4
8.2
174.3
87.9
104.7
174.3
131
At
30 September
2013
£m
Note
At
30 September
2012
Restated
(Note 2)
£m
At
2 October
2011
Restated
(Note 2)
£m
59.2
26.6
25.8
49.0
254.0
301.3
(4.0)
711.9
4.1
716.0
54.4
28.3
29.9
45.7
258.9
271.0
(31.4)
656.8
8.1
664.9
66.4
33.9
32.6
31.2
235.9
255.2
–
655.2
11.9
667.1
19
At
30 September
2013
£m
At
30 September
2012
£m
At
2 October
2011
£m
17.2
(9.5)
7.7
20.8
(3.6)
17.2
53.2
(9.1)
44.1
At
30 September
2013
£m
At
30 September
2012
£m
At
2 October
2011
£m
0.8
15.0
15.8
4.5
4.1
8.6
1.1
10.7
11.8
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
OverviewStrategic ReportDirectors’ ReportShareholder InformationFinancial StatementsAnnual Report 2013 Annual Report 2013
132
Financial Statements
Notes to the accounts
Continued
32. Borrowings
The Group’s borrowings are unsecured and are analysed as follows:
At 30 September 2013
Within one year
Over five years
At 30 September 2012
Within one year
Over five years
At 2 October 2011
Within one year
Between two and five years
Over five years
Other
borrowings
£m
Overdrafts
£m
–
–
–
–
–
–
23.4
–
–
–
23.4
–
–
–
–
–
–
2.6
–
–
–
2.6
The Group’s borrowings are analysed by currency and interest rate type as follows:
At 30 September 2013
Fixed rate interest
Floating rate interest
At 30 September 2012
Fixed rate interest
Floating rate interest
At 2 October 2011
Fixed rate interest
Floating rate interest
Sterling
£m
US dollar
£m
Australian
dollar
£m
674.3
2.0
676.3
725.4
2.6
728.0
832.0
28.4
860.4
–
–
–
–
–
–
–
–
–
–
–
–
–
0.1
0.1
–
0.8
0.8
Bonds
£m
–
674.3
674.3
Loan
notes
£m
2.0
–
2.0
Total
£m
2.0
674.3
676.3
47.3
2.6
49.9
678.1
725.4
–
2.6
678.1
728.0
–
3.3
29.3
158.3
673.7
832.0
832.0
–
–
–
3.3
158.3
673.7
832.0
861.3
Total
£m
674.3
2.0
676.3
725.4
2.6
728.0
832.0
29.3
861.3
133
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 30 September 2013
Analysed as:
Fixed rate interest
Floating rate interest
At 30 September 2012
Analysed as:
Fixed rate interest
Floating rate interest
At 2 October 2011
Analysed as:
Fixed rate interest
Floating rate interest
Sterling
£m
US dollar
£m
Australian
dollar
£m
Euro
£m
Other
£m
Total
£m
528.0
(321.6)
206.4
175.5
301.2
476.7
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
–
(5.9)
(5.9)
–
5.6
5.6
–
–
–
–
(0.9)
(0.9)
703.5
(27.2)
676.3
–
–
–
–
–
–
636.8
91.2
728.0
821.2
40.1
861.3
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 contain covenants based on a maximum net debt to EBITDA ratio and 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 and the ratio is calculated in Note 33. These covenants were met at the relevant test dates
during the year.
During the prior year the Company cancelled £90.0 million of its committed borrowing facilities which were surplus to the Group’s
requirements.
The Group’s facilities and their maturity dates are as follows:
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
30 September
2013
£m
At
30 September
2012
£m
At
2 October
2011
£m
–
300.3
–
–
300.3
–
–
300.7
–
300.7
90.0
–
–
300.0
390.0
OverviewStrategic ReportDirectors’ ReportShareholder InformationFinancial StatementsAnnual Report 2013 Annual Report 2013
134
Financial Statements
Notes to the accounts
Continued
32. Borrowings continued
The following undrawn committed borrowing facilities were available to the Group in respect of which all conditions precedent had been met:
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
30 September
2013
£m
At
30 September
2012
£m
At
2 October
2011
£m
–
299.8
–
–
299.8
–
–
298.3
–
298.3
36.4
–
–
291.1
327.5
The Group has issued standby letters of credit in favour of the Trustees of the Group’s defined benefit pension fund amounting to £nil (2012
£nil, 2011 £53.6 million) together with other guarantees of £1.2 million (2012 £2.4 million, 2011 £9.3 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
30 September
2013
Fair value
£m
At
30 September
2012
Fair value
£m
At
2 October
2011
Fair value
£m
At
30 September
2013
Carrying
value
£m
At
30 September
2012
Carrying
value
£m
At
2 October
2011
Carrying
value
£m
At
30 September
2013
Nominal
value
£m
At
30 September
2012
Nominal
value
£m
–
351.9
202.3
207.8
762.0
47.4
344.2
195.3
193.2
162.3
307.6
188.0
177.5
780.1
835.4
–
309.2
169.2
195.9
674.3
47.3
307.4
171.4
199.3
725.4
158.3
304.1
171.1
198.5
832.0
–
324.7
156.4
200.0
681.1
46.4
324.7
156.4
200.0
727.5
At
2 October
2011
Nominal
value
£m
156.5
324.7
156.4
200.0
837.6
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 £3.1 million (2012 £3.5 million, 2011 £3.8 million), the unamortised premia
£7.7 million (2012 £9.2 million, 2011 £10.5 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 pages 24 to 27.
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 24 to 27.
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.
135
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 1.56 times (2012 1.65 times, 2011 1.96 times). Using a closing rate basis for the valuation of net debt, the ratio was 1.53 times
(2012 1.62 times, 2011 1.99 times)
Cash and liquidity risk management
The Group monitors its cash balances to ensure that sufficient resources are available to meet operational requirements as they fall due.
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.
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 9.2 times (2012
6.72 times, 2011 6.36 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 70.0% to 80.0% 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:
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
Consolidated 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 Consolidated Income Statement. These interest rate swaps
amount to £73.9 million (2012 £108.9 million, 2011 £75.0 million) with the Group paying floating rates of between 0.51% and 1.86%
(2012 0.63% and 1.86%, 2011 1.24% and 1.61%).
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 Consolidated Income Statement. These interest rate swaps amount to US$67.0 million (2012 US$67.0 million, 2011 US$nil)
with the Group receiving floating US dollar interest at rates of between 0.25% and 0.38% (2012 0.38% and 0.47%, 2011 nil% and nil%)
Cross currency fixed to fixed interest rate swaps amount to £72.4 million / US$128 million (2012 £158.4 million / US$288.0 million, 2011 £192.3
million / US$ 355.0 million) resulting in the Group paying fixed US dollar interest at rates of between 6.01% and 6.07% (2012 4.40% and 6.07%,
2011 4.40% and 6.07%).
The Group also had a number of outstanding interest rate caps amounting to US$100.0 million notional (2012 US$100.0 million, 2011 US$100.0
million) at a rate of 6.00% (2012 6.00%, 2011 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 30 September 2013. 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 39 days (2012 43 days, 2011 42 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.
OverviewStrategic ReportDirectors’ ReportShareholder InformationFinancial StatementsAnnual Report 2013 Annual Report 2013
136
Financial Statements
Notes to the accounts
Continued
33. Financial instruments and risk management continued
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.
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 remeasured
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 in 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 year together with the changes
in the fair value of the hedged item due to the hedged risk, to the extent the hedge is effective. When the hedging instrument expires or
is sold, terminated, or exercised, or no longer qualifies for hedge accounting, hedge accounting is discontinued.
Gains and losses on the borrowings and related derivatives designated as fair value hedges included in the Consolidated Income
Statement for the year ending 30 September 2013 were:
Sterling interest rate swaps
Sterling debt
Total
At
2 October
2011
£m
Fair value
movement
gain/(loss)
£m
At
30 September
2012
£m
Fair value
movement
gain/(loss)
£m
At
30 September
2013
£m
8.3
(8.3)
–
2.2
(2.2)
–
10.5
(10.5)
–
(6.6)
6.6
–
3.9
(3.9)
–
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 ending 30 September 2013. 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.
137
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 ending 30 September 2013.
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 30 September 2013
Within one year
Between one and two years
Over five years
At 30 September 2012
Within one year
Between one and two years
Over five years
At 2 October 2011
Within one year
Between one and two years
Over five years
Fair value
hedges
£m
Cash flow
hedges
£m
Net
investment
hedges
£m
Derivative
financial
assets
£m
–
–
17.2
17.2
17.2
0.8
–
22.9
22.9
23.7
–
1.9
6.5
8.4
8.4
1.7
0.7
–
0.7
2.4
2.7
0.3
–
0.3
3.0
1.1
0.2
–
0.2
1.3
17.2
–
3.3
3.3
20.5
5.4
–
1.4
1.4
6.8
–
–
–
–
–
18.9
0.7
20.5
21.2
40.1
8.9
0.3
24.3
24.6
33.5
1.1
2.1
6.5
8.6
9.7
OverviewStrategic ReportDirectors’ ReportShareholder InformationFinancial StatementsAnnual Report 2013 Annual Report 2013
138
Financial Statements
Notes to the accounts
Continued
33. Financial instruments and risk management continued
Derivative financial liabilities:
At 30 September 2013
Within one year
Over five years
At 30 September 2012
Within one year
Over five years
At 2 October 2011
Within one year
Between one and two years
Over five years
Cash flow
hedges
£m
Net
investment
hedges
£m
Derivatives
not qualifying
for hedge
accounting
£m
Derivative
financial
liabilities
£m
(0.9)
(0.9)
(0.3)
–
(0.3)
(4.7)
(0.7)
–
(0.7)
(5.4)
–
(9.7)
(9.7)
(13.8)
(13.2)
(27.0)
(0.8)
(22.8)
(37.4)
(60.2)
(61.0)
–
(14.2)
(14.2)
–
(21.7)
(21.7)
(0.4)
–
–
–
(0.4)
(0.9)
(23.9)
(24.8)
(14.1)
(34.9)
(49.0)
(5.9)
(23.5)
(37.4)
(60.9)
(66.8)
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 30 September 2013 it is estimated that an increase of 1.0% in interest rates would have reduced the Group’s finance costs by £3.9 million
(2012 increase £1.2 million, 2011 increase £1.1 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 30 September 2013 it is estimated that a decrease of 1.0% in interest rates would have increased the Group’s finance costs by £5.7 million
(2012 reduction £1.1 million, 2011 reduction £1.3 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 30 September 2013 it is estimated that a 10.0% strengthening of sterling against the US dollar would have increased the net gain taken
to equity by £26.5 million (2012 £49.1 million, 2011 reduced the net loss by £55.6 million) and reduced the net loss taken to income by
£1.4 million (2012 £nil, 2011 £nil). A 10.0% weakening of sterling against the US dollar would have reduced the net gain taken to equity
by £29.3 million (2012 £53.6 million, 2011 increased the net loss by £64.0 million) and increased the net loss taken to income by £1.8 million
(2012 £nil, 2011 £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 30 September 2013 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 £0.2 million (2012 £nil, 2011 £0.2 million).
At 30 September 2013 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 £0.2 million (2012 £nil, 2011 £0.2 million).
139
The carrying amounts and gains and losses on financial instruments are as follows:
At
30 September
2013
Carrying
amount
£m
Year ending
30 September
2013
(Loss)/gain to
income
£m
Year ending
30 September
2013
Gain/(loss) to
equity
£m
At
30 September
2012
Carrying
amount
£m
Year ending
30 September
2012
(Loss)/gain to
income
£m
Year ending
30 September
2012
Gain/(loss) to
equity
£m
At
2 October
2011
Carrying
amount
£m
Year ending
2 October
2011
(Loss)/gain
to income
£m
Year ending
2 October
2011
(Loss)/gain
to equity
£m
Investments
Available-for-sale
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
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
Derivative liabilities not
designated as hedging
instruments
Total for financial instruments
2.7
2.7
193.7
28.1
87.9
309.7
17.2
3.3
19.6
1.8
1.8
(0.7)
–
1.3
0.6
(3.2)
–
0.3
40.1
(2.9)
(58.8)
–
(674.3)
–
(2.0)
–
–
–
(44.1)
(6.2)
–
–
(0.2)
(0.2)
(1.0)
–
(0.8)
(1.8)
–
–
1.9
1.9
3.6
–
–
–
–
–
1.5
1.5
210.6
22.9
104.7
338.2
23.7
1.4
0.5
0.5
3.1
–
1.5
4.6
4.5
–
(0.1)
(0.1)
(3.1)
–
(1.7)
(4.8)
–
–
8.4
(0.2)
19.8
33.5
4.3
19.8
(53.5)
–
(725.4)
–
(2.6)
–
–
0.1
(61.7)
(5.9)
–
–
8.4
0.1
–
–
–
–
4.2
4.2
227.3
42.3
174.3
443.9
8.4
–
1.3
9.7
(66.4)
(2.6)
(832.0)
–
(3.3)
–
2.7
2.7
1.5
–
1.9
3.4
2.3
–
0.2
2.5
–
–
(63.4)
(5.3)
(0.1)
(1.7)
4.4
4.4
1.1
–
–
1.1
–
–
2.0
2.0
(3.6)
–
–
–
–
–
(735.1)
(50.3)
3.6
(781.5)
(67.5)
8.5
(904.3)
(70.5)
(3.6)
(9.7)
(0.9)
(1.2)
(0.7)
(27.0)
0.3
(0.3)
(10.6)
(0.9)
(0.7)
(27.3)
(15.8)
(2.9)
(14.2)
–
(30.0)
5.0
–
2.1
–
–
–
–
(8.6)
(21.7)
–
(30.3)
(2.3)
(0.2)
(2.5)
2.0
(0.3)
–
1.7
12.8
(60.3)
(2.6)
(6.0)
5.4
(6.1)
1.5
(7.5)
18.2
(66.4)
(1.1)
(13.5)
0.3
(11.8)
(0.5)
–
–
–
(0.4)
–
–
0.3
(12.2)
(0.5)
–
–
–
–
(423.2)
(49.6)
2.8
(465.9)
(58.9)
41.9
(525.1)
(63.5)
(9.6)
OverviewStrategic ReportDirectors’ ReportShareholder InformationFinancial StatementsAnnual Report 2013 Annual Report 2013
140
Financial Statements
Notes to the accounts
Continued
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
Dividend income
Interest receivable from short-term deposits
Finance charge on discounting of contingent consideration
Fair value movement of contingent consideration
Net finance costs
Note
38
38
38
Year ending
30 September
2013
£m
Year ending
30 September
2012
£m
Year ending
2 October
2011
£m
(1.0)
–
1.6
2.2
2.8
34.4
–
3.9
3.6
41.9
(18.3)
4.6
(2.7)
6.8
(9.6)
Year
ending
30 September
2013
£m
Year
ending
30 September
2012
£m
Year
ending
2 October
2011
£m
Note
(49.6)
(58.9)
(63.5)
27
8
9
9
10
10
10
0.7
–
(1.8)
(1.3)
(1.1)
(5.0)
(58.1)
(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)
The remaining undiscounted contractual liabilities and their maturities are as follows:
Trade
payables
£m
Interest rate
swaps
£m
Currency
swaps
£m
Forward
contracts
£m
Bonds
£m
Bank loans
and overdrafts
£m
Loan
notes
£m
At 30 September 2013
Within one year
Between one and two years
Between two and five years
Between five and 10 years
Between 10 and 15 years
At 30 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 2 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
(58.8)
–
–
–
–
–
(58.8)
(53.5)
–
–
–
–
–
(53.5)
(66.4)
–
–
–
–
–
–
(66.4)
(2.4)
(2.4)
(7.2)
(12.0)
(8.9)
(30.5)
(32.9)
–
–
–
–
(68.5)
(68.5)
(68.5)
–
–
–
–
–
–
–
–
(2.4)
(2.4)
(7.1)
(11.8)
(47.6)
(68.9)
(71.3)
(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)
(40.1)
–
–
–
–
–
(40.1)
(59.7)
(7.8)
–
–
–
(7.8)
(67.5)
(367.5)
(16.2)
–
–
–
–
(16.2)
(383.7)
(47.1)
(47.1)
(141.2)
(587.8)
(247.4)
(1,023.5)
(1,070.6)
(95.2)
(47.1)
(141.2)
(622.1)
(260.2)
(1,070.6)
(1,165.8)
(58.4)
(209.3)
(141.2)
(656.4)
(63.8)
(209.2)
(1,279.9)
(1,338.3)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(2.6)
–
–
–
–
–
–
(2.6)
(2.0)
–
–
–
–
–
(2.0)
(2.6)
–
–
–
–
–
(2.6)
(3.3)
–
–
–
–
–
–
(3.3)
141
Total
£m
(152.8)
(51.9)
(155.5)
(611.6)
(303.9)
(1,122.9)
(1,275.7)
(317.0)
(59.7)
(155.5)
(646.0)
(430.4)
(1,291.6)
(1,608.6)
(511.6)
(351.5)
(163.9)
(694.2)
(101.6)
(340.0)
(1,651.2)
(2,162.8)
OverviewStrategic ReportDirectors’ ReportShareholder InformationFinancial StatementsAnnual Report 2013 Annual Report 2013
142
Financial Statements
Notes to the accounts
Continued
33. Financial instruments and risk management continued
Reconciliation of undiscounted liabilities to amounts on the Statement of Consolidated Financial Position:
At 30 September 2013
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
At 30 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
(152.8)
(51.9)
(155.5)
(611.6)
(303.9)
(1,122.9)
(1,275.7)
(58.8)
(2.0)
(1,070.6)
(32.9)
(71.3)
(40.1)
(1,275.7)
(317.0)
(59.7)
(155.5)
(646.0)
(430.4)
(1,291.6)
(1,608.6)
(53.5)
(2.6)
(1,165.8)
(68.5)
(250.7)
(67.5)
(1,608.6)
50.1
50.1
150.2
121.7
58.6
380.6
430.7
–
–
389.4
32.9
8.4
–
430.7
48.8
47.1
141.2
141.0
94.3
423.6
472.4
–
–
438.2
34.2
–
–
472.4
0.4
0.4
1.5
0.6
0.2
2.7
3.1
–
–
3.1
–
–
–
3.1
0.4
0.4
1.3
1.1
0.3
3.1
3.5
–
–
3.5
–
–
–
3.5
1.7
1.9
6.6
(2.9)
0.4
6.0
7.7
–
–
7.7
–
–
–
7.7
1.6
1.7
6.1
(0.6)
0.4
7.6
9.2
–
–
9.2
–
–
–
9.2
(3.9)
–
–
–
–
–
(3.9)
–
–
(3.9)
–
–
–
(3.9)
(10.5)
–
–
–
–
–
(10.5)
–
–
(10.5)
–
–
–
(10.5)
–
–
–
–
(17.1)
(17.1)
(17.1)
–
–
–
(14.2)
(2.9)
–
(17.1)
(0.3)
0.4
1.5
2.5
8.7
13.1
12.8
–
–
–
12.6
0.4
(0.2)
12.8
40.9
1.8
5.3
8.8
38.5
54.4
95.3
–
–
–
–
56.1
39.2
95.3
151.8
12.1
12.8
21.4
92.6
138.9
290.7
–
–
–
–
223.3
67.4
290.7
Total
£m
(63.6)
2.3
8.1
(483.4)
(223.3)
(696.3)
(759.9)
(58.8)
(2.0)
(674.3)
(14.2)
(9.7)
(0.9)
(759.9)
(125.2)
2.0
7.4
(480.6)
(234.1)
(705.3)
(830.5)
(53.5)
(2.6)
(725.4)
(21.7)
(27.0)
(0.3)
(830.5)
143
At 2 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
Bank overdrafts
Loan notes
Bonds
Fixed to fixed cross currency swaps
Forward foreign currency contracts
Undiscounted
value of
financial
liabilities
£m
(511.6)
(351.5)
(163.9)
(694.2)
(101.6)
(340.0)
(1,651.2)
(2,162.8)
(66.4)
(2.6)
(3.3)
(1,338.3)
(368.5)
(383.7)
(2,162.8)
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
58.4
52.8
141.2
175.3
63.8
9.2
442.3
500.7
–
–
–
500.7
–
–
500.7
0.5
0.4
1.3
1.3
0.2
0.1
3.3
3.8
–
–
–
3.8
–
–
3.8
1.6
1.7
6.3
0.4
0.5
0.1
9.0
10.6
–
–
–
10.6
–
–
10.6
(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
371.9
118.6
18.4
30.7
30.8
110.9
309.4
681.3
–
–
–
–
304.6
376.7
681.3
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)
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 (i.e. as prices) or indirectly (i.e. derived from prices); and
Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based
on observable market data (unobservable inputs).
At 30 September 2013
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
Note
25
33
31
33
33
Level 1
£m
Level 2
£m
Level 3
£m
–
–
–
–
–
–
–
–
40.1
40.1
–
(14.2)
(10.6)
(24.8)
2.7
–
2.7
(15.8)
–
–
(15.8)
Total
£m
2.7
40.1
42.8
(15.8)
(14.2)
(10.6)
(40.6)
OverviewStrategic ReportDirectors’ ReportShareholder InformationFinancial StatementsAnnual Report 2013 Annual Report 2013
144
Financial Statements
Notes to the accounts
Continued
33. Financial instruments and risk management continued
At 30 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
There were no transfers between categories in the year.
Reconciliation of level 3 fair value measurement of financial liabilities:
At 30 September 2012
Settlements
Change in fair value of acquisition put option commitments in income
Additions
At 30 September 2013
Level 1
£m
Level 2
£m
Level 3
£m
0.7
–
0.7
–
–
–
–
–
33.5
33.5
–
(21.7)
(27.3)
(49.0)
0.8
–
0.8
(8.6)
–
–
(8.6)
Note
10
31
Total
£m
1.5
33.5
35.0
(8.6)
(21.7)
(27.3)
(57.6)
£m
(8.6)
0.1
(2.9)
(4.4)
(15.8)
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 £70.2 million (2012 £nil to £38.3 million, 2011 £nil to
£39.2 million).
34. Retirement benefit obligations
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 ending 30 September 2013 were £3.3 million (2012 £11.8 million, 2011 £16.5 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 has begun automatically enrolling relevant employees into the defined contribution
pension plans. The Group has employed an external specialist to provide a platform for enrolling employees. Group entities will be staging
progressively over the next three years with the first staging completed successfully on 1 September 2013.
For reporting years beginning on or after 1 January 2013, a revision to the International Accounting Standard 19 – Employee Benefits will
become effective. IAS19 (Revised) will first apply to the Group for the year ending 30 September 2014. Had IAS19 (Revised) been applied at
the year ending 30 September 2013, Finance Costs reported in the Consolidated Income Statement would have increased by £27.8 million
(2012 £23.5 million, 2011 £25.1 million) with a corresponding decrease in the actuarial loss reported within cumulative actuarial (loss)/gain in
the Consolidated Statement of Comprehensive Income.
Defined Benefit Schemes
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. Benefits accrued up to 31 March 2011 were accrued on a final salary basis,
but with the value of those benefits having been de-linked from pensionable salary. Existing members still in employment can continue to
accrue benefits in the scheme on a cash balance basis, with members building up a retirement account that they can use to buy an
annuity from an insurance company at retirement.
Full actuarial valuations of the defined benefit schemes are carried out triennially by the Scheme Actuary. As a result of the valuations of
the main schemes completed as at 31 March 2010, the Company has been making 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 5 October 2023. In
accordance with these agreements, a payment of £36.7 million was made on 5 October 2011 and a payment of £24.0 million was made
on 28 September 2012. A further payment of £11.6 million was made 5 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 31 March 2013. The triennial funding
valuation of the main schemes as at 31 March 2013, is not expected to be completed until the first quarter of 2014.
145
Since the year end the Group has agreed, in principle, to a revised schedule of additional funding payments to the main schemes totalling
£30.0 million per annum to 2020 and £24.0 million per annum thereafter until 2026, or until the schemes’ actuary agrees the schemes are
no longer in deficit, if shorter.
On 30 December 2012, the Company’s disposal of Northcliffe Media Limited resulted in 1,038 (approximately 40%) of active members of
the schemes ceasing employment and becoming deferred members of the schemes. This resulted in a curtailment gain of £3.8 million.
Following the disposal of Northcliffe Media Limited mentioned above, the Company agreed to make additional contributions of
£30.0 million, including debts calculated in accordance with Section 75 of the Pensions Act 1995. Payments of £17.1 million were
made during the year to 30 September 2013 with the balance of £12.9 million to be paid in January 2014.
Following the announcement of a buy-back programme of up to £100.0 million of shares in Autumn 2012, the Company agreed with
the trustees that additional special contributions would be paid to the Schemes when the total value of shares bought-back exceeded
£50 million. Contributions arising from this agreement during the year amounted to £1.8 million.
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 31 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.
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 over a period of 15 years to 2027. 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.
The figures in this note are based on calculations using membership data at 30 September 2013 along with asset valuations and cash flow
information from the schemes for the year to 30 September 2013.
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
30 September
2013
Schemes in
deficit
£m
At
30 September
2012
Schemes in
deficit
£m
(2,169.7)
1,962.0
(207.7)
(2,089.0)
1,764.6
(324.4)
At
2 October
2011
Schemes in
deficit
£m
(1,921.1)
1,584.9
(336.2)
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 would be in accordance with the interpretations
of IFRIC 14. In 2013, 2012 and 2011 all schemes were in deficit.
The deficit for the year, set out above, excludes a related deferred tax asset of £42.3 million (2012 £74.6 million, 2011 £83.6 million).
OverviewStrategic ReportDirectors’ ReportShareholder InformationFinancial StatementsAnnual Report 2013 Annual Report 2013
146
Financial Statements
Notes to the accounts
Continued
34. Retirement benefit obligations continued
A reconciliation of the present value of the defined benefit obligation is shown in the following table:
At start of year
Service cost
Service cost in respect of salary sacrifice
Interest cost
Curtailment
Member contributions
Benefit payments
Actuarial gain/(loss) as a result of:
– changes in assumptions
– membership experience
At 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
Year ending
30 September
2013
£m
Year ending
30 September
2012
£m
Year ending
2 October
2011
£m
Note
(2,089.0)
(8.8)
(3.5)
(89.7)
3.8
(0.2)
91.5
(1,921.1)
(12.0)
(4.9)
(97.7)
–
(0.5)
85.0
(1,878.2)
(17.2)
(5.5)
(91.7)
–
(0.2)
87.1
38, 39
38, 39
(80.8)
7.0
(2,169.7)
(116.7)
(21.1)
(2,089.0)
32.5
(47.9)
(1,921.1)
At
30 September
2013
£m
At
30 September
2012
£m
At
2 October
2011
£m
Note
1,764.6
104.6
43.8
0.2
(91.5)
140.3
1,962.0
1,584.9
106.2
82.0
0.5
(85.0)
76.0
1,764.6
1,606.8
104.1
35.2
0.2
(87.1)
(74.3)
1,584.9
38, 39
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 30 September 2013
Value (£m)
% of assets held
Long-term rate of return expected (%)
At 30 September 2012
Value (£m)
% of assets held
Long-term rate of return expected (%)
At 2 October 2011
Value (£m)
% of assets held
Long-term rate of return expected (%)
Equities
Bonds
Property
Other assets
Total
1,137.8
57.99
8.20
981.7
55.63
7.60
849.2
53.60
8.30
586.0
29.87
3.80
581.6
32.96
3.40
562.3
35.50
4.30
201.8
10.29
6.70
172.6
9.78
6.00
157.3
9.90
6.80
36.4
1.85
3.80
1,962.0
100.00
6.70
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
147
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 30 September 2013 was £13.1 million (0.67% of assets), (2012 £18.2
million – 1.03% of assets, 2011 £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 £244.9 million (2012 return of £182.2 million, 2011 return of £29.7 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
As at
30 September
2013
%
As at
30 September
2012
%
As at
2 October
2011
%
3.20
3.00
3.00
4.60
6.70
2.40
2.40
2.40
4.40
6.00
3.00
2.90
2.90
5.20
6.70
The discount rate for scheme liabilities reflects yields at the year 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 ‘CMI’
projections but with a long-term rate of improvement in future mortality rates of 1.25% per annum. Allowance is made for the extent to
which employees have chosen to commute part of their pension for cash at retirement.
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
As at
30 September
2013
Future life
expectancy
from age 60
(years)
As at
30 September
2012
Future life
expectancy
from age 60
(years)
As at
2 October
2011
Future life
expectancy
from age 60
(years)
27.0
28.8
28.3
30.0
27.2
29.0
28.7
30.5
27.0
28.8
28.6
30.3
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
Curtailment
Charge to operating profit
Interest cost
Expected return on assets
Credit to net Finance costs
Total net charge to the Consolidated Income Statement
As at
30 September
2013
£m
As at
30 September
2012
£m
Note
(8.8)
(3.5)
3.8
(8.5)
(89.7)
104.6
14.9
6.4
(12.0)
(4.9)
–
(16.9)
(97.7)
106.2
8.5
(8.4)
4
9
OverviewStrategic ReportDirectors’ ReportShareholder InformationFinancial StatementsAnnual Report 2013 Annual Report 2013
148
Financial Statements
Notes to the accounts
Continued
34. Retirement benefit obligations continued
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 principle assumptions used above:
Mortality
Change in pension obligation at 30 September 2013 from a 1 year change in life
expectancy
Change in pension cost from a 1 year change
Inflation rate
Change in pension obligation at 30 September 2013 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 30 September 2013 from a 0.1% per annum change
Change in pension cost from a 0.1% per annum change
As at
30 September
2013
£m
As at
30 September
2012
£m
As at
2 October
2011
£m
82.4
77.2
71.0
3.3
3.7
4.1
31.3
0.1
33.4
–
30.4
0.1
33.8
0.1
27.7
0.2
31.0
0.1
Amounts recognised in the Consolidated Statement of Comprehensive Income (SOCI) are shown in the following table:
Actuarial gain/(loss) recognised in SOCI
Cumulative actuarial loss recognised in SOCI at beginning of year
Cumulative actuarial loss recognised in SOCI at end of year
A history of experience gains and losses is shown in the following table:
Present value of defined benefit obligation
Fair value of scheme assets
Combined deficit in schemes
Experience adjustments on defined benefit obligation
Experience adjustments on fair value of scheme assets
As at
30 September
2013
£m
As at
30 September
2012
£m
66.5
(282.6)
(216.1)
(61.8)
(220.8)
(282.6)
At
30 September
2013
£m
At
30 September
2012
£m
(2,169.7)
1,962.0
(207.7)
(73.8)
140.3
(2,089.0)
1,764.6
(324.4)
(137.8)
76.0
At
2 October
2011
£m
(1,921.1)
1,584.9
(336.2)
(15.4)
(74.3)
At
3 October
2010
£m
(1,878.2)
1,606.8
(271.4)
57.5
89.4
As at
2 October
2011
£m
(89.6)
(131.2)
(220.8)
At
4 October
2009
£m
(1,901.8)
1,471.4
(430.4)
(256.6)
(167.9)
The Group expects to contribute approximately £52.5 million to the schemes during the year to 30 September 2014 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
£65.8 million (2012 £50.3 million, 2011 £39.8 million) at the year end. The pension cost attributable to these plans during the year amounted
to £3.0 million (2012 £1.9 million, 2011 £3.4 million).
149
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 £2.9 million (2012 £1.4 million, 2011 £2.7 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 superceded when automatic enrolment begins in 2013.
35. Provisions
Current liabilities
At 2 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 30 September 2012
Additions
Charged during year
Utilised during year
Transfer from non-current
liabilities
Payments in advance
Contingent consideration
paid
Notional interest on
contingent consideration
Adjustment to goodwill/
contingent consideration
Fair value adjustment to
contingent consideration
Classified as held-for-sale
Exchange adjustment
At 30 September 2013
Contract
discount
£m
Coupon
discount
£m
Onerous
leases
£m
Note
Re-
organisation
costs
£m
Contingent
consideration
£m
12.9
–
8.8
(9.3)
–
–
–
–
–
(0.2)
–
12.2
–
16.4
(9.9)
–
–
–
–
–
–
(0.2)
0.1
18.6
1.8
–
8.3
(8.4)
–
–
–
–
–
–
0.1
1.8
–
8.2
(8.0)
–
–
–
–
–
–
–
–
2.0
1.3
–
0.2
(0.4)
–
0.3
–
–
–
–
(0.1)
1.3
–
0.5
(1.5)
2.2
–
–
–
–
–
15.6
–
9.5
(14.2)
(1.4)
–
–
–
–
(1.4)
0.1
8.2
–
(0.9)
(5.6)
–
–
–
–
–
–
–
(0.4)
2.1
–
–
1.7
8.2
0.2
–
–
–
0.2
(7.7)
0.1
(0.3)
–
–
0.7
4.6
–
–
1.6
4.5
(4.5)
0.2
(0.5)
2.6
–
–
9.2
19
16
16
10
20, (i)
10
19
Legal
£m
5.4
–
5.4
(7.6)
–
–
–
–
–
(0.3)
(0.1)
2.8
–
5.2
(5.0)
–
–
–
–
–
–
–
(0.1)
2.9
Other
(Note (ii))
£m
4.5
–
5.6
(4.9)
1.4
1.2
–
–
–
(0.3)
(0.3)
7.2
–
27.1
(16.9)
1.4
–
–
–
–
–
–
18.8
Total
£m
49.7
0.2
37.8
(44.8)
–
1.7
(7.7)
0.1
(0.3)
(2.2)
(0.3)
34.2
4.6
56.5
(46.9)
5.2
4.5
(4.5)
0.2
(0.5)
2.6
(0.2)
(0.4)
55.3
OverviewStrategic ReportDirectors’ ReportShareholder InformationFinancial StatementsAnnual Report 2013 Annual Report 2013
150
Financial Statements
Notes to the accounts
Continued
35. Provisions continued
Non-current liabilities
At 2 October 2011 Restated (Note 2)
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 30 September 2012 Restated (Note 2)
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
Exchange adjustment
At 30 September 2013
Onerous
leases
£m
Re-
organisation
costs
£m
Contingent
consideration
£m
Other
(Note (ii))
£m
Note
2.9
–
0.2
(0.1)
(0.3)
–
–
–
0.1
2.8
–
13.0
(0.6)
(2.2)
–
–
–
–
0.1
13.1
3.9
–
(3.9)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2.6
3.4
–
–
(0.3)
0.2
(0.3)
(0.2)
0.5
5.9
10.2
–
–
(1.6)
(2.4)
0.9
0.9
2.4
0.7
17.0
3.1
–
3.8
–
(1.2)
–
–
–
–
5.7
–
6.3
(0.5)
(1.4)
–
–
–
–
(0.2)
9.9
16
16
10
20, (i)
10
Total
£m
12.5
3.4
0.1
(0.1)
(1.8)
0.2
(0.3)
(0.2)
0.6
14.4
10.2
19.3
(1.1)
(5.2)
(2.4)
0.9
0.9
2.4
0.6
40.0
(i)
The adjustment to goodwill/contingent consideration relates to prior year acquisitions only.
(ii) Other current provisions principally of dilapidation provisions of £4.3 million (2012 £0.7 million, 2011 £0.4 million), provisions for national
insurance of £2.1 million (2012 £1.4 million, 2011 £0.4 million) and loyalty programme provision of £5.5 million (2012 £nil, 2011 £nil).
Other non-current provisions principally of dilapidation provisions of £2.1 million (2012 £1.7 million, 2011 £1.6 million), provisions for national
insurance of £nil (2012 £1.1 million, 2011 £1.1 million) and provision for remuneration following business combinations of £7.6 million (2012 £nil,
2011 £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
30 September
2012
£m
Restated
(Note 2)
At
2 October
2011
£m
Restated
(Note 2)
At
30 September
2013
9.2
13.1
3.9
26.2
0.7
0.8
5.1
6.6
8.2
0.4
2.2
10.8
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 relating to acquisitions
in the year is £nil to £26.8 million. Certain contingent consideration arrangements are not capped since they are based on future business
performance.
36. Deferred taxation
Accelerated
capital
allowances
£m
Goodwill and
intangible
assets
£m
Note
Disclosed within non-current
liabilities
Disclosed within non-current assets
At 2 October 2011
(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
Classified as held-for-sale
Exchange adjustment
At 30 September 2012
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
Exchange adjustment
At 30 September 2013
Disclosed within non-current
liabilities
Disclosed within non-current assets
At 30 September 2013
19
11
11
38,39
38,39
16
17
–
7.6
7.6
(29.8)
(0.8)
–
–
–
1.3
3.1
0.1
(18.5)
0.5
(19.0)
(4.3)
2.7
–
–
–
(3.1)
–
(23.2)
(0.6)
(22.6)
(23.2)
27.8
42.2
70.0
4.9
(3.0)
–
–
8.6
(1.0)
(0.2)
(1.3)
78.0
30.4
47.6
10.7
(1.6)
–
–
5.5
(0.1)
(0.2)
92.3
28.9
63.4
92.3
Share-
based
payments
£m
(3.5)
Deferred
interest
£m
Trading losses
and tax
credits
£m
–
(0.8)
Pension
scheme
deficit
£m
–
(12.6)
(16.1)
(0.5)
–
(1.2)
–
–
–
–
–
(17.8)
(4.1)
(13.7)
(0.3)
1.0
(1.4)
–
–
–
–
(18.5)
(3.4)
(15.1)
(18.5)
(36.8)
(36.8)
(74.9)
3.0
–
–
–
–
–
1.5
(107.2)
–
(107.2)
(10.2)
5.3
–
–
–
–
–
(112.1)
(1.1)
(111.0)
(112.1)
(87.8)
(88.6)
72.1
1.5
–
–
–
0.2
1.5
0.5
(12.8)
–
(12.8)
(12.6)
0.9
–
–
–
(1.5)
1.4
(24.6)
(1.4)
(23.2)
(24.6)
(83.6)
(83.6)
7.9
(1.7)
(14.1)
8.5
–
–
2.0
–
(81.0)
(0.6)
(80.4)
10.7
(5.6)
13.1
14.5
–
(2.0)
–
(50.3)
(0.6)
(49.7)
(50.3)
Other
£m
0.3
(29.6)
(29.3)
6.0
0.2
1.8
–
0.1
1.2
–
(1.5)
(21.5)
(2.3)
(19.2)
8.1
0.6
(0.1)
–
–
0.2
–
(12.7)
–
(12.7)
(12.7)
151
Total
£m
23.8
(200.6)
(176.8)
(14.3)
(0.8)
(13.5)
8.5
8.7
1.7
6.4
(0.7)
(180.8)
23.9
(204.7)
2.1
3.3
11.6
14.5
5.5
(6.5)
1.2
(149.1)
21.8
(170.9)
(149.1)
OverviewStrategic ReportDirectors’ ReportShareholder InformationFinancial StatementsAnnual Report 2013 Annual Report 2013
152
Financial Statements
Notes to the accounts
Continued
36. Deferred taxation continued
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
Rest of Europe
North America
Australia
At
30 September
2013
£m
At
30 September
2012
£m
At
2 October
2011
£m
43.9
1.4
78.7
12.7
136.7
39.6
–
75.0
5.4
120.0
56.2
–
62.4
6.8
125.4
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 charge to income of £5.4 million (2012 credit £15.1 million, 2011 credit £27.2 million) is a charge of £1.5 million (2012 charge
£9.3 million, 2011 credit £1.2 million) relating to discontinued operations.
Included in Other deferred tax are deferred tax assets of £nil (2012 £1.7 million, 2011 £3.2 million) in respect of capital losses and deferred tax
liabilities of £nil (2012 £1.7 million, 2011 £3.2 million) in respect of revaluations and rolled over gains and £0.4 million (2012 £0.4 million, 2011
asset £5.3 million) in respect of financial instruments. The £0.1 million credit to equity (2012 charge of £1.9 million, 2011 credit of £1.7 million)
relates entirely to financial instruments.
There is an unrecognised deferred tax asset of £54.8 million (2012 £79.1 million, 2011 £72.9 million) which relates to revenue losses where there
is insufficient certainty that these losses will be utilised in the foreseeable future. There is an additional unprovided deferred tax asset relating
to capital losses carried forward of £92.4 million (2012 £62.4 million, 2011 £63.1 million). Of these assets none have an expiry date.
No deferred tax liability is recognised on temporary differences of £177.5 million (2012 £117.2 million, 2011 £79.8 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 30 September 2013 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 30 September
2013
£m
Allotted, issued
and fully paid
At 30 September
2012
£m
Allotted, issued
and fully paid
At 2 October
2011
£m
2.5
46.7
49.2
2.5
46.6
49.1
2.5
46.6
49.1
Allotted, issued
and fully paid
At 30 September
2013
Number of shares
Allotted, issued
and fully paid
At 30 September
2012
Number of shares
Allotted, issued
and fully paid
At 2 October
2011
Number of shares
19,886,472
373,687,330
393,573,802
19,886,472
373,073,648
392,960,120
19,886,472
372,774,648
392,661,120
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.
153
During the year the Company disposed of 4.7 million A Ordinary Non-Voting shares, in order to satisfy incentive schemes. This represented
1.3% of the called up A Ordinary Non-Voting share capital at 30 September 2013.
The Company also purchased 10.4 million A Ordinary Non-Voting shares having a nominal value of £1.3 million to match obligations under
incentive plans and as part of a £100.0 million share buy-back programme. The consideration paid for these shares was £68.2 million. Shares
repurchased during the year represented 2.8% of the called up A Ordinary Non-Voting share capital at 30 September 2013.
At 30 September 2013 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 3,507,058 (2012 4,929,968 2011 5,399,633) A Ordinary Non-Voting shares.
38. Reserves
Share premium account
At start of year
Issue of shares
At end of year
Capital redemption reserve
At start and end of year
Revaluation reserve
At start of year
Transfer to retained earnings
At end of year
Shares held in treasury
At start of year
Purchase of own shares
Own shares released on vesting of share options
At end of year
Year ending
30 September
2013
£m
Year ending
30 September
2012
£m
13.5
2.8
16.3
12.7
0.8
13.5
1.1
1.1
–
–
–
3.3
(3.3)
–
Year ending
30 September
2013
£m
Year ending
30 September
2012
£m
(43.8)
(94.6)
21.8
(116.6)
(46.3)
(30.1)
32.6
(43.8)
The Group’s investment in its own shares is classified within shareholders’ funds as shares held in treasury. At 30 September 2013, this
investment comprised the cost of 20,412,954 A Ordinary Non-Voting shares (2012 10,188,174 shares, 2011 9,728,174 shares). The market value of
these shares at 30 September 2013 was £155.5 million (2012 £49.1 million, 2011 £35.3 million).
Translation reserve
At start of year
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 on hedges of net investments in foreign operations
At end of year
Year ending
30 September
2013
£m
Year ending
30 September
2012
£m
Note
17
(32.6)
(2.0)
(2.5)
1.4
(2.3)
1.0
(37.0)
(42.5)
(22.6)
(0.9)
2.1
1.9
29.4
(32.6)
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.
OverviewStrategic ReportDirectors’ ReportShareholder InformationFinancial StatementsAnnual Report 2013 Annual Report 2013
154
Financial Statements
Notes to the accounts
Continued
38. Reserves continued
Retained earnings
At start of year
Net profit for the year
Dividends paid
Expenses incurred in relation to scheme of arrangement
Actuarial gain/(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
Current tax on items recognised in equity
Deferred tax on actuarial movement
Deferred tax on other items recognised directly in equity
At end of year
Year ending
30 September
2013
£m
Note
Year ending
30 September
2012
Restated
(Note 2)
£m
12
44
34
(i)
36
36
169.1
189.2
(69.6)
(1.5)
66.0
12.5
(11.0)
(3.0)
–
(16.1)
(0.7)
1.4
(27.5)
1.3
310.1
49.6
253.8
(66.2)
–
(60.7)
12.5
(15.6)
–
3.3
(13.5)
0.1
0.4
5.4
169.1
At end of year – Total Reserves
173.9
107.3
(i)
£3.0 million (2012 £nil, 2011 £7.1 million) 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 start of year
Share of profit for the year
Dividends paid
Shares issued
Non-controlling interests arising from business combinations
Gain 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 gain/(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
Year ending
30 September
2013
£m
Year ending
30 September
2012
£m
95.3
23.4
(9.1)
2.3
1.4
1.4
0.8
(1.1)
(2.4)
0.5
0.3
(0.1)
0.2
0.7
0.7
0.6
–
(1.3)
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
–
16
34
36
36
At end of year
113.6
95.3
155
40. Commitments and contingent liabilities
Commitments
Property, plant and equipment
Contracted but not provided in the financial statements
At
30 September
2013
£m
At
30 September
2012
£m
At
2 October
2011
£m
0.2
0.7
17.4
At 30 September 2013 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
30 September
2013
Properties
£m
At
30 September
2012
Properties
£m
At
2 October
2011
Properties
£m
At
30 September
2013
Plant and
equipment
£m
At
30 September
2012
Plant and
equipment
£m
At
2 October
2011
Plant and
equipment
£m
28.0
26.0
61.5
69.9
185.4
27.9
24.7
56.9
66.4
175.9
28.2
24.8
59.7
74.9
187.6
2.8
2.0
2.3
–
7.1
5.9
5.1
3.4
–
14.4
7.3
5.8
7.1
–
20.2
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 25 December 2022.
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
At
30 September
2013
£m
At
30 September
2012
£m
At
2 October
2011
£m
12.0
4.9
1.2
18.1
12.6
1.3
0.8
14.7
10.3
2.4
0.2
12.9
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 £65.1 million (2012 £76.8 million, 2011 £91.2 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 £59.1 million (2012 £68.6 million, 2011 £100.5 million).
Contingent liabilities
The Group has issued stand by letters of credit in favour of the Trustees of the Group’s defined benefit pension fund amounting to £nil
(2012 £nil, 2011 £53.6 million) together with other guarantees of £1.2 million (2012 £2.4 million, 2011 £9.3 million).
The Group is exposed to libel claims in the ordinary course of business and vigorously defends against claims received. The Group makes
provision for the estimated costs to defend such claims 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 22 October 1996. Two of these writs have been discontinued. The total outstanding
amount claimed on the two remaining writs is Malaysian Ringgits 82.4 million (£15.6 million) (2012 Malaysian Ringgits 82.3 million (£16.6
million), 2011 Malaysian Ringgits 82.0 (£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.
OverviewStrategic ReportDirectors’ ReportShareholder InformationFinancial StatementsAnnual Report 2013 Annual Report 2013
156
Financial Statements
Notes to the accounts
Continued
41. Share-based payments
The Group offers a number of share-based remuneration schemes to certain Directors and 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 ten 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 51 to 70.
For equity-settled share-based payment transactions, IFRS 2 applies to grants of shares, share options or other equity instruments made
after 7 November 2002 that had not vested by 1 January 2005.
The charge to the Consolidated Income Statement is as follows:
Division
DMGT
RMS
Euromoney
Business information
Other
Social security costs
Scheme
Executive Share Option Scheme
Executive Bonuses
Long-Term Incentive Plan
Capital Appreciation Plan
Year ending
30 September
2013
£m
Year ending
30 September
2012
£m
Year ending
2 October
2011
£m
Note
0.4
0.4
1.7
7.6
2.1
1.7
–
4.2
18.1
0.3
0.5
1.9
6.6
2.3
1.6
–
1.2
14.4
–
0.9
1.2
7.3
8.1
1.7
0.2
1.4
20.8
6
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 58.
Outstanding at 1 October 2012
Forfeited during the year
Exercised during the year
Outstanding at 30 September 2013
Exercisable at 30 September 2013
Exercisable at 1 October 2012
Year ending
30 September
2013
Number of
share options
1,401,480
(512,030)
(10,000)
879,450
–
–
Year ending
30 September
2013
Weighted
average
exercise price
£
6.44
5.94
6.08
6.73
–
–
Year ending
30 September
2012
Number of
share options
1,737,745
(336,265)
–
1,401,480
–
–
Year ending
30 September
2012
Weighted
average
exercise price
£
6.43
6.42
–
6.44
–
–
Year ending
2 October
2011
Number of
share options
1,815,807
(78,062)
–
1,737,745
–
–
Year ending
2 October
2011
Weighted
average
exercise price
£
6.43
6.38
–
6.43
–
–
No share options were granted although options were forfeited by leavers during the year.
The options outstanding at 30 September 2013 had a weighted average remaining contractual life of 0.8 years
(2012 1.3 years, 2011 2.3 years).
The inputs into the Black-Scholes model for options, granted since 7 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 (£)
157
8 December
2003
6 December
2004
6.08
6.08
383,742
10.00
6.50
6.08
4.80
1.65
20.00
1.43
7.24
7.24
495,708
10.00
6.50
7.24
4.50
1.52
20.00
1.70
DMGT 2006 Executive Share Option Scheme
Under the 2006 Scheme, each award of options has a maximum life of 10 years. The maximum award limit is 100% of salary in any year in
normal circumstances and 200% of salary in exceptional circumstances. Awards will not normally vest until three years after the award and
the performance conditions have been met. No options were outstanding to Directors during the year.
Outstanding at 1 October 2012
Granted during the year
Forfeited during the year
Exercised during the year
Expired during the year
Outstanding at 30 September 2013
Exercisable at 30 September 2013
Exercisable at 1 October 2012
Year ending
30 September
2013
Number of
share options
Year ending
30 September
2013
Weighted
average
exercise price
£
Year ending
30 September
2012
Number of
share options
Year ending
30 September
2012
Weighted
average
exercise price
£
2,301,074
188,250
(148,564)
(603,682)
–
1,737,078
918,828
1,183,647
4.59
5.27
6.22
4.68
–
4.71
4.71
5.15
2,394,074
370,000
(164,000)
(299,000)
–
2,301,074
1,183,647
1,100,647
4.73
3.96
5.91
2.96
–
4.59
5.15
5.97
Year ending
2 October
2011
Number of
share options
2,571,960
266,000
(48,000)
(221,703)
(174,183)
2,394,074
1,100,647
838,579
Year ending
2 October
2011
Weighted
average
exercise price
£
4.74
5.39
3.56
5.62
5.05
4.73
5.97
6.47
Options were forfeited by leavers during the year.
The aggregate of the estimated fair values of the options granted during the year is £0.2 million (2012 £0.3 million, 2011 £0.3 million).
The options outstanding at 30 September 2013 had a weighted average remaining contractual life of 6.2 years (2012 6.5 years,
2011 6.8 years).
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 (£)
31 March
2006
6.98
6.98
158,406
10.00
7.00
6.98
4.50
1.72
20.00
1.53
5 July
2006
27 November
2006
17 December
2007
27 May
2008
24 November
2008
6.11
6.11
5,000
10.00
7.00
6.11
4.80
2.01
20.00
1.44
6.88
6.88
148,000
10.00
7.00
6.88
4.30
1.90
20.00
1.51
5.05
5.05
96,108
10.00
7.00
5.05
4.30
2.84
20.00
1.18
4.02
4.02
35,000
10.00
7.00
4.02
4.30
3.66
20.00
0.92
2.50
2.50
184,000
10.00
7.00
2.50
3.00
5.89
40.00
0.56
OverviewStrategic ReportDirectors’ ReportShareholder InformationFinancial StatementsAnnual Report 2013 Annual Report 2013
158
Financial Statements
Notes to the accounts
Continued
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 (£)
26 January
2009
14 December
2009
6 December
2010
5 December
2011
27 June
2012
17 December
2012
2.53
2.53
62,887
10.00
7.00
2.53
3.00
5.81
40.00
0.56
4.04
4.04
229,427
10.00
7.00
4.04
3.00
3.64
40.00
1.13
5.39
5.39
260,000
10.00
7.00
5.39
2.00
2.97
30.00
1.22
3.98
3.98
270,000
10.00
7.00
3.98
1.50
4.27
30.00
0.71
3.91
3.91
100,000
10.00
7.00
3.91
1.00
4.43
30.00
0.70
5.27
5.27
188,250
10.00
7.00
5.27
1.00
3.42
30.00
0.98
Nil-Cost Options under the DMGT Executive Bonus Scheme
Since December 2009, a portion of the bonus earned by Executive Directors under the Executive Bonus Scheme has been deferred into
shares in the form of nil-cost options. 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. Details of the nil-cost options awarded and outstanding are shown in the table on page 56 of the Remuneration
Report. The total bonus is calculated in accordance with the Plan rules, as set out on page 54 of the Remuneration Report.
Outstanding at 1 October 2012
Granted during the year
Exercised during the year
Outstanding at 30 September 2013
Exercisable at 30 September 2013
Exercisable at 1 October 2012
Year ending
30 September
2013
Number of
share options
1,227,394
193,276
(530,140)
890,530
–
–
Year ending
30 September
2013
Weighted
average
exercise price
£
–
–
–
–
–
–
Year ending
30 September
2012
Number of
share options
951,445
275,949
1,227,394
–
–
Year ending
30 September
2012
Weighted
average
exercise price
£
Year ending
2 October
2011
Number of
share options
Year ending
2 October
2011
Weighted
average
exercise price
£
–
–
–
–
–
–
429,625
678,013
(156,193)
951,445
–
–
–
–
–
–
–
–
No share options expired or were forfeited during the year.
All of the outstanding options are grants to Directors. A further 400,000 options were granted to a former senior executive, other than a
Director, all of which were exercised during the year.
DMGT Long-Term incentive Plan
Details of the terms and conditions relating to this scheme are set out in the remuneration report on page 62.
Outstanding at 1 October 2012
Granted during the year
Forfeited during the year
Exercised during the year
Expired during the year
Outstanding at 30 September 2013
Exercisable at 30 September 2013
Exercisable at 1 October 2012
No share awards were forfeited during the year.
Year ending
30 September
2013
Number of
share options
Year ending
30 September
2013
Weighted
average
exercise price
£
Year ending
30 September
2012
Number of
share options
Year ending
30 September
2012
Weighted
average
exercise price
£
2,126,265
694,489
(422,952)
(33,147)
–
2,364,655
–
–
4.84
5.27
4.71
4.63
–
4.96
–
–
1,555,853
643,614
–
–
(73,202)
2,126,265
–
–
5.14
4.37
–
–
7.06
4.84
–
–
Year ending
2 October
2011
Number of
share options
1,637,225
595,695
–
(356,890)
(320,177)
1,555,853
–
–
Year ending
2 October
2011
Weighted
average
exercise price
£
4.92
5.59
–
5.17
4.81
5.14
–
–
159
The aggregate of the estimated fair values of the awards made during the year is £3.7 million (2012 £2.8 million, 2011 £3.3 million).
The awards outstanding at 30 September 2013 had a weighted average remaining contractual life of 2.6 years (2012 2.2 years,
2011 2.3 years).
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 (£)
1 January
2007
19 December
2009
19 December
2009
19 December
2009
19 December
2009
7.17
7.17
89,101
7.00
–
Nil
4.30
1.82
20.00
5.45
4.04
4.04
125,115
2.78
–
Nil
3.00
3.64
40.00
4.04
4.04
4.04
62,557
3.00
–
Nil
3.00
3.64
40.00
4.04
4.04
4.04
64,273
4.00
–
Nil
3.00
3.64
40.00
4.04
4.04
4.04
62,557
5.00
–
Nil
3.00
3.64
40.00
4.04
19 December
2009
20 December
2010
20 December
2010
20 December
2010
20 December
2010
4.04
4.04
62,557
6.00
–
Nil
3.00
3.64
40.00
4.04
5.59
5.59
192,758
2.78
–
Nil
3.00
2.86
30.00
5.59
5.59
5.59
96,380
3.00
–
Nil
3.00
2.86
30.00
5.59
5.59
5.59
93,945
4.00
–
Nil
3.00
2.86
30.00
5.59
5.59
5.59
93,945
5.00
–
Nil
3.00
2.86
30.00
5.59
20 December
2010
1 January
2011
13 February
2012
10 December
2012
5.59
5.59
93,945
6.00
–
Nil
2.00
2.86
30.00
5.59
5.74
5.74
17,421
3.00
–
Nil
1.50
2.97
30.00
5.74
4.37
4.37
721,470
5.00
–
Nil
1.00
3.89
30.00
4.37
5.27
5.27
588,631
5.00
–
Nil
1.00
3.42
30.00
5.27
OverviewStrategic ReportDirectors’ ReportShareholder InformationFinancial StatementsAnnual Report 2013 Annual Report 2013
160
Financial Statements
Notes to the accounts
Continued
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 30 September 2011
options under the 2001 and 2005 plan have no longer been 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 amortized using an accelerated
methods. 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 1 October 2012
Granted during the year
Forfeited during the year
Exercised during the year
Expired during the year
Outstanding at 30 September 2013
Exercisable at 30 September 2013
Exercisable at 1 October 2012
Year ending
30 September
2013
Number of
share options
Year ending
30 September
2013
Weighted
average
exercise price
US$
2,890,562
86,695
(225,167)
(708,491)
–
2,043,599
724,984
1,134,841
46.59
51.93
46.67
45.87
–
47.10
45.95
45.86
Year ending
30 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
Year ending
30 September
2012
Weighted
average
exercise price
US$
45.67
52.27
46.59
44.17
36.39
46.59
45.86
44.71
Year ending
2 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
Year ending
2 October
2011
Weighted
average
exercise price
US$
43.52
46.89
46.66
36.89
–
45.67
44.71
40.78
The weighted average share price at the date of exercise for share options exercised during the year was US$ 56.46 (2012 US$52.27, 2011
US$46.89).
The options outstanding at 30 September 2013 had a weighted average exercise price of US$47.10 (2012 US$46.59, 2011 US$45.67) and a
weighted average remaining contractual life of 3.03 years (2012 3.27 years, 2011 4.06 years).
The inputs into the Black-Scholes model are as follows:
Date of grant
Market value of shares at date of grant (US$)
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$)
During 2004
During 2005
During 2009
During 2010
During 2011
9.13
9.13
1,907
2.67
6–9
9.13
4.00
2.00
35.00
17.91
16.61
16.61
6,688
3.67
6–9
16.61
4.00
2.00
35.00
12.53
47.81
47.81
275,460
3.80
6–9
47.81
2.20
2.50
29.32
9.59
45.25
45.25
449,769
3.80
6–9
45.25
1.78
2.63
36.58
10.93
46.89
46.89
1,125,798
4.30
6–9
46.89
2.27
3.05
33.00
10.08
161
During 2012
During 2013
52.27
52.27
132,282
4.75
6–9
52.27
1.25
3.05
35.15
10.08
56.46
56.46
51,695
4.64
6–9
56.46
1.09
3.01
33.52
13.13
Date of grant
Market value of shares at date of grant (US$)
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$)
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 21 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 30 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 1 October 2012
Granted during the year
Exercised during the year
Expired during the year
Outstanding at 30 September 2013
Exercisable at 30 September 2013
Exercisable at 1 October 2012
Year ending
30 September
2013
Number of
share options
2,719,801
440,630
(1,432,443)
(7,674)
1,720,314
10,468
–
Year ending
30 September
2013
Weighted
average
exercise price
£
Year ending
30 September
2012
Number of
share options
Year ending
30 September
2012
Weighted
average
exercise price
£
0.0025
0.0025
0.0025
0.0025
0.0025
0.0025
–
2,719,801
–
–
–
2,719,801
–
–
0.0025
–
–
–
0.0025
–
–
Year ending
2 October
2011
Number of
share options
2,719,801
–
–
–
2,719,801
–
–
Year ending
2 October
2011
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 £9.39 (2012 n/a, 2011 n/a).
The options outstanding at 30 September 2013 had a weighted average exercise price of £0.0025 (2012 £0.0025, 2011 £0.0025) and a
weighted average remaining contractual life of 7.0 years (2012 8.0 years, 2011 9.0 years).
The aggregate of the estimated fair values of the options granted during the year is £nil (2012 £nil, 2011 £nil).
OverviewStrategic ReportDirectors’ ReportShareholder InformationFinancial StatementsAnnual Report 2013 Annual Report 2013
162
Financial Statements
Notes to the accounts
Continued
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)
30 March
2010
30 March
2010
501.00
0.25
10,468
10.00
4.00
0.25
2.28
7.00
4.37
501.00
0.25
1,709,846
10.00
5.00
0.25
2.75
7.00
4.20
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 21 January 2010. The CSOP 2010
UK was approved by HM Revenue and Customs on 21 June 2010 and granted on 28 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 28 June 2013. The CSOP 2010 Canada, granted on 30 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 30 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 1 October 2012
Granted during the year
Exercised during the year
Expired during the year
Outstanding at 30 September 2013
Exercisable at 30 September 2013
Exercisable at 1 October 2012
Year ending
30 September
2013
Number of
share options
Year ending
30 September
2013
Weighted
average
exercise price
Year ending
30 September
2012
Number of
share options
Year ending
30 September
2012
Weighted
average
exercise price
Year ending
2 October
2011
Number of
share options
Year ending
2 October
2011
Weighted
average
exercise price
781,191
(223,243)
(531,268)
(2,632)
24,048
–
–
5.7200
5.9400
5.6100
6.0300
6.0300
–
–
781,191
–
–
–
781,191
–
–
5.7200
–
–
–
5.7200
–
–
781,191
–
–
–
781,191
–
–
5.7200
–
–
–
5.7200
–
–
The weighted average share price at the date of exercise for share options exercised during the year was £9.74 (2012 n/a, 2011 n/a).
The options outstanding at 30 September 2011 had a weighted average exercise price of £6.03 (2012 £5.72, 2011 £5.72) and a weighted
average remaining contractual life of 6.38 years (2012 7.38 years, 2011 8.38 years).
The aggregate of the estimated fair values of the options granted during the year is £nil (2012 £nil, 2011 £nil).
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)
163
28 June
2010
603.34
603.34
24,048
9.38
3.00
603.34
2.28%
7.00%
437.00
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 £1.9 million (2012 £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 30 September 2013 included in the Statement of Financial Position
is a liability of £7.4 million (2012 £14.6 million, 2011 £10.3 million). Of these schemes, options with an intrinsic value of £nil (2012 £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 1 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 30 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 to profits for
financial year 2010 to 2012 for those individual participants where the additional performance conditions for the second and final tranches
had not previously been met and 303,321; 244,152 and 39,907 options vested in February 2011, 2012 and 2013 respectively. No further options
will vest under this scheme and all outstanding options have been exercised.
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 1 October 2012
Granted during the year
Exercised during the year
Expired during the year
Outstanding at 30 September 2013
Exercisable at 30 September 2013
Exercisable at 1 October 2012
Year ending
30 September
2013
Number of
share options
Year ending
30 September
2013
Weighted
average
exercise price
£
Year ending
30 September
2012
Number of
share options
Year ending
30 September
2012
Weighted
average
exercise price
£
52 weeks
ending 2
October 2011
Number of
share options
52 weeks
ending 2
October 2011
Weighted
average
exercise price
£
70,114
(14,693)
(55,421)
–
–
–
–
0.0025
0.0025
0.0025
–
–
–
–
351,828
–
(245,469)
(36,245)
70,114
70,114
351,828
0.0025
0.0025
7.3300
0.0025
0.0025
0.0025
0.0025
335,606
334,997
(313,765)
(5,010)
351,828
351,828
335,606
0.0025
0.0025
7.2700
0.0025
0.0025
0.0025
0.0025
OverviewStrategic ReportDirectors’ ReportShareholder InformationFinancial StatementsAnnual Report 2013 Annual Report 2013
164
Financial Statements
Notes to the accounts
Continued
41. Share-based payments continued
The weighted average share price at the date of exercise for share options exercised during the year was £9.28 (2012 £7.33, 2011 £7.27).
The options outstanding at 30 September 2013 had a weighted average exercise price of £nil (2012 £0.0025, 2011 £0.0025) and a weighted
average remaining contractual life of nil years (2012 2.0 years, 2011 3.0 years).
The aggregate of the estimated fair values of the options granted during the year is £nil (2012 £0.2 million, 2011 £1.0 million).
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 year.
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.
The remuneration of the Directors at the year end, who are the key management personnel of the Group, is set out in aggregate in the
audited part of the Directors’ Remuneration Report on page 53.
Transactions with joint ventures and associates
Details of the Group’s principal joint ventures and associates are set out in Note 24.
Associated Newspapers Limited (‘ANL’) has a 33.3% (2012 33.3%, 2011 33.3%) shareholding in Fortune Green Limited. During the year the
Group received revenue for newsprint, computer and office services of £0.4 million (2012 £0.6 million, 2011 £0.5 million). The amount due
from Fortune Green Limited at 30 September 2013 was £0.2 million (2012 £0.2 million, 2011 £0.2 million).
ANL has a 12.5% (2012 12.5%, 2011 12.5%) share in the Newspapers Licensing Agency (‘NLA’) from which royalty revenue of £3.3 million
was received (2012 £3.8 million, 2011 £3.1 million) and £0.2 million receivable at the year end (2012 £0.4 million, 2011 £0.4 million).
Commissions paid on this revenue total £0.6 million (2012 £0.7 million, 2011 £0.6 million). The amount due to the NLA at 30 September 2013
was £nil (2012 £0.1 million, 2011 £nil). Interest bearing loans of £0.4 million are due to ANL from NLA at 30 September 2013 (2012 £0.4 million,
2011 £0.4 million).
Northcliffe Media Holdings Limited has a 25.0% (2012 25.0%, 2011 25.0%) share in Hold the Front Page.co.uk Limited to which it provides
payroll services. The amount due from Daily Mail and General Holdings Limited (‘DMGH’) to Hold the Front Page.co.uk Limited at
30 September 2013 was £0.1 million (2012 £nil, 2011 £nil).
165
DMGH has a 15.6% (2012 15.6%, 2011 15.6%) shareholding in The Press Association. During the year the Group received dividends of
£1.7 million, services amounting to £2.6 million (2012 £3.8 million, 2011 £3.7 million) and the net amount due from the Press Association
as at 30 September 2013 was £0.1 million (2012 £0.2 million, 2011 £0.1 million).
DMGH has a 38.7% (2012 nil%, 2011 nil%) shareholding in Local World, the media segment group formed in November 2012 which combined
the Group’s local media titles with those of Illife News and Media Limited. During the year the Group provided printing and newspaper
services of £17.6 million (2012 £nil, 2011 £nil) to Local World. Local World provided staff and other services to the Group totalling £42.9 million
(2012 £nil, 2011 £nil). During the year Local World were charged £0.9 million (2012 £nil, 2011 £nil) by the Group for rent and service charges in
relation to leasehold and investment properties. The net amount due to the Group from Local World at 30 September 2013 was £3.9 million
(2012 £nil, 2011 £nil).
During the year the Group received a dividend of £nil (2012 £0.4 million, 2011 £0.3 million) from Hasznaltauto kft, a joint venture.
During the year, Landmark Information Group Limited (Landmark) charged management fees of £0.3 million (2012 £0.3 million, 2011
£0.3 million) to Point X Limited, a joint venture, and recharged costs of £0.1 million (2012 £0.1 million, 2011 £0.1 million). Point X Limited received
royalty income from Landmark of £0.1 million (2012 £0.1 million, 2011 £0.1 million) and the amount from Landmark at 30 September 2013
was £nil (2012 owed from Landmark £0.1 million, 2011 owed to Landmark £0.3 million).
Trepp LLC has a 50% interest in TreppPort LLC, a joint venture. During the year, Trepp LLC and Rockport Group made cash contributions
of £1.2 million and £0.2 million respectively (2012 £nil and £nil, 2011 £0.6 million and £0.1 million respectively) to TreppPort LLC.
During the year, DMG Information Inc. received interest income of £0.4 million (2012 £nil, 2011 £nil) ) on a loan to Xcelligent Inc., an
associate. Interest bearing loans of £7.0 million are due to DMG Information Inc. from Xcelligent Inc. at 30 September 2013 (2012 £nil,
2011 £nil)
RMS Inc., has a 29.6% (2012 29.6%, 2011 nil%) interest in Praedicat, an associate. During the year RMS made a further investment in Praedict
amounting to £0.8 million (2012 £1.5 million, 2011£nil).
ANL has a nil% shareholding (2012 100.0%, 2011 50.0%) in Globrix Limited (Globrix) and a 50.0% shareholding (2012 50.0%, 2011 50.0%) in Artirix
Limited (Artirix). During the year, the Group recharged £nil (2012 £nil, 2011 £0.2 million) staff costs to Globrix and Globrix recharged the
Group £nil (2012 £0.5 million, 2011 £0.6 million) for website development costs. The Group provided services totalling £nil (2012 £0.1 million,
2011 £nil) to Artirix, with £nil (2012 £nil, 2011 £nil) remaining due at 30 September 2013. At 30 September 2013 Globrix owed £nil to Artirix
(2012 £nil, 2011 £1.1 million) and £nil to various Group companies (2012 £1.3 million, 2011 £0.2 million), and £nil was due from Artirix (2012
£nil, 2011 £nil) to Globrix.
During the period, Artirix received revenues of £nil from Globrix (2012 £0.5 million, 2011 £0.6 million). At 30 September 2013 Artirix owed
£1.4 million to various Group companies (2012 £1.3 million, 2011 £1.9 million) and £nil to Globrix (2012 £nil, 2011 £nil). Artirix provided staff
and other services to Teletext Holdings Limited (an associate company) totalling £nil, with £nil remaining due from Teletext Holdings Limited
at 30 September 2013.
ANL had a 50.0% interest in Teletext Holdings Limited (‘Teletext’). The Group provided services (under the Transitional Services Agreement)
amounting to £nil (2012 £0.3 million, 2011 £nil) for the year, and £nil (2012 £0.1 million, 2011 £nil) was due from Teletext at 30 September 2013.
VAT of £0.7 million (2012 £0.5 million, 2011 £nil) was paid by DMG Media Limited on behalf of Teletext and £nil was due from Teletext at
30 September 2013 (2012 £nil, 2011 £nil).
Artirix provided staff and other services to Teletext totalling £nil (2012 £0.2 million, 2011 £nil), with £nil (2012 £0.1 million, 2011 £nil) remaining
due from Teletext at 30 September 2013.
Proceeds on the sale of Teletext Ltd to Teletext Holdings Ltd of £6.0 million are due to ANL as at 30 September 2013 (2012 £6.0 million,
2011 £nil).
ANL has a 50.8% (2012, 52.5%, 2011 nil%) shareholding in Zoopla Limited (‘Zoopla’). During the year, listing services amounting to £0.2 million
(2012 £1.0 million, 2011 £nil) were provided by Zoopla to ANL as part of a revenue share agreement, with £nil (2012 £0.2 million, 2011
£nil) remaining due to Zoopla at 30 September 2013. Net services (under the Transitional Services Agreement) provided by ANL totalled
£0.3 million (2012 £0.2 million, 2011 £nil) for the year, £nil (2012 £5.4 million, 2011 £nil) of other transactional payments were made by ANL
on behalf of Zoopla, with a balance of £nil (2012 £0.9 million, 2011 £nil) being due from Zoopla at 30 September 2013.
During the year, the Group received dividends of £5.3 million (2012 £nil, 2011 £nil) from Zoopla.
AN Mauritius Limited has a 26.0% (2012 26.0%, 2011 26.0%) interest in Mail Today Newspapers Pte Ltd (India). During the year, additional share
capital of £1.1 million (2012 £2.3 million, 2011 £2.8 million) was invested in Mail Today, by AN Mauritius Limited.
ANL has a 34.7% (2012 30.0%, 2011 30.0%) interest in Social Metrix SA (Argentina). During the year, £nil (2012 £0.4 million, 2011 £0.9 million)
additional share capital was invested by A&N International Media Limited.
ANL has a 50.0% (2012 50.0%, 2011 50.0%) shareholding in Northprint Manchester Limited. The net amount due to Associated Newspapers
Limited for £5.8 million (2012 £5.8 million, 2011 £5.8 million) has been fully provided.
ANL has a 25.0% (2012 25.0%, 2011 nil%) shareholding in Extra Newspapers Limited to which it provided £nil (2012 £0.3 million, 2011 £nil)
of funding during the year. This amount is due to ANL at 30 September 2013, with repayments commencing June 2014.
During the year, the Group received a dividend of £nil (2012 £3.5 million, 2011 £14.6 million) from dmg Radio Investments Pty Limited,
a joint venture. This investment was sold in August 2012.
The Group received a dividend of £nil (2012 £0.3 million, 2011 £0.7 million) from Capital Net, an associate.
OverviewStrategic ReportDirectors’ ReportShareholder InformationFinancial StatementsAnnual Report 2013 Annual Report 2013
166
Financial Statements
Notes to the accounts
Continued
43. Related party transactions continued
Other related party disclosures
During the year, the Group purchased the Ultimate Holding Company’s share of Associated Newspapers North America Inc., for a
consideration of £0.1 million.
During the year, the Group disposed of certain assets for consideration of £0.1 million to The Addison Road Settlement whose trustees
are Lady Rothermere, wife of the Company’s Chairman and David Nelson, a Non-Executive Director of the Company.
The Group has accrued rent and service charges payable to the Harmsworth Pension Scheme amounting to £0.3 million (2012 £nil,
2011 £nil) under an agreement to guarantee the income generated from certain property assets held by the Harmsworth Pension
Scheme which were purchased from the Group during the prior period.
At 30 September 2013 the Group owed £0.9 million (2012 £1.5 million, 2011 £1.2 million) to the pension schemes which it operates.
his amount comprised employees’ and employer’s contributions in respect of September 2013 payrolls which were paid to the pension
schemes in October 2013.
The Group recharges its principal pension schemes with costs of investment management fees. The total amount recharged during
the year was £nil (2012 £0.2 million, 2011 £1.7 million).
Contributions made during the year to the Group’s retirement benefit plans are set out in Note 34, along with details of the Group’s future
funding commitments.
In July 2012, the Group entered into a contingent asset partnership whereby a £150.0 million loan note, guaranteed by the Group, had
been used to commit £10.8 million funding per annum to the Harmsworth Pension Scheme. Interest payable to DMG Pension Partnership
Limited Liability Partnership in the year totalled £11.2 million (2012 £2.8 million, 2011 £nil).
44. Post balance sheet events
Following the year end the Company announced a recommended scheme of arrangement which resulted in Rothermere Continuation
Limited (‘RCL’) holding all of the issued A Ordinary voting share capital of DMGT not already owned by RCL (the ‘Scheme’). An application
has been made to the UK Listing Authority requesting the cancellation of the listing of DMGT Ordinary shares on the Official List and an
application has been made to the London Stock Exchange requesting the cancellation of trading of DMGT Ordinary shares on the
London Stock Exchange’s main market for listed securities. As a result of the allotment of 268,538 new DMGT shares which become
DMGT A Ordinary Voting Shares pursuant to the Scheme, an application for the admission of securities to the Official List and for admission
to trading on the London Stock Exchange’s main market has also been made. The total number of DMGT A Ordinary Voting Shares will
not increase as a result of the Scheme. The cancellation of the listing and trading of DMGT Ordinary shares and the listing and admission
to trading of the 268,538 new DMGT A Ordinary Voting Shares occurred on 30 October 2013.
On 28 October 2013 DMG Information, the business information division of DMGT, agreed to acquire the entire share capital of DIIG EUROPE
for consideration of £75.0 million, from Decision Insight Information Group (‘DIIG’), a portfolio company of the US private equity firm TPG
Capital. DIIG EUROPE is the UK and Ireland’s leading property searches group, primarily delivering residential and commercial property
search results to legal professionals, and is based in Kent, with additional offices in Edinburgh and Dublin DIIG EUROPE’S (‘DIIG(E)’) business
comprises SearchFlow Limited (England & Wales, www.searchflow.co.uk), Millar & Bryce Limited (Scotland, www.millar-bryce.co.uk),
Rochford Brady Legal Services Limited (Ireland, www.rochfordbrady.ie), Decision Insight Hub Limited (also known as NLIS Hub) and Decision
First Limited.
The acquired businesses had revenues of £69.0 million and operating profit of £6.0 million, for the year ending 31 December 2012. The
provisional fair value of net assets acquired with DIIG were as follows:
Goodwill
Intangible assets
Property, plant and equipment
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Deferred tax
Group share of net assets acquired
Provisional fair
value
adjustments
£m
Provisional fair
value
£m
Book value
£m
61.1
1.4
2.6
7.3
3.8
(14.9)
1.4
62.7
(23.0)
45.3
–
–
–
–
(9.1)
13.2
38.1
46.7
2.6
7.3
3.8
(14.9)
(7.7)
75.9
Cost of acquisition:
Total consideration at fair value
167
Cash paid
£m
75.9
The principal provisional fair value adjustments relate to intangible assets recognised relating to the exhibition brands, related deferred tax
liability and £38.1 million attributable to goodwill which represent future synergies.
The fair values set out above are provisional as the Group is currently finalising the purchase price allocation.
45. Subsidiaries exempt from audit
The following UK subsidiaries will take advantage of the newly available audit exemption set out within s479A of the Companies Act 2006 for
the year ending 30 September 2013:
CTF Asset Finance Limited
DMG Asset Finance Limited
Harmsworth Royalties Limited
Kensington US Holdings Limited
Daily Mail International Limited
DMG Atlantic Limited
DMG Investment Holdings Limited
DMG Business Media Limited
DMG Minor Investments Limited
DMGRH Finance Limited
Kensington Finance Limited
Derry Street Investments Limited
Ralph US Holdings
Young Street Holdings Limited
Teletext Holidays Limited – now Ex TH Limited
Associated London Distribution Limited
The Appointment Limited
A&N International Media Limited
Derby Telegraph Media Group Limited
Harmsworth Printing (Stoke) Limited
Alderton Limited
Express and Echo News and Media Limited
Central Independent News and Media Limited
South West Wales Media Limited
Lincolnshire Media Limited
Grimsby and Scunthorpe Media Group Limited
Company
registration
number
03178533
05528329
04219212
06320636
01966438
04521108
03263138
02823743
04228751
03191181
03960683
04485760
06341444
04485808
02336018
03961514
03257727
04147978
00218661
04148861
02774204
00070992
03015855
00120013
00037928
02642787
Broadbean Holdings Limited
Interbase UK Limited
Jobsgroup.Net Limited
Digital Response Network Services Limited
Northcliffe Media Holdings Limited
Northcliffe Media Limited
Blackmore Vale Media Limited
Courier Media Group Limited
Leicester Mercury Media Group Limited
The Western Gazette Company Limited
South West Media Group Limited
Herald Express News and Media Limited
Gloucestershire Media Limited
Bath News and Media
Admag Newspapers Limited
DMG Information Limited
DMG Events Limited
DMG Events International Limited
DMG Angex Limited
Euromoney Canada Limited
Euromoney Charles Limited
Euromoney Institutional Investor
(Ventures) Limited
Euromoney Partnership LLP
Fantfoot Limited
Internet Securities Limited
Company
registration
number
03415808
02894310
05523469
03778379
00272225
03403993
00392494
00101944
00226937
00022796
00210591
02642788
00163659
03215208
01599454
03708142
01150306
04118004
02302189
01974125
04082590
05885797
0C363064
05503274
02976791
OverviewStrategic ReportDirectors’ ReportShareholder InformationFinancial StatementsAnnual Report 2013 Annual Report 2013
168
Financial Statements
Principal Subsidiaries
Principal Subsidiary
Activity
Central activities
Daily Mail and General Holdings Limited*
RMS
Risk Management Solutions, Inc (98.0%)
(Incorporated and operating in the US)
dmg information
DMG Information, Inc
(Incorporated in the USA)
Environmental Data Resources, Inc
(Incorporated and operating in the US)
Landmark Information Group Limited
Hobsons Australia Pty Ltd
(Incorporated and operating in Australia)
Hobsons, Inc
(Incorporated and operating in the US)
Genscape, Inc. (99.9%)
(Incorporated and operating in the US)
Lewtan Technologies, Inc
(Incorporated and operating in the US)
Trepp, LLC
(Incorporated and operating in the US)
dmg events
dmg events (UK) Limited
dmg world media Abu Dhabi Ltd
(Incorporated in Jersey, managed and operating
in Abu Dhabi)
Ad:Tech Expositions LLC
(Incorporated and operating in the US)
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)
EIMN LLC (68.1%)
(Incorporated and operating in the US)
Institutional Investor, Inc (68.1%)
(Incorporated and operating in the US)
Internet Securities, LLC(68.1%)
(Incorporated and operating in the US)
Metal Bulletin Limited (68.1%)
dmg media
Associated Newspapers Limited
Evenbase Recruitment Holdings Limited
Wowcher Limited
Holding company
Provider of risk management information on natural and other related perils
Holding company
Provider of geographic based real estate information services
Provider of property and mapping information
Careers and education information publishing and services
Careers and education information publishing and services
Provider of real time power supply and other energy information
Provider of asset-backed securities information
Provider of commercial mortgage-backed securities and real estate information
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
Internet job search company
Internet daily deals company
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.
Financial Statements
Five Year Financial Summary
169
Consolidated income statement
Revenue
Operating profit before exceptional operating costs, 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 earnings/(loss) per share
Adjusted earnings per share (before amortisation and impairment of
intangible assets and exceptional items)
2009
Restated
(Note 2)
£m
1,772.9
234.0
2010
Restated
(Note 2)
£m
1,703.4
271.8
2011
Restated
(Note 2)
£m
1,748.5
264.4
2012
Restated
(Note 2)
£m
1,746.8
273.7
2013
£m
1,752.6
292.5
(316.0)
(57.2)
(94.3)
(130.1)
(82.8)
(82.0)
214.6
170.1
143.6
209.7
(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
33.9 p
(5.2)
209.4
0.4
209.8
(76.0)
133.8
41.1
174.9
42.6
(19.2)
198.3
227.7
51.8 p
46.0 p
(2.7)
167.4
13.1
180.5
(54.6)
125.9
3.7
129.6
(5.2)
(15.9)
108.5
232.1
28.3 p
46.1 p
(1.8)
141.8
114.4
256.2
(53.3)
202.9
18.8
221.7
54.8
(22.7)
253.8
255.4
66.3 p
49.4 p
5.3
215.0
27.6
242.6
(40.1)
202.5
(37.8)
164.7
47.9
(23.4)
189.2
281.5
50.1 p
51.7 p
Earnings before interest, taxation, depreciation and amortisation (EBITDA)
Adjusted profit after taxation and non-controlling interests
335.5
128.3
371.3
176.3
355.1
176.6
378.3
189.1
374.4
200.1
OverviewStrategic ReportDirectors’ ReportShareholder InformationFinancial StatementsAnnual Report 2013 Annual Report 2013
170
Financial Statements
Five Year Financial Summary
Continued
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
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
64.3
–
2012
£m
254.0
(12.1)
(304.7)
(62.8)
171.7
(1.6)
2013
£m
347.2
(87.7)
(277.5)
(18.0)
107.3
(0.8)
Cash and cash equivalents at end of year
46.9
64.3
171.7
107.3
88.5
Net (decrease)/increase in cash and cash equivalents
Cash outflow 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
(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
(18.0)
17.8
(0.2)
–
40.2
40.0
Net debt at beginning of year
Net debt at end of year
(1,014.6)
(1,048.6)
(1,048.6)
(862.0)
(862.0)
(719.6)
(719.6)
(613.0)
(613.0)
(573.0)
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
2009
Restated
(Note 2)
£m
1,195.1
440.4
46.2
159.8
1,841.5
(352.1)
(1,599.8)
(110.4)
49.1
12.4
4.1
(35.9)
46.8
(186.9)
(110.4)
2010
Restated
(Note 2)
£m
1,113.7
377.8
56.3
174.1
1,721.9
(315.7)
(1,269.0)
137.2
49.1
12.5
7.0
(60.2)
57.4
71.4
137.2
2011
Restated
(Note 2)
£m
1,034.3
327.0
33.5
239.9
1,634.7
(238.4)
(1,289.0)
107.3
49.1
12.7
3.3
(87.7)
80.3
50.5
108.2
2012
Restated
(Note 2)
£m
968.5
244.9
150.3
243.9
1,607.6
(268.0)
(1,087.9)
251.7
49.1
13.5
–
(75.3)
95.3
169.1
251.7
2009
2010
2011
2012
14.70 p
16.00 p
17.00 p
18.00 p
£2.11
£4.61
£3.90
£5.33
£3.47
£5.95
£3.48
£4.97
2013
£m
1,056.8
214.0
188.3
203.3
1,662.4
(338.9)
(986.8)
336.7
49.2
16.3
0.0
(152.5)
113.6
310.1
336.7
2013
19.2p
£4.51
£8.35
* Represents the dividends declared by the Directors in respect of the above years.
Financial Statements
Company balance sheet
At 30 September 2013
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
171
At
30 September
2013
£m
At
30 September
2012
£m
–
2,825.8
2,825.8
0.5
2,024.6
2,025.1
46.6
46.9
5.1
90.1
25.3
3.1
Note
4
5
6
7
11
8
(362.4)
(597.1)
(263.8)
(478.6)
2,562.0
1,546.5
9
10
(698.2)
(0.5)
(750.8)
(0.5)
1,863.3
795.2
49.2
16.2
(116.5)
1.1
1,913.3
12
12
13
14
49.1
13.4
(43.8)
1.1
775.4
1,863.3
795.2
The accounts on pages 171 to 178 were approved by the Directors and authorised for issue on 4 December 2013. They were signed on their
behalf by:
Rothermere
M.W.H. Morgan
Directors
OverviewStrategic ReportDirectors’ ReportShareholder InformationFinancial StatementsAnnual Report 2013 Annual Report 2013
172
Financial Statements
Notes to the Company Balance Sheet
– UK GAAP
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 £1,202.7 million (2012 £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
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 year.
Investments
Investments in subsidiaries are stated at cost, less any provision for impairment, where appropriate.
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.
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.
173
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 set out on pages 134 to 137 of the Group’s Annual Report and Accounts. 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) Cash Flow Statements, and has not presented a cash flow
statement. A consolidated cash flow statement has been presented in the Group’s Annual Report and Accounts.
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 and Accounts.
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
and Accounts.
OverviewStrategic ReportDirectors’ ReportShareholder InformationFinancial StatementsAnnual Report 2013 Annual Report 2013
174
Financial Statements
Notes to the Company Balance Sheet
– UK GAAP
Continued
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
2013
Number
25
2012
Number
18
2013
£m
6.0
2.8
0.4
0.1
9.3
2012
£m
8.0
2.1
1.5
0.2
11.8
The remuneration of the Directors of Company during the year are disclosed in the Remuneration Report on page 53 of the Group’s
Annual Report and Accounts.
4. Tangible fixed assets
Cost
At 30 September 2012
Disposals
At 30 September 2013
Accumulated depreciation
At 30 September 2012
Eliminated on disposal
At 30 September 2013
Net book value – 2012
Net book value – 2013
5. Investments in Group undertakings (as listed on page 168)
At 30 September 2012
Additions
Disposals
Write back of provision
At 30 September 2013
Fixtures,
fittings and
artwork
£m
0.7
(0.7)
–
0.2
(0.2)
–
0.5
–
Cost
£m
Provision
£m
2,120.2
963.6
(258.0)
–
2,825.8
(95.6)
(0.4)
94.8
1.2
–
Net book
value
£m
2,024.6
963.2
(163.2)
1.2
2,825.8
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.
Amounts falling due after more than one year
Derivative financial assets
7. Cash and cash equivalents
Cash and cash equivalents
8. Creditors – amounts falling due within one year
Bank overdrafts
Loan notes
Interest payable
Amounts owed to Group undertakings
Accruals and deferred income
Derivative financial liabilities
175
2012
£m
44.6
1.2
–
20.4
23.9
90.1
2012
£m
–
–
2013
£m
13.1
0.1
0.1
12.8
–
26.1
2013
£m
20.5
20.5
2013
£m
46.9
2012
£m
25.3
2013
£m
1.4
0.8
26.7
325.0
8.5
–
362.4
2012
£m
6.4
1.2
28.5
534.6
4.8
21.6
597.1
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 owed to Group undertakings are repayable on demand and bear interest of UK bank base rate plus 0.5%.
OverviewStrategic ReportDirectors’ ReportShareholder InformationFinancial StatementsAnnual Report 2013 Annual Report 2013
176
Financial Statements
Notes to the Company Balance Sheet
– UK GAAP
Continued
9. Creditors – amounts falling 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
2013
£m
–
309.2
169.2
195.9
23.9
698.2
2013
£m
–
324.7
156.4
200.0
681.1
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
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 £3.1 million (2012 £3.5 million, 2011 £3.8 million) and the unamortised premia
amounts to £7.7 million (2012 £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:
2013
Within one year
Over five years
2012
Within one year
Over five years
2013
High
2.35%
1.93%
2013
Low
1.77%
1.42%
2012
High
2.66%
2.10%
2012
Low
1.54%
1.23%
Overdrafts
£m
Bonds
£m
Loan notes
£m
1.4
–
1.4
–
674.3
674.3
0.8
–
0.8
Total
£m
2.2
674.3
676.5
6.4
47.3
1.2
54.9
–
–
6.4
678.1
678.1
725.4
–
–
1.2
678.1
678.1
733.0
10. Provisions for liabilities
Other provisions
11. Deferred taxation
Other timing differences
Movements on the deferred taxation asset were as follows:
At start of year
Share-based payments
Tax credit/(charge) for the year
At end of year
177
2012
£m
0.5
0.5
2012
£m
3.1
2012
£m
2.8
0.5
(0.2)
3.1
2013
£m
0.5
0.5
2013
£m
5.1
2013
£m
3.1
1.5
0.5
5.1
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 start of year
Issue of shares
At end of year
Shares held in treasury
At start of year
Additions
Own shares released on vesting of share options
At end of year
2013
£m
13.4
2.8
16.2
2013
£m
(43.8)
(94.6)
21.9
(116.5)
2012
£m
12.7
0.7
13.4
2012
£m
(46.3)
(30.1)
32.6
(43.8)
The Group’s investment in its own shares is classified within shareholders’ funds as shares held in treasury. At 30 September 2013, this
investment comprised the cost of 20,412,954 A Ordinary Non-Voting shares (2012 10,188,174, 2011 9,728,174 shares). The market value of these
shares at 30 September 2013 was £155.5 million (2012 £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.
OverviewStrategic ReportDirectors’ ReportShareholder InformationFinancial StatementsAnnual Report 2013 Annual Report 2013
Financial Statements
Notes to the Company Balance Sheet
– UK GAAP
Continued
13. Capital redemption reserve
At start and end of year
14. Profit and loss account
At 30 September 2012
Net profit for the year
Dividends paid
Expenses incurred in relation to scheme of arrangement
Other movements on share option schemes
At 30 September 2013
Total reserves – 2012
Total reserves – 2013
178
£m
1.1
Note
£m
17
775.4
1,202.5
(69.6)
(1.5)
6.5
1,913.3
746.1
1,814.1
The Company estimates that £1,305.5 million of the Company’s profit and loss account reserve is not distributable (2012 £583.6 million,
2011 £607.3 million).
15. Contingent liabilities
At 30 September 2013 the Company had guaranteed a subsidiary’s outstanding derivatives which have a mark to market asset valuation
of £18.7 million (2012 £7.2 million, 2011 liability £3.9 million) and letters of credit with a principal value of £1.2 million (2012 £2.4 million, 2011
£9.3 million). The Company has also issued stand by letters of credit in favour of the Trustees of the Group’s defined benefit pension fund
amounting to £nil (2012 £nil, 2011 £53.6 million). The Company is the guarantor of a loan note amounting £150.0 million (2012 £150.0 million,
2011 £150.0 million) in respect of the contingent asset partnership referred to in Note 34 in the Group’s Annual Report and Accounts.
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.
17. Post balance sheet events
Details of the Company’s post balance sheet events can be found within Note 44 of the Group’s Annual Report and Accounts.
Financial Statements
Shareholder information
179
Company Secretary and Registered Office
Claire 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 subsidiaries and provides details of
significant Group announcements.
www.dmgt.com
Financial Calendar 2014
8 January
5 February
5 February
7 February
30 March
30 March
22 May
4 June
6 June
4 July
24 July
30 September
30 September
26 November
3 December
5 December
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 31 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 180.
Electronic Communications
Equiniti operate Shareview, a free online service which enables shareholders 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 contact 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 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.
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 28 February or 31 August for repayments on 31 March or 30 September respectively.
Share Price Information
The current price of the Company’s A Ordinary Non-Voting Shares can be found on the homepage of the Company’s website at
www.dmgt.com.
OverviewStrategic ReportDirectors’ ReportShareholder InformationFinancial StatementsAnnual Report 2013 Annual Report 2013
180
Financial Statements
Shareholder information
Continued
Eurobond Paying Agent
The principal paying agent for the Company’s 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 e-mail 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 2013
Ordinary Shares
Balance Ranges
Total Number 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 and over
Totals
450
114
12
13
5
5
5
2
606
Percentage of Holders
Total Number of Shares
Percentage Issued capital
74.25%
18.81%
1.98%
2.14%
0.83%
0.83%
0.83%
0.33%
100.00%
161,525
253,997
84,914
183,098
147,353
405,312
912,110
17,738,163
19,886,472
0.81%
1.28%
0.43%
0.92%
0.74%
2.04%
4.58%
89.20%
100.00%
A Ordinary Non-Voting Shares
Balance Ranges
Total Number of Holdings
Percentage of Holders
Total Number of Shares
Percentage Issued capital
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 and over
Totals
890
507
231
144
104
52
101
78
2,107
Advisers
Stockbrokers
Credit Suisse Securities (Europe) Limited
One Cabot Square
London
E14 4QJ
Telephone: 020 7888 8888
Numis Securities Limited
The London Stock Exchange Building
10 Patermoster Square
London
EC4M 7LT
42.24%
24.06%
10.96%
6.83%
4.94%
2.47%
4.79%
3.70%
100.00%
324,824
1,306,703
1,679,840
2,000,502
3,149,065
3,500,210
24,565,881
337,160,305
373,687,330
0.09%
0.35%
0.45%
0.53%
0.84%
0.94%
6.57%
90.23%
100.00%
Auditor
Deloitte LLP
2 New Street Square
London
EC4A 3BZ
Telephone: 020 7936 3000
Registrars
Equiniti
Aspect House
Spencer Road
Lancing
West Sussex
BN99 6DA
Telephone: 0871 384 2302
Facsimile: 0871 384 5100
Corporate brochure and video
Take a look at our corporate brochure
and video for a snapshot of our core
strategic messages and key success
stories from around our business.
www.dmgt.com/corporate_brochure
Find out more at dmgt.com
Visit dmgt.com to see what is
happening across our business
and the marketplaces in which
we operate.
Contact Details
DMGT HQ
Northcliffe House
2 Derry Street
London W8 5TT
UK
Tel +44 020 3615 0000
Fax +44 020 7938 4626
enquiries@dmgt.com
www.dmgt.com
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