Euromoney Institutional Investor
Annual Report 2013

Plain-text annual report

A n n u a l R e p o r t & A c c o u n t s 2 0 1 3 E u r o m o n e y I n s t i t u t i o n a l I n v e s t o r p l c Annual Report & Accounts 2013 Euromoney Institutional Investor PLC 22706.04 13 December 2013 6:27 PM Proof 4 Euromoney Institutional Investor PLC www.euromoneyplc.com 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. The group publishes more than 70 titles in both print and online, including Euromoney, Institutional Investor and Metal Bulletin, and is a leading provider of electronic research and data under the BCA Research, Ned Davis Research and ISI Emerging Markets brands. It also runs an extensive portfolio of conferences, seminars and training courses for financial markets. The group’s main offices are in London, New York, Montreal and Hong Kong and more than a third of its revenues are derived from emerging markets. “We have continued, and will continue, to invest across the business to drive organic growth and through selective acquisitions. The five businesses acquired since the beginning of last year build on our existing strengths but also take us into exciting new sectors. First quarter trading in the new financial year is in line with the board’s expectations and sentiment in financial markets remains broadly positive. This encourages us to believe that we can continue to grow our revenues and gives us confidence that our investment programme for the digital transformation of our businesses, in particular via the Delphi content management system, is the right strategy to pursue.” Richard Ensor Chairman 22706.04 13 December 2013 6:27 PM Proof 4 Visit us online www.euromoneyplc.com Annual Report and Accounts 2013 Highlights Revenue £404.7m Adjusted Operating Profit* £121.1m 2013 2012 2011 404.7 394.1 363.1 2013 2012 2011 121.1 118.2 109.0 Operating Profit £105.6m Adjusted Profit before Tax* £116.5m 2013 2012 2011 105.6 95.9 77.8 2013 2012 2011 116.5 106.8 92.7 Profit before tax £95.3m Adjusted Diluted Earnings per Share* 71.0p 2013 2012 2011 95.3 92.4 2013 2012 2011 68.2 71.0 65.9 56.1 Diluted Earnings per Share 56.7p Dividend 22.75p 2013 2012 2011 56.7 55.2 2013 2012 2011 37.3 22.75 21.75 18.75 Net debt £9.9m 2013 9.9 2012 30.8 2011 119.2 * See reconciliation of Consolidated Income Statement to adjusted results on page 7. 01 01 02 04 07 08 30 32 33 35 44 49 49 52 58 74 77 78 79 80 82 83 84 Contents Overview Highlights Our Divisions Chairman’s Statement Appendix to Chairman’s Statement Strategy and Performance Strategic Report Directors’ Report Directors’ Responsibility Statement Governance Directors and Advisors Corporate Governance Corporate and Social Responsibility Directors’ Remuneration Report Report from the Chairman of the Remuneration Committee Remuneration Policy Report Annual Report on Remuneration Financial Statements Group Accounts Independent Auditor’s Report Consolidated Income Statement Consolidated Statement of Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Note to the Consolidated Statement of Cash Flows Notes to the Consolidated Financial Statements Company Accounts Company Balance Sheet Notes to the Company Accounts 150 151 Other Five Year Record Financial Calendar and Shareholder Information 162 163 s t h g i l h g H i w e i v r e v O e c n a n r e v o G s t n u o c c A p u o r G s t n u o c c A y n a p m o C r e h t O 22706.04 13 December 2013 6:27 PM Proof 6 02 Our Divisions 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. Revenue £75.6m BUSINESS PUBLISHING Revenue £68.9m CONFERENCES AND SEMINARS Revenue £99.4m A selection of the company’s leading financial brands includes: Euromoney, Institutional Investor, EuroWeek, Latin Finance, Asiamoney, Global Investor, Project Finance, Air Finance and the hedge fund title EuroHedge. The business publishing division produces print and online information for the metals and mining, legal, telecoms and energy sectors. Its leading brands include: Metal Bulletin, American Metal Market; International Financial Law Review, International Tax Review and Managing Intellectual Property; Capacity; Petroleum Economist, World Oil and Hydrocarbon Processing. The group 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 programme and speakers, and outstanding networking opportunities. Such events include: Euromoney’s Covered Bond Congress; the Global Borrowers and Investors Forum; the Annual Global Hedge Fund Summit; the European Airfinance Conference; and Global ABS and ABS East for the asset-backed securities market. In the commodities sector, events include Metal Bulletin’s International Ferro Alloys conference and the world’s leading annual coal conferences, Coaltrans and Coaltrans Asia; TelCap runs International Telecoms Week, the worldwide meeting place for telecom carriers and service providers; and MIS runs a leading event for the information security sector in the US, InfoSec World. 22706.04 13 December 2013 6:27 PM Proof 6 HeadingStraplineEuromoney Institutional Investor PLC www.euromoneyplc.com03 w e i v r e v O s n o i s i v i D r u O Group revenue £404.7m » For more information go to the Strategic report on pages 8-29 GROUP REVENUE SPLIT ● Financial publishing 19% ● Business publishing 17% ● Conferences and seminars 25% ● Training 7% ● Research and data 32% TRAINING The training division runs a comprehensive range of banking, finance and legal courses, both public and in-house, under the 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. Revenue £30.1m RESEARCH AND DATA Revenue £131.4m The group provides a number of subscription-based research and data services for financial markets. Montreal-based BCA Research is one of the world’s leading independent providers of global macro economic research. In 2011, the group expanded its independent research activities with the acquisition of US-based Ned Davis Research, a leading provider of independent financial research to institutional and retail investors. The company’s US subsidiary, Internet Securities, Inc. provides the world’s most comprehensive service for news and data on global emerging markets under the Emerging Markets Information Service (EMIS) brand, and includes CEIC, one of the leading providers of time-series macro-economic data for emerging markets. The group also offers global capital market databases through a venture with its partner, Dealogic (Holdings) plc. Principal Brands Ned Davis Research Group Design Shell Strategic ReportOverviewAnnual Report and Accounts 2013 04 Chairman’s Statement Richard Ensor Highlights Euromoney Institutional Investor PLC, the and margins remained tightly controlled it was first introduced in 2004. Accordingly, been offset by savings on central costs. Costs the fivefold increase in the group’s profits since international online information and events throughout the year and, as highlighted in subject to shareholder approval at the AGM in group, achieved a record adjusted profit before previous announcements, the group has January 2014, the board proposes to introduce tax of £116.5 million for the year to September continued to invest in technology and new a new CAP, CAP 2014, which will be structured 30 2013, against £106.8 million in 2012. products as part of its online growth strategy. along similar lines to CAP 2010. Adjusted diluted earnings per share were 71.0p (2012: 65.9p). The directors recommend a 7% Net debt at September 30 was £9.9 million As highlighted in previous trading updates, the increase in the final dividend to 15.75p, giving a compared with £38.1 million at March profitability of banks and asset managers has total for the year of 22.75p (2012: 21.75p), to 31 and £30.8 million last year-end. The group’s improved during 2013, particularly in the US. be paid to shareholders on February 13 2014. net debt is at its lowest level since the acquisition However, continuing litigation against banks, of Institutional Investor in 1997. The group often leading to significant financial settlements, Total revenues for the year increased by spent £28.1 million on four acquisitions during combined with increasing regulation and 3% to £404.7 million. Underlying revenues, the year, and since the year-end has put in place demands for stronger capital bases, continues excluding acquisitions, increased by 1%. a new $160 million multi-credit facility providing to put pressure on the profits of the banking Headline subscription revenues increased by 3% headroom for a larger acquisition if and when industry. As a result, the broadly positive outlook to £206.3 million, after a flat first half, and again the opportunity arises. accounted for just over half of group revenues. for markets and economic growth is taking time to translate into a recovery in the spending of The board believes the Capital Appreciation Plan financial institutions on marketing, training and The adjusted operating margin was unchanged (CAP), the group’s long-term incentive scheme information buying. at 30%. While the operating margins of some designed to retain and reward those who drive divisions have come under pressure, this has profit growth, has been an important driver of 22706.04 13 December 2013 6:27 PM Proof 6 Euromoney Institutional Investor PLC www.euromoneyplc.comStrategy The group’s strategy remains the building of a robust and tightly focused global online information business with an emphasis on emerging markets. This strategy is being executed through increasing the proportion of revenues derived from electronic subscription products; investing in technology to drive the online migration of the group’s products as well as developing new electronic information services; building large, must-attend annual events; maintaining products of the highest quality; eliminating products with a low margin or too high a dependence on print advertising; maintaining tight cost control at all times; retaining and fostering an entrepreneurial culture; and using a healthy balance sheet and strong cash flows to fund selective acquisitions. Acquisitions remain a key part of the group’s strategy. Four were completed in the year and another post year-end. In December, the group acquired TTI/Vanguard, a private membership organisation for executives who lead technology innovation, providing an opportunity for Institutional Investor to apply its expertise in building global subscription membership organisations to a new sector. In April the group acquired CIE, Australia’s leading provider of investment forums for senior executives of superannuation funds and asset management firms. Combining CIE with the expertise and relationships of Institutional Investor’s forums and membership business has extended the group’s coverage of the asset management events sector to a key geographic market. The acquisition of Insider Publishing in March enhanced the group’s position in the insurance and reinsurance sector and provides a strong complementary fit with its other reinsurance title, Reactions. At the end of September the group completed the acquisition of HSBC’s Quantitative Techniques operation, the benchmark and calculation agent business of HSBC Bank plc. The business has been rebranded Euromoney Indices and the group believes the acquisition creates an exciting opportunity to establish a significant footprint in the attractive 05 w e i v r e v O t n e m e t a t S s ’ n a m r i a h C index compilation market. Finally, at the end of in the year included: SteelFirst, a specialised October, the group completed the acquisition online news, pricing and analysis service for the of Infrastructure Journal, a leading information steel markets; Institutional Investor’s Sovereign source for the international infrastructure Wealth Center, a premium digital research tool markets. By combining the deals database designed to provide a detailed understanding and news coverage of Infrastructure Journal of sovereign wealth fund investment strategies; with the deals analysis, awards and events of and Petroleum Economist’s interactive digital Euromoney’s Project Finance, the group aims to maps covering global energy infrastructure. create the market’s most comprehensive online infrastructure information provider. In addition, the group has continued the development of its new platform for authoring, All of these transactions were consistent with storing and delivering its content (Project the group’s strategy of investing in online Delphi), with a view to both improving the subscription and events businesses which quality of its existing subscription products will benefit from its global reach, marketing and increasing the speed to market of new expertise and content platforms, and the group digital information services. Initially the Delphi will continue to use its robust balance sheet and platform will be used to transform BCA’s strong cash flows to pursue further acquisitions content into a fully integrated online research in 2014. service, including personalised content and alerts, dynamic and interactive charts, semantic Driving revenue growth from new products search and a research dashboard to track is another key part of the group’s strategy. research themes, investment recommendations The group has continued to invest heavily in and trades. Delphi is also being used to upgrade technology and content delivery platforms, the group’s Global Capital Markets products, particularly for the mobile user, and in new digital products as part of its transition to an online information business. New products launched including EuroWeek, through improved search, more data feeds and new transaction and data products, starting with the launch of a new 22706.04 13 December 2013 6:27 PM Proof 6 Annual Report and Accounts 2013 06 Chairman’s Statement continued service covering the Renminbi debt market. The Delphi platform is expected to be ready for launch in the second quarter of financial year 2014. The total expected capital investment in Project Delphi is £9.4 million, of which £6.1 million was spent in 2013, with a further £2.7 million expected to be incurred to completion. The cost of this project will be amortised over a four-year period. Capital Appreciation Plan The CAP is the group’s long-term incentive scheme designed to retain and reward those who drive profit growth and is an integral part of the group’s successful growth and investment strategy. approval at the AGM in January 2014, the board proposes to introduce a new CAP, CAP 2014, which will have a similar structure and cost to CAP 2010. The primary performance test under CAP 2014 will require the group to achieve an adjusted profit before tax (and before CAP expense) of £173.6 million by financial year 2017, equivalent to an average profit growth rate of at least 10% a year from a base of £118.6 million* in 2013. This profit target would be adjusted in the event of any significant acquisitions or disposals during the CAP performance period. CAP 2014 awards would vest in three roughly equal tranches in financial years 2018, 2019 and 2020, subject to additional performance tests. Outlook First quarter trading has started in line with the board’s expectations. As part of its strategy, the group has increased significantly the proportion of revenues derived from less volatile subscriptions, and from events. Subscription revenues, supported by deferred revenues at the balance sheet date, should continue to grow, while the outlook for events and training is reasonably robust. However, the sharp improvement in fourth quarter financial advertising has not continued into the first quarter of the new financial year. As usual at this time, forward revenue visibility beyond the first quarter is limited for revenues other than subscriptions. After satisfying the profit target under CAP 2010, the first 50% of CAP 2010 awards vested in February 2013, satisfied by the issue of approximately 1.75 million new ordinary shares and a cash payment of £7.5 million. The second 50% of CAP 2010 awards, to the extent the additional performance test has been satisfied, will vest in February 2014 and lead to the issue of a similar number of new shares and cash distribution. In accounting terms, CAP 2014 is expected to cost the group up to £41 million which will be amortised over its six-year life, against a cost of £30 million for CAP 2010 over its four-year life. A maximum of 3.5 million ordinary shares will be used to satisfy CAP 2014 rewards, with the balance settled in cash. The company intends to acquire these shares in the market over the course of the CAP performance period, rather than through the issue of new shares. The board, supported by its Remuneration Committee, believes the CAP has been an important driver of the fivefold increase in the group’s profits since it was first introduced in 2004. Accordingly, subject to shareholder Further details of the proposed terms of CAP 2014 will be included in the circular to shareholders to be issued in December in connection with the AGM to be held on January 30 2014. While sentiment in financial markets remains reasonably positive, there is usually a lag between their improved profitability and the appetite for financial institutions to increase their spending on marketing, training and information buying. Most customer budgets are calendar year driven so it is too early to determine whether this lag will translate into increased spend in 2014. in In 2014, the board plans to continue its programme of the digital investing transformation of its publishing businesses, in particular using the Delphi platform to improve the quality of its content and launch new products. The board is confident its strategy for investing in new products and technology and using its strong balance sheet to fund further acquisitions will continue to drive further growth. Richard Ensor Chairman November 13 2013 * The base profit for 2013 is £118.6 million, being the adjusted profit before tax of £116.5 million before CAP expense of £2.1 million. 22706.04 13 December 2013 6:27 PM Proof 6 Euromoney Institutional Investor PLC www.euromoneyplc.comAppendix to Chairman’s Statement 07 w e i v r e v O t n e m e t a t S s ’ n a m r i a h C Reconciliation of Consolidated Income Statement to adjusted results for the year ended September 30 2013 The reconciliation below sets out the adjusted results of the group and the related adjustments to the statutory Income Statement that the directors consider necessary in order to provide an indication of the adjusted trading performance. Adjusted £000 Notes Adjust- ments £000 2013 Total £000 Adjusted £000 Adjust- ments £000 2012 Total £000 Total revenue 3 404,704 – 404,704 394,144 – 394,144 Operating profit before acquired intangible amortisation, long-term incentive expense and exceptional items Acquired intangible amortisation Long-term incentive expense Exceptional items 3 11 5 121,088 – 121,088 118,175 – – (15,890) (15,890) – (14,782) (2,100) – – 2,232 (2,100) 2,232 (6,301) – – (1,617) 118,175 (14,782) (6,301) (1,617) Operating profit before associates 118,988 (13,658) 105,330 111,874 (16,399) 95,475 Share of results in associates Operating profit 284 – 284 459 – 459 119,272 (13,658) 105,614 112,333 (16,399) 95,934 Finance income Finance expense Net finance costs Profit before tax Tax expense on profit Profit after tax Attributable to: Equity holders of the parent Equity non-controlling interests 7 7 1,830 (4,575) (2,745) – (7,609) (7,609) 1,830 (12,184) (10,354) 1,500 (7,064) (5,564) 2,975 (977) 1,998 116,527 (21,267) 95,260 106,769 (14,401) 8 (25,241) 3,006 (22,235) (23,359) 831 91,286 (18,261) 73,025 83,410 (13,570) 4,475 (8,041) (3,566) 92,368 (22,528) 69,840 90,884 (18,261) 72,623 83,242 (13,570) 69,672 402 – 402 168 – 168 91,286 (18,261) 73,025 83,410 (13,570) 69,840 Diluted earnings per share 10 70.96p (14.26)p 56.70p 65.91p (10.74)p 55.17p Adjusted figures are presented before the impact of amortisation of acquired intangible assets (comprising trademarks and brands, databases and customer relationships), exceptional items, movements in acquisition deferred consideration, and net movements in acquisition commitment values. In respect of earnings, adjusted amounts reflect a tax rate that includes the current tax effect of the goodwill and intangible assets. Further analysis of the adjusting items is presented in notes 5, 7, 8, 10 and 11 to the Annual Report. 22706.04 13 December 2013 6:27 PM Proof 6 Annual Report and Accounts 2013 08 Strategic Report Euromoney Institutional Investor PLC is listed on the London Stock Exchange and a member 1. Strategy The group’s strategy is designed to build a of the FTSE 250 share index. It is a leading growing, robust and tightly focused global international business-to-business media group information and events business. To achieve this focused primarily on the international finance, strategy the four key objectives are: metals and commodities sectors. It publishes more than 70 titles in both print and online, including Euromoney, Institutional Investor ●● ●● to drive organic growth; using a healthy balance sheet and strong and Metal Bulletin, and is a leading provider cash flows for selective acquisitions to of electronic research and data under the BCA accelerate growth and build market share; Research, Ned Davis Research and ISI Emerging ●● to maintain focus on high margins and Markets brands. It also runs an extensive tight cost control; and portfolio of conferences, seminars and training ●● to retain and foster entrepreneurial culture. courses for financial and other markets. The group’s main offices are in London, New York, Set out below is how the group intends to Montreal and Hong Kong and more than a achieve its objectives, the related risks and third of its revenues are derived from emerging key performance indicators. See page 22 for markets. Details of the group’s legal entities can detailed explanation of the group’s principal risks be found in note 13. and uncertainties and page 12 for the group’s performance against its key performance The Strategic Report has been prepared for the indicators. 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 to assess the company’s strategy and the potential for that strategy to succeed, and the Strategic Report should not be relied upon by any other party for any other purpose. 22706.04 13 December 2013 6:27 PM Proof 6 Euromoney Institutional Investor PLC www.euromoneyplc.com09 t r o p e R c i g e t a r t S e c n a m r o f r e P d n a y g e t a r t S 1.1 Drive organic growth BuilDinG ROBuSt SuBSCRiptiOn AnD RepeAt RevenueS AnD ReDuCinG tHe DepenDenCe On ADveRtiSinG The group has increased the proportion of revenues derived from subscription products to more than half of its total revenues and expects the proportion of revenues derived from subscriptions to remain between 50% and 60% for the foreseeable future. Subscription–based products, particularly online have the advantage of premium–prices, high renewal rates and high margins. Key RiSKS Key peRfORmAnCe inDiCAtORS ●● Downturn in economy or market sector ●● ●● ●● Subscription revenue growth Revenue mix – percentage of revenues from subscriptions Product subscription retention rates DRivinG tOp-line Revenue GROwtH fROm BOtH new AnD exiStinG pRODuCtS Approximately two thirds of the group’s revenues are derived from its information activities including print and online content, databases and research. The other third is derived from events including training. Growth from these activities remains an integral part of the group’s overall strategy. Since 2010, the group has been investing heavily in technology and content delivery platforms, particularly for the mobile user, and in new digital products as part of its transition to an online information business. Key RiSKS ●● ●● Downturn in economy or market sector Failure of online strategy Key peRfORmAnCe inDiCAtORS ●● ●● ●● Revenue growth Like-for-like change in profits Percentage of revenues delivered online uSinG teCHnOlOGy effiCiently tO ASSiSt tHe Online miGRAtiOn Of tHe GROup’S pRint pRODuCtS AnD DevelOp new eleCtROniC infORmAtiOn SeRviCeS The group invests for the long–term in businesses and products that meet certain financial and strategic criteria. The group is investing heavily in its program to migrate its print products online, develop new electronic information services, and to take advantage of mobile and cloud technology. Key RiSKS KEY PERFORMANCE INDICATORS ●● ●● ●● Data integrity, availability and security Failure of central back-office technology Failure of online strategy ●● ●● ●● Investment in technology and new products Online user engagement Product subscription retention rates StRenGtHeninG tHe GROup’S mARKet pOSitiOn in Key AReAS wHiCH HAve tHe CApACity fOR ORGAniC GROwtH uSinG tHe exiStinG KnOwleDGe BASe Of tHe GROup The group has a global customer base with revenue derived from almost 200 countries, with approximately 60% from the US, Canada, UK and the rest of Europe and more than a third of its revenue from emerging markets. Its customer base predominantly consists of financial institutions, governments, financial advisory firms, hedge fund organisations, law firms, commodity traders, other corporate organisations and, for the group’s niche focused products, relevant corporate entities across the length of the respective supply chain. The group has a sizeable and valuable marketing database allowing new and existing products to be matched with relevant companies and individuals. Key RiSKS ●● ●● ●● Travel risk London, New York, Montreal or Hong Kong wide disaster Downturn in economy or market sector Key peRfORmAnCe inDiCAtORS ●● ●● Revenue by customer location Revenue by market sector 22706.04 13 December 2013 6:27 PM Proof 6 Annual Report and Accounts 2013 10 Strategic Report continued 1.2 Using a healthy balance sheet and strong cash flows for selective acquisitions to accelerate growth and build market share mAKinG ACquiSitiOnS tHAt Supplement tHe GROup’S exiStinG BuSineSSeS AnD DiSpOSAlS wHeRe tHey nO lOnGeR fit While the market for acquisitions of specialist online information businesses remains competitive and valuations challenging, the group continues to use its robust balance sheet and strong cash flows to pursue further transactions. Equally, where businesses no longer fit, the group divests. Key RiSKS ●● Acquisitions and disposal risk Key peRfORmAnCe inDiCAtORS ●● ●● Cash consideration on acquisitions Acquisitions: TTI/Vanguard; Insider Publishing; Centre for Investor Education and Quantitative Techniques mAnAGinG itS CASH flOwS tO Keep itS DeBt witHin A net DeBt tO eBitDA limit Of tHRee timeS The group has strong covenants and takes advantage of its ability to borrow money cheaply using these funds to invest in new products and fund acquisitions. The group’s subscription revenues are normally received in advance, at the beginning of the subscription service, and a typical subscription contract would be for a 12–month period. This helps provide the group with strong cash flows and normally leads to cash generated from operations being in excess of adjusted operating profit – a cash conversion percentage in excess of 100%. Key RiSKS ●● Treasury operations Key peRfORmAnCe inDiCAtORS ●● ●● Net debt to EBITDA Cash conversion rate 1.3 Maintain focus on high margins and tight cost control impROvinG OpeRAtinG mARGinS tHROuGH tiGHt COSt COntROl The group’s costs are tightly managed with a constant focus on margin control. The group benefits from having a flexible cost base, outsourcing the printing of publications, hiring external venues for events, and choosing to engage freelancers, contributors, external trainers and speakers to help deliver its products. Other than its main offices, the group avoids the fixed costs of offices in most of the markets in which it operates. This allows the group to scale up resources or reduce overheads as the economic environment in which it operates demands. The group continues to eliminate products with a low margin or too high a dependence on print advertising. Key RiSKS ●● Downturn in economy or market sector Key peRfORmAnCe inDiCAtORS ●● ●● Gross margin Adjusted operating margin 1.4 Retain and foster entrepreneurial culture pROviDinG inCentiveS tO fOSteR An entRepReneuRiAl CultuRe AnD RetAin Key peOple The board does not micro–manage each business, instead devolving operating decisions to the local management of each business, while taking advantage of a strong central control environment for monitoring performance and underlying risk. This encourages an entrepreneurial culture where businesses have the right kind of support and managers are motivated and rewarded for growth and initiative. Key RiSKS ●● Loss of key staff Key peRfORmAnCe inDiCAtORS ●● ●● ●● Long-term incentives (see section 3.3.6 of the Strategic Report) Variable pay as a percentage of total pay CAP profit and Adjusted PBT 22706.04 13 December 2013 6:27 PM Proof 6 Euromoney Institutional Investor PLC www.euromoneyplc.com11 t r o p e R c i g e t a r t S e c n a m r o f r e P d n a y g e t a r t S 2. Business model The group’s activities are categorised into Subscription revenues are the fees that Delegate revenues represent fees paid by customers pay to receive access to the group’s customers to attend a conference, training five operating divisions: Financial Publishing; information, through online access to various course or seminar. Delegate revenues are Business Publishing; Conferences and Seminars; databases, through regular delivery of soft copy derived from the Conferences and Seminars and Training; and Research and Data (see page 2 for research, publications and newsletters or hard Training divisions and from smaller events run by further details). The group has many mutually copy magazines. Subscriptions are also received the publishing businesses. exclusive valuable brands (see page 3) allowing from customers who belong to Institutional the directors to extend the value of existing Investor’s exclusive specialised membership Details of the group’s revenues by revenue products and to develop these in new areas groups. Subscription revenue is primarily stream and by division are set out in note 3. – both on a geographical basis and with new generated from the Financial Publishing, products. For example, publishing businesses Business Publishing and Research and Data The group’s costs are tightly managed with a often run branded events and produce data divisions. products covering their area of specialism. The constant focus on margin control. The group benefits from having a flexible cost base, group has a sizeable and valuable marketing Sponsorship revenues represent fees paid by outsourcing the printing of publications, hiring database allowing new and existing products customers to sponsor an event. A payment external venues for events, and choosing to to be matched with relevant companies and of sponsorship can entitle the sponsor to engage freelancers, contributors, external individuals. high-profile speaking opportunities at the trainers and speakers to help deliver its products. conference, unique branding before, during and Other than its main offices, the group avoids the The group primarily generates revenues from after the event and an unparalleled networking fixed costs of offices in most of the markets in four revenue streams: advertising; subscriptions; opportunity to meet the sponsor’s clients which it operates; this allows the group to scale sponsorship and delegates. and representatives. Sponsorship revenue is up resource or reduce overhead as the economic generated from the Conferences and Seminars environment in which it operates demands. Advertising revenues represent the fees that division and the publishing businesses which customers pay to place an advertisement in one run smaller events. or more of the group’s publications, either in print or online. Advertising revenue is primarily generated from the Financial Publishing and Business Publishing divisions. s S E eleg a t e AINING R nts N et w D R T e v E S R A N n o i t a c W o r k i I M u n d g E E w E A R C H AND DATA i n g Research r o k Sub sc ri p B U D S I N t i o a t a E n S S s 7 million contacts 180 countries A n a l y s i s P U B L I I S H N G s e i t i n u m N e w FIN e ss com s Marketin ANCIAL P dvertisin B U L g A S D N A p i h it s w s r o S E C N s n o Sp h over 30 b u s i n g services Expert vie ISHING CONFER E 22706.04 13 December 2013 6:27 PM Proof 6 Annual Report and Accounts 2013 12 Strategic Report continued 3. Business review 3.1 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/closed Foreign exchange losses on forward contracts Revenue growth by quarter Subscriptions Advertising Sponsorship Delegates Other/closed Revenue 2013 £m 206.3 57.6 51.4 77.8 12.3 (0.7) 404.7 Q1 % (3%) (10%) +8% +1% +35% +1% Mix 2013 % 51% 14% 13% 19% 3% – 100% Q2 % +3% (10%) (3%) (21%) +21% (3%) Revenue 2012 £m Mix 2012 % Revenue growth % 199.7 58.4 47.6 80.1 9.7 (1.4) 394.1 Q3 % +4% (9%) +9% +1% +27% +2% 51% 15% 12% 20% 2% – 100% Q4 % +9% +17% +17% +11% +25% +11% +3% (1%) +8% (3%) +27% – +3% Year % +3% (1%) +8% (3%) +27% +3% Revenue by type Revenue by customer location Revenue by division Eastern Europe 4% Africa 3% ROW 1% Middle East 4% Latin America 4% Subscriptions 51% Advertising 14% Sponsorship 13% Delegates 19% Other 3% US 42% UK 14% Western Europe 15% Asia 13% Other 16% Financial publishing 19% Business publishing 17% Conferences & seminars 25% Training 7% Research & data 32% Gross margin1 Adjusted operating margin2 Like-for-like change in profits3 Investment in technology and new products4 Headcount5 Cash consideration on acquisitions6 Net debt to EBITDA7 Cash conversion rate8 Variable pay as a percentage of total pay9 2013 2012 Change 74.3% 29.9% (£2.7m) £12.3m 2,142 £28.1m 0.09:1 88% 32% 75.1% 30.0% £5.7m £10.0m 2,133 £6.5m 0.27:1 103% 39% (0.8%) (0.1%) £2.3m 9 £21.6m 22706.04 13 December 2013 6:27 PM Proof 6 Euromoney Institutional Investor PLC www.euromoneyplc.com13 t r o p e R c i g e t a r t S e c n a m r o f r e P d n a y g e t a r t S CAP Profit Adjusted PBT CAP 2004 Original Target CAP 2004 Revised Target CAP 2010 Target CAP 2010 Revised Target CAP profit10 and Adjusted PBT11 130 120 110 100 90 80 70 60 50 40 30 20 10 n o i l l i M £ 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 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, long-term incentive expense, exceptional items and associates as a percentage of revenue. Operating profit and revenue are both as per the Consolidated Income Statement in the financial statements. 3. Like-for-like change in profits: proportion of adjusted operating profit growth that relates to organic growth, rather than acquisitions. Adjusted operating profit is from continuing operations and excludes closed businesses, acquired intangible amortisation, exceptional items, long-term incentive expense, unallocated corporate costs and interest and is adjusted for significant timing differences. 4. Investment in technology and new products: the group’s investment in technology and new digital products as part of its transition to an online information business. 5. Headcount: number of permanent people employed at the end of the period excluding people employed in associates. 6. Cash consideration on acquisitions: the total cash outflow on acquisition related activity in the Consolidated Statement of Cash Flows net of cash acquired. 7. Net debt to EBITDA: the amount of the group’s net debt (converted at the group’s weighted average exchange rate for a rolling 12 month period) to earnings before interest, tax, depreciation, amortisation and also before exceptional items but after the normal long-term incentive expense. 8. Cash conversion rate: the percentage by which cash generated from operations covers adjusted operating profit. 9. Variable pay as a percentage of total pay: staff incentives including bonuses, commissions and normal long-term incentive expense as a percentage of total staff costs as per note 6 in the financial statements. 10. CAP profit: profit before tax excluding acquired intangible amortisation, long-term incentive expense, exceptional items, net movements in acquisition commitments values, imputed interest on acquisition commitments, movement in acquisition deferred consideration, foreign exchange loss interest charge on tax equalisation contracts and foreign exchange on restructured hedging arrangements as set out in the Consolidated Income Statement, note 5 and note 7. 11. Adjusted PBT: CAP profit after the deduction of long-term incentive expense as set out on page 7. 22706.04 13 December 2013 6:27 PM Proof 6 Annual Report and Accounts 2013 14 Strategic Report continued 3.2 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 4 to 6, and in section 3.3 below. 3.3 Development of the business of the group 3.3.1 Trading review Total revenues for the year increased by 3% to £404.7 million. After a 1% decline in the first half, the headline rate of revenue growth improved to 6% in the second, due to a combination of gradually improving markets and the contribution from three acquisitions completed in the middle of the year. Underlying revenues, excluding acquisitions, increased by 1%. The group derives nearly two thirds of its total revenue in US dollars and movements in the sterling-US dollar rate can have a significant impact on reported revenues. However, currency movements in 2013 were not significant and headline revenue growth rates are similar to those at constant currency (see table below). Revenues Subscriptions Advertising Sponsorship Delegates Other/closed Foreign exchange losses on forward contracts Total revenue Less: revenue from acquisitions Underlying revenue 2013 £m 206.3 57.6 51.4 77.8 12.3 (0.7) 404.7 (6.2) 398.5 2012 £m 199.7 58.4 47.6 80.1 9.7 (1.4) 394.1 – 394.1 Headline change H1 – (10%) 2% (10%) 29% – (1%) – (2%) H2 7% 5% 12% 5% 26% – 6% – 4% Year 3% (1%) 8% (3%) 27% – 3% – 1% Change at constant exchange rates Year 2% (2%) 7% (3%) 27% – 2% – 1% 22706.04 13 December 2013 6:27 PM Proof 6 Euromoney Institutional Investor PLC www.euromoneyplc.com 15 t r o p e R c i g e t a r t S e c n a m r o f r e P d n a y g e t a r t S Headline subscription revenues increased by The group’s adjusted operating margin was dependent on advertising. The growth achieved 3% to £206.3 million, after a flat first half, and 30%, the same as 2012. Over the past four in the first half continued into the second, with again accounted for just over half of group years the group has consistently delivered revenues up 7% to £68.9 million and adjusted revenues. Underlying subscription revenues, steady operating margins around the 30% operating profits 5% ahead at £25.8 million. For excluding acquisitions, increased by 2% with level. Increased spend on technology and digital the first time, profits from business publishing the strongest performances coming from CEIC products has reduced margins in the publishing exceeded those from financial publishing. Data, the emerging markets data business, and businesses, but has been largely offset by Institutional Investor’s membership business. changes in the divisional mix towards higher Conferences and Seminars: revenues comprise Revenues from independent research were margin research and data products, as well as both sponsorship and paying delegates and unchanged. rigorous cost control and a constant refreshing increased by 5% to £99.4 million, despite the of the portfolio with new products replacing timing differences on biennial events in the first After two years of decline, advertising revenues those with lower margins. The permanent half, and helped in the second by a contribution returned to growth in the final quarter. This was headcount at September 30 was 2,142 people, from CIE. Growth was achieved across most largely driven by factors specific to the quarter: including 38 from businesses acquired in the sectors and reflects both new events and more new products and a tendency for advertising in year, against 2,133 a year ago. robust US financial markets. However, adjusted the main financial titles, Euromoney, Institutional Investor, Latin Finance and Asiamoney, to be concentrated in their IMF issues published in 3.3.2 Business division review Research and Data: this division accounts for September. This quarterly improvement is more a third of group revenues and, with its higher operating profits fell by 4% to £28.9 million and the decline in adjusted operating margin is largely due to the event timing differences. indicative of product timing than a sustained margins, nearly 40% of group operating Training: the group’s training division improvement in advertising markets. Over the profits before central costs. Revenues are predominantly serves the global financial sector year, advertising fell across most of the group’s derived predominantly from subscriptions and banks have continued to tightly control titles with Latin Finance, which celebrated its 25th anniversary, and the energy titles the only significant exceptions. and increased by 1% to £131.3 million while headcount and training budgets. Revenues fell adjusted operating profits fell by 1% to by 3% to £30.1 million, although performance £54.8 million. The trends seen in the first half in the second half showed an improvement on continued, with financial institutions exercising the first. The decline in operating margin from Event sponsorship revenues have continued to tight control over their information buying and 22% to 18% reflects the high operational grow from a combination of new events and new business difficult to generate. In addition, gearing in this business and adjusted operating strong demand for emerging market events, US sequestration had a negative impact in the profits fell by 23% to £5.4 million. helped in the second half by the acquisitions second half as customers including government of Insider Publishing and CIE. Paying delegate agencies and libraries were forced to cut costs. attendance improved across most of the event That apart, renewal rates for most products 3.3.3 Financial review The adjusted profit before tax of £116.5 million businesses, mostly due to new events. The remained robust, and more recently have shown compares to a statutory profit before tax of £95.3 first half decline in revenues was due to timing signs of improving. differences on biennial events not held this year. million. A detailed reconciliation of the group’s adjusted and statutory results is set out on page Financial Publishing: revenues increased by 7. The statutory profit is generally lower than Other revenues largely comprise content 2% to £75.6 million while adjusted operating the adjusted profit before tax because of the redistribution royalties and one-off content profits fell by 1% to £23.8 million. An impact of acquired intangible amortisation and sales. Although only accounting for 3% of total advertising-led rebound in the final quarter, and non-cash movements in acquisition liabilities. revenues, these revenues increased sharply as a contribution from Insider Publishing, helped the group continues to explore the possibilities offset first half weakness. The 1% point decline A net exceptional credit of £2.2 million (2012: for alternative distribution channels for its in the adjusted operating margin reflects the £1.6 million charge) was recognised. This content. continued investment in the transition to a includes a credit of £4.4 million for negative digital first publishing model. goodwill arising from the valuation of intangibles Business Publishing: the group’s activities Techniques, offset by acquisition, restructuring in the non-financial sectors of the market, and other exceptional costs of £2.2 million. as part of the acquisition of Quantitative particularly energy and telecoms, have proved more robust, partly because they are less 22706.04 13 December 2013 6:27 PM Proof 6 Annual Report and Accounts 2013 16 Strategic Report continued The reduction in long-term incentive expense to £2.1 million (2012: £6.3 million) reflects the final cost of CAP 2010, which has now been fully amortised after the performance test was satisfied in 2011 and again in 2012. Adjusted net finance costs for the group’s committed borrowing facility fell by £2.8 million to £2.7 million, reflecting lower debt levels during the year. The average cost of funds for the year was 4.7% (2012: 4.8%). Statutory net finance costs of £10.4 million (2012: £3.6 million) include a charge of £4.7 million for the increase in deferred consideration payable on two of the acquisitions completed in the year which have performed better than expected since acquisition, and a charge of £2.7 million largely due to the extension of the put option agreement to acquire the outstanding minority interest in Ned Davis Research. The adjusted effective tax rate for the year was 22%, the same as 2012. The tax rate depends on the geographic mix of profits and applicable tax rates. The group has benefited this year from the reduction in the UK corporate tax rate from 24% to 23%, although this was offset by the expiry of the US tax deduction for goodwill amortisation from the acquisition of Institutional Investor 15 years ago. The UK tax rate will fall further to 21% in April 2014 and 20% in April 2015. The group continues to generate two thirds of its revenues, including approximately 30% of the revenues from its UK businesses, and more than half its operating profits in US dollars. The group hedges its exposure to the US dollar revenues in its UK businesses by using forward contracts to sell surplus US dollars. This delays the impact of movements in exchange rates for at least a year. Significant non-operating cash outflows in the year included four acquisitions with a net cash cost of £28.1 million, dividends of £27.2 million against £7.5 million in 2012 when a scrip dividend was offered, and capital investment in Project Delphi of £6.1 million. Cash generated from operations fell by £16.0 million to £106.2 million and the operating cash conversion rate was 88% (2012: 103%). The reduction in operating cash flow and operating cash conversion was due to cash payments in 2013 in respect of long-term incentive costs and profit shares which were expensed in 2012 or earlier. The underlying operating cash conversion rate, after adjusting for these timing differences, was unchanged at 103%. The company’s policy is to distribute a third of its after-tax earnings by way of dividends each year. Pursuant to this policy, the board recommends a final dividend of 15.75p a share (2012: 14.75p) giving a total dividend for the year of 22.75p a share (2012: 21.75p). As explained in previous announcements, following the earlier than expected achievement of the CAP 2010 profit target an additional accelerated CAP expense of £6.6 million was not charged against earnings for dividend purposes in 2011, but is being spread over the period to which it originally related. Accordingly, earnings for dividend purposes were reduced by £1.1 million in 2012 and by £3.9 million in 2013, and will be similarly reduced by £1.6 million in 2014. It is expected that the final dividend will be paid on February 13 2014 to shareholders on the register at November 22 2013. The group does not hedge the foreign exchange risk on the translation of overseas profits, although it does endeavour to match foreign currency borrowings with investments and the related foreign currency finance costs provide a partial hedge against the translation of overseas profits. The translation impact on overseas profits of a one cent movement in the average US dollar exchange rate is approximately £0.6 million on an annualised basis. The average sterling-US dollar rate for the year was $1.56 (2012: $1.58). 3.3.4 Net debt, cash flow and dividend Net debt at September 30 was £9.9 million compared with £38.1 million at March 31 and £30.8 million last year-end. The group’s debt is provided through a dedicated multi-currency committed facility from its parent company, Daily Mail and General Trust plc (DMGT). The group has exercised its option to replace its existing $300 million (£190 million) facility with DMGT, which expires in December 2013, with a new $160 million (£100 million) facility which expires at the end of April 2016. This new facility will continue to provide funding for the group’s acquisition strategy. 22706.04 13 December 2013 6:27 PM Proof 6 Euromoney Institutional Investor PLC www.euromoneyplc.com17 t r o p e R c i g e t a r t S e c n a m r o f r e P d n a y g e t a r t S 2013 £m 505.6 16.8 (31.1) (7.4) (117.3) (1.3) (6.9) (2.9) (11.8) 343.7 (9.9) 333.8 2012 £m Change £m 469.3 18.0 (7.9) (14.1) (105.1) (4.8) (22.3) (4.8) (9.6) 318.7 (30.8) 287.9 36.3 (1.2) (23.2) 6.7 (12.2) 3.5 15.4 1.9 (2.2) 25.0 20.9 45.9 3.3.5 Balance Sheet The main movements in the balance sheet were as follows: Goodwill and other intangible assets Property, plant and equipment Acquisition commitments and deferred consideration Liability for cash-settled options Deferred income Other non-current assets and liabilities Other current assets and liabilities Net pension deficit Deferred tax Net assets before net debt Net debt Net assets These movements are explained below: ●● Goodwill and other intangible assets – includes £25.3 million of goodwill and £23.4 million of acquired intangible assets following the acquisitions during the year of TTI/Vanguard, Insider Publishing, Centre for Investor Education (CIE) and Quantitative Techniques (QT) (see note 14) and the addition of £6.1 million of intangible assets in development, offset by amortisation costs of £15.9 million; ●● ●● Property, plant and equipment – regular capital expenditure across the group of £2.7 million offset by depreciation of £3.9 million; Acquisition commitments – increased by £7.2 million to £15.0 million, deferred consideration increased by £16.0 million to £16.1 million – due to the acquisitions of TTI/Vanguard, Insider Publishing and CIE and an increase in the Ned Davis Research (NDR) acquisition commitment following the amended acquisition agreement for the remaining equity shareholding; ●● Liability for cash settled options – reflecting the cash payment of £7.6 million following the vesting of the first tranche of the cash element of CAP 2010 in February 2013; ●● Deferred income – due to balances brought into the balance sheet following this year’s acquisitions and an underlying increase in deferred subscription revenue, mainly from NDR as it continues to move clients onto subscription contracts; ●● Other current assets and liabilities – includes an increase in trade debtors and accrued subscription income also due to balances brought into the balance sheet following the acquisitions together with the impact from NDR as it moves clients onto subscription contracts. Prepayments increased as deferred consideration was paid in advance into escrow following the acquisitions of Insider Publishing and CIE. Accruals fell, with lower profit shares and bonuses following the death of Padraic Fallon in October 2012; ●● ●● Net pension deficit – a £2.8 million increase in the pension asset value offset by a £0.9 million increase in the obligation; Net debt – the DMGT loans reduced by the group’s excess cash: net cash generated by the group from operations of £106.1 million offset by £31.6 million used in investing activities, £33.4 million spent on financing activities (excluding repayment of loans), £19.2 million on tax and an exchange loss of £1.0 million, (see cash flow on page 82). 22706.04 13 December 2013 6:27 PM Proof 6 Annual Report and Accounts 2013 18 Strategic Report continued 3.3.6 Capital Appreciation Plan (CAP) The CAP, the group’s long-term incentive plan, remains an important part of the group’s Acquisitions Purchase of new business tti technologies, llC (tti/vanguard) On December 21 2012, the group acquired The remaining 12.8% equity holding will be acquired in two instalments of 7.4% in March 2014 based on a pre-determined multiple of the profits for the year to December 31 2013 and remuneration strategy. It is a highly geared, 87.2% of the equity of TTI/Vanguard, a 5.4% in March 2015 based on a pre-determined performance-based share option scheme US-based private membership organisation for multiple of the profits for the year to December which both directly rewards executives for executives who lead technology innovation 31 2014. The total discounted amount that the the growth in profits of the businesses they in global organisations, for US$8,063,000 group expects to pay at September 30 2013 manage, and links to the delivery of shareholder (£5,031,000) followed by a working capital under the earn-out agreement is US$678,000 value by satisfying rewards in a mix of shares adjustment of £91,000 in June 2013. The (£418,000) calculated using the group’s WACC. in the company and cash. It aims to deliver acquisition of TTI/Vanguard is consistent with exceptional profit growth over the performance the group’s strategy of acquiring high-quality period and for this profit to be maintained over events businesses and accelerating their growth the remaining payout period. The graph set globally. out in the Directors’ Remuneration Report on page 49 shows the group’s profit achieved since the introduction of the CAP scheme. Further details are set out in the Company Share Schemes section in the Directors’ Remuneration Report. 3.3.7 Acquisitions and disposals Acquisitions remain an important 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 revenues and profits by buying into rapidly growing niche businesses. The group continues to look for strategic acquisitions which will fit well with its existing businesses. US-based private membership for executives who lead technology innovation in global organisations Australian provider of investment forums for senior executives of superannuation funds and global asset management firms Leading information source and events provider for the international insurance/reinsurance markets. Mostly online and subscription-driven Leading provider of online data, intelligence and events for the global infrastructure sector. Also mostly online and subscription- driven. €50tr global investment by 2025 Benchmark and calculation agent business of HSBC: creates and maintains c100 equity/bond indices for HSBC Global Markets division, and over 60 external clients insider publishing On March 19 2013, the group acquired 100% of the equity share capital of Insider Publishing Limited, a leading information source and events provider for the international insurance and reinsurance markets, for an initial cash consideration of £14,148,000, followed by a working capital adjustment of £2,549,000 in June 2013. The acquisition is consistent with the group’s strategy of investing in specialist online information businesses and using its global reach to drive further growth. 22706.04 13 December 2013 6:27 PM Proof 6 Euromoney Institutional Investor PLC www.euromoneyplc.comAt acquisition a discounted deferred consideration of £8,342,000 was recognised. In May 2013, deferred consideration of £251,000 was paid and the remaining discounted deferred consideration of £8,091,000 was expected to be paid between March 2014 and March 2015 dependent upon the audited results of the business for the average of the 2013 and 2014 calendar years. The discounted expected payment under this mechanism increased to £11,081,000 at September 30 2013 resulting in a charge to the Income Statement of £2,990,000. At the date of acquisition, £2,400,000 of the deferred consideration was paid in advance into escrow. Centre for investor education (Cie) On April 18 2013, the group acquired 75% of the trade and assets of CIE, a leading Australian provider of investment forums for senior executives of superannuation funds and global asset management firms, for A$10,800,000 (£7,415,000) offset by a working capital adjustment receipt of £929,000 in July 2013. By combining CIE with the expertise and relationships of Institutional Investor’s forums and memberships, the group expects to consolidate its leading position in the global asset management events sector. A discounted deferred consideration of A$5,586,000 (£3,835,000) was expected to Ned Davis Research 19 t r o p e R c i g e t a r t S e c n a m r o f r e P d n a y g e t a r t S be paid between March 2014 and March 2015 dependent upon the audited results of the business for the 2013 and 2014 calendar years. Increase in equity holdings internet Securities, inc. (iSi) During the year the group spent £67,000 on the The expected payment under this mechanism remaining 0.08% interest in ISI, the emerging increased to A$8,737,000 (£5,044,000) at market content aggregator and data business, September 30 2013 resulting in a charge to the taking its holding to 100%. Income Statement of £1,209,000. In April 2013, A$3,600,000 (£2,472,000) of the deferred consideration was paid in advance into escrow. The remaining 25% interest in the trade and assets of CIE will be acquired in two equal instalments based on the profits for the calendar years to 2014 and 2015. The total discounted amount that the group expects to pay at September 30 2013 under this earn-out agreement is A$7,315,000 (£4,224,000). quantitative techniques (qt) On April 3 2013, the group signed a binding agreement with HSBC to acquire its QT operation for £1. QT is the benchmark and calculation agent business of HSBC Bank plc and creates and maintains more than 100 equity and bond indices for HSBC’s Global Markets division as well as over 60 external clients. Completion of the sale took place on September 30 2013. HSBC has agreed to purchase index calculation services from QT for a minimum period of three years. The group believes the acquisition Structured Retail products limited (SRp) In April 2013, the group purchased 0.76% of the equity share capital of SRP from some its employees for a cash consideration of £86,000, representing the fair value of 0.76% of assets at date of acquisition, increasing the group’s equity shareholding in SRP to 98.94%. 3.3.8 Headcount The number of people employed is monitored monthly to ensure there are sufficient resources to meet the forthcoming demands of each business and to make sure that the businesses continue to deliver sustainable profits. During 2013 the directors have focused on maintaining headcount at a similar level to that in 2012, hiring new heads only where it was considered essential or for investment purposes. Headcount at September 2013 was 2,142, an increase of only nine since September 2012, including 38 acquired heads offset by restructuring across creates an opportunity to establish a significant the group. footprint in the index compilation market. Further details of the above acquisitions are set out in note 14. 3.3.9 Marketing and digital development The group’s digital development continues with record investment. Part of this contributes to a major scale roll-out of best-in-class publishing authoring tools and a new content management system. The group’s customers increasingly desire mobile access – Euromoney launched 13 22706.04 13 December 2013 6:27 PM Proof 6 Annual Report and Accounts 2013 20 Strategic Report continued new mobile and tablet services in 2013, as well as redesigning online sites and email alerts with responsive design, to adapt to the mobile or tablet interface. Notable new product launches include: SteelFirst – one of the group’s most significant online product launches to date, this has already become one of the top news, pricing data and analysis service for the steel industry delivered via online, email alerts and mobile; Sovereign Wealth Center – provides detailed information, Social media growth and visibility across all To aid in flexible delivery a new locally based brands continues with over 335,000 members partnership was introduced that is proving (130% increase from last year). These members particularly successful. insight, deal flows and data on sovereign wealth are highly engaged through third party funds; Digital Maps for Petroleum Economist – interactive map providing interactive country-and-project level infrastructure networks, such as LinkedIn and Twitter, as well The first phase of Project Delphi continued as as the group’s own social networks, and now planned with the successful trial of the first contribute to event sales, subscription trials and new BCA product in May and the integration information and data on the world’s Liquid sponsorship opportunities. of an acquisition. All EuroWeek content will be created using the new authoring platform and is Natural Gas; Islamic Finance – information service and comprehensive and timely analysis for the Islamic banking community. Customer-segmented campaign management and social media have dominated marketing in 2013. The group made a recent investment in a new campaign system that sits on top of proprietary customer database and enables personalised cross-channel campaigns and an improved customer marketing experience. Combined with this new process is the increasing investment in customer insight data – the group now help customers find the right products and services through their online behaviour, online chat plus user feedback and trial/purchase history. The marketing structure and central contacts now truly digital first. Plans for the second phase data capability have enabled the company to of Project Delphi and an accelerated rollout are rapidly integrate new acquisitions – Euromoney also underway while the project itself has been Indices, Insurance Insider and Infrastructure shortlisted for an Agile development award. Journal have all benefited from this capability. Forty other projects were also completed 3.3.10 Systems and information technology The group continues to focus significant investment on enhancing its corporate and digital infrastructure and services as well the people that deliver it. A number of new products were launched as well as existing digital assets redesigned during the year to support continued business demand. with a focus on updating legacy codebases and delivering mobile and socially integrated products. Notable launches include the American Metal Market iPad app, EuromoneyIndices.com and StructuredRetailProducts.com. There are now over 15 apps available across the group with five publications available in Apple’s newsstand. All new development projects are now run on an Agile/Kanban basis with Behaviour Driven Design. The project to migrate the digital and corporate infrastructure to an enterprise-class hybrid, cloud supplier was successfully completed while a leading search solution was also enabled via Elastic Search. This, in conjunction with rigorous new service management disciplines, has resulted in business-impacting incidents being reduced by over 50% during the year. Investment was increased again in information security with a revised auditable baseline plan agreed across the group entities. The corporate network has been upgraded to improve its resilience, support the increasing demands of a global, remote workforce, and to absorb network demand from three new satellite 22706.04 13 December 2013 6:27 PM Proof 6 Euromoney Institutional Investor PLC www.euromoneyplc.com 21 t r o p e R c i g e t a r t S e c n a m r o f r e P d n a y g e t a r t S The group is therefore exposed to foreign exchange risk on the US dollar revenues in its Tax The adjusted effective tax rate based on UK businesses, and on the translation of the adjusted profit before tax and excluding results of its US dollar-denominated businesses. deferred tax movements on intangible assets, prior year items and exceptional items is 22% In order to hedge its exposure to US dollar (2012: 22%). The group’s reported effective tax revenues in its UK businesses, a series of forward rate decreased to an expense of 23% compared contracts are put in place to sell forward surplus to an expense of 24% in 2012. A reconciliation US dollars. The group hedges 80% of forecast to the underlying effective rate is set out in US dollar revenues for the coming 12 months note 8 in the accounts. and up to 50% for a further six months. The total net deferred tax balance held is a The group does not hedge the foreign exchange liability of £11.8 million (2012: £9.6 million) and risk on the translation of overseas profits, relates primarily to capitalised intangible assets although it does endeavour to match foreign and rolled over capital gains, net of deferred currency borrowings with investments and the tax assets held in respect of US tax losses and related foreign currency finance costs provide a short-term timing differences and the future partial hedge against the translation of overseas deductions available for the CAP. profits. As a result of this hedging strategy, any profit or loss from the strengthening or weakening of the US dollar will largely be delayed until the following financial year and offices following the group’s acquisitions. A Microsoft Office 365 and Windows platform rollout will be completed within the second quarter of 2014 as planned while an upgrade to the Customer Relationship Management platform is also underway. These steps have positioned the group to make the most of product opportunities and increased the group’s agility allowing technical staff to focus on revenue-generating activities rather than commodity maintenance. 3.3.11 Tax and treasury 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 mitigate 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 beyond. Details of the financial instruments used are set out in note 18 to the accounts. 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. Given the group’s low level of debt, there were no interest rate hedges in place as at September 30 2013. The group generates approximately two-thirds of its revenues in US dollars, including approximately 30% of the revenues in its UK-based businesses, and approximately 60% of its operating profits are US dollar-denominated. 22706.04 13 December 2013 6:27 PM Proof 6 Annual Report and Accounts 2013 22 Strategic Report continued 4. Principal risks and uncertainties The principal risks and uncertainties the group faces vary across the different businesses and are identified in the group’s risk register. Management of significant risk is regularly on the agenda of the board and other senior management meetings. The geographical spread and diverse portfolio of businesses within the group help to dilute the impact of some of the group’s key risks. The group’s principal risks and uncertainties are summarised below. The arrows provide a pictorial indication in the change in riskiness of each principal risk compared to last year. DOwntuRn in eCOnOmy OR mARKet SeCtOR The group generates significant income from certain key geographical regions and market sectors for its publishing, events, research and data businesses. pOtentiAl impACt mitiGAtiOn Uncertainty in global financial markets increases the risk of a downturn The group has a diverse product mix and operates in many geographical or potential collapse in one or more areas of the business. If this occurs locations. This reduces dependency on any one sector or region. income is likely to be adversely affected and for events businesses some Management has the ability to cut costs quickly if required or to abandonment costs may also be incurred. switch the group’s focus to new or unaffected markets e.g. through development of new vertical markets or transferring events to better performing regions. tRAvel RiSK The conference, seminar and training businesses account for approximately a third of the group’s revenues and profits. The success of these events and courses relies heavily on the confidence in and ability of delegates and speakers to travel internationally. pOtentiAl impACt mitiGAtiOn Significant disruptions to or reductions in international travel for any Where possible, contingency plans are in place to minimise the reason could lead to events and courses being postponed or cancelled disruption from travel restrictions. Events can be postponed or moved and could have a significant impact on the group’s performance. to another location, or increasingly can be attended remotely using online technologies. Cancellation and abandonment insurance is in Past incidents such as transport strikes, extreme weather including place for the group’s largest events. hurricanes, terrorist attacks, fears over SARS and swine flu, and natural disasters such as the disruption from volcanic ash in Europe, have all had a negative impact on the group’s results, although none materially. 22706.04 13 December 2013 6:27 PM Proof 6 Euromoney Institutional Investor PLC www.euromoneyplc.com23 t r o p e R c i g e t a r t S e c n a m r o f r e P d n a y g e t a r t S COmpliAnCe witH lAwS AnD ReGulAtiOnS Group businesses are subject to legislation and regulation in the jurisdictions in which they operate. The key laws and regulations that may have an impact on the group cover areas such as libel, bribery and corruption, competition, data protection, privacy (including e–privacy), health and safety and employment law. Additionally, specific regulations from the Audit Bureau of Circulations apply to published titles (see incorrect circulation claims below). pOtentiAl impACt mitiGAtiOn A breach of legislation or regulations could have a significant impact Compliance with laws and regulations is taken seriously throughout on the group in terms of additional costs, management time and the group. The group’s Code of Conduct (and supporting policies) sets reputational damage. out appropriate standards of business behaviour and highlights the key legal and regulatory issues affecting group businesses. Divisional and In recent years responsibilities for managing data protection have local management are responsible for compliance with applicable local increased significantly. The emergence of new online technology is laws and regulations, overseen by the executive committee and the further driving legislation and responsibilities for managing data privacy. board; and supported by internal audit. Failure to comply with data protection and privacy laws could result in significant financial penalties and reputational damage. The group has strict policies and controls in place for the management of data protection and privacy with staff receiving relevant training. This year the group began rolling out new website technology across its online businesses to reinforce legal and regulatory compliance. Controls are also in place to comply with the Audit Bureau of Circulation’s regulations and other regulatory bodies to which the group adheres. DAtA inteGRity, AvAilABility AnD CyBeR SeCuRity The group uses large quantities of data including customer, employee and commercial data in the ordinary course of its business. The group also publishes data (see published content risk below). The integrity, availability and security of this data is key to the success of the group. Risk to the group’s data has increased as a result of the growing number of cyber attacks affecting organisations around the world. pOtentiAl impACt mitiGAtiOn Any challenge to the integrity or availability of information that the The group has comprehensive information security standards and group relies upon could result in operational and regulatory challenges, policies in place which are reviewed on a regular basis. Access to key costs to the group, reputational damage to the businesses and the systems and data is restricted, monitored, and logged with auditable data permanent loss of revenue. This risk has increased as the threat of cyber trails. Restrictions are in place to prevent unauthorised data downloads. attack has become more significant. A successful cyber attack could The group is subject to regular internal information security audits, cause considerable disruption to business operations. supplemented by expert external resource. The group continues to invest in appropriate cyber defences including implementation of The wider use of social media has also increased information risk as intrusion detection systems to mitigate the risk of unauthorised access. negative comments made about the group’s products can now spread The group’s Information Security Group meets regularly to consider and more easily. address cyber risks. Although technological innovations in mobile working, the Comprehensive back-up plans for IT infrastructure and business data introduction of cloud-based technologies and the growing use of social are in place to protect the businesses from unnecessary disruption. media present opportunities for the group, they also introduce new information security risks that need to be managed carefully. The group has professional indemnity insurance. 22706.04 13 December 2013 6:27 PM Proof 6 Annual Report and Accounts 2013 24 Strategic Report continued 4. Principal risks and uncertainties continued lOnDOn, new yORK, mOntReAl OR HOnG KOnG wiDe DiSASteR The group’s main offices are located in London, New York, Montreal and Hong Kong. A significant incident affecting these cities could lead to disruption to group operations. POTENTIAL IMPACT MITIGATION An incident affecting one or more of the key offices could disrupt the Business continuity plans are in place for all businesses. These plans are ordinary operations of the businesses at these locations; a region-wide refreshed annually and a programme is in place for testing. If required, disaster affecting all offices could have much worse implications with employees can work remotely. serious management and communication challenges for the group and a potential adverse effect on results. The group has robust IT systems with key locations (including the UK, US, Canada and Asia) benefiting from offsite data back-ups, remote The risk of office space becoming unusable for a prolonged period and recovery sites and third-party 24-hour support contracts for key a lack of suitable alternative accommodation in the affected area could applications. also cause significant disruption to the business and interfere with delivery of products and services. The group’s business continuity planning helped its New York office to recover quickly and effectively from the significant disruption caused by Incidents affecting key clients or staff in these regions could also give Hurricane Sandy in 2012. rise to the risk of not achieving forecast results. puBliSHeD COntent RiSK The group generates a significant amount of its revenue from publishing magazines, journals or information and data online. As a result, there is an inherent risk of error which, in some instances, may give rise to claims for libel. The rapid development of social media has increased this risk. The transition to online publishing means content is being distributed far quicker and more widely than ever before. This has introduced new challenges for securing and delivering content and effective management of content rights and royalties. The business also publishes databases and data services with a particular focus on high–value proprietary data. There is the potential for errors in data collection and data processing. The group publishes industry pricing benchmarks for the metals markets and more than 100 equity and bond indices. The group also runs more than 100 reader polls and awards each year. POTENTIAL IMPACT MITIGATION A successful libel claim could damage the group’s reputation. The rise The group runs mandatory annual libel courses for all journalists and in use of social media, and in particular blogging, has further increased editors. Controls are in place, including legal review, to approve content this risk. Damage to the reputation of the group arising from libel could that may carry a libel risk. The group also has editorial controls in place lead to a loss of revenue, including income from advertising. In addition for publishing using social media and this activity is monitored carefully. there could be costs incurred in defending the claim. The failure to manage content redistribution rights and royalty rights tightly. Royalty and redistribution agreements are in place to agreements could lead to overpayment of royalties, loss of intellectual mitigate risks arising from online publishing. The group’s policy is to own its content and manage redistribution property and additional liabilities for redistribution of content. The group has implemented tight controls for the verification, cleaning and processing of data used in its database, research and data services. 22706.04 13 December 2013 6:27 PM Proof 6 Euromoney Institutional Investor PLC www.euromoneyplc.com25 t r o p e R c i g e t a r t S e c n a m r o f r e P d n a y g e t a r t S puBliSHeD COntent RiSK continued POTENTIAL IMPACT MITIGATION The integrity of the group’s published data is critical to the success The group’s processes and methodologies for assessing metals and of the group’s database, research and data services. The group also other commodity prices and calculating indices are clearly defined publishes extensive pricing information and indices for the global and documented. All employees involved with publishing pricing metals industries and financial markets. Errors in published data, price information or indices receive relevant training. Robust contractual assessments or indices could affect the reputation of the group leading disclaimers are in place for all businesses that publish pricing data, to fewer subscribers and lower revenues. benchmarks and indices. Any challenge to the integrity of polls and awards could damage the Polls and awards are regularly audited and a firewall is in place between reputation of the product and by association the rest of the group, the commercial arm of the business and the editors involved in the polls resulting in legal costs and a permanent loss of revenue. and awards. Key staff are aware of the significant risks associated with publishing content and strong internal controls are in place for reporting to senior management if a potential issue arises. The group also has libel insurance and professional indemnity cover. inCORReCt CiRCulAtiOn OR AuDienCe ClAimS The group publishes over 70 titles and sells advertising based partly on circulation and online audience figures. An incorrect claim for circulation or audience could adversely affect the group’s reputation. POTENTIAL IMPACT MITIGATION A claim resulting from an incorrect circulation or audience claim could The group audits the circulation figures of every publication regularly lead to the permanent loss of advertisers and other revenue and and monitors related internal controls. A strict approval system is in damage to the reputation of the group. place for all media packs. Detailed guidance is provided to all relevant 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 including online traffic reporting. 22706.04 13 December 2013 6:27 PM Proof 6 Annual Report and Accounts 2013 26 Strategic Report continued 4. Principal risks and uncertainties continued lOSS Of Key StAff The group is reliant on key management and staff across all of its businesses. Many products are dependent on specialist, technical expertise. POTENTIAL IMPACT MITIGATION The inability to recruit and retain talented people could affect the Long-term incentive plans are in place for key staff to encourage group’s ability to maintain its performance and deliver growth. retention. The directors remain committed to recruitment and retention of high-quality management and talent, and provide a programme of When key staff leave or retire, there is a risk that knowledge or career opportunity and progression for employees including extensive competitive advantage is lost. training and international transfer opportunities. Succession planning is in place for senior management. In 2012, following an independent and rigorous selection process PR Ensor, managing director, succeeded PM Fallon as executive chairman. CHC Fordham, an executive director since 2003, succeeded Mr Ensor. fAiluRe Of CentRAl BACK-OffiCe teCHnOlOGy The business has invested significantly in central back–office technology to support the transition of the business from print to online publishing. The back–office provides customer and product management, digital rights management, e–commerce and performance and activity reporting. The platform supports a large share of the group’s online requirements including key activities for publishing, events and data businesses. The back–office technology is critical to the successful functioning of the online business and hence carries a significant amount of risk. POTENTIAL IMPACT MITIGATION A failure of the back-office technology may affect the performance, The group continues to invest significantly in its central back-office data integrity or availability of the group’s products and services. Any technology. The platform is planned, managed and run by a dedicated, extensive failure is likely to affect a large number of businesses and skilled team and its progress and performance are closely monitored by customers, and lead directly to a loss of revenues. the executive committee and the board. Online customers are accessing the group’s digital content in an The group continues to invest in digital rights management technology increasing number of ways, including using websites, apps and to ensure its content is adequately secured and changing customer e-books. The group relies on effective digital rights management requirements for accessing the group’s products and services are met. technology to provide flexible and secure access to its content. An inability to provide flexible access rights to the group’s content could Operational and financial due diligence is undertaken for all key lead to products being less competitive or allow unauthorised access to suppliers as part of a formal risk assessment process as well as regular content, reducing subscription revenues as a result. monitoring. Contingency planning is carried out to mitigate risk from The group’s reliance on key suppliers, particularly IT suppliers, has supplier failure. increased. An operational or financial failure of a key supplier could The group has made a substantial investment in e-commerce technology affect the group’s ability to deliver products, services or events with a and hosting infrastructure to ensure the back-office platform continues direct impact on management time and financial results. to perform effectively. A reduction in back-office technology investment increases the risk of the online platform becoming ineffective with the group becoming less competitive. This could lead to fewer customers and declining group revenues. 22706.04 13 December 2013 6:27 PM Proof 6 Euromoney Institutional Investor PLC www.euromoneyplc.com27 t r o p e R c i g e t a r t S e c n a m r o f r e P d n a y g e t a r t S ACquiSitiOn AnD DiSpOSAl RiSK As well as launching and building new businesses, the group continues to make strategic acquisitions where opportunities exist to strengthen the group. The management team reviews a number of potential acquisitions each year with only a small proportion of these going through to the due diligence stage and possible subsequent purchase. The strategy also results in the disposal of businesses that no longer fit the group’s strategy. POTENTIAL IMPACT MITIGATION There is a risk that an acquisition opportunity could be missed. The group Senior management perform detailed in-house due diligence on could also suffer an impairment loss if an acquired business does not all possible acquisitions and call on expert external advisers where generate the expected returns or fails to operate or grow. Additionally, necessary. Acquisition agreements are usually structured so as to retain there is a risk that a newly acquired business is not integrated into key employees in the acquired company and there is close monitoring the group successfully or that the expected risks of a newly acquired of performance at board level of the entity concerned post-acquisition. entity are misunderstood. As a consequence a significant amount of management time could be diverted from other operational matters. The board regularly reviews the group’s existing portfolio of businesses to identify underperforming businesses or businesses that no longer fit The group is also subject to disposal risk, possibly failing to achieve with the group’s strategy and puts in place divestment plans accordingly. optimal value from disposed businesses, failing to identify the time at which businesses should be sold or underestimating the impact on the remaining group from such a disposal. fAiluRe Of Online StRAteGy The emergence of new technologies such as tablets and other mobile devices and the proliferation of social media are changing how customers access and use the group’s products and services. The group has established a strategy to meet the many challenges of migrating the publishing businesses from traditional print media to online and to ensure the non–publishing businesses take advantage of new technology when advantageous to do so. This strategy has been pursued for a number of years. POTENTIAL IMPACT MITIGATION The group’s online strategy addresses a number of challenges arising The group is already embracing these challenges and overall sees the from the group’s transition from print media to an online business and Internet and other technological advances as an opportunity, not a changing customer behaviour. threat. Competition has increased, with free content becoming more available Significant investment in the group’s online strategy has already on the Internet and new competitors benefiting from lower barriers to been made and will continue for as long as necessary. New content entry. A failure to manage pricing effectively or successfully differentiate management technology is being implemented across the group the group’s products and services could negatively affect business to enable more effective publishing to web, print and the rapidly results. increasing number of mobile platforms coming onto the market. Many of the group’s businesses already produce soft copies of publications to The customer environment is changing fast with an increasing number supplement the hard copies as well as provide information and content spending more time using the Internet. Print circulation is declining via apps. and a failure to convert customers from print risks a permanent loss of customers to competitors. 22706.04 13 December 2013 6:27 PM Proof 6 Annual Report and Accounts 2013 28 Strategic Report continued 4. Principal risks and uncertainties continued fAiluRe Of Online StRAteGy continued POTENTIAL IMPACT MITIGATION The transition from a traditional weekly or monthly publishing cycle to The group’s acquisition strategy has increased the number of online continuous publishing has affected editorial practices significantly. A information providers in the business. However, while online revenues failure to continue to manage this transition effectively could make the are important, the group’s product mix reduces dependency on this business less efficient and less competitive. income. For example, the group generates a third of its profits from its event businesses and face-to-face meetings remain an important part Further changes in technology including the widespread use of tablets of customers’ marketing activities. and other mobile devices and the impact of social media such as LinkedIn and Twitter are changing customer behaviour and will introduce new challenges for all businesses. A failure in the group’s online strategy to meet these challenges could result in a permanent loss of revenue. tReASuRy OpeRAtiOnS The group treasury function is responsible for executing treasury policy which seeks to manage the group’s funding, liquidity and treasury derivatives risks. More specifically, these include currency exchange rate fluctuations, interest rate risks, counterparty risk and liquidity and debt levels. These risks are described in more detail in note 18 to the financial statements. POTENTIAL IMPACT MITIGATION If the treasury policy does not adequately mitigate the financial risks The tax and treasury committee is responsible for reviewing and summarised above or is not correctly executed, it could result in approving group treasury policies which are executed by the group unforeseen derivative losses or higher than expected finance costs. treasury. The treasury function undertakes high-value transactions, hence there Segregation of duties and authorisation limits are in place for all is an inherent high risk of payment fraud or error having an adverse payments made. The treasury function is also subject to regular internal impact on group results. audit. unfOReSeen tAx liABilitieS The group operates within many tax jurisdictions and earnings are therefore subject to taxation at differing rates across these jurisdictions. POTENTIAL IMPACT MITIGATION The directors endeavour to manage the tax affairs of the group in an External tax experts and in-house tax specialists, reporting to the tax efficient manner; however, due to an ever-more complex international and treasury committee, work together to review all tax arrangements tax environment there will always be a level of uncertainty when within the group and keep abreast of changes in global tax legislation. 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. 22706.04 13 December 2013 6:27 PM Proof 6 Euromoney Institutional Investor PLC www.euromoneyplc.com29 5. Future development in the business An indication of the trading outlook for the Quality and integrity of employees The competence of people is ensured through compliance with all local health and safety regulations. External health and safety advisers high recruitment standards and a commitment are used where appropriate. The UK businesses group is given in the Chairman’s Statement on to management and business skills training. The benefit from a regular assessment of the page 6. In 2014 the directors will manage the group has the advantage of running external working environment by experienced assessors business to facilitate growth and to continue to training businesses and uses this in-house and regular training of all existing and new UK shape the business to remain competitive in the resource to train cost effectively its employees on employees in health and safety matters. economic environments in which it operates. a regular basis. Employees are also encouraged The group is well placed to diversify its product actively to seek external training as necessary. and geographical base and remains committed to its strategy set out on page 8. High-quality and honest personnel are an essential part of the control environment. 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, The board will continue to review the portfolio The high ethical standards expected are wherever possible, the employment of, and to of businesses, disposing, closing or restructuring communicated by management and through arrange appropriate training for, employees who any underperforming businesses to allow the the employee handbook which is provided to all become disabled; and to provide opportunities group to have the necessary resources and skills employees. The employee handbook includes for the career development, training and to remain acquisitive. The group will invest in specific policies on matters such as the use of promotion of disabled employees. t r o p e R c i g e t a r t S e c n a m r o f r e P d n a y g e t a r t S technology and new businesses, particularly the group’s information technology resources, electronic information products, as well as in its data protection policy, the UK Bribery Act, 8. Corporate and social responsibility Information on the group’s corporate and social responsibility including information on its carbon footprint, greenhouse gas emissions and charitable activities is set out in the Corporate and Social Responsibility report on page 44. and disciplinary and grievance procedures. The group operates an internal intranet site which is used to communicate with employees and provide guidance and assistance on day-to-day matters facing employees. The group has a specific whistle-blowing policy that is supported by an externally monitored and run whistle-blowing hotline. The whistle-blowing policy is updated regularly and is reviewed by the audit committee. internal systems. 6. Gender diversity The group’s gender diversity information is set out in the Corporate Governance report on page 38. 7. Employees’ involvement and training Equal opportunities The group is an equal opportunities employer. It seeks to employ a workforce which reflects the diverse community at large, because the contribution of the individual is valued, irrespective of sex, age, marital status, disability, sexual preference or orientation, race, colour, religion, ethnic or national origin. It does not discriminate in recruitment, promotion or other employee matters. The group endeavours to provide a working environment free from unlawful discrimination, victimisation or harassment. Human rights and health and safety requirements The group is committed to the health and Christopher Fordham Managing Director November 13 2013 safety and the human rights of its employees and communities in which it operates. Health and safety issues are monitored to ensure 22706.04 13 December 2013 6:27 PM Proof 6 Annual Report and Accounts 2013 30 Directors’ Report The directors submit their annual report and group accounts for the year ended Directors and their interests The company’s Articles of Association give Details of the interests of the directors in the ordinary shares of the company and of September 30 2013. power to the board to appoint directors from options held by the directors to subscribe for Business review and activities The principal activities of the group are set out on page 8 of this Annual Report and Accounts. The information that fulfils the Companies Act requirements of the business review is included time to time. In addition to the statutory rights ordinary shares in the company are set out in of shareholders to remove a director by ordinary the Directors’ Remuneration Report on pages resolution, the board may also remove a director 50 to 73. where 75% of the board give written notice to such director. The Articles of Association themselves may be amended by a special Post balance sheet events Events arising after September 30 2013 are set in the Strategic Report on pages 8 to 29. This resolution of the shareholders. out in note 29. includes a review of the development of the business of the group during the year, of its position at the end of the year and of likely future developments in its business. Details of the principal risks and uncertainties are included in the Strategic Report on pages 22 to 28. The Corporate Governance report forms part of this Directors’ Report. Forward-looking statements 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 standards, 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. Group results and dividends The group profit for the year attributable to shareholders amounted to £72.6 million (2012: £69.7 million). The directors recommend a final dividend of 15.75 pence per ordinary share (2012: 14.75 pence), payable on Thursday February 13 2014 to shareholders on the register on Friday November 22 2013. This, together with the interim dividend of 7.00 pence per ordinary share (2012: 7.00 pence) which was declared on May 16 2013 and paid on June 27 2013, brings the total dividend for the year to 22.75 pence per ordinary share (2012: 21.75 pence). The directors who served during the year are listed on page 58. The directors’ interests are given on page 67. PM Fallon, the chairman, who was due to retire at the AGM in January 2013, died on October 14 2012. The company announced that, effective from October 15 2012, its previously announced succession plans would be accelerated and that PR Ensor would succeed PM Fallon as chairman and CHC Fordham would succeed PR Ensor as managing director. In addition, on December 12 2012 ART Ballingal and TP Hillgarth were appointed as non-executive directors and on January 31 2013 JC Gonzalez retired as non-executive director. Following best practice under the September 2012 UK Corporate Governance Code and in accordance with the company’s Articles of Association, all directors submit themselves for re-election annually. Accordingly, all directors will retire at the forthcoming Annual General Meeting and, being eligible, will offer themselves for re-election. In addition, in accordance with the September 2012 UK 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 directors’ performance continues to be effective and demonstrates commitment to the role. Accordingly, the non-executive directors will retire at the forthcoming Annual General Meeting and, being eligible following a formal performance evaluation by the chairman, offer themselves for re-election. Going concern, debt covenants and liquidity The results of the group’s business activities, together with the factors likely to affect its future development, performance and financial position are set out in the Chairman’s Statement on pages 4 to 7. The financial position of the group, its cash flows and liquidity position are set out in detail in this report. The group meets its day-to-day working capital requirements through its US$300 million dedicated multi-currency borrowing facility with Daily Mail and General Trust plc group (DMGT). The total maximum borrowing capacity is US$250 million (£154 million) and £33 million and was due to mature in December 2013. The facility’s covenant requires the group’s net debt to be no more than four times adjusted EBITDA on a rolling 12 month basis. At September 30 2013, the group’s net debt to adjusted EBITDA covenant was 0.09 times and the committed undrawn facility available to the group was £165.9 million. Subsequent to the year end, the group has signed a US$160 million multi-currency replacement funding facility with DMGT that provides access to funds during the period to April 2016. The new facility’s covenant requires the group’s net debt to be no more than three times adjusted EBITDA on a rolling 12 month basis. 22706.04 13 December 2013 6:27 PM Proof 6 Euromoney Institutional Investor PLC www.euromoneyplc.com31 The group’s forecasts and projections, looking ●● there are no people who hold securities out to September 2016 and taking account carrying special rights with regard to of reasonably possible changes in trading control of the company; Directors’ indemnities The company has directors’ and officers’ liability and corporate reimbursement insurance for performance, show that the group should be ●● the company’s employee share schemes do the benefit of its directors and those of other able to operate within the level and covenants not give rights with regard to control of the associated companies. This insurance has been of its current borrowing facility. company that are not exercisable directly in place throughout the year and remains in by employees; force at the date of this report. After making enquiries, the directors have a reasonable expectation that the group has ●● ●● there are no restrictions on voting rights; the directors are not aware of any adequate resources to continue in operational agreements between holders or securities Annual General Meeting The company’s next Annual General Meeting existence for the foreseeable future. Accordingly, that may result in restrictions on the will be held on January 30 2014. t r o p e R c i g e t a r t S e c n a m r o f r e P d n a y g e t a r t S the directors continue to adopt the going transfer of securities or on voting rights; concern basis in preparing this annual report. ●● the company has a number of agreements Capital structure and significant shareholdings Details of the company’s share capital are given in note 22. The company’s ultimate controlling party is given in note 30. 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. Significant shareholdings at November 12 2013 Nature of holding Number of shares % of voting rights Name of holder DMG Charles Limited Direct 85,838,458 67.88 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 which is not covered elsewhere in this annual report. Such disclosures are as follows: ●● there are no restrictions on the transfer of securities (shares or loan notes) in the company, including: (i) limitations on the holding of securities; and (ii) requirements to obtain the approval of the company, or of other holders or securities in the company, for a transfer of securities; 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 employee share plans. None of these agreements are deemed to be significant in terms of their potential impact on the business of the group as a whole; and ●● details of the directors’ entitlement to compensation for loss of office following a takeover or contract termination are given in the Directors’ Remuneration Report. Authority to purchase and allot own shares The company’s authority to purchase up to 10% Auditor In the case of each of the persons who is a director of the company at November 13 2013: ●● so far as each of the directors is aware, there is no relevant audit information (as defined in the Companies Act 2006) 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 s418 of the Companies Act 2006. of its own shares expires at the conclusion of A resolution to reappoint Deloitte LLP as the the company’s next Annual General Meeting. company’s auditor is expected to be proposed A resolution to renew this authority for a at the forthcoming Annual General Meeting. further period will be put to shareholders at this meeting. At the Annual General Meeting of the company on January 31 2013, the shareholders authorised the directors to allot shares up to an aggregate nominal amount of £93,266 expiring at the conclusion of the Annual General Meeting to be held in 2014. A resolution to renew this authority for a further period will be put to shareholders at this meeting. 22706.04 13 December 2013 6:27 PM Proof 6 Annual Report and Accounts 2013 32 Directors’ Report Directors’ responsibility statement The directors are responsible for preparing the In preparing the group financial statements, annual report and the financial statements in International Accounting Standard 1 requires Responsibility statement We confirm that to the best of our knowledge: accordance with applicable law and regulations. that directors: Company law requires the directors to prepare ●● properly select and apply accounting financial statements for each financial year. Under policies; that law the directors are required to prepare ●● present information, including accounting the group financial statements in accordance policies, in a manner that provides relevant, with International Financial Reporting Standards reliable, comparable and understandable (“IFRSs”) as adopted by the European Union information; ●● the financial statements, prepared in accordance with the relevant financial reporting framework, 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 and Article 4 of the IAS Regulation and have ●● provide additional disclosures when ●● the management report, which is elected to prepare the parent company financial compliance with the specific requirements statements in accordance with United Kingdom in IFRSs are insufficient to enable users Generally Accepted Accounting Practice (United to understand the impact of particular Kingdom Accounting Standards and applicable transactions, other events and conditions law). Under company law the directors must not on the entity’s financial position and approve the accounts unless they are satisfied financial performance; and that they give a true and fair view of the state of ●● make an assessment of the company’s incorporated into the Strategic 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 affairs of the company and of the profit or loss ability to continue as a going concern. uncertainties that they face. of the company for that period. In preparing the parent company financial adequate accounting records that are sufficient that the annual report and accounts, taken as statements, the directors are required to: to show and explain the company’s transactions a whole, is fair, balanced and understandable The directors are responsible for keeping In addition, each of the directors considers ●● select suitable accounting policies and then time the financial position of the company for shareholders to assess the company’s apply them consistently; and enable them to ensure that the financial performance, business model and strategy. and disclose with reasonable accuracy at any and provides the information necessary ●● make judgements and accounting statements comply with the Companies Act estimates that are reasonable and prudent; 2006. They are also responsible for safeguarding By order of the board ●● state whether applicable UK Accounting the assets of the company and hence for Standards have been followed, subject taking reasonable steps for the prevention and to any material departures disclosed and detection of fraud and other irregularities. explained in the financial statements; and ●● prepare the financial statements on The directors are responsible for the the going concern basis unless it is maintenance and integrity of the corporate and inappropriate to presume that the company financial information included on the company’s will continue in business. website. Legislation in the United Kingdom Christopher Fordham Director November 13 2013 governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Colin Jones Director November 13 2013 22706.04 13 December 2013 6:27 PM Proof 6 Euromoney Institutional Investor PLC www.euromoneyplc.comDirectors and Advisors Executive Directors 33 33 Mr PR Ensor ‡ Chairman Mr CR Jones Mr CR Jones (aged 53) is the finance director and a chartered accountant. Mr PR Ensor (aged 65) joined the company in 1976 and was appointed an He joined the company in July 1996 and was appointed finance director executive director in 1983. He was appointed managing director in 1992 in November 1996. He is also the group’s chief operating officer and a and chairman on October 15 2012. He is chairman of the nominations director of Institutional Investor, LLC. and BCA Research, Inc. committee. He is also a director of BCA Research, Inc., Ned Davis Research Inc., and Davis, Mendel & Regenstein Inc., and an outside member of the Finance Committee of Oxford University Press. Mr CHC Fordham ‡ Managing Director Ms DE Alfano Ms DE Alfano (aged 57) joined Institutional Investor, LLC. in 1984 and was appointed an executive director in July 2000. She is managing director of Institutional Investor’s conference division and a director and chairman of Institutional Investor, LLC. Mr CHC Fordham (aged 53) joined the company in 2000 and was appointed an executive director in July 2003 and managing director on October 15 2012. He was appointed a member of the nominations Ms JL Wilkinson Ms JL Wilkinson (aged 48) joined the company in 2000 and was appointed committee on December 12 2012. He was previously the director an executive director in March 2007. She is group marketing director, CEO responsible for acquisitions and disposals as well as running some of the of Institutional Investor’s publishing activities and president of Institutional company’s businesses. Investor, LLC. Mr NF Osborn Mr NF Osborn (aged 63) joined the company in 1983 and was appointed Mr B AL-Rehany Mr B AL-Rehany (aged 56) was appointed an executive director in an executive director in February 1988. He is the publisher of Euromoney. November 2009. He is chief executive officer and a director of BCA He is also a director of RBC OJSC, a Moscow-listed media company. Research, Inc. which he joined in January 2003. Euromoney acquired BCA e c n a n r e v o G s r o s i v d A d n a s r o t c e r i D Mr DC Cohen Mr DC Cohen (aged 55) joined the company in 1984 and was appointed an executive director in September 1989. He is managing director of the training division. Research, Inc. in October 2006. ‡ Member of the nominations committee 22706.04 13 December 2013 6:27 PM Proof 6 Annual Report and Accounts 2013 34 34 Directors and Advisors Non-executive Directors The Viscount Rothermere ‡ The Viscount Rothermere (aged 45) was appointed a non-executive Mr ART Ballingal Mr ART Ballingal (independent), aged 52, was appointed a non-executive director in September 1998 and is a member of the nominations director on December 12 2012. He is chief executive and chief investment committee. He is chairman of Daily Mail and General Trust plc. officer of Ballingal Investment Advisors (BIA), an independent investment Sir Patrick Sergeant ‡ Sir Patrick Sergeant (aged 89) 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 a non-executive director. He is a member of the nominations committee. Mr JC Botts †‡§ Mr JC Botts (aged 72) was appointed a non-executive director in December 1992 and is chairman of the remuneration committee and a member of the audit and nominations committees. He is senior adviser of Allen & Company in London, a director of Songbird Estates plc and a director of several private companies. He was formerly a non-executive chairman of United Business Media plc. Mr MWH Morgan †‡ Mr MWH Morgan (aged 63) was appointed a non-executive director in October 2008. He is a member of the remuneration and nominations committees. He was previously chief executive of DMG Information and became chief executive of Daily Mail and General Trust plc in October 2008. Mr DP Pritchard §† Mr DP Pritchard (independent) (aged 69) was appointed a non-executive director in December 2008. He is chairman of the audit committee and a member of the remuneration committee. He is chairman of Songbird Estates plc and of AIB Group (UK) plc, and a director of The Motability Tenth Anniversary Trust. He was formerly deputy chairman of Lloyds TSB Group, chairman of Cheltenham & Gloucester plc and a director of Scottish Widows Group and LCH.Clearnet Group. Advisors and registered office President Sir Patrick Sergeant Company Secretary C Benn Registered Office Nestor House, Playhouse Yard, London EC4V 5EX Registered Number 954730 Auditor Deloitte LLP, 2 New Street Square, London EC4A 3BZ Solicitors Nabarro, Lacon House, Theobald’s Road, London WC1 8RW firm based in Hong Kong, which advises two award-winning Asia Pacific hedge funds, the BIA Pacific Fund and the BIA Pacific Macro Fund. A graduate of Oxford University, he has lived in Asia for over 20 years and worked in the Asia Pacific investment market at various firms including Barclays/BZW, Sloane Robinson, Schroders and Ruffer before founding BIA in 2002. In addition to extensive Asia Pacific investment experience, he has had significant involvement over two decades as an advisor, investor, and partner in hedge and absolute return investment funds. Since 2008, he has served as a member of the Euromoney Institutional Investor PLC Asia Pacific Advisory Board. Mr TP Hillgarth § Mr TP Hillgarth (independent), aged 64, was appointed a non-executive director on December 12 2012 and a member of the audit committee on March 12 2013. He is a partner of Powe Capital Management LLP, a European hedge fund management company. He has 30 years of experience in the asset management industry having recently been a director of Jupiter Asset Management for eight years and before that at Invesco where he held several senior positions over 14 years including CEO of Invesco’s UK and European business. † Member of the remuneration committee ‡ Member of the nominations committee § Member of the audit committee Brokers UBS, 1 Finsbury Avenue, London EC2M 2PP Registrars Equiniti, Aspect House, Spencer Road, Lancing, West Sussex, BN99 6DA 22706.04 13 December 2013 6:27 PM Proof 6 Euromoney Institutional Investor PLC www.euromoneyplc.comCorporate Governance 35 35 e c n a n r e v o G e c n a n r e v o G e t a r o p r o C The Financial Reporting Council’s 2012 UK have access to the advice and services of the (Structured Retail Products and TelCap); BR Corporate Governance Code (“the Code”) is company secretary. In accordance with best Jones (information technology); JG Orchard part of the Listing Rules (“the Rules”) of the corporate governance practice under the 2012 (capital markets group); AB Shale (Asiamoney); Financial Conduct Authority. The paragraphs UK Corporate Governance Code all directors and DRJ Williams (Euromoney). The discussions below and in the Directors’ Remuneration Report will submit themselves for annual re-election. of the committee are summarised by the group on pages 49 to 73 set out how the company has Newly appointed directors are submitted for chairman and reported to each board meeting, applied the principles laid down by the Code. election at the first available opportunity after together with recommendations on matters The company continues substantially to comply their appointment. reserved for board decisions. with the Code, save for the exceptions disclosed in the Directors’ Compliance Statement on The board meets every two months and there page 42. Directors The board and its role Details of directors who served during the year are set out on page 58. PM Fallon, the chairman, who was due to retire at the AGM in January 2013, died on October 14 2012. The company announced that, effective from October 15 2012, its previously announced succession plans would be accelerated and that PR Ensor would succeed PM Fallon as chairman and CHC Fordham would succeed PR Ensor as managing director. In addition, on December 12 2012 ART Ballingal and TP Hillgarth were appointed as non-executive directors and on January 31 2013 JC Gonzalez retired as non-executive director. Following these changes the board comprised the chairman, managing director, and six other executive directors and seven is frequent contact between meetings. Board meetings take place in London, New York, Montreal and Hong Kong, and occasionally in other locations where the group has operations. The board has delegated certain 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. Nominations committee The nominations committee is responsible for proposing candidates for appointment to the board having regard to the balance of skills, structure and composition of the board and ensuring the appointees have sufficient time available to devote to the role. The chairman of the committee, PM Fallon, died on October 14 2012 and was succeeded by PR Ensor, previously a member of the nominations committee. On December 12 2012 CHC Fordham was appointed a member of the committee. Following these changes the committee comprises PR Ensor (chairman of the committee), CHC Fordham and four non-executive directors, being Sir Patrick Sergeant, The Viscount Rothermere, MWH Morgan and JC Botts. The committee’s terms of reference are available on the company’s website at: www.euromoneyplc. com/reports/Nominationcommittee.pdf. non-executive directors. Four of the seven non- executive directors are not independent, one is the founder and ex-chairman of the company, Committees Executive committee The executive committee meets each month The committee meets when required and this year met four times: in October 2012 to recommend the succession of PM Fallon two are directors of Daily Mail and General Trust to discuss strategy, results and forecasts, risks, by PR Ensor as chairman of the nominations plc (DMGT), an intermediate parent company, possible acquisitions and divestitures, costs, committee; in November 2012 to recommend to and one has served on the board for more than staff numbers, recruitment and training and the board the appointment of ART Ballingal and the recommended term of nine years under other management issues. It also discusses TP Hillgarth as non-executives to the board, CHC the Code. corporate and social responsibility including Fordham to the nominations committee and the group’s various charity initiatives. It is not C Benn as company secretary; in December 2012 There are clear divisions of responsibility within empowered to make decisions except those to recommend to the board the re-election of the board such that no one individual has that can be made by the members in their directors retiring by rotation; and in March 2013 unfettered powers of decision. The board, individual capacities as executives with powers to recommend to the board the appointment of although larger than average, does not consider approved by the board of the company. It is TP Hillgarth to the audit committee. itself to be unwieldy and believes it is beneficial chaired by the group chairman and comprises all to have representatives from key areas of executive directors plus the following divisional The group’s gender diversity information is set the business at board meetings. There is a directors: RP Daswani (Metal Bulletin); R Davies out in the Corporate Governance report on procedure for all directors in the furtherance of (specialist publication group); RCM Garnett page 38. their duties to take independent professional (Euromoney conferences); L Gibson (Euromoney advice, at the company’s expense. They also seminars and Metal Bulletin events); RG Irving 22706.04 13 December 2013 6:27 PM Proof 6 Annual Report and Accounts 2013 36 36 Corporate Governance continued Remuneration committee The remuneration committee meets twice a year Non-executive directors The non-executive directors bring both The Viscount Rothermere has a significant shareholding in the company through his and additionally as required. It is responsible for independent views and the views of the beneficial holding in DMGT and because of this determining the contract terms, remuneration company’s major shareholder to the board. he is not considered independent. and other benefits for executive directors, On December 12 2012, ART Ballingal including performance-related incentives. This (independent) and TP Hillgarth (independent) The Viscount Rothermere and MWH Morgan committee also recommends and monitors the were appointed non-executive directors of the are also executive directors of DMGT, an level of remuneration for senior management company. JC Gonzalez (independent) retired as intermediate parent company. However, the and overall, including group-wide share a non-executive director at the Annual General company is run as a separate, distinct and option schemes. The composition of the Meeting on January 31 2013. The other non- decentralised subsidiary of DMGT and these committee, details of directors’ remuneration executive directors who served during the year directors have no involvement in the day-to- and interests in share options and information were The Viscount Rothermere, Sir Patrick day management of the company. They bring on directors’ service contracts are set out in Sergeant, JC Botts, MWH Morgan, and DP valuable experience and advice to the company the Directors’ Remuneration Report on pages Pritchard (independent). Their biographies can and the board does not believe these non- 49 to 73. The committee’s terms of reference be found on page 34 of the accounts. are available on the company’s website at: executive directors are able to exert undue influence on decisions taken by the board, http://www.euromoneyplc.com/reports/ At least once a year the company’s chairman nor does it consider their independence to be Remunerationcommittee.pdf. meets the non-executive directors without the impaired by their positions with DMGT. However, Audit committee Details of the members and role of the audit committee are set out on page 39. The executive directors being present. The non- their relationship with DMGT means they do not executive directors meet without the company’s meet the Code’s definition of independence. chairman present at least annually to appraise the chairman’s performance and on other committee’s terms of reference are available occasions as necessary. on the company’s website at: http://www. euromoneyplc.com/reports/Auditcommittee. pdf. Tax and treasury committee tax and The group’s 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 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. Details of the tax and treasury policies are set out in the Strategic Report on page 21. The board considers DP Pritchard, ART Ballingal and TP Hillgarth to be independent non- executive directors. JC Botts has been on the board for more than the recommended term of nine years under the Code and the board believes that his length of service enhances his role as a non-executive director. However, due to his length of service, JC Botts does not meet the Code’s definition of independence. Sir Patrick Sergeant has served on the board in various roles since founding the company in 1969 and has been a non-executive director since 1992. As founder and president of the company, the board believes his insight and external contacts remain invaluable. However, due to his length of service, Sir Patrick Sergeant does not meet the Code’s definition of independence. 22706.04 13 December 2013 6:27 PM Proof 6 Euromoney Institutional Investor PLC www.euromoneyplc.com37 37 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 2013: Board Executive committee Remuneration committee Nominations committee Audit committee Tax & treasury committee Number of meetings held during year Executive directors PM Fallon (died October 14 2012) PR Ensor - chairman CHC Fordham - managing director NF Osborn DC Cohen CR Jones - finance director DE Alfano JL Wilkinson B AL-Rehany Non-executive directors The Viscount Rothermere Sir Patrick Sergeant JC Botts JC Gonzalez (retired January 31 2013) MWH Morgan DP Pritchard ART Ballingal (appointed December 12 2012) TP Hillgarth (appointed December 12 2012) 6 – 6 6 6 6 6 6 6 6 6 4 5 1 6 6 3 4 10 – 10 10 10 10 10 10 10 8 – – – – – – – – 3 – – – – – – – – – – – 3 – 3 3 – – 4 – 3 – – – – – – – 4 4 4 – 4 – – – 4 – – – – – – – – – – – 4 1 – 4 – 3 e c n a n r e v o G e c n a n r e v o G e t a r o p r o C 2 – 2 2 – – 2 – – – – – – – – 2 – – Board and committee effectiveness The Code requires an externally facilitated evaluation of the board every three years. The external evaluation was due this year, but the board decided to delay it until 2014 following the changes to the board earlier in the year, including the appointment of a new chairman. However, as in previous years, in 2013 the board, through its chairman, assessed its performance and that of its committees. The chairman surveyed each board member and evaluated the strengths and weaknesses of the board and its members. In addition, each of the main committees completed a questionnaire encompassing key areas within their mandates. The chairman concluded that the board and its committees had been effective throughout the year. As part of the performance evaluation the board are asked to assess the chairman’s performance. The results of the assessment are provided to the non-executive directors for review in the absence of the group having a senior independent director. It was concluded that the chairman had been effective throughout the year. 22706.04 13 December 2013 6:27 PM Proof 6 Annual Report and Accounts 2013 38 38 Corporate Governance continued Diversity The board believes that diversity is important for board effectiveness. However, diversity is much Internal control and risk management The board as a whole is responsible for the ●● the board has overall responsibility for the group and there is a formal schedule of matters specifically reserved for decision by more than an issue of gender, and includes a oversight of risk, the group’s system of internal the board; diversity of skills, experience, nationality and control and for reviewing its effectiveness. Such ●● each executive director has been given background. Diversity will continue to be a a system is designed to manage rather than responsibility for specific aspects of the key consideration when contemplating the eliminate the risk of failure to achieve business group’s affairs; composition and refreshing of the board and objectives, and can only provide reasonable ●● the board reviews and assesses the group’s indeed senior and wider management. The and not absolute assurance against material principal risks and uncertainties at least board recognises that while the overall balance misstatement or loss. annually; of gender is good within the group, with 49% In accordance with principle C.2 and C.2.1 of the ●● the board seeks assurance that effective of employees being female as at September 30 Code and section 34 of the Revised Guidance control is being maintained through 2013, there is still more work to be done to fulfil for Directors on Internal Control (formally called regular reports from business group overall diversity ambitions. Turnbull guidance), the board has implemented management, the audit committee and a continuing process for identifying, evaluating various independent monitoring functions; Executive committee Permanent employees Board and managing the material risks faced by the group. and the board approves the annual forecast ●● after performing a review of key risk Male Female Total % Female 13 2 15 13% 14 3 17 18% 1,099 1,043 2,142 49% Communication with shareholders The company’s chairman, together with the board, encourages regular dialogue with shareholders. Meetings with shareholders are held, both in the UK and in the US, 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 The board has reviewed the effectiveness of factors. Performance is monitored regularly the group’s system of internal control and risk by way of variances and key performance management systems and has taken account of indicators to enable relevant action to material developments which have taken place be taken and forecasts are updated each since September 30 2012. It has considered the quarter. The board considers longer-term major business and financial risks, the control financial projections as part of its regular environment and the results of internal audit. discussions on the group’s strategy and Steps have been taken to embed internal funding requirements. control and risk management further into the operations of the group and to deal with Executive management of risk is provided by areas of improvement which have come to a risk committee comprising the chairman, management’s and the board’s attention. managing director and finance director, which reports to the board each month and is Key procedures which the directors have responsible for managing and addressing risk established with a view to providing effective matters as they arise. In addition, the group internal control, and which have been in place employs an information security manager, throughout the year and up to the date of this a data protection manager and a risk and Meeting at which the executive directors, non- report, are as follows: executive directors and committee chairs are available for questioning. The board of directors The company’s chairman and finance director report to fellow board members matters raised by shareholders and analysts to ensure members of the board, in particular the non-executive directors, develop an understanding of the investors’ and potential investors’ view of the company. ●● the board normally meets six times a year to consider group strategy, risk management, financial performance, acquisitions, business development and management issues; compliance officer as well as having the ability to draw on the resources of DMGT’s risk and assurance should it be considered necessary. 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 in the group’s system of internal control which it has determined to be significant. Therefore a confirmation of necessary actions has not been considered appropriate. 22706.04 13 December 2013 6:27 PM Proof 6 Euromoney Institutional Investor PLC www.euromoneyplc.com39 39 e c n a n r e v o G e c n a n r e v o G e t a r o p r o C Investment appraisal The managing director, finance director and and the departments and businesses reviewed ●● monitoring and reviewing the resources previously and the findings from these reviews. and effectiveness of internal audit; business group managers consider proposals This approach ensures that the internal audit ●● reviewing the internal audit programme for acquisitions and new business investments. focus is placed on the higher risk areas of the and receiving periodic reports on its Proposals beyond specified limits are put to group, while ensuring an appropriate breadth findings; the board for approval and are subject to due of coverage. DMGT’s internal audit reports ●● reviewing the whistle-blowing diligence by the group’s finance team and, its findings to management and to the audit arrangements available to staff; if necessary, independent advisors. Capital committee. expenditure is regulated by strict 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 business plan. 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’s internal audit function 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 teams 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 support management by providing cost effective 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 of the group’s businesses; the scope and findings of external audit work; Accountability and audit Audit committee Committee composition, skill and experience The audit committee comprises DP Pritchard (chairman, independent), JC Botts, SW Daintith, the finance director of DMGT and from March 12 2013 TP Hillgarth (independent). JC Gonzalez (independent) retired from the committee on January 31 2013. Three of the four members are non-executive directors. All members of the committee have a high level of financial literacy; SW Daintith and TP Hillgarth are chartered accountants and members of the ICAEW, and DP Pritchard has considerable audit committee experience. Responsibilities The committee meets at least three times each financial year and is responsible for: ●● monitoring the integrity of the interim report, the annual report and accounts and other related formal statements, reviewing accounting policies applied and judgements applied; ●● reviewing the content of the annual report and accounts and advising the board on whether, taken as a whole, it is fair, balanced and understandable and provides the information necessary for shareholders to assess the company’s performance, business model and strategy; ●● considering the effectiveness of the group’s internal financial control systems; ●● considering the appointment or reappointment of the external auditors and to review their remuneration, both for audit and non-audit; ●● monitoring and reviewing the external auditors’ independence and objectivity and the effectiveness of the audit process; ●● reviewing the group’s policy on the employment of former audit staff; and ●● reviewing the group’s policy on non-audit fees. The audit committee’s terms of reference are available at www.euromoneyplc.com/reports/ Auditcommittee.pdf. Content of the annual report and accounts – fair, balanced and understandable One of the key governance requirements of a group’s financial statements is for the report and accounts to be fair, balanced and understandable. The co-ordination and review of the group-wide input to the annual report and accounts is a sizeable exercise performed within an exacting time-frame which runs alongside the formal audit process undertaken by the external auditors. Arriving at a position where initially the audit committee, and then the board, are satisfied with the overall fairness, balance and clarity of the report and accounts is underpinned by the following: ●● attendance by the committee members and the board in the summer at a comprehensive training session on corporate governance matters, and specifically the new reporting and legislative requirements; ●● early preparation by management and review by the committee of key components of the annual report, particularly those reflecting new disclosure and reporting requirements; ●● comprehensive reviews undertaken by management, a sub-committee of the directors and the auditors to ensure consistency and overall balance; 22706.04 13 December 2013 6:27 PM Proof 6 Annual Report and Accounts 2013 40 40 Corporate Governance continued ●● knowledge sharing by management of on the financial statements. The committee ●● the carrying value of goodwill and intangible key risks and matters likely to affect the was satisfied these were appropriate, assets and any potential impairments. The annual report through attendance by the consistent and complete; committee discussed the appropriateness chairman of the audit committee at the ●● at the request of the board, the committee of the life of the intangible assets and the annual internal audit planning meeting considered whether the 2013 Annual methodology around and inputs into the and tax and treasury committee meetings Report and Accounts was fair, balanced and calculation supporting the carrying value held during the year as well as through understandable and whether it provided of the amounts concerned. It was satisfied the audit committee chairman’s regular the necessary information for shareholders that no provisions or impairments were meetings with management and internal to assess the group’s performance, required and that the disclosures were audit; business model and strategy. Following the reasonable and appropriate; ●● a twice yearly review by the audit committee committee’s review of the accounts and ●● capitalisation of internally generated of key assumptions and judgements after applying their knowledge of matters intangible assets in relation to the made by management in preparation of raised during the year the committee was implementation of the global management the annual and interim reports as well as satisfied that, taken as a whole, the Annual content system. The committee discussed considering significant issues arising during Report and Accounts is fair, balanced and with management and the auditor the the year. understandable; assessing significant provisions ●● type of expenditure capitalised to help and ensure this was in accordance with the Financial reporting and significant financial judgements The committee, with input from the external auditor, assessed whether suitable accounting policies had been adopted, whether management had made appropriate estimates and judgements and whether disclosures were balanced and fair. For the year ended September 30 2013 the committee reviewed the following main issues: accruals including tax provisions. The group’s accounting policy in this area. The committee discussed with management committee had previously discussed and and the auditor how the provision levels approved the group’s accounting policy, were determined and calculated. They also including the amortisation period, related discussed matters not provided against to this type of spend. The committee to establish if this was appropriate. The was satisfied the capitalisation of the chairman of the audit committee also internally generated intangible assets were attends the tax and treasury committee which provides valuable insight into the ●● reasonable and appropriate; revenue recognition in relation to the tax matters and related provisions. The cut-off for publications and events, the ●● accounting for acquisitions of committee was satisfied that these were deferral of subscription revenues and TTI/Vanguard, Insider Publishing, Quantitative Techniques and CIE, and the valuation of acquisition commitments and deferred consideration including that related to previous acquisitions including NDR. The committee discussed the appropriateness of the life of the intangible asset, and the methodology around and inputs into the calculation of the amounts concerned. The committee was satisfied these were reasonable and appropriate; adequate and appropriate; the treatment of voting and commission ●● assessing the recognition and share agreement revenues. The committee measurement of deferred tax assets and discussed with management the internal liabilities. The committee discussed the controls in place in this area and what work deferred tax balances with the auditor the auditor had completed on revenue and management to establish how they recognition. were determined and calculated. As ●● the appropriateness of the disclosures for stated above, the chairman of the audit going concern at year end by review of committee attends the tax and treasury the available facilities, facility headroom, committee which also helps establish the the banking covenants and the sensitivity appropriateness of the recognition of the analyses on these items. The committee ●● presentation of the financial statements deferred tax balances. The committee was was satisfied that the going concern basis and in particular, the presentation of the adjusted performance and the adjusting items. The committee reviewed the financial statements and discussed with management and the auditor the appropriateness of the adjusted items including consideration of their consistency and the avoidance of any misleading effect satisfied that these were appropriately of preparation continues to be appropriate recognised; in the context of the group’s funding and liquidity position. 22706.04 13 December 2013 6:27 PM Proof 6 Euromoney Institutional Investor PLC www.euromoneyplc.com 41 41 appointment of Deloitte followed a formal by finance people across the group but tender process undertaken in 1998 and, rather independent from the business being audited. External auditors As noted the committee has primary responsibility for making a recommendation to than adopting a policy on tendering frequency, The peer reviews audit the operation of key the board on the appointment, reappointment the annual review of the effectiveness of the internal controls which have been confirmed by and removal of external auditors, together with external audit is supplemented by a periodic the businesses as in place through a six-monthly approval of their remuneration. As part of its comprehensive reassessment by the committee. control standards sign-off. Internal audit review role in ensuring effectiveness, the committee The last such reassessment was performed the findings of this supplemental work and has completed a formal review which focused in financial year 2009, when having received present a summary to the committee at each on the effectiveness, independence and assurances on the continued quality of the audit committee meeting. This is challenged by objectivity of the external audit and included audit, the committee determined to recommend the committee and discussed as necessary. the following areas: the reappointment of the incumbent firm. As ●● the audit partners and audit teams with the appointment of the auditor is for one year particular focus on the lead audit partner only, being subject to annual approval at the including an annual assessment of the company’s Annual General Meeting, there is no qualifications, expertise and resources of contractual commitment to the current audit the external auditors; planning and scope of the audit and ●● firm and, as such, the committee may undertake an audit tender at any time at its discretion. identification of areas of audit risk; ●● the execution of the audit including the The committee has reviewed the changes to the robustness and perceptiveness of the Code including the new provision for FTSE 350 auditors in handling their key accounting companies to put the external audit contract Resources available to internal audit and its effectiveness The committee monitors the level and skill base available to the group from internal audit. Although internal audit areas are planned a year ahead, the amount of time available to the group from internal audit is not fixed. Internal audit is able to scale up resource as required and draws on finance people across the wider DMGT group as well as regularly supplementing and audit judgements; out to tender at least every ten years. Having its team through the use of specialists. e c n a n r e v o G e c n a n r e v o G e t a r o p r o C ●● the role of management in an effective considered the FRC’s guidance on aligning audit process; the timing of such tenders with the audit ●● communications by the auditor, including engagement rotation cycle, it is the committee’s the quality of their reporting and the intention to initiate an audit tender process availability of the lead audit partner to in 2015. This policy will be kept under review meet senior management and to discuss and the committee will use its regular review of matters with the committee; audit effectiveness to assess whether an earlier ●● how the auditor supported the work of the date for such a tender is desirable. audit committee; ●● how the audit contributed insights and Having considered the output of the review added value; above, the committee recommends the ●● a review of independence and objectivity reappointment of Deloitte as the group’s auditor of the audit firm; at the next Annual General Meeting. The committee are able to monitor the effectiveness of internal audit through their involvement in its focus, planning, process and outcome. The committee approve the internal audit plan and any revision to this during the year, the chair of the committee is invited to attend the initial internal audit planning meeting between management and internal audit. Internal audit present, at each audit committee meeting, a summary of their work and findings, the results of the internal audit team’s follow up of completed reviews and a summary of assurance work completed ●● the quality and content of the formal audit report in the annual report; ●● the appropriateness of the audit fee including value for money considerations but also to ensure a sufficient quality of work can be achieved for the fee proposed; ●● results of regulatory reviews by the audit inspection unit. The appointment of Deloitte as the group’s external auditor (incumbents since the last audit tender in 1998) is kept under annual review and, if satisfactory, the committee will recommend the reappointment of the audit firm. The Effectiveness of internal financial control systems The committee invests time in meeting with by others including ISI (Internet Securities Inc, a multi-location subsidiary business) internal audits; technology audits; circulation audits; internal audit to better understand their work polls and awards audits and peer reviews (as and its outcome. At each meeting of the explained above). Internal audit is also involved committee internal audit present a detailed in other risk assurance projects including fraud report covering controls audited since the last investigation, an annual fraud and bribery risk meeting, matters identified and updates to assessment, information security and business any previous control issues still outstanding. continuity. Internal audit is subject to an external The committee challenges internal audit and review every five years, the results of which are discusses these audits and matters identified fed back to the committee. This external review as appropriate. Internal audit supplement their was last carried out in September 2013. work through a series of peer reviews completed 22706.04 13 December 2013 6:27 PM Proof 6 Annual Report and Accounts 2013 42 42 Corporate Governance continued Non-audit work The audit committee completes an annual The company has, however, made significant The Viscount Rothermere has a significant strides over the past few years to bring its shareholding in the company through his assessment of the type of non-audit work board structure more in line with best practice. beneficial holding in DMGT and because of this permissible and a de minimis level of non-audit In particular, the number of executive directors he is not considered independent. fees acceptable. Any non-audit work performed has been reduced to eight, compared to 14 outside this remit is assessed and where in 2009, and two new independent directors The Viscount Rothermere and MWH Morgan appropriate approved by the committee. Fees were appointed at the beginning of the year. are also executive directors of DMGT, an paid to Deloitte for audit services, audit related It is the company’s intention over time to get intermediate parent company. However, services and other non-audit services are set out to a position where the majority of its board the company is run as a separate, distinct in note 4. During 2013 Deloitte did not provide comprises non-executive directors, even if not and decentralised subsidiary of DMGT and significant non-audit services. The group’s all are independent because of their relationship these directors have no involvement in the non-audit fee policy is available on the with DMGT. company’s website (www.euromoneyplc.com/ day-to-day management of the company. They bring valuable experience and advice to reports/nonauditfee.pdf). Provision B.1.2 states that half the board, the company and the board does not believe excluding the chairman, should be comprised of these non-executive directors are able to exert Annual Report and Accounts The directors have responsibility for preparing non-executive directors determined by the board undue influence on decisions taken by the to be independent. For the majority of the year board, nor does it consider their independence the 2013 annual report and accounts and for the board, excluding the chairman, comprised to be impaired by their positions with DMGT. making certain confirmations concerning it. In 14 directors of whom seven were non-executive However, their relationship with DMGT means accordance with the Code provision C.1.1 the but only three were considered independent they do not meet the Code’s definition of board considers that taken as a whole, it is fair, under the Code. However, there are clear independence. balanced and understandable and provides the divisions of responsibility within the board such information necessary for shareholders to assess that no one individual has unfettered powers Contrary to provision A.4.1, the board has not the company’s performance, business model of decision. The board, although large, does identified a senior independent non-executive and strategy. not consider itself to be unwieldy and believes director. However, JC Botts, although not it is beneficial to have representatives from key independent due to his length of service, acts as The board reached this conclusion after receiving areas of the business at board meetings. senior non-executive director. advice from the audit committee. Statement by the directors on compliance with the Code The UK Listing Rules require the board to report on compliance throughout the accounting year with the applicable principles and provisions of the 2012 UK Corporate Governance Code issued by the Financial Reporting Council. Since its formation in 1969, the company has had a majority shareholder, Daily Mail and General Trust plc (DMGT). As majority shareholder, DMGT retains two non-executive positions on the board. These non-executive directors are not regarded as independent under the Code. In addition, the company’s founder, president and ex-chairman, Sir Patrick Sergeant, remains on the board but is not regarded as an independent director under the Code. As a result, the company failed to comply throughout the financial year ended September 30 2013 with certain provisions in the Code as set out below. JC Botts has been on the board for more than Provision B.2.1 requires that the majority of the the recommended term of nine years under the nominations committee should be comprised of Code and the board believes that his length of independent non-executive directors. Although service enhances his role as a non-executive the committee consists of four non-executive director. However, due to his length of service, and two executive directors, none of these JC Botts does not meet the Code’s definition of non-executive directors can be considered independence. independent under the Code. Sir Patrick Sergeant has served on the board Provision B.3.2 states that the terms and in various roles since founding the company conditions of appointment of non-executive in 1969 and has been a non-executive director directors should be available for inspection. since 1992. As founder and president of the JC Botts, DP Pritchard, ART Ballingal and company, the board believes his insight and TP Hillgarth have terms and conditions external contacts remain invaluable. However, of appointment, however, The Viscount due to his length of service, Sir Patrick Sergeant Rothermere, MWH Morgan and Sir Patrick does not meet the Code’s definition of Sergeant operate under the terms of their independence. employment contracts with DMGT and Euromoney respectively. 22706.04 13 December 2013 6:27 PM Proof 6 Euromoney Institutional Investor PLC www.euromoneyplc.com43 43 e c n a n r e v o G e c n a n r e v o G e t a r o p r o C Provision B.6.2 requires the board of FTSE 350 companies to be externally facilitated every three years. As explained above, due to the changes in the board this year, including the appointment of a new chairman, the board decided to delay this external review until 2014. An internal evaluation of board effectiveness was completed. Provisions C.3.1 and D.2.1 require the remuneration and audit committees to comprise entirely of independent non-executive directors. The remuneration committee is comprised of three non-executive directors, one of whom can be considered independent under the Code. During the year, the audit committee comprised four members, only three of which were non-executive directors of the company, only two of whom can be considered independent under the Code. On behalf of the board Richard Ensor Chairman November 13 2013 22706.04 13 December 2013 6:27 PM Proof 6 Annual Report and Accounts 2013 44 44 Corporate and Social Responsibility The group is diverse and operates through who have environment management systems a large number of businesses in many compliant with the ISO 14001 standard. The Greenhouse Gas (GHG) reporting The company, as part of the wider Daily Mail and geographical locations. Each business provides paper used for the group’s publications is General Trust plc group (DMGT), participates in important channels of communication to produced from pulp obtained from sustainable a DMGT group-wide carbon footprint analysis different sections of society throughout the forests, manufactured under strict, monitored completed by ICF International. This exercise world. The success of the group’s businesses and accountable environmental standards. has been undertaken every year since 2007 owes much to understanding and engaging using the widely recognised GHG protocol with the communities they serve both locally The group is not a heavy user of energy; methodology developed by the World Resource and globally. however, it does manage its energy Institute and the World Business Council for requirements sensibly using low-energy office Sustainable Development. This year, the group’s The paragraphs below provide more detailed equipment where possible and using a common carbon footprint has been restated in order to explanations on key areas of corporate sense approach to office energy management. account for material changes to the conversion responsibility. For instance, the UK group uses new secure factors provided by Defra for company reporting Environmental responsibility The group does not operate directly in industries where there is the potential for serious industrial multi-functional device technology which purposes. enables two sided printing and allows employees to delete unwanted documents at The directors are committed to reducing the printer before printing. This initiative should the group’s absolute carbon emissions and pollution. It does not print products in-house or reduce paper, ink and electricity usage. managing its carbon footprint. The company, as part of the wider DMGT group, committed to 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 Each office within the group is encouraged reducing its absolute carbon emissions by 10% to reduce waste, reuse paper and only print from the baseline year of 2007 by the end of documents and emails where necessary. The 2012. The targeted 10% reduction was achieved main offices across the group also recycle two years early. In 2012 the company, as part of waste where possible. This year the UK, US the wider DMGT group, set a challenging new and Canadian offices recycled 81,000kg of target to reduce its carbon footprint relative to paper and card, which is equivalent to more revenue by 10% from the 2012 base by the end monitored. For instance, the group’s two biggest than 900 trees. print contracts are outsourced to companies of 2015. GReenHOuSe emiSSiOn StAtement The following emissions have been calculated according to the Greenhouse Gas Protocol Corporate Accounting and Reporting Standard (revised edition) methodology. Data was gathered to fulfil the requirements under the CRC Energy Efficiency scheme, and emission factors from the UK Government’s GHG Conversion Factors for Company Reporting 2014. The carbon footprint is expressed in tonnes of Carbon Dioxide equivalent and includes all the Kyoto Protocol gases that are of relevance to the business. The company’s footprint covers emissions from its global operations and the following emission sources: Scope 1 and 2 (as defined by the GHG Protocol), business travel and outsourced delivery activities. ASSeSSment pARAmeteRS Baseline year Consolidation approach Boundary summary 2012 Operational control All entities and facilities either owned or under operational control Consistency with the financial statements The only variation is that leased properties, under operational control Assessment methodology Intensity ratio are included in scope 1 and 2 data, all scope 3 emissions are off-balance sheet emissions Greenhouse Gas Protocol and Defra environmental reporting guidelines Emissions per £million of revenue 22706.04 13 December 2013 6:27 PM Proof 6 Euromoney Institutional Investor PLC www.euromoneyplc.com45 45 GReenHOuSe GAS emiSSiOn SOuRCe 2013 2012 Scope 1: Combustion of fuel and operation of facilities Scope 2: Electricity, heat, steam and cooling purchased for own use Total scope 1 and 2* Scope 3: Business travel and outsourced activities Total emissions * Statutory carbon reporting disclosures required by Companies Act 2006 (tCO2e) (tCO2e) / £m) (tCO2e) (tCO2e) / £m) 200 3,100 3,300 7,700 11,000 0.5 7.7 8.2 19.0 27.2 200 3,000 3,200 7,400 10,600 0.5 7.6 8.1 18.8 26.9 FTSE4Good The group was included for the first time in the FTSE4Good index in 2011 and continued The group works and partners with recognised charitable organisations that have expertise within certain sectors, thus ensuring that the implementation and management of a charitable project is carried out efficiently and to be a constituent of the index in 2013. The that donated funds reach the communities at group has maintained its ESG rating of 3/5 and which the charitable cause is aimed. At the has a group percentile rating of 44% in the ICB same time, the charity committee is careful ‘Global Super Sector’. FTSE Group confirms that Euromoney Institutional independently assessed Investor PLC has been according to the FTSE4Good criteria, and has satisfied the requirements to become a constituent of the FTSE4Good Index Series. FTSE4Good is an equity index series designed to facilitate investment in companies that meet globally recognised corporate responsibility standards. Companies Index in Series have met stringent environmental, social and governance criteria, and are positioned to capitalise on the benefits of responsible business practice. the FTSE4Good Social responsibility The group continues to expand its charitable activities and raised over £1.4 million for local and international charitable causes during the year. These contributions came from its own charitable budget, individual employee fundraising efforts and also from clients who generously made donations in support of the company’s charitable projects. The group also continues to encourage employees to be involved actively in supporting charities by fundraising themselves which it then matches. to address the sustainability aspects in each charitable project to ensure a long lasting beneficial impact. Below is a summary of some of the charitable activities undertaken in the past year. Water and Sanitation, Kechene, Addis Ababa, Ethiopia Since February 2011, the group has supported the African and Medical Research Foundation (AMREF) with its sustainable water and sanitation project in Addis Ababa, Ethiopia. The group’s funding for the project to date has exceeded £260,000, with additional funds to be donated in the coming months to fund a second phase of the project. Working together, AMREF and Euromoney have provided better access to water, sanitation and health information for more than 19,000 residents of Kechene. Programme activities have included the construction of 12 sanitation kiosks, nine water storage tankers, and seven community shower facilities, as well as rebuilding two water springs. 24 local water and sanitation committees have also been established which are now managing these facilities. e c n a n r e v o G y t i l i b i s n o p s e R l a i c o S d n a e t a r o p r o C Condemned water facilities New sanitation blocks Activities in 2013 have included the construction of two sanitation kiosks and three water storage tanks, as well as reaching a total of 2,420 residents with hygiene and sanitation campaigns and education sessions. These activities are having a notable impact on the health of communities in Kechene. Euromoney plans to fund a second phase of AMREF’s water and sanitation project in Kechene which will see the organisation extend its proven model of developing community run water and sanitation facilities to more communities throughout the slum. 22706.04 13 December 2013 6:27 PM Proof 6 Annual Report and Accounts 2013 46 46 Corporate and Social Responsibility continued Little Rock School, Kibera, Nairobi, Kenya involved This project funding the cost of land and the construction of new school premises for Little Rock School and was completed in February 2013. The original Little Rock premises consisted of five separate rented buildings spread across the slum area of Kibera in Nairobi. The school has 16 classrooms, a computer and physiotherapy rooms and kitchens. The school caters for over 300 full- time pupils (one third of whom are disabled) and over 200 after-school pupils. Little Rock is much more than a school. In addition to day teaching, it provides a feeding programme, after-schools clubs, term holiday tutoring, a public library, community engagement, parent support groups and an income generating workshop. This holistic approach empowers children, families and the community to work together to improve the lives of some of the most vulnerable children in the world, not only while they attend Little Rock but with skills and resources they carry forward into further schooling. The co-ordination of the Little Rock is carried out by AbleChildAfrica, a UK-headquartered charity which specialises exclusively in advocating for and supporting disabled children and disabled young people in East Africa. The school’s operations are now on a much sounder footing but it still needs over £150,000 a year to operate (70% of the costs involve teacher salaries). There is no government funding and little income from the childrens’ parents as all the pupils live in very poor conditions in Kibera. Euromoney continues to help with part of the funding and our employees have played a very active role in helping to fund some of the operating costs of Little Rock over the past year. Previous Little Rock school premises New Little Rock school buildings (Completed February 2013) 22706.04 13 December 2013 6:27 PM Proof 6 Euromoney Institutional Investor PLC www.euromoneyplc.com47 47 e c n a n r e v o G y t i l i b i s n o p s e R l a i c o S d n a e t a r o p r o C Water Well Project in Kimbunga Valley, Mombasa, Kenya Euromoney has continued its support of Haller’s work in the Kisuani District, north of Mombasa in Kenya, to help rural communities become self-sufficient. This year, Euromoney has sponsored the prototype and demonstration model for a new innovative eco-sanitation facility and the funding for an additional four community facilities to provide basic sanitation and to ensure water supplies are not contaminated. This infrastructure is combined with extensive farmer training which will help transform the fertility of their land, suitable to grow crops. This year’s funding is expected to help approximately 1,600 people by providing them with the infrastructure and support they need to achieve sustainable livelihoods. Collecting drinking water from the well Irrigating crops surrounding the dam Eco-sanitation facility Anchor House, Canning Town, London E16 Anchor House is a residential and life skills centre for single, homeless people in Newham – the second most deprived borough in the UK. It aims to turn its 1960s-style building into a 21st Century facility providing workshops for vocational courses; an e-learning zone; a new kitchen training facility and 25 Workshop new ‘move on’ studio flats for residents. Anchor House is transforming itself into a residential life-skills centre for the homeless. It annually supports around 180 people and provides a stable and safe environment to help them develop aspirations, confidence and self-esteem, thus enabling them to move towards leading independent and self-fulfilling lives. Euromoney raised over £45,000 for Anchor House in 2013, in addition to the £175,000 raised at the EuroWeek 25th Anniversary Awards Dinner in 2012. Education and counselling 22706.04 13 December 2013 6:27 PM Proof 6 Annual Report and Accounts 2013 48 48 Corporate and Social Responsibility continued Trachoma Project, South Omo, Ethiopia This project aims to provide clean water and sanitation facilities to help eradicate Action Against Cancer Action Against Cancer funds the development of cures for cancer at Imperial College, led by the world-renowned trachoma (a chronic, contagious inflammatory oncologist Professor Justin Stebbing. The funds eye disease which can lead to blindness) are being devoted to the development of a new and is run jointly by ORBIS and AMREF. The drug aimed at blocking a cancer-causing gene, aim is to improve the water and sanitation which Professor Stebbing’s team discovered and facilities for 230,000 people within the found to be responsible for promoting resistance South Omo community, improve the primary to treatment to available cancer treatments. The eye-care services for 644,000 people, treat drug, once developed, will be made available to over 550,000 people suffering from trachoma all. The work will be undertaken in memory of with antibiotics, surgically treat 13,000 adult the company’s former chairman, Padraic Fallon, sufferers of trachoma and train 16 eye care who lost his battle with cancer in October 2012. workers and 600 teachers to identify trachoma Scientist at work Télécoms Sans Frontières Close to 100 runners took part in a 5km fun run at TelCap’s ITW conference held in Chicago and raised US$15,000 for Télécoms Sans Frontières, symptoms. The first 12 months of the project have been taken up with a thorough planning Euromoney has raised a total of £1 million the humanitarian-aid non-governmental including client contributions at the annual organisation specialising in telecommunications Euromoney and EuroWeek awards dinners as for emergency situations. well as individual contributions from employees which are being match-funded by DMGT. In addition, numerous other fundraising initiatives Expert Miracles Foundation Institutional Investor raised over US$95,000 and research phase. Key milestones during 2013 by various divisions including Institutional at their annual awards dinners for the Expert have included: Investor and American Metal Market have also Miracles Foundation, which is one of the ●● a three day planning workshop in Addis raised funds for the charity. Ababa followed by a series of meetings with government staff to develop plans for the implementation of the project for the South Omo region; ●● the mapping of trachoma incidence across South Omo which has created an accurate picture of the prevalence of the disease; and ●● an analysis of the region’s water and sanitation facilities. The full project delivery plan has now been Professor Stebbing and team developed with two regions in South Omo prioritised due to their high incidence of trachoma and dense populations. The project is expected to begin in early 2014. At its July 2012 Awards Dinner, Euromoney raised over £480,000 to fund the first two years of this five-year project and the group raised a further £49,000 in 2013. leading advocates in the fight against cancer within the financial services industry, and the High Water Women Backpack Program which helps thousands of children start the school year ready to learn by providing fully-supplied backpacks for children in need. Project Paz Latin Finance raised over US$31,000 at its Deal of the Year Awards Dinner for Project Paz, which focuses its work for underprivileged children in Ciudad Juarez/El Paso, Mexico by expanding and strengthening children’s basic education development with complimentary educational activities and extended after-school hours. 22706.04 13 December 2013 6:27 PM Proof 6 Euromoney Institutional Investor PLC www.euromoneyplc.comDirectors’ Remuneration Report Report from the chairman of the remuneration committee 49 49 Information not subject to audit Remuneration report contents This report covers the reporting period from October 1 2012 to September 30 2013 and includes three sections: ●● the report from the chairman of the remuneration committee setting out the key decisions taken on executive and senior management pay during the year; ●● the policy report which outlines the remuneration policy for the year to September 2014; and ●● the annual implementation report on remuneration which outlines how the current remuneration policy has been implemented this financial year, including details of payments made and outcomes for the variable pay elements based on performance for the year. This report has been prepared in accordance with the relevant requirements of the Large and Medium-Sized Companies and Groups (Accounts and Reports) Regulations 2013 (“the Regulations”) and of the Listing Rules of the Financial Conduct Authority. As required by the Regulations, a separate resolution to approve the policy and implementation reports will be his participation in the Capital Appreciation proposed at the company’s AGM. Plan, will help align his reward with that of Report from the chairman of the remuneration committee 2013 was the first year for the company’s new senior management team, appointed following a comprehensive search in conjunction with Egon Zhender. In October 2012, Christopher Fordham succeeded Richard Ensor as managing director, and the latter moved to the role of executive chairman to succeed Padraic Fallon who sadly died before he had a chance to complete his retirement plans. With the help of its advisers, the committee spent considerable time benchmarking the remuneration package of Mr Fordham against those on offer across other FTSE 250 companies as well as those available within the media sector in general. Mr Fordham’s salary was set at a relatively low base compared to the market, although relatively high by Euromoney standards. At the same time his profit share was rebased to reward above average profit growth from his appointment which, together with shareholders. The committee decided to leave Mr Ensor’s profit share unchanged as he continued to carry out an executive role. The remuneration committee also reviews the remuneration and incentive plans of the executive directors and other key people across the group as well as looking at the remuneration costs and policies of the group as a whole. One result of this and the management succession plan referred to above was an increase in the salaries of Colin Jones, finance director, and Jane Wilkinson who combines the roles of director of marketing and CEO of Institutional Investor. These were the only changes made to the salaries and incentives of the executive directors during financial year 2013. The committee structures remuneration packages to encourage an entrepreneurial culture with a focus on profit growth alongside tight cost control and risk management. This generally means setting salaries below market levels, with a significant part of a director’s e c n a n r e v o G t r o p e R n o i t a r e n u m e R ’ s r o t c e r i D n o i l l i M £ 130 120 110 100 90 80 70 60 50 40 30 20 10 0 P 2 A C . 7 2 9 . 6 6 8 5 . 6 1 1 8 . 6 0 1 P 1 A C . 3 7 6 . 0 3 6 . 5 5 5 . 6 1 3 . 9 7 2 . 4 5 2 . 9 2 2 . 2 5 2 . 3 1 2 . 0 8 2 . 7 4 3 . 0 7 3 1998 1999 2000 2001 2002 2003 (CAP1 base) 2004 2005 2006 2007 (CAP1 target met) Adjusted PBT 2008 2009 (CAP2 base) 2010 2011 2012 (CAP2 target met) 2013 22706.04 13 December 2013 6:27 PM Proof 6 Annual Report and Accounts 2013 50 50 Directors’ Remuneration Report Report from the chairman of the remuneration committee continued remuneration derived from variable profit driven tranches in February 2018, 2019 and 2020, company’s expense, although none did so in incentives. The importance of variable pay to with the second and third tranches subject to 2013. The group itself can use external advice each director’s total remuneration is illustrated an additional RPI test as well as the requirement and information in preparing proposals for the on pages 60 and 61. for individual businesses to achieve at least 80% remuneration committee. It does apply external of the profits achieved in 2017. This ensures benchmarking although no material assistance The committee is also a strong believer in that the profits of the group are maintained in from a single source was received in 2013. long-term incentives to drive profit growth and relation to at least inflation and the businesses align the interests of executive management continue to focus on profit growth. The key activities of the committee in the year with those of shareholders. The company’s ended September 30 2013 included: Capital Appreciation Plan (CAP), first introduced CAP 2014 will cost the group, in accounting ●● approving salary increases for CR Jones in 2004, has been a key driver of the company’s terms, no more than £41 million over its life and and JL Wilkinson to reflect changes to growth over the past ten years with adjusted will be satisfied with approximately 3.5 million their responsibilities as a result of the profit before tax increasing more than fivefold ordinary shares and £10 million in cash. The management succession plan implemented from a base of £21.3 million in 2003 to £116.5 shares will be purchased in the market over the million in 2013 (see chart on page 49). next few years. at the start of the year; confirming that salaries would remain ●● unchanged at April 1 2013 for the other The group’s long-term incentive plan, the CAP, is The committee also focuses on the remuneration executive directors for the next 12 months; an important part of the group’s remuneration of the wider group and this year approved ●● approving the average annual pay increase, strategy. It is a highly geared performance- an average group-wide salary increase of just effective from April 1 2013, for the group based share option scheme which directly under 2% (excluding promotions). In approving of just under 2%; rewards executives for the growth in profits this increase, the committee ensured that the ●● approving the payment of annual profit of the businesses they manage, and links to directors and local management considered shares for the executive directors and the delivery of shareholder value by satisfying inflation in local areas in which the group senior management of the group for profit rewards in a mix of shares in the company and operates, the performance of the businesses shares earned in financial year 2012; cash. It aims to deliver exceptional profit growth they work for, micro and macroeconomic ●● approving the vesting in February 2013 over the performance period and for this profit factors, market rates for similar roles and of the first tranche of awards under CAP to be maintained over the subsequent vesting the skills and responsibility of the individuals 2010 following the satisfaction of the period. concerned. The increases proposed by local primary performance condition; management were focused on those individuals ●● considering and approving the Since the implementation of CAP 2010, who excelled in their roles and were performing implementation, subject to shareholder adjusted profit before tax has increased above expectations. This means that strong approval, of CAP 2014, a replacement from £63.0 million in 2009, the base year, to performing employees received an increase scheme for CAP 2010. £116.5 million in 2013, an increase of 85% over well above the average and conversely those four years. The second and final tranche of CAP who weren’t meeting expectations received no 2010 will vest for the majority of participants in increase. February 2014. The remuneration committee is proposing, Remuneration committee During the year the remuneration committee Linking KPIs to remuneration As explained in the Remuneration Policy Report on page 52, the group’s remuneration policies are designed to drive and reward earnings growth and shareholder value. The KPIs set out subject to shareholder approval at the 2014 comprised JC Botts (chairman), MWH Morgan, on page 12 of the Strategic Report similarly AGM, to put in place a new CAP, CAP 2014, and DP Pritchard (independent). All members of contribute to the growth in the group’s earnings in order to drive further above average profit the committee are non-executive directors of and shareholder value. These KPIs are integral growth and to help retain key employees. the company. MWH Morgan is also a director to the setting of incentives for senior managers The performance target for CAP 2014 will be of Daily Mail and General Trust plc, the group’s and others across the group. appropriately demanding, requiring the group parent company. For the year under review, the to generate profit growth of at least 10% a year committee also sought advice and information (or RPI plus 5%, whichever is higher) over a four from the company’s chairman, managing year period from a base of profits achieved in director and finance director. The committee’s 2013. If the profit target of £173.6 million is terms of reference permit its members to achieved by 2017, CAP rewards will vest in three obtain professional advice on any matter, at the 22706.04 13 December 2013 6:27 PM Proof 6 Euromoney Institutional Investor PLC www.euromoneyplc.com51 51 Remuneration at a glance 2013 Executive directors PM Fallon (died October 14 2012) PR Ensor CHC Fordham NF Osborn DC Cohen CR Jones DE Alfano JL Wilkinson B AL-Rehany Total Salary and fees £ 8,692 175,500 375,000 133,159 115,700 252,500 141,157 268,332 261,830 1,731,870 Benefits £ Profit Share £ Long-term incentives* £ Pension £ Total Remuneration £ 1,823 1,019 1,274 1,019 1,274 1,274 8,960 8,968 1,491 27,102 246,009 4,544,828 648,025 336,695 221,878 670,111 644,389 125,610 599,433 8,036,978 – – 536,917 452 99,365 417,012 165,969 240,107 556,504 2,016,326 – 22,918 37,500 9,399 15,855 37,875 4,101 18,657 7,447 153,752 256,524 4,744,265 1,598,716 480,724 454,072 1,378,772 964,576 661,674 1,426,705 11,966,028 * The long-term incentive figures represent both cash and share options under the group’s CAP schemes that have vested during the year. The committee welcomes the new remuneration disclosure regulations that came into force this year and believes that this report complies not only with the letter of these regulations, but also the spirit under which they were written. It is hoped that the report provides clarity and transparency of the work of the committee in its objective of rewarding and retaining the right people and driving the profit growth of the group. e c n a n r e v o G t r o p e R n o i t a r e n u m e R ’ s r o t c e r i D John Botts Chairman of the remuneration committee 22706.04 13 December 2013 6:27 PM Proof 6 Annual Report and Accounts 2013 52 52 Directors’ Remuneration Report continued Remuneration policy report Information not subject to audit Introduction This report sets out the group’s policy and Maximising earnings per share This first objective is achieved through a profit Creating shareholder value This second objective is encouraged through the structure for the remuneration of executive and sharing scheme that links the pay of executive Capital Appreciation Plan (CAP). non-executive directors together with details of directors and key managers to the growth in how the policy is applied to each component profits of the group or relevant parts of the The CAP is a highly geared performance- of remuneration. In accordance with the Large group. This scheme is completely variable with based share option scheme which directly and Medium-sized Companies and Groups no guaranteed floor and no ceiling. All those rewards executives for the growth in profits of Accounts and Reports Regulations, shareholders on profit shares are aware that if profits rise, so the businesses they manage, and links this to are provided with the opportunity to endorse does their pay. Similarly if profits fall, so do their the delivery of shareholder value by satisfying the company’s remuneration policy through profit shares. a binding vote. The first binding vote on the rewards in a mix of shares in the company and cash. As the chart on page 49 shows, the CAP company’s directors’ remuneration policy will To support the policy of profit sharing, the group has been a key factor in driving the exceptional be put to shareholders at the AGM on January is divided into approximately 150 profit centres profit growth achieved by the company since it 30 2014 and it is expected that the policy will from which approximately 100 directors and was introduced in 2004. Further details of CAP remain in operation for three years from October managers receive profit shares. The manager of 2004 and CAP 2010 are set out on pages 62 1 2014. The views of the largest shareholder each profit centre is paid a profit share based to 63. were taken into account when formulating the on the profit centre’s profit growth above a policy through MWH Morgan’s membership of threshold each year. Each profit centre is in The company also has an executive share option the remuneration committee. turn part of a larger division and each divisional scheme which expired in 2006. No options Remuneration policy The group believes in aligning the interests of management with those of shareholders. It is the group’s policy to construct executive remuneration packages such that a significant director or executive director has a profit share have been issued under it since February 2004 based on the division’s profit growth. The profit although options previously granted may be sharing scheme is closely aligned with the exercised before January 2014. The performance group’s strategy in that it encourages managers criteria under which options granted under this and directors to grow their businesses, to invest scheme may be exercised are set out on page in new products, to search for acquisitions and 64. part of a director’s pay is based on the growth in to manage costs and risks tightly. the group’s profits contributed by that director. The two consistent objectives in its remuneration policy since the company’s formation in 1969 have been the maximisation of earnings per share and the creation of shareholder value. The directors believe that these profit sharing and share option arrangements have contributed significantly to the company’s success since 1969. These arrangements align the interests of the directors and managers with those of shareholders and are considered an important driver of the company’s growth. 22706.04 13 December 2013 6:27 PM Proof 6 Euromoney Institutional Investor PLC www.euromoneyplc.com53 53 Detailed remuneration arrangements of executive directors Remuneration components The group believes in aligning the interests of management with those of shareholders. 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. Salaries and benefits are generally not intended to be the most significant part of a director’s remuneration. In formulating its directors’ remuneration policy, the group has considered employee pay and benefits available across the group and did not consider it necessary to consult with its employees. e c n a n r e v o G t r o p e R n o i t a r e n u m e R ’ s r o t c e r i D BASiC SAlARy Purpose and link to strategy Operation Benchmarking group ●● ●● ●● ●● ●● Part of an overall pay package which seeks to keep fixed salary costs below market with salary generally not the most significant part of a director’s overall package; Reflect the individual’s experience, role and performance within the company. Paid monthly in cash; Salaries are normally reviewed annually by the remuneration committee in April or October each year. The committee periodically examines salary levels at FTSE250 companies and other listed peer group publishers to help determine executive director pay increases. Relationship to all employee salary ●● The approach to setting base salary increases elsewhere in the group takes into account performance of the individuals concerned, the performance of the business they work for, micro and macro economic factors, and market rates for similar roles, skills and responsibility. BenefitS Purpose and link to strategy ●● Basic benefits are provided but are not the most significant part of a director’s overall remuneration and not linked to performance, role or experience. Operation Non-cash and cash benefits may include: Relationship to all employee benefits Benefit levels penSiOnS Purpose and link to strategy Operation ●● ●● ●● ●● ●● ●● ●● ●● ●● ●● Private healthcare; Life insurance under a pension plan; Overseas relocation and housing costs. Benefits are available to all directors and employees subject to a minimum length of service or passing a probationary period. All executive directors participate in the healthcare scheme offered in the country where they reside; JL Wilkinson’s salary includes an annual housing allowance. This allowance increases with rental values; PR Ensor receives a paid parking space that is treated as a non-cash benefit in kind. Retirement benefits are provided as a retention mechanism and to recognise long service. Directors may participate in the pension arrangements applicable to the country where they work; A director who is obliged to cease contributing to a company pension scheme due to changes in tax or pension legislation may choose to receive a salary payment in lieu of the company’s pension contributions. Relationship to all employee pension levels ●● All directors and employees are entitled to participate in the same pension scheme arrangements applicable to the country where they work. 22706.04 13 December 2013 6:27 PM Proof 6 Annual Report and Accounts 2013 54 54 Directors’ Remuneration Report continued Remuneration policy report continued Detailed remuneration arrangements of executive directors Remuneration components continued pROfit SHAReS Purpose and link to strategy Operation Relationship to all employee salary ●● ●● ●● ●● ●● ●● ●● ●● ●● ●● ●● ●● ●● ●● ●● ●● ●● Profit share links the pay of directors directly to the growth in profits of their businesses. It encourages each director to grow their businesses, to invest in new products, to search for acquisitions, and to manage costs and risks tightly; Profit shares are designed to maximise profits with no guaranteed floor and no ceiling for profit share; Profit shares are expected to make up much of the director’s total pay and encourage long-term retention. Profit shares are paid in full in the financial year following the year in which they are earned. In exceptional circumstances profit shares may be paid in part during the year in which they are earned but only to the extent that profits have already been generated; There is no deferral of profit share; There is no guaranteed floor or ceiling on profit shares earned; Profit shares are calculated after charging the cost of funding acquisitions at the group’s actual cost of funds; Each director’s profit share is subject to remuneration committee approval, and can be revised at any time if the director’s responsibilities are changed; The profit share of PR Ensor (executive chairman) is based on the adjusted pre-tax post non-controlling interests’ profit of the group, thereby matching his profit share with the pre-tax return the group generates for its shareholders. The profit share is calculated by applying a multiplier to the adjusted pre-tax profits. The multiplier is adjusted for the dilution arising from increases in the company’s share capital. PR Ensor is also entitled to a percentage of adjusted pre-tax profit in excess of a threshold. This threshold increases by 5% each year. This multiplier is also adjusted for any dilution arising from the issue of new equity; The profit share of CHC Fordham (managing director) is linked to the growth in the group’s adjusted pre-tax earnings per share (EPS), from a base pre-tax EPS that increases at 5% per year; NF Osborn receives a profit-share linked to the operating profits of the businesses he manages at fixed rates on profits above various thresholds; DC Cohen receives a profit-share linked to the operating profits of the businesses he manages at fixed rates on profits above various thresholds; CR Jones (finance director) receives a profit share linked to the adjusted pre-tax EPS of the group. A fixed sum is payable for every percentage point the adjusted pre-tax EPS is above a threshold and an additional fixed sum is payable for every percentage point that the adjusted pre-tax EPS is above a second higher threshold; DE Alfano receives a profit-share linked to the operating profits of the businesses she manages at fixed rates on profits above various thresholds. She also receives a profit share on acquisitions she manages at a fixed rate; JL Wilkinson receives a profit-share linked to the operating profits of the businesses she manages at the rate of 5% of adjusted profits above a threshold that is adjusted for titles sold, closed or acquired in line with the group’s US investment in digital strategy. As group marketing director, she receives an incentive based on the growth in the group’s subscription and delegate revenues above certain thresholds. These thresholds are based on a rolling three year average of the respective revenue streams; B AL-Rehany receives a profit-share linked to the operating profits of the businesses he manages at a fixed rate on profits above a threshold. This threshold increases each year. Incentives, including profit shares, are an important part of the group culture. The directors believe they directly reward good and exceptional performance. Most employees across the group have some incentive scheme in place. 22706.04 13 December 2013 6:27 PM Proof 6 Euromoney Institutional Investor PLC www.euromoneyplc.com55 55 Detailed remuneration arrangements of executive directors Remuneration components continued lOnG-teRm inCentive plAnS Purpose and link to strategy Operation Relationship to all employee long-term incentive schemes e c n a n r e v o G t r o p e R n o i t a r e n u m e R ’ s r o t c e r i D ●● ●● ●● ●● ●● ●● Share schemes are an important part of the overall compensation and align the interests of directors and managers with shareholders. They encourage directors to deliver long-term sustainable profit growth. 2014 Capital Appreciation Plan (CAP 2014) At the company’s AGM in January 2014 the directors will seek approval for a new long-term incentive scheme following the achievement of the performance conditions of CAP 2010, now closed to new members, (see page 50). Awards under CAP 2014 are likely to be granted in March 2014 to approximately 250 directors and senior employees who have direct and significant responsibility for the profits of the group. Each CAP 2014 award, if approved, will comprise: a nil-paid option to subscribe for ordinary shares of 0.25 pence each in the company; and a right to receive a cash payment. No individual may receive an award over more than 5% of the award pool. In accordance with the terms of CAP 2014, no consideration will be payable for the grant of the awards. The primary performance test under CAP 2014 will require the company to achieve an adjusted profit before tax (before CAP costs) of £173.6 million by financial year 2017. Subject to the performance test being satisfied, rewards under CAP 2014 are expected to vest in three equal tranches in February 2018, 2019 and 2020. The profit target under CAP 2014 will be increased in the event that any significant acquisitions are made during the period; 2014 Company Share Option Plan (CSOP 2014) Also at the company’s AGM, the directors will seek approval of a new CSOP. The CSOP 2014 will be a delivery mechanism for part of the CAP 2014 award. Awards are likely to be granted under the CSOP 2014 in March 2014 to approximately 150 directors and senior employees of the group who have direct and significant responsibility for the profits of the group. Each CSOP 2014 option will enable each UK based director and UK based participant to purchase up to £30,000* of shares in the company with reference to the market price of the company’s shares at the date of grant. No consideration will be payable for the grant of these awards. The options will vest and become exercisable at the same time as the corresponding share award under the CAP 2014 providing the CSOP option is in the money at that time; *The Canadian version of the CSOP 2014 will enable a Canadian based director or employee to purchase up to £100,000 of shares in the company with reference to the market price of the company’s share at the date of grant. 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. No performance conditions attach to options granted under this plan. It is designed to incentivise all employees. 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; DMGT SIP Daily Mail and General Trust plc, the group’s parent company, operates a share incentive plan in which all UK-based employees of the Euromoney group can participate. Participants can contribute up to £125 a month from their gross pay to purchase DMGT ‘A’ non-voting shares. These shares are received tax free after five years. All employees based in the UK are entitled to participate in the DMGT SIP and Euromoney SAYE schemes. The CAP 2014 scheme is expected to be available to approximately 250 senior people across the group who have direct and significant responsibility for the profits of their businesses, and new participants may be added during the performance period. 22706.04 13 December 2013 6:27 PM Proof 6 Annual Report and Accounts 2013 56 56 Directors’ Remuneration Report continued Remuneration policy report continued Non-executive directors The remuneration of non-executive directors is determined by the board based on the time commitment required by the non-executive, their role, and market conditions. Each non-executive director receives a base fee for services to the board with an additional fee payable to the chairs of the remuneration and audit committees. The non-executive directors do not participate in any of the company’s incentive schemes. Policy on external appointments The company encourages its executive directors to take a limited number of outside directorships provided they are not expected to impinge on their principal employment. Subject to the approval of the chairman, directors may retain the remuneration received from the first such appointment. Recruitment policy Compensation packages for new board directors are set on the same basis as those in place for existing board directors. The main components are detailed below. Executive directors will receive a salary commensurate with their responsibilities, likely to be below market average and not the most significant part of the director’s overall remuneration package. Directors’ salaries are reviewed every year by the committee. The directors will also be invited to receive non-cash benefits in the form of private healthcare. Other benefits may include a relocation or housing allowance and, in exceptional circumstances, compensation for loss of earnings from their previous employment which have been forfeited in order to join the company. Where these exceptional circumstances apply the remuneration committee would try to match closely the compensation type foregone with that offered by the company. New executive directors are expected to be paid a profit share directly linked to the growth in profits of the business units they manage. There will be no floor or ceiling to the profit share. Profit share thresholds and the specific arrangements will be agreed with the remuneration committee. The standard profit share arrangement pays 5% of the operating profits in excess of a threshold, which is normally set at the level of profits achieved in the 12 months prior to joining the company. In some exceptional cases there may be an additional incentive paid to a director in the event of the director turning around a non-performing business. The quantum of this incentive will be dependent on the time frame taken to turn the business around and the initial level of losses. Non-executive directors appointed to the board will receive a base fee in line with that payable to other non-executive directors (see above). Policy on payment for loss of office Executive directors are generally employed on 12 month rolling contracts with a 12 month notice period. Non-executive directors’ contracts can be terminated by the company giving summary notice, with the exception of Sir Patrick Sergeant who has a 12 month notice period. In the event of a termination of contract, executive directors are entitled to 12 months’ salary, pension and a pro-rated profit share up to the date of termination. Executive directors are not entitled to any payment from the group’s CAP and other option schemes unless the schemes vest within the director’s notice period, in which case the director is only entitled to the options vesting at that time. No other termination payments are provided unless otherwise required by law. 22706.04 13 December 2013 6:27 PM Proof 6 Euromoney Institutional Investor PLC www.euromoneyplc.com 57 57 e c n a n r e v o G t r o p e R n o i t a r e n u m e R ’ s r o t c e r i D Directors’ service contracts The company’s policy is to employ executive directors on 12 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. Directors’ service contracts are reviewed from time to time and updated where necessary. A service contract terminates automatically on the director reaching their respective retirement age. With the exception of Sir Patrick Sergeant, none of the non-executive directors has a service contract, although JC Botts, DP Pritchard, TP Hillgarth and ART Ballingal serve under a letter of appointment. A summary of the notice periods and any obligation under the executive director’s service contract is outlined in the table below: Executive directors Date of service contract Notice period (months) Retirement age Benefits accruing if contract terminated1 Benefits accruing if contract terminated due to incapacity2 PR Ensor Jan 13 1993 12 CHC Fordham Sep 21 2004 12 NF Osborn3 Jan 4 1991 12 DC Cohen Nov 2 1992 12 CR Jones Aug 27 1997 12 DE Alfano4 Jan 10 2001 12 JL Wilkinson July 26 2000 12 B AL-Rehany5 Nov 11 2009 12 Non-executive director 67 62 62 62 62 62 62 62 12 months’ salary, pension and a 6 months’ salary, pension and profit pro-rated profit share up to the share up to the date of termination. date of termination. 12 months’ salary, pension and a 6 months’ salary, pension, and pro– pro-rated profit share up to the rated profit share up to the date of date of termination. 12 months’ salary, pension and a termination. 1 month’s salary, pension, and a pro– pro-rated profit share up to the rated profit share up to the date of date of termination. 12 months’ salary, pension and a termination. 1 month’s salary, pension, and a pro– pro-rated profit share up to the rated profit share up to the date of date of termination. 12 months’ salary, pension and a termination. 6 months’ salary, pension, and a pro– pro-rated profit share up to the rated profit share up to the date of date of termination. 12 months’ salary, pension and a termination. Salary, pension and profit share earned pro-rated profit share up to the up to the date of termination only. date of termination. 12 months’ salary, pension and a 6 months’ salary, pension, and a pro– pro-rated profit share up to the rated profit share up to the date of date of termination. 12 months’ salary, pension and a termination. 6 months’ salary, pension, and pro– pro-rated profit share up to the rated profit share up to the date of date of termination. termination. Sir Patrick Sergeant Jan 10 1993 12 n/a 12 months’ expense allowance. Expense allowance up to the date of termination. 1 2 3 4 5 On termination, profit share is calculated as though the director has been employed for the full financial year and then pro-rated according to the date of termination. These reduced benefits also apply if the director gives less than their required notice period to the company. In the event of death in service, benefits accrue to the date of death. If a contract is terminated for reasons of bankruptcy or serious misconduct, it is terminated with immediate effect with no payment in lieu of notice. NF Osborn has a second service contract with a subsidiary of the group, Euromoney Inc., dated January 4 1991 which may be terminated by 12 months notice. In the event of termination NF Osborn is entitled to 12 months base salary and pension, plus a pro-rated profit share to the date notice of termination is given. The company may also terminate his agreement due to incapacity giving three months notice and NF Osborn would be entitled to three months’ salary, pension and pro-rated profit share. Remuneration received under this contract is included in NF Osborn’s single figure of remuneration on page 58. DE Alfano’s service agreement is with Institutional Investor, LLC. B AL-Rehany’s service agreement is with BCA Research, Inc. 22706.04 13 December 2013 6:27 PM Proof 6 Annual Report and Accounts 2013 58 58 Directors’ Remuneration Report continued Annual report on remuneration Information subject to audit (pages 58 to 59) Annual report on remuneration The table below sets out the break-down of the single total figure of remuneration for each executive director in 2013 and 2012. Executive directors PM Fallon (died October 14 2012) PR Ensor¹ CHC Fordham² NF Osborn³ DC Cohen4 CR Jones5 DE Alfano6 JL Wilkinson7 B AL-Rehany8 Total executive directors Non-executive directors The Viscount Rothermere Sir Patrick Sergeant JC Botts JC Gonzalez (resigned January 31 2013) MWH Morgan DP Pritchard ART Ballingal (appointed December 12 2012) TP Hillgarth (appointed December 12 2012) Total non-executive directors Salary and fees £ 8,692 222,000 175,500 175,500 375,000 151,300 133,159 132,559 115,700 115,700 252,500 240,000 141,157 138,994 268,332 231,002 261,830 260,662 1,731,870 1,667,717 28,000 28,000 28,000 28,000 34,500 34,500 9,333 28,000 28,000 28,000 34,500 34,500 21,000 – 21,000 – 204,333 181,000 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 Benefits £ Profit share £ Long-term incentive £ Pension £ Total £ 1,823 1,823 1,019 1,019 1,274 1,274 1,019 1,019 1,274 1,274 1,274 1,274 8,960 8,367 8,968 8,527 1,491 1,908 27,102 26,485 246,009 5,636,600 4,544,828 4,630,646 648,025 743,792 336,695 313,407 221,878 348,796 670,111 643,278 644,389 636,808 125,610 146,301 599,433 752,127 8,036,978 13,851,755 – 26,640 – 26,640 536,917 507,525 452 27,013 99,365 162,194 417,012 395,643 165,969 146,860 240,107 240,476 556,504 392,471 2,016,326 1,925,462 – – 22,918 22,918 37,500 15,130 9,399 9,399 15,855 40,349 37,875 43,900 4,101 3,938 18,657 14,982 7,447 7,173 153,752 157,789 256,524 5,887,063 4,744,265 4,856,723 1,598,716 1,419,021 480,724 483,397 454,072 668,313 1,378,772 1,324,095 964,576 934,967 661,674 641,288 1,426,705 1,414,341 11,966,028 17,629,208 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 28,000 28,000 28,000 28,000 34,500 34,500 9,333 28,000 28,000 28,000 34,500 34,500 21,000 – 21,000 – 204,333 181,000 Total 2013 Total 2012 1,936,203 27,102 8,036,978 2,016,326 153,752 12,170,361 1,848,717 26,485 13,851,755 1,925,462 157,789 17,810,208 22706.04 13 December 2013 6:27 PM Proof 6 Euromoney Institutional Investor PLC www.euromoneyplc.com59 59 ●● ●● ●● ●● 1 2 3 4 5 6 7 8 Salaries and fees include basic salaries and any non-executive directors’ fees. The salaries and fees figure for JL Wilkinson includes £88,332 of housing allowance. Benefits include private healthcare and also dental cover for directors based in Canada and the US. The long-term incentive figure represents the value of the CAP 2004 share options, CAP 2010 share options, CAP CSOP share options and the CAP cash award where the performance conditions were met during the period. The value of these share options is derived by multiplying the number of share options with the market value of options and deducting the cost of the options. The value of the CAP cash award is equivalent to the cash received. Pension amounts are those contributed by the company to pension schemes or cash amounts paid in lieu of pension contributions. The profit share of PR Ensor (executive chairman) is based on the adjusted pre-tax post non-controlling interests’ profit of the group. The profit share is calculated by applying a multiplier of 2.98% (2012: 3.01%) to the adjusted pre-tax profits. In addition, PR Ensor is also entitled to 1.12% (2012: 1.13%) of adjusted pre-tax profit in excess of a threshold of £40,806,097 (2012: £38,862,950). The profit share of CHC Fordham (managing director) is linked to the growth in the group’s adjusted pre-tax earnings per share (EPS), from a base pre-tax EPS of 67.5 pence (2012: 64.3 pence), equivalent to an adjusted pre-tax profit of £83 million (2012: £79 million). This is broadly equivalent to a 2% profit share above the base. NF Osborn receives a profit-share linked to the operating profits of the businesses he manages at a rate of 2.5% on profits to £1 million, 4% on the next £1 million, 5.5% on the next £1 million and 7% on profits in excess of £3 million; DC Cohen receives a profit-share linked to the operating profits of the businesses he manages at a rate of 1% on profits to £1.525 million, 5% on profits above £1.525 million and an additional 2.5% on profits above £4.675 million; CR Jones receives a profit share linked to the adjusted pre-tax EPS of the group. A fixed sum of £500 is payable for every percentage point the adjusted pre-tax EPS is above 11 pence and an additional fixed sum of £800 is payable for every percentage point that the adjusted pre-tax EPS is above 20 pence; DE Alfano receives a profit-share linked to the operating profits of the businesses she manages at a rate of 1% on profits between US$632,000 and US$957,000, and a rate of 6.5% on profits above US$957,000. Her profit share on acquisitions she manages is at a rate of 5%; JL Wilkinson receives a profit-share linked to the operating profits of the businesses she manages at the rate of 5% of adjusted profits above a threshold. For 2013 the threshold was US$8,341,050 (2012: US$8,434,369). As group marketing director, she receives an incentive based on the growth in the group’s subscription and delegate revenues above certain thresholds. In 2013, the rates applied were reduced by one-third to reflect Ms Wilkinson’s reduced responsibilities for the marketing group. B AL-Rehany receives a profit-share linked to the operating profits of the businesses he manages at a rate of 5% of profits above a threshold. This threshold increases by 10% per annum. e c n a n r e v o G t r o p e R n o i t a r e n u m e R ’ s r o t c e r i D Non-executive directors The remuneration of non-executive directors is determined by the board based on the time commitment required by the non-executive, their role, and market conditions. Each non-executive director receives a base fee for services to the board of £28,000 (2012: £28,000) with an additional fee of £6,500 payable to the chairs of the remuneration and audit committees. Effective October 1 2013, the base fee for non-executive directors was increased to £30,000, the first increase in ten years. The non-executive directors do not participate in any of the company’s incentive schemes. Information not subject to audit (pages 59 to 64) External appointments PR Ensor is an external member of the Finance Committee of Oxford University Press. During the year he retained earnings of £20,000 (2012: £20,000) from this role. This amount has not been included in his single figure of remuneration on page 58. NF Osborn is a non-executive director of RBC OJSC, a Moscow-listed media company. During the year he retained earnings of US$50,000 (2012: US$50,000) from this role. He also serves on the management board of A&N International Media Limited, a fellow group company, for which he received fees for the year of £25,000 (2012: £25,000); and as an advisor to the boards of both DMG Events and dmgi, fellow group companies, for which he received a combined fee of US$45,000 (2012: US$45,000). These amounts have not been included in his single figure of remuneration on page 58. Effective October 1 2013, NF Osborn’s fees from DMGT related companies were reduced to US$45,000. 22706.04 13 December 2013 6:27 PM Proof 6 Annual Report and Accounts 2013 60 60 Directors’ Remuneration Report continued Annual report on remuneration continued Variable pay Of the total remuneration of the nine executive directors who served in the year, 82% was derived from variable profit shares, as illustrated in the following graph: PM Fallon (died October 14 2012) 4.1% PR Ensor 3.7% CHC For dham 36.7% 28.5% 27.5% 34.5% 18.9% NF Osborn DC Cohen CR Jones DE Alfano JL Wilkinson B Al-Rehany Total 18.0% Total (excluding PR Ensor) 68.8% 30.5% 31.2% 95.9% 96.3% 63.3% 71.5% 65.5% 72.5% 81.1% 31.2% 69.5% 82.0% 68.8% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100 Fixed salary & benefits Variable profit shares The graphs below set out, for each director, the minimum remuneration, the remuneration expected at the beginning of the year, the actual remuneration and an estimate of the maximum remuneration. The variable element of remuneration relates to the group’s profit share schemes. The minimum profit share payable is zero; because the group’s profit share schemes have no ceiling, the maximum remuneration was calculated assuming that profits achieved had been 20% higher. All figures are in sterling. PR Ensor CHC Fordham 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 0 0 ’ £ 0 Minimum In line with expectations Actual Maximum Profit Share Pension Benefits Salary 1,600 1,400 1,200 1,000 0 0 0 ’ £ 800 500 400 200 0 Profit Share Pension Benefits Salary Minimum In line with expectations Actual Maximum 22706.04 13 December 2013 6:27 PM Proof 6 Euromoney Institutional Investor PLC www.euromoneyplc.comNF Osborn DC Cohen 0 0 0 ’ £ 600 500 400 300 200 100 0 Profit Share Pension Benefits Salary 600 500 400 0 0 0 ’ £ 300 200 100 0 Minimum In line with expectations Actual Maximum Minimum In line with expectations Actual Maximum CR Jones 0 0 0 ’ £ 1,200 1,000 800 600 400 200 0 Profit Share Pension Benefits Salary DE Alfano 1,000 0 0 0 ’ £ 800 600 400 200 0 Minimum In line with expectations Actual Maximum Minimum In line with expectations Actual Maximum JL Wilkinson B AL-Rehany 600 500 400 0 0 0 ’ £ 300 200 100 0 0 8 Minimum In line with expectations Actual Maximum Profit Share Pension Benefits Salary 1,200 1,000 0 0 0 ’ £ 800 600 400 200 0 Minimum In line with expectations Actual Maximum 61 61 Profit Share Pension Benefits Salary Profit Share Pension Benefits Salary Profit Share Pension Benefits Salary e c n a n r e v o G t r o p e R n o i t a r e n u m e R ’ s r o t c e r i D The data above does not include information for PM Fallon, the provision of the information for PM Fallon being misleading and irrelevant due to his death on October 14 2012. Capital Appreciation Plan 2010 (CAP 2010) minimum and maximum payouts The minimum payout under the CAP 2010 variable long-term incentive plan is zero. The maximum payout is an award of 6% of the award pool. There is no monetary maximum as the payout depends upon the company share price at the time of vesting. The number of options awarded to individuals is determined by the growth in profits of the businesses they are responsible for from the base year of financial year 2009, relative to the growth in the profits of the group over the same period. The award only vests following satisfaction of the primary performance target and in addition for tranche 2 (which can vest at the earliest in February 2014) the additional performance target (further details of the CAP 2010 scheme are given below). 22706.04 13 December 2013 6:27 PM Proof 6 Annual Report and Accounts 2013 62 62 Directors’ Remuneration Report continued Annual report on remuneration continued Company share schemes Details of each director’s share options can be found on pages 65 to 66. Capital Appreciation Plan 2010 (CAP 2010) CAP 2010 was approved by shareholders on January 21 2010 as a direct replacement for CAP 2004. of the primary performance condition and an year 2013, the primary performance condition additional performance condition (see below). having been met for a second time in financial The primary performance condition required the group to achieve adjusted pre-tax profits1 of £100 million, from a 2009 base profit of year 2012. Thus the CAP 2010 is designed so that profit growth must be sustained if awards are to vest in full. £62.3 million, by no later than the financial year The number of options received under the share ending September 30 2013, and that adjusted pre-tax profits1 remained above this level for a second year. award of CAP 2010 is reduced by the number of options vesting with participants from the 2010 Company Share Option Plan (see below Awards under CAP 2010 were granted on and note 23). March 30 2010 to approximately 200 directors The primary performance condition was first and senior employees who had direct and significant responsibility for the profits of the group. Each CAP 2010 award comprises achieved in financial year 2011, two years earlier than expected, when adjusted pre-tax profits1 were £101.3 million. However, the internal rules two equal elements: an option to subscribe of the plan were modified to prevent the awards for ordinary shares of 0.25 pence each in the vesting more than one year early so although In February 2013, 1,460,656+ CAP 2010 options and 311,710 CSOP options vested. A maximum of 1,750,000+ CAP 2010 and CSOP 2010 options remain unvested. company at an exercise price of 0.25 pence per ordinary share; and a right to receive a cash payment. No individual could receive an award over more than 6% of the award pool. In accordance with the terms of CAP 2010, no consideration was payable for the grant of the awards. the primary condition had been achieved the The true up to the number of options estimated award pool was allocated between the holders to be received by the directors under the first of outstanding awards by reference to their tranche of CAP 2010 last year to that actually contribution to the growth in profits of the vested in February 2013 and the anticipated group from the 2009 base year to the profits number of options to be received by the achieved in financial year 2012. These awards directors under the second tranche of CAP became exercisable in February 2013. 2010 are given in the directors’ share option The value of awards received by a participant is directly linked to the growth in profits over the performance period of the businesses for which the participant is responsible. Where there is no growth, no awards are allocated, whereas participants whose businesses grow the most will receive the highest proportion of the award. table on page 65. The number of options The primary performance condition for the estimated to be received under the first tranche second tranche of the award was increased to adjusted pre-tax profits1 of £105.0 million following the acquisition of NDR in August of the CAP 2010 last year was provisional as it reflected management’s best estimate taking into consideration the profits of the individual 2011. This primary performance condition was profit centres for financial year 2012, the achieved again in financial year 2012 when adjusted pre-tax profits1 were £113.0 million, resulting in the second tranche of CAP 2010 respective weighting of these profits between participants and the offsetting number of options delivered under the CSOP 2010. The The award pool comprises 3,500,992 ordinary shares with an option value (calculated at date of grant using an option pricing valuation model) awards vesting and becoming exercisable remuneration committee required management from February 2014 subject to the additional to apply true-up adjustments to these awards to performance condition being achieved in reflect the results during the three month period of £15 million, and cash of £15 million, limiting financial year 2013. to December 2012. The number of options estimated to be received under the second the total accounting cost of the scheme to £30 million over its life. Awards will vest in two equal tranches. The first becomes exercisable on satisfaction of the primary performance condition, but no earlier than February 2013, and lapses to the extent unexercised by September 30 2020. The second tranche of awards becomes exercisable in the February following the next financial year in which the primary performance condition is again The additional performance condition, tranche of the CAP 2010 in the table on page 65 applicable for the vesting of the second tranche is also provisional and it reflects management’s of awards, requires the profits of each business best estimate taking into consideration the in the subsequent vesting period be at least profits of the individual profit centres for 75% of that achieved in the year the first financial year 2013 and the offsetting number tranche of awards become exercisable. As the of options delivered under the CSOP 2010. The initial allocation of awards to participants was remuneration committee requires management calculated with reference to the profits achieved to apply true-up adjustments to these awards to in financial year 2012, the earliest the additional reflect the results during the three month period satisfied, but no earlier than February 2014. performance condition can be applied is by to December 2013. The second tranche only vests on satisfaction reference to the profits achieved in financial 22706.04 13 December 2013 6:27 PM Proof 6 Euromoney Institutional Investor PLC www.euromoneyplc.com63 63 The fair value per option granted and the same gain had been delivered using CAP 2010 condition, 2,241,269 options from the second assumptions used to calculate its value are set options. The amount of the funding award will tranche of options vested in February 2009. out in note 23. depend on the company’s share price at the The primary performance target was achieved date of exercise. Company Share Option Plan 2010 (CSOP 2010) The shareholders approved the CSOP 2010 at the Annual General Meeting on January 21 Capital Appreciation Plan 2004 (CAP 2004) CAP 2004 was approved by shareholders 2010. The CSOP 2010 plan was approved by on February 1 2005 and replaced the 1996 HM Revenue and Customs on June 21 2010. executive share option scheme. Each CAP 2004 award comprised an option to subscribe Awards were granted under the CSOP 2010 on June 28 20102 to approximately 135 directors and senior employees of the group who have for ordinary shares of 0.25 pence each in the company for an exercise price of 0.25 pence per ordinary share. No consideration was paid for direct and significant responsibility for the the grant of the awards. No further awards may profits of the group. Each CSOP 2010 option be granted under CAP 2004. enables each participant to purchase up to 4,9722 shares in the company at a price of £6.032 per share, the market value at the date of grant. No consideration was payable for CAP 2004 awards vest in three equal tranches. The first tranche became exercisable on satisfaction of the primary performance the grant of these awards. The options vested condition in 2007, and lapse to the extent and became exercisable at the same time as unexercised on September 30 2014. The other again in 2009 and, after applying the additional performance condition, 1,527,152 options from the third (final) tranche of options vested in February 2010. The additional performance condition was applied to profits for financial years 2010, 2011 and 2012 for those individual participants where the additional performance conditions had not previously been met and 303,321 options, 244,152 options and 39,907 options vested in February 2011, February 2012 and February 2013 respectively. No further options can vest under this scheme and 644,199 unvested CAP 2004 options lapsed. For the executive directors, the value of the second and third tranches of the CAP 2004 award that vested in February 2013 is set out in the directors’ share option table on page 65 and has been trued-up from the estimates provided the corresponding share award under the CAP two tranches of awards became exercisable in last year’s annual report. e c n a n r e v o G t r o p e R n o i t a r e n u m e R ’ s r o t c e r i D 2010. Once vested the CSOP option remained following the results achieved in financial years exercisable for a period of one month and then 2008 and 2009, but only to the extent that lapsed. As the UK CSOP 2010 vested before the the additional performance condition was also third anniversary of the grant of CSOP options, achieved. The primary performance condition, any unvested CSOP options from the first tranche of the award that had not been exercised vested again on June 28 2013, the third anniversary of broadly, required the company to achieve adjusted pre-tax profits1 of £57.0 million by no later than the financial year ending September grant, and remained exercisable for one month 30 2008 and remain at least this level for and then lapsed. Any CSOP options that did not two further vesting periods. The additional fully vest in the first tranche of the CAP 2010 performance condition required that the profits award vest at the same time as the second of the respective participants’ businesses in tranche of an individual’s CAP award, but only the subsequent two vesting periods be at least where the CSOP 2010 is in the money. 75% of that achieved in the year the primary performance condition was first met. The CSOP 2010 has the same performance criteria as that of the CAP 2010 as set out The CAP 2004 profit target was achieved in 2007 above. The number of CSOP 2010 awards that and the option pool (a maximum of 7.5 million vested proportionally reduced the number of shares) was allocated between the holders shares that vested under the CAP 2010. The of outstanding awards by reference to their CSOP is effectively a delivery mechanism for profit contribution to the achievement of the part of the CAP 2010 award. The CSOP 2010 options have an exercise price of £6.032, which will be satisfied by a funding award mechanism which is in place and results in the net gain3 on these options being delivered in the equivalent primary performance condition, subject to the condition 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 number of shares to participants as if the and, after applying the additional performance 22706.04 13 December 2013 6:27 PM Proof 6 Annual Report and Accounts 2013 64 64 Directors’ Remuneration Report continued Annual report on remuneration continued 1996 executive share option scheme Some of the executive directors had options DMGT SIP DMGT, the group’s parent company, operates a share incentive plan in which all UK-based from a previous executive share option scheme employees of the Euromoney group can approved by shareholders in 1996. This scheme participate. Employees can contribute up to expired in 2006 and no share options have been £125 a month from their gross pay to purchase issued under it since February 2004 although DMGT ‘A’ shares. These shares are received options granted may be exercised before tax free by the employee after five years. The February 2014. These options were exercisable executive directors who participated in this following satisfaction of the performance scheme during the year were PM Fallon, PR condition that the Total Shareholder Return Ensor and CR Jones, details of which can be (TSR) of the company exceeds the average TSR found on page 68 of this report. exceptional amortisation, Adjusted pre-tax profits are before acquired intangible items, movements in acquisition commitment values, imputed interest on acquisition commitments, foreign exchange loss interest charge on tax equalisation contracts, foreign exchange on restructured hedging arrangements, and the cost of the CAP itself. The Canadian version of the CSOP 2010 has a grant date of March 30 2010 and an exercise price of £5.01, the market value of the company’s shares at the date of grant, and enables each Canadian participant to purchase up to 19,960 shares in the company. The net gain on the CSOP options is the market price of the company’s shares at the date of exercise less the exercise price (£6.032) multiplied by the number of options exercised. The number of options vested and left to vest excludes the options required for the funding award element of the CSOP 2010. for the FTSE 250 index for the same period. For the performance condition to be satisfied, the 1 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. 2 3 + All of the executive director’s options outstanding under this scheme were exercised during the year as set out on pages 65 to 67 of this report. The fair value per option granted and the assumptions used to calculate its value are set out in note 23. SAYE The group operates an all employee save as you earn scheme in which all employees, including 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 participated in this scheme during the year were PR Ensor, CHC Fordham, NF Osborn and DC Cohen details of which can be found on page 65 of this report. 22706.04 13 December 2013 6:27 PM Proof 6 Euromoney Institutional Investor PLC www.euromoneyplc.com65 65 Information subject to audit (pages 65 to 67) Directors’ share options At start of year 1,810 1,810 621 24,950 4,972 29,921 – 60,464 4,299 – 673 3,626 1,810 10,408 5,000 15,896 7,186 3,454 10,639 1,810 43,985 15,000 21,533 4,972 26,504 68,009 9,798 9,798 19,596 12,415 4,972 17,387 34,774 14,258 19,960 34,217 68,435 307,481 Granted/ trued up during year Exercised during year At end of year Exercise price Date from which exercisable Expiry date – – – 8,225 – 5,007 1,408 14,640 (4,272) 18 (646) (3,608) – (8,508) – (13,956) 2,191 – (44) – (11,809) – 3,842 – 624 4,466 999 999 1,998 3,698 (531) 292 3,459 1,984 – 1,985 3,969 8,215 – – (621) (33,175) (4,972) – – (38,768) (27) (18) – – – (45) (5,000) (1,940) (9,377) (3,454) – – (19,771) (15,000) (25,375) (4,972) – (45,347) (10,797) – (10,797) (16,113) (4,441) – (20,554) (16,242) (19,960) – (36,202) (171,484) 1,810 * 1,810 – ‡ – ^ – † 34,928 ^ 1,408 § 36,336 – † – ^ 27 † 18 ^ 1,810 * 1,855 – – ‡ – ^ – † 10,595 ^ 1,810 * 12,405 – – ^ – † 27,128 ^ 27,128 – ^ 10,797 ^ 10,797 – ^ – † 17,679 ^ 17,679 – ^ – † 36,202 ^ 36,202 144,212 e c n a n r e v o G t r o p e R n o i t a r e n u m e R ’ s r o t c e r i D £4.97 Feb 01 15 Aug 01 15 £0.0025 £0.0025 £6.03 £0.0025 £6.39 £6.03 £0.0025 £6.03 £0.0025 £4.97 £4.19 £0.0025 £0.0025 £6.03 £0.0025 £4.97 £4.19 £0.0025 £6.03 £0.0025 exercised exercised exercised Feb 13 14 Feb 01 16 exercised exercised Feb 13 14 Feb 13 14 Feb 01 15 exercised exercised exercised exercised Feb 13 14 Feb 01 15 exercised exercised exercised Feb 13 14 Sep 30 14 Sep 30 20 Feb 14 20 Sep 30 20 Aug 01 16 Feb 14 20 Sep 30 20 Feb 14 20 Sep 30 20 Aug 01 15 Jan 28 14 Sep 30 14 Sep 30 20 Feb 14 20 Sep 30 20 Aug 01 15 Jan 28 14 Sep 30 20 Feb 14 20 Sep 30 20 £0.0025 £0.0025 exercised Feb 13 14 Sep 30 20 Sep 30 20 £0.0025 £6.03 £0.0025 £0.0025 £5.01 £0.0025 exercised exercised Feb 13 14 exercised exercised Feb 13 14 Sep 30 20 Feb 14 20 Sep 30 20 Sep 30 20 Feb 14 20 Sep 30 20 PR Ensor CHC Fordham NF Osborn DC Cohen CR Jones DE Alfano JL Wilkinson B AL-Rehany Total 22706.04 13 December 2013 6:27 PM Proof 6 Annual Report and Accounts 2013 66 66 Directors’ Remuneration Report continued Annual report on remuneration continued Directors’ cash settled options Under the terms of CAP 2010, the directors have been granted the following cash awards: CHC Fordham CHC Fordham NF Osborn NF Osborn DC Cohen DC Cohen CR Jones CR Jones DE Alfano DE Alfano JL Wilkinson JL Wilkinson B AL-Rehany B AL-Rehany At start of year £ Granted/ trued up during year £ Exercised during year £ 128,199 128,199 18,420 18,419 45,586 45,586 113,558 113,558 41,979 41,979 74,494 74,493 146,605 146,605 1,137,680 21,451 21,451 (18,304) (18,303) (190) (190) 2,672 2,672 4,280 4,280 1,253 1,254 8,504 8,504 39,334 (149,650) – (116) – (45,396) – (116,230) – (46,259) – (75,747) – (155,109) – (588,507) At end of year £ – 149,650 – 116 – 45,396 – 116,230 – 46,259 – 75,747 – 155,109 588,507 Date from which entitled exercised Feb 13 14 exercised Feb 13 14 exercised Feb 13 14 exercised Feb 13 14 exercised Feb 13 14 exercised Feb 13 14 exercised Feb 13 14 ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ The cash settled options lapse four months after the preliminary announcement of the group’s results for the financial year in which the performance conditions are met (note 23). * § ‡ Issued under the Euromoney Institutional Investor PLC SAYE scheme 2011. Issued under the Euromoney Institutional Investor PLC SAYE scheme 2012. Options granted relate to the true-up to the awards outstanding from either tranche 2 or tranche 3 of CAP 2004 which vested on February 14 2013 following the satisfaction of the additional performance test (see page 63). The number of such options granted to each director was provisional last year and was trued-up to reflect adjustments to the respective director’s individual business profits between year end and December 31 2012. ^ Options granted relate to the true-up to the estimate made last year of the first tranche of CAP 2010 together with the estimated number of shares that are expected to be issued under tranche 2 of CAP 2010 following the satisfaction of the additional performance test (see page 62). Tranche 2 vests on February 13 2014, three months following the announcement of the company’s results. The number of such options granted to each director under tranche 2 of CAP 2010 is provisional and will require a true-up to reflect adjustments to the respective director’s individual business profits between year end and December 31 2013. As such the actual number of options granted could vary from that disclosed. † Similarly, the number of options granted under CSOP 2010 relates to the true-up to the estimate made last year to the number of CSOP options expected to vest together with an estimate of the number of CSOP 2010 options expected to vest under the second tranche. The number of options vesting under the second tranche is provisional and dependent on satisfaction of the additional performance test and providing the CSOP is in the money at the time of the vesting. Once vested the option remains exercisable for a period of one month and then lapses. The remuneration committee requires management to apply true-up adjustments to these awards to reflect the results during the three month period to December 2013. Where the option does not vest, the option continues to subsist and becomes exercisable at the same time as the second tranche of the respective CAP 2010 share award (note 23). The market price of the company’s shares on September 30 2013 was £11.60. The high and low share prices during the year were £12.09 and £7.48 respectively. There were 8,215 options granted during the year (2012: 23,757). 22706.04 13 December 2013 6:27 PM Proof 6 Euromoney Institutional Investor PLC www.euromoneyplc.com67 67 Directors’ options exercised during the year The aggregate gain made by the directors on the exercise of share options in the year was £1,441,411 (2012: £387,800) as follows: CHC Fordham CHC Fordham DC Cohen DC Cohen DC Cohen NF Osborn NF Osborn CR Jones CR Jones CR Jones DE Alfano JL Wilkinson JL Wilkinson B AL-Rehany Number of options exercised Date of exercise Market price on date of exercise (£) Gain on exercise (£) Number of shares retained 33,796 4,972 11,317 5,000 3,454 27 18 25,375 15,000 4,972 10,797 16,113 4,441 36,202 171,484 Feb 14 13 Jun 28 13 Feb 14 13 May 30 13 Jun 28 13 Jun 28 13 Jun 28 13 Feb 14 13 Jun 28 13 Jun 28 13 Feb 14 13 Feb 14 13 Jun 28 13 Feb 14 13 £9.32 £10.39 £9.32 £9.30 £10.39 £10.39 £10.39 £9.32 £10.39 £10.39 £9.32 £9.32 £10.39 £9.32 314,894 21,661 105,446 25,542 15,048 280 78 236,432 92,975 21,661 100,601 150,133 19,348 337,312 1,441,411 16,164 4,972 – – – – – 12,136 4,000 4,972 – – – 22,485 64,729 e c n a n r e v o G t r o p e R n o i t a r e n u m e R ’ s r o t c e r i D Information not subject to audit (pages 67 and 68). Directors’ interests in the company PM Fallon (died October 14 2012) PR Ensor CHC Fordham NF Osborn DC Cohen CR Jones DE Alfano JL Wilkinson B AL-Rehany The Viscount Rothermere Sir Patrick Sergeant JC Botts JC Gonzalez (resigned January 31 2013) MWH Morgan DP Pritchard ART Ballingal (appointed December 12 2012) TP Hillgarth (appointed December 12 2012) Non-beneficial Sir Patrick Sergeant Ordinary shares of 0.25p each 2013 2012 – 194,529 161,513 31,354 39,490 190,380 99,256 77,275 37,276 24,248 165,304 15,503 – 7,532 – – – 1,043,660 630,383 194,529 140,377 45,354 74,490 169,272 99,256 77,275 14,791 24,248 165,304 15,503 – 7,532 – – – 1,658,314 20,000 20,000 22706.04 13 December 2013 6:27 PM Proof 6 Annual Report and Accounts 2013 68 68 Directors’ Remuneration Report continued Annual report on remuneration continued 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 (died October 14 2012) PR Ensor CR Jones Sir Patrick Sergeant MWH Morgan1&2 Ordinary shares of ‘A’ Ordinary non–voting 12.5p each shares of 12.5p each 2013 2012 2013 2012 17,738,163 – – – – 764 11,903,132 4,000 – – – 764 68,570,098 – 1,124 1,077 – 1,049,826 75,134,502 42,234 866 821 36,000 978,104 1 2 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 annual report. The figures in the table above include ‘A’ shares awarded to executives under the DMGT Executive Bonus Scheme. For MWH Morgan and The Viscount Rothermere respectively, 17,500 and 43,926 of these shares were subject to restrictions as explained in the Daily Mail and General Trust plc annual report. The Viscount Rothermere had non-beneficial interests as a trustee at September 30 2013 in 5,540,000 ‘A’ ordinary non-voting shares of 12.5 pence each (2012: 5,540,000 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 17,738,163 ordinary shares of 12.5 pence each (2012: 11,903,132 shares). At September 30 2013 and September 30 2012, The Viscount Rothermere was beneficially interested in 756,700 ordinary shares of Rothermere Continuation Limited, the company’s ultimate parent company. The Viscount Rothermere and MWH Morgan had options over 632,986 and 183,047 respectively ‘A’ ordinary non-voting shares in Daily Mail and General Trust plc at September 30 2013 (2012: 553,351 and 333,187 options respectively). The exercise price of these options ranges from £nil to £7.24. Further details of these options are listed in the Daily Mail and General Trust plc annual report. Since September 30 2013, PR Ensor and CR Jones purchased, through the DMGT SIP scheme, 31 and 32 additional ‘A’ ordinary non-voting shares in Daily Mail and General Trust plc respectively. There have been no other changes in the directors’ interests since September 30 2013. 22706.04 13 December 2013 6:27 PM Proof 6 Euromoney Institutional Investor PLC www.euromoneyplc.com69 69 Information subject to audit (pages 69 to 70) Directors’ pensions Executive directors can participate in the Harmsworth Pension Scheme (a defined benefit scheme), the Euromoney Pension Plan (a money purchase plan) or their own private pension scheme. Further details of these schemes are set out in note 26 to the accounts. Pension contributions paid by the company on behalf of executive directors during the year were as follows: Cash alternative to pension scheme contribution 2013 £ Harmsworth Pension Sceme 2013 £ Euromoney Pension Plan 2013 £ Private Schemes 2013 £ – – – – – – – – – – – 22,918 – – 15,855 37,875 – – – 76,648 – – 37,500 9,399 – – – 18,657 – 65,556 – – – – – – 4,101 – 7,447 11,548 Total 2013 £ – 22,918 37,500 9,399 15,855 37,875 4,101 18,657 7,447 153,752 e c n a n r e v o G t r o p e R n o i t a r e n u m e R ’ s r o t c e r i D Total 2012 £ – 22,918 15,130 9,399 7,928 12,375 3,938 14,982 7,173 93,843 PM Fallon (died October 14 2012) PR Ensor CHC Fordham NF Osborn DC Cohen1 CR Jones1 DE Alfano JL Wilkinson B AL-Rehany The Harmsworth scheme is closed to new entrants; existing members still in employment can continue to accrue benefits in the scheme on a cash basis, with members using this cash account to purchase an annuity at retirement. Under the Harmsworth Pension Scheme, the following pension benefits were earned by the directors: Harmsworth Pension Scheme Accrued annual pension at Sept 30 2013 £ Pension cash accrual at Sept 30 2013 £ Transfer value at Sept 30 2013 £ Normal retirement date Additional value of benefits if early retirement taken Weighting of pension benefit value as shown in single figure table Director PM Fallon (died October 14 2012) DC Cohen1 CR Jones1 – – – n/a 32,390 50,200 631,000 Oct 26 2019 44,788 65,200 807,000 Aug 11 2022 none none none none Cash allowance: 100% Cash allowance: 100% The accrued annual pension entitlement is that which would be paid annually on retirement based on service to September 30 2013 and ignores any increase for future inflation. The pension cash accrual represents the sum which would be available on retirement based on service to September 30 2013 to secure retirement benefits, ignoring 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 include the pension cash accrual and 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 22706.04 13 December 2013 6:27 PM Proof 6 Annual Report and Accounts 2013 70 70 Directors’ Remuneration Report continued Annual report on remuneration continued directors and, therefore, cannot be added meaningfully to annual remuneration. The pension cash accrual has been included in 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 pension cash accrual element of the scheme is 65. The normal retirement age for the accrued benefits under the now closed element of the Harmsworth Pension Scheme is 62. 1 Company contributions to the Harmsworth Pension Scheme on behalf of DC Cohen and CR Jones were made until March 31 2012. From April 1 2012, these directors received a cash allowance in lieu of company pension contributions. Information not subject to audit (pages 70 to 73) Comparison of overall performance and remuneration of the managing director The chart below compares the company’s TSR with the FTSE250 over the past five financial years. The company is a constituent of the FTSE250 and, accordingly, this is considered to be an appropriate benchmark. % n r u t e R r e d o h e r a h S l l a t o T 500 450 400 350 300 250 200 150 100 50 3 0 3 1 3 1 Company FTSE 250 3 0 S e D M D M D M D M D M 3 0 J u S e S e p t 2 e c 2 0 0 8 0 0 8 a r 2 n e 0 0 9 2 0 0 p t 2 e c 2 0 0 0 9 9 3 0 3 1 3 1 3 0 3 1 3 1 3 0 3 1 3 1 3 0 3 1 3 1 3 0 J u a r c h n e S e p t 2 e c 2 0 a r c n e h 2 0 9 2 0 1 0 2 0 1 0 0 1 0 1 0 2 0 1 1 3 0 J u S e p t 2 e c 0 1 1 0 1 1 2 0 1 1 3 0 J u a r 2 n e S e p t 2 e c 0 1 2 2 0 1 2 0 1 2 3 0 J u 2 0 1 2 a r 2 n e p t 2 0 1 3 2 0 1 3 0 1 3 Managing director - single figure of remuneration CHC Fordham replaced PR Ensor as managing director on October 15 2012. The single figure of total remuneration for the managing director set out below includes salary, benefits, company pension contributions and long-term incentives as set out on page 58 of this report. Managing director single figure of total remuneration £ Annual variable element (profit share) £ Year on year % change % Annual variable element (profit share) payout against maximum opportunity % 2013 2012 2011 2010 2009 CHC Fordham PR Ensor PR Ensor PR Ensor PR Ensor (67%) 10% 11% 36% 0% 1,598,716 4,856,723 4,396,681 3,976,660 2,916,771 648,025 4,630,646 4,201,414 3,787,355 2,508,665 58.5% 81.9% 81.8% 81.6% 81.0% Value of long-term incentive (share options) vesting in period £ 536,917 26,640 – – 218,983 Long-term incentive vesting rates against maximum opportunity % 100% 100% – – 100% Maximum opportunity £ 536,917 26,640 – – 218,983 The group’s profit share scheme has no ceiling; hence the maximum annual variable element of remuneration was calculated assuming that profits achieved had been 20% higher. The maximum long-term incentive award vesting under the CAP is restricted to 6% of the award pool as set out in the rules of those schemes. 22706.04 13 December 2013 6:27 PM Proof 6 Euromoney Institutional Investor PLC www.euromoneyplc.com 71 71 Percentage change in remuneration of the managing director The table below illustrates the change in remuneration for the managing director, previously PR Ensor and now CHC Fordham. It is also compared with the change in remuneration of all other employees across the group. The directors feel that this group of people is the most appropriate as a comparator because employees pay is determined annually by the remuneration committee at the same time as that of the managing director and under the same economic circumstances. The directors believe this demonstrates the best link between the increase in average remuneration compared to the managing director. Total remuneration 2013 £ 2012 £ % increase/ (decrease) £ Managing director remuneration (excluding LTIP and pension) 1,024,299 4,807,165 (78.7%) Total employee remuneration (excluding managing director remuneration) 138,841,988 135,395,699 Average number of employees (excluding managing director) 2,323 2,262 2.5% 2.7% Average employee remuneration 59,768 59,857 (0.1%) Remuneration in the above table excludes long-term incentive payments and pension benefits. Employees exclude temporary staff. The remuneration of the managing director fell by 78.7% this year. This reflects CHC Fordham’s appointment as managing director and PR Ensor’s appointment as chairman under the management succession plan implemented in October 2012. The majority of Mr Ensor’s remuneration was profit share which was calculated from a low base threshold set in 1978 when the company was in its infancy. This profit share was in lieu of equity at the time. As the group’s profit has grown significantly from this date, so Mr Ensor’s remuneration has grown with it. Mr Fordham’s remuneration was structured to include a higher proportion from his salary and his profit share threshold was based on the profits achieved in 2012. e c n a n r e v o G t r o p e R n o i t a r e n u m e R ’ s r o t c e r i D 22706.04 13 December 2013 6:27 PM Proof 6 Annual Report and Accounts 2013 72 72 Directors’ Remuneration Report continued Annual report on remuneration continued Relative importance of spend on pay The first chart below demonstrates how the group’s revenue covers its cost base, employee costs at 38% of revenue (2012: 38.8%). After covering the costs the revenue remaining equates to adjusted profit before tax, the adjusted profit before tax margin at 28.8% (2012: 27.1%), (see Appendix to the Chairman’s Statement). The second chart takes the adjusted profit before tax above and shows how these profits are utilised, for instance, local tax authorities with 21.7% of adjusted profit before tax (2012: 21.9%). The notional CAP charge relates to the notional reversal of the £6.6 million additional accelerated CAP charge originally recognised in 2011. The directors agreed to exclude the impact of the distorted charge in 2011 and its subsequent reversal in later years when setting the dividend. The resultant balance of 74.6% (2012: 77%) represents the proportion of adjusted profit before tax available for distribution to shareholders. The group’s dividend policy is to distribute a third of these adjusted distributable profits to shareholders. Costs and resultant profit as a percentage of revenue 25.7% 38.0% 6.3% 0.5% 0.7% 28.8% 2013 2012 24.9% 38.8% 1.6% 1.4% 27.1% 6.1% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Direct costs Employee costs CAP costs Overheads Interest Adjusted PBT Employee costs reflects remuneration paid to all employees of the group including temporary staff, and include salary, benefits, social security costs and pension costs (see note 6). Proportion of adjusted profit before tax 3.4% 21.7% 0.3% 74.6% 1.0% 21.9% 0.2% 77.0% 2013 2012 0 10 20 30 40 50 60 70 80 90 100 Tax Non-controlling interests Notional CAP charge Adjusted Distributable profits 22706.04 13 December 2013 6:27 PM Proof 6 Euromoney Institutional Investor PLC www.euromoneyplc.com 73 73 Annual General Meeting - shareholder vote outcome The table below shows the advisory shareholder vote on the 2012 Remuneration Report at the January 2013 AGM. The committee believes the 93.70% votes in favour of the remuneration report shows strong shareholder support for the company’s remuneration arrangements. The committee consults with key investors prior to any major changes in its remuneration arrangements. Votes for 106,242,920 % 93.7% Votes against 7,121,791 % 6.3% Abstentions 395 % 0.00% Payments to past directors There were no payments made to past directors during the year other than to PM Fallon who died on October 14 2012 and whose estate was paid his profit share and salary earned up to his date of death. Appointments and re-election All directors will be standing for re-election at the forthcoming AGM. Other related party transactions NF Osborn serves on the management board of A&N International Media Limited and as an advisor to the boards of both DMG Events and dmgi, all fellow group companies, for which he received fees for the year to September 30 2013 of £25,000 and US$45,000 respectively (2012: £25,000 and US$40,000 respectively). Implementation of the remuneration policy For the year ending September 30 2014 the group intends to apply the remuneration policy as follows: ●● Directors’ salaries from October 1 2013 will be as set out on page 58. These salaries will be reviewed (and may be increased) in April 2014 in line with the group’s policy. ●● Benefits will also be reviewed during the year although it is not anticipated that any significant changes will be made other than possibly the provision of a UK or group wide life assurance scheme. ●● The profit share arrangement for each director will be as described on page 54. Profit share thresholds are subject to review during the year. Changes to thresholds are made only where considered appropriate by the remuneration committee, taking into account the businesses that the respective director is responsible for and any acquisitions and disposals, as well, where applicable, the other factors stated in the group’s policy. ●● ●● The thresholds for the year ending September 30 2014 will be disclosed in the 2014 Annual Report and Accounts. Directors will continue to be able to participate in the pension schemes operated in the country they reside on an unchanged basis. Subject to approval of the CAP 2014 and CSOP 2014 by the company’s shareholders at the AGM in January 2014 the directors will be granted CAP 2014 and CSOP 2014 options. The actual number of options awarded will be directly linked to the profit growth delivered by the directors from the base year (September 30 2013) to the year the performance condition is achieved (expected to be September 30 2017). A summary of this new plan is provided on page 55. e c n a n r e v o G t r o p e R n o i t a r e n u m e R ’ s r o t c e r i D John Botts Chairman of the remuneration committee November 13 2013 22706.04 13 December 2013 6:27 PM Proof 6 Annual Report and Accounts 2013 74 74 Independent Auditor’s Report to the members of Euromoney Institutional Investor PLC Opinion on financial statements of Euromoney Institutional Investor PLC In our opinion: Our assessment of risks of material misstatement The assessed risks of material misstatement described below are those that had the greatest effect on our audit strategy, the allocation of resources in ●● the financial statements give a true and fair view of the state of the the audit and directing the efforts of the engagement team: group’s and of the parent company’s affairs as at September 30 2013 ●● acquisition accounting for the new businesses acquired, being TTI/ and of the group’s profit for the year then ended; Vanguard, Insider Publishing, Quantitative Techniques and CIE, as ●● the group financial statements have been properly prepared in well as the ongoing accounting for acquisition commitments on accordance with International Financial Reporting Standards (IFRSs) previous acquisitions including NDR. Each acquisition is typically as adopted by the European Union; structured in a different manner, resulting in judgement over the ●● the parent company financial statements have been properly accounting as well as over the assumptions used in the fair value prepared in accordance with United Kingdom Generally Accepted acquisition accounting assessment, including the identification of Accounting Practice; and the financial statements have been prepared in accordance with the ●● ●● intangible assets; the assessment of the carrying value of goodwill and intangible requirements of the Companies Act 2006 and, as regards the group assets. Management is required to carry out an annual impairment financial statements, Article 4 of the IAS Regulation. test which incorporates judgements based on assumptions about the future cash flows of the businesses and discount rates applied to The group financial statements comprise the Consolidated Income those cash flows; Statement, the Consolidated Statement of Comprehensive Income, the ●● revenue recognition, including deferred income on subscription and Consolidated Statement of Financial Position, the Consolidated Statement delegate revenue; of Changes in Equity, the Consolidated Statement of Cash Flows and the ●● the continued requirement for significant provisions and accruals related notes 1 to 30. The parent company financial statements comprise including the provision for impairment of trade receivables; the company Balance Sheet and the related notes 1 to 19. The financial ●● the presentation of adjusting items, in particular the quantum and reporting framework that has been applied in the preparation of the consistency of the items included in the reconciliation from statutory group financial statements is applicable law and IFRSs as adopted by profit to the non-statutory adjusted profit; the European Union. The financial reporting framework that has been ●● the appropriateness of capitalisation of internally-generated applied in the preparation of the parent company financial statements intangible assets, in particular in relation to the global content is applicable law and United Kingdom Accounting Standards (United management system; and Kingdom Generally Accepted Accounting Practice). Going concern As required by the Listing Rules we have reviewed the directors’ statement ●● the group’s exposure to tax risks through open items with tax authorities accrued for in several jurisdictions, in particular in the US, and the recognition and measurement of deferred tax assets. contained within the Directors’ Report that the group is a going concern. Our audit procedures relating to these matters were designed in the We confirm that: context of our audit of the financial statements as a whole, and not to ●● we have not identified material uncertainties related to events or conditions that may cast significant doubt on the group’s ability express an opinion on individual accounts or disclosures. Our opinion on the financial statements is not modified with respect to any of the risks to continue as a going concern which we believe would need to described above, and we do not express an opinion on these individual be disclosed in accordance with IFRSs as adopted by the European matters. Union; and ●● we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate. However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the group’s ability to continue as a going concern. Our application of materiality We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements on our audit and on the financial statements. For the purposes of determining whether the financial statements are free from material misstatement we define materiality as the magnitude of misstatement that makes it probable that the economic decisions of a reasonably knowledgeable person, relying on the financial statements, would be changed or influenced. 22706.04 13 December 2013 6:27 PM Proof 6 HeadingStraplineEuromoney Institutional Investor PLC www.euromoneyplc.com75 75 When establishing our overall audit strategy, we determined a magnitude ●● we carried out testing in relation to revenue using a combination of of uncorrected misstatements that we judged would be material for the analytical procedures and substantive testing, focusing in particular financial statements as a whole. We determined planning materiality for on the reconciliation of deferred subscription income to subscription/ the group to be £5.7 million, which is approximately 5% of adjusted fulfillment reports and the treatment of income and costs on events operating profit before acquired intangible amortisation, long-term spanning the period end; incentive expense and exceptional items. We use this profit measure as it ●● we challenged management’s assumptions around provisions, is a key measure of business performance for the group. including specifically US sales tax provisions, onerous lease commitments and employee tax exposures on share option liabilities We agreed with the Audit Committee that we would report to them as well challenging the continued requirement for the provision for all audit differences in excess of £114,000, based on 2% of planning impairment of trade receivables; materiality, as well as differences below that threshold that, in our view, ●● we considered the appropriateness, consistency and completeness of warranted reporting on qualitative grounds. the items classified as adjusting items and the related disclosures in the financial statements; An overview of the scope of our audit ●● we have tested the costs capitalised in respect of the global content Our group audit scope focused primarily on the audit work at ten management system as set out in note 11, assessing whether the components. Six of these were subject to a full scope audit. A further nature of those costs met the criteria for capitalisation under the four components were subject to specified audit procedures where the group’s accounting policy and whether they were directly attributable extent of our testing was based on our assessment of the risks of material to the development of the content management system; and misstatement and of the materiality of the group’s business operations at ●● we assessed the adequacy of accruals made in respect of items under those locations. Together with the central functions which were also subject discussion with the tax authorities and the anticipated resolution of to a full scope audit, these components represent the principal business those items. We challenged the recognition of deferred tax assets units of the group and account for 79% of revenue and 85% of adjusted and whether sufficient taxable profits were expected to be generated operating profit. They were also selected to provide an appropriate basis in the relevant jurisdictions in which they arise. for undertaking audit work to address the risks of material misstatement identified above. The work at these ten components was executed at The audit committee’s consideration of these risks is set out on page 40. levels of materiality applicable to each individual entity which were much lower than group materiality. The remaining components were subject to analytical review procedures designed to confirm that no further risks of Opinion on other matters prescribed by the Companies Act 2006 misstatement existed that were material to the group financial statements. In our opinion: ●● the part of the Directors’ Remuneration Report to be audited has The group audit team continued to follow a programme of planned visits been properly prepared in accordance with the Companies Act 2006; that has been designed so that the Senior Statutory Auditor or another and senior member of the group audit team visits the nine larger locations ●● the information given in the Strategic Report and the Directors’ where the group audit scope was focused at least once a year. Report for the financial year for which the financial statements are prepared is consistent with the financial statements. The way in which we scoped our response to the risks identified above was as follows: ●● we carried out testing on the acquisitions made in the year. We have Matters on which we are required to report by exception tested the valuation of intangible assets identified by management Adequacy of explanations received and accounting records on acquisitions, challenging key assumptions relating to royalty rates, Under the Companies Act 2006 we are required to report to you if, in short and long term growth rates and discount rates. We have also our opinion: challenged management’s assumptions used in the valuation of ●● we have not received all the information and explanations we require the deferred consideration and put option liabilities, predominantly for our audit; or relating to the profit forecasts of the acquired businesses; ●● we challenged management’s assumptions used in the impairment model for goodwill and intangible assets, described in note 11 to the ●● adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or financial statements, including specifically the cash flow projections, ●● the parent company financial statements are not in agreement with discount rates and sensitivities used; the accounting records and returns. We have nothing to report in respect of these matters. s t n u o c c A p u o r G t r o p e R s ’ r o t i d u A t n e d n e p e d n i 22706.04 13 December 2013 6:27 PM Proof 6 Annual Report and Accounts 2013 76 76 Independent Auditor’s Report to the members of Euromoney Institutional Investor PLC continued Directors’ remuneration Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the group’s and the parent company’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the annual report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. Robert Matthews (Senior Statutory Auditor) for and on behalf of Deloitte LLP Chartered Accountants and Statutory Auditor London, United Kingdom November 13 2013 Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of directors’ remuneration have not been made or the part of the Directors’ Remuneration Report to be audited is not in agreement with the accounting records and returns. Under the Listing Rules we are required to review certain elements of the Directors’ Remuneration Report. We have nothing to report arising from these matters or our review. Corporate Governance Statement Under the Listing Rules we are also required to review the part of the Corporate Governance Statement relating to the company’s compliance with nine provisions of the UK Corporate Governance Code. We have nothing to report arising from our review. Our duty to read other information in the Annual Report Under the ISAs (UK and Ireland), we are required to report to you if, in our opinion, information in the annual report is: ●● materially inconsistent with the information in the audited financial statements; or ●● apparently materially incorrect based on, or materially inconsistent with, our knowledge of the group acquired in the course of performing our audit; or ●● is otherwise misleading. In particular, we are required to consider whether we have identified any inconsistencies between our knowledge acquired during the audit and the directors’ statement that they consider the annual report is fair, balanced and understandable and whether the annual report appropriately discloses those matters that we communicated to the audit committee which we consider should have been disclosed. We confirm that we have not identified any such inconsistencies or misleading statements. Respective responsibilities of directors and auditors As explained more fully in the Directors’ Responsibilities Statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors. This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed. 22706.04 13 December 2013 6:27 PM Proof 6 HeadingStraplineEuromoney Institutional Investor PLC www.euromoneyplc.comAnnual Report and Accounts 2013 77 77 Consolidated Income Statement for the year ended September 30 2013 Notes 2013 £000 2012 £000 Total revenue 3 404,704 394,144 Operating profit before acquired intangible amortisation, long-term incentive expense and exceptional items Acquired intangible amortisation Long-term incentive expense Exceptional items 3 11 23 5 121,088 (15,890) (2,100) 2,232 118,175 (14,782) (6,301) (1,617) Operating profit before associates 3, 4 105,330 95,475 Share of results in associates Operating profit Finance income Finance expense Net finance costs Profit before tax Tax expense on profit Profit after tax Attributable to: Equity holders of the parent Equity non-controlling interests Basic earnings per share Diluted earnings per share Adjusted basic earnings per share Adjusted diluted earnings per share Dividend per share (including proposed dividends) 284 105,614 1,830 (12,184) (10,354) 459 95,934 4,475 (8,041) (3,566) 95,260 92,368 (22,235) 73,025 (22,528) 69,840 72,623 402 73,025 57.88p 56.70p 72.43p 70.96p 22.75p 69,672 168 69,840 56.74p 55.17p 67.79p 65.91p 21.75p s t n u o c c A p u o r G t n e m e t a t S e m o c n I d e t a d i l o s n o C 7 7 7 3 8 3 10 10 10 10 9 A detailed reconciliation of the group’s statutory results to the adjusted results is set out in the appendix to the Chairman’s Statement on page 7. 22706.04 12 December 2013 Proof 6 78 Consolidated Statement of Comprehensive Income for the year ended September 30 2013 Profit after tax Items that may be reclassified subsequently to profit or loss: Change in fair value of cash flow hedges Transfer of gains on cash flow hedges from fair value reserves to Income Statement: Foreign exchange gains in total revenue Foreign exchange (losses)/gains in operating profit Interest rate swap gains in interest payable on committed borrowings Net exchange differences on translation of net investments in overseas subsidiary undertakings Net exchange differences on foreign currency loans Tax on items that may be reclassified Items that will not be reclassified to profit or loss: Actuarial gains/(losses) on defined benefit pension schemes Tax (charge)/credit on actuarial gains/losses on defined benefit pension schemes Other comprehensive expense for the year Total comprehensive income for the year Attributable to: Equity holders of the parent Equity non-controlling interests 2013 £000 2012 £000 73,025 69,840 (3,298) 3,913 2,320 (176) 226 (7,167) 4,317 90 1,433 (287) (2,542) 70,483 69,774 709 70,483 3,382 184 1,251 (13,650) 5,886 (1,509) (3,398) 782 (3,159) 66,681 65,675 1,006 66,681 Euromoney Institutional Investor PLC www.euromoneyplc.com22706.04 12 December 2013 Proof 6 Consolidated Statement of Financial Position as at September 30 2013 79 79 Non-current assets Intangible assets Goodwill Other intangible assets Property, plant and equipment Investments Deferred tax assets Derivative financial instruments Current assets Trade and other receivables Current income tax assets Cash at bank and in hand Derivative financial instruments Current liabilities Acquisition commitments Deferred consideration Trade and other payables Liability for cash-settled options Current income tax liabilities Group relief payable Accruals Deferred income Committed loan facility Loan notes Derivative financial instruments Provisions Net current liabilities Total assets less current liabilities Non-current liabilities Acquisition commitments Deferred consideration Liability for cash-settled options and other non-current liabilities Preference shares Committed loan facility Deferred tax liabilities Net pension deficit Derivative financial instruments Provisions Net assets Shareholders’ equity Called up share capital Share premium account Other reserve Capital redemption reserve Own shares Reserve for share-based payments Fair value reserve Translation reserve Retained earnings Equity shareholders’ surplus Equity non-controlling interests Total equity The accounts were approved by the board of directors on November 13 2013. Christopher Fordham Colin Jones Directors Notes 2013 £000 2012 £000 11 11 12 13 21 18 15 18 24 24 16 23 17 19 19 18 20 24 24 23 19 21 26 18 20 22 356,574 149,039 16,792 702 5,015 746 528,868 79,245 5,436 11,268 1,736 97,685 (539) (7,040) (26,841) (7,435) (12,653) (473) (48,381) (117,296) (20,177) (1,028) (909) (3,974) (246,746) (149,061) 379,807 (14,498) (9,085) (498) (10) – (16,838) (2,883) – (2,236) (46,048) 333,759 316 101,709 64,981 8 (74) 37,122 (20,216) 38,707 102,959 325,512 8,247 333,759 333,065 136,243 17,982 735 7,344 296 495,665 65,952 2,678 13,544 2,715 84,889 (4,273) (77) (27,623) (7,768) (9,076) – (54,170) (105,106) – (1,228) (656) (2,037) (212,014) (127,125) 368,540 (3,595) – (6,966) (10) (43,154) (16,975) (4,757) (241) (4,918) (80,616) 287,924 311 99,485 64,981 8 (74) 36,055 (18,152) 40,728 58,033 281,375 6,549 287,924 s t n u o c c A p u o r G n o i t i s o P l a i c n a n i F f o t n e m e t a t S d e t a d i l o s n o C Annual Report and Accounts 2013 22706.04 12 December 2013 Proof 6 80 Consolidated Statement of Changes in Equity for the year ended September 30 2013 Share premium account £000 Other reserve £000 Share capital £000 Capital redemp- tion reserve £000 Own shares £000 Reserve for share- based pay- ments £000 Fair value reserve £000 Trans- lation reserve £000 Retained earnings £000 Equity non- control- ling interests £000 Total £000 Total £000 At September 30 2012 Retained profit for the year Change in fair value of cash flow hedges Transfer of gains on cash flow hedges from fair value reserves to Income Statement: Foreign exchange gains in total revenue Foreign exchange losses in operating profit Interest rate swap gains in interest payable on committed borrowings Net exchange differences on translation of net investments in overseas subsidiary undertakings Net exchange differences on foreign currency loans Actuarial gains on defined benefit pension schemes Tax relating to components of other comprehensive income Total comprehensive income for the year Exercise of acquisition commitments Recognition of acquisition commitments Non-controlling interest recognised on acquisition Credit for share-based payments Cash dividend paid Exercise of share options Tax relating to items taken directly to equity At September 30 2013 311 – 99,485 64,981 – – – – – – – – – – – – – – – – – – 5 – – – – – – – – – – – – – 2,224 – – – – – – – – – – – – – – – – 316 101,709 64,981 – 8 – – – – – – – – – – – – – – – – – 8 (74) – – – – – – – – – – – – – – – – – (74) 36,055 (18,152) 40,728 – – – 58,033 281,375 72,623 72,623 6,549 287,924 402 73,025 – (3,298) – – (3,298) – (3,298) – 2,320 – (176) – 226 – – – – – (7,474) – (1,136) 5,453 – – – – – 2,320 (176) 226 – – – 2,320 (176) 226 (7,474) 307 (7,167) – – – – 4,317 – – 4,317 1,433 – 1,433 1,433 – (197) (197) – (197) – (2,064) (2,021) 73,859 69,774 709 70,483 – – – 1,067 – – – – – – – – – – – – – – 18 18 (18) – (4,404) (4,404) – (4,404) – – 1,402 1,402 – (27,156) – 1,067 (27,156) 2,229 – (413) 18 1,067 (27,569) 2,247 – 2,609 37,122 (20,216) 38,707 102,959 325,512 2,609 – – – 2,609 8,247 333,759 The investment in own shares is held by the Euromoney Employees’ Share Ownership Trust (ESOT). At September 30 2013 the ESOT held 58,976 shares (2012: 58,976 shares) carried at a historic cost of £1.25 per share with a market value of £684,000 (2012: £454,000). 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. The other reserve represents the share premium arising on the shares issued for the purchase of Metal Bulletin plc in October 2006. Euromoney Institutional Investor PLC www.euromoneyplc.com22706.04 12 December 2013 Proof 6Consolidated Statement of Changes in Equity for the year ended September 30 2012 81 81 Share premium account £000 Other reserve £000 Share capital £000 Capital redemp- tion reserve £000 At September 30 2011 Retained profit for the year Change in fair value of cash flow hedges Transfer of gains on cash flow hedges from fair value reserves to Income Statement: Foreign exchange gains in total revenue Foreign exchange gains in operating profit Interest rate swap gains in interest payable on committed borrowings Net exchange differences on translation of net investments in overseas subsidiary undertakings Net exchange differences on foreign currency loans Actuarial losses on defined benefit pension schemes Tax relating to components of other comprehensive income Total comprehensive income for the year Exercise of acquisition option commitments Credit for share-based payments Scrip/cash dividends paid Exercise of share options At September 30 2012 303 – 82,124 64,981 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 6 2 311 – 16,304 1,057 – – – 99,485 64,981 8 – – – – – – – – – – – – – – 8 Own shares £000 (74) – – – – – – – – – – – – – – (74) Reserve for share- based pay- ments £000 Fair value reserve £000 Trans- lation reserve £000 Retained earnings £000 Total £000 Equity non- control- ling interests £000 Total £000 33,725 (32,768) 55,216 – – – 16,218 219,733 69,672 69,672 5,842 225,575 69,840 168 – 3,913 – – 3,913 – 3,913 – 3,382 – 184 – 1,251 – – – – – (14,488) – 5,886 – – – – – – – – – 3,382 184 – – 3,382 184 – 1,251 – 1,251 (14,488) 838 (13,650) – – 5,886 (3,398) (3,398) (727) (727) – – – 5,886 (3,398) (727) – 14,616 (14,488) 65,547 65,675 1,006 66,681 – – – 62 62 (62) – 2,330 – – – – – 36,055 (18,152) 40,728 – – – – (23,794) – 2,330 (7,484) 1,059 58,033 281,375 – (299) 62 2,330 (7,783) 1,121 6,549 287,924 s t n u o c c A p u o r G y t i u q E n i s e g n a h C f o t n e m e t a t S d e t a d i l o s n o C Annual Report and Accounts 2013 22706.04 12 December 2013 Proof 6 82 Consolidated Statement of Cash Flows for the year ended September 30 2013 Cash flow from operating activities Operating profit Share of results in associates Acquired intangible amortisation Licences and software amortisation Depreciation of property, plant and equipment Loss on disposal of property, plant and equipment Long-term incentive expense Negative goodwill (Decrease)/increase in provisions Operating cash flows before movements in working capital (Increase)/decrease in receivables Decrease in payables Cash generated from operations Income taxes paid Group relief tax paid Net cash from operating activities Investing activities Dividends paid to non-controlling interests Dividends received from associate Interest received Purchase of intangible assets Purchase of property, plant and equipment Proceeds from disposal of property, plant and equipment Payment following working capital adjustment from purchase of subsidiary Purchase of subsidiary undertaking, net of cash acquired Purchase of associates Receipt following working capital adjustment from purchase of associate Net cash used in investing activities Financing activities Dividends paid Interest paid Interest paid on loan notes Issue of new share capital Payment of acquisition deferred consideration Purchase of additional interest in subsidiary undertakings Proceeds received from non-controlling interest Settlement of derivative assets/liabilities Redemption of loan notes Loan repaid to DMGT group company Loan received from DMGT group company Net cash used in financing activities Net (decrease)/increase 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 2013 £000 2012 £000 105,614 (284) 15,890 301 3,926 – 2,100 (4,449) (786) 122,312 (4,343) (11,813) 106,156 (17,230) (1,970) 86,956 (413) 268 239 (6,314) (2,701) 2 (1,711) (20,971) – 49 (31,552) (27,156) (3,142) (3) 2,229 (5,329) (153) – – (199) (196,264) 172,488 (57,529) (2,125) 13,544 (151) 11,268 95,934 (459) 14,782 339 3,408 53 6,301 – 844 121,202 4,905 (3,932) 122,175 (11,065) (4,204) 106,906 (299) 291 306 (819) (1,665) 2 (1,151) (5,099) (567) – (9,001) (7,484) (5,218) (12) 1,059 (612) (924) 1,828 (332) (386) (139,067) 54,700 (96,448) 1,457 12,497 (410) 13,544 Euromoney Institutional Investor PLC www.euromoneyplc.com22706.04 12 December 2013 Proof 6Note to the Consolidated Statement of Cash Flows Net Debt Net debt at beginning of year Net (decrease)/increase in cash and cash equivalents Net decrease in amounts owed to DMGT group company Redemption of loan notes Interest paid on loan notes Accrued interest on loan notes Effect of foreign exchange rate movements Net debt at end of year Net debt comprises: Cash and cash equivalents Committed loan facility Loan notes Net debt 83 83 2013 £000 (30,838) (2,125) 23,776 199 3 (2) (950) (9,937) 11,268 (20,177) (1,028) (9,937) 2012 £000 (119,179) 1,457 84,367 386 12 (9) 2,128 (30,838) 13,544 (43,154) (1,228) (30,838) s t n u o c c A p u o r G s w o l F h s a C f o t n e m e t a t S d e t a d i l o s n o C e h t o t e t o N Annual Report and Accounts 2013 22706.04 12 December 2013 Proof 6 84 Notes to the Consolidated Financial Statements 1 Accounting policies General information The directors have assessed that the impact of the adoption of these standards will have no material impact on the financial statements of the Euromoney Institutional Investor PLC (the ‘company’) is a company group except for additional disclosures. incorporated in the United Kingdom (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. 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 (IFRS) 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 those 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. (a) Relevant new standards, amendments and interpretations issued and applied in the 2013 financial year: ●● Presentation of Items of Other Comprehensive Income (Amendments to IAS 1), effective for accounting periods beginning on or after July 31 2012. This amends IAS 1 ‘Presentation of Financial Statements’ to revise the way other comprehensive income is presented. (b) Relevant new standards, amendments and interpretations issued but effective in the 2014 financial year: (c) Relevant new standards, amendments and interpretations issued but effective in future accounting periods: ●● IFRS 9 ‘Financial Instruments’ issued in October 2010 (effective for accounting periods beginning on or after January 1 2015). This standard is the first step in the process to replace IAS 39 ‘Financial Instruments: recognition and measurement’. IFRS 9 introduces new requirements for classifying and measuring financial assets and is likely to affect the group’s accounting for its financial assets. This standard has not yet been endorsed by the EU. The group is yet to assess IFRS 9’s full impact. IFRS 10 ‘Consolidated Financial Statements’ (effective for accounting ●● periods beginning on or after January 1 2014). This standard builds on existing principles by identifying the concept of control as the determining factor in whether an entity should be included within the consolidated financial statements of the parent company and provides additional guidance to assist in the determination of control where this is difficult to assess. The group is yet to assess IFRS 10’s full impact. ●● IFRS 11 ‘Joint Arrangements’ (effective for accounting periods beginning on or after January 1 2014). This standard replaces IAS 31 ‘Interests in Joint Ventures’ and requires a party to a joint arrangement to determine the type of joint arrangement in which it is involved by assessing its rights and obligations and then account for those rights and obligations in accordance with that type of joint arrangement. A joint venturer applies the equity method of accounting for its investment in a joint venture in accordance with IAS 28 ‘Investments in Associates and Joint Ventures (2011)’. Unlike ●● IFRS 13 ‘Fair Value Measurement’ (effective for accounting periods IAS 31 the use of ‘proportionate consolidation’ to account for joint beginning on or after January 1 2013). This standard aims to improve ventures is not permitted. consistency and reduce complexity by providing a precise definition ●● IFRS 12 ‘Disclosure of Interests in Other Entities’ (effective for of fair value and a single source of fair value measurement and accounting periods beginning on or after January 1 2014). This disclosure requirements for use across IFRSs. The requirements, standard includes the disclosure requirements for all forms of which are largely aligned between IFRSs and US GAAP, do not extend interests in other entities, including joint arrangements, associates, to the use of fair value accounting but provide guidance on how it special purpose vehicles and other off balance sheet vehicles. The should be applied where its use is already required or permitted by group is yet to assess IFRS 12’s full impact. other standards within IFRSs or US GAAP. ●● IAS 12 ‘Income Taxes’ on deferred tax: recovery of underlying assets ●● IAS 19 (revised) ‘Employee Benefits’, issued in June 2011 (effective (effective for accounting periods beginning on or after January 1 for accounting periods beginning on or after January 1 2013). The 2013). This amendment provides a presumption that recovery of the impact on the group will be as follows: to recognise all actuarial carrying value of an asset measured using the fair value model in gains and losses in Other Comprehensive Income as they occur; to IAS 40 ‘Investment Property’ will, normally, be through sale. immediately recognise all past service costs; and to replace interest cost and expected return on plan assets with a net interest amount that is calculated by applying the discount rate to the net defined liability/(asset). Euromoney Institutional Investor PLC www.euromoneyplc.com22706.04 12 December 2013 Proof 685 85 to provide additional transition relief in by limiting the requirement to provide adjusted comparative information to only the preceding comparative period. Effective for accounting periods beginning on or after January 1 2014. Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS ●● 27), effective for accounting periods beginning on or after January 1 2014. This amends IFRS 10 ‘Consolidated Financial Statements’, IFRS 12 ‘Disclosure of Interests in Other Entities’ and IAS  27 ‘Separate Financial Statements’ to: provide investment entities an exemption from the consolidation of particular subsidiaries and instead require that an investment entity measure the investment in each eligible subsidiary at fair value through profit or loss in accordance with IFRS  9 ‘Financial Instruments’ or IAS  39 ‘Financial Instruments: Recognition and Measurement’; require additional disclosure about why the entity is considered an investment entity, details of the entity’s unconsolidated subsidiaries, and the nature of relationship and certain transactions between the investment entity and its subsidiaries; require an investment entity to account for its investment in a relevant subsidiary in the same way in its consolidated and separate financial statements (or to only provide separate financial statements if all subsidiaries are unconsolidated). Recoverable Amount Disclosures ●● for Non-financial Assets (Amendments to IAS 36), effective for accounting periods beginning on or after January 1 2014. This amends IAS 36 ‘Impairment of Assets’ to reduce the circumstances in which the recoverable amount of assets or cash-generating units is required to be disclosed, clarify the disclosures required, and to introduce an explicit requirement to disclose the discount rate used in determining impairment (or reversals) where the recoverable amount (based on fair value less costs of disposal) is determined using present value techniques. ●● Novation of Derivatives and Continuation of Hedge Accounting (Amendments to IAS 39), effective for accounting periods beginning on or after January 1 2014. This amends IAS 39 ‘Financial Instruments: Recognition and Measurement’ to make it clear that there is no need to discontinue hedge accounting if a hedging derivative is novated, provided certain criteria are met. s t n u o c c A p u o r G s t n e m e t a t S l a i c n a n i F d e t a d i l o s n o C e h t o t s e t o N 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. 1 Accounting policies continued ●● IAS 27 ‘Separate Financial Statements (2011)’ (effective for accounting periods beginning on or after January 1 2014). The standard requires that when an entity prepares separate financial statements, investments in subsidiaries, associates, and jointly controlled entities are accounted for either at cost, or in accordance with IFRS 9 ‘Financial Instruments’. It also deals with the recognition of dividends, certain group reorganisations and includes a number of disclosure requirements. ●● IAS 28 ‘Investments in Associates and Joint Ventures (2011)’ (effective for accounting periods beginning on or after January 1 2014). This standard supersedes IAS 28, ‘Investments in Associates’, and prescribes the accounting for investments in associates and sets out the requirements for the application of the equity method when accounting for investments in associates and joint ventures. The standard defines ‘significant influence’ and provides guidance on how the equity method of accounting is to be applied (including exemptions from applying the equity method in some cases). It also prescribes how investments in associates and joint ventures should be tested for impairment. Disclosures — Offsetting Financial Assets and Financial Liabilities ●● (Amendments to IFRS 7), effective for accounting periods beginning on or after January 1 2013. This amends the disclosure requirements in IFRS 7 ‘Financial Instruments: Disclosures’ to require information about all recognised financial instruments that are set off in accordance with paragraph 42 of IAS 32 ‘Financial Instruments: Presentation. ●● Offsetting Financial Assets and Financial Liabilities (Amendments to IAS 32), effective for accounting periods beginning on or after January 1 2014. This amends IAS 32 ‘Financial Instruments: Presentation’ to clarify certain aspects because of diversity in application of the requirements on offsetting, focused on four main areas: — the meaning of ‘currently has a legally enforceable right of set-off’ — the application of simultaneous realisation and settlement — the offsetting of collateral amounts — the unit of account for applying the offsetting requirements. Annual Improvements 2009–2011 Cycle: In May 2012 the IASB issued ●● Annual Improvements to IFRSs 2009–2011 Cycle incorporating six amendments to five standards. Most of the proposed amendments clarify existing guidance. One very useful clarification relates to the ‘third balance sheet’  requirements in IAS 1: under the proposals, additional related notes are not required to accompany that additional balance sheet. Effective for accounting period beginning on or after January 1 2014. ●● Consolidated Financial Statements, Joint Arrangements and Disclosure of Interests in Other Entities: Transition Guidance amends IFRS 10 ‘Consolidated Financial Statements’, IFRS 11 ‘Joint Arrangements’ and IFRS 12 ‘Disclosure of Interests in Other Entities’ Annual Report and Accounts 2013 22706.04 12 December 2013 Proof 6 86 Notes to the Consolidated Financial Statements continued 1 Accounting policies continued Basis of preparation The accounts have been prepared under the historical cost convention, The measurement period is the period from the date of acquisition to the date the group obtains complete information about facts and circumstances that existed as of the acquisition date and is a maximum except for certain financial instruments which have been measured of one year. at fair value. The accounting policies set out below have been applied consistently to all periods presented in these group financial statements. The directors continue to adopt the going concern basis in preparing this report as explained in detail on page 30. Basis of consolidation (a) Subsidiaries Partial acquisitions – control unaffected Where the group acquires an additional interest in an entity in which a controlling interest is already held, the consideration paid for the additional interest is reflected within movements in equity as a reduction in non-controlling interests. No goodwill is recognised. The consolidated accounts incorporate the accounts of the company and Step acquisitions – control passes to the group entities controlled by the company (its ‘subsidiaries’). Control is achieved Where a business combination is achieved in stages, at the stage at which where the company has the power to govern the financial and operating control passes to the group, the previously held interest is treated as if it policies of an investee entity so as to obtain benefits from its activities. had been disposed of, along with the consideration paid for the controlling interest in the subsidiary. The fair value of the previously held interest then Intercompany transactions, balances and unrealised gains and losses on forms one of the components that is used to calculate goodwill, along transactions between group companies are eliminated. with the consideration and the non-controlling interest less the fair value of identifiable net assets. The group uses the acquisition method of accounting to account for business combinations. The amount recognised as consideration by The consideration paid for the earlier stages of a step acquisition, before the group equates to the fair value of the assets, liabilities and equity control passes to the group, is treated as an investment in an associate. acquired by the group plus contingent consideration (should there be any such arrangement). Acquisition related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at acquisition. On an acquisition-by-acquisition basis, the group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net assets. (b) Transactions and non-controlling interests Transactions with non-controlling interests in the net assets of consolidated subsidiaries are identified separately and included in the group’s equity. Non-controlling interests consist of the amount of those interests at the date of the original business combination and its share of changes in equity since the date of the combination. Total comprehensive income is attributed to non-controlling interests even if this results in the non- controlling interests having a deficit balance. To the extent the consideration (including the assumed contingent consideration) provided by the acquirer is greater than the fair value of the assets and liabilities, this amount is recognised as goodwill. Goodwill also incorporates the amount of any non-controlling interest in the acquiree 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 the acquisition date fair value of any previous equity interest in the and net realisable value. acquiree over the fair value of the group’s share of the identifiable net assets acquired. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognised as ‘negative goodwill’ directly in the Income Statement. If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period, or additional asset and liabilities are recognised to reflect new information obtained about facts and circumstances that existed as of the date of the acquisition that, if known, would have affected the amounts recognised as of that date. (c) Associates 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. The results and assets and liabilities of associates are incorporated in these financial statements using the equity method of accounting and are initially recognised at cost. The group’s investment in associates includes goodwill identified on acquisition, net of any accumulated impairment loss. Euromoney Institutional Investor PLC www.euromoneyplc.com22706.04 12 December 2013 Proof 687 87 1 Accounting policies continued Property, plant and equipment The group’s share of associate post-acquisition profit or losses is recognised in the Income Statement, and its share of post-acquisition movements in other comprehensive income is recognised in the Statement of Comprehensive Income. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the group’s share of losses in an associate equals its interest in the associate, including any other unsecured receivables, the group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate. 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 a straight- line basis over their expected useful lives at the following rates per year: Freehold land Freehold buildings Long-term leasehold premises Short-term leasehold premises Office equipment do not depreciate 2% over term of lease over term of lease 11% – 33% Unrealised gains on transactions between the group and its associates are eliminated to the extent of the group’s interest in the associates. Unrealised losses are also eliminated unless the transaction provides Intangible assets Goodwill evidence of an impairment of the asset transferred. Accounting policies of Goodwill represents the excess of the fair value of purchase consideration associates have been changed where necessary to ensure consistency with over the net fair value of identifiable assets and liabilities acquired. the policies adopted by the group. Dilution gains and losses arising in investments in associates are recognised cost less accumulated impairment. For the purposes of impairment testing, Goodwill is recognised as an asset at cost and subsequently measured at in the Income Statement. Foreign currencies Functional and presentation currency goodwill is allocated to those cash generating units that have benefited from the acquisition. Assets are grouped at the lowest level for which there are separately identifiable cash flows. The carrying value of goodwill is reviewed for impairment at least annually or where there is an indication The functional and presentation currency of Euromoney Institutional that goodwill may be impaired. If the recoverable amount of the cash Investor PLC and its UK subsidiaries, other than Fantfoot Limited and generating unit is less than its carrying amount, then the impairment loss Centre for Investor Education (UK) Limited, is sterling. The functional is allocated first to reduce the carrying amount of the goodwill allocated currency of other subsidiaries and associates is the currency of the primary to the unit and then to the other assets of the unit on a pro rata basis. Any economic environment in which they operate. Transactions and balances 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 Transactions in foreign currencies are recorded at the rate of exchange the profit and loss on disposal. 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. 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. Group companies The Income Statements of overseas operations are translated into sterling at the weighted 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. 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. s t n u o c c A p u o r G s t n e m e t a t S l a i c n a n i F d e t a d i l o s n o C e h t o t s e t o N Annual Report and Accounts 2013 22706.04 12 December 2013 Proof 6 88 Notes to the Consolidated Financial Statements continued 1 Accounting policies continued Internally generated intangible assets An internally generated intangible asset arising from the group’s software and systems development is recognised only if all of the following conditions are met: of an asset’s fair value less costs to sell or value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units). Non-financial assets, other than goodwill, that suffered impairment are reviewed for possible reversal of the impairment at each reporting date. ●● An asset is created that can be identified (such as software or a Trade and other receivables website); ●● It is probable that the asset created will generate future economic benefits; and ●● The development cost of the asset can be measured reliably. 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. More information on impairment is included in the impairment of financial Internally generated intangible assets are stated at cost and amortised on a straight-line basis over the useful lives from the date the asset becomes usable. Where no internally generated intangible asset can be recognised, development expenditure is recognised as an expense in the period in which it is incurred. Other intangible assets For all other intangible assets, the group initially makes an assessment of their fair value at acquisition. 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. Subsequent to acquisition, amortisation is charged so as to write off the costs of other intangible assets over their estimated useful lives, using a straight-line or reducing balance method. These intangible assets are reviewed for impairment as described below. 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: Trademarks and brands Customer relationships Databases Licences and software 5 – 30 years 1 – 16 years 1 – 22 years 3 – 5 years Impairment of non-financial assets Assets that have an indefinite useful life – for example, goodwill or intangible assets not ready to use – are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher assets section below. 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 assets The group classifies its financial assets in the following categories: financial assets at fair value through profit or loss, loans and receivables, and available-for-sale financial assets. The classification depends on the purpose for which the assets were acquired. Management determines the classification of its assets at initial recognition and re-evaluates this designation at every reporting date. Classification Financial assets at fair value through profit and loss Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term or if so designated by management. Derivatives are also categorised as held for trading unless they are designated as hedges. Assets in this category are classified as current assets if expected to be settled within 12 months; otherwise, they are classified as non-current. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for those with maturities greater than 12 months after the end of the reporting period which are classified as non-current assets. The group’s loans and receivables comprise trade and other receivables and cash and cash equivalents in the balance sheet. Euromoney Institutional Investor PLC www.euromoneyplc.com22706.04 12 December 2013 Proof 689 89 1 Accounting policies continued Available-for-sale financial assets The criteria that the group uses to determine that there is objective evidence of an impairment loss include: Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless the investment matures or management intends to dispose of it within 12 months of the end of the ●● ●● Significant financial difficulty of the issuer or obligor; A breach of contract, such as a default or delinquency in interest or principal payments; reporting period. Recognition and measurement Regular purchases and sales of financial assets are recognised on the date on which the group commits to purchase or sell the asset. All financial assets, other than those carried at fair value through profit or loss, are initially recognised at fair value plus transaction costs. Financial assets at fair value through profit and loss Financial assets carried at fair value through profit or loss are initially recognised at fair value, and transaction costs are expensed in the profit and loss component of the Statement of Comprehensive Income. Gains and losses arising from changes in the fair value of the ‘financial assets at fair value through profit or loss category’ are included in the profit and ●● The group, for economic or legal reasons relating to the borrower’s financial difficulty, granting to the borrower a concession that the lender would not otherwise consider; ●● It becomes probable that the borrower will enter bankruptcy or other financial reorganisation; ●● The disappearance of an active market for that financial asset because of financial difficulties; or Observable data indicating that there is a measurable decrease in ●● the estimate of future cash flows from a portfolio of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the portfolio, including: (i) Adverse changes in the payment status of borrowers in the portfolio; loss component of the Statement of Comprehensive Income in the period and in which they arise. Dividend income from assets, categorised as financial assets at fair value through profit or loss, is recognised in the profit and loss component of the Statement of Comprehensive Income as part of other income when the group’s right to receive payments is established. Loans and receivables Loans and receivables are carried at amortised cost using the effective interest method. Available-for-sale financial assets Available-for-sale financial assets are subsequently measured at fair value. Offsetting financial instruments (ii) National or local economic conditions that correlate with defaults on the assets in the portfolio. The group first assesses whether objective evidence of impairment exists. The amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The asset’s carrying amount is reduced and the amount of the loss is recognised in the profit and loss component of the Statement of Comprehensive Income. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the s t n u o c c A p u o r G s t n e m e t a t S l a i c n a n i F d e t a d i l o s n o C e h t o t s e t o N Financial assets and liabilities are offset and the net amount reported in contract. As a practical expedient, the group may measure impairment on the balance sheet when there is a legally enforceable right to offset the the basis of an instrument’s fair value using an observable market price. recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously. If the asset’s carrying amount is reduced, the amount of the loss is recognised in the profit and loss component of the Statement of Impairment of financial assets Comprehensive Income. The group assesses at each reporting period whether there is objective evidence that a financial asset or a group of financial assets is impaired. A If in a subsequent period, the amount of the impairment loss decreases financial asset or a group of financial assets is impaired and impairment and the decrease can be related objectively to an event occurring after losses are incurred only if there is objective evidence of impairment as a the impairment was recognised (such as an improvement in the debtor’s result of one or more events that occurred after the initial recognition of credit rating), the reversal of the previously recognised impairment loss the asset (a ‘loss event’) and that loss event (or events) has an impact on is recognised in the profit and loss component of the Statement of the estimated future cash flows of the financial asset or group of financial Comprehensive Income. assets that can be reliably estimated. Annual Report and Accounts 2013 22706.04 12 December 2013 Proof 6 90 Notes to the Consolidated Financial Statements continued 1 Accounting policies continued Financial liabilities Committed borrowings and bank overdrafts Cash flow hedge The effective portion of gains or losses on derivatives that are designated and qualify as cash flow hedges is recognised in other comprehensive Interest-bearing loans and overdrafts are recorded at the amounts income within the Statement of Comprehensive Income. The ineffective received, net of direct issue costs. Direct issue costs are amortised over the portion of such gains and losses is recognised in the Income Statement period of the loans and overdrafts to which they relate. Finance charges, immediately. including premiums payable on settlement or redemption are charged to the Income Statement as incurred using the effective interest rate method Amounts accumulated in equity are reclassified to the Income Statement in and are added to the carrying value of the borrowings or overdraft to the the periods when the hedged item is recognised in the Income Statement extent they are not settled in the period which they arise. (for example, when the forecast transaction that is hedged takes place). Trade payables and accruals The gain or loss relating to the effective portion of interest rate swaps Trade payables and accruals are not interest-bearing and are stated at hedging variable rate borrowings is recognised in the Income Statement their fair value. Derivative financial instruments accordingly, the gain or loss relating to the ineffective portion is recognised in the Income Statement immediately. However, whenever the forecast transaction that is hedged results in the recognition of a non-financial The group uses various derivative financial instruments to manage its asset (for example fixed assets), the gains and losses previously deferred in exposure to foreign exchange and interest rate risks, including forward equity are transferred from equity and included in the initial measurement foreign currency contracts and interest rate swaps. of the cost of the asset. The deferred amounts are ultimately recognised in depreciation in the case of fixed assets. All derivative instruments are recorded in the balance sheet at fair value. The recognition of gains or losses on derivative instruments depends on When a hedging instrument expires or is sold, or when a hedge no longer whether the instrument is designated as a hedge and the type of exposure meets the criteria for hedge accounting, any cumulative gain or loss it is designed to hedge. The group designates certain derivatives as either: existing in equity at that time remains in equity and is recognised when (a) hedges of the fair value of recognised assets or liabilities or a firm When a forecast transaction is no longer expected to occur, the cumulative commitment (fair value hedge); gain or loss that was reported in equity is immediately transferred to the the forecast transaction is ultimately recognised in the Income Statement. (b) hedges of a particular risk associated with a recognised asset or Income Statement. liability or a highly probable forecast transaction (cash flow hedge); or The premium or discount on interest rate instruments is recognised as part (c) hedges of a net investment in a foreign operation (net investment of net interest payable over the period of the contract. Interest rate swaps hedge). are accounted for on an accruals basis. The full fair value of a hedging derivative is classified as a non-current Net investment hedge asset or liability when the derivative matures in more than 12 months, Hedges of net investments in foreign operations are accounted for in the and as a current asset or liability when the derivative matures in less than same way as cash flow hedges. 12 months. Trading derivatives are classified as a current asset or liability. Fair value hedge Gains or losses on the qualifying part of net investment hedges are recognised in other comprehensive income together with the gains and Changes in the fair value of derivatives that are designated and qualify losses on the underlying net investment. The ineffective portion of such as fair value hedges are recorded in the Income Statement, together gains and losses is recognised in the Income Statement immediately. with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. The group only applies fair value hedge Changes in the fair value of the derivative financial instruments that do accounting for hedging fixed asset risk on borrowings. The gain or loss not qualify for hedge accounting are recognised in the Income Statement relating to the effective portion of interest rate swaps hedging fixed rate as they arise. borrowings is recognised in the Income Statement within ‘finance costs’. The gain or loss relating to the ineffective portion is recognised in the Gains and losses accumulated in equity are transferred to the Income Income Statement within operating profit. Changes in the fair value Statement when the foreign operation is partially disposed of or sold. of the hedge fixed rate borrowings attributable to interest rate risk are recognised in the Income Statement within ‘finance costs’. Euromoney Institutional Investor PLC www.euromoneyplc.com22706.04 12 December 2013 Proof 691 91 1 Accounting policies continued Provisions Liabilities in respect of acquisition commitments Liabilities for acquisition commitments over the remaining minority interests in subsidiaries are recorded in the Statement of Financial Position 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. 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 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 Taxation The tax expense for the period comprises current and deferred tax. Tax is recognised in the Income Statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. 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 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. 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. Defined contribution plans A defined contribution plan is a pension plan under which the group pays fixed contributions into a separate non-group related entity. Payments to the Euromoney Pension Plan and the Metal Bulletin Group Personal Pension Plan, both defined contribution pension schemes, are charged as an expense as they fall due. Multi-employer scheme The group 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 group 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. In other words, this scheme is treated as a defined contribution plan. Defined benefit plans Defined benefit plans define an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation. The group operates the Metal Bulletin Pension Scheme, a defined benefit scheme. The present value 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 Statement of Comprehensive Income in the period in which they occur. The retirement benefit obligation recognised in the Statement of Financial Position 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. s t n u o c c A p u o r G s t n e m e t a t S l a i c n a n i F d e t a d i l o s n o C e h t o t s e t o N Annual Report and Accounts 2013 22706.04 12 December 2013 Proof 6 92 Notes to the Consolidated Financial Statements continued 1 Accounting policies continued Share-based payments The group makes share-based payments to certain employees which are equity and cash-settled. 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. For cash-settled share-based payments a liability equal to the portion of the services received is recognised at the current fair value as determined at each balance sheet date. 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 additional disclosure in order to provide an indication of the underlying trading performance of Revenue Revenue represents income from advertising, subscriptions, sponsorship and delegate fees, net of value added tax. the group. Segment reporting ●● Advertising revenues are recognised in the Income Statement on the date of publication. Operating segments are reported in a manner consistent with the internal reporting provided to the board and executive committee members who are responsible for strategic decisions, allocating resources and assessing ●● Subscription revenues are recognised in the Income Statement on a performance of the operating segments. 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. 2 Key judgemental areas adopted in preparing these financial statements Revenues invoiced but relating to future periods are deferred and treated The group prepares its group financial statements in accordance with as deferred income in the Statement of Financial Position. Leased assets International Financial Reporting Standards (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 Leases in which a significant portion of the risks and rewards of ownership required to adopt those accounting policies most appropriate to the are retained by the lessor are classified as operating leases. Operating group’s circumstances for the purpose of presenting fairly the group’s lease rentals are charged to the Income Statement on a straight-line basis financial position, financial performance and cash flows. as allowed by IAS 17 ‘Leases’. Dividends In determining and applying accounting policies, judgement is often required in respect of items where the choice of specific policy, accounting Dividends are recognised as a liability in the period in which they are estimate or assumption to be followed could materially affect the reported approved by the company’s shareholders. Interim dividends are recorded results or net asset position of the group should it later be determined that in the period in which they are paid. a different choice would have been more appropriate. Own shares held by Employees’ Share Ownership Trust Management considers the accounting estimates and assumptions Transactions of the group-sponsored trust are included in the group discussed below to be its key judgemental areas and, accordingly, provides financial statements. In particular, the trust’s holdings of shares in the an explanation of each below. Management has discussed its critical company are debited direct to equity. 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. Euromoney Institutional Investor PLC www.euromoneyplc.com22706.04 12 December 2013 Proof 693 93 2 Key judgemental areas adopted in preparing these financial statements continued Acquisitions The purchase consideration for the acquisition of a subsidiary or business is allocated over the net fair value of identifiable assets, liabilities and contingent liabilities acquired. Fair value Acquisition commitments The group is party to a number of put and call options over the remaining non-controlling interests in some of its subsidiaries. IAS  39 ‘Financial Instruments: Recognition and Measurement’ requires the discounted present value of these acquisition commitments to be recognised as a liability on the Statement of Financial Position 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 Determining the fair value of assets, liabilities and contingent liabilities the discounted present value of the commitments are the expected future acquired requires management’s judgement and often involves the use of cash flows and earnings of the business, the period remaining until the significant estimates and assumptions, including assumptions with respect option is exercised and the discount rate. At September 30 2013 the to future cash flows, recoverability of assets, and unprovided liabilities and discounted present value of these acquisition commitments was £15.0 commitments particularly in relation to tax and VAT. million (2012: £7.9 million). Intangible assets Share-based payments The group makes an assessment of the fair value of intangible assets The group makes long-term incentive payments to certain employees. arising on acquisitions. An intangible asset will be recognised as long as These payments are measured at their estimated fair value at the date of the asset is separable or arises from contractual or other legal rights, and grant, calculated using an appropriate option pricing model. The fair value its fair value can be measured reliably. determined at the grant date is expensed on a straight-line basis over the expected vesting period, based on the estimate of the number of shares The measurement of the fair value of intangible assets acquired requires that will eventually vest. The key assumptions used in calculating the fair significant management judgement particularly in relation to the expected value of the options are the discount rate, the group’s share price volatility, future cash flows from the acquired marketing databases (which are dividend yield, risk free rate of return, and expected option lives. generally based on management’s estimate of marketing response rates), customer relationships, trademarks, brands, intellectual property, repeat These assumptions are set out in note 23. Management regularly performs and well established events. At September 30 2013 the net book value of a true-up of the estimate of the number of shares that are expected to intangible assets was £142.0 million (2012: £135.2 million). vest, which is dependent on the anticipated number of leavers. Goodwill The directors regularly reassess the expected vesting period. A plan that Goodwill is impaired where the carrying value of goodwill is higher than vests earlier than originally estimated results in an acceleration of the the net present value of future cash flows of those cash generating units to fair value expense of the plan recognised in the Income Statement at which it relates. Key areas of judgement in calculating the net present value the time the reassessment occurs. Equally, a plan that vests later than are the forecast cash flows, the long-term growth rate of the applicable previously estimated results in a credit to the Income Statement at the businesses and the discount rate applied to those cash flows. Goodwill date of reassessment. held on the Statement of Financial Position at September 30 2013 was £356.6 million (2012: £333.1 million). The charge for long-term incentive payments for the year ended September 30 2013 is £2.1 million (2012: £6.3 million). Deferred consideration The group often pays for a portion of the equity acquired at a future Defined benefit pension scheme date. This deferred consideration is contingent on the future results of the The surplus or deficit in the defined benefit pension scheme that is entity acquired and applicable payment multipliers dependent on those recognised through the Statement of Comprehensive Income is subject results. The initial amount of the deferred consideration is recognised to a number of assumptions and uncertainties. The calculated liabilities of as a liability in the Statement of Financial Position. At each period end the scheme are based on assumptions regarding salary increases, inflation management reassesses the amount expected to be paid and any changes rates, discount rates, the long-term expected return on the scheme’s assets to the initial amount are recognised as a finance income or expense in and member longevity. Details of the assumptions used are shown in note the Income Statement. Significant management judgement is required 26. Such assumptions are based on actuarial advice and are benchmarked to determine the amount of deferred consideration that is likely to be against similar pension schemes. paid, particularly in relation to the future profitability of the acquired business. At September 30 2013 the discounted present value of deferred consideration was £11.6 million (2012: £0.1 million). s t n u o c c A p u o r G s t n e m e t a t S l a i c n a n i F d e t a d i l o s n o C e h t o t s e t o N Annual Report and Accounts 2013 22706.04 12 December 2013 Proof 6 94 Notes to the Consolidated Financial Statements continued 2 Key judgemental areas adopted in preparing these financial statements continued Treasury 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 sterling versus foreign 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. 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 and euro forward contracts is put in place up to 18 months forward partially to hedge its US dollar and euro denominated revenues into sterling. The timing and value of these forward contracts is based on management’s estimate of its future US dollar and euro revenues over an 18 month period. If management materially underestimates the group’s future US dollar or euro revenues this would lead to too few forward contracts being in place and the group being more exposed to swings in US dollar and euro to sterling exchange rates. An overestimate of the group’s US dollar or euro revenues would lead to associated costs in unwinding the excess forward contracts. At September 30 2013, the fair value of the group’s forward contracts was a net asset of £1.6 million (2012: £2.8 million). Details of the financial instruments used are set out in note 18 to the accounts. 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 multinational 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 2013, the group had a deferred tax asset of £5.0 million (2012: £7.3 million). Euromoney Institutional Investor PLC www.euromoneyplc.com22706.04 12 December 2013 Proof 695 95 3 Segmental analysis Segmental information is presented in respect of the group’s business divisions and reflects 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 Research and data. Financial publishing and Business publishing consist primarily of advertising and subscription revenue. The Training division consists primarily of delegate revenue. Conferences and seminars consist of both sponsorship income and delegate revenue. Research and data consists of subscription revenue. A breakdown of the group’s revenue by type is set out below. Analysis of the group’s three main geographical areas is also set out to provide additional information on the trading performance of the businesses. Inter-segment sales are charged at prevailing market rates and shown in the eliminations columns below. United Kingdom North America Rest of World Eliminations Total 2013 £000 2012 £000 2013 £000 2012 £000 2013 £000 2012 £000 2013 £000 2012 £000 2013 £000 2012 £000 Revenue by division and source: Financial publishing Business publishing Conferences and seminars Training Research and data Closed businesses Foreign exchange losses on forward contracts – Total revenue 176,423 168,710 194,375 188,765 4 Investment income (note 7) Total revenue and investment income 176,426 168,713 194,377 188,769 46,609 48,621 44,717 19,565 17,571 – 45,345 46,027 41,150 20,492 17,084 – 32,170 21,137 45,720 7,355 87,993 – 31,953 18,924 42,778 7,584 87,554 (28) (1,388) (660) 3 3 2 – 2,444 1,766 9,633 3,397 25,846 – – 43,086 228 43,314 2,487 1,879 11,181 3,317 25,772 – – 44,636 146 44,782 (5,576) (2,653) (686) (175) (90) – – (9,180) – (9,180) 75,647 68,871 99,384 30,142 74,385 (5,400) 64,645 (2,185) 95,033 (76) (181) 31,212 (125) 131,320 130,285 (28) – – – (660) (1,388) (7,967) 404,704 394,144 153 (7,967) 404,937 394,297 233 – United Kingdom North America Rest of World Total 2013 £000 2012 £000 2013 £000 2012 £000 2013 £000 2012 £000 2013 £000 2012 £000 Revenue by type and destination: Subscriptions Advertising Sponsorship Delegates Other Closed businesses Foreign exchange losses on forward contracts Total revenue 33,519 6,686 7,537 7,138 2,859 – (660) 57,079 66,588 206,246 199,728 33,685 58,385 57,629 27,091 8,303 47,598 51,363 21,160 6,605 80,145 77,795 52,227 7,085 9,704 12,331 2,943 2,025 (28) – – – (1,388) (1,388) (660) – 56,315 173,212 167,820 174,413 170,009 404,704 394,144 99,455 22,991 19,833 20,833 4,736 (28) – 73,421 26,476 22,085 49,344 3,087 – – 99,306 24,467 21,741 21,313 6,385 – – s t n u o c c A p u o r G s t n e m e t a t S l a i c n a n i F d e t a d i l o s n o C e h t o t s e t o N Annual Report and Accounts 2013 22706.04 12 December 2013 Proof 6 96 Notes to the Consolidated Financial Statements continued 3 Segmental analysis continued Operating profit1 by division and source: Financial publishing Business publishing Conferences and seminars Training Research and data Closed businesses Unallocated corporate costs Operating profit before acquired intangible amortisation, long-term incentive expense and exceptional items Acquired intangible amortisation2 (note 11) Long-term incentive expense Exceptional items (note 5) Operating profit before associates Share of results in associates Finance income (note 7) Finance expense (note 7) Profit before tax Tax expense (note 8) Profit after tax United Kingdom North America Rest of World Total 2013 £000 2012 £000 2013 £000 2012 £000 2013 £000 2012 £000 2013 £000 2012 £000 17,460 16,834 13,290 3,810 8,619 – (15,754) 16,893 16,768 13,559 5,285 9,177 – (20,789) 5,822 9,033 14,145 1,101 40,263 – (1,292) 6,485 7,714 13,328 1,288 40,403 (34) (1,157) 44,259 (4,608) (1,017) 2,812 41,446 40,893 (2,986) (1,796) (49) 36,062 69,072 (10,886) (880) (394) 56,912 68,027 (11,681) (3,705) (905) 51,736 514 (27) 1,443 468 5,919 (14) (546) 7,757 (396) (203) (186) 6,972 600 16 3,067 449 5,805 (40) (642) 23,796 25,840 28,878 5,379 54,801 (14) (17,592) 23,978 24,498 29,954 7,022 55,385 (74) (22,588) (115) (800) (663) 9,255 121,088 118,175 (14,782) (15,890) (6,301) (2,100) (1,617) 2,232 95,475 7,677 105,330 459 284 4,475 1,830 (8,041) (12,184) 92,368 95,260 (22,528) (22,235) 69,840 73,025 1 Operating profit before acquired intangible amortisation, long-term incentive expense and exceptional items (refer to the appendix to the Chairman’s Statement). 2 Acquired intangible amortisation represents amortisation of acquisition related non-goodwill assets such as trademarks and brands, customer relationships and databases (note 11). Other segmental information by division: Financial publishing Business publishing Conferences and seminars Training Research and data Unallocated corporate costs Acquired intangible amortisation Long-term incentive expense Exceptional items Depreciation and amortisation 2013 £000 2012 £000 2013 £000 2012 £000 2013 £000 2012 £000 2013 £000 2012 £000 (1,672) (2,507) (1,224) – (10,373) (114) (15,890) – (2,663) (461) – (11,537) (121) (14,782) (238) (298) (84) (493) (655) (332) (2,100) (797) (940) (1,492) (295) (1,742) (1,035) (6,301) 3,321 (16) (533) (115) (213) (212) 2,232 18 – (94) – (1,541) – (1,617) (13) (21) (57) (14) (1,256) (2,866) (4,227) (10) (15) (52) (16) (1,491) (2,163) (3,747) Euromoney Institutional Investor PLC www.euromoneyplc.com22706.04 12 December 2013 Proof 697 97 United Kingdom North America Rest of World Total 2013 £000 2012 £000 2013 £000 2012 £000 2013 £000 2012 £000 2013 £000 2012 £000 106,837 52,650 13,673 702 91,555 239,175 237,005 95,256 102,223 32,688 3,309 13,716 – 735 173,862 138,694 336,917 342,537 (810) 2,486 – (1,618) (788) (431) 10,562 1,133 633 – 12,328 (295) 4,505 356,574 333,065 1,332 149,039 136,243 17,982 16,792 702 735 6,794 523,107 488,025 (1,665) (2,701) 957 – (424) 3 Segmental analysis continued Non-current assets (excluding derivative financial instruments and deferred tax assets) by location: Goodwill Other intangible assets Property, plant and equipment Investments Non-current assets Capital expenditure by location The group has taken advantage of paragraph 23 of IFRS 8 ‘Operating segments’ and does not provide segmental analysis of net assets as this information is not used by the directors in operational decision making or monitoring of the businesses performance. 4 Operating profit Revenue Cost of sales Gross profit Distribution costs Administrative expenses Operating profit before associates 2013 £000 404,704 (104,104) 300,600 (4,320) (190,950) 105,330 2012 £000 394,144 (98,308) 295,836 (4,280) (196,081) 95,475 Administrative expenses include an acquisition cost of £822,000 (2012: acquisition credit of £205,000), restructuring and other exceptional costs of £1,395,000 (2012: £1,822,000) and a credit for negative goodwill of £4,449,000 (2012: £nil) (note 5). s t n u o c c A p u o r G s t n e m e t a t S l a i c n a n i F d e t a d i l o s n o C e h t o t s e t o N Annual Report and Accounts 2013 22706.04 12 December 2013 Proof 6 98 Notes to the Consolidated Financial Statements continued 4 Operating profit continued Operating profit is stated after charging/(crediting): Staff costs (note 6) Intangible amortisation: Acquired intangible amortisation Licences and software Depreciation of property, plant and equipment Auditor’s remuneration: Group audit Assurance services Non-audit Property operating lease rentals Loss on disposal of property, plant and equipment Acquisition costs/(credits) (note 5) Restructuring and other exceptional costs (note 5) Negative goodwill (note 5) Foreign exchange loss Audit and non-audit services relate to: Group audit: Fees payable for the audit of the company’s annual accounts Fees payable for other services to the group: Audit of subsidiaries pursuant to local legislation Audit services provided to all group companies Assurance services: Interim review Non-audit services: Taxation compliance services Other taxation advisory services Other services Total group auditor’s remuneration 5 Exceptional items 2013 £000 2012 £000 155,862 159,305 15,890 301 3,926 829 114 166 6,910 – 822 1,395 (4,449) 1,234 2013 £000 458 371 829 14,782 339 3,408 779 95 41 6,405 53 (205) 1,822 – 524 2012 £000 447 332 779 114 95 126 37 3 166 1,109 28 – 13 41 915 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 additional disclosure in order to provide an indication of the underlying trading performance of the group. Acquisition (costs)/credit Restructuring and other exceptional costs Negative goodwill 2013 £000 (822) (1,395) 4,449 2,232 2012 £000 205 (1,822) – (1,617) Euromoney Institutional Investor PLC www.euromoneyplc.com22706.04 12 December 2013 Proof 6 99 99 5 Exceptional items continued In 2013 the group recognised a net exceptional credit of £2,232,000. This comprised an exceptional credit for negative goodwill offset by acquisition costs, restructuring and other exceptional costs. The negative goodwill of £4,449,000 arose from the valuation of the intangible assets of Quantitative Techniques, acquired for zero consideration. The acquisition costs of £822,000 are in connection with the acquisitions of TTI/Vanguard, Insider Publishing, Centre for Investor Education and Quantitative Techniques. The exceptional restructuring and other charge of £1,395,000 includes restructuring costs to integrate the business and assets of Quantitative Techniques before the completion date and other restructuring costs across the group. The group’s tax charge includes a related tax charge of £372,000. For the year ended September 30 2012 the group recognised an exceptional expense of £1,617,000. This comprised an exceptional restructuring charge of £1,822,000, and acquisition costs of £94,000 offset by a credit of £299,000 following the release of previously accrued costs in relation to the acquisition of Ned Davis Research. The group’s tax charge included a related tax credit of £456,000. 6 Staff costs (i) Number of staff (including directors and temporary staff) By business segment: Financial publishing Business publishing Conferences and seminars Training Research and data Central By geographical location: United Kingdom North America Rest of World (ii) Staff costs (including directors and temporary staff) Salaries, wages and incentives Social security costs Pension contributions Long-term incentive expense Details of directors’ remuneration have been disclosed in the Directors’ Remuneration Report on page 49. s t n u o c c A p u o r G s t n e m e t a t S l a i c n a n i F d e t a d i l o s n o C e h t o t s e t o N 2013 Average 2012 Average 353 273 280 124 827 467 351 262 250 123 890 387 2,324 2,263 2013 2012 Average Average 895 767 662 806 751 706 2,324 2,263 2013 £000 2012 £000 139,866 140,203 11,392 2,504 2,100 155,862 10,436 2,365 6,301 159,305 Annual Report and Accounts 2013 22706.04 12 December 2013 Proof 6 100 Notes to the Consolidated Financial Statements continued 7 Finance income and expense Finance income Interest income: Interest receivable from DMGT group undertakings Interest receivable from short-term investments Expected return on pension scheme assets (note 26) Net movements in acquisition commitment values (note 24) Movement in acquisition deferred consideration (note 24) Fair value gains on financial instruments: Ineffectiveness of interest rate swaps and forward contracts Finance expense Interest expense: Interest payable on committed borrowings Interest payable on loan notes Interest on pension scheme liabilities (note 26) Net movements in acquisition commitment values (note 24) Imputed interest on acquisition commitments (note 24) Movements in acquisition deferred consideration (note 24) Interest on tax Fair value losses on financial instruments: Ineffectiveness of interest rate swaps and forward contracts Net finance costs Reconciliation of net finance costs in Income Statement to adjusted net finance costs Total net finance costs in Income Statement Add back: Net movements in acquisition commitment values Imputed interest on acquisition commitments Movements in acquisition deferred consideration Adjusted net finance costs 2013 £000 2012 £000 – 233 1,235 – – 362 1,830 (2,561) (2) (1,302) (1,619) (1,269) (4,721) (710) – (12,184) (10,354) 2013 £000 18 153 1,329 2,940 35 – 4,475 (4,728) (9) (1,314) – (977) – (958) (55) (8,041) (3,566) 2012 £000 (10,354) (3,566) 1,619 1,269 4,721 7,609 (2,745) (2,940) 977 (35) (1,998) (5,564) The reconciliation of net finance costs in the Income Statement has been provided since the directors consider it necessary in order to provide an indication of the adjusted net finance costs. Euromoney Institutional Investor PLC www.euromoneyplc.com22706.04 12 December 2013 Proof 6 101 101 2013 £000 9,732 12,522 (540) 21,714 1,859 (1,338) 521 22,235 23% 2012 £000 8,229 13,243 1,294 22,766 2,759 (2,997) (238) 22,528 24% 2013 £000 2012 £000 22,235 22,528 5,592 (372) 5,220 (4,092) 1,878 3,006 25,241 5,146 456 5,602 (6,474) 1,703 831 23,359 116,527 106,769 22% 22% s t n u o c c A p u o r G s t n e m e t a t S l a i c n a n i F d e t a d i l o s n o C e h t o t s e t o N 8 Tax on profit on ordinary activities Current tax expense UK corporation tax expense Foreign tax expense Adjustments in respect of prior years Deferred tax expense/(credit) Current year Adjustments in respect of prior years Total tax expense in Income Statement Effective tax rate The adjusted effective tax rate for the year is set out below: Reconciliation of tax expense in Income Statement to adjusted tax expense Total tax expense in Income Statement Add back: Tax on intangible amortisation Tax on exceptional items Tax on US goodwill amortisation Tax adjustments in respect of prior years Adjusted tax expense Adjusted profit before tax (refer to the appendix to the Chairman’s Statement) Adjusted effective tax rate The group presents the above adjusted effective tax rate to help users of this report better understand its tax charge. In arriving at this rate, the group removes the tax effect of items which are adjusted for in arriving at the adjusted profit disclosed in the appendix to the Chairman’s Statement. However, the current tax effect of goodwill and intangible items is not removed. The group considers that the resulting adjusted effective tax rate is more representative of its tax payable position, as the deferred tax effect on the goodwill and intangible items is not expected to crystallise. The UK income tax expense is based on a blended rate of the UK statutory rates of corporation tax during the year to September 30 2013 of 23.5% (2012: 25%) and reflects the reduction in the UK corporation tax rate from 24% to 23% from April  1  2013 and a further reduction to 20% by April 1 2015. This change has resulted in a deferred tax credit of £510,000 (2012: £18,000) arising on the reduction in the carrying value of deferred tax liabilities reflecting the anticipated rate of tax at which those liabilities are expected to reverse. Annual Report and Accounts 2013 22706.04 12 December 2013 Proof 6 102 Notes to the Consolidated Financial Statements continued 8 Tax on profit on ordinary activities continued The actual tax expense for the year is different from 23.5% of profit before tax for the reasons set out in the following reconciliation: Profit before tax Tax at 23.5% (2012: 25%) Factors affecting tax charge: Different tax rates of subsidiaries operating in overseas jurisdictions Associate income reported net of tax US state taxes Goodwill and intangibles Disallowable expenditure Other items deductible for tax purposes Tax impact of consortium relief Deferred tax credit arising from changes in tax laws Adjustments in respect of prior years Total tax expense for the year 2013 £000 95,260 22,386 2,914 (67) 987 38 2,629 (3,607) (657) (510) (1,878) 22,235 2012 £000 92,368 23,092 3,767 (115) 833 32 1,325 (3,824) (861) (18) (1,703) 22,528 In addition to the amount charged to the Income Statement, the following amounts relating to tax have been directly recognised in other comprehensive income and equity: Current tax Deferred tax (note 21) 9 Dividends Amounts recognisable as distributable to equity holders in period Final dividend for the year ended September 30 2012 of 14.75p (2011: 12.50p) Interim dividend for year ended September 30 2013 of 7.00p (2012: 7.00p) Employees’ Share Ownership Trust dividend Proposed final dividend for the year ended September 30 Employees’ Share Ownership Trust dividend Other comprehensive income Equity 2013 £000 – 197 197 2012 £000 (602) 1,329 727 2013 £000 (2,058) (551) (2,609) 2013 £000 18,342 8,827 27,169 (13) 27,156 2012 £000 – – – 2012 £000 15,162 8,643 23,805 (11) 23,794 19,917 18,342 (9) (9) 19,908 18,333 The proposed final dividend of 15.75p (2012: 14.75p) is subject to approval at the Annual General Meeting on January 30 2014 and has not been included as a liability in these financial statements in accordance with IAS 10 ‘Events after the balance sheet date’. Euromoney Institutional Investor PLC www.euromoneyplc.com22706.04 12 December 2013 Proof 6103 103 2013 £000 72,623 15,890 (2,232) 1,269 1,619 4,721 (5,220) 4,092 (1,878) 90,884 2012 £000 69,672 14,782 1,617 977 (2,940) (35) (5,602) 6,474 (1,703) 83,242 2013 Basic earnings per share Number 000’s 2013 Diluted earnings per share Number 000’s 2012 Basic earnings per share Number 000’s 2012 Diluted earnings per share Number 000’s 125,532 125,532 122,859 122,859 (59) 125,473 (59) 122,800 (59) 125,473 2,605 128,078 (59) 122,800 3,490 126,290 s t n u o c c A p u o r G s t n e m e t a t S l a i c n a n i F d e t a d i l o s n o C e h t o t s e t o N 10 Earnings per share Basic earnings attributable to equity holders of the parent Acquired intangible amortisation Exceptional items Imputed interest on acquisition commitments Net movements in acquisition commitment values Movements in acquisition deferred consideration Tax on the above adjustments Tax on US goodwill amortisation Tax adjustments in respect of prior years Adjusted earnings Weighted average number of shares Shares held by the Employees’ Share Ownership Trust Weighted average number of shares Effect of dilutive share options Diluted weighted average number of shares Annual Report and Accounts 2013 22706.04 12 December 2013 Proof 6 104 Notes to the Consolidated Financial Statements continued 10 Earnings per share continued Basic earnings per share Effect of dilutive share options Diluted earnings per share Effect of acquired intangible amortisation Effect of exceptional items Effect of imputed interest on acquisition commitments Effect of net movement in acquisition commitment values Effect of movements in acquisition deferred consideration Effect of tax on the above adjustments Effect of tax on US goodwill amortisation Effect of tax adjustments in respect of prior years Adjusted basic and diluted earnings per share Basic pence per share Diluted pence per share Basic pence per share Diluted pence per share 57.88 12.66 (1.78) 1.01 1.29 3.76 (4.15) 3.26 (1.50) 72.43 57.88 (1.18) 56.70 12.41 (1.74) 0.99 1.26 3.69 (4.07) 3.19 (1.47) 70.96 56.74 12.04 1.32 0.80 (2.39) (0.03) (4.57) 5.27 (1.39) 67.79 56.74 (1.57) 55.17 11.70 1.28 0.77 (2.33) (0.03) (4.43) 5.13 (1.35) 65.91 The adjusted diluted earnings per share figure has been disclosed since the directors consider it necessary in order to give an indication of the underlying trading performance. All of the above earnings per share figures relate to continuing operations. Euromoney Institutional Investor PLC www.euromoneyplc.com22706.04 12 December 2013 Proof 6105 105 11 Goodwill and other intangibles Acquired intangible assets Trademarks & brands 2013 £000 Customer relationships 2013 £000 Databases 2013 £000 Total acquired intangible assets 2013 £000 Licences & software 2013 £000 Intangible assets in development 2013 £000 Goodwill 2013 £000 Total 2013 £000 139,259 77,103 9,171 225,533 2,865 625 362,267 591,290 2013 Cost/carrying amount At October 1 2012 Additions – – Acquisitions (note 14) 10,261 13,118 Disposals Exchange differences – (884) – (362) At September 30 2013 148,636 89,859 Amortisation and impairment At October 1 2012 Amortisation charge Disposals Exchange differences 47,480 7,479 – (213) 37,572 7,572 – (323) – – – (21) 9,150 5,262 839 – (58) – 23,379 – (1,267) 247,645 90,314 15,890 – (594) 216 – (41) (17) 6,098 – 6,314 – – 25,271 48,650 – (41) (33) (2,020) (3,337) 3,023 6,690 385,518 642,876 2,466 301 (41) (17) – – – – – 29,202 121,982 – – (258) 16,191 (41) (869) 28,944 137,263 At September 30 2013 54,746 44,821 6,043 105,610 2,709 Net book value/carrying amount at September 30 2013 93,890 45,038 3,107 142,035 314 6,690 356,574 505,613 Acquired intangible assets Trademarks & brands 2012 £000 Customer relationships 2012 £000 Databases 2012 £000 Total acquired intangible assets 2012 £000 Licences & software 2012 £000 Intangible assets in development 2012 £000 Goodwill 2012 £000 Total 2012 £000 142,324 78,683 9,440 230,447 2,761 – 366,395 599,603 – 719 (3,784) 139,259 41,433 7,339 (1,292) 47,480 – 553 (2,133) 77,103 32,429 5,761 (618) 37,572 – – (269) 9,171 3,736 1,682 (156) 5,262 – 1,272 (6,186) 194 – (90) 625 – – – 5,248 (9,376) 819 6,520 (15,652) 225,533 2,865 625 362,267 591,290 77,598 14,782 (2,066) 90,314 2,200 339 (73) 2,466 – – – – 29,763 109,561 – (561) 15,121 (2,700) 29,202 121,982 91,779 39,531 3,909 135,219 399 625 333,065 469,308 2012 Cost/carrying amount At October 1 2011 Additions Acquisitions Exchange differences At September 30 2012 Amortisation and impairment At October 1 2011 Amortisation charge Exchange differences At September 30 2012 Net book value/carrying amount at September 30 2012 s t n u o c c A p u o r G s t n e m e t a t S l a i c n a n i F d e t a d i l o s n o C e h t o t s e t o N Annual Report and Accounts 2013 22706.04 12 December 2013 Proof 6 106 Notes to the Consolidated Financial Statements continued 11 Goodwill and other intangibles continued Intangible assets, other than goodwill, have a finite life and are amortised over their expected useful lives at the rates set out in the accounting policies in note 1 of this report. The carrying amounts of acquired intangible assets and 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 Benchmark Financials Structured Retail Products NDR Global Grain Geneva TTI/Vanguard Insider Publishing Centre for Investor Education Quantitative Techniques Other Total Acquired intangible assets Goodwill 2013 £000 2012 £000 2013 £000 2012 £000 2,282 2,456 12,988 13,025 – – – – – 2,872 35 56,558 22,140 – 1,938 2,210 203 2,607 30,030 930 2,407 9,068 4,183 4,572 – – – – – – 3,199 44 62,780 24,590 – 2,292 2,379 234 2,801 33,346 1,098 – – – – – 8,383 2,543 236 4,710 14,718 29,160 185 142,780 52,710 196 8,180 10,448 455 4,794 35,848 4,247 2,844 15,280 5,860 – 9 8,406 2,550 236 4,723 14,718 29,243 185 143,187 52,710 196 8,180 10,448 456 4,794 35,951 4,048 – – – – 9 142,035 135,219 356,574 333,065 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’. The methodology applied to the value in use calculations, reflecting past experience and external sources of information, included: ●● forecasts by business based on pre-tax cash flows for the next four years derived from approved 2013 budgets. Management believes these budgets to be reasonably achievable; ●● ●● subsequent cash flows for one additional year increased in line with growth expectations of the applicable business; the pre-tax discount rates between 9.5% and 11.1%, derived from the companies weighted average cost of capital (WACC) of 9.5%, adjusted for risks specific to the nature of CGUs and risks included within the cash flows themselves; ●● long-term nominal growth rate of 0%. Euromoney Institutional Investor PLC www.euromoneyplc.com22706.04 12 December 2013 Proof 6107 107 11 Goodwill and other intangibles continued Further disclosures in accordance with IAS 36 are provided where the group holds an individual goodwill item relating to a CGU that is significant, which the group considers to be 15% of the total net book value, in comparison with the group’s total carrying value of goodwill. The only significant item of goodwill included in the net book value above relates to BCA. Using the above methodology and a pre-tax discount rate of 9.5% the recoverable amount exceeded the total carrying value by £136.2 million. For this business the directors performed a sensitivity analysis on the total carrying value of the CGU. For the recoverable amount to be equal to the carrying value the discount rate would need to be increased by 9.3% or the long-term growth rate reduced by 24.8%. 12 Property, plant and equipment 2013 Cost At October 1 2012 Additions Disposals Acquisitions Exchange differences At September 30 2013 Depreciation At October 1 2012 Charge for the year Disposals Exchange differences At September 30 2013 Net book value at September 30 2013 Freehold land and buildings 2013 £000 Long-term leasehold premises 2013 £000 Short-term leasehold premises 2013 £000 Office equipment 2013 £000 6,447 3,072 – – – – 6 – – 4 15,576 1,054 (27) – (20) 19,286 1,641 (93) 14 (57) Total 2013 £000 44,381 2,701 (120) 14 (73) 6,447 3,082 16,583 20,791 46,903 366 83 – – 449 5,998 679 127 – 2 808 2,274 9,174 1,676 (27) (42) 10,781 5,802 16,180 2,040 (91) (56) 18,073 2,718 26,399 3,926 (118) (96) 30,111 16,792 s t n u o c c A p u o r G s t n e m e t a t S l a i c n a n i F d e t a d i l o s n o C e h t o t s e t o N Annual Report and Accounts 2013 22706.04 12 December 2013 Proof 6 108 Notes to the Consolidated Financial Statements continued 12 Property, plant and equipment continued 2012 Cost At October 1 2011 Additions Disposals Acquisitions Exchange differences At September 30 2012 Depreciation At October 1 2011 Charge for the year Disposals Exchange differences At September 30 2012 Net book value at September 30 2012 Net book value at September 30 2011 Freehold land and buildings 2012 £000 Long-term leasehold premises 2012 £000 Short-term leasehold premises 2012 £000 Office equipment 2012 £000 6,447 3,251 15,539 Total 2012 £000 44,840 1,665 (893) (422) (809) 307 (49) – (221) 19,603 1,333 (844) (246) (560) 15,576 19,286 44,381 8,309 1,064 (49) (150) 9,174 6,402 7,230 15,297 2,130 (789) (458) 16,180 3,106 4,306 24,450 3,408 (838) (621) 26,399 17,982 20,390 – – – – 6,447 283 83 – – 366 6,081 6,164 25 – (176) (28) 3,072 561 131 – (13) 679 2,393 2,690 The directors do not consider the market value of freehold land and buildings to be significantly different from its book value. 13 Investments At October 1 Additions Fair value adjustment Share of profits after tax retained Dividends At September 30 Associated undertakings Investments in associated undertakings 2013 £000 Investments in associated undertakings 2012 £000 735 – (49) 284 (268) 702 – 567 – 459 (291) 735 The associated undertakings at September 30 2013 were Capital NET Limited, whose principal activity is the provision of electronic database services, and GGA Pte. Limited whose principal activity is the provision of events for grain industry professionals in the Asia-Pacific region. The group has a 48.4% (2012: 48.4%) interest in Capital NET Limited and a 50% (2012: 50%) interest in GGA Pte. Limited. Euromoney Institutional Investor PLC www.euromoneyplc.com22706.04 12 December 2013 Proof 6109 109 13 Investments continued 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 The total assets, liabilities, revenues and profit after tax generated by GGA Pte. Limited at September 30 are set out below: Total assets Total liabilities Total revenues Profit after tax Assets available for sale Dec 31 2012 £000 749 (249) 2,032 722 2013 £000 219 (59) 282 38 Dec 31 2011 £000 603 (224) 2,035 733 2012 £000 172 (55) 327 119 The group has a 50% interest in Capital DATA Limited (Capital DATA). 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 in Capital DATA is accounted for as an asset available- for-sale with a carrying value of £nil (2012: £nil). Under a separate licence agreement the group is entitled to 28.2% of Capital DATA’s revenues being £5,361,000 in the year (2012: £5,065,000). At December 31 2012, based on its latest available audited accounts, Capital DATA had £229,000 of issued share capital and reserves (December 31 2011: £515,000), and its profit for the year then ended was £708,000 (December 31 2011: £1,026,000). s t n u o c c A p u o r G s t n e m e t a t S l a i c n a n i F d e t a d i l o s n o C e h t o t s e t o N Annual Report and Accounts 2013 22706.04 12 December 2013 Proof 6 110 Notes to the Consolidated Financial Statements continued 13 Investments continued Details of the company and its principal subsidiary undertakings included in these consolidated financial statements at September 30 2013 are as follows: Country of Principal activity Proportion Company Euromoney Institutional Investor PLC Direct investments Euromoney Institutional Investor (Jersey) Limited Euromoney Institutional Investor (Ventures) Limited Euromoney Canada Limited Euromoney Canada Finance Limited Euromoney Jersey Limited Fantfoot Limited Indirect investments Adhesion Group SA BCA Research, Inc. BPR Benchmark Limitada Carlcroft Limited Centre for Investor Education (UK) Limited Centre for Investor Education Pty Limited CEIC Holdings Limited Coaltrans Conferences Limited EII Holdings, Inc. EII US, Inc. Euromoney Canada Limited Euromoney Charles Limited Euromoney Consortium Limited Euromoney Consortium 2 Limited Euromoney Holdings US, Inc. Euromoney Partnership LLP Euromoney (Singapore) Pte Limited Euromoney Trading Limited Euromoney Training, Inc. Euromoney, Inc. EIMN, LLC Glenprint Limited Global Commodities Group Sarl GSCS Benchmarks Limited Gulf Publishing Company, Inc. HedgeFund Intelligence Limited Insider Publishing Limited Institutional Investor LLC Internet Securities, Inc. Latin American Financial Publications, Inc. Metal Bulletin Holdings LLC Metal Bulletin Limited MIS Training (UK) Limited Ned Davis Research Inc. Structured Retail Products Limited TelCap Limited The Petroleum Economist Limited Tipall Limited Total Derivatives Limited TTI Technologies LLC Associates Capital NET Limited GGA Pte. Limited held and operation incorporation n/a Investment holding company United Kingdom 100%† Publishing 100% Investment holding company Investment holding company 57.2% 100% Investment holding company 100% Investment holding company 100% Investment holding company 100% Events 100% Research and data services 100% Information services 99.7% Publishing 75% Investment holding company 75% Events 100% Information services 99.7% Events 100%* Investment holding company 100% Investment holding company 42.8% Investment holding company 100% Investment holding company Investment holding company 99.7% 99.7% Investment holding company 100% Investment holding company 100% Investment holding company 100% Events 99.7% Publishing, training and events 100% Training 100% Training and events 100% Events 99.7% Publishing 100% Events 99.7% Publishing 100% Publishing 99.7% Publishing 99.7% Publishing 100% Publishing and events 100% Information services 100% Publishing 100% Investment holding company 99.7% Publishing and events 100% Training and events 84.5% Research and data services 98.9% 99.7% Publishing 99.7% Publishing 100% Property holding 99.7% Publishing 87.2% Events Information services 48.4% Databases 50% Events Jersey United Kingdom United Kingdom United Kingdom Jersey United Kingdom France Canada Colombia United Kingdom United Kingdom Australia Hong Kong United Kingdom US US United Kingdom United Kingdom United Kingdom United Kingdom US United Kingdom Singapore United Kingdom US US US United Kingdom Switzerland United Kingdom US United Kingdom United Kingdom US US US US United Kingdom United Kingdom US United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom US United Kingdom Singapore 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 Institutional Investor PLC www.euromoneyplc.com22706.04 12 December 2013 Proof 6111 111 13 Investments continued For the year ended September 30 2013, the following subsidiary undertakings of the group were exempt from the requirements of the Companies Act 2006 relating to the audit of individual accounts by virtue of section 479A of the Companies Act 2006: Company Company registration number Euromoney Canada Limited Euromoney Charles Limited Euromoney Institutional Investor (Ventures) Limited Euromoney Partnership LLP Fantfoot Limited Internet Securities Limited 01974125 04082590 05885797 OC363064 05503274 02976791 14 Acquisitions Purchase of new business TTI Technologies, LLC (TTI/Vanguard) On December 21 2012, the group acquired 87.2% of the equity of TTI/Vanguard, a US-based private membership organisation for executives who lead technology innovation in global organisations, for US$8,063,000 (£5,031,000) followed by a working capital adjustment of £91,000 in June 2013. The acquisition of TTI/Vanguard is consistent with the group’s strategy of acquiring high-quality events businesses and accelerating their growth globally. The remaining 12.8% equity holding will be acquired in two instalments of 7.4% in March 2014 based on a pre-determined multiple of the profits for the year to December 31 2013, and 5.4% in March 2015 based on a pre-determined multiple of the profits for the year to December 31 2014. The total discounted amount that the group expects to pay at September 30 2013 under the earn-out agreement is US$678,000 (£418,000) calculated using the group’s WACC. s t n u o c c A p u o r G s t n e m e t a t S l a i c n a n i F d e t a d i l o s n o C e h t o t s e t o N Annual Report and Accounts 2013 22706.04 12 December 2013 Proof 6 112 Notes to the Consolidated Financial Statements continued 14 Acquisitions continued Purchase of new business continued TTI Technologies, LLC (TTI/Vanguard) continued The acquisition accounting is provisional pending final determination of the fair value of the assets and liabilities acquired. During the year changes have been made to the cash payable following changes in the working capital calculation and the accounting policy alignment of property, plant and equipment. Following these true-up adjustments, the related goodwill, fair value of net assets acquired and consideration are set out as follows: Net assets: Intangible assets Property, plant and equipment Trade and other receivables Cash and cash equivalents Trade and other payables Non-controlling interest Net assets acquired (87%) Goodwill Total consideration Consideration satisfied by: Cash Working capital adjustment Net cash outflow arising on acquisition: Cash consideration Less: cash and cash equivalent balances acquired Book value £000 Fair value adjustments £000 Provisional fair value March 31 2013 £000 Provisional fair value Sept 30 2013 £000 Change £000 – 5 497 1,176 (1,715) (37) 2,900 – – – – 2,900 2,900 5 497 1,176 (1,715) 2,863 (366) 2,497 2,534 5,031 5,031 – 5,031 – (5) – – (303) (308) 39 (269) 360 91 – 91 91 2,900 – 497 1,176 (2,018) 2,555 (327) 2,228 2,894 5,122 5,031 91 5,122 5,031 (1,176) 3,855 Intangible assets represent brands of US$3,189,000 (£1,990,000) and customer relationships of US$1,460,000 (£910,000), for which amortisation of £484,000 has been charged in the year. The brands and customer relationships will be amortised over their useful economic lives of up to 20 years and ten years respectively. Goodwill arises from the anticipated profitability and future operating synergies from combining the acquired operations within the group. All of the goodwill recognised is expected to be deductible for income tax purposes. Euromoney Institutional Investor PLC www.euromoneyplc.com22706.04 12 December 2013 Proof 6113 113 14 Acquisitions continued Purchase of new business continued TTI Technologies, LLC (TTI/Vanguard) continued The fair value of the assets acquired includes trade receivables of US$763,000 (£476,000), all of which are contracted and expected to be collectable. The non-controlling interest recognised on acquisition of £327,000 represents the proportionate share of the net assets acquired. TTI/Vanguard contributed £2,028,000 to the group’s revenue, £488,000 to the group’s operating profit and £308,000 to the group’s profit after tax for the period between the date of acquisition and September 30 2013. In addition, acquisition related costs of £97,000 were incurred and recognised as an exceptional item in the Income Statement for the year ended September 30 2013 (note 5). If the above acquisition had been completed on the first day of the financial year, TTI/Vanguard would have contributed £2,739,000 to the group’s revenue for the year and £631,000 to the group’s adjusted profit before tax for the year (excluding exceptional costs above). Following a sensitivity analysis of the remaining interest applying reasonably possible assumptions and a 10% change in expected profits, the potential undiscounted amount of all future payments that the group could be required to make under this earn-out arrangement is between £406,000 and £497,000. The maximum amount payable for 100% of TTI/Vanguard is US$15,000,000 (£9,263,000). Insider Publishing On March 19 2013, the group acquired 100% of the equity share capital of Insider Publishing Limited, a leading information source and events provider for the international insurance and reinsurance markets, for an initial cash consideration of £14,148,000, followed by a working capital adjustment of £2,549,000 in June 2013. The acquisition is consistent with the group’s strategy of investing in specialist online information businesses and using its global reach to drive further growth. At acquisition a discounted deferred consideration of £8,342,000 was recognised. In May 2013, deferred consideration of £251,000 was paid and the remaining discounted deferred consideration of £8,091,000 was expected to be paid between March 2014 and March 2015 dependent upon the audited results of the business for the average of the 2013 and 2014 calendar years. The discounted expected payment under this mechanism increased to £11,081,000 at September 30 2013 resulting in a charge to the Income Statement of £2,990,000. At the date of acquisition, £2,400,000 of the expected deferred consideration was paid in advance into escrow. s t n u o c c A p u o r G s t n e m e t a t S l a i c n a n i F d e t a d i l o s n o C e h t o t s e t o N Annual Report and Accounts 2013 22706.04 12 December 2013 Proof 6 114 Notes to the Consolidated Financial Statements continued 14 Acquisitions continued Purchase of new business continued Insider Publishing continued The acquisition accounting is provisional pending final determination of the fair value of the assets and liabilities acquired. During the year changes have been made to the cash payable following changes in the working capital calculation, net assets acquired following the finalisation of the valuation model and forecasts as of the date of acquisition, and deferred consideration to reflect the updated forecasts. Following these true-up adjustments, the related goodwill, fair value of net assets acquired and consideration are set out as follows: Net assets: Intangible assets Property, plant and equipment Trade and other receivables Cash and cash equivalents Trade and other payables Deferred tax liabilities Net assets acquired (100%) Goodwill Total consideration Consideration satisfied by: Cash Working capital adjustment Deferred consideration Net cash outflow arising on acquisition: Cash consideration Less: cash and cash equivalent balances acquired Book value £000 Fair value adjustments £000 Provisional fair value March 31 2013 £000 Provisional fair value Sept 30 2013 £000 Change £000 – – – 3,485 (3,485) – – 9,377 9,377 1,362 10,739 – – – – (2,157) 7,220 – – 3,485 (3,485) (2,157) 7,220 7,220 13,493 20,713 14,148 – 6,565 20,713 14 644 51 566 (98) 2,539 2,539 1,787 4,326 – 2,549 1,777 4,326 14 644 3,536 (2,919) (2,255) 9,759 9,759 15,280 25,039 14,148 2,549 8,342 25,039 14,148 (3,536) 10,612 Intangible assets represent brands of £3,259,000 and customer relationships of £7,480,000, for which amortisation of £1,672,000 has been charged in the year. The brands and customer relationships will be amortised over their useful economic lives of up to 20 years and ten years respectively. Euromoney Institutional Investor PLC www.euromoneyplc.com22706.04 12 December 2013 Proof 6115 115 14 Acquisitions continued Purchase of new business continued Insider Publishing continued Goodwill arises from the anticipated profitability and future operating synergies from combining the acquired operations within the group. The goodwill recognised is not expected to be deductible for income tax purposes. The fair value of the assets acquired includes trade receivables of £494,000, all of which are contracted and expected to be collectable. Insider Publishing contributed £3,052,000 to the group’s revenue, £1,528,000 to the group’s operating profit and £1,155,000 to the group’s profit after tax for the period between the date of acquisition and September 30 2013. In addition, acquisition related costs of £301,000 were incurred and recognised as an exceptional item in the Income Statement for the year ended September 30 2013 (note 5). If the above acquisition had been completed on the first day of the financial year, Insider Publishing would have contributed £5,300,000 to the group’s revenue for the year and £2,432,000 to the group’s adjusted profit before tax for the year (excluding exceptional costs above). The discounted deferred consideration is based on a pre-determined multiple of the average results of the business for the period to December 31 2013 and 2014 and is calculated using the group’s WACC. Following a sensitivity analysis of the deferred consideration applying reasonably possible assumptions and a 10% change in expected profits, the potential undiscounted amount of all future payments, including the amount paid into escrow, that the group could be required to make under this deferred consideration arrangement is between £9,831,000 and £15,215,000. The maximum amount payable for 100% of Insider Publishing is £31,000,000. Centre for Investor Education (CIE) On April 18 2013, the group acquired 75% of the trade and assets of CIE, a leading Australian provider of investment forums for senior executives of superannuation funds and global asset management firms, for A$10,800,000 (£7,415,000) offset by a working capital adjustment receipt of £929,000 in July 2013. By combining CIE with the expertise and relationships of Institutional Investor’s forums and memberships, the group expects to consolidate its leading position in the global asset management events sector. A discounted deferred consideration of A$5,586,000 (£3,835,000) was expected to be paid between March 2014 and March 2015 dependent upon the audited results of the business for the 2013 and 2014 calendar years. The expected payment under this mechanism increased to A$8,737,000 (£5,044,000) at September 30 2013 resulting in a charge to the Income Statement of £1,209,000. In April 2013, A$3,600,000 (£2,472,000) of the deferred consideration was paid in advance into escrow. The remaining 25% interest in the trade and assets of CIE will be acquired in two equal instalments based on the profits for the calendar years to 2014 and 2015. The total discounted amount that the group expects to pay at September 30 2013 under this earn-out agreement is A$7,315,000 (£4,224,000). s t n u o c c A p u o r G s t n e m e t a t S l a i c n a n i F d e t a d i l o s n o C e h t o t s e t o N Annual Report and Accounts 2013 22706.04 12 December 2013 Proof 6 116 Notes to the Consolidated Financial Statements continued 14 Acquisitions continued Purchase of new business continued Centre for Investor Education (CIE) continued The acquisition accounting is set out below and is provisional pending final determination of the fair value of the assets and liabilities acquired: Book value £000 Fair value adjustments £000 Provisional fair value £000 Net assets: Goodwill Intangible assets Property, plant and equipment Trade and other receivables Cash and cash equivalents Trade and other payables Deferred tax liabilities Non-controlling interest Net assets acquired (75%) Goodwill Total consideration Consideration satisfied by: Cash Working capital adjustment Deferred consideration Net cash outflow arising on acquisition: Cash consideration Less: cash and cash equivalent balances acquired 1,727 – 10 598 911 (2,566) – 680 (1,727) 5,168 (10) – – – 188 3,619 – 5,168 – 598 911 (2,566) 188 4,299 (1,075) 3,224 7,097 10,321 7,415 (929) 3,835 10,321 7,415 (911) 6,504 Intangible assets represent brands of A$5,548,000 (£3,809,000) and customer relationships of A$1,980,000 (£1,359,000), for which amortisation of £178,000 has been charged in the year. The brands and customer relationships will be amortised over their useful economic lives of up to 15 years and ten years respectively. Goodwill arises from the anticipated profitability and future operating synergies from combining the acquired operations within the group. The goodwill recognised is not expected to be deductible for income tax purposes. The fair value of the assets acquired includes trade receivables of A$804,000 (£552,000), all of which are contracted and expected to be collectable. Euromoney Institutional Investor PLC www.euromoneyplc.com22706.04 12 December 2013 Proof 6117 117 14 Acquisitions continued Purchase of new business continued Centre for Investor Education (CIE) continued The non-controlling interest recognised on acquisition of £1,075,000 represents the proportionate share of the net assets acquired. CIE contributed £1,119,000 to the group’s revenue, £575,000 to the group’s operating profit and £454,000 to the group’s profit after tax for the period between date of acquisition and September 30 2013. In addition, acquisition related costs of £157,000 were incurred and recognised as an exceptional item in the Income Statement for the year ended September 30 2013 (note 5). If the above acquisition had been completed on the first day of the financial year, CIE would have contributed £2,685,000 to the group’s revenue for the year and £1,275,000 to the group’s adjusted profit before tax for the year (excluding exceptional costs above). The discounted deferred consideration is based on a pre-determined multiple of the results of the business for the period to December 31 2013 and is calculated using the group’s WACC. Following a sensitivity analysis for the fair value of the deferred consideration applying reasonably possible assumptions and a 10% change in expected profits, the potential undiscounted amount of all future payments, including the amount paid into escrow, that the group could be required to make under this deferred consideration arrangement is between £4,156,000 and £6,466,000. Following a sensitivity analysis of the remaining interest applying reasonably possible assumptions and a 10% change in expected profits, the potential undiscounted amount of all future payments that the group could be required to make under this earn-out arrangement is between £4,486,000 and £5,483,000. The maximum amount payable for 100% of CIE is A$30,000,000 (£17,322,000). Quantitative Techniques (QT) On April 3 2013, the group signed a binding agreement with HSBC to acquire its QT operation for £1. QT is the benchmark and calculation agent business of HSBC Bank plc and creates and maintains more than 100 equity and bond indices for HSBC’s Global Markets division as well as over 60 external clients. Completion of the sale took place on September 30 2013 after a transition phase. HSBC has agreed to purchase index calculation services from QT for a minimum period of three years from the date of completion. The group believes the acquisition creates an opportunity to establish a significant footprint in the index compilation market. The business has been rebranded Euromoney Indices. The acquisition accounting is set out below and is provisional pending final determination of the fair value of the assets and liabilities acquired: Net assets: Intangible assets Trade and other receivables Trade and other payables Net assets acquired (100%) Negative goodwill Total consideration Book value £000 Fair value adjustments £000 Provisional fair value £000 – 447 (554) (107) 4,572 – (16) 4,556 4,572 447 (570) 4,449 4,449 (4,449) – Intangible assets represent trademarks of £1,203,000 and customer relationships of £3,369,000, for which no amortisation has been charged in the year. The trademarks and customer relationships will be amortised over their useful economic lives of up to 20 years and ten years respectively. s t n u o c c A p u o r G s t n e m e t a t S l a i c n a n i F d e t a d i l o s n o C e h t o t s e t o N Annual Report and Accounts 2013 Financial Statements Group Accounts22706.04 12 December 2013 Proof 6 118 Notes to the Consolidated Financial Statements continued 14 Acquisitions continued Purchase of new business continued Quantitative Techniques (QT) continued Negative goodwill arose from the valuation of intangible assets acquired for zero consideration. The negative goodwill is credited to the Income Statement within exceptional items (note 5) and is expected to be taxable for income tax purposes. As the acquisition of QT was completed on the last day of the financial year it did not contribute to the group’s revenue or profit. Acquisition related costs of £215,000 and restructuring costs of £581,000 were incurred and recognised as an exceptional item in the Income Statement for the year ended September 30 2013 (note 5). Due to the nature of the operation acquired it is not possible to provide the contribution to the group’s revenue and adjusted profit before tax. Increase in equity holdings Internet Securities, Inc. (ISI) The group held a call option to enable it to purchase the remaining non-controlling interest in ISI and this was exercised in January 2013. The option value was based on the valuation of ISI as determined under a methodology provided by an independent financial adviser. Under the terms of the option agreement consideration caps had been put in place that required 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. In March 2013, under this call option mechanism, the group purchased the remaining 0.08% of the equity share capital of ISI for a cash consideration of US$102,000 (£67,000), increasing the group’s equity shareholding in ISI to 100%. Structured Retail Products Limited (SRP) In April 2013, the group purchased 0.76% of the equity share capital of SRP from some its employees for a cash consideration of £86,000, representing the fair value of 0.76% of assets at date of acquisition, increasing the group’s equity shareholding in SRP to 98.94%. 15 Trade and other receivables Amounts falling due within one year Trade receivables Less: provision for impairment of trade receivables Trade receivables – net of provision Amounts owed by DMGT group undertakings Other debtors Prepayments Accrued income 2013 £000 59,712 (5,846) 53,866 47 7,436 12,153 5,743 79,245 2012 £000 54,146 (6,471) 47,675 2,344 5,560 6,904 3,469 65,952 The average credit period on sales of goods and services is 30 days. Trade receivables beyond 60 days overdue 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 believes 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 2013, trade receivables of £32,019,000 (2012: £24,263,000) were not yet due. Euromoney Institutional Investor PLC www.euromoneyplc.com22706.04 12 December 2013 Proof 6119 119 15 Trade and other receivables continued As of September 30 2013, trade receivables of £20,879,000 (2012: £15,469,000) were past due for which the group has not provided as there has been no significant change in their 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 73 days (2012: 77 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 2013 £000 10,579 4,666 2,395 3,239 2012 £000 7,156 3,348 1,985 2,980 20,879 15,469 As at September 30 2013, trade receivables of £6,814,000 (2012: £14,414,000) were impaired and partially provided for. The amount of the provision was £5,846,000 (2012: £6,471,000). 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 uncollectable Exchange differences At September 30 2013 £000 1,525 1,276 682 3,331 6,814 2013 £000 (6,471) (2,981) 2,842 750 14 (5,846) 2012 £000 7,713 2,857 1,123 2,721 14,414 2012 £000 (7,697) (3,271) 3,266 1,153 78 (6,471) s t n u o c c A p u o r G s t n e m e t a t S l a i c n a n i F d e t a d i l o s n o C e h t o t s e t o N 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 risk 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. Prepayments at September 30 2013 includes deferred consideration of £4,479,000 paid in advance into escrow following the acquisitions of Insider Publishing (£2,400,000) and CIE (A$3,600,000 (£2,079,000)) (note 14). Annual Report and Accounts 2013 Financial Statements Group Accounts22706.04 12 December 2013 Proof 6 120 Notes to the Consolidated Financial Statements continued 16 Trade and other payables Trade creditors Amounts owed to DMGT group undertakings Other creditors The directors consider the carrying amounts of trade and other payables approximate their fair values. 17 Deferred income Deferred subscription income Other deferred income 18 Financial instruments and risk management Current Interest rate swaps – fair value through profit and loss Interest rate swaps – cash flow hedge Forward foreign exchange contracts – cash flow hedge Non-current Interest rate swaps – fair value through profit and loss Forward foreign exchange contracts – cash flow hedge 2013 £000 4,046 44 22,751 26,841 2012 £000 4,170 3 23,450 27,623 2013 £000 90,401 26,895 2012 £000 81,020 24,086 117,296 105,106 2013 2012 Assets £000 Liabilities £000 Assets £000 Liabilities £000 – – 1,736 1,736 – 746 746 2,482 – – (909) (909) – – – – – 2,715 2,715 – 296 296 (909) 3,011 (156) (283) (217) (656) (206) (35) (241) (897) Financial risk management objectives The group’s activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk arising in the normal course of business. Derivative financial instruments are used to manage exposures to fluctuations in foreign currency exchange rates and interest rates but are not employed for speculative purposes. Full details of the objectives, policies and strategies pursued by the group in relation to financial risk management are set out on pages 88 to 91 of the accounting policies and pages 92 to 94 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. Euromoney Institutional Investor PLC www.euromoneyplc.com22706.04 12 December 2013 Proof 6121 121 18 Financial instruments and risk management continued 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 page 124. 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 122. 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 2012. 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 share capital, reserves and retained earnings as disclosed in the Consolidated Statement of Changes in Equity. Net debt to EBITDA* ratio The group’s tax and treasury committee reviews the group’s capital structure at least twice a year. As part of the debt covenants under the loan facility provided by Daily Mail and General Trust plc (DMGT), the board has to ensure that net debt to a rolling 12 month EBITDA* does not exceed four times. The group expects to be able to remain within these limits during the life of the facility. The net debt to EBITDA covenant is defined to allow the rate used in the translation of US dollar EBITDA, including hedging contracts, to be used also in the calculation of net debt, thereby removing any distortion to the covenant from increases in net debt due to short-term movements in the US dollar. The group’s loan facility with DMGT was due to mature on December 31 2013. Subsequent to the year end, the group has signed a US$160 million multi-currency replacement facility with DMGT that provides access to funds, should the group require it during the period to April 2016. The new facility requires the group’s net debt to EBITDA to be no more than three times. The net debt to EBITDA* ratio at September 30 is as follows: Committed loan facility (at weighted average exchange rate) Loan notes Total debt Cash and cash equivalents Net debt EBITDA* Net debt to EBITDA* ratio 2013 £000 2012 £000 (20,858) (1,028) (21,886) 11,268 (10,618) 123,499 0.09 (43,127) (1,228) (44,355) 13,544 (30,811) 116,080 0.27 * EBITDA (Earnings before interest, tax, depreciation, amortisation) = adjusted operating profit before depreciation and amortisation of licences and software, adjusted for the timing impact of acquisitions and disposals. s t n u o c c A p u o r G s t n e m e t a t S l a i c n a n i F d e t a d i l o s n o C e h t o t s e t o N Annual Report and Accounts 2013 Financial Statements Group Accounts22706.04 12 December 2013 Proof 6 122 Notes to the Consolidated Financial Statements continued 18 Financial instruments and risk management continued Categories of financial instruments The group’s financial assets and liabilities at September 30 are as follows: Financial assets Derivative instruments in designated hedge accounting relationships Prepaid deferred consideration (note 24) 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 commitments (note 24) Deferred consideration (note 24) Loans and payables (including overdrafts) 2013 £000 2,482 4,479 78,360 85,321 – (909) (15,037) (16,125) (103,862) (135,933) 2012 £000 3,011 – 72,592 75,603 (362) (535) (7,868) (77) (140,284) (149,126) The fair value of the financial assets and liabilities above are classified as level 2 in the fair value hierarchy other than acquisition commitments and deferred consideration which are classified as level 3 (page 129). i) 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 and forward exchange contracts are set out in this note and represent the value for which an asset could be sold or liability settled between knowledgeable willing parties in an arm’s length transaction calculated using the market rates of interest and exchange at September 30 2013. 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. ii) Foreign exchange rate risk The group’s principal foreign exchange exposure is to US dollar. The group generates approximately two-thirds of its revenues in US dollars, including approximately 30% of the revenues in its UK-based businesses, and approximately 60% of its operating profits are US dollar-denominated. The group is therefore exposed to foreign exchange risk on the US dollar revenues in its UK businesses, the translation of results of foreign subsidiaries and external loans as well as loans to foreign operations within the group where the denomination of the loan is not in the functional currency of the lender/borrower. Euromoney Institutional Investor PLC www.euromoneyplc.com22706.04 12 December 2013 Proof 6123 123 18 Financial instruments and risk management continued The carrying amounts of the group’s US dollar-denominated monetary assets and monetary liabilities at the reporting date are as follows: US dollar Assets Liabilities 2013 £000 2012 £000 2013 £000 2012 £000 55,767 58,770 (8,702) (5,956) 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 and euro forward contracts are put in place to sell forward surplus US dollars and euros so as to hedge 80% of the group’s UK based US dollar and euro revenues for the coming 12 months and 50% of the group’s UK based US dollar and euro revenues for the subsequent six months. The timing and value of these forward contracts is based on management’s estimate of its future US dollar and euro revenues over an 18 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. If management materially underestimates the group’s future US dollar and euro denominated revenues, this would lead to too few forward contracts being in place and the group being more exposed to swings in US dollar and euro to sterling exchange rates. An overestimate of the group’s US dollar and euro denominated revenues would lead to associated costs in unwinding the excess forward contracts. 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 18 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 not in the functional currency of the lender/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 (US$ net assets in UK companies) Change in equity (derivative financial instruments) Change in equity (external loans and loans to foreign operations) 2013 £000 (542) 6,417 3,134 2012 £000 (646) 6,606 4,105 The decrease in the loss from the sensitivity analysis is due to a decrease in the working capital asset position. The fall in equity from £6,606,000 to £6,417,000 from the sensitivity analysis is due to the decrease of the value of the derivative financial assets. s t n u o c c A p u o r G s t n e m e t a t S l a i c n a n i F d e t a d i l o s n o C e h t o t s e t o N Annual Report and Accounts 2013 Financial Statements Group Accounts22706.04 12 December 2013 Proof 6 124 Notes to the Consolidated Financial Statements continued 18 Financial instruments and risk management continued The group is also exposed to the translation of the results of its US dollar-denominated businesses, although the group does not hedge the translation of these results. 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 change in equity from a 10% change in sterling against US dollars in relation to the translation of external loans and loans to foreign operations within the group where the denomination of the loan is not in the functional currency of the lender/borrower would result in a change of £3,134,000 (2012: £4,105,000). However, the change in equity is completely offset by the change in value of the foreign operation’s net assets from their translation into sterling. 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. A series of US dollar and euro forward contracts are put in place to sell forward surplus US dollars and euros so as to hedge 80% of the group’s UK based US dollar and euro revenues for the coming 12 months and 50% of the group’s UK based US dollar and euro revenues for the subsequent six months. In addition, at a group level a series of US dollar forward contracts is put in place up to 18 months forward to hedge a subsidiary’s Canadian cost base. Average exchange rate Foreign currency Contract value Fair value 2013 2012 2013 US$000 2012 US$000 2013 £000 2012 £000 2013 £000 2012 £000 Cash Flow Hedges Sell USD buy GBP Less than a year More than a year but less than two years Sell USD buy CAD† Less than a year More than a year but less than two years Sell EUR buy GBP Less than a year More than a year but less than two years 1.572 1.589 70,575 71,875 44,902 45,236 1,223 1.543 1.581 19,300 17,225 12,509 10,892 519 1.018 1.001 18,682 20,976 11,420 13,219 (164) 1.050 1.011 5,750 6,307 3,628 4,015 35 694 206 176 64 €000 €000 £000 £000 £000 £000 1.203 1.183 36,000 34,630 29,923 29,286 (232) 1,628 1.166 1.248 10,850 9,950 9,305 7,971 192 (9) † Rate used for conversion from CAD to GBP is 1.6646 (2012: 1.5889). As at September 30 2013, the aggregate amount of unrealised gains under forward foreign exchange contracts deferred in the fair value reserve relating to future revenue transactions is £1,573,000 (2012: gains £2,759,000). It is anticipated that the transactions will take place over the next 18 months at which stage the amount deferred in equity will be released to the Income Statement. As at September 30 2013, there were no ineffective cash flow hedges in place at the year end (2012: £nil). iii) Interest rate risk The group’s borrowings are in both sterling and US dollars with the related interest tied to 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 forgone of achieving lower interest Euromoney Institutional Investor PLC www.euromoneyplc.com22706.04 12 December 2013 Proof 6125 125 18 Financial instruments and risk management continued 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. As at September 30 2013, due to the low level of debt there were no interest rate swaps outstanding. The group’s exposures to interest rates on financial assets and financial liabilities are detailed in the liquidity risk section on page 126. 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 the directors’ 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 2013 would decrease or increase by £272,000 (2012: £338,000). 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 £nil (2012: £561,000) mainly as a result of the changes in the fair value of interest rate swaps. 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 yield curves at the reporting date and the credit risk inherent in the contract, and is disclosed below. The following table details the notional principal amounts and remaining terms of interest rate swap contracts outstanding as at the reporting date for the previous year. The average interest rate is based on the outstanding balances at the end of the financial year. Cash flow hedges US dollar: Receive floating pay fixed Average contracted fixed interest rate Notional principal amount Fair value Less than 1 year 1 to 2 years GBP: Receive floating pay fixed 2013 % – – 2012 % 3.25 2.52 2013 £000 2012 £000 – – 18,578 6,193 2013 £000 – – 2012 £000 (389) (206) Average contracted fixed interest rate Notional principal amount Fair value 2013 % 2012 % 2013 £000 2012 £000 2013 £000 2012 £000 Less than 1 year – 2.57 – 5,000 – (50) s t n u o c c A p u o r G s t n e m e t a t S l a i c n a n i F d e t a d i l o s n o C e h t o t s e t o N Annual Report and Accounts 2013 Financial Statements Group Accounts22706.04 12 December 2013 Proof 6 126 Notes to the Consolidated Financial Statements continued 18 Financial instruments and risk management continued Interest rate swap contracts continued 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. As at September 30 2013, the aggregate amount of unrealised interest under swap contracts deferred in the fair value reserve relating to future interest payable was £nil (2012: £283,000). As at September 30 2013, the aggregate amount of unrealised interest recognised in the Income Statement under ineffective swaps still in place at the year end was £nil (2012: £362,000). iv) 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 have 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 with 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 AA. 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 Statement of Financial Position. 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. v) Liquidity risk The group has significant intercompany borrowings and is an approved borrower under a DMGT US$300 million dedicated multi-currency facility. The facility is divided into US dollar and sterling funds and was due to mature in December 2013. The total maximum borrowing capacity is as follows: US Dollar Sterling US$250 million £33 million The facility requires the group to meet certain covenants based on net debt and profits adjusted for certain non-cash items and the impact of foreign exchange. 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 monitors the covenants and prepares detailed cash flow forecasts to ensure that sufficient headroom is available and that the covenants are not close or potentially close to breach. At September 30 2013, the group’s net debt to adjusted EBITDA was 0.09 times. Euromoney Institutional Investor PLC www.euromoneyplc.com22706.04 12 December 2013 Proof 6127 127 18 Financial instruments and risk management continued The group’s strategy is to use excess operating cash to pay down its debt. The group generally has an annual cash conversion rate (the percentage by which cash generated by operations covers operating profit before acquired intangible amortisation, long-term incentive expense and exceptional items) of over 100%, due to much of its subscription, conference and training revenue being paid in advance. However, this year the group’s cash conversion rate was 88% compared to 103% last year, due to cash payments in 2013 in respect of the vesting of the first tranche of options under the CAP (£9.5 million) and profit shares for the company’s former chairman who died in October 2012, both of which were expensed in financial year 2012 or earlier. Under the DMGT facility, at September 30 2013, the group had £165.9 million of undrawn but committed facilities available. There is a risk that the undrawn portion of the facility, or that the additional funding, may be unavailable or withdrawn if DMGT experience funding difficulties themselves. However, if DMGT were unable to fulfil its funding commitment to the group, the directors are confident that the group would be in a position to secure adequate external facilities, although probably at a higher cost of funding. The group has agreed terms with DMGT that provide it with US$160 million of additional funding during the period to April 2016. 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 2013. The contractual maturity is based on the earliest date on which the group may be required to settle. 2013 Weighted average effective interest rate % Less than 1 year £000 1–3 years £000 Variable rate borrowings Acquisition commitments Deferred consideration Non-interest bearing liabilities (trade and other payables, and accruals) 3.56 – – – 21,205 539 7,040 82,657 – 14,498 9,085 – 2012 Variable rate borrowings Acquisition commitments Deferred consideration Non-interest bearing liabilities (trade and other payables, and accruals) Weighted average effective interest rate % 2.49 – – – Less than 1 year £000 1,228 4,273 77 89,561 1–3 years £000 43,154 3,595 – 6,341 s t n u o c c A p u o r G s t n e m e t a t S l a i c n a n i F d e t a d i l o s n o C e h t o t s e t o N Total £000 21,205 15,037 16,125 82,657 Total £000 44,382 7,868 77 95,902 At September 30 2013, £20,177,000 (2012: £38,631,000) of borrowings were designated in US dollars with the remainder in sterling. The average rate of interest paid on the debt was 5.68% (2012: 4.82%). Annual Report and Accounts 2013 Financial Statements Group Accounts22706.04 12 December 2013 Proof 6 128 Notes to the Consolidated Financial Statements continued 18 Financial instruments and risk management continued The following table details the group’s remaining contractual maturity for its non-derivative financial assets, mainly short-term deposits for amounts on loans owed by DMGT group undertakings and equity non-controlling interests. 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 anticipates that the cash flow will occur in a different period. 2013 Variable interest rate instruments (cash at bank) Prepaid deferred consideration Non-interest bearing assets (trade and other receivables excluding prepayments) 2012 Variable interest rate instruments (cash at bank and short-term deposits) Non-interest bearing assets (trade and other receivables excluding prepayments) Weighted average effective interest rate % 1.27 – – Weighted average effective interest rate % 0.86 – Less than 1 year £000 11,268 4,479 67,092 82,839 Less than 1 year £000 13,544 59,048 72,592 Total £000 11,268 4,479 67,092 82,839 Total £000 13,544 59,048 72,592 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 and (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. 2013 Net settled Interest rate swaps Gross settled Foreign exchange forward contracts inflows Foreign exchange forward contracts outflows 2012 Net settled Interest rate swaps Gross settled Foreign exchange forward contracts inflows Foreign exchange forward contracts outflows Less than 1 month £000 1–3 months £000 3 months to 1 year £000 1–5 years £000 Total £000 – – – – – 7,033 (7,074) (41) Less than 1 month £000 14,668 (14,712) (44) 1–3 months £000 64,544 (63,424) 1,120 3 months to 1 year £000 25,442 (24,538) 904 111,687 (109,748) 1,939 1–5 years £000 Total £000 – (196) (375) (66) (637) 7,358 (7,063) 295 13,163 (12,769) 198 67,221 (65,258) 1,588 22,877 (22,500) 311 110,619 (107,590) 2,392 Euromoney Institutional Investor PLC www.euromoneyplc.com22706.04 12 December 2013 Proof 6129 129 18 Financial instruments and risk management continued Fair value of financial instruments The fair values of financial assets and financial liabilities are determined as follows: Level 1 ●● 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. Level 2 ●● 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; Foreign currency forward contracts are measured using quoted forward exchange rates and yield curves derived from quoted interest rates matching maturities of the contracts; and ●● 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. Level 3 ●● If one or more significant inputs are not based on observable market date, the instrument is included in level 3. As at September 30 2013 and the prior year, all the resulting fair value estimates have been included in level 2 other than the group’s acquisition commitments which are classified as level 3. Other financial instruments not recorded at fair value 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. Such financial assets and financial liabilities include cash and cash equivalents, receivables, prepayments, accrued income, payables and loans. 19 Bank overdrafts and loans Loan notes – current liability Committed loan facility – current liability Committed loan facility – non-current liability Loan notes 2013 £000 2012 £000 1,028 1,228 20,177 – 20,177 – 43,154 43,154 Loan notes 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 2013 £199,000 (2012: £386,000) of these loan notes were redeemed. s t n u o c c A p u o r G s t n e m e t a t S l a i c n a n i F d e t a d i l o s n o C e h t o t s e t o N Annual Report and Accounts 2013 Financial Statements Group Accounts22706.04 12 December 2013 Proof 6 130 Notes to the Consolidated Financial Statements continued 19 Bank overdrafts and loans continued Committed loan facility The group’s debt is provided through a dedicated US$300 million multi-currency borrowing facility from Daily Mail and General Trust plc (DMGT). The total maximum borrowing capacity is US$250 million (£154 million) and £33 million. Interest is payable on this facility at a variable rate of between 1.4% and 3.0% above LIBOR dependent on the ratio of adjusted net debt to EBITDA. The facility’s covenant requires the group’s net debt to be no more than four times adjusted EBITDA on a rolling 12 month basis. 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 monitors the covenant and prepares detailed debt forecasts to ensure that sufficient headroom is available and that the covenants are not close or potentially close to breach. At September 30 2013, the group’s net debt to adjusted EBITDA was 0.09 times. Under the DMGT facility, at September 30 2013, the group had £165.9 million of undrawn but committed facilities available. Subsequent to the year end, the group has signed a US$160 million multi-currency replacement funding facility with DMGT that provides access to funds, during the period to April 2016. The new facility requires the group’s net debt to EBITDA to be no more than three times. There is a risk that the undrawn portion of the facility, or that the additional funding, may be unavailable or withdrawn if DMGT experience funding difficulties themselves. However, if DMGT were unable to fulfil its funding commitment to the group, the directors are confident that the group would be in a position to secure adequate external facilities, although probably at a higher cost of funding. 20 Provisions At October 1 2012 Provision in the year Used in the year Exchange differences At September 30 2013 Maturity profile of provisions Within one year (included in current liabilities) Between one and two years (included in non-current liabilities) Between two and five years (included in non-current liabilities) Onerous lease provision £000 Other provisions £000 2,784 224 (1,376) 41 1,673 4,171 2,088 (1,722) – 4,537 2013 £000 3,974 417 1,819 6,210 Group total £000 6,955 2,312 (3,098) 41 6,210 2012 £000 2,037 2,469 2,449 6,955 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 The provision consists of social security arising on share option liabilities and dilapidations on leasehold properties. Euromoney Institutional Investor PLC www.euromoneyplc.com22706.04 12 December 2013 Proof 621 Deferred taxation The net deferred tax liability at September 30 2013 comprised: Capitalised goodwill and intangibles Tax losses Financial instruments Other short-term temporary differences Deferred tax Comprising: Deferred tax assets Deferred tax liabilities Other short-term temporary differences: Share-based payments Pension deficit Accelerated capital allowances Deferred income, accruals and other provisions Total other short-term temporary differences 2012 £000 (28,348) 1,367 (441) 17,791 (9,631) 7,344 (16,975) (9,631) 2012 £000 7,423 626 629 9,113 17,791 Income statement £000 Other comprehensive income £000 Equity £000 Acquisitions and disposals £000 Exchange differences £000 659 2,289 – (3,469) (521) – – 90 (287) (197) (36) – – 587 551 (2,067) – – – (2,067) 43 (62) – 61 42 Income statement £000 Other comprehensive income £000 Equity £000 Acquisitions and disposals £000 Exchange differences £000 (2,305) 237 (24) (1,377) (3,469) – (287) – – 587 – – – (287) 587 – – – – – 20 – (21) 62 61 131 131 2013 £000 (29,749) 3,594 (351) 14,683 (11,823) 5,015 (16,838) (11,823) 2013 £000 5,725 576 584 7,798 14,683 At the balance sheet date, the group has unused US tax losses available for offset against future profits. At September 30 2013 a deferred tax asset of £3,594,000 (2012: £1,367,000) has been recognised in relation to these losses. The US losses can be carried forward for a period of 20 years from the date they arose. The US losses have expiry dates between 2014 and 2029. At September 30 2013, a net deferred tax asset of £693,000 (2012: £5,511,000) has been recognised in respect of US tax deductible goodwill amortisation, capitalised intangible assets and other 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 future years is sufficient to enable the above assets to be recovered. No deferred tax liability is recognised on temporary differences of £153,233,000 (2012: £94,478,000) relating to the unremitted earnings of overseas subsidiaries as the group is able to control the timing of the reversal of these temporary differences and it is probable that they will not reverse in the foreseeable future. The temporary differences at September 30 2013 represent only the unremitted earnings of those overseas subsidiaries where remittance to the UK of those earnings may still result in a tax liability, principally as a result of dividend withholding taxes levied by the overseas tax jurisdictions in which these subsidiaries operate. s t n u o c c A p u o r G s t n e m e t a t S l a i c n a n i F d e t a d i l o s n o C e h t o t s e t o N Annual Report and Accounts 2013 Financial Statements Group Accounts22706.04 12 December 2013 Proof 6 132 Notes to the Consolidated Financial Statements continued 22 Called up share capital Allotted, called up and fully paid 2013 £000 2012 £000 126,457,324 ordinary shares of 0.25p each (2012: 124,349,531 ordinary shares of 0.25p each) 316 311 During the year, 2,107,793 ordinary shares of 0.25p each (2012: 3,102,151 ordinary shares) with an aggregate nominal value of £5,270 (2012: £7,755) were issued as follows: 2,107,793 ordinary shares (2012: 720,741 ordinary shares) following the exercise of share options granted under the company’s share option schemes for a cash consideration of £2,228,590 (2012: £1,058,834). In addition, last year 2,381,410 shares were issued under the company’s 2009 scrip dividend alternative for a cash consideration of £nil. There was no scrip dividend alternative offered in 2013. 23 Share-based payments The group’s long-term incentive expense at September 30 comprised: Equity-settled options SAYE CAP 2004 CAP 2010 Cash-settled options CAP 2010 Internet Securities, Inc. Structured Retail Products Limited The total carrying value of cash-settled options at September 30 included in the Statement of Financial Position is: Current Non-current 2013 £000 (96) – (971) (1,067) (971) (7) (55) (1,033) (2,100) 2013 £000 7,435 – 7,435 2012 £000 (97) 1,809 (4,042) (2,330) (4,042) (8) 79 (3,971) (6,301) 2012 £000 7,768 6,341 14,109 Euromoney Institutional Investor PLC www.euromoneyplc.com22706.04 12 December 2013 Proof 6 133 133 23 Share-based payments continued Equity-settled options The options set out below are outstanding at September 30 and are options to subscribe for new ordinary shares of 0.25p each in the company. The total charge recognised in the year from equity-settled options was £1,067,000, 51% of the group’s long-term incentive expense (2012: charge £2,330,000, 37%). Number of ordinary shares under option: 2013 Period during which option may be exercised: Executive options Before January 28 2014 SAYE Between February 1 2013 and July 31 2013 Between February 1 2014 and July 31 2014 Between February 1 2015 and July 31 2015 Between February 1 2016 and July 31 2016 CAP 2004 Before September 30 2014 (tranche 1)1 Before September 30 2014 (tranche 3)1 CAP 2010 Before September 30 2020 (tranche 1)2 Before September 30 2020 (tranche 2)2 CSOP 2010 Before February 14 2020 (UK) Before February 14 2020 (Canada) Granted/ (trued-up) during year Exercised during year Lapsed/ forfeited during year 2012 Option price (£) 2013 Weighted average market price at date of exercise (£) 52,000 – (44,000) – 8,000 4.19 10.21 44,567 25,497 148,488 – – – – 70,178 (41,929) (2,079) (653) – (2,638) (4,225) (21,682) (7,178) – 19,193 126,153 63,000 421 69,693 – (14,693)‡ (421) (55,000) – – – – 969,305 1,750,496 473,606‡ (1,432,443) (32,976)‡ – – 10,468 (7,674) 1,709,846 541,671 239,520 3,841,658 (203,283)‡ (311,708) (19,960)‡ (219,560) 272,872 (2,107,793) (2,632) – 24,048 – (46,029) 1,960,708 3.44 5.65 4.97 6.39 0.0025 0.0025 0.0025 0.0025 6.03 5.01 8.96 10.15 9.60 – 10.88 9.27 9.39 – 10.03 9.32 s t n u o c c A p u o r G s t n e m e t a t S l a i c n a n i F d e t a d i l o s n o C e h t o t s e t o N Annual Report and Accounts 2013 Financial Statements Group Accounts22706.04 12 December 2013 Proof 6 134 Notes to the Consolidated Financial Statements continued 23 Share-based payments continued Equity-settled options continued The options outstanding at September 30 2013 had a weighted average exercise price of £0.67 and a weighted average remaining contractual life of 6.44 years. Number of ordinary shares under option: 2012 Granted/ (trued up) during year Exercised during year Lapsed/ forfeited during year Option price (£) 2012 – – – – – – – 158,769 (8,000) (86,000) (39,487) (3,018) (338,767) – – – – – – – – 52,000 – (2,258) (1,899) (15,091) (10,281) – – 44,567 25,497 148,488 3.35 2.59 4.19 3.18 1.87 3.44 5.65 4.97 – (18,063)‡ (18,182)‡ – (40,312) (205,157) – – – 421 – 69,693 0.0025 0.0025 0.0025 2011 8,000 86,000 91,487 3,018 341,025 46,466 40,588 – 421 58,375 293,032 969,305 1,750,496 – – – – – 969,305 – 1,750,496 0.0025 0.0025 541,671 239,520 4,469,404 – – 122,524 – – (720,741) – – 541,671 239,520 (29,529) 3,841,658 6.03 5.01 Weighted average market price at date of exercise (£) 7.07 7.31 7.30 6.90 6.93 – – – – 7.37 7.31 – – – – Period during which option may be exercised: Executive options Before January 22 2012 Before December 3 2012 Before January 28 2014 SAYE Between February 1 2011 and July 31 2011 Between February 1 2012 and July 31 2012 Between February 1 2013 and July 31 2013 Between February 1 2014 and July 31 2014 Between February 1 2015 and July 31 2015 CAP 2004 Before September 30 2014 (tranche 1)1 Before September 30 2014 (tranche 2)1 Before September 30 2014 (tranche 3)1 CAP 2010 Before September 30 2020 (tranche 1) Before September 30 2020 (tranche 2) CSOP 2010 Before February 14 2020 (UK) Before February 14 2020 (Canada) The options outstanding at September 30 2012 had a weighted average exercise price of £1.49 and a weighted average remaining contractual life of 7.35 years. 1 2 ‡ CAP 2004 options shown in the above tables relate only to those options that have vested (see page 65 in the Directors’ Remuneration Report for further information on CAP 2004 options). The allocation of the number of options granted under each tranche of the CAP 2010 and CSOP UK and CSOP Canada represents the directors’ best estimate. The CAP 2010 award is reduced by the number of options vesting under the respective CSOP schemes (see below and the Directors’ Remuneration Report for further details). Options granted/(trued-up) relate to the adjustments to those that were likely to vest on February 14 2013 under the second and third tranche of the CAP 2004 following the achievement of the additional performance test and the first tranche of CAP 2010. The number of options granted was provisional and required a true-up to reflect adjustments of the individual businesses’ profits during the period to December 31 2012 and 2013 respectively as required by the Remuneration Committee. As such, the actual number of options vested varied from that disclosed last year. Cash-settled options The group has liabilities in respect of two share option schemes that are classified by IFRS 2 ‘Share-based payments’ as cash settled. These consist of the cash element of the CAP 2010 scheme and options held by employees over equity shares in Structured Retail Products Limited, a subsidiary of the group. Of these schemes, options with an intrinsic value of £nil had vested but are not yet exercised (2012: £3,000). Euromoney Institutional Investor PLC www.euromoneyplc.com22706.04 12 December 2013 Proof 6135 135 23 Share-based payments continued Share Option Schemes Capital Appreciation Plan 2010 (CAP 2010) The CAP 2010 executive share option scheme was approved by shareholders on January 21 2010. Each CAP 2010 award comprises two equal elements – an option to subscribe for ordinary shares of 0.25p each in the company at an exercise price of 0.25p per ordinary share, and a right to receive a cash payment. The awards vest in two equal tranches. The first tranche of awards became exercisable in February 2013 following satisfaction of the primary performance condition (adjusted pre-tax profits of at least £105 million, increased from £100 million following the acquisition of NDR). The second tranche of awards becomes exercisable in the February following a subsequent financial year in which adjusted pre-tax profits* again equal or exceed £105 million, but no earlier than February 2014. The second tranche only vests on satisfaction of the primary performance condition and an additional performance condition and lapse to the extent unexercised by September 30 2020. The number of options received under the share award of the CAP 2010 is reduced by the number of options vesting with participants from the 2010 Company Share Option Plan. The primary performance condition was achieved in financial year 2011, two years earlier than expected, when adjusted pre-tax profits* were £101.3 million. However, the internal rules of the plan prevented the awards vesting more than one year early, so although the primary condition had been achieved, the award pool was allocated between the holders of outstanding awards by reference to their contribution to the growth in profits of the group from the 2009 base year to the profits achieved in financial year 2012 and these awards were exercisable in February 2013. The primary performance condition was achieved again in financial year 2012 and, after applying the additional performance condition, the second tranche of options will become exercisable in February 2014. (see Directors’ Remuneration Report for further information). Company Share Option Plan 2010 (CSOP 2010) In parallel with the CAP 2010, the shareholders approved the CSOP 2010 UK and Canada at the AGM on January 21 2010. The CSOP 2010 UK was approved by HM Revenue & Customs on June 21 2010 and options granted on June 28 2010. The CSOP 2010 UK option enables each participant to purchase up to 4,972 shares in the company at a price of £6.03 per share, the market value at the date of grant. The options vest and become exercisable at the same time as the corresponding share award under the CAP 2010 providing the CSOP option is in the money at that time and did not vest before June 28 2013. Once vested the CSOP option remains exercisable for one month. If the CSOP option is not in the money at the time of vesting of the corresponding CAP 2010 share award it continues to subsist and becomes exercisable at the same time as the second tranche of the CAP 2010 share award. The CSOP 2010 Canada, granted on March 30 2010, enables each participant to purchase up to 19,960 shares in the company at a price of £5.01 per share, the market value at the date of grant. No option may vest after the date falling three months after the preliminary announcement of the results for the financial year ended September 30 2019, and the option shall lapse to the extent unvested at the time. The CSOP has the same performance criteria as that of the CAP 2010 as set out above. The number of CSOP 2010 awards that vest proportionally reduce the number of shares that vest under the CAP 2010 as the CSOP is effectively a delivery mechanism for part of the CAP 2010 award. The CSOP 2010 option exercise price of £6.03 (UK) and £5.01 (Canada) will be satisfied by a funding award mechanism and results in the same net gain on the CSOP options (calculated as the market price of the company’s shares at the date of exercise less the exercise price, multiplied by the number of options exercised) delivered in the equivalent number of shares to participants as if the award had been delivered using 0.25p CAP options. s t n u o c c A p u o r G s t n e m e t a t S l a i c n a n i F d e t a d i l o s n o C e h t o t s e t o N Capital Appreciation Plan 2004 (CAP 2004) The CAP 2004 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 was achieved in the financial year 2007 and the option pool (a maximum of 7.5 million shares) was allocated between the holders of outstanding awards. One-third of the awards vested immediately. The primary performance target was achieved again in 2008 and, after applying the additional performance condition, 2,241,269 options from the second tranche of options vested in February 2009. The primary performance target was also achieved in 2009 and 1,527,152 options (including a true-up adjustment of 5,654) for the third (final) tranche of options in 2009 vested in February 2010. The additional performance condition was applied to profits for financial year 2010 to 2012 for those individual participants where the additional performance conditions for the second and final tranches had not previously been met and 303,321, 244,152 and 39,907 options vested in February 2011, 2012 and 2013 respectively. No further options will vest under this scheme and all outstanding options have been exercised. * Adjusted pre-tax profits is profit before tax excluding acquired intangible amortisation, CAP 2010 element of long-term incentive expense, exceptional items, profits from significant acquisitions, net movements in acquisition commitments values, imputed interest on acquisition commitments, foreign exchange loss interest charge on tax equalisation contracts and foreign exchange on restructured hedging arrangements as set out in the Income Statement, note 5 and note 7. Annual Report and Accounts 2013 Financial Statements Group Accounts22706.04 12 December 2013 Proof 6 136 Notes to the Consolidated Financial Statements continued 23 Share-based payments continued Share Option Schemes continued The company has four share option schemes for which an IFRS 2 ‘Share-based payments’ charge has been recognised. Details of these schemes are set out in the Directors’ Remuneration Report on pages 62 to 64. The fair value per option granted and the assumptions used in the calculation are shown below. 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 (£) Executive Options January 28 2004 SAYE 12 December 21 2010 13 December 20 2011 14 December 17 2012 419 419 8,000 10.0 5.5 419 4.10% 3.93% 30% 0.72 706 565 19,193 3.5 3.0 565 1.63% 5.28% 38% 1.82 621 497 126,153 3.5 3.0 497 0.53% 4.30% 35% 1.54 798 639 63,000 3.5 3.0 639 0.53% 2.31% 27% 1.93 The executive and Save as You Earn (SAYE) 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 three 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 charge recognised in the year in respect of these options was £96,000 (2012: £97,000). 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 (£) CAP 2010 CSOP 2010 Tranche 1 March 30 2010 Tranche 2 March 30 2010 UK June 28 2010 501 0.25 10,468 10 4 0.25 2.28% 7.00% 4.37 501 0.25 1,709,846 10 5 0.25 2.75% 7.00% 4.20 603.34 603.34 24,048 9.38 3 603.34* 2.28% 7.00% 4.37 The CAP 2010 options were valued using a fair value model that adjusted the share price at the date of grant for the net present value of expected future dividend streams up to the date of expected exercise. The expected term of the option used in the models has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. The number of CSOP 2010 awards that vest proportionally reduce the number of shares that vest under the CAP 2010, the CSOP is effectively a delivery mechanism for part of the CAP 2010 award. The CSOP 2010 options have an exercise price of £6.03, which will be satisfied by a funding award Euromoney Institutional Investor PLC www.euromoneyplc.com22706.04 12 December 2013 Proof 6137 137 23 Share-based payments continued mechanism which results in the same net gain1 on these options delivered in the equivalent number of shares to participants as if the same award had been delivered using 0.25 pence CAP options. The amount of the funding award will depend on the company’s share price at the date of vesting. Because of the above and the other direct links between the CSOP 2010 and the CAP 2010, including the identical performance criteria, IFRS 2 ‘Share based payments’ combines the two plans and treats them as one plan (vesting in two tranches). The long-term incentive expense recognised in the year for the CSOP 2010 and CAP 2010 options (including the charge in relation to the cash element) was £1,942,000 (2012: £8,084,000). 1 * Net gain on the CSOP options is the market price of the company’s shares at the date of exercise less the exercise price (£6.03) multiplied by the number of options exercised. Exercise price excludes the effect of the funding award. 24 Acquisition commitments and deferred consideration The group is party to contingent consideration arrangements in the form of both acquisition commitments and deferred consideration payments. IAS 39 ‘Financial Instruments’ requires the group to recognise the discounted present value of the contingent consideration. This discount is unwound as a notional interest charge to the Income Statement. The group regularly performs a review of the underlying businesses to assess the impact on the fair value of the contingent consideration. Any resultant change in these fair values is reported as a finance income or expense in the Income Statement. At October 1 Additions from acquisitions during the year Net movements during the year (note 7) Imputed interest (note 7) Exercise of commitments Paid during the year Exchange differences At September 30 Acquisition commitments Deferred consideration 2013 £000 7,868 4,404 1,619 1,269 (82) – (41) 15,037 2012 £000 11,001 – (2,940) 977 (831) – (339) 7,868 2013 £000 77 12,177 3,887 834 – (5,329) – 11,646 2012 £000 1,131 (407) (35) – – (612) – 77 An expense of £2,888,000 (2012: net income of £1,963,000) was recorded in finance income and expense for acquisition commitments and £4,721,000 (2012: net income of £35,000) for deferred consideration (note 7). Maturity profile of contingent consideration: Prepayments (included in trade and other receivables) Within one year (included in current liabilities) In more than one year (included in non-current liabilities) Acquisition commitments Deferred consideration 2013 £000 – 539 14,498 15,037 2012 £000 – 4,273 3,595 7,868 2013 £000 (4,479) 7,040 9,085 11,646 2012 £000 – 77 – 77 The prepayment represents deferred consideration paid in advance into escrow following the acquisitions of Insider Publishing (£2,400,000) and CIE (A$3,600,000 (£2,079,000)) (note 14). There is a deferred tax asset of £168,000 (2012: £nil) related to the acquisition commitments as at September 30 2013. s t n u o c c A p u o r G s t n e m e t a t S l a i c n a n i F d e t a d i l o s n o C e h t o t s e t o N Annual Report and Accounts 2013 Financial Statements Group Accounts22706.04 12 December 2013 Proof 6 138 Notes to the Consolidated Financial Statements continued 24 Acquisition commitments and deferred consideration continued During the year, the terms of the put option agreement for Ned Davis Research (NDR) were amended to defer the earn-out payment to early 2017 and to combine the payment into one instalment based on a revised pre-determined multiple of the average results of the business for the periods to September 30 2015 and 2016. As a result, the expected liability under this mechanism, discounted using the group’s WACC, has increased from £7,812,000 at September 30 2012 to £10,395,000 at September 30 2013 resulting in a charge to the Income Statement of £2,621,000 and a foreign exchange gain of £38,000 in reserves. As explained in note 2, key judgemental areas in preparing the financial statements, the value of the acquisition commitments and acquisition deferred consideration is subject to a number of assumptions. The potential undiscounted amount of all future payments that the group could be required to make under the contingent consideration arrangements is as follows: NDR Insider Publishing TTI/Vanguard CIE 2013 2012 Maximum £000 Minimum £000 Maximum £000 Minimum £000 37,445 16,600 4,284 11,086 69,415 – – – – – 37,552 – – – 37,552 – – – – – A sensitivity analysis of the fair value of the acquisition commitments, using a reasonably possible increase or decrease of 10% in expected profits, results in the liability at September 30 2013 increasing or decreasing by £1,504,000 with the corresponding change to the value at September 30 2013 charged or credited to the Income Statement in future periods. A sensitivity analysis of the fair value of the deferred consideration payments, using a reasonably possible increase or decrease of 10% in expected profits, results in the liability at September 30 2013 increasing or decreasing by £3,483,000 with the corresponding change to the value at September 30 2013 charged or credited to the Income Statement in future periods. The group has the option to purchase the remaining 50% equity holding of GGA Pte. Limited in March 2014 and if exercised expects to pay €1,021,000 (£854,000). Under IAS 32 ‘Financial Instruments’ this acquisition commitment is not recorded as a liability in the balance sheet. 25 Operating lease commitments At September 30 the group had committed to make the following payments in respect of operating leases on land and buildings: Within one year Between two and five years After five years The group’s operating leases do not include any significant leasing terms or conditions. 2013 £000 7,616 15,578 5,548 28,742 2012 £000 6,728 16,451 2,812 25,991 Euromoney Institutional Investor PLC www.euromoneyplc.com22706.04 12 December 2013 Proof 6139 139 25 Operating lease commitments continued At September 30 the group had contracted with tenants to receive the following payments in respect of operating leases on land and buildings: Within one year Between two and five years After five years 26 Retirement benefit schemes Defined contribution schemes 2013 £000 1,196 2,649 – 3,845 2012 £000 1,320 3,492 445 5,257 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. In compliance with recent legislation the group is making arrangements for relevant employees to be automatically enrolled into defined contribution pension plans. The staging date for the group for automatic enrolment is expected to be November 2013. The pension charge in respect of defined contribution schemes for the year ended September 30 comprised: Euromoney Pension Plan/PensionSaver Metal Bulletin Group Personal Pension Plan Private schemes Harmsworth Pension Scheme 2013 £000 1,238 16 1,101 88 2,443 2012 £000 1,094 24 1,077 112 2,307 Euromoney PensionSaver and Euromoney Pension Plan Euromoney PensionSaver is a group personal pension plan and is the principal pension arrangement offered to employees of the group. Contributions are paid by the employer and employees. Employees are able to contribute a minimum of 2% of salary with an equal company contribution in the first three years of employment and thereafter at twice the employee contribution rate, up to a maximum employer contribution of 10% of salary. 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. When the process of transferring out the remaining assets of the Euromoney Pension Plan has been completed the plan will be 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. s t n u o c c A p u o r G s t n e m e t a t S l a i c n a n i F d e t a d i l o s n o C e h t o t s e t o N Annual Report and Accounts 2013 Financial Statements Group Accounts22706.04 12 December 2013 Proof 6 140 Notes to the Consolidated Financial Statements continued 26 Retirement benefit schemes continued Metal Bulletin Group Personal Pension Plan continued The plan’s 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. The company also provides access to a stakeholder pension plan for relevant employees who are not eligible for other pension schemes operated by the group. These arrangements will be superseded when automatic enrolment begins in 2013. Harmsworth Pension Scheme The Harmsworth Pension Scheme is a defined benefit scheme operated by DMGT. The scheme is closed to new entrants. Existing members still in employment can continue to accrue benefits in the scheme on a cash balance basis, with members building up a retirement account that they can use to buy an annuity from an insurance company at retirement. Full actuarial valuations of the defined benefit schemes are carried out triennially by the Scheme Actuary. As a result of the valuations of the main schemes completed as at March 31 2010, DMGT has been making annual contributions of 10% or 15% of members’ basic pay (depending on membership section). In addition, in accordance with agreed Recovery Plans, DMGT made payments of £11.6 million in the year to September 30 2013. Following the disposal of Northcliffe Media Limited, DMGT agreed to make additional contributions of £30.0 million, including debts calculated in accordance with Section 75 of the Pensions Act 1995. Payments of £17.1 million were made during the year to September 30 2013 with the balance of £12.9 million to be paid in January 2014. In addition, following announcement by DMGT of a buy-back programme of up to £100 million of shares in autumn 2012, DMGT agreed with the Trustees that additional special contributions would be paid to the scheme when the total value of shares bought-back exceeded £50 million. The first contribution arising from this agreement was made in June 2013 in the amount of £1.8 million. The triennial funding valuation of the scheme as at March 31 2013, is not expected to be completed until the first quarter of 2014. DMGT has enabled the trustee of the scheme to acquire a beneficial interest in a Limited Partnership investment vehicle (LP). The LP has been designed to facilitate payment of part of the deficit funding payments described above over a period of 15 years to 2027. In addition, the LP is required to make a final payment to the scheme of £150 million or the funding deficit within the scheme on an ongoing actuarial valuation basis at the end of the 15 year period if this is less. For funding purposes, the interest held by the trustee in the LP will be treated as an asset of the scheme and reduce the actuarial deficit within the scheme. However, under IAS 19 the LP is not included as an asset of the scheme and therefore is not included in the calculation of the deficit below. 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 group’s pension charge for the Harmsworth Pension Scheme for the year ended September 30 2013 was £88,000 (2012: £112,000). 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 the formal valuation of the scheme as at March 31 2010, and adjusted to September 30 2013 taking account of membership data at that date. 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 £1,646.3 million (2012: £1,481.2 million) and that the actuarial value of these assets represented 89.6% (2012: 84.6%) of the benefits that had accrued to members (also calculated in accordance with IAS 19). Euromoney Institutional Investor PLC www.euromoneyplc.com22706.04 12 December 2013 Proof 6141 141 26 Retirement benefit schemes continued Defined benefit scheme Metal Bulletin Pension Scheme The company operates the Metal Bulletin plc Pension Scheme (MBPS), a defined benefit scheme which is closed to new entrants. A full actuarial valuation of the defined benefit scheme is carried out triennially by the Scheme Actuary. The latest valuation of the MBPS was completed as at June 1 2010. As a result of the valuation, the company agreed to make annual contributions of 22.3% per annum of pensionable salaries, plus £42,400 per month to the scheme. The contributions will be reviewed at the next triennial funding valuation of the scheme due to be completed with an effective date June 1 2013. The figures in this note are based on calculations carried out in connection with the actuarial valuation of the scheme as at June 1 2010 adjusted to September 30 2013 by the actuary. The key financial assumptions adopted were as follows: Long-term assumed rate of: Pensionable salary increases 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 2013 2012 2.5% p.a. 5.0% p.a. 2.5% p.a. 5.0% p.a. 3.4% p.a. 2.8% p.a. 2.5% p.a. 4.3% p.a. 3.4% p.a. 3.4% p.a. 2.5% p.a. 4.1% p.a. 2.8% p.a. 2.8% 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. The demographic assumptions adopted were as follows: Pre-retirement mortality rates The following mortality rates represent the probability of a person dying within one year. s t n u o c c A p u o r G s t n e m e t a t S l a i c n a n i F d e t a d i l o s n o C e h t o t s e t o N Age 30 40 50 60 Assumed life expectancy in years, on retirement at 62 Retiring at the end of the reporting period: Males Females Retiring 20 years after the end of the reporting period: Males Females Males Females 0.03% 0.05% 0.14% 0.44% 0.02% 0.04% 0.10% 0.28% 2013 2012 25.9 28.0 28.1 29.3 25.8 28.0 28.0 29.2 Annual Report and Accounts 2013 Financial Statements Group Accounts22706.04 12 December 2013 Proof 6 142 Notes to the Consolidated Financial Statements continued 26 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: 2013 Equities Bonds With profits policy Cash Total Value at September 30 2013 (£000) % of assets held Long-term rate of return expected at September 30 2013 7,812 26.2% 7.00% 17,981 60.3% 4.00% 2,863 9.6% 4.75% 1,163 3.9% 1.50% 29,819 100.0% 2012 Equities Bonds With profits policy Cash Total Value at September 30 2012 (£000) % of assets held Long-term rate of return expected at September 30 2012 6,539 24.2% 8.00% 15,725 58.2% 3.50% 2,567 9.5% 5.00% 2,188 8.1% 1.50% 27,019 100.0% A reconciliation of the net pension deficit reported in the Statement of Financial Position is shown in the following table: Present value of defined benefit obligation Assets at fair value Deficit reported in the Statement of Financial Position The deficit for the year excludes a related deferred tax asset of £576,000 (2012: asset £626,000). Changes in the present value of the defined benefit obligation are as follows: Present value of obligation at October 1 Service cost Interest cost Benefits paid Members’ contributions Actuarial movement Present value of obligation at September 30 2013 £000 2012 £000 (32,702) 29,819 (2,883) (31,776) 27,019 (4,757) 2013 £000 2012 £000 (31,776) (61) (1,302) 653 (12) (204) (32,702) (26,260) (58) (1,314) 579 (12) (4,711) (31,776) Euromoney Institutional Investor PLC www.euromoneyplc.com22706.04 12 December 2013 Proof 626 Retirement benefit schemes continued Changes in the fair value of plan assets are as follows: Fair value of plan assets at October 1 Expected return on plan assets Contributions: Employer Members Annuity surplus refund Actual return less expected return on pension scheme assets Benefits paid Fair value of plan assets at September 30 143 143 2013 £000 27,019 1,235 569 12 30 1,607 (653) 29,819 2012 £000 24,361 1,329 583 12 25 1,288 (579) 27,019 The actual return on plan assets was a gain of £2,842,000 (2012: gain £2,617,000) representing the expected return plus the associated actuarial gain or loss during the year. 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 2013 £000 61 1,302 (1,235) 128 2012 £000 58 1,314 (1,329) 43 s t n u o c c A p u o r G s t n e m e t a t S l a i c n a n i F d e t a d i l o s n o C e h t o t s e t o N Annual Report and Accounts 2013 Financial Statements Group Accounts22706.04 12 December 2013 Proof 6 144 Notes to the Consolidated Financial Statements continued 26 Retirement benefit schemes continued 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 principal assumptions used above. 2013 £000 2012 £000 Mortality Change in pension obligation at September 30 from a one year change in life expectancy Change in pension cost from a one year change Salary Increases Change in pension obligation at September 30 from a 0.25% change Change in pension cost from a 0.25% year change Discount Rate Change in pension obligation at September 30 from a 0.1% change Change in pension cost from a 0.1% change Inflation Change in pension obligation at September 30 from a 0.1% change Change in pension cost from a 0.1% change +/– +/– +/– +/– +/– +/– +/– +/– 946 42 35 4 636 28 197 8 Amounts recognised in the Consolidated Statement of Comprehensive Income (SOCI) are shown in the following table: Actual return less expected return on pension scheme assets Return of surplus annuity payments Experience adjustments on liabilities Losses arising from changes in assumptions Total gains/(losses) recognised in SOCI Cumulative actuarial loss recognised in SOCI at beginning of year Cumulative actuarial loss recognised in SOCI at end of year 2013 £000 1,607 30 (339) 135 1,433 (3,813) (2,380) 943 40 38 4 630 3 182 7 2012 £000 1,288 25 (178) (4,533) (3,398) (415) (3,813) Euromoney Institutional Investor PLC www.euromoneyplc.com22706.04 12 December 2013 Proof 6145 145 26 Retirement benefit schemes continued History of experience gains and losses: 2013 £000 2012 £000 2011 £000 2010 £000 2009 £000 Present value of defined benefit obligation Fair value of scheme assets Deficit 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 (32,702) 29,819 (2,883) (339) 1.0% 1,607 5.4% (31,776) 27,019 (4,757) (178) 0.6% 1,288 4.8% (26,260) 24,361 (1,899) 827 (3.1%) (1,395) (5.7%) (25,811) 24,274 (1,537) (14) 0.1% 1,363 5.6% (21,916) 21,552 (364) (18) 0.1% 760 3.5% The group expects to contribute approximately £509,000 (2012: expected contribution in 2013 of £509,000) to the MBPS during the 2014 financial year. 27 Contingent liabilities 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 82.4 million (£15,615,000). 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. 28 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 group had borrowings under a US$300 million multi-currency facility with DMGRH Finance Limited, a Daily Mail and General Trust plc (DMGT) group company as follows: Amounts owing under US$ facility at September 30 Amounts owing under GBP facility at September 30 Amounts due under current account facility at September 30 2013 US$000 34,782 – (2,108) Commitment fee on unused portion of the available facility for the year – 2013 £000 2012 US$000 21,478 – (1,301) 20,177 856 62,381 – – – 2012 £000 38,631 4,523 – 43,154 618 s t n u o c c A p u o r G s t n e m e t a t S l a i c n a n i F d e t a d i l o s n o C e h t o t s e t o N Annual Report and Accounts 2013 Financial Statements Group Accounts22706.04 12 December 2013 Proof 6 146 Notes to the Consolidated Financial Statements continued 28 Related party transactions continued (ii) During the year the group expensed services provided by DMGT, the group’s parent, and other fellow group companies, as follows: Services expensed 2013 £000 2012 £000 424 444 (iii) At September 30, the group had fixed rate interest rate swaps outstanding with Daily Mail and General Holdings Limited (DMGH), a fellow group company, as follows: 2013 US$000 2013 £000 2012 US$000 2012 £000 US$ fixed rate interest rate swaps (2012: Interest rates between 2.5% and 5.4% and termination dates March 28 2013 and September 30 2013) GBP fixed rate interest rate swaps (2012: Interest rate of 2.6% and termination date of March 28 2013) – – – – 40,000 24,771 – 5,000 During the year the group paid interest to DMGH and related companies in respect of interest rate swaps as follows: US$ interest paid GBP interest paid 2013 US$000 963 – 2013 £000 617 50 2012 US$000 2,353 – 2012 £000 1,488 504 (iv) In January 2011, the group granted an Indian Rupee 112 million loan facility to RMSI Private Limited, a DMGT group company, at a 10.5% fixed interest rate. The loan was repaid to the group on November 21 2011. 2013 INR 000 2013 £000 2012 INR 000 2012 £000 Interest income during the year – – 1,476 18 Euromoney Institutional Investor PLC www.euromoneyplc.com22706.04 12 December 2013 Proof 6 147 147 28 Related party transactions continued (v) During the year DMGT group companies surrendered tax losses to Euromoney Consortium Limited under an agreement between the two groups. These tax losses are relievable against UK taxable profits of the group under HMRC’s consortium relief rules: Amounts payable Tax losses with tax value 2013 £000 1,971 2,628 2012 £000 2,584 3,445 (vi) During the year DMGT group companies surrendered tax losses to Euromoney Consortium 2 Limited under an agreement between the two groups. These tax losses are relievable against UK taxable profits of the group under HMRC’s consortium relief rules: Amounts payable Tax losses with tax value Amounts owed to DMGT Group at September 30 2013 £000 565 754 473 2012 £000 631 841 – (vii) In January 2013 the group exercised its call option to purchase the remaining non-controlling interest in Internet Securities, Inc. (ISI). The option value was based on the valuation of ISI as determined under a methodology provided by an independent financial adviser. Under the terms of the put option agreement consideration caps had been put in place that required 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. In March 2013, under this call option mechanism, the group purchased 0.08% of the equity share capital of ISI for a cash consideration of US$102,000 (£67,000). The group’s equity shareholding in ISI increased to 100%. (viii) NF Osborn serves on the management board of A&N International Media Limited and both DMG Events and dmgi, fellow group companies, for which he received fees for the year to September 30 2013 of £25,000 and US$45,000 respectively (2012: £25,000 and US$45,000 respectively). Effective October 1 2013, NF Osborn’s fees from DMGT related companies were reduced to US$45,000. (ix) PM Fallon served as a director on the executive board of DMGT, the group’s parent. During the year he earned non-executive director fees of £nil (2012: £24,500) and received short-term employee benefits of £nil (2012: £8,749). PM Fallon died on October 14 2012. s t n u o c c A p u o r G s t n e m e t a t S l a i c n a n i F d e t a d i l o s n o C e h t o t s e t o N (x) B AL-Rehany received an interest bearing loan from BCA, a subsidiary company, for CAD39,000 on February 28 2013. The loan accrued interest at 5% per annum. At September 30 2013 the loan balance outstanding was CAD40,000 (2012: £nil). The loan was repaid in full on November 8 2013. (xi) During the year the group received a dividend of £268,000 (2012: £291,000) from Capital NET Limited, an associate of the group. (xii) The directors who served during the year received dividends of £230,000 (2012: £210,000) in respect of ordinary shares held in the company. Annual Report and Accounts 2013 Financial Statements Group Accounts22706.04 12 December 2013 Proof 6 148 Notes to the Consolidated Financial Statements continued 28 Related party transactions continued (xiii) 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 Directors’ Remuneration Report and other key divisional directors who are not on the board. Key management compensation Salaries and short-term employee benefits Non-executive directors’ fees Post-employment benefits Other long-term benefits (all share-based) Of which: Executive directors Non-executive directors Divisional directors 2013 £000 2012 £000 12,791 18,726 204 227 4,181 17,403 11,966 204 5,233 17,403 181 137 1,272 20,316 16,458 181 3,677 20,316 Details of the remuneration of directors are given in the Directors’ Remuneration Report. 29 Events after the balance sheet date The directors propose a final dividend of 15.75p per share (2012: 14.75p) totalling £19,917,000 (2012: £18,342,000) for the year ended September 30 2013. The dividend will be submitted for formal approval at the Annual General Meeting to be held on January 30 2014. In accordance with IAS 10 ‘Events after the Reporting Period’, 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 2014. During 2013, a final dividend of 14.75p (2012: 12.50p) per share totalling £18,342,000 (2012: £15,162,000) was paid in respect of the dividend declared for the year ended September 30 2012. Purchase of new business Infrastructure Journal (IJ) On October 15 2013, the group signed a binding agreement with Top Right Group to acquire 100% of the trade and assets of IJ, a leading provider of online data, intelligence and events for the global infrastructure sector, for a consideration of £12,500,000. The transaction completed, after the required TUPE (Transfer of Undertakings (Protection of Employment)) consultation period, on October 31 2013. The acquisition of IJ is consistent with the group’s strategy of investing in online subscription and events businesses which will benefit from its global reach. With its strong brand and market recognition, IJ’s editorial proposition and geographic reach complements the group’s Project Finance brand which it has owned for 25 years. The additional IFRS 3 (2008) ‘Business Combinations’ disclosures are not provided because the initial accounting for the business combination is incomplete at the time this report is authorised for issue. Investment Family Office Network Limited On October 1 2013, the group invested US$264,000 (£165,000) in 51% of the equity share capital of Family Office Network Limited, a new company whose principal activity is the provision of an online community for single and multi-family offices. The group has the option to purchase a further 24% equity holding of Family Office Network Limited in September 2017. There were no other events after the balance sheet date. Euromoney Institutional Investor PLC www.euromoneyplc.com22706.04 12 December 2013 Proof 6149 149 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 its 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 s t n u o c c A p u o r G s t n e m e t a t S l a i c n a n i F d e t a d i l o s n o C e h t o t s e t o N Annual Report and Accounts 2013 Financial Statements Group Accounts22706.04 12 December 2013 Proof 6 150150 Company Balance Sheet as at September 30 2013 Fixed assets Tangible assets Investments Current assets Debtors Cash at bank and in hand Creditors: Amounts falling due within one year Net current liabilities 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 Reserve for share-based payments Fair value reserve Profit and loss account Equity shareholders’ funds Notes 2013 £000 2012 £000 4 5 6 3,587 934,208 937,795 19,488 155 19,643 7 (101,021) (81,378) 856,417 3,635 983,513 987,148 48,600 10 48,610 (130,095) (81,485) 905,663 8 11 15 15 15 15 15 15 15 15 16 (1,041) 855,376 (44,881) 860,782 316 101,709 64,981 8 1,842 (74) 37,122 1,358 648,114 855,376 311 99,485 64,981 8 1,842 (74) 36,055 1,223 656,951 860,782 Euromoney Institutional Investor PLC (registered number 954730) has taken advantage of section 408 of the Companies Act 2006 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 £18,320,000 (2012: £9,579,000). The accounts were approved by the board of directors on November 13 2013. Christopher Fordham Colin Jones Directors Euromoney Institutional Investor PLC www.euromoneyplc.com22706.04 12 December 2013 Proof 6Notes to the Company Accounts 151151 1 Accounting policies Basis of preparation Turnover Turnover represents income from subscriptions, net of value added tax. The accounts have been prepared under the historical cost convention except for derivative financial instruments which have been measured at fair value and in accordance with applicable United Kingdom accounting standards and the United Kingdom Companies Act 2006. The accounting policies set out below have, unless otherwise stated, been applied consistently throughout the current and prior year. ●● Subscription revenues are recognised in the profit and loss account on a straight-line basis over the period of the subscription. Turnover invoiced but relating to future periods is deferred and treated as deferred income in the balance sheet. The company has taken advantage of the exemption from presenting a cash flow statement under the terms of FRS 1 (Revised) ‘Cash Flow Statements’. 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’. The company is also exempt under the terms of FRS 8 ‘Related Party Disclosures’ from disclosing related party transactions with members of a group that are wholly owned by a member of that group. Further, the company, as a parent company of a group drawing up consolidated financial statements that meet the requirements of IFRS 7 ‘Financial Instruments: Disclosure’, is exempt from disclosures that comply with its UK GAAP equivalent, FRS 29 ‘Financial Statements: Disclosures’. Going concern, debt covenants and liquidity The financial position of the group, its cash flows and liquidity position are set out in detail in this annual report. The group meets its day-to-day working capital requirements through its US$300 million dedicated multi- currency borrowing facility with Daily Mail and General Trust plc group (DMGT). The total maximum borrowing capacity is US$250 million (£154 million) and £33 million and was due to mature in December 2013. The facility’s covenant requires the group’s net debt to be no more than four times adjusted EBITDA on a rolling 12 month basis. At September 30 2013, the group’s net debt to adjusted EBITDA covenant was 0.09 times and the committed undrawn facility available to the group was £165.9 million. Subsequent to the year end, the group has signed a US$160 million multi- currency replacement funding facility with DMGT that provides access to funds during the period to April 2016. The new facility’s covenant requires the group’s net debt to be no more than three times adjusted EBITDA on a rolling 12 month basis. The group’s forecasts and projections, looking out to September 2016 and taking account of reasonably possible changes in trading performance, show that the group should be able to operate within the level and covenants of its current borrowing facility. After making enquiries, the directors have a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, the directors continue to adopt the going concern basis in preparing this annual report. 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: Short-term leasehold premises: over term of lease 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. s t n u o c c A y n a p m o C s t n u o c c A y n a p m o C e h t o t s e t o N Annual Report and Accounts 2013 22706.04 12 December 2013 Proof 6 152152152 Euromoney Institutional Investor PLC www.euromoneyplc.com Notes to the Company Accounts continued 1 Accounting policies continued Provisions Derivatives and other financial instruments The company uses various derivative financial instruments to manage its exposure to interest rate risks, including 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 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 whether the instrument is designated as a hedge and the type of exposure specific to the liability. it is designed to hedge. Share-based payments The company makes share-based payments to certain employees which are equity-settled. 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, 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. 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 the foreign currency loans are recognised in the profit or loss account along with the associated foreign currency movement on the designated portion of the investment in subsidiaries. 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. Subsidiaries Investments in subsidiaries are accounted for at cost less impairment. Cost is adjusted to reflect amendments from contingent consideration. Cost also includes direct attributable cost of investment. Trade and other debtors Trade debtors 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. Euromoney Institutional Investor PLC www.euromoneyplc.com22706.04 12 December 2013 Proof 6Annual Report and Accounts 2013 153153153 2 Staff costs Salaries, wages and incentives Social security costs Share-based compensation costs (note 12) 2013 £000 241 28 96 365 2012 £000 43 6 (1,712) (1,663) Details of directors’ remuneration are set out in the Directors’ Remuneration Report on pages 49 to 73 and in note 6 to the group accounts. The executive directors do not receive emoluments specifically for their services to this company. 3 Remuneration of auditor Fees payable for the audit of the company’s annual accounts 4 Tangible assets Cost At October 1 2012 Additions Disposals At September 30 2013 Depreciation At October 1 2012 Charge for the year Disposals At September 30 2013 Net book value at September 30 2013 Net book value at September 30 2012 2013 £000 2012 £000 458 447 Short-term leasehold premises £000 8,322 930 (27) 9,225 4,687 978 (27) 5,638 3,587 3,635 s t n u o c c A y n a p m o C s t n u o c c A y n a p m o C e h t o t s e t o N Annual Report and Accounts 2013 22706.04 12 December 2013 Proof 6 154154 Notes to the Company Accounts continued 5 Investments At October 1 Additions Return of capital Impairment Exchange differences At September 30 2013 2013 Investments in associated undertakings £000 2012 Investments in associated undertakings £000 Total £000 Subsidiaries £000 29 – – – – 29 983,513 – (46,940) (4,810) 2,445 934,208 938,432 46,940 – – (1,888) 983,484 29 – – – – 29 Subsidiaries £000 983,484 – (46,940) (4,810) 2,445 934,179 Total £000 938,461 46,940 – – (1,888) 983,513 In March 2013, Euromoney Institutional Investor (Jersey) Limited declared a dividend, of which £46,940,000 was in substance a return of the capital invested and credited against the investment. In addition, during the year, the company restructured its investments in subsidiaries resulting in an increased investment in Fantfoot Limited and Euromoney Institutional Investor (Ventures) Limited, previously an indirect investment becoming a direct subsidiary following the transfer of its shares from Euromoney Canada Finance Limited to the company. These changes took place as follows: ●● In April 2013, the company assigned loans receivable of £108,020,000 with BCA Research, Inc. to Fantfoot Limited in return for increased investment in Fantfoot Limited. ●● In June 2013, the company received a dividend in specie of £261,500,000 from Euromoney Canada Finance Limited in return for 100% investment in Euromoney Institutional Investor (Ventures) Limited which was transferred to the company from Euromoney Canada Finance Limited at book value. In accordance with UK GAAP, the decrease in investment in Euromoney Canada Finance Limited was matched against the new investment in Fantfoot Limited and Euromoney Institutional Investor (Ventures) Limited. Following the restructure an impairment review was carried out during the year on investments held by the company, and investments in Euromoney Canada Finance Limited were written down by £4,810,000. 2012 In April 2012, the company assigned its loan receivable with BCA Research, Inc. to Euromoney Institutional Investor (Jersey) Limited in return for increased investment in Euromoney Institutional Investor (Jersey) Limited. Details of the principal subsidiary and associated undertakings of the company at September 30 2013 can be found in note 13 to the group accounts. Euromoney Institutional Investor PLC www.euromoneyplc.com22706.04 12 December 2013 Proof 66 Debtors Trade debtors Amounts owed by DMGT group undertakings Amounts owed by subsidiary undertakings Other debtors Deferred tax (note 10) Prepayments and accrued income Corporation tax The above include the following amounts falling due after more than one year: Amounts owed by subsidiary undertakings 155155 2013 £000 619 47 18,216 – – 437 169 19,488 2012 £000 532 2,344 42,268 165 148 335 2,808 48,600 2013 £000 2012 £000 9,238 – Amounts owed by group undertakings include three loans totalling £18,216,000 (2012: £42,268,000) that bore interest rates of between 1.47% and 10.40% (2012: between 1.56% and 10.40%) and are repayable between February 2014 and September 2018. 7 Creditors: Amounts falling due within one year Bank overdrafts Amounts owed to subsidiary undertakings Accruals and other creditors Other taxation and social security Committed loan facility (see note 19 to the group accounts) Derivative financial instruments (note 14) Provisions (note 9) Loan notes (see note 19 to the group accounts) 2013 £000 2012 £000 – (78,206) (59) (290) (20,177) – (1,261) (1,028) (13,699) (114,459) – (270) – (439) – (1,228) (101,021) (130,095) All amounts owed to subsidiary undertakings are current account balances that are settled on a regular basis. As such, the amounts owed to subsidiary undertakings are interest free and repayable on demand. s t n u o c c A y n a p m o C s t n u o c c A y n a p m o C e h t o t s e t o N Annual Report and Accounts 2013 22706.04 12 December 2013 Proof 6 156156 Notes to the Company Accounts continued 8 Creditors: Amounts falling due after more than one year Committed loan facility (see note 19 to the group accounts) Derivative financial instruments (note 14) Provisions (note 9) 9 Provisions At October 1 Provision in the year Used in the year At September 30 Maturity profile of provisions: Within one year Between two and five years 2013 £000 – – (1,041) (1,041) 2012 £000 (43,154) (206) (1,521) (44,881) 2013 Dilapidations on leasehold properties £000 2012 Dilapidations on leasehold properties £000 1,521 807 (26) 2,302 2013 £000 1,261 1,041 2,302 1,521 – – 1,521 2012 £000 – 1,521 1,521 The provision represents the directors’ best estimate of the amount likely to be payable on expiry of the company’s property leases. Euromoney Institutional Investor PLC www.euromoneyplc.com22706.04 12 December 2013 Proof 610 Deferred tax The deferred tax asset at September 30 comprised: Other short-term timing differences 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 A deferred tax asset of £nil (2012: £148,000) has been recognised in respect of other short-term timing differences. 11 Share capital 157157 2013 £000 2012 £000 – 148 148 – (148) – 2,212 (1,571) (493) 148 2013 £000 2012 £000 Allotted, called up and fully paid 126,457,324 ordinary shares of 0.25p each (2012: 124,349,531 ordinary shares of 0.25p each) 316 311 During the year, 2,107,793 ordinary shares of 0.25p each (2012: 3,102,151 ordinary shares) with an aggregate nominal value of £5,270 (2012: £7,755) were issued as follows: 2,107,793 ordinary shares (2012: 720,741 ordinary shares) following the exercise of share options granted under the company’s share option schemes for a cash consideration of £2,228,590 (2012: £1,058,834). In addition, last year 2,381,410 shares were issued under the company’s 2009 scrip dividend alternative for a cash consideration of £nil. There was no scrip dividend alternative offered in 2013. 12 Share-based payments An explanation of the company’s share-based payment arrangements is set out in the Directors’ Remuneration Report on pages 49 to 73. 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. Share option schemes The executive and Save as You Earn (SAYE) 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 three 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 charge recognised in the year in respect of these options was £96,000 (2012: £97,000). Details of the executive and SAYE options are set out in note 23 to the group accounts. s t n u o c c A y n a p m o C s t n u o c c A y n a p m o C e h t o t s e t o N Annual Report and Accounts 2013 22706.04 12 December 2013 Proof 6 158158 Notes to the Company Accounts continued 12 Share-based payments continued Capital Appreciation Plan 2004 (CAP 2004) CAP 2004 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 charge in the year for the CAP 2004 options was £nil (2012: credit £1,809,000). Details of the CAP 2004 options are set out in note 23 to the group accounts. Capital Appreciation Plan 2010 (CAP 2010) and Company Share Option Plan 2010 (CSOP 2010) The CAP 2010 and CSOP 2010 options were valued using a fair value model that adjusted the share price at the date of grant for the net present value of expected future dividend streams up to the date of expected exercise. The expected term of the option used in the models has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. The share-based expense recognised in the year for the CAP 2010 and CSOP 2010 options was £nil (2012: £nil). Details of the CAP 2010 and CSOP 2010 options are set out in note 23 to the group accounts (excludes ISI and cash-settled options). There is no cost or liability for the cash element of the CAP 2010 option scheme. These are borne by the company’s subsidiary undertakings. A reconciliation of the options outstanding at September 30 2013 is detailed in note 23 to the group accounts. 13 Commitments and contingent liability 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 Cross-guarantee 2013 £000 2012 £000 673 12 888 1,573 – 690 242 932 The company, together with the ultimate parent company and certain other companies in the Euromoney Institutional Investor PLC group, have given an unlimited cross-guarantee in favour of its bankers. 14 Financial Instruments Derivative financial Instruments The derivative financial assets/(liabilities) at September 30 comprised: Interest rate swaps Current portion Non-current portion There were no derivatives outstanding at the balance sheet date. 2013 2012 Assets £000 Liabilities £000 Assets £000 Liabilities £000 – – – – – – – – – (645) (439) (206) Euromoney Institutional Investor PLC www.euromoneyplc.com22706.04 12 December 2013 Proof 6159159 14 Financial Instruments continued In 2012 the company held all the interest rate swaps for the group and full details regarding these can be found in note 18 to the group accounts. 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 £2,445,000 (2012: decrease in liability of £1,888,000) which has been deferred in reserves where it is offset by the translation of the related investment and will only be recognised in the company’s profit and loss account if the related investment is sold. There are no differences in these hedges charged to the profit and loss account in the current and prior year. 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. 15 Reserves Share premium account £000 Share capital £000 Other reserve £000 Capital redemp- tion reserve £000 Capital reserve £000 Own shares £000 At September 30 2011 Retained profit for the year Change in fair value of cash flow hedges Tax on items taken directly to equity Credit for share-based payments Scrip/cash dividends paid Exercise of share options At September 30 2012 Retained profit for the year Change in fair value of cash flow hedges Tax on items taken directly to equity Credit for share-based payments Cash dividends paid Exercise of share options At September 30 2013 303 – – – – 6 2 311 – – – – – 5 82,124 – – – – 16,304 1,057 99,485 – – – – – 2,224 316 101,709 64,981 – – – – – – 64,981 – – – – – – 64,981 8 – – – – – – 8 – – – – – – 8 1,842 – – – – – – 1,842 – – – – – – 1,842 (74) – – – – – – (74) – – – – – – (74) Reserve for share- based pay- ments £000 33,725 – – – 2,330 – – 36,055 – – – 1,067 – – 37,122 Fair value reserve £000 Profit and loss account £000 Total £000 – 1,977 (493) – – – (261) 671,166 853,814 9,579 9,579 1,977 – (493) – 2,330 – (7,484) (23,794) 1,059 – 1,223 656,951 860,782 18,320 18,320 283 (148) 1,067 (27,157) (27,157) 2,229 1,358 648,114 855,376 – 283 (148) – – – – – – – The investment in own shares is held by the Euromoney Employees’ Share Ownership Trust (ESOT). At September 30 2013 the ESOT held 58,976 shares (2012: 58,976 shares) carried at a historic cost of £1.25 per share with a market value of £684,000 (2012: £454,000). 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. The other reserve represents the share premium arising on the shares issued for the purchase of Metal Bulletin plc in October 2006. Of the reserves above, £37,122,000 (2012: £36,055,000) of the liability for share-based payments and £544,939,000 (2012: £575,168,000) of the profit and loss account is distributable to equity shareholders of the company. The remaining balance of £103,175,000 (2012: £81,783,000) is not distributable. s t n u o c c A y n a p m o C s t n u o c c A y n a p m o C e h t o t s e t o N Annual Report and Accounts 2013 22706.04 12 December 2013 Proof 6 160160 Notes to the Company Accounts continued 16 Reconciliation of movements in equity shareholders’ funds Profit for the financial year inclusive of dividends Dividends paid Issue of shares Change in fair value of cash flow hedges Tax on items taken directly to equity Credit to equity for share-based payments Net (decrease)/increase in equity shareholders’ funds Opening equity shareholders’ funds Closing equity shareholders’ funds 17 Related party transactions Related party transactions and balances are detailed below: 2013 £000 2012 £000 18,320 (27,157) (8,837) 2,229 283 (148) 1,067 (5,406) 860,782 855,376 9,579 (23,794) (14,215) 17,369 1,977 (493) 2,330 6,968 853,814 860,782 (i) The company had borrowings under a US$300 million multi-currency facility with DMGRH Finance Limited, a fellow group company (note 19 to the group accounts): Amounts owing under US$ facility at September 30 Amounts owing under GBP facility at September 30 Amounts due under current account facility at September 30 2013 US$000 34,782 – (2,108) 2013 £000 2012 US$000 21,478 – (1,301) 20,177 62,381 – – 2012 £000 38,631 4,523 – 43,154 Commitment fee on unused portion of the available facility for the year – 856 – 618 (ii) At September 30, the company had fixed rate interest rate swaps outstanding with Daily Mail and General Holdings Limited (DMGH), a fellow group company, as follows: 2013 US$000 2013 £000 2012 US$000 2012 £000 US$ fixed rate interest rate swaps (2012: Interest rates between 2.5% and 5.4% and termination dates March 28 2013 and September 30 2013) GBP fixed rate interest rate swaps (2012: Interest rate of 2.6% and termination date of March 28 2013) – – – – 40,000 24,771 – 5,000 Euromoney Institutional Investor PLC www.euromoneyplc.com22706.04 12 December 2013 Proof 6161161 17 Related party transactions continued During the year the group paid interest to DMGH and related companies in respect of interest rate swaps as follows: US$ interest paid GBP interest paid 2013 US$000 963 – 2013 £000 617 50 2012 US$000 2,353 – 2012 £000 1,488 504 (iii) During the year the group received a dividend of £268,000 (2012: £291,000) from Capital NET Limited, an associate of the company. 18 Post balance sheet event The directors propose a final dividend of 15.75p per share (2012: 14.75p) totalling £19,917,000 (2012: £18,342,000) for the year ended September 30 2013 subject to approval at the Annual General Meeting to be held on January 30 2014. In accordance with FRS 21 ‘Events after the Balance Sheet Date’, 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 2014. During 2013, a final dividend of 14.75p (2012: 12.50p) per share totalling £18,342,000 (2012: £15,162,000) was paid in respect of the dividend declared for the year ended September 30 2012. 19 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 its 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 s t n u o c c A y n a p m o C s t n u o c c A y n a p m o C e h t o t s e t o N Annual Report and Accounts 2013 22706.04 12 December 2013 Proof 6 162162162 Five Year Record Consolidated Income Statement Extracts Total revenue 317,594 330,006 363,142 394,144 404,704 2009 £000 2010 £000 2011 £000 2012 £000 2013 £000 Operating profit before acquired intangible amortisation, long-term incentive expense and exceptional items Acquired intangible amortisation Long-term incentive expense Additional accelerated long-term incentive expense Exceptional items Operating profit before associates Share of results in associates Operating profit Net finance costs Profit/(loss) before tax Tax (expense)/credit on profit/(loss) Profit/(loss) after tax from continuing operations Profit from discontinued operations Profit/(loss) for the year Attributable to: Equity holders of the parent Equity non-controlling interests Profit/(loss) for the year Basic earnings/(loss) per share Diluted earnings/(loss) per share Adjusted diluted earnings per share Diluted weighted average number of ordinary shares Dividend per share 79,447 (15,891) (2,697) – (33,901) 26,958 219 27,177 (44,538) (17,361) 10,412 (6,949) 1,207 (5,742) (6,287) 545 (5,742) 100,057 (13,671) (4,364) – (228) 81,794 281 82,075 (10,651) 71,424 (12,839) 58,585 – 58,585 58,105 480 58,585 (6.83)p (6.67)p 40.39p 50.04p 49.47p 53.50p 112,372,620 117,451,228 18.00p 14.00p 108,967 (12,221) (9,491) (6,603) (3,295) 77,357 408 77,765 (9,568) 68,197 (22,527) 45,670 – 45,670 45,591 79 45,670 118,175 (14,782) (6,301) – (1,617) 95,475 459 95,934 (3,566) 92,368 (22,528) 69,840 – 69,840 69,672 168 69,840 121,088 (15,890) (2,100) – 2,232 105,330 284 105,614 (10,354) 95,260 (22,235) 73,025 – 73,025 72,623 402 73,025 38.02p 37.34p 56.05p 122,112,168 18.75p 56.74p 55.17p 65.91p 126,290,412 21.75p 57.88p 56.70p 70.96p 128,077,588 22.75p Consolidated Statement of Financial Position Extracts Intangible assets Non-current assets Accruals Deferred income liability Other net current assets/(liabilities) Non-current liabilities Net assets 425,648 39,002 (46,972) (82,599) (16,642) (213,446) 104,991 422,707 40,921 (45,473) (93,740) 21,962 (176,894) 169,483 490,042 33,824 (56,249) (105,507) (12,304) (124,231) 225,575 469,308 26,357 (54,170) (105,106) 32,151 (80,616) 287,924 505,613 23,255 (48,381) (117,296) 16,616 (46,048) 333,759 Euromoney Institutional Investor PLC Annual Report and Accounts 2013Euromoney Institutional Investor PLC www.euromoneyplc.com22706.04 12 December 2013 Proof 6Annual Report and Accounts 2013 163163163 Financial Calendar and Shareholder Information 2013 final results announcement Thursday November 14 2013 Final dividend ex dividend date Wednesday November 20 2013 Final dividend record date Interim management statement Friday November 22 2013 Thursday January 30 2014 2014 AGM (approval of final dividend and remuneration policy) Thursday January 30 2014 Payment of final dividend 2014 interim results announcement Interim dividend ex-dividend date Interim dividend record date Payment of 2014 interim dividend Interim management statement Thursday February 13 2014 Thursday May 15 2014* Wednesday May 21 2014* Friday May 23 2014* Thursday June 19 2014* Thursday July 24 2014* 2014 final results announcement Thursday November 20 2014* Loan note interest paid to holders of loan notes on Tuesday December 31 2013 Monday June 30 2014 * Provisional dates and are subject to change. Shareholder enquiries — Requesting receipt of shareholder communications by email rather Administrative enquiries about a holding of Euromoney Institutional Investor PLC shares should be directed in the first instance to the company’s registrar whose address is: than by post; — Viewing dividend payment history; and — Making dividend payment choices. Equiniti Aspect House Spencer Road Lancing West Sussex BN99 6DA 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. Telephone: 0871 384 2951 (calls cost 8p per minute plus network extras. Lines open 8:30am to 5:30pm, Monday to Friday). Overseas Telephone: (00) 44 121 415 0246 A number of facilities are available to shareholders through the secure online site www.shareview.co.uk including: Registered office Nestor House Playhouse Yard Blackfriars London EC4V 5EX — Viewing holdings and obtaining an indicative value; — Notifying a change of address; r e h t O OtherAnnual Report and Accounts 2013 22706.04 12 December 2013 Proof 6164164 Shareholder Notes Euromoney Institutional Investor PLC www.euromoneyplc.com22706.04 12 December 2013 Proof 6euromoneyplc.com Claro Silk A white coated paper and board made using 100% ECF pulp 22706.04 13 December 2013 6:27 PM Proof 4 www.euromoneyplc.com Euromoney Institutional Investor plc Nestor House, Playhouse Yard, London EC4V 5EX 22706.04 13 December 2013 6:27 PM Proof 4 Slugline A n n u a l R e p o r t & A c c o u n t s 2 0 1 3 E u r o m o n e y I n s t i t u t i o n a l I n v e s t o r p l c 

Continue reading text version or see original annual report in PDF format above