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www.euromoneyplc.com
Euromoney Institutional Investor PLC
Nestor House, Playhouse Yard,
London EC4V 5EX
Annual Report & Accounts 2008
Euromoney
Institutional
Investor PLC
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Welcome
to Euromoney
Euromoney Institutional Investor PLC is listed on the London Stock
Exchange and is a member of the FTSE 250 share index. It is a leading
international business-to-business media group focused primarily on the
international finance, metals and commodities sectors. It publishes more
than 70 magazines, newsletters and journals, including Euromoney,
Institutional Investor and Metal Bulletin. It also runs an extensive portfolio
of conferences, seminars and training courses and is a leading provider of
electronic information and data covering international finance, metals and
commodities, and emerging markets. Its main offices are located in
London, New York, Montreal and Hong Kong and nearly half of its
revenues are derived from emerging markets.
Prin cip al Bran ds
TMTM
Contents
Group
2 Highlights
2 Chairman’s Statement
7 Reconciliation of Group Income
Statement to underlying results
8 Directors’ Report
22 Directors and Advisors
24 Corporate Governance
42 Independent Auditors’ Report
Company
44 Group Income Statement
45 Group Balance Sheet
46 Group Cash Flow Statement
47 Note to the Group Cash
Flow Statement
48 Group Statement of Recognised
Income and Expense
92 Independent Auditors’
Company Report
93 Company Balance Sheet
94 Notes to the Company Accounts
104 Five Year Record
105 Financial Calendar and
Shareholder Information
30 Directors’ Remuneration Report
49 Notes to the Accounts
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Activities
Financial Publishing
Financial publishing includes an extensive
portfolio of titles covering the international
capital markets as well as a number of
specialist financial titles. Products include
magazines, newsletters, journals, surveys and
research, directories, and books. A selection of
the company’s
leading financial brands
includes: Euromoney, Institutional Investor,
Euroweek, Latin Finance, Asiamoney, Global
Investor, Project Finance, Futures & Options
World, Total Derivatives and the hedge fund
titles EuroHedge, InvestHedge, AsiaHedge,
Absolute Return and Alpha.
Business Publishing
The business publishing division produces
specialist magazines and other publications
covering the metals and mining, energy
and legal sectors. Its leading brands include:
Metal Bulletin, American Metal Market,
Petroleum Economist, World Oil, Hydrocarbon
Processing, International Financial Law Review,
International Tax Review and Managing
Intellectual Property.
Year in Brief
in-house, under
Training
The training division runs a comprehensive
range of banking, finance and legal courses,
the
both public and
Euromoney and DC Gardner brands. Courses
are run all over the world for both financial
institutions and corporates. In addition the
company’s Boston-based subsidiary, MIS, runs
a wide range of courses for the audit and
information security market.
Super Bowl of Indexing®; Global ABS; and
The Annual ABS East Conference for the
asset-backed securities market. In the energy
sector, the group runs the world’s leading
annual coal conference, Coaltrans; TelCap runs
International Telecoms Week, the best meeting
place worldwide for telecom carriers and
service providers and MIS runs the leading
event for the information security sector in the
US, InfoSec World.
Conferences and Seminars
The company runs a large number of
sponsored conferences and seminars for the
international financial markets, mostly under
the Euromoney, Institutional Investor, Metal
Bulletin and IMN brands. Many of these
conferences are the leading annual events in
their sector and provide sponsors with a
high quality program and speakers, and
outstanding networking opportunities. Such
events include: The Global Borrowers and
Investors Forum;
Euromoney Saudi
the
Arabia Conference; the Annual Global Hedge
Fund Summit; the
European Airfinance
Conference; the Islamic Finance Summit; the
Databases and Information Services
The company provides a number of
subscription-based database and electronic
information services for financial markets.
Montreal-based BCA is one of the world’s
leading
independent providers of global
investment research. The company’s US
subsidiary, Internet Securities, Inc. provides the
world’s most comprehensive service for news
and data on global emerging markets, and
includes CEIC, one of the leading providers of
time-series macro-economic data for emerging
markets. The company also offers global capital
market databases through a joint venture with
its AIM-listed partner, Dealogic.
Revenue (£m)
Adjusted diluted earnings a share* (pence)
08
07
06
332.1
305.2
08
07
06
220.5
44.4
35.0
28.6
Adjusted operating profit* (£m)
Dividend (pence)
08
07
06
£m
90
80
70
60
50
40
30
20
81.3
78.6
08
07
06
19.25
19.0
17.0
43.8
Adjusted Operating Profit*
Revenue up 9%
Adjusted diluted earnings a share up 27%
Profit before tax up 21%
Dividend up 1%
2004
2005
2006
2007
2008
*A detailed reconciliation of the group’s underlying results is set out in the appendix to the Chairman’s Statement on page 7.
Annual Report and Financial Statements 2008
01
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Chairman's Statement
Highlights
Revenue
Underlying results*
• Adjusted operating profit
• Adjusted profit before tax
• Adjusted diluted earnings a share
Statutory results
• Operating profit
• Profit before tax^
• Diluted earnings a share
Dividend
2008
2007
£332.1m
£305.2m
change
+9%
£81.3m
£67.3m
44.4p
£61.0m
£37.4m
40.4p
19.25p
£78.6m
£55.5m
35.0p
£54.1m
£41.1m
29.9p
19.0p
+3%
+21%
+27%
+13%
-9%
+35%
+1%
* A detailed reconciliation of the group's underlying results is set out in the appendix to the Chairman's statement.
^ Statutory profit before tax includes a foreign exchange loss on tax equalisation contracts of £12.0 million (2007: £1.8 million). This is matched
by an equal and opposite tax credit and therefore has no effect on earnings a share. The foreign exchange losses and the tax credit are excluded
from underlying profit and the underlying tax expense (note 7, 8 and appendix to the Chairman's statement).
It was a year when our strategy paid off, in spite of shocks
in the financial and commodities markets. The increased
reliance on high quality subscription products, a greater
push into the emerging economies, continued development
of the Metal Bulletin acquisition that we completed more
than two years ago, stronger legal and telecoms publishing
and events, and a continued grip on costs combined to
deliver a record year for revenues and profits. We believe
that strategy will serve us well in whatever is to come in
world markets.
New debt facilities are in place for the next five years. Cash
generation ran at record levels during the year and continue to
do so into the first quarter. The proposed final dividend is the
same, subject to your approval, and we also propose to offer
shareholders a choice to take the final dividend in shares
or cash.
The new year has begun relatively well. Some revenue streams
such as advertising and sponsorship, as we expected, have
begun to turn down, but many of the businesses, including
those in financial events and publishing outside the main
money centres, as well as those outside finance, continue to
deliver strong revenues and profits. The proportion of
subscription revenues as a percentage of the total increased
from 34% to 37%, contributing strongly to the robustness of
our trading, and we expect the proportion to increase.
Adjusted profit before tax rose by 21% to £67.3 million in
the year to September 30. Adjusted diluted earnings a share
increased by 27% to 44.4p, and the directors recommend
an unchanged final dividend of 13p a share to be paid to
shareholders on February 4 2009.
Throughout 2008 the business has demonstrated its resilience
in the face of problems in global credit markets, a gloomier
economic outlook, and more recently the major impact of the
credit crisis on the world’s leading financial institutions.
Total revenue increased by 9% to £332.1 million. Subscription
revenues increased by 18% to £123.1 million. Growth from
emerging markets continued to compensate for weakness in
the developed financial markets, and emerging markets now
account for nearly 50% of the group’s revenues. Our strengths
in sectors outside finance, particularly metals, commodities
and energy, is demonstrated by the 16% increase in revenues
from business publishing activities, which helped offset the
weakness in some financial sectors, particularly structured
finance and hedge funds.
The increase in adjusted profit before tax was helped by
a £4.5 million reduction in underlying net finance costs,
reflecting the strong operating cash flows of the group
which increased by 11% to £99.8 million. Net debt fell to
£172.0 million compared with £201.8 million at March 31 and
new five-year debt facilities have been agreed.
Strategy
The company’s strategy over the past five years has been to
build a more resilient and better focused business. This
strategy has been executed through increasing the proportion
of revenues derived from subscription products; investing in
products of the highest quality that customers will value in
tough times as well as good; eliminating products with a low
margin or too high a dependence on advertising; maintaining
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tight cost control at all times; retaining and fostering an
entrepreneurial culture; and making selective acquisitions to
accelerate that strategy.
revenues, is less than it was and no customer accounts for
more than 1% of group revenues.
Although the group is exposed to the uncertainty of the
economic outlook in general, and to the problems in financial
markets in particular, the increasing diversity of its revenue
streams, product offerings and geographic markets provide
better protection against market trends. The demand for
quality, hard-to-get information products, particularly those
delivered electronically, should remain robust during difficult
times. And while all revenue streams are subject to the impact
of volatility in financial markets, the increased proportion of
revenues now derived from high margin subscription products
and the reduced exposure to traditionally more volatile
advertising revenues should provide some protection against
the widely expected economic downturn in 2009.
Business Review
Financial Publishing: Revenues, which comprise a mix of
advertising and subscriptions, were unchanged at £84 million
while the adjusted operating margin improved slightly to give
adjusted operating profits of £24.5 million. The performance
of the second half mirrored that of the first. Revenues fell for
those titles more reliant on revenues from global financial
institutions, or on sectors particularly exposed to the credit
crisis such as structured finance and hedge funds. In contrast,
those titles with a strong emerging markets exposure held up
well: Euromoney, for example, had its best September issue
ever and increased its advertising revenues for the year by 7%.
Meanwhile, investment in new electronic products targeted at
niche financial sectors continued, and many of the group’s
financial titles have now moved successfully from a print-first
to a web-first publishing model.
The success of this strategy is highlighted by the 2008 results.
Since 2003, revenues have more than doubled. In the same
period, subscription revenues have increased threefold and are
now nearly double the level of advertising revenues. The
group has also made a successful transition from a
predominantly publishing-driven business to one with
significant activities in events and training, and more recently
in the provision of electronic information and database
services, which in 2008 accounted for adjusted operating
profits of £21.1 million compared to just £2.7 million in 2003.
The company’s strategy is equally applicable to tough trading
conditions and will continue to drive the group’s activities in
2009. Our strong cash generation means we can sustain our
investment in high quality subscription products, new events
and the quality of editorial. We will continue with this strategy,
even if revenues come under pressure in the short-term as
customers react to pressure on their own earnings, because
we believe it will deliver excellent growth in the medium and
longer-term. The focus on costs and maintaining margins
will increase and while we are comfortable with our level of
debt and associated covenants, we are unlikely to make any
significant acquisitions over the coming 12 months.
Trading Background
The impact of the global credit crisis on the group’s results was
less severe than expected when problems first surfaced in
2007. Growth in advertising and sponsorship revenues slowed
but delegate revenues for conferences and training courses
remained strong and demand for subscription products,
particularly databases and electronic information services,
such as BCA’s economic research and ISI’s emerging market
information, proved resilient.
The group’s investment in new products has been targeted at
the electronic delivery of niche financial information services
with real-time news, unique data and sophisticated search
engine technology. More than £2.4 million was invested in
these new products in the year with a view to driving future
revenue growth. In addition, the continued investment in
subscription marketing, new events and editorial was a key
factor in the growth in subscription and delegate revenues.
The more recent extreme events experienced by financial
markets, and in particular the demise of so many leading
financial institutions, had no significant effect on the results
for the final quarter of 2008, but will obviously have a
negative impact on financial activity in 2009. The priorities of
many of the leading global financial institutions remain the
raising of finance to secure their futures and determining their
strategies for growth once markets improve. In the short-term,
this is likely to lead to further cuts in headcount and marketing
spend, particularly once institutions start to focus on their
budgets for 2009. However, the group’s dependence on
global financial institutions, particularly for advertising
Annual Report and Financial Statements 2008
03
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Chairman's Statement continued
Business Publishing: The sectors covered by this division –
metals and commodities, energy, legal and telecoms – all
continued to perform well, helped by strong commodity
markets and high levels of investment in infrastructure,
particularly in emerging markets. Revenues increased by 16%
to £53.1 million with growth from both advertising and
subscription products, and adjusted operating profits
improved by 29% to £19.4 million. Metal Bulletin’s revenues
continued to benefit from the increased investment in
marketing and technology since its acquisition, while TelCap,
which publishes Capacity magazine for the wholesale
telecoms market, achieved strong growth through the launch
of new products.
Conferences and Seminars: Revenues, which are generated
from a mix of sponsored and paid delegate events, continued
to hold up well in the second half. Total revenues increased by
8% to £87.9 million while adjusted operating profits for the
year were unchanged at £23.1 million. The decline in margin
largely reflects the impact of the credit crisis on events in the
structured finance sector, particularly securitisation, and cuts
by global financial institutions in their spend on capital
markets conferences. In contrast, events in areas outside
finance performed well, particularly those covering the coal
and alternative energy markets under the Coaltrans brand,
and the metals and commodities markets under Metal
Bulletin.
Training: The revenue growth of the first half continued,
while the steps taken earlier in the year to improve the margin
were successful. As a result, total training revenues increased
by 10% to £40.8 million and adjusted operating profits by 2%
to £10.4 million. Training revenues are heavily dependent on
the headcount and training and travel budgets of financial
institutions, and to date have held up well despite the cost
pressures triggered by the problems in the credit markets. This
has been achieved through a mix of investment in new course
content, effective marketing and an ability to roll out
successful courses quickly to emerging markets.
Databases and Information Services: This division largely
comprises businesses which deliver high quality data and
information services in electronic-only format, and available
on a subscription-only basis. Revenues increased by 28% to
£66.1 million and adjusted operating profits from £18.7
million to £21.1 million. BCA, the independent research
business acquired as part of Metal Bulletin, continued to
achieve strong revenue growth on the back of its expansion
into new geographic markets and increases in sales resource.
ISI, the emerging markets information business, maintained its
strong sales performance of the first half and its local currency
subscription revenues increased by 21%. The decline in
adjusted operating margin was the result of ISI’s continued
investment in new products, most notably the expansion
of the CEIC emerging market economic data business into
new regions.
Financial Review
Cash generated from operations increased by 11% to £99.8
million, and the strong growth in subscription revenues helped
generate an adjusted operating profit to cash conversion rate
of 123% (2007: 115%). These strong cash flows helped
reduce year end net debt to £172.0 million, compared to
£201.8 million at the half year and £204.6 million a year
ago. Net debt to EBITDA at September 30 was a comfortable
2.2 times against 2.8 times at March 31.
In May the group spent £0.6 million on the acquisition of a
51% interest in the assets of Benchmark Financials Limited,
one of the leading providers of company financial data and
analysis for Colombian companies, which is being integrated
with ISI’s Emerging Markets Information Service. Further
investments totalling £6.0 million were made in a number of
the group’s subsidiaries, all in the first half, while in the second
half disposals of investments and property assets acquired as
part of the Metal Bulletin acquisition generated proceeds of
£4.7 million.
The group generates more than 60% of its revenues in US
dollars. The average US dollar exchange rate for the year was
1.97 against 1.96 in 2007. The group uses forward exchange
contracts to hedge its US dollar exposures. As a result, the
profit benefit from the recent strengthening of the US dollar
against sterling will largely be delayed until 2010 and beyond.
In contrast, year end net debt was calculated at a US dollar
rate of 1.78, and the recent strengthening of the US dollar to
rates below 1.60 will have increased the level of net debt by
approximately £15 million.
Net finance costs of £23.6 million shown in the statutory
results include a charge of £8.6 million (2007: £0.2 million)
relating to tax equalisation contracts under a foreign currency
financing derivative. This charge is made up of gains on tax
equalisation contracts of £3.4 million (2007: £1.6 million) and
a foreign exchange loss of £12.0 million (2007: £1.8 million)
which is offset by a matching tax credit. Underlying net
finance costs were £8.9 million compared to £13.4 million in
2007, and the average cost of funding the group’s net debt
was 5.9% compared to 6.1% for 2007.
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Capital Appreciation Plan
Following the achievement in 2007 of the profit target under
the group’s Capital Appreciation Plan (CAP), the first tranche
of 2.5 million CAP options vested in February 2008,
representing 2.4% of the company’s share capital. The 2008
CAP profit target was also achieved, and will give rise to the
vesting of up to 2.5 million CAP options in February 2009. The
third and final tranche of up to 2.5 million CAP options will
vest in February 2010 subject to further performance tests, the
most important of which requires the group’s adjusted profit
before tax before CAP option expense to exceed £57 million
in 2009. The share option expense was £5.4 million
(2007: £10.2 million), the reduction in expense reflecting the
accelerated CAP charge incurred in 2007 as a result of the
CAP profit target being achieved a year earlier than expected.
The board, with the support of the Remuneration Committee,
has approved the
introduction of a second Capital
Appreciation Plan (CAP 2). The structure, terms and cost of
CAP 2 will be broadly similar to those of the first CAP, except
that CAP 2 will comprise an equal mix of cash and new equity,
thereby reducing the dilution effect for existing shareholders
compared to the first CAP which was funded entirely by new
equity. CAP 2 will commence in the year following the
satisfaction of the performance tests for the final tranche of
the first CAP. The performance tests for CAP 2 will be set once
the profits for the final year of the first CAP are known, and
will require above average profit growth over the CAP 2
vesting period.
The introduction of CAP 2 will be subject to shareholder
approval at the Annual General Meeting on January 28 2009,
and the detailed terms and conditions of CAP 2 will be set out
in a circular to shareholders to be sent out in December 2008.
Statutory profit before tax fell by 9% to £37.4 million as a
result of the inclusion of the £12.0 million foreign exchange
loss on tax equalisation contracts in net finance costs. This
foreign exchange loss is matched with a corresponding tax
credit so that there is no financial impact on earnings a share.
The tax credit of £7.3 million shown in the statutory results is
stated after recognising the credit of £12.0 million relating to
tax on foreign exchange losses hedged by the tax equalisation
contracts referred to above. At the half year, the group
changed its presentation of the underlying tax rate by
removing all deferred tax effects of goodwill and intangibles.
This, combined with a reduction in tax rates in the UK and
Canada, and a change in the profit mix, means that the
underlying rate of tax rate for 2008 has fallen from 31%
to 27%.
A detailed reconciliation of the group’s underlying and
statutory results is set out in the appendix to this statement.
Debt Facilities
The group’s debt is provided through a dedicated £300 million
three-year multi-currency facility with a subsidiary of its
majority shareholder, Daily Mail and General Trust plc (DMGT).
This facility is due to expire in August 2009. DMGT refinanced
its bank facilities, of which the Euromoney dedicated facility
was part, in August 2008.
The board is pleased to announce it has approved a renewal
of its facility with DMGT, which is expected to be signed
shortly, securing the group’s funding until December 2013.
The terms of the new facility are broadly similar to those of the
existing facility, except that the margin over LIBOR is expected
to increase by approximately 120 basis points, reflecting the
increased cost of credit in these difficult markets. This will
increase the group’s net finance costs for 2009 by
approximately £2 million. The size of the facility has been
reduced to £250 million to reflect the strong cash flows and
reduced funding requirements of the group.
Dividend
The board has recommended an unchanged final dividend of
13p, making a total for the year of 19.25p (2007: 19p). The
board has also recommended the introduction of a scrip
dividend alternative for shareholders. The payment of a scrip
dividend will be subject to shareholder approval at the Annual
General Meeting on January 28 2009, and the detailed terms
of the scrip dividend will be set out in a circular to
shareholders to be sent out in December 2008. The group’s
majority shareholder, Daily Mail and General Trust plc, has
indicated its intention to accept the scrip dividend alternative
when the final dividend is paid in February 2009. This will help
DMGT to maintain its equity interest in Euromoney in the face
of a further dilution to come from the issue of new shares
under the company’s Capital Appreciation Plans.
Annual Report and Financial Statements 2008
05
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Chairman's Statement continued
Management
Two of the company’s non-executive directors, Charles Sinclair
and Peter Williams of DMGT, stood down from their roles
with effect from September 30 2008. Both have played a
considerable part in the growth of the company over the past
20 years. Martin Morgan, who replaced Charles Sinclair as
chief executive of DMGT, joined the board with effect from
October 1. In future, Peter Williams will serve as an alternate
non-executive director to The Viscount Rothermere. This
reduces the number of DMGT representatives on the
Euromoney board from three to two and it is the company’s
intention to appoint a new independent non-executive
director at the Annual General Meeting.
After nine years of valuable service as an executive director,
Tom Lamont, editor of Institutional Investor’s newsletter
division, will step down from the board in January 2009, on
reaching the normal retirement age for an executive director.
He will continue to serve as a member of the company’s
Executive Committee.
Outlook
The record results for 2008 highlight the success of the
group’s strategy for building a high quality portfolio of leading
information brands across a broad, global customer base.
The current levels of uncertainty and volatility in global
financial markets, and the negative economic outlook, will
present greater challenges to this strategy in 2009. However,
the strategy is robust and will not change. Our strong cash
flows will allow us to continue to invest in new subscription-
based information products, in specialist events, and in
marketing and editorial. We will place even more emphasis on
managing costs tightly and maintaining our margins. We
are unlikely to make any significant acquisitions in the next
12 months and our excess cash flows will be applied to
reducing debt levels and maximising returns for shareholders.
The trading performance in the second half was similar to that
of the first but, unsurprisingly, the outlook is more uncertain
than six months ago. Current trading is in line with the board’s
expectations, but in such volatile markets it is difficult to
predict how well sales will hold up beyond the first quarter.
Deferred revenues at September 30 were £89.5 million, an
increase of 22% since a year ago. October’s revenues were
ahead of last year and forward revenues for the first quarter
are ahead of the same time last year. However, sales for the
past six weeks have shown some signs of weakening in the
face of the extreme credit market conditions and continued
uncertainty over the economic outlook. Visibility beyond the
first quarter is very limited, as usual at this time of year, and
the recent sales weakness means revenues will come under
increasing pressure from the second quarter.
The board of Euromoney remains committed to its strategy of
investing to deliver long-term revenue growth from high
quality products and high margin revenue streams, while using
its strong cash flows to further reduce its debt levels. The
outlook for trading is inevitably uncertain in these markets,
but the group is better positioned than ever to meet the
challenges of this difficult environment.
Finally, I thank our colleagues, on your behalf and mine, for all
they have done.
Padraic Fallon
Chairman
November 12 2008
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Appendix to Chairman's Statement
Reconciliation of Group Income Statement to underlying results for the year ended September 30 2008
The reconciliation below sets out the underlying results of the group and the related adjustments to the statutory income statement
that the directors consider necessary in order to provide a more comparable indication of the underlying trading performance.
Note
3
Underlying Adjustments
£000’s
£000’s
2008
Total
£000’s
Underlying Adjustments
£000’s
£000’s
332,064
–
332,064
–
–
–
332,064
–
305,594
(441)
332,064
305,153
–
–
–
2007
Total
£000’s
305,594
(441)
305,153
3
5
81,308
–
(5,361)
–
–
–
(12,749)
–
–
(2,477)
81,308
(12,749)
(5,361)
–
(2,477)
78,606
–
(6,993)
(3,183)
–
–
(15,716)
–
–
855
78,606
(15,716)
(6,993)
(3,183)
855
75,947
(15,226)
60,721
68,430
(14,861)
53,569
308
–
308
490
–
490
76,255
5,594
(14,506)
(15,226)
–
(14,691)
61,029
5,594
(29,197)
68,920
1,611
(14,998)
(14,861)
3,885
(3,429)
54,059
5,496
(18,427)
7,a
7,b
(8,912)
(14,691)
(23,603)
(13,387)
456
(12,931)
67,343
(29,917)
37,426
55,533
(14,405)
41,128
Continuing operations
Less: share of revenue of joint ventures
Total revenue
Operating profit before acquired
intangible amortisation, share
option expense and
exceptional items
Acquired intangible amortisation
Share option expense
Accelerated share option expense
Exceptional items
Operating profit before associates
and joint ventures
Share of results in associates and
joint ventures
Operating profit
Finance income
Finance expense
Net finance costs
Profit before tax
Tax credit/(expense) on profit on
ordinary activities
8
(18,346)
25,625
7,279
(17,190)
8,967
(8,223)
Profit after tax from
continuing operations
Profit for the year from
discontinued operations
48,997
(4,292)
44,705
38,343
(5,438)
32,905
c
–
245
245
–
500
500
Profit for the year
48,997
(4,047)
44,950
38,343
(4,938)
33,405
Attributable to:
Equity holders of the parent
Equity minority interests
Diluted earnings per share –
continuing operations
47,766
1,231
(4,047)
–
43,719
1,231
36,760
1,583
(4,938)
–
31,822
1,583
48,997
(4,047)
44,950
38,343
(4,938)
33,405
10
44.36p
(3.99p)
40.37p
35.04p
(5.18p)
29.86p
a) Finance income
The adjustment of £nil (2007: £3,885,000) relates to the non-cash net movements in acquisition option commitment values as set out in note 7.
b) Finance expense
The adjustment of £14,691,000 (2007: £3,429,000) relates to the non-cash net movements in acquisition option commitment values of £1,730,000
(2007: £nil), imputed interest charge on acquisition option commitment values of £995,000 (2007: £1,603,000) and tax equalisation swap expense
of £11,966,000 (2007: £1,826,000) as set out in note 7. The tax equalisation swap expense relates to foreign exchange losses on hedges on intra-
group financing. These foreign exchange losses are matched by an equal and opposite tax credit.
c) Profit from discontinued operations
In December 2007 following agreement of the Energy Information Centre Limited completion accounts, the group received a final payment of
£220,000 from the purchasers. Energy Information Centre Limited was sold in April 2007 and was treated as a discontinued operation up to that
date. This results in a tax charge of £nil.
In May 2008 following agreement of the Systematics International Limited completion accounts, the group received a final payment of £25,000 from
the purchasers. Systematics International Limited was sold in May 2007 and was treated as a discontinued operation up to that date. This results in
a tax charge of £nil.
Annual Report and Financial Statements 2008
07
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Directors' Report
The directors submit their annual report and group accounts
for the year ended September 30 2008.
2. Strategy
The key elements of the group's strategy are:
Certain statements made in this document are forward-
looking statements. Such statements are based on current
expectations and are subject to a number of risks and
uncertainties that could cause actual events or results to differ
materially from any expected future events or results referred
to in these forward-looking statements. Unless otherwise
required by applicable law, regulation or accounting standard,
the directors do not undertake any obligation to update or
revise any forward-looking statements, whether as a result of
new information, future development or otherwise. Nothing
in this document shall be regarded as a profit forecast.
The directors' report has been prepared for the group as a
whole and therefore gives greater emphasis to those matters
which are significant to Euromoney Institutional Investor PLC
and its subsidiary undertakings when viewed as a whole. It has
been prepared solely to provide additional information to
shareholders as a body to assess the company's strategy and
the potential for that strategy to succeed and the directors'
report should not be relied upon by any other party for any
other purpose.
1. Principal activities
Euromoney Institutional Investor PLC is listed on the London
Stock Exchange and is a member of the FTSE 250 share index.
It is a leading international business-to-business media group
focused primarily on the international finance, metals and
commodities sectors. It publishes more than 70 magazines,
newsletters and journals, including Euromoney, Institutional
Investor and Metal Bulletin. It also runs an extensive portfolio
of conferences, seminars and training courses and is a leading
provider of electronic information and data covering
international finance, metals and commodities, and emerging
markets. Its main offices are located in London, New York,
Montreal and Hong Kong and nearly half of its revenues are
derived from emerging markets. Details of the group's legal
entities can be found in note 13.
● drive top-line revenue growth from both new and existing
products;
● building robust subscription and repeat revenues and
reduce the dependence on advertising;
● improving operating margins through revenue growth
and tight cost control;
● leveraging technology to
launch specialised new
electronic information services;
● to making focused acquisitions that supplement the
group's existing businesses, strengthen the company’s
market position in key areas and have the capacity for
organic growth using the existing knowledge base of the
group; and
● keeping its net debt within a debt to EBITDA limit of
four times.
In 2004, to supplement this strategy, the board set the group
a profit* target of £50 million by 2008 against a base of
£21 million in 2003. In March 2007, the target was increased
to £57 million to reflect the effect of the Metal Bulletin
acquisition. The profit* achieved in 2007 was £65.7 million,
beating the increased target a year earlier than expected. The
board believes this significant achievement reflects the success
of the Capital Appreciation Plan (CAP) incentive scheme in
driving growth. This was further demonstrated in 2008 when
the profit* achieved of £72.9 million exceeded both that of
2007 and the performance target set for the second tranche
of the CAP. The third and final tranche of the CAP is subject
to a performance test which requires the company's profit*
for 2009 to remain above £57 million.
3. Business review
3.1 Group results and dividends
The group profit for the year attributable to shareholders
amounted to £43.7 million (2007: £31.8 million). The directors
recommend a final dividend of 13.0 pence per ordinary share
(2007: 13.0 pence), payable on February 4 2009 to
shareholders on the register on November 21 2008. This,
together with the interim dividend of 6.25 pence per ordinary
share (2007: 6.0 pence) which was declared on May 14 2008
and paid on June 23 2008, brings the total dividend for the
year to 19.25 pence per ordinary share (2007: 19.0 pence).
* Profit before tax excluding acquired intangible amortisation, share option expense, exceptional items, net movements in acquisition option commitments
values, imputed interest on acquisition option commitments and foreign exchange loss interest charge on tax equalisation contracts as set out in the income
statement and note 7.
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3.2 Key performance indicators
The group monitors its performance against its strategy using the following key performance indicators.
Revenue growth and mix
Subscriptions
Advertising
Sponsorship
Delegates
Other
Sold/closed businesses
Gross margin1
Adjusted operating margin2
Organic growth in profits3
Headcount4
Net debt to EBITDA5
£m
75.0
70.0
65.0
60.0
55.0
50.0
45.0
40.0
35.0
30.0
25.0
20.0
15.0
Revenue
2008
£m
123.1
66.5
45.8
86.4
10.3
––
Mix
2008
%
37%
20%
14%
26%
3%
332.1
100%
City PBT6 and Adjusted PBT7
Revenue
2007
£m
104.0
65.2
46.2
74.1
10.8
4.9
305.2
2008
69.1%
24.5%
£3.4m
2,207
2.17:1
Mix
2007
%
34%
21%
15%
24%
4%
2%
100%
2007
69.8%
25.8%
£13.8m
2,160
2.85:1
Revenue
growth
%
+18%
+2%
(1%)
+17%
(5%)
(100%)
+9%
Growth
(0.7%)
(1.3%)
47
City PBT
Adjusted PBT
CAP Revised Target
CAP Original Target
2001
2002
2003
2004
2005
2006
2007
2008
Year
1 Gross margin = gross profit as a percentage of revenue. Gross profit and revenue are both as per note 4 in the financial statements.
2 Adjusted operating margin = operating profit before acquired intangible amortisation, share option expense, exceptional items and associates and joint
ventures as a percentage of revenue. Operating profit and revenue are both as per the group income statement in the financial statements.
3 Organic growth in profits = proportion of operating profit growth that relates to organic growth, rather than acquisitions. Operating profit is from
continuing operations and excludes closed businesses and is adjusted for significant timing differences.
4 Headcount = number of permanent people employed at the end of the period including people employed in associates and joint ventures.
5 Net debt to EBITDA = the amount of the group's net debt to earnings before interest, tax (operating profit), depreciation, amortisation and also before
exceptional items but after the share option expense.
6 City PBT = Profit before tax excluding acquired intangible amortisation, share option expense, exceptional items, net movements in acquisition option
commitments values, imputed interest on acquisition option commitments and foreign exchange loss interest charge on tax equalisation contracts as set out
in the group income statement and note 7.
7 Adjusted PBT = City PBT after the deduction of share option expense as set out on page 7.
Annual Report and Financial Statements 2008
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Directors' Report continued
3.3 KPIs explained
The key performance indicators are all within the board's
expectations and support its successful strategy. These
indicators are discussed in detail in the Chairman's Statement
on pages 2 to 6, and in section 3.4 below.
3.4 Development of the business of the group
3.4.1 Financial results
A detailed review of the group's results is given in the
Chairman's statement on pages 2 to 6.
3.4.2 Finance costs
IAS 39 'Financial Instruments: Recognition and Measurement'
requires an imputed interest charge to be recognised on the
group's
future acquisition payments under option
agreements. This additional finance charge increased the
group's interest cost by £1.0 million (2007: £1.6 million). IAS
39 also requires any movements in the estimated value of
acquisition option commitments to be recognised in interest
and in 2008 an amount of £1.7 million (2007: income of
£3.9 million) was recognised. There is no related cash effect of
these amounts.
In addition, the group's interest cost includes £12.0 million
(2007: £1.8 million) in relation to foreign exchange losses on
hedges on intra-group financing. These are matched by an
equal and opposite tax credit in the group's tax line from tax
equalisation swaps designed to hedge this transaction.
Excluding these amounts, the group's net finance cost fell
from £13.4 million to £8.9 million, reflecting the successful
reduction in the group's debt and benefiting from a lower
interest margin, a result of the stronger EBITDA to Net Debt
ratio. The group continues to follow its treasury policy of fixing
the interest rate on a portion of its long-term borrowings (see
treasury section below).
3.4.3 Headcount
The number of people employed is monitored monthly, to
ensure that there are sufficient people employed to meet the
forthcoming demands of each business and to make sure that
the businesses continue to deliver sufficient profits to support
the people they employ. At the end of September the group
employed 2,207 people, an increase of 47 since the start of
the year, including 12 acquired as part of the acquisition of
Benchmark Financials Limited (BPR). The majority of additional
heads were recruited at BCA, CEIC and Internet Securities,
Inc., reflecting their strong growth.
3.4.4 Debt and working capital management
Net debt at September 30 2008 was £172.0 million (2007:
£204.6 million) which included cash of £21.2 million (2007:
£26.7 million). At the end of September the group's net debt
to EBITDA ratio improved to 2.17 (2007: 2.85), resulting in the
group's variable rate interest margin above LIBOR falling by
five basis points. The ratio remains within the group's banking
covenant arrangements. During the year the group has
focused on reducing its cash holdings in order to maximise the
amount available to reduce its gross debt. At September 30
2008 cash held has fallen £5.5 million. Cash generated from
operations increased by 11% to £99.8 million producing
an adjusted operating profit cash conversion of 123%
(2007: 115%). A discussion on debt is contained within the
Chairman's statement on page 5. The group has a dedicated
£300 million three-year multi-currency facility with a subsidiary
of Daily Mail and General Trust plc (DMGT). Interest is payable
on this facility at a variable rate of between 0.4% and 1.6%
above LIBOR. The facility expires in August 2009 and the
directors have, subsequent to the year end, agreed to sign a
new replacement facility of up to £250 million offered by
DMGT. The terms of the new facility are similar to the existing
facility with interest payable at a variable rate of between
1.25% and 3.0% above LIBOR dependant on the group's net
debt to EBITDA covenant. At September 30 2008 there were
£115.4 million (2007: £86.4 million) of committed undrawn
amounts directly available to the group.
3.4.5 Balance sheet
The net assets of the group were £88.1 million compared to
£55.8 million in 2007. The main movements in the balance
sheet items were in: intangible assets, reflecting the
recognition of £9.2 million of goodwill and other intangible
assets following the acquisitions and further equity purchases
of ISI, TelCap, Total Derivatives, and BPR, foreign exchange
gains of £36.9 million and amortisation and impairment costs
of £18.7 million; property, plant and equipment, increased
by £0.7 million to £21.7 million, as a result of the £2.5 million
capitalisation of the refurbishment costs of two of the group's
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London premises offset by the freehold sale of a legacy Metal
Bulletin building (£1.2 million net book value) plus foreign
exchange movements and regular capital expenditure across
the group; post retirement benefits, increased £2.2 million
to £2.5 million reflecting the increased pension surplus on the
Metal Bulletin pension scheme; amounts on loans owed to
DMGT, relates to a £155.7 million intercompany receivable
loan with a DMGT company (which is offset by a similar loan
payable to a different DMGT company in current liabilities;
derivative financial instruments (due less than one year and
more than one year), fell from an asset of £7.5 million to a
liability of £23.1 million reflecting the fall in mark to market
value of the group's forward currency contracts and interest
rate swaps; acquisition option commitments due in less
than one year increased £7.4 million to £22.3 million
reflecting the transfer of the liability from acquisition option
commitments due in more than one year, further tranches of
the group's acquisitions due for purchase in 2009; deferred
income increased £16.1 million to £89.5 million reflecting the
underlying growth in the group's subscription revenue; loan
notes fell £4.2 million to £7.6 million, a result of loan note
redemption during the year; committed loan facility (due
less than one year) fell £29.0 million to £184.6 million,
reflecting the net cash generated by the group from
operations; deferred tax, the net deferred tax liability has
fallen from £20.1 million to £11.4 million due to the
recognition of additional deferred tax assets on put option
commitments and US losses and the unwinding of deferred
tax on intangible assets.
3.4.6 Acquisitions and disposals
Acquisitions remain a fundamental part of the group's growth
strategy. In particular the board believes that acquisitions are
valuable for taking the group into new sectors, for bringing
new technologies into the group and for increasing the
group's growth by buying into rapidly developing niche
businesses. The group continues to look for acquisitions to
support its main brands, especially in international finance,
energy, commodities, telecoms and law.
Acquisitions
Our emerging market content aggregator and data business,
ISI Emerging Markets (Internet Securities, Inc), has made two
acquisitions this year. In May 2008, it acquired BPR;
headquartered in Bogota, Colombia, BPR is one of the leading
providers of company financial data, analysis and business
credit ratings for Colombian companies. The business is a
high-quality, international, online business which generates
revenues from selling subscriptions to customers, and as such
closely fits our acquisition criteria. During the summer, we
looked closely at two other significant online subscription
businesses but ultimately withdrew given the state of the
markets and their high valuations.
Increase in equity holdings
The group continues to increase its holdings in its subsidiaries
and this year has paid the following:
In January 2008, the group purchased a further 10.85% of the
equity share capital of Total Derivatives Limited, a leading
provider of real-time news and analysis about the global
fixed income derivatives market, for a cash consideration of
£2.6 million increasing its equity holding to 78.3%.
In February 2008, the group purchased a further 15% of the
equity share capital of TelCap Limited, the global wholesale
telecoms publisher and conference organiser, for a cash
consideration of £2.5 million, increasing the group's equity
holding to 70%.
In February 2008, the group purchased a further 0.5% of the
equity share capital of Internet Securities, Inc. for a cash
consideration of $1.8 million (£0.9 million), bringing the
group's equity shareholding to 93.85%.
3.4.7 Marketing and circulation
In 2008 revenues from direct marketing, including Metal
Bulletin, increased by 15%. Revenue growth was achieved
across all products, in particular paid delegates and electronic
subscriptions. Return on marketing spend improved by 4%,
including significant increased investment in Metal Bulletin
(£1.4 million). Marketing revenues taken on-line grew by
28%, primarily driven by effective use of search and email
marketing which is beginning to replace direct mail.
3.4.8 Systems and information technology
The company continues to invest in its IT infrastructure. In
2008 a new state-of-the-art storage system was implemented
Annual Report and Financial Statements 2008
11
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Directors' Report continued
in London to give staff high performance access to the
company’s data and secure, remote connectivity to our office-
based systems from anywhere in the world. The office move
programme was completed in August this year with all Metal
Bulletin staff now benefiting from Euromoney's infrastructure
and systems.
Investment in high-speed network and wireless technologies
continues across the group; a high performance external
network links the company's main offices in Europe, North
America and Asia.
In the UK new resilient and high capacity telecom infrastructure
was implemented during the year; a VoIP network with
increased internet bandwidth provides a scalable and feature-
rich telephony network. Unified messaging was implemented
recently to enable staff to receive voicemail over the web
worldwide. A video conferencing facility has also been added
improving communication between our offices in London, New
York, Montreal and Hong Kong whilst reducing global travel
costs. Total call costs were also reduced following a full review
of telecom suppliers and services during the year.
A project is underway to review the company's information
security policy and refresh the controls in place for the
protection of the company's data. A programme to train all
managers in relevant information security practices is planned
for 2009 and new procedures will be rolled out to reinforce
incident management. In addition all credit card processing
systems and procedures are being updated to meet the new
standards mandated by the payment card industry. The
company deadline for compliance with these new standards is
December 31 2008.
In 2008 disaster recovery and business continuity plans for all
businesses were updated. The company has an active
programme for testing the disaster recovery plans for all
business units.
3.4.9 Tax and treasury
Committee
The group's tax and treasury committee normally meets
twice a year and is responsible for recommending policy
to the board. The committee members are the chairman,
managing director and finance director of the company,
and the finance director and the deputy finance director of
DMGT. The chairman of the audit committee is also invited to
attend the tax and treasury meetings. The group’s treasury
policies are directed to giving greater certainty of future
costs and revenues and ensuring that the group has
adequate liquidity for working capital and debt capacity for
funding acquisitions.
Treasury
The treasury department does not act as a profit centre,
nor does it undertake any speculative trading activity and
it operates within policies and procedures approved by
the board.
Interest rate swaps are used to manage the group’s exposure
to fluctuations in interest rates on its floating rate borrowings.
The maturity profile of these derivatives is matched with the
expected future debt profile of the group. The group’s policy
is to fix the interest rates on approximately 80% of its term
debt looking forward over five years. The maturity dates are
spread in order to avoid interest rate basis risk and also to
negate short-term changes in interest rates.
At September 30 2008, the group had 83% of its net debt
fixed by the use of interest rate hedges. The predicitability of
interest costs is deemed to be more important than the
possible opportunity cost foregone of achieving lower interest
rates and this hedging strategy has the effect of spreading the
group's exposure to fluctuations arising from changes in
interest rates and hence protects the group's interest charge
against sudden increases in rates but also prevents the group
from benefitting immediately from falls in rates.
The company's websites are located at a dedicated, high-
availability hosting centre. Many sites were re-launched during
2008 with fresh designs and updated technologies. Throughout
2008 the company continued to invest in its e-commerce
infrastructure to help support its growing online revenues.
The group is exposed to foreign exchange risk in the form of
transactions in foreign currencies entered into by group
companies and by the translation of the results of foreign
subsidiaries into sterling for reporting purposes. The group
does not hedge the translation of the results of foreign
12
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subsidiaries, but does endeavour to match foreign currency
borrowings to investments in order to provide a natural hedge
for the translation of the net assets of overseas subsidiaries.
Approximately 60% of the group’s revenues are in US dollars.
Subsidiaries normally do not hedge transactions in foreign
currencies into the functional currency of their own
operations. However, at a group level a series of US dollar
forward contracts is put in place up to 48 months forward
partially to hedge its dollar revenues into sterling.
Details of the financial instruments used are set out in note 18
to the accounts.
Tax
The underlying effective tax rate based on adjusted profit
before tax and excluding deferred tax movements on
intangible assets, prior year items and exceptionals is 27%
(2007: 31%). The decrease in the underlying rate from 2007 is
due a reduction in statutory tax rates in Canada and the UK
as well as a different mix of regional profits. The group's
effective tax rate decreased to a 19% credit compared to 20%
expense in 2007. A credit of £12.0 million relating to tax
on foreign exchange losses (2007: £1.8 million) has been
treated as exceptional as it is hedged by £12.0 million
(2007: £1.8 million) of foreign exchange losses on tax
equalisation contracts included within net finance costs (note
7). A reconciliation to the underlying effective rate is set out in
note 8 in the accounts.
The total net deferred tax balance held is a liability of £11.4
million (2007: £20.1 million) and relates primarily to
capitalised intangible assets, tax deductible US goodwill and
rolled over capital gains, net of deferred tax assets held in
respect of US tax losses and short term timing differences, UK
short term timing differences and the future deductions
available for the CAP. The decrease in the net liability is due to
the recognition of previously unrecognised US deferred tax
asset of £5.4 million (2007: £3.2 million) and the unwinding
of deferred tax on intangible assets. The deferred tax asset
recognised relates to Metal Bulletin group US tax losses and
the
Instruments: Recognition and
Measurement' liability in respect of the group’s obligations
under the put option held by IMN’s minority shareholders.
'Financial
IAS 39
There is an unrecognised US deferred tax asset of £1.8 million
(2007: £5.4 million) relating to capital losses arising on the
sale of the group's 15% interest in LAMP Technologies LLC.
The unrecognised deferred tax asset in 2007 has been
recognised in full in 2008.
4. Risk management
The company has continued to develop its processes for risk
management. Management of significant risk is regularly on
the agenda of the board and other senior management
meetings.
Specific risk areas that potentially could have a material impact
on the group's long-term performance include:
Downturn in economy or market sector
The group generates significant income from certain key
geographical regions and market sectors for both its
publishing and events businesses. Uncertainty in global
financial markets increases the risk of a downturn or potential
collapse in one of these areas, should this occur, income is
likely to be adversely affected and for events businesses some
abandonment costs may also be incurred.
However, the group has a strong product mix and operates in
multiple geographical locations which reduces dependency on
any one sector or region. Management has shown a proven
ability to switch the group's focus to new or unaffected
markets (e.g. following the SARS outbreak in Asia and terrorist
attacks in New York).
Liquidity risk
The group has significant intercompany borrowings and is an
approved borrower under a Daily Mail and General Trust plc
(DMGT), £300 million revolving multi-currency facility. This
facility requires the group to meet certain covenants based on
net debt and profits adjusted for certain non-cash items.
Failure to do so would result in the group being in breach of
the facility potentially resulting in the facility being withdrawn
or impediment of management decision making by the lender.
Management regularly monitor the covenants and prepare
detailed debt forecasts to ensure that sufficient headroom is
available and that the covenants are not close or potentially
close to breach. The group's strategy is to use excess operating
Annual Report and Financial Statements 2008
13
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Directors' Report continued
cash to pay down its debt. The group has a cash conversion
rate (the percentage by which cash generated by operations
covers adjusted operating profit) of over 100%, due to much
of its subscription, conference and training revenue being paid
in advance. This facility is due to expire in August 2009,
however the directors have, subsequent to the year end,
agreed to sign a new replacement facility of up to £250 million
offered by DMGT. The terms of the new facility are similar to
the existing facility.
Under the DMGT facility, at September 30 2008, the group
has £115.4 million of undrawn but committed facilities
available to draw upon if required. This is more than sufficient
for the group to meet expected and unexpected short-term
working capital requirements. However, given the level of
uncertainty in the global economy and financial markets, there
is a risk that the undrawn portion of the facility may be
unavailable or withdrawn if DMGT experience funding
difficulties themselves, for example if one of DMGT's lenders
was unable to fulfil its lending commitments. It is, however,
unlikely that this would impact the group as DMGT have a
wide range of funding sources, other than bank debt,
available to them. In addition, if DMGT were unable to fulfil its
commitment to Euromoney the directors are confident that
the group is in a position that would enable it to secure
adequate facilities outside of DMGT, albeit at an increased cost
to the business due to high interest charges imposed given the
crisis in the credit markets.
Market price risk
Market price risk is the possibility that changes in currency
exchange rates, interest rates or commodity prices will adversely
affect the value of the group’s financial assets, liabilities or
expected future cash flows. The group's primary market risks
are interest rate fluctuations and exchange rate movements.
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. Derivatives used by the group for hedging a
particular risk are not specialised and are generally available
from numerous sources. The fair values of interest rate swaps,
currency options and forward exchange contracts set out in
note 18 represent the replacement costs calculated using the
market rates of interest and exchange at September 30 2008.
The group has no other material market price risks.
Interest rate risk
The group's borrowings are in both pounds sterling and US
dollars with the related interest tied to US and UK LIBOR. This
results in the group's interest charge being at risk to fluctuations
in interest rates. It is the group's policy to hedge approximately
80% of its interest exposure, converting its floating rate debt
into fixed debt by means of interest rate swaps. The maturity
dates are spread in order to avoid interest rate basis risk and also
interest rates. The
to negate short-term changes
predicitability of interest costs is deemed to be more important
than the possible opportunity cost foregone of achieving lower
interest rates and this hedging strategy has the effect of
spreading the group's exposure to fluctuations arising from
changes in interest rates and hence protects the group's interest
charge against sudden increases in rates but also prevents the
group from benefiting immediately from falls in rates. Details
of the group's interest rate swaps are given in note 18.
in
Foreign currency risk
The group is exposed to foreign exchange risk in the form of
transactions in foreign currencies entered into by group
companies and by the translation of the results of foreign
subsidiaries into sterling for reporting purposes.
The group does not hedge the translation of the results of
foreign subsidiaries. Consequently, fluctuations in the value of
sterling versus other currencies could materially affect the
translation of these results in the consolidated financial
statements. The group endeavours to match foreign currency
borrowings to investments in order to provide a natural hedge
for the translation of the net assets of overseas subsidiaries
with the related foreign currency interest cost arising from
these borrowings providing a part natural hedge against the
translation of foreign currency profits.
Approximately 60% of the group's revenues are in US dollars.
At a group level a series of US dollar forward contracts is put
in place up to 48 months forward partially to hedge its dollar
revenues into sterling. The timing and value of these forward
contracts are based on management’s estimate of its future US
dollar revenues over a 48-month period and is regularly
reviewed and revised with any changes in estimates resulting
in either additional forward contracts being taken out or
existing contracts' maturity dates being moved forward or
14
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back. The group also has a significant operation in Canada
whose revenues are mainly in US dollars. At a group level
a series of US dollar forward contracts is put in place up to
48 months forward to hedge the operation's Canadian cost
base. In addition, each subsidiary is encouraged to invoice
sales in its local functional currency where possible. Details of
the group's forward contracts are given in note 18.
Credit risk
The group seeks to limit interest rate and foreign currency risks
described above by the use of financial instruments and as a
result has a credit risk from the potential non-performance by
the counterparties to these 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 risks are controlled by monitoring the
amounts outstanding, with and the credit quality of, these
counterparties. For the group's cash and cash equivalents
these are principally
licensed commercial banks and
investment banks with strong long-term credit ratings, and for
derivative financial instruments DMGT who have treasury
policies in place which do not allow concentrations of risk
with individual counterparties and do not allow significant
treasury exposures with counterparties which are rated lower
than AAA.
The group also has credit risk with respect to trade and other
receivables, prepayments and accrued
income. The
concentration of credit risk from trade receivables is limited due
to the large and broad customer base. Trade receivable
exposures are managed locally in the business units where they
arise. Allowance is made for bad and doubtful debts based on
management’s assessment of the risk of non-payment taking
into account the ageing profile, experience and circumstance.
The maximum exposure to credit risk is represented by the
carrying amount of each financial asset, including derivative
financial instruments, recorded in the balance sheet.
London, New York, Montreal or Hong Kong wide disaster
The group has its main offices located in London, New York,
Montreal and Hong Kong. An area wide disaster is likely to
have serious consequences with office space potentially
becoming unusable for several months and a lack of suitable
alternative accommodation; loss of key clients and staff in an
affected area and difficult communications with both
customers and staff. As a consequence of the above, the
group could suffer a loss of revenue.
To mitigate this risk the group has detailed disaster recovery
(DR) plans for all businesses. All employees can work remotely.
The group regularly tests its DR plans. It has robust systems
in place with key locations (including the UK, US, Canada
and Asia) benefiting from dual locations of back ups, dual
loading of live back ups for key systems and third-party
24-hour support.
Publishing legislation
The group generates a significant amount of its revenue from
publishing and hence has an inherent libel risk. A successful
libel claim is likely to affect the group's reputation in the
market place where the libel claim arose and/or where the
publication was published. As a consequence the group could
suffer a loss of advertising and other add-on revenue streams.
To mitigate this risk the group runs mandatory annual libel
courses for all journalists and editors. Key staff are aware of
the significant nature of the risks and strong internal controls
are in place for reporting to senior management if a potential
issue arises. The group also has libel insurance cover.
Circulation
The group publishes over 70 titles and publications and sells
advertising based partly on circulation figures. An incorrect
claim for circulation could adversely affect the group's
reputation in the applicable market place with a potential
knock-on effect for other titles within the group. This could
lead to the permanent loss of advertisers and other
revenue streams.
All of the above risks have been further heightened by the
impact of the credit crunch resulting in increasing uncertainty
in global financial markets and economies.
To mitigate this risk the group runs rolling annual internal
audits and regularly monitors internal controls designed to
cover circulation. Detailed guidance is provided to all relevant
Annual Report and Financial Statements 2008
15
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Directors' Report continued
employees and their understanding of the rules is regularly
monitored. There are a large number of mutually exclusive
titles and it is unlikely that an incorrect circulation claim,
should it arise, would affect the circulation of other titles
within the wider group. Similar controls are applied to claims
for electronic publishing activities.
brand could impact the group's reported profits. The group
works hard to manage the quality and reputation of its brands
and products and protects these where necessary with trade
marks which are monitored by external advisors. In addition
the group benefits from a broad range of products and brands
which diversifies the brand risk.
Acquisition and disposal risk
Part of the group's strategy is to be acquisitive. Management
review a number of potential acquisitions each year with only
a small proportion of these going through to due diligence
stage and possible subsequent purchase. The group could
suffer an impairment loss if an acquired business does not
generate the expected returns or fails to operate or grow in its
markets and products areas. The expected risks of a newly
acquired entity may be misunderstood. As a consequence a
significant amount of management time could be diverted
from other operational matters. The group is also subject to
disposal risk, possibly failing to achieve optimal value from
disposed businesses or underestimating the impact on the
remaining group businesses from such a disposal.
To mitigate this risk experienced senior management perform
detailed in-house due diligence and call on expert external
advisors where deemed necessary. Acquisition agreements are
usually structured so as to retain key employees in the acquired
company and there is a close monitoring of performance at
board level of the entity concerned post acquisition.
Key staff leaving
In order to pursue our strategy, we are reliant on key
management and staff across all our businesses. Many of the
businesses products are reliant on the technological and
specialist expertise provided by a number of talented staff. All
key staff are engaged in long term incentive plans to
encourage retention. In addition the directors remain
committed to recruitment and retention of high quality
management and talent, and provide a programme of great
opportunity and progression for employees including
extensive training and transfer opportunities.
Reliance on key brands
The group has a portfolio of significant brands. Damage to
any of these brands, or increasing popularity of a competitor
Conferences and events
There has been significant growth in the events businesses
within the group which now account for over 40% of the
group's profits. A number of key events are organised as joint
venture partnerships. Failure
joint venture
relationships could result in loss of profit, reputation and
damage to the specific event brand. Measures are in place to
closely manage these key relationships and the quality of the
events to ensure they remain financially successful.
in these
Events are held all over the world and rely on the ability of the
delegates to travel globally. Disruptions or reductions to global
travel as a result of terrorism, pandemic or climate change
issues, could lead to events being cancelled or refunded.
Abandonment insurance is in place for targeted key events.
Tax
The group operates within many jurisdictions; earnings are
therefore subject to taxation at differing rates across these
jurisdictions. The directors endeavour to manage the tax
affairs of the group in an efficient manner, however, due to an
ever more complex international tax environment there will
always be a level of uncertainty when provisioning for tax
liabilities. There is also a risk of tax laws being amended by
authorities in the different jurisdictions in which the group
operates which could have an adverse effect on the financial
results. External tax experts and in-house tax specialists,
reporting to the tax and treasury committee, work together to
review all tax arrangements within the group and keep abreast
of changes in global tax legislation.
Technological change and IT infrastructure
All of the group's businesses to some degree are dependent
on technology. Information systems are critical for the
effective management and provision of services around the
group. Disruption to information technology could adversely
affect the business and damage the group's reputation. The
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internet is becoming an ever increasing important revenue
stream for the group and with this comes risk. The internet,
through the proliferation of free content and content
aggregators, has the potential to erode hard copy advertising
increasing
and
dependence on information systems has also heightened the
information security risk to the group with breaches in our
data security systems having a potential impact on our
business and reputation.
revenues. The group's
subscription
The group is already embracing these challenges, and overall
sees the internet and other technological advances as an
opportunity not a threat. Business continuity plans are in place
in each business and include comprehensive back up plans for
IT infrastructure, with the aim to protect the businesses from
unnecessary disruption. The group has comprehensive
information security standards and practices in place which are
reviewed on a regular basis. Many of the group's businesses
already produce soft copies of publications to supplement the
hard copies. While the internet is an important tool for
generating additional revenue the group's product mix
provides protection for any potential unforeseen problems. For
example, the group's share of profit from event businesses is
growing, with face-to-face meetings of increasing importance.
5. Social responsibility
The company’s strategy: Euromoney Institutional Investor PLC
encourages its people to be active in charities. Its charity
budget deliberately supports the same good causes that its
employees support, matching or better the money raised by
its people.
In 2007/8 it did the same, but it also set out to do something
extra, something much more ambitious, as described in last
year’s annual report. To remind shareholders, it searched for a
special one-off charity project before choosing a single cause
that was particularly suitable for a publishing company that
earns much of its revenues in emerging markets. The criteria it
selected were that the project must make a maximum
beneficial change to people’s lives, that it would concentrate
on children, that it would be permanent or self-sustaining,
that it would fire the imagination of the company’s employees
around the world, and that it would be entirely funded
through the company’s efforts.
When the search finished, Euromoney Institutional Investor
had found its project, to create a children’s eye clinic in Orissa,
the poorest state in India. It would take three years to come
fully on stream.
Avoidable blindness is very common in poor regions of India
and Africa. Much of it can be cured by a simple cataract
operation that costs around £12. The key is to build the clinic
in the grounds of an existing hospital, in this case the Kalinga
Eye Hospital, and to share many of the facilities. Surgeons and
nurses would be recruited and trained to perform delicate eye
surgery on children in the new clinic under the guidance of
ORBIS, the
is
Euromoney’s partner in the project. The mission of ORBIS is to
restore sight to poor people in developing countries. The clinic
would sustain itself by charging better off parents, so that no
child would be turned away. Hospital teams would tour local
villages, testing children’s eyesight and encouraging parents to
bring them to the clinic for surgery if needed.
international blindness charity, which
The budgeted cost of the project was £188,000. ORBIS
suggested the funds be raised over three years. Euromoney
Institutional Investor set out to raise the money in a year.
At the end of calendar 2006 it asked its people, the
company itself, and its customers to combine in one big effort.
The Board decided that, in addition to the usual charity
budget, the company would donate a further £50,000 to
Kalinga. In addition, the directors individually gave more than
£50,000. Employees everywhere rose to the challenge,
jumping from aeroplanes, raising funds at the company’s
conferences and awards dinners, organising quiz evenings,
running marathons and holding cake sales. They raised a
further £77,000. The company then appealed to its
customers, who responded with a generosity that took the
total raised through £280,000. The additional funds have
been channelled into other similar ORBIS projects, saving
childrens’ sight in other areas.
Progress has been even better than expected. The new
building housing the children’s eye clinic is nearing completion
and ready for its official opening. The clinic has its own
opthalmologist, Dr Susanta Jagadala, who has completed a
one-year fellowship in paediatric opthalmology, financed by
Euromoney Institutional Investor. That means that paediatric
Annual Report and Financial Statements 2008
17
80766 pre 11/12/08 16:49 Page 18
Directors' Report continued
cases can be handled for the first time at Kalinga. Six specialist
support staff have also been trained, while 97 teachers and
community workers have been trained to identify eye
problems in children, all through the company’s funding and
the planning and supervision of ORBIS.
The latest numbers supplied by Orbis state that in the last year
through Euromoney’s support of outreach activity, 23,000
people in Orissa, 10,300 more than target, have received
medical treatment, including 4,150 children, 62,216 people
have been screened in the out-patient department of Kalinga
Eye Hospital, at rural outreach mass screening camps in
remoter areas and through school screening programmes.
Some 22,912 people have been medically treated at the
hospital and at outreach camps (the medical treatment at the
camps includes the provision of spectacles, antibiotics and
patching), while 4,662 people have received sight-saving
surgery at Kalinga Eye Hospital. A further 10,014 people have
been educated on protecting their sight at the hospital and at
outreach camps.
A team from the company led by Jane Wilkinson, group
marketing director, visited Kalinga in November 2007. It was
given a tour of Kalinga Eye Hospital, and also visited an
outreach camp and a school screening event conducted by the
Hospital in the rural areas of Orissa. It also visited some of the
project beneficiaries and their families in the rural areas, and
saw some of the work that has been made possible through
the company’s support.
Charity dinners
A number of charity dinners were held during the year. For
instance, this year £134,000 was raised in support of Hope
and Homes for Children. Hope and Homes for Children is a
registered charity working in Central and Eastern Europe and
Africa. Their Mission is to give hope to the poorest children in
the world – those who are orphaned, abandoned or
vulnerable – by enabling them to grow up within the love of
a family and the security of a home, so that they can fulfil
their potential.
Sixty six thousand pounds was raised for War Child UK, a
charity that provides help to children affected by war in Iraq,
Afghanistan, Democratic Republic of Congo and Uganda.
They work with children who have been hit hardest by the
joint forces of poverty, conflict and social exclusion. Their
groundbreaking work with former child soldiers, street
children and children in prison has supported and helped
thousands who would otherwise not have been able to
reintegrate with their community, gain access to education or
enjoy sustainable livelihood support.
The group raised HK$121,000 (£7,000) for the Hong Kong
Cancer Fund. Hong Kong Cancer Fund was founded in 1987
when limited resources were available to support the needs of
cancer patients and their families. Over the past twenty years,
they have evolved from a small support group to Hong Kong's
leading organisation for cancer care, delivering the philosophy
of 'Care in Action'.
Annual charity drive
Each year the US group conducts a charity drive where
the business will match up to a total of $40,000 (£20,000)
per year in employee contributions made to various
charitable organisations. This is an excellent way to cover a
broad range of charities that employees themselves may
favour and support.
Christmas charity event
Each year a local charity or community group is selected for
employees to donate Christmas gifts. This year the donations
were given to a shelter for single mothers that housed
27 mothers and 62 children. They were invited to participate
in a party at which they were all given gifts that they had
requested in letters to Santa.
Skip lunch and fight hunger
The group's US based company along with other companies
throughout New York City participated in a "Feed the kids"
campaign conducted by City Harvest. People were asked to
skip a fancy coffee or lunch and donate the cost of such to
help feed some of the most vulnerable of our population:
children.
Blood drive
Each year our US offices conduct an annual blood drive, 2008
was the most successful to date with more than 95 employees
donating blood.
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6. Future developments in the business
An indication of the trading outlook for the group is given in
the Chairman's statement on page 6. In 2009 the directors will
work towards maintaining the current success of the group
and continue to shape the business to remain lucrative and
competitive in the midst of an increasingly difficult economic
environment. This will include a full cost base review to ensure
the business is operating as effectively as possible and
facilitate growth in a challenging global market. As discussed
on page 10, the group's financing facility expires in August
2009 and the directors, subsequent to the year end, agreed a
new facility. The group is well placed to diversify its product
and geographical base and remains committed to its strategy
set out on page 8. In addition a new on-line payment
processing system will be completed ensuring the UK group's
credit card payments remain industry compliant. Further
investment will be made in the back-office project, the group's
vast back catalogue of articles and information stored
electronically in a central location and available for easy
interrogation. The group will continue to invest in its systems
and people, for instance a new HR system is planned for 2009
and management will continue to roll out the group's
upgraded accounting system software to other parts of
the group,
The board will continue to review the portfolio of businesses,
disposing, closing or restructuring any under-performing
businesses to allow the group to have the necessary resources
and skills to remain acquisitive. The group will invest in
technology and new businesses, particularly electronic
information products.
7. Directors and their interests
The company’s Articles of Association give power to the board
to appoint directors from time to time. In addition to the
statutory rights of shareholders to remove a director by
ordinary resolution, the board may also remove a director
where 75% of the board give written notice to such director.
The Articles of Association themselves may be amended by a
special resolution of the shareholders.
The directors who served during the year are listed on pages
22 and 23. The directors' interests are given on pages 40 and
41. With effect from September 30 2008 CJF Sinclair and
JP Williams retired as non-executive directors from the board.
CJF Sinclair retired to coincide with his retirement from his role
as Chief Executive of DMGT. JP Williams will continue to serve
as an alternate representative on the company's board in the
absence of The Viscount Rothermere. MWH Morgan was
appointed a non-executive director on October 1 2008, taking
over from CJF Sinclair, and, according to the Articles of
Association, a director appointed during the year must retire
at the first available AGM and, being eligible, offer themselves
for re-election. The effect of these changes is to reduce the
number of DMGT representatives on the company's board
from three to two.
Following best practice under corporate governance and in
accordance with the company’s Articles of Association, all
directors submit themselves for re-election at least every three
years. Accordingly, NF Osborn, CR Brown, D Alfano and
MJ Carroll will retire at the forthcoming Annual General
Meeting and, being eligible, will offer themselves for re-
election. Also, as required by best practice under corporate
governance, all non-executive directors who have served for
more than three three-year terms must submit themselves for
re-election on an annual basis. In addition, in accordance with
the Combined Code on Corporate Governance, before the re-
election of a non-executive director, the chairman is required
to confirm to shareholders that, following formal performance
evaluation, the non-executive's performance continues to be
effective and demonstrates commitment to the role.
Accordingly, The Viscount Rothermere and JC Botts will retire
at the forthcoming Annual General Meeting and, being
eligible following a formal performance evaluation by the
chairman, offer themselves for re-election.
In addition, as required by the Articles of Association, Sir
Patrick Sergeant, being over the age of 70, will retire at the
forthcoming Annual General Meeting and, being eligible
following a formal performance evaluation by the chairman,
will offer himself for re-election. Details of the interests of the
directors in the ordinary shares of the company and of options
held by the directors to subscribe for ordinary shares in the
company are set out in the Directors’ Remuneration Report on
pages 30 to 41.
Annual Report and Financial Statements 2008
19
80766 pre 8/12/08 19:58 Page 20
Directors' Report continued
8. Capital structure and significant shareholdings
Details of the company's share capital are given in note 22.
The company's share capital is divided into ordinary shares of
0.25 pence each. Each share entitles its holder to one vote at
shareholders' meetings and the right to receive one share of
the company's dividends.
At November 12 2008, being the latest practical date before
approval of the accounts, notification had been received, in
accordance with chapter 5 of the Disclosure and Transparency
Rules, of the following voting rights as a shareholder of
the company:
Name of holder
Daily Mail and General
Nature of
holding
% of
Number
of shares voting rights
Holdings Limited
Direct
69,851,416
66.3
BlackRock Merrill Lynch
Investment Manager
Direct
3,207,414
3.05
Banque
issued
Internationale à Luxembourg SA has
international depositary receipts (IDR) in bearer form in respect
of a total of 948,800 shares (0.9%) registered in its name.
Each IDR issued equates to one underlying ordinary share in
the capital of Euromoney Institutional Investor PLC.
Details of the directors' entitlement to compensation for loss
of office following a takeover or contract termination are
given in the Directors' Remuneration Report.
9. EU Takeovers Directive
Pursuant to s992 of the Companies Act 2006, which
implements the EU Takeovers Directive, the company is
required to disclose certain additional information. Such
disclosures, which are not covered elsewhere in this Annual
Report, include the following:
There are a number of agreements that take effect, alter or
terminate upon a change of control of the company following
a takeover bid, such as commercial contracts, bank loan
agreements, property lease arrangements, directors' service
agreements and employees' share plans. None of these are
deemed to be significant in terms of their potential impact on
the business of the group as a whole.
10. Authority to purchase and allot own shares
The company’s authority to purchase up to 10% of its own
shares expires at the conclusion of the company’s next Annual
General Meeting. A resolution to renew this authority for a
further period will be put to shareholders at this meeting.
At the Annual General Meeting of the company on January 30
2008, the shareholders authorised the directors to allot shares
up to an aggregate nominal amount of £85,810 expiring at
the conclusion of the Annual General Meeting to be held in
2009. A resolution to renew this authority for a further period
will be put to shareholders at this meeting.
11. Political and charitable contributions
During the year the group raised charitable contributions of
£290,000 (2007: £390,000). There were no political
contributions in either year.
12. Disabled employees
It is the group’s policy to give full and fair consideration to
applications for employment from people who are disabled; to
continue, wherever possible, the employment of, and to
arrange appropriate training for, employees who become
disabled; and to provide opportunities for the career
development, training and promotion of disabled employees.
13. Employee involvement and training
The group believes it is important to provide skills and
management training for its employees around the world. It
continues to develop these programmes and tries to ensure
that as many employees as possible benefit from internal and
external training. The group is continually developing and
expanding the training programmes provided.
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The group recognises the importance of good communication
in relationships with its staff. This is pursued in a number of
ways, including training and regular meetings between
management and staff, which seek to achieve common
awareness on the part of all employees of the financial and
economic circumstances affecting the group’s performance.
Many employees participate directly in the success of the
business through involvement in the group’s profit sharing
schemes, the Capital Appreciation Plan and in the savings
related share option scheme.
14. Supplier payment policy
Each Euromoney Institutional Investor business agrees
payment terms with its suppliers on an individual basis and it
is group policy to make payments in accordance with these
terms. The group had 80 days of purchases in creditors at
September 30 2008 (2007: 76 days).
15. Directors' indemnities
The company has in place directors and officers liability and
corporate reimbursement insurance for the benefit of the
company's directors and those of other associated companies.
The insurance has been in place throughout the year and
remains in force at the date of this report.
16. Annual General Meeting
The company’s Annual General Meeting will be held on
January 28 2009.
17. Auditors
A resolution to re-appoint Deloitte & Touche LLP as the
company's auditor is expected to be proposed at the
forthcoming Annual General Meeting.
18. Disclosure of information to auditors
In the case of each of the persons who is a director of the
company at November 12 2008:
● so far as each of the directors is aware, there is no relevant
audit information (as defined in the Companies Act 1985)
of which the company's auditors are unaware; and
● each of the directors has taken all the steps that he/she
ought to have taken as a director to make himself/herself
aware of any relevant audit information (as defined)
and to establish that the company's auditors are aware of
the information.
This confirmation is given and should be interpreted in
accordance with the provisions of s234ZA of the Companies
Act 1985.
By order of the board
Colin Jones
Company Secretary
November 12 2008
Annual Report and Financial Statements 2008
21
80766 pre 8/12/08 19:58 Page 22
Directors and Advisors
Executive Directors
Chairman
Mr SM Brady (aged 43) joined the company in 1988 and
was appointed an executive director in May 1999. He is
‡ Mr PM Fallon (aged 62) is chairman. He joined the
managing director of Euromoney.
company in 1974 and was appointed an executive
director in October 1975. He was appointed managing
Mr RT Lamont (aged 61) joined Institutional Investor, Inc.
director in 1985, chief executive in 1989 and chairman in
in 1976 and was appointed an executive director in
1992. He is chairman of the nominations committee. He
May 1999. He is editor of Institutional Investor's
is also an executive director of Daily Mail and General
newsletter division and a director of Institutional Investor,
Trust plc and a member of the board of the Trinity College
Inc. Mr RT Lamont has indicated his intention to retire as
Dublin Foundation.
Managing Director
an executive director on January 13 2009 on reaching the
age of 62.
‡ Mr PR Ensor (aged 60) is the managing director. He
Ms D Alfano (aged 52) joined Institutional Investor, Inc.
joined the company in 1976 and was appointed an
in 1984 and was appointed an executive director in
executive director in 1983. He was appointed managing
July 2000. She is managing director of Institutional
director in 1992 and is a member of the nominations
Investor's conference division and a director of
committee. He is also a director of Internet Securities, Inc
Institutional Investor, Inc.
and BCA Publications Limited.
Mr G Mueller (aged 42) is chairman of Internet
Mr NF Osborn (aged 59) joined the company in 1983 and
Securities, Inc. (ISI), which he founded in 1994.
was appointed an executive director in February 1988.
Euromoney acquired ISI in 1999, at which point
He is the publisher of Euromoney. He is also a director of
Mr Mueller joined the company. He was appointed an
Internet Securities, Inc., and of OAO RBC Information
executive director in July 2000. He is also chairman and
Systems, a Russian public company.
CEO of Institutional Investor and a director and chairman
of Information Management Network, Inc.
Mr DC Cohen (aged 50) joined the company in 1984 and
was appointed an executive director in September 1989.
Mr MJ Carroll (aged 51) joined Institutional Investor, Inc.
He is managing director of the training division.
in 1994 and was appointed an executive director in May
2002. He is the editor of Institutional Investor and a
Mr CR Brown (aged 54) joined the company in 1982 and
director of Institutional Investor, Inc.
was appointed an executive director in September 1989.
He is based in the United States and is president of
Mr CHC Fordham (aged 48) joined the company in 2000
Institutional Investor, Inc.
and was appointed an executive director in July 2003. He
is the director responsible for acquisitions and disposals as
Mr CR Jones (aged 48) is the finance director. He joined
well as some of the company's publishing businesses,
the company in July 1996 and was appointed finance
including the Legal Media Group, HedgeFund Intelligence,
director in November 1996. He is also the company
Total Derivatives and the Metals, Minerals & Mining
secretary and a director of Institutional Investor, Inc.,
division of Metal Bulletin.
Information Management Network,
Inc.,
Internet
Securities, Inc and BCA Publications Limited.
Ms JL Wilkinson (aged 43) joined the company in 2000
and was appointed an executive director in March 2007.
She is director of marketing for the group, and a director
of Adhesion SA, the French events business.
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Non-executive Directors
†‡ The Viscount Rothermere (aged 40) was appointed a
non-executive director in September 1998 and is a
member of
the
remuneration and nominations
committees. He is chairman of Daily Mail and General
Trust plc.
President
Sir Patrick Sergeant
Company Secretary
CR Jones
‡
Sir Patrick Sergeant (aged 84) is a non-executive director
and president. He founded the company in 1969 and was
managing director until 1985 when he became chairman.
He retired as chairman in September 1992 when he was
appointed as president and non-executive director. He
retired as a member of the audit committee in July 2008.
He is a member of the nominations committee.
Mr CJF Sinclair (aged 60) retired from the board with
effect from September 30 2008. He had been appointed
a non-executive director in November 1985 and during
the year was a member of the remuneration and
nominations committees. He was chief executive of Daily
Mail and General Trust plc.
§ Mr JP Williams (aged 55) retired from the board with
effect from September 30 2008. He had been a non-
executive director since June 1991. Mr Williams is a
member of the audit committee. He is finance director
of Daily Mail and General Trust plc.
†‡§ Mr JC Botts (aged 67) was appointed a non-executive
director in December 1992 and is chairman of the audit
and remuneration committees and a member of the
nominations committee. He is managing director of Allen
& Company in London, non-executive chairman of
United Business Media Group Limited, non-executive
director of Convera Corporation and a director of several
private companies.
§ Mr JC Gonzalez (aged 63) was appointed a non-
executive director in November 2004 and is a member of
the audit committee. He is chairman and chief executive
of American Orient Capital Partners Holdings Limited, an
investment and financial advisory services firm based in
Hong Kong covering the Asia Pacific region. He is also
a director of a number of publicly listed companies in
the Philippines.
†‡ Mr MWH Morgan (aged 58) was appointed a non-
executive director on October 1 2008. He was also
appointed a member of the remuneration and nomination
committees with effect from October 1 2008. He was
previously chief executive of DMG Information and
became chief executive of Daily Mail and General Trust plc
on October 1 2008.
† member of the remuneration committee
‡ member of the nominations committee
§ member of the audit committee
Registered Office
Nestor House, Playhouse Yard,
London EC4V 5EX
Registered Number
954730
Auditors
Deloitte & Touche LLP, London
Solicitors
Nabarro, Lacon House,
Theobald’s Road,
London WC1X 8RW
Joint brokers
UBS, 1 Finsbury Avenue,
London EC2M 2PP
and
Dresdner Kleinwort, 30 Gresham Street,
London EC2V 7PG
Depositary
Banque Internationale à Luxembourg SA,
69 route d’Esch, 2953 Luxembourg
Agents of the Depositary
Citicorp Investment Bank (Switzerland),
Bahnhofstrasse 63, PO Box 224,
CH 8021 Zurich.
Citibank NA,
Citibank House, 336 Strand,
London WC2R 1HB
Registrars
Capita IRG plc
The Registry, 34 Beckenham Road,
Beckenham, Kent, BR3 4TU
Annual Report and Financial Statements 2008
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Corporate Gover nance
The Financial Reporting Council's Combined Code on
Corporate Governance is part of the Listing Rules of the
Financial Services Authority. The paragraphs below and in the
Directors' Remuneration Report on pages 30 to 41 set out
how the company has applied the principles laid down by
the Code.
With effect from September 30 2008 CJF Sinclair and
JP Williams retired as non-executive directors from the board.
CJF Sinclair retired to coincide with his retirement from his role
as chief executive of Daily Mail and General Trust plc (DMGT).
Subsequent to the year end, on October 1 2008, MWH
Morgan, chief executive of DMGT, was appointed as a non-
executive director of the company.
At a meeting of the board in July 2008, RT Lamont indicated
his intention to retire as an executive director on January 13
2009 on reaching the age of 62. At the same meeting,
Sir Patrick Sergeant retired as a member of the audit
committee with immediate effect.
The effect of these changes reduces the number of DMGT
representatives on the board from three to two and reduces
the number of executive directors from 13 to 12. JP Williams
has agreed to serve as an alternate representative on the board
of the company in the absence of The Viscount Rothermere.
JP Williams remains a member of the audit committee.
The company continues substantially to comply with the
Code, save for the exceptions disclosed in the directors’
compliance statement on pages 28 and 29.
Directors
The board and its role
Details of directors who served during the year are set out on
pages 22 and 23. During the year the board comprised the
chairman (PM Fallon), managing director (PR Ensor), 11 other
executive directors and six non-executive directors. Two of the
six non-executive directors are independent, one is the
founder and ex-chairman of the company, and the other three
are also directors of DMGT, an intermediate parent company.
On September 30 2008 two of the non-executive directors
(CJF Sinclair and JP Williams) retired and with effect from
October 1 2008 MWH Morgan was appointed to the board as
a non-executive director. In addition RT Lamont has indicated
his intention to retire from the board as an executive director
on January 13 2009.
There are clear divisions of responsibility within the board such
that no one individual has unfettered powers of decision. The
board although large does not consider itself to be unwieldy
and believes it is beneficial to have representatives from all key
areas of the business at board meetings. There is a procedure
for all directors in the furtherance of their duties to take
independent professional advice, at the company’s expense.
They also have access to the advice and services of the
company secretary. All directors submit themselves for re-
election at least once every three years. Newly appointed
directors are submitted for election at the first available
opportunity after their appointment.
The board meets every two months and there is frequent
contact between meetings. Board meetings take place in
London, New York, Montreal and Hong Kong, and in other
locations where the group has operations. The board has
delegated specific aspects of the group’s affairs to standing
committees, each of which operates within defined terms of
reference. Details of these are set out below. However, to
ensure its overall control of the group's affairs, the board has
reserved certain matters to itself for decision. Board meetings
are held to set and monitor strategy, identify, evaluate and
manage material risks, to review trading performance, ensure
adequate funding, examine major acquisition possibilities and
approve reports to shareholders. Procedures are established to
ensure that appropriate information is communicated to the
board in a timely manner to enable it to fulfil its duties.
Executive committee
Chaired by the company's chairman, the executive committee
also comprises the divisional directors of the group’s main
businesses, together with the managing director and finance
director. The committee is responsible for the approval of
acquisitions, divestments, capital expenditure and contractual
commitments below the level that the board has reserved to
itself for decision, and for certain operational, administrative
and other routine matters. The committee also regularly
reviews and reports to the board on the performance of the
group’s businesses. At least 10 meetings are held each year
and other senior executives frequently attend by invitation.
Nominations committee
The nominations committee is responsible for proposing
candidates for appointment to the board having regard to the
balance of skills and structure of the board and ensuring the
appointees have sufficient time available to devote to the role.
The committee meets when required and comprises PM Fallon
(chairman of the nominations committee), PR Ensor and four
non-executive directors; Sir Patrick Sergeant, The Viscount
Rothermere, CJF Sinclair (retired on September 30 2008 and
with effect from October 1 2008 replaced by MWH Morgan),
and JC Botts. The committee's terms of reference are available
on the company's website.
The committee met once during the year to recommend to the
board the appointment of MWH Morgan as a non-executive
director and the re-election of directors retiring by rotation this
year as set out in the Directors' Report.
Remuneration committee
The remuneration committee meets twice a year and
additionally as required. It is responsible for determining the
contract terms, remuneration and other benefits for executive
directors, including performance related profit share schemes.
The committee also recommends and monitors the level of
remuneration for senior management and for the rest of the
group. The composition of the committee, details of directors’
remuneration and interests in share options, together with
information on directors' service contracts, are set out in the
Directors' Remuneration Report on pages 30 to 41. The
committee's terms of reference are available on the company's
website.
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Audit committee
Details of the members and role of the audit committee are set
out on page 27. Sir Patrick Sergeant, with effect from July 16
2008, retired as a member of the audit committee. The
committee's terms of reference are available on the company's
website.
Tax and treasury committee
Details of the members and role of the tax and treasury
committee are set out in the directors' report on page 12.
Non-executive directors
The non-executive directors bring both independent views and
the views of the company’s major shareholder to the board.
The non-executive directors during the year, whose
biographies can be found on page 23 of the accounts, were:
The Viscount Rothermere, Sir Patrick Sergeant, CJF Sinclair, JP
Williams, JC Botts and JC Gonzalez. On September 30 2008
CJF Sinclair and JP Williams retired as non-executive directors.
With effect from October 1 2008, MWH Morgan was
appointed a non-excutive director of the company.
At least once a year the company's chairman meets the non-
executive directors without the executive directors being present.
The board considers JC Botts and JC Gonzalez to be
independent non-executive directors. Although JC Botts
has been on the board for more than the recommended term
of nine years under the Code, the board believes that
his length of service enhances his role as an independent
director. However, due to his length of service, JC Botts does
not meet the Code's definition of independence. JC Botts also
holds options to subscribe for common stock in Internet
Securities, Inc. a subsidiary of the company. However, the
number of options held by JC Botts is not material to him or
to the company.
The Viscount Rothermere has a significant shareholding in the
company through his beneficial holding in DMGT and because
of this he is not considered independent.
The Viscount Rothermere, CJF Sinclair, JP Williams, and from
October 1 2008, MWH Morgan, are also executive directors of
DMGT, an intermediate parent company. However, the
company is run as a separate, distinct and decentralised
subsidiary of DMGT and these directors have no involvement
in the day-to-day management of the company. They bring
valuable experience and advice to the company but the board
does not believe these non-executive directors are able
to exert undue influence on decisions taken by the board,
nor does it consider their independence to be impaired
by their positions with DMGT. However, their relationship
with DMGT means they do not meet the Code's definition
of independence.
Board and committee meetings
Board and committee meetings are arranged well in advance
of the meeting date and papers covering the points to be
discussed are distributed to its members in advance of the
meetings. The following table sets out the number of board
and committee meetings attended by the directors during the
year to September 30 2008:
Board
meetings
Executive
committee
Remuneration
committee
Nominations
committee
Audit
committee
Tax & treasury
committee
Number of meetings held during year
Executive directors
PM Fallon – Chairman
PR Ensor – Managing Director
NF Osborn
DC Cohen
CR Brown
CR Jones – Finance Director
RT Lamont
SM Brady
D Alfano
G Mueller
MJ Carroll
CHC Fordham
JL Wilkinson
Non-executive directors
The Viscount Rothermere
Sir Patrick Sergeant*
CJF Sinclair†
JP Williams†
JC Botts
JC Gonzalez
6
6
6
6
6
6
6
5
5
5
5
6
6
4
5
4
6
6
6
4
* Retired as a member of the audit committee on July 16 2008
† Retired as a non-executive director on September 30 2008
11
11
10
9
11
11
11
9
6
9
10
10
11
11
–
–
–
–
–
–
2
–
–
–
–
–
–
–
–
–
–
–
–
–
2
–
2
–
2
–
1
1
1
–
–
–
–
–
–
–
–
–
–
–
0
0
1
–
1
–
3
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3
–
3
3
3
2
0
1
–
–
–
2
–
–
–
–
–
–
–
–
–
–
2
–
–
Annual Report and Financial Statements 2008
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Corporate Gover nance continued
Board and committee effectiveness
During the year the board, through its chairman, assessed its
performance and that of its committees. The chairman
distributed a detailed questionnaire to each of the board
members and together with personal interviews evaluated the
strengths and weaknesses of the board and its members. In
addition, each of the main committees completed a detailed
questionnaire encompassing key areas within their mandates.
The results of the assessment were presented and discussed at
a board meeting and it was concluded that the board and its
committees had been effective throughout the year.
Communication with shareholders
The company's chairman, together with the board,
encourages regular dialogue with shareholders. Meetings are
held, both in the US and UK, to discuss annual and interim
results and highlight significant acquisitions or disposals, or at
the request of institutional shareholders. Private shareholders
are encouraged to participate in the annual general meeting.
In line with best practice all shareholders have at least 20
working days notice of the annual general meeting at which
the executive directors, non-executive directors and
committee chairs are available for questioning.
Internal control and risk management
The board is responsible for the group’s system of internal
control and for reviewing its effectiveness. Such a system is
designed to manage rather than eliminate the risk of failure to
achieve business objectives, and can only provide reasonable
and not absolute assurance against material misstatement
or loss.
In accordance with principle C.2 and C.2.1 of the Combined
Code on corporate governance, the board has implemented a
continuing process for identifying, evaluating and managing
the material risks faced by the group.
The board has reviewed the effectiveness of the group’s
system of internal control and has taken account of material
developments which have taken place since September 30
2007. It has considered the major business and financial risks,
the control environment and the results of internal audit.
Steps have been taken to embed internal control and risk
management further into the operations of the group and to
deal with areas of improvement which have come to
management’s and the board’s attention.
Key procedures which the directors have established with a
view to providing effective internal control, and which have
been in place throughout the year and up to the date of this
report, are as follows:
The board of directors
● the board normally meets six times a year to consider
group strategy, risk management, financial performance,
acquisitions, business development and management issues;
● the board has overall responsibility for the group and
there is a formal schedule of matters specifically reserved
for decision by the board;
● each executive director has been given responsibility for
specific aspects of the group’s affairs;
● the board divides the group’s key risks into six broad
categories and reviews and assesses each of these at
least annually;
● the board seeks assurance that effective control is being
maintained through regular reports from business group
management,
the audit committee and various
independent monitoring functions; and
● the board approves the annual forecast after performing a
review of key risk factors. Performance is monitored
regularly by way of variances and key performance
indicators to enable relevant action to be taken and
forecasts are updated each quarter. The board considers
longer-term financial projections as part of its regular
discussions on the group’s strategy.
During the year and up to the approval of this annual report
and accounts the board has not identified nor been advised of
any failings or weaknesses which it has determined to be
significant. Therefore a confirmation of necessary actions has
not been considered appropriate.
Quality, integrity of personnel and whistle blowing
arrangements
The integrity and competence of personnel is ensured
through high recruitment standards and a commitment
to management and business skills training. High-quality
personnel are an essential part of the control environment and
the high ethical standards expected are communicated by
management and through the employee handbook which is
provided to all employees. The employee handbook also sets
out the procedures available to staff to raise, in confidence,
possible improprieties in matters of financial reporting or other
matters.
Social responsibility
The group is keen to maintain a high level of social
responsibility and has procedures embedded in its internal
systems and controls to ensure its social standards are
monitored regularly and are not breached. The group supports
and encourages employees who become involved in
social projects and examples of these are given in the
Directors' Report.
Environmental responsibility
The group does not operate directly in industries where there
is the potential for serious industrial pollution. It does not print
products in-house or have any investments in printing works.
It takes its environmental responsibility seriously and complies
with all relevant environmental laws and regulations in each
country in which it operates. Wherever economically feasible,
account is taken of environmental issues when placing
contracts with suppliers of goods and services and these
suppliers are regularly reviewed and monitored. For instance,
the group's two biggest print contracts are outsourced to
companies who have environment management systems
compliant to the ISO 14001 standard. The paper used for the
group's publications is produced from pulp obtained from
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sustainable forests, manufactured under strict, monitored and
accountable environmental standards. The group is not a
heavy user of energy; however, it does manage its energy
requirements sensibly using low-energy office equipment
where possible and using a common sense approach such as
switching off equipment, air-conditioning, heating and lights
when not required.
Health and safety
The group is committed to the health and safety of its
employees and communities in which it operates. The group
complies with all local health and safety regulations and
makes use of external health and safety advisers where
appropriate. The UK businesses benefit from a monthly
assessment of the working environment by experienced
assessors and regular training of all existing and new UK
employees in health and safety matters.
Investment appraisal
The managing director, finance director and business group
managers consider proposals for acquisitions and new
businesses. Proposals beyond specified limits are put to the
board for approval and are subject to due diligence by
the group’s finance team and, if necessary, independent
regulated by strict
advisers. Capital expenditure
authorisation controls. For capital expenditure above specified
levels, detailed written proposals must be submitted to
the board and reviews are carried out to monitor progress
against budget.
is
Accounting and computer systems controls
and procedures
Accounting controls and procedures are regularly reviewed
and communicated throughout the group. Particular attention
is paid to authorisation levels and segregation of duties. The
group’s tax, financing and foreign exchange positions are
overseen by the tax and treasury committee, which meets at
least twice a year. Controls and procedures over the security of
data and disaster recovery are periodically reviewed and are
subject to internal audit.
Internal audit
The group has an internal audit function which is managed by
DMGT's internal audit department, working closely with the
company's finance director. Internal audit draws on the
services of the group's central finance team to assist in
completing the audit assignments. Internal audit aims to
provide an independent assessment as to whether effective
systems and controls are in place and being operated to
manage significant operating and financial risks. It also aims to
cost effective
support management by providing
recommendations to mitigate risk and control weaknesses
identified during the audit process, as well as provide insight
into where cost efficiencies and monetary gains might be
made by improving the operations of the business. Businesses
and central departments are selected for an internal audit
visit on a risk-focused basis, taking account of the risks
identified as part of the risk management process; the risk
and materiality of each the group's businesses; the scope
and findings of external audit work; and the departments
and businesses reviewed previously and the findings from
these reviews. This approach ensures that the internal
audit focus is placed on the higher risk areas of the group,
while ensuring an appropriate breadth of coverage. DMGT's
internal audit reports its findings to management and to the
audit committee.
Accountability and audit
Audit committee
During the year the audit committee comprised four non-
executive directors: JC Botts (chairman), Sir Patrick Sergeant,
JP Williams and JC Gonzalez (independent). With effect from
July 16 2008 Sir Patrick Sergeant retired as a member of the
committee. On September 30 2008 JP Williams, the finance
director of DMGT, retired as a non-executive director, he,
however, remains a member of the audit committee. The
committee meets at least three times each financial year. The
committee is responsible for reviewing the interim report, the
annual report and accounts and other related formal
statements before their submission to the board, and
reviewing and overseeing controls necessary to ensure the
integrity of the financial information reported to the
shareholders. The audit committee advises the board on the
appointment of external auditors and on their remuneration,
both for audit and non-audit work. It has set and applied a
formal policy, which
the effectiveness,
independence and objectivity of the external audit, the type of
non-audit work permissible and a diminimus level of fees
acceptable. Any non-audit work performed outside this remit
is assessed and where appropriate approved by the
committee. The committee discusses the nature, scope and
findings of the audit with the external auditors and considers
and determines relevant action in respect of any control issues
raised by the external auditors. The audit committee is also
responsible for monitoring and assessing the effectiveness of
internal audit, and reviews the internal audit programme
and receives periodic reports on its findings. It reviews the
whistle blowing arrangements available to staff. The
audit committee's terms of reference are available on the
company's website.
focuses on
Going concern basis
After making enquiries, the directors have formed a
judgement, at the time of approving the financial statements,
that there is a reasonable expectation that the group has
adequate resources to continue in operational existence for
the foreseeable future. The group's £300 million three year
multi-currency facility was due to expire in August 2009.
However, the directors have, subsequent to the year end,
approved a new replacement facility of up to £250 million.
The terms of the new facility are broadly similar to the existing
facility. For this reason the directors continue to adopt the
going concern basis in preparing the financial statements.
Statement of directors' responsibilities
The directors are responsible for preparing the Annual Report,
Directors' Remuneration Report and the financial statements
in accordance with applicable law and regulations.
Annual Report and Financial Statements 2008
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Corporate Gover nance continued
Company law requires the directors to prepare financial
statements for each financial year. The directors are required
by the IAS Regulation to prepare the group financial
statements under International Financial Reporting Standards
(IFRSs) as adopted by the European Union. The group financial
statements are also required by law to be properly prepared in
accordance with the Companies Act 1985 and Article 4 of the
IAS Regulation.
The directors are responsible for keeping proper accounting
records that disclose with reasonable accuracy at any time
the financial position of the group and enable them to ensure
that the parent company financial statements comply with
the Companies Act 1985. They are also responsible for
safeguarding the assets of the company and hence for taking
reasonable steps for the prevention and detection of fraud
and other irregularities.
International Accounting Standard 1 requires that IFRS
financial statements present fairly for each financial year the
group's financial position, financial performance and cash
flows. This requires the faithful representation of the effects of
transactions, other events and conditions in accordance with
the definitions and recognition criteria for assets, liabilities,
income and expenses set out in the International Accounting
Standards Board's 'Framework for the preparation and
presentation of financial statements'.
In virtually all
circumstances, a fair presentation will be achieved by
compliance with all applicable IFRSs. However, directors are
also required to:
● properly select and apply accounting policies;
● present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information; and
● provide additional disclosures when compliance with the
specific requirements in IFRSs are insufficient to enable
users to understand the impact of particular transactions,
other events and conditions on the entity's financial
position and financial performance.
The directors have elected to prepare the parent company
financial statements in accordance with United Kingdom
Generally Accepted Accounting Practice (United Kingdom
Accounting Standards and applicable law). The parent
company financial statements are required by law to give a
true and fair view of the state of affairs of the company.
In preparing these financial statements, the directors are
required to:
● select suitable accounting policies and then apply them
consistently;
● make judgments and estimates that are reasonable and
prudent;
● state whether applicable UK Accounting Standards have
been followed, subject to any material departures
disclosed and explained in the financial statements; and
● prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the
company will continue in business.
The directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
company's website. Legislation in the United Kingdom
governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
We confirm to the best of our knowledge:
● the financial statements, prepared in accordance with
International Financial Reporting Standards as adopted by
the EU, give a true and fair view of the assets, liabilities,
financial position and profit or loss of the company and
the undertakings included in the consolidation taken as a
whole; and
● the management report, which is incorporated into the
directors' report includes a fair review of the development
and performance of the business and the position of
the company and the undertakings included in the
consolidation taken as a whole, together with a
description of the principal risks and uncertainties
they face.
Statement by the directors on compliance with the
Combined Code
The UK Listing Rules require the board to report on
compliance throughout the accounting year with the
applicable principles and provisions of the 2006 Combined
Code on Corporate Governance issued by the Financial
Reporting Council. Save for the exceptions outlined below, the
group has complied throughout the financial year ended
September 30 2008 with the provisions set out in Section 1 of
the Combined Code.
Provision A.3.2 states that half the board, excluding the
chairman, should be comprised of non-executive directors
determined by the board to be independent. During the
year the board comprised 19 directors of whom six are
non-executive directors, one of whom is considered to be an
independent non-executive director under the Combined
Code. On September 30 2008, JP Williams retired as a
non-executive director, hence, at the year end, the board
comprises 18 directors of whom one is considered an
independent non-executive director. One executive director,
RT Lamont, has indicated his intention to retire from the board
as a director on January 13 2009.
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Contrary to provision A.3.3, the board has not identified a
senior independent non-executive director as the directors are
of the opinion that all matters relating to the effective
governance of the group must be dealt with by the board as
a whole.
Provision A.4.1 requires that the majority of the nominations
committee should be comprised of independent non-
executive directors. Although the committee consists of four
non-executive and two executive directors, none of these non-
executive directors can be considered independent under the
Combined Code.
Provision A.4.4 states that the terms and conditions of
appointment of non-executive directors should be available
for inspection. As explained in the Directors' Remuneration
Report, the non-executive directors do not have service
contracts.
Provisions B.2.1 and C.3.1 require the remuneration and audit
committees to comprise entirely of independent non-executive
directors. The remuneration committee is comprised of three
non-executive directors, none of whom can be considered
independent under the Combined Code. During the year, the
audit committee comprised of four non-executive directors,
one retired in July 2008 and one retired as a non-executive
director on September 30 2008 although still remains as a
member of the audit committee. Only one of the members of
the audit committee can be be considered independent under
the Combined Code and, with effect from October 1 2008,
one member of the committee is no longer a non-executive
director of the company.
On behalf of the board
Padraic Fallon
Chairman
November 12 2008
Annual Report and Financial Statements 2008
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Directors' Remuneration Report
Introduction
This remuneration report sets out the group's policy and structure for the remuneration of executive and non-executive directors
together with details of directors' remuneration packages and service contracts. The report has been prepared in accordance with
the Directors' Remuneration Report Regulations 2002 and shareholders will be invited to approve this report at the Annual General
Meeting on January 28 2009.
The remuneration committee
The remuneration committee is chaired by JC Botts. Its other members during the year were The Viscount Rothermere and
CJF Sinclair. With effect from September 30 2008, CJF Sinclair stood down as a committee member and was replaced by
MWH Morgan. All members of the committee are non-executive directors of the company. The Viscount Rothermere, CJF Sinclair
and, from October 1 2008, MWH Morgan are also directors of Daily Mail and General Trust plc (DMGT) but have no personal
financial interests in the company (other than as shareholders), and no day-to-day involvement in running the business. The
executive chairman normally attends meetings of the remuneration committee, but is not present at any discussion concerning his
own remuneration. For the year under review, the committee also sought advice and information from the company's managing
director and finance director. The committee's terms of reference permit its members to obtain professional external advice on any
matter, at the company's expense, although none did so in 2008. The group itself can take external advice and information from
many sources in preparing proposals for the remuneration committee, but no material assistance from a single source was received
in relation to remuneration decisions for 2008.
Remuneration policy
The group believes in aligning the interests of management with those of shareholders. The two consistent objectives in its
remuneration policy since the company’s inception in 1969 have been the maximisation of earnings per share and the creation of
shareholder value.
The first objective is achieved through a comprehensive profit sharing scheme that links the pay of executive directors and key
managers to the profits and growth in profits of the group or relevant parts of the group. This scheme is completely variable with
no guaranteed floor and no ceiling.
To support the implementation of the policy of profit sharing, the group is divided into a number of profit centres. The manager
of each profit centre is paid a profit share related to the profit centre’s profits and profit growth. Each profit centre is part of a
larger business group. Each business group manager has an incentive based on the business group’s profits and profit growth.
Profit sharing encourages directors and managers to grow their businesses, to launch new ventures and to search for acquisitions
that would fit well with their businesses.
All executives on profit shares are aware that if profits rise, so does their pay. Similarly if profits fall, so do their profit shares. The
profit shares of executive directors and senior managers make up much of their total pay. For example, of the total remuneration
of the 13 executive directors who served in the year, 86% was derived from profit shares.
The creation of shareholder value is also encouraged through an executive share option scheme and, from October 2003, the
Capital Appreciation Plan (CAP). The current executive share option scheme was approved by shareholders in January 1996. The
performance criteria under which options granted under this scheme may be exercised are set out on page 32. This scheme expired
and closed in 2006, but no share options have been issued under it since February 2004 although options previously granted may
be exercised before various dates to February 2014. The CAP was approved by shareholders in February 2005, and is a highly
geared performance-based share option scheme which not only directly rewards growth in profits of each executive's businesses
but also links more robustly equity reward with the delivery of economic shareholder value. The CAP profit target was achieved in
2007, a year ahead of expectations and exceeded again this year resulting in the second tranche of options vesting. A more
detailed explanation of the CAP is given on page 32.
The directors believe that these profit sharing and share option arrangements are responsible for much of the company’s success
since 1969. These arrangements serve shareholders by aligning the interests of the directors and managers with those of
shareholders and are considered an important driver of the company's growth strategy.
The remuneration of the non-executive directors is determined by the board.
Remuneration structure
Executive directors
It is the group's policy to construct executive remuneration packages such that a significant part of a director's compensation is
based on the growth in the group's profits contributed by that director. The details of the remuneration packages of individual
directors are set out below.
Basic salary and benefits
The basic salary and benefits are generally not the most significant part of a director's overall compensation package. Each
executive director receives a salary which is reviewed annually by the committee. Certain non-cash benefits are also provided
including private health care, and life assurance through the membership of one of the pension schemes.
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Remuneration structure continued
Pension schemes
Each UK-based director is entitled to participate in the Harmsworth Pension Scheme (a defined benefit scheme, closed to new
directors), the Euromoney Pension Plan (a money purchase plan) or their own private pension scheme. Directors based overseas
are entitled to participate in the pension scheme arrangements applicable to the country where they work. During the year,
NF Osborn, CR Brown, RT Lamont, D Alfano, G Mueller and MJ Carroll participated in the group's US 401(k) plan. Details of
pension scheme contributions can be found on page 36 of this report. There are no other post-retirement benefits.
Profit share scheme
The group believes in aligning the economic interests of management with those of shareholders and achieves this through a
comprehensive profit sharing scheme that links the pay of each executive director to the profits and growth in profits of the
businesses that the executive director manages.
The executive directors who manage business divisions are set profit thresholds for the businesses for which they are responsible.
The profit thresholds are set at the time the director takes on responsibility for the businesses concerned, usually based on the
profits of the previous 12 months, and are adjusted if such responsibilities change. The normal profit share arrangement pays 1%
of profits from zero up to a threshold and then 5% of profits achieved in excess of this threshold. Some of the directors have
schemes which have been in place for a number of years and pay profit shares at slightly higher rates or which are subject to
additional thresholds.
The profit shares of the chairman and managing director are based on the adjusted pre-tax post-minority profits of the group,
thereby matching their profit share with the pre-tax return the group generates for its shareholders. The chairman is entitled
to 5.54% (2007: 5.62%) of adjusted pre-tax profit. The managing director is entitled to 3.28% (2007: 3.32%) of adjusted
pre-tax profit up to a threshold of £31,972,645 and an additional 1.23% (2007: 1.25%) of adjusted pre-tax profit in excess of this
threshold.
The finance director receives a profit share linked to the pre-tax adjusted earnings per share of the group (EPS). A fixed sum is
payable for every percentage point the EPS is above 11.00p and an additional fixed sum is payable for every percentage point that
EPS is above 20.00p.
CHC Fordham, in addition to his profit share, has a second incentive linked to the performance of acquisitions.
JL Wilkinson, who is responsible for all the group's marketing activities, receives an incentive based on the growth in the group's
subscription and delegate revenues.
All of the profit share schemes are completely variable with no guaranteed floor and no ceiling and are designed to be the most
significant part of the executive director's remuneration package. Each director's profit share scheme is subject to remuneration
committee approval, and can be revised at any time if the director's responsibilities are changed.
The table below shows the 2008 percentage split of the fixed and variable elements of each director's remuneration package.
Executive directors
PM Fallon
PR Ensor
NF Osborn
DC Cohen
CR Brown
CR Jones
RT Lamont
SM Brady
D Alfano
G Mueller
MJ Carroll
CHC Fordham
JL Wilkinson
Total
Fixed
Salary &
benefits
Variable
Profit
share
5%
6%
23%
16%
38%
31%
73%
44%
19%
20%
64%
19%
33%
14%
95%
94%
77%
84%
62%
69%
27%
56%
81%
80%
36%
81%
67%
86%
Annual Report and Financial Statements 2008
31
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Directors' Remuneration Report continued
Remuneration structure continued
SAYE scheme
The group operates an all employee save as you earn scheme in which those directors employed in the UK are eligible to
participate. Participants save a fixed monthly amount of up to £250 for three years and are then able to buy shares in the company
at a price set at a 20% discount to the market value at the start of the savings period. In line with market practice, no performance
conditions attach to options granted under this plan. The executive directors who are participating in this scheme are PM Fallon,
PR Ensor, NF Osborn, CR Jones, SM Brady and CHC Fordham, details of which can be found on pages 37 and 38 of this report.
Share schemes
The directors consider that share schemes are an important part of overall compensation and align the interests of directors and
employees with those of shareholders.
Capital Appreciation Plan (CAP)
The CAP was approved by shareholders on February 1 2005 and replaced the 1996 executive share option scheme. Each CAP
award comprises an option to subscribe for ordinary shares of 0.25p each in the company for an exercise price of 0.25p per
ordinary share. In accordance with the terms of CAP, no consideration was paid for the grant of the awards. The awards vest in
three equal tranches. The first tranche of awards became exercisable on satisfaction of a primary performance condition and lapse
to the extent unexercised on September 30 2014. The two future tranches of awards become exercisable one year and two years,
respectively, following the financial year in which the primary performance target was achieved. The second and third tranches
only vest on satisfaction of the primary and a secondary performance condition. The scheme was potentially available to all
employees.
The primary performance condition, broadly, required that the company achieve pre-tax profits (before goodwill amortisation or
impairment, exceptional items and before the cost of the CAP) of £57 million by no later than the financial year ending September
30 2008 and remain at least this level for the future vesting periods of the following two tranches. The secondary performance
condition requires that the profits of the respective participants' businesses in the subsequent two vesting periods remain
at least 75% of that achieved in the year the primary performance condition was met.
The CAP profit target was achieved in 2007 and the option pool (of a maximum of 7.5 million shares) was allocated between the
holders of outstanding awards by reference to their contribution to the achievement of the primary performance condition, subject
to conditions that no individual had an option over more than 10% of the option pool. One third of the awards vested immediately.
The primary performance target was achieved again in 2008 and the second tranche of options will vest in February 2009 subject
to the businesses also achieving the secondary performance criteria. The final tranche will vest in 2010, but only if the primary and
secondary performance conditions are again met, otherwise vesting is deferred until both the profit target of £57 million achieved
in 2007 is achieved again, and the profits of the individual participants businesses are at least 75% of that achieved in 2007 but
no later than by reference to the year ending September 30 2012. Thus the CAP is designed so that profit growth must be
sustained if awards are to vest in full.
The actual value of the first tranche of the CAP award to each director is set out in the directors share option table on pages 37
and 38. The number of options received by the directors for the second tranche is provisional and will depend on the extent that
the secondary performance test has been met for their respective businesses. The Remuneration Committee require the results of
the businesses to be reviewed and subsequently modified for true-up adjustments during the period to December 31. The
provisional number of options anticipated to be received by the directors for the second tranche is given in the directors share
option table on pages 37 and 38.
The fair value per option granted and the assumptions used to calculate its value are set out in note 23.
1996 executive share option scheme
All executive directors have options from a previous executive share option scheme approved by shareholders in 1996 in which
potentially all employees could receive options. This scheme expired in 2006 and no share options have been issued under this
scheme since February 2004 although options granted may be exercised before various dates to February 2014. Options were
issued to a selection of individual employees, including directors, on a merit basis. These options are exercisable at least three years
after their grant and are subject to certain performance conditions. For options expiring on January 29 2009, February 11 2009,
June 25 2009 and January 5 2010 the performance test set by the remuneration committee requires the growth in the company's
earnings per share for the three consecutive financial years commencing from the year of grant to exceed the growth in the retail
prices index by an average of 4% a year. For the options expiring on June 25 2009 only, there is an additional performance
condition which requires that Internet Securities, Inc. must have achieved an operating profit for three consecutive months and a
cumulative operating profit over a period of six months. For all other options expiring after 2005, the performance test set by the
remuneration committee requires that the Total Shareholder Return (TSR) of the company exceeds that of the average TSR for the
FTSE 250 index for the same period. For the performance condition to be satisfied, the TSR of the company must exceed that of
the FTSE 250 on a cumulative basis, measured from the date of grant of the option, in any four out of six consecutive months
starting 30 months after the option grant date.
32
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Remuneration structure continued
The fair value per option granted and the assumptions used to calculate its value are set out in note 23.
Internet Securities, Inc. option scheme
G Mueller, NF Osborn and JC Botts are also participants in the Internet Securities, Inc. option scheme. There are no performance
conditions attached to these options. Their options, all of which are fully vested and exercisable, are set out on page 39. The
market price at the date of exercise is determined by an independent financial valuation of Internet Securities, Inc.
Details of directors' share options can be found on pages 37 to 39.
Put options
G Mueller has a put option whereby he is able to sell his 5% holding of shares in Internet Securities, Inc. (ISI), a subsidiary of the
group, to Euromoney Institutional Investor PLC at a fair market value as determined by an independent external valuation of the
company. G Mueller retains the rights granted under this put option should his employment contract terminate. In addition G
Mueller has an IPO registration right over ISI that he may exercise every six months subject to the agreement of the other
shareholders. If an agreement cannot be reached the company has the right to purchase his shares at a fair market value as
determined by the average valuation from three investment banks. If G Mueller has not exercised his option by 2011 the company
has the right to purchase his shares at a pre-determined premium to an independent external valuation of the company.
Non-executive directors
The remuneration of the non-executive directors is determined by the chairman and executive board with the aid of external
professional advice if necessary. Non-executive directors receive a fee and are re-imbursed for expenses incurred in attending
meetings. They do not receive any performance related bonuses, pension provisions, share options or other forms of benefits apart
from JC Botts who is a participant in the Internet Securities, Inc. option scheme.
Total shareholder return (TSR)
Shown below is the group's TSR for the five years to September 30 2008 compared to the TSR achieved by the FTSE 250 index
over the same period. This index has been presented as it comprises the comparator group for the performance conditions
attached to the share option scheme referred to above. The TSR calculations assume the re-investment of dividends.
Euromoney Institutional Investor PLC
Total Shareholder Return
%
n
r
u
t
e
R
r
e
d
l
o
h
e
r
a
h
S
l
a
t
o
T
300
250
200
150
100
50
0
3
0
-
S
3
1
-
3
1
-
D
M
EM PLC
FTSE 250
2
9
-
3
0
-
D
M
3
3
0
-
J
u
0
-
S
3
1
-
3
1
-
D
M
3
3
0
-
J
u
0
-
S
3
0
-
N
2
8
-
F
e
3
1
-
M
3
0
-
S
3
0
-
3
1
-
D
M
3
2
0
-
J
u
9
-
S
2
2
9
-
J
u
8
-
S
e
p
-
0
3
e
c
-
0
3
a
r-
0
4
n
-
0
4
e
p
-
0
4
e
c
-
0
4
a
r-
0
5
n
-
0
5
e
p
-
0
5
o
v
-
0
5
b
-
0
6
a
y
-
0
6
e
p
-
0
6
e
c
-
0
6
a
r-
0
7
n
-
0
7
e
p
t-
0
7
e
c
-
0
7
a
r-
0
8
n
-
0
8
e
p
-
0
8
Service contracts
The group's policy is normally to employ executive directors on twelve month-rolling service contracts. The remuneration
committee seeks to minimise termination payments and believes these should be restricted to the value of remuneration for the
notice period. With the exception of Sir Patrick Sergeant, none of the non-executive directors has a service contract. All executive
service contracts are reviewed from time to time and updated where necessary. A service contract terminates automatically on the
director reaching his/her respective retirement age.
Annual Report and Financial Statements 2008
33
80766 pre 8/12/08 19:58 Page 34
Directors' Remuneration Report continued
Service contracts continued
Executive
directors
Date of
service
contract
Notice
period
(months)
Retire-
ment
age
Benefits accruing
if contract terminated*
Benefits accruing
if contract terminated due to
incapacity/death **
Note
PM Fallon
Jun 2 1986
12
PR Ensor
Jan 13 1993
12
NF Osborn
Jan 4 1991
12
63
62
62
DC Cohen
Nov 2 1992
12
62
CR Brown
Dec 31 1991 12
62
CR Jones
Aug 27 1997 12
62
RT Lamont
Jan 6 2000
6
62
SM Brady
Feb 17 2000 12
62
D Alfano
Jan 10 2001
6
62
G Mueller
Jan 25 1999
12
62
MJ Carroll
Mar 18 1999 6
62
12 months’ salary, profit share,
pension and car allowance.
9 months’ salary, profit share, pension and
car allowance.
12 months’ salary, profit share,
pension and car allowance.
6 months’ salary, profit share, pension and
car allowance.
12 months’ salary, pension and
a pro-rated profit share up to
the date notice of termination
is given.
12 months’ salary, pension, car
allowance and a pro-rated profit
share up to the date notice of
termination is given.
12 months’ salary, pension
and a pro-rated profit share
up to the date notice of
termination is given.
12 months’ salary, pension and
a pro-rated profit share up to
the date notice of termination
is given.
9 months’ salary, pension and
a pro-rated profit share up to
the date notice of termination
is given.
1 month’s salary, pension and a pro-rated
profit share up to the date of termination.
1 month’s salary, pension, car allowance
and a pro-rated profit share up to the date
of termination.
1 month’s salary, pension and a pro-rated
profit share up to the date of termination.
6 months’ salary, pension and a pro-rated
profit share up to the date of termination.
3 months’ salary, pension and profit share
if already paid.
12 months’ salary, pension and
a pro-rated profit share up to the
date notice of termination is given.
6 months’ salary, pension and pro-rated
profit share up to the date of termination.
6 months’ salary, pension and
a pro-rated profit share up to
the date notice of termination
is given.
The contract is terminated immediately.
The director is entitled to her salary, pension
and profit share earned up to the date of
termination.
12 months’ salary, pension and
a pro-rated bonus up to the date
notice of termination is given.
In addition, if the company
terminates the contract without
cause, Mr Mueller is entitled
to exercise immediately any
outstanding and unvested options
due to invest in two years.
6 months’ salary, pension and
a pro-rated profit share up to
the date notice of termination
is given.
The contract is terminated immediately.
The director is entitled to his salary and
pension earned up to the date of termination
and any incentive earned provided it has
already been paid.
6 months’ salary, pension and pro-rated profit
share up to the date of termination.
CHC Fordham Sep 21 2004 12
62
JL Wilkinson
July 26 2000 6
62
12 months’ salary, pension and
a pro-rated profit share up to the
date notice of termination is given.
6 months’ salary, pension and pro-rated profit
share up to the date of termination.
6 months’ salary, pension and
a pro-rated profit share up to
the date notice of termination
is given.
6 months’ salary, pension and a pro-rated
profit share up to the date notice of termination
is given.
Non-executive director
Sir Patrick
Sergeant
Jan 10 1993
12
n/a
12 months’ expense allowance.
The contract is terminated immediately. The
director is entitled to his expense allowance
up to the date of termination.
(1),
(3)
(3)
(2),
(3)
(3)
(3)
(3)
(3),
(4),
(6)
(3)
(3),
(6)
(3),
(5)
(3),
(6)
(3)
(3)
34
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Service contracts continued
(1) PM Fallon has a second service contract with a subsidiary of the group, Euromoney Institutional Investor (Jersey) Limited (EIIJ), dated May 4 1993.
This service contract has the same terms as his contract with Euromoney Institutional Investor PLC. Any termination payment would include profit
share based on EIIJ's results. In addition, if Mr Fallon be adjudicated bankrupt, he is entitled to 7 days salary and profit share from EIIJ.
(2) NF Osborn has a second service contract with a subsidiary of the group, Euromoney Inc, dated January 4 1991 normally terminated by 12 months
notice. In the event of termination Mr Osborn is entitled to 12 months base salary and pension, plus a prorated profit share to the date notice
of termination is given. The company may also terminate his agreement due to incapacity giving 3 months notice and Mr Osborn would be
entitled to 3 months salary, pension and prorated profit share.**
(3) On termination, profit share is calculated as though the director has been employed for the full financial year and then pro-rated accordingly to
the date of termination unless otherwise stated.
(4) If employment is terminated due to a breach of contract and the company is judged to have breached RT Lamont's editorial independence, the
company shall pay $87,500 to the United Way of Greater New York.
(5) G Mueller's service agreement is with Internet Securities, Inc.
(6) RT Lamont, D Alfano and MJ Carroll's services agreement are with Institutional Investor, Inc. If MJ Carroll's contract is terminated due to just cause
he is entitled to his salary and pension up to the date of termination, but no profit share unless already paid.
* If the director terminated reaches retirement age before the expiration of their notice period then benefits will only be paid up to the date of
retirement.
** This also applies if the director gives less than their notice period to the company. If the contract is terminated for reasons of bankruptcy or serious
misconduct it is terminated immediately without any payment in lieu of notice.
Information subject to audit
Directors’ remuneration table
Year to September 30
Executive directors
PM Fallon
PR Ensor
NF Osborn
DC Cohen
CR Brown
CR Jones
RT Lamont
SM Brady
D Alfano
G Mueller
MJ Carroll
CHC Fordham
JL Wilkinson
Non-executive directors
The Viscount Rothermere
Sir Patrick Sergeant
CJF Sinclair3
JP Williams3
JC Botts
JC Gonzalez
Salary
and fees
2008
£
212,000
198,418
120,330
115,700
128,692
215,000
107,709
137,800
104,305
118,226
125,491
141,300
105,000
28,000
28,000
28,000
28,000
37,750
28,000
Benefits
in kind
2008
£
870
870
3,213
1,087
3,247
1,087
5,241
721
6,200
10,408
7,335
1,087
435
–
–
–
–
–
–
Profit
share
2008
£
4,040,470
3,267,792
421,7451
608,184
212,076
470,916
41,369
178,430
482,630
516,955
75,177
598,598
213,259
–
–
–
–
–
–
Total
2008
££
Total
2007
4,253,340
3,467,080
545,288
724,971
344,015
687,003
154,319
316,951
593,135
645,589
208,003
740,985
318,694
28,000
28,000
28,000
28,000
37,750
28,000
3,963,602
3,194,645
581,341
705,952
494,908
635,104
186,427
304,196
527,755
742,101
236,346
694,380
136,7772
28,000
28,000
28,000
28,000
37,750
28,000
2,007,721
41,801
11,127,601
13,177,123
12,581,284
Fees as a director include fees paid as a director of subsidiary companies. Benefits in kind include the payment by the company for
health care.
1 NF Osborn has waived £8,674 of profit share in respect of the current and future years. The profit share waived was paid into a private pension scheme on the director’s behalf.
This waiver has not been deducted from the profit shares above.
2 appointed as a director on April 3 2007.
3 resigned as a non-executive director on September 30 2008.
Annual Report and Financial Statements 2008
35
80766 pre 8/12/08 19:58 Page 36
Directors' Remuneration Report continued
Directors’ pensions
Executive directors can participate in the Harmsworth Pension Scheme (a defined benefit scheme, closed to new directors), the
Euromoney Pension Plan (a money purchase plan) or their own private pension scheme.
Group pension contributions
PM Fallon
PR Ensor
NF Osborn
DC Cohen
CR Brown
CR Jones
RT Lamont
SM Brady
D Alfano
G Mueller
MJ Carroll
CHC Fordham
JL Wilkinson
Harmsworth
Pension
Scheme
2008
£
Euromoney
Pension
Plan
2008
£
–
–
–
18,004
–
35,237
–
–
–
–
–
–
–
53,241
–
–
7,424
–
–
–
–
12,013
–
–
–
12,354
–
31,791
Private
schemes
2008
£
–
–
820
–
2,858
–
2,872
–
2,999
2,364
3,328
–
–
Total
2008
££
––
––
8,244
18,004
2,858
35,237
2,872
12,013
2,999
2,364
3,328
12,354
––
Total
2007
8,292
19,954
2,880
32,985
2,701
12,136
2,622
2,375
2,878
12,478
15,241
100,273
99,301
In addition to the company pension contributions, NF Osborn has elected to waive part of his profit share. The profit share waived
is paid by the company into a private pension scheme as set out on page 35.
Under the Harmsworth Pension Scheme*, the following pension benefits were earned by the directors:
Increase
in accrued
annual pension
during the year
£
Accrued annual
pension at
September 30
2008
£
Transfer value
September 30
2008
££
Increase in
Transfer value
transfer value
September 30 (net of directors’
contributions)
£
2007
500
2,500
2,500
5,600
8,000
64,200
25,000
30,700
170,000
1,460,000
380,000
410,000
140,000
1,180,000
250,000
240,000
30,000
280,000
122,000
155,000
Director
PM Fallon*
PR Ensor
DC Cohen
CR Jones
The accrued annual pension entitlement is that which would be paid annually on retirement based on service to September 30
2008 and ignores any increase for future inflation. All transfer values have been calculated on the basis of actuarial advice in
accordance with ‘Retirement Benefit – Transfer Values (GN11)’ published by the Board for Actuarial Standards. The transfer values
of the accrued entitlement represent the value of assets that the pension scheme would need to transfer to another pension
provider on transferring the scheme’s liability in respect of the directors’ pension benefits. They do not represent a sum paid or
payable to individual directors and therefore cannot be added meaningfully to annual remuneration. During the year there was a
change to the assumptions used to calculate transfer values, which made allowance for the expectation that members will live
longer in retirement than had previously been assumed as well as reflecting a fall in long-term interest rates. These changes
contributed to the ‘Increase in transfer value (net of directors’ contributions)’. Members of the scheme have the option of paying
Additional Voluntary Contributions. Neither the contributions nor the resulting benefits are included in the above table. The normal
retirement age for the Harmsworth Pension Scheme is 62 years.
* PM Fallon's pension benefits relate to a deferred pension in the Mail Newspapers Pension Scheme for pensionable service between April 1 1978 and April 1 1986. No further
contributions have been made to this scheme by the group or PM Fallon.
36
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Directors’ share options
The directors hold options to subscribe for new ordinary shares of 0.25p each in the company as follows:
PM Fallon
PR Ensor
NF Osborn
DC Cohen
CR Brown
CR Jones
RT Lamont
At start
of year
85,000
255,000
2,533
43,722
–
386,255
75,000
225,000
2,533
43,722
–
346,255
5,000
2,533
17,803
–
25,336
8,000
6,000
10,000
5,000
60,888
–
–
89,888
28,000
8,000
40,000
30,000
63,127
–
169,127
32,000
60,000
8,000
6,000
20,000
15,000
2,533
43,722
–
187,255
10,000
5,000
17,315
–
32,315
Granted/
true up
during
year
–
–
–
2,404
46,126
48,530
–
–
–
2,404
46,126
48,530
–
–
997
18,800
19,797
–
–
–
–
Exercised/
lapsed during
year
At end
of year/date
of retirement
–
–
–
(46,126)
–
(46,126)
–
–
–
(46,126)
–
(46,126)
–
–
(18,800)
–
(18,800)
–
–
–
–
85,000
255,000
2,533*
–†
46,126
388,659
75,000
225,000
2,533*
–†
46,126
348,659
5,000
2,533*
–†
18,800‡
26,333
8,000
6,000
10,000
5,000
Exercise
price
£3.95
£4.31
£3.69
£0.0025
£0.0025
£3.95
£4.31
£3.69
£0.0025
£0.0025
£4.19
£3.69
£0.0025
£0.0025
£5.38
£3.35
£2.59
£4.19
–†
3,018***
64,385‡
£0.0025
£3.18
£0.0025
3,497
3,018
64,385
70,900
(64,385)
–
–
(64,385)
–
–
–
–
–
–
–
–
96,403
28,000
8,000
40,000
30,000
(1,780)
61,347
59,567
(61,347)
–
(61,347)
–†
61,347‡
167,347
–
–
–
–
–
–
–
2,404
46,126
48,530
–
–
(1,452)
15,863
14,411
–
–
–
–
–
–
–
(46,126)
–
(46,126)
–
–
(15,863)
–
(15,863)
32,000
60,000
8,000
6,000
20,000
15,000
2,533*
–†
46,126
189,659
10,000
5,000
–†
15,863‡
30,863
£4.19
£5.38
£2.59
£4.19
£0.0025
£0.0025
£4.19
£4.31
£5.38
£3.35
£2.59
£4.19
£3.69
£0.0025
£0.0025
£4.19
£5.38
£0.0025
£0.0025
Date
from which
exercisable
now
now
Feb 01 09
exercised
Feb 14 09
now
now
Feb 01 09
exercised
Feb 14 09
TSR criteria
not satisfied
Feb 01 09
exercised
Feb 14 09
TSR criteria
not satisfied
now
TSR criteria
not satisfied
TSR criteria
not satisfied
exercised
Feb 01 08
Feb 14 09
now
TSR criteria
not satisfied
TSR criteria
not satisfied
TSR criteria
not satisfied
exercised
Feb 14 09
now
now
TSR criteria
not satisfied
now
TSR criteria
not satisfied
TSR criteria
not satisfied
Feb 01 09
exercised
Feb 14 09
now
TSR criteria
not satisfied
exercised
Feb 14 09
Expiry
date
Feb 11 09
Jun 25 09
Aug 01 09
Sept 30 14
Sept 30 14
Feb 11 09
Jun 25 09
Aug 01 09
Sept 30 14
Sept 30 14
Jan 28 14
Aug 01 09
Sept 30 14
Sept 30 14
Mar 02 11
Jan 23 12
Dec 04 12
Jan 28 14
Sept 30 14
Aug 01 11
Sept 30 14
Jan 29 09
Mar 02 11
Dec 04 12
Jan 28 14
Sept 30 14
Sept 30 14
Jan 29 09
Jun 25 09
Mar 02 11
Jan 23 12
Dec 04 12
Jan 28 14
Aug 01 09
Sept 30 14
Sept 30 14
Jan 29 09
Mar 02 11
Sept 30 14
Sept 30 14
Annual Report and Financial Statements 2008
37
80766 pre 8/12/08 19:58 Page 38
Directors' Remuneration Report continued
Directors’ share options continued
SM Brady
D Alfano
G Mueller
MJ Carroll
CHC Fordham
JL Wilkinson
Granted/
true up
during
year
Exercised/
lapsed during
year
At end
of year/date
of retirement
–
–
–
–
–
–
2,355
46,474
48,829
–
–
–
–
–
691
45,882
46,573
–
–
–
10,802
74,874
85,676
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(45,882)
–
(45,882)
–
–
–
(74,874)
–
(74,874)
–
–
–
–
–
16,000
8,000
6,000
20,000
10,000
2,255**
46,474†
46,474‡
155,203
10,000
8,000
5,000
10,000
10,000
–†
45,882‡
88,882
10,000
6,000
20,000
–†
74,874‡
110,874
4,000
8,000
4,000
20,000
10,000
Exercise
price
£4.19
£5.38
£3.35
£2.59
£4.19
£4.19
£0.0025
£0.0025
£4.19
£5.62
£5.38
£2.59
£4.19
£0.0025
£0.0025
£5.38
£3.35
£2.59
£0.0025
£0.0025
£4.19
£5.62
£5.38
£2.59
£4.19
4,330
41,435
45,765
(41,435)
–
(41,435)
–
–
–
–
–
2,873
49,646
52,519
–
–
–
7,499
43,788
51,287
–
–
–
–
–
(49,646)
–
(49,646)
–
–
–
(43,788)
–
(43,788)
–†
41,435‡
£0.0025
£0.0025
87,435
10,000
6,000
20,000
10,000
2,533*
–†
49,646‡
98,179
8,000
8,000
8,000
–†
43,788‡
67,788
£5.38
£3.35
£2.59
£4.19
£3.69
£0.0025
£0.0025
£3.35
£2.59
£4.19
£0.0025
£0.0025
Date
from which
exercisable
now
TSR criteria
not satisfied
now
TSR criteria
not satisfied
TSR criteria
not satisfied
Feb 01 10
now
Feb 14 09
now
now
TSR criteria
not satisfied
TSR criteria
not satisfied
TSR criteria
not satisfied
exercised
Feb 14 09
TSR criteria
not satisfied
now
TSR criteria
not satisfied
exercised
Feb 14 09
now
now
TSR criteria
not satisfied
TSR criteria
not satisfied
TSR criteria
not satisfied
exercised
Feb 14 09
TSR criteria
not satisfied
now
TSR criteria
not satisfied
TSR criteria
not satisfied
Feb 01 06
exercised
Feb 14 09
now
TSR criteria
not satisfied
TSR criteria
not satisfied
exercised
Feb 14 09
Expiry
date
Jan 29 09
Mar 02 11
Jan 23 12
Dec 04 12
Jan 28 14
Aug 01 10
Sept 30 14
Sept 30 14
Jan 29 09
Jan 05 10
Mar 02 11
Dec 04 12
Jan 28 14
Sept 30 14
Sept 30 14
Mar 02 11
Jan 23 12
Dec 04 12
Sept 30 14
Sept 30 14
Jan 29 09
Jan 05 10
Mar 02 11
Dec 04 12
Jan 28 14
Sept 30 14
Sept 30 14
Mar 02 11
Jan 23 12
Dec 04 12
Jan 28 14
Aug 01 09
Sept 30 14
Sept 30 14
Jan 23 12
Dec 04 12
Jan 28 14
Sept 30 14
Sept 30 14
At start
of year
16,000
8,000
6,000
20,000
10,000
2,255
44,119
–
106,374
10,000
8,000
5,000
10,000
10,000
45,191
–
88,191
10,000
6,000
20,000
64,072
–
100,072
4,000
8,000
4,000
20,000
10,000
37,105
–
83,105
10,000
6,000
20,000
10,000
2,533
46,773
–
95,306
8,000
8,000
8,000
36,289
–
60,289
Total
1,769,768
640,914
(554,398)
1,856,284
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Euromoney Institutional Investor PLC
80766 pre 8/12/08 19:58 Page 39
Directors’ share options continued
Of the options exercised during the year:
PM Fallon
PR Ensor
NF Osborn
DC Cohen
CR Brown
CR Jones
CR Jones
RT Lamont
D Alfano
G Mueller
MJ Carroll
CHC Fordham
JL Wilkinson
Number of
options
exercised
46,126
46,126
18,800
64,385
61,347
20,000
26,126
15,863
45,882
74,874
41,435
49,646
43,788
554,398
Market price
per share on
date of
exercise (£)
Date of
exercise
Gain on
exercise (£)
Number
of shares
retained
Feb 15 2008
March 5 2008
Feb 15 2008
Feb 15 2008
Feb 15 2008
Feb 15 2008
March 5 2008
Feb 15 2008
Feb 15 2008
Feb 15 2008
Feb 15 2008
July 25 2008
Feb 15 2008
3.95
3.26
3.95
3.95
3.95
3.95
3.26
3.95
3.95
3.95
3.95
3.19
3.95
182,082
150,255
74,213
254,160
242,167
78,950
85,105
62,619
181,119
295,565
163,565
158,123
172,853
46,126
46,126
18,800
37,883
38,094
20,000
26,126
15,863
45,882
74,874
10,000
49,646
25,764
2,100,777
455,184
*
issued under the Euromoney Institutional Investor PLC Save As You Earn scheme 2006.
**
issued under the Euromoney Institutional Investor PLC Save As You Earn scheme 2007.
*** issued under the Euromoney Institutional Investor PLC Save As You Earn scheme 2008.
†
‡
Options granted relate to those that were issued under the first tranche of the CAP which vested on February 14 2008, three months following the announcement of
the company's results. The number of options granted to each director was provisional and was trued-up following adjustment for the allocation of options belonging
to leavers and adjustments to profits of the respective directors' individual businesses as required by the remuneration committee. As such the actual number of options
granted was different from that reported last year.
Options granted relate to those that are likely to be issued under the second tranche of the CAP which vest on February 14 2009, three months following the
announcement of the company's results. The number of options granted to each director is provisional and will primarily require a true-up to reflect adjustments of the
respective directors' individual businesses profits during the period to December 31 2008 as required by the remuneration committee. As such the actual number of
options granted could vary from that disclosed.
The market price of the company’s shares on September 30 2008 was £3.25. The high and low share prices during the year were
£5.23 and £3.17 respectively. There were 640,914 options granted during the year (2007: 566,103). The aggregate gain made by
directors on the exercise of share options in the year was £2,100,777 (2007: £26,287).
In addition, the following directors hold options to subscribe for common stock of US$0.001 each in Internet Securities, Inc., a
subsidiary of the company. All of these options are fully vested and exercisable.
JC Botts
G Mueller
NF Osborn
Total
At start
of year
6,000
5,063
5,000
At end
of year
6,000
5,063
5,000
16,063
16,063
Exercise
price
US$7.40
US$7.07
US$8.95
Date
from which
exercisable
now
now
now
Expiry
date
May 13 09
Feb 02 14
Sept 05 10
No options in Internet Securities, Inc. were granted or exercised during the year.
Annual Report and Financial Statements 2008
39
80766 pre 8/12/08 19:58 Page 40
Directors' Remuneration Report continued
Information not subject to audit
Directors’ interests in the company
The interests of the directors and their families in the ordinary shares of the company and its subsidiaries as at September 30 were
as follows:
B
eneficial
PM Fallon
PR Ensor
NF Osborn
DC Cohen
CR Brown
CR Jones
RT Lamont
SM Brady
D Alfano
G Mueller
MJ Carroll
CHC Fordham
JL Wilkinson
The Viscount Rothermere
Sir Patrick Sergeant
CJF Sinclair*
JP Williams*
JC Botts
Non-beneficial
Sir Patrick Sergeant
Ordinary shares of 0.25p each
2007
2008
532,998
102,277
33,875
74,547
79,205
67,887
41,366
–
47,629
110,377
10,000
50,519
25,764
20,864
265,304
7,494
3,075
15,503
486,872
56,151
42,590
36,664
41,111
21,761
25,503
–
1,747
20,503
–
873
–
20,864
285,304
7,494
3,075
5,503
1,488,684
1,056,015
20,000
20,000
–
–
At September 30 2008 G Mueller was beneficially interested in 380,000 shares of Internet Securities, Inc. a subsidiary of the group
(2007: 380,000 shares).
Directors’ interests in Daily Mail and General Trust plc
The interests of the directors, to be disclosed under chapter 9.8.6 of the UKLA Listing Rules, in the shares of Daily Mail and General
Trust plc as at September 30 were as follows:
The Viscount Rothermere1&2
PM Fallon
Sir Patrick Sergeant
CJF Sinclair1&2
JP Williams1&2
* resigned September 30 2008.
Ordinary shares
of 12.5p each
‘A’ ordinary non-voting
shares of 12.5p each
2008
2007
2008
2007
11,903,132
–
–
–
–
11,878,132
–
–
–
–
76,213,053
41,500
80,000
477,207
243,072
76,195,913
41,500
80,000
438,150
229,552
1. The figures in the table above include 'A' shares committed by executives under a long-term incentive plan, details of which are set out in the Daily Mail and General Trust
plc's annual report.
2. The figures in the table above include ‘A’ shares awarded to executives under the DMGT Executive Bonus Scheme. For the Viscount Rothermere, CJF Sinclair and JP Williams
respectively, 26,839, 43,312 and 21,414 of these shares were subject to restrictions as explained on in the Daily Mail and General Trust plc's annual report. The comparable
figures at October 1 2007 were 32,108, 33,263 and 18,389 respectively.
40
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80766 pre 8/12/08 19:58 Page 41
Directors’ interests in Daily Mail and General Trust plc continued
The Viscount Rothermere had non-beneficial interests as a trustee at September 30 2008 in 5,540,000 ‘A’ ordinary non-voting
shares of 12.5p each (2007: 5,540,000 shares) plus 639,208 ordinary shares (2007: 665,208 shares).
Daily Mail and General Trust plc has been notified that, under section 824 of the Companies Act 2006 and including the interests
shown in the table above, The Viscount Rothermere is deemed to have been interested in 12,542,340 ordinary shares of 12.5p
each (2007: 12,543,340 shares).
At September 30 2008 and September 30 2007, The Viscount Rothermere was beneficially interested in 756,700 ordinary shares
of Rothermere Continuation Limited, the company’s ultimate parent company.
The Viscount Rothermere, CJF Sinclair and JP Williams had options over 436,000, 898,000 and 365,000 ‘A’ ordinary non-voting
shares in Daily Mail and General Trust plc at September 30 2008 respectively (2007: 436,000, 698,000 and 365,000 respectively).
The exercise price of these options range from £5.05 to £10.30. Further details of these options are listed in the Daily Mail and
General Trust plc group accounts.
There have been no changes in the director's interests since September 30 2008.
John Botts
Chairman of the Remuneration Committee
November 12 2008
Annual Report and Financial Statements 2008
41
80766 pre 8/12/08 19:58 Page 42
Independent Auditors' Report
Independent auditors’ report to the members of Euromoney Institutional Investor PLC
We have audited the group financial statements of Euromoney Institutional Investor PLC for the year ended September 30 2008
which comprise the Group Income Statement, the Group Balance Sheet, the Group Cash Flow Statement, the Group Statement
of Recognised Income and Expense and the related notes 1 to 30. These group financial statements have been prepared under the
accounting policies set out therein. We have also audited the information in the Directors' Remuneration Report that is described
as having been audited.
We have reported separately on the parent company financial statements of Euromoney Institutional Investor PLC for the year
ended September 30 2008.
This report is made solely to the company’s members, as a body, in accordance with section 235 of the Companies Act 1985. Our
audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them
in an auditors’ report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility
to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions
we have formed.
Respective responsibilities of directors and auditors
The directors' responsibilities for preparing the Annual Report, the Directors' Remuneration Report and the group financial
statements in accordance with applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European
Union are set out in the Statement of Directors' Responsibilities.
Our responsibility is to audit the group financial statements in accordance with relevant legal and regulatory requirements and
International Standards on Auditing (UK and Ireland).
We report to you our opinion as to whether the group financial statements give a true and fair view, whether the group financial
statements have been properly prepared in accordance with the Companies Act 1985 and Article 4 of the IAS Regulation and
whether the part of the directors' remuneration report described as having been audited has been properly prepared in accordance
with the Companies Act 1985. We also report to you whether in our opinion the information given in the Directors' Report is
consistent with the group financial statements. In addition we report to you if, in our opinion, we have not received all the
information and explanations we require for our audit, or if information specified by law regarding director's remuneration and
other transactions is not disclosed.
We review whether the Corporate Governance Statement reflects the company's compliance with the nine provisions of the 2006
Combined Code specified for our review by the Listing Rules of the Financial Services Authority, and we report if it does not. We
are not required to consider whether the board's statements on internal control cover all risks and controls, or form an opinion on
the effectiveness of the group's corporate governance procedures or its risk and control procedures.
We read the other information contained in the Annual Report as described in the contents section and consider whether it is
consistent with the audited group financial statements. We consider the implications for our report if we become aware of any
apparent misstatements or material inconsistencies with the group financial statements. Our responsibilities do not extend to any
further information outside the Annual Report.
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Euromoney Institutional Investor PLC
80766 pre 8/12/08 19:58 Page 43
Basis of audit opinion
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices
Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the group financial
statements and the part of the Directors' Remuneration Report to be audited. It also includes an assessment of the significant
estimates and judgments made by the directors in the preparation of the group financial statements, and of whether the
accounting policies are appropriate to the group's circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order
to provide us with sufficient evidence to give reasonable assurance that the group financial statements and the part of the
Directors' Remuneration Report to be audited are free from material misstatement, whether caused by fraud or other irregularity
or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the group financial
statements and the part of the Directors' Remuneration Report to be audited.
Opinion
In our opinion:
●
●
●
●
the group financial statements give a true and fair view, in accordance with IFRSs as adopted by the European Union, of the
state of the group's affairs as at September 30 2008 and of its profit for the year then ended;
the group financial statements have been properly prepared in accordance with the Companies Act 1985 and Article 4 of the
IAS Regulation;
the part of the directors' remuneration report described as having been audited has been properly prepared in accordance
with the Companies Act 1985; and
the information given in the Directors' Report is consistent with the group financial statements.
Deloitte & Touche LLP
Chartered Accountants and Registered Auditors
London
November 12 2008
Annual Report and Financial Statements 2008
43
80766 pre 8/12/08 19:58 Page 44
Group Income Statement
for the year ended September 30 2008
Revenue
Continuing operations
Less: share of revenue of joint ventures
Total revenue
Operating profit before acquired intangible amortisation,
share option expense and exceptional items
Acquired intangible amortisation
Share option expense
Accelerated share option expense
Exceptional items
Operating profit before associates and joint ventures
Share of results in associates and joint ventures
Operating profit
Finance income
Finance expense
Net finance costs
Profit before tax
Tax credit/(expense) on profit
Deferred tax asset recognition
Tax credit/(expense) on profit on ordinary activities
Profit after tax from continuing operations
Profit for the year from discontinued operations
Profit for the year
Attributable to:
Equity holders of the parent
Equity minority interests
Basic earnings per share – continuing operations
Basic earnings per share – continuing and discontinued operations
Diluted earnings per share – continuing operations
Diluted earnings per share – continuing and discontinued operations
Adjusted diluted earnings per share
Dividend per share (including proposed dividends)
Notes
3
3
3
11
5
3, 4
7
7
7
3
8
3
15
10
10
10
10
10
9
2008
£000’s
2007
£000’s
332,064
–
332,064
81,308
(12,749)
(5,361)
–
(2,477)
60,721
305,594
(441)
305,153
78,606
(15,716)
(6,993)
(3,183)
855
53,569
308
490
61,029
54,059
5,594
(29,197)
(23,603)
37,426
1,921
5,358
7,279
44,705
245
5,496
(18,427)
(12,931)
41,128
(11,401)
3,178
(8,223)
32,905
500
44,950
33,405
43,719
1,231
44,950
41.69p
41.92p
40.37p
40.60p
44.36p
19.25p
31,822
1,583
33,405
30.66p
31.16p
29.86p
30.34p
35.04p
19.00p
A detailed reconciliation of the group’s underlying results is set out in the appendix to the Chairman’s statement on page 7.
44
Euromoney Institutional Investor PLC
80766 pre 8/12/08 19:58 Page 45
Gro u p Bal ance Sheet
as at September 30 2008
Non-current assets
Intangible assets
Goodwill
Other intangible assets
Property, plant and equipment
Investments
Deferred tax assets
Net pension surplus
Derivative financial instruments
Current assets
Trade and other receivables
Amounts on loans owed by DMGT group undertakings
Current income tax assets
Cash and cash equivalents
Derivative financial instruments
Current liabilities
Acquisition option commitments
Trade and other payables
Amounts on loans owed to DMGT group undertakings
Current income tax liabilities
Accruals
Deferred income
Derivative financial instruments
Provisions
Committed loan facility
Loan notes
Bank overdrafts
Net current liabilities
Total assets less current liabilities
Non-current liabilities
Acquisition option commitments
Other non-current liabilities
Committed loan facility
Deferred tax liabilities
Derivative financial instruments
Provisions
Net assets
Shareholders’ equity
Called up share capital
Share premium account
Other reserve
Capital redemption reserve
Own shares
Liability for share based payments
Fair value reserve
Translation reserve
Retained earnings
Equity shareholders’ surplus
Equity minority interests
Total equity
Notes
2008
£000’s
2007
£000’s
11
11
12
13
21
27
18
16
29
18
25
17
29
18
20
19
19
19
25
19
21
18
20
22
24
24
24
24
24
24
24
24
272,096
135,482
21,661
303
16,459
2,527
368
448,896
69,141
155,772
1,928
21,211
1,451
249,503
(22,276)
(30,619)
(155,772)
(2,558)
(50,016)
(89,488)
(15,165)
(1,198)
(184,594)
(7,579)
(1,032)
248,137
131,885
20,917
252
11,508
364
5,088
418,151
67,458
–
–
26,711
4,387
98,556
(14,899)
(28,991)
–
(9,681)
(43,424)
(73,382)
(605)
(2,684)
–
(11,796)
(5,935)
(560,297)
(191,397)
(310,794)
(92,841)
138,102
325,310
(7,572)
(1,301)
–
(27,887)
(9,773)
(3,505)
(50,038)
88,064
263
38,575
64,981
8
(74)
20,676
(19,579)
17,113
(36,916)
85,047
3,017
88,064
(18,436)
(1,189)
(213,559)
(31,650)
(1,373)
(3,323)
(269,530)
55,780
258
38,509
64,981
8
(74)
15,737
18,176
(15,335)
(69,975)
52,285
3,495
55,780
The accounts were approved by the board of directors on November 12 2008.
Richard Ensor
Colin Jones
Directors
Annual Report and Financial Statements 2008
45
80766 pre 8/12/08 19:58 Page 46
Group Cash Flow Statement
for the year ended September 30 2008
Cash flow from operating activities
Operating profit
Share of results in associates and joint ventures
Profit from discontinued operations
Profit on disposal of long-term investment
Profit on disposal of businesses
Acquired intangible amortisation
Licences and software amortisation
Share option expense
Goodwill impairment
Reduction in goodwill arising from a deferred tax adjustment
Depreciation of property, plant and equipment
Movement in provisions
(Profit)/loss on disposal of property, plant and equipment
Operating cash flows before movements in working capital
Decrease/(increase) in receivables
Increase in payables
Cash generated from operations
Income taxes paid
Net cash from operating activities
Investing activities
Dividends paid to minorities
Dividends received from associate
Interest received
Purchase of intangible assets
Purchase of property, plant and equipment
Proceeds from disposal of property, plant and equipment
Proceeds from disposal of long-term investment
Purchase of additional interest in subsidiary undertakings
Acquisition of associates and joint ventures
Acquisition of subsidiary undertakings
Proceeds from disposal of businesses
Proceeds from disposal of discontinued operations
2008
£000’s
61,029
(308)
–
(1,589)
–
12,749
207
5,361
2,952
2,784
2,759
(1,419)
(1,662)
82,863
3,224
13,697
99,784
(12,231)
87,553
(2,056)
257
4,212
(156)
(4,240)
2,846
1,589
(5,997)
–
(556)
–
245
2007
£000’s
54,059
(490)
885
–
(6,780)
15,716
289
10,176
–
–
2,585
2,324
297
79,061
(11,570)
22,559
90,050
(9,773)
80,277
(1,511)
646
2,162
(112)
(7,889)
1,106
–
(18,594)
(6)
(151,317)
8,207
6,571
Net cash used in investing activities
(3,856)
(160,737)
Financing activities
Dividends paid
Interest paid
Interest paid on loan notes
Issue of new share capital
Repayment of borrowings
Settlement of derivative assets/liabilities
Redemption of loan notes
Loan repaid to DMGT group company
Loan received from DMGT group company
(19,950)
(10,129)
(534)
72
–
(5,591)
(4,324)
(217,236)
171,218
(18,110)
(17,277)
(578)
428
(78,136)
131
(915)
(61,350)
251,297
Net cash (used in)/from financing activities
(86,474)
75,490
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Effect of foreign exchange rate movements
Cash and cash equivalents at end of year
(2,777)
(4,970)
20,776
2,180
20,179
26,268
(522)
20,776
46
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Note to the Group Cash Flow Statement
Net Debt
Net debt at beginning of year
Decrease in cash and cash equivalents
Increase in loans
Decrease/(increase) in amounts owed to DMGT group company
Debt acquired on acquisition of Metal Bulletin
Redemption/(issue) of loan notes
Interest paid on loan notes
Other non cash changes
Effect of foreign exchange rate movements
2008
£000’s
(204,579)
(2,777)
–
46,018
–
4,324
534
(5,805)
(9,709)
2007
£000’s
(73,438)
(4,970)
78,136
(189,947)
(12,606)
(11,796)
267
(1,422)
11,197
Net debt at end of year
(171,994)
(204,579)
Net debt comprises cash at bank and in hand, bank overdrafts, committed borrowings and loan notes.
Non cash changes represent interest added to the principal amounts owed to DMGT and accrued interest on loan notes.
Annual Report and Financial Statements 2008
47
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Group Statement of Recognised Income and Expense
for the year ended September 30 2008
Loss on sale of available-for-sale investments taken to equity
(Losses)/gains on cash flow hedges
Gains on revaluation of intangible assets
Net exchange differences on translation of foreign operations
Net exchange differences on foreign currency loans
Actuarial gains on defined benefit pension schemes
Tax on items taken directly to equity
Net income recognised directly in equity
Translation reserves recycled to the income statement on disposals
Transfer of gain on cash flow hedges from fair value reserves to income statement
Profit for the year
Total recognised income and expense for the year
Attributable to:
Equity holders of the parent
Equity minority interests
2008
£000’s
–
(17,455)
1,692
32,448
(19,115)
1,589
1,282
441
–
(2,877)
44,950
42,514
41,283
1,231
42,514
2007
£000’s
(405)
6,392
2,384
(15,001)
5,886
4,158
2,082
5,496
(90)
(2,699)
33,405
36,112
34,529
1,583
36,112
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Notes to the Accounts
1 Accounting policies
General information
Euromoney Institutional Investor PLC (the ‘company’) is a company incorporated in the UK.
The group financial statements consolidate those of the company and its subsidiaries (together referred to as the ‘group’) and
equity-account the group’s interest in associates and jointly controlled entities. The parent company financial statements present
information about the entity and not about its group.
The group financial statements have been prepared and approved by the directors in accordance with the International Financial
Reporting Standards adopted for use in the European Union and therefore comply with Article 4 of the EU IAS Regulation. The
company has elected to prepare its parent company financial statements in accordance with UK GAAP.
Judgements made by the directors in the application of these accounting policies that have a significant effect on the financial
statements, and estimates with a significant risk of material adjustment in the next year, are discussed in note 2.
In the current year, the group has adopted IFRS 7 ‘Financial Instruments: Disclosures’ which is effective for annual reporting periods
beginning on or after January 1 2007. The impact of IFRS 7 has been to expand the disclosures provided in these financial
statements regarding the group’s financial instruments.
At the date of authorisation of these financial statements, the following new accounting standards, or amendments and interpretations
to existing standards have not been applied as they are not yet effective: Amendment to IAS 1 ‘Presentation of Financial Statements:
Capital Disclosures’ (effective for annual periods beginning on or after January 1 2009); IFRIC 14 ‘IAS 19 – The Limit on a Defined Benefit
Asset, Minimum Funding Requirements and their Interaction’ (effective for annual periods beginning on or after January 1 2008);
Amendment to IAS 23 ‘Borrowing Costs’ (effective for annual periods beginning on or after July 1 2009); IFRS 8 ‘Operating Segments’
(effective for annual periods beginning on or after January 1 2009); Amendment to IAS 27 ‘Consolidated Financial Statements’ (effective
for annual periods beginning on or after July 1 2009) and amendment to IFRS 3 ‘Business Combinations’ (effective for annual periods
beginning on or after July 1 2009). The directors anticipate that the adoption of these standards in future periods will have no material
impact on the financial statements of the group except for additional disclosures. In addition, certain other standards and interpretations
were issued during the period which either do not apply to the group or are not expected to have any material effect.
Basis of preparation
The accounts have been prepared under the historical cost convention, except for certain financial instruments which have been
measured at fair value.
The accounting policies set out below have been applied consistently to all periods presented in these group financial statements
except for the presentation of segmental information. The segmental information has been re-analysed to better reflect the system
of internal financial reporting to key management and to more accurately reflect the underlying businesses’ results that are used
to assess risk and reward decisions. As a result the comparative segmental information has been restated.
Basis of consolidation
The consolidated accounts incorporate the accounts of the company and entities controlled by the company (its ‘subsidiaries’).
Control is achieved where the company has the power to govern the financial and operating policies of an investee entity so as to
obtain benefits from its activities.
An associate is an entity over which the group is in a position to exercise significant influence, but not control or joint control,
through participation in the financial and operating policy decisions of the investee. A joint venture is an entity over which the
group is in a position to exercise joint control over the financial and operating policies of the investee. The results and assets and
liabilities of associates and joint ventures are incorporated in these financial statements using the equity method of accounting.
Where the group owns a non-controlling interest in the equity share capital of a non-quoted company and does not exercise
significant influence, it is held as an investment and stated in the balance sheet at the lower of cost and net realisable value.
The results of subsidiary and associated undertakings acquired during the year are incorporated from the effective date of
acquisition. Acquisitions are accounted for under the acquisition method, with consideration given and the assets and liabilities
acquired being recorded at fair value.
Minority interests in the net assets of consolidated subsidiaries are identified separately from the group’s equity therein. Minority
interests consists of the amount of those interests at the date of the original business combination and the minority’s share of
changes in equity since the date of the combination. Losses applicable to the minority in excess of the minority interest in the
subsidiary’s equity are allocated against the interests of the group except to the extent that the minority has a binding obligation
and is able to make an additional investment to cover the losses.
Annual Report and Financial Statements 2008
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Notes to the Accounts continued
1 Accounting policies continued
Foreign currencies
The functional and presentation currency of Euromoney Institutional Investor PLC and its UK subsidiaries is sterling (£). The
functional currency of subsidiaries, associates and joint ventures is the currency of the primary economic environment in which
they operate.
Transactions in foreign currencies are recorded at the rate of exchange ruling at the date of the transaction. Monetary assets and
liabilities denominated in foreign currencies are translated into sterling at the rates ruling at the balance sheet date.
The income statements of overseas operations are translated into sterling at the average exchange rates for the year and their
balance sheets are translated into sterling at the exchange rates ruling at the balance sheet date. All exchange differences arising
on consolidation are taken to equity. In the event of the disposal of an operation, the related cumulative translation differences
are recognised in the income statement in the period of disposal.
Gains and losses arising on foreign currency borrowings and derivative instruments, to the extent that they are used to provide a
hedge against the group’s equity investments in overseas undertakings, are taken to equity together with the exchange difference
arising on the net investment in those undertakings. All other exchange differences are taken to the income statement.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and any recognised impairment loss.
Depreciation of property, plant and equipment is provided on the straight-line basis over their expected useful lives at the following
rates per year:
Freehold land and buildings
Long-term leasehold premises
Short-term leasehold premises
Office equipment
Motor vehicles
2%
over term of lease
over term of lease
11% – 33%
20%
All property, plant and equipment are reviewed for impairment in accordance with IAS 36 ‘Impairment of Assets’ when there are
indications that the carrying value may not be recoverable.
Intangible assets
Goodwill
Goodwill represents the excess of the fair value of purchase consideration over the net fair value of identifiable assets and
liabilities acquired.
Goodwill is recognised as an asset at cost and subsequently measured at cost less accumulated impairment. For the purposes of
impairment testing, goodwill is allocated to those cash generating units that have benefited from the acquisition. The carrying
value of goodwill is reviewed for impairment at least annually or where there is an indication that goodwill may be impaired. If the
recoverable amount of the cash generating unit is less than its carrying amount, then the impairment loss is allocated first to reduce
the carrying amount of the goodwill allocated to the unit and then to the other assets of the unit on a pro rata basis. Any
impairment is recognised immediately in the income statement and may not subsequently be reversed. On disposal of a subsidiary
undertaking, the attributable amount of goodwill is included in the determination of the profit and loss on disposal.
Goodwill arising on foreign subsidiary investments held in the consolidated balance sheet are retranslated into sterling at the
applicable period end exchange rates. Any exchange differences arising are taken directly to equity as part of the retranslation of
the net assets of the subsidiary.
Goodwill arising on acquisitions before the date of transition to IFRS has been retained at the previous UK GAAP amounts having
been tested for impairment at that date. Goodwill written off to reserves under UK GAAP before October 1 1998 has not been
reinstated and is not included in determining any subsequent profit or loss on disposal.
Other intangible assets
The group makes an assessment of the fair value of intangible assets arising on acquisitions. An intangible asset will be recognised
as long as the asset is separable or arises from contractual or other legal rights, and its fair value can be measured reliably.
Amortisation is charged so as to write off the costs of intangible assets over their estimated useful lives, using the straight-line or
reducing balance method.
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1 Accounting policies continued
All intangible assets are reviewed for impairment in accordance with IAS 36 ‘Impairment of assets’ when there are indications that
the carrying value may not be recoverable.
The costs of acquiring and developing software that is not integral to the related hardware is capitalised separately as an intangible
asset. These intangibles are stated at cost less accumulated amortisation and impairment losses.
Amortisation
Amortisation of intangible assets is provided on a reducing balance basis or straight-line basis as appropriate over their expected
useful lives at the following rates per year:
Brands
Data providers contracts
Customer relationships
Licences and software
Subscription contracts
20 – 30 years
5 years
3 – 16 years
3 years
1 year
Business combinations achieved in stages
Where a business combination is achieved by more than one exchange transaction, goodwill is calculated separately for each
transaction with the appropriate share of the acquiree’s net assets based on the net fair values at the time of each exchange
transaction. Any adjustment to fair values related to previously held interests is a revaluation which is accounted for as an
adjustment to equity.
Purchases and sale of shares in a controlled entity
Where the group’s interest in a controlled entity increases, which does not result in a change of control, the group calculates the
goodwill arising as the difference between the cost of the additional interest acquired and the fair value of the group’s interest in
the subsidiary’s net assets at the date of the change in interest. All of the assets and liabilities are fair valued at the date of
acquisition of the additional controlling stake.
Financial assets
Trade and other receivables
Trade receivables are recognised and carried at original invoice amount, less provision for impairment. A provision is made and
charged to the income statement when there is objective evidence that the group will not be able to collect all amounts due
according to the original terms.
Cash and cash equivalents
Cash and cash equivalents 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 group cash flow statement, cash and cash equivalents are as defined above, net of outstanding
bank overdrafts.
Financial liabilities and equity
Committed borrowings and bank overdrafts
Interest-bearing loans and overdrafts are recorded at the proceeds received, net of direct issue costs. Direct issue costs are
amortised over the period of the loans and overdrafts to which they relate. Finance charges, including premiums payable on
settlement or redemption are charged to the income statement as incurred using the effective interest rate method and are added
to the carrying value of the borrowings or overdraft to the extent they are not settled in the period which they arise.
Trade payables
Trade payables are not interest-bearing and are stated at their fair value.
Derivatives financial instruments
The group uses various derivative financial instruments to manage its exposure to foreign exchange and interest rate risks,
including forward foreign currency contracts and interest rate swaps.
All derivative instruments are recorded in the balance sheet at fair value. The recognition of gains or losses on derivative
instruments depends on whether the instrument is designated as a hedge and the type of exposure it is designed to hedge.
The effective portion of gains or losses on cash flow hedges are deferred in equity until the impact from the hedged item is recognised
in the income statement. The ineffective portion of such gains and losses is recognised in the income statement immediately.
Annual Report and Financial Statements 2008
51
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Notes to the Accounts continued
1 Accounting policies continued
Gains or losses on the qualifying part of net investment hedges are recognised in equity together with the gains and
losses on the underlying net investment. The ineffective portion of such gains and losses is recognised in the income
statement immediately.
Changes in the fair value of the derivative financial instruments that do not qualify for hedge accounting are recognised in the
income statement as they arise.
The premium or discount on interest rate instruments is recognised as part of net interest payable over the period of the contract.
Interest rate swaps are accounted for on an accruals basis.
Liabilities in respect of put option agreements
Liabilities for put options over the remaining minority interests in subsidiaries are recorded in the balance sheet at their estimated
discounted present value. These discounts are unwound and charged to the income statement as notional interest over the period
up to the date of the potential future payment. In respect of options over further interests in joint ventures and associates, only
movements in their fair value are recognised.
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 taxation is calculated under the provisions of IAS 12 ‘Income tax’ and is recognised on differences between the carrying
amounts of assets and liabilities in the accounts and the corresponding tax bases used in the computation of taxable profit, and
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. No provision is made for temporary differences on unremitted earnings
of foreign subsidiaries, joint ventures or associates where the group has control and the reversal of the temporary difference is
not foreseeable.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised
based on tax rates and laws that have been enacted or substantively enacted by the balance sheet date. Deferred tax is charged
or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the
deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax
liabilities and when they relate to income taxes levied by the same taxation authority and the group intends to settle its current
assets and liabilities on a net basis.
Provisions
A provision is recognised in the balance sheet when the group has a present legal or constructive obligation as a result of a past
event, and it is probable that economic benefits will be required to settle the obligation. If it is material, provisions are determined
by discounting the expected future cash flows at a pre tax rate that reflects current market assessments of the time value of money
and, where appropriate, the risks specific to the liability.
Pensions
Contributions to pension schemes in respect of current and past service, ex-gratia pensions, and cost of living adjustments to
existing pensions are based on the advice of independent actuaries.
Payments to the Euromoney Pension Plan and the Metal Bulletin Group Personal Pension Plan, defined contribution pension
schemes, are charged as an expense as they fall due.
The company operates the Metal Bulletin Pension Scheme, a defined benefit scheme. The cost of providing benefits is determined
by triennial valuations using the attained age method, with actuarial valuations being carried out at each balance sheet date.
Actuarial gains and losses are recognised in full in the period in which they occur. The retirement benefit obligation recognised in
the balance sheet represents the present value of the defined benefit obligation as adjusted for unrecognised past service cost,
and as reduced by the fair value of scheme assets.
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1 Accounting policies continued
The company also participates in the Harmsworth Pension Scheme, a defined benefit pension scheme which is operated by Daily
Mail and General Trust plc. As there is no contractual agreement or stated policy for charging the net defined benefit cost for the
plan as a whole to the individual entities, the company recognises an expense equal to its contributions payable in the period and
does not recognise any unfunded liability of this pension scheme on its balance sheet.
Share-based payments
The group makes share-based payments to certain employees. These payments are measured at their estimated fair value at the
date of grant, calculated using an appropriate option pricing model. The fair value determined at the grant date is expensed on a
straight-line basis over the vesting period, based on the estimate of the number of shares that will eventually vest. At the period
end the vesting assumptions are revisited and the charge associated with the fair value of these options updated. In accordance
with the transitional provisions of IFRS 1, IFRS 2 ‘Share-based payments’ has been applied to all grants of options after
November 7 2002, that were unvested at October 1 2004, the date of transition to IFRS.
For cash settled share based payments a liability equal to the portion of the goods and services received is recognised at the current
fair value as determined at each balance sheet date.
Revenue
Revenue represents income from advertising, subscriptions, sponsorship and delegate fees, net of value added tax.
● Advertising revenues are recognised in the income statement on the date of publication.
● Subscription revenues are recognised in the income statement on a straight-line basis over the period of the subscription.
● Sponsorship and delegate revenues are recognised in the income statement over the period the event is run.
Revenues invoiced but relating to future periods are deferred and treated as deferred income in the balance sheet.
Leased assets
Operating lease rentals are charged to the income statement on a straight-line or other systematic basis as allowed by
IAS 17 ‘Leases’.
Dividends
Dividends are recognised as an expense in the period in which they are approved by the company’s shareholders. Interim dividends
are recorded in the period in which they are paid.
Own shares held by Employees’ Share Ownership Trust
Transactions of the group-sponsored trust are included in the group financial statements. In particular, the trust’s holdings of shares
in the company are debited direct to equity.
Earnings per share
The earnings per share and diluted earnings per share calculations follow the provisions of IAS 33 ‘Earnings per share’. The diluted
earnings per share figure is calculated by adjusting for the dilution effect of the exercise of all ordinary share options, SAYE options
and the Capital Appreciation Plan options granted by the company, but excluding the ordinary shares held by the Euromoney
Employees’ Share Ownership Trust.
Exceptional items
Exceptional items are items of income or expense considered by the directors, either individually or if of a similar type in aggregate, as
being either material or significant and which require disclosure in order to provide a view of the group’s results excluding these items.
2 Key judgemental areas adopted in preparing these accounts
The group prepares its group financial statements in accordance with IFRS, the application of which often requires judgements to
be made by management when formulating the group’s financial position and results. Under IFRS, the directors are required to
adopt those accounting policies most appropriate to the group’s circumstances for the purpose of presenting fairly the group’s
financial position, financial performance and cash flows.
In determining and applying accounting policies, judgement is often required in respect of items where the choice of specific policy,
accounting estimate or assumption to be followed could materially affect the reported results or net asset position of the group
should it later be determined that a different choice would have been more appropriate.
Management considers the accounting estimates and assumptions discussed below to be its key judgemental areas and,
accordingly, provides an explanation of each below. Management has discussed its critical accounting estimates and associated
disclosures with the group’s audit committee.
The discussion below should also be read in conjunction with the group’s disclosure of IFRS accounting policies, which is provided
in note 1.
Annual Report and Financial Statements 2008
53
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Notes to the Accounts continued
2 Key judgemental areas adopted in preparing these accounts continued
Acquisitions
The group’s accounting policy is that on acquisition of a subsidiary or business, the purchase consideration is allocated over the
net fair value of identifiable assets, liabilities and contingent liabilities acquired, with any excess purchase consideration
representing goodwill.
Fair value
Determining the fair value of assets, liabilities and contingent liabilities acquired requires management’s judgement and often
involves the use of significant estimates and assumptions, including assumptions with respect to future cash flows, recoverability
of assets, and unprovided liabilities and commitments particularly in relation to tax and VAT.
Intangible assets
The group makes an assessment of the fair value of intangible assets arising on acquisitions. An intangible asset will be recognised
as long as the asset is separable or arises from contractual or other legal rights, and its fair value can be measured reliably.
The measurement of the fair value of intangible assets acquired requires significant management judgement particularly in relation
to the expected future cash flows from the acquired marketing databases (which are generally based on management’s estimate
of marketing response rates), trademarks, brands, repeat and well established events. At September 30 2008 the net book value
of intangible assets was £135.1 million (2007: £131.5 million).
Goodwill
Goodwill is recognised as an asset at cost and subsequently measured at cost less accumulated impairment. For the purposes of
impairment testing, goodwill is allocated to those cash generating units that have benefited from the acquisition. The carrying
value of goodwill is reviewed for impairment at least annually or where there is an indication that goodwill may be impaired.
Goodwill is impaired where the carrying value of goodwill is higher than the net present value of future cash flows of those
cash generating units to which it relates. Key areas of judgement in calculating the net present value are the forecast
cashflows, the long term growth rate of the applicable businesses and the discount rate applied to those cash flows. During
the year the group recognised a goodwill impairment of £3.0 million (note 5) and a reduction in goodwill arising from a
deferred tax adjustment of £2.8 million (note 5). Goodwill held on the balance sheet at September 30 2008 was £272.1 million
(2007: £248.1 million).
Acquisition option commitments
The group is party to a number of put and call options over the remaining minority interests in some of its subsidiaries.
IAS 39 requires the discounted present value of these acquisition option commitments to be recognised as a liability on the balance
sheet with a corresponding decrease in reserves. The discounts are unwound as a notional interest charge to the income statement.
Key areas of judgement in calculating the discounted present value of the options are the expected future cash flows and earnings
of the business, the period remaining until the option is exercised and the discount rate. At September 30 2008 the discounted
present value of these acquisition option commitments was £29.8 million (2007: £33.3 million).
Share-based payments
The group makes share-based payments to certain employees. These payments are measured at their estimated fair value
at the date of grant, calculated using an appropriate option pricing model. The fair value determined at the grant date is
expensed on a straight-line basis over the vesting period, based on the estimate of the number of shares that will eventually vest.
The key assumptions used in calculating the fair value of the options are the discount rate, the group’s share price volatility,
dividend yield, risk free rate of return, and expected option lives. These assumptions are set out in note 23. Management regularly
perform a true-up of the estimate of the number of shares that are expected to vest, which is dependent on the anticipated
number of leavers.
The Capital Appreciation Plan is explained in detail in the Directors’ Remuneration Report. The number of shares available for
award is dependent on the future profits of the group up to at least 2009 which, in addition to the key assumptions above,
management are required to estimate. A fall in the estimate of these profits would result in a lower cumulative charge to the
income statement.
The charge for share-based payments for the year ended September 30 2008 is £5.4 million (2007: £10.2 million).
Defined benefit pension scheme
The surplus or deficit in the defined benefit pension scheme that is recognised through the statement of recognised income and
expense is subject to a number of assumptions and uncertainties. The calculated liabilities of the scheme are based on assumptions
regarding salary increases, inflation rates, discount rates, the long term expected return on the scheme’s assets and member
longevity. Details of the assumptions used are shown in note 27. Such assumptions are based on actuarial advice and are
benchmarked against similar pension schemes.
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2 Key judgemental areas adopted in preparing these accounts continued
Taxation
The group’s tax charge on ordinary activities is the sum of the total current and deferred tax charges. The calculation of the group’s
total tax charge necessarily involves a degree of estimation and judgement in respect of certain items whose tax treatment cannot
be finally determined until resolution has been reached with the relevant tax authority or, as appropriate, through a formal legal
process. The final resolution of some of these items may give rise to material profit and loss and/or cash flow variances.
The group is a multi-national group with tax affairs in many geographical locations. This inherently leads to a higher than usual
complexity to the group’s tax structure and makes the degree of estimation and judgement more challenging. The resolution of issues
is not always within the control of the group and it is often dependent on the efficiency of the legislative processes in the relevant taxing
jurisdictions in which the group operates. Issues can, and often do, take many years to resolve. Payments in respect of tax liabilities for
an accounting period result from payments on account and on the final resolution of open items. As a result, there can be substantial
differences between the tax charge in the income statement and tax payments.
The group has certain significant open items in several tax jurisdictions and as a result the amounts recognised in the group
financial statements in respect of these items are derived from the group’s best estimation and judgement, as described above.
However, the inherent uncertainty regarding the outcome of these items means eventual resolution could differ from the
accounting estimates and therefore affect the group’s results and cash flows.
Recognition of deferred tax assets
The recognition of net deferred tax assets is based upon whether it is probable that sufficient and suitable taxable profits will be
available in the future, against which the reversal of temporary differences can be deducted. Recognition, therefore, involves
judgement regarding the future financial performance of the particular legal entity or tax group in which the deferred tax asset
has been recognised.
Historical differences between forecast and actual taxable profits have not resulted in material adjustments to the recognition of
deferred tax assets. At September 30 2008, the group had a deferred tax asset of £16.5 million (2007: £11.5 million).
Treasury
Interest rate exposure
Interest rate swaps and caps are used to manage the group’s exposure to fluctuations in interest rates on its floating rate
borrowings. The maturity profile of these derivatives is matched with the expected future debt profile of the group. The group’s
policy is to fix the interest rates on approximately 80% of its term debt looking forward over five years. The expected future debt
profile of the group is based on estimates of both timings and size of future, as yet unknown, acquisitions offset by an estimate
of the cash generated by the group over a five year period. If management materially underestimate the group’s future debt profile
this would lead to too few interest rate instruments being in place and the group more exposed to swings in interest rates. An
overestimate of the group’s future debt profile would lead to associated costs in unwinding the excess interest rate instruments.
At September 30 2008, the fair value of the group’s interest rate swaps was a liability £2.9 million (2007: £0.6 million).
Forward contracts
The group is exposed to foreign exchange risk in the form of transactions in foreign currencies entered into by group companies
and by the translation of the results of foreign subsidiaries into sterling for reporting purposes.
The group does not hedge the translation of the results of foreign subsidiaries, consequently, fluctuations in the value of pounds
sterling versus currencies could materially affect the amount of these items in the consolidated financial statements, even if their
values have not changed in their original currency. The group does endeavour to match foreign currency borrowings to investments
in order to provide a natural hedge for the translation of the net assets of overseas subsidiaries.
Approximately 60% of the group’s revenues are in US dollars. Subsidiaries normally do not hedge transactions in foreign currencies
into the functional currency of their own operations. However, at a group level a series of US dollar forward contracts is put in
place up to 48 months forward partially to hedge its dollar revenues into sterling. The timing and value of these forward contracts
is based on management’s estimate of its future US dollar revenues over a 48 month period. If management materially
underestimated the group’s future US dollar revenues this would lead to too few forward contracts being in place and the group
being more exposed to swings in US dollar to sterling exchange rates. An overestimate of the group’s US dollar revenue would
lead to associated costs in unwinding the excess forward contracts. At September 30 2008, the fair value of the group’s forward
contracts was a liability of £10.9 million (2007: asset of £7.3 million).
Details of the financial instruments used are set out in note 18 to the accounts.
Annual Report and Financial Statements 2008
55
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Notes to the Accounts continued
3
Segmental analysis
Primary reporting format
Segmental information is presented in respect of the group’s business divisions and represent the group’s management and internal
reporting structure. The group is organised into five business divisions: Financial publishing; Business publishing; Training;
Conferences and seminars; and Databases and information services. This is considered to be the primary reporting format. Financial
publishing and Business publishing consist primarily of advertising and subscription revenue. The Training division consists primarily
of delegate revenue. Conferences and seminars consists of both sponsorship income and delegate revenue. Databases and
information services consists of subscription revenue. A breakdown of the group’s revenue by type is set out below.
The presentation of the group’s primary reporting format has been re-analysed to better reflect the system of internal financial
reporting to key management and to more accurately reflect the underlying businesses’ results that are used to assess risk and
reward decisions. As a result the comparative split of divisional revenues and operating profits has been restated. The total revenue
and operating profit remains unchanged. The total revenue and operating profit by geographic source remains unchanged.
Secondary reporting format
The group divides the operation of its businesses across three main geographical areas: United Kingdom; North America; and Rest
of World (which primarily includes Asia). These geographical areas are considered as the secondary reporting format.
Inter segment sales are charged at prevailing market rates and shown in the eliminations columns below.
United Kingdom
2007
2008
(Restated)
£000’s
£000’s
North America
2007
2008
(Restated)
£000’s
£000’s
Rest of World
2007
2008
(Restated)
£000’s
£000’s
Eliminations
Total
2008
£000’s
2007
(Restated)
£000’s
2008
£000’s
2007
(Restated)
£000’s
49,225
40,361
27,078
31,511
47,854
33,742
24,206
29,036
36,401
12,598
10,581
38,386
38,365
11,270
10,521
38,708
1,956
1,963
3,553
18,147
1,803
1,637
2,662
13,714
(3,423)
(1,834)
(460)
(145)
(3,542) 84,159
(1,040) 53,088
(334) 40,752
(159) 87,899
84,480
45,609
37,055
81,299
7,529
39
1,665
7,568
1,306
1,583
40,733
–
299
30,415
3,635
236
17,867
–
2
13,794
–
4
(2)
–
(1,966)
(2) 66,127
(6)
39
(1,823)
–
51,775
4,935
–
157,408 145,295 138,998 133,150
–
–
–
–
43,488
–
33,614
441
(7,830)
–
(6,906) 332,064 305,153
441
–
–
Revenue
By division and source:
Financial publishing
Business publishing
Training
Conferences and seminars
Databases and information
services
Sold/closed businesses
Corporate revenue
Group revenue
Joint ventures
157,408 145,295 138,998 133,150
43,488
34,055
(7,830)
(6,906) 332,064 305,594
The joint venture revenues of £nil (2007: £441,000) can be allocated as follows: Conferences and seminars £nil (2007: £353,000)
and Training £nil (2007: £88,000).
Revenue by type:
Subscriptions
Advertising
Sponsorship
Delegates
Other
Sold/closed businesses
Total revenue
Investment income (note 7)
Total revenue and investment income
56
Euromoney Institutional Investor PLC
2008
£000’s
2007
£000’s
123,067 103,949
65,227
46,203
74,046
10,793
4,935
66,504
45,813
86,350
10,291
39
332,064 305,153
653
597
332,661 305,806
80766 notes 8/12/08 19:07 Page 57
3
Segmental analysis continued
Revenue
By destination:
Sale of goods
Sale of services
Sold/closed businesses
Group revenue
Joint ventures
Total revenue
Investment income
Total revenue (including
share of joint venture
revenue) and
investment income
United Kingdom
2007
2008
£000’s
£000’s
North America
2007
2008
£000’s
£000’s
Rest of World
2007
2008
£000’s
£000’s
Eliminations
Total
2008
£000’s
2007
£000’s
2008
£000’s
2007
£000’s
52,901
8,884
39
61,824
–
61,824
459
34,808
14,244
500
85,650
47,942
–
96,156
47,218
3,765
71,308
73,170
–
56,616
58,059
693
49,552 133,592 147,139 144,478 115,368
441
–
–
–
–
49,552 133,592 147,139 144,478 115,809
–
267
386
106
32
(6,485)
(1,345)
–
(7,830)
–
(7,830)
–
(5,716) 203,374 181,864
(1,167) 128,651 118,354
4,935
(23)
39
(6,906) 332,064 305,153
441
–
–
(6,906) 332,064 305,594
653
597
–
62,283
49,819 133,698 147,525 144,510 115,809
(7,830)
(6,906) 332,661 306,247
Operating profit1
By division and source:
Financial publishing
Business publishing
Training
Conferences and seminars
Databases and information services
Sold/closed businesses
Unallocated corporate costs
Operating profit before acquired intangible
amortisation, share option expense and
exceptional items
Acquired intangible amortisation2
Share option expense
Exceptional items (note 5)
Operating profit before associates and
United Kingdom
2007
2008
(Restated)
£000’s
£000’s
North America
2007
2008
(Restated)
£000’s
£000’s
Rest of World
2007
2008
(Restated)
£000’s
£000’s
Total
2008
£000’s
2007
(Restated)
£000’s
18,583
15,467
7,720
9,067
4,595
71
16,701
11,684
7,240
9,190
5,238
543
(24,132) (11,843)
5,644
3,402
1,838
10,718
14,032
–
5,675
7,092
3,022
2,323
12,048
11,488
711
(1,435)
287
527
883
3,263
2,479
–
1,189
172
322
639
1,878
1,948
(3)
23,965
24,514
15,028
19,396
10,202
10,441
23,116
23,048
18,674
21,106
1,251
71
(352) (17,268) (13,630)
31,371
(4,396)
(3,538)
2,306
38,753
(5,703)
(6,503)
(727)
41,309
(7,107)
(1,555)
(4,783)
35,249
(9,216)
(3,317)
1,582
8,628
(1,246)
(268)
–
4,604
81,308
78,606
(797) (12,749) (15,716)
(5,361) (10,176)
(356)
855
–
(2,477)
joint ventures
25,743
25,820
27,864
24,298
7,114
3,451
60,721
53,569
Share of results in associates and joint ventures
Net finance costs (note 7)
Profit before tax
Tax credit/(expense) (note 8)
Profit after tax
308
490
(23,603) (12,931)
37,426
7,279
41,128
(8,223)
44,705
32,905
The exceptional loss of £2,477,000 (2007: gain £855,000) can be allocated as follows: Business publishing gain £475,000
(2007: £3,628,000); Conferences and seminars loss £2,952,000 (2007: £nil); Databases and information services £nil (2007: loss
£303,000); Unallocated corporate costs £nil (2007: loss £2,470,000).
Share option expense of £5,361,000 (2007: £10,176,000) can be allocated as follows: Financial publishing £1,320,000
(2007: £2,543,000); Business publishing £603,000 (2007: £1,337,000); Training £1,122,000 (2007: £2,160,000); Conferences and
seminars £655,000 (2007: £1,333,000); Databases and information services £805,000 (2007: £1,147,000); Unallocated corporate
costs £856,000 (2007: £1,656,000).
Acquired intangible amortisation of £12,749,000 (2007: £15,716,000) can be allocated as follows: Financial publishing
£1,267,000 (2007: £1,760,000); Business publishing £3,395,000 (2007: £4,418,000); Conferences and seminars £291,000
(2007: £248,000); Databases and information services £7,647,000 (2007: £9,133,000); Unallocated corporate costs £149,000
(2007: £157,000).
1 Operating profit before acquired intangible amortisation, share option expense and exceptional items.
2 Intangible amortisation represents amortisation on acquisition related non-goodwill assets such as brands, database content and trademarks.
Annual Report and Financial Statements 2008
57
80766 notes 8/12/08 19:07 Page 58
Notes to the Accounts continued
3
Segmental analysis continued
Net assets/(liabilities) by division:
As at September 30 2008
Assets
Liabilities
Conferences
Databases
and
and information
Financial
Business
publishing publishing
£000’s
£000’s
Training
£000’s
seminars
£000’s
Closed
services businesses
£000’s
£000’s
Non-
operating
assets/
(liabilities)
£000’s
Total
£000’s
111,251
(139,510)
85,587
(108,996)
54,400
(60,080)
79,688
(101,687)
307,000
(111,786)
5,057
(3,801)
55,416
(84,475)
698,399
(610,335)
Net assets/(liabilities)
(28,259)
(23,409)
(5,680)
(21,999) 195,214
1,256
(29,059)
88,064
Capital expenditure (excluding
intangibles)
Depreciation (excluding intangibles)
Amortisation
Impairment losses
Acquisition put option commitments
(4)
(28)
(1,270)
–
(3,628)
(24)
(34)
(3,548)
(2,784)
(9,535)
(5)
(22)
–
–
–
(53)
(77)
(291)
(2,952)
(7,952)
(496)
(696)
(7,726)
–
(8,733)
–
–
–
–
–
(3,658)
(1,902)
(121)
–
–
(4,240)
(2,759)
(12,956)
(5,736)
(29,848)
Conferences
Databases
and
and information
Financial
Business
publishing publishing
£000’s
£000’s
Training
£000’s
seminars
£000’s
Closed
services businesses
£000’s
£000’s
Non-
operating
assets/
(liabilities)
£000’s
Total
£000’s
Net assets/(liabilities) by division:
As at September 30 2007
Assets
Liabilities
71,247
(94,696)
47,074
(73,632)
29,848
(35,930)
64,393
(77,283)
246,982
(80,292)
6,813
(3,897)
50,350
(95,197)
576,707
(460,927)
Net assets/(liabilities)
(23,449)
(26,558)
(6,082)
(12,890) 166,690
2,916
(44,847)
55,780
Capital expenditure (excluding
intangibles)
Depreciation (excluding intangibles)
Amortisation
Impairment losses
Acquisition put option commitments
(1,549)
(500)
(1,780)
–
(8,578)
(132)
(141)
(4,577)
–
(6,003)
(33)
(12)
(15)
–
–
(84)
(97)
(249)
–
(9,532)
(469)
(464)
(9,297)
–
(9,222)
(11)
(32)
–
–
–
(5,611)
(1,339)
(87)
–
–
(7,889)
(2,585)
(16,005)
–
(33,335)
Non-operating assets and liabilities principally include deferred tax, corporation tax, external bank loans, loans to and from DMGT,
dividend receivable, deferred consideration, and acquisition option commitments.
Net assets/(liabilities)
By location:
Assets
Liabilities
United Kingdom
2007
2008
£000’s
£000’s
North America
2008
£000’s
2007
£000’s
Rest of World
Total
2008
£000’s
2007
£000’s
2008
£000’s
2007
£000’s
306,649
(332,795)
191,336
(165,134)
356,495
(223,882)
297,505
(266,314)
35,255
(53,658)
27,866
(29,479)
698,399
(610,335)
516,707
(460,927)
Net assets/(liabilities)
(26,146)
26,202
132,613
31,191
(18,403)
(1,613)
88,064
55,780
Capital expenditure by location
3,111
5,627
637
1,752
492
510
4,240
7,889
58
Euromoney Institutional Investor PLC
80766 notes 8/12/08 19:07 Page 59
4 Operating profit
Revenue
Cost of sales
Gross profit
Distribution costs
Administrative expenses
Operating profit before associates and joint ventures
Total
2008
£000’s
Total
2007
£000’s
332,064
(102,648)
305,153
(92,169)
229,416
212,984
(5,938)
(162,757)
(6,005)
(153,410)
60,721
53,569
Administrative expenses include a profit on sale of property of £1,670,000 (2007: £nil), profit on disposal of long-term investment
of £1,589,000 (2007: £nil), profit on disposal of businesses of £nil (2007: £6,780,000), reduction in goodwill arising from a
deferred tax adjustment of £2,784,000 (2007: £nil), goodwill impairment of £2,952,000 (2007: £nil) and reorganisation and
restructuring costs of £nil (2007: £5,925,000) (note 5).
Operating profit is stated after charging/(crediting):
Staff costs (note 6)
Intangible amortisation
Acquired intangible amortisation
Licenses and software
Goodwill impairment
Reduction in goodwill arising from a deferred tax adjustment
Depreciation of property plant and equipment
Auditors’ remuneration:
Group audit
Non-audit
Property operating lease rentals
Loss on sale of property, plant and equipment
Exceptional profit on sale of property (note 5)
Reorganisation and restructuring costs
Foreign exchange gain
Impairment loss recognised on trade receivables
Reversal of impairment loss recognised on trade receivables
Audit and non-audit services relate to:
Fees payable for the audit of the company’s annual accounts
Fees payable for other services to the group
The audit of subsidiaries pursuant to local legislation
Total audit fees
Other audit services
Tax services
Other services
Total non-audit fees
2008
£000’s
2007
£000’s
115,326
110,981
12,749
207
2,952
2,784
2,759
830
215
6,035
8
(1,670)
–
(979)
3,662
(758)
2008
£000’s
593
237
830
186
29
215
15,716
289
–
–
2,585
737
302
5,214
297
–
5,925
(1,686)
2,525
(1,493)
2007
£000’s
491
246
737
175
127
302
In addition to the above amounts, non-audit fees of £76,000 (2007: £99,000) was capitalised in respect of acquisitions.
Annual Report and Financial Statements 2008
59
80766 notes 8/12/08 19:07 Page 60
Notes to the Accounts continued
Exceptional items
5
Exceptional items are items of income or expense considered by the directors, either individually or if of a similar type in aggregate, as
being either material or significant and which require disclosure in order to provide a view of the group’s results excluding these items.
Profit on sale of property
Profit on disposal of long-term investment
Profit on disposal of businesses
Reduction in goodwill arising from a deferred tax adjustment (note 11)
Goodwill impairment (note 11)
Reorganisation and restructuring costs
2008
£000’s
1,670
1,589
–
(2,784)
(2,952)
–
(2,477)
2007
£000’s
–
–
6,780
–
–
(5,925)
855
In August 2008 the group sold a freehold property with a net book value of £1,172,000 for £2,842,000 resulting in a profit on
sale, after related sale costs, of £1,670,000 and no corresponding tax charge.
In May 2008 the group sold its 15% interest in LAMP Technologies LLC, a provider of back office services to the hedge fund
industry, resulting in a profit of £1,589,000 and no corresponding tax charge (note 15).
At September 30 2008, the group re-assessed the recoverability of tax losses acquired with Metal Bulletin and as a result
recognised a deferred tax asset of £2,784,000. In accordance with IAS 12 ‘Income taxes’ the group is required to reduce its
previously capitalised goodwill to offset the recognition of this deferred tax asset.
The group is required to review the carrying value of goodwill at least annually, and as a result of the review, the group impaired
capitalised goodwill by £2,952,000 with a corresponding deferred tax credit of £1,181,000.
Staff costs
6
(i) Directors’ emoluments
The emoluments of the directors of Euromoney Institutional Investor PLC were as follows:
Directors’ salaries and fees, benefits in kind and profit shares
Pension contributions (including waiver of profit shares)
2008
£000’s
2007
£000’s
13,168
109
13,277
12,573
108
12,681
Details of directors’ remuneration are set out in the Directors’ Remuneration Report on pages 30 to 41.
(ii) Number of staff (including directors)
By business segment:
Financial publishing
Business publishing
Training
Conferences and seminars
Databases and information services
Central
2008
Average
2007
Average
485
267
161
433
669
347
461
336
157
403
579
396
2,362
2,332
60
Euromoney Institutional Investor PLC
80766 notes 8/12/08 19:07 Page 61
6
Staff costs continued
By geographical location:
United Kingdom
North America
Rest of World
(iii) Staff costs (including directors)
Salaries, wages and incentives
Social security costs
Pension contributions
Share-based compensation costs
7
Finance income and expense
Finance income
Interest receivable from DMGT group undertakings
Interest receivable from short-term investments
Expected return on pension scheme assets
Net movements in acquisition option commitment values
Finance expense
Committed borrowings
Interest payable to DMGT group undertakings
Ineffectiveness of interest rate swaps
Interest payable on loan notes
Interest on pension scheme liabilities
Net movements in acquisition option commitment values
Imputed interest on acquisition option commitments
Foreign exchange loss on tax equalisation contracts
Other gains on tax equalisation contracts
Net loss on tax equalisation contracts
Net finance costs
2008
Average
839
774
749
2007
Average
884
777
671
2,362
2,332
2008
£000’s
99,221
9,041
1,703
5,361
2007
£000’s
89,240
9,939
1,626
10,176
115,326
110,981
2008
£000’s
3,825
597
1,172
–
5,594
(12,252)
(3,825)
(227)
(478)
(1,150)
(1,730)
(995)
(11,966)
3,426
(8,540)
(29,197)
(23,603)
2007
£000’s
–
653
958
3,885
5,496
(14,915)
–
(27)
(578)
(1,114)
–
(1,603)
(1,826)
1,636
(190)
(18,427)
(12,931)
The foreign exchange loss on tax equalisation contracts of £11,966,000 relates to foreign exchange losses on hedges on intra-
group financing (2007: £1,826,000). This foreign exchange loss is matched by an equal and opposite tax credit. The foreign
exchange loss and the tax credit are excluded from underlying profit and the underlying tax expense (note 8).
Annual Report and Financial Statements 2008
61
80766 notes 8/12/08 19:07 Page 62
Notes to the Accounts continued
8
Tax on profit on ordinary activities
Current tax expense
UK corporation tax
Foreign tax
Adjustments in respect of prior years
Deferred tax (credit)/expense
Current year
Adjustments in respect of prior years
Total tax (credit)/expense in income statement
2008
£000’s
860
5,265
(2,234)
3,891
(9,858)
(1,312)
(11,170)
(7,279)
2007
£000’s
4,946
6,343
494
11,783
(4,031)
471
(3,560)
8,223
The effective rate of tax for the year is a credit of 19% (2007: expense at 20%). The underlying tax rate for 2008 is 27% as set
out below:
Reconciliation of tax (credit)/expense in income statement to underlying tax expense
Total tax (credit)/expense in income statement
Add back:
Tax on intangible amortisation
Tax on exceptional items
Tax credit on foreign exchange loss on tax equalisation swap
Tax deduction on US goodwill
Tax adjustments in respect of prior years
Tax credit on non-recurring intergroup transactions
Deferred tax asset recognition
Underlying tax expense
Underlying profit before tax (refer to the appendix to the Chairman’s statement)
Underlying effective tax rate
2008
£000’s
(7,279)
6,950
1,181
11,966
(3,376)
3,546
–
5,358
25,625
18,346
67,343
27%
2007
£000’s
8,223
4,926
(1,095)
1,826
(1,491)
(965)
2,588
3,178
8,967
17,190
55,533
31%
Following a reassessment of the recoverability of the potential deferred tax asset on overseas tax losses and other short-term timing
differences, an additional asset of £5,358,000 (2007: £3,178,000) has been recognised.
A credit of £11,966,000 relating to tax on foreign exchange losses (2007: £1,826,000) has been treated as exceptional as it is
hedged by £11,966,000 (2007: £1,826,000) of foreign exchange losses on tax equalisation contracts included within net finance
costs (note 7).
The group presents the above underlying effective tax rate to help users of this report better understand its tax charge. In this year
the group has removed all deferred tax effects of its goodwill and intangibles from the calculation of its underlying effective tax
rate. This is because in the directors’ opinion the resulting underlying effective tax rate is more representative of the group’s long-
term tax position.
62
Euromoney Institutional Investor PLC
80766 notes 8/12/08 19:07 Page 63
Tax on profit on ordinary activities continued
8
The actual tax credit/(expense) for the year is different from 29% of profit before tax for the reasons set out in the following
reconciliation:
Profit before tax
Tax at 29%
Factors affecting tax charge:
Rates of tax on overseas profits
Joint venture and associate income reported net of tax
US State taxes
Goodwill and intangibles
Disallowable expenditure
Tax effects of intra-group transactions eliminated on consolidation
Recognition of previously unrecognised tax losses
Recognition of previously unrecognised deferred tax
Gains on disposal covered by brought forward losses
Deferred tax (credit)/charge arising from changes in tax laws
Prior year adjustments
Total tax (credit)/expense for the year
9 Dividends
Amounts recognisable as distributable to equity holders in period
Final dividend for the year ended September 30 2007 of 13.0p (2006: 11.6p)
Interim dividend for year ended September 30 2008 of 6.25p (2007: 6.0p)
Employees’ Share Ownership Trust dividend
Proposed final dividend for the period ended September 30
Employees’ Share Ownership Trust dividend
2008
£000’s
37,426
10,854
224
(89)
1,134
(69)
2,559
(8,567)
(2,855)
(2,503)
(960)
(3,461)
(3,546)
(7,279)
2008
£000’s
13,388
6,573
19,961
(11)
19,950
13,689
(8)
13,681
2007
£000’s
41,128
12,338
463
(147)
615
(1,201)
689
(3,901)
(1,890)
–
–
292
965
8,223
2007
£000’s
11,943
6,177
18,120
(10)
18,110
13,386
(8)
13,378
The proposed final dividend of 13.0p (2007: 13.0p) is subject to approval at the Annual General Meeting on January 28 2009 and
has not been included as a liability in these financial statements in accordance with IAS 10 ‘Events after the balance sheet date’.
Annual Report and Financial Statements 2008
63
80766 notes 8/12/08 19:07 Page 64
Notes to the Accounts continued
10 Earnings per share
Earnings attributable to equity holders of the parent
Less earnings from discontinued operations
Basic earnings – continuing operations
Intangible amortisation
Exceptional items
Imputed interest on acquisition option commitments
Net movements in acquisition option commitment values
Tax on above adjustments
Tax deduction on US goodwill
Tax adjustment in respect of prior years
Tax credit on non-recurring intergroup transactions
Deferred tax assets recognition
Adjusted earnings
Basic earnings – continuing and discontinued operations
Weighted average number of shares
Shares held by the Employees’ Share Ownership Trust
Effect of dilutive share options
Diluted weighted average number of shares
Basic earnings per share – continuing operations
Effect of dilutive share options
Diluted earnings per share – continuing operations
Effect of intangible amortisation
Effect of exceptional items
Effect of imputed interest on acquisition option commitments
Effect of net movements in acquisition option commitment values
Effect of tax on the above adjustments
Effect of tax deduction on US goodwill
Effect of tax adjustment in respect of prior years
Effect of tax credit on non-recurring intergroup transactions
Effect of deferred tax assets recognition
Adjusted diluted earnings per share
Basic earnings per share – continuing and discontinued operations
Effect of dilutive share options
Diluted earnings per share – continuing and discontinued operations
2008
£000’s
43,719
(245)
43,474
12,749
2,477
995
1,730
(8,131)
3,376
(3,546)
–
(5,358)
47,766
43,719
Number
000’s
104,348
(59)
104,289
3,398
107,687
2007
£000’s
31,822
(500)
31,322
15,716
(855)
1,603
(3,885)
(3,831)
1,491
965
(2,588)
(3,178)
36,760
31,822
Number
000’s
102,196
(59)
102,137
2,752
104,889
Pence
per share
Pence
per share
41.69
(1.32)
40.37
11.84
2.30
0.92
1.61
(7.55)
3.14
(3.29)
–
(4.98)
44.36
41.92
(1.32)
40.60
30.66
(0.80)
29.86
14.98
(0.82)
1.53
(3.70)
(3.65)
1.42
0.92
(2.47)
(3.03)
35.04
31.16
(0.82)
30.34
The adjusted diluted earnings per share figure has been disclosed since the directors consider it to give a more meaningful
indication of the underlying trading performance. The September 2007 adjustments to earnings have been aligned with those
made at September 2008 for comparability purposes.
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11 Goodwill and other intangibles
Intangibles
acquired on
acquisition
2008
£000’s
Licenses &
software
2008
£000’s
Cost/carrying amount
At October 1
Additions
Acquisitions (note 14)
Disposals
Exchange differences
At September 30
Amortisation and impairment
At October 1
Amortisation charge for the year
Impairment losses
Disposals
Exchange differences
At September 30
Net book value/carrying
146,958
–
4,125
–
14,594
165,677
15,473
12,749
–
–
2,362
30,584
1,414
156
–
–
168
1,738
1,014
207
–
–
128
1,349
Intangibles
acquired on
acquisition
2007
£000’s
2,770
–
152,661
(8,473)
Goodwill
2008
£000’s
248,656
–
5,037
––
24,658
278,351
146,958
519
–
5,736
––
–
6,255
144
15,716
–
(387)
Licenses &
software
2007
£000’s
1,295
112
71
(7)
(57)
1,414
775
289
–
(7)
(43)
15,473
1,014
Goodwill
2007
£000’s
68,971
–
196,006
(1,871)
(14,450)
248,656
519
–
–
–
–
519
amount at September 30
135,093
389
272,096
131,485
400
248,137
The carrying amounts of goodwill by business are as follows:
CEIC
Internet Securities
MIS
Petroleum Economist
Gulf Publishing
HedgeFund Intelligence
Information Management Network
MAR
BCA
Metal Bulletin publishing businesses
FOW
Total Derivatives
TelCap
Asia Business Forum
Benchmark Financials
Other
Total
2008
£000’s
11,799
5,180
2,310
236
4,279
14,718
33,615
168
129,715
52,710
196
5,698
5,140
5,911
413
8
272,096
2007
£000’s
10,385
4,037
2,022
236
3,744
14,718
31,992
160
113,487
55,494
196
3,761
2,917
4,980
–
8
248,137
Goodwill acquired in a business combination is allocated, at acquisition, to the cash generating units (businesses) that are expected
to benefit from that business combination.
During the year the goodwill in respect of each of the above businesses was tested for impairment in accordance with IAS 36
‘Impairment of assets’. As a result of the review this year, the group impaired capitalised goodwill by £2,952,000.
The key assumptions reflecting past experience and external sources of information in the value in use calculations were:
● Forecasts by business based on pre-tax cash flows derived from approved budgets for 2009. Management believe these
budgets to be reasonably achievable;
● Subsequent cash flows for between one and three additional years were increased in line with growth expectations of the
applicable business;
● The pre-tax discount rate used was 9.1%, reflecting the companies weighted average cost of capital; and
● Long term growth rate assumed to be 3%.
At September 30 2008, the group re-assessed the recoverability of tax losses acquired with Metal Bulletin and as a result
recognised a deferred tax asset of £2,784,000. In accordance with IAS 12 ‘Income taxes’ the group is required to reduce its
previously capitalised goodwill to offset the recognition of this deferred tax asset.
Annual Report and Financial Statements 2008
65
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Notes to the Accounts continued
12 Property, plant and equipment
2008
Cost
At October 1 2007
Additions
Acquisitions (note 14)
Disposals
Exchange differences
At September 30 2008
Depreciation
At October 1 2007
Charge for the year
Disposals
Exchange differences
At September 30 2008
Net book value at
September 30 2008
Net book value at
September 30 2007
2007
Cost
At October 1 2006
Additions
Acquisitions
Disposals
Exchange differences
At September 30 2007
Depreciation
At October 1 2006
Charge for the year
Disposals
Exchange differences
At September 30 2007
Net book value at
September 30 2007
Net book value at
September 30 2006
Freehold
land and
buildings
2008
£000’s
Long-term
leasehold
premises
2008
£000’s
Short-term
leasehold
premises
2008
£000’s
Office
equipment
2008
£000’s
Motor
vehicles
2008
£000’s
5,045
2,457
–
(1,145)
–
6,357
19
58
(40)
–
37
2,685
–
–
–
16
2,701
214
38
–
6
258
14,088
390
–
–
648
15,126
4,270
979
(8)
263
5,504
15,505
1,393
3
(802)
1,241
17,340
11,903
1,684
(715)
1,192
14,064
6,320
2,443
9,622
3,276
5,026
2,471
9,818
3,602
Freehold
land and
buildings
2007
£000’s
–
3,899
1,543
(397)
–
5,045
–
19
–
–
19
Long-term
leasehold
premises
2007
£000’s
2,575
–
114
–
(4)
2,685
159
55
–
–
214
Short-term
leasehold
premises
2007
£000’s
12,837
2,373
206
(981)
(347)
Office
equipment
2007
£000’s
15,592
1,617
874
(1,902)
(676)
14,088
15,505
4,087
873
(564)
(126)
4,270
12,115
1,638
(1,274)
(576)
11,903
5,026
2,471
9,818
3,602
–
2,416
8,750
3,477
7
–
–
–
1
8
7
–
–
1
8
–
–
Motor
vehicles
2007
£000’s
36
–
–
(29)
–
7
36
–
(29)
–
7
–
–
Total
2008
£000’s
37,330
4,240
3
(1,947)
1,906
41,532
16,413
2,759
(763)
1,462
19,871
21,661
20,917
Total
2007
£000’s
31,040
7,889
2,737
(3,309)
(1,027)
37,330
16,397
2,585
(1,867)
(702)
16,413
20,917
14,643
The directors do not consider the market value of freehold land and buildings to be significantly different from its book value.
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13 Investments
2008
At October 1 2007
Share of profits retained
Dividends
At September 30 2008
2007
At October 1 2006
Additions
Share of profits retained
Increase in fair value
Transfer to subsidiaries
Dividends
Provision
At September 30 2007
Investments in
associated
undertakings
£000’s
Investments in
joint
ventures
£000’s
Available
for sale
investments
£000’s
Trade
investment
£000’s
252
308
(257)
303
–
–
–
–
–
–
–
–
–
–
–
–
Investments in
associated
undertakings
£000’s
Investments in
joint
ventures
£000’s
Available
for sale
investments
£000’s
Trade
investment
£000’s
1,944
6
425
–
(1,775)
(348)
–
252
3,743
–
65
–
(3,510)
(298)
–
–
20,145
–
–
(405)
(19,740)
–
–
–
14
–
–
–
–
–
(14)
–
Total
£000’s
252
308
(257)
303
Total
£000’s
25,846
6
490
(405)
(25,025)
(646)
(14)
252
Associated undertakings
The associated undertaking at September 30 2008 was Capital NET Limited whose principal activity is the provision of electronic
database services. The group has a 48.4% (2007: 48.4%) interest in Capital NET Limited.
Capital NET Limited does not have a coterminous year end with the group. The total assets, liabilities, revenues and profit after tax
generated by Capital NET Limited from its latest available audited accounts at December 31 are set out below.
Total assets
Total liabilities
Total revenues
Profit after tax
Associates
2008
£000’s
645
(222)
2,202
587
Associates
2007
£000’s
639
(273)
2,265
682
Trade investments
The group has a 50% interest in Capital DATA Limited. The ordinary share capital of Capital DATA is divided into 50 ‘A’ shares and
50 ‘B’ shares with the group owning the 50 ‘A’ shares. Under the terms of the Articles of Association of Capital DATA, the ‘A’
shares held by the group do not carry entitlement to any share of dividends or other distribution of profits of Capital DATA. The
group does not have the ability to exercise significant influence nor is it involved in the day to day running of Capital DATA. As
such the investment of £14,000 in Capital DATA is accounted for as a trade investment. As at September 30 2008 this balance
has been fully provided for. The group is entitled to 28.2% of Capital DATA’s revenues being £3,440,000 in the year
(2007: £3,141,000). At December 31 2007, based on its latest available audited accounts, Capital DATA Limited had £1,103,000
of issued share capital and reserves (December 31 2006: £787,000), and its profit for the year then ended was £1,808,000.
(December 31 2006: £581,000).
Annual Report and Financial Statements 2008
67
80766 notes 8/12/08 19:07 Page 68
Notes to the Accounts continued
13 Investments continued
Details of the company and its principal subsidiary undertakings included in these consolidated financial statements at
September 30 2008 are as follows:
Company
Proportion
held
Principal activity
and operation
Country of
incorporation
Euromoney Institutional Investor PLC
n/a
Publishing, training and events
Great Britain
Direct investments
Adhesion (UK) Limited
Coaltrans Conferences Limited
EII US, Inc
Euromoney Funding US Limited
Euromoney Hedging Limited
Euromoney Institutional Investor (Jersey) Limited
Euromoney Lending (UK) Limited
Euromoney Publications (Jersey) Limited
Glenprint Limited
HedgeFund Intelligence Limited
The Petroleum Economist Limited
Tipall Limited
World Link Publications Limited
Indirect investments
Adhesion et Associes SA
American Metal Market, LLC
AMM Marketwatch, LLC
Asia Business Forum (Singapore) Pte Limited
BCA Research, Inc
Benchmark Financials Limited
Business Conventions Internationale
Carlcroft Limited
CEIC Holdings Limited
EII Holdings, Inc.
Euromoney Buffalo 1 Limited
Euromoney Buffalo 2 Limited
Euromoney (Singapore) Pte Limited
Euromoney Funding (UK) Limited
Euromoney Institutional Investor (Ventures) Limited
Euromoney Jersey (Finance) Limited
Euromoney Publications (Overseas) Limited
Euromoney Training, Inc.
Euromoney US Holdings LP
Euromoney Yen Finance Limited
Euromoney, Inc.
GSCS Benchmarks Limited
Gulf Publishing Company
Information Management Network, Inc.
Institutional Investor, Inc.
Internet Securities, Inc.
Latin American Financial Publications, Inc.
Managed Account Reports, LLC
MB Marketwatch Limited
Metal Bulletin Billericay Limited
Metal Bulletin Canada, Inc.
Metal Bulletin Holdings Corporation
Metal Bulletin Investments Limited
Metal Bulletin Limited
MIS Training (UK) Limited
Sea.Net Limited
Storas Holdings Pte Limited
TelCap Limited
Total Derivatives Limited
Associates
Capital NET Limited
100%
95%
100%
100%
100%
100%†
100%
100%^
100%
100%
100%
100%
100%
100%
100%
100%
90%
100%
51%
100%
100%
100%
100%*
100%*
100%*
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
80%
100%
94%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
90%
70%
78%
Conventions
Conferences
Investment holding company
Investment holding company
Investment company
Publishing
Investment holding company
Non-trading
Publishing
Publishing
Publishing
Property holding
Non-trading
Conventions
Publishing
Information Services
Conferences
Information Services
Information Services
Conventions
Publishing
Information Services
Holding company
Investment holding company
Investment holding company
Training
Investment holding company
Investment holding company
Non-trading
Dormant
Training
Dormant
Investment company
Training
Publishing
Publishing
Conferences
Publishing
Information Services
Publishing
Non-trading
Information Services
Dormant
Investment holding company
Investment holding company
Investment holding company
Publishing
Training
Non-trading
Investment holding company
Publishing
Publishing
Great Britain
Great Britain
US
Great Britain
Great Britain
Jersey
Great Britain
Jersey
Great Britain
Great Britain
Great Britain
Great Britain
Great Britain
France
US
US
Singapore
Canada
Columbia
France
Great Britain
Hong Kong
US
Great Britain
Great Britain
Singapore
Great Britain
Great Britain
Jersey
Great Britain
US
US
Great Britain
US
Great Britain
US
US
US
US
US
US
Great Britain
Great Britain
Canada
US
Great Britain
Great Britain
Great Britain
Great Britain
Singapore
Great Britain
Great Britain
48%
Databases
Great Britain
All holdings are of ordinary shares.
In addition to the above, the group has a small number of branches outside the United Kingdom.
* 100% preference shares held in addition.
† Euromoney Institutional Investor (Jersey) Limited’s principal country of operation is Hong Kong.
^ Euromoney Publications (Jersey) Limited’s principal country of operation is Great Britain.
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14 Acquisitions
Purchase of new businesses
In May 2008, the group, through Internet Securities, Inc. (ISI), acquired a 51% interest in Benchmark Financials Limited (BPR) for
an initial consideration of $1,116,000 (£563,000). BPR is one of the leading providers of company financial data, analysis and
business credit ratings for Colombian companies, through its BPR Benchmark product, and will be integrated with ISI’s Emerging
Markets Information Service. ISI expects to acquire the remaining 49% stake in the business by December 2012. The total cost of
the transaction is subject to a maximum consideration of $8,000,000 (£4,000,000).
BPR contributed £185,000 to the group’s revenue, £56,000 to the group’s operating profit and £57,000 to the group’s profit
before tax for the period between the date of acquisition and September 30 2008.
Increase in equity holdings
In January 2008, the group exercised its option to purchase the second tranche (10.85%) of Total Derivatives Limited increasing
its equity holding from 67.45% to 78.3%. The equity was purchased for £2,611,000 resulting in additional provisional goodwill
of £1,937,000 and bringing total goodwill to £5,698,000.
In February 2008, the group purchased a further 15% of the equity share capital of TelCap Limited for a cash consideration
of £2,492,000 paid in March 2008 and resulting in additional provisional goodwill of £2,223,000 bringing total goodwill to
£5,140,000. The group’s equity shareholding in TelCap Limited increased to 70%.
Also in February 2008, the group purchased a further 0.5% of the equity share capital of ISI for a cash consideration of $1,779,000
(£894,000) resulting in additional provisional goodwill of £505,000 bringing the total goodwill to $9,233,000 (£5,180,000). The
group’s equity shareholding in ISI increased to 93.85%.
Book value
Intangible assets
Cash
Other assets
Liabilities
Total
Provisional fair value adjustments
Intangible assets
Deferred tax
Provisional fair value of net assets
Net assets acquired
%
£’000
Provisional goodwill
Consideration (satisfied by cash)
BPR
£000’s
Total
Derivatives
£000’s
–
7
79
(24)
62
468
(155)
313
375
51%
191
372
563
5,256
2,823
511
(4,339)
4,251
2,718
(761)
1,957
6,208
10.85%
674
1,937
2,611
TelCap
£000’s
1,530
337
910
(1,661)
1,116
939
(263)
676
1,792
15%
269
2,223
2,492
If the acquisitions in the table above had been completed on the first day of the financial year, group revenues for the period would
have been £191,000 higher and group profit attributable to equity holders of the parent would have been £87,000 higher.
Annual Report and Financial Statements 2008
69
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Notes to the Accounts continued
15 Disposals and discontinued operations
Disposals
In May 2008, the group sold its 15% interest in LAMP Technologies LLC, a provider of back office services to the hedge fund
industry, for £1,589,000 resulting in a profit on sale of £1,589,000. The sale does not result in a tax charge.
Discontinued operations
In December 2007 the group received a final payment of £220,000 from the sale of Energy Information Centre Limited, following
agreement of their completion accounts. There is no related tax charge. Energy Information Centre Limited was sold in April 2007
and was treated as a discontinued operation up to that date.
In May 2008 the group received a final payment of £25,000 from the sale of the business and assets of Systematics International
Limited, following agreement of their completion accounts. There is no related tax charge. The business and net assets of
Systematics International Limited was sold in May 2007 and was treated as a discontinued operation up to that date.
The group’s income statement includes the following results from discontinued operations:
Revenue
Expenses
Profit before tax
Tax
Profit after tax
Profit on disposal of discontinued operations
16 Trade and other receivables
Amounts falling due within one year
Trade receivables
Less: provision for impairment of trade receivables
Trade receivables – net of provision
Other debtors
Prepayments and accrued income
2008
£000’s
–
–
–
–
–
245
2008
£000’s
56,286
(6,593)
49,693
11,689
7,759
69,141
2007
£000’s
5,000
(4,115)
885
(385)
500
–
2007
£000’s
55,152
(4,287)
50,865
8,406
8,187
67,458
The average credit period on sales of goods and services is 30 days.
Trade receivables beyond 60 days over due are provided for based on estimated irrecoverable amounts from the sale of goods and
services, determined by reference to past default experience.
Credit terms for customers are determined in individual territories. Concentration of credit risk with respect to trade receivables is
limited due to the group’s customer base being large and diverse. Due to this, management believe there is no further credit risk
provision required in excess of the normal provision for doubtful receivables. There are no customers who represent more than 5%
of the total balance of trade receivables.
As at September 30 2008, trade receivables of £29,487,000 (2007: £27,992,000) were not yet due.
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16 Trade and other receivables continued
As of September 30 2008, trade receivables of £17,625,000 (2007: £22,846,000) were past due for which the group has not
provided as there has not been a significant change in credit quality and the amounts are still considered recoverable. These relate
to a number of independent customers for whom there is no recent history of default. The average age of these receivables is
71 days (2007: 85 days). The group does not hold any collateral over these balances. The ageing of these trade receivables is
as follows:
Past due less than a month
Past due more than a month but less than two months
Past due more than two months but less than three months
Past due more than three months
2008
£000’s
9,276
3,487
2,780
2,082
2007
£000’s
8,932
4,116
3,128
6,670
17,625
22,846
As at September 30 2008, trade receivables of £9,174,000 (2007: £4,314,000) were impaired and provided for. The amount of
the provision was £6,593,000 (2007: £4,287,000). It was assessed that a portion of the receivables is expected to be recovered.
The ageing of these receivables is as follows:
Past due less than a month
Past due more than a month but less than two months
Past due more than two months but less than three months
Past due more than three months
Movements on the group provision for impairment of trade receivables are as follows:
At October 1
Impairment losses recognised
Impairment losses reversed
Amounts written off as uncollectible
Fair values at acquisition
Balance at disposal of business
Exchange differences
At September 30
2008
£000’s
346
541
663
7,624
9,174
2008
£000’s
(4,287)
(3,662)
758
783
–
–
(185)
(6,593)
2007
£000’s
229
45
89
3,951
4,314
2007
£000’s
(3,849)
(2,525)
1,493
741
(315)
22
146
(4,287)
In determining the recoverability of a trade receivable, the group considers any change in the credit quality of the trade receivable
from the date credit was initially granted up to the reporting date. The concentration of credit risk is limited due to the customer
base being large and unrelated. Accordingly, the directors believe that there is no further credit provision required in excess of the
allowance for doubtful debts.
The allowance for doubtful debts does not include individually impaired trade receivables which have been placed under liquidation
as these trade receivables are written off directly to the income statement.
Annual Report and Financial Statements 2008
71
80766 notes 8/12/08 19:07 Page 72
Notes to the Accounts continued
17 Trade and other payables
Trade creditors
Amounts owed to DMGT group undertakings
Other creditors
2008
£000’s
5,489
3,271
21,859
30,619
2007
£000’s
3,999
4,142
20,850
28,991
The directors consider the carrying amount of trade and other payables approximates their fair values. Management have
reclassified certain provisions previously included within trade and other payables to provisions (note 20) to better reflect
the classification of the creditor. The provision consists of social security arising on share option liabilities and dilapidations on
leasehold properties.
18 Financial instruments
Derivative financial instruments
The derivative financial assets/(liabilities) at September 30 comprised:
Current
Interest rate swaps
Forward foreign exchange contracts – fair value through
profit and loss
Forward foreign exchange contracts – cash flow hedge
Forward foreign exchange contracts – net investment hedge
Non-current
Interest rate swaps
Forward foreign exchange contracts – cash flow hedge
2008
2007
Assets
£000’s
108
138
1,205
–
1,451
189
179
368
Liabilities
£000’s
(189)
(9,410)
(4,707)
(859)
(15,165)
(3,018)
(6,755)
(9,773)
1,819
(24,938)
Assets
£000’s
135
762
3,490
–
4,387
459
4,629
5,088
9,475
Liabilities
£000’s
(56)
–
(549)
–
(605)
(1,134)
(239)
(1,373)
(1,978)
The presentation of the group’s derivative financial instruments have been reclassified to better reflect the contractual maturity of
it’s derivative assets and liabilities. As a result the comparative split of derivative assets and liabilities have been restated.
Financial risk management objectives
Full details of the objectives, policies and strategies pursued by the group in relation to financial instruments are set out on
pages 51 and 52 of the accounting policies and page 55 of the key judgemental areas. In summary, the group’s tax and treasury
committee normally meets twice a year and is responsible for recommending policy to the board. The group’s treasury policies are
directed to giving greater certainty of future costs and revenues and ensuring that the group has adequate liquidity for working
capital and debt capacity for funding acquisitions.
The treasury department does not act as a profit centre, nor does it undertake any speculative trading activity and it operates within
policies and procedures approved by the board.
Interest rate swaps are used to manage the group’s exposure to fluctuations in interest rates on its floating rate borrowings. Further
details are set out in the interest rate risk section on pages 75 and 76.
Forward contracts are used to manage the group’s exposure to fluctuations in exchange rate movements. Further details are set
out in the foreign exchange rate risk section on page 74.
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18 Financial instruments continued
Capital risk management
The group manages its capital to ensure that entities in the group will be able to continue as a going concern while
maximising the return to stakeholders through the optimisation of the debt and equity balance. The group’s overall strategy
remains unchanged from 2007.
The capital structure of the group consists of debt, which includes the borrowings disclosed in note 19, cash and cash equivalents
and equity attributable to equity holders of the parent, comprising issued capital, reserves and retained earnings as disclosed in
notes 22 and 24 respectively.
Net debt to EBITDA* ratio
The group’s tax and treasury committee reviews the capital structure at least twice a year. As part of the debt commitments under
the loan facility provided by Daily Mail and General Trust plc (DMGT), the board has to ensure that net debt to EBITDA does not
exceed 5 times in 2008 and 4 times thereafter. The group expects to remain within these limits.
The net debt to EBITDA* ratio at September 30 is as follows:
Committed loan facility
Loan notes
Total debt
Cash and cash equivalents
Net debt
EBITDA*
Net debt to EBITDA* ratio
2008
£000’s
(184,594)
(7,579)
(192,173)
20,179
2007
£000’s
(213,559)
(11,796)
(225,355)
20,776
(171,994)
(204,579)
79,221
2.17
71,794
2.85
* EBITDA = earnings before interest, tax, depreciation, amortisation and also before exceptional items but after the share option expense.
Categories of financial instruments
The group’s financial assets and liabilities at September 30 are as follows:
Financial assets
Derivative instruments – fair value through profit and loss
Derivative instruments in designated hedge accounting relationships
Loans and receivables (including cash and cash equivalents)
Financial liabilities
Derivative instruments – fair value through profit and loss
Derivative instruments in designated hedge accounting relationships
Acquisition option commitments
Loans and payables (including overdrafts)
2008
£000’s
138
1,681
239,743
241,562
(9,410)
(15,528)
(29,848)
(429,612)
2007
£000’s
762
8,713
88,446
97,921
–
(1,978)
(33,335)
(303,705)
(484,398)
(339,018)
Market price risk
Market price risk is the possibility that changes in currency exchange rates, interest rates or commodity prices will adversely affect
the value of the group’s financial assets, liabilities or expected future cash flows. The group’s primary market risks are interest rate
fluctuations and exchange rate movements. 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. Derivatives used by the group for hedging a particular risk are not
specialised and are generally available from numerous sources. The fair values of interest rate swaps, currency options and forward
exchange contracts are set out in this note and represent the replacement costs calculated using the market rates of interest and
exchange at September 30 2008. The group has no other material market price risks.
Market risk exposures are measured using sensitivity analysis.
There has been no change to the group’s exposure to market risks or the manner in which it manages and measures the risks
during the year.
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Notes to the Accounts continued
18 Financial instruments continued
Foreign exchange rate risk
The group is exposed to foreign exchange risk in the form of transactions in foreign currencies entered into by group companies
and by the translation of the results of foreign subsidiaries into sterling for reporting purposes.
The group does not hedge the translation of the results of foreign subsidiaries. Consequently, fluctuations in the value of sterling
versus other currencies could materially affect the translation of these results in the consolidated financial statements. The group
endeavours to match foreign currency borrowings to investments in order to provide a natural hedge for the translation of the net
assets of overseas subsidiaries with the related foreign currency interest cost arising from these borrowings providing a partial
hedge against the translation of foreign currency profits.
The group’s principal foreign exchange exposure is to US Dollar. The carrying amounts of the group’s US Dollar denominated
monetary assets and monetary liabilities at the reporting date are as follows:
Liabilities
Assets
2008
£000’s
2007
£000’s
2008
£000’s
2007
£000’s
US Dollar
(319,647)
(251,450)
412,386
325,632
Approximately 60% of the group’s revenues are in US dollars. At a group level a series of US dollar forward contracts are put in
place up to 48 months forward partially to hedge its dollar revenues into sterling. The timing and value of these forward contracts
are based on managements estimate of its future US dollar revenues over a 48-month period and is regularly reviewed and revised
with any changes in estimates resulting in either additional forward contracts being taken out or existing contracts’ maturity dates
being moved forward or back. The group also has a significant operation in Canada whose revenues are mainly in US dollars. At
a group level a series of US dollar forward contracts is put in place up to 48 months forward to hedge the operation’s Canadian
cost base. In addition, each subsidiary is encouraged to invoice sales in its local functional currency where possible.
Forward exchange contracts are gross settled at maturity.
The following table details the group’s sensitivity to a 10% increase and decrease in sterling against US Dollar. A 10% sensitivity
has been determined by the board as the sensitivity rate appropriate when reporting an estimated foreign currency risk internally
and represents management’s assessment of a reasonably possible change in foreign exchange rates at the reporting date.
The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the
period end for a 10% change in foreign currency rates. The sensitivity analysis includes external loans as well as loans to foreign
operations within the group where the denomination of the loan is in a currency other than the currency of the lender or the
borrower. Where sterling strengthens 10% against the relevant currency a positive number below indicates an increase in profit
and equity. For a 10% weakening of sterling against the relevant currency, there would be an equal and opposite impact on the
profit and other equity, and the balances below would be negative.
Impact of 10% strengthening of sterling against US Dollar
Change in profit for the year in income statement
Change in equity
2008
£000’s
(1,652)
606
2007
£000’s
(1,217)
(15)
The increase in the change in the loss from the sensitivity analysis is due to the increase of US Dollar working capital. The
reduction in the loss in equity from the sensitivity analysis is due to the increase of net investment value in US Dollar companies
and derivatives.
In management’s opinion, the sensitivity analysis is unrepresentative of the inherent foreign exchange risk as the year-end exposure
does not reflect the exposure during the year. US Dollar denominated sales are seasonal with higher volumes in September than
the average for the financial year resulting in increased receivables at year-end.
Forward foreign exchange contracts
It is the policy of the group to enter into forward foreign exchange contracts to cover specific foreign currency payments and
receipts. These are entered into up to 48 months forward.
The group has designated certain forward contracts as a hedge of its net investment in US subsidiaries which have US Dollar as
their functional currency.
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18 Financial instruments continued
Cash Flow Hedges
Sell USD buy GBP
Less than a year
More than a year but less than
Average exchange rate
2008
2007
Foreign currency
2007
2008
USD 000’s USD 000’s
Contract value
2008
£000’s
2007
£000’s
Fair value
2008
£000’s
2007
£000’s
1.894
1.967
88,225
101,050
46,587
51,362
(2,961)
1,764
two years
1.895
1.866
61,150
49,225
32,267
26,375
(2,559)
2,215
More than two year but less than
three years
1.922
1.934
46,500
32,150
24,195
16,625
(2,365)
845
More than three years but less than
four years
1.847
1.961
34,000
26,500
18,408
13,513
(1,183)
506
Sell USD buy CAD†
Less than a year
More than a year but less than
1.032
1.093
36,500
24,900
19,872
13,439
(541)
1,217
two years
1.035
1.072
24,500
9,000
13,381
4,767
(268)
350
More than two year but less than
three years
1.036
1.087
10,500
6,500
5,739
3,489
(88)
299
More than three years but less than
four years
1.030
1.036
13,500
6,500
7,337
3,325
(113)
135
Net Investment hedge
Sell USD buy GBP
Less than a year
Fair value through profit and loss
Buy JPY
Less than a year
1.899
–
25,000
–
13,163
–
(859)
–
JPY 000’s
JPY 000’s
£000’s
£000’s
£000’s
£000’s
188.301* 110.750‡ 11,847,350 12,683,869
53,507
56,212
(9,272)
95
† Rate used for conversion from CAD to GBP is 1.8951 (2007: 2.0246)
* In 2008 this represents outstanding foreign currency contracts to buy JPY and GBP
‡ In 2007 this represents outstanding foreign currency contracts to buy JPY and sell USD. Rate used for conversion from USD to GBP is 1.7825 (2007: 2.0374)
As at September 30 2008, the aggregate amount of unrealised losses under forward foreign exchange contracts deferred in the
fair value reserve relating to future revenue transactions is £10,078,000 (2007: unrealised gains of £7,331,000). It is anticipated
that the transactions will take place over the next 48 months at which stage the amount deferred in equity will be released in the
income statement.
As at September 30 2008 there were no ineffective cashflow or net investment hedges recognised in the income statement.
Interest rate risks
The group’s borrowings are in both sterling and US dollars with the related interest tied to US and UK LIBOR. This results in the
group’s interest charge being at risk to fluctuations in interest rates. It is the group’s policy to hedge approximately 80% of its interest
exposure, converting its floating rate debt into fixed debt by means of interest rate swaps. The maturity dates are spread in order
to avoid interest rate basis risk and also to negate short-term changes in interest rates. The predictability of interest costs is deemed
to be more important than the possible opportunity cost foregone of achieving lower interest rates and this hedging strategy has
the effect of spreading the group’s exposure to fluctuations arising from changes in interest rates and hence protects the group’s
interest charge against sudden increases in rates but also prevents the group from benefitting immediately from falls in rates.
The group’s exposures to interest rates on financial assets and financial liabilities are detailed in the liquidity risk section on page 77.
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Notes to the Accounts continued
18 Financial instruments continued
Interest rate sensitivity analysis
The sensitivity analysis below has been determined based on the exposure to interest rates for both derivative and non-derivative
instruments at the balance sheet date. For floating rate liabilities, the analysis is prepared assuming the amount of liability
outstanding at the balance sheet date was outstanding for the whole year. A 100 basis point increase or decrease is used when
reporting interest rate risk internally to key management personnel and represents management’s assessment of a reasonably
possible change in interest rates at the reporting date.
If interest rates had been 100 basis points higher or lower and all other variables were held constant, the group’s:
● Profit for the year ended September 30 2008 would decrease or increase by £420,000 (2007: £365,000). This is mainly
attributable to the group’s exposure to interest rates on its variable rate borrowings; and
● Other equity reserves would decrease or increase by £3,617,000 (2007: £3,736,000) mainly as a result of the changes in the
fair value of interest rate swaps.
The group’s sensitivity to interest rates has not materially changed during the period mainly due to similar levels of fixed rates.
Interest rate swap contracts
Under interest rate swap contracts, the group agrees to exchange the difference between fixed and floating rate interest amounts
calculated on agreed notional principal amounts. Such contracts enable the group to mitigate the risk of changing interest rates
on the fair value of issued fixed rate debt and the cash flow exposures on the issued variable rate debt. The fair value of interest
rate swaps at the reporting date is determined by discounting the future cash flows using the discount curves at reporting date
and the credit risk inherent in the contract, and is disclosed below.
The average interest rate is based on the outstanding balances at the end of the financial year.
The following table details the notional principal amounts and remaining terms of interest rate swap contracts outstanding as at
the reporting date:
Cash flow hedges
US Dollar: Receive floating pay fixed
Average contracted
fixed interest rate
Notional
principal amount
Fair value
2008
%
4.08
4.81
4.77
–
2007
%
4.33
4.08
4.88
5.42
2008
£000’s
30,856
30,856
47,686
–
2007
£000’s
24,541
26,995
41,719
9,816
Average contracted
fixed interest rate
Notional
principal amount
2008
%
5.61
5.73
5.61
–
2007
%
5.94
5.61
5.65
6.20
2008
£000’s
14,000
15,000
22,000
–
2007
£000’s
14,000
14,000
32,000
5,000
2008
£000’s
(182)
(866)
(1,745)
–
2008
£000’s
100
23
(240)
–
Fair value
2007
£000’s
72
196
(405)
(312)
2007
£000’s
6
34
(41)
(146)
Less than 1 year
1 to 2 years
2 to 5 years
over 5 years
GBP: Receive floating pay fixed
Less than 1 year
1 to 2 years
2 to 5 years
over 5 years
The interest rate swaps settle on a quarterly basis. The floating rate on the interest rate swaps is LIBOR. The group will settle the
difference between the fixed and floating interest rate on a net basis. All interest rate swap contracts exchanging floating rate
interest amounts for fixed rate interest amounts are designated as cash flow hedges in order to reduce the group’s cash flow
exposure resulting from variable interest rates on borrowings. The interest rate swaps and the interest payments on the loan occur
simultaneously and the amount deferred in equity is recognised in the income statement over the period that the floating rate
interest payments on debt impact the income statement.
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18 Financial instruments continued
Credit Risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the group.
The group seeks to limit interest rate and foreign currency risks described above by the use of financial instruments and as a result
has a credit risk from the potential non-performance by the counterparties to these 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 risks are
controlled by monitoring the amounts outstanding, with and the credit quality of, these counterparties. For the group’s cash and
cash equivalents these are principally licensed commercial banks and investment banks with strong long-term credit ratings, and
for derivative financial instruments DMGT who have treasury policies in place which do not allow concentrations of risk with
individual counterparties and do not allow significant treasury exposures with counterparties which are rated lower than AAA.
The group also has credit risk with respect to trade and other receivables, prepayments and accrued income. The concentration of
credit risk from trade receivables is limited due to the group’s large and broad customer base. Trade receivable exposures are
managed locally in the business units where they arise. Allowance is made for bad and doubtful debts based on management’s
assessment of the risk of non-payment taking into account the ageing profile, experience and circumstance.
The maximum exposure to credit risk is represented by the carrying amount of each financial asset, including derivative financial
instruments, recorded in the balance sheet. The group does not have any significant credit risk exposure to any single counterparty
or any group of counterparties having similar characteristics. The group defines counterparties as having similar characteristics if
they are related entities. Concentration of credit risk did not exceed 5% of gross monetary assets at any time during the year.
Liquidity risk
The group has significant intercompany borrowings and is an approved borrower under a DMGT, £300 million revolving multi-currency
facility. This facility requires the group to meet certain covenants based on net debt and profits adjusted for certain non-cash items.
Failure to do so would result in the group being in breach of the facility potentially resulting in the facility being withdrawn or
impediment of management decision making by the lender. Management regularly monitor the covenants and prepare detailed debt
forecasts to ensure that sufficient headroom is available and that the covenants are not close or potentially close to breach. The group’s
strategy is to use excess operating cash to pay down its debt. The group has a cash conversion rate (the percentage by which cash
generated by operations covers operating profit) of over 100%, due to much of its subscription, conference and training revenue being
paid in advance. This facility is due to expire in August 2009, however the directors have, subsequent to the year end, agreed to sign
a new replacement facility of up to £250 million offered by DMGT. The terms of the new facility are similar to the existing facility.
Under the DMGT facility, at September 30 2008, the group has £115.4 million of undrawn but committed facilities available to
draw upon if required. This is more than sufficient for the group to meet expected and unexpected short-term working capital
requirements. However, given the level of uncertainty in the global economy and financial markets, there is a risk that the undrawn
portion of the facility may be unavailable or withdrawn if DMGT experience funding difficulties themselves, for example if one of
DMGT’s lenders was to be unable to fulfil its lending commitments. It is, however, unlikely that this would impact the group as
DMGT have a wide range of funding sources, other than bank debt, available to them. In addition, if DMGT were unable to fulfil
its commitment to the group the directors are confident that the group is in a position that would enable it to secure adequate
facilities outside of DMGT, albeit at an increased cost to the business due to high interest charges imposed given the crisis in the
credit markets. The following table details the group’s remaining contractual maturity for its non-derivative financial liabilities,
mainly variable borrowings.
This table has been drawn up based on the undiscounted contractual cash flows of the financial liabilities including both interest
and principal cash flows. To the extent that the interest rates are floating, the undiscounted amount is derived from interest rate
curves at September 30 2008. The contractual maturity is based on the earliest date on which the group may be required to settle.
Weighted average
effective
interest rate
%
2008
Variable rate borrowings
Acquisition option commitments
Non interest bearing liabilities (Trade creditors and accruals)
2007
Variable rate borrowings
Acquisition option commitments
Non interest bearing liabilities (Trade creditors and accruals)
5.79
–
–
6.57
–
–
Less than
one year
£000’s
348,977
22,499
80,635
17,731
14,969
72,415
1 - 3 years
£000’s
–
8,128
–
213,559
19,960
–
Total
£000’s
348,977
30,627
80,635
231,290
34,929
72,415
At September 30 2008, £159,029,000 (2007: £130,559,000) of borrowings were designated in US dollars with the remainder in
sterling. The average rate of interest paid on the debt was 5.90% (2007: 6.09%).
Annual Report and Financial Statements 2008
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Notes to the Accounts continued
18 Financial instruments continued
The following tables detail the group’s remaining contractual maturity for its non-derivative financial assets, mainly medium term
deposit for amounts on loans owed by DMGT group undertakings and minority interest. This table has been drawn up based on
the undiscounted contractual maturities of the financial assets including interest that will be earned on those assets except where
the group anticipate that the cash flow will occur in a different period.
2008
Variable interest rate instruments
Fixed interest rate instruments
Non interest bearing assets
2007
Variable interest rate instruments
Fixed interest rate instruments
Non interest bearing assets
Weighted average
effective
interest rate
%
1.60
1.87
–
2.48
4.22
–
Less than
one year
£000’s
175,936
1,047
62,760
239,743
25,266
1,445
61,735
88,446
1 - 3 years
£000’s
–
–
–
–
–
–
–
–
Total
£000’s
175,936
1,047
62,760
239,743
25,266
1,445
61,735
88,446
The following table details the group’s liquidity analysis for its derivative financial instruments. The table has been drawn up based
on the undiscounted net cash inflows/(outflows) on the derivative instrument that settle on a net basis and the undiscounted gross
inflows and (outflows) on those derivatives that require gross settlement. When the amount payable or receivable is not fixed, the
amount disclosed has been determined by reference to the projected interest rates as illustrated by the yield curves existing at the
reporting date.
Less than
1 month
£000’s
1-3
months
£000’s
3 months
to 1 year
£000’s
1-5 years
£000’s
5+ years
£000’s
Total
£000’s
2008
Net settled
Interest rate swaps
Foreign exchange forward contracts
Gross settled
Foreign exchange forward contracts
–
(9,272)
(62)
–
(279)
–
(843)
–
inflows
8,272
20,154
76,112
104,150
Foreign exchange forward contracts
outflows
(8,583)
(21,067)
(79,264)
(109,498)
(9,583)
(975)
(3,431)
(6,191)
2007
Net settled
Interest rate swaps
Foreign exchange forward contracts
Foreign currency options
Gross settled
Foreign exchange forward contracts
–
–
(667)
255
–
–
208
–
–
(308)
2,083
–
inflows
4,784
10,862
59,233
75,639
Foreign exchange forward contracts
outflows
(4,564)
(10,197)
(57,177)
(71,249)
–
–
–
–
–
(21)
–
–
–
–
(1,184)
(9,272)
208,688
(218,412)
(20,180)
134
2,083
(667)
150,518
(143,187)
(447)
920
2,264
6,165
(21)
8,881
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18 Financial instruments continued
Fair value of financial instruments
The fair values of non-derivative financial assets and financial liabilities are determined as follows:
● The fair value of financial assets and financial liabilities with standard terms and conditions and traded on active liquid markets
is determined with reference to quoted market prices;
● The fair value of other financial assets and financial liabilities (excluding derivative instruments) is determined in accordance
with generally accepted pricing models based on discounted cash flow analysis using prices from observable current market
transactions and dealer quotes for similar instruments; and
● The directors consider that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the
financial statements approximate their fair values.
The fair values of derivative financial assets and financial liabilities are determined as follows:
● Foreign currency forward contracts are measured using quoted forward exchange rates and yield curves derived from quoted
interest rates matching maturities of the contracts.
● Interest rate swaps are measured at the present value of future cash flows estimated and discounted based on the applicable
yield curves derived from quoted interest rates.
19 Bank overdrafts and loans
Bank overdrafts
Committed loan facility – current liability
Committed loan facility – non-current liability
Loan notes
2008
£000’s
1,032
184,594
2007
£000’s
5,935
–
–
213,559
7,579
11,796
Committed loan facility
The group has a dedicated £300 million three-year multi-currency facility with a subsidiary of DMGT. Interest is payable on this
facility at a variable rate of between 0.4% and 1.6% above LIBOR dependant on the ratio of net debt to EBITDA. The facility expires
in August 2009 and the directors have, subsequent to the year end, agreed to sign a new replacement facility of up to
£250 million offered by DMGT. The terms of the new facility are similar to the existing facility with interest payable at a variable
rate of between 1.25% and 3.0% above LIBOR dependant on the group’s net debt to EBITDA covenant. As at September 30 2008
there were £115,406,000 (2007: £86,441,000) of other uncommitted undrawn facilities directly available to the group.
Loan notes
Loan notes for £12,711,000 were issued in October and November 2006 to fund the purchase of Metal Bulletin plc. Interest is
payable on these loan notes at a variable rate of 0.75% below LIBOR payable in June and December. Loan notes can be redeemed
at the option of the loan note holder twice a year on the interest payment dates above. At least 20 business days’ written notice
prior to the redemption date is required. During the year ended September 30 2008 £4,324,000 (2007: £915,000) of these loan
notes were redeemed reducing the debt to £7,579,000 (2007: £11,796,000).
Annual Report and Financial Statements 2008
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Notes to the Accounts continued
20 Provisions
At October 1 2007
Provision
Used in the year
Released during the year
Exchange differences
At September 30 2008
Maturity profile of provisions
Within 1 year (included in current liabilities)
Between 1 and 2 years (included in non-current liabilities)
Between 2 and 5 years (included in non-current liabilities)
Onerous lease
provision
£000’s
Other
provisions
£000’s
1,852
–
(811)
(523)
115
633
4,155
583
(668)
–
–
4,070
2008
£000’s
1,198
1,198
2,307
4,703
Group
total
£000’s
6,007
583
(1,479)
(523)
115
4,703
2007
£000’s
2,684
854
2,469
6,007
Onerous lease provision
The onerous lease provision relates to certain buildings within the property portfolio which either at acquisition were rented at
non-market rates, or are no longer occupied by the group.
Other provisions
Management have reclassified certain provisions previously included within trade and other payables to provisions to better reflect
the classification of the creditor. The provision consists of social security arising on share option liabilities and dilapidations on
leasehold properties.
21 Deferred taxation
The net deferred tax liability at September 30 2008 comprised:
2007
£000’s
Capitalised goodwill and intangibles
(42,313)
Tax deductible goodwill amortisation 10,317
1,317
US and overseas tax losses
(1,778)
Financial instruments
Other short-term temporary differences 12,315
Income
statement
£000’s
9,601
(2,158)
2,223
188
1,316
Deferred tax
(20,142)
11,170
Comprising:
Deferred tax assets
Deferred tax liabilities
11,508
(31,650)
(20,142)
Equity
£000’s
–
–
–
4,546
(4,280)
266
Acquisitions
and disposals
£000’s
Exchange
differences
£000’s
(1,179)
–
–
–
–
(1,179)
(3,337)
1,246
188
–
360
2008
£000’s
(37,228)
9,405
3,728
2,956
9,711
(1,543)
(11,428)
16,459
(27,887)
(11,428)
At the balance sheet date, the group has unused tax losses available for offset against future profits. At September 30 2008 a
deferred tax asset of £3,728,000 (2007: £1,317,000) has been recognised. The US losses can be carried forward for a period of
20 years from the date they arose. The losses have expiry dates up to January 2026.
At the balance sheet date, a net deferred tax asset of £12,731,000 (2007: £10,190,000) has been recognised in respect of US tax
deductible goodwill amortisation and other overseas short-term timing differences. The directors are of the opinion that based on
recent and forecast trading, it is probable that the level of profits in the future years are sufficient to enable the asset to be recovered.
A deferred tax asset of £1,842,000 has not been recognised in respect of overseas capital losses arising on the sale of the group’s
15% interest in LAMP Technologies LLC. (2007: £5,404,000) as the directors do not believe there is sufficient evidence that it is
probable they will be recovered. The unrecognised deferred tax asset in 2007 has been recognised in full in 2008.
At the balance sheet date, the aggregate amount of temporary differences with undistributed earnings of subsidiaries for which
deferred tax liabilities have not been recognised was £121,912,000 (2007: £86,062,000). No liability has been recognised in
respect of these differences because the group is in a position to control the timing of the reversal of the temporary differences
and it is probable that such differences will not reverse in the foreseeable future.
80
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80766 notes 8/12/08 19:07 Page 81
22 Called up share capital
Authorised
137,365,200 ordinary shares of 0.25p each
(2007: 137,365,200 ordinary shares of 0.25p each)
Allotted, called up and fully paid
105,300,896 ordinary shares of 0.25p each
(2007: 102,972,478 ordinary shares of 0.25p each)
2008
£000’s
2007
£000’s
343
343
263
258
During the year, 2,328,418 ordinary shares of 0.25p each (2007: 107,049 ordinary shares) with an aggregate nominal value of
£5,821 (2007: £268) were issued for a cash consideration of £71,680 (2007: £428,076) following the exercise of share options
granted under the company’s share option schemes.
23 Share-based payments
Equity settled options
The following options are outstanding at September 30 and are options to subscribe for new ordinary shares of 0.25p each in
the company:
Number of ordinary shares under option: 2008
Granted
during
year
Exercised
during
year
Lapsed
during
year
Option
price
(£)
2008
Period during which option may be exercised:
Before January 6 2008
Before January 28 2009
Before February 10 2009
Before June 24 2009
Before January 4 2010
Before March 1 2011
Before January 22 2012
Before December 3 2012
Before January 27 2014
Before July 31 2007
Between February 1 2008 and July 31 2008
Between February 1 2009 and July 31 2009
Between January 5 2010 and July 4 2010
Between December 17 2010 and June 16 2011
Before September 30 2014
Before September 30 2014
2007
17,984
150,000
160,000
540,000
119,648
209,000
116,000
376,000
335,000
1,138
26,143
77,250
125,563
–
2,500,000
–
–
–
–
–
–
–
–
–
–
–
–
–
119,410
–
–
–
–
–
–
–
–
–
(1,138)
(16,607)
–
(1,453)
–
– (2,309,220)
–
(17,984)
–
(10,000)
140,000
–
160,000
–
540,000
(8,000)
111,648
(5,000)
204,000
(6,000)
110,000
(20,000)
356,000
(16,000)
319,000
–
–
(8,415)
1,121
(6,381)
70,869
(53,972)
70,138
(27,098)
92,312
–
190,780
– 2,500,000
3.96
4.19
3.96
4.31
5.63
5.38
3.35
2.59
4.19
3.24
3.38
3.69
4.19
3.18
0.0025
0.0025
– 2,500,000 ‡
Weighted
average
market
price at
date of
exercise
(£)
–
–
–
–
–
–
–
–
–
5.10
3.98
–
5.10
–
3.85
–
4,753,726 2,619,410 (2,328,418)
(178,850) 4,865,868
The options outstanding at September 30 2008 had a weighted average exercise price of £1.80 and a weighted average remaining
contractual life of 4.37 years.
‡ Options granted relate to those that are likely to be issued under the second tranche of the CAP which vest on February 14 2009, three months following the announcement
of the company’s results. The number of options granted is provisional and will primarily require a true-up to reflect adjustments of the individual businesses profits during
the period to December 31 2008 as required by the remuneration committee. As such the actual number of options granted could vary from that disclosed.
Annual Report and Financial Statements 2008
81
80766 notes 8/12/08 19:07 Page 82
Notes to the Accounts continued
23 Share-based payments continued
Number of ordinary shares under option: 2007
Period during which option may be exercised:
Before February 6 2007
Before January 6 2008
Before January 28 2009
Before February 10 2009
Before June 24 2009
Before January 4 2010
Before March 1 2011
Before January 22 2012
Before December 4 2005 and December 3 2012
Before January 28 2007 and January 27 2014
Before February 1 2007 and July 31 2007
Between February 1 2008 and July 31 2008
Between February 1 2009 and July 31 2009
Between January 5 2010 and July 4 2010
Before September 30 2014
Granted
during
year
Exercised
during
year
Lapsed
during
year
2006
2007
–
20,448
–
17,984
–
190,000
–
160,000
–
540,000
–
156,000
–
257,000
–
138,000
–
428,000
–
394,000
–
29,999
–
32,954
–
83,580
–
140,578
– 2,500,000
(20,448)
–
(32,000)
–
–
(18,352)
–
(8,000)
–
–
(26,469)
–
(1,685)
(95)
–
–
–
(8,000)
–
–
(18,000)
(48,000)
(14,000)
(52,000)
(59,000)
(2,392)
(6,811)
(4,645)
(14,920)
–
17,984
150,000
160,000
540,000
119,648
209,000
116,000
376,000
335,000
1,138
26,143
77,250
125,563
– 2,500,000
2,447,965 2,640,578
(107,049)
(227,768) 4,753,726
Weighted
average
market
price at
date of
exercise
(£)
5.82
–
5.66
–
–
6.45
–
6.04
–
–
5.90
–
5.42
5.20
–
Option
price
(£)
3.55
3.96
4.19
3.96
4.31
5.63
5.38
3.35
2.59
4.19
3.24
3.38
3.69
4.19
0.0025
The options outstanding at September 30 2007 had a weighted average exercise price of £1.92 and a weighted average remaining
contractual life of 5.25 years.
Capital Appreciation Plan (CAP)
The CAP executive share option scheme was approved by shareholders on February 1 2005. Each of the CAP awards comprises
an option to subscribe for ordinary shares of 0.25p each in the company for an exercise price of 0.25p per ordinary share.
The awards become exercisable on satisfaction of certain performance conditions and lapse to the extent unexercised on
September 30 2014. The initial performance condition (increased during 2007 to reflect the acquisition of Metal Bulletin) was
achieved in the financial year 2007 and the option pool (a maximum of 7.5 million shares) was allocated between the holders of
outstanding awards. One third of the awards vested on February 14 2008. The primary performance target was achieved again in
2008 and the second tranche of options will vest in February 2009 subject to the businesses also achieving the secondary
performance criteria (page 32). The final tranche will vest in 2010, but only if the primary and secondary performance conditions
are again met, otherwise vesting is deferred until both the profit target of £57 million achieved in 2007 is achieved again, and the
profits of the individual participants businesses are at least 75% of that achieved in 2007 but no later than by reference to the
year ending September 30 2012.
Share Option Schemes
The company has 12 share option schemes for which an IFRS2 ‘Share based payments’ charge has been recognised. Details of
these schemes are set out in the Directors Remuneration report on pages 32 to 33. The fair value per option granted and the
assumptions used in the calculation are shown below:
The executive and Save as You Earn Options were valued using the Black-Scholes option-pricing model. Expected volatility was
determined by calculating the historical volatility of the group’s share price over a period of 13 years. The executive options’ fair
values have been discounted at a rate of 10% to reflect their performance conditions. The expected term of the option used in
the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and
behavioural considerations. The expense recognised in the year in respect of these options was £281,000 (2007: £202,000).
82
Euromoney Institutional Investor PLC
80766 notes 8/12/08 19:07 Page 83
23 Share-based payments continued
Executive Options
SAYE
Date of grant
Market value at date of grant (p)
Option price (p)
Number of share options
outstanding
Option life (years)
Expected term of option
(grant to exercise (years))
Exercise price (p)
Risk-free rate
Dividend yield
Volatility
Fair value per option (£)
December 4
2002
January 28
2004
259
259
419
419
356,000
10
319,000
10
5.5
259
4.10%
3.93%
30%
0.52
5.5
419
4.10%
3.93%
30%
0.72
6
January 4
2005
7
February 1
2006
8
January 5
2007
9
December 17
2007
423
338
1,121
3.5
3
338
4.80%
3.35%
30%
1.22
461
369
70,869
3.5
3
369
4.80%
3.35%
30%
1.24
524
419
70,138
3.5
3
419
4.75%
3.35%
30%
1.51
397
318
92,312
3.5
3
318
4.25%
3.35%
30%
1.13
The CAP options were valued using a fair value model that adjusted the share price at the date of grant for the net present value
of expected future dividend streams up to the date of expected exercise. Under IFRS 2, Internet Securities, Inc. options are classified
as cash settled options. As such their related fair value equates to the fair value at the balance sheet date. For both these option
schemes, the expected term of the option used in the models has been adjusted, based on management’s best estimate, for the
effects of non-transferability, exercise restrictions and behavioural considerations. The share based expense recognised in the year
for the CAP options was £4,658,000 (2007: £9,629,000), and for Internet Securities, Inc. options was £422,000 (2007: £345,000).
Date of grant
Market value at date of grant (p)
Option price (p)
Number of share options
outstanding
Option life (years)
Expected term of option
(grant to exercise (years))
Exercise price (p)
Risk-free rate
Dividend growth
Fair value per option (£)
Internet Securities, Inc. Cash Settled Options
Tranche 1
June 20
2005
401
0.25
CAP
Tranche 2
June 20
2005
401
0.25
Tranche 3
June 20
2005
401
0.25
February 2
2004
n/a
n/a
190,780
10
2,500,000
10
2,500,000
10
47,539
10
May 11
2005
n/a
n/a
1,845
10
3.28
0.25
5.0%
8.44%
3.28
4.53
0.25
5.0%
8.44%
3.02
5.53
0.25
5.0%
8.44%
2.82
6.5
n/a
n/a
n/a
US$18.57
5.5
n/a
n/a
n/a
US$18.57
February 28
2006
n/a
n/a
38,501
10
4.5
n/a
n/a
n/a
US$18.57
Annual Report and Financial Statements 2008
83
80766 notes 11/12/08 14:43 Page 84
Notes to the Accounts continued
24 Statement of movement on reserves
Share
premium
account
£000’s
38,081
–
–
–
–
–
–
–
–
–
–
–
–
–
428
–
–
–
64,981
–
–
–
–
–
–
–
–
–
–
–
–
–
38,509
–
64,981
–
–
–
–
–
–
–
–
–
–
–
66
–
–
–
–
–
–
–
–
–
–
–
–
–
At September 30 2006
Retained profit for the year
Premium on shares issued for
acquisition of Metal Bulletin plc
Recognition of acquisition
option commitments
Exercise of acquisition option
commitments
Exchange differences arising on
translation of net investments in
overseas subsidiary undertakings
Translation reserves recycled to the
income statement on disposals
Net exchange difference on foreign
currency loans
Change in fair value of available
for sale investments
Change in fair value of hedges
Transfer of gain on cash flow
hedges from fair value reserves to
income statement
Change in fair value of intangibles
Credit for share-based payments
Dividends paid
Change in actuarial assumptions in
defined benefit scheme
Exercise of share options
Tax on items going through reserves
At September 30 2007
Retained profit for the year
Recognition of acquisition option
commitments
Exercise of acquisition option
commitments
Exchange differences arising on
translation of net investments in
overseas subsidiary undertakings
Net exchange difference on foreign
currency loans
Change in fair value of hedges
Transfer of gain on cash flow
hedges from fair value reserves to
income statement
Change in fair value of intangibles
Credit for share-based payments
Dividends paid
Change in actuarial assumptions in
defined benefit scheme
Exercise of share options
Tax on items going through reserves
Capital
Other redemption
reserve
£000’s
reserve
£000’s
Liability
for share
based
payments
£000’s
Own
shares
£000’s
Fair value Translation
reserve
£000’s
reserve
£000’s
Retained
earnings
£000’s
Total
£000’s
8
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
8
–
–
–
–
–
–
–
–
–
–
–
–
–
8
(74)
–
5,907
–
6,618
–
(244)
–
(78,642)
31,822
(28,346)
31,822
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
9,830
–
–
–
–
–
–
–
–
–
5,886
(405)
6,392
(2,699)
2,384
–
–
–
–
–
–
–
–
–
64,981
(18,533)
(18,533)
7,248
7,248
(15,001)
(90)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(15,001)
(90)
5,886
(405)
6,392
–
–
–
(18,110)
(2,699)
2,384
9,830
(18,110)
4,158
–
2,082
4,158
428
2,082
(74)
–
15,737
–
18,176
–
(15,335)
–
(69,975)
43,719
52,027
43,719
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4,939
–
–
–
–
–
–
–
(19,115)
(17,455)
(2,877)
1,692
–
–
–
–
–
–
–
(500)
(500)
6,919
6,919
32,448
–
–
–
–
–
–
–
–
–
–
–
–
32,448
(19,115)
(17,455)
–
–
–
(19,950)
(2,877)
1,692
4,939
(19,950)
1,589
–
1,282
1,589
66
1,282
(74)
20,676
(19,579)
17,113
(36,916)
84,784
At September 30 2008
38,575
64,981
The investment in own shares is held by the Euromoney Employees’ Share Ownership Trust (ESOT). At September 30 2008 the
ESOT held 58,976 shares (2007: 58,976 shares) carried at a historic cost of £1.25 per share with a market value of £192,000
(2007: £312,000). The trust waived the rights to receive dividends. Interest and administrative costs are charged to the profit and
loss account of the ESOT as incurred.
84
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25 Acquisition option commitments
The group is party to a number of put options over the remaining minority interests in some of its subsidiaries. IAS 39 ‘Financial
Instruments’ requires the recognition of acquisition liabilities. The group regularly performs a review of the underlying businesses
with option commitments and in 2008 the review resulted in a net increase in the fair value of the group’s option commitments
of £1,730,000 (2007: decrease of £3,885,000). This increase is reported as finance expense in the income statement. New option
commitments of £500,000 have been recognised relating to subsidiaries acquired in the year and existing options have been
exercised totalling £6,919,000. As at September 30 2008, the discounted present value of the remaining put option commitments
is £29,848,000 (2007: £33,335,000). These discounts are unwound as a notional interest charge to the income statement.
26 Commitments
At September 30 the group has committed to make the following payments in respect of operating leases on land and buildings:
Within 1 year
Between 2 and 5 years
After 5 years
2008
£000’s
5,623
18,519
15,619
39,761
2007
£000’s
4,764
16,213
19,385
40,362
The group’s operating leases do not include any significant leasing terms or conditions.
At September 30 the group had contracted with tenants to receive the following payments in respect of operating leases on land
and buildings:
1
Within
year
Between 2 and 5 years
After 5 years
2008
£000’s
364
1,480
1,937
3,781
2007
£000’s
–
–
–
–
27 Retirement benefit schemes
Defined contribution schemes
The group operates the following defined contribution schemes: Euromoney PensionSaver, Euromoney Pension Plan, the Metal
Bulletin Group Personal Pension Plan in the UK and the 401(k) savings and investment plan in the US. It also participates in the
Harmsworth Pension Scheme, a defined benefit scheme which is operated by Daily Mail and General Trust plc (DMGT) but is
accounted for in Euromoney Institutional Investor PLC as a defined contribution scheme.
The pension charge in respect of defined contribution schemes for the year ended September 30 comprised:
Euromoney Pension Plan
Metal Bulletin Group Personal Pension Plan
Private schemes
Harmsworth Pension Scheme
2008
£000’s
575
39
801
203
2007
£000’s
460
63
596
184
1,618
1,303
Euromoney PensionSaver and Euromoney Pension Plan
Euromoney PensionSaver was launched on October 1 2008 to replace the Euromoney Pension Plan as the principal pension
arrangement offered to employees of the group. Under both plans, contributions are paid by the employer and employees.
However, Euromoney PensionSaver is a group personal pension arrangement rather than the trust-based arrangement used by the
Euromoney Pension Plan. The Euromoney Pension Plan is a part of the DMGT Pension Trust, an umbrella trust under which DMGT
UK trust-based defined contribution plans are held. Insured death benefits previously held under this trust have been transferred
to a new trust-based arrangement specifically for life assurance purposes.
Annual Report and Financial Statements 2008
85
80766 notes 8/12/08 19:07 Page 86
Notes to the Accounts continued
27 Retirement benefit schemes continued
Active members of the Euromoney Pension Plan have been given the opportunity to join and transfer their assets to Euromoney
PensionSaver. Following these transfers, all assets remaining in the Euromoney Pension Plan will be transferred out before the Plan
is wound up.
Assets of both plans are invested in funds selected by members and held independently from the company’s finances. The
investment and administration of both plans is undertaken by Fidelity Pension Management.
Metal Bulletin Group Personal Pension Plan
The Metal Bulletin Group Personal Pension Plan is a defined contribution arrangement under which contributions are paid by the
employer and employees. The scheme is closed to new members.
The plan is contracted-in to the State Second Pension and its assets are invested under trust in funds selected by members and held
independently from the company’s finances. The investment and administration of the plan is undertaken by Skandia Life Group.
Private schemes
Institutional Investor, Inc. contributes to a 401(k) savings and investment plan for its employees which is administered by an
independent investment provider. Employees are able to contribute up to 15% of salary with the company matching up to 50%
of the employee contributions, up to 5% of salary.
Stakeholder pensions
The company provides access to a stakeholder pension plan for relevant employees who are not eligible for other pension schemes
operated by the group.
Harmsworth Pension Scheme
The Harmsworth Pension Scheme is a defined benefit scheme operated by DMGT providing service-related benefits based on final
pensionable salary. The assets of the scheme are held independently from the company’s finances and are administered by a trustee
company. The scheme is no longer offered to new employees of the company.
The contributions payable to the scheme are determined by the trustee company after taking advice from an independent qualified
actuary, and following agreement with the company. The most recent actuarial valuation of the scheme, upon which the current
contributions are based, was carried out as at March 31 2007 using the projected unit credit method.
On November 30 2007 the members, assets and liabilities of the Mail Newspapers Pension Scheme (MNPS) were merged into the
Harmsworth Pension Scheme. As a condition of the merger, DMGT, as the principal employer, has provided letters of credit for
£40 million to cover the period to December 1 2011. The trustee would have a call on this contingent asset in the event that the
newly combined scheme begins to be wound up before December 1 2011 and the assets of the scheme are insufficient to provide
benefits in full for all members.
The funding strategy agreed with the trustee made allowance for assumed future investment returns on the scheme’s assets of
3.3% p.a. above price inflation, compared with the real return of some 2.6% p.a. implicit within the calculation of the Technical
Provisions (i.e. the value of the scheme’s benefit liabilities). DMGT agreed with the trustee that this margin would be covered by a
contingent asset and DMGT has put in place a letter of credit (to be updated annually) of an amount sufficient to cover any
potential shortfall in this additional investment return arising prior to the next triennial valuation. As at September 28 2008 the
letter of credit had a value of £21.8 million (2007: £nil). In addition the company is paying annual cash contributions of 18% of
members’ scheme salaries (2007: 18%).
Other key financial assumptions adopted were as follows:
Long-term assumed rate of:
Price inflation
Salary increases
Pension increases (on excess over guaranteed minimum pension)
Discount rate for accrued liabilities
- Pre-retirement
- Post-retirement
2008
2007
3.0% p.a.
4.3% p.a.
3.0% p.a.
6.4% p.a.
4.8% p.a.
2.75% p.a.
4.5% p.a.
2.75% p.a.
6.6% p.a.
5.0% p.a.
The financial assumptions shown above used in the most recent actuarial valuation were selected to provide a basis for funding
the schemes and are not intended to reflect the company’s experience or policy regarding pay in any one financial year.
The valuation of the scheme showed that the combined accumulated assets of the scheme as at March 31 2007 represented 99%
of the scheme’s Technical Provisions in respect of past service benefits.
86
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27 Retirement benefit schemes continued
Members are able to make additional voluntary contributions (AVCs) into unit-linked funds held within each scheme. No benefit
obligation arises to the DMGT, or the company, from these AVCs and the related unit-linked AVC assets have been excluded from
the valuation of assets and liabilities reported below.
The group’s pension charge for the Harmsworth Pension Scheme for the year ended September 30 2008 was £203,000
(2007: £184,000).
Included in debtors in 2007 is an advance payment into the pension schemes amounting to £143,000. In accordance with the
provisions of the contribution schedules for the schemes, the company has not made an advance payment in 2008 but will be
making regular monthly contribution payments from October 2008.
The group is unable to identify its share of the underlying assets and liabilities in the Harmsworth Pension Scheme. The scheme is
operated on an aggregate basis with no segregation of the assets to individual participating employers and, therefore, the same
contribution rate is charged to all participating employers (i.e. the contribution rate charged to each employer is affected by the
experience of the schemes as a whole). The scheme is therefore accounted for as a defined contribution scheme by the company.
This means that the pension charge reported in these financial statements is the same as the cash contributions due in the period.
The ultimate parent company, DMGT, is required to account for the Harmsworth Pension Scheme under IAS 19 ‘Employee
Benefits’. The IAS 19 disclosures in the Annual Report and Accounts of DMGT have been based on calculations performed as part
of the work being carried out for the formal valuation of the scheme as at March 31 2007, and adjusted to September 30 2008
by the actuary. The calculations are adjusted to allow for the assumptions and actuarial methodology required by IAS 19. These
showed that the market value of the scheme’s assets was £1,322.5 million (2007: £650.0 million) and that the actuarial value
of these assets represented 99% (2007: 106%) of the benefits that had accrued to members (also calculated in accordance
with IAS 19).
Defined benefit scheme
The company operates the Metal Bulletin plc Pension Scheme (closed to new members), a defined benefit scheme.
Metal Bulletin Pension Scheme
The acquisition by the group of Metal Bulletin plc on October 6 2006 included a defined benefit obligation in respect of the Metal Bulletin
plc Pension Scheme (MBPS). As a result, at that date the company acquired a defined benefit obligation of £21.7 million along with a fair
value of pension scheme assets of £17.7 million resulting in a net pension liability of £4.0 million. The impact of the acquisition of MBPS
on the balance sheet disclosures, and the subsequent pension costs arising, are included in the figures reported below.
The MBPS is a defined benefit scheme providing service-related benefits based on final pensionable salary. The assets of the scheme
are held independently from the company’s finances, being invested with the Norwich Union Life Insurance Society, Schroder
Investment Management Ltd, and certain other specific investments managed directly by the Trustees. Contributions to the scheme
are charged to the income statement so as to spread the cost of pensions over employees’ working lives with the group. The
contributions are determined by an independent qualified actuary on the basis of triennial valuations using the attained age method.
The most recent actuarial valuation of the scheme, upon which the current contributions are based, was carried out as at June 1 2007.
The company cash contribution rate to the scheme during the year was 22.8% (2007: 22.8%) of pensionable salaries.
This MBPS is closed to new members. The figures in this note are based on calculations carried out in connection with the actuarial
valuation of the scheme as at June 1 2007 and adjusted to September 30 2008 by the actuary. The key financial assumptions
adopted were as follows:
Long-term assumed rate of:
Pensionable salary growth
Pension escalation in payment (pre January 1997 members)
Pension escalation in payment (pensions earned from May 30 2002 to June 30 2006)
(post January 1997 members)
Pension escalation in payment (pensions earned from June 30 2006)
(post January 1997 members)
Discount rate for accrued liabilities
Inflation
Pension increase in deferment
2008
2007
5.0% p.a.
5.0% p.a.
4.6% p.a.
5.0% p.a.
3.7% p.a.
3.3% p.a.
2.5% p.a.
7.0% p.a.
3.7% p.a.
3.7% p.a.
2.5% p.a.
5.9% p.a.
3.3% p.a.
3.3% p.a.
The discount rate for scheme liabilities reflects yields at the balance sheet date on high quality corporate bonds. All assumptions
were selected after taking actuarial advice.
Annual Report and Financial Statements 2008
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Notes to the Accounts continued
27 Retirement benefit schemes continued
The fair value of the assets held by the MBPS and the long-term expected rate of return on each class of assets are
shown in the following table:
Equities
Bonds
Property
With profits
policy
Cash
Total
2008
Value at September 30 2008 (£000’s)
% of assets held
Long-term rate of return expected at
4,449
22.8%
7,512
38.5%
–
0.0%
2,400
12.3%
5,151
26.4%
19,512
100.0%
September 30 2008
8.70%
5.00%
7.00%
5.75%
5.00%
2007
Value at September 30 2007 (£000’s)
% of assets held
Long-term rate of return expected at
Equities
Bonds
Property
With profits
policy
Cash
Total
3,440
17.3%
3,240
16.3%
–
0.0%
6,120
30.8%
7,065
35.6%
19,865
100.0%
September 30 2007
7.75%
5.00%
4.50%
5.50%
4.50%
A reconciliation of the net pension surplus reported in the balance sheet is shown in the following table:
Present value of defined benefit obligation
Assets at fair value
Surplus reported in the balance sheet
2008
£000’s
(16,985)
19,512
2,527
2007
£000’s
(19,501)
19,865
364
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 balance sheet. Having taken account of the rules of the scheme, the fact that the
scheme remains open to new accrual, and the current levels of service cost and cash contributions, the company considers that
recognition of the scheme’s surplus on its balance sheet is in accordance with the interpretations of IFRIC 14. The surplus for the
year excludes a related deferred tax liability of £708,000 (2007: £109,000).
Changes in the present value of the defined benefit obligation are as follows:
Present value of obligation at September 30
Service cost
Interest cost
Benefits paid
Members contributions
Actuarial movement
Present value of obligation at September 30
Changes in the fair value of plan assets are as follows:
Fair value of plan assets at September 30
Expected return on plan assets
Contributions:
Employer
Members
Actual return less expected return on pension scheme assets
Benefits paid
2008
£000’s
(19,501)
(85)
(1,150)
463
(19)
3,307
(16,985)
2008
£000’s
19,865
1,172
637
19
(1,718)
(463)
2007
£000’s
(21,708)
(323)
(1,114)
315
(37)
3,366
(19,501)
2007
£000’s
17,680
958
713
37
792
(315)
Fair value of plan assets at September 30
19,512
19,865
The actual return on plan assets was a loss of £546,000 (2007: gain of £1,750,000) representing the expected return plus the
associated actuarial gain or loss during the year.
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27 Retirement benefit schemes continued
The amounts charged to the income statement based on the above assumptions are as follows:
Current service costs (charged to administrative costs)
Interest cost (note 7)
Expected return on plan assets (note 7)
Total charge recognised in income statement
2008
£000’s
85
1,150
(1,172)
63
2007
£000’s
323
1,114
(958)
479
Pension costs and the size of any pension surplus or deficit are sensitive to the assumptions adopted. The table below indicates
the effect of changes in the principle assumptions used above.
Mortality
Change in pension obligation at September 30 from a 1 year change in life expectancy +/-
+/-
Change in pension cost from a 1 year change
Salary Increases
Change in pension obligation at September 30 from a 0.25% change
Change in pension cost from a 1 year change
Discount Rate
Change in pension obligation at September 30 from a 0.1% change
Change in pension cost from a 1 year change
+/-
+/-
2008
£000’s
346
25
26
4
290
5
2007
£000’s
583
79
70
7
429
9
Amounts recognised in the statement of recognised income and expense (SORIE) are shown in the following table:
Actual return less expected return on pension scheme assets
Experience adjustments on liabilities
Gains arising from changes in assumptions
Total gains recognised in SORIE
Cumulative actuarial gain recognised in SORIE at beginning of year
Cumulative actuarial gain recognised in SORIE at end of year
History of experience gains and losses:
Present value of defined benefit obligation
Fair value of scheme assets
Surplus in scheme
Experience adjustments on defined benefit obligation
Percentage of present value of defined benefit obligation
Experience adjustments on fair value of scheme assets
Percentage of the fair value of the scheme assets
2008
£000’s
(1,717)
(36)
3,342
1,589
4,158
5,747
2008
£000’s
(16,985)
19,512
2,527
(36)
0.2%
(1,717)
8.8%
2007
£000’s
792
498
2,868
4,158
–
4,158
2007
£000’s
(19,501)
19,865
364
498
2.6%
792
4.0%
The group expects to contribute approximately £614,000 (2007: £630,000) to the MBPS during the 2009 financial year.
Annual Report and Financial Statements 2008
89
80766 notes 8/12/08 19:07 Page 90
Notes to the Accounts continued
28 Contingent liabilities and assets
Claims in Malaysia
Four writs claiming damages for libel were issued in Malaysia against the company and three of its employees in respect of an
article published in one of the company’s magazines, International Commercial Litigation, in November 1995. The writs were
served on the company on October 22 1996. Two of these writs have been discontinued. The total outstanding amount claimed
on the two remaining writs is Malaysian ringgits 82.0 million (£13,506,000). No provision has been made for these claims in these
financial statements as the directors do not believe the company has any material liability in respect of these writs.
29 Related party transactions
The group has taken advantage of the exemption allowed under IAS 24 ‘Related party disclosures’ not to disclose transactions and
balances between group companies that have been eliminated on consolidation. Other related party transactions and balances are
detailed below:
(i) The company has a £300 million multi-currency credit facility with DMG Jersey Finance Limited. As at September 30 2008 the
amount owing under the facility was: $243,155,000 (£136,413,000) ((2007: $266,000,000 (£130,559,000)), and £48,181,000
(2007: £83,000,000). A commitment fee of £191,000 (2007: £830,000) was paid on the unused portion of the available facility.
(ii) The group expensed £237,400 (2007: £132,000) for services provided by Daily Mail and General Trust plc.
(iii) In September 2008, the group agreed a new loan facility from Daily Mail & General Investment Limited and provides the same loan
facility to Bouverie Holdings Inc. The amount owing and receivable at September 30 2008 was US$40,315,000 (£22,617,000)
which includes accrued interest. Each balance is repayable within one month of demand and bears interest at the US prime rate.
(iv) In April 2008, the group agreed a new loan facility from Daily Mail and General Holdings Limited. The amount owing at
September 30 2008 was £133,155,000 which includes accrued interest. The balance is repayable in October 2008 and bears
interest 0.34% above LIBOR. At the same time, the group granted a new loan facility to Harmsworth Quays Printing Ltd. The
amount receivable at September 30 2008 was Yen 25,159,696,000 (£133,155,000) which includes accrued interest. The
balance is repayable in October 2008 and bears interest at 0.5% above Yen LIBOR.
At the same time the group entered into a swap agreement with Harmsworth Quays Printing Ltd to buy Yen 24,053,698,000
and sell £124,097,000 on October 2 2008. The swap was settled in advance on September 30 2008 for £3,205,000.
(v) At September 30 2008 the group had £154,788,000 (2007: £163,163,000) fixed rate interest rate swaps outstanding with
Daily Mail and General Holdings Limited amounting to $185,000,000 (2007: $200,000,000) at interest rates between 3.3%
and 5.4% and termination dates between March 30 2009 and March 28 2013 and £51,000,000 (2007: £65,000,000) at
interest rates between 4.9% and 6.3% and termination dates between March 30 2009 and September 28 2012. During the
year the group paid $1,263,000 (2007: received $2,346,000) and received £124,000 (2007: £51,000) of interest from Daily
Mail and General Holdings Limited in respect of interest rate swaps.
(vi) There is an annual put option agreement over the sale of Internet Securities, Inc (ISI) shares between the company and
G Mueller, a director of the company. The annual put option value is based on the valuation of ISI as determined by an
independent financial adviser. Under the terms of the agreement consideration caps have been put in place that require the
maximum consideration payable to option holders to be capped at an amount such that the results of any relevant class tests
would, at the relevant time, fall below the requirement for shareholder approval.
No such shares or options were sold or exercised in 2008 or 2007.
90
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29 Related party transactions continued
(vii) The compensation paid or payable for key management is set out below. Key management includes the executive and
non-executive directors as set out in the remuneration report and other key divisional directors who are not on the board.
Key management compensation
Salaries and short-term employee benefits
Non-executive director’s fees
Post-employment benefits
Other long-term benefits (all share-based)
Of which:
Executive directors
Non-executive directors
Divisional directors
2008
£000’s
15,451
178
170
1,956
17,755
14,385
178
3,192
17,755
2007
£000’s
14,973
178
156
3,894
19,201
13,947
178
5,076
19,201
Details of the remuneration of directors is given in the Directors’ Remuneration Report.
30 Ultimate parent undertaking and controlling party
The directors regard the ultimate parent undertaking as Rothermere Continuation Limited, which is incorporated in Bermuda. The
ultimate controlling party is The Viscount Rothermere. The largest and smallest group of which the company is a member and for
which group accounts are drawn up is that of Daily Mail and General Trust plc, incorporated in Great Britain and registered in
England and Wales. Copies of the report and accounts are available from:
The Company Secretary
Daily Mail and General Trust plc
Northcliffe House, 2 Derry Street
London W8 5TT
Annual Report and Financial Statements 2008
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80766 notes 8/12/08 19:07 Page 92
Independent Auditors’ Company Report
Independent auditors’ report to the members of Euromoney Institutional Investor PLC
We have audited the parent company financial statements of Euromoney Institutional Investor PLC for the year ended
September 30 2008 which comprise the Company Balance Sheet and the related notes 1 to 20. These parent company financial
statements have been prepared under the accounting policies set out therein.
We have reported separately on the group financial statements of Euromoney Institutional Investor PLC for the year ended
September 30 2008 and on the information in the directors’ remuneration report that is described as having been audited.
This report is made solely to the company’s members, as a body, in accordance with section 235 of the Companies Act 1985. Our
audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them
in an auditors’ report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility
to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions
we have formed.
Respective responsibilities of directors and auditors
The directors’ responsibilities for preparing the Annual Report, the Directors’ Remuneration Report and the parent company
financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally
Accepted Accounting Practice) are set out in the Statement of Directors’ Responsibilities.
Our responsibility is to audit the parent company financial statements and the part of the Directors’ Remuneration Report in
accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland).
We report to you our opinion as to whether the parent company financial statements give a true and fair view and whether the
parent company financial statements have been properly prepared in accordance with the Companies Act 1985. We also report
to you whether in our opinion the Directors’ Report is consistent with the parent company financial statements.
In addition we report to you if, in our opinion, the company has not kept proper accounting records, if we have not received all
the information and explanations we require for our audit, or if information specified by law regarding directors’ remuneration and
other transactions is not disclosed.
We read the other information contained in the Annual Report as described in the contents section and consider whether it is
consistent with the audited parent company financial statements. We consider the implications for our report if we become aware
of any apparent misstatements or material inconsistencies with the parent company financial statements. Our responsibilities do
not extend to any further information outside the Annual Report.
Basis of audit opinion
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices
Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the parent company
financial statements. It also includes an assessment of the significant estimates and judgments made by the directors in the
preparation of the parent company financial statements, and of whether the accounting policies are appropriate to the company’s
circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order
to provide us with sufficient evidence to give reasonable assurance that the parent company financial statements are free from
material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the parent company financial statements.
Opinion
In our opinion:
● the parent company financial statements give a true and fair view, in accordance with United Kingdom Generally Accepted
Accounting Practice, of the state of the company’s affairs as at September 30 2008;
● the parent company financial statements have been properly prepared in accordance with the Companies Act 1985; and
● the information given in the Directors’ Report is consistent with the parent company financial statements.
Deloitte & Touche LLP
Chartered Accountants and Registered Auditors
London
November 12 2008
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Com pa ny Bal ance Sheet
as at September 30 2008
Fixed assets
Intangible assets
Tangible assets
Investments
Derivative financial instruments
Current assets
Debtors
Derivative financial instruments
Creditors: amounts falling due within one year
Net current (liabilities)/assets
Total assets less current liabilities
Creditors: amounts falling due after more than one year
Net assets
Capital and reserves
Called up share capital
Share premium account
Other reserve
Capital redemption reserve
Capital reserve
Own shares
Liability for share based payments
Fair value reserve
Profit and loss account
Equity shareholders’ funds
Notes
5
6
7
16
8
16
9
9
12
14
14
14
14
14
14
14
14
17
2008
£000’s
2,765
14,463
658,498
189
675,915
128,251
12,918
141,169
2007
£000’s
2,765
13,745
456,121
5,088
477,719
114,352
3,625
117,977
(493,058)
(96,023)
(351,889)
21,954
324,026
499,673
(59,777)
(250,654)
264,249
249,019
263
38,575
64,981
8
1,842
(74)
12,251
(6,286)
152,689
258
38,509
64,981
8
1,842
(74)
9,174
(1,051)
135,372
264,249
249,019
Euromoney Institutional Investor PLC has taken advantage of section 230 of the Companies Act 1985 and has not included its own
profit and loss account in these accounts. The profit after taxation of Euromoney Institutional Investor PLC included in the group
profit for the year is £37,201,000 (2007: £112,357,000).
The accounts were approved by the board of directors on November 12 2008.
Richard Ensor
Colin Jones
Directors
Annual Report and Financial Statements 2008
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Notes to the Company Accounts
1 Accounting policies
Basis of preparation
The accounts have been prepared under the historical cost convention except for derivatives financial instruments which have been
measured at fair value and in accordance with applicable United Kingdom accounting standards and the United Kingdom
Companies Act 1985. The accounting policies set out below have, unless otherwise stated, been applied consistently through
current and prior year.
The company has taken advantage of the exemption from presenting a cash flow statement under the terms of FRS 1 (Revised)
‘Cash Flow Statements’.
The company is also exempt under the terms of FRS 8 ‘Related Party Disclosures’ from disclosing related party transactions with
entities that are part of the group.
Further, the company, as a parent company of a group drawing up consolidated financial statements that meet the requirements
of IFRS 7, is exempt from disclosures that comply with its UK GAAP equivalent, FRS 29 ‘Financial Statements: Disclosures’.
Accounting policies
Turnover
Turnover represents income from advertising, subscriptions, sponsorship and delegate fees, net of value added tax.
● Advertising revenues are recognised in the income statement on the date of publication.
● Subscription revenues are recognised in the income statement on a straight-line basis over the period of the subscription.
● Sponsorship and delegate revenues are recognised in the income statement over the period the event is run.
Turnover invoiced but relating to future periods are deferred and treated as deferred income in the balance sheet.
Leased assets
Operating lease rentals are charged to the profit and loss account on a straight line or other systematic basis as allowed by
SSAP 21 ‘Accounting for Leases and Hire Purchase Contracts’.
Pension schemes
Details of the company’s pension schemes are set out in note 27 to the group accounts. The company participates in the
Harmsworth Pension Scheme. It is unable to identify its share of the underlying assets and liabilities in this scheme. The defined
benefit scheme is operated on an aggregate basis with no segregation of the assets to individual participating employers and,
therefore, the same contribution rate is charged to all participating employers (i.e. the contribution rate charged to each employer
is affected by the experience of the scheme as a whole). The scheme is therefore accounted for as a defined contribution scheme
by the company. This means that the pension charge included in these financial statements is the same as the cash contributions
due in the period.
Tangible fixed assets
Tangible fixed assets are stated at cost less accumulated depreciation and any recognised impairment loss.
Depreciation of tangible fixed assets is provided on the straight-line basis over their expected useful lives at the following rates
per year:
Freehold land and buildings
Short-term leasehold premises
Office equipment
2%
over term of lease
11% - 33%
Goodwill
Where the company has divisionalised the unincorporated businesses of its subsidiaries, the investment in the subsidiary then has
the substance of goodwill and is reclassified accordingly. Goodwill arising in these circumstances is not amortised in the company
where the directors are of the view that the goodwill has an indefinite economic life, but is reviewed annually for impairment. The
non-amortisation of goodwill represents a departure from the Companies Act 1985 but is necessary to give a true and fair view
under the provisions of FRS 10 ‘Goodwill and Intangible Assets’. It is not possible to quantify the impact of this departure, as it
would depend on the life adopted. As at September 30 2008, the total of such goodwill was £2,765,000 (2007: £2,765,000).
94
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1 Accounting policies continued
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 taxation is calculated under the provisions of FRS 19 ‘Deferred Taxation’, and 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 the timing differences crystallise based on current tax rates and law. Deferred tax is not provided on timing differences
on unremitted earnings of subsidiaries and associates where there is no commitment to remit these earnings. Deferred tax assets
are only recognised to the extent that it is regarded as more likely than not that they will be recovered.
Foreign currencies
Transactions in foreign currencies are recorded at the rate of exchange ruling at the date of the transaction or, if hedged forward,
at the rate of exchange of the related foreign exchange contract. Monetary assets and liabilities denominated in foreign currencies
are translated into sterling at the rates ruling at the balance sheet date.
Derivatives and other financial instruments
The company uses various derivative financial instruments to manage its exposure to foreign exchange and interest rate risks,
including forward foreign currency contracts and interest rate swaps.
All derivative instruments are recorded in the balance sheet at fair value. Recognition of gains or losses on derivative instruments
depends on whether the instrument is designated as a hedge and the type of exposure it is designed to hedge.
The effective portion of gains or losses on cash flow hedges are deferred in equity until the impact from the hedged item is
recognised in the profit and loss account. The ineffective portion of such gains and losses is recognised in the profit and loss
account immediately.
Gains or losses on the qualifying part of net investment hedges are recognised in equity together with the gains and losses on the
underlying net investment. The ineffective portion of such gains and losses is recognised in the profit and loss account immediately.
Changes in the fair value of the derivative financial instruments that do not qualify for hedge accounting are recognised in the
profit and loss account as they arise.
The premium or discount on interest rate instruments is recognised as part of net interest payable over the period of the contract.
Interest rate swaps are accounted for on an accruals basis.
Liabilities for put options over the remaining minority interests in subsidiaries are recorded in the balance sheet at their estimated
discounted present value. These discounts are unwound and charged to the income statement as notional interest over the period
up to the date of the potential future payment. In respect of options over further interests in joint ventures and associates, only
movements in their fair value are recognised.
Trade and other receivables
Trade receivables are recognised and carried at original invoice amount, less provision for impairment. A provision is made and
charged to the profit and loss account when there is objective evidence that the company will not be able to collect all amounts
due according to the original terms.
Cash at bank and in hand
Cash at bank and in hand includes cash, short-term deposits and other short-term highly liquid investments with an original
maturity of three months or less.
Dividends
Dividends are recognised as an expense in the period in which they are approved by the company’s shareholders. Interim dividends
are recorded in the period in which they are paid.
Provisions
A provision is recognised in the balance sheet when the company has a present legal or constructive obligation as a result of a
past event, and it is probable that economic benefits will be required to settle the obligation. If it is material, provisions are
determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time
value of money and, where appropriate, the risks specific to the liability.
Annual Report and Financial Statements 2008
95
80766 notes 8/12/08 19:07 Page 96
Notes to the Company Accounts continued
1 Accounting policies continued
Share-based payments
The company makes share-based payments to certain employees. These payments are measured at their estimated fair value at
the date of grant, calculated using an appropriate option pricing model. The fair value determined at the grant date is expensed
on a straight-line basis over the vesting period, based on the estimate of the number of shares that will eventually vest. At the
period end the vesting assumptions are revisited and the charge associated with the fair value of these options updated. In
accordance with the transitional provisions of FRS 20 ‘Share-based payments’ has been applied to all grants of options after
November 7 2002, that were unvested at October 1 2004, the date of application of FRS 20.
2
Staff costs
Salaries, wages and incentives
Social security costs
Pension contributions
Share based compensation costs (note 13)
2008
£000’s
33,561
3,994
638
3,077
41,270
2007
£000’s
31,421
4,356
492
6,281
42,550
Details of directors’ remuneration are set out in the Directors' Remuneration Report on pages 30 to 41 and in note 6 of the
group accounts.
The ultimate parent company, Daily Mail and General Trust plc, is required to account for the Harmsworth Pension Scheme
under IAS 19 ‘Employee Benefits’. The IAS 19 disclosures in the Annual Report and Accounts of Daily Mail and General Trust plc
have been based on calculations performed as part of the work being carried out for the formal valuation of the scheme as at
March 31 2007, and adjusted to September 30 2008 by the actuary. The calculations are adjusted to allow for the assumptions
and actuarial methodology required by IAS 19. These showed that the market value of the scheme’s assets was £1,322.5 million
(2007: £650.0 million) and that the actuarial value of these assets represented 99% (2007: 106%) of the benefits that had accrued
to members (also calculated in accordance with IAS 19). The valuations and disclosures required under IAS 19 for the financial
statements of Daily Mail and General Trust plc are not materially different to the valuations and disclosures required under FRS 17.
The group is unable to identify its share of the underlying assets and liabilities in the Harmsworth Pension Scheme. The scheme is
operated on an aggregate basis with no segregation of the assets to individual participating employers and, therefore, the same
contribution rate is charged to all participating employers (i.e. the contribution rate charged to each employer is affected by the
experience of the schemes as a whole). The scheme is therefore accounted for as a defined contribution scheme by the company.
This means that the pension charge reported in these financial statements is the same as the cash contributions due in the period.
3 Number of staff
Financial publishing
Business publishing
Training
Conferences and seminars
Databases and information services
Central
4 Remuneration of auditors
Parent company audit fee
96
Euromoney Institutional Investor PLC
2008
Average
2007
Average
202
148
96
113
38
213
810
2008
£000’s
593
174
85
89
90
16
208
662
2007
£000’s
491
80766 notes 8/12/08 19:07 Page 97
5
Intangible assets
Cost at October 1 2007 and September 30 2008
Amortisation at October 1 2007 and September 30 2008
Net book value at September 30 2007 and September 30 2008
The company does not amortise its goodwill (note 1).
6
Tangible assets
Cost
At September 30 2007
Additions
Disposals
At September 30 2008
Depreciation
At September 30 2007
Charge for the year
Disposals
At September 30 2008
Net book value at September 30 2008
Net book value at September 30 2007
7
Investments
At October 1 2007
Addition
At September 30 2008
Freehold
land and
buildings
£000’s
Short-term
leasehold
premises
£000’s
Office
equipment
£000’s
5,045
2,457
(1,145)
6,357
19
58
(40)
37
6,320
5,026
8,751
163
(2)
8,912
2,618
605
(12)
3,211
5,701
6,133
8,510
489
(688)
8,311
5,924
565
(620)
5,869
2,442
2,586
Investments
in associated
undertakings
£000’s
29
–
29
Subsidiaries
£000’s
456,092
202,377
658,469
Goodwill
£000’s
5,050
2,285
2,765
Total
£000’s
22,306
3,109
(1,835)
23,580
8,561
1,228
(672)
9,117
14,463
13,745
Total
£000’s
456,121
202,377
658,498
Details of the principal subsidiary and associated undertakings of the company at September 30 2008 can be found in note 13 to
the group accounts.
8 Debtors
Due within one year:
Trade debtors
Amounts owed by subsidiary undertakings
Other debtors
Deferred tax (note 11)
Prepayments and accrued income
2008
£000’s
11,584
107,455
343
6,296
2,573
128,251
2007
£000’s
14,309
92,315
108
3,826
3,794
114,352
Annual Report and Financial Statements 2008
97
80766 notes 8/12/08 19:07 Page 98
Notes to the Company Accounts continued
9 Creditors
Due within one year:
Committed facility
Bank overdraft
Trade creditors
Amounts owed to DMGT group undertakings
Amounts owed to subsidiary undertakings
Other creditors
Corporation tax
Other taxation and social security
Derivative financial instruments (note 16)
Acquisition option commitments
Loan notes
Provisions (note 10)
Due after more than one year:
Committed facility
Provisions (note 10)
Accruals
Deferred income
Derivative financial instruments (note 16)
10 Provisions
At October 1 2007
Provision
Used in the year
At September 30 2008
Maturity profile of provisions:
Within 1 year
Between 1 and 2 years
Between 2 and 5 years
2008
£000’s
184,594
5,880
1,582
158,947
120,817
3,484
1,892
1,101
5,006
978
7,579
1,198
493,058
2008
£000’s
–
2,872
24,997
22,784
9,124
59,777
Other
provisions
£000’s
4,155
583
(668)
4,070
2008
£000’s
1,198
1,198
1,674
4,070
2007
£000’s
–
3,483
1,048
4,142
61,166
5,460
4,288
1,820
605
978
11,796
1,237
96,023
2007
£000’s
213,559
2,940
22,165
10,617
1,373
250,654
Total
£000’s
4,177
583
(690)
4,070
2007
£000’s
1,237
714
2,226
4,177
Onerous
lease
provision
£000’s
22
–
(22)
–
Onerous lease provision
The onerous lease provision relates to certain buildings within the property portfolio which either through acquisition were rented
at non-market rates or are no longer occupied by the group.
Other provisions
Management have reclassified certain provisions previously included within trade and other payables to provisions to better reflect
the classification of the creditor. The provision consists of social security arising on share option liabilities and dilapidations on
leasehold properties.
98
Euromoney Institutional Investor PLC
80766 notes 8/12/08 19:07 Page 99
11 Deferred tax
The deferred tax asset at September 30 2008 comprised:
Accelerated capital allowances
Other short-term timing differences
Provision for deferred tax
Movement in deferred tax:
Deferred tax asset at October 1
Deferred tax charge in the profit and loss account
Deferred tax charge to equity
Deferred tax asset at September 30
2008
£000’s
(723)
7,019
6,296
£000’s
3,826
1,707
763
6,296
2007
£000’s
(224)
4,050
3,826
£000’s
3,181
645
–
3,826
A deferred tax asset of £6,296,000 (2007: £3,826,000) has been recognised in respect of depreciation in excess of UK capital
allowances and other short-term timing differences. The directors are of the opinion that based on recent and forecast trading,
the level of profits in future years are more likely than not to be sufficient to enable the asset to be recovered.
12 Share capital
Authorised
137,365,200 ordinary shares of 0.25p each
(2007: 137,365,200 ordinary shares of 0.25p each)
Allotted, called up and fully paid
105,300,896 ordinary shares of 0.25p each
(2007: 102,972,478 ordinary shares of 0.25p each)
2008
£000’s
343
2007
£000’s
343
263
258
During the year, 2,328,418 ordinary shares of 0.25p each (2007: 107,049 ordinary shares) with an aggregate nominal value of
£5,821 (2007: £268) were issued for a cash consideration of £71,680 (2007: £428,076) following the exercise of share options
granted under the company’s share option schemes.
13 Share based payments
An explanation of the company’s share based payment arrangements are set out in the Directors’ Remuneration Report on
page 32. The number of shares under option, the fair value per option granted and the assumptions used to determine their values
is given in note 23 to the group accounts. Their dilutive effect on the number of weighted average shares of the company is given
in note 10 to the group accounts.
Equity settled options
The executive and Save as You Earn Options were valued using the Black-Scholes option-pricing model. Expected volatility was
determined by calculating the historical volatility of the group’s share price over a 13 year period. The executive options’ fair values
have been discounted at a rate of 10% to reflect their performance conditions. The expected term of the option used in the model
has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and
behavioural considerations. The expense recognised in the year in respect of these options was £281,000 (2007: £202,000).
Annual Report and Financial Statements 2008
99
80766 notes 8/12/08 19:07 Page 100
Notes to the Company Accounts continued
13 Share based payments continued
Date of grant
Executive Options
SAYE
December 4
2002
January 28
2004
6
January 4
2005
7
February 1
2006
8
January 5
2007
9
December 17
2007
259
Market value at date of grant (p)
259
Option price (p)
Number of share options outstanding 174,000
Option life (years)
10
Expected term of option
(grant to exercise (years))
Exercise price (p)
Risk-free rate
Dividend yield
Volatility
Fair value per option (£)
5.5
259
4.10%
3.93%
30%
0.52
419
419
157,000
10
5.5
419
4.10%
3.93%
30%
0.72
423
338
1,121
3.5
3
338
4.80%
3.35%
30%
1.22
461
369
70,869
3.5
3
369
4.80%
3.35%
30%
1.24
524
419
70,138
3.5
3
419
4.75%
3.35%
30%
1.51
397
318
92,312
3.5
3
318
4.25%
3.35%
30%
1.13
Capital Appreciation Plan (CAP)
The Capital Appreciation Plan (CAP) options were valued using a fair value model that adjusted the share price at the date of grant
for the net present value of expected future dividend streams up to the date of expected exercise. The expected term of the option
used in the models has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise
restrictions and behavioural considerations. The share based expense in the year for the CAP options was £2,796,000
(2007: £6,079,000).
Date of grant
Market value at date of grant (p)
Option price (p)
Number of share options outstanding
Option life (years)
Expected term of option (grant to exercise (years))
Exercise price (p)
Risk-free rate
Dividend growth
Fair value per option (£)
Tranche 1
June 20
2005
401
0.25
166,013
10
3.28
0.25
5.0%
8.44%
3.28
CAP
Tranche 2
June 20
2005
401
0.25
1,501,029
10
4.53
0.25
5.0%
8.44%
3.02
Tranche 3
June 20
2005
401
0.25
1,501,029
10
5.53
0.25
5.0%
8.44%
2.82
The following options are outstanding at September 30 and are options to subscribe for new ordinary shares of 0.25p each:
Outstanding at October 1
Granted during the year
Exercised during the year
Expired during the year
Outstanding at September 30
2008
Number of
share options
2,086,123
1,620,439
(1,354,214)
(119,866)
2007
Number of
share options
592,533
1,641,607
(28,249)
(119,768)
2,232,482
2,086,123
The weighted average share price at the date of exercise for share options exercised during the year was £3.80 (2007: £5.88). The
options outstanding at September 30 2008 had a weighted average exercise price of £1.95 (2007: £2.12), and a weighted average
remaining contractual life of 4.0 years (2007: 4.8 years).
100 Euromoney Institutional Investor PLC
80766 notes 8/12/08 19:07 Page 101
14 Statement of movement on reserves
Share
premium
account
£000’s
38,081
–
Capital
Other redemption
reserve
£000’s
reserve
£000’s
–
–
At September 30 2006
Retained profit for the year
Premium on shares issued for
acquisition of Metal Bulletin plc
Change in fair value of available for
sale investments
Gain on cash flow hedges
Credit for share-based payments
Dividends paid
Exercise of share options
Tax on items going through reserves
At September 30 2007
Retained profit for the year
Gain on cash flow hedges
Credit for share-based payments
Dividends paid
Exercise of share options
Tax on items going through reserves
–
64,981
–
–
–
–
428
–
38,509
–
–
–
–
66
–
–
–
–
–
–
–
64,981
–
–
–
–
–
–
At September 30 2008
38,575
64,981
Liability
for share
based
payment
£000’s
Own
shares
£000’s
Fair
value
reserves
£000’s
Profit
and loss
account
£000’s
Total
£000’s
(74)
–
2,893
–
405
–
41,125
112,357
84,280
112,357
–
–
–
–
–
–
–
(74)
–
–
–
–
–
–
–
–
–
64,981
–
–
6,281
–
–
–
9,174
–
–
3,077
–
–
–
(405)
(552)
–
–
–
(499)
(1,051)
–
(6,537)
–
–
–
1,302
–
–
–
(18,110)
–
–
135,372
37,201
–
–
(19,950)
–
66
(405)
(552)
6,281
(18,110)
428
(499)
248,761
37,201
(6,537)
3,077
(19,950)
66
1,368
(74)
12,251
(6,286) 152,689 263,986
Capital
reserve
£000’s
1,842
–
–
–
–
–
–
–
–
1,842
–
–
–
–
–
–
1,842
8
–
–
–
–
–
–
–
–
8
–
–
–
–
–
–
8
The investment in own shares is held by the Euromoney Employees’ Share Ownership Trust (ESOT). At September 30 2008 the
ESOT held 58,976 shares (2007: 58,976 shares) carried at a historic cost of £1.25 per share with a market value of £192,000 (2007:
£312,000), and waived the rights to receive dividends. Interest and administrative costs are charged to the profit and loss account
of the ESOT as incurred.
Of the reserves above £12,251,000 of the liability for share based payments and £51,126,000 of the profit and loss account is
distributable to equity shareholders of the company. The remaining balance of £101,563,000 is not distributable.
15 Commitments
At September 30 the company has committed to make the following payments in respect of operating leases on land
and buildings:
Operating leases which expire:
Within one year
Between two and five years
Over five years
2008
£000’s
148
17
892
2007
£000’s
65
100
892
1,057
1,057
Annual Report and Financial Statements 2008 101
80766 notes 8/12/08 19:07 Page 102
Notes to the Company Accounts continued
16 Financial instruments
Derivative financial instruments
The derivative financial assets/(liabilities) at September 30 2008 comprised:
Interest rate swaps
Forward foreign exchange contracts - cash flow hedge
Forward foreign exchange contracts - net investment
Currency swap with subsidiary undertakings
Current portion
Non-current portion
2008
2007
Assets
£000’s
296
996
–
11,815
13,107
12,918
189
Liabilities
£000’s
(3,207)
(10,064)
(859)
–
(14,130)
(5,006)
(9,124)
Assets
£000’s
594
8,119
–
–
8,713
3,625
5,088
Liabilities
£000’s
(1,190)
(788)
–
–
(1,978)
(605)
(1,373)
As at September 30 2008, the aggregate amount of unrealised losses under forward foreign exchange contracts deferred in the
fair value reserve relating to future revenue transactions is £4,438,000 (2007: £nil). It is anticipated that the revenue transactions
will take place during the next 48 months at which stage the amount deferred in equity will be released in the income statement.
The ineffective portion recognised directly in the company’s profit or loss that arose from cash flow hedges in the year was a loss
of £11,961,000 (2007: gain £7,331,000).
As at September 30 2008 all net investment hedges were classified as effective.
The company holds all the interest rate swaps for the group and full details regarding these can be found in note 18 to the
group accounts.
There were no derivatives outstanding at the balance sheet date that were designated as fair value hedges.
Hedge of net investment in foreign entity
The company has US dollar denominated borrowings which it has designated as a hedge of the net investment of its subsidiaries
which have US Dollars as their functional currency. The change in fair value of these hedges resulted in an increased liability of
£12,936,000 (2007: £nil). The ineffective portion of these hedges was £2,563,000 (2007: £nil) and has been charged to profit and
loss account, the remaining portion has been deferred in reserves and will only be recognised in the company’s profit and loss
account if the related investment is sold.
Fair values of non-derivative financial assets and financial liabilities
Where market values are not available, fair values of financial assets and financial liabilities have been calculated by discounting
expected future cash flows at prevailing interest rates and by applying year end exchange rates. The carrying amounts of short-
term borrowings approximate the book value.
17 Reconciliation of movements in equity shareholders’ funds
Profit for the financial year
Dividends paid
Issue of shares
Gains on cash flow hedges
Tax on items taken directly to equity
Change in fair value of available for sale investments
Credit to equity for share based payments
Net increase in equity shareholders’ funds
Opening equity shareholders’ funds
Closing equity shareholders’ funds
102 Euromoney Institutional Investor PLC
2008
£000’s
37,201
(19,950)
2007
£000’s
112,357
(18,110)
17,251
94,247
71
(6,537)
1,368
–
3,077
65,445
(552)
(499)
(405)
6,281
15,230
164,517
249,019
264,249
84,502
249,019
80766 notes 8/12/08 19:07 Page 103
18 Related party transactions
Related party transactions and balances are detailed below:
(i) The company has a £300 million multi-currency credit facility with DMG Jersey Finance Limited. As at September 30 2008
the amount owing under the facility was: $243,155,000 (£136,413,000) ((2007: $266,000,000 (£130,559,000)), and
£48,181,000 (2007: £83,000,000). A commitment fee of £191,000 (2007: £830,000) was paid on the unused portion of the
available facility.
(ii) The group expensed £237,400 (2007: £132,000) for services provided by Daily Mail and General Trust plc.
(iii) In September 2008, the group agreed a new loan facility from Daily Mail & General Investment Limited. The amount owing
at September 30 2008 was US$40,315,000 (£22,617,000) which includes accrued interest. The balance is repayable within
one month of demand and bears interest at the US prime rate.
(iv) In April 2008, the group agreed a new loan facility from Daily Mail and General Holdings Limited. The amount owing at
September 30 2008 was £133,155,000 which includes accrued interest. The balance is repayable in October 2008 and bears
interest 0.34% above LIBOR.
(v) At September 30 2008 the company had £154,788,000 (2007: £163,163,000) fixed rate interest rate swaps outstanding with
Daily Mail and General Holdings Limited amounting to $185,000,000 (2007: $200,000,000) at interest rates between 3.3%
and 5.4% and termination dates between March 30 2009 and March 28 2013 and £51,000,000 (2007: £65,000,000) at
interest rates between 4.9% and 6.3% and termination dates between March 30 2009 and September 28 2012. During the
year the company paid $1,263,000 (2007: received $2,346,000) and received £124,000 (2007: £51,000) of interest from Daily
Mail and General Holdings Limited in respect of interest rate swaps.
19 Post balance sheet event
The directors propose a final dividend of 13.0p per share (2007: 13.0p) totalling £13,689,000 (2007: £13,386,000) for the year
ended September 30 2008. The dividend will be submitted for formal approval at the Annual General Meeting to be held on
January 28 2009. In accordance with FRS 21 ‘Post balance sheet events’, these financial statements do not reflect this dividend
payable but will be accounted for in shareholders’ equity as an appropriation of retained earnings in the year ending September
30 2009. During 2008, a final dividend of 13.0p (2007: 11.6p) per share totalling £13,388,000 (2007: £11,943,000) was paid in
respect of the dividend declared for the year ended September 30 2007.
20 Ultimate parent undertaking and controlling party
The directors regard the ultimate parent undertaking as Rothermere Continuation Limited, which is incorporated in Bermuda. The
ultimate controlling party is The Viscount Rothermere. The largest and smallest group of which the company is a member and for
which group accounts are drawn up is that of Daily Mail and General Trust plc, incorporated in Great Britain and registered in
England and Wales. Copies of the report and accounts are available from:
The Company Secretary
Daily Mail and General Trust plc
Northcliffe House, 2 Derry Street
London W8 5TT
www.dmgt.co.uk
Annual Report and Financial Statements 2008 103
80766 notes 8/12/08 19:07 Page 104
Five Year Record
Group income statement extracts
UK GAAP
2004
£000’s
2005
£000’s
IFRS
2006
£000’s
2007
£000’s
2008
£000’s
Revenue
174,654
196,266
222,276
305,594
332,064
43,812
n/a
(144)
(4,428)
(716)
38,524
1,208
39,732
(4,498)
35,234
3,512
38,746
–
38,746
37,430
1,316
38,746
42.11p
41.90p
28.61p
78,606
n/a
(15,716)
(10,176)
855
53,569
490
54,059
(12,931)
41,128
(8,223)
32,905
500
33,405
31,822
1,583
33,405
30.66p
29.86p
35.04p
81,308
n/a
(12,749)
(5,361)
(2,477)
60,721
308
61,029
(23,603)
37,426
7,279
44,705
245
44,950
43,719
1,231
44,950
41.69p
40.37p
44.36p
Operating profit before acquired
intangible amortisation, share
option expense and exceptional items
Goodwill amortisation
Acquired intangible amortisation
Share option expense
Exceptional items
Operating profit before associates
and joint ventures
Share of results in associates and joint ventures
Operating profit
Net finance costs
Profit before tax
Tax credit/(expense) on profit on ordinary
30,606
(7,534)
–
–
–
23,072
373
23,445
(2,954)
20,491
39,348
n/a
–
(1,380)
(315)
37,653
624
38,277
(3,843)
34,434
activities
(3,899)
(2,417)
Profit after tax from continuing operations
Profit from discontinued operations
16,592
–
16,592
16,014
578
16,592
18.22p
18.16p
26.71p
32,017
–
32,017
30,181
1,836
32,017
34.19p
34.10p
26.28
Profit for the year
Attributable to:
Equity holders of the parent
Equity minority interests
Profit for the financial year
Basic earnings per share
Diluted earnings per share
Adjusted diluted earnings per share
Diluted weighted average number of
ordinary shares
Dividend per share
Group balance sheet extracts
Intangible assets
Non-current assets
Accruals
Deferred income liability
Other net current assets/(liabilities)
Non-current liabilities
Net assets/(liabilities)
88,160,349
15.00p
88,508,359
16.20p
89,340,024
17.00p
104,888,887
19.00p
107,687,024
19.25p
60,989
7,766
(18,569)
(35,317)
(66,093)
(11,186)
(62,410)
66,508
27,647
(23,225)
(37,491)
3,924
(73,313)
(35,950)
71,598
63,406
(29,478)
(45,324)
7,334
(94,310)
(26,774)
380,022
38,129
(43,424)
(73,382)
23,965
(269,530)
407,578
41,318
(50,016)
(89,488)
(171,290)
(50,038)
55,780
88,064
The income statements, earnings per share and dividends per share for 2005, 2006, 2007, and 2008 have been prepared under
IFRS. 2004 and earlier periods have not been adjusted from UK GAAP as it is not practicable to restate these years reports in
accordance with IFRS. Due to differences between IFRS and UK GAAP, there are some comparative inconsistencies in the above
tables. Refer to the group’s September 30 2006 annual report, note 29 for an indication of the adjustments to comply with IFRS.
104 Euromoney Institutional Investor PLC
80766 notes 8/12/08 19:07 Page 105
Fina nc ial Calen dar and Shareholder Information
2008 final results announcement
Thursday November 13 2008
Final dividend ex-dividend date
Wednesday November 19 2008
Final dividend record date
Friday November 21 2008
2009 AGM (approval of final dividend)
Wednesday January 28 2009
Payment of final dividend
Wednesday February 4 2009
2009 interim results announcement
Thursday May 14 2009
Interim dividend ex-dividend date
Wednesday May 20 2009
Interim dividend record date
Friday May 22 2009
Payment of 2009 interim dividend
Monday June 22 2009*
2009 final results announcement
Thursday November 12 2009
Holders of International Depositary Receipts can receive their:
Final 2008 year end dividend from
Interim 2009 dividend from
Wednesday February 4 2009
Monday June 22 2009*
Loan note interest paid to holders of loan notes on:
Wednesday December 31 2008
Tuesday June 30 2009
* Provisional dates and are subject to change.
Shareholder queries
Administrative enquiries about the holding of Euromoney Institutional Investor PLC shares should be directed in the first instance
to the company’s Registrar whose address is:
Capita Registrars
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
Telephone: 0870 162 3100 (Calls cost 10p per minute plus network extras)
(from outside the UK: +44 (0) 20 8639 3399)
E-mail: ssd@capitaregistrars.com
www.capitaregistrars.com
Loan note redemption information
Loan notes can be redeemed twice a year on the interest payment dates above by depositing the Notice of Repayment
printed on the Loan Note Certificate at the company’s registered office. At least 20 business days’ written notice prior to the
redemption date is required.
Registered office
Nestor House
Playhouse Yard
London
EC4V 5EX
Annual Report and Financial Statements 2008 105
80766 notes 8/12/08 19:07 Page 106
Shareholder’s Notes
106 Euromoney Institutional Investor PLC
80766 notes 8/12/08 19:07 Page 107
Shareholder’s Notes
Annual Report and Financial Statements 2008 107
80766 notes 8/12/08 19:07 Page 108
Shareholder’s Notes
108 Euromoney Institutional Investor PLC
80766 notes 8/12/08 19:07 Page 109
80766 Cover 8/12/08 18:53 Page 1
www.euromoneyplc.com
Euromoney Institutional Investor PLC
Nestor House, Playhouse Yard,
London EC4V 5EX
Annual Report & Accounts 2008
Euromoney
Institutional
Investor PLC
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