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Intelligent
Insights.
Consumer
connections
Annual Report
2017
Daily Mail and General Trust plc
Overview
Financial Highlights
Statutory Results†
Adjusted Measures
Revenue
Operating (loss)/profit
Revenue#
£1,564m
2016: £1,514m
£(129)m
2016: £91m
(Loss)/profit before tax
Profit for the year#
£(112)m
2016: £202m
£342m
2016: £214m
£1,660m
2016: £1,917m
2016 pro formaΩ: £1,604m
Profit before tax*#
£226m
2016: £260m
2016 pro formaΩ: £217m
Operating margin*#
12%
2016: 14%
2016 pro formaΩ: 12%
Earnings per share*#
55.6p
2016: 56.0p
2016 pro formaΩ: 52.1p
Earnings per share#
Dividend per share
Cash operating income*#
Net debt§/EBITDA
97.8p
2016: 57.8p
22.7p
2016: 22.0p
£199m
2016: £254m
2016 pro formaΩ: £172m
1.4x
2016: 1.8x
£ million
Statutory (loss)/profit before tax
Discontinued operations
Exceptional operating costs
Impairment of plant
Intangible impairment and amortisation
Profit on sale of assets
Pension finance charge
Other adjustments
Adjusted profit before tax
For explanations i to vii and more detailed tables please refer to pages 29 to 31.
†
Statutory revenue, operating profit and profit before tax figures are for continuing operations only
(excluding Euromoney). The FY 2016 statutory results have been reclassified accordingly.
FY 2017
FY 2016
Explanation
(112)
523
50
42
282
(530)
5
(33)
226
202
45
58
–
107
(138)
5
(19)
260
i
ii
iii
iv
v
vi
vii
# From continuing and discontinued operations.
*
Before exceptional items, other gains and losses, impairment of goodwill and intangible assets,
amortisation of intangible assets arising on business combinations, pension finance charges and fair
value adjustments; see Consolidated Income Statement on page 96 and the reconciliation in Note 13
to the Accounts.
Pro forma FY 2016 figures have been restated to treat Euromoney as a c.67% owned subsidiary during
the first three months and as a c.49% owned associate during the nine months to September 2016,
consistent with the ownership profile during FY 2017. See reconciliation on page 28.
Ω
§ See Note 16 for details of Net debt.
Go online to www.dmgt.com to find out more
and read our case studies
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Daily Mail and General Trust plc Annual Report 2017
DMGT is an international business
built on entrepreneurialism
and innovation.
DMGT manages a diverse, multinational portfolio of companies,
with total revenues of around £1.5 billion, that provide
businesses and consumers with compelling information,
analysis, insight, events, news and entertainment. DMGT is also
a founding investor and the largest shareholder of Euromoney
Institutional Investor PLC and ZPG Plc.
02
Chairman’s Statement
Maintaining a strong
portfolio of
businesses
10
CEO Review
Delivering against
clear strategic
priorities
06
Our Business Model
How we create value
16
Operating Business
Reviews
A resilient performance
Strategic Report
Chairman’s Statement
DMGT at a glance
Our Business Model
Market Overview
CEO Review
Key Performance Indicators
Operating Business Reviews
Insurance Risk: RMS
dmg information
Property Information
EdTech
Energy Information
Events and Exhibitions: dmg events
dmg media
JVs & Associates
Financial Review
Our People and Our Communities
Principal Risks
Governance
Board of Directors
Chairman’s Statement on Governance
Corporate Governance
Remuneration Report
Statutory Information
Annual General Meeting 2018: Resolutions
Independent Auditor’s Report
Financial Statements
Shareholder Information
02
04
06
08
10
14
16
17
18
19
19
20
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22
24
25
32
36
40
42
44
57
81
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199
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Strategic Report
Maintaining a strong portfolio of businesses
Chairman’s Statement
DMGT has benefited from the resilience
provided by its diversified portfolio,
during continued challenging
market conditions.
The Viscount Rothermere
Chairman
I am pleased to present the Annual
Report for 2017, a year in which DMGT
demonstrated once again the benefits
of maintaining a strong portfolio of
businesses that have the potential to
deliver attractive long-term returns for
our shareholders. This has been a year
of transformation as we have made
significant changes across the Group. We
have established new strategic priorities
and we are better positioned to deliver
long-term shareholder value. That said,
this year’s financial performance has
been affected by challenging market
conditions and the continued volatility
in the wider media industry, however,
DMGT has benefited from the resilience
provided by its diversified portfolio.
Your Group has also continued to invest
to take advantage of the trends in both
B2B and consumer digital markets.
The strategic focus on operational execution
under Paul Zwillenberg, your CEO, resulted
in DMGT maintaining a double-digit adjusted
operating margin.
We saw encouraging signs of growth from
investments in several initiatives designed
to deliver long-term organic returns, albeit
with reduced expectations for some B2B
businesses that are facing particularly
challenging market conditions and which
resulted in impairments that adversely
affected our statutory results.
2
We have continued to take a disciplined
approach to capital allocation, investing to
expand our market positions in key sectors.
During 2017, enhancing our financial
flexibility has also been one of our strategic
priorities, with disposals and healthy cash
flow reducing net debt to 1.4 times EBITDA,
the lowest level for over 20 years. The Board
is therefore pleased to recommend a 3%
increase in the final dividend per share for
2017, giving a total dividend for the year
of 22.7 pence per share, an increase of
3% continuing DMGT’s long-standing
commitment to delivering sustainable
annual real dividend growth.
In Consumer Media, dmg media’s
performance demonstrated that it is
possible for a modern news media company
to prosper in a digital world. Our Mail titles,
in print and online, have continued to
produce highly valued content for their
global audience. Providing quality, popular
journalism has resulted in circulation
outperformance. In addition, an unparalleled
cross-media advertising proposition in
print and digital formats across the Mail
and Metro titles has benefited performance.
While print advertising continues its secular
decline, MailOnline continues to win
audiences across each platform it partners
with, delivering strong levels of digital
advertising growth.
In our B2B businesses, the requirement to
have fully integrated data analytic solutions
has become an increasing priority across all
industries and our operations are already at
the forefront of this trend. A major milestone
was reached this year with the launch of
Risk Modeler on the RMS(one) platform,
DMGT’s first truly enterprise class solution.
This was achieved alongside the release
of an unprecedented number of new risk
models. Our Education Technology (EdTech)
business, Hobsons, is bringing predictive
analytics and improvements to the customer
experience across its Naviance, Starfish and
Intersect platforms. Our European property
information businesses are using their
modelling expertise with large data sets
to launch new products which will enable
faster decision-making in the insurance and
banking sectors. Continued investment in
our events business has supported a strong
launch programme where innovative organic
growth is being pursued internationally.
Beyond operational execution and
enhancing financial flexibility, one of the
main considerations of the Board is to
ensure our portfolio is in optimal shape to
harness market growth dynamics, as well as
withstand market volatility. During the year,
DMGT unlocked significant value by reducing
its holding in Euromoney Institutional
Investor PLC (Euromoney) to around 49%.
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Daily Mail and General Trust plc Annual Report 2017
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We have established
new strategic
priorities and we
are better positioned
to deliver long-term
shareholder value.”
This has also given Euromoney the financial
flexibility to pursue its own strategy.
Refocusing and disposals within our
Consumer Media and B2B divisions have
enabled us to focus on the most attractive
growth opportunities. Going forward,
although we recognise the benefits of
spreading risk across a diversified portfolio,
there are clear advantages to operating in
fewer sectors, especially in terms of resource
allocation and our ability to expand our
market shares in the most attractive sectors.
Read more in CEO Review,
pages 10 to 13
The implementation of our Group strategy
is overseen by the Board of Directors, which
maintains the high standards of governance
our shareholders expect. The Governance
Report sets out the framework for operating
performance and shareholder value that
is central to the growth of DMGT.
I am pleased that Tim Collier joined as the
Group Chief Financial Officer during the year.
Tim’s prior experience working for portfolio
companies in B2B information, events and
media sectors with a significant US presence
is aligned with DMGT’s businesses and
overall Group focus. I am confident
he will help to lead DMGT to further success.
I would like to thank our Non-Executive
Directors for their contribution over the past
year with the Group benefiting from their
skills and experience at both an individual
business and Board level. During the year
François Morin joined DMGT’s Board as a
Non-Executive Director. François brings an
international perspective relevant to the
Group’s global operations and experience of
regulatory matters across a range of areas.
Sadly, following a short illness, Nicholas
Berry, Non-Executive Director, died in
December 2016. Nicholas had served on
the DMGT Board for nine years, providing
invaluable advice and insights across
a wide range of areas, particularly our
leadership programmes.
Read more in Governance Report,
pages 40 to 56
Throughout its history, DMGT has relied
upon the talent, experience and skills of its
employees through their innovation and
entrepreneurial drive. We also recognise
that the talent development in critical skills
must keep pace with our strategic ambitions
both through leveraging our existing teams
as well as supplementing our abilities
with leading-edge external experience.
For more information on our talent
development programmes please refer to
the Our People and Our Communities section.
As Chairman of the Board, I want to thank
all our employees for their dedication,
hard work and significant contribution to
the Group as well as their wider community.
Sadly, this came into sharp focus in 2017,
as DMGT employees supported the relief
efforts following the Grenfell Tower fire and
Hurricane Harvey, tragedies that struck at
the heart of communities where our people
live and work.
Read more in Our People and
Our Communities, pages 32 to 35
At the senior management level,
remuneration and incentives drive focus
on performance aligned to our strategic
priorities. Our value creation metrics
and related payments are set out in the
Remuneration Report.
Read more in Remuneration Report,
pages 57 to 80
The Board and I remain confident in
DMGT’s prospects for long-term growth.
Our focus in the coming year is to continue
to execute against the new strategic
framework, which will position DMGT
for the next wave of growth, as well
as manage expected continued market
volatility. We remain confident that through
our strong entrepreneurial and innovative
Revenue by business FY 2017 (%)
RMS
dmg information
dmg events
Euromoney 1
dmg media
14
32
7
6
41
1 Revenue for 3 months to December 2016.
Dividend per share
The Board’s policy is to maintain
dividend growth in real terms over the
long term and for this to be supported
by earnings per share growth.
25
20
15
10
5
0
5.8p
1997
22.7p
8.5p
2017
Dividend
Inflation
capability, DMGT will be able to benefit
from the opportunities being brought by the
increasing pace of change and complexity
in our industries. Through harnessing our
growth opportunities and investing in
the best ideas we remain confident that
DMGT will deliver good long-term returns
to shareholders.
The Viscount Rothermere
Chairman
3
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Strategic Report
Who we are
DMGT at a glance
DMGT’s diversified portfolio of companies, operating across B2B and consumer
markets, has continued to evolve as we position ourselves for long-term growth.
Our business in FY 2017
B2B
RMS
Produces risk models and software applications, and provides analytical
data services used by the global risk and insurance industry to quantify
and manage catastrophic risks.
dmg information
An international provider of B2B information, analysis and software
for the property information, EdTech and energy information sectors.
dmg events
An international B2B exhibitions and conferences organiser, focusing on
the energy, construction, interiors, hotel, hospitality and leisure sectors.
Revenue
£233m
2016: £205m
Revenue
£531m
2016: £498m
Revenue
£117m
2016: £105m
Operating profit*
£33m
2016: £36m
Operating profit*
£69m
2016: £77m
Operating profit*
£31m
2016: £29m
Consumer
dmg media
A modern news media company with two of the UK’s most-read
paid-for newspapers, MailOnline, which attracts an average 15 million
unique browsers each day, and one of the world’s most popular
free newspapers.
Revenue
£683m
2016: £706m
Operating profit*
£77m
2016: £77m
JVs & Associates
Euromoney Institutional Investor PLC became a c.49% associate
interest in January 2017 (see below). DMGT also owns a c.30% interest
in ZPG Plc. Other JVs & Associates include DailyMailTV, Real Capital
Analytics and Wowcher.
Share of Operating profit*
£69m
2016: £23m
2016 Pro formaΩ: £61m
In December 2016, DMGT reduced its stake in Euromoney from c.67% to c.49% and Euromoney ceased to be a subsidiary of DMGT
and became an associate. To allow a like-for-like comparison, FY 2016 pro forma results have been presented based on a c.67% stake
in Euromoney during the first quarter of the year and a c.49% stake during the final three quarters, consistent with the actual holding
during FY 2017. Underlying revenue and operating profit growth rates exclude Euromoney. The results of Euromoney are described
within the JVs & Associates section of this Annual Report on page 24.
*
Ω
These are adjusted results see pages 29 to 31 for more detailed tables and explanations.
Pro forma FY 2016 figures have been restated to treat Euromoney as a c.67% owned subsidiary during the first three months and as a c.49% owned associate during the nine months to
September 2016, consistent with the ownership profile during FY 2017. See reconciliation on page 28.
Go online to www.dmgt.com for more information about our businesses
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4
Daily Mail and General Trust plc Annual Report 2017
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DMGT is making significant steps to focus and simplify the portfolio.
From FY 2018 the portfolio will be managed by sector
B2B
Insurance Risk
RMS produces risk models and software applications, and provides analytical data services
used by the global risk and insurance industry to quantify and manage catastrophic risk.
Read more page 17
Property Information
Our Property Information companies provide technology, data and workflow solutions
to clients involved in commercial and residential property markets as well as risk and
valuation services to the Commercial Mortgage-Backed Securities (CMBS) market.
Read more page 19
Education Technology (EdTech)
Hobsons is the leading provider of student success solutions in the US through its
Naviance, Starfish and Intersect platforms.
Read more page 19
Energy Information
Genscape provides data, workflow tools and predictive analytics to improve market
transparency and efficiency across several energy and power asset classes to better
manage volatility and increase supply chain efficiency.
Read more page 20
Events and Exhibitions
dmg events is an international B2B exhibitions and conference organiser, focusing on
the energy, construction, interiors, hotel, hospitality and leisure sectors, operating
across several geographies.
Read more page 21
Consumer
Consumer Media
dmg media is a modern news media company with two of the UK’s most-read paid-for
newspapers, MailOnline, which attracts an average 15 million unique browsers each day,
and one of the world’s most popular free newspapers.
Read more pages 22 and 23
JVs & Associates
DMGT holds two significant associate interests in Euromoney (c.49%) and ZPG (c.30%).
Other JVs & Associates include Real Capital Analytics and DailyMailTV.
Read more page 24
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5
Strategic Report
How we create value
Our Business Model
Intelligent Insights.
Consumer Connections
Which we monetise
through five
revenue models
DMGT creates first-choice products,
combining data, technology and
consumer know-how to connect
people with intelligent insight and
engaging content.
Proprietary
data
Innovative
technology
Compelling
content
Consumer
know-how
6
Subscription
Our B2B businesses have a strong subscription revenue
component with high renewal rates demonstrating the
strength of our client relationships.
Advertising
Our Consumer Media business generates advertising
revenue both in print and digital formats. Growth in
our digital advertising revenues continues to help offset
structural declines in print advertising. Enhanced user
engagement drives advertiser interest in increasingly
sophisticated advertising formats.
Circulation
Circulation revenues are generated from sales of the
Daily Mail and The Mail on Sunday newspapers, which
continue to hold strong market-leading positions in the
context of declining industry volumes.
Events attendance and sponsorship
Exhibitor fees, delegate fees and sponsorship revenues
are earned from the growing portfolio of B2B shows
run by dmg events.
Transactions
Revenues from property information businesses
are influenced by property transaction volumes.
Financial Review, pages 25 to 31
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Daily Mail and General Trust plc Annual Report 2017
Supported by
our values
Enabling us to
create value for all
of our stakeholders
Entrepreneurialism
As a home for entrepreneurs, working at the cutting
edge of technology, DMGT fosters constant innovation,
growth and talent development across our
international businesses.
For shareholders
We have a track record of generating a positive return
on investment with strong cash flow. Our active portfolio
management aims to achieve sustainable long-term
earnings and dividend growth.
Purpose
Long-term perspective and businesses with a clear
sense of purpose for their customers and society.
Excellence
Commitment to quality, craftsmanship and
delivering excellence. We seek the best talent,
leadership and expertise.
Total shareholder return FY 2012 – FY 2017
9% CAGR
For employees
We nurture entrepreneurial talent and encourage our people
to make their own mark on DMGT, a diverse international
portfolio with over 120 years of heritage.
Employees worldwide
7,395
For customers
Our deep understanding of customer needs enables us
to constantly innovate and create content, products and
solutions that provide our businesses with a competitive
edge and make us even more relevant to our customers.
Organic investment as a percentage of revenues FY 2017
9%
For our communities
DMGT businesses have developed strategic partnerships
with a number of charitable organisations, with a focus on
making a difference in the communities where our people
work and live.
Amount donated to charity FY 2017
£817k
7
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Strategic Report
Adapting to continuous change
Market Overview
DMGT comprises a portfolio of businesses working across diverse
marketplaces. While each has its own individual characteristics,
some common features exist:
• Fast-paced and evolving to adopt new technology and business models
• Technology-enabled with high degrees of innovation
• Enduring and resilient
• Content and information-driven
Increased
volatility
Political
uncertainty
Cyber
security
Context to DMGT
• As a provider of proprietary, hard-to-
obtain information, DMGT benefits from
growing uncertainty in the world as its
customers rely more heavily on data
and analysis to inform critical decisions.
Market trend
• Global economic uncertainty, political
tensions and supply and demand
disruptions continue to influence our
customers and their markets in what is
becoming a ‘new normal’ level of market
volatility. Extreme weather events,
commodity price fluctuations and
continued exchange rate swings have
directly impacted the economic and
social environments for both investment
and business operations.
Our approach
• Our diversification provides beneficial
offsets in an increasingly volatile world:
as one industry may be facing headwinds,
another may benefit from the forces
of volatility.
• In this sustained-volatile environment,
DMGT is providing its customers with
fundamental data, analytics and insights
that enable them to move away from
instinct-driven decision-making and
to embrace market-relevant data as
a means to navigate uncertain times.
Context to DMGT
• Political policy decisions have direct
and often unexpected impacts on the
geographies and industries in which
DMGT operates and will continue to
shape where and how DMGT pursues
commercial and strategic opportunities.
Market trend
• There is still long-term geopolitical and
economic uncertainty for UK companies’
operations abroad. Furthermore, the
rise of populist policies and changing
political landscapes throughout the
world each add to the climate
of political uncertainty.
Our approach
• DMGT closely follows political changes
and implications for the geographies
and industries in which it participates.
In many instances, the uncertainty
of changing political and regulatory
norms presents commercial opportunities,
as we help our customers anticipate
implications for their business.
Context to DMGT
• As a provider of business-critical data,
analytic tools for global industries and
news media, DMGT is exposed to cyber
security risks across its operations.
Market trend
• Cyber security threat is a permanent
business risk in the digital age.
Governments and regulatory bodies
have awakened to the threat posed to
individuals and society by data breaches.
• Customer confidence is easily eroded,
enforcing the highest possible cyber
security standards is critical for
maintaining customer and market trust.
Our approach
• DMGT continues to strengthen
its information security controls with the
formation of a new Information Security
Steering Committee, the recruitment
of a Group Chief Information Officer,
and in October 2017, a Chief Information
Security Officer, together with regular
cyber security audits.
• RMS has developed a cyber risk
management tool that seeks to provide
insurers with a framework to capture
and report on all cyber exposure and
facilitate risk transfer in the market.
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8
Daily Mail and General Trust plc Annual Report 2017
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Our businesses are constantly looking towards the future to identify and manage current and future trends.
The most significant of these are identified here.
More detail on the trends affecting the Group can be found in the Principal Risks section, pages 36 to 39
Continuous
innovation
Machine
Learning
A competitive
talent pool
Context to DMGT
• Technological change and the speed
at which customers are adopting
new technologies in our key markets
are accelerating at a pace never
seen before, irrevocably changing
and erasing more traditional
business models.
Market trend
• The speed of technology evolution is
increasing the capital intensity of IT
investment and product development
such that business investment horizons
have changed compared with previous
economic cycles.
Our approach
• As an entrepreneurial Group focused
on digital growth, DMGT stays ahead
by continually fostering innovation
and embracing new ideas. This is best
reflected by DMGT’s expectation
of investing at least 5% of revenue
in organic initiatives each year.
• As a company with a family heritage
which encourages long-term thinking,
DMGT can invest for the future.
Throughout DMGT’s history, innovation
and diversification have been essential
elements of how we do business, and
have given us a wealth of experience
to draw on in order to adapt to
market changes.
• DMGT’s investment approach enables
us to remain close to customers through
our portfolio of businesses, gaining
greater insight and understanding
into exactly what our customers value,
engage with, and ultimately, want to buy.
Context to DMGT
• An ever-growing number of
machines are producing, using,
and communicating with virtually
immeasurable amounts of information.
Machine learning is what makes
machines appear ‘intelligent’ by
enabling them to understand concepts
in their environment and also to learn.
Through machine learning, a smart
machine can change its future
behaviour. These developments
create opportunities for DMGT
and its businesses.
Market trend
• Machine learning gives rise to a spectrum
of smart machine implementations
helping to unearth insights in discrete
datasets that were previously impossible
to see.
Our approach
• DMGT’s businesses help their customers
to identify which information provides
strategic value, access data from different
sources and explore how algorithms
leverage the Internet of Everything to
fuel new business designs. This area is
evolving quickly, and DMGT’s businesses
are embracing the opportunity.
• BuildFax uses different machine learning
models, for instance, to estimate roof age
from property characteristics where the
business does not have high-confidence
roof age data, and another model is
used to estimate property conditions.
• We are developing products and services
across a number of our businesses,
including sensing technology at
Genscape and statistical analytics
at Hobsons and RMS.
Context to DMGT
• Across the global workforce but
especially with millennials, top
talent is drawn to companies that
offer a compelling employee value
proposition, incorporating purpose
beyond profit, ongoing learning and
development opportunities as well
as competitive remuneration.
Market trend
• Demand for top talent is always fierce,
however, in the critical areas of big data
analytics, artificial intelligence and data
science, demand in many labour markets
outstrips supply.
Our approach
• In competing for key employees,
especially critical technology talent,
DMGT is committed to enhancing its
Group-wide employee proposition,
defining the jobs of the future, for
instance through its groundbreaking work
in data science and predictive analytics.
• DMGT supports training and development
in order to enhance employees’ capabilities
and transfer skills throughout the
businesses. We also provide Group-wide
initiatives such as our talent development
programmes and workshops to encourage
rising talent within DMGT.
9
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Strategic Report
Delivering against clear strategic priorities
CEO Review
Overview
In spite of challenging market conditions
DMGT has delivered a resilient
performance in a year of transformation
at the Company.
During the reporting period, we strengthened
our balance sheet by reducing our holding
in Euromoney; we agreed to divest assets;
and we delivered cost savings through
operational efficiency.
At the operating level, dmg media
outperformed in its markets and many
of our B2B companies delivered a robust
performance, with the exception of Genscape
and Xceligent. As a long-term investor,
we continued to invest through the cycle,
particularly at RMS, which successfully
launched Risk Modeler on RMS(one), and
dmg information. The Consumer Media
business delivered good underlying profit
growth, reflecting the progress made at
MailOnline, which moved into operating
profit during the final quarter. Adjusted
operating and pre-tax profits declined
year-on-year, mainly due to the reduced
stake in Euromoney.
The challenging conditions in many of our
markets served as a further reminder of the
need to transform our business. This work
has begun as part of our Company-wide
Performance Improvement Programme,
which we are rolling out to better position
us for consistent long-term growth.
Already, we have made good progress on
the strategic priorities laid out at the start
of the year: improving operational execution,
increasing portfolio focus and enhancing
financial flexibility.
We have delayered management, reduced
overheads, enhanced our talent and
refocused each business’s priorities. We have
sharpened our focus on our strongest brands
and our financial flexibility has improved
with net debt to EBITDA now at 1.4 times,
the lowest level in over 20 years.
I am confident that our programme of action
will deliver long-term sustainable growth
and shareholder returns.
10
Key Strategic Priorities
Delivering on our potential
Improving operational
execution
Increasing portfolio
focus
Enhancing financial
flexibility
Expansion into the national market has been
slower than previously expected at Xceligent
and SiteCompli, notably Xceligent’s revenue
growth in New York, which it launched into
during the year. Given the further investment
required in Xceligent and the long path to
cash generation, the prudent decision has
been taken to incur a full impairment charge
of £65 million in respect of both businesses.
I am confident, however, that DMGT is on
track to becoming a higher performance
business with a strong balance sheet to
deliver on our long-term potential. We are
laying the groundwork to position the
Group for further success. Above all,
our commitment remains to deliver
on DMGT’s full potential.
Financial Performance
Group revenues grew by 1% on an underlying
basis, reflecting good growth from our digital
consumer business, MailOnline, and modest
progress elsewhere in the Group. Operating
profit declined by an underlying 2%,
primarily due to our investments in the
B2B businesses and amortisation costs at
RMS. There was encouraging underlying
profit growth at dmg media, driven by
good cost control and increasing MailOnline
profitability. This was offset by profit
declines at dmg information and RMS.
The performance of dmg information
was adversely affected by the challenges
at Genscape and Xceligent.
We are building on strong foundations, as
shown by aspects of our performance in the
past financial year. For the year covered by
this report, operational highlights include
the sustained strong revenue growth and
transition to profitability of MailOnline
following a multi-year investment strategy;
the successful delivery of RMS(one) in the
Insurance Risk sector; and the restructuring
and refocusing of our EdTech business,
Hobsons, into a more growth oriented
model focused on student success.
Another focus area has been to strengthen
our management team, both at the centre
and throughout the businesses, ensuring we
have the right talent to improve performance
and position DMGT for the future.
We managed our portfolio more actively,
initially with the reduction in our stake in
Euromoney and subsequently with the sale
of Elite Daily in Consumer Media and the
Admissions business within the EdTech
sector. This, coupled with a renewed focus
on cash generation, has lowered our debt,
strengthened our leverage ratios, and
ultimately given us the financial flexibility
to take advantage of opportunities as
they arise.
The carrying values of Genscape, the Energy
Information business, and two early-stage
US Property Information businesses,
Xceligent and SiteCompli, were impaired.
This decision reflected a more cautious
outlook for each of these businesses.
At Genscape, which faced challenging market
conditions during the year with low levels of
price volatility, a sustained low oil price and
changes to solar energy distribution channels
in the US, the carrying value of the business
has been reduced to £141 million, resulting
in an impairment charge of £140 million.
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Paul Zwillenberg
CEO
In FY 2017, we started to deliver on the clear
strategic priorities laid out at the start of the
year; improving operational execution,
increasing portfolio focus and enhancing
financial flexibility.
Reported results were impacted by the
reduction in our stake of Euromoney to
c.49% in December 2016, whereupon
it became an associate for the final nine
months of the financial year. Pro forma
reported revenue, adjusting for the
Euromoney transaction, increased by 3%,
reflecting the benefit of the stronger US
dollar versus the British pound. The Group’s
pro forma operating profit was up 2%,
with an operating profit margin of 12%.
Group adjusted profit before tax and
earnings per share were down 13% and 1%
respectively, although up by 4% and 7% on
a pro forma basis, and the recommended
dividend per share was up 3%.
The Board remains committed to delivering
dividend growth in excess of inflation,
consistent with our dividend policy.
FY 2017 saw
a major focus on
strengthening our
management teams,
enhancing our
performance
management system
and eliminating red
tape to ensure that
we are faster and
more agile.”
Statutory operating profit and profit
before tax were adversely affected by the
impairments at dmg information but statutory
earnings per share increased 69% due to
the gain on the Euromoney transaction.
Year end net debt of £464 million was
£214 million lower than in FY 2016, reflecting
the net operating cash inflow and disposal
proceeds. The net debt to EBITDA ratio
of 1.4 times was comfortably below the
Group’s preferred upper limit of 2.0 times.
The strengthening of the balance sheet was
an important achievement during the year.
In the Financial Review (pages 25 to 31),
Tim Collier, Group Chief Financial Officer,
describes our financial performance in
further detail. Key Performance Indicators
(KPIs) are used to measure DMGT’s
performance at a Group level and there is
an update on how these have progressed
during the reporting period on pages 14
and 15 of the Strategic Report.
2017 Strategic Priorities
In December 2016, I outlined three strategic
priorities that will help position DMGT for
the future. While there is much more to do,
we have made good, clear progress
with the launch of our Performance
Improvement Programme.
Improving operational execution
The first priority of improving operational
execution included enhancing our
performance management system and
eliminating red tape to ensure that we are
faster, fitter and more agile. These areas
will help us deliver on our investments,
ultimately driving value creation across
the Group.
As a part of this, we remodelled and
strengthened our central management team,
drawing heavily on existing DMGT talent.
Key internal promotions included a
Group Head of Strategy & Performance
Management, Group HR Director, Group
Chief Information Officer, and Group Head of
M&A, alongside the external appointment of
a new Group CFO. Among our businesses, we
also made a number of senior appointments
including new Presidents, CEOs and Chief
Operating Officers, supplementing internal
talent with external hires to broaden the
industry expertise within the Group.
We have reduced the complexity of the
management structure in the B2B portfolio,
bringing the individual operating companies
closer to the central management team.
Above all, our aim has been to give each
company the resources they require to fulfil
their strategic ambitions, whilst supporting
the extraordinary entrepreneurial spirit and
talent that drives our success. In addition,
we have increased our focus on nurturing
and developing rising talent as well as
bolstering skills critical for our future such
as technology, customer solutions and
data science capabilities.
From a business perspective, the operational
improvements have driven significant
progress in three particular areas.
Firstly, RMS executed the successful launch
and rollout of the Risk Modeler application
on RMS(one), the new platform for digitising
risk for the insurance industry. RMS also
delivered RiskLink17 and an unprecedented
array of modelling solutions, with major
updates to its core models and the release
of several entirely new models. With the
gradual client migration to RMS(one) and
continued strong model development, RMS
is poised to deliver good long-term growth
and returns in support of the Insurance Risk
sector’s digital transformation.
11
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Strategic Report
Delivering against clear strategic priorities
CEO Review
Secondly, we have been encouraged by
continued strong growth from MailOnline,
where revenues reached £119 million,
up an underlying 20%. The performance
was driven by its growing global audience,
content and distribution partnerships with
global platforms Google, Facebook and
Snapchat, and strong performance in
programmatic advertising in the US and
UK. The increased scale of the business,
combined with a deep focus on operational
efficiencies, resulted in MailOnline moving
into operating profit during the final quarter
of the financial year.
Finally, in the EdTech sector, Hobsons
made good progress on strengthening
its high growth Student Success solutions
for US High School and College students
following a refocusing and restructuring
of the business. In particular, the
modernisation of the Naviance platform to
improve customer experience is progressing
well and will continue to be a core focus of
Hobsons’ activity this coming year. Looking
forward, we are optimistic about the future
growth prospects for its Naviance, Intersect
and Starfish products.
Increasing portfolio focus
By increasing our portfolio focus, DMGT is
seeing the benefits of a more streamlined
structure. In FY 2017 we began a major
strategic review, working through every
business in the portfolio to understand
its potential growth and returns and the
resources required to achieve this.
The first significant step in delivering
increased portfolio focus was the reduction
in our stake in Euromoney in December 2016
to c.49%. This was followed by the disposal
of Elite Daily and closure of 7 Days in the
Consumer Media sector. Within EdTech,
we split the Hobsons business into the faster
growing Student Success and the more
mature Admissions and Solutions businesses
to enable a distinct approach to managing
the two parts. Both the Admissions and
Solutions businesses were disposed of, in
September and October 2017 respectively.
The disposal of EDR, the US Property
Information business, is currently underway
and will further sharpen DMGT’s focus.
A clear strategy and bold vision for the future
We have defined a new strategic vision for DMGT entitled
‘Intelligent Insights. Consumer Connections’. Due to the Group’s
strengths and capabilities across B2B and Consumer Media,
DMGT has a competitive advantage from two important
converging trends across these sectors. Firstly, in B2B sectors,
customers increasingly expect to have the same quality of user
interface as they do with consumer products. Secondly, the
most successful consumer products are built on robust use of
data and analytics to gain insight. The agility, speed to market,
Read more in our Operating Reviews, pages 16 to 24
user engagement and audience understanding demonstrated
by MailOnline can be applied within our B2B businesses. The
advanced analytics and resilient and secure technology required
in our B2B sectors can be applied to Consumer Media digital
businesses. DMGT’s strategy will be focused on seeking
opportunities, either through organic initiatives or acquisition,
which can exploit the converging trends across the B2B and
Consumer Media sectors.
B2B
Proprietary data
Advanced analytics
Integrated with processes
Scaleable and reliable
Consumer
Addictive content
Personalised and responsive
Accessible everywhere
Intuitive experience
12
Intelligent simplicity
Deep understanding, intuitive solutions
Continuous evolution
Advanced analytics, constant refinement
Speed and agility
Timely insights, fast-to-market products
High value content, great user experience
Capture attention, and keep it
Community enabled
Physical connections, enriched digitally
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Investment criteria
We have conducted a rigorous evaluation
of all our businesses as part of our strategic
review. We aim to position DMGT for the
future and, in particular, for what we refer
to as a ‘Digital 4.0’ world, where artificial
intelligence, machine learning on big data
and the use of predictive analytics play an
increasingly important role.
In maintaining a diversified portfolio,
with a more focused investment approach,
we can allocate resources according to each
individual business’s growth characteristics
and funding requirements. The five broad
investment criteria used are shown here:
Investment criteria
What we consider
Attractive and value creating
Scalability
Long-term competitive advantage
Affordability
Achievability
Expected future revenue, profit
and cash flow to deliver value
End market size, growth rate
and competitive position
Value of proprietary data
and services
Investment to achieve
full potential
Ability and resources of current
business to execute
Diversified portfolio, with more focused investment approach
Enhancing financial flexibility
Through our improved operational execution
and increased portfolio focus, we have
achieved a stronger balance sheet. At the
year end, net debt was £464 million with
a net debt to EBITDA ratio of 1.4 times, the
lowest it has been in over 20 years, as a
result of disposal proceeds and continuing
healthy cash generation. We now have more
flexibility to invest behind our businesses,
both organically and via acquisition, to
support long-term growth and value creation.
In pursuing a balanced capital allocation
approach, we remain committed to
increasing shareholder returns through
sustainable real dividend growth.
Strategy update
A new strategic vision has been defined
based on the convergence of trends within
B2B and Consumer Media and the strong
position that DMGT is in given the breadth
of expertise across the Group.
We have begun to execute on the
Performance Improvement Programme,
which will deliver results against our three
key strategic priorities. Building on the solid
foundations established through recent
operational initiatives, DMGT’s performance
and execution will be improved through
upgrading businesses’ technology, sales
force effectiveness and pricing capabilities.
The increasing focus of the portfolio will
be driven by the Group’s strengths,
notably where the convergence of B2B and
Consumer Media gives DMGT a competitive
advantage. DMGT will also ensure it has the
financial flexibility to pursue opportunities
as they arise, notably to build scale in those
sectors that can deliver focused growth.
Outlook
We have started the new financial year
with our businesses performing in line
with our expectations. FY 2018 will be an
important year of transition for DMGT as we
continue to lay the necessary groundwork
for the future.
The markets in which we operate continue
to be disrupted by new technologies, volatile
demand and changing consumption habits
among the audiences we serve.
In B2B, the financial performance will
be adversely affected by disposals.
Despite challenging market conditions, we
nevertheless expect B2B to deliver modest
underlying revenue growth, reflecting
the benefits of increased focus. On the
Consumer Media side, digital revenues are
expected to grow further, helping to offset
anticipated circulation volume and print
advertising declines, with advertising
market conditions likely to remain volatile.
The Consumer Media operating profit is
expected to reflect lower overall revenues,
continued cost efficiencies within the
newspapers and MailOnline being profitable.
The Board remains confident that DMGT
has good long-term prospects, supported
by a more flexible balance sheet and by the
entrepreneurialism, purpose and passion
that are so distinctive in the Group.
I am confident that the Performance
Improvement Programme will generate
long-term sustainable growth. And it will
help us to navigate near term challenging
trading conditions. This will, in turn, enable
us to maintain our progressive dividend
policy, with a commitment to growing
shareholder returns.
We look forward to delivering on
DMGT’s potential.
Paul Zwillenberg
CEO
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Measuring our performance
Key Performance Indicators
The Board seeks to deliver sustained long-term growth for DMGT’s shareholders.
DMGT is a portfolio of different companies. Many Key Performance Indicators (KPIs) that are targeted by our individual businesses,
such as revenue per client as well as non-financial measures including customer numbers and audience reach, are not appropriate at a
consolidated Group level. The KPIs shown below, however, are considered to be good indicators of the Group’s overall progress against
its strategic priorities.
A new KPI, Group adjusted cash operating income, has been introduced, reflecting the focus on improving the cash generation of the
individual businesses within the portfolio over time. International revenues as a percentage of total revenues is no longer a KPI as DMGT
is not targeting a specific change to the existing mix.
Description
Relevance
Performance
Narrative
Strategic priority
Underlying
revenue
growth^
Underlying revenue
growth compares
revenues on a like-for-like
basis and is an important
indicator of the health
and trajectory of the
individual businesses and
the Group as a whole.
2017
+1%
2016
+0%
2015
+1%
2014
2013
+2%
2017
2016
2015
2014
2013
2017
2016
2015
2014
2013
2017
2016
2015
2014
2013
Group
adjusted
profit
before tax
DMGT actively manages
its portfolio and allocates
capital to increase
adjusted profit before
tax over the long term.
Adjusted
earnings
per share
Management seeks
sustained long-term
growth in adjusted
earnings per share to
maximise overall returns
for DMGT’s shareholders.
Group
adjusted
cash
operating
income
This metric adds back
depreciation and
amortisation and deducts
capital expenditure from
Group adjusted operating
profit. It reflects the
cash generation of the
Group’s businesses.
14
+5%
Underlying revenue growth
+1%
2016: +0%
The underlying revenue performance
reflects the resilience of the B2B
and consumer businesses despite
challenging market conditions
in many sectors.
£226m
£260m
£281m
£291m
£267m
Group adjusted profit
before tax#*
£226m
2016: £260m
2016Ω: £217m
Group adjusted profit before tax
declined by £34m, although
increased by £9m on a pro formaΩ
basis, reflecting the reduced profits
from RMS and increased investment
at Xceligent, offset by reduced
corporate costs.
Adjusted earnings per share#*
55.6p
2016: 56.0p
2016Ω: 52.1p
Adjusted earnings per share declined
by 1%, reflecting the Euromoney
transaction although increased
by 7% on a pro formaΩ basis.
55.6p
56.0p
59.7p
55.7p
49.9p
£199m
Group adjusted cash
operating income#*
£199m
2016: £254m
2016Ω: £172m
£254m
£278m
£267m
£263m
Group adjusted cash operating
income declined by £55m, reflecting
the Euromoney transaction, although
increased £27m on a pro formaΩ
basis, reflecting the improving
cash generation from RMS.
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Key strategic priorities
Improving operational execution
Increasing portfolio focus
Enhancing financial flexibility
Description
Relevance
Performance
Narrative
Strategic priority
Net debt§/
EBITDA ratio
Management aims
to maintain a strong
balance sheet and retain
DMGT’s investment-
grade status and
consequently targets
the net debt/EBITDA
ratio to be no more than
2.0 times throughout
the year.
2017
2016
2015
2014
2013
1.4x
Net debt/EBITDA
1.8x
1.8x
1.4x
2016: 1.8x
1.5x
1.6x
Through increasing portfolio focus,
strong operational cash flows and
tight control of working capital,
the net debt/EBITDA ratio remains
comfortably below our preferred
upper limit of 2.0 times and did
so throughout the year.
Dividend per share
22.7p
2016: 22.0p
We have proposed a full-year
dividend of 22.7 pence, up by 3%
from last year, continuing our strong
track record of dividend growth
and delivering a 7% cumulative
annual growth rate over the past
20 years.
Organic investment
as a % of revenues
9%
2016: 9%
DMGT continued to reinvest
in the businesses during the year,
notably in RMS and dmg information.
Dividend
per share
The Board’s policy is
to maintain dividend
growth in real terms
and, in the medium-
term, to distribute about
one-third of the Group’s
adjusted earnings.
25
20
15
10
5
0
5.8p
1997
Dividend
Inflation
Organic
investment¥
as a
percentage
of revenues
Investing back into the
businesses to support
product innovation
and effective use of
technology is key to
delivering DMGT’s
sustained long-term
growth. The Board
expects at least 5% of
revenues to be used
for organic investment.
2017
2016
2015
2014
2013
Read more in Financial Review, pages 25 to 31
22.7p
8.5p
2017
9%
9%
7%
7%
7%
^
§
#
*
Ω
¥
Underlying revenue growth is on a like-for-like basis, adjusted for constant exchange rates, the exclusion of disposals and closures and for the inclusion of the year-on-year organic growth from
acquisitions. For events, the comparisons are between events held in the year and the same events held previously. For dmg media, underlying growth rates exclude the benefit of an additional
53rd week from the FY 2016 results and excludes low-margin newsprint resale activities. See page 31.
See Note 16 for details of net debt.
From continuing and discontinued operations.
Before exceptional items, other gains and losses, impairment of goodwill and intangible assets, amortisation of intangible assets arising on business combinations, pension finance charges and
fair value adjustments; see Consolidated Income Statement on page 96 and the reconciliation in Note 13 to the Accounts.
Pro forma FY 2016 figures have been restated to treat Euromoney as a c.67% owned subsidiary during the first three months and as a c.49% owned associate during the nine months to
September 2016, consistent with the ownership profile during FY 2017. See reconciliation on page 28.
Organic investment is expenditure that is incurred with the objective of delivering long-term growth. It includes expenditure on product development, whether capitalised or expensed directly,
and the adjusted operating losses from early-stage businesses.
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Operating Business Reviews
B2B
Summary
Our B2B companies operate in five sectors, namely Insurance Risk,
Property Information, Education Technology (EdTech), Energy Information,
Events and Exhibitions.
Total B2B
Revenue#
Operating profit*
Operating margin*
2017
£m
976
152
16%
2016
Pro formaΩ
£m
899
160
18%
Movement
%
+9%
(5)%
Underlying^
%
+2%
(15)%
# Revenue from continuing and discontinued operations.
* Adjusted operating profit and operating margin; see pages 29 to 31 for details.
^ Underlying growth rates give a like-for-like comparison; see page 31 for details.
Ω
Pro forma FY 2016 figures have been restated to treat Euromoney as a c.67% owned subsidiary during the first three months
and as a c.49% owned associate during the nine months to September 2016, consistent with the ownership profile during
FY 2017. See reconciliation on page 28.
Euromoney
In December 2016, DMGT reduced its stake
in Euromoney and the company ceased to
be a subsidiary of DMGT and became an
associate. To allow a like-for-like comparison,
2016 pro forma results have been presented
based on a c.67% stake in Euromoney during
the first quarter of the year and a c.49%
stake during the final three-quarters,
consistent with the actual holding during
FY 2017. Underlying revenue and operating
profit growth rates exclude Euromoney.
The results of Euromoney are described
within JVs & Associates on page 24.
Performance
Revenues from B2B totalled £976 million,
up 9% on a pro forma basis, including the
benefit of the stronger US dollar versus
the British pound. On an underlying basis,
B2B revenues grew 2%, with growth from
Hobsons, dmg events, RMS and Genscape
and stable revenues from the Property
Information businesses. B2B adjusted
operating profits, excluding any allocation
of Group corporate costs, were £152 million,
a reduction of 5% on a pro forma basis and
an underlying decline of 15%, largely driven
by RMS, where amortisation costs increased,
and within dmg information, by Xceligent
and Genscape. The overall B2B operating
margin declined to 16%, down from 18% on
a pro forma basis in FY 2016, reflecting lower
margins across each of RMS, dmg information
and dmg events.
dmg information restructure
DMGT has historically reported the results
of Property Information, EdTech and
Energy Information businesses within
dmg information. In FY 2017, DMGT undertook
a management delayering project to
reduce complexity and move the operating
companies closer to decision-making by
the Group’s central management team.
For the purposes of this Annual Report,
these businesses will appear as part of
dmg information and from FY 2018 will be
presented as part of the overall B2B portfolio,
with dmg information no longer in place.
Outlook
Our B2B companies are collectively expected
to deliver low single-digit underlying revenue
growth in FY 2018, although revenues will be
adversely affected by the disposals that have
taken place in the past year and the planned
disposal of EDR. In the Insurance Risk sector,
RMS will continue to expand the client
base for the RMS(one) software platform
and associated applications, laying the
groundwork for revenue acceleration
in FY 2019 and beyond. In the Property
Information sector, the European businesses
are expected to continue to experience
relatively subdued market conditions and
the remaining US businesses to continue
to deliver growth. Following the disposal
of Hobsons’ Admissions and Solutions
businesses, the remaining EdTech business
is expected to benefit from increased focus
and to continue to deliver growth. In the
Energy Information sector, Genscape is
also expected to deliver growth across most
of its sub-sectors, albeit the challenging
market conditions are expected to persist.
Despite challenges in some Events and
Exhibitions end markets, notably the energy
sector and some Gulf Cooperation Council
countries, and the expected reduction in
revenues from Gastech reflecting the change
in location in 2018, dmg events is well
positioned to continue delivering underlying
revenue growth.
There continues to be a focus on improving
operational execution, combined with laying
the foundations for long-term growth. The
adjusted operating profit margin for B2B is
expected to be in the mid-teens in FY 2018.
Revenue# (%)
Insurance Risk
EdTech
Property Information
Energy Information
Events and Exhibitions
Euromoney
24
12
34
9
12
9
16
B2B Sectors
RMS
Insurance Risk
dmg information
Property Information
EdTech
Energy Information
dmg events
Events and Exhibitions
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Insurance Risk: RMS
B2B
Revenue
£233m
Operating profit
£33m
Revenue
Operating profit*
Operating margin*
2017
£m
233
33
14%
2016
£m
205
36
18%
Movement
%
+14%
(9)%
Underlying^
%
+2%
(25)%
* Adjusted operating profit and operating margin; see pages 29 to 31 for details.
^ Underlying growth rates give a like-for-like comparison; see page 31 for details.
RMS is focused on execution and
investment for organic growth, in both
its core modelling business and the new
risk management platform, RMS(one).
RMS has delivered an unprecedented
level of modelling solutions in FY 2017,
with updates to the North American
Earthquake and North American
Hurricane models, new models for Asian
earthquakes and typhoons, and further
expansion into new lines of risk with
the second release of our cyber models.
The release of the second RMS(one)
application, Risk Modeler, was also a key
milestone for the business in FY 2017.
Business model
RMS offers models, data, services and
software to insurers, brokers and reinsurers.
Its solutions are also increasingly in demand
from capital market entrants into the risk
and insurance market.
Revenues are derived mainly from annual
subscriptions to its models and data
intellectual property. RMS also offers
a variety of analytical, managed and
hosted services.
Performance highlights
RMS produced underlying revenue growth
of 2%. Reported revenues were up 14% to
£233 million reflecting the benefit of the
stronger US dollar versus the British pound.
The business achieved this solid revenue
performance, in line with expectations,
despite the continuing adverse impact of
some client consolidation. There was good
demand for RMS core subscription services,
with renewal rates remaining above 95%.
As previously indicated, capitalisation of
RMS(one) development activities ceased
and the amortisation of the RMS(one) asset
started in August 2016. Consequently,
operating profit declined by an underlying
25% to £33 million with an operating margin
of 14%, broadly in line with the low-teens
guidance provided in December 2016. RMS
continue to invest strongly in its modelling
business to underpin its market position
and long-term growth trajectory. Excluding
the benefit of the £13 million of RMS(one)
capitalisation in the prior period, as well as
depreciation and amortisation, the EBITDA
margin was 24%, an improvement on the
17% in FY 2016.
RMS continues to lead in the risk modelling
market. In April 2017, RMS released
RiskLink17, which included updates to
five models, notably North American
Earthquake, and three new models: South
East Asia Earthquake, Taiwan Typhoon
and South Korea Typhoon.
A major milestone was achieved in April 2017,
with the release of Risk Modeler, the second
application to run on the RMS(one) risk
management platform, and over a dozen
clients are now using applications on
RMS(one). Given the enterprise acceptance
testing required during the clients’ adoption
processes and the relatively slow roll-out,
the revenues from RMS(one) are expected
to have a more significant impact on
RMS’s overall revenue growth and margin
improvement in FY 2019 and beyond.
The increasing pace of digitalisation across
the risk and insurance market combined
with the requirement for real-time risk
assessment on one risk modelling evaluation
platform that has integrated data analytics
is expected to create progressive demand
for the RMS(one) platform.
The appointment of a new President,
reporting to the CEO, to lead RMS
market-facing activities has increased the
client focus during 2017, especially in the
areas of client service and delivering
high-value solutions to clients.
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Key developments
• Risk Modeler released in April 2017
– the second application to run on
the RMS(one) risk management
platform with clients starting to
migrate onto the new system.
• Release of RiskLink17 with an
unprecedented model release
programme delivering updates
to five models, notably the North
American Earthquake model,
and three new models covering
natural disasters in Asia.
• Management team strengthened
with a new RMS President appointed.
Priorities in the year ahead
The main areas of focus for the RMS
management team in FY 2018 will be on
the continued successful development
and delivery of its core and new models to
clients and managing the gradual migration
of clients to the RMS(one) platform.
The RMS model pipeline remains strong,
reflecting an ongoing commitment to
strengthen the business’s market-leading
position. The model pipeline for 2018 covers
a wide range of perils, including North
America Flood, Central and Western
European Storm, Indian Flood, Japanese
Earthquake and Typhoon and North American
Wild Fire. The pipeline includes high
definition models, which provide increased
granularity, as a key differentiated offering.
Go online to read the RMS case study
www.dmgt.com
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Strategic Report
dmg information
B2B
Revenue
£531m
Operating profit
£69m
Introduction
dmg information is a portfolio of companies with market-leading positions in the Property Information, EdTech and Energy Information sectors.
Revenue
Property Information
EdTech
Energy Information
Total dmg information
Operating profit*
Operating margin*
* Adjusted operating profit and operating margin; see pages 29 to 31 for details.
^ Underlying growth rates give a like-for-like comparison; see page 31 for details.
2017
£m
328
114
88
531
69
13%
2016
£m
307
115
76
498
77
15%
Movement
%
Underlying^
%
+7%
+0%
+16%
+7%
(10)%
+0%
+9%
+1%
+2%
(13)%
EdTech –
key developments
• Refocus and restructure of
Hobsons with disposal of
Admissions and Solutions
businesses in September and
October 2017 respectively.
Energy Information –
key developments
• Robust performance from core
Energy areas of power, oil and
natural gas, despite sustained low
oil prices and low price volatility
impacting customer budgets.
• Continued strong growth from
Naviance, Starfish and Intersect.
• Solar business faced challenging
market conditions.
• More challenging trading
conditions for Admissions.
• Development underway to upgrade
Naviance platform.
• Appointment of new CEO
in May 2017.
• Continued investment in building
global product offerings and in
providing analytics and forecasts.
• Difficult market conditions resulted
in an impairment to the carrying
value of Genscape.
Performance summary
dmg information revenues were £531 million,
up 7% on a reported basis and 2% on an
underlying basis. Growth from the US
Property Information, EdTech and Energy
Information businesses was partly offset
by a decline in revenues from the European
Property Information businesses.
Operating profit decreased by an underlying
13% to £69 million, with an operating margin
of 13%. The decline in profit compared to
the previous year was due in large part to
investment in the roll-out of Xceligent, one
of the US Property Information companies.
More detail on the performance of each of
the sectors can be found in the following
Operating Business Reviews.
Property Information –
key developments
• Stable underlying revenues despite
challenging market conditions.
• Good revenue growth from US-based
companies, despite subdued
commercial property market.
• European property information
delivered profit growth despite
revenue decline.
• The carrying values of Xceligent and
SiteCompli were both fully impaired,
reflecting disappointing progress
with expansion plans.
• Good product development and
expansion into insurance sector
by Landmark.
For the purposes of this Annual Report
for FY 2017, these businesses will appear
as part of dmg information and from
FY 2018 will be presented as part
of the overall B2B portfolio, with
dmg information no longer in place.
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dmg information
B2B
Property Information
Revenue
£328m
Business model
The Property Information portfolio
operates in the US, UK and Germany.
Companies within the portfolio derive their
revenues from providing services that use
technology, data and workflow to streamline
and help reduce the risk associated with
commercial and residential property
transactions. In addition, Trepp in the US
provides risk, valuation and data solutions
for the CMBS market. Revenues are
generated from subscriptions as well
as volume-related transactions.
Performance highlights
The Property Information portfolio’s
revenues grew by 7%, including the benefit
of the stronger US dollar and Euro relative to
the British pound, and were in line with the
prior year on an underlying basis. The five
US-based businesses collectively delivered
underlying revenue growth of 5%, offset by
a 3% decline in underlying revenue in Europe.
Adjusted operating profit declined by 4% on
a reported basis and 9% on an underlying
basis, reflecting planned investment in
Xceligent, which more than offset operating
profit growth from the European businesses.
US
Trepp, the securitised mortgage data and
analytics business, delivered another year
of underlying revenue growth, reflecting
continued investment in its core services.
EDR, which is a leading provider of data and
workflow for US commercial real estate due
diligence, was adversely impacted by lower
real estate transaction volumes and the
business experienced an underlying decline
in revenues in the year. EDR is pursuing
growth opportunities in managed services,
an area the market is expected to transition
towards. Service industries are not a
preferred area of growth for DMGT and
consequently a process is underway to
dispose of EDR to a more appropriate owner.
This will further increase the focus within
the portfolio and enhance DMGT’s financial
flexibility. The earlier stage businesses,
Xceligent, SiteCompli and BuildFax,
continued to grow in the year. Xceligent’s
revenue growth in new markets, notably
New York, has been slower than previously
expected and, given the significant further
investment and time required to achieve full
national coverage, a decision has been taken
to reduce the carrying value of the business
to zero, resulting in an impairment charge of
£42 million. Similarly, SiteCompli’s planned
expansion into the national retail market has
proved more challenging than previously
expected and an impairment charge of
£24 million has been taken in respect of
its carrying value. Xceligent now has a new
management team in place and a strategic
review of the business is in progress,
whilst the SiteCompli management team
are focusing on growth opportunities.
Europe
The European Property Information
businesses, which include Landmark
and SearchFlow in the UK and On-Geo in
Germany, experienced a modest underlying
revenue decline as lower residential
property transaction volumes and mortgage
approvals adversely impacted trading.
In the legal property market, SearchFlow
delivered a major upgrade of its ordering
platform while Landmark continued to
deliver enhancements to its range of
conveyancing searches. In the mortgage
lending market, Landmark successfully
deployed its new Valuation Risk Hub with the
first lender and surveyor clients. Landmark
has also made significant first steps into
the UK household insurance market with
long-term agreements to provide its risk
models to leading providers in the industry.
At the same time, Landmark has continued
to focus on operational efficiencies,
delivering operating margin improvement
despite lower revenues, and evolving its
cost base as the business develops.
Priorities in the year ahead
In the US, there will be continued investment
in several growth initiatives across the
portfolio. There will also be ongoing product
development at Trepp to enhance its
market-leading position. In Europe,
Landmark expects to continue with its
dynamic new product development and
launch programme.
Go online to read the Property
Information case study
www.dmgt.com
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Revenue
£114m
Business model
Hobsons operates in the education
technology market and is a leading provider
of college and career readiness and student
success solutions in the US. Hobsons helps
students identify their strengths, explore
careers, create academic plans and match
these to educational opportunities.
Hobsons’ revenues are mainly derived
from subscription contracts with a wide
range of educational institutions.
Performance highlights
Hobsons produced another year of
underlying growth with revenues up 9%.
There was continued strong growth from its
K-12 career and college planning platform,
Naviance, its college matching business,
Intersect and its higher education student
retention business, Starfish. Hobsons’
Admissions business was operating in
an increasingly competitive environment
and experienced declining revenue.
Following a strategic review of Hobsons,
the business underwent a refocusing and
restructuring programme. Hobsons was
split into two distinct areas to provide a
dedicated management team for each,
namely the fast-growing student success
businesses for college and career readiness,
matching and retention (Naviance, Intersect
and Starfish) and the more mature
Admissions and Solutions businesses.
Following this restructure, the Admissions
and Solutions businesses were sold
in September and October 2017 respectively.
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Strategic Report
dmg information
B2B
Operationally, Hobsons made good progress
in strengthening its core products and
services. The first phase of Naviance
platform modernisation was launched,
improving the user interface and mobile
responsiveness of the student-facing
components of Naviance. Naviance was
also successfully transitioned to a cloud
computing platform during the year. A new
centralised modern platform for Intersect
was built. Two new products were delivered
on the platform and progress is underway
to incorporate all existing matching
products into the new platform. In July 2017
Hobsons released Starfish 7 which includes
predictive analytics based on the research
and methodologies developed by PAR
Framework, a business acquired in 2016,
that will deliver useful data to advisers
and institutional leadership teams. This
product is expected to help support the
continued growth of this early-stage business.
A major project to upgrade the sales force
was also undertaken. A more structured,
focused and data-driven approach has
been adopted to enhance team capabilities
and better profile and target customers.
Priorities in the year ahead
FY 2018 will be another year of transition
for Hobsons as it continues to refocus
and strengthen its high-value, high-growth
core products and services. Operational
improvements are expected to flow
through as the cost base is streamlined and
an agile methodology is adopted across core
internal processes. Hobsons will continue
with its long-term objective to become
the trusted partner for institutions and
communities using digital solutions to
drive student success.
Go online to read the
EdTech case studies
www.dmgt.com
Energy Information
Revenue
£88m
Business model
Genscape delivers innovative solutions to
improve market transparency and efficiency
across several asset classes including oil,
power, natural gas and liquid natural gas,
agriculture, maritime and renewables.
Genscape provides its customers with
fundamental data, intelligence and real-time
alerts, workflow tools and predictive
analytics to better manage volatility,
make complex decisions and increase the
efficiency of their supply chains. Revenues
are mainly subscription based through
annual and multi-year client contracts.
Performance highlights
Genscape delivered underlying revenue
growth of 1% in the year. The core
businesses operating in the power, oil
and gas sectors continued to grow despite
the sustained low oil price and low price
volatility environment, reflecting good
ongoing product development and client
expansion. The solar business, Locus Energy,
experienced challenging market conditions,
with sales of monitors adversely affected
by a market shift in distribution channels.
There was a solid profit performance in core
Energy areas which was more than offset by
weaker trading performance at Locus Energy
and our planned investment in building new
products and enhancing existing services.
Genscape is bringing transparency to global
energy markets by building global product
offerings and continuing to move up the
value chain by providing analytics and
forecasts. For example, Genscape Power
has expanded its services to deregulated
markets in Mexico and Japan. Genscape
is developing a real-time, comprehensive
and accurate global crude oil supply and
demand product and is expanding its
proprietary sensor network to monitor
industrial facilities.
Given the continued challenges facing the
Energy Information sector, notably solar,
and the likely time required before the
business becomes a major cash generator,
the carrying value of the Genscape business
has been reduced to £141 million, resulting
in an impairment charge of £140 million.
Priorities in the year ahead
Under Genscape’s new management team,
the business will continue to invest in new
products and service development and its
long-term growth trajectory remains strong,
despite the current challenging market
conditions. One of the key priorities will be
to reposition the Locus Energy product suite
given recent market changes in distribution.
After delivering some pricing model
improvements this year, Genscape will
continue to drive operational improvements,
particularly around pricing and an enhanced
go-to-market strategy.
Go online to read the
Energy case study
www.dmgt.com
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20
Daily Mail and General Trust plc Annual Report 2017
Events and Exhibitions: dmg events
B2B
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Revenue
£117m
Revenue
Operating profit*
Operating margin*
2017
£m
117
31
26%
2016
£m
105
29
28%
Movement
%
Underlying
%
+11%
+6%
+3%
(7)%
* Adjusted operating profit and operating margin; see pages 29 to 31 for details.
^ Underlying growth rates give a like-for-like comparison; see page 31 for details.
dmg events is focused on seeking new
opportunities for customers in emerging
markets, leading to 10 new events
being launched in FY 2017 with five
more planned for FY 2018. dmg events
hosted over 50 events attracting over
300,000 visitors and exhibitors from
more than 100 different countries.
Performance highlights
dmg events produced a resilient
performance in FY 2017, delivering 3%
underlying revenue growth, despite the
continued weakness in the oil price.
Reported revenues grew by 11% due
to the strength of the US dollar relative
to the British pound.
Business model
dmg events is an organiser of B2B exhibitions
and associated conferences with industry-
leading events in the energy, construction,
interiors, hotel, hospitality and leisure
sectors. The strong market and brand
positions, emerging market experience and
entrepreneurial culture create opportunities
for growth through geo-cloning existing
events into new locations and by creating
spin-off sections to become standalone
events. The key branded events are the Big 5,
ADIPEC, INDEX, Gastech and The Hotel Show
which all provide opportunities to develop
our spin-off and geo-clone strategy.
Revenues are derived from exhibitor,
sponsorship and delegate fees and over
60% of revenues are generated from the
top five events.
The key branded events of the Big 5,
ADIPEC and Gastech all produced good
levels of visitor and exhibitor growth.
Gastech produced double-digit levels of
revenue growth due to a larger conference
programme, increased popularity with
sponsors and exhibitors and the positive
effect of changing the location to Japan, the
world’s largest liquefied natural gas market.
The Global Petroleum Show, however, was
impacted by the tough Canadian energy
sector which has experienced strong
headwinds during FY 2017.
dmg events continued to geo-clone shows
by launching into new locations, including
two South African events, The Hotel Show
Africa and Oil & Gas Africa, as well as East
Africa Big 5 and Saudi Stone. A number
of new spin-off events launched into
adjacencies from the existing construction,
energy and hospitality sectors.
Operating profit declined by 7% on an
underlying basis reflecting the tough
conditions in the Canadian energy events
market and investment in the strong launch
programme for both FY 2017 and FY 2018.
Action was taken to address the challenging
market conditions, through disposing of five
events and closing three events during the
year. Operating margins were, however,
a healthy 26% due to strong cost control,
low overheads and a more effective digital
marketing approach.
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Key developments
• Robust revenue growth despite
challenging energy event market
conditions: Gastech revenues in
Japan grew by over 20% on the
previous event.
• Geo-cloning: strong performance
of new geo-clones in key sectors.
• Spin-offs: successful development
of spin-off events.
• Prior year acquisition of Exhibition
Management Services drove two
new launches in FY 2017: Oil & Gas
Africa and The Hotel Show Africa.
Priorities for the year ahead
dmg events will remain focused on
developing its key large-scale market-leading
events. These events have the potential to
continue to grow and are key brands capable
of future geo-cloning and generating new
spin-off events. The teams will continue to
create new relevant event content whilst
also focusing on enhancing the customer
experience through the increased use of
mobile technology and data analytics.
The five launches planned for 2018 in North
Africa, the Middle East and South East Asia
illustrate the continued strong commitment
to organic growth.
21
Strategic Report
dmg media
Consumer Media
Revenue
£683m
Operating profit
£77m
Revenue
Operating profit*
Operating margin*
2017
£m
683
77
11%
2016
£m
706
77
11%
Movement
%
(3)%
+0%
Underlying^
%
+1%
+10%
* Adjusted operating profit and operating margin; see pages 29 to 31 for details.
^ Underlying growth rates give a like-for-like comparison; see page 31 for details.
dmg media has continued to focus on
delivering quality, popular journalism
to a large audience on a global basis.
A multi-year investment programme,
positioning dmg media as a modern news
media company, has ensured that the
business has prospered in an increasingly
digital-oriented consumer market.
The combined strength of the Mail and
Metro brands creates opportunities to
position dmg media’s proposition to
advertisers through a sophisticated
and targeted omni-channel approach.
Business model
dmg media’s portfolio of news media
businesses includes two of the UK’s most
read paid-for newspapers, the Daily Mail
and The Mail on Sunday, and MailOnline,
which attracts an average 15 million unique
browsers each day. The Mail brand has the
largest reach of any commercial news media
brand in the UK and has achieved scale in
other geographic markets, including the
US and Australia. Metro, dmg media’s
free newspaper, has the largest weekday
newspaper readership in the UK each month.
Combined, the Mail and Metro brands reach
c.70% of the UK’s adult population each
month. dmg media’s revenues are generated
mainly from advertising and circulation
revenues. While the newspaper businesses
continue to generate strong profits and cash
flow, the digital businesses are the driver
of dmg media’s future growth.
Performance highlights
dmg media delivered an encouraging
performance in the year. Revenues were
up 1% on an underlying basis, with the
decline in print advertising revenues of
5% being more than offset by digital
advertising growth, up 18%, and a stable
circulation performance.
Revenues were £683 million, representing
an absolute decline of 3%, with the benefit
of the strong US dollar and the inclusion of
MailOnline Australia’s revenue being offset
by the disposal of Elite Daily in April 2017
and the decline in revenues from reselling
newsprint. The disposal of Elite Daily has
enabled dmg media to concentrate its
digital resources on MailOnline.
Adjusted operating profit was £77 million,
an underlying increase of 10%, reflecting
growth in digital revenues, good progress
on MailOnline’s path to profitability and
cost savings in the newspaper businesses,
primarily the closure of the Didcot printing
plant. These were partially offset by the
decline in print advertising revenues.
The operating margin remained relatively
healthy at 11%.
Mail businesses
Revenues for the combined newspaper and
website businesses (the Daily Mail, The Mail
on Sunday and MailOnline) were in line
on an underlying basis, at £574 million,
despite continued challenging conditions
in the print advertising market. The 10%
underlying decline in print advertising
revenue to £131 million was offset by the
strong performance at MailOnline, which
grew revenues by an underlying 20% to
£119 million, whilst circulation revenues
of £308 million remained stable on an
underlying basis.
22
Key developments
• Another year of good performance
with multi-year investment
programme driving results.
• Strong digital advertising growth
drove underlying increase in
dmg media’s profits.
• Mail Advertising, dmg media’s
cross-media partnership for
advertising solutions, is gaining
traction.
• Circulation and advertising
outperformance of the market for
the Daily Mail, The Mail on Sunday
and Metro.
• Disposal of Elite Daily in April 2017
to focus digital resources on
MailOnline.
• Cost reduction initiatives continue
with the closure of the Didcot
printing plant facilities.
• Successful launch of DailyMailTV joint
venture in the US in September 2017.
Total advertising revenues from the Mail
titles were £248 million, up £7m, representing
an increase of 2% on an underlying basis.
Whilst the UK newspaper advertising market
continued to decline, Mail Newspapers
outperformed the market. Print advertising
decreased by an underlying 10%, compared
to the 13% decline during FY 2016.
The Daily Mail and The Mail on Sunday
continue to outperform their markets,
holding significant market shares, averaging
23.4% and 22.1% for the year respectively.
The robust revenue performance was
achieved due to the full-year benefit of
cover price increases in FY 2016 and FY 2017
offsetting the declining circulation volumes.
Since the year-end the cover price of The Mail
on Sunday increased from £1.70 to £1.80
in October 2017.
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Daily Mail and General Trust plc Annual Report 2017
Outlook
Consumer Media is expected to continue
to benefit from digital advertising growth
and to experience circulation volume
and print advertising declines, although
advertising revenues will remain volatile.
In FY 2018, the underlying rate of decline of
dmg media’s revenues is expected to be in
the mid-single digits. The operating margin
is expected to be around 10% in FY 2018,
compared to the 11% delivered in FY 2017,
with the revenue reduction being partly
offset by the benefit of continued cost
efficiencies within the newspapers and by
MailOnline achieving profitability for the full
year in FY 2018.
Go online to read the dmg media
case study www.dmgt.com
Metro
Metro delivered a strong revenue
performance in the context of a declining
print advertising market, growing underlying
revenues by 7% over the year. The
performance reflects increased circulation
in London as well as taking on four regional
franchises from Trinity Mirror in January
2017. Metro has the largest circulation of any
weekday newspaper in the UK, is read by an
average of 3.1 million people each day and
has the largest Monday to Friday advertising
market share by volume. The challenging
print advertising market conditions are
expected to continue and Metro will
remain focused on defending its profitability
whilst ensuring that the quality of the
newspaper and its creative approach
to advertising remains.
Priorities in the year ahead
dmg media will continue to harness the
value of the Mail brands for both readers
and advertisers and invest in the quality of
its popular journalism to drive and engage
its global audiences. Operating efficiently
with a relentless focus on an agile cost base,
combined with initiatives like the partnership
advertising team, will also be important
priorities. Significant investment has been
made to establish MailOnline as a global
market leader over the last few years
and it is expected to achieve its first year
of profitability in the coming year.
MailOnline generated strong levels of
underlying revenue growth in FY 2017
of 20%. In the US, MailOnline’s revenues
grew by an underlying 36%, reflecting the
increased traffic, further product innovation
and the partnerships with Facebook and
Snapchat. The audience on the core sites
continues to grow, with 14.9 million average
daily global unique browsers during the year,
up 4%, and the site attracted on average
227 million monthly global unique browsers
during the year.
Engagement levels have also increased
which, alongside the growth in global
audiences and ability to provide
programmatic advertising solutions with
data analytics, creates a compelling offering
for advertising clients. MailOnline has
continued to focus on increasing the size
and engagement level of its global audience,
particularly in the US and Australian
markets. The growth strategy is far-reaching
and includes providing new video advertising
formats, working in collaboration with
our key commercial partners, Facebook,
Snapchat and Google. It also includes
DailyMailTV, a joint venture which launched
successfully in the US in September 2017
and which attracted an average of 1.3 million
viewers a night by its eighth week. This
makes DailyMailTV the highest-rated debut
of a national news magazine show since 2007.
In the UK, the Mail Advertising team has
created a compelling, multi-channel
advertising solution which continues to
gain traction and has supported continued
market outperformance. dmg media’s
approach has created a more effective,
creative and increasingly targeted
proposition to advertisers which is vital
in the dynamic market conditions in which
we operate.
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Strategic Report
JVs & Associates
Share of adjusted
operating profit
£69m
Euromoney Institutional Investor PLC
ZPG Plc
Other
Total share of operating profit
2017
£m
47
25
(2)
69
2016
Pro formaΩ
£m
42
21
(3)
61
Movement
%
+11%
+15%
(18)%
+14%
Ω
Pro forma FY 2016 figures have been restated to treat Euromoney as a c.67% owned subsidiary during the first three months
and as a c.49% owned associate during the nine months to September 2016, consistent with the ownership profile during
FY 2017. See reconciliation on page 28.
As well as a diverse portfolio of operating
businesses, DMGT holds two large
associate interests, in Euromoney
Institutional Investor PLC (Euromoney)
and ZPG Plc, formerly Zoopla Property
Group Plc. Euromoney and ZPG are
both UK listed companies and as at
30 September 2017 had a combined
market value to DMGT of £1,101 million.
Other current JVs & Associates include:
• Insurance Risk – c.30% stake in Praedicat,
which is dedicated to improving the
underwriting and management of
casualty risk;
• Property Information – c.40% stake in
Real Capital Analytics, an authority on
the deals, the players and the trends
that drive the US commercial real estate
investment markets;
• Consumer Media – c.24% stake in
Excalibur, which operates the online
discount businesses Wowcher and
LivingSocial UK; and
• Consumer Media – c.50% stake in
DailyMailTV.
In FY 2017, the Group’s share of adjusted
operating profits from its JVs & Associates
was £69 million, including £47 million in
respect of Euromoney for the nine months
to September 2017, following the reduction
in the Group’s stake in Euromoney to c.49%.
Euromoney – DMGT holding c.49%
Euromoney was founded in 1969 by the then
City editor of the Daily Mail and has grown
into a FTSE 250, international business-to-
business information and events group.
The portfolio consists of over 50 specialist
businesses, spread across primary
sectors including:
• Asset management – provides
independent research, critical news and
data and runs networks and conferences
for the asset management industry
– e.g. BCA Research, Ned Davis Research,
Institutional Investor;
• Pricing, data and market intelligence
– provides information and analysis
critical to clients’ business processes
and workflows across the metals and
mining, telecoms, insurance, airline and
banking industries – e.g. Metal Bulletin,
TelCap, CEIC;
• Banking and finance – provides market
intelligence, news, training and
conferences to the global finance industry
– e.g. Euromoney, IMN, Global Capital; and
• Commodity events – leading conferences
in the metals, agriculture and energy
sectors – e.g. Indaba, Global Grain.
Following the reduction in stake to
c.49%, Euromoney’s balance sheet is
now independent of DMGT’s, increasing
Euromoney’s financial flexibility to
be acquisitive and to accelerate the
implementation of its strategy.
24
In April 2017, Euromoney completed the
acquisition of RISI, the leading price
reporting agency for the global forest
products market, for US$125 million.
ZPG – DMGT holding c.30%
ZPG was founded in 2007 and has a highly
experienced management team. The group
has a multi-brand, multi-channel approach,
with its portfolio consisting of:
• Zoopla – the UK’s most comprehensive
property website that combines hundreds
of thousands of property listings with
market data and local information;
• PrimeLocation – one of the UK’s leading
property websites, helping the middle
and upper tiers of the market explore
dream homes from the top estate and
letting agents;
• uSwitch – the UK’s leading comparison
website for home services switching;
• Property Software Group – the UK’s
largest supplier of software and workflow
solutions to the property industry; and
• Hometrack – the UK’s leading provider
of residential property market insights
and analytics.
The share of adjusted operating profits from
ZPG increased to £25 million. In October
2017 ZPG acquired Money.co.uk, one
of the UK’s leading financial services
comparison websites.
Go online to read about
Euromoney and ZPG
www.euromoneyplc.com
www.zpg.co.uk
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Daily Mail and General Trust plc Annual Report 2017
Focusing on driving long-term shareholder value
Financial Review
DMGT is making progress towards
becoming a higher performance
business with a strong balance sheet and
the foundations for long-term growth.
Tim Collier
Group Chief Financial Officer
DMGT’s long-term perspective and
financial strength have enabled
continued investment to support
future growth opportunities.
The Financial Review details DMGT’s
performance during a year of transition,
where new strategic priorities were
established and investment to drive
long-term growth continued.
The statutory results reflect the exclusion of
discontinued operations, namely Euromoney,
from revenue, operating profit and profit
before tax. As a result of the impairment of
the carrying value of goodwill and intangible
assets associated with Genscape, Xceligent
and SiteCompli, businesses in the Energy
Information and Property Information
sectors, DMGT made an operating loss in
the year. Profit for the year was £342 million,
an increase of 60% on the prior year,
benefiting from gains on disposals and,
similarly, earnings per share grew 69%. Good
progress was made strengthening DMGT’s
balance sheet during the year as borrowings
reduced by 32% and the Group’s defined
benefit pension schemes’ position improved,
as they ended the year with a net surplus.
The recommended total dividend for the
year of 22.7 pence is up 3% on the prior year,
continuing DMGT’s track record of delivering
annual real dividend growth and reflecting
the Board’s confidence in the Group’s ability
to deliver long-term earnings growth.
The Board and management team use
adjusted results and measures, rather than
statutory results, to give greater insight to
the financial performance of the Group and
the way it is managed. Similarly, adjusted
results are used in setting management
remuneration. Adjusted results exclude
certain items which, if included, could distort
the understanding of performance during
the year and the comparability between
periods and businesses. Consequently,
the rest of this Financial Review focuses on
adjusted measures. The explanations for
the different types of adjustment and the
reconciliations to statutory results are shown
on pages 28 to 31. Similarly, when assessing
revenue and operating profit growth, the
Board and management focus on underlying
growth rates as the most meaningful
like-for-like comparison between the current
year and the prior year. A more detailed
explanation and the calculations are shown
on page 31.
There has been good progress against the
three strategic priorities during the year, with
the reduced stake in Euromoney, from c.67%
to c.49% in December 2016, being the first
significant step in increasing our portfolio
focus. Euromoney consequently changed
from being a subsidiary to being an associate.
To give a more meaningful year-on-year
comparison, prior year pro forma figures
have been prepared assuming the same
holding profile as during FY 2017, as shown
on page 28.
Financial Highlights –
Statutory Results
Revenue
£1,564m
2016: £1,514m
Operating (loss)/profit
£(129)m
2016: £91m
(Loss)/profit before tax
£(112)m
2016: £202m
Profit for the year#
£342m
2016: £214m
Earnings per share#
97.8p
2016: 57.8p
Dividend per share
22.7p
2016: 22.0p
Go online to read more
about our Financial highlights
www.dmgt.com
25
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Strategic Report
Focusing on driving long-term shareholder value
Financial Review
Financial Highlights:
Adjusted measures*
Underlying^ revenue growth
+1%
2016: +0%
Underlying^ operating profit decline
(2)%
2016: (11)%
Operating margin
12%
2016Ω: 12%
PBT growth
+4%Ω
2016: (7)%
Cash operating income growth
+16%Ω
2016: (9)%
EPS growth
+7%Ω
2016: (6)%
Net debt§
£464m
2016: £679m
Net debt§/EBITDA
1.4x
2016: 1.8x
Footnotes are defined on the inside front cover with
the exception of that below.
^
Underlying adjusted revenue or adjusted operating
profit growth is on a like-for-like basis, see page 31.
Underlying results are adjusted for constant
exchange rates, the exclusion of disposals and
closures and for the inclusion of the year-on-year
organic growth from acquisitions. For events, the
comparisons are between events held in the year
and the same events held the previous time. For
dmg media, underlying growth rates exclude the
benefit of an additional 53rd week from the FY 2016
results and underlying revenues only include the
profit but not the gross-up, equivalent to the cost of
sales, from low-margin newsprint resale activities.
Business performance
B2B
RMS
dmg information
dmg events
Euromoney
Consumer
dmg media
Corporate costs
DMGT
26
Performance highlights
Performance in the year was broadly in line
with our expectations, delivering underlying
revenue growth, highlighting the benefit
of a diversified portfolio in challenging
market conditions. Operating profit declined
on an underlying basis, however, as a result
of the combination of these conditions for
some of the B2B information businesses
and our planned investment in long-term
growth opportunities.
The Group’s revenue grew 1% on an
underlying basis including an encouraging
5% for subscriptions and 3% for advertising,
with digital growth driven by MailOnline
outstripping the decline in print. Transaction
revenues declined by an underlying 4%,
reflecting challenging market conditions
for European Property Information and
the solar part of the Energy Information
business. Revenues from events and
training continued to grow whilst circulation
revenues remained stable. Revenues grew
3% on a pro formaΩ basis and benefited
from the stronger US dollar relative to the
British pound.
The 2% underlying decline in Group
adjusted operating profit was principally
due to the increase in RMS(one) related
amortisation costs, increased losses from
dmg information’s Xceligent business and
reduced profits from Genscape, where the
solar energy business had a particularly
challenging year. Adjusted profit before
tax and adjusted earnings per share were
adversely affected by the Euromoney
transaction but grew by 4% and 7%
respectively on a pro formaΩ basis.
DMGT increased the strength of the balance
sheet over the year, with the year-end net
debt to EBITDA ratio reducing to 1.4,
significantly below the Group’s preferred
upper limit of around 2.0 times. The
improved financial flexibility reflects
the benefit from disposal proceeds and
continued good cash flow generation.
Revenue performance
Group revenues in the financial year grew
1% on the prior year on an underlying basis.
On a pro formaΩ basis, revenues rose by 3%
to £1,660 million reflecting the stronger
US dollar relative to the British pound.
The average exchange rate during the year
was £1:$1.27 compared with £1:$1.42 in the
prior year.
Revenues from B2B businesses grew 2%
on an underlying basis, to £976 million.
Within dmg information, continued
underlying growth was achieved by the
EdTech, US Property Information businesses
and by the subscription based units within
the Energy Information company, Genscape.
This was, however, largely offset by declining
transaction revenues from European Property
Information and Genscape’s solar business,
reflecting challenging market conditions.
RMS and dmg events also continued to
deliver underlying revenue growth. Reported
revenues benefited strongly from favourable
exchange rates as described above.
Revenues from the Consumer Media
business, dmg media, were £683 million,
up 1% on an underlying basis, with strong
growth from MailOnline more than offsetting
the decline from print advertising, whilst
circulation revenues remained stable.
The charts on page 27 demonstrate DMGT’s
diverse revenue profile.
Further detail on each operating
business’s revenue performance can
be found on pages 16 to 23
Operating profit performance
In the financial year, adjusted operating
profit of £198 million was down by 2% on
an underlying basis with the reduction being
largely attributed to the lower margin, as
expected, at RMS and increased losses from
Xceligent, and grew by 2% on a pro formaΩ
basis. The reported operating profit
benefited from the stronger US dollar, as
previously indicated. The overall operating
Revenues (FY 16 pro formaΩ)
Operating profit* (FY 16 pro formaΩ)
Growth
Reported
Underlying^
FY 17
£m
FY 16
£m
Growth
Reported
Underlying^
FY 17
£m
233
531
117
95
683
FY 16
£m
205
498
105
90
706
+14%
+7%
+11%
+6%
+2%
+2%
+3%
N/A
(3)%
+1%
33
69
31
19
77
(31)
198
36
77
29
18
77
(42)
195
(9)%
(10)%
+6%
+6%
+0%
+26%
+2%
(25)%
(13)%
(7)%
N/A
+10%
+26%
(2)%
1,660
1,604
+3%
+1%
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Revenue profile
By business (%)
By type (%)
By destination (%)
RMS
dmg information
dmg events
Euromoney
dmg media
14
32
7
6
41
Subscriptions
Circulation
Events, conferences and training
Digital advertising
Print advertising
Transactions and other
31
19
8
9
12
21
UK
North America
Rest of the World
49
33
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margin was 12%, in line with the pro formaΩ
margin in the prior year.
The overall profit of the Group’s B2B
operations was £152 million, down from
£160 million, on a pro formaΩ basis, with the
reduction being attributable to RMS(one)
amortisation, Xceligent losses and Genscape.
The profit from dmg media was £77 million,
an underlying increase of 10%, and
corporate costs reduced by £11 million
to £31 million.
Cash operating income
Cash operating income is a performance
metric used by DMGT to assess the cash
generation of its businesses. It is calculated
by adding back depreciation and amortisation
expenses, which are non-cash items, to
adjusted operating profit and then deducting
capital expenditure. In the financial year,
cash operating income for the Group as a
whole was £199 million, up £27 million or
16% on a pro formaΩ basis, reflecting an
improving profile at RMS.
JVs & Associates
The Group’s share of the adjusted operating
profits* of its JVs & Associates benefited by
£43m from the inclusion of Euromoney as an
associate for nine months of the year and,
as a result, increased by £46 million to
£69 million. The increase was 14% on
a pro formaΩ basis.
Further information on our JVs & Associates’
performance can be found on page 24 of
this report.
Financing costs
Adjusted net finance costs increased by 5%
to £42 million. DMGT benefited from lower
average net debt levels during the year but
the interest payable was adversely affected
by the stronger US dollar and an increase in
the share of associates’ interest payable to
£5 million, from £3 million in the prior year.
The pension finance charge, which is
excluded from adjusted results, was £5 million
for the year, in line with the prior year.
Results before taxation
Adjusted profit before tax was £226 million,
4% growth on a pro formaΩ basis, with the
increased finance costs partly offsetting the
growth in operating profit and the share of
profits from JVs & Associates.
£30 million in the prior year on a pro formaΩ
basis. The adjusted tax rate for the year of
12.8% reduced slightly from the pro formaΩ
basis 13.9% in FY 2016, reflecting the
increased use of historic UK tax losses,
and was lower than previously anticipated
due to the expected enactment of new UK
legislation restricting the use of losses
not taking place until after the year end.
Due to the new legislation and to the
geographical mix of profits, the effective tax
rate is expected to increase to nearer 18%
in FY 2018 and to increase further over the
next few years, to over 20%.
The statutory tax charge for the year was
£65 million. This excludes the charge of
£4 million in respect of discontinued
operations and £5 million in respect of joint
ventures and associates. There were tax
credits of £30 million in respect of the
amortisation and impairment of intangible
fixed assets, tax charges of £109 million in
respect of tax losses that can no longer be
recognised as deferred tax assets and tax
credits of £35 million on other adjusting items.
Taxation
The adjusted tax charge for the year, after
adjusting for the effect of exceptional items,
was £29 million, see Note 11, compared to
Profit after tax
Adjusted Group profit after tax and minority
interests was £196 million, 7% growth on
a pro formaΩ basis.
Cash operating income
£ million
Adjusted Group operating profit
Add: Depreciation of tangible fixed assets
Add: Amortisation of intangible assets (e.g. products and software)
Less: Purchase of tangible fixed assets
Source
Tables on page 30
Note 3
Note 3
Cash flow
Less: Expenditure on intangible assets (e.g. products and software)
Add: Proceeds from tangible fixed assets
Cash flow
Cash flow
DMGT Cash operating income
FY 2017
FY 2016
FY 2016Ω
198
35
44
(21)
(58)
1
199
277
36
28
(27)
(61)
2
254
195
35
24
(24)
(59)
2
172
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Financial Review
Earnings per share
Adjusted basic earnings per share were
55.6 pence, 7% growth on a pro formaΩ basis.
The weighted average number of shares in
issue during the year was 353.1 million, down
slightly from 353.4 million in the prior year.
Net debt and cash flow
Net debt at the end of the year was
£464 million, a decrease of £214 million
during the year, and the net debt:EBITDA
ratio was 1.4. The Group generated operating
cash flows of £175 million, a conversion rate
of 88% of operating profits, compared with
72% in the prior year. Operating cash flows
included £46 million of exceptional operating
items and £79 million of capital expenditure.
During the year there were also payments
made for £78 million of dividends, £35 million
of interest, £13 million of pension funding
and £13 million of taxation.
Net proceeds from disposals, including
expenditure on acquisitions, were
£271 million, and included £218 million from
the reduction of the stake in Euromoney,
after adjusting for the de-consolidation
of £96 million cash on Euromoney’s
balance sheet.
At the end of the financial year, the Group
had £424 million of bonds with £216 million
maturing in December 2018, £10 million
maturing in April 2021 and £197 million
maturing in June 2027. At the year-end, the
committed bank facilities were £611 million,
of which £565 million was unutilised, and
cash balances were £7 million. Bond debt
constitutes less than half of the debt
available to DMGT.
DMGT’s ratio of year-end net debt to
adjusted profits before interest, tax,
depreciation and amortisation (EBITDA) was
1.4 times, significantly below the Group’s
preferred upper limit of 2.0 times. DMGT
has retained its BBB- investment grade
corporate credit ratings from each
of Standard & Poor’s and Fitch.
Pensions
The Group’s defined benefit pension
schemes provide retirement benefits for UK
employees, largely in dmg media. These
schemes are closed to new entrants. The
financial position of the Group’s defined
benefit pension schemes, on an accounting
basis, improved from a net deficit of
£246 million at the start of the year to a net
surplus of £62 million at 30 September 2017,
calculated in accordance with IAS 19
(Revised). During the year, the value of the
assets increased and there was a reduction
in the value of the defined benefit obligation.
Action was also taken to further reduce the
28
exposure to future investment, interest rate
and inflation risk.
Funding payments into the main schemes
were £13 million in the year and are
expected to continue, since the schemes
remain in deficit on an actuarial basis. The
agreed funding plan includes payments of
approximately £13 million p.a. to FY 2019
and £16 million p.a. from FY 2020 to FY 2027.
Contributions may be discontinued should
the schemes’ actuary agree the schemes are
no longer in deficit. The next formal actuarial
valuation is scheduled for 31 March 2019.
Dividends
The Board aims to deliver sustained dividend
growth in real terms. The recommended
final dividend is 15.8 pence which, if
approved, would make the total dividend for
the year 22.7 pence, an increase of 3% over
the prior year. The recommended full year
dividend is equivalent to 41% of adjusted
earnings per share and continues DMGT’s
track record of increasing the dividend in
excess of inflation. The Board’s decision to
recommend increasing the dividend, in real
terms, despite the decline in adjusted
earnings during the year reflects the Group’s
dividend policy and the Board’s confidence
in the Group’s ability to deliver future
long-term earnings growth. The dividend
policy is to grow the dividend in real terms
and, in the medium term, to aim to distribute
around one-third of the Group’s adjusted
earnings. This policy reflects the combined
objectives of delivering a reliable and
predictable dividend growth trajectory while
also being sufficiently prudent to retain the
flexibility to make significant investments in
the long-term future growth of the business.
Exceptional items, impairments
and amortisation
As explained in more detail below, certain
items, including exceptional costs,
impairments and some amortisation, are
excluded from adjusted results. Exceptional
operating costs were £50 million in the year,
compared to £58 million in the prior year,
including our £7 million (2016 £4 million)
share of JVs and Associates’ exceptional
operating costs. There were £17 million
(2016 £25 million) of severance costs,
including £11 million (2016 £4 million) in
respect of dmg information, and £8 million
(2016 £2 million) of restructuring costs,
including £4 million in relation to the
closure of the Didcot printing plant.
Pro formaΩ
In December 2016, DMGT reduced its stake in Euromoney from c.67% to c.49% and
Euromoney ceased to be a subsidiary of DMGT and became an associate. Euromoney
is therefore treated as a discontinued operation and its performance is excluded from
statutory results, other than earnings per share. DMGT’s adjusted results include 100%
of Euromoney’s revenues and operating profits whilst it was a subsidiary during all of
FY 2016 and the first quarter of FY 2017. Thereafter, from January to September 2017,
the performance of DMGT’s c.49% stake in Euromoney is only included within
JVs & Associates, which is reflected in the adjusted profit before tax and adjusted
earnings per share figures. Therefore, to allow for a like-for-like comparison, FY 2016
pro forma results have been presented based on treating Euromoney as a c.67%
owned subsidiary during the first quarter and as a c.49% owned associate during the
remaining nine months of FY 2016, consistent with the actual holding during FY 2017.
£ million
FY 2017
Reported
Revision Pro formaΩ
Growth
FY 2016
Pro forma
Revenue
Operating profit
Income from JVs & Associates
Net finance costs
Profit before tax
Tax charge
Minority interests
Group profit
Earnings per share
Revenue: B2B
Operating profit: B2B
Earnings per share
1,660
198
69
(42)
226
(29)
(1)
196
55.6p
976
152
55.6p
1,917
277
23
(40)
260
(37)
(24)
198
56.0p
1,212
242
56.0p
(313)
(82)
38
1
(43)
7
22
(14)
(3.9)p
(313)
(82)
(3.9)p
1,604
195
61
(40)
217
(30)
(2)
184
52.1p
899
160
52.1p
+3%
+2%
+4%
+7%
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Other exceptional costs comprised £14 million
(2016 £2 million) of legal fees, principally in
respect of the defence by Xceligent, the US
Property Information business, of a complaint
filed by a competitor, and £5 million
(2016 £10 million) of consultancy charges.
The charge for amortisation of intangible
assets arising on business combinations,
including the share from joint ventures
and associates, reduced by £2 million
to £50 million. The Group also made an
impairment charge against goodwill and
intangible assets of £231 million, primarily
in respect of the Energy Information
business, Genscape, and two of the US
Property Information businesses, Xceligent
and SiteCompli. This does not affect the
Group’s cash flows.
Genscape faced challenging market conditions
during the year, due to the sustained low oil
price, a low price volatility environment and,
most notably, a change in distribution
channels for the US residential solar market.
Given the continued challenges, particularly
for solar, and the likely time required before
Genscape becomes a major cash generator,
the carrying value of the business has been
reduced to £141 million, resulting in an
impairment charge of £140 million.
Xceligent expanded into New York, the
US’s largest commercial real estate market,
during the year and the revenue growth has
been significantly slower than previously
expected and, given the significant further
investment and time required to achieve full
national coverage, a decision was taken to
reduce the carrying value of the business to
zero, resulting in an impairment charge of
£42 million. Similarly, SiteCompli’s planned
expansion into the national retail market has
proved more challenging than previously
expected and a full impairment charge
of £24 million has been taken in respect
of its carrying value.
The Group also incurred a £41 million
impairment charge in respect of the Didcot
printing plant which was closed during
the year.
The Group recorded other net gains on
disposal of businesses and investments
of £530 million, compared to a net gain
of £138 million in the prior year. DMGT
recognised £509 million of gains in respect
of the reduced holding in Euromoney,
including the gain on the revaluation
of the retained c.49% stake.
Adjusted results
As explained earlier, the Board and
management team use adjusted results
and measures, rather than statutory results,
Viability Statement
In accordance with provision C.2.2 of the 2014 Corporate Governance Code, the
Directors have assessed the prospects of the Company. The Board used a three-year
review period. The next refinancing of our bank debt facilities and 5.75% bonds is within
the next three years (April 2019 and December 2018 respectively). Three years is also
consistent with the Group’s business planning cycle.
The Board’s assessment of the Company’s future prospects and viability determined
the Group’s overall risk capacity by considering banking and bond covenants, other
financial commitments, and borrowing capacity to determine the maximum loss from
risk events that the Group could endure whilst remaining viable. The assessment has
also been made with reference to the Group’s current position and prospects, the Group
strategy, the Board’s risk appetite and principal risks, which the Directors review at
least annually. The key factors affecting the Group’s future prospects and viability are:
• DMGT manages a portfolio of operating companies with diversity across sector,
revenue stream and geography. See page 27 in the Financial Review for the Group’s
revenue profile.
• Financial flexibility through a strong balance sheet with continued good cash flow
generation and net debt to EBITDA ratio comfortably below our preferred upper limit.
• The Group’s ability to restructure quickly through the portfolio management of
operating company subsidiaries and investments in JVs and Associates.
• The long-term view of the Company afforded by the family shareholding.
Group forecast revenue, operating profit, EBITDA and cash flows were subject to robust
downside stress testing over the assessment period, which involved modelling the
impact of a combination of hypothetical and severe adverse scenarios. This was focused
on the impact of a number of the Group’s principal risks crystallising, including:
• The impact of successive key product investment failures across the Group.
• The impact of a significantly accelerated decline in print advertising and lower
growth in digital advertising affecting profits from the Consumer Media businesses.
• The impact of a significant decline in UK housing transaction volumes affecting
profits of the European Property Information businesses and ZPG.
• The impact of a severe cyberattack resulting in the loss of high volumes of personal
data, considering both the reputational impact, recovery costs and regulatory fines.
• The impact of macro-economic factors including large foreign exchange fluctuations,
significant increases in interest rates and corporation tax increases.
Mitigations considered as part of the stress testing included a number of cost reduction
programmes and disposals of operating company subsidiaries and dilution of the
Group’s stake in JVs and Associates.
Based on the analysis described above, the Directors confirm that they have a
reasonable expectation that the Group will continue to operate and meet its liabilities
as they fall due over the next three years.
to give greater insight to the financial
performance of the Group and the way it is
managed. The tables on page 30 show the
full list of adjustments between statutory
operating profit and adjusted operating
profit by business, as well as between
statutory profit before tax and adjusted
profit before tax at Group level for both
FY 2017 and FY 2016.
Note 13 on page 124 shows the full list
of adjustments between statutory and
adjusted results. The table on page 30 shows
a summarised version of the reconciliation
from statutory profit before tax to adjusted
profit before tax.
The explanation for each adjustment is
as follows:
i.
ii.
Discontinued operations: the adjusted
results for FY 2017 include the pre-
disposal results of discontinued
operations, namely Euromoney, in
which DMGT reduced its stake from
c.67% to c.49% in December 2016,
whereas statutory results only include
continuing operations.
Exceptional operating costs: businesses
occasionally incur exceptional costs,
including severance and consultancy
fees, in respect of a reorganisation that
is incremental to normal operations.
Similarly, for the Group’s B2B businesses,
29
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Financial Review
there may be legal costs in respect of
litigation that are outside the ordinary
course of business and sufficiently material
to be treated as an exceptional cost.
These are excluded from adjusted results.
iii. Impairment of plant: occasionally the
carrying value of an asset in the balance
sheet is considered to be greater than the
value in use or fair value less costs to sell
and it is appropriate to impair it. The
associated charge is excluded from adjusted
results since it is unrelated to the ongoing
cost of doing business. The ongoing
depreciation and amortisation of tangible
assets and software, including products,
is, however, an everyday cost of doing
business and is included in both statutory
and adjusted results. A reorganisation may
also result in the write-off of the carrying
value of tangible fixed assets, as was the
case during FY 2017 when dmg media
closed its Didcot printing plant, and this
expense is excluded from adjusted results.
iv. Intangible impairment and amortisation:
when acquiring businesses, the premium
paid relative to the net assets on the
balance sheet of the acquired business
is classified as either goodwill or as an
intangible asset arising on a business
combination and is recognised on DMGT’s
balance sheet. This differs to organically
developed businesses where assets
such as employee talent and customer
relationships are not recognised on
the balance sheet. Impairment and
amortisation of intangible assets and
goodwill arising on acquisitions are
excluded from adjusted results as they
relate to historical M&A activity and future
expectations rather than the trading
performance of the business during the
year. An example is the impairment in
FY 2017 of the goodwill and intangible
assets associated with the US Property
Information business, Xceligent.
Profit on sale of assets: the Group
makes gains or losses when disposing of
businesses, for example on the disposal
v.
of Euromoney shares when DMGT reduced
its stake from c.67% to c.49%. These items
are excluded from adjusted results as they
reflect the value created since the business
was formed or acquired rather than the
operating performance of the business
during the year.
vi. Pension finance charge: the finance charge
on defined benefit schemes is a formulaic
calculation that does not necessarily
reflect the underlying economics
associated with the relevant pension
assets and liabilities. It is effectively a
notional charge and is excluded from
adjusted results.
vii. Other adjustments: other items that are
excluded from adjusted results include
changes in the fair value of certain
financial instruments and changes to
future acquisition payments. They are
considered to be unrelated to the ongoing
cost of doing business. The share of joint
ventures’ and associates’ tax charges is
included in statutory profit before tax but,
since it is a tax charge, is excluded from
Reconciliation of statutory operating profit to adjusted operating profit: FY 2017
£ million
Statutory operating profit
Discontinued operations
Exceptional operating costs
Impairment of plant
Intangible impairment and amortisation
Exclude JVs & Associates
Adjusted operating profit
RMS
30
–
3
–
–
33
dmg
information
(197)
–
27
–
239
dmg
events Euromoney
–
13
1
–
5
28
–
3
–
–
dmg
media
26
–
9
42
1
Corporate
costs
(33)
–
2
–
–
69
31
19
77
(31)
Reconciliation of statutory operating profit to adjusted operating profit: FY 2016
£ million
Statutory operating profit
Discontinued operations
Exceptional operating costs
Intangible impairment and amortisation
Exclude JVs & Associates
Adjusted operating profit
RMS
33
–
3
–
36
dmg
information
47
–
6
24
dmg
events Euromoney
–
41
13
46
27
–
1
1
dmg
media
28
–
24
25
Corporate
costs
(50)
–
9
–
77
29
100
77
(42)
Pro formaΩ adjusted operating profit of £18 million for Euromoney and £195 million for Group.
Reconciliation of statutory profit before tax to adjusted profit before tax
£ million
Statutory profit before tax
Discontinued operations
Exceptional operating costs
Impairment of plant
Intangible impairment and amortisation
Profit on sale of assets
Pension finance charge
Other adjustments
Adjusted profit before tax
Pro formaΩ FY 2016 adjusted profit before tax of £217 million.
30
JVs &
Associates
17
(1)
7
–
36
59
JVs &
Associates
5
(2)
4
11
17
FY 2017
(112)
523
50
42
282
(530)
5
(33)
226
Group
Explanation
(129)
12
50
42
282
(59)
198
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ii
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iv
Group
Explanation
91
39
58
107
(17)
277
FY 2016
202
45
58
–
107
(138)
5
(19)
260
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ii
iv
Explanation
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adjusted profit before tax. The share of
joint ventures’ and associates’ interest
charges is reclassified to financing costs
in the adjusted results.
Underlying growth
When assessing the performance of the
different businesses, the Board considers
the adjusted results. The year-on-year
change in adjusted results may not, however,
be a fair like-for-like comparison as there
are a number of factors which can influence
growth rates but which do not reflect
underlying performance.
When calculating underlying growth,
adjustments are made to give a like-for-like
comparison. For example, the adjusted
results in FY 2017 benefited from the
strengthening of the US dollar relative to
the British pound. To calculate underlying
growth, the prior year comparatives are
restated using the FY 2017 exchange rates.
Similarly, adjustments are made to
completely exclude disposals from both
Underlying performance
years. When businesses are acquired,
the prior year comparatives are adjusted
to include the acquisition.
The timing of events can also be a distortion.
To give a fair like-for-like comparison when
calculating underlying growth, the FY 2016
comparative is amended to include the
revenues and profits from the previously
held events for each FY 2017 show.
In FY 2017, DMGT’s revenues grew by 3% on a
pro formaΩ basis and the adjusted operating
profit grew by 2% on the same basis. The
growth rates benefited from the stronger US
dollar. After adjusting for this factor as well
as others, such as acquisitions and disposals,
the underlying growth rates were 1% for
revenues and a 2% decline in adjusted
operating profit, as shown in the table below.
Outlook
DMGT’s financial results for the year reflect
the difficult market environment faced
by some of our businesses, particularly
in the Energy Information and Property
Information sectors and print advertising
market. Nevertheless, the Group’s relatively
resilient performance demonstrates the
benefits of our diversified portfolio and the
strength of our market-leading businesses.
Looking forward, we will remain focused on
prudent financial management to maintain
our strong balance sheet, alongside delivering
on the long-term revenue, profit and cash
flow potential which the Group has
developed. In 2018, in line with our strategic
priorities, we will continue to deliver further
operational efficiencies, increase the portfolio
focus and enhance our financial flexibility to
invest in our chosen segments and markets
while increasing shareholder returns.
Tim Collier
Group Chief Financial Officer
£ million
Revenues
RMS
dmg information
dmg events
Euromoney
dmg media
DMGT
Operating profit
RMS
dmg information
dmg events
Euromoney
dmg media
Corporate costs
DMGT
FY 2017
Reported
M&A
Other* Underlying
Reported
M&A
FY 2016
Exchange
rates
Other Underlying
Underlying
growth
233
531
117
95
683
1,660
33
69
31
19
77
(31)
198
–
(33)
–
(95)
(5)
(133)
–
(12)
–
(19)
5
–
(27)
–
–
–
–
(34)
(34)
–
–
–
–
–
–
–
233
498
117
–
645
1,493
33
57
30
–
82
(31)
172
205
498
105
403
706
1,917
36
77
29
100
77
(42)
277
–
(49)
(1)
(403)
(18)
(471)
–
(16)
–
(100)
6
–
(109)
25
41
11
–
4
79
8
5
3
–
(2)
–
14
–
–
(1)
–
(52)
(53)
–
–
–
–
(6)
–
(6)
230
490
114
–
640
1,473
44
66
33
–
75
(42)
175
+2%
+2%
+3%
N/A
+1%
+1%
(25)%
(13)%
(7)%
N/A
+10%
+26%
(2)%
Other underlying adjustments include the timing of events, the exclusion of low-margin newsprint reselling and the additional 53rd week for dmg media in FY 2016.
*
Statutory results†
£ million
Revenue
Operating (loss)/profit
(Loss)/profit before tax
Profit for the year
Earnings per share
Dividend per share
Net assets
Borrowings
Pension surplus/(deficit)
FY 2017
FY 2016
Movement
1,564
(129)
(112)
342
97.8p
22.7p
919
480
62
1,514
91
202
214
57.8p
22.0p
529
705
(246)
+3%
(242)%
(156)%
+60%
+69%
+3%
+74%
(32)%
(125)%
† Statutory revenue, operating profit and profit before tax figures are for continuing operations only (excluding Euromoney). The FY 2016 statutory results have been reclassified accordingly.
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Strategic Report
Entrepreneurialism, Purpose and Excellence
Our People and Our Communities
DMGT encourages curiosity and
innovation amongst our people.
We value people who stretch themselves
to achieve high standards, who also act
with a clear sense of purpose and who
value the communities in which they live
and work. In turn our people can expect
an environment that allows them to
reach their full potential with the support
of experienced leaders, high-quality
learning and development tools and the
career opportunities afforded by working
within a diverse, international portfolio
of businesses.
Our values
The way DMGT thinks about its
business and its people is embodied
in our three overarching values:
Entrepreneurialism
Purpose
Excellence
Entrepreneurialism
Entrepreneurs have been a driving force
for DMGT’s business since brothers Alfred
and Harold Harmsworth invented popular
journalism with the launch of the Daily Mail
in 1896.
DMGT is dedicated to backing great ideas
and the people who make them a reality,
from home-grown success stories like
MailOnline and Euromoney to early
investments in innovative businesses like
RMS, Hobsons and Trepp.
DMGT seeks out entrepreneurs renowned
in their industries for growing businesses
and provides them with the backing and
resources of a multinational public company.
Many of DMGT’s operating businesses
continue to be led by the entrepreneurs
who founded them, a testament to DMGT’s
culture of nurturing and developing
talented entrepreneurial people.
Purpose
Alongside our commitment to
entrepreneurialism, DMGT’s businesses
and our people operate with a clear sense
of purpose, beyond profit.
DMGT is able to invest for long-term
sustainable growth and quality, and in
businesses that share our ethos, whether
that’s providing insights that make it
possible to ‘insure the uninsurable’, driving
towards ever-greater transparency across
property markets, enriching connections
between businesses and communities
with industry-leading exhibitions or
holding authority to account through
high-quality journalism.
DMGT is a responsible business,
dedicated to its people and communities,
and operates to a clear set of principles
and ethical standards. Through a range of
local partnerships within the communities
our businesses serve and Group-wide
programmes such as our CR Champions
network, DMGT supports and encourages
purpose within our community.
Read more about our communities
programme on page 33
Excellence
DMGT is committed to excellence,
demonstrated through its dedication
to creating the highest quality content,
proprietary data and products.
Our aim is to be at the forefront of cutting
edge technology and within new, exciting,
high-potential growth sectors.
As a driver in technological innovation,
DMGT is defining the jobs of the future
through its ground-breaking work in data
science, artificial intelligence, machine
learning and predictive analytics found
across businesses including Genscape,
Hobsons and RMS.
DMGT holds a wealth of top leadership
talent and sector expertise at Group level
and across its operating companies.
Our people are supported by a range of
tailored local and Group-wide learning
and development programmes.
In FY 2017, the Group initiated a programme
to leverage our scale and the expertise of our
people and improve sharing of best practice
across the Group. The aim is to support
the Group’s operating companies through
Centres of Expertise.
DMGT established and upgraded a number
of business functions including Group HR,
M&A and performance management,
building on expert knowledge and best
practice from around the Group.
Our People Agenda
DMGT’s people agenda plays a key role
in helping the Group to deliver against its
strategic priorities, particularly improving
operational execution.
HR centre of expertise
In FY 2017, led by the Group HR Director,
DMGT embarked on a fundamental
re-shaping of its central HR function to
ensure that the Group’s operating companies
have access to a world-class people operation,
backed by the scale and expertise of DMGT.
The HR centre offers a set of services across
talent, reward and communications that
support the operational HR business
partners with leadership, employee
development and best practice with the aim
of achieving:
• Better connectivity across our business;
• An increased level of support for HR
services within operating companies; and
• A more efficient structure for delivering
key HR services across the business.
Keeping our people informed
One of the challenges of a geographically
diverse organisation is ensuring that we
can effectively communicate with all of our
people. This year we have launched a new
global employee portal with increased
functionality, enabling easier employee
connectivity, which complements local
intranet sites. We began our employee
engagement programme to help ensure that
our colleagues have the opportunity to have
their voice heard. We also operate DMGT
Daily, our daily email news bulletin and we
have a number of topic-specific employee
networks such as the Cyber working group,
bringing people together from across
the Group to discuss common themes,
share our strengths and improve local
operational practices.
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Talent
The DMGT talent centre provides talent
acquisition and development support for
the Group’s operating businesses including
carrying out executive talent reviews and
identifying and delivering a learning and
development curriculum.
Reward
The reward centre provides operating
companies with access to accurate salary
benchmarking as well as managing
employee benefits across the Group.
Communications
The DMGT communications centre provides
a range of support services including
internal communications, media relations
and corporate branding.
Global Mobility
In line with our commitment to support
and reward exceptional employees,
creating international opportunities, DMGT
promoted a number of internal candidates
to Group-level leadership, including roles
in Performance Management & Strategy,
Corporate Development and M&A, HR and
Technology and we will continue to develop
our capabilities at the HR Centre to support
global employment advancement
opportunities. DMGT offers short-term
secondment opportunities such as the
Guest Auditor Programme. (See case study
for more details.)
Responsible business
DMGT is a responsible business that adheres
to strong ethical standards with a clear,
robust Code of Conduct.
Our Code of Conduct sets the standards
for our corporate and individual conduct.
The code includes standards for equal
opportunities, anti-bribery, conflicts of
interest, share dealing and fair competition
among other topics. Many of the topics in
the Code are supported by detailed policies
and procedures.
In a climate where employees, customers
and other stakeholders are increasingly
interested in the way companies do
business, the things we do to encourage
responsible business practice across the
Group contribute to the credibility and value
of DMGT’s reputation and employer brand.
These include:
• Strong governance and leadership which
promote responsible business attitudes
and actions across the Group;
• Ensuring DMGT employees understand
key legal and reputational issues;
• Operating effective risk management
and internal controls; and
• Business level participation in CR and
community support.
Our Communities
As a diverse, international business,
DMGT focuses its community efforts on
a combination of Group-level partnerships
that allow it to make the most of its
scale and size, and support for local
community initiatives and relief efforts,
through its CR Champions network.
Total charitable donations during the year
were £817 thousand. Funds donated are in
addition to initiatives which encourage our
businesses to allow employees to volunteer
their time to support local charities.
Following the terrible fire at Grenfell Tower,
over 80 employees volunteered their time
to help victims of this tragedy, coordinated
by DMGT’s local charity partner the K&C
Foundation. DMGT responded with a £150,000
donation to the Grenfell Tower Appeal and
matched individual employee donations.
Following Hurricane Harvey, which hit
the US Gulf Coast at the end of August this
year, colleagues from Genscape, Hobsons,
RMS and Xceligent all helped out with the
relief effort. Volunteers assisted at food
banks and DMGT and Hobsons matched
individual fundraising donations
with US$50,000.
Guest Auditor Programme
Run by DMGT’s Internal Audit function.
The aim is to offer an opportunity for
employees from finance and IT across all
our businesses to join the Internal Audit
team on a review of another operating
company within the DMGT portfolio.
The benefits of this programme are
multifaceted. It offers the individual
a development opportunity, exposing
them to a different operating company.
It helps them compare, contrast and
suggest new or improved processes
that could be implemented in their
own team. The programme also assists
with sharing of knowledge and best
practice, and professional networking
across the Group.
“The Guest Auditor Programme is
a brilliant initiative. I took part working
with the DMGT Internal Audit team at
our RMS office based in California.
I spent a week with the managers of
RMS understanding their business,
processes and controls alongside a
high-performing Internal Audit team.
I had the opportunity to share
my experience whilst utilising ideas
from RMS that could apply to my
own job. I would highly recommend
the programme to anybody wanting
to broaden their financial skillset”.
James Traynor (Commercial Analyst, dmg events)
At a Group level, the programme helps
to further highlight and promote the
importance of a controlled financial and
IT Security environment. The business
under review gains an understanding
of its importance, at the same time the
guest auditor will return to their home
business and cascade information on the
importance of maintaining this control.
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Strategic Report
Entrepreneurialism, Purpose and Excellence
Our People and Our Communities
CR Champions Network
A network of individuals representing each operating business who meet by video
call each quarter to discuss CR at a grassroots level.
The CR Champions share ideas and lessons learnt from CR initiatives they have
carried out to encourage best practice. They promote Group initiatives such as the
Community Champions Awards and coordinate efforts for unexpected events and
disasters in communities where our businesses operate.
Fran Sallas
Company Secretary
& Head of CR Champions
Network, DMGT
Michael Collins
Data Specialist and
Corporate Responsibility
Officer, BuildFax
John Boanno
Human Resources
Administrator, EDR
John Whitaker
Digital & Data
Director, dmg events
Kate Gregory
PA to CEO & CR Champion,
Landmark
Alexandria Elia
Communications
Executive,
dmg media
Carrie Patterson
Application
Administrator,
dmg media Finance Services
Niki Lee
Vice President,
Human Resources,
Trepp
Premila Braganza
Head of HR,
dmg events –
Middle East & Asia
Rebecca Spitzer
Head of Corporate
Communications
& Corporate Social
Responsibility, RMS
Susan Hotchkiss
Director, Human
Resources, EDR
Dan Via
Head of
Administration,
Xceligent
Merabeth Martin
Chief People Officer,
Genscape
Victoria Halfhide
PA to Company
Secretary, DMGT
Karen Farrelly
Finance Controller,
Harmsworth Printing
dmg media
To find out more about the CR Champions network go to
www.dmgt.com/corporate-responsibility
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Community Champion Awards
The DMGT Community Champions Awards are designed to recognise
some of the outstanding work DMGT’s people do to support the
communities they work and live within. The awards attracted over
100 nominations from across the Group with winners for the 2017
awards selected by members of the DMGT CR Champions Network.
The scheme is detailed at
www.dmgt.com/corporate-responsibility
Videos of the Awards
ceremonies can be found at
www.youtube.com/user/dmgtplc
Community Champions Awards winners 2017
Personal Achievement Award –
Susan Caesar & Community First
Susan Caesar, Head of Customer Service,
dmg media, secured the Personal
Achievement Award for her work with
Community First UK. Susan supported
founders Carol Malone and Pauline Lockhart
to formally set up Community First UK, a
not-for-profit social enterprise that facilitates
projects and initiatives that act locally.
Community First is a start-up. Carol and
Pauline came up with the concept of
Community First in 2014 as they were
delivering digital support within the county
of Angus, Scotland.
Susan provided essential business advice
in helping them identify and decide on
the structure and requirements of a
not-for-profit social enterprise. With Susan’s
wealth of knowledge and business acumen,
this advice was invaluable in formalising
the company.
The funds raised by Community First will
be going towards two main objectives:
creating an employability and digital
training programme which will produce a
talent bank to connect delegates with local
employers; and creating public training
courses to promote digital inclusion in the
local community.
Team Award – Jade Woodall and Bjorn
Sirum, Livingstone Tanzania Trust (LTT)
Jade Woodall, Project Manager, and
Bjorn Sirum, Commercial Sales Manager,
dmg events, were the winners of this year’s
Team Award. dmg events have been
supporting the LTT for over six years,
and Jade and Bjorn helped the charity with
a project to fund and build the Sawe Primary
School in Tanzania.
The project will give hundreds of young children
every year the opportunity to receive an
education in a safe environment and in total,
they raised funds for the Sawe School Project.
During a trip in 2017 to Tanzania and the Sawe
village, they worked alongside builders and
volunteers from the community to complete
the foundations of three classrooms.
Commenting on their win, Jade and Bjorn
said, “The Livingstone Tanzania Trust is a
charity we are very passionate about, so
finding out we had won was a really exciting
moment! We have been overwhelmed
with everyone’s support at DMGT and feel
extremely proud to have received as many
nominations as we did, let alone actually win!
We are excited to see the Sawe Primary
School Project progress to the next stage.”
Green Award – RMS Green Team
The RMS Green Team won the Award
for their work during RMS Green Week.
They ensured the changes they made
were sustainable throughout the year.
Across six RMS offices it is estimated that
a total of 120 hours were used to plan
and participate in environmentally
friendly activities.
Activities included various events and
several e-waste collections throughout
the offices, employees signing on pledge
boards and hosting a clothing drive for
an organisation that helps provide outfits
to low-income individuals, enabling them
to make a good impression at their
job interviews.
In a few RMS offices, guest speakers were
invited to lecture on:
• Waste Management, which covered the
various ways in which to recycle and
reuse waste products;
• Sustainable Textiles and the environmental
and social impact of buying a certain
piece was given by one of the RMS
flood modellers;
• Ways to compensate for greenhouse
gas emissions; and
• Thinking about diet! Explanation on
how a vegetarian or vegan diet helps to
reduce CO2 and methane gas emissions.
Rebecca Spitzer, Head of Corporate
Communications & Corporate Social
Responsibility, RMS, said, “Ensuring
that our company is conscious of our
environment and continues to be ‘green’
Susan said, “This is amazing! I’m so pleased
to be able to gift £5,000 to Community First
from DMGT, they deserve the recognition
and will be able to change more people’s
lives for the better. A massive thank you
to everyone who voted for me.”
is one of the pillars of our CSR teams
across the company. The prize reflects
the work we have done and continues to
motivate us in our efforts. This initiative
benefits our earth and reminds us to
stay cognitive of what is necessary to
maintain and improve the environment
around us. We will continue to try to
make smart choices.”
35
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Strategic Report
Actively monitoring and managing our risks
Principal Risks
A robust and detailed assessment of the Group Risk Register and the Group’s
risk management processes was carried out by management and overseen
by the Audit & Risk Committee.
The Group’s risks are categorised as either strategic or operational. Strategic risks are linked to the Group’s strategic priorities and impact
the whole Group. Operational risks are those arising from the execution of the business functions and typically impact on one or more of
the principal businesses.
Further details of the Group’s risk management process, the governance structure surrounding risk and the Audit & Risk Committee
can be found in the Governance Report on pages 50 to 55.
Strategic risks
Description and impact
Market disruption
Market disruption creates opportunities as well as risks. Disruption
enables us to move into new markets and geographies to grow
the business.
Failure to anticipate and respond to market disruption may affect
the demand for our products and services and our ability to drive
long-term growth.
Examples
Market disrupters include changes to customer behaviours and demands, new
technologies, the emergence of competitors or structural changes to markets.
Examples from the operating companies include:
• Consumer Media: decline in print advertising revenue and fast-changing
digital advertising environment;
• Insurance Risk: convergence of reinsurance with capital markets and
consolidation in insurance industry in RMS;
• EdTech: politically driven change to public school funding and/or the
regulation of post-secondary education; and
• Energy Information: rapidly evolving solar industry.
Success of new product launches and internal investments
A lack of innovation in response to competitive pressures or failure
to successfully develop our products and services may compromise
their appeal.
Some may fail to achieve customer acceptance and yield expected
benefits. This could result in lower-than-expected revenue and/or
impairment losses.
Uncertainty also results from geographic expansion into new and
emerging markets.
The Group is continually investing in our products and services, developing
new lines and enriching existing products and services. Examples include:
• Consumer Media: increased monetisation of our online user base and
execution of DailyMailTV;
• Insurance Risk: client adoption of RMS(one) and the launch of new models;
• Property Information: geographical expansion of Xceligent across the US
and Trepp's entrance into Collateralized Loan Obligations market;
• Energy Information: Genscape launch of new real-time power generation
platform and maritime voyages service; and
• Events and Exhibitions: the geo-cloning of events across new locations.
Portfolio management¤
Increasing portfolio focus is key to the Group’s strategy. This could be
compromised by portfolio changes not delivering expected benefits,
acquisitions and investments not delivering as expected or not
divesting from non-core businesses at the right time.
• Growth opportunities and potential synergies lost through failure to
identify or succeed with acquisition and investment targets.
• Underperforming acquisitions and investments may lead to reduced return
on capital and/or impairment losses.
• Underperforming acquisitions and investments could result in a diversion
of management time.
• Optimal value may not be achieved from divestments.
¤ Referred to as ‘Acquisitions and disposals’ in the 2016 Annual Report.
Economic and geopolitical uncertainty
The Group performance could be adversely impacted by factors beyond
our control such as the economic conditions in key markets and sectors,
and political uncertainty.
• Property Information: volatility in residential and commercial property
transactions could impact revenue.
• Consumer Media: a weakening of the UK economy, particularly if
consumer-led, could accelerate the decline in print advertising revenue.
• Energy Information: fluctuations in the global commodities markets
could impact Genscape’s revenues.
• Insurance Risk: sustained low interest rates could weaken the sector's
overall performance and impact RMS.
• Events and Exhibitions: fluctuations in the global oil markets could
impact revenue from associated trade shows if discretionary revenue
from delegates, exhibitors and sponsorships decline. Political
uncertainty, particularly in the Middle East, could impact execution
of events in the region.
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Trend
Mitigation
overall Group impact.
revenues in FY 2017.
• The Group’s diverse and balanced portfolio of businesses and products reduces the
• Organic investment initiatives across the Group to innovate our products and services
and to remain competitive in the markets we serve. Organic investment was 9% of total
• The Executive Committee, supported by the Performance Management and Strategy
function and operating companies’ management teams, monitor markets, the
competitive landscape and technological developments.
• Analysis of the performance management dashboard and detailed financial
management information for each operating company to highlight and react to early
indicators of market disruption.
• DMGT executive membership of operating business boards.
• The autonomous culture of the Group encourages an entrepreneurial approach to
identifying growth opportunities and new products.
• The Executive Committee, supported by the Performance Management and Strategy
function, provide oversight of progress from the centre. Analysis of the performance
management dashboard and detailed financial management information to monitor
achievement of key milestones.
• Performance Management and Strategy function partners with operating company
senior management teams to support achievement of key milestones where necessary.
• Significant investments are approved by the Investment & Finance Committee and/or
the Board.
• The Executive Committee conducted (and continues to conduct) a rigorous evaluation
of the Group’s portfolio in order to allocate resources according to individual business
growth characteristics and funding requirements.
• Investments and divestments are approved by the Investment & Finance Committee.
• Extensive due diligence conducted pre-acquisition and comprehensive integration plan
implemented post-acquisition by dedicated function.
• The Executive and Investment & Finance Committees, supported by the Performance
Management and Strategy function, monitor post-acquisition performance, and support
proactive intervention if performance milestones are not being met.
• DMGT executive membership of operating business boards and associate boards
(Euromoney and ZPG).
This risk increased over FY 2017 due to the increasing
number of transactions, particularly divestments,
in the portfolio in the year including the reduction
in Euromoney holding.
• The Group’s diverse and balanced portfolio of businesses and products reduces the
overall impact of any one disruption or change.
• Analysis of the performance management dashboard and detailed financial management
information by the Executive Committee and operating companies’ management teams
to highlight early trends and impacts from economic and geopolitical uncertainty.
This risk increased over FY 2017 reflecting the
continued uncertainty in political and economic
landscapes in which we operate.
Daily Mail and General Trust plc Annual Report 2017
Strategic risks
Description and impact
Market disruption
Market disruption creates opportunities as well as risks. Disruption
enables us to move into new markets and geographies to grow
the business.
Failure to anticipate and respond to market disruption may affect
the demand for our products and services and our ability to drive
long-term growth.
Market disrupters include changes to customer behaviours and demands, new
technologies, the emergence of competitors or structural changes to markets.
Examples from the operating companies include:
• Consumer Media: decline in print advertising revenue and fast-changing
digital advertising environment;
• Insurance Risk: convergence of reinsurance with capital markets and
consolidation in insurance industry in RMS;
• EdTech: politically driven change to public school funding and/or the
regulation of post-secondary education; and
• Energy Information: rapidly evolving solar industry.
Success of new product launches and internal investments
A lack of innovation in response to competitive pressures or failure
to successfully develop our products and services may compromise
The Group is continually investing in our products and services, developing
new lines and enriching existing products and services. Examples include:
• Consumer Media: increased monetisation of our online user base and
their appeal.
impairment losses.
emerging markets.
Some may fail to achieve customer acceptance and yield expected
benefits. This could result in lower-than-expected revenue and/or
Uncertainty also results from geographic expansion into new and
execution of DailyMailTV;
• Insurance Risk: client adoption of RMS(one) and the launch of new models;
• Property Information: geographical expansion of Xceligent across the US
and Trepp's entrance into Collateralized Loan Obligations market;
• Energy Information: Genscape launch of new real-time power generation
platform and maritime voyages service; and
• Events and Exhibitions: the geo-cloning of events across new locations.
Portfolio management¤
Increasing portfolio focus is key to the Group’s strategy. This could be
compromised by portfolio changes not delivering expected benefits,
acquisitions and investments not delivering as expected or not
divesting from non-core businesses at the right time.
• Growth opportunities and potential synergies lost through failure to
identify or succeed with acquisition and investment targets.
• Underperforming acquisitions and investments may lead to reduced return
on capital and/or impairment losses.
• Underperforming acquisitions and investments could result in a diversion
of management time.
• Optimal value may not be achieved from divestments.
Economic and geopolitical uncertainty
• Property Information: volatility in residential and commercial property
¤ Referred to as ‘Acquisitions and disposals’ in the 2016 Annual Report.
The Group performance could be adversely impacted by factors beyond
our control such as the economic conditions in key markets and sectors,
and political uncertainty.
transactions could impact revenue.
• Consumer Media: a weakening of the UK economy, particularly if
consumer-led, could accelerate the decline in print advertising revenue.
• Energy Information: fluctuations in the global commodities markets
could impact Genscape’s revenues.
• Insurance Risk: sustained low interest rates could weaken the sector's
overall performance and impact RMS.
• Events and Exhibitions: fluctuations in the global oil markets could
impact revenue from associated trade shows if discretionary revenue
from delegates, exhibitors and sponsorships decline. Political
uncertainty, particularly in the Middle East, could impact execution
of events in the region.
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Changes in principal risks during the year
1.
The risk of ‘Major change projects’ disclosed last year primarily related to the execution of simplification and reorganisation initiatives,
which are now mostly implemented. For this reason the risk is not currently considered a principal risk for the Group. The operating
companies continue to undertake operational change projects and the associated risks are tracked on the Group’s risk register.
2. The principal risk examples below do not include Euromoney’s risks as they are no longer consolidated into the Group’s overall
risk profile.
Risk increased
Risk did not change
Risk decreased
Examples
Mitigation
Trend
• The Group’s diverse and balanced portfolio of businesses and products reduces the
overall Group impact.
• Organic investment initiatives across the Group to innovate our products and services
and to remain competitive in the markets we serve. Organic investment was 9% of total
revenues in FY 2017.
• The Executive Committee, supported by the Performance Management and Strategy
function and operating companies’ management teams, monitor markets, the
competitive landscape and technological developments.
• Analysis of the performance management dashboard and detailed financial
management information for each operating company to highlight and react to early
indicators of market disruption.
• DMGT executive membership of operating business boards.
• The autonomous culture of the Group encourages an entrepreneurial approach to
identifying growth opportunities and new products.
• The Executive Committee, supported by the Performance Management and Strategy
function, provide oversight of progress from the centre. Analysis of the performance
management dashboard and detailed financial management information to monitor
achievement of key milestones.
• Performance Management and Strategy function partners with operating company
senior management teams to support achievement of key milestones where necessary.
• Significant investments are approved by the Investment & Finance Committee and/or
the Board.
• The Executive Committee conducted (and continues to conduct) a rigorous evaluation
of the Group’s portfolio in order to allocate resources according to individual business
growth characteristics and funding requirements.
• Investments and divestments are approved by the Investment & Finance Committee.
• Extensive due diligence conducted pre-acquisition and comprehensive integration plan
implemented post-acquisition by dedicated function.
• The Executive and Investment & Finance Committees, supported by the Performance
Management and Strategy function, monitor post-acquisition performance, and support
proactive intervention if performance milestones are not being met.
• DMGT executive membership of operating business boards and associate boards
(Euromoney and ZPG).
This risk increased over FY 2017 due to the increasing
number of transactions, particularly divestments,
in the portfolio in the year including the reduction
in Euromoney holding.
• The Group’s diverse and balanced portfolio of businesses and products reduces the
overall impact of any one disruption or change.
• Analysis of the performance management dashboard and detailed financial management
information by the Executive Committee and operating companies’ management teams
to highlight early trends and impacts from economic and geopolitical uncertainty.
This risk increased over FY 2017 reflecting the
continued uncertainty in political and economic
landscapes in which we operate.
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Strategic Report
Actively monitoring and managing our risks
Principal Risks
Strategic risks continued
Description and impact
Talent¥
Our ability to identify, attract, retain and develop the right people for
senior and business-critical roles could impact the Group’s performance.
¥ Referred to as ‘Securing and retaining talent’ in the 2016 Annual Report.
Examples
• Entrepreneurship and leadership skills are a priority for the Group and
key to the continued success of many of our operating companies.
• Technology and software development skills remain crucial to many of our
businesses, particularly RMS, Genscape and MailOnline where collectively
there is significant investment in product development.
• The strategy to build out our data analytics capabilities places focus on
developing and attracting data scientists and specialists in machine
learning, artificial intelligence and other emerging technologies. These
skills are in high demand which makes attracting and retaining people with
these skills more competitive.
• Enterprise sales and operational execution expertise with market and
product knowledge are vital, particularly in our businesses with significant
expansion plans.
Operational risks
Description and impact
Examples
Information security breach or cyberattack
An information security breach, including a failure to prevent or detect
a malicious cyberattack, could cause reputational damage and financial
loss. The investigation and management of an incident would result
in remediation costs and the diversion of management time.
A breach of data protection legislation could result in financial penalties
for the business affected and potentially the Group.
The risk is relevant to all businesses in the Group due to the nature of products
and services across the portfolio. Examples which could impact the Group include:
• Loss or unauthorised access to personal information and sensitive client data;
• Unavailability or disruption of online products and services;
• Integrity of online products, services and data compromised;
• Disruption to critical systems which support business operations; and
• Theft of intellectual property.
Reliance on key third parties
Certain third parties are critical to the operations of our businesses.
A failure of one of our critical third parties may cause disruption to
business operations, impact our ability to deliver products and services
and result in financial loss. The reputation of our businesses may be
damaged by poor performance or a regulatory breach by critical third
parties, particularly outsourced service providers.
Key third parties include:
• Data centre and cloud service providers;
• IT development support;
• Data providers for core product;
• Newsprint, flexographic plate and ink suppliers;
• Newspaper distribution and wholesale; and
• Event venues.
Compliance with laws and regulations
The Group operates across multiple jurisdictions and sectors.
Increasing regulation increases the risk that the Group is not compliant
with all applicable laws and regulations across all of the jurisdictions
in which it operates, which could result in financial penalties and
reputational damage.
Increasing regulation also results in increasing costs of compliance.
Pension scheme deficit
Defined benefit pension schemes, although now closed to new entrants
were in operation across the newspaper business, certain other UK
businesses and DMGT head office. The schemes remain ultimately
funded by DMGT, with Pension Fund Trustees (Trustees) controlling
the investment allocation.
There is a risk that the funding of any deficit could be greater
than expected.
Particular areas of focus for DMGT businesses are:
• Data protection, including the EU General Data Protection Regulation (GDPR)
and the proposed ePrivacy Regulation;
• Competition and anti-trust legislation;
• EU Market Abuse Regulation;
• Libel legislation;
• Tax compliance;
• UK Bribery Act;
• Trade sanctions; and
• Entering regulated markets or sectors.
Future pension costs and funding requirements could be increased by:
• Adverse changes in investment performance;
• Valuation assumptions and methodology; and
• Inflation and interest rate risks.
38
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Mitigation
and reward.
• The Group has established a centre of expertise for HR specialising on recruitment,
succession planning, critical skills planning, identifying and developing internal talent,
• Executive management is involved in the recruitment of all operating company leadership
roles and their ongoing development.
• Retention of key management in businesses.
• Payment of competitive rewards for key senior roles, developed using industry benchmarks
and external specialist input.
• Employee engagement initiatives including Group-wide employee survey with follow-up
action plans in place in each operating company.
Trend
The risk increased over FY 2017 as a result of the
reorganisational changes implemented. As these
changes are embedded in the operating companies,
we expect the risk to stabilise.
This risk increased over FY 2017 as the inherent threat of
an information security breach or cyberattack continues
to increase. This is partially offset by continuous
improvement in information security controls.
Mitigation
Trend
• Establishment of an Information Security Steering Committee led by the CEO to provide
oversight of information security initiatives in the Group.
• Appointment of a Group Chief Information Officer and a Group Chief Information
Security Officer.
• Commissioned by the Information Security Steering Committee, a Group-wide
independent review of information security posture within the operating companies.
• This review has resulted in actionable roadmaps for improvement where necessary.
• Group information security policy and detailed information security standards with
regular reviews against these standards reported to the Information Security Steering
Committee. Periodic reviews of the standards themselves are performed to ensure they
• Working group with representatives from across the Group meeting regularly and sharing
• Information security is reviewed as part of every internal audit of an operating company.
keep pace with best practice.
information security best practice.
• Cyber insurance policies in place.
• The Group’s diverse and balanced portfolio of businesses and products reduces the
overall impact of the failure of an individual third party.
• Operational and financial due diligence is undertaken for key suppliers on an
• Close management of key supplier relationships including contracts, service levels
ongoing basis.
and outputs.
• Robust business continuity arrangements for the disruption to key third parties.
• Dedicated newsprint-buying team.
• Event cancellation and business interruption insurance policies.
• Changes in laws and regulations are monitored and potential impacts discussed
with the relevant persons, Board, or Committee, or escalated as appropriate.
• Developments in the legal and regulatory landscape are reviewed by the Audit &
• Implementation and monitoring of Group-wide policies to address new legislation
• Group-wide working groups in readiness for key emerging compliance areas, such
Risk Committee.
and regulation where applicable.
as the GDPR.
• The agreed funding plan gives certainty over the financial commitment until FY 2019.
• Monitoring and management of pension risks is performed by the DMGT Pension
Sub Committee.
• Company-appointed Trustees.
This risk has decreased over FY 2017 as the Group’s
defined benefit schemes are in surplus, and exposure to
future investment and inflation risk was further reduced.
Daily Mail and General Trust plc Annual Report 2017
Strategic risks continued
Description and impact
Talent¥
Our ability to identify, attract, retain and develop the right people for
senior and business-critical roles could impact the Group’s performance.
¥ Referred to as ‘Securing and retaining talent’ in the 2016 Annual Report.
Operational risks
Description and impact
• Entrepreneurship and leadership skills are a priority for the Group and
key to the continued success of many of our operating companies.
• Technology and software development skills remain crucial to many of our
businesses, particularly RMS, Genscape and MailOnline where collectively
there is significant investment in product development.
• The strategy to build out our data analytics capabilities places focus on
developing and attracting data scientists and specialists in machine
learning, artificial intelligence and other emerging technologies. These
skills are in high demand which makes attracting and retaining people with
these skills more competitive.
• Enterprise sales and operational execution expertise with market and
product knowledge are vital, particularly in our businesses with significant
expansion plans.
Information security breach or cyberattack
An information security breach, including a failure to prevent or detect
a malicious cyberattack, could cause reputational damage and financial
loss. The investigation and management of an incident would result
in remediation costs and the diversion of management time.
The risk is relevant to all businesses in the Group due to the nature of products
and services across the portfolio. Examples which could impact the Group include:
• Loss or unauthorised access to personal information and sensitive client data;
• Unavailability or disruption of online products and services;
• Integrity of online products, services and data compromised;
• Disruption to critical systems which support business operations; and
A breach of data protection legislation could result in financial penalties
for the business affected and potentially the Group.
• Theft of intellectual property.
Reliance on key third parties
Key third parties include:
Certain third parties are critical to the operations of our businesses.
A failure of one of our critical third parties may cause disruption to
business operations, impact our ability to deliver products and services
and result in financial loss. The reputation of our businesses may be
damaged by poor performance or a regulatory breach by critical third
parties, particularly outsourced service providers.
• Data centre and cloud service providers;
• IT development support;
• Data providers for core product;
• Newsprint, flexographic plate and ink suppliers;
• Newspaper distribution and wholesale; and
• Event venues.
Compliance with laws and regulations
Particular areas of focus for DMGT businesses are:
• Data protection, including the EU General Data Protection Regulation (GDPR)
The Group operates across multiple jurisdictions and sectors.
Increasing regulation increases the risk that the Group is not compliant
with all applicable laws and regulations across all of the jurisdictions
in which it operates, which could result in financial penalties and
reputational damage.
Increasing regulation also results in increasing costs of compliance.
and the proposed ePrivacy Regulation;
• Competition and anti-trust legislation;
• EU Market Abuse Regulation;
• Libel legislation;
• Tax compliance;
• UK Bribery Act;
• Trade sanctions; and
• Entering regulated markets or sectors.
• Adverse changes in investment performance;
• Valuation assumptions and methodology; and
• Inflation and interest rate risks.
Pension scheme deficit
Future pension costs and funding requirements could be increased by:
Defined benefit pension schemes, although now closed to new entrants
were in operation across the newspaper business, certain other UK
businesses and DMGT head office. The schemes remain ultimately
funded by DMGT, with Pension Fund Trustees (Trustees) controlling
the investment allocation.
There is a risk that the funding of any deficit could be greater
than expected.
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Examples
Mitigation
Trend
• The Group has established a centre of expertise for HR specialising on recruitment,
succession planning, critical skills planning, identifying and developing internal talent,
and reward.
• Executive management is involved in the recruitment of all operating company leadership
roles and their ongoing development.
• Retention of key management in businesses.
• Payment of competitive rewards for key senior roles, developed using industry benchmarks
and external specialist input.
• Employee engagement initiatives including Group-wide employee survey with follow-up
action plans in place in each operating company.
The risk increased over FY 2017 as a result of the
reorganisational changes implemented. As these
changes are embedded in the operating companies,
we expect the risk to stabilise.
Examples
Mitigation
Trend
This risk increased over FY 2017 as the inherent threat of
an information security breach or cyberattack continues
to increase. This is partially offset by continuous
improvement in information security controls.
• Establishment of an Information Security Steering Committee led by the CEO to provide
oversight of information security initiatives in the Group.
• Appointment of a Group Chief Information Officer and a Group Chief Information
Security Officer.
• Commissioned by the Information Security Steering Committee, a Group-wide
independent review of information security posture within the operating companies.
• This review has resulted in actionable roadmaps for improvement where necessary.
• Group information security policy and detailed information security standards with
regular reviews against these standards reported to the Information Security Steering
Committee. Periodic reviews of the standards themselves are performed to ensure they
keep pace with best practice.
• Working group with representatives from across the Group meeting regularly and sharing
information security best practice.
• Information security is reviewed as part of every internal audit of an operating company.
• Cyber insurance policies in place.
• The Group’s diverse and balanced portfolio of businesses and products reduces the
overall impact of the failure of an individual third party.
• Operational and financial due diligence is undertaken for key suppliers on an
ongoing basis.
• Close management of key supplier relationships including contracts, service levels
and outputs.
• Robust business continuity arrangements for the disruption to key third parties.
• Dedicated newsprint-buying team.
• Event cancellation and business interruption insurance policies.
• Changes in laws and regulations are monitored and potential impacts discussed
with the relevant persons, Board, or Committee, or escalated as appropriate.
• Developments in the legal and regulatory landscape are reviewed by the Audit &
Risk Committee.
• Implementation and monitoring of Group-wide policies to address new legislation
and regulation where applicable.
• Group-wide working groups in readiness for key emerging compliance areas, such
as the GDPR.
• The agreed funding plan gives certainty over the financial commitment until FY 2019.
• Monitoring and management of pension risks is performed by the DMGT Pension
Sub Committee.
• Company-appointed Trustees.
This risk has decreased over FY 2017 as the Group’s
defined benefit schemes are in surplus, and exposure to
future investment and inflation risk was further reduced.
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39
Governance
Governance
Board of Directors
and Company Secretary
1.
4.
7.
2.
5.
8.
3.
6.
9.
10.
11.
12.
Key to Board and Committees
Audit & Risk Committee
Remuneration & Nominations Committee
Investment & Finance Committee
40
Francisco Balsemão, Nicholas Berry, Stephen
Daintith, John Hemingway, and Suresh Kavan
each served on the Board for part of the year.
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Daily Mail and General Trust plc Annual Report 2017
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1. The Viscount Rothermere
Chairman
Appointed to the Board: 1995
Appointed Chairman: 1998
Skills and experience:
Lord Rothermere brings significant experience
of media and newspapers. 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.
Other appointments: Euromoney Institutional
Investor PLC Board and Nominations Committee
until November 2017.
2. P A Zwillenberg
CEO
Appointed to the Board and CEO: 2016
Skills and experience:
Paul Zwillenberg has over 25 years’ experience
across the media industry. He has a breadth of
experience across DMGT’s portfolio and a broad
knowledge of the Group, having set up the digital
division of dmg media (formerly Associated
Newspapers digital) in 1996. Prior to joining
DMGT, Paul was the Global Leader Media Sector
and Senior Partner and Managing Director at
The Boston Consulting Group and before that
founded an early interactive media company and
launched a European technology services firm.
Other appointments: Euromoney Institutional
Investor PLC Board, Remuneration and
Nominations Committee until November 2017.
3. T G Collier
Group Chief Financial Officer
Appointed to the Board and Group Chief Financial
Officer: 2017
Skills and experience:
Prior to joining DMGT, Tim Collier was Chief
Financial Officer of Thomson Reuters Financial
and Risk Business where he was responsible for
driving financial and risk performance, optimising
resources and enhancing growth through
organic and strategic investments. Tim’s
experience has spanned media and business
information industries and functions including
banking, corporate finance, treasury, insurance,
internal audit, accounting and M&A.
Other appointments: Euromoney Institutional
Investor PLC Board, Nominations and Audit
Committee from November 2017.
4. K J Beatty
Executive Director
Appointed to the Board: 2004
Skills and experience:
Kevin Beatty brings a number of years’ media
industry experience. He is CEO of dmg media.
He was Managing Director of the Scottish Daily
Record and Sunday Mail. Kevin has been Managing
Director of The Mail on Sunday, the Evening
Standard and London Metro, COO of both
Associated New Media and Northcliffe Newspapers.
Other appointments: ZPG Plc, and Euromoney
Institutional Investor PLC Board, Nominations and
Remuneration Committee from November 2017.
5. P M Dacre
Executive Director
10. K A H Parry
Independent Non-Executive Director
Appointed to the Board: 1998
Appointed to the Board: 2014
Skills and experience:
Paul Dacre brings unparalleled experience
of the UK newspaper industry. He 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 in which saw the launches of Metro
and MailOnline, respectively.
6. Lady Keswick
Independent Non-Executive Director
Appointed to the Board: 2013
Skills and experience:
Lady Keswick’s extensive career is based in public
policy and international affairs, particularly in
Asia. She is Deputy Chairman of the Centre of
Policy Studies and was a Special Policy Adviser
to the Rt. Hon. Kenneth Clarke QC MP, working
at the Departments for Health, Education and
Science, the Home Office and HM Treasury. She
previously worked in advertising and journalism.
In September 2013, Lady Keswick was elected
as Chancellor of the University of Buckingham.
No other appointments.
7. A H Lane
Non-Executive Director
Appointed to the Board: 2013
Skills and experience:
Andrew Lane brings a range of experience of
dealing in complex legal and regulatory matters.
He is a partner at Forsters LLP and specialises
in private client law.
Other appointments: Trustee of the Pension
Fund of the Royal Agricultural Society of England.
8. F L Morin
Non-Executive Director
(Canadian)
Appointed to the Board: 2017
Skills and experience:
François Morin brings a broad range of
experience and skills to the Board arising from
his role as Partner at the Canadian law firm
Borden Ladner Gervais. He is a qualified lawyer
admitted to the Québec Bar. In particular, he
brings an international perspective relevant to
the Group’s global operations and experience
of regulatory matters across a range of areas.
François also has a strong record of community
involvement including as director on a number
of charitable boards.
9. D H Nelson
Non-Executive Director
Appointed to the Board: 2009
Skills and experience:
David Nelson provides the Board and Audit &
Risk Committee with relevant financial expertise,
gained through a career in accounting. He 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.
Skills and experience:
Kevin Parry is a chartered accountant who brings
a broad range of experience and skills to the
Board. He serves on a number of listed company
boards and has previously been a Non-Executive
Director of Schroders plc and Knight Frank LLP.
He has extensive experience chairing audit
and risk committees and being a member of
remuneration and nominations committees.
He was Group CEO of Management Consulting
Group PLC and the managing partner of KPMG’s
information, communications and entertainment
practice in London.
Other appointments: Intermediate Capital Group
plc, Nationwide Building Society, Standard Life
Aberdeen plc and Royal National Children’s
SpringBoard Foundation.
11. J H Roizen
Independent Non-Executive Director
(American)
Appointed to the Board: 2012
Skills and experience:
Heidi Roizen provides the Board with experience
in digital media, entrepreneurial growth and
business development in both public and private
companies in the US. She teaches entrepreneurship
at Stanford University. Heidi 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.
Other appointments: DFJ.
12. D Trempont
Independent Non-Executive Director
(American)
Appointed to the Board: 2011
Skills and experience:
Dominique Trempont brings experience as a Chief
Executive Officer, Chairman and Independent
Board Director in large multinational high-tech
companies and start-ups. He has extensive
knowledge of online B2C and B2B markets.
He is currently on the board of one US public
company (Real Networks) and one private
company (ON24), focusing on disruptive
innovation and emerging markets.
Other appointments: ON24, Real Networks
F L Sallas
Company Secretary
Appointed as Company Secretary: 2017
Skills and experience:
Fran Sallas is Secretary to the Board, Audit &
Risk Committee, Remuneration & Nominations
Committee and the Investment & Finance
Committee. Fran is a Fellow of the Institute
of Chartered Secretaries and Administrators.
Claire Chapman stood down as Company
Secretary in July 2017.
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Governance
Governance
Chairman’s Statement on Governance
Strong governance is essential to the
way we operate throughout the Group.
It is a key factor in our ability to achieve
growth in a profitable, responsible and
sustainable manner and in how we
maximise shareholder value over the
long term. In practice, this means that
the Board establishes a framework
within which our businesses operate
and deliver shareholder value. DMGT’s
approach to governance is distinctive,
as in addition to typical corporate
procedures, we are able to rely on and
utilise the significant benefits from the
family shareholding and the long-term
view that this permits.
The Board continues to be fully supportive
of the strategic objectives set out by
Paul Zwillenberg as described in the CEO’s
Review on pages 10 to 13. Areas of particular
focus for the Board include our approach
to our portfolio of businesses and their
continued growth, as well as divestments,
rigorous financial management, balanced
capital allocation and managing a strong
balance sheet. Additionally the Board
has focused on our people agenda and
leadership capabilities.
Our Board was strengthened by the
appointment of Tim Collier as Group
Chief Financial Officer in May 2017 and
FranÇois Morin as a Non-Executive in
February 2017 as detailed on page 3.
I would like to thank John Hemingway and
Francisco Balsemão for their contribution
to the DMGT Board as they both stood down
at the Annual General Meeting (AGM) in
February 2017. I would also like to pay tribute
to Nicholas Berry for his contribution to the
Board, who sadly died in December 2016.
This year we have continued to focus the
Governance Report on the key information
for shareholders in order to encourage
clear and concise reporting. More routine
information such as our Investor Relations
calendar and the Committee responsibilities
and Terms of Reference can be found on
our website.
www.dmgt.com/about-us/
board-and-governance
The Viscount Rothermere
Chairman
Strong governance
is essential to the
way we operate
throughout the
Group.”
The Viscount Rothermere
Chairman
In this section
Chairman’s Statement
on Governance
Corporate Governance
Executive Committee Report
Investment &
Finance Committee Report
Audit & Risk Committee Report
Remuneration &
Nominations Committee Report
Remuneration Report
Statutory Information
Annual General Meeting 2018:
Resolutions
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49
49
50
56
57
81
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Committee structure
The Board Committee structure is set out in the diagram below.
DMGT
DMGT Board
Collectively responsible for the long-term success of the Company.
Executive Committee
The Executive Committee meets regularly to discuss all
aspects of the Group’s performance and strategy,
particularly performance management, capital allocation
and senior talent considerations.
Investment & Finance Committee
The Investment & Finance Committee evaluates investment
opportunities and financing proposals and monitors returns
on investments made.
Audit & Risk Committee
The Audit & Risk Committee has responsibility for:
• The Company’s financial reporting;
• Narrative reporting;
• Whistleblowing arrangements;
• The Internal and External audit processes; and
• The signing off of external disclosures.
The Committee also oversees:
• The Group’s system of internal controls and risk
management;
• The Group’s risk register, risk appetite and tolerance,
including as part of the Viability Statement; and
• Developments in relevant legislation and regulation.
Time is allocated at each meeting for both Audit and Risk
matters, to ensure that all items are adequately addressed.
Remuneration & Nominations Committee
The Remuneration & Nominations Committee ensures that
remuneration arrangements support the strategic aims of
the business and enables the recruitment, motivation and
retention of senior executives in a manner that is aligned
to shareholder interests, while also complying with the
requirements of regulation. It also reviews the structure and
composition of the Board and its Committees, in particular
the skills, knowledge and experience of Directors.
Time is allocated at each meeting for both Remuneration
and Nominations matters, to ensure that all items are
adequately addressed.
Family shareholding
Rothermere Continuation Limited (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 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, included two directors
of DMGT during the reporting period:
Lord Rothermere and François Morin.
RCL has controlled the Company for many
years. RCL maintains that the Company
should be managed in accordance with high
standards of corporate governance for the
benefit of all shareholders; this has been the
case throughout the period of RCL’s control.
• Continue to voluntarily observe the UK
Corporate Governance Code on a ‘comply
or explain’ basis; and
RCL has again indicated to the Company that
its intentions for the Company’s governance
are long-term in nature and that it will
discuss with the Board of the Company
any material change in its intentions. In
particular, RCL has confirmed its 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;
• Have an appropriate number of
Independent Non-Executive Directors
on its Board.
It is also intended by RCL that the Company’s
independent Directors would 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.
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Governance
Governance
Corporate Governance
UK Corporate Governance Code
The UK Corporate Governance Code (Code)
is an important part of how we operate.
It allows a ‘comply or explain’ approach to
achieving best governance practice. We have
chosen to explain our governance practices
if these do not fully meet the provisions
of the Code. This allows us to recognise
our requirements under the Code and the
benefits of our shareholding structure.
Our explanations where we deviate from
the code are set out in the relevant sections
of this Corporate Governance Report.
Information required under DTR 7.2.6
is provided on page 81 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 expenditure; financial
performance; reviewing the effectiveness
of the Group’s systems of internal controls;
governance; risk management; and training
and development.
Persons Discharging Managerial
Responsibility
As part of the Company’s continuing
obligation to ensure compliance with the
Listing Rules and related regulations, we
have identified that Directors and other
senior executives who have regular access
to inside information and the power to make
managerial decisions affecting the future
development and business prospects of the
Company are those on the Board, Executive
Committee and regular attendees at the
Investment & Finance Committee.
How the Board operates
There is a schedule of matters reserved to
the Board. This details key matters in respect
of the Company’s management that the
Board does not delegate. This can be seen
at www.dmgt.com/about-us/board-and-
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
of the Company is the responsibility of the
Executive Committee and of the executive
management of the operating businesses.
Delegation of authority
The Board has delegated certain activities
to Board Committees, under formal terms
of reference, details of which are set out
on pages 49 to 56.
Full Terms of Reference can be found
on DMGT’s website at www.dmgt.com/
about-us/board-and-governance
Division of Chairman and CEO
responsibilities
In accordance with the Code, the roles
of Chairman and CEO are separate. The
Chairman is responsible for leading the
Board and overseeing operations and
strategy. The CEO is responsible for the
execution of the strategy and the day-to-day
management of the Group and is supported
by the Executive Committee.
Non-Executive Directors
The Non-Executive Directors, as members
of the Board and its Committees, are
responsible for ensuring the Company has
effective systems of internal controls and
risk management and additionally, for
monitoring financial performance. All
Committee Chairmen report to the Board on
Committee activity at each Board meeting.
Senior Independent Director
The Chairman has an interest in all the
Ordinary Shares of the Company through
the Trust and so there is no need for a Senior
Independent Director to represent Ordinary
Shareholders. Accordingly the Board has not
appointed a Senior Independent Director as
recommended under Code provision A.4.1.
The Remuneration & Nominations
Committee (without the Chairman being
present) annually assesses the Chairman’s
performance. Other Directors consider that
they can represent themselves freely to the
Chairman. However, when a situation arises
that would best be handled by an individual
Independent Non-Executive Director, the
most appropriate person is appointed by
the Board (with or without the Chairman
being present, as appropriate).
Independence
The Board has determined that Lady
Keswick, Kevin Parry, Heidi Roizen and
Dominique Trempont are independent
within the meaning of the Code.
David Nelson, Andrew Lane and François
Morin are not considered to be independent
within the meaning of the Code, 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 employees.
The Board believes that 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 the Board’s
Non-Executive Directors in terms of skill
and independence. The Board keeps this
under review. Less than half of the Board are
Independent Non-Executive Directors, which
is not in line with provision B.1.2 of the Code.
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Effectiveness
The Board reviewed its effectiveness within
the context of the provisions of Section B
of the Code. In addition to its review of
independence and the Board evaluation
process, discussed separately, the Board
discharged its Code duties as follows:
• Appointments: the Remuneration &
Nominations Committee is responsible
for referring potential appointments to
the Board for approval and is assisted
by the CEO. Further details are in the
Remuneration & Nominations Committee
Report on page 56;
• 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
following a review by the Remuneration
& Nominations Committee and the
shareholder vote at the AGM;
• Multiple commitments: the Remuneration
& Nominations Committee recognises
that 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 40 and 41.
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 Company Secretary
and the Legal Adviser, 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; and
• Re-election: in line with the Code,
all Directors are eligible to stand for
re-election annually and will do so at
the 2018 AGM.
Relations with shareholders
Any concerns raised by shareholders in
relation to the Company and its affairs are
communicated to the Board through regular
briefings. Summaries of 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.
DMGT understands the importance of
considering a company’s responsibilities to
a broad stakeholder group. When making
decisions, the Board considers the impact on
its employees, customers, the communities
in which we operate, its shareholders and
its suppliers.
The Company’s website, www.dmgt.com,
provides the latest news, historical financial
information, details about forthcoming
events for shareholders and analysts, and
other information regarding the Group.
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Board Evaluation
In 2017, the Board undertook a review
of its own performance and those of
its Committees, which built on the
results of the 2016 review. The review
was conducted through an internal
process facilitated by the Company
Secretary. A questionnaire was used
focusing on the remit and key issues
facing the Board. In particular, the
Board considered how it was
discharging its strategic remit and
reviewed key issues facing the Group
and its businesses.
Completed questionnaires were
submitted and reviewed by the
Chairman. A summary of findings were
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 content with the progress during
the year and that the Board and its
Committees continue to function well.
There was a continuous monitoring
programme to ensure that items
addressed in the FY 2016 evaluation
were addressed during the year.
Actions arising from the evaluation
included ensuring that time on the
Board agenda was allocated for:
• Reviews of major projects and
lessons learnt during the year;
• Continued review of the
composition of the Board through
the Remuneration & Nominations
Committee;
• Continued follow-up on key matters
and actions arising at Board
meetings; and
• Continued reviews of strategy, with
close alignment of the Board and
the Executive Committee agenda.
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Governance
Governance
Corporate Governance
Board composition and diversity
We have continued to review the
composition of the Board during FY 2017
to ensure that we have the right mix of
members to contribute effectively to the
development of our strategy and how we
operate. We consider diversity in its broadest
sense in reviewing how the Board operates
and its composition.
François Morin and Tim Collier were
appointed to the Board on 8 February 2017
and 2 May 2017 respectively to ensure the
mix of skills and expertise represented
complements our strategic goals.
Stephen Daintith and Suresh Kavan stood
down as Directors during the year.
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, international and
specific sector experience will continue to
be a factor in our Board succession planning.
The Board is aware of and takes into account
the principles regarding diversity of its senior
management. This is considered as part
of the senior management appointment
process. Further details on our approach are
included in the Remuneration & Nominations
Committee Report on page 56.
DMGT Board – membership
Member
Chairman
The Viscount Rothermere
CEO
P A Zwillenberg
Group Chief Financial Officer
T G Collier
Executive Directors
K J Beatty
P M Dacre
Non-Executive Directors
Lady Keswick
A H Lane
F L Morin
D H Nelson
K A H Parry
J H Roizen
D Trempont
Former Board members
F P Balsemão
Non-Executive Director
N W Berry
Non-Executive Director
S W Daintith
Finance Director
J G Hemingway
Non-Executive Director
S Kavan
Executive Director
Member for
the full period
Meetings held
Meetings attended
Yes
Yes
5
5
No
Joined
02/05/2017
3
After
02/05/2017
Yes
Yes
5
5
Yes
Yes
No
Joined
08/02/2017
Yes
Yes
Yes
Yes
No
Until
08/02/2017
No
Until
25/12/2016
No
Until
06/04/2017
No
Until
08/02/2017
No
Until
31/03/2017
5
5
4
After
08/02/2017
5
5
5
5
1
Before
08/02/2017
1
Before
25/12/2016
2
Before
06/04/2017
1
Before
08/02/2017
2
Before
31/03/2017
5
5
3
5
5
5
5
4
5
5
5
5
0
0
1
1
1
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The Board’s focus in 2017
Board members have visited, received presentations and functional area updates
from DMGT’s operating businesses on a rolling basis. During the year, as part of the
Directors’ ongoing development, these updates were a combination of presentations
to the whole Board and smaller groups as deemed appropriate and detailed below.
Portfolio management and strategy
Finance and capital
• A strategic review of our portfolio.
• Assessment and monitoring on a
regular basis, performance against
agreed financial targets, budget
and returns on investment.
• Approval of authority limits and
process for investments.
• Assessment and monitoring of
approach to pensions and tax policy.
Governance
• Regular updates throughout the year
including on Market Abuse Regulation,
Tax Policy publication, failure to
prevent criminal facilitation of tax
evasion, Payments Practices
Reporting, Gender Pay Gap Reporting,
Modern Slavery and Human Trafficking,
General Data Protection Regulation as
well as from the Committee Chairmen.
• Approval and changes to updated
versions of Terms of Reference
and matters reserved to the Board.
• Review of the quality of the
External Audit.
• Future size and shape of the Group.
• Non-Executive Director Dominique
Trempont attended RMS Exceedance
in Miami in May 2017.
• Presentations by the majority of
operating businesses.
• The New York Board meeting
incorporated site visits to RMS,
Trepp and MailOnline.
Risk management
• The Group’s risk appetite for 2018
as part of the Viability Statement
approval process.
• With the support of the Audit & Risk
Committee, review of principal risks,
other key risk areas and performance
against risk appetite.
People
• Approval of the appointment of the
Group Chief Financial Officer and
Non-Executive Director.
• Discussions regarding senior
appointments and succession
planning.
• Updates on talent management.
Board oversight of risk
management and internal controls
The Board delegates day-to-day oversight
of management's operations of internal
controls and risk management to the Audit &
Risk Committee. The Board considers that
the Audit & Risk Committee possesses the
requisite skills and experience to meet
its obligations and provide the relevant
assurance to the Board. Operating and
investment decisions are delegated to the
Investment & Finance Committee. Further
details of the activities of these Committees
are on pages 49 to 55.
The Board has overall responsibility for
establishing, monitoring and maintaining
an effective system of risk management
and 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’s operating businesses have
a level of autonomy regarding the
establishment of risk management and
internal control systems, but are overseen
by a central management team which
reports to the Board. Certain functions
are undertaken centrally, including: Group
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accounting; investor relations; strategy;
risk; internal audit; corporate tax; treasury;
insurance; and HR.
The Board has established an ongoing
process for identifying, evaluating and
managing the principal risks faced by the
Company. This process has continued
throughout the year and up to the date
of approval of the financial statements.
Monitoring is an ongoing process and
principal risks are formally reviewed
at half-year and year-end.
Risk management function
The Group has separate Risk and Internal
Audit functions. The Board believes that
this separation minimises the threat of
self-review across our ‘three lines of defence’
model (see page 48). The Risk function
provides an increased focus on priority risk
areas. It is responsible for maintaining the
Group risk management process, facilitating
change for selected risks, evolving our
approach to operational compliance,
and working with other Group functions.
The Risk function engages specialist
external expertise to maintain best practice
approaches. To ensure an open discussion
of emerging risks, the Chairman of the
Audit & Risk Committee meets separately
with the Head of Risk independent of
operational management.
Internal Audit
The Internal Audit function undertakes
an agreed programme of independent
assurance reviews. The function sources
external expertise as required from specialist
suppliers. This mix of internal and specialist
resource works well. Internal Audit seeks to
comply with relevant professional standards,
notably those issued by the Institute of
Internal Auditors.
The Internal Audit Charter (The Charter) sets
out the purpose and objectives of Internal
Audit. The Charter takes a systematic and
disciplined approach to the evaluation and
improvements in control and governance
processes. It strengthens the function’s
independence and objectivity by means of
the function’s reporting lines and access
to all records, personnel, property and
operations of the Group. To ensure his
independence from management, the
Director of Internal Audit reports directly to
the Chairman of the Audit & Risk Committee.
The Charter confirms the high-level
responsibilities of operational management
(first line of defence) and ensures that the
Internal Audit function undertakes its third
line of defence duties, avoiding any first or
47
Governance
Governance
Corporate Governance
second line duties. The Charter is reviewed
annually and updated as required to take
account of changing practices and
standards. The Audit & Risk Committee is
satisfied that the provisions of the Charter
have been achieved in the year.
The Board formally evaluated the system
of risk management and internal control in
conjunction with the Audit & Risk Committee
during the year (see pages 50 to 55). This
evaluation focused on material controls
relating to principal risks and entity-level
controls, as well as additional controls and
processes required to support the
Company’s Viability Statement (see page 29).
The evaluation also considered any control
weaknesses identified by Internal
or External Audit, or as a result of incidents
of fraud. Controls over the recording of
amounts in the Group’s consolidated
financial statements relating to investments
have also been assessed and considered
as appropriate.
Although DMGT does not have the ability
to dictate or modify controls at its material
associates, namely Euromoney and ZPG,
the Directors review the effectiveness
of the systems of risk management and
internal control at these entities via
Board representation.
Monitoring and oversight
The Group operates a ‘three lines of defence’
model. The benefits of this approach are
shown in the table below. The Board
delegates day-to-day responsibility for
internal controls to operational management
with oversight by the Executive Committee
and the Audit & Risk Committee.
Three lines of defence table
First line of defence
Second line of defence
Third line of defence
Each operating business is responsible for
the identification and assessment of risks,
understanding the Group’s risk strategy
and operating appropriate controls.
Benefits
• Ownership and responsibility remains
close to the operating businesses and
their attendant performance.
• Promotes a strong culture of adhering
to limits and managing risk exposures
in accordance with each business’s risk
appetite and the regulatory environment.
• Promotes a healthy risk culture and
long-term approach to risk management.
Key features of the risk management
and internal controls system
The main features of the system of risk
management and internal controls in
relation to the financial reporting process
are described below:
1. Confirmation of key internal controls,
and the fraud and bribery assessment
Each operating business confirms the
operation of key internal controls to Group
Finance and Internal Audit annually. The
purpose of the assessment is to confirm
the operation of a framework of internal
controls, including anti-fraud controls, which
are expected to be in place in each business
unit. These internal controls are intended to
provide standards against which the control
environments of DMGT’s business units
can be monitored. An annual fraud and
bribery risk assessment is completed
simultaneously, detailing risks and mitigating
controls. In each case, the Internal Audit
team reviews and follows up on these
submissions, as appropriate.
48
Risk, supported as appropriate by other
functional areas, particularly legal, tax and
finance, reviews the completeness and
accuracy of risk assessments, reporting
and adequacy of mitigation plans.
Internal Audit provides independent and
objective assurance on the robustness of
the risk management framework and the
effectiveness of internal controls.
Benefits
• Understand aggregated risk positions.
Benefits
• Independent assurance on the system
• Objective oversight and challenge to the
business areas and internal control and
risk management framework used in the
first line.
• Provide ongoing training and support
on Group-wide risks to the operating
businesses.
of risk management and internal controls.
• Assessment of the appropriateness and
effectiveness of internal controls.
• Internal Audit provides assurance to the
Audit & Risk Committee.
2. Review of relevant and timely
financial information
Each of the operating businesses and DMGT
executive management regularly review
relevant and timely financial information.
This is produced from a financial information
system operated across the Group. It is
supported by a framework of forecasts as
well as annual budgets that are approved
by the Executive Committee and confirmed
by the Investment & Finance Committee.
3. Senior Accounting Officer sign-off
The Group Chief Financial Officer is the
Senior Accounting Officer and is required,
by HMRC, 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.
Fair, balanced and understandable
One of the key governance requirements
of a group’s Annual Report is for it to be
fair, balanced and understandable. The
coordination and review of Group-wide input
into the Annual Report is a specific project,
with defined time frames, which runs
alongside the formal audit process
undertaken by the External Auditor. The
Audit & Risk Committee’s and the Board’s
confirmations 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;
• A verification process in respect of the
factual context of the submissions made;
• Comprehensive sign-off process by
owners of all statements 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 &
Risk Committee and the Board are satisfied
with the overall fairness, balance and
understandability of the Annual Report.
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Key activities
• Reviewing all acquisitions,
disposals and capital expenditure
within its remit, including
presentations made by operating
businesses to request support in
line with strategic objectives.
• Reviewing performance against
budget and plan including
reviewing debt position, tracking
performance against the original
investment case and assumptions
for acquisitions and investments.
• Oversight of the Company’s pension
scheme planning, including
discussions with the various
Scheme Trustees and their advisers
and the latest triannual valuations.
• Reviewing the Company’s dividend
planning activities.
• Reviewing and approving the
Company’s tax strategy.
• Reviewing the Committee's
effectiveness.
Governance
• The Investment & Finance Committee
reviewed its membership and approved
that Lord Rothermere continue as
its Chairman.
• The Investment & Finance Committee
reviewed its Terms of Reference.
• The Investment & Finance Committee
confirmed that it had complied with its
Terms of Reference throughout the year
and reviewed its effectiveness.
Board Committees
Executive Committee
The Executive Committee is
responsible for the day-to-day
operation of the Group in line
with the overall strategic aims
set by the Board.
Membership
Member
The Viscount Rothermere
P A Zwillenberg
T G Collier
K J Beatty
Former members
C Chapman
S W Daintith
S Kavan
Member for
full period
Yes
Yes
No
Joined
02/05/2017
Yes
No
Until 01/07/2017
No
Until 06/04/2017
No
Until 31/03/2017
The Executive Committee meets regularly.
It has a broad remit covering strategy
and its execution, and operational
performance oversight.
Key activities
• Business reviews with all operating
businesses at least twice yearly.
• Performance management review
and analysis.
• Talent acquisition and
management.
• Review of key investment and
divestment opportunities and
capital allocation decisions.
Investment &
Finance Committee
The Investment & Finance
Committee evaluates the
benefits and risks of investment
opportunities and financing
proposals up to a value
threshold with the Board. The
Investment & Finance Committee
provides regular updates to the
Board including monitoring
returns on investments made
and progress against agreed
targets.
Membership
There were 7 meetings held in the year.
Member
The Viscount Rothermere
(Chairman)
P A Zwillenberg
T G Collier
A H Lane
D H Nelson
K A H Parry*
Former members
N W Berry*
S W Daintith
J G Hemingway
Member for
the full period
Yes
Yes
No
Joined
02/05/2017
Yes
Yes
No
Joined
01/04/2017
No
Until
25/12/2016
No
Until
06/04/2017
No
Until
08/02/2017
• Budget approval and tracking
*
Independent
against budget.
Governance
The Executive Committee is designed to
represent key businesses. It ensures that
there is appropriate support for and
challenge to all of the operating businesses.
The Investment & Finance Committee has
been supported in its activities during the
year by the Deputy Finance Director, Director
of Performance Management & Strategy,
Group Head Corporate Development and
M&A, and the Technology Advisor to the
Chairman and CEO.
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49
Governance
Governance
Corporate Governance
Audit & Risk Committee:
Chairman’s Introduction
In the context of our changing business, we focus our audit work on
judgemental areas of accounting and auditing, and our risk work on
high impact possible events.
There is a comprehensive process to review significant business risks
to the Group including financial risk, operational risk and compliance
risk that could affect or impact the achievement of the Group’s strategy
and business objectives.
The following pages set out the
Audit & Risk Committee’s Report
for the financial year. The Report
is structured in four parts:
•
How the Audit & Risk Committee
operates: membership, key
responsibilities, governance,
effectiveness and operating
practices;
•
•
•
Review of the year: key activities
and the significant financial
reporting and auditing issues;
Oversight: Risk and controls, and
Internal Audit; and
External Auditor: appointment,
independence, effectiveness
and objectivity.
Dear Shareholders
I am pleased to present the Audit & Risk
Committee Report.
The combination of the former Audit and
Risk Committees has progressed well
with care being taken to give appropriate
emphasis to both aspects of our work
in line with the financial reporting cycle.
To recognise the extra workload, we
introduced an extra meeting in July that
concentrated on risks.
Risk has hardly been out of the news over
the last 12 months. We have addressed
macro-risks such as Brexit, the minority
UK government and sanctions, as well as
corporate risks such as cyber-crime and
data protection legislation.
The Group changed significantly during the
year with the partial disposal of the stake
in Euromoney Institutional Investor PLC
(Euromoney) which is now no longer a
subsidiary. As part of the transitional
services agreement, Internal Audit continued
to provide its services for the first half of the
financial year. As the Group no longer has
management responsibility for Euromoney,
the work of Internal Audit in respect of that
business is not addressed in this report,
but will be described in the Annual Report
of Euromoney Institutional Investor PLC.
The Audit & Risk Committee spent time
at the half-year and year-end reviewing
and challenging the effectiveness of the
communication of the Group’s results
in the light of Euromoney becoming an
associate company.
The completion of the scheduled triennial
external review of Internal Audit was
timely in the light of the de-scoping of its
responsibility to the Euromoney Audit
Committee. The independent review
has resulted in a blueprint for the future
development of the function that has been
embraced by both the Director of Internal
Audit and the Audit & Risk Committee.
Further details are set out in the
oversight section.
Kevin Parry
Audit & Risk Committee Chairman
Membership
Member
K A H Parry (Chairman)*
A H Lane
D H Nelson
D Trempont*
Former members
N W Berry*
J G Hemingway
*
Independent.
Member for
full period
Meetings
held
Meetings
attended
Yes
Yes
Yes
Yes
5
5
5
5
No
Until 25/12/2016
No
Until 08/02/2017
1
Until 25/12/2016
1
Until 08/02/2017
5
5
5
5
1
1
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The Audit & Risk Committee meets at least
four times a year. This year the Committee
met five times to incorporate a meeting to
focus specifically on risk matters.
All members of the Audit & Risk Committee
are Non-Executive Directors and two are
Independent Non-Executive Directors. The
Committee members continue to represent
the necessary range of financial, risk, control
and commercial expertise required to
provide an effective level of challenge to
management. Kevin Parry is a former senior
audit partner, former chief financial officer
and has extensive experience as an audit
committee chairman. David Nelson is the
senior partner of an accounting practice.
Dominique Trempont is a former chief
financial officer and has extensive
experience as an audit committee chairman
and member. Consequently Kevin Parry,
David Nelson and Dominique Trempont
are designated for Code purposes as the
financial experts with competence in
accounting and auditing.
Key responsibilities
The Audit & Risk Committee’s terms of
reference are on our website at www.dmgt.
com/about-us/board-and-governance.
Governance
The integrity of the Group’s financial results
and internal control systems are important
to the Directors and the shareholders.
Consequently, the Audit & Risk Committee
encourages and seeks to safeguard high
standards of integrity and conduct in
financial reporting and internal control.
The Committee tests and challenges the
results and controls in conjunction with
management and the Internal and
External Auditors.
The Committee has fulfilled its
responsibilities during the year and confirms
the Group is in compliance with the Statutory
Audit Services for Large Companies Market
Investigation (Mandatory Use of Competitive
Tender Processes and Audit Committee
Responsibilities) Order 2014. The Committee
is permitted to obtain its own external
advice at the Company’s expense. No such
advice was sought during the year.
Andrew Lane and David Nelson are
advisers to the Harmsworth family and not
Independent Directors. This is a deviation
from Code Provision C.3.1. The Board
considers that their membership adds to the
deliberations of the Audit & Risk Committee
and I, as the Committee Chairman confirm
there was no conflict of interest during
the year.
Effectiveness
The Audit & Risk Committee reviews its
Terms of Reference and effectiveness
annually. The review confirmed that the
Committee is effective at meeting its
objectives, the provisions of the Code
and the needs of the Group.
The Committee embraced greater
emphasis being placed on cyber risks
and restructurings of businesses
and management.
Operating practices
During the year the Audit & Risk Committee
meetings were scheduled to take place just
prior to Board meetings to maximise the
efficiency of interactions. Reports are made
to each Board meeting on the activities
of the Committee, focusing on matters of
particular relevance to the Board in the
conduct of its work.
The Committee has been supported in its
activities during the year by the CEO, Group
Chief Financial Officer, Risk team, and
Director of Internal Audit as well as the
External Auditors. These individuals
generally sponsor Committee papers, which
are typically distributed one week prior to
meetings. The Committee works with all
contributors to discuss judgemental issues
at an early and relevant opportunity.
The Group Chief Financial Officer, the Deputy
Finance Director, the Group Financial
Controller, the Director of Internal Audit,
the Risk managers and the External Auditor
are invited to each meeting but are recused
when appropriate. This approach results in
informed decisions based on quality papers
and discussion which provides a thorough
understanding of facts and circumstances.
The Committee met regularly and separately
with: the External Auditor, Director of
Internal Audit, the Group Chief Financial
Officer and Head of Risk, without other
executive management being present.
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Review of the year
Key activities
Key activities undertaken by the
Audit & Risk Committee during the
year included:
Audit
• Agreeing the scope of internal and
external audit work.
• Challenging management’s
accounting judgements.
• Commissioning an external
effectiveness review of the Internal
Audit function.
• Reviewing and discussing Internal
Audit reports to maintain their
contribution to improving the
control environment.
• Reviewing the disclosure of the
Group tax policy.
• Auditing the basis of alternative
performance measures.
• Reviewing the effectiveness of
external audit.
Risk
• Reviewing the Group’s risk
management processes and the
Group risk register.
• Robust challenge to the assumptions
supporting the Group’s Viability
Statement.
• A rolling programme of focused risk
topics including information security
and cyber resilience.
• Recommending the establishment
of a dedicated Information Security
Steering Committee reviewing the
output of associated benchmarking
undertaken by a consultancy
specialising in the prevention
of cyber-crime.
• Preparing for compliance with
the General Data Protection
Regulations (GDPR).
• Compliance with legislation relating
to anti-bribery and corruption; trade
sanctions; health and safety; modern
slavery and whistleblowing.
• Business continuity and incident
management.
51
Governance
Governance
Corporate Governance
Financial reporting and auditing issues
The Audit & Risk Committee considered and discussed the significant matters relating to financial reporting and accounting,
as set out in the table below.
The issue and its significance
Focus of work
Comments and conclusion
Financial reporting
The content of the Annual and
Half-Year Reports and trading
updates needs to be
appropriate, complying with
laws and regulation.
We reviewed the reports to improve their clarity,
focusing particularly on disclosures in connection
with the partial disposal of Euromoney and
impairment charges.
We specifically reviewed:
• All accounting policies for continued
appropriateness and consistency of application;
• All sections of the Annual Report having
particular regard for the Audit & Risk Committee’s
responsibilities for the financial statements;
• Reports from financial management, Legal,
Risk and Internal Audit which confirmed
compliance with regulations; and
• The financial risks and papers to support
the going concern basis of accounting.
Taken as a whole, the Annual
Report needs to be fair,
balanced and understandable
so that it is relevant to readers.
We continued our practice of comparing our
Annual Report with those of other relevant
companies and asked our External Auditors
for improvement recommendations.
Drafts of the Annual Report were reviewed by
both the Audit & Risk Committee and the Board.
We used the Executive Directors’, the External
Auditors’ and the Committee’s knowledge to
determine the overall fairness, balance and
understandability of the Report, prior to its
final approval by the Board.
The Annual Report includes
a number of non-GAAP
measures. See Note 13
and page 124.
52
In addition to the disclosure of operating profit,
before and after specified adjustments, other
non-GAAP measures (known as alternative
performance measures) are disclosed in the
Annual Report, e.g. underlying revenue growth,
net debt to EBITDA ratio. We commissioned
Internal Audit to review other alternative
performance measures to ensure whenever
possible that they were third-party sourced
or otherwise robustly compiled.
We also sought to ensure that equal prominence
was given to statutory measures and that
explanations accompanied all alternative
measures including pro forma figures quoted
throughout the accounts.
A materiality threshold of £5 million has been set
for exceptional items unless there was continuation
of an activity previously disclosed as exceptional.
There were no significant changes to accounting
policies. Based on our enquiries with management
and the External Auditors, we concluded the policies
were being properly applied.
We were satisfied that judgemental matters were
explained.
We were satisfied that the Group complied with
reporting requirements.
We designed additional disclosures in connection with
the disposal of Euromoney to allow the performance
of the Group to be readily understood.
We received confirmation that individuals’
responsibilities had been fulfilled and confirmed that
the overall Report was consistent with the Directors’
knowledge. This allowed the Audit & Risk Committee
and the Board to be satisfied that the Annual Report
taken as a whole is fair, balanced and understandable.
We were satisfied that the information presented in the
Strategic Report was consistent with the performance
of the business reported in the financial statements.
In particular, we were satisfied that the estimates,
outlook and quantified risk disclosures in the financial
statements are consistent with those identified in
the Strategic Report. The Committee concluded
that appropriate judgements had been applied
in determining the estimates and that sufficient
disclosure has been made to allow readers to
understand the uncertainties surrounding outcomes.
We were satisfied that the Viability Statement should
be over a three-year period, consistent with the
Group’s business planning cycle and the next
refinancing of our short-term bank debt facilities.
We will continue to monitor feedback for future
enhancements to the Annual Report.
We decided to continue to adjust operating profit for
intangible asset amortisation and for compensation
payments which were capital in nature because they
are akin to investment payments which are capitalised.
Additional adjustments have been made to exclude
the impact of exceptional costs, impairments and
other fair value adjustments. These adjustments assist
understanding the outcome for the reporting period.
We enhanced the prominence of GAAP numbers
and improved the reconciliation of APMs to GAAP.
We determined that the published data was of a high
quality and helps shareholders understand progress
(particularly in the digital arena). Sources of data
are disclosed.
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The issue and its significance
Focus of work
Comments and conclusion
Accounting judgements
The Group has capitalised
software development costs,
other intangible assets and
goodwill associated with
acquisitions. Goodwill and
intangible assets represent
40% (2016 185%) and 23%
(2016 94%) respectively of net
assets. The carrying values
need to be justified by
reference to future economic
benefits to the Group
(see Notes 21 and 22).
The Group carries deferred
tax assets in respect of
brought-forward losses and
deferred interest that represent
7% (2016 32%) of net assets
(see Note 37).
The Group actively manages
its portfolio of investments
and consequently is active
in making acquisitions and
disposals. Transactions that
contain unusual terms and/or
innovative structures would
require the accounting
treatment to be carefully
considered.
During the year, £26.7 million
was incurred on acquisitions
and £215.8 million was realised
on disposals (see Notes 17
and 18).
The Group has multiple sources
of revenue, including
subscriptions, software sales,
display and native advertising,
branded and pre-roll videos
and licence fees. Consequently
revenue recognition can
be intricate.
We ensured capitalised costs were separately
identifiable and met the requirements of relevant
accounting standards.
We considered whether there have been events
triggering an impairment review. Where there was
such an event and whenever impairment testing
was otherwise required, we reviewed papers
prepared by executive management to determine
whether an impairment event had taken place.
As there were significant impairments in the
second half we specifically reassessed the timing
of the recognition of the impairments to ensure
that they were recognised in the correct period.
We focused on facts, assumption, methodologies
and discount rates. We received input from
both operational and financial management and
also reviewed relevant external commentaries
and valuations.
At the year end, the Group recognised deferred
tax assets of £61.5 million (2016 £169.3 million)
in respect of brought-forward losses and
deferred interest.
We ensured deferred tax assets were reduced
in line with the reduced trading outlook in the
B2B businesses, notably those which triggered
impairment reviews.
We reviewed papers prepared by executive
management in respect of overseas tax losses that
can no longer be recognised as deferred tax assets.
The Audit & Risk Committee carefully considers
judgemental accounting and the carrying value
of intangible assets and goodwill.
The Committee considered the accounting
treatment for both the sell-down of Euromoney
and the dilution of DMGT’s stake in ZPG. We
considered the complexity of the Euromoney
sell-down and the adequacy of the explanation
of its new status as an associate.
We reviewed the valuation of fair value of the
Group’s remaining c.49% stake.
The Internal Audit team audits all significant
acquisitions within 12 months of the relevant
acquisition where consideration exceeds
£10 million.
We reviewed the accounting policies for
revenue recognition and determined their
appropriateness. We also reviewed deviations
in the applications of policies and sought
to eliminate differences in preparation for
the adoption of IFRS 15 in the year ending
30 September 2018.
Internal Audit visits all businesses on a rotational
basis taking account of changed circumstances
and perceived risk. Their work includes the testing
of revenue recognition.
We were satisfied that costs that had been capitalised
were appropriately held on the balance sheet.
Our reviews embraced sensitivities to changes in
assumptions which allowed us to understand the
materiality of conclusions in the context of our
financial reporting.
We focused on RMS, Genscape, Hobsons, Xceligent
and SiteCompli.
We were satisfied with the impairments in respect of
goodwill, capitalised software, and other intangibles
were charged in the appropriate period and in
appropriate amounts.
The Audit & Risk Committee noted that the conclusions
were sensitive to future outcomes. Some combined
downside sensitivities could trigger impairments if
they occur in the future. Appropriate disclosures were
included in financial statements.
The assets on the balance sheet were recognised
following a detailed review of how the brought-forward
tax losses would be utilised and we were satisfied that
changes to tax laws internationally did not adversely
impact the carrying value of the total assets.
Where required tax assets were written off in the year.
The Investment & Finance Committee oversees all
acquisition and disposal activity. There are three
common Committee members. We were satisfied
with the judgements made in the year.
We performed a robust review of the treatment of
disposals during the year and were satisfied with the
treatments and calculations.
The Audit & Risk Committee reassessed the timing
of reviews of acquisitions by Internal Audit and
approved revised practices.
One immaterial difference was identified as a result
of the review.
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Governance
Governance
Corporate Governance
Other financial matters
In addition to the significant matters
addressed above, the Audit & Risk Committee
maintains a rolling agenda of items for its
review, including: capital strategy; financial
and treasury management; feedback from
analysts and investors; reconciliations of
reported financial results with management
accounts; tax management; and litigation.
Nothing of significance arose in respect of
those reviews during the year. There was
no interaction with the Financial Reporting
Council’s (FRC) corporate reporting team
during the year.
There was no disagreement over accounting
or reporting outcomes with management
or the External Auditors during the
reporting period.
Oversight
The Audit & Risk Committee has oversight
responsibility for risks and controls and
direct responsibility for the operation of the
Internal Audit function.
The Committee approves separate annual
audit and risk plans that are flexible enough
to embrace intra-year changes due to
changed circumstances, such as acquisitions,
disposals, extensive management change
etc. The plans changed during the year
to extend from a one-year to a flexible
three-year planning cycle.
At each Committee, the Risk Managers and
the Director of Internal Audit address key
matters which have arisen, focusing on
the most significant findings. Additionally,
common themes are drawn out so that
management can make early enquiries
of businesses not recently visited by the
assurance functions with a view to heading
off potential issues.
In addition to formal reporting, the Audit &
Risk Committee Chairman meets with the
Risk team and the Director of Internal Audit.
Risk and controls
A Group-wide risk assessment process is
managed biannually by the Risk function,
reviewing risks to the achievement of
business plans in operating businesses. This
process assists management in identifying
internal and external threats and prioritising
responses to them. The results are collated
and an overall Group-wide risk plan is
derived from these results which is approved
by the Audit & Risk Committee. The work
evaluates whether the system, including
reporting and controls, adequately supports
the Board in its risk oversight. The Audit &
Risk Committee focuses on insights into
54
material changes and trends in the risk
profile. For example, the complexity of cyber
risks and data governance and security risks
increased during the year. The principal
risks and mitigating actions are set out
on pages 36 to 39.
The Committee’s view is that financial risks
are not the principal risks that the Group faces
but it places emphasis on the maintenance of
high standards for controlling financial risks.
In addition to an annual confirmation from
financial officers that the environment has
operated effectively, it gains independent
assurance from internal audits. During the
year the Committee reviewed the top financial
risks facing the Group, including: foreign
exchange and interest rates; liquidity; credit;
counterparty and capital management.
Further, two reports were received on
proposed developments in the systems
for financial control and reporting.
During the year a new Group Chief Financial
Officer, Tim Collier was appointed. To
simplify reporting lines all operational CFOs
report to him directly in addition to their
CEOs. The Committee monitored and
participated in his induction and was
satisfied that the more direct reporting line of
operational companies to the central finance
function improved transparency. The Audit &
Risk Committee closely monitored changes
in financial management and reviewed the
competence and quantity of the financial
management resource in discussion with the
Group Chief Financial Officer. The Committee
was also satisfied that the Company
remained able to fulfil its first line of
defence duties and that there is a culture
of continuous improvement.
The Committee reviewed the whistleblowing
arrangements in place, which enable
employees to raise concerns in confidence.
The Committee received analysis of the
types of concerns raised by employees.
No significant matters were reported in the
year and the number of reports made was
consistent with prior years of operation.
Internal Audit
The Audit & Risk Committee reviewed and
approved the Internal Audit Charter.
Amendments were made to adopt a
three-year cycle and maintain compliance
with evolving best practice.
The scope of Internal Audit work is considered
for each operating company (including Head
Office) and takes account of assessments of
risk, input from senior management and the
Committee, and previous findings. Some
thematic audits are undertaken for the
Group as a whole. For example, this year
there was a further Group-wide emphasis on
cash collection management, information
security (including the General Data Protection
Regulation), cyber-crime and anti-fraud and
bribery procedures. Other issues selectively
audited included revenue recognition and
payroll. At each meeting, the Committee
assesses recommended changes to the annual
plan to ensure that total coverage meets
its requirements and that the budget and
resource levels are adequate.
Throughout the year, there was a range of
outcomes from internal audits. The Audit &
Risk Committee welcomes the identification
of areas for improvement and places higher
emphasis on actions taken as a result of
review points than on particular findings at
the time of review. Whenever deficiencies or
opportunities for improvements are identified,
the Audit & Risk Committee’s emphasis is on
the appropriateness of the reaction to the
identified issue. The Committee looks to
management to take timely and proportionate
steps to eliminate weaknesses. The Audit &
Risk Committee monitors their adherence
to agreed timescales.
During the year, as planned, the Audit & Risk
Committee commissioned an external review
of the effectiveness of the Internal Audit
function. The review was conducted by
Deloitte LLP in February 2017 and their overall
assessment was that in delivering its remit,
the Internal Audit function is providing an
effective service to DMGT.
Recommendations for future developments
were welcomed by the Director of Internal
Audit and the Committee and provide a
blueprint for development over the next three
years. Some changes have already been
introduced, such as audit analytics and use
of audit technology.
External Auditor
PricewaterhouseCoopers (PwC) is the External
Auditor. The Group lead audit partner is
Neil Grimes, who has led the audit since the
beginning of the relationship. Its first audit
of DMGT was in respect of the year ended
30 September 2015. The Audit & Risk Committee
has responsibility for making recommendations
to the Board on the reappointment of the
External Auditor, for determining its fees and
for ensuring its independence of the Group and
management. The External Auditor stand for
reappointment at the Annual General Meeting,
but absent concerns over the quality of their
service or opinion, we anticipate retaining PwC
as our auditors for at least the next two years.
Auditor independence
The Audit & Risk Committee considered the
safeguards in place to protect the External
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Auditor’s independence. In particular, the
Committee has ensured that the Company’s
policy on the External Auditor’s
independence is consistent with the Ethical
Standard set out by the FRC in the UK. PwC
reviewed its own independence in line with
this criteria and its own ethical guideline
standards. PwC confirmed to the Committee
that following this review it was satisfied
that it had acted in accordance with relevant
regulatory and professional requirements
and that its objectivity is not compromised.
To ensure no conflicts of independence
arising from Auditors being responsible for
non-audit work, the Audit & Risk Committee
reviewed and approved the policy on
non-audit services. The review included
consideration of the process to manage the
engagement of PwC, regulatory changes
and good practice.
The audit fee payable to PwC amounts to
£3.0 million (2016 £2.7 million). The Audit &
Risk Committee is satisfied that the fee is
commensurate with permitting PwC to
provide a quality audit. In addition to the
Group’s policy, PwC has confirmed that any
non-audit work commissioned by the Group
is reviewed for compliance with its internal
policy on the provision of non-audit services.
The cap on non-audit service fees is set at
70% of the average audit fees for the
preceding three years. The total non-audit
fees paid to PwC amounted to £0.8 million
(2016 £0.8 million) which is within the 70% of
audit fees. The Committee is satisfied that
PwC was selected based on individuals’
particular expertise, knowledge and
experience and that the work did not impair
PwC’s independence as External Auditor (see
Note 5 to the accounts). All non-audit work
undertaken by PwC was approved by the
Committee unless it was de minimis and not
prohibited under our policy.
The Committee, having taken account of
PwC’s confirmations, is satisfied that PwC
is independent of DMGT and its subsidiaries.
Audit quality and materiality
The Audit & Risk Committee places great
importance on ensuring that there are high
standards of quality and effectiveness in the
external audit process.
The Committee has reviewed the quality
of PwC’s audit by way of interviews and
completion of a questionnaire by Audit &
Risk Committee members, by regular
attendance at Audit & Risk Committees and
by financial management. The Audit & Risk
Committee is satisfied that its requirements
were met with some improvement actions
in respect of communications being noted.
In addition, the Committee reviewed PwC’s
scope and approved the external audit plan
to ensure that it is consistent with the scope
of the external audit engagement. The
Committee discussed significant and
elevated risk areas that are most likely to
give rise to a material financial reporting
error or those that are perceived to be of
a higher risk and requiring audit emphasis
(including those set out in PwC’s Report on
pages 86 to 92). It considered the audit scope
and materiality threshold. This included
the Group-wide risks and local statutory
reporting, enhanced by desktop reviews for
smaller, low-risk entities. 79% (2016 75%) of
the revenue and 76% (2016 71%) of adjusted
profit was fully audited; 8% (2016 8%) of
revenue was subjected to specific procedures
and the balance of revenue and profit was
covered by desktop reviews. As scheduled
this year's audit included Genscape.
We have discussed the accuracy of financial
reporting (known as materiality) with PwC,
both as regards to accounting errors that will
be brought to the Audit & Risk Committee’s
attention, and as regards to amounts that
would need to be adjusted so that the
financial statements give a true and fair view.
Errors can arise for many reasons, ranging
from deliberate errors (fraud), to good
estimates that were made at a point in time
that, with the benefit of more time, could
have been more accurately measured. Overall
audit materiality has been set at £9 million
(2016 £10.0 million). This equates to
approximately 4% (2016 4%) of adjusted
pre-tax profit, as reported in the income
statement. This is within the range that audit
opinions are conventionally thought to be
reliable. The absolute decline in materiality
results from Euromoney no longer being a
subsidiary. To manage the risk that aggregate
uncorrected errors become material,
we agreed that audit testing would be
performed to a lower materiality threshold
of £6.8 million (2016 £7.5 million). PwC has
drawn the Committee’s attention to all
identified uncorrected misstatements greater
than £0.5 million. The aggregate net
difference between the reported adjusted
profit before tax and the Auditor’s judgement
of net adjusted profit before tax was less than
£1.2 million which, was significantly less than
audit materiality. The gross differences were
attributable to various individual components
of the income statement. No audit difference
was material to any line item in either the
income statement or the balance sheet.
Accordingly, the Committee did not require
any adjustment to be made to the financial
statements as a result of the audit differences
reported by the External Auditor.
As in the prior year, we asked PwC to write to
us to explain how they would respond to the
findings of the Audit Quality Review team
of the FRC in its annual review of their firm
(in so far as comments are relevant to DMGT).
Additionally, the Committee Chairman, Group
Chief Financial Officer and Group Financial
Controller discussed with PwC in detail the
work it carried out on the audit of DMGT’s
Annual Report. The Audit & Risk Committee
was satisfied with the specific responses to
both sets of enquiries.
PwC has outlined to the Audit & Risk
Committee the professional development
programme applicable to the partners and
employees engaged on our audit, has
reviewed key judgements taken during the
course of the audit, and confirmed the audit
complies with their internal independent
review procedures. We have reviewed the
professional skills, knowledge and scepticism
of key members of the audit team including
the Group team and partners responsible
for the divisional audits.
We have reviewed PwC's latest available
transparency report. We have enquired
whether the audit of DMGT was subject to
either a quality assurance process undertaken
internally by PwC or externally by the FRC.
The Audit & Risk Committee met in private
with PwC at the conclusion of the audit to
confirm that they had received a high level
of cooperation from management and to
receive private feedback on the quality
of financial management.
During the year, the Audit & Risk Committee
reviewed the quality of the 2016 audit, taking
account of PwC’s internal assessment,
management’s assessment and the
Committee’s assessment. The Committee was
satisfied with the robustness of the opinion
and with the audit service. In particular the
Audit & Risk Committee was pleased with an
overall improvement in service scores, whilst
asking PwC to put added emphasis on the
service provided to some US subsidiaries.
Based on the information currently available,
which draws on the enquiries outlined above
and informal soundings of management, the
Audit & Risk Committee anticipates it will
conclude there has been a robust, high-
quality audit for the year ended 30 September
2017, both in respect of PwC’s opinion and
service. The Committee has consequently
recommended that PricewaterhouseCoopers
LLP be reappointed as Auditor at the 2018
Annual General Meeting.
Kevin Parry
Audit & Risk Committee Chairman
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Governance
Governance
Corporate Governance
Remuneration & Nominations Committee
The Remuneration & Nominations Committee meetings are held together.
Remuneration items are taken separately to the Nominations items.
The Remuneration element of the Committee is described within the Remuneration Report
on pages 57 to 80. The Nominations element of the Committee keeps under regular review
the structure and composition of the Board and its Committees, particularly the skills,
knowledge and experience of the Directors to ensure that these remain aligned with the
Group’s developing requirements and strategic agenda.
Membership
The Remuneration & Nominations Committee has been supported in its activities during the
year by the CEO, the Group Chief Financial Officer, the Reward Director and the Global HR
Director. Membership and meetings are shown below.
Member
Member for
full period
Meetings
held
Meetings
attended
The Viscount Rothermere (Chairman) Yes
Yes
D H Nelson
Yes
J H Roizen*
Former members
N W Berry*
*
Independent
No
Until
25/12/2016
7
7
7
2
6
7
7
1
Governance
• The Committee confirmed that it had
complied with its Terms of Reference
throughout the year.
• The combined Remuneration &
Nominations Committee reviewed and
updated its Terms of Reference to take
effect from 30 November 2017.
• 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 its Non-Executive
Director members and agreed to
recommend that Heidi Roizen continued
to be considered independent
in accordance with the Code Provisions.
• Following the death of Nicholas Berry
the Committee reviewed its composition.
Independent Non-Executive Director
Dominique Trempont was appointed
on 1 November 2017.
• The Chairman of the Committee is
Lord Rothermere and the majority of its
members are not considered to be
independent under the Code. Although
this does not meet Code Provision B.2.1,
as holder of all the Ordinary Shares of the
Company through the Trust, the Board
considers that Lord Rothermere’s interests
are fully aligned with those of other
shareholders. Additionally, the Committee
is confident that its membership ensures
that it carries out all aspects of its role
with proper and appropriate regard to
long-term shareholder interests.
• The process for appointing Directors
depends on which role is being filled.
External recruiters and other methods
have been used to identify potential
candidates.
• In line with Code Provision A.4.2 the
Non-Executive Directors met with
the Chairman without the Executive
Directors present.
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Key activities of the
Nominations element
of the Remuneration &
Nominations Committee
• Reviewing potential candidates
for Board appointments including
Tim Collier and François Morin.
• Reviewing the Letter of Engagement
with each Non-Executive Director
to ensure the provisions remain in
line with best practice, following
shareholder approval at the AGM.
• Re-engaging the service of
Non-Executive Directors for a further
period of a minimum of one year.
• Reviewing time commitments
required by Non-Executive
Directors and confirming that it
was satisfied that the Directors
had met or exceeded the time
commitment required.
• In line with the Code, recommending
that all Directors stand for
re-election at the AGM.
• Discussing Board and Committee
composition and longevity of
service, and Board independence.
• Reviewing Committee's
effectiveness and governance
activities against best practice.
Looking ahead, the Committee’s key
activities for the forthcoming year are:
• Reviewing the composition of the
Board to ensure that the right skills
and experience to support the
Group’s strategy are represented;
• Reviewing Committee membership
to ensure that there is a balance
of skills reflected;
• Continuing to review succession
planning for the Executive
Directors; and
• Reviewing the Committee's
effectiveness.
The Viscount Rothermere
Chairman
Daily Mail and General Trust plc Annual Report 2017
Governance
Remuneration Report
The Viscount Rothermere
Chairman
Chairman’s statement
on remuneration
Remuneration at a glance
Annual report on remuneration
Remuneration Policy
Implementation of Remuneration
Policy in FY 2018
57
59
60
72
77
The purpose of the Executive Bonus Plan
is to focus the participants on delivering
sustainable profitable growth. In this
year of transformation, the Committee
considered it was fair and appropriate to
use its discretion to apply adjustments to
account for strategic re-structuring decisions
during the year. These decisions were taken
to set the business up to deliver long-term
shareholder value but impacted on the
ability to meet the performance parameters
of the plan. As such, the Committee was
satisfied that an outcome of 85% of target
was reflective of overall DMGT financial
and non-financial performance.
Kevin Beatty’s bonus, as CEO of dmg media,
reflects the relatively strong performance
of the Consumer Media business in a
challenging environment. Paul Dacre does
not participate in the annual bonus scheme.
Details of the Executive Directors’ bonuses
can be found on page 62.
Pay Review for FY 2018
We regularly review the competitive position
of remuneration for the Company’s Executive
Directors. Base pay increases in the last few
years have been modest and in line with
increases for the general DMGT workforce
and the relevant external market. Salaries for
FY 2017 were frozen for all Executive Directors
and there was a targeted and modest salary
increase for other employees across the
Group. The Committee is keeping base pay
under review and retains the discretion
to authorise subsequent increases.
Chairman’s statement
on remuneration
On behalf of the Board, I am pleased to
present the Directors’ Remuneration Report.
Pay for performance continues to be a key
objective for the business and we believe
that the refinements we have made to both
our short and long-term incentives this year
will ensure that we achieve this. We continue
to focus on standardising bonus terms and
conditions for senior executives across all
our global operations whilst recognising
the different countries, sectors and stage
of development of each business.
Our incentive schemes across our businesses
are designed to reward sustainable
profitable growth and we focus on ensuring
that performance targets are in line with
our long-term strategy and the creation
of sustained shareholder value.
Executive Directors’ bonus payments
for FY 2017
In FY 2017 we broadened the metrics used
in the Executive Bonus Plan to include
a revenue and cash flow component in
addition to a profit metric. The previous
weighting given to strategic objectives has
been removed. In FY 2018 it is our intention
to refine this further and to use two metrics,
revenue and cash operating income. Cash
operating income (operating profit plus
depreciation and amortisation less capital
expenditure) is a metric that captures both
profit and underlying cash generation of
the business.
The FY 2017 plan introduced an adjustment,
to ensure that participants do not benefit
from, and are not penalised by, short-term
currency fluctuations beyond their control.
This will continue in FY 2018.
Remuneration Policy
In accordance with the Large and
Medium-sized Companies and Groups
(Accounts and Reports) Regulations
2008 (as amended), shareholders are
provided with the opportunity to
endorse the Company’s Remuneration
Policy through a binding vote. The
current policy was agreed at the
Annual General Meeting (AGM) on
8 February 2017 and the policy
has been operated, as described,
from that date.
Pay for performance continues to be
a key objective for the business and
we believe that the refinements we have
made to both our short and long-term
incentives this year will ensure that
we achieve this.”
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Governance
Governance
Remuneration Report
Key strategic priorities
Improving operational execution
Increasing portfolio focus
Enhancing financial flexibility
2016 Long-term incentive award
Our new Long-Term Executive Incentive Plan
was introduced in 2017. The performance
period in respect of the 2016 award will be
from FY 2017 to the end of FY 2019. The plan
is intended to:
• provide a direct link between pay and
performance of the business – with the
opportunity for exceptional levels of
reward linked to truly exceptional business
performance; and
• reward the delivery of sustainable
long-term growth and capital efficiency.
To achieve this, the plan has been designed
to give participants a share of profit growth
before tax above a minimum growth
threshold – ensuring that the award is
appropriately challenging and an Executive
Director is not rewarded unless a minimum
performance threshold is reached.
To ensure that shareholders’ capital is used
efficiently, a capital charge (or credit) will
be applied, business-by-business, for any
additional capital used (or released) relative
to the starting level. The total reward for
each participant is subject to a cap.
At the same time we have also increased
the shareholding guidelines for the CEO
(and Chairman) to 500% of base salary.
The outcome of the 2016 LTIP award will be
delivered in shares upon vesting at the end
of FY 2019.
In FY 2018 we intend to make LTIP awards
on the same basis.
Long-term incentive awards vesting
in FY 2017
The vesting of the award made in
December 2012 was measured against
the following priorities:
• growing B2B business;
•
investing in strong brands of digital
consumer media, particularly MailOnline;
• growing sustainable earnings and
dividends; and
•
increasing the Company’s exposure to
growth economies and international
opportunities.
We have continued to make progress against
these priorities. Over the last five years,
B2B revenues (excluding Euromoney)
achieved an average increase of 7% on
an underlying basis; MailOnline revenues
have grown from £28 million in FY 2012
to £119 million in FY 2017 and made good
progress on its path to profitability;
dividends continued to grow in real terms
and international revenues increased from
37% to 51% of total revenue. Given this, the
Committee has determined that the award
should vest in full in December 2017. For
more information see table 6.1 on page 64.
The award made in December 2014 to
Paul Dacre is measured against the
following priorities:
• ensuring the financial stability of the Mail
Titles; and
•
investing in strong brands of digital
consumer media, particularly MailOnline.
We have made good progress against
these priorities and the Committee has
determined that the award should vest in
full in December 2017. For more information
see table 6.3 on page 65.
The award to Kevin Beatty made in
December 2010 under the 2008 Long Term
Incentive Plan which vested at 53.9% in
September 2013 became fully realisable
in December 2016. For more information
see table 4 on page 62.
Changes to the Executive Directors
Stephen Daintith and Suresh Kavan both
stood down from the Board during the year
and I would like to thank them for their
contribution to the business.
Under the terms of his service contract,
Suresh Kavan was entitled to a pro-rated
bonus for FY 2017. On resignation, Stephen
Daintith was not eligible to participate in
the bonus for FY 2017 and unvested share
awards were forfeited in full. Further details
can be found on page 66.
Tim Collier was appointed as Group Chief
Financial Officer in May 2017. Details of his
compensation arrangements can be found
on page 59. His appointment terms are in
line with DMGT’s Remuneration Policy and
include a one-off award of DMGT shares.
The award is intended to compensate him
for the forfeiture of unvested incentives from
his previous employer. The award will vest
in two tranches in December 2018 (188,284
shares) and December 2019 (136,681 shares),
subject to continuing employment.
Reflecting our emphasis on pay for
performance, the fixed pay (base salary and
pension allowance) agreed for Tim Collier is
lower than his predecessor’s, with a greater
focus on variable pay elements.
The Viscount Rothermere
Chairman
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Remuneration at a glance
FY 2017 Remuneration outcomes for the Executive Directors
The table below summarises the remuneration for the Executive Directors in FY 2017:
Salary 2017
Bonus (including deferred amounts)
As a % of salary
Taxable benefits
Pension benefits
LTIP awards vesting in year
Total remuneration FY 2017
Total remuneration FY 2016
The Viscount
Rothermere
£000
P A
Zwillenberg
£000
837
640
76.5%
55
310
–
1,842
1,961
750
446
59.5%
29
225
–
1,450
458
T G
Collier
£000
207
124
59.5%
6
52
–
389
–
K J
Beatty
£000
744
304
40.9%
29
275
976
2,328
2,571
P M
Dacre
£000
1,448
–
–
68
–
856
2,372
1,514
S W
Daintith
£000
S Kavan
£000
368
–
–
7
111
–
486
2,605
275
–
–
–
–
–
275
328
Total
£000
4,629
1,514
194
973
1,832
9,142
9,437
The key elements of remuneration for the Executive Directors
The key elements of remuneration applicable for the current Executive Directors in FY 2017 are described below:
The Viscount
Rothermere
P A
Zwillenberg
Salary
£837,000
(including
Euromoney
Board fees)
£750,000
(including
Euromoney
Board fees)
T G Collier
£500,000
(£206,522 since
appointment)
K J Beatty
£744,000
Annual bonus
opportunity
180% of salary
maximum
90% of salary
on target
140% of salary
maximum
70% of salary
on target
140% of salary
maximum
70% of salary
on target
60% of salary
maximum
30% of salary
on target
Annual bonus deferral
None applies
Any amount above target
deferred into nil cost
options for two years
Any amount above target
deferred into nil cost
options for two years
Any amount above target
deferred into nil cost
options for two years
LTIP
Percentage of eligible
profit with calibrated
on-target value of c.90%
of salary vesting after
three years
Percentage of eligible
profit with calibrated
on-target value of
c.100% of salary vesting
after three years
Percentage of eligible
profit with calibrated
on-target value of c.90%
of salary vesting after
three years
Percentage of eligible
profit with calibrated
on-target value of c.60%
of salary vesting after
three years
Pension
Allowance of
37% of salary
Benefits
Car allowance
and driver
Allowance of
30% of salary
Allowance of
25% of salary
Family medical
insurance, Life
Assurance
Car allowance
and driver
Family medical
insurance, Life
Assurance
Car allowance
Family medical
insurance, Life
Assurance
Allowance of
37% of salary
Car allowance
and driver
P M Dacre
£1,448,000
–
–
–
Award with a value
equivalent to 70% of
salary vesting after three
years subject to
performance conditions
Family medical
insurance, Life
Assurance
Company car and
driver, car allowance
Fuel benefit
Family medical
insurance
Note
1. Suresh Kavan stood down from the Board on 12 January 2017, Stephen Daintith stood down from the Board on 6 April 2017 and Tim Collier joined the Board on 2 May 2017.
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Governance
Governance
Remuneration Report
Annual Report on Remuneration
Remuneration and Nominations Committee role and activities
The Committee’s responsibilities with respect to remuneration include:
• Group remuneration policy; and
• 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 Lord Rothermere with Committee
members David Nelson and Heidi Roizen. Dominique Trempont was appointed with effect from 1 November 2017.
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, Lord Rothermere’s interests are
fully aligned with those of 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 Non-Executive Directors meet regularly and independently outside of the formal meetings.
The Committee spends a large portion of its time reviewing the remuneration and incentive plans of businesses which are diverse both in
geography and sector. There are a variety of incentive plans requiring significant consideration and oversight, which are designed to reflect
each business type and stage of development, the market it operates in and aims to incentivisation of 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.
Committee Performance and Effectiveness
In September 2017, 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.
Advice to the Remuneration Committee
The Committee received advice from members of the senior management team during the year. KPMG also provided advice in relation
to valuation of subsidiaries for the purpose of long-term incentive schemes. Fees paid to KPMG amounted to £16,000 during FY 2017.
Remuneration Committee discussion topics
Date
Agenda items
November 2016
(2 meetings)
February 2017
April 2017
June 2017
• Vesting of FY 2012 DMGT LTI awards.
• Approval of FY 2017 DMGT LTI structure.
• FY 2016 outcome of executive bonus schemes.
• Approval of FY 2017 executive bonus targets.
• Suresh Kavan leaving arrangements.
• Approval of 2017 DMGT LTI participants and awards.
• Developments in Reward and Corporate Governance.
• Approval of CFO recruitment terms.
• Preparation for Gender Pay reporting.
• Operating businesses compensation and appointments.
• Operating businesses compensation and appointments.
September 2017
• Review of Remuneration Committee Effectiveness.
• Annual Salary Review.
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Table 1: Single figure of remuneration paid to Executive Directors for FY 2017 (Audited)
The table below sets out the single total figure of remuneration and breakdown for each Executive Director in FY 2017 and FY 2016. Details of
the calculation of the annual bonus figure for FY 2017 can be found in the section variable pay awards vesting in FY 2017, on page 62.
The Viscount Rothermere
P A Zwillenberg
T G Collier
K J Beatty
P M Dacre
S W Daintith
S Kavan5
Total
Financial
year
Salary and
fees1
£000
Taxable
benefits2
£000
Pension
benefits
£000
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
837
837
750
250
207
–
744
744
1,448
1,448
368
714
275
221
4,629
4,214
55
58
29
7
6
–
29
29
68
66
7
16
–
4
194
180
310
310
225
75
52
–
275
275
–
–
111
214
–
1
973
875
Total
fixed
£000
1,202
1,205
1,004
332
265
–
1,048
1,048
1,516
1,514
486
944
275
226
5,796
5,269
Annual
bonus3
£000
Total annual
remuneration
£000
LTIP4
£000
Total
remuneration
£000
640
756
446
126
124
–
304
211
–
–
–
384
–
102
1,514
1,579
1,842
1,961
1,450
458
389
–
1,352
1,259
1,516
1,514
486
1,328
275
328
7,310
6,848
–
–
–
–
–
–
976
1,312
856
–
–
1,277
–
–
1,832
2,589
1,842
1,961
1,450
458
389
–
2,328
2,571
2,372
1,514
486
2,605
275
328
9,142
9,437
Notes
1.
2.
3.
4.
Salary shown for The Viscount Rothermere and Paul Zwillenberg includes fees of £43,333 as Directors of Euromoney which increased from £30,000 p.a. to £50,000 p.a. during the year. The salary
shown for Suresh Kavan is for the period from 1 October 2016 to 11 January 2017 whilst he was a Board member.
Taxable benefits comprise car or equivalent allowances which are £34,000 p.a. for The Viscount Rothermere; £18,000 p.a. for Paul Zwillenberg; £16,000 p.a. (pro-rated) for Tim Collier; £14,000
p.a.(pro-rated) for Stephen Daintith; and £16,000 p.a. for Kevin Beatty. Paul Dacre has a company car with a taxable value of £33,775 p.a. plus a car allowance of £10,000 p.a.. Paul Dacre also
received a fuel benefit of £15,433 p.a.. The Viscount Rothermere, Paul Zwillenberg, Kevin Beatty and Paul Dacre also received benefits in respect of home-to-work travel which was not included in
the 2016 report. Amounts,including tax paid by the company, are £18,042; £7,371; £9,898 and £6,745 respectively for 2017. The taxable benefits amounts for 2016 have also been adjusted to reflect
the amount relating to this benefit during the year. Each of the Executive Directors received medical benefits with a cost to the Company of approximately £3,000 p.a.
The bonuses shown include amounts that will be deferred into shares but do not have any further performance conditions attached. A deferral applies for Kevin Beatty in FY 2017. Details of the
calculation of the bonus and deferral are shown on page 62.
Awards made in December 2012 under the 2012 Long-Term Executive Incentive Plan vest in full in December 2017. The award made to Paul Dacre under the 2012 Long-Term Executive Incentive
Plan in December 2014 also vests in full in December 2017. The value of the award shown is calculated using the average share price for the fourth quarter FY 2017 which was £6.30.
Under the rules of the 2012 Long-Term Executive Incentive Plan, participants are entitled to the value of the dividends that they would have received between the award date and the exercise
date, the amount shown includes accrued payments of £155,744 for Kevin Beatty and £100,648 for Paul Dacre in 2017. In 2016, the award for Kevin Beatty realised at a share price of £7.68 with
a cash dividend equivalent payment of £141,509 and for Stephen Daintith, the award realised at a share price of £7.76 with a cash dividend equivalent payment of £140,905.
5. Payments to Suresh Kavan have been converted at a the average rate for the year of £1: $1.27
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Governance
Governance
Remuneration Report
Variable pay awards vesting in FY 2017
Table 2.1: Annual bonus weightings, opportunity and outcomes (Audited)
The details of the weightings and opportunity relating to the annual bonus paid to Executive Directors for the year ended 30 September 2017
and included in the single figure table 1 on page 61 are shown below. The performance measures for FY 2017 are a combination of revenue,
profit and cashflow. The resulting bonus amounts are shown in the table below:
The Viscount Rothermere
P A Zwillenberg
T G Collier1
K J Beatty2
S Daintith3
S Kavan4
Weightings
Opportunity as a % of salary
Revenue
Profit
Cashflow
Threshold
Target
Maximum
Actual
outcome %
of salary
Actual
outcome
£000
40%
40%
40%
40%
0%
0%
40%
40%
40%
40%
0%
0%
20%
20%
20%
20%
0%
0%
0%
0%
0%
0%
0%
0%
90%
70%
70%
30%
0%
0%
180%
140%
140%
60%
0%
0%
76.5%
59.5%
59.5%
40.9%
0%
0%
640
446
124
304
0
0
Note
1. Tim Collier’s bonus was pro-rated.
2. Kevin Beatty’s bonus is weighted 70% against targets specific to dmg media and 30% against DMGT targets.
3. Stephen Daintith did not participate in an annual bonus in FY 2017.
4.
A pro-rated on-target bonus was paid to Suresh Kavan on leaving which is detailed in the payments to past directors section on page 66.
Table 2.2: DMGT annual bonus targets (Audited)
Strategic measures were removed as measures in FY 2017. The financial measures are split into three categories and weighted appropriately
to the role of the Executive Director (shown in table 2.1). Kevin Beatty’s bonus is weighted 70% against targets specific to dmg media and 30%
against DMGT targets.
The Board considers the performance targets for the measures to be commercially sensitive as it would disclose information of value
to competitors, and they will not be disclosed. The final targets were adjusted to reflect the final US$/£ average exchange rate over the year.
The purpose of the Executive Bonus Plan is to focus the participants on delivering profitable growth. The Committee considered it was fair and
appropriate to use its discretion to apply adjustments to account for strategic restructuring during the year and was satisfied that an outcome
of 85% of target was reflective of overall DMGT performance.
The following tables illustrate performance against DMGT and dmg media bonus targets and the corresponding outcome:
DMGT bonus targets (All)
Revenue
Profit
Cashflow
Below
0%
Threshold
0%
Target
100%
Maximum
200%
Outcome as
a % of target
35.7%
107.2%
138.3%
dmg media bonus targets (Kevin Beatty only)
Below
0%
Threshold
0%
Target
100%
Maximum
200%
Outcome as
a % of target
Revenue
Profit
Cashflow
99.6%
118.8%
114.6%
Table 3: Deferred annual bonus (Audited)
The Committee agreed the following deferral requirements would apply to the annual bonus with no further performance conditions except
for continued employment:
The Viscount Rothermere
P A Zwillenberg
T G Collier
S W Daintith1
K J Beatty
S Kavan
Deferral requirement
Nil
Amounts above target bonus deferred for two years
Amounts above target bonus deferred for two years
Amounts above target bonus deferred for two years
Amounts above target bonus deferred for two years
Amounts above target bonus deferred for two years
Type of deferral
None
Nil cost options
Nil cost options
Nil cost options
Nil cost options
Nil cost options
Note
1. Stephen Daintith did not participate in the annual bonus scheme in FY 2017.
Amount
deferred
FY 2017
£000
Amount
deferred
as a % of
FY 2017 bonus
0
0
0
0
81
0
0%
0%
0%
0%
27%
0%
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Daily Mail and General Trust plc Annual Report 2017
Awards made under share schemes
Table 4: 2010 LTIP award, core award and matching shares (Audited)
The table below sets out the details of the 2010 LTIP core awards and matching shares which became realisable for Kevin Beatty with no
further restrictions in December 2016 in accordance with the 2001 Plan rules. The value shown was calculated using the average share price
for the fourth quarter of FY 2013.
Award date
Award type
Relating to
Vests
Realisable in
Status of awards
Realised during year
K J Beatty
Dec 2010
Core
2010 LTIP
Sep 2013
Dec 2016
Vested
Dec 2010
Matching
2010 LTIP
Dec 2013
Dec 2016
Vested
Dec 2010
Matching
2010 LTIP
Dec 2014
Dec 2016
Vested
Dec 2010
Matching
2010 LTIP
Dec 2015
Dec 2016
Vested
Dec 2010
Matching
2010 LTIP
Dec 2016
Dec 2016
Vested
39,017
19,508
19,508
19,508
19,508
117,049
892
Total
realised during
the year
Value at 30
September 2013
(£7.62 per share)
£000
Shaded columns show options that have vested.
Notes
1.
The Committee determined that the award for Kevin Beatty vested at 53.9% in September 2013. The award was realised on 21 February 2017 at a share price of £7.24. Details of performance
measures for the vesting award can be seen in the 2013 Annual Report.
Table 5: Nil cost options (Audited)
The table below sets out the details of all outstanding awards of nil cost options as part of the deferred bonus plan. 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 is made. No further performance conditions are imposed except for continued employment. The Award price
used each year is the closing price on the last working day of November.
The Awards made in December 2014 vested in December 2016 and were exercised during the year by Kevin Beatty and Stephen Daintith.
There were no deferrals in relation to the FY 2016 bonus outcomes. A deferral applies to Kevin Beatty’s bonus for FY 2017.
Award date
Award type
Relating to
Exercisable from
Expiry date
Status of awards
Award price
Outstanding awards
The Viscount Rothermere
K J Beatty
Total outstanding
Exercised during year
The Viscount Rothermere
S W Daintith
K J Beatty
Total exercised
Forfeited during year
S W Daintith1
Total forfeited
Dec 2010
Nil cost
options
2010
Bonus
Dec 2013
Dec 2017
Vested
£5.39
Dec 2011
Nil cost
options
2011
Bonus
Dec 2014
Dec 2018
Vested
£3.98
Dec 2012
Nil cost
options
2012
Bonus
Dec 2014
Dec 2019
Vested
£5.27
Dec 2012
Nil cost
options
2012
Bonus
Dec 2015
Dec 2019
Vested
£5.27
Dec 2013
Nil cost
options
2013
Bonus
Dec 2015
Dec 2020
Vested
£9.16
Dec 2014
Dec 2015
Nil cost
options
2014
Bonus
Dec 2016
Dec 2021
Nil cost
options
2015
Bonus
Dec 2017
Dec 2022
Vested Outstanding
£7.06
£8.29
–
–
–
110,464
–
110,464
–
–
–
129,635
–
129,635
–
–
–
–
–
–
–
12,804
12,804
Total
outstanding
during the year
240,099
12,804
252,903
Total
exercised
during the year
187,581
–
34,970
222,551
–
–
17,069
17,069
–
–
19,473
19,473
–
–
–
–
–
–
–
–
–
–
–
–
–
23,257
16,795
40,052
–
2,416
25,585
28,001
–
–
–
–
187,581
25,673
113,892
327,146
Total
forfeited during
the year
–
–
–
–
15,666
–
15,666
15,666
Shaded columns show options that have vested.
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Notes
1.
2. No awards under the deferred bonus plan have been made to Paul Zwillenberg or Tim Collier.
3.
Under the rules of the deferred bonus plan, participants are entitled to the value of the dividends that they would have received between the award date and the exercise date. Kevin Beatty
received cash dividend equivalent payments of £106,696 in relation to the exercise of awards made under this plan in FY 2017. Dividend equivalent payments to Stephen Daintith and Martin
Morgan for awards exercised during the year are detailed on page 66. Lord Rothermere exercised his award in September and dividends were received in October 2017.
63
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Remuneration Report
Table 6.1: Awards made under the 2012 Long-Term Executive Incentive Plan (LTIP) (Audited)
Outstanding awards subject to performance conditions under the 2012 Long-Term Executive Incentive Plan are summarised in the table
below. Awards are share based. The Board considers the performance targets for the measures to be commercially sensitive as it would
disclose information of value to competitors and they will not be disclosed.
The 2012 LTIP award made to Kevin Beatty vested in full during the year based on an evaluation by the Committee of the performance against
the measures detailed below. 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 is made. No further performance conditions are imposed.
No further awards are being made under this plan.
Award name
Award date
Performance period ends
Standard award as a % of salary
Award price
Price at vesting
2011 LTIP
award
Feb 2012
Oct 2016
100%
£4.37
£6.95
2012 LTIP
award
Dec 20122
Oct 2017
100%
£5.27
£6.30
2013 LTIP
award
Dec 2013
Oct 2018
100%
£9.16
N/A
2014 LTIP
award
Dec 2014
Oct 2019
100%
£8.29
N/A
2015 LTIP
award
Dec 2015
Oct 2020
100%
£7.06
N/A
Performance measures
• Grow B2B business.
Status of award
Maximum percentage of face value
that could vest
Outstanding awards
K J Beatty
Total outstanding
Realised during year
S W Daintith
K J Beatty
Total exercised/realised during year
Forfeited during year
S W Daintith1
Total forfeited during year
Shaded columns show options that have vested.
• Continue to invest in strong brands of digital consumer media, particularly MailOnline.
• Grow sustainable earnings and dividends.
•
Increase the Company’s exposure to growth economies and to international opportunities.
Vested
100%
Vested
100%
Outstanding
100%
Outstanding
100%
Outstanding
100%
–
–
130,246
130,246
77,226
77,226
87,937
87,937
105,382
105,382
146,453
152,494
298,947
–
–
–
–
–
–
–
–
–
–
–
–
–
–
125,085
125,085
74,167
74,167
84,439
84,439
101,133
101,133
Total
outstanding
during the year
400,791
400,791
Total
realised
during the year
146,453
152,494
298,947
Total
forfeited during
the year
384,824
384,824
Notes
1.
2.
The awards for Stephen Daintith in 2013, 2014 and 2015 of 74,167, 84,439 and 101,133 shares respectively were forfeited under the rules of the plan.
The value of the 2012 LTIP award at vesting was £820,550 for Kevin Beatty calculated using the average share price for the fourth quarter FY 2017 which was £6.30. This award was made under the
rules of the 2012 LTIP.
3. Under the rules of the 2012 LTI plan, participants are entitled to the value of the dividends that they would have received between the award date and the exercise date. Stephen Daintith
and Kevin Beatty received cash dividend equivalent payments in relation to the realisation of awards made under this plan in FY 2017.
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Table 6.2: Awards made under the 2017 Executive Incentive Plan (EIP) (Audited)
Outstanding awards subject to performance conditions under the 2017 Long-Term Executive Incentive Plan are summarised in the table
below. Awards are made annually in line with policy and will be equity settled. 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 is
made. No further performance conditions are imposed. The 2016 LTIP awards made to Lord Rothermere, Paul Zwillenberg and Kevin Beatty,
made in December 2017, were based on a 1 December 2017 market closing price of £7.88.
Award name
Award date
Performance period ends
Performance period
Award price
Status of award
Basis on which award
is made
Percentage receivable if
maximum performance
achieved
Performance Measures
The Viscount Rothermere
P A Zwillenberg
T G Collier
K J Beatty
2016 LTIP
Jun 2017
Oct 2019
Starts Oct 2016
£7.88/£7.172
Outstanding
Percentage share growth in eligible profit over the performance period, converted at the end of the performance
period to shares based on share price immediately before start of performance period.
If the performance level is on target or above, The Viscount Rothermere and Paul Zwillenberg would receive 1.25%
and Tim Collier and Kevin Beatty 0.75% of eligible profits. No amounts are payable if there are no eligible profits.
There is a cap on the maximum amounts payable which is five times base salary at the time the award was made with
the number of shares being calculated by reference to the award price above.
Outcomes are linked to stretching targets for cumulative growth in profits over a minimum growth threshold, subject
to fair adjustment for any change in capital usage.
Maximum shares
that could vest
531,091
Shares vesting
at target1
95,178
475,888
280,851
318,655
95,178
62,762
57,107
Notes
1. The value of the 2016 at target LTIP awards at issue was £750,000 for Lord Rothermere and Paul Zwillenberg and £450,000 for Tim Collier and Kevin Beatty.
2.
The awards made to Lord Rothermere, Paul Zwillenberg and Kevin Beatty were based on the average share price for the first three days following the release of FY 2016 financial results of £7.88,
the award made to Tim Collier was based on the closing share price on his employment start date of £7.17.
Table 6.3: Long-Term Executive Incentive Plan (LTIP) Awards to Paul Dacre (Audited)
The outstanding awards subject to performance conditions made to Paul Dacre are summarised in the table below. Awards are share-based
and made annually in line with policy. The Board considers the performance targets for the measures to be commercially sensitive as it would
disclose information of value to competitors, and they will not be disclosed. The 2016 LTIP award made to Paul Dacre, made in December 2017,
was based on a 1 December 2017 market closing price of £7.88.
The 2014 LTIP award made to Paul Dacre under the 2012 Long-Term Executive Incentive Plan vested in full during the year based on an
evaluation by the Committee of the performance against the measures detailed below. 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
is made. No further performance conditions are imposed.
Award name
Award date
Performance period ends
Standard award as a % of salary
Award price
Price at vesting
Performance measures
Status of award
Maximum percentage of face value that could vest
Outstanding awards
P M Dacre
Total outstanding
Shaded columns show options that have vested.
2014 LTIP
award
Dec 20142
Oct 2017
70%
£8.29
£6.30
2015 LTIP
award
Dec 2015
Oct 2018
70%
£7.06
N/A
2016 LTIP
award
Feb 20171
Oct 2019
70%
£7.88
N/A
• Continue to invest in strong brands of digital consumer media,
particularly MailOnline.
• Ensure the financial sustainability of the Mail Titles.
Vested
100%
Outstanding
100%
Outstanding
100%
119,819
119,819
143,569
143,569
128,629
128,629
Total
outstanding
during the year
392,017
392,017
Notes
1. The value of the 2016 LTIP awards at issue was £1,013,600 for Paul Dacre. This award was made under the rules of the 2017 EIP.
2.
The value of the 2014 LTIP awards at vesting was £754,860 for Paul Dacre calculated using the average share price for the fourth quarter FY 2017 which was £6.30.
This award was made under the rules of the 2012 LTIP.
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Payments to past Directors (Audited)
Martin Morgan
1. Vested share options and awards
The Committee were satisfied that the performance conditions had been met for the award made to Martin Morgan in December 2012
of 176,243 shares under the DMGT 2012 Long-Term Incentive Plan (the ‘2012 LTIP’).
In accordance with the rules of the plan, 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 is made. Martin Morgan received £175,185
in FY 2017 in relation to exercises of vested awards made under the Nil Cost Option Plan that were exercised during the year.
Payments for loss of office (Audited)
Suresh Kavan
Suresh Kavan left the Company during the year. In his role as CEO for dmg information and dmg events, he helped to diversify the Group
into the B2B sector. He stood down from the Board of DMGT on 12 January 2017 but remained an employee of DMGT until 31 March 2017
during which time he continued to receive salary and benefits. His notice period was 12 months and ran from 12 January 2017.
Payments for loss of office reflect the transition arrangements that were put in place. After he stood down from the Board on 12 January 2017,
he received US$274,917, in respect of salary for the period until 31 March 2017, US$31,250 in respect of holiday accrued but not taken and
US$6,593 in respect of benefits for the period until 31 March 2017 when he was still employed by the Company.
1. Termination payments
In accordance with his service contract Suresh Kavan received a payment in lieu of notice of US$806,533 in respect of his salary for the period
from the termination date of 31 March 2017 to 30 September 2017. He also continues to be covered under the existing medical and dental plans
for a period of 18 months. In addition he received a lump-sum payment of $4,145 to cover the cost of life insurance for a 12-month period.
2. FY 2017 bonus
Under the terms of his service contract, Suresh Kavan received a bonus for the 2017 financial year, scaled back on a time-apportioned basis
by reference to the termination date of 31 March 2017. The amount of bonus was agreed at US$350,000 and was paid immediately after the
termination date.
3. Unvested Long-Term Executive Incentive Plan Awards
The Committee determined that outstanding share awards under the DMGT 2012 Long-Term Executive Incentive Plan (the ‘2012 LTIP’) over
a total of 320,942 shares would vest on their normal respective vesting dates between December 2017 and December 2018. The proportion
of the Award which vests would be determined by the Committee based on achievement of the Performance Conditions and the proportion
of the Performance Period which has been completed at the Termination Date. The award vesting in December 2017 has not exceeded the
threshold of its performance conditions and will not vest.
4. Vested Share Options and Awards
In accordance with the rules of the relevant plan any outstanding share options and awards which have vested and are already exercisable
remained exercisable following the Termination Date for a period of six months. An amount of £163,492 was received in relation to options
exercised during the year.
Stephen Daintith
1. Termination payments
No termination or bonus payments were made to Stephen Daintith in FY 2017. He received £5,492, in respect holiday accrued but not taken.
2. Vested share options and awards
In accordance with the rules of the relevant plan any outstanding share options and awards which had vested were exercised before the
termination date. Options and Long-Term Incentive Awards which were unvested at the Termination Date were forfeited. In accordance with
the rules of the plan, 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 is made. Stephen Daintith received £15,395 during FY 2017 in relation
to exercises of vested awards made under the Nil Cost Option Plan.
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Table 7: Executive Directors’ accrued entitlements under DMGT Senior Executives’ Pension Fund (Audited)
The defined benefit scheme is closed for future accrual. It is the Company’s policy that annual bonuses and benefits in kind are not pensionable.
The Company does not make any contributions on behalf of Paul Dacre. Suresh Kavan participated in a US 401(k) retirement plan.
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
P A Zwillenberg
T G Collier
K J Beatty1
P M Dacre
Defined benefit: Accrued annual
benefit as at 30 September 2017
based on normal retirement age
£000
78
N/A
N/A
N/A
708
Defined
benefit: normal
retirement age
3 December 2027
–
–
–
14 November 2008
Defined benefit:
Additional value
of benefits if early
retirement taken
Weighting of
pension benefit
value as shown
in single figure table
–
–
–
–
N/A
Cash allowance: 100%
Cash allowance: 97%;
Defined contribution: 3%
Cash allowance: 97%;
Defined contribution: 3%
Cash allowance: 100%
N/A
Note
1. Kevin Beatty transferred his deferred pension to a personal retirement plan in September 2016.
Table 8: Single figure of remuneration paid to Non-Executive Directors
The table below sets out the single total figure of remuneration for each Non-Executive Director in FY 2017 and FY 2016. The Non-Executive
Director fee increased to £50,000 p.a. effective 1 July 2017. Additional fees are paid for membership and chairmanship of sub-committees and
subsidiary boards.
Travel allowances are paid of £4,000 for each Board meeting which requires a single (one way) flight of between five and ten hours and £10,000
for each Board meeting which requires a single (one way) flight of more than 10 hours.
F P Balsemão
N W Berry
J G Hemingway
Lady Keswick
A H Lane
F Morin
D H Nelson
K A H Parry
H Roizen1
D Trempont1
Total
2016
Travel
allowance
£000
4
–
4
4
–
–
4
4
48
48
116
Fees
£000
37
98
76
35
78
–
195
123
99
87
828
Total
£000
41
98
80
39
78
–
199
127
147
135
944
2017
Travel
allowance
£000
–
–
–
–
–
20
–
–
30
50
100
Fees
£000
13
24
27
39
78
20
138
92
161
56
648
Note
1.
Fees shown above include the fees and travel allowances for Board and Committee participation.
Total
£000
13
24
27
39
78
40
138
92
191
106
748
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Governance
Remuneration Report
Table 9: Percentage change in remuneration of the CEO
The table below sets out the remuneration delivered to the Chief Executive compared to total employee remuneration.
Chief Executive remuneration
(excluding LTIP)1
£000
Total employee
remuneration
£000
Average
remuneration2
£000
2017
2016
2017
2016
2017
2016
Notes
1.
2. The change in average employee remuneration is partly due to movement in the US$ exchange rate.
Total employee remuneration includes salaries, wages and incentives, but excludes pension benefits.
Chart 1: Comparison of overall performance and remuneration of the CEO
% increase/decrease
£1,450
£1,586
-9%
£523,300
-10%
£578,800
£63
+10%
£57
DMGT
Media UK
FTSE 100 (all rebased to 100)
£
400
350
300
250
200
150
100
50
0
FY 2008
FY 2009
FY 2010
FY 2011
FY 2012
FY 2013
FY 2014
FY 2015
FY 2016
FY 2017
The chart compares the
Company’s TSR with
the Media Sector Total
Return Index and the
FTSE 100 Index over the
past nine 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 the
most appropriate
comparison to
demonstrate the
Company’s relative
performance.
Source: Thomson Reuters
Datastream
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Table 10: Chief Executive remuneration outcomes FY 2009 to FY 2017
Financial year ending
Total remuneration (single figure)
Annual variable pay (% maximum)
LTIP achieved (% maximum)
FY 20091
£000
FY 20102
£000
FY 20113
£000
2,312
63%
0%
1,722
2,961
98%
40%
25% 25%/100%
FY 20124
£000
2,809
63%
52.5%
FY 20135
£000
FY 20146
£000
FY 20157
£000
FY 20168
£000
2,949
88%
37.5%
2,021
54%
40%
1,944
58%
–
3,342
63%
100%
FY 20179
£000
1,450
42.5%
–
Notes
1.
In FY 2009 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 from FY 2010
to FY 2017 when it increased to 140%.
In FY 2010 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.
Two awards vested in FY 2011. 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.
In FY 2012 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.
In FY 2013 the price on 30 September 2013 (£7.62) is used for the 2010 award which vested 37.5% out of a maximum 100% in September 2013 and the 2006 award lapsed.
In FY 2014 the price on realisation on 23 June 2014 (£8.31) is used for the 2007 award which vested at 120% out of a maximum 300% in December 2013.
No LTIP vested in FY 2015.
In FY 2016, awards made to Martin Morgan in February 2012 under the 2012 Long-Term Incentive Plan vested in 2016. The average share price for the last of quarter of FY 2016 is used (£6.95).
The single figure shown combines the period of his service to 31 May 2016 and his successor Paul Zwillenberg from 1 June 2016.
2.
3.
4.
5.
6.
7.
8.
9. The figure for FY 2017 is for Paul Zwillenberg.
Chart 2: Relative importance of spend on pay in the financial year
The chart sets out the
relative importance of
spend on pay in the
financial year.
£ millions
£ millions
800
700
600
500
400
300
200
100
0
-14%
705
604
-13%
260
226
-5%
6
76
78
FY 2017
FY 2016
Total employment pay
FY 2017
FY 2016
Buy-back
Dividend
Buy-back
Dividend
FY 2017
FY 2016
Adjusted profit before tax
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Governance
Governance
Remuneration Report
Table 11: Statement of Directors’ shareholding and share interests (Audited)
The number of shares of the Company in which Executive and Non-Executive Directors or their families had a beneficial or non-beneficial
interest during FY 2017 and details of Long-Term Incentive Plan (LTI) interests as at 30 September 2017 are set out in the table below. The
shareholding guideline for Executive Directors is 5x (500%) for Lord Rothermere and Paul Zwillenberg and 1.5x (150%) of salary for all others.
The value as a multiple of salary has been calculated using the 30 September 2017 share price of £6.49.
Beneficial
As at 30 September 2017
The Viscount Rothermere
P A Zwillenberg
T G Collier
K J Beatty
P M Dacre
S W Daintith
S Kavan
K A H Parry
Non-beneficial
The Viscount Rothermere
D H Nelson
Ordinary
19,890,3645
–
–
–
–
–
–
–
A Ordinary
Non-Voting
61,644,654
24,642
14,250
299,166
–
–
271,624
5,711
LTI interests
not subject to
performance
conditions1
Vested
LTI interests
not subject to
performance
conditions2
Unvested
Value (as
a multiple
of salary)2
Guideline
met
LTI interests
subject to
performance
conditions3
Total
outstanding
interests4
240,099
–
–
–
–
–
–
–
–
109,569
324,965
12,804
–
–
–
–
634
1.2
4.2
2.7
–
–
1.7
n/a
Yes
No
Yes
No
No
n/a
n/a
n/a
531,091
475,888
280,851
719,446
392,017
n/a
n/a
n/a
771,190
585,457
605,816
732,250
392,017
n/a
n/a
n/a
19,890,364
62,260,087
240,099
447,338
–
–
4,880,000
212,611
5,092,611
Total Directors’ interests
Less duplications
19,890,364
–
67,352,698
(212,611)
19,890,364
67,140,087
Notes
1.
2.
The LTI interests not subject to performance conditions (vested) are the nil cost options awarded as the bonus deferral; full details can be found in table 5 on page 63.
The LTI interests not subject to performance conditions (unvested) are the nil cost options awarded as the bonus deferral; full details can be found in table 5 on page 63. The LTI interests not
subject to performance conditions (unvested) also includes the recruitment awards made to Paul Zwillenberg and Tim Collier of 109,569 and 324,965 shares respectively. These were awarded
under the 2017 LTI plan as Conditional Share Awards.
The value as a multiple of salary includes LTI interests not subject to performance conditions.
The LTI interests subject to performance conditions are detailed in table 6 on pages 64 and 65 and include those shares which have vested but are not realisable as well as those that are
outstanding. Details of these awards are in tables 6.1, 6.2 and 6.3 on pages 64 and 65.
Total outstanding interests are the sum of the LTI interests (both subject to and not subject to performance conditions) and options subject to performance conditions.
The Company has been notified that under Sections 793 and 824 of the Companies Act 2006, Lord Rothermere was deemed to have been interested as a shareholder in 19,890,364 Ordinary
Shares at 30 September 2017.
None of the other directors held any shares in the Company, either beneficial or non-beneficial.
2.
3.
4.
5.
6.
At 30 September 2017, Lord Rothermere was beneficially interested in 756,700 Ordinary Shares of Rothermere Continuation Limited, the Company’s ultimate holding company.
The figures in the table above include shares purchased by participants of the DMGT 2010 Share Incentive Plan. For Paul Zwillenberg and Kevin Beatty, purchase of shares were made between
30 September 2017 and 30 November 2017. These purchases increased the beneficial holdings of these Executive Directors by 45 shares for Paul Zwillenberg and 37 shares for Kevin Beatty.
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Table 12: Directors’ interests in Euromoney (Audited)
Executive Directors’ beneficial shareholdings in Euromoney were as follows:
The Viscount Rothermere
Total Directors’ interests
30 Sep 2017
0
0
Disclosable transactions by the Group under IAS 24, Related Party Disclosures, are set out in Note 44 on pages 179 and 180. 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.
Table 13: Voting at general meeting
The table below shows the advisory vote on the 2017 Remuneration Report and the binding vote on future policy at the February 2017 AGM.
The Committee consults with major shareholders prior to any major changes.
Remuneration Report
Votes for
19,890,364
%
100
Votes against
–
%
0%
Abstentions
–
%
0%
Non-Executive Directors’ appointment
The Non-Executive Directors are appointed for specified terms under the Company’s Articles of Association and are subject to re-election by
ordinary shareholders at the AGM following appointment. The Non-Executive Directors are subject to annual re-election at the AGM. Each
appointment can be terminated before the end of the one-year period with no notice or fees due. The dates of each Non-Executive Director’s
original appointment and latest re-appointment are set out below:
Non-Executive Director
Appointment commencement date
Latest reappointment date
Lady Keswick
A H Lane
F Morin
D H Nelson
K A H Parry
H Roizen
D Trempont
23 September 2013
6 February 2013
8 February 2017
1 July 2009
22 May 2014
26 September 2012
9 February 2011
8 February 2017
8 February 2017
n/a
8 February 2017
8 February 2017
8 February 2017
8 February 2017
Directors’ service contracts/letters of appointment are available for inspection at DMGT’s registered office.
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Governance
Remuneration Report
Directors’ Remuneration Policy
This part of the report sets out the Company’s policy for the remuneration of Directors (Policy). The Policy was last approved by shareholders
at the AGM on 8 February 2017. The Committee has reviewed the Policy and is satisfied that it remains appropriate. The original policy can be
found on the Company website.
The Policy, as set out on pages 72 to 75, is intended to apply for a three-year period from the date of the 2017 AGM. The Committee will
continue to review the Policy on an annual basis.
Policy overview
The Committee aims to structure remuneration packages which motivate and retain Directors, drive the right behaviours and pay at market.
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. Our approach is to align base salary with reference to market levels of pay and to
ensure that a significant part of executive pay is variable and linked to the success of the Company.
The new Long-Term Executive Incentive Plan was approved at the AGM in February 2017. The plan directly links payouts to business
performance by awarding management a share of profit growth, over and above a minimum threshold, after deducting a charge for additional
capital. The new Long-Term Executive Incentive Plan provides for exceptional pay in cases of truly exceptional performance, while not
over-rewarding average performance.
The Committee regularly reviews remuneration structures to ensure they are aligned to business strategy. The Policy incorporates a degree
of flexibility to allow the Committee to manage remuneration over the next three years.
Policy applied to Executive Directors
Operation
Opportunity
Performance metrics
Not performance related.
Not performance related.
Annual increases are normally
in line with average UK and
US-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’.
The maximum salary level
for each Executive Director is
set at a level the Committee
considers appropriate taking
account of the individual’s
skills, experience and
performance, and the
external environment.
Current salary levels are set
out on page 61.
For executives who
participated in the defined
benefit scheme the pension
allowance has been set at
a higher level (up to 37%).
30% or less for new recruits.
Purpose and link to strategy
Base salary
To recruit, retain and
reflect responsibilities of
the Executive Directors
and be competitive with
peer companies.
The basic salary for each Executive
Director is 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.
Given the location of the Company’s
principal operations, a particular focus
is put on US and UK market conditions.
Benchmarking based on media and
other relevant companies is performed
periodically and the Committee’s
intention is to apply judgement
in evaluating market data.
Pension
To recruit, retain and
reflect responsibilities of
the Executive Directors
and be competitive with
peer companies.
Executive Directors may participate in a
defined contribution pension scheme or
may receive a cash allowance in lieu of
pension contribution. Any contributions
paid to the Company pension scheme
will be offset from the cash allowance.
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Purpose and link to strategy
Operation
Opportunity
Performance metrics
Benefits
To recruit, retain and
reflect responsibilities of
the Executive Directors
and be competitive with
peer companies.
Annual bonus
To focus Executive
Directors on the delivery
of financial performance
and strategic objectives
which create value for
the Company and
shareholders.
To reward individual
contribution to the
success of the Company.
Benefits typically include cash allowances
and non-cash benefits such as medical
and car benefits. Where appropriate, the
Committee may also offer allowances
for relocation or other benefits where
it concludes that it is in the interest of
the Company to do so, having regard
to the particular circumstances and
to market practice.
Allowances do not form part of
pensionable earnings.
Executives are also eligible to participate
in the DMGT SharePurchase+ plan, an
all-employee Share Incentive Plan, on
the same basis as other employees.
The annual bonus is based on in-year
performance against financial objectives:
The performance targets and measures
are determined annually by the
Committee and may change from year
to year.
• Up to 100% of total bonus opportunity
is based on financial performance at
corporate and business unit level; and
• A proportion of total bonus opportunity
may be based on performance against
strategic non-financial objectives.
The bonus weightings applied for each
of the Executive Directors may vary from
time to time and may include financial
measures and targets relating to the
Group as well as their specific business.
The weightings that apply to the bonus
may vary if the Committee determines
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 2.2 and 2.3
on page 62.
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.
Bonuses are subject to malus prior to
payment, and to clawback for two years
after payment, in circumstances including
a material misstatement in results, an
error in calculating/assessing satisfaction
of any condition, the participant causing
material reputational damage to any
member of the Group or serious
misconduct by the participant causing
loss to any member of the Group.
Benefits may vary by role and
individual circumstances.
Benefits are not performance
related.
The cost of benefits changes
periodically and may be
determined by outside
providers.
The DMGT SharePurchase+ plan
is not performance related.
Maximum opportunity is
as follows:
• For The Viscount
Rothermere, 180% of salary;
• For Paul Zwillenberg,
140% of salary;
• For Tim Collier 140% of
salary; and
• For Kevin Beatty, 60%
of salary
Paul Dacre does not
participate in the annual
bonus plan.
The maximum level for new
recruits will not exceed 200%
of salary.
The achievement of stretch
targets results in maximum
payout. On-target bonus is
normally 50% of maximum.
There is normally no payout
for performance below
threshold. Payout between
threshold and target is on
a straight-line basis.
The performance range sets
a balance between upside
opportunity and downside
risk and is normally based
on targets in accordance
with the annual budget.
Bonuses are subject to the
achievement of financial
measures set prior to grant by
the Committee. The measures for
determining the annual bonus in
FY 2017 were profit; revenue and
cash flow. These measures may
be varied from year to year.
Targets are against budget.
The performance required for
a maximum payout is set at a
stretch performance level that is
above the level of the Company’s
forecasts. If performance is in line
with forecast, then typically an
on-target level of the annual
bonus will be paid.
The weightings that were applied
to the FY 2017 bonus targets are
as reported in table 2.1 on page 62.
The Board considers the specific
targets and relative weightings for
each measure to be commercially
sensitive and they will not be
disclosed. Performance against
targets in the year that bonus
awards are made will be disclosed
along with the relevant weightings
in the Annual Report following
the payment.
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Purpose and link to strategy
Operation
Opportunity
Performance metrics
Bonus deferral
To provide an element
of retention and align
Executive Directors’
interests with those
of shareholders.
Long-term incentives
To focus Executive
Directors on the delivery
of strategic priorities
creating sustainable
long-term value for
the Company and
shareholders, thereby
aligning Executive
Directors’ interests
with the interests of
the Company and
shareholders.
Specifically, the key
objective is to incentivise
Executive Directors to
grow Company profits in
an appropriate manner.
Please see the notes
to this table for further
details about the link
between the Executive
Incentive Plan (EIP)
and the Group’s
strategic goals.
Awards are delivered through a grant of nil
cost options.
A proportion of some Executive Directors’
annual bonus is deferred for a period of
two years.
Annual bonus deferral requirements are
reported in detail in table 3 on page 62.
Following the exercise of an option, 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.
Clawback of vested and unvested awards
is possible in the event of material
misstatement of information or
misconduct.
The Company adopted a new Long-Term
Executive Incentive plan, following
shareholder approval at the AGM,
known as the DMGT Long-Term Executive
Incentive Plan 2017. This plan will be
used to grant long-term incentive awards
to Executive Directors.
There will be an annual grant of awards,
which may be in the form of conditional
share awards, options, restricted shares
or cash at the discretion of the Committee.
Awards may vest at the end of a
performance period of a minimum
duration of three years, subject to
achievement of performance targets
and continued service.
In exceptional cases (e.g. recruitment)
awards may be made without
performance conditions if the Committee
considers this appropriate.
Awards will typically be paid out in
shares, calculated by reference to the
share price as at the date of grant, in
order to ensure further alignment of
the Executive Directors’ interests with
those of shareholders. The Committee
may determine that awards will
alternatively be settled in cash if
it considers this appropriate.
Awards may be granted on terms that
the value of any dividends paid to
shareholders on their shares in the period
between the date of grant and the date
of vesting (or exercise) is paid to the
individual following the end of that period.
74
All Executive Directors (with
the exception of The Viscount
Rothermere) are required to
defer any above-target annual
bonus into nil cost options for
two years.
No further performance conditions
are imposed except for continued
employment. This is reflective of
market practice.
In order to incentivise
and allow the potential
to appropriately reward
Executive Directors for truly
exceptional performance,
the maximum annual value
of shares at grant and which
can vest is capped at 500%
for each Executive Director.
Performance below threshold
results in zero payout.
Paul Dacre will remain on his
existing arrangements with
a maximum award of 70%
of salary and an on-target
full vesting.
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 the Committee considers
that such measures are aligned
with the Company’s strategic
goals and with the interests of
its shareholders.
Performance conditions may also
be set on an individual basis to
reflect a particular individual’s role.
The performance measures are
designed to reflect progress
towards the achievement of key
strategic goals which may vary
from year to year.
For awards granted to Executive
Directors under the EIP, current
performance measures link awards
to cumulative growth in Group
profits over a minimum growth
threshold, subject to fair
adjustment for any change in
capital usage. The minimum
growth threshold feature is
designed to ensure that the awards
are appropriately challenging
and Executive Directors are not
rewarded unless they achieve a
minimum performance threshold.
The capital charge/credit feature is
designed to ensure that Executive
Directors use capital efficiently
over the long term, by requiring
higher profits to be made if more
capital is used.
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Purpose and link to strategy
Operation
Opportunity
Performance metrics
Long-term incentives
continued
Shareholding
requirement
To align the interests
of Executive Directors
and shareholders.
The Committee has discretion, within
the rules of the EIP and the 2012 LTIP,
to make adjustments taking into
account exceptional factors that distort
underlying business performance, such
as (for example) material M&A activity.
EIP awards are subject to malus prior to
vesting, and to clawback for three years
after vesting, in circumstances including a
material misstatement in results, an error
in calculating/assessing satisfaction of
any condition, the participant causing
material reputational damage to any
member of the Group or serious
misconduct by the participant causing
loss to any member of the Group.
Awards under the 2012 LTIP are subject
to clawback (whether vested or unvested)
in the event of material misstatement
of information or misconduct.
All awards are subject to the rules of
the plan (as may be amended from time
to time in accordance with the rules)
and any other terms and conditions
applicable to the awards as the
Committee may determine.
Executive Directors are encouraged
to build up a substantial shareholding
in the Company.
Shares which have been awarded subject
to satisfaction of performance measures
are not included in the calculation of
the value of the Executive Director’s
shareholding.
Hedging by Executive Directors of any
shares held in the Company is prohibited.
For Paul Dacre performance is
currently measured against the
delivery of strategic objectives
for the Mail titles.
The Committee sets the applicable
performance targets prior to or at
the time of the grant of awards
in accordance with its strategic
planning. The Board considers the
specific performance targets for
each measure and the relative
performance measure weightings
to be commercially sensitive.
Performance against targets
and the relative weightings will
be disclosed at the time the
awards vest.
Not performance related.
The Committee recommends
a minimum shareholding of
500% of base salary for the
CEO and the Chairman, and
150% for all other Executive
Directors.
There is no time frame over
which the guidelines should
be met.
Notes to the policy table
Differences in remuneration policy for all employees:
• Base salary:
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 69.
• Pension:
− Employees in the UK are auto-enrolled into the Company defined contribution pension scheme. There are a number of schemes in operation, all of which offer levels of employer matching
contributions.
− Employees in the US are typically offered 401(k) retirement plans.
• Benefits:
Allowances and benefits for employees reflect the local labour market in which they are based.
• Annual bonus:
− Many 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.
• Bonus deferral:
Most annual incentive plans around the Group do not include a requirement for deferral.
• Long-term incentives:
− The EIP 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.
• Shareholding requirement:
There is no shareholding requirement for employees below Executive Director level.
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Governance
Governance
Remuneration Report
Pay scenario charts
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:
£000s
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
£000s
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
6,876
61%
5,803
65%
2,687
28%
28%
13%
31%
22%
5%
12%
1,184
29%
71%
2,278
33%
23%
11%
33%
18%
4%
13%
1,003
25%
75%
3,839
65%
18%
3.6%
13%
1,439
31%
24%
9.7%
34.7%
639
22%
78%
Minimum
On-target Maximum
Minimum
On-target Maximum
Minimum
On-target Maximum
The Viscount Rothermere
P A Zwillenberg
T G Collier
Fixed (Salary)
Fixed (Benefits)
Annual variable (Bonus incl deferral)
Multiple reporting variable (LTIP)
5,204
71%
1,711
26%
13%
17%
43%
1,038
28%
72%
9%
6%
14%
2,521
40%
2.3%
57.4%
2,521
40%
2.3%
57.4%
1,507
4%
96%
2,656
33%
33%
0.6%
33%
895
2%
98%
3,536
37%
37%
0.4%
25%
Minimum
On-target Maximum
Minimum
On-target Maximum
Minimum
On-target Maximum
K J Beatty
P M Dacre
S Kavan
Fixed (Salary)
Fixed (Benefits)
Annual variable (Bonus incl. deferral)
Multiple reporting variable (LTIP)
Notes
Potential reward opportunities illustrated above are based on this Policy, applied to the latest-known base salaries and incentive opportunities.
Minimum in the graphs above is fixed remuneration only (salary, pension and benefits). On-target assumes that the standard long-term incentive award and target bonus
have been awarded as stated in the policy table.
Maximum assumes that the standard long-term incentive award and the maximum bonus have been awarded as stated in the policy table.
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.
Amounts for Suresh Kavan are converted from US dollars at $1.27 = £1.
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Implementation of Remuneration Policy in FY 2018
Executive Directors’ basic fees
and salary
Executive Directors’ pension
Benefits in kind
Executive Directors’
annual bonus
There are no intentions to increase base salaries for Executive Directors during FY 2018.
No change to prior year. Pension allowances are reported in the single figure table 1 on page 61 with further
details in the Pension entitlements and cash allowances section in table 7 on page 67.
No change to policy since prior year. Allowances and benefits for FY 2017 are reported in detail in the notes
to the single figure table 1 on page 61.
Annual bonus payments for FY 2017 are reported in detail in tables 2.1 and 2.2.
Awards in FY 2018 will be measured against two metrics: Group level revenue and cash operating income.
In addition to Group level performance, Kevin Beatty will be measured on the performance of his division
against the same metrics (weighting 30% Group, 70% Divisional).
The Board considers the specific targets and relative weightings for each measure to be commercially
sensitive and they will not be disclosed.
Bonus deferral
There were no nil cost option awards made under the plan for FY 2017. The cash amounts that apply for the
FY 2017 bonus are shown in table 2.1 on page 62.
Executive Directors’
long-term incentive
Executive Directors’
service contracts
External appointments
Bonus deferral requirements for FY 2018 remain as stated in table 3 on page 62.
A new Long-Term Executive Incentive Plan (approved by shareholders at the AGM), was introduced in
FY 2017 which directly links pay outs to business performance by awarding management a share of profit
growth, over and above a minimum threshold, after deducting a charge for additional capital. The new
Executive Incentive Plan provides for exceptional pay in cases of truly exceptional performance, while not
over-rewarding average performance.
Further details of the applicable performance criteria are included in the policy table.
Individual award amounts will be determined at the time of the award and will be subject to the
performance conditions outlined in the new policy. In addition, subject to approval, the Chairman will
be eligible to participate in the Executive Incentive Plan.
Paul Dacre will remain on his existing long-term incentive arrangements.
Stephen Daintith and Suresh Kavan did not receive a long-term incentive award in FY 2017.
Outstanding awards will continue to vest according to the Rules of the Plans they were awarded under.
Details of outstanding awards and their status are shown in detail in tables 6.1, 6.2 and 6.3 on page 62.
The Board considers the specific targets and relative weightings for each measure to be commercially
sensitive and they will not be disclosed.
No changes to service contracts are planned for FY 2018.
The Company allows its Executive Directors to take a very limited number of outside directorships.
Individuals retain the payments from such services since these appointments are not expected to impinge
on their principal employment. The Viscount Rothermere and Paul Zwillenberg are on the Board of
Euromoney plc and Kevin Beatty is on the Board of ZPG.
Executive Directors’
shareholding guidelines
For FY 2017 the guideline increased to 500% of base salary for Lord Rothermere and Paul Zwillenberg.
All others will remain unchanged at 150% of base salary.
Executive Directors’ pension
Pension allowances for any new Executive Director will be limited to a maximum of 30%.
Directors’ interests are reported in detail in table 11 on page 70.
Recruitment Award
Pension allowances are reported in the single figure table 1 on page 61 with further details in the Pension
entitlements and cash allowances section in table 7 on page 67.
In accordance with the terms of his recruitment Tim Collier received a one-off award of 324,965 DMGT
shares as at 2 May 2017, which will vest subject to his continuing employment and following release of
audited year-end results, 188,284 in December 2018 and 136,681 in December 2019.
Exit Payments
Stephen Daintith and Suresh Kavan stood down during FY 2017, their exit payments are details on pages 66.
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Governance
Governance
Remuneration Report
Executive Directors’ service contracts
The Executive Directors are employed under service contracts, the principal terms of which are summarised below.
Executive Director Position
Effective date
of contract
Employer
Notice period
(by either party)
Compensation on termination by employer
without notice or cause
The Viscount
Rothermere
Chairman
17 October 1994
Daily Mail and General
Trust plc
3 months
P A Zwillenberg CEO
1 June 2016
Daily Mail and General
Holdings Limited
12 months
T G Collier
Group Chief
Financial Officer
2 May 2017
Daily Mail and General
Trust plc
12 months
K J Beatty
Executive Director
19 May 2002
Associated Newspapers
Limited
12 months
P M Dacre
Executive Director
13 July 1998
Associated Newspapers
Limited
12 months
Basic salary, benefits, pension
entitlement and, as appropriate,
a prorated bonus payment for the
notice period.
Basic salary, pension allowance, car
allowance and cash equivalent value
of other benefits for the notice
period. Compensation is subject to
mitigation if the Director obtains an
alternative remunerated position.
Basic salary, pension allowance, car
allowance and cash equivalent value
of other benefits for the notice
period. Compensation is subject to
mitigation if the Director obtains an
alternative remunerated position.
Basic salary, benefits, pension
entitlement and, as appropriate,
a prorated bonus payment for the
notice period.
Basic salary, benefits, pension
entitlement and, as appropriate,
a prorated bonus payment for the
notice period.
External appointments
The Company allows its Executive Directors to take a very limited number of outside directorships. Individuals retain the payments received
from such services since these appointments are not expected to impinge on their principal employment. Lord Rothermere and Paul Zwillenberg
are Directors of Euromoney plc and receive fees of £50,000 per annum which are included in the single figure table shown on page 61.
Kevin Beatty is a Director of ZPG plc for which there is no fee.
Legacy arrangements
For the avoidance of doubt, in approving this Policy, authority is given to the Company to honour any commitments entered into with current
or former Directors prior to the approval and implementation of this Policy (such as payment of pensions or the vesting/exercise of past share
awards), provided that such commitments complied with any Remuneration Policy in effect at the time they were given.
Approach to recruitment remuneration
When appointing or recruiting a new Executive Director from outside the Company, the Committee will normally aim to set remuneration at
a level which is consistent with the remuneration policy in place for other Executive Directors and in particular the Executive Director who
previously filled the relevant role, although it is recognised that, in order to secure the best candidate for a role, the Company may need to pay
a new Executive Director more than it pays its existing Executive Directors. Pre-existing contractual agreements for internal candidates may
be maintained on promotion to an Executive Director role.
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The Committee may make use of any of the below components in the remuneration package.
Component
Approach
Base salary
Base salary will be determined by reference to the individual’s role and responsibilities,
location of employment, and the salary paid to the previous incumbent.
Maximum annual grant level
Not applicable.
Pension
Benefits
Annual bonus
Long-term
incentives
Replacement
awards
The appointed Executive Director will be eligible to participate in the Group’s defined
contribution pension plan and/or receive a cash pension allowance.
30% of base salary.
New appointments may be eligible to receive benefits in line with the Policy for current
Executive Directors as well as benefits relating to relocation such as (but not limited to)
cost of living, housing and tax equalisation support.
Not applicable.
The appointed Executive Director will be eligible to participate in the Company’s annual
bonus plan in accordance with the Policy for current Executive Directors and may be
required to defer some or all of any bonus granted in accordance with the Policy.
200% of base salary.
The appointed Executive Director will be eligible to participate in the Executive
Incentive Plan in accordance with the Policy for current Executive Directors, save that
the Committee may provide that an initial award under EIP (within the salary multiple
limits on page 74) is subject to a requirement of continued service over a specified
period, rather than the usual performance conditions.
If in joining DMGT a new Executive Director would forfeit any existing award under
variable remuneration arrangements with a previous employer, the Committee will
consider on a case-by-case basis what replacement awards (if any) are reasonably
necessary to facilitate that individual’s recruitment, 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 due to be forfeited.
500% of base salary at the time
the award is made.
Not applicable.
Exit payment policy
The Company normally sets the notice period of Executive Directors as 12 months, but may decide to vary this in circumstances it deems
appropriate.
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 awards under the
Company’s Long-Term Incentive Plans 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.
In the event that a participant’s employment is terminated, treatment of outstanding awards under the Group’s incentive plans will be
determined based on the relevant plan rules, which are summarised below:
Incentive plan
Treatment of awards
DMGT SharePurchase+
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 National Insurance Contributions are paid.
Annual bonus
Deferred bonus plan
Long-term incentive plans
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 rules (including those identified at the discretion of the Committee),
outstanding awards will vest, either on the normal vesting date or on such earlier date as the Committee
may determine, to the extent determined by the Committee taking into account the performance conditions,
the proportion of the performance period which has elapsed at the date of termination and any other factors
it considers appropriate. 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.
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Governance
Governance
Remuneration Report
The Committee may make payments it considers reasonable in settlement of potential legal claims, e.g. unfair dismissal or where agreed
under a settlement agreement. This may include an entitlement to compensation in respect of their statutory rights under employment
protection legislation and such reasonable reimbursement of fees for legal and/or tax advice in connection with such agreements and/or costs
of outplacement services.
Where an Executive Director is a ‘Good Leaver’, the Committee reserves the discretion to approve any or all of the following additional benefits:
• continuation of private health insurance or life assurance for a period of time following termination;
• use of business premises for a period after termination;
• retention of IT equipment by the Executive Director; and/or
• use of a company car and/or driver for a period after termination.
Consideration of pay and employment conditions elsewhere across the Group
The Committee considers pay and employment conditions elsewhere in the Group when making decisions on remuneration matters affecting
the 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 internal and external advisers when making decisions on
remuneration matters affecting the Directors. It does not specifically consult with employees over the effectiveness and appropriateness
of the Remuneration Policy and framework.
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. An example of this was the adoption of the 2012 LTIP, when major shareholders were consulted.
Implementation of Policy for Non-Executive Directors FY 2018
Non-Executive Directors’ fees
An increase in base directors fees to £50,000 p.a. was agreed by the Chairman and the CEO, these were
effective 1 July 2017. The actual fees paid to Non-Executive Directors in FY 2017 are shown in table 8 on
page 67.
There is currently no intention to increase fees or allowances in FY 2018 but fees may be reviewed within
the policy terms.
This report covers the reporting period to 30 September 2017 and has been prepared in accordance with the relevant requirements of the
Large and Medium-Sized Companies and Groups (Accounts and Reports) Regulations 2008 (the Regulations) and of the Listing Rules of the
Financial Conduct Authority.
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Governance
Statutory Information
Directors’ Report
Other statutory information
Required information can be found in
the Strategic Report on pages 2 to 39, which
is incorporated into this Report by reference.
Information on employees, community and
social issues is given in the Our People and
Our Communities section on pages 32 to 35.
In accordance with the UK Financial Conduct
Authority’s Listing Rules (LR 9.8.4C), the
information to be included in the Annual
Report, where applicable, under LR 9.8.4,
is set out in the Governance section, with
the exception of details of transactions with
controlling shareholders (if any) which are
set out in Note 44.
Forward-looking statements
This Annual Report 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 will not be updated during the year.
Nothing in this Annual Report should be
construed as a profit forecast.
Tangible fixed assets and investments
The Company’s subsidiaries are set out on
page 182. Changes to the Group’s tangible
fixed assets and investments during the year
are set out in Notes 23 to 26. There was no
material difference in value between the
book value and the market value of the
Group’s land and buildings.
Directors
The names of the Directors, plus brief
biographical details are given on pages 40
and 41. Directors held office throughout
the year with the exception of Tim Collier,
Nicholas Berry, Stephen Daintith, John
Hemingway, Suresh Kavan and François
Morin. In accordance with the UK Corporate
Governance Code, all existing Directors will
stand for re-election at the Annual General
Meeting (AGM) on 7 February 2018.
Tim Collier will stand for election at the AGM.
François Morin was elected at the AGM on
the 8 February 2017.
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 2 to 29.
Results and dividends
The profit for the year of the Group
amounted to £342 million. After excluding
the £3 million loss element attributable to
non-controlling interests, the Group profit
for the year attributable to owners of the
Company amounted to £345 million. The
Board recommends a final dividend of
15.8 pence per share. If approved at the
2018 AGM, the final dividend will be paid on
9 February 2018 to shareholders registered
in the books of the Company at the close of
business on 8 December 2017. Together with
the interim dividend of 6.9 pence per share
paid on 30 June 2017, this makes a total
dividend for the year of 22.7 pence per share
(2016 22.0 pence).
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 57.
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 (Employee Trust)
and, as such, are deemed to be interested
in any A Shares held by the Employee Trust.
At 30 September 2017, the Employee Trust’s
shareholding totalled 3,710,764 A Shares.
Between 30 September 2017 and
30 November 2017 the Employee Trust
transferred 37,692 A Shares to satisfy the
exercise of awards under employee
share plans.
Significant shareholdings
As at 30 November 2017, 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 Shares other
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than those shown in the Remuneration
Report on page 57.
Share capital
The Company has two classes of shares.
Its total share capital is comprised of 5%
Ordinary Shares and 95% A Shares. Full
details of the Company’s share capital are
given in Note 38.
Holders of Ordinary and A Shares are entitled
to receive the Company’s Annual Report.
Holders of Ordinary Shares are entitled to
attend and speak at General Meetings and
to appoint proxies and exercise voting rights.
During the year, the Company transferred 5.3
million shares out of Treasury, representing
1.6% of called-up A Shares, in order to satisfy
incentive schemes. The Company held
8,523,183 shares in Treasury and the DMGT
Employee Benefit Trust with a nominal value
of £1.1 million at 30 September 2017. The
maximum number of shares held in Treasury
and by the DMGT Employee Benefit Trust
during the year was 9,887,935, which had a
nominal value of £1.2 million. The Company
also purchased 3.9 million shares for holding
in Treasury having a nominal value of
£0.5 million in order to match obligations
under various incentive plans. The
consideration paid for these shares was
£28.6 million. Shares purchased during
the year represented 1.2% of the called-up
A Share capital as at 30 September 2017.
On 30 November 2017 the Company held
4,812,419 Treasury Shares.
Details of allotments of share capital which
arose solely from the exercise of options are
given at Note 39.
Authority to purchase shares
At the Company’s AGM on 8 February 2017,
the Company was authorised to make
market purchases of up to 34,201,672.
A Shares representing approximately 10%
of the total number of A Shares in issue.
During the period from 9 December 2016 to
30 September 2017, the Company purchased
nil shares into Treasury, at a total cost of £nil
(see Note 39).
External Auditor and disclosure of
information to the External Auditor
So far as the Directors are aware, there is
no relevant audit information of which the
Company’s External 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 External Auditor is aware
of that information.
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Governance
Governance
Statutory Information
The Company’s External Auditor PwC
has indicated its willingness to serve and,
in accordance with Section 489 of the
Companies Act 2006, a resolution proposing
the reappointment of PwC will be put to
the AGM on 7 February 2018.
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’ defence 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 Financial Review
on pages 25 to 31 and in the Notes to the
accounts on page 99.
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.
Viability Statement
A Viability Statement in respect of the
Company can be found on page 29.
Directors’ responsibilities
The Directors are responsible for preparing
the Annual Report, the Directors’
Remuneration Report 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
82
have prepared the Group Financial
Statements in accordance with International
Financial Reporting Standards (IFRS) 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 IFRS 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’ Remuneration Report
comply with the Companies Act 2006 and,
as regards the Group financial statements,
Article 4 of the International Accounting
Standards 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
IFRS 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 2 to 39 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.
Relationship agreements
Daily Mail and General Trust plc entered
into a Relationship Deed with Euromoney
Institutional Investor PLC on 8 December
2016, and ZPG Plc on 5 June 2014, in each
case in accordance with the Listing Rules
and have acted in accordance with the
terms of the Deeds since execution.
Political donations
No political donations were made during
the period.
Principal risks
The principal risks and how they are being
managed or mitigated are shown on pages
36 to 39. The Directors have reviewed the
Group’s principal risks including those that
would threaten the Group’s business model,
future performance, solvency or liquidity.
Events after the balance sheet date
of 30 November 2017
There were no post balance sheet events.
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 41 as regards ink and printing, where
arrangements are in place until FY 2021
and FY 2023 respectively in order to obtain
competitive prices and to secure supplies.
Arrangements are made biannually with
a range of newsprint 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 or any particular
customer. Distribution arrangements are in
place to ensure the delivery of newspapers
to retail outlets.
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Daily Mail and General Trust plc Annual Report 2017
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Employees
Details in respect of employees are in the
Our People and Our Communities section
on pages 32 to 35.
Human rights
The Company believes that our exposure to
the associated risks in the context of human
rights frameworks is minimal. DMGT does
not have a specific human rights policy but
has a number of policies that cover areas
such as health and safety, modern slavery,
bribery and corruption, and a questionnaire
for evaluating whether new suppliers are
ethical and lawful.
Group policies
The Company upholds equal opportunities
and does not discriminate. DMGT’s
businesses are required to follow DMGT
policies that safeguard the welfare of our
employees. These include policies on equal
opportunities, anti-bribery, entertainment
and gifts, information security, share dealing,
and health and safety, in addition to our Code
of Conduct. We have an active and rolling
training programme to reinforce compliance
and to ensure there is a high level of
awareness of the Company’s standards.
Gender breakdown of our employees
The table below sets out the gender
breakdown of our employees. Our aim is to
promote equality and diversity in accordance
with our Group Code of Conduct.
Male
Female
At 30 September 2017
Board Directors
11 85%
2 15%
Operating business
CEOs and other
direct reports to
the Group CEO*
All employees*
8 57%
6 43%
4,307 58% 3,075 42%
* Excluding Executive Board Directors.
Carbon footprint
The Company’s most significant
environmental impact comes from the
printing plants in our consumer media
businesses. The majority of the Company’s
newspapers are now produced at plants
designed to be as efficient as possible; this
reduces energy usage, vehicle movements
and the volume of waste generated. There is
also a considerable effort to maximise the
volume of waste recycled including
newsprint waste, water and heat recovery.
The Company is, and has for many years
been, committed to comprehensive and
transparent reporting of its environmental
performance. The Company has collected CO2
emissions data from each of its businesses.
This data is collated and independently
reviewed by environmental consultancy ICF
International, which calculates the Group’s
emissions following the Greenhouse Gas
Protocol. The Group’s carbon footprint can
be seen in the table below.
Articles of Association
The appointment and replacement of
Directors is 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.
The Directors have authority to issue and
allot A 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 Shares. This authority is also
renewed annually at the AGM.
Conflicts of interest
The Articles of Association permit the Board
to authorise a conflict of interest in respect
of 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
Carbon footprint
The table below shows the evolution of our carbon footprint since 2015:
their responsibility to inform the Board of
any potential conflicts as soon as possible.
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 vesting 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
2017, nor was entered into during the year
for any Director and/or connected person
except as detailed in Note 44 (2016 none).
Annual General Meeting
The Annual General Meeting will be held
at 9.00 am on Wednesday 7 February 2018
at Northcliffe House, 2 Derry Street, London
W8 5TT. The resolutions to be put to the
meeting are set out on pages 84 and 85.
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.
A resolution to reappoint the Group’s
External Auditor PricewaterhouseCoopers
LLP, will be proposed at the 2018 AGM.
By order of the Board
F Sallas
Company Secretary
Year
2015
2016
2017
Tonnes of CO2e
tCO2e/£million revenue
Scope 1:
Combustion of fuel and
operation of facilities
Scope 2:
Electricity, heat, steam and
cooling purchased for own use
Scope 3:
Business travel and
outsourced delivery
Total scope 1, 2 & 3
emissions/revenue
1,900
1,800
1,500
19,400
18,000
18,000
16,100
15,000
16,100
20.3
18.2
18.1
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Governance
Governance
Annual General Meeting 2018: Resolutions
The Company’s Annual General Meeting
(AGM) will be held at 9.00 am on Wednesday
7 February 2018. 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 2017.
Remuneration Report
2. To receive and approve the Directors’
Remuneration Report (other than
the part containing the Directors’
Remuneration Policy) as set out on pages
57 to 80 of the Annual Report for the
financial year ended 30 September 2017,
in accordance with Section 439 of the
Companies Act 2006.
The Daily Mail and General Trust plc
2006 Executive Share Option Scheme
That the rules of the readopted and
3.
revised The Daily Mail and General Trust
plc 2006 Executive Share Option Scheme
(ESOP), be approved and the Directors be
authorised to do all such acts and things
necessary to operate the ESOP, including
making such modifications as the
Directors consider appropriate to take
account of the requirements of the UK
Listing Authority, legislative changes in
relation to tax advantaged options and
best practice.
Dividend
4.
To declare a final dividend on the
Ordinary and A Ordinary Non-Voting
Shares (A Shares).
(ii) the higher of the price of the last
independent trade and the highest
current independent bid as
stipulated by Regulatory Technical
Standards adopted by the
European Commission under
Article 5(6) of the Market Abuse
Regulation (EU) No 596/2014; and
(d) 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).
As Ordinary Business
21. 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 £2,138,542 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 2018 whichever
is the earlier; and
(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.
This authority revokes and replaces all
unexercised authorities previously granted
to the Directors to allot A Shares but
without prejudice to any allotment of
A Shares or grant of rights already made,
offered or agreed to be made pursuant
to such authority.
Directors
5.
To re-elect Viscount Rothermere
as a Director.
6. To re-elect Mr Zwillenberg as a Director.
7. To re-elect Mr Beatty as a Director.
8. To re-elect Mr Dacre as a Director.
9. To re-elect Lady Keswick as a Director.
10. To re-elect Mr Lane as a Director.
11. To re-elect Mr Morin as a Director.
12. To re-elect Mr Nelson as a Director.
13. To re-elect Mr Parry as a Director.
14. To re-elect Ms Roizen as a Director.
15. To re-elect Mr Trempont as a Director.
16. To elect Mr Collier as a Director.
17. To elect Mr Rangaswami as a Director.
Auditor
18. To re-appoint PricewaterhouseCoopers
LLP as the Company’s auditors until the
end of the next general meeting at which
accounts are laid before the Company.
19. To authorise the Directors to determine
the Company’s auditors’ remuneration.
As Special Business
20. 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 provided
that:
(a) the maximum aggregate number of
A Shares of 12.5 pence each in its
share capital which may be purchased
is 34,216,678;
(b) the minimum price which may be paid
for each A Share of 12.5 pence each in
its share capital is not less than 12.5
pence per share (excluding expenses);
(c) the maximum price (excluding
expenses) which may be paid for
each A Share of 12.5 pence each in its
share capital does not exceed the
higher of:
(i)
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
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84
Governance
Annual General Meeting 2018: Resolutions
Daily Mail and General Trust plc Annual Report 2017
Notice
24. That, a general meeting other than an
annual general meeting may be called
on not less than 14 clear days’ notice.
By order of the Board
F Sallas
Company Secretary
Daily Mail and General Trust plc
Northcliffe House, 2 Derry Street,
London W8 5TT
30 November 2017
As Special Business
22. If Resolution 21 is passed, 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, or sell A Shares
held by the Company as treasury shares
for cash, pursuant to the authority
conferred by Resolution 21, 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
2018, 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 A Shares or sale of treasury
shares for cash up to an aggregate
nominal amount of £2,138,542.
23. If Resolution 21 is passed, that the
Directors be generally empowered, in
addition to any authority granted under
Resolution 22, 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, or sell A Shares held by the
Company as treasury shares for cash,
pursuant to the authority conferred
by Resolution 21, 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 2018, 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:
(b) shall be limited to the allotment of
such A Shares or sale of treasury
shares for cash up to an aggregate
nominal amount of £2,138,542; and
(c) shall be used only for the purposes
of financing (or refinancing, if the
authority is to be used within six
months after the original transaction)
a transaction which the Board
determines to be an acquisition or
other capital investment of a kind
contemplated by the Statement of
Principles on Disapplying Pre-Emption
Rights most recently published by the
Pre-Emption Group prior to the date
of this notice.
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85
Governance
Governance
Independent auditors’ report to the members
of Daily Mail and General Trust plc
Report on the audit of the
financial statements
Opinion
In our opinion:
• Daily Mail and General Trust plc’s Group
financial statements and parent Company
financial statements (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 2017
and of the Group’s profit and cash flows
for the year then ended;
• the Group financial statements have been
properly prepared in accordance with
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
(United Kingdom Accounting Standards,
comprising FRS 101 “Reduced Disclosure
Framework”, and applicable law); 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.
We have audited the financial statements,
included within the Annual Report, which
comprise: Consolidated Statement of
Financial Position; Consolidated Income
Statement; Consolidated Statement of
Comprehensive Income; Consolidated
Statement of Changes in Equity;
Consolidated Cash Flow Statement; and
the notes to the financial statements,
which include a description of the
significant accounting policies.
Our opinion is consistent with our reporting
to the Audit Committee.
Basis for opinion
We conducted our audit in accordance with
International Standards on Auditing (UK)
(“ISAs (UK)”) and applicable law. Our
responsibilities under ISAs (UK) are further
described in the Auditors’ responsibilities for
the audit of the financial statements section
of our report. We believe that the audit
evidence we have obtained is sufficient
and appropriate to provide a basis for
our opinion.
Independence
We remained independent of the Group in
accordance with the ethical requirements
that are relevant to our audit of the financial
statements in the UK, which includes the
FRC’s Ethical Standard, as applicable to
listed public interest entities, and we have
fulfilled our other ethical responsibilities
in accordance with these requirements.
To the best of our knowledge and belief, we
declare that non-audit services prohibited by
the FRC’s Ethical Standard were not provided
to the Group or the parent Company.
Other than those disclosed in Note 5 to the
financial statements, we have provided no
non-audit services to the Group or the parent
Company in the period from 1 October 2016
to 30 September 2017.
Our audit approach
Overview
Materiality
• Overall Group materiality: £9 million
(2016: £10 million), based on 4% of
adjusted profit before tax.
• Overall parent Company materiality:
£9 million (2016: £10 million), being the
lower of 1% of total assets and Overall
Group materiality.
Audit scope
• Of the Group’s four trading reporting
divisions, we identified that dmg media
required a full scope audit due to its size.
In addition we obtain full scope audit
opinions for the RMS and dmg events
divisions.
• For dmg information we scoped our
audit at a business level, and identified
six businesses over which we performed
either a full scope audit or specified
audit procedures on certain balances
or transactions.
• Full scope audits were also performed
for the Group's two material associates
(ZPG Plc and Euromoney Institutional
Investor PLC), and in the case of
Euromoney, specified audit procedures
were performed on certain balances
and transactions for the three month
period prior to deconsolidation.
• We used local teams in the UK, US and
Dubai to perform those full scope audits
or specified procedures relating to the
relevant overseas businesses within RMS,
Euromoney Institutional Investor PLC,
dmg information and dmg events
divisions. The Group audit team held
regular meetings with these locations
to ensure sufficient involvement and
oversight of the work of these local teams
and to make sure that we had a full and
comprehensive understanding of the
results of their work – particularly insofar
as it related to the identified areas
of focus.
Key audit matters
• Impairment of intangible assets and
goodwill.
• Accounting for Euromoney disposal.
• Presentation of adjusted profit.
• Capitalisation of development costs.
• Accounting for deferred taxation and
uncertain tax positions.
The scope of our audit
As part of designing our audit, we
determined materiality and assessed
the risks of material misstatement in the
financial statements. In particular, we looked
at where the directors made subjective
judgements, for example in respect of
significant accounting estimates that
involved making assumptions and
considering future events that are inherently
uncertain. As in all of our audits we also
addressed the risk of management override
of internal controls, including evaluating
whether there was evidence of bias by the
directors that represented a risk of material
misstatement due to fraud.
Key audit matters
Key audit matters are those matters that,
in the auditors’ professional judgement,
were of most significance in the audit of the
financial statements of the current period
and include the most significant assessed
risks of material misstatement (whether or
not due to fraud) identified by the auditors,
including those which had the greatest effect
on: the overall audit strategy; the allocation
of resources in the audit; and directing the
efforts of the engagement team. These
matters, and any comments we make on
the results of our procedures thereon, were
addressed in the context of our audit of
the financial statements as a whole, and
in forming our opinion thereon, and we do
not provide a separate opinion on these
matters. This is not a complete list of all
risks identified by our audit.
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Area of focus
Impairment of intangible assets and goodwill
Refer to the Audit & Risk Committee report on pages 50 to 59
and to Notes 21 and 22 in the Consolidated Financial Statements.
The Group had £363.1m of goodwill and a further £213m of
intangible assets on the balance sheet at 30 September 2017.
Impairment charges of £117.0m to goodwill and £96.4m to
intangible assets have been taken in the year principally in
relation to Genscape, Sitecompli and Xceligent.
The carrying values of the remaining goodwill and intangibles
are contingent on future cash flows of the underlying CGUs and
there is a risk that if these cash flows do not meet the directors’
expectations that the assets will be impaired.
We focused our testing on those CGUs where the directors had
identified an impairment or where headroom was limited. The
directors’ impairment reviews also identified limited headroom
in relation to the RMS(one) intangible asset.
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How our audit addressed the area of focus
As part of our audit of the directors’ impairment reviews (for both
goodwill and intangible assets) we evaluated future cash flow
forecasts and the process by which they were drawn up. This
included comparing them to the latest Board approved budgets and
management’s three year plans, and testing the underlying calculations.
For the impairment assessment of goodwill and intangible assets
we tested all key assumptions, including:
• revenue and profit assumptions included within budgets and future
forecasts, by considering the historical accuracy of budgets against
actual results;
• key assumptions for long term growth rates in the forecasts by
comparing them to historical results, economic and industry
forecasts, and comparable companies;
• the discount rate by comparing the cost of capital for the Group with
comparable organisations, and assessed the specific risk premium
applied to the business in question; and
• the directors’ potential bias through performance of our own
sensitivity analysis on key assumptions particularly those driving
underlying cash flows.
We engaged our valuation specialists to assist us in evaluating the
appropriateness of key market related assumptions in the directors’
valuation models, including discount and long term growth rates.
In addition, with regards to Genscape we:
• reviewed the implied earnings multiple and compared these against
comparable companies; and
• considered the third party valuation obtained, which had
incorporated various valuation methodologies and compared
them to management’s on value in use calculations.
As part of our testing over the underlying calculations, we recalculated
the impairment charges recognised.
Having undertaken these procedures we consider management’s
impairment charge to be appropriate.
With regards to RMS(one) we met with relevant directors and sales
staff to obtain corroborative evidence of expected pricing packages
and client uptake and to confirmed our understanding of the product
development roadmap. We have corroborated pricing assumptions
with reference to signed third party contracts.
We considered the need for additional sensitivity disclosures for CGUs
with limited headroom as required by IAS 36 ‘Impairment of assets’
and we agree with the directors’ decision to provide these additional
disclosures for Landmark and Hobsons.
For those assets where the directors determined that no impairment
was required and that no additional sensitivity disclosures were
necessary, we found that these judgements were supported by
reasonable assumptions that would require significant downside
changes before any additional material impairment was necessary.
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Governance
Governance
Independent auditors’ report to the members
of Daily Mail and General Trust plc
Area of focus
How our audit addressed the area of focus
Accounting for Euromoney disposal
Refer to the Audit & Risk Committee report on pages 50 to 55
and to Note 19 in the Consolidated Financial Statements.
On 31 December 2017, the Group reduced its stake in Euromoney
from 67.9% to 49.9% from which point Euromoney was treated
as an associate.
The reduction in holding to 49.9% resulted in a gain on disposal
of £509.3m, comprising both a gain on the 18% holding sold of
£151.9m, and a gain on the fair value of the retained interest
of £357.4m.
The calculation of the profit on disposal is complex.
Presentation of adjusted profit
Refer to the Audit & Risk Committee report on pages 50 to 55
and to Note 13 in the Consolidated Financial Statements.
The Group presents adjusted profit before taxation to enable users
of the financial statements to gain a better understanding of the
underlying results.
In arriving at adjusted profit a number of items are considered
‘exceptional’ by management and are excluded from underling
earnings. Current year exceptional charges relate to the closure
of the Didcot printing plant, other restructuring initiatives, and
significant, non-recurring legal costs. The classification of items
as non-trading or exceptional is an area of judgement and the
appropriateness and consistency of the presentation of adjusted
measures of performance continues to attract scrutiny from the
financial reporting regulators.
We considered whether DMGT exercises de facto control over
Euromoney after the completion of the transaction given its 49.9%
shareholding and having considered factors such as DMGT’s ability
to control Euromoney through the Board or other means.
We determined that the Group does not have control over Euromoney
and treatment as an associate was appropriate.
With regards to the calculation of the profit on disposal, we:
• obtained and recalculated the directors’ calculation of the profit
on disposal;
• recalculated the allocation of gain between the holdings disposed
and gain on the fair value of retained interest;
• verified the fair value of consideration received to underlying
support including cash transactions and the Share Purchase
Agreements; and
• recalculated foreign exchange differences that were appropriately
recycled on disposal.
Based on the procedures performed, we concluded that the
accounting for the disposal was accurate.
We have considered the appropriateness of the adjustments made
to statutory profit before taxation to derive adjusted profit before tax.
We have understood the rationale for classifying items as exceptional
or non-trading and considered whether this is reasonable and
consistent, in that it includes items that both increase and decrease
the adjusted profit measure, are consistent year on year, and are in
accordance with the Group’s accounting policy.
We considered the appropriateness of those costs determined to be
exceptional, specifically we:
• verified severance costs and confirmed that these reflect permanent
reductions in head count and where not settled are supported by
appropriate evidence that these redundancies were sufficiently
communicated prior to year-end;
• considered the nature and scope of the consulting engagements and
confirmed the fees classified as exceptional were sufficiently linked
to the Group restructuring initiatives;
• tested the value of the assets written off and considered the
carrying value of the remaining site assets to third party valuations;
• tested the exceptional legal costs to supporting documentation.
We have also audited the reconciliation of adjusted profit to statutory
profit in Note 13, and agreed all material adjustments to underlying
accounting records and our audit work performed over other balances.
We have determined that the rationale for including or excluding items
from adjusted profit has been consistently applied across gains and
losses and year on year.
We consider the Group’s disclosures setting out the reasons for its use
of alternative performance measures and the reconciliations of these
measures to the statutory amounts to be in line with the FRC guidance
in this area.
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Area of focus
How our audit addressed the area of focus
Capitalisation of development costs
Refer to the Audit & Risk Committee report on pages 50 to 55
and to Note 22 in the Consolidated Financial Statements.
£57.7m of internal costs were capitalised during the year in relation
to projects undertaken by the Group, primarily relating to the
development of new computer software within dmg information.
IAS 38 ‘Intangible assets’ (“IAS 38”) requires that the Group
demonstrates that internal costs satisfy certain requirements to
qualify for capitalisation some of which require the application
of judgement.
£96.4m of capitalised development costs were impaired during
the year including an amount that had been capitalised during
the year.
Accounting for deferred taxation and uncertain tax positions
Refer to the Audit & Risk Committee report on pages 50 to 55
and to Note 37 in the Consolidated Financial Statements.
The Group’s recognition of deferred tax assets in respect of trading
and non-trading tax losses in the Group is an area of focus due to
the quantum of the losses and the requirement to make estimates
of future taxable profits in determining the valuation of deferred
tax assets.
In addition the Group has provisions for uncertain tax positions
relating to both historic and current tax arrangements.
The recognition and measurement of these items in the financial
statements is judgemental, and we focussed on the directors’
forecasts of future profits against which to utilise accumulated
losses, and the technical interpretation of taxation law in respect
to transactions giving rise to deferred tax assets and uncertain
tax positions.
In the period £108.9m of deferred tax assets were written off.
With regards to the costs capitalised during the year, we tested a
sample to determine whether they meet the criteria of IAS 38, agreeing
the costs selected to supporting evidence.
Where these capitalised costs related to time spent by staff developing
intangible assets, we also:
• agreed that these salary costs were directly attributable to the
creation of the asset;
• agreed the salary costs capitalised to payroll records; and
• verified time spent and the associated allocations to individual
projects to timesheets or other supporting evidence.
We considered the directors’ intention and ability to complete the
project by obtaining and assessing the business cases and current
budgets for material intangible asset additions.
We also assessed the consistency of the application of the Group’s
accounting policy across costs capitalised in the different operating
divisions. We found that the Group’s accounting policy for
capitalisation of intangible assets was in accordance with the
requirements of with IAS 38 and had been consistently applied.
Where costs capitalised were subsequently written off in the year we
verified that the IAS 38 criteria were met at the time of capitalisation
and that the impairment arose from subsequent strategic decisions
taken as part of the strategic review of the businesses at the end of
the year.
We involved our in-house tax specialists in our testing of the
appropriateness of the estimates and judgements taken in relation to
deferred taxation and in respect of uncertain tax positions recognised
in the financial statements.
In assessing the likelihood of the Group being able to generate
sufficient future taxable profits against which to offset accumulated
losses, we considered:
• key inputs to the calculation including revenue and profit
assumptions, in line with our work over the carrying value of
goodwill and intangible assets; and
• the directors’ ability to accurately forecast future profits.
In understanding and evaluating the directors’ technical interpretation
of tax law in respect of specific transactions that gave rise to deferred
tax assets and uncertain tax positions we considered:
• third party tax advice received by the Group;
• the status of recent and current tax authority audits and enquiries;
• the outturn of previous claims;
•
judgemental positions taken in tax returns and current year
estimates; and
• developments in the tax environment.
We consider the impairment of deferred tax balances in the current
year of £108.9m appropriate following our evaluation of the technical
interpretations outlined above. We consider the amounts written off,
the valuation of the remaining deferred tax assets and the provisions
for uncertain tax positions recognised to be supportable and the
level of provisioning to be acceptable in the context of the Group
financial statements.
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Governance
Governance
Independent auditors’ report to the members
of Daily Mail and General Trust plc
How we tailored the audit scope
We tailored the scope of our audit to ensure
that we performed enough work to be
able to give an opinion on the financial
statements as a whole, taking into account
the structure of the Group and the parent
Company, the accounting processes and
controls, and the industry in which
they operate.
The Group consists of a head office
and four trading reporting divisions:
RMS; dmg media; dmg information; and
dmg events. As each of these prepares a
sub-consolidation, we considered each
of these to be a separate component, with
the exception of dmg information. While
there are consolidated results for dmg
information, each business is run separately
and management primarily reviews the
performance of the individual businesses
rather than the division as a whole. As such
we scoped our audit of dmg information
at a business level.
Of the four divisions we identified one,
dmg media, which in our view required an
audit of their complete financial information
due to their size. In order to obtain sufficient
and appropriate audit evidence over the
Group as a whole we also instructed
component teams to complete full scope
audits of the RMS and dmg events divisions.
Within dmg information we identified two UK
businesses, Searchflow Ltd and Landmark
Information Group Ltd, for which we perform
accelerated statutory audits to align with
the Group audit timetable. In addition we
performed a full scope audit of two US
businesses, Hobsons Inc and Genscape Inc.
For two US businesses for which statutory
audits are not required, Trepp LLC and
Environmental Data Resources Inc, we
conducted specified procedures over higher
risk financial statement line items, including
revenue and capitalised development spend.
Full scope audits were also performed for
the Group's two material associates (ZPG Plc
and Euromoney Institutional Investor PLC).
For Euromoney Institutional Investor PLC, we
instructed our component team to complete
a full scope audit. For the audit of ZPG Plc
we rely on an audit opinion from Deloitte
LLP, who are Zoopla’s auditors, and
performed additional procedures to
calculate the Group’s share of these results.
Taken together, the components where we
performed audit work accounted for 87% of
Group revenue and 76% of absolute adjusted
profit before taxation.
We sent detailed instructions to all
component audit teams, which included
communication of the areas of focus above
and other required communications.
In addition, regular meetings were held
with the UK and overseas audit teams and
members of the Group audit team visited
the Searchflow Ltd, Landmark Information
Group Ltd, Hobson Inc, Genscape Inc,
dmg media and Euromoney component
audit teams.
This, together with additional procedures
performed at the Group level (including audit
procedures over impairment of goodwill and
intangibles, material head office entities, tax,
pensions and consolidation adjustments),
gave us the evidence we needed for our
opinion on the Group financial statements
as a whole.
Materiality
The scope of our audit was influenced
by our application of materiality. We
set certain quantitative thresholds for
materiality. These, together with qualitative
considerations, helped us to determine
the scope of our audit and the nature, timing
and extent of our audit procedures on the
individual financial statement line items
and disclosures and in evaluating the effect
of misstatements, both individually and
in aggregate on the financial statements
as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Overall materiality
How we determined it
Rationale for
benchmark applied
Group financial statements
£9 million (2016: £10 million).
4% of adjusted profit before tax.
The Group is profit oriented. Adjusted profit
before taxation is the adjusted performance
measure that is reported to investors and
shareholders and is the measure which the
directors consider best represents the underlying
performance of the Group. Due to the inherent
judgement in classification of certain items as
non-trading, and therefore non-underlying, we
have applied a 4% rule of thumb, which is lower
than the 5% suggested by ISAs (UK) for the audit
of profit-oriented entities.
Parent Company financial statements
£9 million (2016: £10 million).
Lower of 1% of total assets and Group materiality.
The parent Company is not profit oriented. Total
assets is used as the benchmark as the parent
Company’s principal activity is to hold investments,
creditors, and debtors balances. We have applied
a 1% rule of thumb suggested by ISAs (UK) as the
parent Company is a public interest entity. As the
parent Company also contributes to our Group
audit as a head office entity, we have used the
Group materiality, which is lower than 1% of the
parent Company’s total assets.
For each component in the scope of our Group audit, we allocated a materiality that is less than our overall Group materiality. The range
of materiality allocated across components was between £1.0 million and £6.8 million (2016: between £1.2 million and £7.0 million).
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £0.5 million (Group audit)
(2016: £0.5 million) and £0.5 million (parent Company audit) (2016: £0.5 million) as well as misstatements below those amounts that, in our
view, warranted reporting for qualitative reasons.
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Going concern
In accordance with ISAs (UK) we report as follows:
Reporting obligation
We are required to report if we have anything material to add or draw attention to in
respect of the directors’ statement in the financial statements about whether the directors
considered it appropriate to adopt the going concern basis of accounting in preparing the
financial statements and the directors’ identification of any material uncertainties to the
Group’s and the parent Company’s ability to continue as a going concern over a period
of at least twelve months from the date of approval of the financial statements.
Outcome
We have nothing material to add or to draw
attention to. However, because not all future
events or conditions can be predicted, this
statement is not a guarantee as to the Group’s
and parent Company’s ability to continue as
a going concern.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’ report thereon.
The directors are responsible for the other information. Our opinion on the financial statements does not cover the other information and,
accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether
the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to
be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to
conclude whether there is a material misstatement of the financial statements or a material misstatement of the other information. If, based
on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that
fact. We have nothing to report based on these responsibilities.
With respect to the Strategic Report and Directors’ Report, we also considered whether the disclosures required by the UK Companies Act
2006 have been included.
Based on the responsibilities described above and our work undertaken in the course of the audit, the Companies Act 2006, (CA06)
and ISAs (UK) require us also to report certain opinions and matters as described below (required by ISAs (UK) unless otherwise
stated). Strategic Report and Directors’ Report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic Report and Directors’ Report
for the year ended 30 September 2017 is consistent with the financial statements and has been prepared in accordance with applicable legal
requirements. (CA06)
In light of the knowledge and understanding of the Group and parent Company and their environment obtained in the course of the audit,
we did not identify any material misstatements in the Strategic Report and Directors’ Report. (CA06)
The directors’ assessment of the prospects of the Group and of the principal risks that would threaten the solvency or liquidity
of the Group
As a result of the directors’ voluntary reporting on how they have applied the UK Corporate Governance Code (the “Code”), we are required
to report to you if we have anything material to add or draw attention to regarding:
• The directors’ confirmation on page 36 of the Annual Report that they have carried out a robust assessment of the principal risks facing
the Group, including those that would threaten its business model, future performance, solvency or liquidity.
• The disclosures in the Annual Report that describe those risks and explain how they are being managed or mitigated.
• The directors’ explanation on page 29 of the Annual Report as to how they have assessed the prospects of the Group, over what period they
have done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable expectation
that the Group will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any
related disclosures drawing attention to any necessary qualifications or assumptions.
We have nothing to report in respect of this responsibility.
Other Code Provisions
As a result of the directors’ voluntary reporting on how they have applied the Code, we are required to report to you if, in our opinion:
• The statement given by the directors, on page 48, that they consider the Annual Report taken as a whole to be fair, balanced and
understandable, and provides the information necessary for the members to assess the Group’s and parent Company’s position and
performance, business model and strategy is materially inconsistent with our knowledge of the Group and parent Company obtained
in the course of performing our audit.
• The section of the Annual Report on pages 50 to 55 describing the work of the Audit & Risk Committee does not appropriately address
matters communicated by us to the Audit & Risk Committee.
We have nothing to report in respect of this responsibility.
Directors’ Remuneration
In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies
Act 2006. (CA06)
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Governance
Governance
Independent auditors’ report to the members
of Daily Mail and General Trust plc
Responsibilities for the financial
statements and the audit
Responsibilities of the directors
for the financial statements
As explained more fully in the directors’
responsibilities, the directors are
responsible for the preparation of the
financial statements in accordance with
the applicable framework and for being
satisfied that they give a true and fair view.
The directors are also responsible for
such internal control as they determine
is necessary to enable the preparation
of financial statements that are free from
material misstatement, whether due
to fraud or error.
In preparing the financial statements, the
directors are responsible for assessing the
Group’s and the parent Company’s ability
to continue as a going concern, disclosing
as applicable, matters related to going
concern and using the going concern basis
of accounting unless the directors either
intend to liquidate the Group or the parent
Company or to cease operations, or have
no realistic alternative but to do so.
Auditors’ responsibilities for the audit
of the financial statements
Our objectives are to obtain reasonable
assurance about whether the financial
statements as a whole are free from material
misstatement, whether due to fraud or error,
and to issue an auditors’ report that includes
our opinion. Reasonable assurance is a high
level of assurance, but is not a guarantee
that an audit conducted in accordance
with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements
can arise from fraud or error and are
considered material if, individually or
in the aggregate, they could reasonably
be expected to influence the economic
decisions of users taken on the basis of
these financial statements.
A further description of our responsibilities
for the audit of the financial statements
is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities.
This description forms part of our
auditors’ report.
Use of this report
This report, including the opinions,
has been prepared for and only for the
parent Company’s members as a body
in accordance with Chapter 3 of Part 16 of
the Companies Act 2006 and for no other
purpose. We do not, in giving these opinions,
accept or assume responsibility for any other
purpose or to any other person to whom this
report is shown or into whose hands it may
come save where expressly agreed by our
prior consent in writing.
Other required reporting
Companies Act 2006 exception reporting
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 by the parent Company, or
returns adequate for our audit have not
been received from branches not visited
by us; or
• certain disclosures of directors’
remuneration specified by law are not
made; or
• the parent Company financial
statements and the part of the Directors’
Remuneration Report to be audited are
not in agreement with the accounting
records and returns.
We have no exceptions to report arising
from this responsibility.
Appointment
Following the recommendation of the
audit committee, we were appointed by
the members on 4 February 2015 to audit
the financial statements for the year ended
30 September 2015 and subsequent financial
periods. The period of total uninterrupted
engagement is 3 years, covering the
years ended 30 September 2015 to
30 September 2017.
Other voluntary reporting
Going concern
The directors have requested that we review
the statement on page 82 in relation to going
concern as if the parent Company were a
premium listed company. We have nothing
to report having performed our review.
The directors’ assessment of the
prospects of the Group and of the
principal risks that would threaten
the solvency or liquidity of the Group
The directors have requested that we
perform a review of the directors’
statements on pages 36 to 39 that they
have carried out a robust assessment of
the principal risks facing the Group and in
relation to the longer-term viability of the
Group, as if the parent Company were a
premium listed company. Our review was
substantially less in scope than an audit
and only consisted of making inquiries
and considering the directors’ process
supporting their statements; checking
that the statements are in alignment with
the relevant provisions of the Code; and
considering whether the statements
are consistent with the knowledge and
understanding of the Group and parent
Company and their environment obtained
in the course of the audit. We have nothing
to report having performed this review.
Other Code provisions
The directors have prepared a corporate
governance statement and requested that
we review it as though the parent Company
were a premium listed company. We
have nothing to report in respect of the
requirement for the auditors of premium
listed companies to report when the
directors’ statement relating to the parent
Company’s compliance with the Code does
not properly disclose a departure from a
relevant provision of the Code specified,
under the Listing Rules, for review by
the auditors.
Neil Grimes (Senior Statutory Auditor)
for and on behalf of
PricewaterhouseCoopers LLP
Chartered Accountants and
Statutory Auditors
London
30 November 2017
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Financial Statements
Consolidated Income Statement
For the year ended 30 September 2017
CONTINUING OPERATIONS
Revenue
Year ended
30 September
2017
£m
Year ended
30 September
2016
£m
Note
3
1,564.3
1,514.2
Adjusted operating profit
Exceptional operating costs, impairment of internally generated and acquired computer software,
property, plant and equipment
Amortisation and impairment of acquired intangible assets arising on business combinations and
impairment of goodwill
3, (i)
179.0
3
(166.2)
3, 21, 22
(158.2)
Operating (loss)/profit before share of results of joint ventures and associates
Share of results of joint ventures and associates
Total operating (loss)/profit
Other gains and losses
(Loss)/profit before investment revenue, net finance costs and tax
Investment revenue
Finance expense
Finance income
Net finance costs
(Loss)/profit before tax
Tax
(Loss)/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
(Loss)/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
*Continuing operations
Discontinued operations
4
7
8
9
10
10
11
19
39
40
14
(145.4)
16.9
(128.5)
14.0
(114.5)
2.5
(43.8)
43.5
(0.3)
(112.3)
(64.7)
(177.0)
519.3
342.3
345.3
(3.0)
342.3
(49.3)p
(48.5)p
147.1p
144.8p
97.8p
96.3p
55.6p
54.7p
(6.4)
3.4
(3.0)
177.0
(41.8)
(49.6)
85.6
4.9
90.5
130.8
221.3
2.2
(49.1)
27.3
(21.8)
201.7
(19.9)
181.8
32.4
214.2
204.2
10.0
214.2
48.6p
47.4p
9.2p
9.0p
57.8p
56.4p
56.0p
54.7p
(0.3)
10.3
10.0
(i)
Adjusted operating profit is defined as total operating profit from continuing operations before share of results of joint ventures and
associates, exceptional operating costs, impairment of goodwill and intangible assets, amortisation of acquired intangible assets arising
on business combinations and impairment of property, plant and equipment.
93
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Financial Statements
Financial Statements
Consolidated Statement of Comprehensive Income
For the year ended 30 September 2017
Profit for the year
Items that will not be reclassified to Consolidated Income Statement
Actuarial gain/(loss) on defined benefit pension schemes
Losses on hedges of net investments in foreign operations of non-controlling interests
Foreign exchange differences on translation of foreign operations of non-controlling interests
Tax relating to items that will not be reclassified to Consolidated Income Statement
Total items that will not be reclassified to Consolidated Income Statement
Items that may be reclassified subsequently to Consolidated Income Statement
Gains/(losses) on hedges of net investments in foreign operations
Cash flow hedges:
Losses arising during the year
Transfer of losses on cash flow hedges from translation reserve to Consolidated Income Statement
Share of joint ventures’ and associates’ items of other comprehensive income
Translation reserves recycled to Consolidated Income Statement on disposals
Foreign exchange differences on translation of foreign operations
Tax relating to derivative financial instruments
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
Continuing operations
Discontinued operations
Total comprehensive income/(expense) for the year from continuing operations attributable to:
Owners of the Company
Non-controlling interests
Note
Year ended
30 September
2017
£m
Year ended
30 September
2016
£m
342.3
214.2
35, 39, 40
40
40
39
39, 40
39, 40
7, 39
18, 39, 40
39
299.1
(5.5)
11.4
(49.3)
255.7
4.5
(0.6)
1.1
(9.7)
49.4
8.7
–
53.4
309.1
651.4
645.7
5.7
651.4
51.7
599.7
651.4
54.2
(2.5)
51.7
(114.7)
(14.0)
31.2
6.4
(91.1)
(72.9)
(9.5)
2.2
–
(0.6)
116.0
1.4
36.6
(54.5)
159.7
136.9
22.8
159.7
93.2
66.5
159.7
91.1
2.1
93.2
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94
Daily Mail and General Trust plc Annual Report 2017
Consolidated Statement of Changes in Equity
For the year ended 30 September 2017
At 30 September 2015
Profit for the year
Other comprehensive income/(expense) for
the year
Total comprehensive income for the year
Note
39, 40
39, 40
39
39
39
40
12, 39
38, 39
Cancellation of A Ordinary Shares
Issue of share capital
Dividends
Own shares acquired in the year
Own shares transferred on exercise of share
options
Exercise of acquisition put option commitments
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 subsidiary
undertakings
Non-controlling interest recognised on
39, 40
acquisition
39
Corporation tax on share-based payments
Deferred tax on other items recognised in equity 37, 39, 40
At 30 September 2016
39
39
39
39
39
Profit/(loss) for the year
Other comprehensive income
for the year
Total comprehensive income for the year
Issue of share capital
Dividends
Own shares acquired in the year
Disposal of Euromoney treasury shares held
by Euromoney
Own shares transferred on exercise of share
options
Changes in non-controlling interests following
disposal of Euromoney
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
Deferred tax on other items recognised
in equity
At 30 September 2017
39, 40
39, 40
40
12, 39
38, 39
38, 39
39
39
39
39
39
39
Called-up
share
capital
£m
Share
premium
account
£m
Capital
redemption
reserve
£m
Own
shares
£m
Translation
reserve
£m
Retained
earnings
£m
Equity
attributable
to owners of
the Company
£m
Non-
controlling
interests
£m
Total
equity
£m
45.4
–
17.8
–
4.9
–
(76.3)
–
(25.9)
–
339.0
204.2
304.9
204.2
154.9 459.8
10.0 214.2
(12.1)
(12.1)
–
(12.1)
–
–
–
(0.5)
(0.5)
(0.2)
(0.7)
–
–
(0.1)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
45.3
–
–
–
17.8
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.1
–
–
–
–
–
–
–
–
–
–
–
–
6.5
–
–
(29.8)
10.9
–
–
–
–
–
–
–
–
–
5.0
–
–
–
(88.7)
–
–
–
–
–
–
–
–
–
–
–
(28.6)
–
14.1
–
38.9
–
–
–
–
–
–
–
–
–
–
–
–
37.8
37.8
(105.1)
99.1
(6.5)
–
(76.4)
–
–
(0.3)
–
(4.9)
(0.2)
15.8
–
–
–
–
–
–
–
–
–
–
–
–
–
–
11.9
–
5.4
1.4
359.8
–
345.3
237.4
582.7
–
(78.3)
–
–
–
–
–
0.4
(0.3)
4.0
63.0
63.0
–
–
–
–
–
–
–
–
–
–
–
(67.3)
136.9
–
–
(76.4)
(29.8)
10.9
(0.3)
–
12.8
(54.5)
22.8 159.7
–
0.3
(12.7)
–
–
0.3
(89.1)
(29.8)
–
–
0.2
10.9
(0.3)
0.2
(4.9)
4.9
–
(0.2)
15.8
0.2
0.2
–
16.0
–
5.4
1.4
351.1
345.3
300.4
645.7
–
(78.3)
(28.6)
7.6
–
–
7.6
5.4
1.4
178.2 529.3
(3.0) 342.3
8.7 309.1
5.7 651.4
0.5
–
–
0.5
(78.3)
(28.6)
14.1
–
14.1
38.9
–
38.9
–
–
(171.1) (171.1)
(0.1)
(0.1)
0.4
(2.6)
(2.2)
(0.3)
4.0
0.3
0.1
–
4.1
(38.4)
(38.4)
–
(38.4)
37, 39, 40
–
45.3
–
17.8
–
5.0
–
(64.3)
–
74.9
(0.4)
829.5
(0.4)
908.2
–
(0.4)
11.0 919.2
95
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Financial Statements
Financial Statements
Consolidated Statement of Financial Position
At 30 September 2017
ASSETS
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Investments in joint ventures
Investments in associates
Available-for-sale investments
Trade and other receivables
Other financial assets
Derivative financial assets
Retirement benefit assets
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Current tax receivable
Other financial assets
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
96
At
30 September
2017
£m
At
30 September
2016
£m
Note
21
22
23
24
24
25
27
28
34
35
37
26
27
31
28
34
29
20
30
31
32
33
34
36
20
30
32
33
34
35
36
37
363.1
213.0
103.3
0.2
735.2
30.6
20.5
15.5
4.6
73.4
75.9
1,635.3
26.6
236.8
9.6
14.5
3.0
14.6
107.8
412.9
2,048.2
(502.7)
(1.7)
(0.6)
(9.4)
(0.4)
(43.6)
(29.0)
(587.4)
(2.9)
(7.4)
(470.3)
(18.8)
(11.0)
(19.1)
(12.1)
(541.6)
(1,129.0)
981.6
499.2
176.1
4.8
145.3
15.8
18.7
21.0
28.3
40.1
177.4
2,108.3
30.8
346.2
15.6
17.1
0.4
25.7
5.0
440.8
2,549.1
(756.2)
(27.0)
(18.5)
(11.0)
(11.5)
(54.4)
(5.5)
(884.1)
(5.7)
(26.3)
(693.7)
(47.3)
(286.1)
(52.8)
(23.8)
(1,135.7)
(2,019.8)
919.2
529.3
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Daily Mail and General Trust plc Annual Report 2017
At
30 September
2017
£m
At
30 September
2016
£m
Note
38
39
39
39
39
39
40
45.3
17.8
63.1
5.0
(64.3)
74.9
829.5
908.2
11.0
919.2
45.3
17.8
63.1
5.0
(88.7)
11.9
359.8
351.1
178.2
529.3
At 30 September 2017
SHAREHOLDERS’ EQUITY
Called-up share capital
Share premium account
Share capital
Capital redemption reserve
Own shares
Translation reserve
Retained earnings
Equity attributable to owners of the Company
Non-controlling interests
The financial statements of DMGT plc (Company number 184594) on pages 93 to 187 were approved by the Directors and authorised for issue
on 30 November 2017. They were signed on their behalf by:
The Viscount Rothermere
P A Zwillenberg
Directors
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97
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Financial Statements
Financial Statements
Consolidated Cash Flow Statement
For the year ended 30 September 2017
Cash generated by operations
Taxation paid
Taxation received
Net cash generated by 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
Expenditure on other intangible assets
Purchase of available-for-sale investments
Proceeds on disposal of property, plant and equipment and investment property
Proceeds on disposal of available-for-sale investments
Purchase of subsidiaries
Settlements and collateral payments on treasury derivatives
Purchase of option over equity instrument
Investment in joint ventures and associates
Loans advanced to joint ventures and associates
Loans to joint ventures and associates repaid
Proceeds on disposal of businesses
Proceeds on disposal of joint ventures and associates
Proceeds from redemption of preference share capital
Net cash generated by/(used in) investing activities
Financing activities
Purchase of additional interests in controlled entities
Equity dividends paid
Dividends paid to non-controlling interests
Issue of shares by Group companies to non-controlling interests
Purchase of own shares
Net receipt/(payment) on settlement of subsidiary share options
Interest paid
Loan notes repaid
Repayments of obligations under finance lease agreements
Inception of finance leases
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 gain on cash and cash equivalents
Net cash and cash equivalents at end of year
98
Year ended
30 September
2017
£m
Year ended
30 September
2016
£m
232.7
(18.1)
4.9
219.5
2.4
35.9
0.1
(21.1)
(57.7)
(0.2)
(19.4)
0.7
–
(26.7)
2.8
–
(2.3)
(2.7)
8.6
215.8
2.4
–
138.6
(2.1)
(78.3)
–
0.5
(28.6)
0.5
(34.7)
(0.6)
(0.7)
0.5
(224.9)
261.0
(29.7)
0.8
232.1
1.6
5.3
–
(27.2)
(58.3)
(3.0)
(1.6)
1.5
0.1
(29.5)
(40.4)
(6.5)
(4.7)
(0.2)
1.2
39.5
72.0
14.4
(35.8)
(0.2)
(76.4)
(12.7)
0.3
(29.8)
(1.2)
(33.9)
(0.5)
(0.2)
0.6
(60.6)
(368.4)
(214.6)
(10.3)
17.5
0.2
7.4
(18.3)
31.5
4.3
17.5
Note
15
24
9
23
22
22
25
17
34
24
18
8, 24
18
17
12, 39
40
40
39
16
16
16
16
16
29
16
29
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Daily Mail and General Trust plc Annual Report 2017
Notes to the accounts
1 Basis of preparation
DMGT plc is a company incorporated and domiciled in the United Kingdom. The address of the registered office is Northcliffe House,
2 Derry Street, London, W8 5TT.
These financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and related IFRS
Interpretations Committee (IFRIC) interpretations 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 ended 30 September 2017.
Other than the Daily Mail, The Mail on Sunday and Metro businesses, the Group prepares accounts for a year ending on 30 September. The
Daily Mail, The Mail on Sunday and Metro businesses prepare financial statements for a 52- or 53-week financial period ending on a Sunday
near to the end of September and do not prepare additional financial statements corresponding to the Group’s financial year for consolidation
purposes as it would be impractical 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.
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 certain financial instruments which are held at fair value through profit or loss.
The Group presents the results from discontinued operations separately from those of continuing operations. An operation is classed as
discontinued if it has been, or is in the process of being disposed and represents either a separate major line of business or a geographical
area of operations, or is part of a single coordinated plan to dispose of a separate major line of business or exit a major geographical area
of operations.
Prior period amounts have been re-presented to conform to the current period’s presentation, as prescribed by IFRS 5, Non-current Assets
Held for Sale and Discontinued Operations.
All amounts presented have been rounded to the nearest £0.1 million.
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 Review and the Strategic Report.
As highlighted in Notes 33 and 34 to the Accounts, 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 March 2019. 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.
Accordingly, the Directors continue to adopt the going concern basis in preparing these financial statements.
2 Significant accounting policies
The following new and amended IFRSs have been adopted during the year:
• Amendments to IFRS 10 and IAS 28, Accounting for the sale or contribution of assets between an investor and its associate or joint venture
(effective 1 January 2016)
• Amendments to IFRS 11, Accounting for Acquisitions of Interests in Joint Operations (effective 1 January 2016)
• Amendments to IAS 16 and IAS 38, Clarification of Acceptable Methods of Depreciation and Amortisation (effective 1 January 2016)
• Amendment to IAS 1, disclosure initiative (effective 1 January 2016)
• Annual Improvements 2010-2012 cycle and 2011-2013 cycle have been implemented in the prior year and had no material impact on
the Group.
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Financial Statements
Financial Statements
Notes to the accounts
2 Significant accounting policies continued
Annual improvements 2012-2014 cycle (effective 1 January 2016)
• Amendment to IFRS 5, Non-current Assets Held for Sale and Discontinued Operations
• Amendments to IFRS 7, Financial Instruments disclosures
• IAS 19, Employee Benefits, discount rates for post-employment benefits
• IAS 34, Interim Financial Reporting, Disclosure of information ‘elsewhere in the interim financial report’
The above amendments have not had any significant impact on the Group’s financial statements.
The Group has not yet adopted certain new standards, amendments and interpretations to existing standards, which have been published
but are only effective for the Group’s accounting periods beginning on or after 1 October 2017. These new pronouncements are listed below:
• Amendments to IAS 7, Statement of cash flows (effective 1 January 2017)
• Amendment to IAS 12, Recognition of deferred tax assets for unrealised losses (effective 1 January 2017)
• IFRS 15, Revenue from Contracts with Customers (effective 1 January 2018)
• IFRS 9, Financial Instruments (effective 1 January 2018)
• IFRS 16, Leases (effective 1 January 2019)
Annual improvements 2014-2016 cycle
• Amendments to IFRS 1, First-time Adoption of International Financial Reporting Standards (effective 1 January 2018)
• Amendments to IFRS 12, Disclosure of Interests in Other Entities (effective 1 January 2017)
• Amendments to IAS 28, Investments in Associates and Joint Ventures (effective 1 January 2018)
A number of new and amended IFRS’s have been adopted in the period, none had any significant impact on the Group’s financial statements.
Other than IFRS 15 Revenue from Contracts with Customers and IFRS 16 Leases, the adoption of standards, amendments and interpretations
which have been issued but are not yet effective is not expected to have a material impact on the Group’s financial statements.
IFRS 15, effective for the 2019 fiscal year introduces additional guidance surrounding performance obligations within sales contracts and the
timing of revenue recognition. In 2016 the Group commenced a project to evaluate the impact of IFRS 15 but due to the complexity of this new
accounting standard and the number of different revenue streams in the Group, the impact is still being evaluated.
IFRS 16, effective for the 2020 fiscal year will require lessees to recognise assets and liabilities for all leases unless the lease term is 12 months
or less or the underlying asset has a low value eliminating the distinction between operating and finance leases. The new standard will also
replace the operating lease expense with a depreciation charge for the leased assets and an interest expense on the corresponding lease
liability. Lessors will continue to classify leases as operating or finance, with IFRS 16’s approach to lessor accounting substantially unchanged
from its predecessor, IAS 17.
The Group is in the process of assessing the impact of this standard. Note 41 provides further information on the Group’s operating
lease obligations.
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 the consideration for an acquisition includes any asset or liability resulting from a contingent arrangement, this is measured at
its discounted fair value on the acquisition date. Subsequent changes in such fair values are adjusted through the Consolidated Income
Statement in Financing. All other changes in the fair value of contingent consideration classified as an asset or liability are measured
at fair value at each reporting date and changes in fair value are recognised in profit or loss. Changes in the fair value of contingent
consideration classified as equity are not recognised.
Put options granted to non-controlling interests are recorded at present value as a reduction in equity on initial recognition, as the
arrangement represents a transaction with equity holders. Changes in value after initial recognition are recorded in the Consolidated Income
Statement in Financing.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the
Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the
measurement period, or additional assets or liabilities are recognised, to reflect new information obtained about facts and circumstances
that existed as of the date of the acquisition that, if known, would have affected the amounts recognised as of that date.
The measurement period is the period from the date of acquisition to the date the Group obtains complete information about facts and
circumstances that existed as of the acquisition date and is a maximum of one year.
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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.
Contingent consideration receivable
Where the consideration for a disposal includes consideration resulting from a contingent arrangement, the contingent consideration
receivable is discounted to its fair value, with any subsequent movement in fair value being recorded in the Consolidated Income Statement
in Financing.
Discontinued operations
The Group presents the results from discontinued operations separately from those of continuing operations. An operation is classed as
discontinued if it has been, or is in the process of being disposed and represents either a separate major line of business or a geographical
area of operations, or is part of a single coordinated plan to dispose of a separate major line of business or exit a major geographical area
of operations.
Assets and liabilities of businesses held for sale
An asset or disposal group is classified as held-for-sale if its carrying amount is intended to be recovered principally through sale rather
than continuing use, is available for immediate sale and is highly probable that the sale will be completed within 12 months of classification
as held-for-sale. Assets classified as held-for-sale are measured at the lower of their carrying amount and fair value less costs to sell. Any
impairment is recognised in the Consolidated Income Statement and is first allocated to the goodwill associated with the disposal group
and then to the remaining assets and liabilities on a pro rata basis. No further depreciation or amortisation is charged on non-current assets
classified as held-for-sale from the date of classification.
Accounting for subsidiaries
A subsidiary is an entity controlled by the Group. Control is achieved where the Group has power over an investee; exposure, or rights, to
variable returns from its involvement with the investee; and the ability to use its power over the investee to affect the amount of the returns.
The results of subsidiaries acquired or disposed of during the year are included in the Consolidated Income Statement from the effective
date control is obtained or up to the date control is relinquished, as appropriate. Where necessary, adjustments are made to the financial
statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group.
All intra-group transactions, balances, income and expenses are eliminated on consolidation.
Non-controlling interests
Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the Group’s equity therein, either at
fair value or at the non-controlling interest’s share of the net assets of the subsidiary, on a case-by-case basis. The total comprehensive
income of a subsidiary is apportioned between the Group and the non-controlling interest, even if it results in a deficit balance for the
non-controlling interest.
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Financial Statements
Financial Statements
Notes to the accounts
2 Significant accounting policies continued
Interests in joint ventures and associates
A joint venture is a contractual arrangement whereby the Group and other parties undertake an economic activity that is subject to joint
control, that is, when the strategic financial and operating policy decisions relating to the activities require the unanimous consent of the
parties sharing control.
An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture.
Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control
over those policies.
The post-tax results of joint ventures and associates are incorporated in the Group’s results using the equity method of accounting. Under
the equity method, investments in joint ventures and associates are carried in the Consolidated Statement of Financial Position at cost as
adjusted for post-acquisition changes in the Group’s share of the net assets of the joint venture and associate, less any impairment in the
value of investment. Losses of joint ventures and associates in excess of the of the Group’s interest in that joint venture or associate are not
recognised. Additional losses are provided for, and a liability is recognised, only to the extent that the Group has incurred legal or constructive
obligations or made payments on behalf of the joint venture or associate.
Any excess of the cost of acquisition over the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities
of the joint venture or associate recognised at the date of acquisition is recognised as goodwill. The goodwill is included within the carrying
amount of the investment.
Foreign currencies
For the purpose of presenting consolidated financial statements, the assets and liabilities of entities with a functional currency other than
sterling are translated into sterling using exchange rates prevailing on the period end date. Income and expense items and cash flows are
translated at the average exchange rates for the period and exchange differences arising are recognised directly in equity. On disposal of a
foreign operation, the cumulative amount recognised in equity relating to that operation is recognised in the Consolidated Income Statement
as part of the gain or loss on sale.
The Group records foreign exchange differences arising on retranslation of foreign operations within the translation reserve in equity.
In preparing the financial statements of the individual entities, transactions in currencies other than the entity’s functional currency are
recorded at the exchange rate prevailing on the date of the transaction. At each period end date, monetary items denominated in foreign
currencies are retranslated at the rates prevailing on the period end date.
Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rate prevailing on the date when
fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are included in the
Consolidated Income Statement for the period.
Goodwill, intangible assets and fair value adjustments arising on the acquisition of foreign operations after transition to IFRS are treated as
part of the assets and liabilities of the foreign operation and are translated at the closing rate. Goodwill which arose pre-transition to IFRS
is not translated.
In respect of all foreign operations, any cumulative exchange differences that have arisen before 4 October 2004, the date of transition to IFRS,
were reset to £nil and will be excluded from the determination of any subsequent profit or loss on disposal.
Goodwill and intangible assets
Goodwill and intangible assets acquired arising on the acquisition of an entity represents the excess of the cost of acquisition over the Group’s
interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the entity recognised at the date of acquisition.
Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses. Negative
goodwill arising on an acquisition is recognised directly in the Consolidated Income Statement.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity
and are translated at the closing exchange rates on the period end date.
On disposal of a subsidiary 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.
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Impairment of goodwill
The Group tests goodwill annually for impairment, or more frequently if there are indicators that goodwill might be impaired. The Group has
no other 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 the carrying amount of the unit, the impairment loss is
allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit, prorated on the
basis of the carrying amount of each asset in the unit, but subject to not reducing any asset below its recoverable amount. An impairment loss
recognised for goodwill is not reversed in a subsequent period.
When testing for impairment, the recoverable amounts for all of the Group’s CGUs are measured at the higher of value in use or fair value
less costs to sell. Value in use is calculated by discounting future expected cash flows. These calculations use cash flow projections based on
Board-approved budgets and projections which reflect management’s current experience and future expectations of the markets in which the
CGU operates. Risk-adjusted pre-tax discount rates used by the Group in its impairment tests range from 11.45% to 19.2% (2016 11.25% to
25.0%) the choice of rates depending on the risks specific to that CGU. The Directors’ estimate of the Group’s weighted average cost of capital
is 8.0% (2016 8.0%). The cash flow projections consist of Board-approved budgets for the following year, together with forecasts for up to five
additional years and nominal long-term growth rates beyond these periods. The nominal long-term growth rates range between 1.5% and
3.0% (2016 1.0% and 5.0%) 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 the CGU operates.
An impairment loss recognised for goodwill is charged immediately in the Consolidated Income Statement and is not subsequently reversed.
Research and development expenditure
Expenditure on research activities is recognised as an expense in the period in which it is incurred. An internally generated intangible asset
arising from the Group’s development activity, including software for internal use, is recognised only if the asset can be separately identified,
it is probable the asset will generate future economic benefits, the development cost can be measured reliably, the project is technically
feasible and the project will be completed with a view to sell or use the asset. Additionally, guidance in Standing Interpretations Committee
(SIC) 32 has been applied in accounting for internally developed website development costs.
Internally generated intangible assets are amortised on a straight-line basis over their estimated useful lives, when the asset is available
for use, and are reported net of impairment losses. Where no internally generated intangible asset can be recognised, such development
expenditure is charged to the Consolidated Income Statement in the period in which it is incurred.
Licences
Computer software licences are capitalised on the basis of the costs incurred to acquire and bring into use the specific software. These costs
are amortised over their estimated useful lives, being three to five years.
Costs that are directly associated with the production of identifiable and unique software products controlled by the Group, and that are
expected to generate economic benefits exceeding costs and directly attributable overheads, are capitalised as intangible assets.
Computer software which is integral to a related item of hardware equipment is accounted for as property, plant and equipment.
Costs associated with maintaining computer software programmes are recognised as an expense as incurred.
Other intangible assets
Other intangible assets with finite lives are stated at cost less accumulated amortisation and impairment losses. Amortisation is charged to
the Consolidated Income Statement on a straight-line basis over the estimated useful lives of the intangible assets from the date they become
available for use. The estimated useful lives are as follows:
Publishing rights, mastheads and titles
Brands
Market and customer-related databases and customer relationships
Computer software
5 – 30 years
3 – 20 years
3 – 20 years
2 – 5 years
Amortisation of intangibles not arising on business combinations is included within operating profit in the Consolidated Income Statement.
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Financial Statements
Financial Statements
Notes to the accounts
2 Significant accounting policies continued
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:
(i)
whether the asset’s market value has increased significantly during the period;
(ii)
whether any significant changes with a favourable effect on the entity have taken place during the period, or will take place in the near
future, in the technological, market, economic or legal environment in which the entity operates or in the market to which the asset is
dedicated; and
(iii) whether market interest rates or other market rates of return on investments have decreased during the period, and those decreases
are likely to affect the discount rate used in calculating the asset’s value in use and increase the asset’s recoverable amount materially.
Property, plant and equipment
Land and buildings held for use are stated in the Consolidated Statement of Financial Position at their cost, less any subsequent accumulated
depreciation and subsequent accumulated impairment losses.
Assets in the course of construction are carried at cost, less any recognised impairment loss. Depreciation of these assets commences when
the assets are ready for their intended use.
Plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses.
Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter,
over the term of the relevant lease.
The gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between
the sale 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
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 dmg media segment for newsprint and the First In First Out method for all other inventories.
Exhibitions, training and event costs
Directly attributable costs relating to future exhibitions, training and events are deferred within work in progress and measured at the lower of
cost and net realisable value. These costs are charged to the Consolidated Income Statement when the exhibition, training or event takes place.
Pre-publication costs
Pre-publication costs represent direct costs incurred in the development of titles prior to their publication. These costs are recognised as work
in progress on the Consolidated Statement of Financial Position to the extent that future economic benefit is virtually certain and can be
measUred reliably. These are recognised in the Consolidated Income Statement on publication.
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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
Revenue is stated at the fair value of consideration, net of value added tax, trade discounts and commission where applicable and is
recognised using methods appropriate for the Group’s businesses.
Where revenue contracts have multiple elements (such as software licences, data subscriptions and support), all aspects of the transaction
are considered to determine whether these elements can be separately identified. Where transaction elements can be separately identified
and revenue can be allocated between them on a fair and reliable basis, revenue for each element is accounted for according to the relevant
policy below. Where transaction elements cannot be separately identified, revenue is recognised over the contract period.
The dmg media segment enters into agreements with advertising agencies and certain clients, which are subject to a minimum spend and
typically include a commitment to deliver rebates to the agency or client based on the level of agency spend over the contract period.
The principal revenue 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 the publication or report;
• advertising revenue is recognised on issue of the publication or over the period of the online campaign;
• contract print revenue is recognised on completion of the print contract;
• exhibitions, training and events revenues are recognised over the period of the event;
• software revenue is recognised on delivery of the software or the technology or over a period of time where the transaction is a licence
(the licence term). If support is unable to be separately identified from hosting and revenue is unable to be allocated on a fair and reliable
basis, support revenue is recognised over the licence term. Commissions paid to acquire software and services contracts are capitalised
in prepayments and recognised over the term of the contract;
• support revenue associated with software licences and subscriptions is recognised over the term of the support contract; and
• long-term contract revenue is recognised using the percentage of completion method according to the percentage of work completed at the
period end date.
Adjusted measures
The Group presents adjusted operating profit and adjusted profit before tax by making adjustments for costs and profits which management
believe to be significant by virtue of their size, nature or incidence or which have a distortive effect on current year earnings.
Such items would include, but are not limited to, closure costs, costs associated with business combinations, gains and losses on the disposal
of businesses, finance costs relating to premia on bond buy-backs, fair value movements, exceptional operating costs, impairment of goodwill
and amortisation and impairment of intangible assets arising on business combinations.
The Board and management team believe these adjusted results, used in conjunction with statutory IFRS results, give a greater insight into
the financial performance of the Group and the way it is managed. Similarly, adjusted results are used in setting management remuneration.
A description of each adjustment is set out in the Financial Review together with a reconciliation of operating profit to adjusted operating profit.
See Note 13 for a reconciliation of adjusted profit before and after tax.
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.
EBITDA
The Group discloses EBITDA, being adjusted operating profit before depreciation of property, plant and equipment and investment property.
EBITDA is broadly used by analysts, rating agencies, investors and the Group’s banks as part of their assessment of the Group’s performance.
A reconciliation of EBITDA from operating profit is shown in Note 15 and the ratio of net debt to EBITDA is disclosed in Note 34.
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Financial Statements
Financial Statements
Notes to the accounts
2 Significant accounting policies continued
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 premia paid on settlement or redemption and direct issue costs and discounts related to
borrowings, are accounted for on an accruals basis and charged to the Consolidated Income Statement using the effective interest method.
Retirement benefits
Pension scheme assets are measured at market value at the period end date. Scheme liabilities are measured using the projected unit credit
method and discounted at a rate reflecting current yields on high-quality corporate bonds having regard to the duration of the liability profiles
of the schemes.
For defined benefit retirement plans, the difference between the fair value of the plan assets and the present value of the plan liabilities is
recognised as an asset or liability on the Consolidated Statement of Financial Position. Actuarial gains and losses arising in the year are taken
to the Consolidated Statement of Comprehensive Income. For this purpose, actuarial gains and losses comprise both the effects of changes
in actuarial assumptions and experience adjustments arising because of differences between the previous actuarial assumptions and what
has actually occurred. For defined benefit schemes, the cost of providing benefits is determined using the projected unit credit method,
with actuarial valuations being carried out triennially. In accordance with the advice of independent qualified actuaries in assessing whether
to recognise a surplus, the Group has regard to the principles set out in IFRIC 14.
Other movements in the net surplus or deficit are recognised in the Consolidated Income Statement, including the current service cost,
any past service cost and the effect of any curtailment or settlements. The interest cost less the expected return on assets is also charged
to the Consolidated Income Statement within net finance costs.
Following the adoption of FRS 101 and FRS 102 in the prior year, the defined benefit pension schemes’ deficits have been allocated to
Group companies on a buy-out basis – that is, on an estimate of the liabilities and assets of the defined benefit schemes as at 30 September.
The Group’s contributions to defined contribution pension plans are charged to the Consolidated Income Statement as they fall due.
Taxation
Income tax expense represents the sum of current tax and deferred tax for the year.
The current tax payable or recoverable is based on the taxable profit for the year. Taxable profit differs from profit as reported in the
Consolidated Income Statement because some items of income or expense are taxable or deductible in different years or may never
be taxable or deductible. The Group’s liability for current tax is calculated using the UK and foreign tax rates that have been enacted
or substantively enacted by the period end date.
Current tax assets and liabilities are set off and stated net in the Consolidated Statement of Financial Position when there is a legally
enforceable right to set off current tax assets against current tax liabilities and when they either relate to income taxes levied by the same
taxation authority or on the same taxable entity or on different taxable entities which intend to settle the current tax assets and liabilities
on a net basis.
Deferred tax is the tax expected to be payable or recoverable in the future arising from temporary differences between the carrying amounts
of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. It is accounted
for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred
tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences
can be utilised. Such assets and liabilities are not recognised if the temporary differences arise from the initial recognition of goodwill or from
the initial recognition other than in a business combination of other assets and liabilities in a transaction that affects neither the taxable profit
nor the accounting profit.
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Deferred tax liabilities are recognised for taxable temporary differences arising in investments in subsidiaries, joint ventures and associates
except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not
reverse in the foreseeable future.
Goodwill arising on business combinations also includes amounts corresponding to deferred tax liabilities recognised in respect of acquired
intangible assets. A deferred tax liability is recognised to the extent that the fair value of the assets for accounting purposes exceeds the value
of those assets for tax purposes and will form part of the associated goodwill on acquisition.
The carrying amount of deferred tax assets is reviewed at each period end date, and is reduced or increased as appropriate to the extent that
it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered, or it becomes probable
that sufficient taxable profits will be available.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised, based on
tax rates that have been enacted or substantively enacted by the period end date, and is not discounted.
Deferred tax assets and liabilities are set off when there is a legally enforceable right to set off current tax assets against current tax liabilities
and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current assets and liabilities
on a net basis.
Tax is charged or credited to the Consolidated Income Statement, except when it relates to items charged or credited directly to equity,
in which case the tax is also recognised directly in equity.
Actual tax liabilities or refunds may differ from those anticipated due to changes in tax legislation, differing interpretations of tax legislation
and uncertainties surrounding the application of tax legislation. In situations where uncertainties exist, provision is made for contingent tax
liabilities and assets when it is more likely than not that there will be a cash impact. These provisions are made for each uncertainty individually
on the basis of management judgement following consideration of the available relevant information. The measurement basis adopted
represents the best predictor of the resolution of the uncertainty which is usually based on the most likely cash outflow. The company reviews
the adequacy of these provisions at the end of each reporting period and adjusts them based on changing facts and circumstances.
Financial instruments
Financial assets and financial liabilities are recognised on the Consolidated Statement of Financial Position when the Group becomes a party
to the contractual provisions of the instrument.
Financial assets and liabilities are offset and the net amount reported in the Consolidated Statement of Financial Position when there is a
legally enforceable right to settle on a net basis, or realise the asset and liability simultaneously and where the Group intends to net settle.
Financial assets
Trade receivables
Trade receivables do not carry 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 derecognised on a trade date where a purchase or sale of an investment is under a
contract whose terms require delivery of the investment within the time frame established by the market concerned, and are measured at fair
value, including transaction costs.
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. Unlisted securities are recorded at cost less provision for
impairment, as since there is no active market upon which they are traded, their fair values cannot be reliably measured. The recoverable
amount is determined by discounting future cash flows to present value using market interest rates.
Financial liabilities and equity instruments
Trade payables
Trade payables are non-interest bearing and are stated at their nominal value.
Financial liabilities and equity instruments issued by the Group are classified according to the substance of the contractual arrangements
entered into and the definitions of a financial liability and an equity instrument. An equity instrument is any contract that evidences a residual
interest in the assets of the Group after deducting all of its liabilities. The accounting policies adopted for specific financial liabilities and
equity instruments are set out below:
Capital market and bank borrowings
Interest bearing loans and overdrafts are initially measured at fair value (which is equal to net proceeds at inception), and are subsequently
measured at amortised cost, using the effective interest rate method. A portion of the Group’s bonds are subject to fair value hedge
accounting as explained below and this portion is adjusted for the movement in the hedged risk to the extent hedge effectiveness is achieved.
Any difference between the proceeds, net of transaction costs, and the settlement or redemption of borrowings is recognised over the term
of the borrowing.
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Financial Statements
Financial Statements
Notes to the accounts
2 Significant accounting policies continued
Equity instruments
Equity instruments issued by the Group are recorded at the proceeds received, net of transaction costs.
Derecognition
The Group derecognises a financial asset, or a portion of a financial asset, from the Consolidated Statement of Financial Position where the
contractual rights to cash flows from the asset have expired, or have been transferred, usually by sale, and with them either substantially
all the risks and rewards of the asset or significant risks and rewards, along with the unconditional ability to sell or pledge the asset.
Financial liabilities are derecognised when the liability has been settled, has expired or has been extinguished.
Derivative financial instruments and hedge accounting
Derivative financial instruments are used to manage exposure to market risks. The principal derivative instruments used by the Group are
foreign currency swaps, interest rate swaps, foreign exchange forward contracts and options. The Group does not hold or issue derivative
financial instruments for trading or speculative purposes.
Changes in the fair value of derivative instruments which do not qualify for hedge accounting are recognised immediately in the Consolidated
Income Statement.
Where the derivative instruments do qualify for hedge accounting, the following treatments are applied:
Fair value hedges
Changes in the fair value of the hedging instrument are recognised in the Consolidated Income Statement for the year together with the
changes in the fair value of the hedged item due to the hedged risk, to the extent the hedge is effective. When the hedging instrument expires
or is sold, terminated, or exercised, or no longer qualifies for hedge accounting, hedge accounting is discontinued.
Cash flow hedges
Changes in the fair value of derivative financial instruments that are designated and effective as hedges of future cash flows are recognised
directly in equity and the ineffective portion is recognised immediately in the Consolidated Income Statement.
If a hedged firm commitment or forecast transaction results in the recognition of a non-financial asset or liability, then, at the time that the
asset or liability is recognised, the associated gains and losses on the derivative that had previously been recognised in equity are included
in the initial measurement of the asset or liability.
For hedges that do not result in the recognition of an asset or a liability, amounts deferred in equity are recognised in the Consolidated Income
Statement in the same period in which the hedged item affects the Consolidated Income Statement.
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, exercised, revoked, or no longer qualifies for
hedge accounting. At that time, any cumulative gain or loss on the hedging instrument recognised in equity is retained in equity until the
forecast transaction occurs. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss previously recognised
in equity is included in the Consolidated Income Statement for the period.
Net investment hedges
Exchange differences arising from the translation of the net investment in foreign operations are recognised 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.
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 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.
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A liability equal to the portion of the goods or services received is recognised at the current fair value determined at each period end date
for cash-settled share-based payments.
Investment in own shares
Treasury shares
Where the Company purchases its equity share capital as Treasury Shares, the consideration paid, including any directly attributable
incremental costs (net of income taxes) is recorded as a deduction from shareholders’ equity until such shares are cancelled, reissued or
disposed of. Where such shares are subsequently sold or reissued, any consideration received, net of any directly attributable incremental
transaction costs and the related income tax effects, is recognised in equity, with any difference between the proceeds from the sale and the
original cost being taken to retained earnings.
Employee Benefit Trust
The Company has established an Employee Benefit Trust (EBT) for the purpose of purchasing shares in order to satisfy outstanding share
options and potential awards under long-term incentive plans. The assets of the Trust comprise shares in DMGT plc and cash balances. The
Trust is administered by independent trustees and its assets are held separately from those of the Group. The Group bears the major risks and
rewards of the assets held by the EBT until the shares vest unconditionally with employees. The Group recognises the assets and liabilities of
the Trust in the consolidated financial statements and shares held by the Trust are recorded at cost as a deduction from shareholders’ equity.
Consideration received for the sale of shares held by the Trust is recognised in equity, with any difference between the proceeds from the sale
and the original cost being taken to retained earnings.
Critical accounting judgements and key sources of estimation uncertainty
In addition to the judgement taken by management in selecting and applying the accounting policies set out above, the Directors have made
the following judgements concerning the amounts recognised in the consolidated financial statements:
Adjusted measures
The Group presents adjusted operating profit and adjusted profit before tax by making adjustments for costs and profits which management
believe to be significant by virtue of their size, nature or incidence or which have a distortive effect on current year earnings.
Such items would include, but are not limited to, closure costs, costs associated with business combinations, gains and losses on the disposal
of businesses, finance costs relating to premia on bond buy-backs, fair value movements, exceptional operating costs, impairment of goodwill
and amortisation and impairment of intangible assets arising on business combinations.
The Board and management team believe these adjusted results, used in conjunction with statutory IFRS results, give a greater insight into
the financial performance of the Group and the way it is managed. Similarly, adjusted results are used in setting management remuneration.
A description of each adjustment is set out in the Financial Review together with a reconciliation of operating profit to adjusted operating profit.
See Note 13 for a reconciliation of adjusted profit before and after tax.
Investment in Euromoney
Following loss of control the Group has also considered factors which may indicate de facto control. The Group has determined that it does
not have de facto control over Euromoney since it cannot block any ordinary resolutions, which comprise the majority of corporate actions,
has no control over the remuneration of Euromoney’s directors and has no control over Euromoney’s day-to-day operations nor budgets.
In addition, the Group has no material trading activities or relationships which are critical for Euromoney to carry out its business. The Group’s
relationship with Euromoney is monitored on an ongoing basis to ensure no change in this assessment.
The following represent critical judgements, involving estimations, that have the most significant effect on the amounts recognised in
the financial statements:
Forecasting
The Group prepares medium-term forecasts based on Board-approved budgets and up to four-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, going concern
assessment and for the purposes of impairment reviews. Longer-term forecasts use long-term growth rates applicable to the relevant businesses.
Impairment of goodwill and intangible assets
Determining whether goodwill and intangible or other assets are impaired or whether a reversal of an impairment should be recorded requires
a comparison of the balance sheet carrying value with the recoverable amount of the asset or CGU. The recoverable amount is the higher
of the value in use and fair value less costs to sell.
The value in use calculation requires management to estimate the future cash flows expected to arise from the asset or CGU and calculate
the net present value of these cash flows using a suitable discount rate. A key area of judgement is deciding the long-term growth rate and
the operating cash flows of the applicable businesses and the discount rate applied to those cash flows (Note 21). The carrying amount of
goodwill and intangible assets at the year end was £576.1 million (2016 £1,480.8 million) after a net impairment charge of £213.4 million
(2016 £53.6 million) was recognised during the year (Notes 21 and 22). The key assumptions used and associated sensitivity analysis is shown
in Note 21.
The key assumptions used and associated sensitivity analysis in relation to Genscape, Landmark, Hobsons and RMS(one) are shown in Note 21
and 22.
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Financial Statements
Financial Statements
Notes to the accounts
2 Significant accounting policies continued
Acquisitions and intangible assets
The Group’s accounting policy on the acquisition of subsidiaries is to allocate purchase consideration to the fair value of identifiable assets,
liabilities and contingent liabilities acquired with any excess consideration representing goodwill. Determining the fair value of assets,
liabilities and contingent liabilities acquired requires significant estimates and assumptions, including assumptions with respect to cash flows
and unprovided liabilities and commitments, including in respect to tax, to be used. The Group recognises intangible assets acquired as part
of a business combination at fair value at the date of 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 and put options payable
Estimates are required in respect of the amount of contingent consideration and put options 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 and put options 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 made a provision for outstanding contingent
consideration amounting to £17.0 million (2016 £52.6 million) and put options payable amounting to £8.0 million (2016 £44.8 million).
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 actual
tax liabilities or refunds may differ from those anticipated due to changes in tax legislation, differing interpretations of tax legislation and
uncertainties surrounding the application of tax legislation. Such issues can take several years to resolve.
The Group accounts for unresolved issues based on its best estimate of the final outcome, however, the inherent uncertainty regarding these
items means that the eventual resolution could differ significantly from the accounting estimates and, therefore, impact the Group’s results
and future cash flows. In situations where uncertainties exist, provision is made for contingent tax liabilities and assets when it is more likely
than not that there will be a cash impact. These provisions are made for each uncertainty individually on the basis of management judgement
following consideration of the available relevant information. The measurement basis adopted represents the best predictor of the resolution
of the uncertainty which is usually based on the most likely cash outflow. The company reviews the adequacy of these provisions at the end
of each reporting period and adjusts them based on changing facts and circumstances.
In addition, the Group makes estimates regarding the recoverability of deferred tax assets relating to losses based on forecasts of future
taxable profits which are, by their nature, uncertain. In the US there has been a significant reduction in forecast future profits since March 2017
and accordingly it is no longer estimated that the deferred tax asset in respect of US deferred interest will be recovered in the foreseeable
future. This has resulted in a significant exceptional write off of the deferred tax asset. If the forecast future profits in the US increase in future
periods then the level of the recognised deferred tax asset may increase. Further detail is provided in Note 37.
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, future salary increases and mortality rates. Due to the long-term nature of these plans,
such estimates are subject to significant uncertainty. The assumptions and the resulting estimates are reviewed annually and, when
appropriate, changes are made which affect the actuarial valuations and, hence, the amount of retirement benefit expense recognised in
the Consolidated Income Statement and the amounts of actuarial gains and losses recognised in the Consolidated Statement of Changes
in Equity. The carrying amount of the retirement benefit obligation at 30 September 2017 was a surplus of £62.4 million (2016 deficit of
£246.0 million). The assumptions used and the associated sensitivity analysis is given in Note 35.
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3 Segment analysis
The Group’s business activities are split into four operating divisions: RMS, dmg information, dmg events and dmg media. These divisions are
the basis on which information is reported to the Group’s Chief Operating Decision Maker, which has been determined to be the Group Board.
The segment result is the measure used for the purposes of resource allocation and assessment and represents profit earned by each
segment, including share of results from joint ventures and associates but before exceptional operating costs, amortisation of acquired
intangible assets arising on business combinations, impairment charges, other gains and losses, net finance costs and taxation.
Details of the types of products and services from which each segment derives its revenues are included within the Strategic Report.
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.
Total and
external
revenue
£m
233.2
530.7
117.0
95.2
683.4
1,659.5
(95.2)
1,564.3
Year ended 30 September 2017
Note
RMS
dmg information
dmg events
Euromoney
dmg media
Continuing operations
Corporate costs
Discontinued operations
Continuing operations
Adjusted operating profit
Exceptional operating costs, impairment of internally generated and
acquired computer software, property, plant and equipment
Impairment of goodwill and acquired intangible assets arising on
business combinations
Amortisation of acquired intangible assets arising on business combinations
Operating loss before share of results of joint ventures and associates
Share of results of joint ventures and associates
Total operating loss
Other gains and losses
Loss before investment revenue, net finance costs and tax
Investment revenue
Net finance costs
Loss before tax
Tax
Profit from discontinued operations
Profit for the year
19, (i)
(i)
21, 22
22
7
8
9
10
11
19
Less operating
profit/(loss)
of joint
ventures and
associates
£m
Segment
operating
profit
£m
Adjusted
operating
profit
£m
32.0
69.2
30.6
67.3
99.2
298.3
(67.3)
(0.8)
0.1
–
48.0
22.0
69.3
–
(48.0)
32.8
69.1
30.6
19.3
77.2
229.0
(30.7)
(19.3)
179.0
(166.2)
(131.7)
(26.5)
(145.4)
16.9
(128.5)
14.0
(114.5)
2.5
(0.3)
(112.3)
(64.7)
519.3
342.3
(i)
Revenue and adjusted operating profit relating to the discontinued operations of Euromoney have been deducted in order to reconcile
total segment result to Group loss before tax from continuing operations.
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Financial Statements
Financial Statements
Notes to the accounts
3 Segment analysis continued
An analysis of the amortisation and impairment of goodwill and intangible assets, exceptional operating costs and impairment of property,
plant and equipment and investment property by segment is as follows:
Year ended 30 September 2017
Note
Amortisation of
intangible assets
not arising
on business
combinations
(Note 22)
£m
Amortisation of
intangible assets
arising on
business
combinations
(Note 22)
£m
Impairment of
goodwill and
intangible assets
arising on business
combinations
(Notes 21, 22)
£m
Impairment of
internally
generated and
acquired computer
software
(Note 22)
£m
Exceptional
operating costs
£m
Impairment of
property, plant
and equipment (i)
(Note 23)
£m
RMS
dmg information
dmg events
Euromoney
dmg media
Corporate costs
Relating to discontinued
operations
Continuing operations
19
(17.8)
(20.6)
(0.1)
(0.9)
(4.8)
(44.2)
–
(44.2)
0.9
(43.3)
–
(26.1)
(0.2)
(5.4)
(0.2)
(31.9)
–
(31.9)
5.4
(26.5)
–
(131.7)
–
–
–
(131.7)
–
(131.7)
–
(131.7)
–
(81.4)
–
–
(0.3)
(81.7)
–
(81.7)
–
(81.7)
(2.8)
(26.5)
(2.6)
(0.9)
(8.8)
(41.6)
(1.8)
(43.4)
0.9
(42.5)
–
–
–
–
(42.0)
(42.0)
–
(42.0)
–
(42.0)
(i)
Following continued declines in the UK printing market the Group has decided to close its Didcot print site, resulting in an impairment
charge of £41.3 million.
The Group’s exceptional operating costs are analysed as follows:
Year ended 30 September 2017
RMS
dmg information
dmg events
Euromoney
dmg media
Corporate costs
Relating to discontinued operations
Continuing operations
Severance
costs
£m
Consultancy
charges
£m
Other
restructuring
costs
£m
Claims and
legal fees (i)
£m
0.5
(11.2)
–
–
(4.0)
(1.8)
(16.5)
–
(16.5)
(3.3)
(1.9)
–
(0.1)
–
–
(5.3)
0.1
(5.2)
–
(0.5)
(2.6)
–
(4.8)
–
(7.9)
–
(7.9)
(12.9)
(0.8)
–
–
(13.7)
0.8
(12.9)
Total
£m
(2.8)
(26.5)
(2.6)
(0.9)
(8.8)
(1.8)
(43.4)
0.9
(42.5)
The Group’s tax charge includes a related credit of £11.1 million in relation to these exceptional operating costs.
(i)
Exceptional charges in the dmg information segment include dispute settlements and fees paid to the Group’s lawyers in defence of
various claims brought against businesses in this segment.
The charge relates principally to a claim by CoStar Inc. (CoStar) against Xceligent, Inc. (Xceligent) asserting, inter alia, misuse by Xceligent
of CoStar’s intellectual property. Xceligent has filed a motion to dismiss on the basis that CoStar’s actions are contrary to a Federal Trade
Commission (FTC) consent order which was put in place when Xceligent was spun out of CoStar’s acquisition of LoopNet. The damages
claimed have not been quantified and the Group has made no provision for any claim.
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Daily Mail and General Trust plc Annual Report 2017
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An analysis of the depreciation of property, plant and equipment and investment property, research costs, investment revenue, and net
finance costs by segment is as follows:
Year ended 30 September 2017
RMS
dmg information
dmg events
Euromoney
dmg media
Corporate costs
Relating to discontinued operations
Continuing operations
Year ended 30 September 2016
RMS
dmg information
dmg events
Euromoney
dmg media
Corporate costs
Discontinued operations
Continuing operations
Adjusted operating profit
Exceptional operating costs, impairment of internally generated
and acquired computer software, property, plant and equipment
and investment property
Impairment of goodwill and acquired intangible assets arising
on business combinations
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 investment revenue, net finance costs and tax
Investment revenue
Net finance costs
Profit before tax
Tax
Profit from discontinued operations
Profit for the year
Depreciation of
property, plant
and equipment
(Note 23)
£m
Note
Research costs
£m
Investment
revenue
(Note 9)
£m
Net finance
costs
(Note 10)
£m
(5.9)
(10.3)
(0.5)
(0.8)
(16.8)
(34.3)
(0.2)
(34.5)
0.8
(33.7)
Total and
external
revenue
£m
205.0
498.2
105.4
403.1
705.6
1,917.3
(403.1)
1,514.2
19
Note
(i)
19, (ii)
(ii)
21, 22
22
7
8
9
10
11
19
(40.3)
(1.8)
–
(2.5)
(1.4)
(46.0)
–
(46.0)
2.5
(43.5)
0.3
0.5
–
–
1.5
2.3
0.2
2.5
–
2.5
(0.1)
38.5
–
(0.7)
(3.5)
34.2
(35.2)
(1.0)
0.7
(0.3)
Segment
operating
profit
£m
Less operating
profit/(loss)
of joint ventures
and associates
£m
Adjusted
operating
profit
£m
35.5
76.3
29.0
104.3
96.4
341.5
(104.3)
(0.5)
(0.3)
–
4.3
19.4
22.9
(4.3)
36.0
76.6
29.0
100.0
77.0
318.6
(41.6)
(100.0)
177.0
(41.8)
(24.9)
(24.7)
85.6
4.9
90.5
130.8
221.3
2.2
(21.8)
201.7
(19.9)
32.4
214.2
(i)
Included within corporate costs is a credit of £0.9 million which adjusts the pensions charge recorded in each operating segment from
a cash rate to the net service cost in accordance with IAS 19 (Revised), Employee Benefits.
(ii)
Revenue and adjusted operating profit relating to the discontinued operations of Euromoney businesses have been deducted in order
to reconcile total segment result to Group profit before tax from continuing operations.
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Financial Statements
Financial Statements
Notes to the accounts
3 Segment analysis continued
An analysis of the amortisation and impairment of goodwill and intangible assets, exceptional operating costs and impairment of property,
plant and equipment and investment property by segment is as follows:
Year ended 30 September 2016
Note
RMS
dmg information
dmg events
Euromoney
dmg media
Corporate costs
Relating to discontinued operations
Continuing operations
19
Amortisation
of intangible
assets not arising
on business
combinations
(Note 22)
£m
Amortisation
of intangible
assets arising
on business
combinations
(Note 22)
£m
Impairment of
goodwill and
intangible assets
arising on
business
combinations
(Notes 21, 22)
£m
Exceptional
operating costs
£m
Impairment of
property, plant
and equipment
(Note 23)
£m
(6.2)
(13.3)
–
(3.7)
(4.4)
(27.6)
–
(27.6)
3.7
(23.9)
–
(23.7)
(0.7)
(17.6)
(0.3)
(42.3)
–
(42.3)
17.6
(24.7)
–
–
–
(28.7)
(24.9)
(53.6)
–
(53.6)
28.7
(24.9)
(2.7)
(5.7)
(0.9)
(12.9)
(23.6)
(45.8)
(8.7)
(54.5)
12.9
(41.6)
–
–
–
–
(0.2)
(0.2)
–
(0.2)
–
(0.2)
In Euromoney the impairment charge includes £12.9 million relating to Indaba, £8.2 million to Total Derivatives, £5.9 million to Hedge Fund
Intelligence and £1.7 million to Euromoney Indices reflecting the challenging market conditions in the energy and financial sectors and
weakness in the commodity markets.
In dmg media the impairment charge of £24.9 million relates to the goodwill and intangible assets arising on business combinations
of Elite Daily following continued poor performance in that business.
The Group’s tax charge includes a related credit of £2.8 million in respect of impairment of goodwill and intangible assets.
The Group’s exceptional operating costs are analysed as follows:
Year ended 30 September 2016
RMS
dmg information
dmg events
Euromoney
dmg media
Corporate costs
Relating to discontinued operations
Continuing operations
Severance
costs
£m
Consultancy
charges
£m
Other
restructuring
costs
£m
Supplier
entering
voluntary
administration
£m
(2.7)
(4.4)
(0.5)
(3.3)
(9.8)
(4.1)
(24.8)
3.3
(21.5)
–
(0.9)
–
(0.3)
(4.5)
(4.5)
(10.2)
0.3
(9.9)
–
(0.4)
(0.4)
–
(1.2)
–
(2.0)
–
(2.0)
–
–
–
–
(5.1)
–
(5.1)
–
(5.1)
Overseas
sales tax (i)
Legal fees (i)
£m
–
–
–
(7.9)
–
–
(7.9)
7.9
–
£m
–
–
–
(1.4)
–
(0.1)
(1.5)
1.4
(0.1)
Contingent
consideration
required to be
shown as
remuneration
£m
–
–
–
–
(3.0)
–
(3.0)
–
(3.0)
Total
£m
(2.7)
(5.7)
(0.9)
(12.9)
(23.6)
(8.7)
(54.5)
12.9
(41.6)
The Group’s tax charge includes a related credit of £15.0 million in relation to these exceptional operating costs.
(i)
In the Euromoney segment the provision for overseas sales tax of £7.9 million relates to a claim by tax authorities in the US which is being
challenged. Exceptional legal fees in Euromoney relate to a legal dispute with the previous owners of Centre for Investor Education.
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An analysis of the depreciation of property, plant and equipment and investment property, research costs, investment revenue, and net
finance costs by segment is as follows:
Year ended 30 September 2016
RMS
dmg information
dmg events
Euromoney
dmg media
Corporate costs
Depreciation of
property, plant
and equipment
(Note 23)
£m
Note
Research costs
£m
Investment
revenue
(Note 9)
£m
Net finance
costs
(Note 10)
£m
(6.6)
(9.5)
(0.5)
(2.8)
(16.8)
(36.2)
–
(36.2)
2.8
(33.4)
(28.7)
(7.2)
–
(8.3)
(1.8)
(46.0)
–
(46.0)
8.3
(37.7)
0.2
0.2
–
0.3
1.8
2.5
–
2.5
(0.3)
2.2
–
27.0
–
(1.1)
(3.5)
22.4
(45.3)
(22.9)
1.1
(21.8)
Relating to discontinued operations
Continuing operations
19
The Group’s revenue comprises sales excluding value added tax, less discounts and commission where applicable and is analysed as follows:
Print advertising
Digital advertising
Circulation
Subscriptions
Events, conferences and training
Transactions and other
Year ended
30 September
2017
Total
£m
203.6
142.7
307.8
517.4
140.9
347.1
1,659.5
Year ended
30 September
2017
Discontinued
operations
(Note 19)
£m
Year ended
30 September
2017
Continuing
operations
£m
Year ended
30 September
2016
Total
£m
Year ended
30 September
2016
Discontinued
operations
(Note 19)
£m
Year ended
30 September
2016
Continuing
operations
£m
7.1
2.0
–
63.5
24.7
(2.1)
95.2
196.5
140.7
307.8
453.9
116.2
349.2
1,564.3
247.9
131.6
314.7
623.2
233.9
366.0
1,917.3
39.3
–
–
232.4
127.8
3.6
403.1
208.6
131.6
314.7
390.8
106.1
362.4
1,514.2
Investment revenue is shown in Note 9 and finance income in Note 10.
Transactions and other within discontinued operations include a £3.8 million foreign exchange loss on forward contracts in the
Euromoney segment.
By geographic area
The majority of the Group’s operations are located in the United Kingdom, North America, rest of Europe, and Australia.
The 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.
UK
North America
Rest of Europe
Australia
Rest of the World
Year ended
30 September
2017
Total
£m
873.8
615.5
43.0
22.6
104.6
1,659.5
Year ended
30 September
2017
Discontinued
operations
(Note 19)
£m
Year ended
30 September
2017
Continuing
operations
£m
Year ended
30 September
2016
Total
£m
Year ended
30 September
2016
Discontinued
operations
(Note 19)
£m
Year ended
30 September
2016
Continuing
operations
£m
30.9
50.6
4.4
0.4
8.9
95.2
842.9
564.9
38.6
22.2
95.7
1,564.3
1,023.0
714.9
47.6
17.5
114.3
1,917.3
156.6
203.4
11.9
2.5
28.7
403.1
866.4
511.5
35.7
15.0
85.6
1,514.2
115
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Financial Statements
Financial Statements
Notes to the accounts
3 Segment analysis continued
The analysis below is based on the geographic location of customers in these regions.
UK
North America
Rest of Europe
Australia
Rest of the World
Year ended
30 September
2017
Total
£m
808.1
557.9
155.7
23.3
114.5
1,659.5
Year ended
30 September
2017
Discontinued
operations
(Note 19)
£m
Year ended
30 September
2017
Continuing
operations
£m
Year ended
30 September
2016
Total
£m
Year ended
30 September
2016
Discontinued
operations
(Note 19)
£m
Year ended
30 September
2016
Continuing
operations
£m
9.1
43.9
18.6
2.0
21.6
95.2
799.0
514.0
137.1
21.3
92.9
1,564.3
891.2
638.0
193.0
24.2
170.9
1,917.3
50.9
184.6
73.0
6.7
87.9
403.1
840.3
453.4
120.0
17.5
83.0
1,514.2
The closing net book value of goodwill, intangible assets and property, plant and equipment is analysed by geographic area as follows:
UK
North America
Rest of Europe
Australia
Rest of the World
Closing net
book value
of goodwill
(Note 21)
2017
£m
Closing net
book value
of goodwill
(Note 21)
2016
£m
Closing net
book value of
intangible assets
(Note 22)
2017
£m
Closing net
book value of
intangible assets
(Note 22)
2016
£m
Closing net
book value
of property,
plant and
equipment
(Note 23)
2017
£m
Closing net
book value
of property,
plant and
equipment
(Note 23)
2016
£m
92.0
231.2
25.7
2.3
11.9
363.1
234.4
687.7
30.2
5.1
24.2
981.6
47.4
145.7
18.2
–
1.7
213.0
122.5
345.4
25.0
1.3
5.0
499.2
79.1
19.3
3.3
0.6
1.0
103.3
132.8
36.6
3.8
0.7
2.2
176.1
The additions to non-current assets are analysed as follows:
Goodwill
(Note 21)
Year ended
30 September
2017
£m
Goodwill
(Note 21)
Year ended
30 September
2016
£m
Intangible assets
(Note 22)
Year ended
30 September
2017
£m
Intangible assets
(Note 22)
Year ended
30 September
2016
£m
Property, plant
and equipment
(Note 23)
Year ended
30 September
2017
£m
Property, plant
and equipment
(Note 23)
Year ended
30 September
2016
£m
–
0.4
–
–
–
–
0.4
–
24.2
1.6
8.9
4.4
–
39.1
–
56.7
0.2
0.5
1.2
–
58.6
14.1
66.4
1.3
14.0
5.5
–
101.3
2.5
10.2
0.4
2.8
4.7
0.5
21.1
2.2
11.2
0.4
3.8
9.9
–
27.5
RMS
dmg information
dmg events
Euromoney
dmg media
Centrally held
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4 Operating (loss)/profit analysis
Operating (loss)/profit before the share of results of joint ventures and associates is further analysed as follows:
Year ended
30 September
2017
Total
£m
Note
Year ended
30 September
2017
Discontinued
operations
(Note 19)
£m
Year ended
30 September
2017
Continuing
operations
£m
Year ended
30 September
2016
Total
£m
Year ended
30 September
2016
Discontinued
operations
(Note 19)
£m
Year ended
30 September
2016
Continuing
operations
£m
Revenue
1,659.5
95.2
1,564.3
1,917.3
403.1
1,514.2
Decrease in stocks of finished goods
and work in progress
Raw materials, consumables and direct
event costs
Inventories recognised as an expense
in the year
Staff costs
Impairment of goodwill and
intangible assets
Amortisation of intangible assets
arising on business combinations
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
Rental of property
Other property costs
Rental of plant and equipment
Foreign exchange translation differences
Other expenses
Operating (loss)/profit
(4.3)
(236.8)
(241.1)
(588.3)
–
–
–
(38.3)
(4.3)
(0.9)
(236.8)
(317.2)
(241.1)
(550.0)
21, 22
(213.4)
–
(213.4)
22
22
23
23
(31.9)
(44.2)
(41.9)
(41.6)
(111.0)
(42.5)
(51.2)
(34.5)
(42.0)
(29.5)
(26.9)
(22.8)
(0.2)
(228.9)
(132.4)
(5.4)
(0.9)
(1.6)
(8.2)
(3.5)
(0.6)
–
(0.8)
–
–
(3.6)
–
(0.3)
(19.0)
13.0
(26.5)
(43.3)
(40.3)
(33.4)
(107.5)
(41.9)
(51.2)
(33.7)
(42.0)
(29.5)
(23.3)
(22.8)
0.1
(209.9)
(145.4)
(318.1)
(682.0)
(53.6)
(42.3)
(27.6)
(59.2)
(69.8)
(117.3)
(40.4)
(79.5)
(36.2)
(0.2)
(23.2)
(36.6)
(28.4)
2.7
(179.2)
126.4
–
–
–
(143.5)
(28.7)
(17.6)
(3.7)
(6.4)
(40.5)
(11.6)
(2.5)
–
(2.8)
–
–
(13.1)
–
1.9
(93.8)
40.8
(0.9)
(317.2)
(318.1)
(538.5)
(24.9)
(24.7)
(23.9)
(52.8)
(29.3)
(105.7)
(37.9)
(79.5)
(33.4)
(0.2)
(23.2)
(23.5)
(28.4)
0.8
(85.4)
85.6
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Financial Statements
Financial Statements
Notes to the accounts
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
Audit-related assurance services
Services relating to tax compliance
Services relating to tax advisory
Assurance services
Services relating to corporate finance transactions
Other non-audit services
Total remuneration
6 Employees
The average monthly number of persons employed by the Group including Directors is analysed as follows:
Year ended
30 September
2017
£m
Year ended
30 September
2016
£m
0.3
2.6
2.9
0.5
–
–
0.3
–
0.1
0.9
3.8
0.2
2.5
2.7
0.3
0.1
0.1
–
0.1
0.2
0.8
3.5
RMS
dmg information
dmg events
Euromoney
dmg media
DMGT Board and head office
Note
(i)
Year ended
30 September
2017
Number
Year ended
30 September
2016
Number
1,149
3,772
359
2,192
2,417
56
9,945
1,106
3,591
342
2,262
2,734
73
10,108
(i)
Represents the average monthly number of persons employed by Euromoney for the period ended 31 December 2016 when Euromoney
ceased to be a subsidiary.
The total average number of persons employed by the Group in the year, for the purposes of calculating an average cost per employee,
is 8,301 (2016 10,108).
Total staff costs comprised:
Wages and salaries
Share-based payments
Social security costs
Pension costs
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Note
42
35
Year ended
30 September
2017
£m
Year ended
30 September
2016
£m
539.7
3.9
47.3
13.3
604.2
604.6
16.6
59.5
15.3
696.0
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Daily Mail and General Trust plc Annual Report 2017
7 Share of results of joint ventures and associates
Share of adjusted operating (losses)/profits from operations of joint ventures
Share of adjusted operating profits from operations of associates
Share of profits before exceptional operating costs, amortisation, impairment of goodwill,
interest and tax
Share of exceptional operating costs of associates
Share of amortisation of intangibles arising on business combinations of joint ventures
Share of amortisation of intangibles arising on business combinations of associates
Share of associates’ interest payable
Share of joint ventures’ tax
Share of associates’ tax
Share of impairment of intangibles arising on business combinations of associates
Impairment of carrying value of joint ventures
Impairment of carrying value of associates
Note
(i)
11, 13
11, 13
13
13, 24, (ii)
13, 24, (iii)
Share of associates’ items of other comprehensive income
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 ventures
Impairment of carrying value of associates
Share of associates’ items of other comprehensive income
Share of results of joint ventures and associates
Year ended
30 September
2017
£m
Year ended
30 September
2016
£m
(0.1)
68.6
68.5
(6.7)
(0.1)
(17.1)
(4.5)
–
(5.2)
(13.7)
(3.3)
(1.0)
16.9
(9.7)
7.2
(0.2)
21.4
(3.3)
(1.0)
16.9
(9.7)
7.2
0.6
18.0
18.6
(3.1)
–
(4.8)
(1.1)
(0.3)
(3.0)
–
(0.1)
(1.3)
4.9
–
4.9
0.3
6.0
(0.1)
(1.3)
4.9
–
4.9
(i)
Share of adjusted operating profits from associates includes £47.2 million from the Group’s interest in Euromoney and £24.7 million
(2016 £21.4 million) from the Group’s interest in ZPG Plc (ZPG) in the dmg media segment.
(ii)
Represents a £3.0 million write-down in the carrying value of Knowlura in the dmg information segment and a £0.3 million write-down
in the carrying value of Artirix in the dmg media segment. In the prior period, represents a write-down in the carrying value of Mail Today
Newspapers Pte Ltd in the dmg media segment.
(iii) Represents a £0.5 million write-down in the carrying value of Carspring in the dmg media segment and £0.5 million write-down in the
carrying value of iProf Learning Solutions in the dmg information segment. In the prior period, represents a write-down in the carrying
value of Spaceway Storage Services UK Ltd in the dmg media segment.
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Financial Statements
Financial Statements
Notes to the accounts
8 Other gains and losses
Impairment of available-for-sale assets
Impairment of held-for-sale-assets
Profit on disposal of property, plant and equipment
(Loss)/profit on sale and closure of businesses
Recycled cumulative translation differences
Gain on dilution of stake in associate
Gain on change in control
Profit on disposal of joint ventures and associates
Note
13, 25
20
13
13, 18, (i)
13, 18, 39, 40, (ii)
24, (iii)
13, (iv)
13, (v)
Year ended
30 September
2017
£m
Year ended
30 September
2016
£m
(0.5)
(4.1)
–
(6.5)
4.7
18.0
–
2.4
14.0
–
–
0.5
66.4
0.6
–
13.5
49.8
130.8
There is a tax charge of £0.2 million in relation to these other gains and losses (2016 £3.5 million).
(i)
Principally relates to a £6.2 million profit on disposal of Elite Daily in the dmg media segment offset by a loss of £6.5 million representing
an adjustment to the net assets sold with Wowcher in the dmg media segment and a loss of £4.4 million on sale of various businesses
in the Education sector in the dmg information segment.
In the prior year this principally relates to a £60.5 million profit on disposal of Wowcher in the dmg media segment, £5.3 million profit
on sale of Gulf Publishing and £1.7 million profit on sale of The Petroleum Economist both in the Euromoney segment.
(ii)
Represents cumulative translation differences required to be recycled through the Consolidated Income Statement on disposals.
(iii) During the year ZPG placed 5.0% of its issued share capital to part fund the acquisition of Hometrack.co.uk Ltd. The Group did not
participate in this placing and accordingly the Group’s stake in ZPG was diluted. In accordance with IAS 28, Investments in Associates and
Joint Ventures, the dilution in the Group’s share of ZPG has been treated as a deemed disposal. The carrying value of the investment has
increased resulting in a gain on dilution.
(iv) During the prior period, the Group increased its interests in Dailymail.com Australia Pty Ltd in the dmg media segment and Instant
Services AG, The Petrochemical Standard Inc. and Ochresoft Technologies Ltd, in the dmg information segment and obtained control.
In accordance with IFRS 3, Business Combinations, the difference between the fair value of these investments and their carrying value
at the date control passed to the Group is been treated as a gain during the relevant period.
(v)
Principally relates to the disposal of the Group’s holding in Fortunegreen, Spaceway Storage Services in the dmg media segment and
Clipper Data. During the prior period, this principally relates to the disposal of the Group’s 38.7% equity stake in Local World Holdings Ltd,
held by the dmg media segment.
9 Investment revenue
Dividend income
Interest receivable from short-term deposits
Interest receivable on loan notes
Year ended
30 September
2017
£m
Year ended
30 September
2016
£m
0.1
1.0
1.4
2.5
–
0.4
1.8
2.2
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Daily Mail and General Trust plc Annual Report 2017
10 Net finance costs
Interest, arrangement and commitment fees payable on bonds, bank loans and loan notes
Loss on derivatives, or portions thereof, not designated for hedge accounting
Finance charge on defined benefit pension schemes
Change in fair value of derivative hedge of bond
Change in fair value of hedged portion of bond
Finance charge on discounting of contingent consideration payable
Fair value movement of undesignated financial instruments
Finance costs
Fair value movement of contingent consideration payable
Fair value movement of undesignated financial instruments
Change in present value of acquisition put options
Finance income
Net finance costs
Note
13, 35
16, 34
16, 34
36, (i)
13
13, 36, (i)
13
13, 34
Year ended
30 September
2017
£m
Year ended
30 September
2016
£m
(37.2)
(1.7)
(4.9)
(4.7)
4.7
–
–
(43.8)
28.6
7.5
7.4
43.5
(0.3)
(37.5)
(1.5)
(4.6)
2.3
(2.3)
(0.1)
(5.4)
(49.1)
12.3
–
15.0
27.3
(21.8)
(i)
The fair value movement of contingent consideration arises from the requirement of IFRS 3, Business Combinations, to measure such
consideration at fair value with changes in fair value taken to the Income Statement.
The finance income/(charge) on the discounting of contingent consideration arises from the unwinding of the discount following the
requirement under IFRS 3, Business Combinations, to record contingent consideration at fair value using a discounted cash flow approach.
11 Tax
The charge on the profit for the period consists of:
UK tax
Corporation tax at 19.5% (2016 20.0%)
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
Relating to discontinued operations
Year ended
30 September
2017
£m
Year ended
30 September
2016
£m
Note
–
0.3
0.3
(12.0)
–
(12.0)
(11.7)
(62.4)
5.4
(57.0)
(68.7)
4.0
(64.7)
37
19
(0.6)
(1.9)
(2.5)
(33.0)
0.8
(32.2)
(34.7)
(12.0)
14.0
2.0
(32.7)
12.8
(19.9)
121
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Financial Statements
Financial Statements
Notes to the accounts
11 Tax continued
In the March 2016 Budget the UK Government announced plans to introduce new rules with effect from 1 April 2017 which would restrict the
deductibility of net interest costs and restrict the amount of tax losses that can be offset against taxable profits to 50% of those losses. The
proposed changes were substantively enacted after the balance sheet date in November 2017 and therefore their effects are not included in
these financial statements. If the changes had been substantively enacted by the balance sheet date, they would have had no material effect
on the deferred tax assets and deferred tax expense.
The current and deferred tax implications of Brexit on the Group have been considered by management and are not expected to have any
material impact.
A deferred tax credit of £49.3 million (2016 £6.4 million charge) relating to the actuarial movement on defined benefit pension schemes and
a deferred tax credit of £nil (2016 £1.4 million) relating to derivative financial instruments were recognised directly in the Consolidated
Statement of Comprehensive Income. A deferred tax charge of £0.4 million (2016 credit of £1.4 million) and a current tax credit of £nil
(2016 £5.4 million) were recognised directly in equity (Notes 39 and 40).
Legislation was passed in November 2015 to reduce the UK corporation tax rate from 20.0% to 19.0% from 1 April 2017. A further 2.0%
reduction was enacted in September 2016. UK deferred tax balances therefore have been measured at 17.0% as this is the tax rate that will
apply on reversal unless the timing difference is expected to reverse before April 2020, in which case the appropriate tax rate has been used.
The tax charge for the year is lower than the standard rate of corporation tax in the UK of 19.5% (2016 20.0%) representing the weighted
average annual corporate tax rate for the full financial year. The differences are explained below:
(Loss)/profit 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
Derecognition of previously recognised deferred tax assets
Effect of overseas tax rates
Effect of associates
Unrecognised tax losses utilised
Write off/disposal of subsidiaries
Effect of change in tax rate
Adjustment in respect of prior years
Other
Total tax charge on the profit for the year
Year ended
30 September
2017
£m
Year ended
30 September
2016
£m
Note
(112.3)
523.3
411.0
(80.1)
(28.4)
0.4
7.7
(109.9)
21.6
4.5
7.7
102.3
(0.2)
5.7
–
(68.7)
201.7
45.2
246.9
(49.4)
(7.9)
(0.1)
17.0
(30.2)
(0.9)
0.9
0.1
25.5
(2.4)
12.9
1.8
(32.7)
(i)
(ii)
13
(i)
Additional items deductible for tax purposes of £7.7 million (2016 £17.0 million) primarily relate to financing arrangements that result
in asymmetrical tax treatments in the territories involved. Some of these are expected to recur in the short term.
(ii) The net prior year credit of £5.7 million (2016 £12.9 million) arose largely from a reassessment of temporary differences.
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Daily Mail and General Trust plc Annual Report 2017
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Adjusted tax on profits before amortisation and impairment of intangible assets, restructuring costs and non-recurring items (adjusted tax
charge) amounted to a charge of £29.0 million (2016 £37.4 million) and the resulting rate is 12.8% (2016 14.4%). The differences between the
tax charge and the adjusted tax charge are shown in the reconciliation below:
Total tax charge on the profit for the year
Share of tax in joint ventures and associates
Deferred tax on intangible assets
Reassessment of temporary differences
Tax on other adjusting items
Adjusted tax charge on the profit for the year
Year ended
30 September
2017
£m
Year ended
30 September
2016
£m
(68.7)
(4.9)
(29.6)
108.9
(34.7)
(29.0)
(32.7)
(2.5)
(12.0)
24.0
(14.2)
(37.4)
Note
7, 19
13
In calculating the adjusted tax rate, the Group excludes the potential future impact of the deferred tax effects of intangible assets (other than
internally generated and acquired computer software), as the Group prefers to give users of its accounts a view of the tax charge based on the
current status of such items. Deferred tax would only crystallise on a sale of the relevant businesses, which is not anticipated at the current
time, and such a sale, being an exceptional item, would result in an exceptional tax impact.
Reassessment of temporary differences includes a net charge of £100.4 million (2016 £31.4 million) relating to the derecognition of overseas
tax losses and a net charge of £8.5 million (2016 credit of £9.7 million) relating to the derecognition of UK tax losses which are treated as
exceptional due to their distortive impact on the Group’s adjusted tax charge.
Uncertain tax positions
At 30 September 2017 the Group’s 49.9% associate, Euromoney held provisions for uncertain tax of £10.2 million (30 September 2016
£12.5 million) relating to permanent establishment risk and challenges by tax authorities. The maximum potential additional exposure to
Euromoney in relation to challenges by tax authorities not provided for is approximately £28.0 million if all cases were to be settled at their
maximum potential liability. These additional exposures include challenges by: the Canadian Revenue Agency (CRA) on a foreign currency
trade in 2009, which has a maximum exposure of £20.0 million; and the UK’s HMRC on a share-for-share exchange with Euromoney’s
investment in Dealogic, which has a maximum exposure of £11.0 million of which £2.8 million has been provided. On 23 October 2017, the
CRA issued a Notice of Reassessment to BCA Research Inc (BCA) based on the CRA view that the loss sustained by BCA on an intra-group
derivative transaction cannot be deducted in computing income. We are confident that we will be able to set aside these reassessments
through the normal litigation process, which has already begun. Nonetheless, BCA is obligated either to pay one-half of the consequential
tax owing or to provide security for payment satisfactory to the CRA.
12 Dividends paid
Amounts recognisable as distributions to equity holders in the year
Ordinary Shares – final dividend for the year ended 30 September 2016
A Ordinary Non-Voting Shares – final dividend for the year ended 30 September 2016
Ordinary Shares – final dividend for the year ended 30 September 2015
A Ordinary Non-Voting Shares – final dividend for the year ended 30 September 2015
Ordinary Shares – interim dividend for the year ended 30 September 2017
A Ordinary Non-Voting Shares – interim dividend for the year ended
30 September 2017
Ordinary Shares – interim dividend for the year ended 30 September 2016
A Ordinary Non-Voting Shares – interim dividend for the year ended
30 September 2016
Year ended
30 September
2017
Pence per share
Year ended
30 September
2017
£m
Year ended
30 September
2016
Pence per share
Year ended
30 September
2016
£m
15.3
15.3
–
–
6.9
6.9
–
–
3.0
50.9
–
–
53.9
1.4
23.0
–
–
24.4
78.3
–
–
14.9
14.9
–
–
6.7
6.7
–
–
3.0
49.7
52.7
–
–
1.3
22.4
23.7
76.4
The Board has declared a final dividend of 15.8 pence per Ordinary/A Ordinary Non-Voting Share (2016 15.3 pence) which will absorb an
estimated £55.8 million (2016 £55.4 million) of shareholders’ equity for which no liability has been recognised in these financial statements.
It will be paid on 9 February 2018 to shareholders on the register at the close of business on 8 December 2017.
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Financial Statements
Financial Statements
Notes to the accounts
13 Adjusted profit
(Loss)/profit before tax – continuing operations
Profit before tax – discontinued operations
Profit on disposal of discontinued operations including recycled cumulative translation differences
Adjust for:
Amortisation of intangible assets in Group profit, including joint ventures and associates,
arising on business combinations
Impairment of goodwill and intangible assets arising on business combinations
Impairment of goodwill and intangible assets arising on business combinations of joint ventures
and associates
Exceptional operating costs, impairment of internally generated and acquired computer software
and property, plant and equipment
Share of exceptional operating costs of joint ventures and associates
Impairment of carrying value of joint ventures and associates
Other gains and losses:
Impairment of available-for-sale assets
Impairment of held-for-sale-assets
Profit on disposal of property, plant and equipment
Profit on disposal of businesses, joint ventures, associates, change of control and recycled
cumulative translation differences
Profit on disposal of discontinued operations including recycled cumulative translation differences
Finance costs:
Finance charge on defined benefit pension schemes
Fair value movements including share of joint ventures and associates
Tax:
Share of tax in joint ventures and associates
Adjusted profit before tax and non-controlling interests
Total tax charge on the profit for the year
Adjust for:
Share of tax in joint ventures and associates
Deferred tax on intangible assets
Reassessment of temporary differences
Tax on other adjusting items
Non-controlling interests
Adjusted profit after taxation and non-controlling interests
Note
3
19
19
3, 7, 19
3, 19
7
3, 19
7, 19
7
8
8
8
8, 19
19
10
(i), 10, 19
7, 11
11
7
11
11
11
(ii)
Year ended
30 September
2017
£m
Year ended
30 September
2016
£m
(112.3)
14.0
509.3
50.3
131.7
13.7
167.1
6.7
4.3
0.5
4.1
–
(21.0)
(509.3)
4.9
(42.8)
4.9
226.1
(68.7)
(4.9)
(29.6)
108.9
(34.7)
(0.8)
196.3
201.7
45.2
–
51.5
53.6
–
54.7
3.5
1.5
–
–
(0.5)
(137.4)
–
4.6
(21.3)
2.5
259.6
(32.7)
(2.5)
(12.0)
24.0
(14.2)
(24.4)
197.8
(i)
Fair value movements include movements on undesignated financial instruments, contingent consideration payable and receivable and
change in value of acquisition put options.
(ii)
The adjusted non-controlling interests’ share of profits for the year of £0.8 million (2016 £24.4 million) is stated after eliminating a charge
of £3.8 million (2016 £14.4 million), being the non-controlling interests’ share of adjusting items.
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Daily Mail and General Trust plc Annual Report 2017
14 Earnings per share
Basic earnings per share of 97.8 pence (2016 57.8 pence) and diluted earnings per share of 96.3 pence (2016 56.4 pence) are calculated,
in accordance with IAS 33, Earnings per share, on Group profit for the financial year of £345.3 million (2016 £204.2 million) as adjusted
for the effect of dilutive Ordinary Shares of £0.1 million (2016 £0.9 million) and earnings from discontinued operations of £519.3 million
(2016 £32.4 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 55.6 pence (2016 56.0 pence)
are calculated on profit for continuing and discontinued operations before exceptional operating costs, impairment of goodwill and intangible
assets, amortisation of intangible assets arising on business combinations, other gains and losses and exceptional financing costs after
taxation and non-controlling interests associated with those profits, of £196.3 million (2016 £197.8 million), as set out in Note 13 and on the
basic weighted average number of Ordinary Shares in issue during the year.
Basic and diluted earnings per share:
(Losses)/earnings from continuing operations
Effect of dilutive Ordinary Shares
Earnings from discontinued operations
Adjusted earnings from continuing and discontinued operations
Effect of dilutive Ordinary Shares
(Losses)/earnings per share from continuing operations
Effect of dilutive Ordinary Shares
Earnings per share from discontinued operations
Earnings per share from continuing and discontinued operations
Adjusted earnings per share from continuing and discontinued operations
Effect of dilutive Ordinary Shares
Adjusted earnings per share from continuing and discontinued operations
Year ended
30 September
2017
Diluted earnings
£m
Year ended
30 September
2016
Diluted earnings
£m
Year ended
30 September
2017
Basic earnings
£m
Year ended
30 September
2016
Basic earnings
£m
(174.0)
(0.1)
519.3
345.2
196.3
(0.1)
196.2
171.8
(0.9)
32.4
203.3
197.8
(0.9)
196.9
(174.0)
–
519.3
345.3
196.3
–
196.3
171.8
–
32.4
204.2
197.8
–
197.8
Year ended
30 September
2017
Diluted
pence
per share
Year ended
30 September
2016
Diluted
pence
per share
Year ended
30 September
2017
Basic
pence
per share
Year ended
30 September
2016
Basic
pence
per share
(48.5)
–
144.8
96.3
54.7
–
54.7
47.6
(0.2)
9.0
56.4
54.9
(0.2)
54.7
(49.3)
–
147.1
97.8
55.6
–
55.6
48.6
–
9.2
57.8
56.0
–
56.0
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
Own shares held
Basic earnings per share denominator
Effect of dilutive share options
Dilutive earnings per share denominator
Year ended
30 September
2017
Number
m
Year ended
30 September
2016
Number
m
362.1
(9.0)
353.1
5.5
358.6
362.4
(9.0)
353.4
7.2
360.6
125
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Financial Statements
Financial Statements
Notes to the accounts
15 EBITDA and cash generated by operations
Continuing operations
Adjusted operating profit
Non-exceptional depreciation charge
Amortisation of internally generated and acquired computer software
Operating profits from joint ventures and associates
Share of charge of depreciation and amortisation of internally generated and acquired computer
software of joint ventures and associates
Dividend income
Discontinued operations
Adjusted operating profit
Non-exceptional depreciation charge
Amortisation of internally generated and acquired computer software
Share of profits from operations of joint ventures and associates
EBITDA
Adjustments for:
Share-based payments
Loss on disposal of property, plant and equipment
Pension charge less than cash contributions
Share of profits from joint ventures and associates
Exceptional operating costs
Dividend income
Share of depreciation charge of joint ventures and associates
Decrease in inventories
Decrease/(increase) in trade and other receivables
Increase in trade and other payables
Decrease in provisions
Additional payments into pension schemes
Cash generated by operations
Note
3
3, 19
3, 22
7
9
19
19
19
19
39, 40
3
7, 19
3
9
Year ended
30 September
2017
£m
Year ended
30 September
2016
£m
179.0
33.7
43.3
68.5
4.0
0.1
19.3
0.8
0.9
0.8
350.4
4.1
–
–
(69.3)
(43.4)
(0.1)
(4.0)
3.6
8.0
0.4
(3.9)
(13.1)
232.7
177.0
33.4
23.9
18.6
–
–
100.0
2.8
3.7
4.3
363.7
16.0
0.4
(0.9)
(22.9)
(54.5)
–
–
4.2
(11.2)
2.6
(2.4)
(34.0)
261.0
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Daily Mail and General Trust plc Annual Report 2017
16 Analysis of net debt
Note
29
29, 33
33
33
33
33
33
(ii)
28
Cash and cash equivalents
Bank overdrafts
Net cash and cash equivalents
Debt due within one year
Loan notes
Finance lease obligations
Debt due after one year
Bonds
Bank loans
Finance lease obligations
Net debt before effect
of derivatives
Effect of derivatives on debt
Collateral deposits
Net debt at closing exchange rate
Net debt at average exchange rate
At
30 September
2016
£m
Cash flow
£m
Fair value
hedging
adjustments
Note 10
£m
Foreign
exchange
movements
£m
(11.2)
0.9
(10.3)
0.6
0.2
–
224.9
0.5
215.9
(6.6)
(2.6)
206.7
–
–
–
–
–
4.7
–
–
4.7
(4.7)
–
–
0.1
0.1
0.2
–
–
–
(3.5)
–
(3.3)
14.4
–
11.1
25.7
(8.2)
17.5
(2.4)
(0.4)
(425.3)
(267.7)
(0.7)
(679.0)
(16.8)
17.1
(678.7)
(643.9)
Other
non-cash
movements (i)
£m
–
–
–
–
(0.2)
(2.9)
–
(0.3)
(3.4)
–
–
(3.4)
At
30 September
2017
£m
14.6
(7.2)
7.4
(1.8)
(0.4)
(423.5)
(46.3)
(0.5)
(465.1)
(13.7)
14.5
(464.3)
(482.2)
The net cash outflow of £10.3 million (2016 £18.3 million) includes a cash outflow of £45.8 million (2016 £26.1 million) in respect of operating
exceptional items.
(i)
Other non-cash movements comprise the unwinding of bond issue discount amounting to £2.6 million (2016 £2.5 million), amortisation
of bond issue costs of £0.3 million (2016 £0.3 million), accrued collateral payments of £nil (2016 £3.0 million) together with the inception
of new finance leases of £0.5 million (2016 £0.6 million).
(ii)
The effect of derivatives on debt is the net currency gain or loss on derivatives entered into with the intention of economically converting
the currency borrowings into an alternative currency.
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Financial Statements
Financial Statements
Notes to the accounts
17 Summary of the effects of acquisitions
On 22 February 2017, the dmg events segment acquired 100% of the assets relating to the Coatings for Africa Symposium and Expo (CFA)
for total consideration of £0.2 million. The Coatings for Africa Show is a biennial trade show held in Johannesburg, South Africa for paints,
wallpaper and lacquer industry sectors.
CFA contributed £nil to the Group’s revenue, £nil to the Group’s operating profit and £nil to the Group’s profit after tax for the period between
the date of acquisition and 30 September 2017.
If the acquisition had been completed on the first day of the financial period, CFA would have contributed £nil to the Group’s revenue,
£nil to the Group’s operating profit and £nil to the Group’s adjusted profit after tax.
On 12 September 2017, the dmg information segment acquired 100% of the assets of Cerulean Analytics (CA) for total consideration
of £0.9 million. CA offers a web-based, interactive software platform used to monitor collateralised loan obligation performance.
CA contributed £nil to the Group’s revenue, £nil to the Group’s operating profit and £nil to the Group’s profit after tax for the period between
the date of acquisition and 30 September 2017.
If the acquisition had been completed on the first day of the financial period, CA would have contributed £nil to the Group’s revenue,
£nil to the Group’s operating profit and £nil to the Group’s adjusted profit after tax.
Provisional fair value of net assets acquired with all acquisitions:
Goodwill
Intangible assets
Group share of net assets acquired
Cost of acquisitions:
Cash paid in current year
Contingent consideration
Total consideration at fair value
Note
21, (i)
22
Note
36, (ii)
CFA
£m
–
0.2
0.2
CFA
£m
0.2
–
0.2
CA
£m
0.4
0.5
0.9
CA
£m
0.3
0.6
0.9
Total
£m
0.4
0.7
1.1
Total
£m
0.5
0.6
1.1
(i) The amount of goodwill which is deductible for the purposes of calculating the Group’s tax charge is £nil.
Goodwill arising on these acquisitions is principally attributable to the anticipated profitability relating to the distribution of the Group’s
products in new and existing markets and anticipated operating synergies from the business combinations.
(ii)
The contingent consideration recognised during the period is based on future business valuations and profit multiples and has been
estimated using available data forecasts. It is expected to fall due as follows: £0.1 million within one year, £0.1 million between one and
two years and £0.4 million between two and five years.
The estimated range of undiscounted outcomes for contingent consideration relating to acquisitions in the year is £nil to £1.1 million.
The contingent consideration has been discounted back to current values in accordance with IFRS 3, Business Combinations. In each case,
the Group has used acquisition accounting to account for the purchase.
All of the companies acquired during the period contributed £nil to the Group’s revenue and £nil to the Group’s profit after tax for the period
between the date of acquisition and 30 September 2017.
Acquisition-related costs, amounting to £0.2 million, are charged against profits for the period in the Consolidated Income Statement.
If all acquisitions had been completed on the first day of the period, Group revenues for the period would have been £1,564.3 million and
Group profit attributable to equity holders of the parent would have been a profit of £357.1 million. This information takes into account the
amortisation of acquired intangible assets together with related income tax effects but excludes any pre-acquisition finance costs and should
not be viewed as indicative of the results of operations that would have occurred if the acquisitions had actually been completed on the first
day of the period.
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Daily Mail and General Trust plc Annual Report 2017
Purchase of additional shares in controlled entities:
Cash consideration
Year ended
30 September
2017
£m
Year ended
30 September
2016
£m
2.1
0.2
During the year, the Group acquired additional shares in controlled entities amounting to £2.1 million (2016 £0.2 million).
Reconciliation to purchase of subsidiaries as shown in the Consolidated Cash Flow Statement:
Cash consideration
Cash paid to settle contingent consideration in respect of acquisitions
Cash paid to settle acquisition put options
Cash and cash equivalents acquired with subsidiaries
Purchase of subsidiaries
Note
36, (i)
Year ended
30 September
2017
£m
Year ended
30 September
2016
£m
0.5
8.2
18.0
–
26.7
37.4
0.3
–
(8.2)
29.5
(i)
Cash paid to settle contingent consideration in respect of acquisitions includes £7.5 million (2016 £0.3 million) within the dmg information
segment, £0.2 million (2016 £nil) within the dmg events segment and £0.5 million (2016 £nil) in the Euromoney segment.
18 Summary of the effects of disposals
On 8 December 2016, the Group announced its intention to reduce its holding in Euromoney Institutional Investor PLC (Euromoney) by the
sale of approximately 32.3 million shares in Euromoney. The sale comprised two parts:
(i) a placing and
(ii)
a buy-back by Euromoney and subsequent cancellation of the bought-back shares.
The effect of the sale was to reduce the Group’s holding from 67.9% of Euromoney’s issued share capital to 49.9% after which Euromoney
ceased to be a subsidiary and is accounted for as an associate.
Following loss of control the Group has also considered factors which may indicate de facto control. The Group has determined that it does
not have de facto control over Euromoney since it cannot block any ordinary resolutions, which comprise the majority of corporate actions,
has no control over the remuneration of Euromoney’s directors and has no control over Euromoney’s day-to-day operations nor budgets.
In addition, the Group has no material trading activities or relationships which are critical for Euromoney to carry out its business. The Group’s
relationship with Euromoney is monitored on an ongoing basis to ensure no change in this assessment.
On 1 February 2017, the dmg information segment disposed of the assets in Beat the GMAT (BTG) for consideration of £0.4 million.
On 17 April 2017, the dmg media segment disposed of the assets and brand of Elite Daily for total consideration of £7.2 million.
On 29 September 2017, the dmg information segment disposed of the Admissions software business. The consideration received comprised
a £15.7 million 9.0% loan note.
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Financial Statements
Notes to the accounts
18 Summary of the effects of disposals continued
The impact of the disposal of businesses completed during the period on net assets is as follows:
Elite Daily
£m
Admissions
£m
Other
£m
Sub Total
£m
Prior year
assets held
for sale
disposed in
current year
£m
Adjustment
on sale of
assets held
for sale in
current year
£m
Goodwill
Intangible assets
Property, plant and equipment
Investments in joint ventures
Investments in associates
Available-for-sale investments
Trade and other receivables
Derivative financial assets
Cash and cash equivalents
Trade and other payables
Current tax payable
Derivative financial liabilities
Retirement benefit obligations
Provisions
Deferred tax liabilities
Treasury shares
Net assets/(liabilities)disposed
Non-controlling interest share of net
assets disposed
Gain on remeasurement of retained
interest in Euromoney
Profit on sale of businesses including
recycled cumulative exchange differences
Satisfied by:
Cash received
Directly attributable costs paid
Deferred consideration
Fair value of available-for-sale investment
in BDG Media Inc.
Fair value of associate investment
in Euromoney retained
Intercompany loan forgiven
Loan notes
Working capital adjustment
Recycled cumulative translation
differences
Euromoney
£m
Note
21
22
23
24
24
25
35
36
37
39
433.8
147.7
12.7
0.2
29.8
5.8
141.2
0.4
32.0
(246.2)
(11.9)
(9.9)
(1.1)
(3.4)
(10.6)
14.1
534.6
40
(171.1)
357.4
BTG
£m
1.2
0.2
–
–
–
–
0.1
–
–
–
–
–
–
–
–
–
1.5
–
–
151.9
872.8
(0.8)
0.7
252.8
(3.5)
–
0.1
(0.1)
0.3
25
–
(i), 24
613.1
64.5
–
–
–
–
–
–
–
39
(54.1)
872.8
0.4
0.7
4.0
–
–
–
–
–
0.2
–
–
(4.4)
–
–
–
–
–
–
(0.2)
–
–
–
(0.2)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
6.2
6.2
2.2
(1.0)
–
3.4
–
–
1.6
–
–
6.2
5.4
10.6
0.7
–
–
–
11.4
–
–
(11.8)
–
–
–
–
–
–
16.3
–
–
0.2
2.6
–
–
–
–
0.6
–
–
(1.0)
–
–
–
(0.1)
–
–
2.3
–
–
440.6
161.1
13.4
0.2
29.8
5.8
153.3
0.4
32.0
(259.0)
(11.9)
(9.9)
(1.1)
(3.5)
(10.6)
14.1
554.7
(171.1)
357.4
0.8
17.1
(8.0)
(5.7)
150.1
891.1
–
(3.2)
–
–
–
–
15.7
–
4.6
17.1
255.1
(7.8)
0.3
3.4
613.1
64.5
17.3
(5.4)
–
–
–
–
–
–
(5.4)
(0.3)
(5.7)
(49.4)
891.1
Total
£m
444.6
161.1
13.4
0.2
29.8
5.8
153.7
0.4
32.0
(262.9)
(11.9)
(9.9)
(1.1)
(3.5)
(10.6)
14.1
555.2
(171.1)
357.4
–
–
–
–
–
–
0.2
–
–
0.5
–
–
–
–
–
–
0.7
–
–
2.4
3.1
152.5
894.0
0.6
(0.1)
2.4
–
–
–
–
–
255.7
(7.9)
2.7
3.4
613.1
64.5
17.3
(5.4)
–
2.9
(49.4)
894.0
(i)
This was measured in accordance with IFRS 10, as the fair value of this listed investment is quoted in an active market.
Reconciliation to disposal of businesses as shown in the Consolidated Cash Flow Statement:
Cash consideration net of disposal costs
Cash and cash equivalents disposed with subsidiaries
Proceeds on disposal of businesses
130
Year ended
30 September
2017
£m
Year ended
30 September
2016
£m
247.8
(32.0)
215.8
39.5
–
39.5
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In addition, the Group’s interest in Euromoney, before Euromoney ceased to be a subsidiary undertaking, was diluted during the period by
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 Condensed Consolidated Statement of Financial Position. The difference between the Group’s
share of net assets before and after this dilution is adjusted in retained earnings. The adjustment to retained earnings in the period was
a charge of £0.3 million (2016 £0.1 million).
The Group’s tax charge includes £4.4 million in relation to these disposals.
All of the businesses disposed of during the period generated £15.6 million of the Group’s net operating cash flows, paid £3.0 million
in investing activities and paid £0.8 million in financing activities.
Proceeds from redemption of preference share capital
During the prior period the Group received £14.4 million relating to preference share capital following the prior year sale of Capital DATA Ltd
in the Euromoney segment.
19 Discontinued operations
On 8 December 2016, the Group announced its intention to reduce its holding in Euromoney to 49.9% by a sale of approximately 32.3 million
shares in Euromoney. The sale comprised two parts:
(i)
a placing and
(ii)
a buy-back by Euromoney and subsequent cancellation for the bought-back shares.
The effect of the sale was to reduce DMGT’s holding from 67.9% of Euromoney’s issued share capital to 49.9% after which Euromoney ceased
to be a subsidiary and is accounted for as an Associate. The results of Euromoney up to the point of disposal are included in discontinued
operations for the current period.
The Group’s Consolidated Income Statement includes the following results from discontinued operations:
Revenue
Expenses
Depreciation
Amortisation of intangible assets not arising on business combinations
Adjusted operating profit
Exceptional operating costs
Impairment of goodwill and intangible assets
Amortisation of intangible assets arising on business combinations
Operating profit before share of results of joint ventures and associates
Share of adjusted operating profits from operations of joint ventures and associates
Share of exceptional operating costs of associates
Share of impairment of intangibles arising on business combinations of associates
Share of amortisation of intangibles arising on business combinations of associates
Share of interest payable of associates
Share of tax in associates
Total operating profit
Other gains and losses
Profit before net finance costs and tax
Investment revenue
Interest, arrangement and commitment fees payable on bonds, bank loans and loan notes
Change in present value of acquisition put options
Finance costs
Profit before tax
Tax charge
Profit after tax attributable to discontinued operations
Profit on disposal of discontinued operations
Recycled cumulative translation differences on disposal of discontinued operations
Profit attributable to discontinued operations
Note
3
3
3
3
3, 13
3
3, 13
13
13
13
13
13
11
13, 18
13, 18
Year ended
30 September
2017
£m
95.2
(74.2)
(0.8)
(0.9)
19.3
(0.9)
–
(5.4)
13.0
0.8
–
–
(1.2)
(0.6)
0.3
12.3
2.4
14.7
–
–
(0.7)
(0.7)
14.0
(4.0)
10.0
563.4
(54.1)
519.3
Year ended
30 September
2016
£m
403.1
(296.6)
(2.8)
(3.7)
100.0
(12.9)
(28.7)
(17.6)
40.8
4.3
(0.4)
(0.1)
(4.4)
(2.1)
0.8
38.9
7.1
46.0
0.3
(0.5)
(0.6)
(1.1)
45.2
(12.8)
32.4
–
–
32.4
During the period as a subsidiary undertaking Euromoney generated £15.3 million (2016 £87.1 million) of the Group’s net operating cash
flows, paid £3.0 million (2016 received £6.1 million) in respect of investing activities and paid £0.8 million (2016 £10.5 million) in respect
of financing activities.
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Financial Statements
Financial Statements
Notes to the accounts
20 Total assets and liabilities of businesses held for sale
At 30 September 2017, the assets and liabilities held for sale principally relate to EDR and Hobsons Solutions, both of which are included
in the dmg information 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 value with all losses taken to the Consolidated Income Statement.
The impairment charge recorded in the period in relation to these assets and liabilities amounted to £6.5 million, of which £2.4 million relates
to goodwill and intangible asset impairment and £4.1 million relates to impairment of other net assets (Note 8).
During the prior year, the assets and liabilities held for sale principally related to Euromoney Indices, HedgeFund Intelligence and the assets
of II Searches, all within the Euromoney 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 were recorded at their fair value with all losses taken to the Consolidated
Income Statement.
Goodwill
Intangible assets
Property, plant and equipment
Inventories
Trade and other receivables
Total assets associated with businesses held for sale
Trade and other payables
Current tax
Deferred tax
Total liabilities associated with businesses held for sale
Net assets/(liabilities) of the disposal group
At
30 September
2017
£m
At
30 September
2016
£m
Note
21
22
23
26
27
30
31
37
70.9
8.6
8.7
0.1
19.5
107.8
(16.8)
(5.3)
(6.9)
(29.0)
78.8
4.0
0.3
–
–
0.7
5.0
(5.5)
–
–
(5.5)
(0.5)
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Note
Goodwill
£m
17
18
20
17
18
20
966.3
39.1
(7.1)
(14.7)
90.3
1,073.9
0.4
(504.2)
(72.7)
8.8
506.2
Note
Goodwill
£m
3
18
20
3
18
20
57.6
46.8
(1.9)
(10.7)
0.5
92.3
117.0
(63.6)
(1.8)
(0.8)
143.1
908.7
981.6
363.1
21 Goodwill
Cost
At 30 September 2015
Additions
Disposals
Classified as held-for-sale
Exchange adjustment
At 30 September 2016
Additions
Disposals
Classified as held-for-sale
Exchange adjustment
At 30 September 2017
Accumulated impairment losses
At 30 September 2015
Impairment
Disposals
Classified as held-for-sale
Exchange adjustment
At 30 September 2016
Impairment
Disposals
Classified as held-for-sale
Exchange adjustment
At 30 September 2017
Net book value – 2015
Net book value – 2016
Net book value – 2017
Goodwill impairment losses recognised in the year amounted to £117.0 million (2016 £46.8 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 cash generating unit (CGU) that is significant. The Group considers this to be the case when the goodwill carrying
value of the individual CGU is 15.0% or more of the Group’s total carrying value of goodwill.
Using this criteria the only significant items of goodwill included in the net book value above relate to Genscape, Landmark and Hobsons
in the dmg information segment.
Genscape goodwill has a carrying value of £100.5 million (2016 £196.3 million) together with intangible assets with a carrying value of
£40.4 million (2016 £97.3 million). The recoverable amount 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) cash flows for the business for the following year derived from budgets for 2018. The Directors believe these to be reasonably achievable;
(ii) subsequent cash flows for four additional years increased in line with growth expectations of the business;
(ii) cash flows beyond the four-year period extrapolated using a long-term nominal growth rate of 2.5%; and
(iv) a pre-tax discount rate of 19.2%.
Using the above methodology the recoverable amount was lower than the carrying value by £140.3 million (2016 exceeding carrying value
by £10.3 million). Accordingly an impairment charge was recorded in the year amounting to £140.3 million.
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Financial Statements
Notes to the accounts
21 Goodwill continued
Landmark goodwill has a carrying value of £80.9 million (2016 £80.9 million) together with intangible assets with a carrying value of
£22.0 million (2016 £20.5 million). The carrying value of Landmark 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) cash flows for the business for the following year derived from budgets for 2018. The Directors believe these to be reasonably achievable;
(ii) subsequent cash flows for two additional years increased in line with growth expectations of the business;
(iii) cash flows beyond the three-year period extrapolated using a long-term nominal growth rate of 2.0%; and
(iv) a pre-tax discount rate of 13.3%.
Using the above methodology the recoverable amount exceeded the total carrying value by £169.9 million (2016 £292.8 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 15.47% to 26.47% (2016 by 25.78% to 35.78%), the long-term growth rate
would need to decline by 22.69% to -20.69% (2016 by 31.51% to -28.51%), or the CGU would need to miss budget by 62.4% (2016 77.4%).
Hobsons goodwill has a carrying value of £69.6 million (2016 £76.1 million) together with intangible assets with a carrying value of £22.4 million
(2016 £37.4 million). The carrying value of Hobsons 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) cash flows for the business for the following year derived from budgets for 2018. The Directors believe these to be reasonably achievable;
(ii) subsequent cash flows for two additional years increased in line with growth expectations of the business;
(iii) cash flows beyond the three-year period extrapolated using a long-term nominal growth rate of 3.0%; and
(iv) a pre-tax discount rate of 18.3%.
Using the above methodology the recoverable amount exceeded the total carrying value by £25.2 million (2016 £302.9 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 1.96% to 12.96% (2016 by 20.27% to 30.27%), the long-term growth rate
would need to decline by 2.23% to 0.77% (2016 by 24.66% to -21.66%), or the CGU would need to miss budget by 21.3% (2016 71.8%).
The impairment charge is analysed by major CGU as follows:
CGU
Segment
Goodwill
impairment
£m
Intangible
asset
impairment
£m
Recoverable
amount
£m
2017
pre-tax
discount
rate
%
2016
pre-tax
discount
rate
% Reason for impairment charge
Genscape
dmg information
85.6
54.7
140.9
19.2
20.0
A weaker performance than expected and a significantly
reduced forecast since March 2017 when a recovery in
revenue growth plus a reduction in costs was envisaged.
Genscape’s financial performance however continued
to decline and new management forecasts have resulted
in a reduction in value in use.
Lower than anticipated customer demand and the
abandonment of the national retail product roll-out
in the second half of the year.
18.3
25.0 Weaker revenues and renewal rates in the second half
of the year.
SiteCompli dmg information
17.5
6.4
Xceligent
dmg information
11.7
29.8
–
–
Other
Total
2.2
117.0
5.5
96.4
140.9
18.3
16.7
Recoverable amounts have been determined using value in use calculations for all of the above CGUs.
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22 Other intangible assets
Cost
At 30 September 2015
Additions from business combinations
Other additions
Internally generated
Disposals
Classified as held-for-sale
Exchange adjustment
At 30 September 2016
Additions from business combinations
Other additions
Internally generated
Disposals
Classified as held-for-sale
Transfer to property, plant and equipment
Exchange adjustment
At 30 September 2017
Accumulated amortisation
At 30 September 2015
Charge for the year
Impairment
Disposals
Classified as held-for-sale
Exchange adjustment
At 30 September 2016
Charge for the year
Impairment
Disposals
Classified as held-for-sale
Transfer to property, plant and equipment
Exchange adjustment
At 30 September 2017
Net book value – 2015
Net book value – 2016
Net book value – 2017
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Publishing
rights,
mastheads
and titles
£m
Note
Market- and
customer-related
databases and
customer
relationships
£m
Brands
£m
Computer
software (i)
£m
Other
£m
Total
£m
17
(i)
18
20
17
(i)
18
20
23
Note
3
3
17, 18
20
3
3
17, 18
20
23
254.6
1.9
–
–
–
–
18.6
275.1
–
–
–
(185.1)
(0.2)
–
6.1
95.9
84.1
5.9
–
–
(0.1)
–
9.4
99.3
0.1
–
–
(48.9)
(1.2)
–
(0.8)
48.5
219.1
24.2
–
–
–
(3.4)
20.4
260.3
0.1
–
–
(150.9)
(8.0)
–
4.1
105.6
376.2
8.0
3.0
58.3
(5.0)
–
52.1
492.6
0.5
0.2
57.7
(114.8)
(9.0)
(47.1)
(7.6)
372.5
10.4
–
–
–
–
(1.2)
2.0
11.2
–
–
–
(4.7)
–
–
–
6.5
Publishing
rights,
mastheads
and titles
£m
Market- and
customer-related
databases and
customer
relationships
£m
Brands
£m
Computer
software (i)
£m
Other
£m
179.5
8.3
–
–
–
9.6
197.4
4.1
1.0
(124.4)
(0.2)
–
3.1
81.0
75.1
77.7
14.9
38.7
5.4
5.2
–
–
5.2
54.5
4.2
0.6
(13.9)
(1.2)
–
(1.0)
43.2
45.4
44.8
5.3
112.4
18.9
0.6
–
(3.1)
11.1
139.9
13.7
10.4
(105.6)
(3.3)
–
2.6
57.7
106.7
120.4
47.9
185.8
36.7
–
(3.9)
–
23.5
242.1
52.6
81.7
(94.8)
(5.1)
(41.1)
(6.2)
229.2
190.4
250.5
143.3
4.1
0.6
1.0
–
(1.2)
0.9
5.4
1.5
2.7
(4.9)
–
–
0.2
4.9
6.3
5.8
1.6
944.4
40.0
3.0
58.3
(5.1)
(4.6)
102.5
1,138.5
0.7
0.2
57.7
(504.4)
(18.4)
(47.1)
1.8
629.0
Total
£m
520.5
69.9
6.8
(3.9)
(4.3)
50.3
639.3
76.1
96.4
(343.6)
(9.8)
(41.1)
(1.3)
416.0
423.9
499.2
213.0
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Financial Statements
Notes to the accounts
22 Other intangible assets continued
(i) Computer software includes purchased and internally generated intangible assets, not forming part of a business combination, as follows:
Note
£m
315.8
61.3
(5.0)
42.7
414.8
57.9
(88.0)
(39.5)
(7.4)
(7.8)
330.0
166.6
27.6
(3.9)
20.2
210.5
44.2
57.8
(69.5)
(33.5)
(4.1)
(5.7)
199.7
149.2
204.3
130.3
20
20
Cost
At 30 September 2015
Additions
Disposals
Exchange adjustment
At 30 September 2016
Additions
Disposals
Analysis reclassifications
Classified as held-for-sale
Exchange adjustment
At 30 September 2017
Accumulated amortisation
At 30 September 2015
Charge for the year
Disposals
Exchange adjustment
At 30 September 2016
Charge for the year
Impairment
Disposals
Analysis reclassifications
Classified as held-for-sale
Exchange adjustment
At 30 September 2017
Net book value – 2015
Net book value – 2016
Net book value – 2017
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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 since they have not been brought into use.
Cost
At 30 September 2015
Additions
Projects completed
Exchange adjustment
At 30 September 2016
Additions
Impairment
Projects completed
Exchange adjustment
At 30 September 2017
£m
86.7
29.1
(78.0)
2.6
40.4
18.4
(21.9)
(16.9)
(0.5)
19.5
The Group’s most significant individual internally developed intangible asset is RMS(one). The development of RMS(one) was completed
during the prior period and the asset was transfered out of the assets in the course of construction category and amortisation commenced.
The RMS(one) intangible asset has a carrying value of £71.3 million (2016 £89.1 million) which has been assessed for recoverability using
a value in use calculation in line with IAS 36, Impairment of assets. The methodology applied to the value in use calculations reflects past
experience and external sources of information including:
(i) budget and forecast data which the Directors believe to be reasonably achievable;
(ii) cash flows over five years post-launch;
(iii) the rate at which core clients start using RMS(one) platform;
(iv) a pre-tax discount rate of 17.4% for platform & software and 15.2% for models & data; and
(v) average annual growth rates of 4.0%–15.0% in the core underlying business.
Using the above methodology the recoverable amount exceeded the carrying value and accordingly no impairment charge was recorded
in the year.
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:
RMS(one)
DIIG customer relationships
Genscape intellectual property
Instant Services customer relationships
Genscape real time power platform
Genscape tradenames
Petrotranz proprietary knowledge
Estate Technical Solutions customer relationships
Starfish customer relationships
Higher Education student matching platform
Segment
RMS
dmg information
dmg information
dmg information
dmg information
dmg information
dmg information
dmg information
dmg information
dmg information
At
30 September
2017
Carrying value
£m
At
30 September
2016
Carrying value
£m
At
30 September
2017
Remaining
amortisation
period
Years
At
30 September
2016
Remaining
amortisation
period
Years
71.3
22.8
9.8
8.7
5.3
5.2
4.5
4.1
3.7
3.4
89.1
26.5
11.3
9.6
5.2
6.0
5.1
4.6
4.3
0.2
4.8
7.0
8.5
8.5
4.8
7.6
7.1
7.4
8.0
–
5.8
8.0
9.5
9.5
5.8
8.6
8.1
8.4
9.0
–
137
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Financial Statements
Financial Statements
Notes to the accounts
23 Property, plant and equipment
Note
17
18
20
18
22
Note
3
3
3
20
18
22
Freehold
properties
£m
Long leasehold
properties
£m
Short leasehold
properties
£m
Plant and
equipment
£m
58.9
–
–
–
–
(1.0)
–
57.9
–
–
–
–
–
–
–
57.9
0.8
–
0.7
–
–
–
0.2
1.7
0.2
(0.1)
–
(1.3)
–
–
0.1
0.6
37.9
–
1.3
–
–
–
3.5
42.7
1.9
(0.1)
–
(16.3)
–
(1.6)
(0.3)
26.3
296.1
0.3
25.2
(6.9)
(1.1)
1.0
21.0
335.6
19.0
(10.4)
(27.5)
(27.1)
47.1
1.6
(1.8)
336.5
Freehold
properties
£m
Long leasehold
properties
£m
Short leasehold
properties
£m
Plant and
equipment
£m
14.0
1.8
–
–
–
(1.6)
–
14.2
1.9
22.4
–
–
–
–
–
–
0.1
38.6
44.9
43.7
19.3
0.4
0.1
–
–
–
–
0.2
0.7
0.1
–
–
(0.1)
–
(0.6)
–
–
(0.1)
–
0.4
1.0
0.6
19.7
3.2
–
–
–
–
2.3
25.2
2.8
0.6
–
(0.1)
–
(9.3)
–
(1.5)
–
17.7
18.2
17.5
8.6
178.5
31.1
0.2
(5.4)
(0.5)
1.6
16.2
221.7
29.7
19.0
0.4
(9.8)
(18.8)
(21.4)
41.1
1.5
(1.7)
261.7
117.6
113.9
74.8
Cost
At 30 September 2015
Owned by subsidiaries acquired
Additions
Disposals
Owned by subsidiaries disposed
Reclassifications
Exchange adjustment
At 30 September 2016
Additions
Disposals
Classified as held-for-sale
Owned by subsidiaries disposed
Transfers from intangible fixed assets
Reclassifications
Exchange adjustment
At 30 September 2017
Accumulated depreciation and impairment
At 30 September 2015
Charge for the year
Impairment
Disposals
Owned by subsidiaries disposed
Reclassifications
Exchange adjustment
At 30 September 2016
Charge for the year
Impairment
Impairment of assets held for sale
Disposals
Classified as held for sale
Owned by subsidiaries disposed
Transfers from intangible fixed assets
Reclassifications
Exchange adjustment
At 30 September 2017
Net book value – 2015
Net book value – 2016
Net book value – 2017
138
Total
£m
393.7
0.3
27.2
(6.9)
(1.1)
–
24.7
437.9
21.1
(10.6)
(27.5)
(44.7)
47.1
–
(2.0)
421.3
Total
£m
212.6
36.2
0.2
(5.4)
(0.5)
–
18.7
261.8
34.5
42.0
0.4
(10.0)
(18.8)
(31.3)
41.1
–
(1.7)
318.0
181.1
176.1
103.3
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Note
Cost of shares
£m
Share of
post-acquisition
retained reserves
£m
(ii)
7
(iii)
(iv)
18
7
(i)
7
12.6
0.3
2.8
–
(0.1)
–
2.4
–
1.7
19.7
1.0
0.3
(10.5)
(4.7)
–
–
(3.3)
0.3
2.8
(11.3)
–
–
2.1
–
0.2
(3.4)
(1.4)
(1.1)
(14.9)
(1.0)
–
10.5
4.5
(0.5)
(0.6)
–
(0.6)
(2.6)
Total
£m
1.3
0.3
2.8
2.1
(0.1)
0.2
(1.0)
(1.4)
0.6
4.8
–
0.3
–
(0.2)
(0.5)
(0.6)
(3.3)
(0.3)
0.2
24 Investments in joint ventures and associates
Joint ventures
At 30 September 2015
Additions – cash
Additions – non cash
Disposals
Impairment
Share of retained reserves
Reclassification from other debtors
Transfer to investment in subsidiaries
Exchange adjustment
At 30 September 2016
Reclassifications
Additions – cash
Disposals
Owned by subsidiaries disposed
Share of retained reserves
Dividends received
Impairment
Exchange adjustment
At 30 September 2017
(i) The Group received dividends from Decision First in the dmg information segment.
(ii)
During the prior year, the dmg information segment disposed of the assets of Enrolment Management Services in exchange for a 50.0%
interest in Knowlura, Inc.
(iii) During the prior year the Group increased its interest in Instant Services AG, held by the dmg information segment and obtained control.
(iv) During the year the Group disposed of Mail Today Newspapers Pte Ltd in the dmg media segment.
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Financial Statements
Financial Statements
Notes to the accounts
24 Investments in joint ventures and associates continued
Summary aggregated financial information for the Group’s joint ventures, extracted on a 100% basis from the joint ventures’ own financial
information, is set out below:
Year ended 30 September 2017
dmg information
dmg media
At 30 September 2017
dmg information
dmg media
Year ended 30 September 2016
dmg information
Euromoney
At 30 September 2016
dmg information
Euromoney
Revenue
£m
10.9
–
10.9
Current
assets
£m
3.1
–
3.1
Revenue
£m
19.7
0.1
19.8
Current
assets
£m
4.7
–
4.7
Operating
(loss)/profit
£m
1.6
(1.9)
(0.3)
Total
assets
£m
3.7
–
3.7
Operating
profit/(loss)
£m
2.1
(0.1)
2.0
Total
assets
£m
10.8
–
10.8
Total
expenses
£m
(9.5)
(1.9)
(11.4)
Current
liabilities
£m
(1.6)
(1.9)
(3.5)
Total
expenses
£m
(18.3)
(0.2)
(18.5)
Current
liabilities
£m
(2.7)
(0.1)
(2.8)
(Loss)/profit
for the year
£m
Total
comprehensive
(expense)/income
£m
1.4
(1.9)
(0.5)
1.4
(1.9)
(0.5)
Total
liabilities
£m
Net assets/
(liabilities)
£m
(1.6)
(1.9)
(3.5)
2.1
(1.9)
0.2
Profit/(loss)
for the year
£m
Total
comprehensive
income/(expense)
£m
1.4
(0.1)
1.3
1.4
(0.1)
1.3
Total
liabilities
£m
Net assets/
(liabilities)
£m
(2.7)
(0.1)
(2.8)
8.1
(0.1)
8.0
Non-current
assets
£m
0.6
–
0.6
Non-current
assets
£m
6.1
–
6.1
At 30 September 2017 the Group’s joint ventures had capital commitments amounting to £nil (2016 £nil). There were no material contingent
assets (2016 none).
Information on principal joint ventures:
Segment
Principal activity
Year ended
of holding Group interest %
Description
Unlisted
The Sanborn Map Company, Inc.
(incorporated and operating in the US)
Knowlura, Inc.
(incorporated and operating in the US)
Daily Mail On-Air LLC (DailyMailTV)
(incorporated and operating in the US)
dmg information
dmg information
Photogrammetric mapping
and GIS data conversion
Provider of online
educational services
dmg media
Producer of DailyMailTV
30 September
2017 Preferred stock
30 September
2017
30 September
2017
Common
Membership
interests
49.00
50.00
50.00
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Daily Mail and General Trust plc Annual Report 2017
Note
Cost of shares
£m
Share of
post-acquisition
retained reserves
£m
162.3
(3.6)
4.4
0.1
–
–
(1.4)
(3.8)
3.4
161.4
0.2
2.0
613.1
0.2
–
–
(1.0)
18.0
1.4
10.2
(0.6)
(32.4)
(1.2)
771.3
(20.4)
3.6
–
–
4.3
(5.3)
–
1.7
–
(16.1)
(0.2)
–
–
–
11.3
(35.3)
–
–
–
–
0.7
2.6
0.9
(36.1)
7
(i)
7
17, (ii)
18
7
(i)
7
8
25
(iii)
18
Total
£m
141.9
–
4.4
0.1
4.3
(5.3)
(1.4)
(2.1)
3.4
145.3
–
2.0
613.1
0.2
11.3
(35.3)
(1.0)
18.0
1.4
10.2
0.1
(29.8)
(0.3)
735.2
Associates
At 30 September 2015
Reclassifications
Additions – cash
Additions – non cash
Share of retained reserves
Dividends received
Impairment
Transfer to investment in subsidiaries
Exchange adjustment
At 30 September 2016
Reclassifications
Additions – cash
Additions – non cash Euromoney
Additions – non cash
Share of retained reserves
Dividends received
Impairment
Deemed disposal of investment in associates
Transfer from available-for-sale investments
Transfer from derivatives
Disposals
Owned by subsidiaries disposed
Exchange adjustment
At 30 September 2017
The cumulative unrecognised share of losses of the Group’s associates principally comprises £23.5 million (2016 £14.7 million) in relation to the
Group’s investment in ITN.
Joint ventures and associates have been accounted for under the equity method using unaudited financial information to 30 September 2017.
(i)
Dividends received in the current and prior year principally relate to the Group’s investments in ZPG (2017 £7.3 million, 2016 £5.2 million)
in the dmg media segment, RGJ Destiny LLC (previously named Axiometrics LLC) (2017 £9.2 million, 2016 £nil) in the dmg information
segment and Euromoney (2017 £18.8 million, 2016 £nil) in the Euromoney segment.
(ii)
During the prior year the group increased its interest in Ochresoft Technologies Ltd, held by the dmg information segment, and World Bulk
Wine Exhibition S.L., held by the Euromoney segment and obtained control.
(iii) During the year the Group disposed of its investment in Clipper Data in the dmg information segment and Fortunegreen, IntoStuff and
Spaceway Storage Services UK in the dmg media segment.
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Financial Statements
Financial Statements
Notes to the accounts
24 Investments in joint ventures and associates continued
Summary aggregated financial information for the Group’s associates, extracted on a 100% basis from the associates’ own financial
information is set out below:
Year ended 30 September 2017
RMS
dmg information
dmg events
Euromoney
dmg media
At 30 September 2017
RMS
dmg information
dmg events
Euromoney
dmg media
Year ended 30 September 2016
RMS
dmg information
dmg events
Euromoney
dmg media
At 30 September 2016
RMS
dmg information
dmg events
Euromoney
dmg media
Non-current
assets
£m
3.1
16.6
–
648.7
511.5
1,179.9
Revenue
£m
3.8
38.0
1.6
386.9
379.5
809.8
Operating
profit/(loss)
£m
Total expenses
£m
Profit/(loss)
for the year
£m
Other
comprehensive
income
£m
Total
comprehensive
income/(expense)
£m
(2.8)
(10.8)
0.1
43.4
49.5
79.4
(7.5)
(49.4)
(1.5)
(343.7)
(357.6)
(759.7)
(3.7)
(11.4)
0.1
43.2
21.9
50.1
–
–
–
3.5
1.1
4.6
(3.7)
(11.4)
0.1
46.7
23.0
54.7
Current assets
£m
Total assets
£m
Current liabilities
£m
Non-current
liabilities
£m
Total liabilities
£m
Net assets
£m
6.5
36.7
0.3
127.9
152.5
323.9
9.6
53.3
0.3
776.6
664.0
1,503.8
(1.3)
(24.8)
(0.2)
(267.5)
(105.2)
(399.0)
Revenue
£m
3.6
35.8
0.9
105.9
300.3
446.5
(4.7)
(8.5)
–
(212.3)
(436.5)
(662.0)
(6.0)
(33.3)
(0.2)
(479.8)
(541.7)
(1,061.0)
3.6
20.0
0.1
296.8
122.3
442.8
Operating
profit/(loss)
£m
Total expenses
£m
Profit/(loss) for
the year and total
comprehensive
income/(expense)
£m
(0.9)
(12.1)
–
0.7
50.2
37.9
(5.4)
(49.7)
(0.9)
(115.4)
(263.3)
(434.7)
(1.8)
(13.9)
–
(9.5)
37.0
11.8
Non-current
assets
£m
3.4
12.5
–
505.4
328.6
849.9
Current assets
£m
Total assets
£m
Current liabilities
£m
Non-current
liabilities
£m
Total liabilities
£m
Net assets
£m
8.3
52.3
0.5
58.6
86.2
205.9
11.7
64.8
0.5
564.0
414.8
1,055.8
(1.1)
(24.4)
(0.2)
(280.1)
(106.9)
(412.7)
(3.1)
(6.7)
–
(5.3)
(238.8)
(253.9)
(4.2)
(31.1)
(0.2)
(285.4)
(345.7)
(666.6)
7.5
33.7
0.3
278.6
69.1
389.2
At 30 September 2017 the Group’s associates had capital commitments amounting to £nil (2016 £nil). There were no material contingent
liabilities (2016 none).
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Information on principal associates:
Segment
Note
Principal activity
Year ended
Description
of holding
Group
interest %
Listed
ZPG Plc (incorporated and operating
in the UK)
Euromoney Institutional Investor PLC
(incorporated and operating in the UK)
Unlisted
Excalibur Holdco Ltd
(incorporated and operating in the UK)
Real Capital Analytics, Inc. (incorporated
and operating in the US)
Independent Television News Ltd
(incorporated and operating in the UK)
Praedicat, Inc. (incorporated and
operating in the US)
Propstack Services Private Ltd
(incorporated and operating in India)
dmg media
(i)
Euromoney
(ii)
Online property portal
Provider of information focused
on the global asset management,
capital markets and
commodities sectors
dmg media
dmg information
dmg media
RMS
dmg information
Operator of online discount
businesses
Provider of real estate
information
Independent TV news provider
Provision of catastrophe
risk analytics
Provider of commercial real
estate information
30 September
2017
30 September
2017
30 September
2017
30 September
Ordinary
29.84
Ordinary
49.90
B Ordinary
23.90
2017 Preferred stock
39.73
31 December
2016
30 September
Ordinary
20.00
2017 Preferred stock
29.60
31 March
2017
Ordinary
21.83
(i)
The market value of the Group’s investment in ZPG at 30 September 2017 was £473.7 million (2016 £426.0 million). 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 29.84% the
Group has treated this investment as an associated undertaking.
Summary financial information for ZPG, extracted on a 100% basis from ZPG’s own financial statements, for the year to 30 September 2017
is set out below:
Revenue
Depreciation and amortisation
Profit from continuing operations
Interest expense
Tax charge
Post-tax profit from operations
Other comprehensive income
Total comprehensive income
Non-current assets
Cash and cash equivalents
Other current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Group interest (29.84%)
Goodwill and intangibles carrying value
Group carrying value
£m
244.5
(18.4)
53.7
(5.6)
(10.7)
37.4
1.1
38.5
£m
502.0
75.4
38.5
615.9
(71.4)
(304.6)
(376.0)
239.9
71.6
37.6
109.2
(ii)
On 8 December 2016, the Group announced its intention to reduce its holding in Euromoney by the sale of approximately 32.3 million
shares in Euromoney. The sale comprised two parts: (i) a placing and (ii) a buy-back by Euromoney and subsequent cancellation of the
bought back shares. The effect of the sale was to reduce the Group’s holding from 67.9% of Euromoney’s issued share capital to 49.9%
after which Euromoney ceased to be a subsidiary and is accounted for as an associate.
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Financial Statements
Financial Statements
Notes to the accounts
24 Investments in joint ventures and associates continued
The market value of the Group’s investment in Euromoney at 30 September 2017 was £627.0 million.
Summary financial information for Euromoney, extracted on a 100% basis from Euromoney’s own financial statements, for the year to
30 September 2017 is set out below:
Revenue
Depreciation and amortisation
Profit from continuing operations
Share of results in joint ventures and associates
Interest income
Interest expense
Tax charge
Post-tax profit from discontinued operations
Post-tax profit from operations
Other comprehensive income
Total comprehensive income
Non-current assets
Cash and cash equivalents
Other current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Group interest (49.9%)
Goodwill and intangibles carrying value
Group carrying value
25 Available-for-sale investments
At 30 September 2015
Additions – cash
Disposals
Exchange adjustment
At 30 September 2016
Additions – cash
Additions – non cash
Owned by subsidiaries disposed
Transfer to investment in associates
Impairment charge
Exchange adjustment
At 30 September 2017
£m
386.9
(28.0)
43.4
(1.9)
3.3
(4.1)
(3.4)
5.9
43.2
3.5
46.7
£m
648.7
4.4
123.5
776.6
(267.5)
(212.3)
(479.8)
296.8
148.1
449.8
597.9
Note
Unlisted
£m
13.8
1.6
(0.1)
0.5
15.8
19.4
3.4
(5.8)
(1.4)
(0.5)
(0.3)
30.6
18
18
24, (i)
8
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 securities
are recorded at cost less provision for impairment, as their fair values cannot be reliably measured.
(i)
During the year, the Group acquired an additional interest in PropStak Services Limited (PropStak), taking its overall holding to 23.17%.
By virtue of the Group’s board representation and shareholder rights the Group now has significant influence over PropStak and has
treated this investment as an associate (see Note 24).
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Available-for-sale investments are analysed as follows:
Note
Class of holding Group interest %
At
30 September
2017
NBV
£m
At
30 September
2016
NBV
£m
Unlisted
Yopa Property Ltd (incorporated and operating in the UK)
Brit Media, Inc. (incorporated and operating in the US)
BDG Media, Inc. (incorporated and operating in the US)
Taboola.com Ltd (incorporated and operating in Israel)
Pascal Metrics, Inc. (incorporated and operating in the US)
Cue Ball Capital (incorporated and operating in the US)
CompStak (incorporated and operating in the US)
Evening Standard Ltd (incorporated and operating in the UK)
Shanghai Maili Marine Technology Co Ltd (incorporated and
operating in China)
Other
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
(ix)
Ordinary
Ordinary
Common stock
Ordinary
Ordinary
Limited Partner
Ordinary
Ordinary
Preferred
17.4
10.1
2.8
0.4
4.3
2.5
2.0
24.9
20.0
15.4
5.3
3.2
2.0
1.5
1.4
0.5
0.3
0.1
0.9
30.6
0.5
1.5
–
2.0
1.5
1.1
0.5
0.3
0.1
8.3
15.8
(i) Yopa Property provides an online estate agency service.
(ii)
Brit Media, Inc. owns and operates an online media and e-commerce platform that provides tools to teach, inspire, and enable creativity
among women and girls.
(iii) BDG Media, Inc. operates a website with news, entertainment, fashion and beauty, books and lifestyle content.
(iv) Taboola.com Limited provides a content marketing platform that provides a web widget to content creators on their website to show
contents that include relevant links within the site and from other publishers.
(v)
Pascal Metrics, Inc. is used by healthcare organisations including hospitals to improve patient safety and clinical reliability by measuring
and using workforce and clinical data.
(vi) Cue ball Capital LLC is a venture capital and private equity firm specialising in start-ups, early-stage, mid-venture, growth equity scale-ups
and buy-out investments.
(vii) CompStak provides commercial real estate information to brokers, appraisers, researchers, landlords, lenders and investors.
(viii) The Group has no Board representation and no influence over the day-to-day management of the Evening Standard Ltd. Accordingly the
Group has treated this investment as an available-for-sale investment.
(ix) Shanghai Maili Marine Technology Co Ltd provides maritime information services.
Interest analysis of available-for-sale investments is as follows:
Non-interest bearing
26 Inventories
Raw materials and consumables
Work in progress
Finished goods
Classified as held-for-sale
At
30 September
2017
£m
At
30 September
2016
£m
30.6
15.8
At
30 September
2017
£m
At
30 September
2016
£m
Note
7.5
17.6
1.6
26.7
(0.1)
26.6
20
7.0
20.8
3.0
30.8
–
30.8
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Financial Statements
Financial Statements
Notes to the accounts
27 Trade and other receivables
Current assets
Trade receivables
Allowance for doubtful debts
Prepayments and accrued income
Other receivables
Classified as held-for-sale
Non-current assets
Trade receivables
Prepayments and accrued income
Other receivables
Movement in the allowance for doubtful debts is as follows:
At 30 September 2016
Impairment losses recognised
Amounts written off as uncollectable
Amounts recovered during the year
Owned by subsidiaries disposed
Exchange adjustment
30 September 2017
At
30 September
2017
£m
At
30 September
2016
£m
Note
20
170.4
(5.1)
165.3
72.2
18.8
256.3
(19.5)
236.8
3.6
1.3
15.6
20.5
257.3
245.9
(16.1)
229.8
90.8
26.3
346.9
(0.7)
346.2
8.0
3.4
7.3
18.7
364.9
At
30 September
2017
£m
At
30 September
2016
£m
(16.1)
(4.3)
6.6
0.8
7.9
–
(5.1)
(14.6)
(8.7)
5.1
3.7
0.1
(1.7)
(16.1)
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:
0 – 30 days
31 – 60 days
61 – 90 days
91 – 120 days
121+ days
Total
At
30 September
2017
£m
At
30 September
2016
£m
0.2
0.1
0.1
0.2
4.5
5.1
1.8
0.6
1.3
0.8
11.6
16.1
Included in the Group’s trade receivables are debtors with a carrying value of £94.8 million (2016 £85.8 million) which are past due at
30 September 2017 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.
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Ageing of past due but not impaired receivables is as follows:
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 to their fair value.
28 Other financial assets
Current assets
Collateral
Non-current assets
Loans to associates and joint ventures
At
30 September
2017
£m
At
30 September
2016
£m
32.3
9.8
34.3
18.4
94.8
35.6
18.0
12.0
20.2
85.8
Note
(i)
At
30 September
2017
£m
At
30 September
2016
£m
14.5
14.5
15.5
15.5
17.1
17.1
21.0
21.0
(i)
The Group deposits collateral with its bank counterparties with whom it has entered into a credit support annex to an ISDA (International
Swaps and Derivatives Association) Master Agreement. This represents cash that cannot be readily used in operations.
29 Cash and cash equivalents
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 carrying amount of cash and cash equivalents equates to their fair values.
Note
33
16
At
30 September
2017
£m
At
30 September
2016
£m
14.6
(7.2)
7.4
0.9
2.9
0.2
0.4
3.7
6.5
14.6
25.7
(8.2)
17.5
2.4
2.3
0.3
0.8
3.9
16.0
25.7
14.6
25.7
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Financial Statements
Financial Statements
Notes to the accounts
30 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 to their fair value.
31 Current tax
Corporation tax payable
Classified as held-for-sale
Corporation tax receivable
32 Acquisition put option commitments
Current
Non-current
The carrying amount of put option commitments approximates to their fair value.
148
At
30 September
2017
£m
At
30 September
2016
£m
Note
20
Note
20
83.1
14.2
10.7
13.5
154.8
243.2
519.5
(16.8)
502.7
2.9
505.6
67.9
14.7
17.8
34.1
253.0
374.2
761.7
(5.5)
756.2
5.7
761.9
At
30 September
2017
£m
At
30 September
2016
£m
7.0
(5.3)
1.7
(9.6)
(7.9)
27.0
–
27.0
(15.6)
11.4
At
30 September
2017
£m
At
30 September
2016
£m
0.6
7.4
8.0
18.5
26.3
44.8
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33 Borrowings
The Group’s borrowings are unsecured and are analysed as follows:
Overdrafts
£m
Bank loans
£m
Bonds
£m
Loan notes
£m
Finance leases
£m
At 30 September 2017
Within one year
Between one and two years
Between two and five years
Over five years
At 30 September 2016
Within one year
Between one and two years
Between two and five years
Over five years
7.2
–
–
–
–
7.2
8.2
–
–
–
–
8.2
–
–
46.3
–
46.3
46.3
216.2
10.0
197.3
423.5
423.5
–
–
–
267.7
–
267.7
267.7
–
223.6
201.7
425.3
425.3
–
1.8
0.4
0.3
0.2
–
0.5
0.9
0.4
0.1
0.6
–
0.7
1.1
–
–
–
–
1.8
2.4
–
–
–
–
2.4
The Group’s borrowings are analysed by currency and interest rate type as follows:
At 30 September 2017
Fixed rate interest
Floating rate interest
At 30 September 2016
Fixed rate interest
Floating rate interest
Sterling
£m
US dollar
£m
423.5
28.2
451.7
425.3
98.9
524.2
0.9
27.1
28.0
1.1
179.4
180.5
Total
£m
9.4
216.5
56.5
197.3
470.3
479.7
11.0
0.1
491.9
201.7
693.7
704.7
Total
£m
424.4
55.3
479.7
426.4
278.3
704.7
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 2017
Fixed rate interest
Floating rate interest
At 30 September 2016
Fixed rate interest
Floating rate interest
Sterling
£m
US dollar
£m
214.7
(71.3)
143.4
231.9
36.0
267.9
334.5
1.8
336.3
345.2
91.6
436.8
Total
£m
549.2
(69.5)
479.7
577.1
127.6
704.7
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Financial Statements
Financial Statements
Notes to the accounts
33 Borrowings continued
Committed borrowing facilities
The Group’s bank loans bear interest charged at LIBOR plus a margin. The margin varies by bank and is based on the Group’s ratio of net debt
to EBITDA or the Group’s credit rating. Each committed bank facility contains covenants based on a maximum 3.75 times net debt to EBITDA
ratio and a minimum interest cover ratio of 3.0 times. EBITDA for these purposes is defined as the aggregate of the Group’s consolidated
operating profit including share of results of joint ventures and associates before deducting depreciation, amortisation and impairment of
goodwill, intangible and tangible assets, before exceptional items and before interest and finance charges, and the ratio is shown in Note 34.
These covenants were met at the relevant test dates during the year.
The Group’s total committed bank facilities amount to £611.4 million. Of these facilities £195.0 million are denominated in sterling and
£416.4 million (US$558.0 million) are denominated in US dollars. Drawings are permitted in all major currencies.
The Group’s committed bank facilities analysed by maturity 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
Total bank facilities
At
30 September
2017
£m
At
30 September
2016
£m
611.4
–
611.4
–
624.2
624.2
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
Total undrawn committed bank facilities
The Group has issued standby letters of credit amounting to £3.5 million (2016 £3.8 million).
Bonds
The nominal, carrying and fair values of the Group’s bonds and the coupons payable are as follows:
At
30 September
2017
£m
At
30 September
2016
£m
565.1
–
565.1
–
366.5
366.5
Maturity
Coupon %
2018
2021
2027
5.75
10.00
6.375
At
30 September
2017
Fair value
£m
At
30 September
2016
Fair value
£m
At
30 September
2017
Carrying value
£m
At
30 September
2016
Carrying value
£m
At
30 September
2017
Nominal value
£m
At
30 September
2016
Nominal value
£m
229.4
9.0
235.8
474.2
237.4
9.6
251.5
498.5
216.2
10.0
197.3
423.5
214.1
9.5
201.7
425.3
218.5
7.2
200.0
425.7
218.5
7.2
200.0
425.7
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 £0.9 million (2016 £1.2 million) and the unamortised premia £4.1 million (2016 £6.8 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 Review.
Loan notes
The Group has issued loan notes which attract interest at rates which range between approximately 6.0% to LIBID minus 1.0%. 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.
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34 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.
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 BBB- 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 are sufficient to cover the likely medium-term cash
requirements of the Group.
Associates, joint ventures and other investments in general arrange and maintain their own financing and funding requirements. In all cases
such financing is on a non-recourse basis to the Company.
Whilst the Group’s internal target of a 12-month rolling net debt to EBITDA ratio of no greater than 2.0 times at any point, the limit imposed by
its bank covenants is no greater than 3.75 times measured in March and September. The bank covenant ratio uses the average exchange rate
in the calculation of net debt. The resultant net debt to EBITDA ratio is 1.38 times (2016 1.77 times). Using a closing rate basis for the valuation
of net debt, the ratio was 1.33 times (2016 1.87 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. A detailed maturity analysis of both derivative and non-derivative financial instruments are analysed in the table
on page 157 of this note.
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 3.0 times EBITDA to net interest. The actual ratio for the year was 10.07 times
(2016 9.4 times).
Group debt is largely comprised of floating rate sterling (GBP) and US dollar (USD) bank borrowings and fixed GBP bond debt.
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 rate exposures fixed with the balance floating.
This is achieved by issuing fixed rate GBP 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.
To meet policy the Group:
• swaps a portion of its fixed GBP bond debt into GBP floating debt using interest rate swaps;
• swaps a portion of its fixed GBP bond debt into USD fixed bond debt by using cross-currency fixed to fixed swaps;
• buys USD caps to fix its USD debt; and
• enters forward contracts, selling USD and buying GBP to swap its GBP floating rate debt into USD floating rate debt.
The derivatives in place to meet Group policy are as follows:
(i)
Fixed-to-floating interest rate swaps hedging a portion of the Group’s bonds; changes in the fair value of the swaps are recognised in
the Income Statement and at the same time the carrying value of the hedged bonds is adjusted for movements in the hedged risk to the
extent effective and those adjustments are also recognised in the Income Statement. The notional value of these interest rate swaps
amounts to £93.1 million (2016 £73.9 million) with the Group paying floating rates of between 0.29% and 0.99% (2016 0.38% and 1.05%).
(ii)
Floating-to-fixed interest rate swaps which are not designated as hedging instruments; changes in the fair value of the swaps are
recognised in the Income Statement. The notional value of these interest rate swaps amounts to US$67.0 million (2016 US$67.0 million)
with the Group receiving floating US dollar interest at rates of between 0.86% and 1.33% (2016 0.35% and 0.86%).
151
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Financial Statements
Financial Statements
Notes to the accounts
34 Financial instruments and risk management continued
(iii) Cross-currency fixed-to-fixed interest rate swaps. The notional value of these cross-currency swaps amounts to £96.3 million/
US$155.0 million (2016 £96.3 million/US$155.0 million) resulting in the Group paying fixed US dollar interest at rates of between 5.56%
and 6.99% (2016 5.56% and 6.99%).
(iv) The Group also had a number of outstanding interest rate caps. These amounted to US$225.0 million notional (2016 US$225.0 million)
at rates of between 1.00% and 2.75% (2016 1.00% and 2.75%).
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 rates of interest and exchange as at 30 September 2017 and the
use of established estimation techniques such as discounted cash flow and option valuation models. 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, forward contracts and US dollar bank borrowings 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 segment 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 32 days (2016 39 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.
The maximum exposure to credit risk from trade and other receivables at the reporting date is the amount of each class disclosed in the table
on page 155.
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.
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 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 or £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.
The maximum exposure to credit risk from derivative assets and cash and cash equivalents at the reporting date is the amount of each class
disclosed in the table on page 155.
Derivative financial instruments and hedge accounting
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.
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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.
Gains and losses on the borrowings and related derivatives designated as fair value hedges included in the Consolidated Income Statement
for the year ended 30 September 2017 were:
Sterling interest rate swaps
Sterling debt
Total
At
30 September
2015
£m
Fair value
movement gain/
(loss)
£m
At
30 September
2016
£m
Fair value
movement gain/
(loss)
£m
At
30 September
2017
£m
5.2
(5.2)
–
2.3
(2.3)
–
7.5
(7.5)
–
(4.7)
4.7
–
2.8
(2.8)
–
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.
All cash flow hedges were effective throughout the year ended 30 September 2017.
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.
All net investment hedges were effective throughout the year ended 30 September 2017.
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 2017
Within one year
Between one and two years
Between two and five years
Over five years
At 30 September 2016
Within one year
Between one and two years
Between two and five years
Over five years
Fair value
hedges
£m
Cash flow
hedges
£m
Net
investment
hedges
£m
Derivatives
not qualifying
for hedge
accounting
£m
Option
over equity
instrument (i)
£m
Derivative
financial
assets
£m
–
1.4
2.7
–
4.1
4.1
–
–
4.4
16.4
20.8
20.8
–
–
–
–
–
–
0.4
–
–
–
–
0.4
3.0
–
–
–
–
3.0
–
–
–
–
–
–
–
–
0.4
0.1
0.5
0.5
–
–
0.4
–
0.4
0.4
–
–
–
–
–
–
–
–
7.1
–
7.1
7.1
3.0
1.4
3.1
0.1
4.6
7.6
0.4
–
11.9
16.4
28.3
28.7
(i)
During the prior year the dmg information segment purchased an option to acquire an 18.7% equity instrument in RGJ Destiny LLC
(previously named Axiometrics LLC). The option does not represent an equity interest since dmg information is not entitled to any
economic benefits associated with this option.
The option was recognised as a derivative asset and recorded at a fair value of £7.1 million. Changes in the fair value of this instrument
were recognised in the Consolidated Income Statement in Financing.
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Financial Statements
Financial Statements
Notes to the accounts
34 Financial instruments and risk management continued
Derivative financial liabilities:
At 30 September 2017
Within one year
Between one and two years
Between two and five years
Over five years
At 30 September 2016
Within one year
Between one and two years
Between two and five years
Over five years
Fair value
hedges
£m
Cash flow
hedges
£m
Net
investment
hedges
£m
Derivatives
not qualifying
for hedge
accounting
£m
Derivative
financial
liabilities
£m
–
–
–
(1.3)
(1.3)
(1.3)
–
–
–
–
–
–
–
–
–
–
–
–
(9.7)
(0.8)
–
–
(0.8)
(10.5)
(0.4)
(5.7)
–
(11.8)
(17.5)
(17.9)
(1.8)
–
(6.9)
(16.1)
(23.0)
(24.8)
–
–
–
–
–
–
–
–
–
(23.5)
(23.5)
(23.5)
(0.4)
(5.7)
–
(13.1)
(18.8)
(19.2)
(11.5)
(0.8)
(6.9)
(39.6)
(47.3)
(58.8)
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 statutory results.
At 30 September 2017 it is estimated that an increase of 1.0% in interest rates would have decreased the Group’s finance costs by £3.7 million
(2016 £4.6 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 2017 it is estimated that a decrease of 1.0% in interest rates would have increased the Group’s finance costs by £3.0 million
(2016 £3.8 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 2017 it is estimated that a 10.0% strengthening of sterling against the US dollar would have decreased the net loss taken
to equity by £33.2 million (2016 £50.8 million) with no change to the net gain taken to income (2016 decreased the net loss by £2.1 million).
A 10.0% weakening of sterling against the US dollar would have increased the net loss taken to equity by £40.5 million (2016 £60.5 million)
and increased the net gain taken to income by £0.1 million (2016 increased the net loss by £2.6 million). 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 2017, 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 present value of acquisition put option commitments of £nil (2016 £1.0 million).
At 30 September 2017, 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 present value of acquisition put option commitments of £nil (2016 £1.0 million).
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The carrying amounts and gains and losses on financial instruments are as follows:
At
30 September
2017
Carrying
amount
£m
Year ended
30 September
2017
Gain/(loss)
to income
£m
Year ended
30 September
2017
(Loss)/gain
to equity
£m
At
30 September
2016
Carrying
amount
£m
Year ended
30 September
2016
Gain/(loss)
to income
£m
Year ended
30 September
2016
(Loss)/gain
to equity
£m
Investments
Available-for-sale investments
Trade receivables
Other receivables
Other financial assets
Cash and cash equivalents
Loans and receivables
Option over equity instrument
Contingent consideration
Assets at fair value through profit or loss
Interest rate swaps
Forward foreign currency contracts
Derivative assets in effective hedging relationships
Interest rate swaps
Interest rate caps
Derivative assets not designated as hedging instruments
Trade payables
Bank overdrafts
Bonds
Bank loans
Loan notes
Amounts payable under finance leases
Liabilities at amortised cost
Contingent consideration
Liabilities at fair value through profit or loss
Interest rate swaps
Fixed-to-fixed cross currency swaps
Forward foreign currency contracts
Derivative liabilities in effective hedging relationships
Acquisition put option commitments
Interest rate swaps
Derivative liabilities not designated as hedging instruments
Total for financial instruments
30.6
30.6
149.4
34.1
30.0
14.6
228.1
–
0.3
0.3
4.1
3.0
7.1
0.1
0.4
0.5
(66.3)
(7.2)
(423.5)
(46.3)
(1.8)
(0.9)
(546.0)
(17.0)
(17.0)
(1.3)
(17.5)
(0.4)
(19.2)
(8.0)
–
(8.0)
(323.6)
(0.5)
(0.5)
(3.1)
–
1.4
1.0
(0.7)
2.9
–
2.9
(1.4)
(1.7)
(3.1)
1.8
–
1.8
–
–
(24.2)
(6.6)
(0.2)
(0.2)
(31.2)
28.6
28.6
–
(1.7)
–
(1.7)
7.4
–
7.4
3.5
(0.3)
(0.3)
(1.7)
(1.6)
–
0.1
(3.2)
–
–
–
–
(2.8)
(2.8)
–
–
–
0.6
0.1
–
(3.5)
–
–
(2.8)
(0.6)
(0.6)
–
5.5
(3.2)
2.3
(0.9)
–
(0.9)
15.8
15.8
237.1
32.2
38.1
25.7
333.1
7.1
1.4
8.5
20.8
0.4
21.2
–
0.4
0.4
(62.4)
(8.2)
(425.3)
(267.7)
(2.4)
(1.1)
(767.1)
(52.6)
(52.6)
–
(23.0)
(12.3)
(35.3)
(44.8)
(23.5)
(68.3)
–
–
(0.1)
–
1.8
0.4
2.1
–
–
–
5.8
–
5.8
–
(0.7)
(0.7)
–
–
(31.1)
(8.9)
(0.1)
(0.1)
(40.2)
12.2
12.2
–
(0.6)
(0.8)
(1.4)
15.0
(7.9)
7.1
0.5
0.5
21.4
11.5
–
4.8
37.7
–
0.1
0.1
–
(9.4)
(9.4)
–
–
–
(2.6)
(0.5)
–
(21.6)
(0.4)
(0.1)
(25.2)
(7.5)
(7.5)
–
(18.1)
(66.6)
(84.7)
(7.5)
–
(7.5)
(8.3)
(544.3)
(15.1)
(96.0)
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Financial Statements
Notes to the accounts
34 Financial instruments and risk management continued
Reconciliation of net (loss)/gain taken to equity is as follows:
Change in fair value of hedging derivatives
Translation of financial instruments of overseas operations
Transfer of gain on cash flow hedges from translation reserve to the Consolidated Income
Statement
Total loss on financial instruments to equity
Reconciliation of loss taken through income to net finance costs is as follows:
Total gain/(loss) on financial instruments to income
Add back:
Impairment of trade receivables
Impairment of available-for-sale assets
Dividend income
Interest receivable
Interest on pension scheme liabilities less expected return on pension scheme assets
Net finance costs
Reconciliation of amounts due under finance lease agreements is as follows:
At 30 September 2017
Future minimum lease payments
Present value of minimum lease payments
At 30 September 2016
Future minimum lease payments
Present value of minimum lease payments
156
Note
39, 40
39, 40
Year ended
30 September
2017
£m
Year ended
30 September
2016
£m
(3.7)
(7.9)
3.3
(8.3)
(96.4)
(1.8)
2.2
(96.0)
Year ended
30 September
2017
£m
Year ended
30 September
2016
£m
Note
3.5
3.1
0.5
(0.1)
(2.4)
(4.9)
(0.3)
(15.1)
0.1
–
–
(2.2)
(4.6)
(21.8)
Due in less
than one year
£m
Due between one
and five years
£m
0.4
0.4
0.5
0.5
Due in less
than one year
£m
Due between one
and five years
£m
0.4
0.4
0.7
0.7
27
8
9
9
10
10
Total
£m
0.9
0.9
Total
£m
1.1
1.1
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The remaining undiscounted contractual liabilities and their maturities are as follows:
At 30 September 2017
Trade payables
Bank loans
Bank overdrafts
Bonds
Loan notes
Finance leases
Contingent consideration
Acquisition put option commitments
Interest rate swaps
Currency swaps
Forward contracts
At 30 September 2016
Trade payables
Bank loans
Bank overdrafts
Bonds
Loan notes
Finance leases
Contingent consideration
Acquisition put option commitments
Interest rate swaps
Currency swaps
Forward contracts
Within
one year
£m
Between one
and two years
£m
Between two
and five years
£m
Between five
and ten years
£m
Between
ten and
fifteen years
£m
(66.3)
–
(7.3)
(26.0)
(1.8)
(0.4)
(3.4)
(0.6)
0.4
(7.2)
(36.9)
(149.5)
(62.4)
–
(8.4)
(26.0)
(2.4)
(0.4)
(9.3)
(18.5)
(2.5)
(7.4)
(210.0)
(347.3)
–
–
–
(234.3)
–
(0.3)
(6.9)
–
0.4
(35.7)
–
(276.8)
–
–
–
(26.0)
–
(0.1)
(5.0)
–
(2.5)
(7.4)
(22.1)
(63.1)
–
(47.6)
–
(46.5)
–
(0.2)
(7.8)
(7.4)
1.1
(16.6)
–
(125.0)
–
(278.2)
–
(268.1)
–
(0.6)
(38.5)
(35.4)
(7.6)
(48.1)
–
(676.5)
–
–
–
(260.2)
–
–
–
–
1.7
(112.1)
–
(370.6)
–
–
–
(63.8)
–
–
–
–
(12.6)
(28.5)
–
(104.9)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(209.2)
–
–
–
–
(1.9)
(92.7)
–
(303.8)
Total
£m
(66.3)
(47.6)
(7.3)
(567.0)
(1.8)
(0.9)
(18.1)
(8.0)
3.6
(171.6)
(36.9)
(921.9)
(62.4)
(278.2)
(8.4)
(593.1)
(2.4)
(1.1)
(52.8)
(53.9)
(27.1)
(184.1)
(232.1)
(1,495.6)
Included in the maturity table above are interest rate swaps with a notional value of US$67.0 million (2016 US$67.0 million) and currency
swaps with a notional value of US$90.0 million (2016 US$90.0 million) with mutual break clauses at fair value every five years.
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Financial Statements
Financial Statements
Notes to the accounts
34 Financial instruments and risk management continued
Reconciliation of undiscounted liabilities to amounts on the Consolidated Statement of Financial Position is as follows:
Undiscounted
value of
financial
liabilities
£m
Interest
£m
Unamortised
issue costs
£m
Discount/
premium
on issue
£m
Discounting
and mark-
to-market
adjustments
£m
Undiscounted
value of
financial
asset
£m
At 30 September 2017
Trade payables
Bank loans
Bank overdrafts
Bonds
Loan notes
Finance leases
Contingent consideration
Acquisition put option commitments
Interest rate swaps
Fixed-to-fixed cross currency swaps
Forward foreign currency contracts
At 30 September 2016
Trade payables
Bank loans
Bank overdrafts
Bonds
Loan notes
Finance leases
Contingent consideration
Acquisition put option commitments
Interest rate swaps
Fixed-to-fixed cross currency swaps
Forward foreign currency contracts
(66.3)
(47.6)
(7.3)
(567.0)
(1.8)
(0.9)
(18.1)
(8.0)
3.6
(171.6)
(36.9)
(921.9)
(62.4)
(278.2)
(8.4)
(593.1)
(2.4)
(1.1)
(52.8)
(53.9)
(27.1)
(184.1)
(232.1)
(1,495.6)
–
1.3
0.1
141.4
–
–
–
–
(3.6)
9.1
–
148.3
–
10.5
0.2
167.3
–
–
–
–
27.1
18.8
–
223.9
–
–
–
0.9
–
–
–
–
–
–
–
0.9
–
–
–
1.2
–
–
–
–
–
–
–
1.2
–
–
–
4.1
–
–
–
–
–
–
–
4.1
–
–
–
6.8
–
–
–
–
–
–
–
6.8
–
–
–
(2.9)
–
–
1.1
–
(1.3)
2.0
(0.3)
(1.4)
–
–
–
(7.5)
–
–
0.2
9.1
(23.5)
(6.6)
0.6
(27.7)
–
–
–
–
–
–
–
–
–
143.0
36.8
179.8
–
–
–
–
–
–
–
–
–
148.9
219.2
368.1
Total
£m
(66.3)
(46.3)
(7.2)
(423.5)
(1.8)
(0.9)
(17.0)
(8.0)
(1.3)
(17.5)
(0.4)
(590.2)
(62.4)
(267.7)
(8.2)
(425.3)
(2.4)
(1.1)
(52.6)
(44.8)
(23.5)
(23.0)
(12.3)
(923.3)
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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 prices (unadjusted) in active markets for identical assets or liabilities;
• Level 2 fair value measurements are those derived from inputs other than quoted prices included within level 1 that are observable for the
asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
• Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based
on observable market data (unobservable inputs).
At 30 September 2017
Financial assets
Available-for-sale financial assets
Fair value through profit and loss
Derivative instruments not designated in hedge
accounting relationships
Provision for contingent consideration receivable
Derivative instruments in designated hedge accounting relationships
Note
25
Financial liabilities
Fair value through profit and loss
Provision for contingent consideration payable
36
Derivative instruments in designated hedge accounting relationships
At 30 September 2016
Financial assets
Available-for-sale financial assets
Fair value through profit and loss
Derivative instruments not designated in hedge accounting
relationships
Option over equity instrument
Provision for contingent consideration receivable
Derivative instruments in designated hedge accounting relationships
Note
25
Financial liabilities
Fair value through profit and loss
Derivative instruments not designated in hedge accounting
relationships
Provision for contingent consideration payable
Derivative instruments in designated hedge accounting relationships
36
Level 1
£m
Level 2 (i)
£m
Level 3 (ii)
£m
Total
£m
–
30.6
30.6
–
–
–
–
–
–
–
–
0.5
–
7.1
7.6
–
(19.2)
(19.2)
–
0.3
–
30.9
(17.0)
–
(17.0)
Level 1
£m
Level 2
£m
Level 3
£m
–
–
–
–
–
–
–
–
–
–
–
15.8
0.4
–
–
21.2
21.6
(23.5)
(35.3)
(58.8)
–
7.1
1.4
–
24.3
–
(52.6)
–
(52.6)
0.5
0.3
7.1
38.5
(17.0)
(19.2)
(36.2)
Total
£m
15.8
0.4
7.1
1.4
21.2
45.9
(23.5)
(52.6)
(35.3)
(111.4)
There were no transfers between categories in the period.
(i)
The fair value of derivative instruments is determined using market rates of interest and exchange, and established estimation techniques
such as discounted cash flow and option valuation models.
(ii)
Available-for-sale financial assets are recorded at cost less provision for impairment, as since there is no active market upon which they
are traded their fair values cannot be reliably measured. The recoverable amount is determined by discounting future cash flows to
present value using market interest rates.
Contingent consideration is valued based on the future profitability of the businesses to which the contingent consideration relates,
discounted at market rates of interest.
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Financial Statements
Financial Statements
Notes to the accounts
34 Financial instruments and risk management continued
Reconciliation of level 3 fair value measurement of financial liabilities is as follows:
At 30 September 2015
Cash paid to settle contingent consideration in respect of acquisitions
Change in fair value of contingent consideration in income
Finance charge on discounting of contingent consideration
Additions to contingent consideration
Release of payments made in advance in prior year
Exchange adjustment
At 30 September 2016
Cash paid to settle contingent consideration in respect of acquisitions
Change in fair value of contingent consideration in income
Additions to contingent consideration
Exchange adjustment
At 30 September 2017
Note
36
10
36
£m
(54.3)
0.3
12.3
(0.1)
(5.3)
2.0
(7.5)
(52.6)
8.2
28.6
(0.6)
(0.6)
(17.0)
The key inputs into the significant level 3 financial liabilities are the future profitability of the businesses to which the contingent consideration
relate and the discount rate. The estimated range of possible outcomes for the fair value of these liabilities is £1.1 million to £233.0 million
(2016 £2.2 million to £311.3 million).
The reduction in fair value of contingent consideration of £28.6 million (2016 £12.3 million increase) and finance charge on discounting
of contingent consideration of £nil (2016 £0.1 million) were charged or credited to the Income statement within net finance costs (Note 10).
A one percentage point increase or decrease in the growth rate used in estimating the expected profits, results in the contingent consideration
liability at 30 September 2017 increasing or decreasing by £1.7 million and £1.3 million respectively (2016 £0.5 million increase and £0.6 million
decrease), with the corresponding change to the value at 30 September 2017 charged or credited to the Consolidated Income Statement in
future periods.
The rates used to discount contingent consideration range from 0.0% to 0.2% (2016 0.0% to 1.3%). A one percentage point increase or
decrease in the discount rate used to discount the expected gross value of payments, results in the liability at 30 September 2017 decreasing
or increasing by £0.3 million and £0.1 million respectively (2016 £1.1 million and £0.3 million), with the corresponding change to the value
at 30 September 2017 charged or credited to the Consolidated Income Statement in future periods.
35 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 ended 30 September 2017 were £18.2 million (2016 £19.9 million).
The schemes include a number of defined contribution pension arrangements, in addition to funded defined benefit pension arrangements
which are closed to future accrual. The defined benefit schemes in the UK, together with some defined contribution plans, are administered
by Trustees or Trustee Companies.
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 closed to new entrants and to further accrual.
Full actuarial valuations of the defined benefit schemes are carried out triennially by the scheme actuary. Prior to its closure to future
accrual on 1 January 2016, the Group made annual contributions of 12.0% or 18.0% of members’ basic pay (depending on membership
section) to HPS. Following the results of the latest triennial valuation as at 31 March 2016, the Company agreed a Recovery Plan involving
a series of annual funding payments, of £13.0 million on 5 October 2016 to 2018, £16.2 million on 5 October 2019 to 2025 and £76.2 million
on 5 October 2026. The Company considers that these contribution rates are sufficient to eliminate any deficit over the agreed period.
This Recovery Plan will be reviewed at the next triennial funding valuation of the main schemes which is due to be completed with an
effective date of 31 March 2019.
In addition the Company has agreed with the Trustees that, should it make any permanent reductions in the Company’s capital, including
share buy-backs, it will make additional contributions to the schemes amounting to 20.0% of the capital reduction. Contributions of £nil
(2016 £3.5 million) relating to this agreement were made in the year to 30 September 2017.
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Limited Partnership investment vehicle
HPS owns a beneficial interest in a Limited Partnership investment vehicle (LP). The LP has been designed to facilitate annual payments of
£10.8 million as part of the deficit funding payments described above over the period to 2026. In addition, the LP is required to make a final
payment to the scheme of £149.9 million, or the funding deficit within the scheme on an ongoing actuarial valuation basis, at the end of
the period to 2026 if this is less. The Recovery Plan above assumes £60.0 million of the £149.9 million final payment is required. For funding
purposes, the interest of HPS in the LP is treated as an asset of the scheme and reduces the actuarial deficit within the scheme. However,
under IAS 19, Employee benefits, the LP is not included as an asset of the scheme and therefore is not included in the disclosures below.
The Trustee has developed a comprehensive approach to managing the Scheme’s investment strategy to ensure it is always aligned with
the Strategic Plan of becoming fully funded on a gilts+0.5% funding basis by 2028. This approach is defined in the Trustee’s Strategic Plan
whose overriding objective is to set out a framework for reducing investment risk as and when the improvement in the Scheme’s funding
position allows.
This framework defines a series of triggers which present opportunities for the Trustee to reduce risk either by reducing the allocation to
return seeking assets, such as equities and increasing the interest rate and inflation hedge or a combination of the two.
The figures in this note are based on calculations using membership data as at 30 September 2017 along with asset valuations and cash flow
information from the schemes for the year to 30 September 2017.
A reconciliation of the net pension obligation reported in the Consolidated Statement of Financial Position is shown in the following table:
At
30 September
2017
Schemes
in surplus
£m
At
30 September
2017
Schemes
in deficit
£m
Present value of defined benefit obligation
Assets at fair value
Surplus/(deficit) reported in the Consolidated
Statement of Financial Position
(2,631.9)
2,705.3
73.4
(58.8)
47.8
(11.0)
At
30 September
2017
Total
£m
(2,690.7)
2,753.1
At
30 September
2016
Schemes
in surplus
£m
(296.8)
336.9
At
30 September
2016
Schemes
in deficit
£m
(2,702.1)
2,416.0
At
30 September
2016
Total
£m
(2,998.9)
2,752.9
62.4
40.1
(286.1)
(246.0)
The IAS 19 accounting surplus/(deficit) data above differs to the triennial actuarial surplus/(deficit) calculation used in the assessment of
future funding obligations. There are a number of reasons for this – the actuarial valuation is as at the Schemes’ year end date of 31 March
and is calculated triennially based on more prudent assumptions including those covering discount rates and mortality. IAS 19 requires the
Company to use best estimate assumptions.
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.
In relation to HPS and the SEPF, having taken account of the rules of the Schemes, the Company has an unconditional right to a refund of any
surplus under IFRIC 14 and considers that the recognition of surpluses in these Schemes on its Statement of Financial Position is in accordance
with the interpretations of IFRIC 14. In relation to the AVC, having taken account of the rules of the Scheme, the Company does not have an
unconditional right to a refund under IFRIC 14. However, at 30 September 2017 the AVC Plan showed a deficit and no contributions are payable
into the AVC Plan. Therefore no asset ceiling needs to be applied to restrict surplus on the balance sheet and no additional minimum funding
liability is needed under IFRIC 14.
IFRIC 14 is in the process of being revised which may lead to a reassessment of the Company’s recognition of any pension surplus on its
Statement of Financial Position.
The surplus/(deficit) for the year, set out above, excludes a related deferred tax asset of £9.9 million (2016 £42.8 million).
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Financial Statements
Financial Statements
Notes to the accounts
35 Retirement benefit obligations continued
A reconciliation of the present value of the defined benefit obligation is shown in the following table:
Defined benefit obligation at start of year
Attributable to subsidiaries disposed
Current service cost
Current service cost in respect of salary sacrifice
Interest cost
Net benefit payments
Actuarial gain/(loss) as a result of:
– changes in financial assumptions
– changes in demographic assumptions
– membership experience
Defined benefit obligation 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
Attributable to subsidiaries disposed
Interest income on scheme assets
Company contributions
Net benefit payments
Return on plan assets, excluding amounts included in interest income on scheme assets
Fair value of assets at end of year
Note
18
10
39, 40
39, 40
39, 40
Note
18
10
15
39, 40
Year ended
30 September
2017
£m
Year ended
30 September
2016
£m
(2,998.9)
72.2
–
–
(62.6)
106.8
140.7
47.3
3.8
(2,690.7)
(2,437.4)
–
(1.7)
(0.6)
(88.3)
104.0
(720.3)
27.4
118.0
(2,998.9)
Year ended
30 September
2017
£m
Year ended
30 September
2016
£m
2,752.9
(71.1)
57.7
13.1
(106.8)
107.3
2,753.1
2,278.1
–
83.7
34.9
(104.0)
460.2
2,752.9
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The fair value of assets is categorised as follows:
Quoted equities
Note
(i)
Unquoted equities
(i)
(ii)
(iii)
(iv)
Bonds/Credit
LDI
Property
Other assets
Total
Total
Year ended
30 September
2017
£m
Year ended
30 September
2017
%
Year ended
30 September
2016
£m
Year ended
30 September
2016
%
Consumer goods and services
Financials
Healthcare
Industrials
Technology and telecommunications
Other
Consumer goods and services
Financials
Healthcare
Industrials
Technology and telecommunications
Private equity and infrastructure
Other
Government gilts
Investment grade
Non-investment grade
Quoted
Unquoted
Industrial
Retail
Office
Leisure/Mixed
Forests
Other
Quoted
Unquoted
Quoted
Unquoted
131.9
166.3
52.1
157.2
78.7
69.7
40.9
33.4
35.0
109.3
58.9
67.9
36.9
4.9
422.7
321.0
11.7
495.6
70.0
73.2
102.3
154.4
0.0
14.5
44.5
–
1,139.7
1,613.4
4.8
6.0
1.9
5.7
2.9
2.5
1.5
1.2
1.3
4.0
2.1
2.5
1.3
0.2
15.4
11.7
0.4
18.0
2.5
2.7
3.7
5.6
0.0
0.5
1.6
–
41.4
58.6
162.2
188.3
61.2
187.7
97.8
91.1
45.3
37.0
38.8
109.2
62.9
62.8
37.8
5.7
277.0
290.8
–
617.0
52.4
67.2
71.7
104.5
11.0
13.8
57.4
2.3
1,128.4
1,624.5
5.9
6.8
2.2
6.8
3.6
3.3
1.6
1.3
1.4
4.0
2.3
2.3
1.4
0.2
10.1
10.6
–
22.4
1.9
2.4
2.6
3.8
0.4
0.5
2.1
0.1
41.0
59.0
2,753.1
100.0
2,752.9
100.0
(i)
Equities include hedge funds and infrastructure funds. Quoted securities in active markets are valued at the latest available bid price
at the reporting date.
Private equity and infrastructure funds are valued by investment managers using appropriate valuation techniques. These are derived
from market based multiples and discount rates of comparable quoted businesses or market transactions which have been determined
by the Trustees’ investment advisors to represent fair value.
(ii)
Bonds and credit assets include corporate bonds, distressed credit and loans. Corporate bonds are held in unitised pooled investment
vehicles and are valued at the latest available bid price provided by the pooled investment manager. Distressed credit and loans are
valued by the investment managers using relevant valuation techniques.
(iii) Liability Driven Investment funds (LDI) are a collateralised portfolio of gilt repo and swap contracts designed to hedge circa 50.0%
(by value of assets) of the scheme’s inflation and discount rate risks. These are independently valued using quoted prices and for OTC
instruments by the investment manager using recognised discounting techniques.
(iv) The Schemes’ property portfolio represent a mixture of industrial, retail, office and leisure. These assets are independently valued at open
market value at 31 March each year with subsequent changes in value based on changes in the Investment Property Databank Index (IPD)
which tracks retail, office and industrial property transactions.
The value of employer-related assets held on behalf of the schemes at 30 September 2017 was £nil (0.0% of assets), (2016 £nil, 0.0% of assets).
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Financial Statements
Financial Statements
Notes to the accounts
35 Retirement benefit obligations continued
The main financial assumptions are shown in the following table:
Price inflation
Pension increases
Discount rate
Year ended
30 September
2017
%
Year ended
30 September
2016
%
3.20
3.00
2.60
2.95
2.80
2.15
The discount rate for both scheme liabilities and the fair value of scheme assets reflects yields at the year-end date on high-quality corporate
bonds and are based on a cash flow-based yield curve, calculating a single equivalent discount rate reflecting the average duration of the
schemes’ liabilities, rounded to the nearest 0.05% p.a. This methodology incorporates bonds given an AA rating from at least two of the main
four rating agencies (Standard and Poors, Moody’s, Fitch and DBRS).
RPI inflation is derived in a similar way to the discount rate but with reference to the Bank of England spot curve at the duration of the schemes’
weighted averaged duration with an appropriate allowance for inflation risk premium (0.20% p.a.), rounded to the nearest 0.05% p.a..
Mortality assumptions take account of scheme experience, and also allow for further improvements in life expectancy based on the
Continuous Mortality Investigation (CMI) projections but with a long-term rate of improvement in future mortality rates of 1.25% p.a..
Allowance is made for the extent to which employees have chosen to commute part of their pension for cash at retirement.
The average duration of the defined benefit obligation at the end of the year is approximately 20 years (2016 20 years).
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
Year ended
30 September
2017
Future life
expectancy
from age 60
(years)
Year ended
30 September
2016
Future life
expectancy
from age 60
(years)
26.4
28.3
26.8
29.2
26.5
28.6
27.2
29.8
The amounts charged to the Consolidated Income Statement relating to the Group’s defined benefit schemes, based on the above
assumptions are shown in the following table:
Current service cost
Current service cost in respect of salary sacrifice
Charge to operating profit
Finance cost
Total charge to the Consolidated Income Statement
Note
10
Year ended
30 September
2017
£m
Year ended
30 September
2016
£m
–
–
–
(4.9)
(4.9)
(1.7)
(0.6)
(2.3)
(4.6)
(6.9)
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Pension costs and the size of any pension surplus or deficit are sensitive to the assumptions adopted. The table below indicates the effect
from changes in the principal assumptions used above:
Mortality
Increase in pension obligation at 30 September 2017 from a one-year increase in life expectancy
Change in pension cost from a one-year increase
Inflation rate
Decrease in pension obligation at 30 September 2017 from a 0.1% p.a. increase
Change in pension cost from a 0.1% p.a. increase
Discount rate
Decrease in pension obligation at 30 September 2017 from a 0.1% p.a. decrease
Change in pension cost from a 0.1% p.a. decrease
Year ended
30 September
2017
£m
Year ended
30 September
2016
£m
78.9
0.1
46.5
0.8
53.2
0.6
89.4
1.9
54.1
1.1
61.7
1.0
+/-
+/-
+/-
There are significant risks in connection with running defined benefit schemes, and the key risks are highlighted below:
Inflation rate risk
A significant proportion of the defined benefit obligation is linked to inflation, therefore increased inflation will result in a higher pension
obligations. The Trustees have sought to acquire certain assets with exposure to inflationary uplifts in order to negate a proportion of this risk,
including the LDI investment funds which reduce this risk by 50.0%.
Life expectancy risk
The present value of the defined benefit obligation is calculated with reference to the best estimate of the mortality of scheme members.
An increase in assumed life expectancy will result in an increase in the defined benefit obligation. Regular reviews of mortality experience
are performed to ensure life expectancy assumptions remain appropriate.
Investment risk
This is a measure of the uncertainty that the return on the schemes’ assets meet the return necessary to fund pension obligations.
The schemes hold a significant proportion of equities, but during the period have been reallocating some of these investments into credit
and property investments which exhibit lower volatility of return and the LDI investments.
Discount rate risk
The present value of the defined benefit obligation is calculated using a discount rate set with reference to high-quality corporate bond yields.
A decrease in corporate bond yields will increase the present value of the defined benefit obligation, although this will be partially offset
by the LDI investment funds which reduce the gilt rate risk by 50.0% and an increase in the value of corporate bonds held by the schemes.
Amounts recognised in the Consolidated Statement of Comprehensive Income (SOCI) are shown in the following table:
Actuarial gain/(loss)recognised in SOCI
Impact of asset ceiling on AVC Plan
Total gain/(loss) recognised in SOCI
Cumulative actuarial loss recognised in SOCI at beginning of year
Cumulative actuarial gain/(loss) recognised in SOCI at end of year
Year ended
30 September
2017
£m
Year ended
30 September
2016
£m
299.1
–
299.1
(151.4)
147.7
(114.7)
–
(114.7)
(36.7)
(151.4)
165
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Financial Statements
Financial Statements
Notes to the accounts
35 Retirement benefit obligations continued
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 surplus/(deficit) in schemes
Experience adjustments on defined benefit obligation
Experience adjustments on fair value of scheme assets
At
30 September
2017
£m
At
30 September
2016
£m
At
30 September
2015
£m
At
30 September
2014
£m
(2,690.7)
2,753.1
62.4
191.8
107.3
(2,998.9)
2,752.9
(246.0)
(574.9)
460.2
(2,437.4)
2,278.1
(159.3)
(47.0)
54.5
(2,381.9)
2,170.1
(211.8)
(195.7)
145.8
At
3 October
2013
£m
(2,169.7)
1,962.0
(207.7)
(73.8)
168.1
The Group expects to contribute approximately £13.0 million to the schemes during the year to 30 September 2018 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 segments. The
benefits for all members of the trust-based plans have been transferred to individual policies held in the member’s own name and the scheme
is now wound up. Insured death benefits previously held under this trust have already been transferred to a new trust-based arrangement
specifically for life assurance purposes.
The aggregate value of the Group personal pension plans was £130.5 million (2016 £105.4 million) at the year end. The pension cost
attributable to these plans during the year amounted to £13.1 million (2016 £14.0 million).
Overseas pension plans
Overseas subsidiaries of certain Group segments operate defined contribution retirement benefit plans, primarily in North America.
The pension cost attributable to these plans during the year amounts to £4.5 million (2016 £4.2 million).
36 Provisions
Current liabilities
At 30 September 2015
Owned by subsidiaries acquired
Additions
Charged during year
Utilised during year
Owned by subsidiaries disposed
Transfer (to)/from non-current liabilities
Reclassification of amounts held in escrow
Contingent consideration paid
Fair value adjustment to contingent
consideration
Exchange adjustment
At 30 September 2016
Additions
Charged during year
Utilised during year
Owned by subsidiaries disposed
Transfer (to)/from non-current liabilities
Contingent consideration paid
Fair value adjustment to contingent
consideration
Exchange adjustment
At 30 September 2017
166
Contract
discounts
and rebates
£m
Note
Coupon
discount
£m
Onerous
leases
£m
Reorganisation
costs
£m
17
17
18
17
10
17
18
17
10
25.6
–
–
17.6
(22.4)
–
–
–
–
–
0.1
20.9
–
20.7
(21.9)
–
–
–
–
–
19.7
1.0
–
–
–
(0.4)
–
–
–
–
–
–
0.6
–
(0.1)
–
–
–
–
–
–
0.5
1.8
–
–
–
(0.8)
–
0.5
–
–
–
–
1.5
–
(0.5)
(0.6)
(0.2)
0.4
–
–
0.2
0.8
4.9
–
–
5.0
(4.9)
–
–
–
–
–
0.1
5.1
–
0.1
(3.6)
–
–
–
–
(0.1)
1.5
Contingent
consideration (ii)
£m
5.2
–
1.3
–
–
–
1.8
(2.0)
(0.3)
2.2
1.1
9.3
0.1
–
–
–
5.3
(8.2)
(3.3)
0.2
3.4
Claims
and
legal
£m
Other (i)
£m
Total
£m
3.4
–
–
4.6
(3.2)
–
–
–
–
–
–
4.8
–
13.0
(9.2)
–
–
–
–
(0.3)
8.3
11.3
0.1
–
3.6
(1.5)
(0.9)
(0.8)
–
–
–
0.4
12.2
–
0.6
(3.5)
(0.1)
0.4
–
–
(0.2)
9.4
53.2
0.1
1.3
30.8
(33.2)
(0.9)
1.5
(2.0)
(0.3)
2.2
1.7
54.4
0.1
33.8
(38.8)
(0.3)
6.1
(8.2)
(3.3)
(0.2)
43.6
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Non-current liabilities
At 30 September 2015
Additions
Charged during year
Utilised during year
Transfer (to)/from current liabilities
Notional interest on contingent consideration
Fair value adjustment to contingent consideration
Exchange adjustment
At 30 September 2016
Additions
Charged during year
Utilised during year
Owned by subsidiaries disposed
Transfer (to)/from current liabilities
Fair value adjustment to contingent consideration
Exchange adjustment
At 30 September 2017
Onerous
leases
£m
Reorganisation
costs
£m
Contingent
consideration (ii)
£m
Legal
£m
Note
Other (i)
£m
Total
£m
17
10
10
17
18
10
7.9
–
–
(3.4)
(0.5)
–
–
0.1
4.1
–
–
–
(0.5)
(0.4)
–
0.1
3.3
0.1
–
–
(0.1)
–
–
–
–
–
–
–
–
–
–
–
–
–
49.1
4.0
–
–
(1.8)
0.1
(14.5)
6.4
43.3
0.5
–
–
–
(5.3)
(25.3)
0.4
13.6
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3.9
–
0.7
(0.1)
0.8
–
–
0.1
5.4
–
0.3
(0.1)
(2.7)
(0.4)
–
(0.3)
2.2
61.0
4.0
0.7
(3.6)
(1.5)
0.1
(14.5)
6.6
52.8
0.5
0.3
(0.1)
(3.2)
(6.1)
(25.3)
0.2
19.1
(i)
Other current provisions principally comprise provisions for VAT of £1.8 million (2016 £1.1 million), end of service provisions of £3.1 million
(2016 £2.1 million), dilapidation provisions of £2.1 million (2016 £2.1 million) and provisions for the future funding of a joint venture of £nil
(2016 £1.3 million).
Other non-current provisions principally comprise dilapidation provisions of £0.9 million (2016 £3.8 million), end of service provisions
amounting to £0.5 million (2016 £nil) and a provision for amounts payable to the Newspaper Society following the cessation of
membership on disposal of Northcliffe Newspapers Ltd in 2012 of £0.8 million (2016 £0.8 million).
(ii) 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
2017
£m
At
30 September
2016
£m
3.4
5.8
7.8
17.0
9.3
5.1
38.2
52.6
The contingent consideration is based on future business valuations and profit multiples and has been estimated using available data
forecasts. The estimated range of undiscounted outcomes for contingent consideration relating to acquisitions in the year is £nil to
£1.1 million. Certain contingent consideration arrangements are not capped since they are based on future business performance.
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Financial Statements
Financial Statements
Notes to the accounts
37 Deferred taxation
Disclosed within non-current liabilities
Disclosed within non-current assets
At 30 September 2015
Credit/(charge) to income
Credit to equity
Owned by subsidiaries acquired
Owned by subsidiaries sold
Exchange adjustment
At 30 September 2016
Disclosed within non-current liabilities
Disclosed within non-current assets
Credit/(charge) to income
Charge to equity
Owned by subsidiaries sold
Classified as held-for-sale
Exchange adjustment
At 30 September 2017
Disclosed within non-current liabilities
Disclosed within non-current assets
At 30 September 2017
Accelerated
capital
allowances
£m
Goodwill and
intangible
assets
£m
Note
Share-based
payments
£m
Deferred
interest
£m
Trading
losses and
tax credits
£m
Pension
scheme
deficit
£m
11
39, 40
11, (i)
39, 40
18
20
(0.2)
31.6
31.4
6.8
–
–
(0.2)
1.0
39.0
–
39.0
12.9
–
(0.5)
0.7
–
52.1
8.6
43.5
52.1
(38.1)
(91.1)
(129.2)
(5.5)
–
(6.8)
–
(14.5)
(156.0)
(23.9)
(132.1)
43.7
–
36.2
7.6
(0.2)
(68.7)
(61.9)
(6.8)
(68.7)
–
14.4
14.4
0.1
1.4
–
–
1.4
17.3
–
17.3
(5.5)
(0.4)
(0.1)
–
–
11.3
9.5
1.8
11.3
2.9
144.6
147.5
(28.8)
–
–
–
12.2
130.9
–
130.9
(92.6)
–
(4.3)
–
–
34.0
–
34.0
34.0
4.8
19.4
24.2
9.2
–
–
–
5.0
38.4
0.3
38.1
(5.4)
–
(5.4)
–
(0.1)
27.5
19.1
8.4
27.5
0.4
42.7
43.1
1.3
6.4
–
–
–
50.8
–
50.8
(6.4)
(49.3)
(1.7)
–
–
(6.6)
–
(6.6)
(6.6)
Other
£m
6.1
6.5
12.6
18.9
1.4
–
(0.2)
0.5
33.2
(0.2)
33.4
(3.7)
–
(13.6)
(1.4)
(0.3)
14.2
12.6
1.6
14.2
Total
£m
(24.1)
168.1
144.0
2.0
9.2
(6.8)
(0.4)
5.6
153.6
(23.8)
177.4
(57.0)
(49.7)
10.6
6.9
(0.6)
63.8
(12.1)
75.9
63.8
(i) All attributable to continuing operations.
The net deferred tax asset disclosed in the Consolidated Statement of Financial Position in respect of deferred interest, tax losses and tax
credits is analysed as follows:
UK
Rest of Europe
North America
Australia
At
30 September
2017
£m
At
30 September
2016
£m
41.2
1.5
18.8
–
61.5
55.2
1.5
101.6
11.0
169.3
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 £18.9 million (2016 £21.1 million) have expiry dates between 2017 and 2036.
Included within other deferred tax are £nil (2016 £1.7 million) in respect of financial instruments. The £nil credit to equity (2016 £1.4 million)
relates entirely to financial instruments.
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There is an unrecognised deferred tax asset of £75.4 million (2016 £72.2 million) which relates to revenue losses and £131.4 million
(2016 £34.3 million) which relates to deferred interest 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 £127.4 million (2016 £131.2 million).
Of these assets £40.1 million (2016 £42.7 million) have expiry dates between 2022 and 2036.
No deferred tax liability is recognised on temporary differences of £58.8 million (2016 £321.5 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 2017 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 dividend
withholding taxes levied by the overseas tax jurisdictions in which these subsidiaries operate.
38 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
2017
£m
Allotted, issued
and fully paid
At 30 September
2016
£m
2.5
42.8
45.3
2.5
42.8
45.3
Allotted, issued
and fully paid
At 30 September
2017
Number
of shares
Allotted, issued
and fully paid
At 30 September
2016
Number
of shares
19,890,364
342,204,470
362,094,834
19,890,364
342,204,470
362,094,834
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.
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Financial Statements
Notes to the accounts
39 Reserves
Share premium account
At start and end of the year
Capital redemption reserve
At start of year
On cancellation of A Ordinary Non-Voting Shares
At end of year
Own shares
At start of year
Purchase of DMGT shares
Disposal of Group share of Euromoney own shares acquired
Own shares released on vesting of share options
On cancellation of A Ordinary Non-Voting Shares
At end of year
Year ended
30 September
2017
£m
Year ended
30 September
2016
£m
Note
17.8
17.8
5.0
–
5.0
(88.7)
(28.6)
14.1
38.9
–
(64.3)
4.9
0.1
5.0
(76.3)
(29.8)
–
10.9
6.5
(88.7)
38, (ii)
18
(i)
(iii)
The Group’s investment in its own shares represents shares held in treasury or shares held by an employee benefit trust to satisfy
incentive schemes.
(i)
During the year the Company utilised 5.3 million A Ordinary Non-Voting Shares in order to satisfy incentive schemes. This represented
1.6% of the called-up A Ordinary Non-Voting Share capital at 30 September 2017.
(ii)
The Company also purchased 3.9 million A Ordinary Non-Voting Shares having a nominal value of £0.5 million to match obligations under
incentive plans. The consideration paid for these shares was £28.6 million.
(iii) During the prior period the Company cancelled 0.9 million A Ordinary Non-Voting shares held in treasury.
At 30 September 2017, this investment comprised 4,812,419 A Ordinary Non-Voting Shares (2016 5,000,000 shares) held in treasury and
3,710,764 A Ordinary Non-Voting Shares (2016 4,887,935 shares) held in the employee benefit trust. The market value of the Treasury
Shares at 30 September 2017 was £31.2 million (2016 £37.2 million) and the market value of the shares held in the employee benefit trust
at 30 September 2017 was £24.1 million (2016 £36.4 million).
The employee benefit trust is independently managed and purchases shares in order to satisfy outstanding share options and potential
awards under long-term incentive plans.
At 30 September 2017 options were outstanding under the terms of the Company’s Executive Share Option Schemes, Long-Term Incentive
Plans and nil-cost options, over a total of 4,052,581 A Ordinary Non-Voting Shares (2016 5,841,614 shares).
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/(loss) on hedges of net investments in foreign operations
At end of year
Year ended
30 September
2017
£m
Year ended
30 September
2016
£m
Note
8, 18, 19
11.9
8.7
49.4
2.2
(1.8)
4.5
74.9
(25.9)
116.0
(0.4)
1.5
(6.4)
(72.9)
11.9
170
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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.
Retained earnings
At start of year
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 subsidiary undertakings
Exercise of acquisition put option commitments
Cancellation of shares held in treasury
Adjustment to equity following increased stake in controlled entity
Adjustment to equity following decreased stake in controlled entity
Corporation tax on share-based payments
Deferred tax on actuarial movement
Deferred tax on financial instruments
Deferred tax on other items recognised directly in equity
Share of items recognised in Statement of Comprehensive Income by the Group’s associated
undertakings
At end of year
At end of year – total reserves
Year ended
30 September
2017
£m
Year ended
30 September
2016
£m
Note
12
35
15
(i)
37
37
37
7
359.8
345.3
(78.3)
296.4
4.0
(38.4)
–
–
–
0.4
(0.3)
–
(49.3)
–
(0.4)
(9.7)
829.5
862.9
339.0
204.2
(76.4)
(112.0)
15.8
(12.1)
(0.5)
(0.3)
(6.5)
(4.9)
(0.2)
5.4
5.9
1.0
1.4
–
359.8
305.8
(i)
£nil (2016 £0.5 million) representing the present 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 value
after initial recognition are recorded in the Consolidated Income Statement.
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Financial Statements
Financial Statements
Notes to the accounts
40 Non-controlling interests
At start of year
Share of (loss)/profit for the year
Dividends paid
Shares issued
Non-controlling interests arising from business combinations
Loss on hedges of net investments in foreign operations
Transfer of loss on cash flow hedges to Consolidated Income Statement
Change in fair value of cash flow hedges
Foreign exchange differences on translation of foreign operations
Actuarial gain/(loss) on defined benefit pension schemes
Credit to equity for share-based payments
Deferred tax on actuarial movement
Deferred tax on financial instruments
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
Recycled to Consolidated Income Statement on disposals
Recycled to Consolidated Income Statement on disposal of controlling interest in Euromoney
At end of year
The movement in the non-controlling interest in Euromoney is as follows:
At start of year
Share of profit for the year
Dividends paid
Shares issued
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
Exchange adjustment
Recycled to Consolidated Income Statement on disposals
At end of year
172
Year ended
30 September
2017
£m
Year ended
30 September
2016
£m
Note
17
35
15
37
37
8, 18
8, 18
178.2
(3.0)
–
0.5
–
(5.5)
1.1
(0.9)
11.4
2.7
0.1
–
–
0.3
(2.6)
(0.2)
–
–
(171.1)
11.0
2017
£m
158.9
3.4
–
–
0.3
0.1
8.4
–
(171.1)
–
154.9
10.0
(12.7)
0.3
7.6
(14.0)
0.7
(3.1)
31.2
(2.7)
0.2
0.5
0.4
0.2
4.9
0.2
(0.2)
(0.2)
–
178.2
2016
£m
147.1
10.3
(9.9)
0.3
0.2
–
9.6
1.3
–
158.9
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41 Commitments and contingent liabilities
Commitments:
Property, plant and equipment
Contracted but not provided in the financial statements
At
30 September
2017
£m
At
30 September
2016
£m
–
–
At 30 September 2017 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
2017
Properties
£m
At
30 September
2016
Properties
£m
At
30 September
2017
Plant and
equipment
£m
At
30 September
2016
Plant and
equipment
£m
25.1
23.8
49.4
11.7
110.0
32.2
26.2
63.9
22.1
144.4
1.4
1.0
1.0
–
3.4
6.3
1.4
1.8
–
9.5
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, security of tenure and lease terms against the risk of entering into excessively long or
onerous arrangements.
Of the Group’s rented properties, the most significant operating lease commitments relate to the DMGT head office premises at 2 Derry Street,
London W8 5TT, which expires in December 2022, and to the RMS head office at 7575 Gateway Blvd, Newark, California which expires in
December 2020.
Future payments under non-cancellable agreements made to secure venues for future events and exhibitions are separately disclosed below.
Within one year
Between one and two years
Between two and five years
At
30 September
2017
£m
At
30 September
2016
£m
9.4
3.4
2.0
14.8
13.1
–
–
13.1
The Group has entered into arrangements with ink suppliers to obtain ink for the period to December 2020 at competitive prices and to secure
supply. At the year end, the commitment to purchase ink over this period was £24.2 million (2016 £31.1 million).
The Group has entered into agreements with various printers for periods up to December 2022 at competitive prices and to secure supply.
At the year end, the commitment to purchase printing capacity over this period was £39.4 million (2016 £49.2 million).
The Group has entered into a number of arrangements with Microsoft to provide cloud infrastructure to the RMS segment until June 2019.
At the year end the commitment under this agreement was £12.1 million (2016 £11.6 million).
Contingent liabilities
The Group has issued standby letters of credit amounting to £3.5 million (2016 £3.8 million).
The Group is exposed to libel claims in the ordinary course of business and vigorously defends against claims received. The Group makes
provision for the estimated costs to defend such claims and provides for any settlement costs when such an outcome is judged probable.
Four writs claiming damages for libel were issued in Malaysia against Euromoney, the Group’s 49.9% associate, and three of Euromoney’s
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 on 22 October 1996. Two of these writs have been discontinued. The total outstanding amount claimed
on the two remaining writs is Malaysian Ringgit 83.1 million (£14.7 million). No provision has been made for these claims by Euromoney
as Euromoney does not believe it has any material liability in respect of these writs.
On 12 December 2016, CoStar Inc. (CoStar) filed a complaint in the Missouri Federal Court against Xceligent, Inc. (Xceligent) asserting,
inter alia, misuse by Xceligent of CoStar’s intellectual property. The damages claimed have not been quantified. Xceligent consider CoStar’s
actions to be in violation of the FTC consent order which was put in place when Xceligent was spun out of CoStar’s acquisition of LoopNet.
The Group has therefore made no provision for any claim which may be payable.
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Financial Statements
Financial Statements
Notes to the accounts
42 Share-based payments
The Group offers a number of share-based remuneration schemes to Directors and certain employees. The principal schemes comprise
share options under the DMGT, RMS, and within dmg information, Genscape, Hobsons and Trepp Executive Share Option Schemes and the
Company’s LTIP. Share options are exercisable after three years, subject in some cases to the satisfaction of performance conditions, and
up to 10 years from the date of grant at a price equivalent to the market value of the respective shares at the date of grant. Details of the
performance conditions relating to the Company schemes are explained in the Remuneration Report.
The charge/(credit) to the Consolidated Income Statement is as follows:
Segment
DMGT Board and head office
RMS
Euromoney
dmg information
dmg media
Social security costs
Scheme
Executive Share Option Scheme
Executive Bonuses
Long-Term Incentive Plan
Option Plan
SAYE & Recruitment Award/CAP Award
Cash-settled options
Option Plan
Long-Term Incentive Plan
Year ended
30 September
2017
£m
Year ended
30 September
2016
£m
Note
(0.1)
(0.2)
(0.7)
1.0
0.2
–
1.7
2.0
0.1
4.0
0.2
–
7.0
4.6
0.7
0.5
1.7
1.9
3.2
19.8
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, expected volatility has been estimated, based upon relevant
historic data in respect of the DMGT A Ordinary Non-Voting 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 reprice any of its outstanding options during the year.
Further details of the Group’s significant schemes are set out below:
DMGT 2006 Executive Share Option Scheme
Under the DMGT 2006 Executive Share Option 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 2016
Granted during the year
Forfeited during the year
Exercised during the year
Expired during the year
Outstanding at 30 September 2017
Exercisable at 30 September 2017
Exercisable at 1 October 2016
Year ended
30 September
2017
Number of
share options
Year ended
30 September
2017
Weighted average
exercise price
£
Year ended
30 September
2016
Number of
share options
Year ended
30 September
2016
Weighted average
exercise price
£
1,527,614
75,000
(555,232)
(157,163)
(4,476)
885,743
472,409
550,579
6.34
7.88
7.17
5.08
6.88
6.16
5.28
4.65
921,668
795,000
(60,000)
(69,054)
(60,000)
1,527,614
550,579
421,383
5.90
6.93
8.12
5.23
6.98
6.34
4.65
5.02
The aggregate of the estimated fair values of the options granted during the year is £0.6 million (2016 £0.2 million).
The options outstanding at 30 September 2017 had a weighted average remaining contractual life of 4.8 years (2016 5.8 years).
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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 (£)
17 December
2007
24 November
2008
26 January
2009
14 December
2009
6 December
2010
5.05
5.05
18,000
10
7
5.05
4.30
2.84
20.00
1.18
5 December
2011
3.98
3.98
24,000
10
7
3.98
1.50
4.27
30.00
0.71
2.50
2.50
17,000
10
7
2.50
3.00
5.89
40.00
0.56
27 June
2012
3.91
3.91
100,000
10
7
3.91
1.00
4.43
30.00
0.70
2.53
2.53
7,887
10
7
2.53
3.00
5.81
40.00
0.56
4.04
4.04
71,605
10
7
4.04
3.00
3.64
40.00
1.13
5.39
5.39
71,198
10
7
5.39
2.00
2.97
30.00
1.22
17 December
2012
9 December
2013
10 December
2014
5.27
5.27
79,250
10
7
5.27
1.00
3.42
30.00
0.98
9.16
9.16
83,469
10
5
9.16
1.50
2.00
25.00
1.69
8.10
8.29
30,000
10
5
8.29
1.08
2.77
25.70
1.31
14 December
2015
22 December
2015
6 December
2016
7.06
7.06
75,000
3
7
7.06
1.19
3.26
25.10
0.93
7.06
7.06
233,334
1
6
7.06
0.77
3.26
24.10
0.81
7.88
7.88
75,000
3
2
7.88
1.25
3.02
26.00
0.83
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Financial Statements
Notes to the accounts
42 Share-based payments continued
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. Further details are shown in the Remuneration Report.
Outstanding at 1 October 2016
Granted during the year
Forfeited during the year
Exercised during the year
Outstanding at 30 September 2017
Exercisable at 30 September 2017
Exercisable at 1 October 2016
Year ended
30 September
2017
Number of
share options
Year ended
30 September
2017
Weighted average
exercise price
£
Year ended
30 September
2016
Number of
share options
Year ended
30 September
2016
Weighted average
exercise price
£
792,274
–
(15,666)
(512,812)
263,796
250,992
735,803
–
–
–
–
–
–
–
752,911
39,363
–
–
792,274
735,803
512,604
–
–
–
–
–
–
–
The aggregate of the estimated fair values of the awards granted during the year is £nil (2016 £nil).
The awards outstanding at 30 September 2017 had a weighted average remaining contractual life of 2.0 years (2016 2.3 years).
DMGT Long-Term Incentive Plan
Details of the terms and conditions relating to this scheme are set out in the Remuneration Report.
Outstanding at 1 October 2016
Granted during the year
Forfeited during the year
Exercised during the year
Expired during the year
Outstanding at 30 September 2017
Exercisable at 30 September 2017
Exercisable at 1 October 2016
Year ended
30 September
2017
Number of
share options
Year ended
30 September
2017
Weighted average
exercise price
£
Year ended
30 September
2016
Number of
share options
Year ended
30 September
2016
Weighted average
exercise price
£
3,521,726
626,615
(441,662)
(803,637)
–
2,903,042
–
–
6.50
7.18
7.09
4.65
–
7.12
–
–
2,801,711
1,212,733
(21,858)
(470,860)
–
3,521,726
–
111,110
6.08
6.71
7.32
4.51
–
6.50
–
4.04
The aggregate of the estimated fair values of the awards granted during the year is £4.5 million (2016 £8.1 million).
The awards outstanding at 30 September 2017 had a weighted average remaining contractual life of 1.4 years (2016 1.8 years).
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Daily Mail and General Trust plc Annual Report 2017
10 December
2012
9 December
2013
22 December
2014
22 December
2014
5.27
Nil
441,852
5
Nil
Nil
Nil
Nil
Nil
5.27
9.16
Nil
258,976
5
Nil
Nil
Nil
Nil
Nil
9.07
8.11
Nil
291,331
5
Nil
Nil
Nil
Nil
Nil
8.11
8.11
Nil
205,133
3
Nil
Nil
Nil
Nil
Nil
8.11
14 December
2015
14 December
2015
14 December
2015
28 February
2017
6.71
Nil
213,531
2
Nil
Nil
Nil
Nil
Nil
6.71
6.71
Nil
519,387
3
Nil
Nil
Nil
Nil
Nil
6.71
6.71
Nil
346,217
4
Nil
Nil
Nil
Nil
Nil
6.71
30 May
2017
7.17
Nil
136,681
2
Nil
Nil
Nil
Nil
Nil
7.17
6.71
Nil
301,650
3
Nil
Nil
Nil
Nil
Nil
7.19
30 May
2017
7.17
Nil
188,284
1
Nil
Nil
Nil
Nil
Nil
7.17
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 (£)
DMGT Long-Term Executive Incentive Plan Award 2017
During the year the Company introduced a new LTIP for senior executives. This plan entitles certain executives to a percentage share of eligible
profit growth over a three-year performance period.
The award is settled in A Ordinary Non-Voting Shares based on the later of the average share price for the first three days following release
of the 2016 financial results or the date of employment.
The charge for the year in the Consolidated Income Statement for this award amounts to £0.5 million (2016 £nil) and is included in the
Long-Term Incentive Plan charge.
177
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Financial Statements
Financial Statements
Notes to the accounts
42 Share-based payments continued
RMS option plan
RMS options are granted at market value. The options become exercisable after a four-year vesting period and lapse ten years and five years
from grant date under the 2001 and 2005 option plans respectively. The stock issued under the plan is subject to put or call options where
DMGT has the right to settle in DMGT A Ordinary Non-Voting Shares or cash. The option 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 were no longer awarded.
During the year ended 30 September 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.
A 2014 Equity Award Plan (the Plan) was introduced during the year ended 30 September 2014. Under the Plan options and RSUs, both
time- and performance-based, are granted to employees who are deemed to be in a position to contribute to the long-term success of RMS.
The RSU expense is determined by the fair market value of RMS stock at the date of grant. The expense is amortised using an accelerated
method. Under this method the RSUs are equally allocated to each of the three annual vesting components and the related expense is
amortised over 12, 24, and 36 months respectively.
In November 2014, RMS approved an option exchange programme allowing RMS option holders to exchange their existing out-of-the-money
options for new options with a strike price of US$40.0 or RSUs where eligible.
In 2015 RMS introduced the 2015 stock option plan which was adopted in January 2016. Options granted under this plan vest on satisfaction
of two conditions: a four-year service period and the occurrence of an initial public offering of RMS or an event in which the Group ceases
to hold at least 50% of the voting rights of RMS.
Outstanding at 1 October 2016
Granted during the year
Forfeited during the year
Exercised during the year
Outstanding at 30 September 2017
Exercisable at 30 September 2017
Exercisable at 1 October 2016
Year ended
30 September
2017
Number of
share options
Year ended
30 September
2017
Weighted average
exercise price
US$
Year ended
30 September
2016
Number of
share options
Year ended
30 September
2016
Weighted average
exercise price
US$
12,954,350
5,244,596
(2,943,930)
(223,496)
15,031,520
1,648,124
1,537,824
9.18
9.52
9.08
9.68
9.31
10.04
10.03
2,040,920
11,539,810
(626,380)
–
12,954,350
1,537,824
1,297,024
10.05
9.04
9.33
–
9.18
10.03
10.04
The weighted average share price at the date of exercise for share options exercised during the year was US$10.11 (2016 US$nil).
The options outstanding at 30 September 2017 had a weighted average remaining contractual life of 8.0 years (2016 8.5 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 2014
During 2015
During 2016
During 2017
14.59
14.59
16,000
7
3-6
14.59
1.25
2.91
28.81
2.70
10.00
10.00
1,632,124
7
4-5
10.00
1.25
3.63
25.63
1.44
9.04
9.04
8,578,310
10
6
9.04
1.10
Nil
25.60
2.58
10.11
9.52
4,805,086
10
4
9.52
1.00
Nil
35.00
4.00
Expected volatility was determined by calculating the historical volatility of comparable companies.
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Daily Mail and General Trust plc Annual Report 2017
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RMS RSU awards:
Outstanding at 1 October 2016
Granted during the year
Forfeited during the year
Vested during the year
Expired during the year
Outstanding at 30 September 2017
Year ended
30 September
2017
Number of RSUs
Year ended
30 September
2017
Weighted average
exercise price
US$
Year ended
30 September
2016
Restated
Number of RSUs
Year ended
30 September
2016
Restated
Weighted average
exercise price
US$
1,406,356
–
–
(889,499)
(247,076)
269,781
–
–
–
–
–
–
2,736,768
78,192
(355,556)
(1,053,048)
–
1,406,356
–
–
–
–
–
–
43 Ultimate holding company
The Company’s immediate parent Company is Rothermere Continuation Limited (RCL), a company incorporated in Bermuda.
Daily Mail and General Trust plc is the only company in the Group to prepare consolidated financial statements.
44 Related party transactions
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not
disclosed in this note. The transactions between the Group and its joint ventures and associates are disclosed below.
For the purposes of IAS 24, Related Party Disclosures, executives below the level of the Company’s Board are not regarded as related parties.
The remuneration of the Directors at the year end, who are the key management personnel of the Group, is set out in aggregate in the audited
part of the Directors’ Remuneration Report.
Ultimate controlling party
RCL is a holding company incorporated in Bermuda. The main asset of RCL is its 100.0% holding of DMGT Ordinary Shares. RCL has controlled
the Company for many years and as such is its immediate parent Company. RCL is owned by a trust (the Trust) which is held for the benefit of
Viscount Rothermere and his immediate family. The Trust represents the ultimate controlling party of the Company. Both RCL and the Trust
are administered in Jersey, in the Channel Islands. RCL and its directors, the Trust and its beneficiaries are related parties of the Company.
Transactions with Directors
During the year Forsters LLP in which Mr A. Lane, a Non-Executive Director of the Company, is a partner, provided legal services to the
Company amounting to £13,970.
Transactions with joint ventures and associates
Details of the Group’s principal joint ventures and associates are set out in Note 24.
DMG Media Investments Ltd holds a 23.9% stake in Excalibur Holdco Ltd (Excalibur), an associate. During the year, services provided
to Excalibur amounted to £0.7 million (2016 £1.5 million). At 30 September 2017, amounts due from Excalibur amounted to £3.8 million
(2016 £1.1 million), together with loan notes of £13.6 million (2016 £20.5 million). The loan notes carry a coupon of 10.0% and £2.3 million
(2016 £1.8 million) was outstanding in relation to this coupon at 30 September 2017.
Associated Newspapers Ltd (ANL) holds a 50.0% (2016 50.0%) shareholding in Artirix Ltd, a joint venture. During the year, the Group received
services totalling £0.2 million (2016 £0.1 million) from Artirix.
AN Mauritius Ltd had a 26.0% (2016 26.0%) interest in Mail Today Newspapers Pte Ltd, a joint venture, which was disposed during the year.
During the year, additional share capital of £nil (2016 £0.1 million) was invested in Mail Today Newspapers Pte Ltd.
ANL has a 50.0% (2016 50.0%) shareholding in Northprint Manchester Ltd, a joint venture. The net amount due to ANL of £5.8 million
(2016 £5.8 million) has been fully provided.
DMG US Holdings, Inc. has a 45.0% (2016 45.0%) shareholding in Truffle Pig LLC, an associate. Funding provided by DMG US Holdings, Inc.
in the previous period amounting to £0.2 million remained outstanding at 30 September 2017.
Mail Media, Inc. has a 50.0% (2016 50.0%) shareholding in Daily Mail On Air, a joint venture. Funding provided by Mail Media, Inc. amounting
to £0.2 million remained outstanding at 30 September 2017 (2016 £0.2 million).
DMG Media Investments Ltd has a 22.1% shareholding in Zipjet Ltd, an associate. Services provided to Zipjet amounted to £0.1 million
(2016 £nil).
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Financial Statements
Financial Statements
Notes to the accounts
44 Related party transactions continued
The Group reduced its shareholding in its subsidiary Euromoney on 31 December 2016 to 49.9% and Euromoney is now an associate. From
1 January 2017, services were recharged to Euromoney amounting to £0.4 million (2016 £nil) and consortium relief losses were surrendered
under an agreement between Euromoney and the Group amounting to £0.4 million (2016 £nil). At 30 September 2017, £0.5 million (2016 £nil)
was owed by Euromoney. On 6 January 2017, Euromoney completed an off-market purchase of 19,247,173 Euromoney ordinary shares from
the Group for cancellation at a price of £9.75 per share.
During the year, DMG World Media (2006) Ltd, a DMG Events subsidiary, recharged costs amounting to £0.2 million (2016 £nil) to BCA Research,
Inc. (BCA), a Euromoney subsidiary.
During the year, ANL recharged costs amounting to £0.2 million (2016 £0.4 million) to Euromoney. At 30 September 2017, £0.1 million
(2016 £0.5 million) was owed by Euromoney.
During the year, Euromoney provided services to RMS Ltd, a DMGT subsidiary amounting to £0.1 million (2016 £nil).
The Group has a 29.8% (2016 31.3%) shareholding in ZPG, an associate. During the year, the Group received dividends of £7.3 million
(2016 £5.2 million) from ZPG.
During the year, Landmark Information Group Ltd (Landmark) charged management fees of £0.3 million (2016 £0.3 million) and recharged
costs of £0.2 million (2016 £0.1 million) to Point X Ltd, a joint venture. Point X Ltd received royalty income from Landmark of £0.1 million
(2016 £0.1 million).
Decision Insight Information Group (UK) Ltd (DIIG UK) has a 50.0% (2016 50.0%) interest in Decision First Ltd (DF), a joint venture. During the
year, DIIG UK recharged costs to DF amounting to £0.2 million (2016 £0.2 million).
On-Geo GmbH (On-Geo) has a 50.0% (2016 50.0%) interest in HypoPort On-Geo GmbH (HypoPort), a joint venture. During the year, HypoPort
made purchases from On-Geo amounting to £8.2 million (2016 £8.4 million). At 30 September 2017, £1.2 million (2016 £1.8 million) was owed
by HypoPort to On-Geo.
In the prior year Hobsons, Inc. (Hobsons) acquired a 50.0% stake in Knowlura, a joint venture, following the sale of Enrolment Management
Solutions. Hobsons was obligated to fund Knowlura’s working capital up to £0.8 million and interest was charged at 6.0% p.a. on the
outstanding amount, however this balance was fully impaired. Since the joint venture was dissolved before the year end, Knowlura owed
Hobsons £nil (2016 £nil) at 30 September 2017.
During the prior year, Hobsons contributed subscriptions on behalf of other dmg information businesses to Knowlura amounting to £0.4 million.
During the year, revenue of £0.4 million (2016 £nil) was recognised by Knowlura in relation to these subscriptions. At 30 September 2017,
£0.3 million (2016 £0.4 million) of deferred revenue was recognised by Knowlura in relation to these subscriptions.
Other related party disclosures
Under an agreement to guarantee the income generated from certain property assets held by the Harmsworth Pension Scheme which were
purchased from the Group during a prior period, the Group was charged for rent and service charges in relation to the current year amounting
to £0.5 million (2016 £1.1 million). At 30 September 2017 £0.1 million (2016 £0.4 million) was owed to the Harmsworth Pension Scheme by
the Group.
At 30 September 2017, the Group owed £0.8 million (2016 £0.8 million) to the pension schemes which it operates. This amount comprised
employees’ and employer’s contributions in respect of September 2017 payrolls.
The Group recharges its principal pension schemes with costs of investment management fees. The total amount recharged during the year
was £0.3 million (2016 £0.1 million).
Contributions made during the year to the Group’s retirement benefit plans are set out in Note 35, 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, was used
to commit £10.8 million funding p.a. to the Harmsworth Pension Scheme. Interest payable to DMG Pension Partnership LP in the year totalled
£11.0 million (2016 £11.1 million).
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Daily Mail and General Trust plc Annual Report 2017
45 Subsidiaries exempt from audit
The following UK subsidiaries will take advantage of the audit exemption set out within Section 479A of the Companies Act 2006 for the year
ending 30 September 2017:
Subsidiary name
A&N International Media Ltd
Associated London Distribution Ltd
EX ERH Ltd
Northcliffe Media Ltd
DMG Information Ltd
DMG Angex Ltd
DMG Events International Ltd
DMG Events Ltd
Daily Mail International Ltd
Derry Street Investments Ltd
DMG Asset Finance Ltd
DMG Atlantic Ltd
Company
registration number
Subsidiary name
Company
registration number
04147978
03961514
05910261
03403993
03708142
02302189
04118004
01150306
01966438
04485760
05528329
04521108
DMG Business Media Ltd
DMG Charles Ltd
DMG Investment Holdings Ltd
DMG Minor Investments Ltd
DMG Plymouth Ltd
DMGRH Finance Ltd
DMGZ Ltd
Harmsworth Royalties Ltd
Kensington Finance Ltd
Kensington US Holdings Ltd
Ralph US Holdings
Young Street Holdings Ltd
02823743
04211684
03263138
04228751
09198500
03191181
00272225
04219212
03960683
06320636
06341444
04485808
The Directors of Daily Mail and General Trust plc have confirmed that the Company will provide a guarantee under Section 479C in relation
to the subsidiaries listed above.
No dormant subsidiaries have taken the exemption from preparing individual accounts by virtue of Section 394A of Companies Act 2006.
No dormant subsidiaries have taken the exemption from filing with the registrar individual accounts by virtue of Section 448A of Companies
Act 2006.
The following UK subsidiaries will take advantage of the audit exemption set out within Section 480 of the Companies Act 2006, exemption
from audit for dormant companies, for the year ending 30 September 2017:
Subsidiary name
Associated Newspapers (USA) Ltd
Daily Mail Ltd
Derby Telegraph Media Group Ltd
EX TTH Ltd
Harmsworth Printing (Didcot) Ltd
Harmsworth Printing (Stoke) Ltd
Harmsworth Printing Ltd
Harmsworth Quays Printing Ltd
Mail Life Financial Services Ltd
Rental Systems.com Ltd
The Mail on Sunday Ltd
DKA Ltd
Company
registration number
Subsidiary name
Company
registration number
03016861
01160542
00218661
04282263
05539456
04148861
02208579
02208582
01063950
04404934
01160545
SC292312
Richards Gray Holdings Ltd
Richards Gray Ltd
Trepp Ltd
Central Independent News and Media Ltd
Conveyancing Searches Ltd
Courier Media Group Ltd
Gloucestershire Media Ltd
Lincolnshire Media Ltd
Northcliffe Trustees Ltd
South West Wales Media Ltd
The Conveyancing Report Agency Ltd
The Western Gazette Co Ltd
05778231
03209331
03209327
03015855
05063368
00101944
00163659
00037928
03394992
00120013
04666668
00022796
181
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Financial Statements
Financial Statements
Notes to the accounts
46 Full list of Group undertakings
Subsidiary name
Registered office
A&N International Media Ltd
Northcliffe House, 2 Derry Street, London W8 5TT
A&N Media Finance Services Ltd
Northcliffe House, 2 Derry Street, London W8 5TT
AgRisk Ltd
AN Mauritius Ltd
Argyll Environmental Ltd
Asia Risk Centre Pte Ltd
Northcliffe House, 2 Derry Street, London W8 5TT
10th Floor, Standard Chartered Tower, 19 Cybercity, Ebène,
Republic Of Mauritius, Mauritius
5-7, Abbey Court Eagle Way, Sowton, Exeter, Devon EX2 7HY
3F, 19 Cecil Street, Singapore 049704
Associated London Distribution Ltd
Northcliffe House, 2 Derry Street, London W8 5TT
Associated Metro Holdings Ltd (i)
15 Esplanade, St Helier, Jersey, JE1 1RB, Channel Islands
Associated Newspapers (Ireland) Holdings Ltd
Northcliffe House, 2 Derry Street, London W8 5TT
Associated Newspapers (Ireland) Ltd
Third Floor, Embassy House, Herbert Park Lane, Ballsbridge,
Dublin 4 662817
Associated Newspapers (USA) Ltd
Northcliffe House, 2 Derry Street, London W8 5TT
Associated Newspapers Ltd
Northcliffe House, 2 Derry Street, London W8 5TT
Country of
incorporation
or registration
Classes of
shares held
% shareholding
(% held directly
by parent)
UK
UK
UK
Mauritius
UK
Singapore
UK
Jersey
UK
Ireland
UK
UK
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Associated Newspapers North America, Inc
2711 Centerville Road, Suite 400, Wilmington, Delaware 19808
USA Common, Series A
AVMGE GmbH
Brixspan, LLC
Parsevalstr. 2, 99092 Erfurt, Germany
48 West 21st Street 4th Floor, New York NY 10010,
Germany
USA
Ordinary
Ordinary
BuildFax Inc
42 N. French Broad Ave, Asheville NC 28801, US
Catchpole Communications FZ-LLC
Ground 0, Building 08, Dubai Media City, Dubai, 502068
Central Independent News and Media Ltd
Northcliffe House, 2 Derry Street, London W8 5TT
Commodity Vectors (Ireland) Ltd
Commodity Vectors Ltd
Conveyancing Searches Ltd
Courier Media Group Ltd
Business And Research Centre, National College Of Ireland,
Mayor Street, Dublin, 1, Ireland
Northcliffe House, 2 Derry Street, London W8 5TT
Northcliffe House, 2 Derry Street, London W8 5TT
Northcliffe House, 2 Derry Street, London W8 5TT
Daily Mail and General Holdings Ltd
Northcliffe House, 2 Derry Street, London W8 5TT
Daily Mail and General Investments Ltd
Northcliffe House, 2 Derry Street, London W8 5TT
Daily Mail and General Trust plc
Northcliffe House, 2 Derry Street, London W8 5TT
Daily Mail International Ltd
Northcliffe House, 2 Derry Street, London W8 5TT
Daily Mail Ltd
Northcliffe House, 2 Derry Street, London W8 5TT
Common, Series A,
B, C, D, E, G
Preferred Stock
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary and
A ordinary
non voting
Ordinary
Ordinary
USA
UAE
UK
Ireland
UK
UK
UK
UK
UK
UK
UK
UK
Level 7, Tower Building, Australia Square, 264 George Street,
Sydney NSW 2000
Australia
Ordinary
Dailymail.com Australia Pty Ltd
Decision Insight Hub Ltd
Decision Insight Information Group (Europe) Ltd
5-7 Abbey Court Eagle Way, Sowton, Exeter, Devon,
England EX2 7HY United Kingdom
5-7 Abbey Court Eagle Way, Sowton, Exeter, Devon,
England EX2 7HY United Kingdom
Decision Insight Information Group (Ireland) Ltd
39/40 Upper Mount Street, Dublin 2, Ireland
Decision Insight Information Group (UK) Ltd
Decision Insight Packco Ltd
5-7 Abbey Court Eagle Way, Sowton, Exeter, Devon,
England EX2 7HY United Kingdom
5-7 Abbey Court Eagle Way, Sowton, Exeter, Devon,
England EX2 7HY United Kingdom
Derby Telegraph Media Group Ltd
PO Box 6795, St George Street, Leicester LE1 1ZP
Derry Street Investments Ltd
Northcliffe House, 2 Derry Street, London W8 5TT
Digital H20 Inc
DKA Ltd
DMG Angex Ltd
DMG Asset Finance Ltd
DMG Atlantic Ltd
DMG Business Media Ltd
DMG Charles Ltd
DMG Comet Sarl
Bonnington Bond, 2 Anderson Place, Leith, Edinburgh
Scotland EH6 5NP United Kingdom
Northcliffe House, 2 Derry Street, London W8 5TT
Northcliffe House, 2 Derry Street, London W8 5TT
Northcliffe House, 2 Derry Street, London W8 5TT
Northcliffe House, 2 Derry Street, London W8 5TT
Northcliffe House, 2 Derry Street, London W8 5TT
595, Rue De Neudorf, L-2220, Luxembourg
DMG Comet Sarl US branch
2201 West Royal Lane, Irving, Texas 75603 USA
DMG Conference & Exhibition Services
(Shanghai) Ltd
Room 428, Level 4, No 55 Xiya Road (Plot 5 Of Zone F),
Shanghai, China
182
UK
UK
Ireland
UK
UK
UK
UK
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
UK
UK
UK
UK
UK
UK
Luxembourg
USA
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
China
Ordinary
Corporation Service Company, 27110 Centerville Road, Suite 400,
Wilmington DE 19808, US
USA
Common
S
t
r
a
t
e
g
i
c
R
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p
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G
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n
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a
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h
o
l
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r
I
n
f
o
r
m
a
t
i
o
n
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
90%
56%
90%
100%
100%
100%
100%
100%
100%
100%
100%
N/A
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Daily Mail and General Trust plc Annual Report 2017
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S
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I
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f
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m
a
t
i
o
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Subsidiary name
Registered office
DMG Consolidated Holdings Pty Ltd
Level 2, 452 Flinders Street, Melbourne VIC 3000, Australia
DMG Development Co
DMG Events (Canada), Inc
DMG Events (Doha), LLC
DMG Events (MEA) Ltd
DMG Events (UK) Ltd
DMG Events (USA) Inc
DMG Events Asia Pacific Pte Ltd
DMG Events Energy Japan KK
DMG Events India Private Ltd
DMG Events International Ltd
DMG Events Ltd
DMG Exhibition Management Services (PTY) Ltd
Corporation Services Company, 251 Little Falls Drive,
Wilmington DE 19808, United States
180 Duncan Mill Road, 4th Floor, Toronto ON M3B 1Z6,
Level 14/15 Commercial Bank Plaza, West Bay, Doha, Qatar
Northcliffe House, 2 Derry Street, London W8 5TT
Northcliffe House, 2 Derry Street, London W8 5TT
Corporation Services Company, 251 Little Falls Drive,
Wilmington DE 19808, United States
8 Marina Boulevard #05-02, Marina Bay Financial Centre,
Singapore 018981
Roppongi Hills Keyakizaka Terrace, 6151, Roppongi, Minatoku,
Tokyo, Japan
Unit 1, Level 2, B Wing, Times Square, Andheri Kurla Road,
Andheri, Mumbai, 400059, India
Northcliffe House, 2 Derry Street, London W8 5TT
Northcliffe House, 2 Derry Street, London W8 5TT
76 Eleventh Street, Parkmore, Johannesburg, 2196,
South Africa
DMG India Private Ltd
DMG Information Asia Pacific Pte Ltd
402-409, 4th Floor Of Square One, Saket District Centre, Delhi,
South Delhi, Delhi – 110017
8 Marina Blvd, #0502, Marina Bay Financial Centre,
Singapore, 018981
DMG Information Hong Kong Company Ltd
27/F 248 Queen’s Road East, Wanchai, Hong Kong
DMG Information Ltd
DMG Investment Holdings Ltd
DMG Ireland Holdings Ltd
DMG Loanco Ltd
Northcliffe House, 2 Derry Street, London W8 5TT
Northcliffe House, 2 Derry Street, London W8 5TT
First Floor, Fitzwilton House, Wilton Place, Dublin 2
Northcliffe House, 2 Derry Street, London W8 5TT
DMG Media Investments Ltd
Northcliffe House, 2 Derry Street, London W8 5TT
DMG Media Ltd
Northcliffe House, 2 Derry Street, London W8 5TT
DMG Minor Investments Ltd
Northcliffe House, 2 Derry Street, London W8 5TT
DMG Guernsey Ltd (ii)
Kingsway House, Havilland Street, St Peter Port, Guernsey, GY1 2QE
Guernsey
India
Ordinary
DMG Nederland BV
DMG Oceans Ltd
DMG Plymouth Ltd
DMG US Group, Inc
DMG US Holdings Inc
DMG US Investments Inc
Herikerbergweg 238, 1101 CM Amsterdam, The Netherlands
Netherlands
Scottish Daily Mail, 20 Waterloo Street, Glasgow, G2 6DB
Northcliffe House, 2 Derry Street, London W8 5TT
Corporation Services Company, 251 Little Falls Drive,
Wilmington DE 19808, United States
Corporation Services Company, 251 Little Falls Drive,
Wilmington DE 19808, United States
Corporation Services Company, 251 Little Falls Drive,
Wilmington DE 19808, United States
DMG World Media Abu Dhabi Ltd (i)
Rathbone House, 15 Esplanade, St Helier, Jersey, England
DMG World Media Dubai (2006) Ltd (i)
Rathbone House, 15 Esplanade, St Helier, Jersey, England
DMGB Ltd
Northcliffe House, 2 Derry Street, London W8 5TT
dmgi Land & Property Europe Ltd
5-7 Abbey Court, Eagle Way, Exeter, Devon, EX2 7HY
DMGRH Finance Ltd
Northcliffe House, 2 Derry Street, London W8 5TT
DMGT US Employee Services, Inc
DMGT US, Inc
DMGZ Ltd
Corporation Services Company, 251 Little Falls Drive,
Wilmington DE 19808, United States
Corporation Services Company, 251 Little Falls Drive,
Wilmington DE 19808, United States
Northcliffe House, 2 Derry Street, London W8 5TT
EDR Landmark Management Services Ltd
5-7 Abbey Court, Eagle Way, Exeter, Devon, EX2 7HY
EI Cap II LLC
Corporation Services Company, 251 Little Falls Drive,
Wilmington DE 19808, United States
Energy Fundamentals GmbH
Technoparkstrasse 1, 8005, Zurich, Switzerland
Switzerland
Energytics Inc
Ensura Ltd
Enva Power Inc
Environmental Data Resources, Inc
Corporation Services Company, 2711 Centerville Road, Suite 400,
Wilmington DE 19808, United States
5-7, Abbey Court Eagle Way, Sowton, Exeter, Devon EX2 7HY
Corporation Services Company, 251 Little Falls Drive, Wilmington
DE 19808, United States
Corporation Services Company, 251 Little Falls Drive, Wilmington
DE 19808, United States
USA
UK
USA
USA
USA
Common
USA Common, Series A
Country of
incorporation
or registration
Australia
Classes of
shares held
Ordinary
USA
Canada
Qatar
UK
UK
USA
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Common
Singapore
Ordinary
Japan
Ordinary
S
t
r
a
t
e
g
i
c
R
e
p
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t
G
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r
n
a
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c
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F
i
n
a
n
c
i
a
l
S
t
a
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m
e
n
t
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S
h
a
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h
o
l
d
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r
I
n
f
o
r
m
a
t
i
o
n
% shareholding
(% held directly
by parent)
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
183
Ordinary
Ordinary
A Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Common
Common
Common
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Membership
interests
Ordinary
Common
Ordinary
Common
Common
India
UK
UK
South Africa
Singapore
Hong Kong
UK
UK
Ireland
UK
UK
UK
UK
UK
UK
USA
USA
USA
Jersey
Jersey
UK
UK
UK
UK
UK
USA
Financial Statements
Financial Statements
Notes to the accounts
46 Full list of Group undertakings continued
Subsidiary name
Registered office
Epropretydata.com LLC
ES London Ltd
Corporation Services Company, 251 Little Falls Drive, Wilmington
DE 19808, United States
Northcliffe House, 2 Derry Street, London W8 5TT
Country of
incorporation
or registration
USA
UK
UK
Jersey
Jersey
UK
UK
USA
USA
USA
USA
USA
Belgium
Czech
France
Germany
Spain
USA
USA
USA
Italy
Japan
Mexico
USA
Estate Technical Solutions Ltd
Eve 3 Ltd * (ii)
Eve 4 Ltd *
EX ERH Ltd
EX TTH Ltd
Excido Pty Ltd (D)
First Search Mid West LLC
c/o Landmark Information Group Ltd, 5-7 Abbey Court Eagle Way,
Sowton Industrial Estate, Exeter, EX2 7HY
15 Esplanade, St Helier, JE1 1RB Jersey
15 Esplanade, St Helier, JE1 1RB Jersey
Northcliffe House, 2 Derry Street, London W8 5TT
Northcliffe House, 2 Derry Street, London W8 5TT
Level 2, 452 Flinders Street, Melbourne VIC 3000, Australia
Australia
320 N Meridian Street, Indianapolis IN 46204
First Search Technology Corporation
303 Congress Street, Boston MA 02210
Fortress Digital Holdings, Inc
27110 Centerville Road, Suite 400, Wilmington DE 19808
Fortress Digital, LLC
48 West 21st Street 4th Floor, New York NY 10010
Genscape Asia, Inc
Genscape Belgium SA
Corporation Services Company, 251 Little Falls Drive, Wilmington
DE 19808, United States
Pegasuslaan 5, 1831 Brussels Deigem, Belgium
Genscape Czech Republic sro
Empiria Na Strzi, 65/1702, 140 00 Parague 4, Prague
Genscape France
Genscape Germany GmbH
Genscape Iberia SL
Genscape Inc
Genscape Intangible Holding Inc
Genscape International Inc
Genscape Italy
Genscape Japan, K.K.
6 Place De La Madeleine, 75008, Paris, France
Prinzenallee 7, 40549, Dusseldorf, Germany
C/Conde De Aranda, 1 2 DO Izquierda, 28001, Madrid, Spain
Corporation Services Company, 251 Little Falls Drive, Wilmington
DE 19808, United States
Corporation Services Company, 251 Little Falls Drive, Wilmington
DE 19808, United States
Corporation Services Company, 251 Little Falls Drive, Wilmington
DE 19808, United States
Via Torino 2, 20123, Milan, Italy
Ark Hills Sengokuyama Mori Tower 28F, 1-9-10 Roppongi, Minato,
Tokyo, Japan
Genscape Mex, S. de R.L. de C.V.
1140 Garvin Place, Louisville, KY 40203
Genscape Natural Gas Inc
Genscape Netherlands
Genscape Poland SA
Genscape Slovakia sro
Genscape UK Ltd
Gloucestershire Media Ltd
GP Energy Management, LLC
Gridfit, LLC
GSquared, LLC
Harmsworth Printing (Didcot) Ltd
Harmsworth Printing (Stoke) Ltd
Harmsworth Printing Ltd
Corporation Services Company, 251 Little Falls Drive, Wilmington
DE 19808, United States
Damrak 20A, 1012 LH, Amsterdam, Netherlands
Ul. Rzymowskiego, 02-697, Warsaw Poland
Kapitulska 18/A, Bratislava-Stare Mesto, 81101, Slovakia
Northcliffe House, 2 Derry Street, London W8 5TT
Northcliffe House, 2 Derry Street, London W8 5TT
Netherlands
Poland
Slovakia
UK
UK
131 Varick St. Suite 1008-1009, New York 10013 United States
USA Membership units
3500 South Dupont Highway, c/o Interstate Agent Services, LLC,
Dover 19901, United States
USA Membership units
Northcliffe House, 2 Derry Street, London W8 5TT
Northcliffe House, 2 Derry Street, London W8 5TT
Northcliffe House, 2 Derry Street, London W8 5TT
Northcliffe House, 2 Derry Street, London W8 5TT
Harmsworth Quays Printing Ltd
Northcliffe House, 2 Derry Street, London W8 5TT
Harmsworth Royalties Ltd
Northcliffe House, 2 Derry Street, London W8 5TT
Hobsons Asia SDN BHD
Hobsons Australia Pty Ltd
Hobsons, Inc
Hobsons Ltd
Block B East, PJ8, No.23, Jalan Barat, Seksyen 8 46050 Petaling
Jaya, Selangor, Malaysia
Level 2, 452 Flinders Street, Melbourne VIC 3000, Australia
Corporation Services Company, 251 Little Falls Drive, Wilmington
DE 19808 United States
44 Featherstone Street, London, England And Wales, EC1Y
Inframation GmbH
ParsevalstraBe 2, 99092, Erfurt, Germany
184
USA
UK
UK
UK
UK
UK
Malaysia
Australia
USA
UK
Germany
Membership
Interests
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Common
Ordinary
Ordinary,
Preference
Classes of
shares held
Membership
Interests
Ordinary
Ordinary A,
Ordinary B,
Ordinary C,
Ordinary D,
Ordinary E
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary A
Ordinary,
Ordinary A
Ordinary
Ordinary
Common
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Common
Common
Common
Ordinary
Ordinary
Common
Common
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
S
t
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g
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R
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I
n
f
o
r
m
a
t
i
o
n
% shareholding
(% held directly
by parent)
87%
100%
100%
74%
100%
100%
100%
100%
100%
100%
100%
56%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
10%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Daily Mail and General Trust plc Annual Report 2017
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f
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m
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Subsidiary name
Registered office
Justice for Sgt Blackman Ltd
Northcliffe House, 2 Derry Street, London W8 5TT
Karnes Research Company LLC
Kensington Finance Ltd
Kensington US Holdings Ltd
KWG Inc
Landmark Analytics Ltd
Landmark FAS Ltd
Corporation Service Company, 27110 Centerville Road, Suite 400,
Wilmington DE 19808, United States
Northcliffe House, 2 Derry Street, London W8 5TT
Northcliffe House, 2 Derry Street, London W8 5TT
Corporation Service Company, 27110 Centerville Road, Suite 400,
Wilmington DE 19808, United States
5-7 Abbey Court, Eagle Way, Exeter, Devon, EX2 7HY
5-7 Abbey Court, Eagle Way, Exeter, Devon, EX2 7HY
Landmark Information Group Ltd
5-7 Abbey Court, Eagle Way, Exeter, Devon, EX2 7HY
Landmark International Holdings Ltd
5-7 Abbey Court, Eagle Way, Exeter, Devon, EX2 7HY
Lawlink (UK) Ltd
Lincolnshire Media Ltd
Locus Energy Inc
5-7 Abbey Court, Eagle Way, Exeter, Devon, EX2 7HY
Northcliffe House, 2 Derry Street, London W8 5TT
Corporation Services Company, 251 Little Falls Drive, Wilmington
DE 19808, United States
Mail Life Financial Services Ltd
Northcliffe House, 2 Derry Street, London W8 5TT
Mail Media Inc
Microdot, LLC
Millar & Bryce Ltd
Corporation Services Company, 251 Little Falls Drive, Wilmington
DE 19808, United States
351 W Camden Street, Baltimore MD 21201, United States
10th Floor 133 Finnieston Street, Glasgow, Scotland G3 8HB
National RE/Sources LLC
CT Corporation, 1633 Broadway, New York, NY 10019 USA
Naviance Education Information consulting
(Nanjing) Co Ltd
Room D-13, Floor 5, Yindu Building, Shuiximen Street No. 2,
Qinhuai District, Nanjing China
Naviance, Inc
Northcliffe Media Ltd
Corporation Services Company, 251 Little Falls Drive, Wilmington
DE 19808, United States
Northcliffe House, 2 Derry Street, London W8 5TT
Northcliffe Trustees Ltd
Northcliffe House, 2 Derry Street, London W8 5TT
Ochresoft Technologies Ltd
5-7 Abbey Court, Eagle Way, Exeter, Devon EX2 7HY
Country of
incorporation
or registration
UK
USA
UK
UK
USA
UK
UK
UK
UK
UK
UK
USA
UK
USA
USA
UK
USA
Classes of
shares held
Limited by
Guarantee
Membership
Interests
Ordinary
Ordinary
Common
Ordinary
Ordinary
Ordinary, Ordinary
A, Redeemable
Preference
Ordinary
Ordinary
Ordinary
Common
Ordinary
Ordinary
Ordinary A
Ordinary
Membership
Interests
China Registered Capital
USA
UK
UK
Common
Ordinary
Ordinary A,
Ordinary B
Deferred, Ordinary,
Ordinary A,
Preference
UK
On-Geo GmbH
Petrotranz Holdings Inc
Petrotranz Inc
Pipeline & Energy Expo, LLC
Parsevalstrasse 2, 99092, Erfurt, Germany
855 – 2 Street SW, Suite 3500, Calgary AB T2P 4J8 Canada
855 – 2 Street SW, Suite 3500, Calgary AB T2P 4J8 Canada
Germany
Canada
Canada
Corporation Services Company, 251 Little Falls Drive, Wilmington
DE 19808, United States
Power Supply, LLC
131 Varick Street, Suite 1006, New York, NY, 10013, USA
Quest End Computer Services Ltd
5-7 Abbey Court Eagle Way, Sowton, Exeter, Devon, England EX2 7HY
Ralph US Holdings
Real Data Insights, LLC
Rental Systems.com Ltd
Richards Gray Holdings Ltd
Richards Gray Ltd
Northcliffe House, 2 Derry Street, London W8 5TT
48 West 21st Street 4th Floor, New York NY 10010 United States
Northcliffe House, 2 Derry Street, London W8 5TT
5-7 Abbey Court Eagle Way, Sowton, Exeter, Devon, England EX2 7HY
5-7 Abbey Court Eagle Way, Sowton, Exeter, Devon, England EX2 7HY
Risk Management Solutions (Bermuda) Ltd
Milner House, 18 Parliament Street, Hamilton, HM 12 Bermuda
Bermuda
Risk Management Solutions Inc
Risk Management Solutions Ltd
7015 Gateway Blvd., Newark, CA, 94560, USA
Northcliffe House, 2 Derry Street, London W8 5TT
USA
UK
Risk Management Solutions Ltd (China)
Risk Management Solutions (Swiss)
RMS Japan KK
RMS Risk Management Solutions India Pte Ltd
12th Floor, Office 1205F, Beijing Excel Centre, No.6 Wudinghou
Street, Xicheng District Beijing, 100033, PR China
Zweigniederlassung Zürich, Stampfenbachstrasse 85, CH-8006
Zurich, Switzerland
Akasaka Kikyo Building 4th Floor, 11-15 Akasaka 3-Chome,
Minato-Ku, Tokyo, 107-0052 Japan
406-407, Pooja Complex 22, Veer Savarkar Block, Shakarpur, Delhi
110092 India
RMS Technologies Ltd
RMS Worldwide, Inc
Northcliffe House, 2 Derry Street, London W8 5TT
7015 Gateway Blvd. Newark, CA, 94560 USA
Rochford Brady Legal Services Ltd
39/40 Upper Mount Street, Dublin 2 Ireland
China
Common
Switzerland
Ordinary
Japan
Ordinary
India
Ordinary Voting
UK
USA
Ireland
Ordinary
Common
Ordinary
Ordinary
Ordinary
Ordinary
Common
Class A
membership units
Ordinary
Ordinary
Ordinary
Ordinary,
Preference
Ordinary A
Ordinary
Ordinary
Common
Ordinary
USA
USA
UK
UK
USA
UK
UK
UK
S
t
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o
l
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I
n
f
o
r
m
a
t
i
o
n
% shareholding
(% held directly
by parent)
100%
87%
100%
100%
56%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
2%
100%
100%
100%
100%
100%
90%
100%
100%
100%
100%
100%
100%
56%
100%
100%
100%
98%
98%
98%
98%
98%
98%
100%
100%
98%
100%
185
Financial Statements
Financial Statements
Notes to the accounts
46 Full list of Group undertakings continued
Subsidiary name
SearchFlow Ltd
SiteCompli, LLC
South West Wales Media Ltd
Springthorpe Drake, Inc
Starfish Retention Solutions Inc
Stennet Website Plc
Registered office
5-7 Abbey Court Eagle Way, Sowton, Exeter, Devon England EX2 7HY
C/O Corporation Service Company, 80 State Street, Albany,
New York 12207-2543
Northcliffe House, 2 Derry Street, London W8 5TT
2711 Centerville, Suite 400, Wilmington NY DE 19808
Corporation Services Company, 251 Little Falls Drive, Wilmington
DE 19808, United States
3rd Floor, Embassy House, Herbert Park Lane, Ballsbridge,
Dublin 4, Ireland
The Conveyancing Report Agency Ltd
Northcliffe House, 2 Derry Street, London W8 5TT
The Mail on Sunday Ltd
Northcliffe House, 2 Derry Street, London W8 5TT
Country of
incorporation
or registration
UK
USA
UK
USA
USA
Ireland
UK
UK
The Petrochemical Standard (Singapore) Pte Ltd
12 Marina View #21-01, Singapore, 018961, Singapore
Singapore
The Petrochemical Standard, Inc
The Sanborn Library, LLC
The Western Gazette Co Ltd
Trepp Holdings Inc
Trepp LLC
Trepp Ltd
Trepp Port LLC
Trepp UK Ltd
Corporation Services Company, 251 Little Falls Drive,
Wilmington DE 19808, United States
Corporation Services Company, 251 Little Falls Drive,
Wilmington DE 19808, United States
Northcliffe House, 2 Derry Street, London W8 5TT
Corporation Services Company, 251 Little Falls Drive,
Wilmington DE 19808, United States
477 Madison Avenue, New York, NY 10022
Northcliffe House, 2 Derry Street, London W8 5TT
Corporation Services Company, 251 Little Falls Drive, Wilmington
DE 19808, United States
Northcliffe House, 2 Derry Street, London W8 5TT
USA
USA
UK
USA
USA
UK
USA
UK
Vesseltracker.com GmbH
Mundsburger Damm 14, D-22087, Hamburg, Germany
Germany
Watervale Ltd
Web2 d.o.o.
Xceligent Inc
5-7 Abbey Court, Eagle Way, Sowton Industrial Estate, Exeter,
Devon EX2 7HY
Park Rajhl Ferenca 8, 24000 Subotica, Severno-Bački – Serbia
Corporation Services Company, 251 Little Falls Drive, Wilmington
DE 19808, United States
Young Street Holdings Ltd
Northcliffe House, 2 Derry Street, London W8 5TT
All subsidiaries are included in the consolidated financial statements of the Group.
UK
Serbia
USA
UK
Classes of
shares held
Ordinary
Ordinary
Ordinary
Ordinary
Common
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Membership
Interests
Ordinary
Common
Membership
Interests
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Common, Series A
preferred
Ordinary
% shareholding
(% held directly
by parent)
100%
56%
100%
100%
100%
71%
100%
100%
100%
100%
100%
100%
100%
100%
100%
51%
100%
100%
100%
51%
87%
100%
*
Direct investment held by the parent Company Daily Mail and General Trust plc (DMGT). All other subsidiaries are held indirectly through
subsidiaries of DMGT.
(i) Principal place of business in the UAE.
(ii) Principal place of business in the UK.
Joint venture name
Address of principal place of business
Artirix Ltd
Unit 10 1 Luke Street, London, EC2A 4PX
Daily Mail On-Air LLC
137 N. Larchmont Blvd., #705, Los Angeles, California, 90004
Decision First Ltd
Cardinal House, 9 Manor Road, Leeds, West Yorkshire, England LS11 9AH
United Kingdom
Hypoport On-Geo GmbH
Klosterstr. 71, 10179 Berlin, Germany
Instant Service GmbH
Peterstr. 1, 99084 Erfurt, Germany
Financial
year end
% capital included
in consolidation
Classes of
shares held
Ordinary
Membership
interests
30 September
30 September
Ordinary
Ordinary
Ordinary
31 December
31 December
31 December
Knowlura, Inc
2711 Centerville Road, Suite 400, Wilmington, DE 19808
Common
30 September
Northprint Manchester Ltd
PO Box 68164, Kings Place, 90 York Way, London N1P 2AP
Point X Ltd
5-7 Abbey Court, Eagle Way, Exeter, Devon EX2 7HY
Sanborn Colorado Government LLC
1935 Jamboree Drive, Suite 100, Colorado Springs, Colorado, 80920 USA
The Sanborn Map Company Inc
Corporation Services Company, 251 Little Falls Drive, Wilmington DE
19808, United States
This is Essex Ltd
Loud Water Mill, Station Road, High Wycombe, Buckinghamshire, HP10 9TY
Ordinary
Ordinary
Membership
Interests
31 March
31 March
31 December
Ordinary
Ordinary
31 December
30 September
50.0%
50.0%
50.0%
50.0%
49.9%
50.0%
50.0%
50.0%
49.0%
49.0%
50.0%
The Group has joint control over all of the joint ventures listed above, because key operating decisions require the unanimous consent of the
Group and the other investor(s).
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Country of
incorporation
or registration
UK
UK
UK
UK
Hong Kong
UK
India
UK
India
USA
UK
Japan
USA
India
USA
USA
UK
India
UK
USA
USA
UK
USA
UK
UK
Classes of shares held
%
shareholding
Series A1
Series A1
Ordinary
B Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Equity Share, Series A
Compulsary, Cumulative
Convertible Preference Shares
Ordinary
Ordinary
25.0%
16.9%
49.9%
23.9%
23.6%
15.0%
10.8%
20.0%
30.5%
10.8%
25.0%
Ordinary
19.6%
Preference
Ordinary
Common Preference shares
Class B units
Ordinary
Ordinary
Series A1
Common Units
Preference
Ordinary
Membership Interests
Series A1
Ordinary
29.0%
21.8%
39.7%
18.7%
20.0%
20.1%
25.0%
45.0%
8.2%
20.0%
19.5%
22.1%
29.8%
Associate name
Address of principal place of business
2 Eastbourne Terrace, London W2 6LG
203 Railway Arches, Barnardo Street, London E1 0LL
8 Bouverie Street, London EC4Y 8AX
Wowcher Towers, 12-27 Swan Yard, Islington, London
Carspring Ltd
Eatfirst UK Ltd
Euromoney Institutional Investor Plc
Excalibur Holdco Ltd
Funcent DMG Information Technology
Hong Kong Company Ltd
Global Event Partners Ltd
iProf Learning Solutions India Pte Ltd G-15 / G-3, Gf Dilshad Colony, New Delhi, 110095, India
Independent Television News Ltd
27F/F 248 Queen’s Road East, Wanchai, Hong Kong
Suite 1, 3rd Floor 11-12 St. James’s Square, London SW1Y 4LB
20 Grays Inn Road, London WC1X 8XZ
Liases Foras Real Estate Rating
and Research Private Ltd
Mercatus Inc
North Cornwall Post & Diary Ltd
OYO RMS
Praedicat, Inc
Propstack Services Private Ltd
Real Capital Analytics, Inc
RGJ Destiny, LLC
RLTO Ltd
Skymet Weather Services Private Ltd
Spaceways Storage Services UK Ltd
Truffle Pig LLC
WellAware Holdings Inc
Wellington Weekly News Ltd
Whereoware LLC
Zipjet Ltd
ZPG plc
Corporation Service Company, 27110 Centerville Road, Suite
400, Wilmington DE 19808
1735 Technology Dr, Suite 250, San Jose, California 95110
The Old Court House, Union Road, Farnham, Surrey GU9 7PT
Akasaka Kikyo Building 4th Floor, 11-15 Akasaka 3-Chome,
Minato-Ku, Tokyo, 107-0052 Japan
Corporation Services Company, 2711 Centerville Road, Suite
400, Wilmington DE 19808, United States
Nyay Sagar, Kalanagar, Bandra (East), Mumbai – 400 051
32 Union Square East, Suite 1100, New York NY 10003
14901 Quorum Drive, Suite 600, Dallas, Texas 75254
Office 7 35-37 Ludgate Hill, London EC4M 7JN
109, Kushal Bazar, Nehru Place, New Delhi – 110019
4 The Floor, Oxford House, 76 Oxford Street, London, W18 1BS
3411 Silverside Road, Rodney Building, Suite 104, City Of
Wilmington, County Of New Castle, State Of Delaware
2330 N Loop 1604 W, Ste 110, San Antonio Tx 78248, United States
The Old Court House, Union Road, Farnham, Surrey
2711 Centerville Rd Suite 400, Wilmington, New Castle, 19808
Unit 2 York House, 2 Avonmore Road, London W14 8RL
The Cooperage, 5 Copper Row, London, SE1 2LH
Investment name
BDG Media, Inc
Brit Media Inc
Compstak Inc
Cue Ball Capital LP
Evening Standard Ltd
Financial Network Analytics Ltd
London Real Estate Exchange Ltd
Nazca IT Solutions BV
Pascal Metrics Inc
Pembroke Holdings, L.L.C
Pharmacy 2u Ltd
Shanghai Maili Marine Technology
Co Ltd
Taboola.com Ltd
The Press Association Ltd
TigerBeat Media LLC
Upstream Group Inc
Workana LLC
XAP Corporation
Yopa Property Ltd
Address of principal place of business
559 Driggs Avenue, Suite 2, Brooklyn, NY 11211 United States
556 Sutter Street, San Francisco, CA 94102, United States
Corporation Services Company, 2711 Centerville Road, Suite
400, Wilmington, Delaware 19808
The Corporation Trust Company, 1209 Orange Street,
Wilmington, Delaware 19801
Northcliffe House, 2 Derry Street, London W8 5TT
4 Crown Place, London EC2A 4BT
Cannon Place, 78 Cannon Street, London EC4N 6AF
Standerdmolen 20, 3995 AA Houten, Netherlands
Corporation Services Company, 2711 Centerville Road, Suite
400, Wilmington, Delaware 19808
46 Southfield Ave Ste 400, Stamford CT 06902
1 Hawthorn Park, Coal Road, Leeds, LS14 1PQ
Room A208 A Building 12, No. 99 Huan Hu Xi Yi Road, Lingang
New Town, Pudong New District, Shanghai, 20306 China
7 Totseret Haaretz St., Tel-Aviv Israel
PA News Centre, 292 Vauxhall Bridge Road, London SW1V 1AV
233 Wilshire Boulevard, Suite 525, Santa Monica, California
90401, C/O Mesa Global
Corporation Services Company, 251 Little Falls Drive,
Wilmington DE 19808, United States
13th Avenue Suite 202 Brooklyn, New York, 11228
100 Corporate Pointe, Suite 100, Culver City CA 90230
Acre House, 11/15 William Road, London NW1 3ER
Country of
incorporation or
registration
Classes of shares held
%
shareholding
USA
USA
USA
Ordinary
Ordinary
2.8%
10.1%
Common
2.0%
USA
Partnership Units
UK Ordinary, Ordinary Non Voting
Ordinary
UK
Ordinary
UK
Ordinary
Netherlands
USA
USA
UK
China
Israel
UK
Ordinary
Membership Interests
Ordinary
Registered Capital
Ordinary
Ordinary
2.5%
24.9%
10.0%
2.8%
15.0%
4.3%
10.0%
1.0%
20.0%
0.4%
15.6%
USA
Membership interests
12.8%
USA
Argentina
USA
UK
Ordinary
Membership interests
Common
Ordinary
3.6%
5.2%
19.4%
17.4%
187
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Financial Statements
Financial Statements
Five-Year Financial Summary
Consolidated Income Statement
Revenue
Adjusted operating profit
Exceptional operating costs, impairment of internally generated and
acquired computer software, property, plant and equipment and
investment property, amortisation and impairment of acquired intangible
assets arising on business combinations and impairment of goodwill
Operating (loss)/profit before share of results from joint ventures
and associates
Share of results of joint ventures and associates
Total operating (loss)/profit
Other gains and losses
(Loss)/profit before investment revenue, net finance costs and tax
Investment revenue
Net finance costs
(Loss)/profit before tax
Tax
(Loss)/profit for the year after tax
Discontinued operations
Equity interests of minority shareholders
Profit for the year
2013
Audited
52 weeks
ended
30 September
2013
£m
2014
Audited
52 weeks
ended
30 September
2014
£m
2015
Audited year
ended
30 September
2015
£m
2016
Audited year
ended
30 September
2016
£m
2017
Audited year
ended
30 September
2017
£m
1,674.2
280.3
1,811.2
296.2
1,842.7
287.0
1,514.2
177.0
1,564.3
179.0
(66.8)
(112.2)
(80.2)
(91.4)
(324.4)
213.5
5.3
218.8
27.6
246.4
3.1
(71.0)
178.5
(34.2)
144.3
43.7
(23.4)
164.6
184.0
14.3
198.3
138.9
337.2
10.1
(80.3)
267.0
(18.3)
248.7
34.3
(20.1)
262.9
206.8
11.3
218.1
82.4
300.5
4.0
(88.4)
216.1
(20.8)
195.3
50.0
(28.7)
216.6
85.6
4.9
90.5
130.8
221.3
2.2
(21.8)
201.7
(19.9)
181.8
32.4
(10.0)
204.2
(145.4)
16.9
(128.5)
14.0
(114.5)
2.5
(0.3)
(112.3)
(64.7)
(177.0)
519.3
3.0
345.3
Adjusted profit before tax and non-controlling interests
266.6
291.1
280.5
259.6
226.1
Earnings before interest, taxation, depreciation and
amortisation (EBITDA)
374.4
391.1
376.8
363.7
Adjusted profit after taxation and non-controlling interests
188.2
207.4
215.5
197.8
(Loss)/earnings per share
Number of shares for basic
Number of shares for diluted
Profit effect of dilutive shares
From continuing operations
Basic
Diluted
From discontinued operations
Basic
Diluted
From continuing and discontinued operations
Basic
Diluted
Adjusted earnings per share
Basic
Diluted
188
377.5
386.8
(0.3)
372.4
378.2
(0.7)
360.8
366.5
(0.3)
353.4
360.6
(0.9)
32.1p
31.2p
11.5p
11.3p
43.6p
42.5p
49.9p
48.5p
61.4p
60.2p
9.2p
9.1p
70.6p
69.3p
55.7p
54.6p
46.2p
45.4p
13.9p
13.6p
60.1p
59.0p
59.7p
58.7p
48.6p
47.4p
9.2p
9.0p
57.8p
56.4p
56.0p
54.7p
350.4
196.3
353.1
358.6
(0.1)
(49.3)p
(48.5)p
147.1p
144.8p
97.8p
96.3p
55.6p
54.7p
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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 gain/(loss) on cash and cash equivalents
Cash and cash equivalents at end of year
Net (decrease)/increase in cash and cash equivalents
Cash inflow/(outflow) from change in debt and finance leases
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
2013
£m
347.2
(87.7)
(277.5)
(18.0)
107.3
(0.8)
88.5
(18.0)
17.8
(0.2)
–
40.2
40.0
2014
£m
218.4
26.0
(302.7)
(58.3)
88.5
(1.2)
29.0
(58.3)
31.3
(27.0)
(3.0)
0.2
(29.8)
2015
£m
259.7
(44.2)
(212.2)
3.3
29.0
(0.8)
31.5
3.3
(86.9)
(83.6)
–
(15.1)
(98.7)
2016
£m
232.1
(35.8)
(214.6)
(18.3)
31.5
4.3
17.5
(18.3)
101.5
83.2
(0.2)
(60.2)
22.8
Net debt at start of year
Net debt at end of year
(613.0)
(573.0)
(573.0)
(602.8)
(602.8)
(701.5)
(701.5)
(678.7)
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
Other reserves
Minority interests
Retained earnings
Total equity
Shareholder information
Dividend per share*
Price of A Ordinary Non-Voting Shares:
Lowest
Highest
2013
£m
1,056.8
214.0
188.3
203.3
1,662.4
(338.9)
(986.8)
336.7
49.2
16.3
(152.5)
113.6
310.1
336.7
2013
19.20p
£4.51
£8.35
2014
£m
1,125.3
202.0
145.9
213.6
1,686.8
(511.1)
(785.1)
390.6
49.2
17.8
(240.7)
117.8
446.5
390.6
2014
20.40p
£6.99
£10.74
2015
£m
1,332.6
181.1
157.0
230.7
1,901.4
(363.2)
(1,078.4)
459.8
45.4
17.8
(97.3)
154.9
339.0
459.8
2015
21.40p
£6.99
£10.74
2016
£m
1,480.8
176.1
165.9
285.5
2,108.3
(443.3)
(1,135.7)
529.3
45.3
17.8
(71.8)
178.2
359.8
529.3
2016
22.00p
£5.71
£7.90
* Represents the dividends declared by the Directors in respect of the above years.
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2017
£m
219.5
138.6
(368.4)
(10.3)
17.5
0.2
7.4
(10.3)
217.0
206.7
–
7.7
214.4
(678.7)
(464.3)
2017
£m
576.1
103.3
766.0
189.9
1,635.3
(174.5)
(541.6)
919.2
45.3
17.8
15.6
11.0
829.5
919.2
2017
22.70p
£6.06
£8.36
189
Financial Statements
Financial Statements
Company Statement of Financial Position
At 30 September 2017
ASSETS
Fixed assets
Shares in Group undertakings
Other investments
Trade and other receivables
Current assets
Trade and other receivables
Cash at bank and in hand
Deferred tax
Total assets
LIABILITIES
Creditors: amounts falling due within one year
Trade and other payables
Borrowings
Creditors: amounts falling due after more than one year
Trade and other payables
Borrowings
Derivative financial liabilities
Total liabilities
Net assets
CAPITAL AND RESERVES
Called-up share capital
Share premium account
Share capital
Reserve for own shares
Capital redemption reserve
Profit and loss account
Equity shareholders’ funds
At
30 September
2017
£m
At
30 September
2016
£m
Note
7
8
9
9
10
14
11
11
12
12
12
15
15
16
17
3,349.0
5.7
169.1
3,523.8
81.2
0.1
2.5
83.8
3,607.6
(140.2)
(2.5)
(142.7)
–
(469.8)
(18.8)
(488.6)
(631.3)
3,109.5
1.8
643.3
3,754.6
165.8
0.1
5.1
171.0
3,925.6
(251.5)
(3.3)
(254.8)
(8.9)
(693.0)
(46.5)
(748.4)
(1,003.2)
2,976.3
2,922.4
45.3
17.8
63.1
(64.3)
5.2
2,972.3
45.3
17.8
63.1
(74.6)
5.2
2,928.7
2,976.3
2,922.4
The financial statements on pages 190 to 198 were approved by the Directors and authorised for issue on 30 November 2017. They were signed
on their behalf by:
The Viscount Rothermere
P A Zwillenberg
Directors
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Company Statement of Changes in Equity
For the year ended 30 September 2017
At 30 September 2015
Profit for the year
Total comprehensive income for the year
Cancellation of A Ordinary shares
Dividends paid
Credit to equity for share-based payments
Deferred tax on share-based payments
Own shares acquired in the year
Movement in financial liability for closed period purchases
At 30 September 2016
Profit for the year
Total comprehensive income for the year
Dividends paid
Credit to equity for share-based payments
Deferred tax on share-based payments
Own shares acquired in the year
Own shares released on vesting of share options
Called-up
share
capital
£m
45.4
–
–
(0.1)
–
–
–
–
–
45.3
–
–
–
–
–
–
–
Share
premium
account
£m
17.8
–
–
–
–
–
–
–
–
17.8
–
–
–
–
–
–
–
Capital
redemption
reserve
£m
Reserve for
own shares
£m
Profit and
loss account
£m
5.1
–
–
0.1
–
–
–
–
–
5.2
–
–
–
–
–
–
–
(61.6)
–
–
6.5
–
–
–
(29.8)
10.3
(74.6)
–
–
–
–
–
(28.6)
38.9
Total
£m
2,194.7
820.1
820.1
–
(76.4)
5.4
(0.6)
(29.8)
9.0
2,188.0
820.1
820.1
(6.5)
(76.4)
5.4
(0.6)
–
(1.3)
2,928.7
127.9
2,922.4
127.9
127.9
(78.3)
(3.8)
(1.5)
–
(0.7)
127.9
(78.3)
(3.8)
(1.5)
(28.6)
38.2
At 30 September 2017
45.3
17.8
5.2
(64.3)
2,972.3
2,976.3
191
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Financial Statements
Financial Statements
Notes to the Company Statement
of Financial Performance
1 Basis of preparation
The financial statements of Daily Mail and General Trust plc have been prepared in accordance with Financial Reporting Standard 101,
Reduced Disclosure Framework (FRS 101). The financial statements have been prepared under the historical cost convention, and in
accordance with the Companies Act 2006. The preparation of financial statements in conformity with FRS 101 requires the use of certain
critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Company’s accounting
policies. See Note 2 of the Group’s Annual Report for further detail.
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 was £127.9 million (2016 £820.1 million). This includes dividends receivable from
subsidiary undertakings amounting to £152.2 million (2016 £1,045.0 million).
Impact of amendments to accounting standards
The company has applied the exemption available under FRS 101 in relation to paragraphs 30 and 31 of IAS 8, Accounting policies, changes
in accounting estimates and errors (requirement for the disclosure of information when an entity has not applied a new IFRS that has been
issued and is not yet effective).
2 Significant accounting policies
Foreign exchange
Transactions in currencies other than the Company’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 profit and loss account for the year.
Available-for-sale investments
Available-for-sale investments 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 and other receivables
Trade receivables do not carry any interest and are stated at their nominal value as reduced by appropriate allowances for estimated
irrecoverable amounts. The majority of other receivables relate to amounts owed by subsidiary undertakings. Further information concerning
interest charged on these receivables is set out in Note 9.
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.
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Trade payables
Trade payables are non-interest bearing and are stated at their nominal value.
Capital market and bank borrowings
Interest bearing loans and overdrafts are initially measured at fair value (which is equal to net proceeds at inception), and are subsequently
measured at amortised cost, using the effective interest rate method. A portion of the Company’s bonds are subject to fair value hedge
accounting and this portion of the carrying value is adjusted for the movement in the hedged risk to the extent hedge effectiveness is
achieved. Any difference between the proceeds, net of transaction costs and the settlement or redemption of borrowings is recognised over
the term of the borrowing.
Equity instruments
Equity instruments issued by the Company 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 in Note 34 of the Group’s Annual Report. 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 IFRS 7, Financial Instruments: Disclosures and included disclosures relating
to financial instruments in Note 34 of the Group’s Annual Report.
Cash flow statement
The Company has utilised the exemptions provided under IAS 7, Statement of Cash Flows and has not presented a cash flow statement.
A consolidated cash flow statement has been presented in the Group’s Annual Report on page 98.
Related party transactions
The Company has taken advantage of the exemptions of IAS 24, Related Party Disclosures and included disclosures relating to related parties
in Note 44 of the Group’s Annual Report.
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 42 of the
Group’s Annual Report.
Retirement benefits
The defined benefit pension schemes’ surpluses/deficits have been allocated to Group companies on a buy-out basis – that is on an estimate
of the liabilities and assets of the defined benefit schemes as at 30 September 2017. Accordingly the Company has not recorded an asset
or liability in relation to the Group’s defined benefit scheme.
Further information can be found in Note 35 of the Group’s Annual Report.
3 Auditor’s remuneration
Statutory audit fees relating to the Company amounted to £0.3 million (2016 £0.2 million).
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Financial Statements
Financial Statements
Notes to the Company Statement
of Financial Performance
4 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
2017
Number
14
2016
Number
27
2017
£m
5.6
(1.1)
0.4
0.1
5.0
2016
£m
7.7
3.8
1.2
0.1
12.8
The remuneration of the Directors of the Company during the year are disclosed in the Remuneration Report of the Group’s Annual Report.
5 Tax
There was a current tax credit for the year of £7.8 million (2016 £9.3 million).
6 Dividends
During the year, the Company paid a final dividend for the year ended 30 September 2016 of 15.3 pence per share and an interim dividend
for the year ended 30 September 2017 of 6.9 pence to Ordinary and A Ordinary shareholders amounting to £78.3 million (2016 £76.4 million).
The Board has declared a final dividend for the year ended 30 September 2017 of 15.8 pence per Ordinary/A Ordinary Non-Voting Share
(2016 15.3 pence) which will absorb an estimated £55.8 million (2016 £55.4 million) of shareholders’ equity for which no liability has been
recognised in these financial statements. It will be paid on 9 February 2018 to shareholders on the register at the close of business on
8 December 2017.
7 Shares in Group undertakings (listed on pages 182 to 187)
Cost
£m
3,293.5
239.5
3,533.0
Provision
£m
Net book value
£m
(184.0)
–
(184.0)
3,109.5
239.5
3,349.0
Additions
237.2
2.3
239.5
Cost and
net book value
£m
1.8
3.9
5.7
At 30 September 2016
Additions
At 30 September 2017
Analysis of movements in the year:
DMGB Ltd
Daily Mail and General Holdings Ltd
8 Other investments
At 30 September 2016
Additions
At 30 September 2017
194
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9 Trade and other receivables
Amounts falling due after more than one year
Amounts owed by Group undertakings
Other financial assets
Derivative financial assets
2017
£m
150.0
14.5
4.6
169.1
2016
£m
605.4
17.1
20.8
643.3
Included within amounts owed by Group undertakings is an amount owed by a subsidiary company, DMGB Ltd, totalling £nil (2016 £455.4 million).
The principal loan amount of £455.4 million bore interest of 4.0% p.a..
Also included within this balance is an amount owed by a subsidiary company, DMGZ Ltd, of £150.0 million (2016 £150.0 million). The loan
bears interest of 6.3% p.a. and is repayable on 30 September 2018.
Amounts falling due within one year
Amounts owed by Group undertakings
Prepayments and accrued income
Other receivables
Corporation tax
10 Cash at bank and in hand
Cash at bank and in hand
11 Trade and other payables falling due within one year
Bank overdrafts
Interest payable
Amounts owing to Group undertakings
Accruals and deferred income
Other payables
2017
£m
70.7
2.6
0.2
7.7
81.2
2017
£m
0.1
2017
£m
2.5
14.2
121.5
4.5
–
142.7
Note
(i)
(i) Amounts owing to Group undertakings are repayable on demand and bear interest of UK bank base rate plus 0.5%.
2016
£m
144.6
7.7
3.4
10.1
165.8
2016
£m
0.1
2016
£m
3.3
14.2
225.3
11.9
0.1
254.8
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Financial Statements
Financial Statements
Notes to the Company Statement
of Financial Performance
12 Trade and other payables falling due after more than one year
5.75% Bonds 2018
10.00% Bonds 2021
6.375% Bonds 2027
Bank loans
Amounts owing to Group undertakings
Derivative financial liabilities
The nominal values of the bonds are as follows:
5.75% Bonds 2018
10.00% Bonds 2021
6.375% Bonds 2027
Note
(i)
2017
£m
216.2
10.0
197.3
46.3
–
18.8
488.6
2017
£m
218.5
7.2
200.0
425.7
2016
£m
214.1
9.5
201.7
267.7
8.9
46.5
748.4
2016
£m
218.5
7.2
200.0
425.7
(i)
Details of the Company’s derivative financial liabilities are set out in Note 34 of the Group’s Annual Report.
The Company’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 £0.9 million (2016 £1.2 million) and the unamortised premia amounts
to £4.1 million (2016 £6.8 million).
Details of the fair value of the Company’s bonds are set out in Note 33 of the Group’s Annual Report.
The bonds are subject to fair value hedging using derivatives as set out in Note 34 of the Group’s Annual Report. Consequently, their carrying
value is also adjusted to take into account the effects 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 bank loans during the year ranged as follows:
Sterling
US dollar
The maturity profile of the Company’s borrowings is as follows:
2017
High
1.95%
2.75%
2017
Low
0.98%
1.46%
2016
High
2.19%
2.16%
2017
Within one year
Between one and two years
Between two and five years
Over five years
2016
Within one year
Between one and two years
Between two and five years
Over five years
196
Overdrafts
£m
Bank loans
£m
Derivatives
£m
Bonds
£m
Owed to group
undertakings
£m
2.5
–
–
–
–
2.5
–
–
–
–
–
–
–
–
46.3
–
46.3
46.3
–
–
267.7
–
267.7
267.7
–
–
–
–
–
–
–
–
6.9
39.6
46.5
46.5
–
216.2
10.0
197.3
423.5
423.5
–
–
223.6
201.7
425.3
425.3
–
–
–
–
–
–
–
–
8.9
–
8.9
8.9
2016
Low
1.02%
0.90%
Total
£m
2.5
216.2
56.3
197.3
469.8
472.3
–
–
507.1
241.3
748.4
748.4
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Note
2017
£m
–
–
–
–
–
2017
£m
2.5
2017
£m
5.1
(1.5)
(1.1)
2.5
2016
£m
–
–
0.5
(0.5)
–
2016
£m
5.1
2016
£m
6.8
(0.6)
(1.1)
5.1
13 Provisions
Other provisions
Movements on other provisions were as follows:
At 30 September 2016
Utilised during year
At 30 September 2017
14 Deferred tax
Other timing differences
Movements on the deferred tax asset were as follows:
At start of year
Share-based payments
Tax credit for the year
At end of year
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.
15 Capital and Reserves
Share premium account:
At start and end of year
Own shares:
At start of year
Additions
Own shares released on vesting of share options
Own shares cancelled
At end of year
2017
£m
17.8
2017
£m
(74.6)
(28.6)
38.9
–
(64.3)
2016
£m
17.8
2016
£m
(61.6)
(29.8)
10.3
6.5
(74.6)
The Company’s investment in its own shares are shares held in treasury or shares held by an employee benefit trust to satisfy incentive
schemes. At 30 September 2017, this investment comprised the cost of 4,812,419 A Ordinary Non-Voting Shares (2016 5,000,000) held in
treasury and 3,710,764 A Ordinary Non-Voting Shares (2016 4,887,935) held in the employee benefit trust. The market value of the Treasury
Shares at 30 September 2017 was £31.2 million (2016 £37.2 million) and the market value of the shares held in the employee benefit trust
at 30 September 2017 was £24.1 million (2016 £36.4 million).
The employee benefit trust is independently managed and has purchased shares in order to satisfy outstanding share options and potential
awards under the long-term incentive plan.
The Treasury Shares are considered to be a realised loss for the purposes of calculating distributable reserves.
197
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Financial Statements
Financial Statements
Notes to the Company Statement
of Financial Performance
16 Capital redemption reserve
At start and end of year
17 Profit and loss account
At start of year
Net profit for the year
Dividends paid
On cancellation of A Ordinary Non-Voting Shares
Other movements on share option schemes
At end of year
£m
5.2
2016
£m
2,188.0
820.1
(76.4)
(6.5)
3.5
2,928.7
2017
£m
2,928.7
127.9
(78.3)
–
(6.0)
2,972.3
Total reserves
2,931.0
2,877.1
The Directors estimate that £1,422.0 million of the Company’s profit and loss account reserve is not distributable (2016 £1,422.0 million).
18 Contingent liabilities
At 30 September 2017 the Company had guaranteed subsidiaries’ outstanding derivatives which had a mark-to-market liability valuation of
£2.6 million (2016 £11.9 million) and letters of credit with a principal value of £3.5 million (2016 £3.8 million). The Company is the guarantor
of a loan note amounting to £150.0 million (2016 £150.0 million) in respect of the contingent asset partnership referred to in Note 44 of the
Group’s Annual Report.
19 Ultimate holding company
The Company’s immediate parent company is Rothermere Continuation Limited (RCL), a company incorporated in Bermuda.
Ultimate controlling party
RCL is a holding company incorporated in Bermuda. The main asset of RCL is its 100% holding of DMGT Ordinary Shares. RCL has controlled
the Company for many years and as such is its immediate parent Company. RCL is owned by a trust (the Trust) which is held for the benefit
of Viscount Rothermere and his immediate family. The Trust represents the ultimate controlling party of the Company. Both RCL and the Trust
are administered in Jersey, in the Channel Islands.
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Shareholder Information
Company Secretary and Registered Office
Fran Sallas
Northcliffe House
2 Derry Street
London
W8 5TT
Telephone: +44 (0)20 7938 6000
E-mail: enquiries@dmgt.com
England Registered Number: 184594
Website
The Group has a website (www.dmgt.com) which gives information on the Company and its operating companies and provides details
of significant Group announcements.
Financial calendar 2018
25 January
7 February
9 February
31 March
9 April
24 May
7 June
8 June
21 June
29 June
26 July
30 September
29 November
6 December
7 December
7 December
Trading update
Annual General Meeting
Payment of final dividend
Half year end
Payment of interest on bonds
Half yearly financial report released
Interim ex-dividend date
Interim record date
Payment of interest on bonds
Payment of interim dividend
Trading update
Year end
Preliminary announcement of annual results
Ex-dividend date
Record date
Payment of interest on bonds
Capital gains tax
The market value of both the Ordinary and A Ordinary Non-Voting Shares (A Shares) in the Company on 31 March 1982 (adjusted for the 1994
bonus issue of A 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
Limited or changes of address should be directed to Equiniti, the Company’s Registrars, at the address set out on the following page.
Electronic communications
Equiniti operates 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 provides a simple low-cost dealing service for the Company’s A Shares, details of which are available at www.shareview.co.uk/dealing
or by calling +44 (0) 3456 037 037. Details of this and other low-cost dealing services can be found on the Company’s website at www.dmgt.com.
Share price information
The current price of the Company’s A Shares can be found on the home page of the Company’s website at www.dmgt.com.
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Shareholder Information
Shareholder Information
Eurobond paying agent
The principal paying agent for the Company’s 10% Bonds due 2021 and the 6.375% Bonds due 2027 is Deutsche Trustee Company Limited,
Winchester House, 1 Great Winchester St, London EC2N 2DB. The principal paying agent for the Company’s 5.75% Bonds due 2018 is HSBC
Trustee (CI) Limited, HSBC House, Esplanade, Jersey, Channel Islands JE1 1GT. Enquiries should be directed to John Donegan, Group Financial
Controller, who can be contacted on +44 (0)20 7938 6000, and whose email address is john.donegan@dmgt.com.
CREST
Shareholders have the choice either of holding their shares in electronic form in an account on the CREST system or in the physical form
of share certificates.
Investor relations
Investor relations are the responsibility of Adam Webster. The investor relations email address is investor.relations@dmgt.com.
ShareGift
In the UK, DMGT supports ShareGift, which is administered by the Orr Mackintosh Foundation (registered charity number 1052686) and which
operates a charity share donation scheme for shareholders wishing to give small holdings of shares to benefit charitable causes. It may be
especially useful for those who wish to dispose of a small parcel of shares which would cost more to sell than they are worth. There are no
capital gains tax implications (i.e. no gain or loss) on gifts of shares to charity and it is also possible to obtain income tax relief. If you would
like to use ShareGift or receive more information about the scheme, ShareGift 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 2017
Ordinary Shares
Balance ranges
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
A Shares
Balance ranges
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
Total number of holdings
Percentage of holders
Total number of shares
Percentage issued capital
0
0
0
0
0
0
0
3
3
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
100.00%
100.00%
0
0
0
0
0
0
0
19,890,364
19,890,364
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
100.00%
100.00%
Total number of holdings
Percentage of holders
Total number of shares
Percentage issued capital
804
461
195
114
76
55
74
60
43.72%
25.07%
10.60%
6.20%
4.13%
2.99%
4.02%
3.26%
277,831
1,142,388
1,430,612
1,645,110
2,444,655
3,771,821
16,951,857
314,540,196
0.08%
0.33%
0.42%
0.48%
0.71%
1.10%
4.95%
91.92%
1,839
100.00%
342,204,470
100.00%
Advisers
Credit Suisse Securities (Europe) Limited
One Cabot Square
London E14 4QJ
Telephone: +44 (0)20 7888 8888
Auditor
PricewaterhouseCoopers LLP
1 Embankment Place
London WC2N 6RH
Telephone: +44 (0)20 7583 5000
Numis Securities Limited
The London Stock Exchange Building
10 Paternoster Square
London EC4M 7LT
Telephone: +44 (0)20 7260 1000
200
Registrars
Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex BN99 6DA
Telephone: +44 (0)371 384 2302
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Visit www.dmgt.com to see what is
happening across our business and
the marketplaces in which we operate.
Contact Details
DMGT Head Office
Northcliffe House
2 Derry Street
London W8 5TT
UK
Tel +44 (0)20 3615 0000
enquiries@dmgt.com
www.dmgt.com
Design and production
This report is printed on UPM Fine SC which
is FSC® certified, as well as having ISO 14001
EMS, EMAS and the European EcoLabel.
Printed in the UK by Pureprint who are
a CarbonNeutral® company.
Both manufacturing mill and the printer are
registered to the Environmental Management
System ISO 14001 and are Forest Stewardship
Council® (FSC) chain-of-custody certified.
See our online
report at
dmgt.com