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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
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35
44
49
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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
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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
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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
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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
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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
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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
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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
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E A R C H AND DATA
i n g Research
r
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Sub
sc
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B
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7 million contacts
180 countries
A
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a
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FIN
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ANCIAL P
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ISHING CONFER
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22706.04 13 December 2013 6:27 PM Proof 6
Annual Report and Accounts 2013
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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
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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
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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
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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%
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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
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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.
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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).
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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.
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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
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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
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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
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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.
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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.
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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.
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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.
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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.
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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.
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Euromoney Institutional Investor PLC www.euromoneyplc.com 27
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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.
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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.
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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.
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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.
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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
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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
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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
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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
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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
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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.
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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
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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.
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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.
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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;
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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.
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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.
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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
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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.
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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
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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
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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.
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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.
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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)
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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
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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
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120
110
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90
80
70
60
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40
30
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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
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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
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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.
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John Botts
Chairman of the remuneration committee
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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.
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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.
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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.
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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.
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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
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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.
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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.
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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.
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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
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●●
●●
●●
●●
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.
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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.
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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
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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
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Profit Share
Pension
Benefits
Salary
Profit Share
Pension
Benefits
Salary
Profit Share
Pension
Benefits
Salary
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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).
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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
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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.
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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
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Directors’ Remuneration Report continued
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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
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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.
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22706.04 13 December 2013 6:27 PM Proof 6
Annual Report and Accounts 2013
72
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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.
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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.
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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
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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
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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
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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)
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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
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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.
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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.
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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
●●
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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
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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.
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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’.
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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.
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Annual Report and Accounts 2013 22706.04 12 December 2013 Proof 6
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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.
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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).
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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).
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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
–
–
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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
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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).
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Annual Report and Accounts 2013 22706.04 12 December 2013 Proof 6
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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)
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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.
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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
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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
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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%
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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
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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
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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
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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
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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
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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
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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).
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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
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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.
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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
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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.
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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
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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).
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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.
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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.
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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.
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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)
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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.
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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.
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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.
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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.
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Annual Report and Accounts 2013 Financial Statements Group Accounts22706.04 12 December 2013 Proof 6
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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)
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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
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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
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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
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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.
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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.
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a
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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
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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
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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).
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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.
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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.
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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
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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.
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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
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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.
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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
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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.
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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
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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
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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
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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.
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(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
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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.
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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
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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.
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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.
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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.
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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
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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
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