Annual Report & Accounts 2014
Euromoney
Institutional
Investor PLC
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Euromoney Institutional Investor PLC
www.euromoneyplc.com
Euromoney
Institutional
Investor PLC
is listed on the London Stock Exchange and a member of the FTSE 250
share index. It is a leading international business-to-business media
group focused primarily on the international finance, metals and
commodities sectors.
It owns more than 70 brands including Euromoney, Institutional
Investor and Metal Bulletin, and is a leading provider of economic and
investment research and data under brands including BCA Research,
Ned Davis Research and the emerging markets information providers,
EMIS and CEIC. It also runs an extensive portfolio of conferences,
seminars and training courses for financial and commodities 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.
Year in Brief
October
Acquisition of Infrastructure
Journal (IJ) for £12.5m
April
Disposal of MIS Training
Launch of IJGlobal — merger of
Project Finance and IJ
June
Decision to move London
headquarters to Bouverie Street
after 40 years in Nestor House
March
Delphi project with investment
of £10m completed on time and
on budget
BCA and GlobalCapital first products
launched on Delphi content platform
July
for £45m
Acquisition of Mining Indaba
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Annual Report and Accounts 2014
01
01
Highlights
Revenue
£406.6m
Net Debt
£37.6m
2014
2013
2012
406.6
2014
37.6
404.7
2013
9.9
394.1
2012
30.8
Operating Profit
£103.6m
2014
2013
2012
Profit before Tax
£101.5m
Adjusted Operating Profit
£119.8m
103.6
105.6
95.9
2014
2013
2012
118.2
119.8
121.1
Adjusted Profit before Tax
£116.2m
2014
2013
2012
95.3
92.4
101.5
2014
2013
2012
106.8
116.2
116.5
Diluted Earnings per Share
59.2p
Adjusted Diluted Earnings per Share
70.6p
2014
2013
2012
56.7
55.2
59.2
October
Acquisition of Infrastructure
Journal (IJ) for £12.5m
April
Disposal of MIS Training
Launch of IJGlobal — merger of
Project Finance and IJ
June
Decision to move London
headquarters to Bouverie Street
after 40 years in Nestor House
2014
2013
2012
65.9
Dividend
23.0p
2014
2013
2012
21.75
70.6
71.0
23.00
22.75
Contents
Overview
Highlights
Our Divisions
Chairman’s Statement
Appendix to Chairman’s Statement
Strategy and Performance
Strategic Report
Governance
Board of Directors
Directors’ Report
Corporate Governance
Directors’ Remuneration Report
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
Other
Five Year Record
Shareholder Information
01
02
04
06
07
34
35
38
46
67
71
72
73
74
75
76
77
133
134
145
146
March
Delphi project with investment
of £10m completed on time and
on budget
BCA and GlobalCapital first products
launched on Delphi content platform
July
Acquisition of Mining Indaba
for £45m
Visit us online at
euromoneyplc.com
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02
Our Divisions
RESEARCH
AND DATA
REVENUE
£126.5m
FINANCIAL
PUBLISHING
REVENUE
£80.3m
BUSINESS
PUBLISHING
REVENUE
£67.8m
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. EMIS
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.
provides the world’s most comprehensive
A selection of the company’s leading
The business publishing
division produces print
and online information
for the metals, minerals
and mining, legal,
telecoms and energy
sectors.
Its leading brands include: Metal Bulletin,
American Metal Market,
Industrial
Minerals;
International Financial Law
Review,
International
Tax
Review,
Managing Intellectual Property; Capacity;
Petroleum Economist, World Oil and
service for news and data on global
financial brands
includes: Euromoney,
Hydrocarbon Processing.
emerging markets and CEIC, one of the
Institutional Investor, GlobalCapital, Latin
leading providers of time-series macro-
Finance, Insurance Insider, IJGlobal, Air
economic data for emerging markets.
Finance, FOW and the hedge fund title
EuroHedge.
Divisional split
5%
26%
32%
17%
20%
Research and data
Financial publishing
Business publishing
Conference and seminars
Training
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Euromoney Institutional Investor PLC www.euromoneyplc.com Overview
Our Divisions
03
CONFERENCES
AND SEMINARS
REVENUE
£106.1m
TRAINING
REVENUE
£19.4m
The training division
runs a comprehensive
range of banking,
finance, energy 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.
Ned Davis
Research
Group
The group runs a
large number of
sponsored conferences
and seminars for the
international financial
and commodities
markets, mostly
under the Euromoney,
Institutional Investor,
Metal Bulletin,
Coaltrans 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 Saudi Arabia Conference;
the
EuroHedge Summit; the Global Airfinance
Conference; and Global ABS and ABS East
for the asset-backed securities market. In
the commodities sector, events include
Metal Bulletin’s Middle East Iron and
Steel conference and the world’s leading
annual coal conferences, Coaltrans World
Coal Conference and Coaltrans Asia; and
TelCap runs International Telecoms Week,
the worldwide meeting place for telecom
carriers and service providers and Capacity
Middle East.
media
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Annual Report and Accounts 2014 04
Chairman’s Statement
in
to
We have continued
the business
invest
difficult
the
despite
trading conditions. The
Delphi content platform
was successfully launched
and the focus in 2015
include rolling out
will
to
Delphi’s functionality
Euromoney’s other
titles
and investing in a strong
pipeline of new information
services and databases,
while accelerating the move
to a digital-only format for
most of the group’s titles
by the end of 2016.
disposals, increased by 3% at constant currency.
maintaining tight cost control; retaining and
The underlying revenue trends reported for
fostering an entrepreneurial culture; and using
the first half for subscriptions and advertising
a healthy balance sheet and strong cash flows
largely continued into the second, while event
to fund selective acquisitions. A detailed review
revenue growth was driven by a combination
of the group’s strategy is set out in the Strategic
of increased event volumes and favourable
Report from page 7.
timing. The adjusted operating margin fell from
30% to 29%, reflecting the group’s continued
strategic investment in digital publishing.
Capital Appreciation Plan (CAP)
The CAP is the long-term incentive scheme
designed to retain and reward those who drive
The new Delphi content platform was launched
profit growth and is an integral part of the
successfully earlier in the year and is already
group’s successful growth strategy. The CAP was
starting to generate benefits for businesses such
as BCA and the newly launched GlobalCapital
first introduced in 2004, since then it has been
a key driver of the more than fivefold increase in
news and data service for international capital
the company’s adjusted profit before tax.
markets. The digital focus in 2015 will include
rolling out Delphi’s functionality to the group’s
other titles and investing in a strong pipeline
of new information services and databases,
while accelerating the move to a digital-only
format for most of the group’s titles by the end
of 2016.
Shareholders approved the
introduction of
CAP 2014 at the AGM in January 2014. It has
a similar structure to CAP 2010. Initial awards
under CAP 2014 were granted on June 20
to approximately 250 senior employees and
executive directors. A maximum of 3.5 million
ordinary shares and £7.6 million of cash will be
Net debt at September 30 was £37.6 million
used to satisfy CAP 2014 awards. The shares will
compared with £28.6 million at March 31 and
be acquired in the market under the authority
The pressures on the investment banking sector
£9.9 million at last year end. The increase reflects
from increased regulation and compliance
net acquisition spend of £55.7 million, including
costs show no real sign of easing. However,
£45.6 million for the purchase of Mining Indaba
other organic growth initiatives in events and
and £12.5 million for Infrastructure Journal, and
granted by shareholders at the AGM, and
1.7 million shares were acquired during 2014 at
a cost of £21.5 million. CAP awards are expected
to vest in three tranches in 2018, 2019 and
data provide confidence in the company’s
£21.5 million spent buying the company’s own
2020, subject to certain performance tests.
longer term growth strategy, while its strong
shares to satisfy expected future rewards under
balance sheet and cash flows provide plenty of
its new long-term incentive plan. Underlying
headroom for future investment and selective
cash flows remain strong and there is plenty of
acquisitions.
headroom for the group to pursue its selective
Highlights
Euromoney
Institutional
Investor PLC, the
international online information and events
acquisition strategy.
Strategy
The group’s strategy remains the building of
The primary performance test for CAP 2014
requires the group to achieve growth in
adjusted profit before tax (and CAP expense)
of at least 10% a year over a four-year period,
i.e. £173.6 million by 2017 from a base of
£118.6 million
in 2013.
If
the primary
performance test is not satisfied in 2017 the
group, achieved an adjusted profit before tax
a robust and tightly focused global online
awards will lapse, subject to the secondary
of £116.2 million for the year to September
information business with an emphasis on
performance test. The secondary performance
30 2014, against £116.5 million in 2013.
emerging markets. This strategy
is being
test requires the group to achieve an adjusted
Adjusted diluted earnings a share were 70.6p
executed through increasing the proportion of
profit before tax (and CAP expense) of at least
(2013: 71.0p). The directors recommend a 2%
revenues derived from electronic subscription
84.9% of the primary performance target, i.e.
increase in the dividend to 16.00p, giving a
products; investing in technology to drive the
£147.4 million, equivalent to growth of 6%
total for the year of 23.00p (22.75p) to be paid
online migration of the group’s products as
a year, at which point only one third of the
to shareholders on February 12 2015.
well as developing new electronic information
awards will vest. If the adjusted profit before
Total revenues for the year were marginally
ahead of last year at £406.6 million. Underlying
revenues, after adjusting for acquisitions and
services; building large, must-attend annual
tax (and CAP expense) in 2017 is between the
events; maintaining products of the highest
secondary and primary targets, then between
quality; eliminating products with a low margin
33% and 100% of the CAP awards will vest
or too high a dependence on print advertising;
according to a sliding scale.
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Euromoney Institutional Investor PLC www.euromoneyplc.com Overview
Chairman’s Statement
05
The rules of the CAP require these performance
targets to be adjusted for significant acquisitions
Outlook
The pressures on the investment banking sector
earnings dilution in 2015 of approximately 2%
assuming it completes at the end of December
or disposals during the performance period. The
from increased regulation and compliance costs
as expected.
only significant transaction in the period was the
show no real sign of easing. It is the investment
acquisition of Mining Indaba, as a result of which
banks’ fixed income activities which are most
the primary and secondary performance targets
important to Euromoney and which have been
have been increased to £178.4 million and
hardest hit over the past couple of years from
£151.5 million, respectively. These performance
low trading volumes and volatility, as well as
targets will also require adjustment for the
weak commodity prices. In contrast, the group’s
Dealogic transaction once it completes.
businesses serving the asset management
The maximum cost of CAP 2014 is £41 million
if the primary performance test is satisfied
in 2017 and all subsequent performance
tests are satisfied in full. The CAP cost will be
sector have seen conditions improve during
2014 and recent trends in subscription sales
and renewal rates suggest these businesses are
positioned for further growth in 2015.
First quarter trading has started in line with
the board’s expectations. As usual at this
time, there is little visibility into the start of
the next calendar year when new budgets
are set by most customers. While the trading
environment remains challenging, the initial
reaction to the Delphi content platform has
been very positive and the pipeline for new
Delphi-based products is strong which, with
other organic growth initiatives in events and
data, provides confidence in the company’s
amortised over the expected six-year life of CAP
Looking ahead, the acquisition of Mining
longer term growth strategy. At the same time,
2014. Given the uncertainty of both financial
Indaba
should
contribute
approximately
the company’s low balance sheet gearing and
markets and the timing of future acquisitions
£5 million to operating profits in 2015. However,
strong cash flows provide plenty of headroom
and disposals, the significant digital investment
it is anticipated that adjusted operating profits
for future investment and acquisitions.
requirements, and the volatility of exchange
will be reduced by approximately £3 million from
rates, it is difficult to estimate the level of profit
unfavourable event timing differences, property
the group will achieve in 2017. For the purpose
costs will increase by £2 million following the
of provisioning, the group has decided to
London office relocation, and the group’s
amortise the CAP cost on the assumption that
adjusted operating margin will also be reduced
only the secondary performance test will be
by the impact of a full year’s Delphi costs and
satisfied by 2017. This means that initially the
investment in other new products including
CAP amortisation charge assumes a total CAP
the Investor Intelligence Network. In addition,
cost of £30 million. The charge in future years
the full year impact of the cost of CAP 2014
will be adjusted once there is more visibility over
will reduce adjusted profit before tax by nearly
future profits. On this basis the CAP charge for
£4 million. Further, as previously reported, the
2014 is £2.4 million and the expected charge for
proposed Dealogic transaction will lead to
2015 is £6.1 million.
Richard Ensor
Chairman
November 19 2014
BCA Analytics
One of the first products launched on the
Delphi Content platform was BCA Analytics
(BAN) – a new application that bridges the
gap between strategy research and the
investment decision-making process. This
service delivers the power to spot trends,
uncover correlations and identify actionable
investment opportunities. The BAN platform
provides clients with the ability to build upon
BCA Research’s high quality research and
effectively communicate their ideas through
powerful data visualisations.
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Annual Report and Accounts 2014 06
Appendix to Chairman’s Statement
Reconciliation of Consolidated Income Statement to adjusted results for the year ended September 30 2014
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
2014
Total
£000
Adjusted
£000
Adjust-
ments
£000
2013
Total
£000
Total revenue
3
406,559
–
406,559
404,704
–
404,704
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
119,809
–
119,809
121,088
–
–
(16,735)
(16,735)
–
(15,890)
(2,367)
–
–
2,630
(2,367)
2,630
(2,100)
–
–
2,232
121,088
(15,890)
(2,100)
2,232
Operating profit before associates
117,442
(14,105)
103,337
118,988
(13,658)
105,330
Share of results in associates
Operating profit
264
–
264
284
–
284
117,706
(14,105)
103,601
119,272
(13,658)
105,614
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
248
(1,799)
(1,551)
1,298
(1,873)
(575)
1,546
(3,672)
(2,126)
595
(3,340)
(2,745)
–
(7,609)
(7,609)
116,155
(14,680)
101,475
116,527
(21,267)
8
(25,722)
112
(25,610)
(25,241)
3,006
90,433
(14,568)
75,865
91,286
(18,261)
595
(10,949)
(10,354)
95,260
(22,235)
73,025
89,832
(14,568)
75,264
90,884
(18,261)
72,623
601
–
601
402
–
402
90,433
(14,568)
75,865
91,286
(18,261)
73,025
Diluted earnings per share
10
70.60p
(11.45)p
59.15p
70.96p
(14.26)p
56.70p
Adjusted figures are presented before the impact of amortisation of acquired intangible assets (comprising trademarks and brands, databases and
customer relationships), exceptional items, net movements in acquisition deferred consideration and acquisition commitments. 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 group financial statements.
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Euromoney Institutional Investor PLC www.euromoneyplc.com Strategy and Performance
Strategic Report
07
Strategic Report
Euromoney delivered a robust performance in
the context of continued challenging market
conditions. The investment banking sector,
particularly fixed income, accounts for roughly
half the group’s revenues. Regulatory pressures
on
investment banks remain the biggest
drag on the group’s trading and have offset
the improvement in revenues from the asset
management sector. In addition, the strength
of sterling against the US dollar has had a
significant negative impact on the group’s
results for most of the second half of the
financial year.
Total revenues for the year were in line with
last year at £406.6 million, with an underlying
increase, at constant currency and excluding
acquisitions and disposals, of 3%. The slight
decrease in operating margin over the previous
The main focus of 2014
has been the completion
of Project Delphi including
the launch of the group’s
new platform for authoring,
storing and delivering its
content. The Delphi content
platform will
improve
the quality of existing
subscription products and
reduce the time to market
for new digital information
services.
content from EuroWeek, Asiamoney and a
number of smaller newsletters, as well as a new
offshore renminbi service. For BCA, the real
value of Delphi is still to come: first from BCA
Edge, a fully integrated online research service
including a content dashboard featuring live
reports, personalised views and alerts, theme
insights and recommendations for trades and
asset allocation. Delphi will also help BCA
accelerate its plans to launch a number of new
research services over the next two years.
In 2015, Delphi’s digital authoring tool and
enhanced search functionality will be rolled
out across the group’s titles. Further investment
will also be made in an exciting pipeline of new
products for launch on the Delphi platform in
2015 and 2016, including new or enhanced
services for HedgeFund Intelligence, Metal
year reflected tight control of underlying
The first products launched on the platform
Bulletin and Euromoney, as well as several
costs offset by planned investment in digital
included BCA Analytics,
a
standalone
new financial databases. Restructurings took
publishing,
including
the Delphi content
interactive charting tool which has already
place in 2014 with a view to consolidating or
platform which was launched in the second
generated sales of nearly $1 million, and
reducing the number of print products, and
quarter. A detailed operating and financial
the GlobalCapital news and data service for
several print titles were closed or sold. With the
review is set out from page 22.
international capital markets which combines
help of Delphi, the group expects most of its
titles to be digital-only by the end of 2016.
Project Delphi
Delphi is the group’s new content platform to help drive the group’s
digital-first strategy. It will increase the value of the group’s content
with enhanced personalisation and discoverability. Journalists and
editors use an intuitive authoring interface to create content and
giving them greater editorial control over web presentation. The
content relationships are better defined using semantic tagging
(intelligent relationships) within a domain ontology (e.g. asset
classes) which significantly enhances search capabilities. Content is
easily distributed to multiple devices (desktop, tablet, phone) using
responsive design.
Presentation
Search
Semantic
Storage
Authoring (DAT)
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Annual Report and Accounts 2014 08
Strategic Report
continued
The group’s investment in new products is not
market. The business was re-launched under
have jointly operated since the 1980s. The
limited to those on the Delphi platform. One of
the IJGlobal brand in March 2014. In July 2014
transaction values Euromoney’s participation in
the most exciting opportunities is the Investor
the group acquired the Investing in African
these two businesses at $85 million, comprising
Intelligence Network launched by Institutional
Mining Indaba (“Mining Indaba”), the largest
equity in New Dealogic of $59 million and cash
Investor. This private online network brings
mining event in emerging markets, as part of
and preference shares of $26 million. The
together some of the largest asset owners and
its strategy to build on its strength in the global
transaction is subject to regulatory approval
managers around the world and allows them
commodities sector. The group will draw on
and is expected to complete by the end of
to connect, share knowledge and put capital
its strong links to institutional investors and
December. While the transaction has significant
to work. This disruptive technology connects
governments to enhance the investor content
long-term financial upside, in the short term
buyers, sellers and intermediaries in the asset
and networking opportunities which have been
the loss of earnings from the Capital DATA
management industry. Revenues will come
at the heart of Mining Indaba’s success.
and Capital NET arrangements* will more
from capital introduction fees, data services,
platform fees and, subject to regulatory
approval being obtained, the ability to charge
basis points on capital placed.
Since the year end, the group has announced
plans to acquire a 15.5% equity stake in a
company (“New Dealogic”) incorporated by
than offset the group’s share of profits from
New Dealogic and lead to earnings dilution of
approximately 2% in 2015.
The Carlyle Group to acquire Dealogic Holdings
As part of a regular portfolio review, at the
Acquisitions are a key part of the group’s
plc (Dealogic) alongside Carlyle and Dealogic’s
beginning of the year the group reviewed the
growth strategy. The group completed four
founders. This investment fits Euromoney’s
strategy for its training division and concluded
small transactions in 2013, all of which have
strategy of expanding the scope of its activities
that MIS Training Institute, the Boston-based
been integrated successfully and are performing
in the global financial information and analytics
provider of audit and information security
well. In October 2013 the group acquired
sector. Dealogic, with its strong brand and
training, offered limited synergies with the
Infrastructure Journal, a leading information
global adoption
levels among
investment
rest of Euromoney’s financial training business
source for the
international
infrastructure
banks in the US, EMEA and Asia-Pacific, offers
and would require significant investment to
markets. Its deal database and news coverage
Euromoney attractive strategic and financial
drive future growth. Accordingly, the business
were combined with the deal analysis, awards
upside. Euromoney’s
investment will be
was sold to a private equity buyer on April 1
and events of Euromoney’s Project Finance to
funded through the sale to New Dealogic of its
for an initial consideration of £6.6 million and
create the most comprehensive online source of
interests in two businesses, Capital DATA and
deferred consideration of up to £2.2 million.
news, analysis and data for the infrastructure
Capital NET, which Dealogic and Euromoney
GlobalCapital
One of the first products launched on the Delphi Content
platform was GlobalCapital, a consolidated capital markets
service incorporating EuroWeek, Asiamoney and a number
of smaller newsletters. GlobalCapital provides both a
customisable series of dedicated ‘vertical’ news and data
services for specific markets and, for full subscribers, a
universal view of the wholesale financial markets worldwide.
While the web service has been expanded, the regular print
output has been rationalised into a single weekly publication,
together with supplements as and when required.
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Euromoney Institutional Investor PLC www.euromoneyplc.com Strategy and Performance
Strategic Report
09
Following the expiry of the lease for one of its
to fund further acquisitions. The roll-out of the
London properties, the company has decided to
Delphi platform to boost organic growth will be
consolidate its offices in refurbished premises a
a priority.
* For the year to September 30 2014, Euromoney’s
subscription revenues and adjusted operating profits
included licence fees of £5.7 million from Capital
DATA, while its adjusted profit before tax included an
amount of £0.3 million from equity accounting for its
48.4% interest in Capital NET.
Christopher Fordham
Managing Director
November 19 2014
short distance away in Bouverie Street, off Fleet
Street. The new space has significantly larger
floor plates and will reflect a more modern
working environment, encourage a digital-first
culture and give the group more flexibility for
expansion. It will, however, increase the group’s
operating costs by £2 million a year. At the
same time the company expects to release up
to £10 million of capital from the sale of its
freehold and leasehold interests later in 2015.
An indication of the trading outlook for the
group is given in the Chairman’s Statement
on page 5. In 2015 the board will continue
with its strategy of maintaining its portfolio,
including the possibility of disposing, closing or
restructuring any under-performing businesses
as well as pursuing relevant acquisitions.
The group will invest in technology and new
businesses, particularly electronic information
products, as well as in its internal systems.
Euromoney expects to use its financial strength
The new web platform is ‘responsive’; adapting automatically to
the format of the reader’s device. New product streams will be
quicker to market on this platform.
The first of these, GlobalRMB, a news and data product about
the internationalisation of the renminbi, was completed in ten
weeks.
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Annual Report and Accounts 2014 10
Strategic Report
continued
BUSINESS MODEL
The group’s activities are categorised into five operating divisions: Research and data; Financial
Subscription revenues are the fees that
customers pay to receive access to the group’s
publishing; Business publishing; Conferences and seminars; and Training (see page 2 for further
information, through online access to various
details). The group has many valuable brands (see page 3) allowing the group to extend the value
databases, through regular delivery of soft copy
of existing products and to develop in new areas – both geographically and with new products. For
research, publications and newsletters or hard
example, publishing businesses often run branded events and produce data products covering their
copy magazines. Subscriptions are also received
area of specialism. The group has a sizeable and valuable marketing database allowing new and
from customers who belong to Institutional
existing products to be matched with relevant customers.
Investor’s exclusive specialised membership
The group primarily generates revenues from four revenue streams: subscriptions; advertising;
sponsorship; and delegates.
groups.
Advertising revenues represent the fees that
customers pay to place an advertisement in one
or more of the group’s publications, either in
print or online.
Sponsorship revenues represent fees paid by
customers to sponsor an event. A payment
of sponsorship can entitle the sponsor to
high-profile speaking opportunities at the
conference, unique branding before, during
and after the event and an unparalleled
networking opportunity to invite the sponsor’s
clients and representatives.
Delegate revenues represent fees paid by
customers to attend a conference, training
course or seminar.
Details of the group’s revenues by revenue
stream and by division are set out in note 3 to
the group financial statements.
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
does not incur the fixed costs of offices in most
of the markets in which it operates; this allows
the group to scale up or reduce overheads as
the economic environment in which it operates
demands.
E A R C H AND DATA
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ISHING CONFER
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23612.04 - 17 December 2014 12:23 PM - Proof 8
Euromoney Institutional Investor PLC www.euromoneyplc.com
Strategy and Performance
Strategic Report
11
Group revenue split
14%
18%
3%
13%
52%
Subscriptions
Advertising
Sponsorship
Delegates
Other
100%
80%
60%
40%
20%
0
11%
13%
16%
38%
60%
62%
26%
52%
15%
5%
79%
11%
9%
Subscriptions
Advertising
1%
Sponsorship
2%
Delegates
Research and data
Financial publishing
Business publishing
Conferences and seminars
Training
MARKETPLACE
Euromoney has a global customer base with
revenue derived from almost 200 countries,
with approximately 60% from the US,
Canada, UK and Europe and more than a
third of its revenue from emerging markets.
Its customer base predominantly consists
of global financial institutions, investment
banks and asset managers; governments,
agencies and corporates; and
service
providers including lawyers, consultants and
technology providers.
The group’s total addressable market is driven
by customers’ capital and trading activities.
The group’s EDEN marketing database holds
two million active names of which more
than 600,000 have bought Euromoney’s
products in the past three years. However,
more important than the size of the market
is its propensity to spend which is driven by
the profitability of the group’s clients, their
expectations of market developments and
increasingly the regulatory environment.
They spend more willingly where there is
market share to be won (for example the
renminbi bond market) than in a market in
Revenue by customer location
42%
12%
14%
16%
16%
UK
Other
Asia
US
Western Europe
Revenue by market sector
structural decline. Although total headcount
29%
26%
in financial markets has been on a downward
trend for the past five years, the group’s
strategy is driven by growing revenue per
customer.
Euromoney is an international group with
a strong focus on emerging markets. Only
16% of revenues are derived from the UK
and approximately 60% of the group’s
people are based outside the UK. More than
a third of the revenues are derived from
emerging markets, including sales of specific
emerging market products (for example EMIS
and CEIC) to developed market customers.
45%
Banking
Asset management
Other
0
8
23612.04 - 17 December 2014 12:23 PM - Proof 8
Annual Report and Accounts 2014 12
Strategic Report
continued
STRATEGIC PRIORITIES
The group’s strategy is designed to build a growing, robust and tightly focused global online information business with a strong emphasis on emerging
markets. This represents a significant and challenging transformation from its roots as a traditional print publishing and events business.
The group’s key strategic priorities are:
Priorities
Actions
Key risks
KPIs
Increasing the
proportion of
revenues derived
from subscription
products
The group has increased the proportion of revenues derived
from subscription products to more than half of its total
revenues and expects the proportion 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.
●● Downturn in
●● Underlying
economy or market
sector
subscription revenue
growth
Subscription share of
total revenues
Subscription retention
rates
●●
●●
Using technology
efficiently to assist the
online migration of the
group’s print products
and develop new
electronic information
services
Investing in products of
the highest quality
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 programme to
migrate its print products online, develop new electronic
information services, and to take advantage of mobile and
cloud technology.
●● Data integrity,
availability and cyber
security
Failure of central
back-office
technology
Failure of online
strategy
●●
●●
●●
Investment in
technology and new
products
●● Online user
engagement
Subscription retention
rates
●●
Approximately two thirds of the group’s revenues are
derived from its information activities including online and
print content, databases and research. The other third is
derived from events including training. 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.
●● Downturn in
●● Underlying revenue
economy or market
sector
Failure of online
strategy
●●
●●
growth
Percentage of
revenues delivered
online
Eliminating products
with a low margin or
too high a dependence
on print advertising.
The group continues to eliminate products with a low
margin or too high a dependence on print advertising. The
group closed, in 2014, the Asiamoney print edition and
Euromoney’s Colchester-based yearbooks and handbooks
division.
●● Downturn in
economy or market
sector
Revenue by type
●●
●● Adjusted operating
margin
●● Adjusted profit
before tax
Maintaining tight cost
control at all times
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 demand.
●● Downturn in
●● Adjusted operating
economy or market
sector
margin
●● Adjusted profit
before tax
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Euromoney Institutional Investor PLC www.euromoneyplc.com Strategy and Performance
Strategic Report
13
Priorities
Actions
Key risks
KPIs
Retaining and fostering
an entrepreneurial
culture
The board does not micro-manage each business,
but instead devolves 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.
●●
Loss of key staff
Using a healthy balance
sheet and strong cash
flows to fund selective
acquisitions
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.
●● Acquisition and
disposal risk
Treasury operations
●●
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%.
●●
●●
Long-term incentives
(see Directors’
Remuneration Report)
Variable pay as a
percentage of total
pay
●● Cash consideration
on acquisitions
●● Acquisitions:
Infrastructure Journal
and Mining Indaba
●● Disposals: MIS
Training
●● Net debt to EBITDA
●● Cash conversion rate
See page 16 for detailed explanation of the group’s principal risks and uncertainties and page 14 for the group’s performance against its KPIs.
BCA Dashboard
The new BCA Dashboard is a platform for
all customised content in one location. It
focuses on showcasing the quality of macro
themes, analyses,
insights and
investment
recommendations. Some of the key features
include powerful semantic tagging and search,
personalised
investment
guidance,
view
evolution and the semantic search graph.
23612.04 - 17 December 2014 12:23 PM - Proof 8
Annual Report and Accounts 2014 14
Strategic Report
continued
KEY PERFORMANCE INDICATORS
The group monitors its performance against its strategy using the following key performance indicators:
KPI
Description
Performance
Underlying revenue
growth
Total revenue at constant currency excluding acquisitions and disposals.
12%
8%
4%
3%
1%
2010
2011
2012
2013
2014
Underlying
subscription revenue
growth
Subscription revenues at constant currency excluding acquisitions and
disposals.
14%
Subscription share of
total revenues
Subscription-based products, particularly online, have the advantage of
premium-prices, high renewal rates and high margins. The group has
increased the proportion of revenues derived from subscription products to
more than half of its total revenues and expects the proportion to remain
between 50% and 60% for the foreseeable future.
4%
2%
2%
1%
2010
2011
2012
2013
2014
52%
52%
51%
47%
46%
2010
2011
2012
2013
2014
Investment in
technology and new
products (£m)
The group’s investment in technology and new digital products as part of its
transition to an online information business.
14.5
12.3
10.0
9.0
6.0
2010
2011
2012
2013
2014
Cash consideration
on acquisitions (£m)
The total cash outflow on acquisition related activity net of cash acquired in
the Consolidated Statement of Cash Flows.
67.2
61.2
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 adjusted operating
profit earnings before depreciation and amortisation of licences and
software, adjusted for the timing impact of acquisitions and disposals. The
strategic priority is to keep net debt to EBITDA below three times.
16.7
28.1
6.5
2010
2011
2012
2013
2014
1.28
1.01
0.27
0.30
0.09
2010
2011
2012
2013
2014
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Euromoney Institutional Investor PLC www.euromoneyplc.com Strategy and Performance
Strategic Report
15
KPI
Description
Performance
Cash conversion rate
The percentage by which cash generated from operations covers adjusted
operating profit. The group’s cash conversion rate was less than 100%
in 2014 and 2013 due to cash payments during the year in respect of
long-term costs, for which the expense was accrued in previous years. The
underlying operating cash conversion rate, after adjusting for these timing
differences, was 100% (2013: 103%).
Adjusted profit
before tax (£m)
Adjusted profit before tax as set out in the appendix to the Chairman’s
Statement.
Adjusted operating
margin
Operating profit before acquired intangible amortisation, long-term
incentive expense, exceptional items and associates as a percentage of
revenue. The decrease in operating margin in 2014 over the previous year
is due to the planned investment in digital publishing, including the Delphi
content platform which was launched in the second quarter.
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 to the
group financial statements.
101%
108%
103%
88%
92%
2010
2011
2012
2013
2014
116.5
116.2
106.8
86.6
92.7
2010
2011
2012
2013
2014
30%
30%
30%
30%
29%
2010
2011
2012
2013
2014
44%
40%
39%
32%
31%
2010
2011
2012
2013
2014
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 and 5, and in the operating and financial review from page 22.
23612.04 - 17 December 2014 12:23 PM - Proof 8
Annual Report and Accounts 2014 16
Strategic Report
continued
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 of the change in level of perceived risk
compared to last year.
Risk
Potential Impact
Mitigation
Trend
Downturn in economy or
market sector
The group generates significant
income from certain key
geographical regions and market
sectors.
Uncertainty
in global financial markets
increases the risk of a downturn or potential
collapse in one or more areas of the business.
If this occurs income is likely to be adversely
affected and for events businesses some
abandonment costs may also be incurred.
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.
Significant disruptions to or reductions in
international travel for any reason could lead
to events and courses being postponed or
cancelled and could have a significant impact
on the group’s performance.
Past incidents such as transport strikes,
extreme weather including 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.
The group has a diverse product mix and
operates
locations.
in many geographical
This reduces dependency on any one sector
or region. Management has the ability to
cut costs quickly if required or to 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.
Where possible, contingency plans are in
place to minimise the disruption from travel
restrictions. Events can be postponed or
moved to another location, or increasingly
can be attended remotely using online
technologies.
Cancellation and abandonment insurance is in
place for the group’s largest events, including
Ebola cover for Mining Indaba, the group’s
newest conference taking place in South
Africa in February 2015.
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Strategic Report
17
Risk
Potential Impact
Mitigation
Trend
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.
More recently new financial
regulations being introduced
as a result of the financial crisis
of 2008 have implications for
the group’s price reporting,
benchmark and indices businesses
(see published content risk).
A breach of legislation or regulations could
have a significant impact on the group in
terms of additional costs, management time
and reputational damage.
In recent years responsibilities for managing
data protection have increased significantly.
The emergence of new online technology is
further driving legislation and responsibilities
for managing data privacy.
Proposed new regulation by the European
Union to improve market transparency under
which prices, benchmarks and indices are
provided, contributed to and used will affect a
number of businesses in the group.
Failure to comply with laws and regulations
in any part of the world could result in
significant financial penalties and reputational
damage.
Compliance with laws and regulations is taken
seriously throughout the group. A Code of
Conduct (and supporting policies) sets out
appropriate standards of business behaviour
and highlights the key legal and regulatory
issues affecting group businesses. Divisional
and local management are responsible
for compliance with applicable local laws
and regulations, overseen by the executive
committee and the board and supported by
internal audit.
A new compliance framework for price
reporting, benchmark and indices businesses
was implemented during the year, formalising
standards of conduct, procedural guidance
and staff training. Two ethics audits were also
completed.
The group has strict policies and controls
in place for the management of data
protection and privacy. This is supported by
new computer-based training (CBT) being
rolled out worldwide in 2015. The group has
website technology to reinforce online legal
and regulatory compliance.
A new compliance handbook is being
provided to all managers in all office locations
this year, to support governance and further
mitigate compliance risk.
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Annual Report and Accounts 2014 18
Strategic Report
continued
Risk
Potential Impact
Mitigation
Trend
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).
Any challenge to the integrity or availability
of information that the group relies upon
could result in operational and regulatory
challenges, costs to the group, reputational
damage to the businesses and the permanent
loss of revenue. This risk has increased as
the threat of cyber-attack has become more
significant. A successful cyber-attack could
cause considerable disruption to business
operations.
The integrity, availability and
security of this data is key to the
success of the group.
Information risk has increased as
a result of the growing number
of cyber-attacks affecting
organisations around the world.
The wider use of social media has also
increased information risk as negative
comments made about the group’s products
can now spread more easily.
Although technological innovations in mobile
working, the introduction of cloud-based
technologies and the growing use of social
media present opportunities for the group,
they also introduce new information security
risks that need to be managed carefully.
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.
An incident affecting one or more of the key
offices could disrupt the ordinary operations
of the businesses at these locations; a
region-wide disaster affecting all offices could
have much worse implications with serious
management and communication challenges
for the group and a potential adverse effect
on results.
The risk of office space becoming unusable
for a prolonged period and a lack of suitable
alternative accommodation in the affected
area could also cause significant disruption
to the business and interfere with delivery of
products and services.
Incidents affecting key clients or staff in these
regions could also give rise to the risk of not
achieving forecast results.
The group has comprehensive information
security standards and policies in place which
are reviewed on a regular basis. Access to key
systems and data is restricted, monitored, and
logged with auditable data trails. Restrictions
are in place to prevent unauthorised
data downloads. The group is subject to
regular internal information security audits,
supplemented by expert external resource.
The group continues to invest in appropriate
cyber defences including implementation of
intrusion detection systems to mitigate the
risk of unauthorised access.
The group’s Information Security Group meets
regularly to consider and address cyber risks.
Comprehensive back-up plans for IT
infrastructure and business data are in place
to protect the businesses from unnecessary
disruption.
The group’s professional indemnity insurance
provides cover for cyber risks including cyber-
attack and data breach incidents.
Business continuity plans are in place for all
businesses. These plans are refreshed annually
and a programme is in place for testing. If
required, employees can work remotely.
The group has robust IT systems with key
locations (including the UK, US, Canada and
Asia) benefiting from offsite data back-ups,
remote recovery sites and third-party 24-hour
support contracts for key applications.
The group’s business continuity planning
helped its New York office to recover quickly
and effectively from the significant disruption
caused by Hurricane Sandy in 2012, and more
recently maintain operations in its Bangkok
office during the Thai political crisis earlier
this year.
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Euromoney Institutional Investor PLC www.euromoneyplc.com Strategy and Performance
Strategic Report
19
Risk
Potential Impact
Mitigation
Trend
A successful libel claim could damage the
group’s reputation. The rise in use of social
media, and in particular blogging, has
increased this risk. Damage to the reputation
of the group arising from libel could lead
to a loss of revenue, including income from
advertising. In addition, there could be costs
incurred in defending the claim.
The failure to manage content redistribution
rights and royalty agreements could lead to
overpayment of royalties, loss of intellectual
property and additional liabilities for
redistribution of content.
The integrity of the group’s published data is
critical to the success of the group’s database,
research and data services. The group also
publishes extensive pricing information and
indices for the global metals industries and
financial markets. Errors in published data,
price assessments or indices could affect the
reputation of the group leading to fewer
subscribers and lower revenues.
Any challenge to the integrity of polls and
awards could damage the reputation of
the product and by association the rest of
the group, resulting in legal costs and a
permanent loss of revenue.
Published content risk
The group generates a significant
amount of its revenue from
publishing information and data
online or in its magazines and
journals. 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
1,000 equity and bond indices.
The group also runs more than
100 reader polls and awards
each year.
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.
The inability to recruit and retain talented
people could affect the group’s ability to
maintain its performance and deliver growth.
When key staff leave or retire, there is a risk
that knowledge or competitive advantage
is lost.
The group runs mandatory annual libel
courses for all journalists and editors. Controls
are in place, including legal review, to approve
content that may carry a libel risk. Editorial
controls are also in place for social media and
this activity is monitored carefully.
The group’s policy is to own its content and
manage redistribution rights tightly. Royalty
and redistribution agreements are in place to
mitigate risks arising from online publishing.
Tight controls have been implemented for
the verification, cleaning and processing of
data used in its database, research and data
services.
Processes and methodologies for assessing
metals and other commodity prices and
calculating indices are clearly defined and
documented. All employees involved with
publishing pricing information or indices
receive relevant training. Robust contractual
disclaimers are in place for all businesses that
publish pricing data, benchmarks and indices.
Polls and awards are regularly audited and a
firewall is in place between the commercial
arm of the business and the editors.
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. These are documented in a publishing
risk handbook provided to all journalists. The
group also has libel insurance and professional
indemnity cover.
Long-term incentive plans are in place for key
staff to encourage retention. The directors
remain committed to recruitment and
retention of high-quality management and
talent, and provide a programme of career
opportunity and progression for employees
including extensive training and international
transfer opportunities.
Succession planning is in place for senior
management.
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Annual Report and Accounts 2014 20
Strategic Report
continued
Risk
Potential Impact
Mitigation
Trend
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.
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.
A failure of the back-office technology
may affect the performance, data integrity
or availability of the group’s products and
services. Any extensive failure is likely to affect
a large number of businesses and customers,
and lead directly to a loss of revenues.
The group continues to invest significantly
in its central back-office technology. The
platform is planned, managed and run by a
dedicated, skilled team and its progress and
performance are closely monitored by the
executive committee and the board.
Online customers are accessing the group’s
digital content in an increasing number of
ways, including using websites, apps and
e-books. The group relies on effective digital
rights management technology to provide
flexible and secure access to its content. An
inability to provide flexible access rights to the
group’s content could lead to products being
less competitive or allow unauthorised access
to content, reducing subscription revenues as
a result.
The group’s reliance on key suppliers,
particularly IT suppliers, has increased. An
operational or financial failure of a key
supplier could affect the group’s ability to
deliver products, services or events with a
direct impact on management time and
financial results.
The group has digital rights management
technology to ensure its content is adequately
secured and changing customer requirements
for accessing the group’s products and
services are met.
Operational and financial due diligence is
undertaken for all key suppliers as part of a
formal risk assessment process. Contingency
planning is carried out to mitigate risk from
supplier failure.
The group has made a substantial investment
in e-commerce technology and hosting
infrastructure to ensure the back-office
platform continues to perform effectively.
There is a risk that an acquisition opportunity
could be missed. The group could also suffer
an impairment loss if an acquired business
does not generate the expected returns or
fails to operate or grow. Additionally, there
is a risk that a newly acquired business is
not integrated into the group successfully or
that the expected risks of a newly acquired
entity are misunderstood. As a consequence a
significant amount of management time could
be diverted from other operational matters.
The group is also subject to disposal risk,
possibly failing to achieve optimal value from
disposed businesses, failing to identify the
time at which businesses should be sold or
underestimating the impact on the remaining
group from such a disposal.
Senior management perform detailed
in-house due diligence on all possible
acquisitions and call on expert external
advisers where necessary. Acquisition
agreements are usually structured to retain
key employees in the acquired company and
there is close monitoring of performance at
board level of the entity concerned post-
acquisition. The group acquired Mining Indaba
and Infrastructure Journal during the year.
The board regularly reviews the group’s
existing portfolio of businesses to identify
under-performing businesses or businesses
that no longer fit with the group’s strategy
and puts in place divestment plans
accordingly. In 2014 the group disposed of
MIS Training.
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Risk
Potential Impact
Mitigation
Trend
The group’s online strategy addresses a
number of challenges arising from the group’s
transition from print media to an online
business and changing customer behaviour.
The group is already embracing these
challenges and overall sees the Internet
and other technological advances as an
opportunity not a threat.
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.
Competition has increased, with free content
becoming more available on the Internet
and new competitors benefiting from lower
barriers to entry. A failure to manage pricing
effectively or successfully differentiate the
group’s products and services could negatively
affect business results.
The customer environment is changing fast
with an increasing number spending more
time using the Internet. Print circulation is
declining and a failure to convert customers
from print risks a permanent loss of customers
to competitors.
Further changes in technology including the
widespread use of tablets and other mobile
devices and social media such as LinkedIn and
Twitter are changing customer behaviour and
will introduce new challenges.
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
If the treasury policy does not adequately
mitigate the group’s financial risks or is
not correctly executed, it could result in
unforeseen derivative losses or higher than
expected finance costs.
treasury derivatives risks. 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 group financial
statements.
Unforeseen tax liabilities
The group operates within many
tax jurisdictions and earnings
are therefore subject to taxation
at differing rates across these
jurisdictions.
The treasury function undertakes high-value
transactions hence there is an inherent high
risk of payment fraud or error having an
adverse impact on group results.
The directors endeavour to manage the tax
affairs of the group in an efficient manner;
however, due to an ever-more complex
international tax environment there will
always be a level of uncertainty when
provisioning for tax liabilities. There is also a
risk of tax laws being amended by authorities
in the different jurisdictions in which the
group operates which could have an adverse
effect on the financial results.
Significant investment in the group’s online
strategy has already been made and will
continue for as long as necessary. New
content management technology is being
implemented across the group to enable more
effective publishing to web, print and the
rapidly increasing number of mobile platforms
coming onto the market. Many of the group’s
businesses already produce soft copies of
publications to supplement the hard copies as
well as provide information and content via
apps.
The group’s acquisition strategy has increased
the number of online information providers
in the business. However, while online
revenues are important, the group’s product
mix reduces dependency on this income. For
example, the group generates a third of its
profits from its event businesses and face-to-
face meetings remain an important part of
customers’ marketing activities.
The tax and treasury committee is responsible
for reviewing and approving group treasury
policies which are executed by the group
treasury.
Segregation of duties and authorisation
limits are in place for all payments made. The
treasury function is also subject to regular
internal audit.
External tax experts and in-house tax
specialists, reporting to the tax and treasury
committee, work together to review all tax
arrangements within the group and keep
abreast of changes in global tax legislation.
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Annual Report and Accounts 2014 22
Strategic Report
continued
OPERATING REVIEW
The group generates approximately two thirds
currency finance cost has been of only limited
adjusted profit before tax by approximately
benefit as a hedge against the translation of
£5 million. Each one cent movement in the
of both its revenues, including approximately a
overseas profits.
third of its UK revenues, and profit before tax in
US dollars. The exposure to US dollar revenues
in its UK businesses is hedged using forward
contracts to sell US dollars, which delays the
impact of movements in exchange rates for at
least a year. However, the group does not hedge
the foreign exchange risk on the translation of
overseas profits. While it endeavours to match
foreign currency borrowings with investments,
as debt levels have fallen the related foreign
US dollar rate reduces profits on translation by
approximately £0.6 million on an annualised
The strength of sterling against the US dollar
started to have a negative impact on the
basis.
translation of overseas profits towards the
The revenue tables below show headline
end of the first half and had a more significant
growth rates as well as those at constant
impact in the second half. The average sterling-
currency. Underlying revenue growth rates
US dollar rate for the year to September
exclude the impact of acquisitions, disposals
30 was $1.66 (2013: $1.56). This reduced
and currency movements.
headline revenue growth rates for the year
by approximately four percentage points and
Trading review
Total revenues were in line with last year at £406.6 million. At constant currency total revenues increased by 4% and, once acquisitions and disposals
are excluded, underlying revenues by 3%.
Revenues
Subscriptions
Advertising
Sponsorship
Delegates
Other
Sold/closed businesses
Foreign exchange gains/(losses) on forward contracts
Total revenue
Less: revenue from acquisitions/disposals
Underlying revenue
Change at
constant
exchange
rates
Underlying
change at
constant
exchange
rates
5%
(3%)
18%
5%
15%
(60%)
–
4%
2%
(4%)
12%
5%
14%
(3%)
–
3%
Headline
change
(1%)
(7%)
12%
3%
12%
(61%)
–
–
2014
£m
205.0
53.6
56.9
71.2
13.4
3.6
2.9
406.6
(9.1)
397.5
2013
£m
206.2
57.6
51.0
69.4
12.0
9.2
(0.7)
404.7
(5.5)
399.2
Trading conditions have remained difficult,
will not be seen until 2015. The strength
revenues continued to decline in 2014 largely
particularly in the investment banking sector,
of sterling against the US dollar also had a
due to reduced bank spend.
where there has been no real sign of an easing
negative impact on revenues in 2014, although
of the pressures from increased compliance,
more recent currency trends have been positive.
The adjusted operating margin fell from 30%
to 29% as a result of the group’s continued
a tougher regulatory regime, tighter capital
adequacy tests and record fines for bank
misdemeanours including most recently the
global
settlements
for
foreign exchange
manipulation. The commodities sector has
also suffered from price weakness and lower
trading volumes. In contrast, the performance
of the group’s businesses serving the asset
management industry has improved over the
course of the year, although the natural lag
effect of subscriptions means the full benefit
The main driver of underlying revenue growth
strategic
investment
in digital publishing
was a 12% increase in event sponsorship and
including the new Delphi content platform.
a 5% increase in delegate revenues largely
Delphi was launched in March and has full
from new financial market events in the second
year running costs of £4 million including
quarter and favourable timing of events.
Underlying subscription revenues have been
increasing at a steady rate of 2% for the past
amortisation of the build costs. Permanent
headcount has increased by 49 to 2,191 people
since September 30 2013 reflecting acquisitions
18 months from a combination of new products
and the increased investment in technology
and a gradual return to growth of the asset
and new products.
management sector. Underlying advertising
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Business division review
Research and data: underlying revenues, which are derived predominantly from subscriptions, fell by 1%. This has been a consistent trend throughout
the year following a tough 2013 for both the banking and asset management sectors with the burden of additional compliance costs on information
buying budgets. Sales and renewal rates for the group’s research businesses, BCA and NDR, improved in the second half, the benefits from which should
be seen in 2015, although revenue growth in 2014 was held back by the lag effect of the difficult 2013. The cost pressures facing investment banks
have also affected the performances of the group’s emerging market information and data products, EMIS and CEIC, although again there were signs
of a recovery in the second half. The adjusted operating margin was down 2% at 40% mainly due to investments made by BCA in the Delphi content
platform and NDR’s repurposing of its content into new, more targeted products.
Revenues
Research and data
Financial publishing
Business publishing
Conferences and seminars
Training
Sold/closed businesses
Foreign exchange gains/(losses)
on forward contracts
Total revenue
Less: revenue from acquisitions/
disposals
Underlying revenue
2014
£m
126.5
80.3
67.8
106.1
19.4
3.6
2.9
406.6
(9.1)
397.5
Headline
change
(4%)
6%
(2%)
7%
(8%)
(61%)
–
–
2013
£m
131.3
75.6
68.9
99.4
21.0
9.2
(0.7)
404.7
(5.5)
399.2
Change at
constant
exchange
rates
Underlying
change at
constant
exchange
rates
Operating
margin
2014
£m
Operating
margin
2013
£m
2%
10%
2%
12%
(2%)
(60%)
–
4%
(1%)
7%
2%
9%
(2%)
(3%)
–
3%
40%
28%
34%
29%
20%
13%
–
29%
42%
32%
38%
29%
18%
16%
–
30%
Financial publishing: underlying revenues
Business publishing:
the 2%
increase
Conferences and seminars: underlying event
increased by 7% reflecting the group’s newly
in underlying
revenues
reflects a good
revenues increased by 9% from a combination
combined
infrastructure finance business,
performance from the wholesale telecoms
of new financial market events in the US, the
IJGlobal, and a strong performance from
information business, TelCap, offset by tough
favourable timing of events, and the strength
LatinFinance, offset by weakness in other
commodities and energy markets faced by
of Institutional Investor’s subscription-based
financial titles from their dependence on
Metal Bulletin and Gulf Publishing. As with
memberships
for
the asset management
banks
for advertising. The
reduction
in
Financial Publishing, the adjusted operating
industry. In contrast, markets for commodities-
the adjusted operating margin reflects the
margin fell after investment in digital publishing
related events including metals and coal have
continued investment in the transition to a
including Metal Bulletin’s steel information
been more challenging.
digital publishing model including the launch
service and a new pricing database.
of GlobalCapital using the Delphi content
platform.
Training: revenues for the training division,
which relies heavily on customers in the
banking sector, fell by 2%. The adjusted
operating margin improved from 18% to 20%
following a restructuring undertaken last year
and the sale of the lower margin MIS business.
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Annual Report and Accounts 2014 24
Strategic Report
continued
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. Equally, where businesses no longer
fit, the group divests.
During 2014, the group purchased the trade and assets of two businesses, Infrastructure Journal (IJ) and Mining Indaba and disposed of 100% of its
equity share capital in MIS Training. Details of all acquisitions and disposals are set out in note 14 to the group financial statements.
Business acquired
Description
Strategic priority
Total consideration
Date acquired
Leading provider
of online data,
intelligence and
events for the global
infrastructure sector.
The world’s largest
mining investment
forum and Africa’s
largest mining event.
The acquisition is consistent with
the group’s strategy of investing
in online subscription and events
businesses which will benefit
from its global reach.
The acquisition is consistent
with the group’s strategy to
consolidate and strengthen its
position in the global metals and
mining sector.
£12,767,000
October 15 2013
£45,405,000
July 15 2014
On April 1 2014 the group sold 100% of its equity share capital in MIS Training for an initial cash consideration of US$11 million (£6.6 million), offset by
a working capital adjustment of US$1.1 million (£0.7 million) paid in April 2014. At date of disposal a discounted deferred consideration receivable of
US$3.7 million (£2.2 million) was recognised. In September 2014 deferred consideration of US$0.1 million (£0.07 million) was paid and the remaining
discounted deferred consideration is expected to be received in cash between January 2015 and September 2019. The disposal of MIS Training gave
rise to a profit on disposal of £6.8 million, after deducting disposal costs incurred, which was recognised as an exceptional item (note 5) in the Income
Statement.
IJGlobal
In October 2013 the group acquired Infrastructure Journal,
and merged it with an existing title, Project Finance, to
launch IJGlobal in April 2014. The product combined
the two titles’ presence in New York, Hong Kong and
London, their databases and events portfolios, alongside a
rebranding and redesign.
Despite combining competing
titles with disparate
customer bases, the product has 95% of the mandated
lead arrangers and financial advisors subscribing to its
service, has grown its flagship World Infrastructure Summit,
and improved its website and database functionality. The
IJGlobal site now receives over 48,000 visitors each month.
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Systems and information
technology
The group continues to invest in developing
Marketing and digital
development
The group continues to
invest
customer
insight team
is now providing
dedicated analytical support to business groups
in digital
such as Metals, Mining and Minerals and Asset
its digital platforms and services as well as the
development especially customer engagement
Management. These analysts provide more in-
people that support and deliver them.
and product innovation.
The original scope of Project Delphi was
The group’s digital success is reflected in its
completed with the new GlobalCapital site
engagement metrics. There are now more
going live in the second quarter and the main
than 100 businesses active on social media.
BCA Research product in beta by the third
The group’s social media connections have
quarter. Plans for a second phase involving
increased 183% year on year, and the group
depth analysis of customer usage behaviour,
renewal cycles, web usage, demographics,
helping to identify opportunities for cross-
selling and new customer opportunities.
Headcount
The number of people employed is monitored
Institutional Investor and other businesses are
has more than 600,000 members across
monthly to ensure there are sufficient resources
well underway with individual components
of the platform being rolled out to additional
major social platforms, such as LinkedIn and
Twitter. The group has also developed a more
to meet the forthcoming demands of each
business and to make sure that the businesses
titles across the group replacing legacy search
integrated approach to content marketing
continue
to deliver
sustainable profits.
and authoring tools. Over 70 other agile-based
in both publishing and events businesses.
During 2014 the directors have focused on
projects were also completed with a focus
This combines multi-media and agenda-led
maintaining headcount at a similar level to that
on continuous deployment and automated
content with speaker, sponsor and attendee
in 2013, hiring new heads only where it was
testing. Notable achievements
include the
interaction throughout the year. The success
considered essential or for investment purposes.
re-launches of EuromoneySeminars.com and
of this integrated approach was demonstrated
Headcount at September 2014 was 2,191, an
NDR.com, the integration of Infrastructure
at the AMM’s Steel Success Strategies XXIX
increase of 49 since September 2013, including
Journal,
the development of a delegate
conference, which
led to an
increase of
43 acquired heads offset by 41 leavers from the
messenger tool for events businesses and an
1,700% in overall site visits, 200% increase
disposal of MIS Training.
internal, auditable pricing
tool
for
the
in social visits and 30% new prospects. This
Metals group. Most websites have also been
increased level of activity is contributing to
redesigned to be mobile-responsive.
event sales, subscription trials and sponsorship
On the corporate infrastructure side, a project
opportunities.
to migrate all employees to Microsoft Office365
A number of significant product initiatives were
and upgrade the legacy XP desktop environment
undertaken. Highlights include the launches
was successfully completed. The on-premises
of GlobalCapital, a new publishing platform
data centres have now been retired in both
that consolidated a number of products
the UK and US with more than 90% of the
including EuroWeek and Asiamoney, onto a
infrastructure virtualised and operating within
single digital property; new product for the
a fault tolerant managed service. There has
continued to be significant investment in both
offshore RMB (renminbi) market; IJGlobal the
merger of Project Finance and Infrastructure
the testing and
infrastructure surrounding
Journal with new branding, integration of
Disaster Recovery and Information Security.
news and data, and a new website design with
These remain key priorities. New acquisitions
improved functionality and usability. Finally a
and offices have been integrated to make use of
new platform was developed for Euromoney
corporate applications across the group including
Seminars that is reusable and scalable, reducing
the latest version of Microsoft Dynamics CRM.
the time to market for new events businesses.
There has been a particular focus this year
on recruiting, developing and retaining top
technical talent. Both an internal and external
Hackathon were held during the year with the
The group also focused on improving the
customer experience across a number of
businesses such as II.com and Sovereign Wealth
Center.
aim of fostering ideas as well as promoting
The group continues to invest in EDEN, the
Euromoney as a high-quality place to work in
group’s marketing database, which has in
technology.
excess of two million active names. The
Capital Appreciation Plan (CAP)
The CAP, the group’s long-term incentive
plan, remains an important part of the group’s
remuneration strategy. It is a highly geared,
performance-based share option scheme which
both directly rewards executives for the growth
in profits of the businesses they manage,
and links to the delivery of shareholder value
by satisfying rewards in a mix of shares in
the company and cash. It aims to deliver
exceptional profit growth over the performance
period and for this profit to be maintained over
the remaining payout period. Further details are
set out in the company share schemes section
in the Directors’ Remuneration Report.
FINANCIAL REVIEW
The adjusted profit before tax of £116.2 million
compares to a statutory profit before tax of
£101.5 million. The statutory profit before tax
is usually lower than the adjusted profit before
tax because of the impact of acquired intangible
amortisation and non-cash movements
in
acquisition liabilities. A detailed reconciliation
of the group’s adjusted and statutory results
is set out in the appendix to the Chairman’s
Statement.
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Annual Report and Accounts 2014 26
Strategic Report
continued
A net exceptional credit of £2.6 million (2013:
Interest payable on the group’s committed
profits and applicable tax rates. The group
£2.2 million credit) has been recognised. This
borrowing facility fell by £1.2 million to
continues to benefit from reductions in the UK
includes a £6.8 million profit from the sale of
£1.3 million, reflecting lower funding costs.
corporate tax rate, offset by higher US taxes.
MIS Training offset by exceptional acquisition,
Headline net finance costs of £2.1 million
The adjusted effective tax rate is expected to
restructuring and property costs of £4.2 million.
(2013: £10.4 million) include a non-cash charge
fall to 20% in 2015, in line with the reduction
of £0.6 million (2013: £7.6 million) for increases
in the UK corporate tax rate.
The long-term incentive expense of £2.4 million
(2013: £2.1 million) reflects the cost of CAP
in deferred acquisition liabilities.
2014 awards which were granted in June 2014.
The adjusted effective tax rate was 22%, the
The charge in 2013 reflected the final cost of
same as 2013. The tax rate in each period
CAP 2010.
depends mainly on the geographic mix of
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
2014
£m
545.4
16.9
(21.9)
(0.6)
(122.3)
(3.1)
3.6
(4.8)
(19.1)
394.1
(37.6)
356.5
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
Change
£m
39.8
0.1
9.2
6.8
(5.0)
(1.8)
10.5
(1.9)
(7.3)
50.4
(27.7)
22.7
In 2014 the net assets increased by £22.7 million to £356.5 million. The increase in net assets is broadly as a result of the £75.3 million group profit
offset by dividends of £28.8 million and £21.5 million for the purchase of 1.7 million of the company’s own shares for the CAP 2014 share scheme.
EMIS
EMIS
launched
its first
industry-specific
business information service, EMIS Energy, in
September 2014.
EMIS Energy has been designed as a new
vertical to capture financial, industry and
company reports on the emerging markets
from the flagship EMIS platform. The
information within EMIS Energy relates only
to the energy sector, the aim being to build
a larger client base among corporate clients
within the energy industry who have specific
information needs.
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27
Dividends
The company’s policy is to distribute a third
These movements are explained below:
Insider Publishing and CIE were released.
Net current tax liabilities decreased by £5.6
●● Goodwill and other intangible assets
– includes £30.8 million of goodwill and
£28.6 million of acquired intangible assets
following the acquisitions of Infrastructure
Journal and Mining
Indaba and
the
addition of £3.2 million of intangible assets
in development, offset by amortisation
costs of £18.7 million and the disposal of
£2.5 million of goodwill for MIS Training;
●●
Property, plant and equipment – regular
capital expenditure across the group of
£3.1 million offset by depreciation of £2.9
million;
●● Acquisition commitments and deferred
million due to timing of tax payments and
of its after-tax earnings by way of dividends.
decrease of UK corporation tax;
Pursuant to this policy, the board recommends a
●● Net pension deficit – losses from changes
final dividend of 16.00p a share (2013: 15.75p)
in demographic and financial assumptions
giving a total dividend for the year of 23.00p a
of £4.0 million were offset by return on plan
share (2013: 22.75p). As previously explained,
assets of £1.4 million and contributions by
the earlier than expected achievement of the
the employer of £0.6 million;
CAP 2010 profit target triggered an accelerated
●● Deferred tax – the group has reversed out
CAP expense of £6.6 million in 2011 which
the deferred tax assets on the CAP 2010
was not charged against earnings for dividend
share plan as a result of option exercises
purposes that year, but spread over the period
taking place in the year and the utilisation
to which it originally related (i.e. mostly 2012
of US federal tax losses against US taxable
and 2013). This has enabled a small increase
income.
consideration – the decrease is due to
payments of £2.8 million for CIE and
Net debt and cash flow
Net debt at September 30 was £37.6 million
TTI/Vanguard; release of the deferred
compared with £28.6 million at March 31 and
in the final dividend despite the decrease in
adjusted diluted earnings a share.
Treasury
The treasury department does not act as a profit
consideration paid in advance into escrow
£9.9 million at last year end. The increase largely
centre, nor does it undertake any speculative
of £4.5 million for
Insider Publishing
reflects £55.7 million of net acquisition spend
trading activity, and it operates within policies
and CIE; and
reduction of deferred
and £21.5 million to purchase the company’s
and procedures approved by the board.
consideration from the disposal of MIS
own shares to satisfy future CAP 2014 rewards.
Training of £2.2 million;
A further £2.6 million was invested in Project
●●
Liability for cash-settled options –
Delphi, bringing the total project cost to date
reflecting the cash payment of £7.0
to £10.0 million, of which £9.3 million has been
million following the vesting of the second
capitalised and is being amortised over a four-
tranche of the cash element of CAP 2010
year period (see Statement of Cash Flows on
in February 2014;
page 75).
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
●● Deferred income – due to balances
brought into the balance sheet following
this year’s acquisitions and an underlying
increase of 4% in deferred subscription
revenue, mainly
Memberships;
from BCA and
II
●● Other non-current assets and liabilities
– includes movements on the marked to
market valuation of long-term derivatives
contracts and increase in provisions for
dilapidations for new London headquarters;
●● Other current assets and liabilities –
includes an increase of £4.2 million in trade
debtors in line with the improvement in
revenue in the fourth quarter and balances
brought into the balance sheet following
the acquisitions offset partly by disposal
of MIS Training. Prepayments decreased by
£4.1 million as the deferred consideration
paid in advance into escrow in 2013 for
The operating cash conversion rate was 92%
looking forward over five years. The maturity
(2013: 88%). The rate was less than 100%
dates are spread in order to avoid interest
in 2014 and 2013 as the vesting of options
rate basis risk and also to mitigate short-term
under CAP 2010 triggered cash outflows of
changes in interest rates. The predictability of
approximately £9 million in both years for which
the expense was accrued in previous years. The
interest costs is deemed to be more important
than the possible opportunity cost foregone of
underlying operating cash conversion rate,
achieving lower interest rates and this hedging
adjusting for this timing difference, was 100%
strategy has the effect of spreading the group’s
(2013: 103%).
The group’s debt is provided through a dedicated
multi-currency borrowing facility from Daily
Mail and General Trust plc, the group’s parent.
In November 2013 the group replaced its
US$300 million (£185 million) facility, which
was due to expire in December 2013, with a
new US$160 million (£99 million) facility which
expires in April 2016.
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. Given the
group’s low level of debt, there were no interest
rate hedges in place as at September 30 2014.
23612.04 - 17 December 2014 12:23 PM - Proof 8
Annual Report and Accounts 2014 28
Strategic Report
continued
The group generates approximately
two-
related foreign currency finance costs provide a
The net deferred tax liability held is £19.1 million
thirds of its revenues in US dollars, including
partial hedge against the translation of overseas
(2013: £11.8 million) and relates primarily to
approximately 30% of the revenues in its UK-
profits. As a result of this hedging strategy,
capitalised intangible assets, net of deferred
based businesses, and approximately 60% of
any profit or loss from the strengthening or
tax assets held in respect of tax deductible
its operating profits are US dollar-denominated.
weakening of the US dollar will largely be
goodwill, short-term temporary differences
The group is therefore exposed to foreign
delayed until the following financial year and
and US state tax losses. The movement in
exchange risk on the US dollar revenues in its
beyond.
the liability is explained in the balance sheet
UK businesses, and on the translation of the
results of its US dollar-denominated businesses.
Details of the financial
instruments used
are set out in note 18 to the group financial
movements above.
In order to hedge its exposure to US dollar
statements.
revenues in its UK businesses, a series of forward
contracts are put in place to sell forward surplus
US dollars. The group hedges 80% of forecast
US dollar revenues for the coming 12 months
and up to 50% for a further six months.
Tax
The adjusted effective tax rate based on adjusted
profit before tax and excluding deferred tax
movements on intangible assets, prior year items
and exceptional items is 22% (2013: 22%). The
The group does not hedge the foreign exchange
group’s reported effective tax rate increased to
risk on the translation of overseas profits,
25% compared to 23% in 2013. A reconciliation
although it does endeavour to match foreign
to the underlying effective rate is set out in note
currency borrowings with investments and the
8 to the group financial statements.
Investor Intelligence
Network
The Investor Intelligence Network (IIN) is a private online
platform in which asset allocators around the world can
share information, research, and access workflow tools
that allow them to allocate capital. Over 1,600 institutions
use the network, spanning 98 countries and controlling a
total of $24.4 trillion in assets. IIN is linked to a separate
online community for sales executives working for asset
managers – The Manager Intelligence Network – in which
managers can view exclusive mandate searches posted
by allocators. The Family Office Network functions as a
separate, secure network exclusively for Family Offices.
Together
the networks provide
investors with a
worldwide perspective on investment and operational
issues, leveraging the views and experiences of their
peers around the world, as well as direct access to the
best investment managers.
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Euromoney Institutional Investor PLC www.euromoneyplc.com Strategy and Performance
Strategic Report
29
CORPORATE AND SOCIAL
RESPONSIBILITY
The group is diverse and operates through a
For instance, the group’s two biggest print
completed by ICF International. This exercise
contracts are outsourced to companies which
has been undertaken every year since 2007
have environment management
systems
using the widely recognised GHG protocol
large number of businesses in many locations.
compliant with the ISO 14001 standard. The
methodology developed by the World Resource
Each business provides important channels of
paper used for the group’s publications is
Institute and the World Business Council for
communication to different sections of society
produced from pulp obtained from sustainable
Sustainable Development. Last year, the group’s
throughout the world. The success of the
forests, manufactured under strict, monitored
carbon footprint was restated in order to
group’s businesses owes much to understanding
and accountable environmental standards.
account for material changes to the conversion
and engaging with the communities they serve
both locally and globally.
The group is not a heavy user of energy; however,
it does manage its energy requirements sensibly
reporting purposes.
factors provided by Defra
for company
The paragraphs below provide more detailed
using
low-energy office equipment where
The directors are committed to reducing
explanations on key areas of corporate
responsibility.
possible and using a common sense approach
to office energy management.
the group’s absolute carbon emissions and
managing its carbon footprint. The company,
Environment
The group does not operate directly
in
Each office within the group is encouraged
to reduce waste, re-use paper and only print
industries where there is the potential for
documents and emails where necessary. The
serious industrial pollution. It does not print
main offices across the group also recycle
products in-house or have any investments
waste where possible. This year the UK, US and
in printing works. It takes its environmental
Canadian offices recycled 218,000kg of paper
responsibility seriously and complies with all
and card, which is equivalent to more than
relevant environmental laws and regulations
2,400 trees.
in each country in which it operates. Wherever
economically feasible, account is taken of
environmental issues when placing contracts
with suppliers of goods and services and these
suppliers are regularly reviewed and monitored.
Greenhouse Gas (GHG) reporting
The company, as part of the wider Daily Mail and
General Trust plc group (DMGT), participates in
a DMGT group-wide carbon footprint analysis
GREENHOUSE EMISSION STATEMENT
as part of the wider DMGT group, committed
to reducing its absolute carbon emissions by
10% from the baseline year of 2007 by the
end of 2012. The targeted 10% reduction
was achieved two years early. In 2012 the
company, as part of the wider DMGT group, set
a challenging new target to reduce its carbon
footprint relative to revenue by 10% from the
2012 base by the end of 2015.
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
Consistency with the financial statements
Assessment methodology
Intensity ratio
2012
Operational control
All entities and facilities either owned or under operational control
The only variation is that leased properties, under operational control,
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
23612.04 - 17 December 2014 12:23 PM - Proof 8
Annual Report and Accounts 2014 30
Strategic Report
continued
GREENHOUSE GAS EMISSION SOURCE
2014
2013
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
500
3,300
3,800
8,300
12,100
1.2
8.1
9.3
20.4
29.7
600
3,100
3,700
7,700
11,400
1.5
7.7
9.2
19.0
28.2
Employees
One of the group’s strategic priorities is to
The group is an equal opportunity employer.
The whistle-blowing policy is updated regularly
It seeks to employ a workforce which reflects
and is reviewed by the audit committee.
retain and foster an entrepreneurial culture.
the diverse community at
large, because
Employees are encouraged to think creatively,
the contribution of the individual is valued,
be entrepreneurial and innovative, and to
irrespective of sex, age, marital status, disability,
deliver organic growth. As a decentralised
sexual preference or orientation, race, colour,
business, people are empowered not only to
religion, ethnic or national origin. It does not
deliver the best for their business, but to give
discriminate in recruitment, promotion or other
back to the communities in which they live and
employee matters. The group endeavours
work to the greater benefit of the group as a
to provide a working environment free from
whole.
unlawful discrimination,
victimisation or
Human rights and health and safety
requirements
The group is committed to the health and
safety and the human rights of its employees
and communities in which it operates. Health
and safety issues are monitored to ensure
compliance with all local health and safety
regulations. External health and safety advisers
are used where appropriate. The UK businesses
benefit from a regular assessment of the
Diversity
The board believes that diversity is important for
board effectiveness. However, diversity is much
harassment.
Quality and integrity of employees
The competence of people is ensured through
working environment by experienced assessors
and regular training of all existing and new UK
more than an issue of gender, and includes a
high recruitment standards and a commitment
employees in health and safety matters.
diversity of skills, experience, nationality and
to management and business skills training.
background. Diversity will continue to be a
The group has the advantage of running
key consideration when contemplating the
external training businesses and uses this in-
composition and refreshing of the board as
house resource to train cost effectively its
well as senior and wider management. The
employees on a regular basis. Employees are
board recognises that while the overall balance
also encouraged actively to seek external
of gender is good within the group, with 47%
training as necessary.
of employees being female (2013: 49%), there
is still more work to be done to fulfil overall
diversity ambitions.
100
80
60
40
20
0
Male
Female
Board
14
Executive
committee
17
Permanent
employees
2,191
High-quality and honest personnel are an
essential part of the control environment.
The high ethical standards expected are
communicated by management and through
the employee handbook which is provided
to all employees. The employee handbook
includes specific policies on matters such as
the use of the group’s information technology
resources, data protection policy, the UK Bribery
Act, and disciplinary and grievance procedures.
The group operates an intranet 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 managed whistle-blowing hotline.
Disabled employees
It is the group’s policy to give full and fair
consideration to applications for employment
from people who are disabled; to continue,
wherever possible, the employment of, and
to arrange appropriate training for, employees
who become disabled; and
to provide
opportunities for the career development,
training and promotion of disabled employees.
Social investment
The group continues to expand its charitable
activities and raised over £0.5 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.
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Euromoney Institutional Investor PLC www.euromoneyplc.com Strategy and Performance
Strategic Report
31
The group works and partners with recognised
The group also tries to adopt a company-wide
The charities:
charitable organisations that have expertise
charity and support that for a year or more. The
●●
should be of a size where the donation will
within certain sectors, thus ensuring that
last such charity was Action Against Cancer
make an impact;
the implementation and management of a
for which Euromoney managed to raise over
●● may be focused on any part of the world
charitable project is carried out efficiently and
£1 million in 2013. The group is going through
(the group’s most recent efforts have been
that donated funds reach the communities at
a selection process to find a new charity
focused on Africa and before that India);
which the charitable cause is aimed. At the
to support for the next 12 to 18 months.
●●
have some proximity to what Euromoney
same time, the charity committee is careful
Employees have been requested to nominate
does – education, training, literacy; and
to address the sustainability aspects of each
charities which satisfy the following guidelines:
●● must be registered.
charitable project to ensure a long lasting
beneficial impact.
Projects that the group has supported in the last year include:
Action Against Cancer (AAC)
The company, its employees and many of its clients last year donated over £1 million to AAC, which has now spent
£365,000 of the funds raised on research during 2014. The next six months will be a significant period for its
research and AAC expects to spend an additional £350,000 during this time.
AAC had found that a particular part of the LMTK3 protein is responsible for most of its catalytic or cancer promoting
activity. AAC has now begun the development of a specific assay to discover ‘hit’-drug compounds to inhibit LMTK3
activity.
AAC is now optimising various protocol conditions before proceeding with a major drug compound screening
experiment. The hope is that this will identify a small number of drug compounds that inhibit LMTK3. AAC will then
look to chemically modify these compounds to create the most accurate treatment possible to inhibit the LMTK3
whilst avoiding serious side effects.
This first drug screening of LMTK3 is planned for February so 2015 will be an exciting year for this project. AAC has
said that the scale of the drug screening and the depth with which it is researching the role of LMTK3 would not
have been possible without Euromoney’s support.
Water and Sanitation, Kechene, Addis Ababa, Ethiopia
Since 2011, Euromoney has enabled 19,000 people in Kechene’s District 5, to have access to clean water and
hygiene education. This work is having a positive impact on reducing cases of diarrhoea in particular. With a
new grant of £100,000 from Euromoney and an additional £10,000 from DMGT, AMREF Health Africa can now
implement the next phase of this work, creating new water facilities to address a continued need in this district of
Kechene and extending this work for the first time into a neighbouring district. When complete, 33,600 people
will have benefited from the work in this phase. This new phase has been underway for six months, and AMREF is
pleased with the progress so far.
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Annual Report and Accounts 2014 32
Strategic Report
continued
Water, outside Mombasa, Kenya
Euromoney has been supporters and partners of The Haller Foundation since 2010. In this time it has funded 23
small-scale projects supporting communities living outside Mombasa, Kenya in the building of community rain-fed
dams, community wells and bio-loos, as well as the provision of farmer training modules at Haller’s innovative
Demonstration Farm at Mtopanga. Many of these communities are on their way to achieving self-sustainability.
The Haller Foundation has now developed a proprietary smartphone ‘App’ which combines proven sustainable
agricultural training programmes with cutting edge technological design, while considering the diverse needs of
different types of smallholder farmer. It is simple, graphic, visually rich and highly practical and has a choice of
language (English and Swahili) as well as an audio option for the illiterate giving every farmer access to knowledge.
In addition, it incorporates an e-commerce functionality that empowers users to buy and sell goods they produce
and develop a nano-economy.
The pilot App was launched in October 2014 and in 2015 Euromoney plans to work with Haller to raise funds to
rollout the App to 20,000 farmers and farming communities across Kenya.
Trachoma Project, South Omo, Ethiopia
Euromoney is funding a joint programme between Africa’s largest health charity, AMREF Health Africa and the
sight-saving charity, ORBIS. They will pool their considerable knowledge and expertise in these areas to eradicate
trachoma in the South Omo area of Ethiopia. This painful and debilitating disease affects two in every five children
in Ethiopia and leads to blindness if left untreated. To do this they will be delivering a World Health Organisation
strategy called SAFE, an innovative public health approach for treating and preventing trachoma. ORBIS will train
38 specialists to carry out 1,700 simple operations helping those with advanced symptoms, and will train health
workers to take part in mass distribution of a drug called Zithromax which will enable prevention and treatment of
early-stage disease. AMREF Health Africa will install water facilities to back up the surgery and antibiotics as well as
help prevent other diseases from spreading. Overall 149,214 community members will benefit from water, sanitation
and hygiene improvement.
Little Rock School, Kibera, Nairobi, Kenya
This project involved 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 new school has 16 classrooms, a computer and physiotherapy rooms,
and kitchens. The school caters for over 350 full-time pupils (one-third of whom are disabled) and over 200 after-
school pupils, and targets orphaned and special needs children. The coordination of Little Rock’s funding is carried
out by AbleChildAfrica, a UK headquartered charity which specialises in advocating for and supporting disabled
children and young people in East Africa.
In November 2013, it was immensely satisfying to see the first 80 children graduate from the new Little Rock school
and enter primary education in Nairobi, and a further 100 children are expected to graduate at the end of 2014. The
school’s operations are on a 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 children’s’ parents as all the
pupils live in very poor conditions. Euromoney continues to help with part of the funding and the group’s employees
have played an active role in helping to fund some of the operating costs of Little Rock.
High Water Women Backpack Program
This project helps thousands of children start the school year ready to learn by providing fully supplied backpacks for
children in need. Institutional Investor raised US$165,000 at its annual awards dinner and helped reach the charity’s
goal of providing 12,500 children with fully supplied backpacks.
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Euromoney Institutional Investor PLC www.euromoneyplc.com Strategy and Performance
Strategic Report
33
FTSE 4 Good
FTSE Group
confirms
that
Euromoney
Forward-looking statements
Certain statements made in this document
The Strategic Report has been prepared for
the group as a whole and therefore focuses
Institutional
Investor
PLC
has
been
are forward-looking. Such statements are
primarily on those matters which are significant
independently assessed according
to
the
based on current expectations and are subject
to Euromoney Institutional Investor PLC and
FTSE4Good criteria, and has satisfied the
to a number of risks and uncertainties that
its subsidiary undertakings when viewed as a
requirements to become a constituent of the
could cause actual events or results to differ
whole. It has been prepared solely to provide
FTSE4Good Index Series. FTSE4Good is an equity
materially from any expected future events or
additional
information to shareholders to
index series designed to facilitate investment
results referred to in these forward-looking
assess the company’s strategy and the potential
in companies that meet globally recognised
statements. Unless otherwise required by
for that strategy to succeed, and the Strategic
corporate responsibility standards. Companies
applicable
law,
regulation or accounting
Report should not be relied upon by any other
in the FTSE4Good Index Series have met
standards, the directors do not undertake any
party for any other purpose.
stringent environmental, social and governance
obligation to update or revise any forward-
criteria, and are positioned to capitalise on the
looking statements, whether as a result of new
benefits of responsible business practice.
information, future development or otherwise.
On behalf of the board
Nothing in this document shall be regarded as
a profit forecast.
Christopher Fordham
Managing director
November 19 2014
CEIC
CEIC China Discovery, the first of a new group of web-
based CEIC products, was launched in September
2014. China Discovery focuses on pre-built insights
and analytics and allows CEIC to expand its business
beyond its core client base with products targeted
specifically at corporations.
23612.04 - 17 December 2014 12:23 PM - Proof 8
Annual Report and Accounts 2014 34
Board of Directors
PR Ensor, 66 ‡
Chairman and chairman of the
nominations committee
Appointed to the board: 1983
B AL-Rehany, 57
Executive director
Appointed to the board: 2009
ART Ballingal, 53
Independent non-executive director
Appointed to the board: 2012
Bashar AL-Rehany is chief executive officer
Andrew Ballingal is Chief Executive and Chief
Richard Ensor joined the company in 1976 and
and a director of BCA Research, Inc. which he
Investment Officer of Ballingal
Investment
was appointed managing director in 1992 and
joined in January 2003. Euromoney acquired
Advisors (BIA), an independent investment firm
chairman in 2012. He is an outside member of
BCA Research, Inc. in October 2006.
based in Hong Kong, which advises two Asia
the Finance Committee of Oxford University
Press.
CHC Fordham, 54 ‡
Managing director
Appointed to the board: 2003
Christopher Fordham joined the company in
2000 and was appointed managing director in
2012. He was previously the director responsible
for acquisitions and disposals as well as running
some of the company’s businesses.
NF Osborn, 64
Executive director
Appointed to the board: 1988
Neil Osborn joined the company in 1983. He is
the publisher of Euromoney.
CR Jones, 54
Finance director
Appointed to the board: 1996
The Viscount Rothermere, 46 ‡
Non-executive director
Appointed to the board: 1998
The Viscount is chairman of Daily Mail and
General Trust plc.
Sir Patrick Sergeant, 90 ‡
Non-executive director and president
Appointed to the board: 1969
Sir Patrick 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.
JC Botts, 73 †‡§
Non-executive director and chairman of
the remuneration committee
Appointed to the board:1992
John Botts is senior adviser of Allen & Company
Colin Jones is a chartered accountant. He
in London, a director of Songbird Estates plc
Pacific hedge funds. He has lived in Asia for
over 20 years and worked in the Asia Pacific
investment market at various firms before
founding BIA in 2002. He has over 20 years of
experience as an advisor, investor, and partner
in hedge funds. Since 2008, he has served as a
member of the Euromoney Institutional Investor
PLC Asia Pacific Advisory Board.
TP Hillgarth, 65 §
Independent non-executive director
Appointed to the board: 2012
Tristan Hillgarth has over 30 years of
experience in the asset management industry
having been a director of Jupiter Asset
Management for eight years and before
that at Invesco where he held several senior
positions including CEO of Invesco’s UK and
European business. He is a non-executive
director of JPMorgan Overseas Investment
Trust PLC.
joined the company in July 1996 from Price
and a director of several private companies. He
† Member of the remuneration committee
Waterhouse, and was appointed finance
was formerly non-executive chairman of United
director in November 1996.
Business Media plc.
‡ Member of the nominations committee
§ Member of the audit committee
DE Alfano, 58
Executive director
Appointed to the board: 2000
MWH Morgan, 64 †‡
Non-executive director
Appointed to the board: 2008
Diane Alfano joined Institutional Investor LLC in
1984. She is managing director of Institutional
Investor’s conference division and a director and
chairman of Institutional Investor LLC.
Martin Morgan was appointed chief executive
of Daily Mail and General Trust plc in 2008.
He was previously chief executive of DMG
Information.
JL Wilkinson, 49
Executive director
Appointed to the board: 2007
Jane Wilkinson joined the company in 2000.
During the year she returned to London to
take on the role of managing director of the
training division. She was previously group
marketing director, CEO of
Institutional
Investor’s publishing activities and president of
Institutional Investor LLC.
DP Pritchard, 70 †§
Independent non-executive director and
chairman of the audit committee
Appointed to the board: 2008
David Pritchard 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.
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Euromoney Institutional Investor PLC www.euromoneyplc.com Governance
Directors’ Report
35
Directors’ Report
The Directors’ Report comprises pages 35 to
Following best practice under the September
45 of this report (together with the sections of
2012 UK Corporate Governance Code and
Share capital
Details of the company’s share capital are given
the Annual Report incorporated by reference).
in accordance with the company’s Articles of
in note 22 to the group financial statements.
Some of the matters required by legislation
Association, all directors submit themselves for
The company’s ultimate controlling party is
have been included in the Strategic Report
re-election annually. Accordingly, all directors
given in note 30. The company’s share capital
(pages 7 to 33) as the board considers them
will retire at the forthcoming AGM and, being
is divided into ordinary shares of 0.25 pence
to be of strategic importance. Specifically these
eligible, will offer themselves for re-election.
each. Each share entitles its holder to one vote
are:
In addition, in accordance with the September
at shareholders’ meetings and the right to
●— future business developments;
2012 UK Combined Code on Corporate
receive one share of the company’s dividends.
●— principal risks; and
Governance, before the re-election of a non-
●— corporate and social responsibility (including
executive director, the chairman is required to
diversity).
Group results and dividends
The group profit for the year attributable
to equity holders of the parent amounted
to £75.3 million (2013: £72.6 million). 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 directors
recommend a final dividend of 16.00 pence per
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 AGM and,
being eligible following a formal performance
evaluation by the chairman, offer themselves
for re-election.
ordinary share (2013: 15.75 pence), payable
Details of the interests of the directors in the
on Thursday February 12 2015 to shareholders
ordinary shares of the company and of options
on the register on Friday November 28 2014.
held by the directors to subscribe for ordinary
This, together with the interim dividend of 7.00
shares in the company are set out in the
pence per ordinary share (2013: 7.00 pence)
Directors’ Remuneration Report on pages 59
which was declared on May 15 2014 and paid
to 61.
on June 19 2014, brings the total dividend for
the year to 23.00 pence per ordinary share
(2013: 22.75 pence).
Board of directors
The company’s Articles of Association give
Employee Share Trust
The executive directors of the company together
with other employees of the group are potential
beneficiaries of the Euromoney Employee Share
Trust and as such, are deemed to be interested
power to the board to appoint directors from
in any ordinary shares held by the trust. The
time to time. In addition to the statutory
trust was established in February 2014 with
rights of shareholders to remove a director
the intention of purchasing ordinary shares in
by ordinary resolution, the board may also
the company, with a nominal value of £0.0025,
Authority to purchase and allot
own shares
At
the 2014 AGM,
the company was
authorised by shareholders to purchase up to
10% of its own shares and to allot shares up to
an aggregate nominal amount of £94,850. The
resolutions to renew this authority for a further
period will be put to shareholders at the 2015
AGM.
Significant shareholdings
As at November 19 2014, the company had
been notified of the following significant
interests:
Name of
holder
DMG
Charles
Limited
Nature
of
holding
Number
of shares
% of
voting
rights
Direct 85,838,458
66.99
Relationship deed
The company and Daily Mail and General
Trust plc, the parent company of DMG Charles
Limited entered into a relationship deed on July
16 2014 in accordance with the Listing Rules
and have acted in accordance with its terms
remove a director where 75% of the board give
to satisfy share awards under CAP 2014
since execution.
written notice to such director. The Articles of
approved by shareholders at the 2014 AGM.
Association themselves may be amended by a
At September 30 2014, the trust’s shareholding
special resolution of the shareholders.
The directors who served during the year are
listed on page 54. The directors’ interests are
given on page 61. In February 2014, DC Cohen
resigned as an executive director with effect
from September 30 2014.
totalled 1,747,631 shares, acquired for a
consideration of £21.5 million (see Statement
of Changes in Equity) and representing 1.4% of
the company’s called up ordinary share capital.
No share awards have vested during the year as
the performance criteria of the CAP 2014 have
not yet been met. Refer to pages 57 and 58 of
the Directors’ Remuneration Report for further
information.
Directors’ indemnities
The company has directors’ and officers’ liability
and corporate reimbursement insurance for
the benefit of its directors and those of other
associated companies. This insurance has been
in place throughout the year and remains in
force at the date of this report.
23612.04 - 17 December 2014 12:23 PM - Proof 8
Annual Report and Accounts 2014 ●●
each of the directors has taken all the
●— there are no restrictions on voting rights;
steps that he/she ought to have taken as
●— the directors are not aware of any
a director to make himself/herself aware of
agreements between holders of securities
any relevant audit information (as defined)
that may result in restrictions on the transfer
and to establish that the company’s auditor
of securities or on voting rights;
is aware of the information.
●— the company has a number of agreements
36
Directors’ Report
continued
Political donations
No political donations were made during the
year (2013: £nil).
Post balance sheet events
Events arising after September 30 2014
are set out in note 29 to the group financial
statements.
Going concern
The results of the group’s business activities,
This confirmation is given and should be
interpreted in accordance with the provisions
of s418 of the Companies Act 2006.
together with the factors likely to affect its
In 2014 the company conducted a tender for
future development, performance and financial
the group statutory audit. More information
position are set out in the Strategic Report on
on the tender process can be found on
pages 7 to 33.
The financial position of the group, its cash
flows and liquidity position are set out in the
Strategic Report on pages 26 to 28. The group’s
debt is provided through a dedicated US$160
million multi-currency borrowing facility from
Daily Mail and General Trust plc (DMGT) which
expires at the end of April 2016 (see note 19 to
the group financial statements).
The group’s forecasts and projections, after
taking account of reasonably possible changes
in trading performance, show that the group
should be able to operate within the level and
page 44. Following the tender process the
board
took
the decision
to
recommend
PricewaterhouseCoopers LLP as the company’s
new statutory auditor. A resolution to appoint
PricewaterhouseCoopers LLP and to authorise
the audit committee
to determine
their
remuneration will be proposed at the 2015
AGM.
Annual general meeting
The company’s next AGM will be held on
January 29 2015.
Additional disclosures
Pursuant to s992 of the Companies Act 2006,
covenants of its current borrowing facility.
which implements the EU Takeovers Directive,
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.
Auditor
In the case of each of the persons who is a
director of the company at November 19 2014:
●●
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 auditor is unaware;
and
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;
●— there are no people who hold securities
carrying special rights with regard to control
of the company;
●— the company’s employee share schemes do
not give rights with regard to control of the
company that are not exercisable directly by
employees;
23612.04 - 17 December 2014 12:23 PM - Proof 8
that take effect, alter or terminate upon
a change of control of the company,
such as commercial contracts, bank loan
agreements, property lease arrangements,
directors’ service agreements and employee
share plans. None of these agreements is
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.
Directors’ responsibilities
The directors are responsible for preparing the
annual report and the financial statements in
accordance with applicable law and regulations.
Company law requires the directors to prepare
financial statements for each financial year.
Under that law the directors are required
to prepare the group financial statements
in accordance with
International Financial
Reporting Standards
(“IFRSs”) as adopted
by the European Union and Article 4 of the
IAS Regulation and have elected to prepare
the parent company financial statements in
accordance with United Kingdom Generally
Accepted Accounting Practice (United Kingdom
Accounting Standards and applicable law).
Under company law the directors must not
approve the accounts unless they are satisfied
that they give a true and fair view of the state
of affairs of the company and of the profit or
loss of the company for that period.
Euromoney Institutional Investor PLC www.euromoneyplc.com Governance
Directors’ Report
37
In preparing the parent company financial
●● make an assessment of the company’s
●●
the Strategic Report and the Directors’
statements, the directors are required to:
ability to continue as a going concern.
Report
include a fair review of the
●●
select suitable accounting policies and
apply them consistently;
●● make
judgements
and
accounting
estimates that are reasonable and prudent;
●●
state whether applicable UK Accounting
Standards have been followed, subject
to any material departures disclosed and
explained in the financial statements; and
●●
prepare the financial statements on the
going concern basis unless it is inappropriate
to presume that the company will continue
in business.
In preparing the group financial statements,
International Accounting Standard 1 requires
that directors:
●●
properly select and apply accounting
policies;
●●
present information, including accounting
policies, in a manner that provides relevant,
reliable, comparable and understandable
information;
●●
provide
additional disclosures when
compliance with the specific requirements
in IFRSs are insufficient to enable users
to understand the impact of particular
transactions, other events and conditions
on the entity’s financial position and
financial performance; and
The directors are responsible for keeping
adequate
accounting
records
that
are
sufficient to show and explain the company’s
transactions and disclose with reasonable
accuracy at any time the financial position
of the company and enable them to ensure
that the financial statements comply with the
Companies Act 2006. They are also responsible
for safeguarding the assets of the company
and hence for taking reasonable steps for the
prevention and detection of fraud and other
development and performance of the
business and the position of the company
and the undertakings included in the
consolidation taken as a whole, together
with a description of the principal risks and
uncertainties that they face.
●●
this annual report and accounts, taken as a
whole, is fair, balanced and understandable
and provides the information necessary
for shareholders to assess the company’s
performance, business model and strategy.
irregularities.
On behalf of the board
The directors are
responsible
for
the
maintenance and integrity of the corporate and
financial information included on the company’s
website. Legislation in the United Kingdom
governing the preparation and dissemination of
financial statements may differ from legislation
in other jurisdictions.
Each of the directors confirms that to the best
of their knowledge:
●●
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
Christopher Fordham
Director
November 19 2014
Colin Jones
Director
November 19 2014
23612.04 - 17 December 2014 12:23 PM - Proof 8
Annual Report and Accounts 2014 38
Corporate Governance
The Financial Reporting Council’s 2012 UK
The board meets every two months and there
Corporate Governance Code (“the Code”) is
is frequent contact between meetings. Board
Nominations committee
The nominations committee is responsible
part of the Listing Rules (“the Rules”) of the
meetings take place in London, New York,
for proposing candidates for appointment
Financial Conduct Authority. The paragraphs
Montreal and Hong Kong, and occasionally in
to the board having regard to the balance of
below and in the Directors’ Remuneration
other locations where the group has operations.
skills, structure and composition of the board
Report on pages 46 to 66 set out how the
The board has delegated certain aspects of the
and ensuring the appointees have sufficient
company has applied
the principles
laid
group’s affairs to standing committees, each
time available to devote to the role. The
down by the Code. The company continues
of which operates within defined terms of
committee comprises PR Ensor
(chairman
substantially to comply with the Code, save
reference. Details of these are set out below.
of the committee), CHC Fordham and four
for the exceptions disclosed in the Directors’
However, to ensure its overall control of the
non-executive directors, being Sir Patrick
Compliance Statement on page 45.
group’s affairs, the board has reserved certain
Sergeant, The Viscount Rothermere, MWH
Directors
The board and its role
Details of directors who served during the year
are set out on page 54. In February 2014 DC
Cohen indicated his intention to resign as an
executive director with effect from September
30 2014. Following this change the board
comprised the chairman, managing director,
five other executive directors and seven non-
executive directors. Four of the seven non-
executive directors are not independent, one is
the founder and ex-chairman of the company,
matters to itself for decision. Board meetings
Morgan and JC Botts. The committee’s terms
are held to set and monitor strategy, identify,
of reference are available on the company’s
evaluate and manage material risks, to review
website at: www.euromoneyplc.com/reports/
trading performance, ensure adequate funding,
Nominationcommittee.pdf.
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.
Committees
Executive committee
The executive committee meets each month
The committee meets when required and
this year met three times as well as informal
discussions held at other times during the
year. The main purpose of the meetings was
to discuss potential non-executive candidates
and the succession planning for PR Ensor who
retires as the company’s chairman at the end of
financial year 2015.
two are directors of Daily Mail and General Trust
to discuss strategy, results and forecasts, risks,
plc (DMGT), an intermediate parent company,
possible acquisitions and disposals, costs, staff
The group’s gender diversity information is set
and one has served on the board for more than
numbers, recruitment and training, and other
out in the Strategic Report on page 30.
the recommended term of nine years under the
management issues. It also discusses corporate
Code.
There are clear divisions of responsibility
within the board such that no one individual
has unfettered powers of decision. The board,
although
larger
than average, does not
consider itself to be unwieldy and believes it
is beneficial to have representatives from key
areas of the business at board meetings. There
is a procedure for all directors in the furtherance
of their duties to take independent professional
advice, at the company’s expense. They also
have access to the advice and services of the
company secretary. In accordance with best
corporate governance practice under the 2012
UK Corporate Governance Code all directors
will submit themselves for annual re-election.
Newly appointed directors are submitted for
election at the first available opportunity after
their appointment.
and social responsibility including the group’s
various charity initiatives. It is not empowered
to make decisions except those that can be
made by the members in their individual
capacities as executives with powers approved
by the board of the company. It is chaired
by the group chairman and comprises all
executive directors plus the following divisional
directors: RP Daswani (Metal Bulletin); RCM
Garnett (Euromoney Conferences); L Gibson
(Euromoney Seminars and Metal Bulletin
Events); RG Irving (SRP and TelCap); BR Jones
(CTO); JG Orchard (Capital Markets Group);
AB Shale
(Asia); DRJ Williams
(Specialist
Finance); A Parente (CEIC); and A Marone
(Chief Development Officer). The discussions
of the committee are summarised by the group
chairman and reported to each board meeting,
together with recommendations on matters
reserved for board decisions.
Remuneration committee
The remuneration committee meets twice a year
and additionally as required. It is responsible for
determining the contract terms, remuneration
and other benefits of executive directors,
including performance-related incentives. This
committee also recommends and monitors the
level of remuneration for senior management
and overall,
including group-wide
share
option schemes. The composition of the
committee, details of directors’ remuneration
and interests in share options and information
on directors’ service contracts are set out in
the Directors’ Remuneration Report on pages
46 to 66. The committee’s terms of reference
are available on the company’s website at:
http://www.euromoneyplc.com/reports/
Remunerationcommittee.pdf.
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Corporate Governance
39
Audit committee
Details of the members and role of the audit
At least once a year the company’s chairman
The Viscount Rothermere and MWH Morgan
meets the non-executive directors without
are also executive directors of DMGT, an
committee are set out on page 42. The
the other executive directors being present.
intermediate parent company. However, the
committee’s terms of reference are available
The non-executive directors meet without the
company is run as a separate, distinct and
on the company’s website at: http://www.
company’s chairman present at least annually
decentralised subsidiary of DMGT and these
euromoneyplc.com/reports/Auditcommittee.
to appraise the chairman’s performance and on
directors have no involvement in the day-
pdf.
other occasions as necessary.
to-day management of the company. While
they bring valuable experience and advice to
the company, and the board does not believe
these non-executive directors are able to exert
undue influence on decisions taken by the
board, nor does it consider their independence
to be impaired by their positions with DMGT.
However, their relationship with DMGT means
they do not meet the Code’s definition of
independence.
Tax and treasury committee
The group’s tax and treasury committee
The board considers DP Pritchard, ART Ballingal
and TP Hillgarth to be independent non-
normally meets twice a year and is responsible
executive directors. JC Botts has been on the
for recommending policy to the board. The
board for more than the recommended term
the chairman,
committee members are
managing director and finance director of the
of nine years under the Code and the board
believes that his length of service enhances his
company, and the finance director and deputy
role as a non-executive director. However, due
finance director of DMGT. The chairman of
to his length of service, JC Botts does not meet
the audit committee is also invited to attend
the Code’s definition of independence.
tax and treasury committee 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.
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,
Details of the tax and treasury policies are set
due to his length of service, Sir Patrick Sergeant
out in the Strategic Report on pages 27 and 28.
does not meet the Code’s definition of
Non-executive directors
The non-executive directors bring both
independence.
The Viscount Rothermere has a significant
independent views and the views of the
shareholding in the company through his
company’s major shareholder to the board. The
beneficial holding in DMGT and because of this
non-executive directors who served during the
he is not considered independent.
year were The Viscount Rothermere, Sir Patrick
Sergeant, JC Botts, MWH Morgan, DP Pritchard
(independent), ART Ballingal (independent) and
TP Hillgarth (independent). Their biographies
can be found on page 34 of the accounts.
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Annual Report and Accounts 2014 40
Corporate Governance
continued
Board and committee meetings
The following table sets out the number of board and committee meetings attended by the directors during the year to September 30 2014:
Number of meetings held during year
Executive directors
PR Ensor – chairman
CHC Fordham – managing director
NF Osborn
DC Cohen (resigned September 30 2014)
CR Jones – finance director
DE Alfano
JL Wilkinson
B AL-Rehany
Non-executive directors
The Viscount Rothermere
Sir Patrick Sergeant
JC Botts
MWH Morgan
DP Pritchard
ART Ballingal
TP Hillgarth
Board
Executive
committee
Remuneration
committee
Nominations
committee
Audit
committee
Tax &
treasury
committee
6
6
6
6
4
6
6
6
6
6
2
6
6
5
6
6
11
11
11
11
10
11
10
11
11
–
–
–
–
–
–
–
2
–
–
–
–
–
–
–
–
–
–
2
2
2
–
–
3
3
–
–
–
–
–
–
–
3
1
3
3
–
–
–
3
–
–
–
–
–
–
–
–
–
–
3
–
3
–
3
2
2
1
–
–
2
–
–
–
–
–
–
–
2
–
–
Board and committee effectiveness
Each year the performance of the board and its committees is evaluated. The Code requires an externally facilitated evaluation of the board to be
concluded every three years. This year an external performance evaluation was conducted by a company independent to the group. A questionnaire
was sent to each of the directors seeking views on a broad range of subjects: the board’s mandate and effectiveness; composition and diversity;
corporate strategy and priorities; training; evaluation of individual performance; and committee effectiveness and communication to the board. This
was followed up with more detailed reviews with the directors to discuss areas identified for improvement. The outcome of the evaluation was reported
to the board. As part of the performance evaluation the board is 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.
In light of the review, the board considers the performance of each director to be effective and has concluded that the board and its committees provide
the effective leadership and control required. The board will continue to review its procedures, its effectiveness and development in the year ahead.
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Euromoney Institutional Investor PLC www.euromoneyplc.com Governance
Corporate Governance
41
Communication with
shareholders
The company’s chairman, together with the
During the year and up to the approval of
Executive management of risk is provided by
this annual report and accounts the board
a risk committee comprising the chairman,
has not identified nor been advised of any
managing director and finance director, which
board, encourages
regular dialogue with
failings or weaknesses in the group’s system of
reports to the board at each board meeting and
shareholders. Meetings with shareholders are
internal control which it has determined to be
is responsible for managing and addressing risk
held, both in the UK and in the US, to discuss
significant.
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 AGM. In line with best practice all
shareholders have at least 20 working days
notice of the AGM at which the executive
directors,
non-executive
directors
and
committee chairs are available for questioning.
The company’s chairman and finance director
report to fellow board members matters raised
by shareholders and analysts to ensure members
of the board, develop an understanding of the
investors’ and potential investors’ views of the
company.
Key procedures which the directors have
established with a view to providing effective
internal control, and which have been in place
throughout the year and up to the date of this
report, are as follows:
The board of directors
●●
the board normally meets six times a year to
consider group strategy, risk management,
financial
performance,
acquisitions,
business development and management
issues;
●●
the board has overall responsibility for the
group and there is a formal schedule of
matters specifically reserved for decision by
the board;
Internal control and risk
management
The board as a whole is responsible for the
●●
each executive director has been given
responsibility for specific aspects of the
group’s affairs;
oversight of risk, the group’s system of internal
●●
the board reviews and assesses the group’s
control and for reviewing its effectiveness.
principal risks and uncertainties at least
Such a system is designed to manage rather
annually;
than eliminate the risk of failure to achieve
●●
the board seeks assurance that effective
business objectives, and can only provide
reasonable and not absolute assurance
against material misstatement or loss. The
control is being maintained through regular
reports from business group management,
the
audit
committee
and
various
board has implemented a continuing process
independent monitoring functions; and
for identifying, evaluating and managing the
material risks faced by the group.
●●
the board approves the annual forecast
after performing a review of key risk
matters as they arise. In addition, the group
employs an
information security manager,
a data protection manager and a risk and
compliance officer as well as having the ability
to draw on the resources of DMGT’s risk and
assurance function should it be considered
necessary.
Investment appraisal
The managing director, finance director and
business group managers consider proposals
for acquisitions and new business investments.
Proposals beyond specified limits are put to
the board for approval and are subject to due
diligence by the group’s finance team and, if
necessary, independent advisors. 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. Controls and procedures
over the security of data and disaster recovery
are periodically reviewed and are subject to
The board has reviewed the effectiveness of
the group’s system of internal control and risk
management systems and has taken account of
material developments which have taken place
since September 30 2013. It has considered the
major business and financial risks, the control
environment and the results of internal audit.
Steps have been taken to embed internal
control and risk management further into
the operations of the group and to deal with
areas of improvement which have come to
management’s and the board’s attention.
factors. Performance is monitored regularly
by way of variances and key performance
internal audit.
indicators to enable relevant action to
be taken and forecasts are updated each
quarter. The board considers longer-term
financial projections as part of its regular
discussions on the group’s strategy and
funding requirements.
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Annual Report and Accounts 2014 42
Corporate Governance
continued
Internal audit
The group’s internal audit function is managed
Responsibilities
The committee meets at least three times each
by DMGT’s internal audit department, working
financial year and is responsible for:
Arriving at a position where initially the audit
committee, and then the board, are satisfied
with the overall fairness, balance and clarity of
closely with the company’s finance director.
●● monitoring the integrity of the interim
the report and accounts is underpinned by the
Internal audit draws on the services of the
report, the annual report and accounts and
following:
group’s central finance teams to assist in
other related formal statements, reviewing
●●
early preparation by management and
completing the audit assignments. Internal audit
accounting policies used and judgements
review by the committee of key components
aims to provide an independent assessment
applied;
of the annual report, particularly those
as to whether effective systems and controls
●●
reviewing the content of the annual
reflecting new disclosure and reporting
are in place and being operated to manage
report and accounts and advise the board
requirements;
significant operating and financial risks. It also
on whether, taken as a whole, it is fair,
●●
comprehensive
reviews
undertaken
aims to support management by providing cost
balanced and understandable and provides
by management, a sub-committee of
effective recommendations to mitigate risk and
the information necessary for shareholders
the directors and the auditor to ensure
control weaknesses identified during the audit
to assess the company’s performance,
consistency and overall balance;
process, as well as provide insight into where
business model and strategy;
●●
knowledge sharing by management of
cost efficiencies and monetary gains might
●●
considering the effectiveness of the group’s
key risks and matters likely to affect the
be made by improving the operations of the
internal financial control systems;
annual report through attendance by the
business. Businesses and central departments
●●
considering
the
appointment
or
chairman of the audit committee at the
are selected for an internal audit on a risk-
reappointment of the external auditor
annual internal audit planning meeting and
focused basis, after taking account of the
and to review their remuneration, both for
tax and treasury committee meetings held
risks identified as part of the risk management
audit and non-audit;
during the year as well as through the audit
process, the risk and materiality of each of the
●● monitoring and reviewing the external
committee chairman’s regular meetings
group’s businesses, the scope and findings of
auditor’s independence and objectivity and
with management and internal audit;
external audit work, and the departments and
the effectiveness of the audit process;
●●
a twice yearly review by the audit committee
businesses reviewed previously and the findings
●● monitoring and reviewing the resources
of key assumptions and
judgements
from these reviews. This approach ensures that
and effectiveness of internal audit;
made by management in preparation of
internal audit focus is placed on the higher
●●
reviewing the internal audit programme
the annual and interim reports as well as
risk areas of the group, while ensuring an
and receiving periodic reports on
its
considering significant issues arising during
appropriate breadth of audit coverage. DMGT’s
findings;
the year.
internal audit function reports its findings to
●●
reviewing the whistle-blowing arrangements
management and to the audit committee.
available to staff;
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 TP Hillgarth
(independent). Three of the four members are
●●
reviewing
the group’s policy on
the
employment of former audit staff; and
●●
reviewing the group’s policy on non-audit
fees.
Content of the annual report
and accounts – fair, balanced and
understandable
One of the key governance requirements
non-executive directors. All members of the
of a group’s financial statements is for the
committee have a high level of financial literacy,
report and accounts to be fair, balanced and
SW Daintith and TP Hillgarth are chartered
understandable. The co-ordination and review
accountants and members of the ICAEW, and
of the group-wide input to the annual report
DP Pritchard has considerable audit committee
and accounts is a sizeable exercise performed
experience.
within an exacting timeframe which runs
alongside the formal audit process undertaken
by the external auditor.
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Corporate Governance
43
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 2014 the committee
reviewed the following main issues:
Issue
Review
Accounting for acquisitions and disposals
The group acquired Infrastructure Journal and Mining Indaba and
The committee discussed the appropriateness of the life of the intangible
disposed of MIS Training during the year. The group also has acquisition
asset, and the methodology around and inputs into the calculation of
contingent commitments on previous acquisitions.
the amounts concerned.
Goodwill and other intangibles
The group has goodwill of £383.9 million and other intangible assets
The committee discussed the appropriateness of the life of the intangible
of £153.2 million. There were no impairments recognised in the year.
asset and the methodology around and inputs into the calculation
supporting the carrying value. The committee has also understood the
sensitivity analysis used by management in their review of impairment.
Revenue recognition
Judgement is exercised in relation to the cut-off for publications and
The committee discussed with management the internal controls in
events, the deferral of subscription revenues and the treatment of
place and the work the auditor had completed on revenue recognition.
voting, best efforts and commission share agreement revenues.
Taxation
The group is a multi-national group with tax affairs in many geographical
The committee discussed the deferred tax balances with the auditor and
locations. This inherently leads to a higher than usual complexity to the
management to establish how they were determined and calculated.
group’s tax structure and makes the degree of estimation and judgement
The chairman of the audit committee also attends the tax and treasury
more challenging.
Share-based payments
committee which provides valuable insight into the tax matters, related
provisions and helps establish the appropriateness of the recognition of
the deferred tax balances.
The group’s new long-term incentive schemes, CAP 2014 and CSOP
The committee discussed with management the assumptions used in
2014, were granted during the year. The fair value calculated using
calculating the fair value of the CAP 2014 and CSOP 2014 options at
an appropriate option pricing model at the grant date is expensed on
the date of grant.
a straight-line basis over the expected vesting period, based on the
estimate of the number of shares that will eventually vest. The final
award is subject to a number of performance tests which may change
The committee reviewed the estimated number of shares that will
eventually vest based on the latest forecasts.
the number of shares that will vest.
Significant provisions and accruals
The group continues to recognise significant provisions and accruals
The committee discussed with management and the auditor how the
including a provision for the impairment of trade receivables.
provision levels were determined and calculated. They also discussed
matters not provided against to establish if this was appropriate.
Presentation of the financial statements
Presentation of the financial statements, in particular the presentation of
The committee reviewed the financial statements and discussed with
the adjusted performance and the adjusting items.
management and the auditor the appropriateness of the adjusted items
including consideration of their consistency and the avoidance of any
misleading effect on the financial statements.
The committee is satisfied that all issues have been managed appropriately and in accordance with the relevant accounting standards and principles.
The committee was satisfied that, taken as a whole, the 2014 Annual Report and Accounts is fair, balanced and understandable.
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Annual Report and Accounts 2014 44
Corporate Governance
continued
External auditor
In 2013 given the length of Deloitte’s tenure
The committee would like to thank each firm
audit committee meeting, a summary of their
that participated in the tender and specifically
work and findings, the results of the internal
(incumbents since the last audit tender in
thank Deloitte on the board’s behalf for their
audit team’s follow up of completed reviews
1998) and the change to the Code in 2013,
significant contribution to the group over the
and a summary of assurance work completed
the committee indicated its intention to put
past 16 years.
the external audit contract out to tender. The
tender process was initiated in May 2014
and concluded in July 2014. From the 2015
financial year, if approved by shareholders,
PricewaterhouseCoopers LLP (PwC) will replace
Deloitte LLP as the company’s statutory auditor.
As part of its role in ensuring effectiveness,
the committee completed a review during
the tender process which focused on the
effectiveness, independence and objectivity
of the external audit. Furthermore, Deloitte
confirmed to the committee that it maintained
appropriate internal safeguards to ensure its
independence and objectivity. The committee
concluded that Deloitte remained independent
and the audit effective.
External audit tender process
A number of firms were approached to tender
for the audit. The list was based upon their
experience, industry skills and knowledge, their
ability to perform the audit to a high standard
and any pre-existing business relationships that
might affect their independence. The committee
held meetings with each firm individually and
each presentation was followed by an extensive
discussion with
the audit firm. Following
each meeting, the committee discussed the
presentation, the views communicated and the
perceived strengths and weaknesses of the team.
Effectiveness of internal financial
control systems
The committee invests time in meeting with
internal audit to better understand their work
and its outcome. At each meeting of the
committee internal audit present a detailed
report covering controls audited since the last
meeting, matters identified and updates to
any previous control issues still outstanding.
The committee challenges internal audit and
discusses these audits and matters identified
as appropriate. Internal audit supplement their
by other audit functions within the business;
technology audits; circulation audits; polls and
awards audits and peer reviews (as explained
above). Internal audit is involved in other risk
assurance projects including fraud investigation,
the annual fraud and bribery risk assessment,
information security and business continuity.
Internal audit is also subject to an external
review every five years, the results of which are
fed back to the committee. This external review
was last carried out in September 2013.
Non-audit work
The audit committee completes an annual
work through a series of peer reviews completed
assessment of the type of non-audit work
by finance people across the group but
permissible and a de minimis level of non-
independent from the business being audited.
audit fees acceptable. Any non-audit work
The peer reviews audit the operation of key
performed outside this remit is assessed and
internal controls which have been confirmed
where appropriate approved by the committee.
by the businesses as in place through an annual
Fees paid to Deloitte for audit services, audit
control standards sign-off. Internal audit review
related services and other non-audit services
the findings of this supplemental work and
are set out in note 4. During 2014 Deloitte did
present a summary to the committee at each
not provide significant non-audit services. The
audit committee meeting. This is challenged by
group’s non-audit fee policy is available on the
the committee and discussed as necessary.
company’s website (www.euromoneyplc.com/
Resources available to internal audit
and its effectiveness
The audit 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
reports/nonauditfee.pdf).
Annual Report and Accounts
The directors have responsibility for preparing
the 2014 Annual Report and Accounts and for
making certain confirmations concerning it. In
accordance with the Code provision C.1.1 the
board considers that 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. The board reached this
conclusion after receiving advice from the audit
committee.
After reviewing all the proposals, the committee
audit is able to scale up resource as required
held a separate meeting to discuss the merits
and draws on finance people across the wider
of each firm and their respective teams. It
DMGT group as well as regularly supplementing
considered the views of internal management,
its team through the use of specialists.
the likely level of disruption as a result of any
change, and the cost proposals presented by
each firm. After extensive debate the committee
agreed to propose to the board that PwC
be appointed as statutory auditor following
completion of the 2014 year end process and
that this appointment would be subject to
shareholder approval at the 2015 AGM.
The committee
is able
to monitor
the
effectiveness of internal audit through their
involvement in its focus, planning, process and
outcome. The committee approves the internal
audit plan and any revision to it during the year.
The chair of the committee is invited to attend
the initial internal audit planning meeting with
management. Internal audit presents, at each
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Corporate Governance
45
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 2014 with certain provisions of the Code as set out below. The company has, however, made significant strides over the past few
years to bring its board structure more in line with best practice. In particular, the number of executive directors has been reduced to seven, compared
to 14 in 2009, and two new independent non-executive directors were appointed in 2012. It is the company’s intention over time to get to a position
where the majority of its board comprises non-executive directors, even if not all are independent because of their relationship with DMGT.
Provision
Code principle
Explanation of non-compliance
A.4.1
Composition of the board
The board has not identified a senior independent director. JC Botts, although not independent due
to his length of service, acts as senior non-executive director.
B.1.2
Composition of the board
Less than half the board are independent non-executive directors. However, there are clear divisions
of responsibility within the board such that no one individual has unfettered powers of decision. The
board, although large, does not consider itself to be unwieldy and believes it is beneficial to have
representatives from key areas of the business at board meetings.
B.2.1
Composition of the
The nominations committee does not comprise a majority of independent non-executive directors.
nominations committee
The committee comprises four non-executive and two executive directors, none of whom can be
considered independent under the Code.
B.3.2
Terms and conditions
JC Botts, DP Pritchard, ART Ballingal and TP Hillgarth have terms and conditions of appointment.
of appointment of non-
However, The Viscount Rothermere, MWH Morgan and Sir Patrick Sergeant operate under the terms
executive directors
of their employment contracts with DMGT and Euromoney respectively.
C.3.1
Composition of the audit
The audit committee does not comprise at least three independent non-executives directors. The
committee
committee comprises four members, only two of whom can be considered independent under the
Code.
D.2.1
Composition of the
The remuneration committee does not comprise at least three independent non-executives directors.
remuneration committee
The committee comprises three non-executive directors, only one of whom can be considered
independent under the Code.
On behalf of the board
Richard Ensor
Chairman
November 19 2014
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Annual Report and Accounts 2014 46
Directors’ Remuneration Report
Report from the chairman of the remuneration committee
Information not subject to audit
Remuneration report contents
This report covers the reporting period from
The committee is a strong believer in long-
The
committee
also
focuses on
the
term incentives to drive profit growth and align
remuneration of the wider group and this
October 1 2013 to September 30 2014 and
the interests of executive management with
year approved an average group-wide salary
includes three sections:
●●
The report from the chairman of the
those of shareholders. The company’s Capital
Appreciation Plan (CAP), first introduced in
increase of 2% (excluding promotions). None
of the executive directors received an increase.
remuneration committee setting out the
2004, has been a key driver of the company’s
In approving the group salary increase, the
key decisions taken on executive and senior
management pay during the year;
growth since then with adjusted profit before
tax increasing more than fivefold from a base
committee ensured that the directors and local
management considered inflation in local areas
●●
The policy report which outlines the
of £21.3 million in 2003 to £116.2 million in
in which the group operates, the performance
remuneration policy
for
the year
to
2014.
September 2015; and
●●
The annual
implementation report on
remuneration including details of payments
made and outcomes for the variable pay
elements based on performance for the
year.
The CAP is a highly geared performance-
based share option scheme which directly
rewards executives for the growth in profits
of the businesses they manage, and links to
the delivery of shareholder value by satisfying
rewards in a mix of shares and cash. It aims
This report has been prepared in accordance
to deliver exceptional profit growth over the
with the relevant requirements of the Large
performance period and for this profit to be
and Medium-Sized Companies and Groups
maintained.
(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
proposed at the company’s AGM.
Report from the chairman of the
remuneration committee
The remuneration committee reviews the
A new CAP, CAP 2014 was approved by
shareholders at the 2014 AGM with a view to
driving further above-average profit growth
and to helping retain key employees. The
performance target for CAP 2014 requires the
group to generate profit growth of at least 10%
a year over a four-year period from a base of
profits achieved in 2013. If the CAP 2014 profit
target is achieved by 2017, CAP rewards will
remuneration and
incentive plans of the
vest in three tranches in February 2018, 2019
executive directors and other key employees
across the group as well as looking at the
and 2020, with the second and third tranches
subject to an additional RPI test as well as the
remuneration costs and policies of the group as
requirement for individual businesses to achieve
a whole. There were no changes made to the
at least 80% of the profits achieved in 2017.
salaries and incentives of the executive directors
This ensures that the profits of the group are
during financial year 2014.
The
committee
structures
remuneration
packages to encourage an entrepreneurial
maintained in relation to at least inflation and
the businesses continue to focus on sustainable
profit growth.
culture with a focus on profit growth alongside
CAP 2014 will cost the group, in accounting
tight cost control and risk management. This
terms, no more than £41 million over its life
generally means setting salaries below market
and will be satisfied with a maximum of 3.5
levels, with a significant part of a director’s
million ordinary shares and £7.6 million in
remuneration derived from variable profit
cash. As at September 30 2014, 1.75 million
driven incentives. The importance of variable
pay to each director’s total remuneration is
illustrated on page 56.
shares had been purchased in the market at a
cost of £21.5 million and it is expected that the
balance will be purchased over the remaining
life of the plan.
of the businesses they work for, micro and
macroeconomic factors, market rates for similar
roles, and the skills and responsibilities of the
individuals concerned. The increases proposed
by local management were focused on those
individuals who excelled in their roles and were
performing above expectations. This means
that strong performing employees received an
increase well above the average and conversely
those who were not meeting expectations
received no increase.
Remuneration committee
During the year the remuneration committee
comprised JC Botts (chairman), MWH Morgan,
and DP Pritchard (independent). All members
of the committee are non-executive directors
of the company. MWH Morgan is the chief
executive of Daily Mail and General Trust plc,
the group’s parent company. For the year under
review, the committee also sought advice and
information from the company’s chairman,
managing director and finance director. The
committee’s terms of reference permit its
members to obtain professional advice on any
matter, at the company’s expense, although
none did so in 2014. The group itself can use
external advice and information in preparing
proposals for the remuneration committee. It
does apply external benchmarking although
no material assistance from a single source was
received in 2014.
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Directors’ Remuneration Report
47
The key activities of the committee in the year included:
●●
●●
●●
●●
●●
●●
confirming that salaries of the executive directors would remain unchanged at April 1 2014;
approving the average annual pay increase for the group, effective from April 1 2014, of 2%;
approving the annual profit shares for the executive directors and senior management of the group for financial year 2014;
approving the vesting in February 2014 of the second tranche of awards under CAP 2010 following the satisfaction of the primary and additional
performance condition;
approving the grant of options under CAP 2014 to the executive directors;
approving the increase in the profit target under CAP 2014 following the acquisition of Mining Indaba.
Linking KPIs to remuneration
As explained in the Remuneration Policy Report on page 48, the group’s remuneration policies are designed to drive and reward earnings growth
and shareholder value. The KPIs set out on pages 14 and 15 of the Strategic Report similarly contribute to the growth in the group’s earnings and
shareholder value. These KPIs are integral to the setting of incentives for senior managers and others across the group.
Salary
and fees
£
175,500
375,000
130,863
115,700
265,000
132,882
180,000
231,740
1,606,685
Benefits
£
Profit Share
£
Pension
£
Total
£
1,416
1,771
1,416
1,771
1,771
8,130
45,656
1,096
63,027
4,375,610
480,935
237,451
334,775
640,800
623,265
103,194
357,896
7,153,926
22,918
37,500
9,399
15,855
39,750
3,986
17,982
6,191
153,581
4,575,444
895,206
379,129
468,101
947,321
768,263
346,832
596,923
8,977,219
Remuneration at a glance
2014
Executive directors
PR Ensor
CHC Fordham
NF Osborn
DC Cohen (resigned September 30 2014)
CR Jones
DE Alfano
JL Wilkinson
B AL-Rehany
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
structure for the remuneration of executive
sharing scheme that links the pay of executive
the Capital Appreciation Plan (CAP).
and non-executive directors together with
directors and key managers to the growth
details of how the policy is applied to each
in profits of the group or parts of the group.
component of remuneration. In accordance
This scheme is completely variable with no
with the Large and Medium-sized Companies
guaranteed floor and no ceiling. All those on
and Groups Accounts and Reports Regulations,
profit shares are aware that if profits rise, so
shareholders are provided with the opportunity
does their pay. Similarly if profits fall, so do their
to endorse the company’s remuneration policy
profit shares.
The CAP is a highly geared performance-
based share option scheme which directly
rewards executives for the growth in profits of
the businesses they manage, and links this to
the delivery of shareholder value by satisfying
rewards in a mix of shares in the company and
cash. The CAP has been a key factor in driving
through a binding vote. The first binding vote
on the company’s directors’ remuneration
policy was approved by shareholders at the
AGM on January 30 2014 and it is expected
that the policy will be resubmitted for approval
by shareholders at the AGM in January 2015.
Remuneration policy
The group believes in aligning the interests
To support the policy of profit sharing, the
the exceptional profit growth achieved by the
group
is divided
into approximately 100
company since it was introduced in 2004.
profit centres from which approximately 100
Further details of CAP 2010 and CAP 2014 are
directors and managers receive profit shares.
set out on pages 57 and 58.
The manager of each profit centre is paid a
profit share based on the profit centre’s profit
growth above a threshold each year. Each profit
centre is in turn part of a larger division and
The directors believe that these profit sharing
and share option arrangements contributed
significantly to the company’s success. They
align the interests of the directors and managers
with those of shareholders and are considered
an important driver of the company’s growth.
of management with those of shareholders.
each divisional director or executive director
It is the group’s policy to construct executive
has a profit share based on the division’s profit
remuneration packages such that a significant
growth. Profit sharing is closely aligned with the
part of a director’s remuneration is based on
group’s strategy in that it encourages managers
the growth in the group’s profits contributed by
and directors to grow their businesses, to invest
that director. Salaries and benefits are generally
in new products, to search for acquisitions, and
not intended to be the most significant part of
to manage costs and risks tightly.
a director’s remuneration.
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.
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Detailed remuneration arrangements of executive directors
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 though it has consulted its largest shareholder.
Basic salary
Purpose and link to
●●
Part of an overall pay package which seeks to keep fixed salary costs below market with salary generally not the most
strategy
significant part of a director’s overall package;
Operation
●●
●●
Reflect the individual’s experience, role and performance within the company.
Paid monthly in cash;
●● Normally reviewed by the remuneration committee in April each year.
Benchmarking
●●
The committee examines salary levels at FTSE 250 companies and other listed peer group companies to help determine
executive director pay increases.
Relationship to
●●
There is no prescribed maximum employee salary level. The approach to setting base salary increases across the group
employee salaries
takes into account performance of the individuals concerned, the performance of the business they work for, micro
and macroeconomic factors, and market rates for similar roles, skills and responsibility.
Benefits
Purpose and link to
●●
Basic benefits are provided but are not the most significant part of a director’s overall remuneration and are not linked
strategy
Operation
to performance, role or experience.
Benefits may include:
●●
●●
Private healthcare;
Life insurance;
●● Overseas relocation and housing costs.
Relationship to
●●
Benefits are available to all directors and employees subject to a minimum length of service or passing a probationary
employee benefits
period.
Benefit levels
●● All executive directors participate in the healthcare scheme offered in the country where they reside. There is no
prescribed maximum level of benefits.
Pensions
Purpose and link to
●●
Retirement benefits are provided as a retention mechanism and to reward long service.
strategy
Operation
●● 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 additional salary in lieu of the company’s pension contributions.
Relationship to
●● All directors and employees are entitled to participate in the same pension scheme arrangements applicable to the
employee pension
country where they work. The maximum employers’ contribution to a pension scheme is 15% of pensionable salary.
levels
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Directors’ Remuneration Report continued
Remuneration policy report continued
Profit shares
Purpose and link to
●●
Profit share links the pay of directors directly to the growth in profits of their businesses. It encourages each director to
strategy
grow their profits, to invest in new products, to search for acquisitions, and to manage costs and risks tightly;
Operation
●●
●●
●●
●●
●●
●●
●●
Profit shares are designed to maximise sustainable profits with no guaranteed floor and no ceiling;
Profit shares are expected to make up much of a 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 audit and to remuneration committee approval, and can be revised at any time
if the director’s responsibilities are changed;
●● Gains or losses on the disposal of capital assets, including subsidiaries and investments, are not included in profit
shares;
●●
The profit share of PR Ensor 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 changes in the company’s share
capital;
●● CHC Fordham and CR Jones receive a profit share linked to the adjusted pre-tax EPS of the group;
●● All other executive directors receive profit shares linked to the operating profits of the businesses they manage at fixed
rates on profits above various thresholds.
Relationship to
●●
Incentives, including profit shares, are an important part of the group culture. The directors believe they directly reward
employee incentive
good and exceptional performance. Most employees across the group have some incentive scheme in place.
schemes
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Directors’ Remuneration Report
51
Long-term incentive plans
Purpose and link to
●●
Share schemes are an important part of overall compensation and align the interests of directors and managers with
strategy
shareholders. They encourage directors to deliver long-term, sustainable profit growth.
Operation
●●
2014 Capital Appreciation Plan (CAP 2014)
At the company’s AGM in January 2014 the directors received approval for a new long-term incentive scheme
following the achievement of the performance conditions of CAP 2010, (see page 46). Awards under CAP 2014 are
granted to senior employees who have direct and significant responsibility for the profits of the group. Each CAP 2014
award 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 these awards.
The primary performance test under CAP 2014 requires the company to achieve an adjusted profit before tax (before
CAP costs) of £173.6 million by financial year 2017 (increased to £178.4 million for the acquisition of Mining Indaba).
This is equivalent to an average profit growth rate of at least 10% a year from a base in 2013 which the committee
decided was a sufficiently challenging target. Subject to the performance test being satisfied, rewards under CAP
2014 are expected to vest in three tranches in February 2018, 2019 and 2020.
The profit target under CAP 2014 will be adjusted in the event that any significant acquisitions or disposals are made
during the performance period. Awards are granted under CAP 2014 to senior employees of acquired entities who
have direct and significant responsibility for the profits of the group.
●●
2014 Company Share Option Plan (CSOP 2014)
At the company’s AGM, the directors also received approval for a new CSOP. The CSOP 2014 will be a delivery
mechanism for part of the CAP 2014 award. Awards are granted under the CSOP 2014 to senior employees who have
direct and significant responsibility for the profits of the group. Each CSOP 2014 option will enable each 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 Canada-based participant to purchase up to $100,000 of shares in the
company with reference to the market price of the company’s shares at the date of grant.
●●
Euromoney 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 £500 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 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.
Relationship to all
●● All employees based in the UK are entitled to participate in the Euromoney SAYE and DMGT SIP schemes. The CAP
employee long-
term incentive
schemes
2014 scheme is available only to senior employees across the group who have direct and significant responsibility for
the profits of their businesses. 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
will be agreed with
the
remuneration
Sir Patrick Sergeant provides for 12 months’
committee. In some exceptional cases there
expense allowance and an expense allowance
is determined by the board based on the time
may be an additional incentive paid to a director
up to the date of termination in the event of
commitment required by the non-executive
in the event of the director turning around a
incapacity.
directors, their role and market conditions.
non-performing business. The quantum of this
Each non-executive director receives a base fee
incentive will be dependent on the time taken
for services to the board with an additional fee
to turn the business around and the initial level
payable to the chairs of the remuneration and
of losses.
The remuneration committee seeks to minimise
Non-executive directors’ contracts can be
termination payments and believes these should
terminated by the company giving summary
be restricted to the value of remuneration for
notice, with the exception of Sir Patrick
the notice period. Directors’ service contracts
Sergeant who has a 12-month notice period.
are reviewed from time to time and updated
where necessary. A service contract terminates
automatically on the director reaching their
The directors’ service contracts are available
for shareholder inspection at the company’s
registered office.
Policy on payment for loss of
office
In the event of a termination of contract, an
executive director is entitled to 12 months’
salary, pension and a pro-rated profit share up
to the date of termination. On termination, an
executive director is not entitled to any payment
from the group’s CAP or 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.
Policy on claw backs
In the event of material misstatement relating
to any information used in determining the
amount of profit share, or gross misconduct by
an executive director, the board may claw back
profit share and long-term incentives previously
paid for a period of up to three years after the
year when the event happened.
Policy on directors holding equity
in the company
All executive directors are encouraged to
hold equity in the company, and all do.
Although there is no minimum equity holding
requirement, most of the directors have a
significant holding (see table on page 61) and
each has a holding valued in excess of their
annual salary.
New executive directors may be granted
awards under CAP 2014 if they have direct
and significant responsibility for the profits of
the group. New executive directors are also
entitled to participate in the Euromoney SAYE
and DMGT SIP schemes.
New non-executive directors appointed to the
board will receive a base fee in line with that
payable to other non-executive directors.
Directors’ service contracts
The company’s policy is to employ executive
directors on 12-month rolling service contracts.
audit committees. The non-executive directors
do not participate in any of the company’s
incentive schemes. The non-executive directors
receive reimbursement for reasonable expenses
incurred as part of their role as non-executive
directors.
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 company 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.
New executive directors will receive a salary
respective retirement age. Service contracts for
commensurate with
their
responsibilities,
all executive directors provide for 12 months’
likely to be below market average and not the
salary, pension and a pro-rated profit share up
most significant part of the director’s overall
to the date of termination. In the event the
remuneration package. The director will also be
contracts are terminated due to incapacity, the
offered the benefit of private healthcare. Other
contracts provide for six months’ salary, pension
benefits may include a relocation or housing
and pro-rated profit share up to the date of
allowance and compensation for
loss of
termination for all executive directors apart
earnings from previous employment which have
from NF Osborn and DE Alfano. The contract
been forfeited in order to join the company.
of NF Osborn provides for one month’s salary,
Where these exceptional circumstances apply
pension and a pro-rated profit share up to the
the remuneration committee would try to
date of termination. The contract of DE Alfano
match closely the compensation type foregone
provides for salary, pension and profit share
with that offered by the company.
earned up to the date of termination only.
New executive directors are expected to be paid
With the exception of Sir Patrick Sergeant, none
a profit share directly linked to the growth in
of the non-executive directors have a service
profits of the business they manage. There will
contract, although JC Botts, DP Pritchard,
be no floor or ceiling to the profit share. Profit
TP Hillgarth and ART Ballingal serve under a
share thresholds and the specific arrangements
letter of appointment. The service contract of
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Scenario charts for directors’ remuneration
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 for financial year 2014. The variable element of remuneration relates to the group’s profit
share schemes. The minimum profit share payable is zero. The maximum potential profit share was calculated assuming that profits achieved had been
20% higher, although profit shares have no ceiling.
PR Ensor
CHC Fordham
6,000
5,000
4,000
0
0
0
’
£
3,000
2,000
1,000
0
Minimum
NF Osborn
In line with
expectations
Actual
Maximum
500
400
0
0
0
’
£
300
200
100
0
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
Profit Share
Pension
Benefits
Salary
Profit Share
Pension
Benefits
Salary
1,600
1,400
1,200
1,000
0
0
0
’
£
800
500
400
200
0
Minimum
In line with
expectations
Actual
Maximum
Profit Share
Pension
Benefits
Salary
DC Cohen (resigned September 30 2014)
600
500
400
0
0
0
’
£
300
200
100
0
Minimum
In line with
expectations
Actual
Maximum
DE Alfano
1,000
0
0
0
’
£
800
600
400
200
0
Profit Share
Pension
Benefits
Salary
Profit Share
Pension
Benefits
Salary
Profit Share
Pension
Benefits
Salary
Minimum
In line with
expectations
Actual
Maximum
Minimum
In line with
expectations
Actual
Maximum
B AL-Rehany
JR Wilkinson
1,000
0
0
0
’
£
800
600
400
200
0
Profit Share
Pension
Benefits
Salary
500
400
300
200
100
0
0
0
’
£
Minimum
In line with
expectations
Actual
Maximum
0
8
0
Minimum
In line with
expectations
Actual
Maximum
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Annual Report and Accounts 2014 54
Directors’ Remuneration Report continued
Annual report on remuneration
Information subject to audit (pages 54 and 55)
The table below sets out the break-down of the single total figure of remuneration for each executive director in 2014 and 2013.
Single total figure of remuneration
Executive directors
PM Fallon (died October 14 2012)
PR Ensor¹
CHC Fordham²
NF Osborn³
DC Cohen (resigned September 30 2014)4
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
Total 2014
Total 2013
Salary
and fees
£
–
8,692
175,500
175,500
375,000
375,000
130,863
133,159
115,700
115,700
265,000
252,500
132,882
141,157
180,000
180,000
231,740
261,830
1,606,685
1,643,538
30,000
28,000
30,000
28,000
36,500
34,500
–
9,333
30,000
28,000
36,500
34,500
30,000
21,000
30,000
21,000
223,000
204,333
1,829,685
1,847,871
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
Benefits
£
Profit
share
£
Long-term
incentive
£
Pension
£
Total
£
–
1,823
1,416
1,019
1,771
1,274
1,416
1,019
1,771
1,274
1,771
1,274
8,130
8,960
45,656
97,300
1,096
1,491
63,027
115,434
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
63,027
115,434
–
246,009
4,375,610
4,544,828
480,935
648,025
237,451
336,695
334,775
221,878
640,800
670,111
623,265
644,389
103,194
125,610
357,896
599,433
7,153,926
8,036,978
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
7,153,926
8,036,978
–
–
–
–
–
585,468
–
452
–
108,350
–
454,720
–
180,976
–
261,818
–
606,825
–
2,198,609
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2,198,609
–
–
–
256,524
22,918
4,575,444
22,918
4,744,265
37,500
895,206
37,500
1,647,267
9,399
379,129
9,399
480,724
15,855
468,101
15,855
463,057
39,750
947,321
37,875
1,416,480
3,986
768,263
4,101
979,583
17,982
346,832
18,657
683,385
6,191
596,923
7,447
1,477,026
8,977,219
153,581
153,752 12,148,311
30,000
–
28,000
–
30,000
–
28,000
–
36,500
–
34,500
–
–
–
9,333
–
30,000
–
28,000
–
36,500
–
34,500
–
30,000
–
21,000
–
30,000
–
21,000
–
223,000
–
204,333
–
153,581
9,200,219
153,752 12,352,644
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●●
●●
Salaries and fees include basic salaries and any non-executive directors’ fees.
Benefits include private healthcare and dental cover for directors based in Canada and the US. The benefits figure for JL Wilkinson includes
£41,837 (2013: £88,332) of housing allowance. JL Wilkinson relocated from New York to London during the year and no longer receives a housing
allowance.
●●
The long-term incentive figures for 2013 represent the value of CAP 2004 share options, CAP 2010 share options, CSOP 2010 share options and
CAP 2010 cash awards where the performance criteria were met during the period. The value of these share options is derived by multiplying the
number of options by the market value of options at vesting and deducting the exercise cost of the options. The value of the CAP 2010 cash award
is the cash received.
●●
Pension amounts are those contributed by the company to pension schemes or cash amounts paid in lieu of pension contributions. From November
2013, NF Osborn received a cash allowance in lieu of company pension contributions.
1.
2.
The profit share of PR Ensor 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
2.97% (2013: 2.98%) to the adjusted pre-tax profits. In addition, PR Ensor is also entitled to 1.11% (2013: 1.12%) of adjusted pre-tax profit in excess of a threshold
of £42,846,402 (2013: £40,806,097).
The profit share of CHC Fordham is linked to the growth in the group’s adjusted pre-tax earnings per share (EPS) above a base pre-tax EPS. This base EPS increases by
5% a year and he receives £24,500 for every 1 pence increase in EPS above the base. For 2014, his base EPS was 70.9 pence (2013: 67.5 pence) and the adjusted
pre-tax EPS was 90.5 pence (2013: 94.0 pence).
3.
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;
4.
DC Cohen received a profit-share linked to the operating profits of the businesses he managed 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;
5.
CR Jones receives a profit share linked to the growth in adjusted pre-tax EPS of the group. A sum of £500 is payable for every percentage point that the adjusted pre-tax
EPS is above 11 pence and an additional sum of £800 is payable for every percentage point that the adjusted pre-tax EPS is above 20 pence;
6.
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%;
7.
JL Wilkinson’s role changed during the year. For the first half of the year she received 5% of adjusted profits above a threshold of US$8,341,050 for the US publishing
businesses she was responsible for. As group marketing director, she received an incentive based on the growth in the group’s subscription and delegate revenues above
certain thresholds. For the second half of the year she received 5% of adjusted profits above a threshold of £1,000,000 for the training businesses.
8.
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.
Non-executive directors
Each non-executive director receives a base fee for services to the board of £30,000 (2013: £28,000) with an additional fee of £6,500 payable to the
chairs of the remuneration and audit committees.
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Directors’ Remuneration Report continued
Annual report on remuneration continued
Information not subject to audit (pages 56 to 58)
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 (2013: £20,000)
from this role. This amount has not been included in his single figure of remuneration on page 54.
NF Osborn resigned during the year as a non-executive director of RBC OJSC, a Moscow-listed media company. During the year he retained earnings
of US$32,500 (2013: US$50,000) from this role. He also serves as an advisor to the boards of both DMG Events and dmgi, fellow group companies,
for which he received a combined fee of US$23,638 (2013: US$45,000). He no longer serves on the management board of A&N International Media
Limited and has not received a fee in the current year (2013: £25,000). These amounts have not been included in his single figure of remuneration on
page 54.
Variable pay
Of the total remuneration of the eight executive directors who served in the year, 81% was derived from variable profit shares, as illustrated in the
following graph:
PR Ensor
4%
CHC Fordham
NF Osborn
DC Cohen (resigned
September 30 2014)
CR Jones
DE Alfano
JL Wilkinson
B AL-Rehany
44%
36%
26%
29%
18%
39%
69%
Total
19%
Total (excluding PR Ensor)
35%
96%
56%
64%
74%
71%
82%
31%
61%
81%
65%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100
Fixed salary & benefits
Variable profit shares
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Adjusted pre-tax profits1
as a % of the primary
target
% reduction
in the
award pool
100
95.7
94.2
93.1
91.5
88.2
84.9
–
2.0
6.0
10.0
17.3
37.1
67.0
If the secondary performance condition is met
in the financial year ended September 30 2017
and the adjusted pre-tax profits1 in the financial
year ended September 30 2018 and/or 2019
exceeds the adjusted pre-tax profits1 for 2017
then an additional number of ordinary shares
and cash will be allocated to the award pool.
The number of ordinary shares and the amount
of cash will be equal to one-third of that which
would have been included in the award pool
for 2017 if the adjusted pre-tax profits had
been equal to 2018 and/or 2019.
Company Share Option Plan 2014
(CSOP 2014)
Shareholders approved the CSOP 2014 at the
AGM on January 30 2014. The CSOP 2014 was
approved by HM Revenue & Customs on March
31 2014.
Awards were granted under the CSOP 2014
on June 20 2014 to approximately 150 UK
and Canadian directors and senior employees
of the group who have direct and significant
responsibility for the profits of the group.
Each CSOP 2014 option enables each UK
participant to purchase up to 2,688 shares
and each Canadian participant to purchase
Company share schemes
Details of each director’s share options can be
found on pages 59 and 60.
Capital Appreciation Plan 2014
(CAP 2014)
CAP 2014 was approved by shareholders
at the AGM on January 30 2014 as a direct
replacement for CAP 2010.
Awards under CAP 2014 were granted in June
2014 to approximately 250 directors and senior
employees who have direct and significant
responsibility for the profits of the group.
Each CAP 2014 award comprises two equal
elements: an option to subscribe for ordinary
shares of 0.25 pence each in the company; and
a right to receive a cash payment. No individual
could receive an award over more than 5% of
the award pool. In accordance with the terms
a. Adjusted pre-tax profits1 for that financial
year equals or exceeds:
i.
if the primary performance condition
is satisfied, the primary target plus the
percentage growth in RPI from the start
of the initial vesting year to the start of
the relevant financial year; or
ii. if the primary performance condition is
not met but the secondary performance
condition is met, the adjusted pre-tax
profits1 for the financial year ending
September 30 2017 plus the growth in
RPI from October 1 2016 to the start of
the relevant financial year; and
b. the contribution
to growth of
that
participant does not fall by more than 20%
of that made in the initial vesting year.
of CAP 2014, no consideration was payable for
The third tranche will vest in the financial year
the grant of the awards.
following the second vesting year in which the
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,
subsequent conditions are satisfied.
Performance conditions
The primary performance condition requires
the group to achieve adjusted pre-tax profits1
of £173.6 million, from a 2013 base profit of
whereas participants whose businesses grow
£118.6 million, by no later than the financial
the most will receive the highest proportion of
year ending September 30 2017. Following the
the award.
acquisition of Mining Indaba, this profit target
has been increased to £178.4 million.
The award pool comprises a maximum of
3.5 million ordinary shares and cash of £7.6
The performance target for CAP 2014 requires
million, limiting the total accounting cost of
the group to generate profit growth of at
the scheme to £41 million over its life. Awards
least 10% a year (or RPI plus 5%, whichever is
will vest in three equal tranches, subject to
higher) over a four year period from a base of
the performance conditions, and lapse to the
profits achieved in 2013.
extent unexercised by September 30 2023.
Vesting
The first tranche will vest on satisfaction of the
primary performance condition, but no earlier
than February 2017.
The second tranche will vest in the February
following the initial vesting year in which the
following conditions (“subsequent conditions”)
are satisfied:
If the primary performance condition is not met
up to 8,963 shares in the company at a price
during the performance period, the awards will
of £11.16 per share, the market value at the
lapse at the end of the last financial year of the
date of grant. No consideration was payable
performance period unless adjusted pre-tax
profits1 are at least 84.9% of the primary target.
This is known as the secondary performance
for the grant of these awards. The options vest
and become exercisable at the same time as
the corresponding share award under the CAP
condition.
If the secondary performance
2014.
condition is met, the number of ordinary shares
and cash in the award pool will be reduced in
accordance with the table below to reflect the
extent to which the adjusted pre-tax profits1
have fallen short of the primary target.
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Annual report on remuneration continued
The CSOP 2014 has the same performance
vesting period be at least 75% of that achieved
All of
the executive directors’ options
criteria as CAP 2014 as set on page 57. The
in the year the first tranche of awards become
outstanding under this scheme were exercised
number of CSOP 2014 awards that vest
exercisable. The options lapse to the extent
during the year as set out on pages 59 and 60
proportionally reduce the number of shares
unexercised by September 30 2020.
of this report. The fair value per option granted
that vest under the CAP 2014. The CSOP is
effectively a delivery mechanism for part of
the CAP 2014 award. The CSOP 2014 options
have an exercise price of £11.16, which will be
satisfied by a funding award mechanism which
results in the net gain2 on these options being
delivered in the equivalent number of shares
to participants as if the same gain had been
delivered using CAP 2014 options. The amount
of the funding award will depend on the
company’s share price at the date of exercise.
The fair value per option granted and the
assumptions used to calculate its value are set
out in note 23.
Capital Appreciation Plan 2010
(CAP 2010)
CAP 2010 was approved by shareholders
at the AGM on January 21 2010 as a direct
replacement for CAP 2004. Each CAP 2010
award comprised two equal elements: an
option to subscribe for ordinary shares of 0.25
pence each in the 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
The number of options received under the
share award of CAP 2010 was reduced by
the number of options vesting from the 2010
Company Share Option Plan (see below and
note 23).
The fair value per option granted and the
assumptions used to calculate its value are set
out in note 23.
Company Share Option Plan 2010
(CSOP 2010)
Shareholders approved the CSOP 2010 at the
AGM on January 21 2010. The CSOP 2010 plan
was approved by HM Revenue & Customs on
June 21 2010.
Each CSOP 2010 option enabled each
participant to purchase up to 4,9723 shares in
the company at a price of £6.033 per share,
the market value at the date of grant. No
consideration was payable for the grant of
these awards. Any CSOP options that did not
fully vest in the first tranche of the CAP 2010
award vested at the same time as the second
tranche of an individual’s CAP award, but only
where the CSOP 2010 is in the money.
and the assumptions used to calculate its value
are set out in note 23.
SAYE
The group operates a 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 £500 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
pages 59 and 60 of this report.
DMGT SIP
DMGT, the group’s parent company, operates
a share incentive plan in which all UK-based
employees of the Euromoney group can
participate. Employees can contribute up to
£125 a month from their gross pay to purchase
DMGT ‘A’ shares. These shares are received
tax free by the employee after five years. The
executive directors who participated in this
CAP 2010, no consideration was payable for
The CSOP 2010 had the same performance
scheme during the year were PR Ensor and
the grant of the awards.
criteria as CAP 2010 as set out above. The
CR Jones, details of which can be found on
The award pool comprised 3,500,992 ordinary
shares with an option value (calculated at date
of grant using an option pricing valuation
model) of £15 million, and cash of £15 million,
limiting the total accounting cost of the scheme
to £30 million over its life. Awards vested in
two equal tranches. The first tranche became
exercisable in February 2013 on satisfaction of
the primary performance condition in 2012. The
second tranche became exercisable in February
2014 when the primary performance condition
was again satisfied in 2013. The vesting of the
second tranche was subject to an additional
performance condition which required the
profits of each business in the subsequent
number of CSOP 2010 awards that vested
proportionally reduced the number of shares
that vested under the CAP 2010. The CSOP was
effectively a delivery mechanism for part of the
CAP 2010 award. The CSOP 2010 options had
an exercise price of £6.033, which was satisfied
by a funding award mechanism which results in
the net gain2 on these options being delivered in
the equivalent number of shares to participants
as if the same gain had been delivered using
CAP 2010 options. The amount of the funding
award depended on the company’s share price
at the date of exercise.
page 62 of this report.
1. Adjusted pre-tax profits are before acquired
intangible amortisation, exceptional items, net
movements
in acquisition commitment and
deferred consideration, foreign exchange loss
interest charge on tax equalisation contracts,
foreign exchange on
restructured hedging
arrangements, and the cost of the CAP itself.
2. 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 multiplied by the
number of options exercised.
3. The Canadian version of the CSOP 2010 had a
grant date of March 2010 and an exercise price of
£5.01, the market value of the company’s shares
at the date of grant, and enabled each Canadian
participant to purchase up to 19,960 shares in the
company.
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Information subject to audit (pages 59 to 61)
Directors’ share options
Granted/
trued up
during year
Exercised
during year
At end
of year
Exercise
price
Date
from which
exercisable
Expiry
date
At start
of year
1,810
1,810
34,928
1,408
–
–
–
–
–
–
(34,928)
–
1,810 *
1,810
–
1,408 §
–
20,167
–
20,167 ^
£0.0025
PR Ensor
CHC Fordham
NF Osborn
DC Cohen (resigned
September 30 2014)
CR Jones
DE Alfano
JL Wilkinson
B AL-Rehany
Total
£4.97
Feb 01 15
Aug 01 15
£0.0025
£6.39
Exercised
Feb 01 16
Performance criteria
not satisfied
Performance criteria
–
Aug 01 16
Sept 30 23
£11.16
not satisfied
Sept 30 23
£6.03
£0.0025
£4.97
Exercised
Exercised
Feb 01 15
Performance criteria
–
–
Aug 01 15
£11.16
not satisfied
Sept 30 23
£0.0025
£0.0025
£4.97
£0.0025
Exercised
Performance criteria
–
not satisfied
Feb 01 15
Sept 30 20
Aug 01 15
Exercised
Performance criteria
not satisfied
Performance criteria
–
Sept 30 23
£0.0025
Exercised
Performance criteria
–
£0.0025
not satisfied
Sept 30 23
–
36,336
27
18
1,810
–
1,855
10,595
–
1,810
12,405
27,128
2,688
22,855
–
(4)
–
1,340
1,336
(4,131)
4,131
–
–
–
–
(34,928)
(27)
(14)
–
–
(41)
(6,464)
–
–
(6,464)
(27,128)
2,688 †
24,263
–
– ‡
1,810 *
1,340 †
3,150
–
4,131
1,810 *
5,941
–
17,145
–
28,020 ^
28,020
–
–
27,128
10,797
–
10,797
17,679
–
–
–
17,679
36,202
2,688
17,145
–
28,020
28,020
(2,059)
2,059
7,954
2,688
10,642
–
–
(27,128)
(10,797)
–
(10,797)
(15,620)
–
–
–
(15,620)
(36,202)
–
14,457
–
14,457 ^
£0.0025
2,688 †
£11.16
not satisfied
Sept 30 23
£0.0025
2,059
£0.0025
7,954 ^
£0.0025
Exercised
Performance criteria
not satisfied
Performance criteria
not satisfied
Performance criteria
–
Sept 30 20
Sept 30 23
2,688 †
£11.16
not satisfied
Sept 30 23
12,701
–
£0.0025
Exercised
Performance criteria
not satisfied
Performance criteria
–
Sept 30 23
–
16,964
–
16,964 ^
£0.0025
–
36,202
144,212
8,963
25,927
105,925
–
(36,202)
(131,180)
8,963 †
£11.16
not satisfied
Sept 30 23
25,927
118,957
23612.04 - 17 December 2014 12:23 PM - Proof 8
Annual Report and Accounts 2014 60
Directors’ Remuneration Report continued
Annual report on remuneration continued
The market price of the company’s shares on September 30 2014 was £10.15. The high and low share prices during the year were £13.88 and £10.07
respectively. There were 105,925 options granted during the year (2013: 8,215).
Directors’ cash settled options
Under the terms of CAP 2010 and CAP 2014, the directors have been granted the following cash awards:
CHC Fordham
CHC Fordham
NF Osborn
NF Osborn
DC Cohen (resigned September 30 2014)
DC Cohen (resigned September 30 2014)
CR Jones
CR Jones
DE Alfano
DE Alfano
JL Wilkinson
JL Wilkinson
JL Wilkinson
B AL-Rehany
B AL-Rehany
At start
of year
£
Granted/
trued up
during year
£
Exercised
during year
£
At end
of year
£
Date from which
entitled
149,650
–
(149,650)
–
–
116
–
27,695
17,701
116,230
–
46,259
–
66,923
49,461
–
2,900
–
–
(116)
49,461 ^
–
–
(27,695)
2,900 ^
–
–
–
–
(116,230)
17,701
–
37,105
–
60,640
–
–
(46,259)
–
(66,923)
37,105 ^
–
60,640 ^
–
8,824
–
–
8,824
–
155,109
–
588,507
23,031
–
–
(155,109)
23,031 ^
–
56,109
229,246
–
(561,982)
56,109 ^
255,771
Exercised
Performance criteria
not satisfied
Exercised
Performance criteria
not satisfied
Exercised
Performance criteria
not satisfied
Exercised
Performance criteria
not satisfied
Exercised
Performance criteria
not satisfied
Exercised
Performance criteria
not satisfied
Performance criteria
not satisfied
Exercised
Performance criteria
not satisfied
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 (see note 23).
Issued under the Euromoney Institutional Investor PLC SAYE scheme 2012.
Issued under the Euromoney Institutional Investor PLC SAYE scheme 2013.
*
§
‡ Options granted relate to the true-up to the funding awards outstanding from tranche 2 of CAP 2010 which vested on February 13 2014. The number of such options
granted was provisional last year and was trued-up to reflect the share price on the date of vesting.
† The number of options granted under CSOP 2014 to each director will vest at the same time as the corresponding share award under CAP 2014 providing the CSOP
2014 is in the money at the time. If the option is not in the money at the time of vesting of the corresponding CAP 2014 award it continues to subsist and will vest at
the same time as the second or third tranche of the CAP 2014 share award.
^ The number of options and amount of cash award granted under CAP 2014 to each director is provisional and based on the performance of the respective directors’
individual businesses up to the end of the performance period (September 2017). As such the actual number of options and amount of cash award issued is likely to be
different to the amount disclosed. The percentage of awards that would vest if the minimum performance test was satisfied is 33%. The number of options received
under the share award of the CAP 2014 is reduced by the number of options vesting with participants from the CSOP 2014. The share options awarded under CAP 2014
have a face value of £10.77 per option on the date of grant June 20 2014.
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Directors’ Remuneration Report
61
Directors’ options exercised during the year
The aggregate gain made by the directors on the exercise of share options in the year was £1,636,637 (2013: £1441,411) as follows:
CHC Fordham
DC Cohen (resigned September 30 2014)
NF Osborn
CR Jones
DE Alfano
JL Wilkinson
B AL-Rehany
Number
of options
exercised
34,928
6,464
41
27,128
10,797
15,620
36,202
131,180
Date of
exercise
Feb 13 14
Feb 13 14
Feb 13 14
Feb 13 14
Feb 13 14
Feb 13 14
Feb 13 14
Market
price on
date of
exercise (£)
Gain on
exercise (£)
Number
of shares
retained
£12.48
£12.48
£12.48
£12.48
£12.48
£12.48
£12.48
435,814
80,655
349
338,490
134,720
194,899
451,710
1,636,637
18,458
–
–
1,620
750
12,155
18,053
51,036
Information not subject to audit (pages 61 and 62)
Directors’ interests in the company
The interests of the directors in the shares of the company as at September 30 were as follows:
PR Ensor
CHC Fordham
NF Osborn
DC Cohen (resigned September 30 2014)
CR Jones
DE Alfano
JL Wilkinson
B AL-Rehany
The Viscount Rothermere
Sir Patrick Sergeant
JC Botts
MWH Morgan
DP Pritchard
ART Ballingal
TP Hillgarth
Non-beneficial
Sir Patrick Sergeant
Ordinary shares of 0.25p each
2014
2013
194,529
179,971
31,354
–
192,000
78,006
89,430
32,844
24,248
165,304
15,503
7,532
–
–
–
1,010,721
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
20,000
20,000
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Annual Report and Accounts 2014 62
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
PR Ensor
CR Jones
Sir Patrick Sergeant
MWH Morgan1
Ordinary shares of
‘A’ Ordinary non-voting
12.5p each
shares of 12.5p each
2014
2013
2014
2013
19,890,364
–
–
–
–
17,738,163
–
–
–
764
64,758,863
1,318
1,271
36,000
1,243,403
68,570,098
1,124
1,077
36,000
1,049,826
1 The figures in the table above include ‘A’ shares awarded to executives under the DMGT Executive Bonus Scheme.
The Viscount Rothermere had non-beneficial interests as a trustee at September 30 2014 in 5,540,000 ‘A’ ordinary non-voting shares of 12.5 pence
each (2013: 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 19,890,364 ordinary shares of 12.5 pence each (2013: 17,738,163 shares).
At September 30 2013 and 2014, 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 487,680 and 201,396 respectively ‘A’ ordinary non-voting shares in Daily Mail and
General Trust plc at September 30 2014 (2013: 632,986 and 183,047 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 2014, PR Ensor and CR Jones each purchased, through the DMGT SIP scheme, 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 2014.
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Directors’ Remuneration Report
63
Information subject to audit (page 63)
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
2014
£
Euromoney
Pension Plan
2014
£
Private
Schemes
2014
£
22,918
–
8,616
15,855
39,750
–
–
–
87,139
–
37,500
783
–
–
–
17,982
–
56,265
–
–
–
–
–
3,986
–
6,191
10,177
Total
2014
£
22,918
37,500
9,399
15,855
39,750
3,986
17,982
6,191
153,581
Total
2013
£
22,918
37,500
9,399
15,855
37,875
4,101
18,657
7,447
153,752
PR Ensor
CHC Fordham
NF Osborn
DC Cohen (resigned September 30 2014)
CR Jones
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
2014
£
Pension
cash
accrual at
Sept 30
2014
£
Transfer
value at
Sept 30
2014
£
Normal
retirement
date
Additional
value of
benefits
if early
retirement
taken
Weighting
of pension
benefit value
as shown in
single figure
table
Director
DC Cohen (resigned September 30 2014)
33,370
50,200
670,000
Oct 26 2022
CR Jones
46,000
65,200
856,000
Aug 11 2025
Cash allowance:
100%
Cash allowance:
100%
none
none
The accrued annual pension entitlement is that which would be paid annually on retirement based on service to September 30 2014 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
2014 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
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.
23612.04 - 17 December 2014 12:23 PM - Proof 8
Annual Report and Accounts 2014 64
Directors’ Remuneration Report continued
Annual report on remuneration continued
Information not subject to audit (pages 64 to 66)
Comparison of overall performance and remuneration of the managing director
The chart below compares the company’s total shareholder return with the FTSE 250 over the past six financial years. For these purposes shareholder
return represents the theoretical growth in value of a shareholding over a specific period, assuming that dividends are reinvested to purchase additional
units of equity. The company is a constituent of the FTSE 250 and, accordingly, this is considered to be an appropriate benchmark.
%
n
r
u
t
e
R
l
r
e
d
o
h
e
r
a
h
S
l
a
t
o
T
500
450
400
350
300
250
200
150
100
50
3
1
3
1
D
M
Company
FTSE 250
3
0
3
0
S
e
S
e
3
0
J
u
S
e
3
0
3
1
3
1
3
0
3
1
3
1
3
0
3
1
3
1
3
0
3
1
3
1
D
M
D
M
D
M
D
M
3
0
J
u
3
0
J
u
3
0
J
u
S
e
p
t
2
e
c
0
1
1
0
1
1
2
0
1
1
a
r
2
n
e
2
S
e
p
t
2
e
c
0
1
2
0
1
2
0
1
2
a
r
2
n
e
p
t
2
p
t
2
0
0
2
0
2
0
1
2
0
1
3
1
3
1
3
1
4
e
c
a
r
2
n
e
0
0
9
2
0
0
2
0
0
8
p
t
2
e
c
2
0
0
0
9
9
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
a
r
c
h
n
e
S
e
Managing director – single figure of remuneration
CHC Fordham replaced PR Ensor as managing director on October 14 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 54 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
%
2014
2013
2012
2011
2010
2009
CHC Fordham
CHC Fordham
PR Ensor
PR Ensor
PR Ensor
PR Ensor
(46%)
(66%)
10%
11%
36%
895,206
1,647,267
4,856,723
4,396,681
3,976,660
2,916,771
480,935
648,025
4,630,646
4,201,414
3,787,355
2,508,665
52.1%
58.5%
81.9%
81.8%
81.6%
81.0%
Value of
long-term
incentive
(share
options)
vesting in
period
£
–
585,468
26,640
–
–
218,983
Long-term
incentive
vesting rates
against
maximum
opportunity
%
–
100%
100%
–
–
100%
Maximum
opportunity
£
–
585,468
26,640
–
–
218,983
The group’s profit share scheme has no ceiling; the maximum annual variable element of remuneration was therefore calculated assuming that profits
achieved had been 20% higher.
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Governance
Directors’ Remuneration Report
65
Percentage change in remuneration of the managing director
The table below illustrates the change in remuneration for the managing director. It is compared with the change in remuneration of the average
employee across the group at constant currency. The directors feel that this group of people is the most appropriate as a comparator because
employee 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 increases in average remuneration compared to the managing director.
Managing director remuneration
Average employee
% change 2013 to 2014
Salary
Benefits
Incentives
–
4.1%
39.0%
(2.3%)
(25.8%)
(5.3%)
Remuneration in the above table excludes long-term incentive payments and pension benefits. The remuneration of the managing director did not
increase this year.
Relative importance of spend on pay
The table below illustrates the company’s expenditure on employee pay in comparison to adjusted profit before tax and distributions to shareholders by
way of dividend payments. For these purposes, total employee pay includes salaries, profit shares and bonuses.
Total employee pay
Dividends
Adjusted profit before tax
2014
£
141.1
28.8
116.2
2013
£
139.9
27.2
116.5
% increase/
(decrease)
£
0.9%
5.9%
(0.3%)
The group has decided to show the relative importance of spend on pay in a tabular format comparing increases in employee pay with increases in
adjusted profit before tax and dividends. These are deemed by the directors to be the significant distributions made during the year and will assist
stakeholders in understanding the relative importance of spend on pay.
Annual General Meeting - shareholder vote outcome
The table below shows the advisory shareholder vote on the 2013 Remuneration Report at the January 2014 AGM.
The committee believes the 91.6% 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
Votes against
Abstentions
107,038,643
9,093,333
693,219
91.6%
7.8%
0.6%
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Annual Report and Accounts 2014 66
Directors’ Remuneration Report continued
Annual report on remuneration continued
Payments to past directors
There were no payments made to past directors during the year.
Appointments and re-election
All directors with the exception of DC Cohen will be standing for re-election at the forthcoming AGM.
Other related party transactions
NF Osborn serves as an advisor to the boards of both DMG Events and dmgi, fellow group companies, for which he received a combined fee of
US$23,638 (2013: US$45,000). He no longer serves on the management board of A&N International Media Limited and has not received a fee in the
current year (2013: £25,000).
Implementation of the remuneration policy
For the year ending September 30 2015 the group intends to apply the remuneration policy as follows:
●● Directors’ salaries from October 1 2014 are as set out on page 54. These salaries will be reviewed (and may be increased) in April 2015.
●●
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 insurance scheme.
●●
The profit share arrangement for each director will be as described on page 50. 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, acquisitions and disposals, and the other factors stated in the group’s policy. The thresholds for the year ending
September 30 2015 will be disclosed in the 2015 report and accounts.
●● Directors will continue to be able to participate in the pension schemes operated in the country in which they reside.
John Botts
Chairman of the Remuneration Committee
November 19 2014
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Euromoney Institutional Investor PLC www.euromoneyplc.com Group Accounts
Independent Auditor’s Report
67
Independent Auditor’s Report
to the members of Euromoney Institutional Investor PLC
Opinion on financial statements of Euromoney
Institutional Investor PLC
the company Balance Sheet and the related notes 1 to 19. The financial
reporting framework that has been applied in the preparation of the
In our opinion:
●●
the financial statements give a true and fair view of the state of the
group’s and of the parent company’s affairs as at September 30 2014
and of the group’s profit for the year then ended;
●●
the group financial statements have been properly prepared in
accordance with International Financial Reporting Standards (IFRSs) as
group financial statements is applicable law and IFRSs as adopted by
the European Union. The financial reporting framework that has been
applied in the preparation of the parent company financial statements
is applicable law and United Kingdom Accounting Standards (United
Kingdom Generally Accepted Accounting Practice).
adopted by the European Union;
Going concern
●●
the parent company financial statements have been properly prepared
As required by the Listing Rules we have reviewed the directors’ statement
in accordance with United Kingdom Generally Accepted Accounting
contained within the Directors’ Report that the group is a going concern.
Practice; and
the financial statements have been prepared in accordance with the
●●
We confirm that:
●● we have concluded that the directors’ use of the going concern
requirements of the Companies Act 2006 and, as regards the group
basis of accounting in the preparation of the financial statements is
financial statements, Article 4 of the IAS Regulation.
appropriate; and
The group financial statements comprise the Consolidated Income
Statement, the Consolidated Statement of Comprehensive Income, the
●● we have not identified any material uncertainties that may cast
significant doubt on the group’s ability to continue as a going concern.
Consolidated Statement of Financial Position, the Consolidated Statement
However, because not all future events or conditions can be predicted,
of Changes in Equity, the Consolidated Statement of Cash Flows and the
this statement is not a guarantee as to the group’s ability to continue as
related notes 1 to 30. The parent company financial statements comprise
a going concern.
Our assessment of risks of material misstatement
The assessed risks of material misstatement described below are those that had the greatest effect on our audit strategy, the allocation of resources in
the audit and directing the efforts of the engagement team:
Risk
How the scope of our audit responded to the risk
Accounting for acquisitions and disposals
The group has acquired Infrastructure Journal and
Mining Indaba in the year and disposed of the
MIS Training business. They also have acquisition
commitments on previous acquisitions including NDR.
The accounting and valuation for each of these involves
significant judgement and is based on management’s
assumptions about the fair value of assets and liabilities
acquired, and the consideration paid or received.
Impairment of goodwill and other intangible
assets
The group has £383.9 million of goodwill and a
further £161.5 million of other intangible assets on
the Consolidated Statement of Financial Position at
September 30 2014.
Management is required to carry out an annual
goodwill impairment test, which is judgemental
and based on a number of assumptions including in
respect of future cash flow projections, growth rates
and discount rates.
We reviewed the sale and purchase agreements for significant acquisitions and assessed
the acquisition accounting for each. This included testing the validity and completeness of
consideration and evaluating management’s assumptions and methodology supporting the
fair values of intangible and net assets acquired for each significant acquisition in the year.
We tested the profit calculation for MIS Training including auditing all related costs of sale
and assessing the fair value of the consideration received by evaluating management’s
estimate of future performance.
We have also assessed management’s assumptions used in the valuation of the deferred
consideration and put option liabilities, predominantly relating to the profit forecasts of the
acquired businesses.
We considered whether management’s impairment review methodology is compliant with
IAS 36 Impairment of Assets. Our audit work focused on the assumptions used in the
impairment model, including specifically:
●●
●●
using valuation experts to determine the appropriateness of the discount rates;
comparison of growth rates against those achieved historically and other external data,
where available; and
●●
agreeing the underlying cash flow projections for each cash generating unit to Board-
approved forecasts and verifying trends to our other audit work to understand the
drivers of potential impairment.
23612.04 - 17 December 2014 12:23 PM - Proof 8
Annual Report and Accounts 2014 68
Independent Auditor’s Report
to the members of Euromoney Institutional Investor PLC continued
Risk
How the scope of our audit responded to the risk
Revenue recognition
Revenue
represents
subscriptions, sponsorships and delegate fees.
income
from advertising,
We carried out testing in relation to revenue using a combination of analytical procedures
and substantive testing, focusing in particular on the reconciliation of deferred subscription
income to subscription/fulfilment reports and the treatment of income and costs on events
spanning the year end.
Judgement is exercised by management, in particular in
relation to the apportionment of subscription revenue
and the point of recognition of revenue earned close
to the year end.
Share-based payments
The group’s new Capital Appreciation Plan (CAP) was
granted in the year.
We assessed management’s assumptions used in calculating the fair value of the options at
the date of grant, as set out in note 23 to the consolidated financial statements, including
specifically:
The accounting and valuation of this plan requires
significant judgement and is based on management’s
assumptions used in calculating the fair value of the
options at the date of grant and their estimate for the
number of shares that are expected to eventually vest.
Significant provisions and accruals
The group continues to recognise central provisions
and accruals. There is a significant judgement exercised
by management in the estimation of such provision
balances.
●●
using valuation experts to assess the valuation model used and to determine the
appropriateness of the discount rate, share price volatility, dividend yield, risk free rate
of return and expected option lives used; and
●●
agreeing underlying cash flow projections at the grant date to Board-approved forecasts.
We also assessed the estimate of the number of shares that are expected to vest by agreeing
the latest underlying CAP profit forecasts at the year end to Board-approved forecasts, and
agreeing the calculations to the underlying rules of the scheme.
Our work focused on assessing the adequacy and appropriateness of the central provisions
and accruals. In particular, we:
●●
assessed the key judgements supporting provisions in relation to onerous property
leases by verifying sub-let income and evaluating the likelihood of default over the
lease term;
●●
tested the restructuring provision to asses whether management had communicated all
redundancies to employees in advance of the year end;
●●
considered the ageing profile of trade receivables and the level of trade receivable
provisioning across the group in relation to write-offs in the year; and
●●
gained an understanding of the implications of outstanding or unresolved indirect
tax and legal disputes to assess whether the level of provisioning continues to be
appropriate by reviewing correspondence with legal advisors.
Tax
The group has exposure to tax risks through open items
with tax authorities accrued for in several jurisdictions.
We involved our tax specialists to consider the appropriateness of provisions in respect
of items under discussion with tax authorities by reviewing the group’s current year
correspondence and assessing management’s judgements on any incremental increases or
decreases in the provisions.
23612.04 - 17 December 2014 12:23 PM - Proof 8
Euromoney Institutional Investor PLC www.euromoneyplc.com Group Accounts
Independent Auditor’s Report
69
Last year our report included two risks which are not included in our
were subject to specified audit procedures where the extent of our testing
report this year: presentation of adjusting items (the group’s policy is
was based on our assessment of the risks of material misstatement and
consistent with last year, and the significant items are audited within
of the materiality of the group’s operations at those locations. Together
the risks above and considered separately) and the appropriateness of
with the central functions which were also subject to a full scope audit,
capitalisation of internally-generated intangible assets (the majority of the
these components represent the principal business units of the group
capitalized spend was completed last year).
and account for 80% (2013: 79%) of revenue and 80% (2013: 85%)
The description of risks above should be read in conjunction with the
significant issues considered by the audit committee discussed on
page 43.
Our audit procedures relating to these matters were designed in the
context of our audit of the financial statements as a whole, and not to
express an opinion on individual accounts or disclosures. Our opinion on
the financial statements is not modified with respect to any of the risks
described above, and we do not express an opinion on these individual
matters.
Our application of materiality
We define materiality as the magnitude of misstatement in the financial
statements that makes it probable that the economic decisions of a
reasonably knowledgeable person would be changed or influenced.
We use materiality both in planning the scope of our audit work and in
evaluating the results of our work.
We determined materiality for the group to be £5.0 million (2013: £5.7
million), which is less than 5% (2013: less than 6%) of profit before tax.
of operating profit before acquired intangible amortisation, long-term
incentive expense and exceptional items.
They were also selected to provide an appropriate basis for undertaking
audit work to address the risks of material misstatement identified above.
Our audit work at these locations was executed at levels of materiality
applicable to each individual entity which were lower than group
materiality and ranged from £1.0m to £2.8m (2013: £0.5m to £3.2m).
In locations where local statutory audits are required, a lower statutory
materiality level was used.
At the parent entity level we also tested the consolidation process and
carried out analytical procedures to confirm our conclusion that there
were no significant risks of material misstatement of the aggregated
financial information of the remaining components not subject to audit
or audit of specified account balances.
The group audit team continued to follow a programme of planned
visits that has been designed so that the Senior Statutory Auditor or a
senior member of the group audit team visits each of the ten locations
where the group audit scope was focused at least once a year except for
Hong Kong where a conference call was held to discuss the results of the
We agreed with the audit committee that we would report to the
component audit work. Our visits are timed to allow the group audit team
Committee all audit differences in excess of £100,000 (2013: £114,000),
to attend the audit closing meetings and to assist in the resolution of
as well as differences below that threshold that, in our view, warranted
audit and accounting issues. We also have ongoing communication with
reporting on qualitative grounds. We also report to the Audit Committee
component teams throughout the year.
on disclosure matters that we identified when assessing the overall
presentation of the financial statements.
Opinion on other matters prescribed by the
Companies Act 2006
An overview of the scope of our audit
In our opinion:
Our group audit was scoped by obtaining an understanding of the group
●●
the part of the Directors’ Remuneration Report to be audited has
and its environment, including group-wide controls, and assessing the
been properly prepared in accordance with the Companies Act 2006;
risks of material misstatement at the group level.
and
Based on that assessment, we focused our group audit scope primarily
on the audit work at ten (2013: ten) components, which comprise
operations headquartered in London together with key operations in
Canada, United Kingdom, United States and Hong Kong. Six (2013: six)
of these were subject to a full scope audit and a further four (2013: four)
●●
the information given in the Strategic Report and the Directors’
Report for the financial year for which the financial statements are
prepared is consistent with the financial statements.
23612.04 - 17 December 2014 12:23 PM - Proof 8
Annual Report and Accounts 2014 70
Independent Auditor’s Report
to the members of Euromoney Institutional Investor PLC continued
Matters on which we are required to report by
exception
Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you if, in
our opinion:
●● we have not received all the information and explanations we require
for our audit; or
●●
adequate accounting records have not been kept by the parent
company, or returns adequate for our audit have not been received
from branches not visited by us; or
●●
the parent company financial statements are not in agreement with
the accounting records and returns.
We have nothing to report in respect of these matters.
Directors’ remuneration
Under the Companies Act 2006 we are also required to report if in our
opinion certain disclosures of directors’ remuneration have not been
made or the part of the Directors’ Remuneration Report to be audited
is not in agreement with the accounting records and returns. We have
nothing to report arising from these matters.
Corporate Governance Statement
Under the Listing Rules we are also required to review the part of the
Respective responsibilities of directors and auditor
As explained more fully in the directors’ responsibilities statement, the
directors are responsible for the preparation of the financial statements and
for being satisfied that they give a true and fair view. Our responsibility is
to audit and express an opinion on the financial statements in accordance
with applicable law and International Standards on Auditing (UK and
Ireland). Those standards require us to comply with the Auditing Practices
Board’s Ethical Standards for Auditors. We also comply with International
Standard on Quality Control 1 (UK and Ireland). Our audit methodology
and tools aim to ensure that our quality control procedures are effective,
understood and applied. Our quality controls and systems include our
dedicated professional standards review team and independent partner
reviews.
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.
Corporate Governance Statement relating to the company’s compliance
Scope of the audit of the financial statements
with ten 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 International Standards on Auditing (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
●●
otherwise misleading.
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
In particular, we are required to consider whether we have identified any
become aware of any apparent material misstatements or inconsistencies
inconsistencies between our knowledge acquired during the audit and the
we consider the implications for our report.
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
Robert Matthews (Senior statutory auditor)
not identified any such inconsistencies or misleading statements.
for and on behalf of Deloitte LLP
Chartered Accountants and Statutory Auditor
London, United Kingdom
November 19 2014
23612.04 - 17 December 2014 12:23 PM - Proof 8
Euromoney Institutional Investor PLC www.euromoneyplc.com Group Accounts
Consolidated Income Statement
71
Consolidated Income Statement
for the year ended September 30 2014
Notes
2014
£000
2013
£000
Total revenue
3
406,559
404,704
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
119,809
(16,735)
(2,367)
2,630
121,088
(15,890)
(2,100)
2,232
Operating profit before associates
3, 4
103,337
105,330
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)
264
103,601
284
105,614
1,546
(3,672)
(2,126)
595
(10,949)
(10,354)
101,475
95,260
(25,610)
75,865
(22,235)
73,025
75,264
601
75,865
59.49p
59.15p
71.00p
70.60p
23.00p
72,623
402
73,025
57.88p
56.70p
72.43p
70.96p
22.75p
7
7
7
3
8
3
10
10
10
10
9
A detailed reconciliation of the group’s statutory results to the adjusted results is set out in appendix to the Chairman’s Statement on page 6.
23612.04 - 17 December 2014 12:23 PM - Proof 8
Annual Report and Accounts 2014 72
Consolidated Statement of
Comprehensive Income
for the year ended September 30 2014
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 gains/(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
Translation reserves recycled to Income Statement
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 (losses)/gains on defined benefit pension schemes
Tax credit/(charge) 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
2014
£000
2013
£000
75,865
73,025
(1,642)
(3,298)
990
164
–
(207)
(482)
(3,448)
36
(2,297)
459
(6,427)
69,438
69,418
20
69,438
2,320
(176)
226
(7,167)
–
4,317
90
1,433
(287)
(2,542)
70,483
69,774
709
70,483
23612.04 - 17 December 2014 12:23 PM - Proof 8
Euromoney Institutional Investor PLC www.euromoneyplc.com
Group Accounts
Consolidated Statement of Financial Position
73
Consolidated Statement of Financial Position
as at September 30 2014
Notes
2014
£000
2013
£000
11
11
12
13
24
21
18
15
24
18
24
24
16
23
17
19
19
18
20
24
24
23
19
21
26
18
20
22
383,934
161,509
16,924
72
1,532
–
179
564,150
79,845
354
6,470
613
8,571
2,611
98,464
(2,088)
(10,389)
(25,385)
(147)
(9,125)
–
(47,973)
(122,263)
–
(490)
(1,322)
(2,164)
(221,346)
(122,882)
441,268
(11,277)
–
(804)
(10)
(45,677)
(19,101)
(4,787)
(385)
(2,704)
(84,745)
356,523
320
102,011
64,981
8
(21,582)
39,158
(22,259)
36,706
149,564
348,907
7,616
356,523
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
Non-current assets
Intangible assets
Goodwill
Other intangible assets
Property, plant and equipment
Investments
Deferred consideration
Deferred tax assets
Derivative financial instruments
Current assets
Trade and other receivables
Deferred consideration
Current income tax assets
Group relief receivable
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 19 2014.
Christopher Fordham
Colin Jones
Directors
23612.04 - 17 December 2014 12:23 PM - Proof 8
Annual Report and Accounts 2014 74
Consolidated Statement of Changes in Equity
for the year ended September 30 2014
Share
capital
£000
Share
premium
account
£000
Other
reserve
£000
Capital
redemp-
tion
reserve
£000
At September 30 2012
Profit for the year
Other comprehensive
(expense)/income for
the year
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 dividends paid
Exercise of share options
Tax relating to items taken
directly to equity
At September 30 2013
Profit for the year
Other comprehensive
expense for the year
Total comprehensive
income for the year
Exercise of acquisition
commitments
Adjustment arising from
change in non-controlling
interest
Credit for share-based
payments
Cash dividend paid
Own shares acquired
Exercise of share options
Tax relating to items taken
directly to equity
At September 30 2014
311
–
99,485 64,981
–
–
–
–
–
–
–
–
–
5
–
–
–
–
–
–
–
2,224
–
–
–
–
–
–
–
–
–
–
–
316 101,709 64,981
–
–
–
–
–
–
–
–
–
–
4
–
–
–
–
–
–
–
302
–
–
–
–
–
–
–
–
–
–
320 102,011 64,981
–
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
36,055 (18,152) 40,728
–
–
–
58,033 281,375
72,623
72,623
6,549 287,924
402 73,025
–
(2,064)
(2,021)
1,236
(2,849)
307
(2,542)
–
(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
75,264
75,264
2,609
–
–
–
–
–
2,609
8,247 333,759
601 75,865
–
(2,043)
(2,001)
(1,802)
(5,846)
(581)
(6,427)
–
(2,043)
(2,001)
73,462
69,418
20 69,438
–
–
2,036
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
176
176
(176)
–
44
44
114
158
–
(28,771)
–
–
2,036
(28,771)
(21,508)
306
–
(589)
–
–
2,036
(29,360)
(21,508)
306
–
1,694
39,158 (22,259) 36,706 149,564 348,907
1,694
–
–
–
1,694
7,616 356,523
Own
shares
£000
(74)
–
–
–
–
–
–
–
–
–
–
(74)
–
–
–
–
–
8
–
–
–
–
–
–
–
–
–
–
8
–
–
–
–
–
–
–
–
–
– (21,508)
–
–
–
–
8 (21,582)
The investment in own shares is held by the Euromoney Employees’ Share Ownership Trust (ESOT) and Euromoney Employee Share Trust (EEST). The
EEST was incorporated in February 2014 to facilitate the purchase of shares for the Capital Appreciation Plan 2014. The trusts waived the rights to
receive dividends. Interest and administrative costs are charged to the profit and loss account of the trusts as incurred.
Euromoney Employees’ Share Ownership Trust
Euromoney Employee Share Trust
Total
Nominal cost per share (p)
Historical cost per share (£)
Market value (£000)
2014
Number
58,976
1,747,631
1,806,607
0.25
11.95
18,337
2013
Number
58,976
–
58,976
0.25
1.25
684
The other reserve represents the share premium arising on the shares issued for the purchase of Metal Bulletin plc in October 2006.
23612.04 - 17 December 2014 12:23 PM - Proof 8
Euromoney Institutional Investor PLC www.euromoneyplc.com Group Accounts
Consolidated Statement of Cash Flows
75
Consolidated Statement of Cash Flows
for the year ended September 30 2014
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
Profit on disposal of property, plant and equipment
Long-term incentive expense
Profit on disposal of businesses and recycled cumulative translation differences
Impairment of carrying value of associate
Negative goodwill
Decrease in provisions
Operating cash flows before movements in working capital
Increase 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 associates
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
Proceeds from disposal of non-controlling interest
Proceeds from disposal of discontinued operation
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
Payments to acquire own shares
Payment of acquisition deferred consideration
Purchase of additional interest in subsidiary undertakings
Redemption of loan notes
Loan repaid to DMGT group company
Loan received from DMGT group company
Net cash used in financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Effect of foreign exchange rate movements
Cash and cash equivalents at end of year
23612.04 - 17 December 2014 12:23 PM - Proof 8
2014
£000
2013
£000
103,601
(264)
16,735
1,962
2,908
(7)
2,367
(6,834)
444
–
(1,326)
119,586
(5,838)
(3,589)
110,159
(19,553)
(2,927)
87,679
(589)
323
242
(3,236)
(3,105)
10
(9)
(58,001)
158
5,345
–
(58,862)
(28,771)
(1,372)
–
306
(21,508)
(2,849)
(369)
(538)
(326,903)
350,819
(31,185)
(2,368)
11,268
(329)
8,571
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
Annual Report and Accounts 2014 76
Note to the Consolidated Statement
of Cash Flows
Net Debt
At October 1
Net decrease in cash and cash equivalents
Net (increase)/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
At September 30
Net debt comprises:
Cash and cash equivalents
Committed loan facility
Loan notes
Net debt
2014
£000
(9,937)
(2,368)
(23,916)
538
–
–
(1,913)
(37,596)
8,571
(45,677)
(490)
(37,596)
2013
£000
(30,838)
(2,125)
23,776
199
3
(2)
(950)
(9,937)
11,268
(20,177)
(1,028)
(9,937)
23612.04 - 17 December 2014 12:23 PM - Proof 8
Euromoney Institutional Investor PLC www.euromoneyplc.com Notes to the Consolidated Financial Statements
77
1 Accounting policies
General information
Euromoney Institutional Investor PLC (the ‘company’) is a company
incorporated in the United Kingdom (UK).
(b) Relevant new standards, amendments and interpretations issued
but effective subsequent to the year end:
●● IFRS 9, ‘Financial Instruments’ – not yet adopted by the EU
●● IFRS 10, ‘Consolidated Financial Statements’
●● IFRS 11, ‘Joint Arrangements’
The group financial statements consolidate those of the company and its
●● IFRS 12, ‘Disclosure of Interests in Other Entities’
subsidiaries (together referred to as the ‘group’) and equity-account the
●● IFRS 15, ‘Revenue from Contracts with Customers’
group’s interest in associates. The parent company financial statements
●● IAS 27, ‘Separate Financial Statements (2011)’
present information about the entity and not about its group.
●● IAS 28, ‘Investments in Associates and Joint Ventures (2011)’
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 2014 financial year:
●● IFRS 7 (amendments), ‘Offsetting Financial Assets and Financial
Liabilities’ – disclosures (effective for accounting periods beginning
on or after January 1 2013). The amendments to IFRS 7 require
entities to disclose information about rights of offset and related
arrangements for financial instruments under an enforceable master
netting agreement or similar arrangement. The adoption of IFRS 7
(amendments) has no material impact on the financial statements of
the group except for additional disclosures.
●● IFRS 13, ‘Fair Value Measurement’ (effective for accounting periods
beginning on or after January 1 2013). This standard aims to improve
consistency and reduce complexity by providing a precise definition of
●● Amendments to IAS 32 on Offsetting Financial Assets and Financial
Liabilities
●● Amendments to IFRS 10, 11 and 12 on transition guidance
●● Amendments to IFRS 10, IFRS 12 and IAS 27 on Consolidation for
Investment Entities
●● Amendments to IAS 36 on Recoverable Amount Disclosures for Non-
financial Assets
●● Amendments to IAS 38 on Intangible Assets
●● Amendments to IAS 39 on Novation of Derivatives and Continuation
of Hedge Accounting
●● Annual Improvements 2010–2012 Cycle
●● Annual Improvements 2011–2013 Cycle
●● Annual Improvements 2012–2014 Cycle
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.
Basis of preparation
The accounts have been prepared under the historical cost convention,
except for certain financial instruments which have been measured
at fair value. The accounting policies set out below have been applied
consistently to all periods presented in these group financial statements.
The directors continue to adopt the going concern basis in preparing this
report as explained in detail on page 36.
fair value and a single source of fair value measurement and disclosure
requirements for use across IFRSs. The requirements, which are largely
Basis of consolidation
(a) Subsidiaries
aligned with IFRSs and US GAAP, do not extend to the use of fair value
The consolidated accounts incorporate the accounts of the company and
accounting but provide guidance on how it should be applied where
entities controlled by the company (its ‘subsidiaries’). Control is achieved
its use is already required or permitted by other standards within IFRS
where the company has the power to govern the financial and operating
or US GAAP. The adoption of IFRS 13 has no material impact on the
policies of an investee entity so as to obtain benefits from its activities.
financial statements of the group except for additional disclosures.
●● IAS 19 (revised), ‘Employee Benefits’ (effective for accounting periods
beginning on or after January 1 2013). The interest cost on pension
plan liabilities and expected return on plan assets reported in previous
years have been replaced with a net interest amount. The group has
amended the presentation of prior-period comparative amounts to
reflect these requirements. There is no material impact of adopting
IAS 19 (revised) on the profit for any of the years presented.
Intercompany transactions, balances and unrealised gains and losses on
transactions between group companies are eliminated.
23612.04 - 17 December 2014 12:23 PM - Proof 8
Annual Report and Accounts 2014 Group AccountsNotes to the Consolidated Financial Statements 78
Notes to the Consolidated Financial Statements
continued
1 Accounting policies continued
The group uses the acquisition method of accounting to account for
business combinations. The amount recognised as consideration by
the group equates to the fair value of the assets, liabilities and equity
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 interests proportionate share of the acquiree’s
net assets.
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
of identifiable net assets. The consideration paid for the earlier stages of
a step acquisition, before control passes to the group, is treated as an
investment in an associate.
(b) Transactions with 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.
Where the group owns a non-controlling interest in the equity share capital
of a non-quoted company and does not exercise significant influence, it is
held as an investment and stated in the balance sheet at the lower of cost
and net realisable value.
and the acquisition date fair value of any previous equity interest in the
(c) Associates
acquiree over the fair value of the group’s share of the identifiable net
An associate is an entity over which the group is in a position to exercise
assets acquired. If this consideration is lower than the fair value of the net
significant influence, but not control or joint control, through participation
assets of the subsidiary acquired, the difference is recognised as ‘negative
in the financial and operating policy decisions of the investee. The results
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.
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.
Those provisional amounts are adjusted during the measurement period,
The group’s share of associate post-acquisition profit or losses is recognised
or additional asset and liabilities are recognised to reflect new information
in the Income Statement, and its share of post-acquisition movements
obtained about facts and circumstances that existed as of the date of the
in other comprehensive income is recognised in the Statement of
acquisition that, if known, would have affected the amounts recognised
Comprehensive Income. The cumulative post-acquisition movements
as of that date.
The measurement period is the period from the date of acquisition to
the date the group obtains complete information about facts and
circumstances that existed as of the acquisition date and is a maximum
of one year.
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.
Step acquisitions – control passes to the group
Where a business combination is achieved in stages, at the stage at which
control passes to the group, the previously held interest is treated as if it
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
forms one of the components that is used to calculate goodwill, along
with the consideration and the non-controlling interest less the fair value
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.
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
evidence of an impairment of the asset transferred. Accounting policies of
associates have been changed where necessary to ensure consistency with
the policies adopted by the group.
Dilution gains and losses arising in investments in associates are recognised
in the Income Statement.
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Euromoney Institutional Investor PLC www.euromoneyplc.com 79
1 Accounting policies continued
Foreign currencies
Functional and presentation currency
The functional and presentation currency of Euromoney Institutional
Investor PLC and its UK subsidiaries, other than Fantfoot Limited, Centre
for Investor Education (UK) Limited, and Redquince Limited is sterling. The
functional currency of other subsidiaries and associates is the currency of
the primary economic environment in which they operate.
Transactions and balances
Intangible assets
Goodwill
Goodwill represents the excess of the fair value of purchase consideration
over the net fair value of identifiable assets and liabilities acquired.
Goodwill is recognised as an asset at cost and subsequently measured at
cost less accumulated impairment. For the purposes of impairment testing,
goodwill is allocated to those cash generating units that have benefited
from the acquisition. Assets are grouped at the lowest level for which
there are separately identifiable cash flows. The carrying value of goodwill
Transactions in foreign currencies are recorded at the rate of exchange
is reviewed for impairment at least annually or where there is an indication
ruling at the date of the transaction. Monetary assets and liabilities
that goodwill may be impaired. If the recoverable amount of the cash
denominated in foreign currencies are translated into sterling at the
generating unit is less than its carrying amount, then the impairment loss
rates ruling at the balance sheet date. Gains and losses arising on foreign
is allocated first to reduce the carrying amount of the goodwill allocated
currency borrowings and derivative instruments, to the extent that they
to the unit and then to the other assets of the unit on a pro-rata basis. Any
are used to provide a hedge against the group’s equity investments in
impairment is recognised immediately in the Income Statement and may
overseas undertakings, are taken to equity together with the exchange
not subsequently be reversed. On disposal of a subsidiary undertaking, the
difference arising on the net investment in those undertakings. All other
attributable amount of goodwill is included in the determination of the
exchange differences are taken to the Income Statement.
profit and loss on disposal.
Group companies
Goodwill arising on foreign subsidiary investments held in the consolidated
The Income Statements of overseas operations are translated into sterling
balance sheet are retranslated into sterling at the applicable period end
at the weighted average exchange rates for the year and their balance
exchange rates. Any exchange differences arising are taken directly to
sheets are translated into sterling at the exchange rates ruling at the
equity as part of the retranslation of the net assets of the subsidiary.
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 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
Property, plant and equipment
determining any subsequent profit or loss on disposal.
Property, plant and equipment are stated at cost less accumulated
depreciation and any recognised impairment loss.
Internally generated intangible assets
An internally generated intangible asset arising from the group’s software
Depreciation of property, plant and equipment is provided on a straight-
and systems development is recognised only if all of the following
line basis over their expected useful lives at the following rates per year:
conditions are met:
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%
●● An asset is created that can be identified (such as software or a
website);
●● It is probable that the asset created will generate future economic
benefits; and
●● The development cost of the asset can be measured reliably.
Internally generated intangible assets are recognised 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.
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Annual Report and Accounts 2014 Group AccountsNotes to the Consolidated Financial Statements 80
Notes to the Consolidated Financial Statements
continued
1 Accounting policies continued
Other intangible assets
For all other intangible assets, the group initially makes an assessment
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
of their fair value at acquisition. An intangible asset will be recognised
months or less.
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
For the purpose of the Statement of Cash Flows, cash and cash equivalents
are as defined above, net of outstanding bank overdrafts.
Financial assets
The group classifies its financial assets into 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 on initial recognition and re-evaluates this
designation at every reporting date. Financial assets in the following
categories are classified as current assets if expected to be settled within
Amortisation of intangible assets is provided on a reducing balance basis
12 months; otherwise, they are classified as non-current.
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
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
Impairment of non-financial assets
unless they are designated as hedges.
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 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-
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. The
group’s loans and receivables comprise trade and other receivables and
cash and cash equivalents in the balance sheet.
Available-for-sale (AFS) financial assets
AFS financial assets are non-derivatives that are either designated in this
category or not classified in any of the other categories.
financial assets, other than goodwill, that suffer impairment are reviewed
Recognition and measurement
for possible reversal of the impairment at each reporting date.
Regular purchases and sales of financial assets are recognised on the date
Trade and other receivables
Trade receivables are recognised and carried at original invoice amount,
less provision for impairment. A provision is made and charged to the
Income Statement when there is objective evidence that the group will
not be able to collect all amounts due in accordance to the original terms.
More information on impairment is included in the impairment of financial
assets section below.
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.
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Euromoney Institutional Investor PLC www.euromoneyplc.com 81
1 Accounting policies continued
●● The disappearance of an active market for that financial asset because
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
loss component of the Statement of Comprehensive Income in the period
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 (AFS) financial assets
AFS financial assets are subsequently measured at fair value where it can
be measured reliably. AFS equity investments that do not have a quoted
market price in an active market and whose fair value cannot be reliably
measured are measured at cost less any identified impairment losses.
Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported in
the balance sheet when there is a legally enforceable right to offset the
recognised amounts and there is an intention to settle on a net basis or
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;
and
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
contract. As a practical expedient, the group may measure impairment on
the basis of an instrument’s fair value using an observable market price.
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
realise the asset and settle the liability simultaneously.
Comprehensive Income.
Impairment of financial assets
If in a subsequent period, the amount of the impairment loss decreases
The group assesses at each reporting period whether there is objective
and the decrease can be related objectively to an event occurring after
evidence that a financial asset or a group of financial assets is impaired. A
the impairment was recognised (such as an improvement in the debtor’s
financial asset or a group of financial assets is impaired and impairment
credit rating), the reversal of the previously recognised impairment loss
losses are incurred only if there is objective evidence of impairment as a
is recognised in the profit and loss component of the Statement of
result of one or more events that occurred after the initial recognition of
Comprehensive Income.
the asset (a ‘loss event’) and that loss event (or events) has an impact on
the estimated future cash flows of the financial asset or group of financial
assets that can be reliably estimated.
The criteria that the group uses to determine that there is objective
evidence of an impairment loss include:
●● Significant financial difficulty of the issuer or obligor;
●● A breach of contract, such as a default or delinquency in interest or
principal payments;
●● 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;
Financial liabilities
Committed borrowings and bank overdrafts
Interest-bearing loans and overdrafts are recorded at the amounts
received, net of direct issue costs. Direct issue costs are amortised over the
period of the loans and overdrafts to which they relate. Finance charges,
including premiums payable on settlement or redemption are charged to
the Income Statement as incurred using the effective interest rate method
and are added to the carrying value of the borrowings or overdraft to the
extent they are not settled in the period in which they arise.
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Annual Report and Accounts 2014 Group AccountsNotes to the Consolidated Financial Statements 82
Notes to the Consolidated Financial Statements
continued
1 Accounting policies continued
Trade payables and accruals
Trade payables and accruals are not interest-bearing and are stated at
their fair value.
Derivative financial instruments
Amounts accumulated in equity are reclassified to the Income Statement in
the periods when the hedged item is recognised in the Income Statement
(for example when the forecast transaction that is hedged takes place).
The gain or loss relating to the effective portion of interest rate swaps
hedging variable rate borrowings is recognised in the Income Statement
The group uses various derivative financial instruments to manage its
accordingly, the gain or loss relating to the ineffective portion is recognised
exposure to foreign exchange and interest rate risks, including forward
in the Income Statement immediately. However, whenever the forecast
foreign currency contracts and interest rate swaps.
All derivative instruments are recorded in the Statement of Financial
Position at fair value. The recognition of gains or losses on derivative
transaction that is hedged results in the recognition of a non-financial
asset (for example fixed assets), the gains and losses previously deferred in
equity are transferred from equity and included in the initial measurement
of the cost of the asset. The deferred amounts are ultimately recognised
instruments depends on whether the instrument is designated as a hedge
in depreciation in the case of fixed assets.
and the type of exposure it is designed to hedge. The group designates
certain derivatives as either:
(a) hedges of the fair value of recognised assets or liabilities or a firm
commitment (fair value hedge);
(b) hedges of a particular risk associated with a recognised asset or
liability or a highly probable forecast transaction (cash flow hedge);
When a hedging instrument expires or is sold, or when a hedge no longer
meets the criteria for hedge accounting, any cumulative gain or loss
existing in equity at that time remains in equity and is recognised when
the forecast transaction is ultimately recognised in the Income Statement.
When a forecast transaction is no longer expected to occur, the cumulative
gain or loss that was reported in equity is immediately transferred to the
or
Income Statement.
(c) hedges of a net investment in a foreign operation (net investment
hedge).
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
The full fair value of a hedging derivative is classified as a non-current
are accounted for on an accruals basis.
asset or liability when the derivative matures in more than 12 months,
and as a current asset or liability when the derivative matures in less than
Net investment hedge
12 months. Trading derivatives are classified as a current asset or liability.
Hedges of net investments in foreign operations are accounted for in the
same way as cash flow hedges.
Fair value hedge
Changes in the fair value of derivatives that are designated and qualify
Gains or losses on the qualifying part of net investment hedges are
as fair value hedges are recorded in the Income Statement, together
recognised in other comprehensive income together with the gains and
with any changes in the fair value of the hedged asset or liability that are
losses on the underlying net investment. The ineffective portion of such
attributable to the hedged risk. The group only applies fair value hedge
gains and losses is recognised in the Income Statement immediately.
accounting for hedging fixed asset risk on borrowings. The gain or loss
relating to the effective portion of interest rate swaps hedging fixed rate
borrowings is recognised in the Income Statement within ‘finance costs’.
The gain or loss relating to the ineffective portion is recognised in the
Income Statement within ‘operating profit’. Changes in the fair value
of the hedge fixed rate borrowings attributable to interest rate risk are
recognised in the Income Statement within ‘finance costs’.
Cash flow hedge
Changes in the fair value of the derivative financial instruments that do
not qualify for hedge accounting are recognised in the Income Statement
as they arise.
Gains and losses accumulated in equity are transferred to the Income
Statement when the foreign operation is partially disposed of or sold.
Liabilities in respect of acquisition commitments and deferred
consideration
The effective portion of gains or losses on derivatives that are designated
Liabilities for acquisition commitments over the remaining minority interests
and qualify as cash flow hedges are recognised in other comprehensive
in subsidiaries and deferred consideration are recorded in the Statement
income within the Statement of Comprehensive Income. The ineffective
of Financial Position at their estimated discounted present value. These
portion of such gains and losses is recognised in the Income Statement
discounts are unwound and charged to the Income Statement as notional
immediately.
interest over the period up to the date of the potential future payment.
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Euromoney Institutional Investor PLC www.euromoneyplc.com 83
1 Accounting policies continued
Pensions
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.
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
Deferred taxation is calculated under the provisions of IAS 12 ‘Income
an expense as they fall due.
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.
Provisions
A provision is recognised in the balance sheet when the group has a
present legal or constructive obligation as a result of a past event, and it is
probable that economic benefits will be required to settle the obligation.
If material, provisions are determined by discounting the expected future
cash flows at a pre-tax rate that reflects current market assessments of
the time value of money and, where appropriate, the risks specific to the
liability.
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 liability recognised in the Statement of Financial Position in
respect of the defined benefit pension plan is the present value of the
defined benefit obligation at the end of the reporting period less the fair
value of plan assets. The defined benefit obligation is calculated annually
by independent actuaries using the projected credit method. The present
value of the defined benefit obligation is determined by discounting
the estimated future cash outflows using interest rates of high-quality
corporate bonds that are denominated in the currency in which the
benefits will be paid, and that have terms to maturity approximating to
the terms of the related pension obligation. The actuarial valuations are
obtained at least triennially and are updated at each balance sheet date.
Actuarial gains and losses arising from experience adjustments and
changes in actuarial assumptions are recognised in full in the Statement
of Comprehensive Income in the period in which they occur.
Past-service costs are recognised immediately in the Income Statement.
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Annual Report and Accounts 2014 Group AccountsNotes to the Consolidated Financial Statements 84
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
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 and Euromoney
number of shares that will eventually vest. At the end of each period the
Employee Share Trust.
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.
Revenue
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 represents income from advertising, subscriptions, sponsorship
the group.
and delegate fees, net of value added tax.
●● Advertising revenues are recognised in the Income Statement on the
date of publication.
●● Subscription revenues are recognised in the Income Statement on a
straight-line basis over the period of the subscription. Subscription
revenues contains certain items recognised on a cash basis including
voting revenues where the amount paid by the customer is determined
by a qualitative vote and paid in arrears for services rendered, and
best efforts revenues where the payments for services rendered are
uncertain until received.
●● Sponsorship and delegate revenues are recognised in the Income
Statement over the period the event is run.
Segment reporting
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
performance of the operating segments.
2 Key judgemental areas adopted in preparing these
financial statements
The group prepares its group financial statements in accordance with
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
Revenues invoiced but relating to future periods are deferred and treated
required to adopt those accounting policies most appropriate to the
as deferred income in the Statement of Financial Position.
group’s circumstances for the purpose of presenting fairly the group’s
financial position, financial performance and cash flows.
Leased assets
Leases in which a significant portion of the risks and rewards of ownership
In determining and applying accounting policies, judgement is often
are retained by the lessor are classified as operating leases. Operating
lease rentals are charged to the Income Statement on a straight-line basis
as allowed by IAS 17 ‘Leases’.
Dividends
required in respect of items where the choice of specific policy, accounting
estimate or assumption to be followed could materially affect the reported
results or net asset position of the group should it later be determined that
a different choice would have been more appropriate.
Dividends are recognised as a liability in the period in which they are
Management considers the accounting estimates and assumptions
approved by the company’s shareholders. Interim dividends are recorded
discussed below to be its key judgemental areas and accordingly provides
in the period in which they are paid.
Own shares held by Employees’ Share Ownership Trust and
Employee Share Trust
Transactions of the group-sponsored trusts are included in the group
financial statements. In particular, the trusts’ holdings of shares in the
company are debited direct to equity.
an explanation of each below. Management has discussed its critical
accounting estimates and associated disclosures with the group’s audit
committee.
The discussion below should be read in conjunction with the group’s
disclosure of IFRS accounting policies, which is provided in note 1.
23612.04 - 17 December 2014 12:23 PM - Proof 8
Euromoney Institutional Investor PLC www.euromoneyplc.com 85
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
Determining the fair value of assets, liabilities and contingent liabilities
acquired requires management’s judgement and often involves the use of
significant estimates and assumptions, including assumptions with respect
to future cash flows, recoverability of assets, and unprovided liabilities and
commitments particularly in relation to tax and VAT.
Intangible assets
The group makes an assessment of the fair value of intangible assets
arising on acquisitions. An intangible asset will be recognised as long as
the asset is separable or arises from contractual or other legal rights, and
its fair value can be measured reliably.
The measurement of the fair value of intangible assets acquired requires
significant management judgement particularly in relation to the expected
future cash flows from the acquired marketing databases (which are
generally based on management’s estimate of marketing response rates),
customer relationships, trademarks, brands, intellectual property, repeat
and well established events. At September 30 2014 the net book value of
intangible assets was £153.2 million (2013: £142.0 million).
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
the discounted present value of the commitments are the expected future
cash flows and earnings of the business, the period remaining until the
option is exercised and the discount rate. At September 30 2014 the
discounted present value of these acquisition commitments was £13.4
million (2013: £15.0 million).
Share-based payments
The group makes long-term incentive payments to certain employees.
These payments are measured at their estimated fair value at the date of
grant, calculated using an appropriate option pricing model. The fair value
determined at the grant date is expensed on a straight-line basis over the
expected vesting period, based on the estimate of the number of shares
that will eventually vest. The key assumptions used in calculating the fair
value of the options are the discount rate, the group’s share price volatility,
dividend yield, risk free rate of return, and expected option lives.
These assumptions are set out in note 23. Management regularly performs
a true-up of the estimate of the number of shares that are expected to
vest, which is dependent on the anticipated number of leavers.
Goodwill
Goodwill is impaired where the carrying value of goodwill is higher than
the net present value of future cash flows of those cash generating units to
which it relates. Key areas of judgement in calculating the net present value
are the forecast cash flows, the long-term growth rate of the applicable
The directors regularly reassess the expected vesting period. A plan that
vests earlier than originally estimated results in an acceleration of the fair
value expense of the plan recognised in the Income Statement at the time
the reassessment occurs. Equally, a plan that vests later than previously
estimated results in a credit to the Income Statement at the date of
businesses and the discount rate applied to those cash flows. Goodwill
reassessment.
held on the Statement of Financial Position at September 30 2014 was
£383.9 million (2013: £356.6 million).
The charge for long-term incentive payments for the year ended
September 30 2014 is £2.4 million (2013: £2.1 million).
Deferred consideration
The group often pays for a portion of the equity acquired at a future date.
Defined benefit pension scheme
This deferred consideration is contingent on the future results of the entity
The surplus or deficit in the defined benefit pension scheme that is
acquired and applicable payment multipliers dependent on those results.
recognised through the Statement of Comprehensive Income is subject
The initial amount of the deferred consideration is recognised as a liability
to a number of assumptions and uncertainties. The calculated liabilities of
in the Statement of Financial Position. Each period end management
the scheme are based on assumptions regarding salary increases, inflation
reassess the amount expected to be paid and any changes to the initial
rates, discount rates, the long-term expected return on the scheme’s assets
amount are recognised as a finance income or expense in the Income
and member longevity. Details of the assumptions used are shown in note
Statement. Significant management judgement is required to determine
26. Such assumptions are based on actuarial advice and are benchmarked
the amount of deferred consideration that is likely to be paid, particularly
against similar pension schemes.
in relation to the future profitability of the acquired business. At September
30 2014 the discounted present value of deferred consideration was £8.5
million (2013: £11.6 million).
23612.04 - 17 December 2014 12:23 PM - Proof 8
Annual Report and Accounts 2014 Group AccountsNotes to the Consolidated Financial Statements 86
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 managements’ 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 2014, the
fair value of the group’s forward contracts was a net asset of £1.1 million
(2013: £1.6 million).
Details of the derivative financial instruments used are set out in note 18
to the accounts.
Taxation
The group’s tax expense on profit is the sum of the total current and
deferred tax expense. The calculation of the group’s total tax charge
necessarily involves a degree of estimation and judgement in respect
of certain items whose tax treatment cannot be finally determined
until resolution has been reached with the relevant tax authority or, as
appropriate, through a formal legal process. The final resolution of some
of these items may give rise to material profit and loss and/or cash flow
variances.
The group is a multi-national group with tax affairs in many geographical
locations. This inherently leads to a higher than usual complexity to the
group’s tax structure and makes the degree of estimation and judgement
more challenging. The resolution of issues is not always within the control
of the group and it is often dependent on the efficiency of the legislative
processes in the relevant taxing jurisdictions in which the group operates.
Issues can, and often do, take many years to resolve. Payments in respect
of tax liabilities for an accounting period result from payments on account
and on the final resolution of open items. As a result, there can be
substantial differences between the tax expense 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 2014, the group had a deferred tax asset of £nil (2013:
£5.0 million).
23612.04 - 17 December 2014 12:23 PM - Proof 8
Euromoney Institutional Investor PLC www.euromoneyplc.com 87
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: Research and data; Financial publishing; Business publishing; Conferences and seminars; and Training.
Research and data consists of subscription revenue. Financial publishing and Business publishing consist primarily of advertising and subscription
revenue. Conferences and seminars consist of both sponsorship income and delegate revenue. The Training division consists primarily of delegate
revenue. A breakdown of the group’s revenue by type is set out below.
In April 2014 the group disposed 100% of its equity share capital in MIS Training Institute Holdings, Inc (MIS Training). As a result segment information
from MIS Training has been reclassified as sold/closed business and the comparative split of divisional revenues, revenue by type and operating profits
have been restated.
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
2014
£000
2013
£000
2014
£000
2013
£000
2014
£000
2013
£000
2014
£000
2013
£000
2014
£000
2013
£000
Revenue
by division and source:
Research and data
Financial publishing
Business publishing
Conferences and seminars
Training
Sold/closed businesses
Foreign exchange gains/(losses) on
–
forward contracts
180,330 176,423 186,237 194,375
Total revenue
Investment income (note 7)
2
Total revenue and investment income 180,330 176,426 186,301 194,377
80,747
32,200
19,327
50,481
1,343
2,139
17,571
46,609
48,621
44,717
16,410
3,155
87,993
32,170
21,137
45,720
1,675
5,680
21,854
50,833
48,900
39,350
15,226
1,290
2,877
(660)
64
3
–
–
23,897
1,949
1,786
16,710
2,970
183
–
47,495
171
47,666
25,846
2,444
1,766
9,633
2,979
418
–
43,086
228
43,314
(3)
(4,728)
(2,212)
(411)
(117)
(32)
–
(7,503)
–
(7,503)
(5,576)
(2,653)
(90) 126,495 131,320
75,647
68,871
99,384
20,965
9,177
80,254
67,801
(686) 106,130
19,422
3,580
(99)
(76)
–
2,877
(660)
(9,180) 406,559 404,704
233
(9,180) 406,794 404,937
235
–
United Kingdom
North America
Rest of World
Total
2014
£000
2013
£000
2014
£000
2013
£000
2014
£000
2013
£000
2014
£000
2013
£000
Revenue
by type and destination:
Subscriptions
Advertising
Sponsorship
Delegates
Other
Sold/closed businesses
Foreign exchange gains/(losses) on forward contracts
Total revenue
37,681
7,028
6,330
7,382
2,784
278
2,877
64,360
33,519
6,686
7,370
7,004
2,715
445
(660)
73,418 204,962 206,104
57,629
53,604
26,476
51,030
56,925
22,022
69,417
71,161
46,121
12,007
13,450
3,047
9,177
3,580
3,329
(660)
2,877
–
57,079 167,916 173,212 174,283 174,413 406,559 404,704
99,167
24,467
21,638
16,292
6,245
5,403
–
94,808
23,010
24,737
15,832
7,535
1,994
–
72,473
23,566
25,858
47,947
3,131
1,308
–
23612.04 - 17 December 2014 12:23 PM - Proof 8
Annual Report and Accounts 2014 Group AccountsNotes to the Consolidated Financial Statements 88
Notes to the Consolidated Financial Statements
continued
3 Segmental analysis continued
Operating profit1
by division and source:
Research and data
Financial publishing
Business publishing
Conferences and seminars
Training
Sold/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
2014
£000
2013
£000
2014
£000
2013
£000
2014
£000
2013
£000
2014
£000
2013
£000
10,549
15,740
15,483
8,936
3,427
263
(9,454)
44,944
(6,869)
(1,146)
(2,887)
34,042
8,549
17,530
16,834
13,290
3,227
583
(15,754)
44,259
(4,608)
(1,017)
2,812
41,446
34,310
6,313
7,474
16,373
73
214
(798)
63,959
(9,485)
(1,090)
6,062
59,446
40,263
5,822
9,033
14,145
150
951
(1,292)
69,072
(10,886)
(880)
(394)
56,912
5,732
333
(149)
5,284
396
(24)
(666)
10,906
(381)
(131)
(545)
9,849
5,919
514
(27)
1,443
488
(34)
(546)
50,591
22,386
22,808
30,593
3,896
453
(10,918)
54,731
23,866
25,840
28,878
3,865
1,500
(17,592)
(396)
(203)
(186)
7,757 119,809 121,088
(15,890)
(16,735)
(2,100)
(2,367)
2,630
2,232
6,972 103,337 105,330
284
264
595
1,546
(10,949)
(3,672)
95,260
101,475
(22,235)
(25,610)
73,025
75,865
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:
Research and data
Financial publishing
Business publishing
Conferences and seminars
Training
Sold/closed businesses
Unallocated corporate costs
Acquired
intangible
amortisation
Long-term
incentive expense
Exceptional
items
Depreciation
and amortisation
2014
£000
2013
£000
2014
£000
2013
£000
2014
£000
2013
£000
2014
£000
2013
£000
(9,469)
(3,434)
(2,322)
(1,403)
–
–
(107)
(16,735)
(10,373)
(1,672)
(2,507)
(1,224)
–
–
(114)
(15,890)
(628)
(464)
(232)
(441)
(116)
–
(486)
(2,367)
(655)
(238)
(298)
(84)
(493)
–
(332)
(2,100)
(547)
(1,202)
(28)
(167)
(23)
6,834
(2,237)
2,630
(213)
3,321
(16)
(533)
(115)
–
(212)
2,232
(1,224)
(30)
(28)
(42)
(6)
–
(3,540)
(4,870)
(1,256)
(13)
(21)
(57)
(14)
–
(2,866)
(4,227)
23612.04 - 17 December 2014 12:23 PM - Proof 8
Euromoney Institutional Investor PLC www.euromoneyplc.com 89
United Kingdom
North America
Rest of World
Total
2014
£000
2013
£000
2014
£000
2013
£000
2014
£000
2013
£000
2014
£000
2013
£000
73,681
14,661
72
137,669 106,837 236,369 239,175
95,256
2,486
–
226,083 173,862 325,104 336,917
(788)
86,978
1,757
–
52,650
13,673
702
(2,465)
(1,618)
(397)
9,896
850
506
–
11,252
(243)
10,562 383,934 356,574
1,133 161,509 149,039
16,792
16,924
702
72
12,328 562,439 523,107
(2,701)
(3,105)
633
–
(295)
3 Segmental analysis continued
Non-current assets (excluding derivative financial
instruments, deferred consideration 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 business performance.
4 Operating profit
Revenue
Cost of sales
Gross profit
Distribution costs
Administrative expenses
Operating profit before associates
2014
£000
406,559
(106,057)
300,502
(3,582)
(193,583)
103,337
2013
£000
404,704
(104,104)
300,600
(4,320)
(190,950)
105,330
Administrative expenses include items separately disclosed in exceptional items of £2,630,000 (2013: £2,232,000) (note 5).
23612.04 - 17 December 2014 12:23 PM - Proof 8
Annual Report and Accounts 2014 Group AccountsNotes to the Consolidated Financial Statements 90
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
Profit on disposal of property, plant and equipment
Acquisition costs (note 5)
Restructuring and other exceptional costs (note 5)
Profit on disposal of businesses and recycled cumulative translation differences (note 5)
Impairment of carrying value of associate (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
2014
£000
2013
£000
156,923
155,862
16,735
1,962
2,908
740
115
392
7,443
(7)
901
2,859
(6,834)
444
–
1,437
2014
£000
390
350
740
15,890
301
3,926
829
114
166
6,910
–
822
1,395
–
–
(4,449)
1,234
2013
£000
458
371
829
115
114
85
284
23
392
126
37
3
166
1,247
1,109
23612.04 - 17 December 2014 12:23 PM - Proof 8
Euromoney Institutional Investor PLC www.euromoneyplc.com
91
5 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 the group.
Acquisition costs
Restructuring and other exceptional costs
Profit on disposal of businesses and recycled cumulative translation differences
Impairment of carrying value of associate
Negative goodwill
2014
£000
(901)
(2,859)
6,834
(444)
–
2,630
2013
£000
(822)
(1,395)
–
–
4,449
2,232
For the year ended September 30 2014 the group recognised a net exceptional credit of £2,630,000. This comprised an exceptional credit for the
profit on disposal of MIS Training Institute Holdings, Inc. offset by exceptional acquisition costs, restructuring and property costs, and impairment of
carrying value of associate. The acquisition costs of £901,000 are in connection with the acquisitions of Infrastructure Journal and Mining Indaba.
The restructuring and other exceptional costs of £2,859,000 include costs of £1,545,000 for the move of the group’s London headquarters and
restructuring costs of £1,314,000 from the reorganisation of certain businesses including closure of print products. The group’s tax charge includes a
related tax charge of £263,000.
For the year ended September 30 2013 the group recognised a net exceptional credit of £2,232,000. This comprised an exceptional credit for negative
goodwill offset by acquisition, restructuring and other exceptional costs. The negative goodwill of £4,449,000 arose from the valuation of the intangible
assets of Quantitative Techniques (QT), 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 QT. The exceptional restructuring and other costs of £1,395,000 include restructuring
costs to integrate the business and assets of QT before the completion date and other restructuring costs across the group. The group’s tax charge
included a related tax charge of £372,000.
6 Staff costs
(i) Number of staff (including directors and temporary staff)
By business segment:
Research and data
Financial publishing
Business publishing
Conferences and seminars
Training
Central
By geographical location:
United Kingdom
North America
Rest of World
2014
Average
2013
Average
822
385
278
343
75
506
827
353
273
280
124
467
2,409
2,324
2014
2013
Average
Average
990
761
658
895
767
662
2,409
2,324
23612.04 - 17 December 2014 12:23 PM - Proof 8
Annual Report and Accounts 2014 Group AccountsNotes to the Consolidated Financial Statements 92
Notes to the Consolidated Financial Statements
continued
6 Staff costs continued
(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 from pages 46 to 66.
7 Finance income and expense
Finance income
Interest income:
Interest receivable from short-term investments
Net movements in acquisition commitments (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
Net interest expense on defined benefit liability (note 26)
Net movements in acquisition commitments (note 24)
Net movements in acquisition deferred consideration (note 24)
Interest on tax
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 commitments
Net movements in acquisition deferred consideration
Adjusted net finance costs
2014
£000
2013
£000
141,131
139,866
10,517
2,908
2,367
156,923
11,392
2,504
2,100
155,862
2014
£000
2013
£000
235
1,298
13
1,546
233
–
362
595
(1,349)
(2,561)
–
(120)
–
(1,873)
(330)
(3,672)
(2,126)
2014
£000
(2)
(67)
(2,888)
(4,721)
(710)
(10,949)
(10,354)
2013
£000
(2,126)
(10,354)
(1,298)
1,873
575
(1,551)
2,888
4,721
7,609
(2,745)
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.
23612.04 - 17 December 2014 12:23 PM - Proof 8
Euromoney Institutional Investor PLC www.euromoneyplc.com
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
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
93
2014
£000
6,906
12,695
(570)
19,031
6,107
472
6,579
25,610
25%
2013
£000
9,732
12,522
(540)
21,714
1,859
(1,338)
521
22,235
23%
2014
£000
2013
£000
25,610
22,235
4,114
(263)
3,851
(3,837)
98
112
25,722
5,592
(372)
5,220
(4,092)
1,878
3,006
25,241
116,155
116,527
22%
22%
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.
23612.04 - 17 December 2014 12:23 PM - Proof 8
Annual Report and Accounts 2014 Group AccountsNotes to the Consolidated Financial Statements 94
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 22% of profit before tax for the reasons set out in the following reconciliation:
Profit before tax
Tax at 22% (2013: 23.5%)
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
2014
£000
101,475
22,325
6,238
(73)
1,075
63
92
(3,394)
(618)
–
(98)
25,610
2013
£000
95,260
22,386
2,914
(67)
987
38
2,629
(3,607)
(657)
(510)
(1,878)
22,235
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 2013 of 15.75p (2012: 14.75p)
Interim dividend for year ended September 30 2014 of 7.00p (2013: 7.00p)
Employee share trust dividend
Proposed final dividend for the year ended September 30
Employee share trust dividend
Other comprehensive income
Equity
2014
£000
–
(495)
(495)
2013
£000
–
197
197
2014
£000
(2,690)
996
(1,694)
2014
£000
19,917
8,969
28,886
(115)
28,771
20,501
(289)
20,212
2013
£000
(2,058)
(551)
(2,609)
2013
£000
18,342
8,827
27,169
(13)
27,156
19,917
(9)
19,908
The proposed final dividend of 16.00p (2013: 15.75p) is subject to approval at the AGM on January 29 2015 and has not been included as a liability in
these financial statements in accordance with IAS 10 ‘Events after the Reporting Period’.
23612.04 - 17 December 2014 12:23 PM - Proof 8
Euromoney Institutional Investor PLC www.euromoneyplc.com 95
2014
£000
75,264
16,735
(2,630)
(1,298)
1,873
(3,851)
3,837
(98)
89,832
2013
£000
72,623
15,890
(2,232)
2,888
4,721
(5,220)
4,092
(1,878)
90,884
2014
Basic
earnings
per share
Number
000’s
2014
Diluted
earnings
per share
Number
000’s
2013
Basic
earnings
per share
Number
000’s
2013
Diluted
earnings
per share
Number
000’s
127,506
127,506
125,532
125,532
(990)
(990)
(59)
126,516
126,516
125,473
720
127,236
Basic
pence
per share
Diluted
pence
per share
Basic
pence
per share
59.49
13.23
(2.08)
(1.03)
1.48
(3.04)
3.03
(0.08)
71.00
59.49
(0.34)
59.15
13.15
(2.07)
(1.02)
1.47
(3.02)
3.02
(0.08)
70.60
57.88
12.66
(1.78)
2.30
3.76
(4.15)
3.26
(1.50)
72.43
(59)
125,473
2,605
128,078
Diluted
pence
per share
57.88
(1.18)
56.70
12.41
(1.74)
2.25
3.69
(4.07)
3.19
(1.47)
70.96
10 Earnings per share
Basic earnings attributable to equity holders of the parent
Acquired intangible amortisation
Exceptional items
Net movements in acquisition commitments
Net 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 employee share trusts
Weighted average number of shares
Effect of dilutive share options
Diluted weighted average number of shares
Basic earnings per share
Effect of dilutive share options
Diluted earnings per share
Effect of acquired intangible amortisation
Effect of exceptional items
Net movements in acquisition commitments
Net 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
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.
23612.04 - 17 December 2014 12:23 PM - Proof 8
Annual Report and Accounts 2014 Group AccountsNotes to the Consolidated Financial Statements 96
Notes to the Consolidated Financial Statements
continued
11 Goodwill and other intangibles
Acquired intangible assets
Trademarks
& brands
2014
£000
Customer
relationships
2014
£000
Databases
2014
£000
Total
acquired
intangible
assets
2014
£000
Licences &
software
2014
£000
Intangible
assets in
development
2014
£000
Goodwill
2014
£000
Total
2014
£000
2014
Cost/carrying amount
At October 1 2013
Additions
Transfer
Acquisitions (note 14)
Balance at disposal of company
Exchange differences
148,636
89,859
9,150
247,645
–
–
16,581
–
(374)
–
–
9,031
–
(177)
–
–
–
–
2,941
28,553
–
(8)
–
(559)
3,023
244
9,598
–
–
58
At September 30 2014
164,843
98,713
12,083
275,639
12,923
Amortisation and impairment
At October 1 2013
Amortisation charge
Balance at disposal of company
Exchange differences
54,746
7,417
–
(19)
44,821
8,300
–
(62)
6,043
1,018
–
164
105,610
16,735
–
83
2,709
1,962
–
16
At September 30 2014
62,144
53,059
7,225
122,428
4,687
6,690
2,992
(9,598)
385,518
642,876
–
–
3,236
–
–
–
(22)
62
30,832
59,385
(3,450)
(1,085)
(3,450)
(1,608)
411,815
700,439
–
–
–
–
–
28,944
137,263
–
18,697
(907)
(156)
(907)
(57)
27,881
154,996
Net book value/carrying
amount at September 30 2014
102,699
45,654
4,858
153,211
8,236
62
383,934
545,443
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
–
–
–
(21)
9,150
5,262
839
–
(58)
–
23,379
–
(1,267)
216
–
(41)
(17)
6,098
–
–
–
25,271
–
6,314
48,650
(41)
(33)
(2,020)
(3,337)
247,645
3,023
6,690
385,518
642,876
90,314
15,890
–
(594)
2,466
301
(41)
(17)
–
–
–
–
–
29,202
121,982
–
–
(258)
16,191
(41)
(869)
28,944
137,263
2013
Cost/carrying amount
At October 1 2012
Additions
Acquisitions
Disposals
Exchange differences
–
–
10,261
13,118
–
(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)
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
23612.04 - 17 December 2014 12:23 PM - Proof 8
Euromoney Institutional Investor PLC www.euromoneyplc.com 97
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 cash generating unit (CGU) are as follows:
CEIC
EMIS
MIS Training
Petroleum Economist
Gulf Publishing
HedgeFund Intelligence
Information Management Network
BCA
Metal Bulletin publishing businesses
FOW
Total Derivatives
TelCap
Structured Retail Products
NDR
Global Grain
TTI/Vanguard
Insider Publishing
Centre for Investor Education
Euromoney Indices
IJGlobal
Mining Indaba
Other
Total
Acquired intangible assets
Goodwill
2014
£000
2,113
190
–
–
–
–
2,667
50,853
19,869
–
1,502
2,041
2,413
2013
£000
2,282
203
–
–
–
–
2,907
56,558
22,140
–
1,938
2,210
2,607
26,778
30,030
660
2,189
7,469
3,604
3,491
5,650
21,722
–
930
2,407
9,068
4,183
4,572
–
–
–
2014
£000
2013
£000
12,973
8,828
–
236
4,705
14,718
29,312
142,621
52,710
196
8,180
10,448
4,794
35,809
4,085
2,841
15,280
5,479
–
7,091
23,619
9
12,988
8,838
2,543
236
4,710
14,718
29,345
142,780
52,710
196
8,180
10,448
4,794
35,848
4,247
2,844
15,280
5,860
–
–
–
9
153,211
142,035
383,934
356,574
Goodwill acquired in a business combination is allocated, at acquisition, to the CGUs 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 2014 budgets. Management believe 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 11.5%, derived from benchmark 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%.
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 relate to BCA.
Using the above methodology and a pre-tax discount rate of 9.5% the recoverable amount exceeded the total carrying value by £155.3 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 10.3% or the long-term growth rate reduced by 28.9%.
23612.04 - 17 December 2014 12:23 PM - Proof 8
Annual Report and Accounts 2014 Group AccountsNotes to the Consolidated Financial Statements 98
Notes to the Consolidated Financial Statements
continued
12 Property, plant and equipment
2014
Cost
At October 1 2013
Additions
Disposals
Balance at disposal of company
Exchange differences
At September 30 2014
Depreciation
At October 1 2013
Charge for the year
Disposals
Balance at disposal of company
Exchange differences
At September 30 2014
Net book value at September 30 2014
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
Net book value at September 30 2012
Freehold
land and
buildings
2014
£000
Long-term
leasehold
premises
2014
£000
Short-term
leasehold
premises
2014
£000
Office
equipment
2014
£000
6,447
3,082
–
–
–
–
–
–
–
(1)
16,583
1,838
(11)
(29)
(8)
20,791
1,267
(319)
(196)
(226)
Total
2014
£000
46,903
3,105
(330)
(225)
(235)
6,447
3,081
18,373
21,317
49,218
449
83
–
–
–
532
5,915
808
121
–
–
1
930
2,151
10,781
1,121
(11)
(15)
1
11,877
6,496
18,073
1,583
(316)
(191)
(194)
18,955
2,362
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
–
–
–
–
6,447
366
83
–
–
449
5,998
6,081
6
–
–
4
3,082
679
127
–
2
808
2,274
2,393
15,576
1,054
(27)
–
(20)
16,583
9,174
1,676
(27)
(42)
10,781
5,802
6,402
19,286
1,641
(93)
14
(57)
20,791
16,180
2,040
(91)
(56)
18,073
2,718
3,106
30,111
2,908
(327)
(206)
(192)
32,294
16,924
Total
2013
£000
44,381
2,701
(120)
14
(73)
46,903
26,399
3,926
(118)
(96)
30,111
16,792
17,982
The directors do not consider the market value of freehold land and buildings to be significantly different from its book value.
23612.04 - 17 December 2014 12:23 PM - Proof 8
Euromoney Institutional Investor PLC www.euromoneyplc.com 99
Investments
in associated
undertakings
2014
£000
Investments
in associated
undertakings
2013
£000
702
(444)
(127)
–
264
(323)
72
735
–
–
(49)
284
(268)
702
13 Investments
At October 1
Impairment
Disposals
Fair value adjustment
Share of profits after tax retained
Dividends
At September 30
Associated undertakings
The associated undertaking at September 30 2014 was Capital NET Limited, whose principal activity is the provision of electronic database services. The
group has a 48.4% (2013: 48.4%) interest in Capital NET Limited.
On June 26 2014, the group acquired the remaining 50% of the equity share capital of GGA Pte. Limited (GG) whose sole asset is Global Grain Asia,
an event for grain industry professionals in the Asia-Pacific region for £127,000 (note 14). The carrying value of the group’s initial 50% equity interest in
GG before the business combination amounted to £571,000. As a result the group recognised an impairment loss of £444,000 (2013: £nil) on its initial
50% equity interest in GG held before the business combination (note 5). The impairment loss is recognised within exceptional items in the Income
Statement for the year ended September 30 2014.
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
Assets available for sale
Dec 31
2013
£000
653
(195)
1,824
511
Dec 31
2012
£000
749
(249)
2,032
722
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 (2013: £nil). Under a separate licence agreement the group is entitled to 28.2% of Capital DATA’s revenues being
£5,653,000 in the year (2013: £5,361,000). At December 31 2013, based on its latest available audited accounts, Capital DATA had £589,000 of
issued share capital and reserves (December 31 2012: £229,000), and its profit for the year then ended was £761,000 (December 31 2012: £708,000).
23612.04 - 17 December 2014 12:23 PM - Proof 8
Annual Report and Accounts 2014 Group AccountsNotes to the Consolidated Financial Statements 100
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 2014 are as follows:
Company
Euromoney Institutional Investor PLC
Direct investments
Euromoney Institutional Investor (Jersey) Limited
Euromoney Institutional Investor (Ventures) Limited
Euromoney Canada Limited
Euromoney Jersey Limited
Fantfoot Limited
Steel First Limited
Indirect investments
Adhesion Group S.A.
Adhesion Asia Limited
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 Global Limited
Euromoney Holdings US, Inc.
Euromoney Partnership LLP
Euromoney (Singapore) Pte Limited
Euromoney Trading Limited
Euromoney Training, Inc.
EIMN LLC
Family Office Network Limited
GGA Pte. Limited
Glenprint Limited
Global Commodities Group Sarl
GSCS Benchmarks Limited
Gulf Publishing Company
HedgeFund Intelligence Limited
Insider Publishing Limited
Institutional Investor LLC
Internet Securities, Inc.
Latin American Financial Publications, Inc.
Metal Bulletin Holdings LLC
Ned Davis Research, Inc.
Redquince Limited
Structured Retail Products Limited
TelCap Limited
The Petroleum Economist Limited
Tipall Limited
Total Derivatives Limited
TTI Technologies LLC
Associates
Capital NET Limited
Proportion
Principal activity
held
and operation
Country of
incorporation
n/a
Investment holding company
United Kingdom
57%
100%† Publishing, training and events
100% Investment holding company
Investment holding company
100%‡ Investment holding company
100% Investment holding company
100% Research and data services
100% Events
80% 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
43.0%
Investment holding company
100% Investment holding company
Investment holding company
99.7%
99.7%
Investment holding company
99.7% Publishing and events
100% Investment holding company
100% Investment holding company
100% Events
99.7% Publishing, training and events
100% Training
100% Events
51% Information services
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
84.5% Research and data services
100%
99.7%
99.7% Publishing
99.7% Publishing
100% Property holding
99.7% Publishing
94.6% Events
Investment holding company
Information services
48.4% Databases
Jersey
United Kingdom
United Kingdom
Jersey
United Kingdom
United Kingdom
France
Hong Kong
Canada
Columbia
United Kingdom
United Kingdom
Australia
Hong Kong
United Kingdom
US
US
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
US
United Kingdom
Singapore
United Kingdom
US
US
United Kingdom
Singapore
United Kingdom
Switzerland
United Kingdom
US
United Kingdom
United Kingdom
US
US
US
US
US
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
US
United Kingdom
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 Jersey Limited’s principal country of operation is United Kingdom.
23612.04 - 17 December 2014 12:23 PM - Proof 8
Euromoney Institutional Investor PLC www.euromoneyplc.com 101
13 Investments continued
For the year ended September 30 2014, the below 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
Redquince Limited
Steel First Limited
14 Acquisitions and disposals
Purchase of new business
Infrastructure Journal (IJ)
01974125
04082590
05885797
0C363064
05503274
02976791
05994621
04002471
On October 15 2013 the group acquired 100% of the assets of Infrastructure Journal, a leading information source for the international infrastructure
markets, from Top Right Group for a cash consideration of £12,500,000, followed by a further cash payment of £267,000 in January 2014. 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.
The final acquisition accounting is set out below:
Net assets:
Intangible assets
Property, plant and equipment
Trade and other receivables
Trade and other payables
Net assets acquired (100%)
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
Final
fair value
£000
–
219
479
(1,207)
(509)
6,404
(219)
–
–
6,185
6,404
–
479
(1,207)
5,676
5,676
7,091
12,767
12,500
267
12,767
12,500
–
12,500
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Annual Report and Accounts 2014 Group AccountsNotes to the Consolidated Financial Statements
102
Notes to the Consolidated Financial Statements
continued
14 Acquisitions and disposals continued
Intangible assets represent a brand of £2,068,000, databases of £2,941,000, and customer relationships of £1,395,000, for which amortisation of
£754,000 has been charged in the year. The brand will be amortised over its useful economic life of 20 years. The databases and customer relationships
will be amortised over their useful economic lives of up to ten years.
Goodwill arises from the anticipated profitability and future operating synergies from integrating the acquired operations within the group. All of the
goodwill recognised is expected to be deductible for income tax purposes.
The fair value of the assets acquired includes trade receivables of £367,000, all of which are contracted and are expected to be collectable.
IJ contributed £1,360,000 to the group’s revenue, £503,000 to the group’s operating profit and £125,000 to the group’s profit after tax for the period
between the date of acquisition and March 31 2014. In addition, acquisition related costs of £744,000 were incurred and recognised as an exceptional
item in the Income Statement for the year ended September 30 2014 (note 5). If the acquisition had been completed on the first day of the financial
year, IJ would have contributed £1,558,000 to the group’s revenue and £228,000 to the group’s profit before tax for the period between the date of
acquisition and March 31 2014 (excluding exceptional costs above). From April 1 2014 the business was merged with an existing Euromoney business,
Project Finance, and the merged business was rebranded IJ Global. As such it is impossible to disclose the contribution of IJ as a standalone business to
the group’s revenue and profit for the six months from April 1 to September 30 2014.
Investment in African Mining Indaba (Mining Indaba)
On July 15 2014, the group acquired the trade and certain assets of the mining investment events division of US-based Summit Professional Networks, the
principal asset acquired was the largest mining event in emerging markets, Investing in African Mining Indaba, for a cash consideration of £45,617,000
(US$78,000,000) offset by a working capital adjustment of £212,000 (US$362,000) received in September 2014. The acquisition of Mining Indaba is
consistent with the group’s strategy to consolidate and strengthen its position in the global metals and mining sector.
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
Property, plant and equipment
Trade and other receivables
Trade and other payables
Net assets acquired (100%)
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
£000
–
2
1,585
(1,974)
(387)
22,149
22,149
(2)
–
26
22,173
–
1,585
(1,948)
21,786
21,786
23,619
45,405
45,617
(212)
45,405
45,617
–
45,617
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Euromoney Institutional Investor PLC www.euromoneyplc.com
103
14 Acquisitions and disposals continued
Intangible assets represent a brand of £14,513,000, and customer relationships of £7,636,000, for which amortisation of £426,000 has been charged
for the period. The brand will be amortised over its useful life of 20 years. The customer relationships will be amortised over their useful economic lives
of up to eight years.
Goodwill arises from the anticipated profitability and future operating synergies from integrating the acquired operations within the group. All of the
goodwill recognised is expected to be deductible for income tax purposes.
The fair value of the assets acquired includes trade receivables of £1,359,000, all of which are contracted and are expected to be collectable.
Mining Indaba contributed £nil to the group’s revenue, £343,000 loss to the group’s operating profit and £268,000 loss to the group’s profit after tax
for the period between the date of acquisition and September 30 2014. In addition, acquisition related costs of £151,000 were incurred and recognised
as an exceptional item in the Income Statement for the year ended September 30 2014 (note 5). If the acquisition had been completed on the first day
of the financial year, Mining Indaba would have contributed £10,013,000 to the group’s revenue and £5,766,000 to the group’s profit before tax for
the year (excluding exceptional costs above).
GGA Pte. Limited (GG Singapore)
On June 26 2014 the group exercised its option to acquire the remaining 50% of the equity share capital of GG Singapore, whose sole asset is Global Grain
Asia, an event for grain industry professionals in the Asia-Pacific region, for £127,000. This acquisition increased the group’s equity shareholding to 100%.
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:
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Net assets acquired (100%)
Goodwill
Total consideration
Consideration satisfied by:
Cash
Fair value of the initial equity interest before acquisition
Net cash inflow arising on acquisition:
Cash consideration
Less: cash and cash equivalent balances acquired
Book
value
£000
Fair value
adjustments
£000
Provisional
fair value
£000
6
243
(117)
132
–
–
–
–
6
243
(117)
132
132
122
254
127
127
254
127
(243)
(116)
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.
GG Singapore contributed £nil to the group’s revenue, £13,000 loss to the group’s operating profit and £10,000 loss to the group’s profit after tax for
the period between the date of acquisition and September 30 2014. If the acquisition had been completed on the first day of the financial year, GG
Singapore would have contributed £127,000 to the group’s revenue and £13,000 to the group’s profit before tax for the year.
23612.04 - 17 December 2014 12:23 PM - Proof 8
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104
Notes to the Consolidated Financial Statements
continued
14 Acquisitions and disposals continued
TTI Technologies LLC (TTI/Vanguard) / Insider Publishing (IP) / Centre for Investor Education (CIE) / Quantitative Techniques (QT).
During the financial year to September 30 2013, the group acquired TTI/Vanguard, IP, CIE and QT. The fair value of net assets acquired and consideration
for the four acquisitions have been finalised and there were no changes since the year ended September 30 2013.
Set up of new business
Family Office Network Limited (FON)
On October 1 2013 the group set up a new company, FON, for an initial investment of £165,000. On the same day, the company issued new ordinary
shares, equivalent to 49% of the total equity share capital, to a non-controlling interest for £158,000. The group’s equity shareholding decreased
to 51%.
Increase in equity holdings
TTI Technologies LLC (TTI/Vanguard)
In January 2014 the group acquired 7.4% of the equity of TTI/Vanguard for a cash consideration of US$410,000 (£247,000). The group’s equity
shareholding in TTI/Vanguard increased to 94.6%.
Structured Retail Products Limited (SRP)
In September 2014 the group purchased 0.76% of the equity share capital of SRP from one of its employees for a cash consideration of £122,000,
representing the fair value of 0.76% of the assets at the date of acquisition, increasing the group’s effective equity shareholding in SRP to 99.7%.
Sale of business
MIS Training Institute Holdings, Inc. (MIS Training)
On April 1 2014 the group sold 100% of its equity share capital in MIS Training for an initial cash consideration of US$11,000,000 (£6,564,000), offset
by a working capital adjustment of US$1,098,000 (£655,000) paid in April 2014.
At the date of disposal a discounted deferred consideration receivable of US$3,690,000 (£2,214,000) was recognised. In September 2014 deferred
consideration of US$119,000 (£73,000) was paid and the remaining discounted deferred consideration is expected to be received in cash between
January 2015 and September 2019.
The disposal of MIS Training gave rise to a profit on disposal of £6,834,000, after deducting disposal costs incurred, which was recognised as an
exceptional item (note 5) in the Income Statement.
The discounted deferred consideration is pre-determined pay-out amounts based on management best estimate of the results of the business for the
periods to December 31 2014, December 31 2015 and December 31 2016 and is calculated using the group’s WACC at date of disposal. A sensitivity
analysis was conducted and the result can be found in note 24.
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Euromoney Institutional Investor PLC www.euromoneyplc.com 105
Final
fair value
£000
2,543
19
1,223
(19)
(2,669)
1,097
1,097
674
(482)
6,834
8,123
6,564
(655)
2,214
8,123
5,326
19
5,345
2013
£000
59,712
(5,846)
53,866
47
7,436
12,153
5,743
79,245
2014
£000
63,336
(5,226)
58,110
485
6,684
8,089
6,477
79,845
14 Acquisitions and disposals continued
The net assets of MIS Training at the date of disposal were as follows:
Net assets:
Goodwill
Property, plant and equipment
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Net assets disposed (100%)
Directly attributable costs
Recycled cumulative translation differences
Profit on disposal (note 5)
Total consideration
Consideration satisfied by:
Cash
Working capital adjustments
Deferred consideration
Net cash inflow arising on disposal:
Cash consideration (net of working capital adjustments and directly attributable costs)
Less: cash and cash equivalent balances disposed
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
23612.04 - 17 December 2014 12:23 PM - Proof 8
Annual Report and Accounts 2014 Group AccountsNotes to the Consolidated Financial Statements
106
Notes to the Consolidated Financial Statements
continued
15 Trade and other receivables continued
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 believe there is no further credit risk provision required in excess of the normal
provision for doubtful receivables. There are no customers who represent more than 5% of the total balance of trade receivables.
As at September 30 2014, trade receivables of £42,604,000 (2013: £32,019,000) were not yet due.
As at September 30 2014, trade receivables of £14,087,000 (2013: £20,879,000) 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 (2013: 73 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
2014
£000
5,978
4,005
1,830
2,274
2013
£000
10,579
4,666
2,395
3,239
14,087
20,879
As at September 30 2014, trade receivables of £6,645,000 (2013: £6,814,000) were impaired and partially provided for. The amount of the provision
was £5,226,000 (2013: £5,846,000). It was assessed that a portion of the receivables is expected to be recovered. The ageing of these receivables is
as follows:
Past due less than a month
Past due more than a month but less than two months
Past due more than two months but less than three months
Past due more than three months
Movements on the group provision for impairment of trade receivables are as follows:
At October 1
Impairment losses recognised
Impairment losses reversed
Amounts written off as uncollectible
Balance at disposal of company
Exchange differences
At September 30
2014
£000
1,763
1,065
157
3,660
6,645
2014
£000
(5,846)
(4,686)
3,537
1,707
30
32
2013
£000
1,525
1,276
682
3,331
6,814
2013
£000
(6,471)
(2,981)
2,842
750
–
14
(5,226)
(5,846)
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.
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Euromoney Institutional Investor PLC www.euromoneyplc.com 107
15 Trade and other receivables continued
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 included 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)) (2014: £nil) (note 24). The escrows were released in financial year 2014.
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.
2014
£000
2,969
20
22,396
25,385
2013
£000
4,046
44
22,751
26,841
2014
£000
94,447
27,816
2013
£000
90,401
26,895
122,263
117,296
2014
2013
Assets
£000
Liabilities
£000
Assets
£000
Liabilities
£000
2,611
179
2,790
(1,322)
(385)
(1,707)
1,736
746
2,482
(909)
–
(909)
17 Deferred income
Deferred subscription income
Other deferred income
18 Financial instruments and risk management
Forward foreign exchange contracts - cash flow hedge:
Current
Non-current
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 page 82 of the
accounting policies and page 86 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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108
Notes to the Consolidated Financial Statements
continued
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 112.
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 (page 110).
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 2013.
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 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 three 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. On November 13 2013, the group 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
2014
£000
2013
£000
(45,403)
(490)
(45,893)
8,571
(37,322)
122,576
0.30
(20,858)
(1,028)
(21,886)
11,268
(10,618)
123,499
0.09
* 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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Euromoney Institutional Investor PLC www.euromoneyplc.com 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
Deferred consideration (note 24)
Loans and receivables (including cash and cash equivalents)
Financial liabilities
Derivative instruments in designated hedge accounting relationships
Acquisition commitments (note 24) (Level 3)
Deferred consideration (note 24) (Level 3)
Loans and payables
109
2014
£000
2,790
1,886
80,327
85,003
(1,707)
(13,365)
(10,389)
(120,138)
(145,599)
2013
£000
2,482
4,479
78,360
85,321
(909)
(15,037)
(16,125)
(103,862)
(135,933)
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 115). The directors consider that the carrying value amounts of financial assets and liabilities
are equal to their fair value.
The group has entered into a number of netting agreements with the banks to set off same currency cash flows under derivative instruments. The
group has gross derivative assets of £2,790,000 (2013: £2,482,000) and gross derivative liabilities of £1,707,000 (2013: £909,000) that do not meet
the offsetting criteria of IAS 32 and are presented separately in the Statement of Financial Position.
The group has entered into an omnibus guarantee and setoff agreement with Lloyds Banking Group plc with a right to setoff outstanding credit
balances against cash balances. Gross assets of £10,338,000 (2013: £14,880,000) and gross liabilities of £1,767,000 (2013: £3,612,000) under
this agreement meet the offsetting criteria of IAS 32, resulting in the presentation of a net cash at bank of £8,571,000 (2013: £11,268,000) in the
Statement of Financial Position.
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 2014.
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.
23612.04 - 17 December 2014 12:23 PM - Proof 8
Annual Report and Accounts 2014 Group AccountsNotes to the Consolidated Financial Statements 110
Notes to the Consolidated Financial Statements
continued
18 Financial instruments and risk management continued
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.
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
2014
£000
2013
£000
2014
£000
2013
£000
77,011
55,767
(138,447)
(8,702)
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 underestimate 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.
Impact of 10% strengthening of sterling against US dollar
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.
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)
2014
£000
(583)
6,819
10,350
2013
£000
(542)
6,417
3,134
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Euromoney Institutional Investor PLC www.euromoneyplc.com 111
18 Financial instruments and risk management continued
The increase in the loss from the sensitivity analysis is due to a decrease in the working capital asset position. The increase in equity from £6,417,000
to £6,819,000 from the sensitivity analysis is due to the increase of the value of the derivative financial assets.
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 £10,350,000
(2013: £3,134,000). 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 the subsidiary’s Canadian cost base.
Average exchange rate
Foreign currency
Contract value
Fair value
2014
2013
2014
US$000
2013
US$000
2014
£000
2013
£000
2014
£000
2013
£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
1.623
1.572
80,500
70,575
49,591
44,902
(229)
1,223
1.653
1.543
20,800
19,300
12,584
12,509
(308)
519
1.081
1.018
15,863
18,682
9,461
11,420
(374)
(164)
1.102
1.050
4,450
5,750
2,707
3,628
(69)
35
€000
€000
£000
£000
£000
£000
1.189
1.203
32,600
36,000
27,408
29,923
1,880
(232)
1.245
1.166
12,000
10,850
9,636
9,305
170
192
† Rate used for conversion from CAD to GBP is 1.8117 (2013: 1.6646).
As at September 30 2014, the aggregate amount of unrealised gains under forward foreign exchange contracts deferred in the fair value reserve
relating to future revenue transactions is £1,070,000 (2013: gains £1,573,000). 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 2014, there were no ineffective
cash flow hedges in place at the year end (2013: £nil).
23612.04 - 17 December 2014 12:23 PM - Proof 8
Annual Report and Accounts 2014 Group AccountsNotes to the Consolidated Financial Statements 112
Notes to the Consolidated Financial Statements
continued
18 Financial instruments and risk management continued
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 foregone of achieving lower interest
rates and this hedging strategy has the effect of spreading the group’s exposure to fluctuations arising from changes in interest rates and hence protects
the group’s interest charge against sudden increases in rates but also prevents the group from benefiting immediately from falls in rates.
As at September 30 2014, due to the low level of debt there were no interest rate swaps outstanding (2013: £nil).
The group’s exposures to interest rates on financial assets and financial liabilities are detailed in the liquidity risk section on page 113.
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 2014 would decrease or increase by £372,000 (2013: £272,000). This is mainly attributable to the group’s
exposure to interest rates on its variable rate borrowings; and
●● Other equity reserves would not change as a result of the changes in the fair value of interest rate swaps.
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.
23612.04 - 17 December 2014 12:23 PM - Proof 8
Euromoney Institutional Investor PLC www.euromoneyplc.com 113
18 Financial instruments and risk management continued
v) Liquidity risk
The group has significant intercompany borrowings and is an approved borrower under a DMGT US$160 million dedicated multi-currency facility. In
November 2013 the group replaced its US$300 million (£185 million) facility with the new US$160 million (£99 million) facility which expires at the
end of April 2016.
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. Exceeding the covenant would result in the group being in breach of the facility potentially resulting in the facility being withdrawn or
impediment of management decision making by the lender. Management regularly monitor the covenants and prepare detailed 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 2014, the group’s
net debt to adjusted EBITDA was 0.30 times.
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 from operations covers operating profit before acquired intangible amortisation, long-term incentive expense and exceptional
items) of 100% or more due to much of its subscription, sponsorship and delegate revenue being paid in advance. However, the group’s cash
conversion rate was 92% (2013: 88%) due to cash payments in respect of the vesting of options under the CAP which were accrued in previous years.
Under the DMGT facility, at September 30 2014, the group had £53.0 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.
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 2014. The
contractual maturity is based on the earliest date on which the group may be required to settle.
2014
Variable rate borrowings
Acquisition commitments
Deferred consideration
Non-interest bearing liabilities (trade and other payables, and accruals)
2013
Variable rate borrowings
Acquisition commitments
Deferred consideration
Non-interest bearing liabilities (trade and other payables, and accruals)
Weighted
average
effective
interest rate
%
2.67
–
–
–
Weighted
average
effective
interest rate
%
3.56
–
–
–
Less than
1 year
£000
490
2,088
10,389
73,505
86,472
Less than
1 year
£000
21,205
539
7,040
82,657
111,441
1–3 years
£000
Total
£000
45,677
11,277
–
466
57,420
46,167
13,365
10,389
73,971
143,892
1–3 years
£000
Total
£000
–
14,498
9,085
–
23,583
21,205
15,037
16,125
82,657
135,024
At September 30 2014, £37,782,000 (2013: £20,177,000) of borrowings were designated in US dollars with the remainder in sterling. The average rate
of interest paid on the debt was 3.42% (2013: 5.68%).
23612.04 - 17 December 2014 12:23 PM - Proof 8
Annual Report and Accounts 2014 Group AccountsNotes to the Consolidated Financial Statements
114
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.
2014
Weighted
average
effective
interest rate
%
Variable interest rate instruments (cash at bank)
Deferred consideration
Non-interest bearing assets (trade and other receivables excluding prepayments)
1.65
–
–
2013
Weighted
average
effective
interest rate
%
Variable interest rate instruments (cash at bank and short term deposits)
Deferred consideration
Non-interest bearing assets (trade and other receivables excluding prepayments)
1.27
–
–
Less than
1 year
£000
1–3 years
£000
8,571
354
71,756
80,681
–
1,532
–
1,532
Less than
1 year
£000
11,268
4,479
67,092
82,839
1–3 years
£000
–
–
–
–
Total
£000
8,571
1,886
71,756
82,213
Total
£000
11,268
4,479
67,092
82,839
The following table details the group’s liquidity analysis for its derivative financial instruments. The table has been drawn up based on 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.
2014
Foreign exchange forward contracts inflows
Foreign exchange forward contracts outflows
2013
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
7,463
(7,085)
378
Less than
1 month
£000
7,033
(7,074)
(41)
14,515
(14,001)
514
1–3
months
£000
14,668
(14,712)
(44)
65,983
(65,235)
748
3 months
to 1 year
£000
64,544
(63,424)
1,120
23,426
(23,445)
(19)
111,387
(109,766)
1,621
1–5
years
£000
Total
£000
25,442
(24,538)
904
111,687
(109,748)
1,939
23612.04 - 17 December 2014 12:23 PM - Proof 8
Euromoney Institutional Investor PLC www.euromoneyplc.com 115
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. The model used also reflects the credit risk of the various counterparties.
●● 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 2014 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 Loans
Loan notes – current liabilities
Committed loan facility – current liabilities
Committed loan facility – non-current liabilities
Loan notes
2014
£000
2013
£000
490
1,028
–
20,177
45,677
45,677
–
20,177
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
2014 £538,000 (2013: £199,000) of these loan notes were redeemed.
23612.04 - 17 December 2014 12:23 PM - Proof 8
Annual Report and Accounts 2014 Group AccountsNotes to the Consolidated Financial Statements 116
Notes to the Consolidated Financial Statements
continued
19 Loans continued
Committed loan facility
The group’s debt is provided through a dedicated multi-currency borrowing facility from Daily Mail and General Trust plc (DMGT). In November 2013
the group replaced its US$300 million (£185 million) facility with a new US$160 million (£99 million) facility which expires at the end of April 2016.
Interest is payable on this facility at a variable rate of between 1.35% and 2.35% 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 three times adjusted EBITDA on a rolling 12 month basis. Exceeding the amount
would result in the group being in breach of the facility, potentially resulting in the facility being withdrawn or impediment of management decision
making by the lender. Management regularly monitor the covenant and prepare 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 2014, the group’s net debt to adjusted EBITDA was 0.30 times
and the committed undrawn facility available to the group was £53.0 million.
In the absence of any significant acquisitions, the group has no pressing requirement to arrange new finance before the facility expires in April 2016.
There is a risk that the undrawn portion of the facility, or that the additional funding, may be unavailable or withdrawn if DMGT experiences 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 2013
Provision in the year
Used in the year
Exchange differences
At September 30 2014
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
1,673
741
(469)
(16)
1,929
4,537
679
(2,277)
–
2,939
2014
£000
2,164
463
2,241
4,868
Group
total
£000
6,210
1,420
(2,746)
(16)
4,868
2013
£000
3,974
417
1,819
6,210
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.
23612.04 - 17 December 2014 12:23 PM - Proof 8
Euromoney Institutional Investor PLC www.euromoneyplc.com 21 Deferred taxation
The net deferred tax liability at September 30 2014 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
Income
statement
£000
Other
comprehensive
income
£000
321
(1,444)
–
(5,456)
(6,579)
–
–
36
459
495
Equity
£000
823
–
–
(1,819)
(996)
Exchange
differences
£000
(119)
(20)
–
(59)
(198)
2013
£000
(29,749)
3,594
(351)
14,683
(11,823)
5,015
(16,838)
(11,823)
2013
£000
Income
statement
£000
Other
comprehensive
income
£000
Equity
£000
Exchange
differences
£000
5,725
576
584
7,798
14,683
(2,936)
(79)
85
(2,526)
(5,456)
–
459
–
–
459
(1,819)
–
–
–
(1,819)
(20)
–
–
(39)
(59)
117
2014
£000
(28,724)
2,130
(315)
7,808
(19,101)
–
(19,101)
(19,101)
2014
£000
950
956
669
5,233
7,808
At the balance sheet date, the group has unused US tax losses available for offset against future profits. At September 30 2014 a deferred tax asset of
£2,130,000 (2013: £3,594,000) 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.
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 £180,975,000 (2013: £153,233,000) 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 2014 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.
23612.04 - 17 December 2014 12:23 PM - Proof 8
Annual Report and Accounts 2014 Group AccountsNotes to the Consolidated Financial Statements 118
Notes to the Consolidated Financial Statements
continued
22 Called up share capital
Allotted, called up and fully paid
2014
£000
2013
£000
128,133,417 ordinary shares of 0.25p each (2013: 126,457,324 ordinary shares of 0.25p each)
320
316
During the year, 1,676,093 ordinary shares of 0.25p each (2013: 2,107,793 ordinary shares) with an aggregate nominal value of £4,191 (2013: £5,270)
were issued following the exercise of share options granted under the company’s share option schemes for a cash consideration of £306,472 (2013:
£2,228,590).
23 Share-based payments
The group’s long-term incentive expense at September 30 comprised:
Equity-settled options
SAYE
CAP 2010
CAP 2014
Cash-settled options
CAP 2010
CAP 2014
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 liabilities
Non-current liabilities
2014
£000
(144)
165
(2,057)
(2,036)
183
(466)
–
(48)
(331)
(2,367)
2014
£000
147
466
613
2013
£000
(96)
(971)
–
(1,067)
(971)
–
(7)
(55)
(1,033)
(2,100)
2013
£000
7,435
–
7,435
23612.04 - 17 December 2014 12:23 PM - Proof 8
Euromoney Institutional Investor PLC www.euromoneyplc.com
119
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 £2,036,000, 86% of the group’s long-term incentive expense (2013: charge
£1,067,000, 51%).
Number of ordinary shares under option: 2014
Granted
during
year
Exercised
during
year
2013
Lapsed/
forfeited
during
year
Option
price
(£)
2014
Weighted
average
market
price at
date of
exercise
(£)
8,000
–
(8,000)
–
–
4.19
12.32
19,193
126,153
63,000
–
–
–
–
67,309
(18,238)
(4,273)
(187)
–
(955)
(15,637)
(8,962)
(6,786)
–
106,243
53,851
60,523
5.65
4.97
6.39
9.17
10,468
1,709,846
24,048
–
–
–
(10,468)
(1,611,158)
–
(43,267)
–
55,421
0.0025
0.0025
(23,769)
–
279
6.03
12.48
– 2,097,363
–
– 2,097,363
0.0025
–
–
–
400,512
–
116,519
1,960,708 2,681,703 (1,676,093)
–
–
400,512
116,519
(75,607) 2,890,711
11.16
11.16
–
–
–
12.63
11.74
11.06
–
12.48
12.48
Period during which option may be exercised:
Executive options
Before January 28 2014
SAYE
Between February 1 2014 and July 31 2014
Between February 1 2015 and July 31 2015
Between February 1 2016 and July 31 2016
Between February 1 2017 and July 31 2017
CAP 2010
Before September 30 2020 (tranche 1)
Before September 30 2020 (tranche 2)
CSOP 2010
Before February 14 2020 (UK)
CAP 2014
Before September 30 20231
CSOP 2014
Before September 30 2023 (UK)
Before September 30 2023 (Canada)
The options outstanding at September 30 2014 had a weighted average exercise price of £2.49 and a weighted average remaining contractual life of
8.38 years.
23612.04 - 17 December 2014 12:23 PM - Proof 8
Annual Report and Accounts 2014 Group AccountsNotes to the Consolidated Financial Statements 120
Notes to the Consolidated Financial Statements
continued
23 Share-based payments continued
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)
Before September 30 2014 (tranche 3)
CAP 2010
Before September 30 2020 (tranche 1)1
Before September 30 2020 (tranche 2)1
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)‡
(19,960)‡
272,872
(311,708)
(219,560)
(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
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.
1
‡
The allocation of the number of options granted under each tranche of the CAP and CSOP UK and CSOP Canada represents the directors’ best estimate. The CAP
award is reduced by the number of options vesting under the respective CSOP schemes (see the Directors’ Remuneration Report for further details).
Options granted/(trued up) relate to the adjustments to those that were likely to vest in February 14 2013 under the third tranche of the CAP 2004 and the first and
second tranche of CAP 2010 following the achievement of the additional performance test. 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 as required by the Remuneration Committee.
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 and the CAP 2014 scheme.
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Euromoney Institutional Investor PLC www.euromoneyplc.com 121
23 Share-based payments continued
Share Option Schemes
The company has three 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 57 and 58. The fair value per option granted and the assumptions used in the calculation are
shown below.
Save as You Earn (SAYE) options
Date of grant
Market value at date of grant (p)
Option price (p)
Option life (years)
Expected term of option (grant to exercise (years))
Exercise price (p)
Risk-free rate
Dividend yield
Volatility
Fair value per option (£)
SAYE
13
December 20
2011
14
December 12
2012
15
December 22
2013
621
497
3.5
3.0
497
0.53%
4.30%
35%
1.54
798
639
3.5
3.0
639
0.53%
2.31%
27%
1.93
1,146
917
3.5
3.0
917
0.53%
2.50%
22%
2.42
The 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 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.
Capital Appreciation Plan (CAP) and Company Share Option Plan (CSOP)
Date of grant
Market value at date of grant (p)
Option price (p)
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
CAP 2014
CSOP 2014
Tranche 2
March 20
2010
UK
June 20
2010
Tranche 1
Tranche 2
Tranche 3
June 20
2014
June 20
2014
June 20
2014
UK
June 20
2014
Canada
June 20
2014
501
0.25
10
5
0.25
2.75%
7.00%
4.20
603.34
603.34
9.38
3
603.34*
2.28%
7.00%
4.37
1,115.67
0.25
9.28
1,115.67
0.25
9.28
1,115.67
0.25
9.28
4
0.25
1.50%
8.43%
9.89
5
0.25
1.90%
8.43%
9.57
6
0.25
2.30%
8.43%
9.19
1,115.67
1,115.67
9.28
4
1115.67*
1.50%
8.43%
9.89
1,115.67
1,115.67
9.28
4
1115.67*
1.50%
8.43%
9.89
Each CAP award comprises two 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 CAP options were valued using a fair value model that adjusted the share price at the date of grant for the net present value of expected future
dividend streams up to the date of expected exercise. The expected term of the option used in the models has been adjusted, based on management’s
best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.
23612.04 - 17 December 2014 12:23 PM - Proof 8
Annual Report and Accounts 2014 Group AccountsNotes to the Consolidated Financial Statements 122
Notes to the Consolidated Financial Statements
continued
23 Share-based payments continued
The number of CSOP 2010 and CSOP 2014 awards that vest proportionally reduce the number of shares that vest under the CAP 2010 and CAP 2014
respectively. The CSOP is effectively a delivery mechanism for part of the CAP award. The CSOP 2010 and CSOP 2014 options have an exercise price
of £6.03 and £11.16 respectively, which will be satisfied by a funding award 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.
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 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
Reduction from disposals during the year
Net movements in finance income and expense during the year (note 7)
Exercise of commitments
Paid during the year
Exchange differences to reserves
At September 30
Acquisition commitments
Deferred consideration
2014
£000
15,037
–
–
(1,298)
(247)
(111)
(16)
13,365
2013
£000
7,868
4,404
–
2,888
(82)
–
(41)
15,037
2014
£000
11,646
–
(2,214)
1,873
–
(2,738)
(64)
8,503
2013
£000
77
12,177
–
4,721
–
(5,329)
–
11,646
Exchange differences to reserves were recorded within net exchange differences on translation of net investments in overseas subsidiary undertakings
in the Statement of Comprehensive Income.
Reconciliation of finance income and expense (note 7):
Fair value adjustment
Imputed interest
Net movements in finance income and expense during the year
Acquisition commitments
Deferred consideration
2014
£000
(2,682)
1,384
(1,298)
2013
£000
1,619
1,269
2,888
2014
£000
800
1,073
1,873
2013
£000
3,887
834
4,721
Unrealised (income)/expense included in net movements during the year
(2,485)
1,641
753
3,887
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Euromoney Institutional Investor PLC www.euromoneyplc.com 123
24 Acquisition commitments and deferred consideration continued
Maturity profile of contingent consideration:
Assets
Prepayments (included in trade and other receivables)
Within one year (included in current assets)
In more than one year (included in non-current assets)
Liabilities
Within one year (included in current liabilities)
In more than one year (included in non-current liabilities)
Acquisition commitments
Deferred consideration
2014
£000
2013
£000
–
–
–
–
2,088
11,277
13,365
13,365
–
–
–
–
539
14,498
15,037
15,037
2014
£000
–
(354)
(1,532)
(1,886)
10,389
–
10,389
8,503
2013
£000
(4,479)
–
–
(4,479)
7,040
9,085
16,125
11,646
The prepayments in 2013 represent 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)). The escrows were released in financial year 2014.
There is a deferred tax asset of £40,000 (2013: £168,000) relating to the acquisition commitments.
The value of the acquisition commitments and 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 acquisition contingent consideration arrangements is as follows:
NDR
Insider Publishing
TTI/Vanguard
CIE
2014
2013
Maximum
£000
Minimum
£000
Maximum
£000
Minimum
£000
37,404
11,653
4,026
5,582
58,665
–
–
–
–
–
37,445
16,601
4,284
11,086
69,416
–
–
–
–
–
The potential undiscounted amount of all future receipts that the group could receive under the disposal contingent consideration arrangement is as
follows:
2014
2013
Maximum
£000
Minimum
£000
Maximum
£000
Minimum
£000
MIS Training
3,466
–
–
–
The discounted acquisition commitment and deferred consideration are based on pre-determined multiples of future profits of the businesses, and have
been estimated on an acquisition by acquisition basis using available performance forecasts. The directors derive their estimates from internal business
plans and financial due diligence. At September 30 2014, the weighted average growth rates used in estimating the expected profits range was 5%.
A one percentage point increase or decrease in growth rate in estimating the expected profits results in the acquisition commitment and deferred
consideration liability at September 30 2014 increasing or decreasing by £186,000 and £255,000 respectively with the corresponding change to the
value at September 30 2014 charged to the Income Statement in future periods.
23612.04 - 17 December 2014 12:23 PM - Proof 8
Annual Report and Accounts 2014 Group AccountsNotes to the Consolidated Financial Statements 124
Notes to the Consolidated Financial Statements
continued
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
2014
£000
9,804
21,558
26,810
58,172
2013
£000
7,616
15,578
5,548
28,742
The group’s operating leases do not include any significant leasing terms or conditions.
At September 30 the group had contracted with tenants to receive the following payments in respect of operating leases on land and buildings:
Within one year
Between two and five years
26 Retirement benefit schemes
Defined contribution schemes
2014
£000
1,195
2,646
3,841
2013
£000
1,196
2,649
3,845
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 legislation the group operates a defined contribution plan, Euromoney PensionSaver, into which relevant employees are automatically
enrolled.
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
2014
£000
1,780
15
967
90
2,852
2013
£000
1,238
16
1,101
88
2,443
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Euromoney Institutional Investor PLC www.euromoneyplc.com 125
26 Retirement benefit schemes continued
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. The benefits for all members of this scheme are being transferred to individual policies held in the member’s own name. 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.
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 LLC 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 50% of salary (maximum of US$52,000 a year) with the company matching up to 50% of the
employee contributions, up to 6% of salary.
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 as at March 31 2013, DMGT makes annual contributions of 12% or 18% of members’ basic pay (depending on membership section). In
addition, in accordance with agreed recovery plans, DMGT made payments of £33.8 million in the year to September 30 2014. In February 2014 DMGT
agreed with the trustees that should it continue its share buy-back programme it would make payments to the schemes amounting to 20% of the value
of shares bought back. Contributions of £4.6 million relating to this agreement were made in the year to September 30 2014.
DMGT enabled the trustee of the scheme to acquire a beneficial interest in a Limited Partnership investment vehicle (LP). The LP was designed to
facilitate payment of part of the deficit funding payments described above over a period of 15 years to 2026. 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 is treated as an asset of the scheme and reduces the actuarial
deficit within the scheme. However, under IAS 19 ‘Employee Benefits’ the LP is not included as an asset of the scheme and therefore is not included in
the calculation of the deficit.
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 group. 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
2014 was £90,000 (2013: £88,000). The expected cash contribution for the year to September 30 2015 is £90,000. There are seven active Euromoney
members in the scheme, out of a total of 808 active members.
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Annual Report and Accounts 2014 Group AccountsNotes to the Consolidated Financial Statements 126
Notes to the Consolidated Financial Statements
continued
26 Retirement benefit schemes continued
DMGT is required to account for the Harmsworth Pension Scheme under IAS 19. 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 2013, and adjusted to September 30 2014 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 £1,820.5 million (2013: £1,646.3 million) and that the actuarial value of these assets represented 90.0% (2013:
89.6%) of the benefits that had accrued to members (also calculated in accordance with IAS 19).
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 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
Fair value of plan assets
Deficit reported in the Statement of Financial Position
The deficit for the year excludes a related deferred tax asset of £956,000 (2013: asset £576,000).
The movements in the defined benefit liability over the year is as follows:
2014
At September 30 2013
Current service cost
Interest (expense)/income
Total charge recognised in Income Statement
Remeasurements:
Return on plan assets, excluding amounts in interest expense/income
Loss from changes in demographic assumptions
Loss from changes in financial assumptions
Experience gain
Total (losses)/gains recognised in Statement of Comprehensive Income
Contributions – employers
Contributions – plan participants
Payments from the plans – benefit payments
At September 30 2014
2014
£000
2013
£000
(36,218)
31,431
(4,787)
(32,702)
29,819
(2,883)
Present
value of
obligation
2014
£000
Fair value of
plan assets
2014
£000
Net defined
benefit
liability
2014
£000
(32,702)
29,819
(2,883)
(55)
(1,380)
(1,435)
–
(774)
(3,184)
298
(3,660)
–
(12)
1,591
(36,218)
–
1,260
1,260
1,363
–
–
–
1,363
568
12
(1,591)
31,431
(55)
(120)
(175)
1,363
(774)
(3,184)
298
(2,297)
568
–
–
(4,787)
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Euromoney Institutional Investor PLC www.euromoneyplc.com 127
Present
value of
obligation
2013
£000
Fair value of
plan assets
2013
£000
Net defined
benefit
liability
2013
£000
(31,776)
27,019
(4,757)
(61)
(1,302)
(1,363)
–
–
135
(339)
(204)
–
(12)
653
–
1,235
1,235
1,607
30
–
–
1,637
569
12
(653)
(61)
(67)
(128)
1,607
30
135
(339)
1,433
569
–
–
(32,702)
29,819
(2,883)
26 Retirement benefit schemes continued
2013
At September 30 2012
Current service cost
Interest (expense)/income
Total charge recognised in Income Statement
Remeasurements:
Return on plan assets, excluding amounts in interest expense/income
Annuity surplus refund
Gain from changes in financial assumptions
Experience loss
Total (losses)/gains recognised in Statement of Comprehensive Income
Contributions – employers
Contributions – plan participants
Payments from the plans – benefit payments
At September 30 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 2013 adjusted to
September 30 2014 by the actuary. The key financial assumptions adopted are as follows:
Discount rate
Inflation
Salary growth rate
Pension increase in deferment
Pension increases in payment:
Pensions earned from June 1 2002 to June 30 2006
Pensions earned from July 1 2006
2014
2013
3.8% p.a.
3.3% p.a.
2.5% p.a.
3.3% p.a.
4.3% p.a.
3.4% p.a.
2.5% p.a.
3.4% p.a.
3.3% p.a.
2.5% p.a.
3.4% p.a.
2.5% 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.
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
2014
2013
26.3
28.6
29.6
31.9
25.9
28.0
28.1
29.3
23612.04 - 17 December 2014 12:23 PM - Proof 8
Annual Report and Accounts 2014 Group AccountsNotes to the Consolidated Financial Statements 128
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 sensitivity of the defined obligation to changes
in the weighted principal assumptions is:
Assumption
Discount rate
Rate of inflation
Rate of salary growth
Life expectancy
Change in
assumption
Change in
liabilities
Increase by 0.1%
Decrease by 2.0%
Increase by 0.1%
Increase by 0.1%
Increase by 0.25%
Increase by 0.1%
Increase by one year
Increase by 3.2%
The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice it is unlikely to occur,
and changes in some of the assumptions may be correlated. The sensitivity of the defined benefit obligation to significant actuarial assumptions has
been estimated by projecting the results of the last full actuarial valuation as at June 1 2013 forward to September 30 2014.
The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the previous period.
The major categories and fair values of plan assets are as follows:
Equities
Bonds
With profits policy
Cash and cash equivalents
2014
£000
9,117
19,977
2,050
287
31,431
2013
£000
7,812
17,981
2,863
1,163
29,819
All the assets listed above excluding cash and cash equivalents have a quoted market price in an active market. The assets do not include any of the
group’s own financial instruments nor any property occupied by, or other assets used by, the group. The actual return on plan assets was £2,623,000
(2013: £2,842,000).
Through the MBPS, the group is exposed to a number of risks, the most significant of which are detailed below:
Asset volatility
The plan liabilities are calculated using a discount rate set with reference to corporate bond yields; if plan assets underperform this yield, this will create
a deficit. The actual investment strategy adopted by the trustees is not to be fully invested in corporate bonds and holds a significant proportion of
equities which are expected to outperform corporate bonds in the long term while providing volatility and risk in the short term. As the plans mature,
the group tends to reduce the level of investment risk by investing more in assets that better match the liabilities.
Changes in bond yields
A decrease in corporate bond yields will increase plan liabilities, although this will be partially offset by an increase in the value in the plans’ bond
holdings.
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26 Retirement benefit schemes continued
Inflation risk
A significant proportion of the defined benefit obligation is linked to inflation, therefore higher inflation will result in a higher defined benefit obligation
(subject to the appropriate caps in place). The majority of the plan’s assets are either unaffected by inflation or only loosely correlated with inflation,
meaning that an increase in inflation will also decrease the deficit.
Salary risk
The present value of the defined benefit plan liability is calculated by reference to the future salaries of plan participants. An increase in the salary of
the plan participants will increase the plan’s liabilities.
Life expectancy
The present value of the defined pension plan liability is calculated by reference to the best estimate of the mortality of plan participants both during
and after their employment. An increase in life expectancy will increase the plan’s liabilities.
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 2013. As a result of the valuation, the company agreed to make annual contributions of 38.9% per annum of pensionable salaries, plus
£42,400 per month to the scheme. The next triennial is due to be completed as at June 1 2016. The group considers that the contributions set at the
last valuation date are sufficient to eliminate the deficit and that regular contributions, which are based on service costs, will not increase significantly.
The group expects to contribute approximately £509,000 (2013: expected contribution in 2014 of £509,000) to the MBPS during the 2015
financial year.
The average duration of the defined benefit obligation at the end of the year is approximately 21 years (2013: 21 years).
Expected maturity analysis of discounted pension benefits:
Term to retirement
Pensioners
Within
1 year
Between
1 and 2 years
Between
2 and 5 years
Over
5 years
Proportion of total liabilities (funding basis)
55.7%
0.6%
5.0%
8.0%
30.7%
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 ringgit 82.6 million (£15,528,000).
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.
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Annual Report and Accounts 2014 Group AccountsNotes to the Consolidated Financial Statements 130
Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
continued
continued
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$160 million multi-currency facility with Daily Mail and General Holdings Limited (DMGH), a Daily Mail and
General Trust plc (DMGT) group company, as follows:
Amounts owing under US$ facility at September 30
Amounts owing under GBP facility at September 30
Amounts due under current account facility at September 30
Fees on the available facility for the year
2014
US$000
2014
£000
2013
US$000
62,486
–
(1,234)
–
38,543
7,895
(761)
45,677
417
34,782
–
(2,108)
–
2013
£000
21,478
–
(1,301)
20,177
856
ii. During the year the group expensed services provided by DMGT, the group’s parent, and other fellow group companies, as follows:
Services expensed
iii.
Last year the group paid interest to DMGH and related companies in respect of interest rate swaps as follows:
2014
£000
2013
£000
503
424
US$ interest paid
GBP interest paid
2014
US$000
2014
£000
2013
US$000
–
–
–
–
963
–
2013
£000
617
50
iv. 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
Amounts owed by DMGT group at September 30
2014
£000
1,626
2,168
(387)
2013
£000
1,971
2,628
–
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Euromoney Institutional Investor PLC www.euromoneyplc.com 131
28 Related party transactions continued
v. 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 by DMGT group at September 30
2014
£000
226
302
(226)
2013
£000
565
754
473
vi. NF Osborn serves as an advisor to the boards of both DMG Events and dmgi, fellow group companies, for which he received a combined fee of
US$23,638 (2013: US$45,000). He no longer serves on the management board of A&N International Media Limited and has not received a fee in
the current year (2013: £25,000).
vii. During the year the group received dividends from its associate undertakings:
Capital NET Limited
GGA Pte. Limited
2014
£000
291
32
323
2013
£000
268
–
268
viii. The directors who served during the year received dividends of £199,000 (2013: £230,000) in respect of ordinary shares held in the company.
ix. 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
Details of the remuneration of directors is given in the Directors’ Remuneration Report.
2014
£000
2013
£000
13,119
12,791
223
268
–
13,610
8,977
223
4,410
13,610
204
227
4,181
17,403
11,966
204
5,233
17,403
23612.04 - 17 December 2014 12:23 PM - Proof 8
Annual Report and Accounts 2014 Group AccountsNotes to the Consolidated Financial Statements 132
Notes to the Consolidated Financial Statements
continued
29 Events after the balance sheet date
Dividend
The directors propose a final dividend of 16.00p per share (2013: 15.75p) totalling £20,212,000 (2013: £19,908,000) for the year ended
September 30 2014. The dividend will be submitted for formal approval at the AGM to be held on January 29 2015. 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 2015. During 2014, a final dividend of 15.75p (2013: 14.75p) per share totalling
£19,917,000 (2013: £18,342,000) was paid in respect of the dividend declared for the year ended September 30 2013.
Investment
Dealogic (New Dealogic)
On November 5 2014, the group announced it will be acquiring 15.5% equity share capital in New Dealogic, a company incorporated by the Carlyle
Group, for US$59,200,000. The investment is funded through the sale of the group’s investment in Capital DATA Limited and Capital NET Limited for
a consideration of US$85,000,000, settled by US$59,200,000 of ordinary shares in New Dealogic, US$4,600,000 in cash and US$21,200,000 of zero-
coupon redeemable preference shares in New Dealogic. The deal is set for completion by the end of December 2014. As such, the additional IAS 10
‘Events after the Reporting Period’ disclosures are not provided.
Sale of business
On October 31 2014, the group completed the sale of its newsletter publications and website services titled Compliance Intelligence, Fund Director
Intelligence, Fund Industry Intelligence, and Real Estate Finance Intelligence to Pageant Media Limited for an initial cash consideration of US$150,000,
royalty consideration receivable of up to US$800,000 over a 24 month period from the completion date, and a 50% share in the net profits from the
2015 Fund Industry Intelligence Awards to be held in March 2015. The additional IAS 10 ‘Events after the Reporting Period’ disclosures are not provided
because the initial accounting for the disposal is incomplete at the time this report is authorised for issue.
There were no other events after the balance sheet date.
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
23612.04 - 17 December 2014 12:23 PM - Proof 8
Euromoney Institutional Investor PLC www.euromoneyplc.com Company Balance Sheet
at September 30 2014
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
Company Accounts
Company Balance Sheet
133
Notes
2014
£000
2013
£000
4
5
6
7
8
11
15
15
15
15
15
15
15
15
16
3,130
937,499
940,629
31,954
13
31,967
(44,885)
(12,918)
927,711
3,587
934,208
937,795
19,488
155
19,643
(101,021)
(81,378)
856,417
(101,172)
826,539
(1,041)
855,376
320
102,011
64,981
8
1,842
(21,582)
39,158
1,358
638,443
826,539
316
101,709
64,981
8
1,842
(74)
37,122
1,358
648,114
855,376
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 £19,100,000 (2013: £18,320,000).
The accounts were approved by the board of directors on November 19 2014.
Christopher Fordham
Colin Jones
Directors
23612.04 - 17 December 2014 12:23 PM - Proof 8
Annual Report and Accounts 2014 134
Notes to the Company Accounts
1 Accounting policies
Basis of preparation
The accounts have been prepared under the historical cost convention
except for 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
Turnover invoiced but relating to future periods is deferred and treated as
deferred income in the balance sheet.
Leased assets
Operating lease rentals are charged to the profit and loss account on a
straight-line or other systematic basis as allowed by SSAP 21 ‘Accounting
for Leases and Hire Purchase Contracts’.
throughout the current and prior year.
Pension schemes
The company has taken advantage of the exemption from presenting
a cash flow statement under the terms of FRS 1 (Revised) ‘Cash Flow
Statements’.
The company is also exempt under the terms of FRS 8 ‘Related Party
Disclosures’ from disclosing related party transactions with 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’.
Details of the company’s pension schemes are set out in note 26 to the
group accounts. The company participates in the Harmsworth Pension
Scheme, a defined benefit pension scheme which is operated by Daily
Mail and General Trust plc. As there is no contractual agreement or stated
policy for charging the net defined benefit cost for the plan as a whole
to the individual entities, the company recognises an expense equal to its
contributions payable in the period and does not recognise any unfunded
liability of this pension scheme on its balance sheet.
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 a straight-line basis over their expected useful lives at the
Going concern, debt covenants and liquidity
following rates per year:
The financial position of the group, its cash flows and liquidity position
are set out in detail in this annual report. The group’s debt is provided
Short-term leasehold premises:
over term of lease.
through a dedicated multi-currency borrowing facility from Daily Mail
Taxation
and General Trust plc (DMGT). In November 2013 the group replaced its
Current tax, including UK corporation tax and foreign tax, is provided at
US$300 million (£185 million) facility with a new US$160 million (£99
amounts expected to be paid (or recovered) using the tax rates and laws
million) facility which expires at the end of April 2016. Interest is payable
that have been enacted or substantively enacted by the balance sheet
on this facility at a variable rate of between 1.35% and 2.35% above
date.
LIBOR dependent on the ratio of adjusted net debt to EBITDA.
The group’s forecasts and projections, looking out to September 2016 and
Taxation’, and is provided in full on timing differences that result in an
taking account of reasonably possible changes in trading performance,
obligation at the balance sheet date to pay more tax, or a right to pay
show that the group should be able to operate within the level and
less tax, at a future date, at rates expected to apply when the timing
Deferred taxation is calculated under the provisions of FRS 19 ‘Deferred
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.
Turnover
Turnover represents income from advertising, subscriptions, sponsorship
and delegate fees, net of value added tax.
●● Advertising revenues are recognised in the income statement on the
date of publication.
●● Subscription revenues are recognised in the income statement on a
straight-line basis over the period of the subscription.
●● Sponsorship and delegate revenues are recognised in the income
statement over the period the event is run.
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.
23612.04 - 17 December 2014 12:23 PM - Proof 8
Euromoney Institutional Investor PLC www.euromoneyplc.com 135
1 Accounting policies continued
Dividends
Derivatives and other financial instruments
The company uses various derivative financial instruments to manage its
exposure to interest rate risks, including interest rate swaps.
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.
All derivative instruments are recorded in the balance sheet at fair value.
Recognition of gains or losses on derivative instruments depends on
whether the instrument is designated as a hedge and the type of exposure
it is designed to hedge.
Provisions
A provision is recognised in the balance sheet when the company has a
present legal or constructive obligation as a result of a past event, and it is
probable that economic benefits will be required to settle the obligation.
If material, provisions are determined by discounting the expected future
The effective portion of gains or losses on cash flow hedges are deferred
cash flows at a pre-tax rate that reflects current market assessments of
in equity until the impact from the hedged item is recognised in the
the time value of money and, where appropriate, the risks specific to the
profit and loss account. The ineffective portion of such gains and losses is
liability.
recognised in the profit and loss account immediately.
Share-based payments
Gains or losses on the qualifying part of the foreign currency loans are
The company makes share-based payments to certain employees which
recognised in the profit or loss account along with the associated foreign
are equity-settled. These payments are measured at their estimated fair
currency movement on the designated portion of the investment in
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.
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 receivables are recognised and carried at original invoice amount,
less provision for impairment. A provision is made and charged to the
profit and loss account when there is objective evidence that the company
will not be able to collect all amounts due according to the original terms.
Cash at bank and in hand
Cash at bank and in hand includes cash, short-term deposits and other
short-term highly liquid investments with an original maturity of three
months or less.
23612.04 - 17 December 2014 12:23 PM - Proof 8
Annual Report and Accounts 2014 Company AccountsNotes to the Company Accounts 136
Notes to the Company Accounts
continued
2 Staff costs
Salaries, wages and incentives
Social security costs
Share-based compensation costs (note 12)
2014
£000
255
35
(21)
269
2013
£000
241
28
96
365
Details of directors’ remuneration are set out in the Directors’ Remuneration Report from pages 46 to 66 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 2013
Additions
At September 30 2014
Depreciation
At October 1 2013
Charge for the year
At September 30 2014
Net book value at September 30 2014
Net book value at September 30 2013
2014
£000
2013
£000
390
458
Short-term
leasehold
premises
£000
9,225
263
9,488
5,638
720
6,358
3,130
3,587
23612.04 - 17 December 2014 12:23 PM - Proof 8
Euromoney Institutional Investor PLC www.euromoneyplc.com 137
5 Investments
At October 1
Return of capital
Impairment
Exchange differences
At September 30
2014
Investments
in associated
undertakings
£000
2013
Investments
in associated
undertakings
£000
Total
£000
Subsidiaries
£000
29
–
–
–
29
934,208
–
–
3,291
937,499
983,484
(46,940)
(4,810)
2,445
934,179
29
–
–
–
29
Subsidiaries
£000
934,179
–
–
3,291
937,470
Total
£000
983,513
(46,940)
(4,810)
2,445
934,208
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, 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.
Details of the principal subsidiary and associated undertakings of the company at September 30 2014 can be found in note 13 to the group accounts.
23612.04 - 17 December 2014 12:23 PM - Proof 8
Annual Report and Accounts 2014 Company AccountsNotes to the Company Accounts 138
Notes to the Company Accounts
continued
6 Debtors
Trade debtors
Amounts owed by DMGT group undertakings
Amounts owed by subsidiary undertakings
Deferred tax (note 10)
Prepayments and accrued income
Corporate tax
2014
£000
–
485
2013
£000
619
47
26,022
18,216
148
473
4,826
31,954
2014
£000
–
437
169
19,488
2013
£000
The above include the following amounts falling due after more than one year:
Amounts owed by subsidiary undertakings
–
9,238
Amounts owed by subsidiary undertakings include three loans totalling £26,022,000 (2013: £18,216,000) with interest rates of 3.92% (2013: between
1.47% and 10.40%) and repayable in September 2015.
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 in the group accounts)
Provisions (note 9)
Loan notes
2014
£000
2013
£000
(1,786)
(40,826)
(16)
(282)
–
(1,485)
(490)
–
(78,206)
(59)
(290)
(20,177)
(1,261)
(1,028)
(44,885)
(101,021)
Amounts owed to subsidiary undertakings include a loan of £28,453,000 (2013: £21,602,000) with an interest rate of zero per cent (2013: zero per
cent) and repayable in September 2015. All other 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.
23612.04 - 17 December 2014 12:23 PM - Proof 8
Euromoney Institutional Investor PLC www.euromoneyplc.com 8 Creditors: Amounts falling due after more than one year
Amounts owed to subsidiary undertakings
Committed loan facility (see note 19 in the group accounts)
Provisions (note 9)
139
2014
£000
(54,737)
(45,677)
(758)
(101,172)
2013
£000
–
–
(1,041)
(1,041)
Amounts owed to subsidiary undertakings include two loans totalling £54,737,000 (2013: £nil) with interest rates between 0.55% and 2.14% and
repayable between September 2016 and February 2019.
9 Provisions
At October 1
Provision/(release) in the year
Used in the year
At September 30
Maturity profile of provisions:
Within one year
Between two and five years
2014
Onerous
lease
provision
£000
Dilapidations
on leasehold
properties
£000
–
741
–
741
2,302
(789)
(11)
1,502
2013
Dilapidations
on leasehold
properties
£000
1,521
807
(26)
2,302
2013
£000
1,261
1,041
2,302
Total
£000
2,302
(48)
(11)
2,243
2014
£000
1,485
758
2,243
The provision represents the directors’ best estimate of the amount likely to be payable on expiry of the company’s property leases.
23612.04 - 17 December 2014 12:23 PM - Proof 8
Annual Report and Accounts 2014 Company AccountsNotes to the Company Accounts
140
Notes to the Company Accounts
continued
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 credit in the profit and loss account
Deferred tax charge to equity
Deferred tax asset at September 30
A deferred tax asset of £148,000 (2013: £nil) has been recognised in respect of other short-term timing differences.
11 Share capital
2014
£000
2013
£000
148
–
–
148
–
148
148
–
(148)
–
2014
£000
2013
£000
Allotted, called up and fully paid
128,133,417 ordinary shares of 0.25p each (2013: 126,457,324 ordinary shares of 0.25p each)
320
316
During the year, 1,676,093 ordinary shares of 0.25p each (2013: 2,107,793 ordinary shares) with an aggregate nominal value of £4,191 (2013: £5,270)
were issued following the exercise of share options granted under the company’s share option schemes for a cash consideration of £306,472 (2013:
£2,228,590).
12 Share-based payments
An explanation of the company’s share-based payment arrangements is set out in the Directors’ Remuneration Report on pages 57 and 58. The number
of shares under option, the fair value per option granted and the assumptions used to determine their values are 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 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 charge recognised in the year in respect of these options was £144,000 (2013:
£96,000). Details of the SAYE options are set out in note 23 to the group accounts.
23612.04 - 17 December 2014 12:23 PM - Proof 8
Euromoney Institutional Investor PLC www.euromoneyplc.com 141
12 Share-based payments continued
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 a credit of £165,000 (2013: £nil). Details of the CAP 2010 and CSOP 2010 options
are set out in note 23 to the group accounts (excludes cash-settled options).
Capital Appreciation Plan 2014 (CAP 2014) and Company Share Option Plan 2014 (CSOP 2014)
The CAP 2014 and CSOP 2014 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 2014 and CSOP 2014 options was £nil (2013: £nil). Details of the CAP 2014 and CSOP 2014 options are set out in
note 23 to the group accounts (excludes cash-settled options).
There is no cost or liability for the cash element of the CAP 2010 or CAP 2014 option scheme. These are borne by the company’s subsidiary undertakings.
A reconciliation of the options outstanding at September 30 2014 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
2014
£000
2013
£000
328
676
260
673
12
888
1,264
1,573
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
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 £3,291,000 (2013: increase in liability
of £2,445,000) 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.
23612.04 - 17 December 2014 12:23 PM - Proof 8
Annual Report and Accounts 2014 Company AccountsNotes to the Company Accounts 142
Notes to the Company Accounts
continued
15 Reserves
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
Retained profit for the year
Own shares acquired
Credit for share-based payments
Cash dividends paid
Exercise of share options
At September 30 2014
Share
premium
account
£000
Share
capital
£000
Other
reserve
£000
Capital
redemp-
tion
reserve
£000
Capital
reserve
£000
Own
shares
£000
311
–
–
–
–
–
5
99,485
–
–
–
–
–
2,224
316 101,709
–
–
–
–
302
320 102,011
–
–
–
–
4
64,981
–
–
–
–
–
–
64,981
–
–
–
–
–
64,981
8
–
–
–
–
–
–
8
–
–
–
–
–
8
(74)
1,842
–
–
–
–
–
–
–
–
–
–
–
–
(74)
1,842
–
–
– (21,508)
–
–
–
–
–
–
1,842 (21,582)
Reserve
for
share-
based
pay-
ments
£000
36,055
–
–
–
1,067
–
–
37,122
–
–
2,036
–
–
39,158
Fair
value
reserve
£000
Profit
and loss
account
£000
Total
£000
–
283
(148)
–
–
–
–
–
–
(27,157)
–
1,223 656,951 860,782
18,320 18,320
283
(148)
1,067
(27,157)
2,229
1,358 648,114 855,376
19,100 19,100
– (21,508)
2,036
–
(28,771) (28,771)
306
1,358 638,443 826,539
–
–
–
–
–
–
The investment in own shares is held by the Euromoney Employees’ Share Ownership Trust (ESOT) and Euromoney Employee Share Trust (EEST). The
EEST was incorporated in February 2014 to facilitate the purchase of shares for the Capital Appreciation Plan 2014. The trusts waived the rights to
receive dividends. Interest and administrative costs are charged to the profit and loss account of the trusts as incurred.
Euromoney Employees’ Share Ownership Trust
Euromoney Employee Share Trust
Total
Nominal cost per share (p)
Historical cost per share (£)
Market value (£000)
2014
Number
2013
Number
58,976
58,976
1,747,631
1,806,607
0.25
11.95
18,337
–
58,976
0.25
1.25
684
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 £39,158,000 (2013: £37,122,000) of the liability for share-based payments and £535,268,000 (2013: £544,939,000) of the
profit and loss account is distributable to equity shareholders of the company. The remaining balance of £103,175,000 (2013: £103,175,000) is not
distributable.
23612.04 - 17 December 2014 12:23 PM - Proof 8
Euromoney Institutional Investor PLC www.euromoneyplc.com 16 Reconciliation of movements in equity shareholders’ funds
Profit for the financial year inclusive of dividends
Dividends paid
Issue of shares
Own shares acquired in the year
Change in fair value of cash flow hedges
Tax on items taken directly to equity
Credit to equity for share-based payments
Net increase in equity shareholders’ funds
Opening equity shareholders’ funds
Closing equity shareholders’ funds
143
2014
£000
2013
£000
19,100
(28,771)
(9,671)
306
(21,508)
–
–
2,036
(28,837)
855,376
826,539
18,320
(27,157)
(8,837)
2,229
–
283
(148)
1,067
(5,406)
860,782
855,376
17 Related party transactions
Related party transactions and balances are detailed below:
i.
The company had borrowings under a US$160 million multi-currency facility with Daily Mail and General Holdings Limited, a fellow group
company (note 19 of group accounts):
Amounts owing under US$ facility at September 30
Amounts owing under GBP facility at September 30
Amounts due under current account facility at September 30
2014
US$000
62,486
–
(1,234)
2014
£000
2013
US$000
38,543
7,895
(761)
45,677
34,782
–
(2,108)
2013
£000
21,478
–
(1,301)
20,177
Fees on the available facility for the year
–
417
–
856
ii.
Last year the group paid interest to DMGH and related companies in respect of interest rate swaps as follows:
US$ interest paid
GBP interest paid
2014
US$000
2014
£000
2013
US$000
–
–
–
–
963
–
2013
£000
617
50
iii. During the year the company received a dividend of £291,000 (2013: £268,000) from Capital NET Limited, an associate of the company.
23612.04 - 17 December 2014 12:23 PM - Proof 8
Annual Report and Accounts 2014 Company AccountsNotes to the Company Accounts 144
Notes to the Company Accounts
continued
17 Related party transactions continued
iv. During the year the company entered into the following trading transactions with Euromoney Trading Limited:
Guarantee fee
Licence fee
Management fee
2014
£000
1,300
6,931
(1,002)
7,229
2013
£000
1,300
6,303
(611)
6,992
Amounts due under current account
(33,214)
(73,178)
18 Post balance sheet event
Dividend
The directors propose a final dividend of 16.00p per share (2013: 15.75p) totalling £20,212,000 (2013: £19,908,000) for the year ended September 30
2014 subject to approval at the AGM to be held on January 29 2015. In accordance with FRS 21 ‘Post Balance Sheet Events’, these financial statements
do not reflect this dividend payable but will be accounted for in shareholders’ equity as an appropriation of retained earnings in the year ending
September 30 2015. During 2014, a final dividend of 15.75p (2013: 14.75p) per share totalling £19,917,000 (2013: £18,342,000) was paid in respect
of the dividend declared for the year ended September 30 2013.
Investment
Dealogic (New Dealogic)
On November 5 2014, the group announced it will be acquiring 15.5% equity share capital in New Dealogic, a company incorporated by the Carlyle
Group, for US$59,200,000. The investment is funded through the sale of the group’s investment in Capital DATA Limited and Capital NET Limited for
a consideration of US$85,000,000, settled by US$59,200,000 of ordinary shares in New Dealogic, US$4,600,000 in cash and US$21,200,000 of zero-
coupon redeemable preference shares in New Dealogic. The deal is set for completion by the end of December 2014. As such the additional FRS 21
‘Past Balance Sheet Events’ disclosures are not provided.
There were no other events after the balance sheet date.
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
23612.04 - 17 December 2014 12:23 PM - Proof 8
Euromoney Institutional Investor PLC www.euromoneyplc.com
Other
Five Year Record
145
Five Year Record
Consolidated Income Statement Extracts
Total revenue
330,006
363,142
394,144
404,704
406,559
2010
£000
2011
£000
2012
£000
2013
£000
2014
£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 before tax
Tax expense on profit
Profit for the year
Attributable to:
Equity holders of the parent
Equity non-controlling interests
Profit for the year
100,057
(13,671)
(4,364)
–
(228)
81,794
281
82,075
(10,651)
71,424
(12,839)
58,585
58,105
480
58,585
108,967
(12,221)
(9,491)
(6,603)
(3,295)
77,357
408
77,765
(9,568)
68,197
(22,527)
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
69,672
168
69,840
121,088
(15,890)
(2,100)
–
2,232
105,330
284
105,614
(10,354)
95,260
(22,235)
73,025
72,623
402
73,025
119,809
(16,735)
(2,367)
–
2,630
103,337
264
103,601
(2,126)
101,475
(25,610)
75,865
75,264
601
75,865
Basic earnings per share
Diluted earnings per share
Adjusted diluted earnings per share
Diluted weighted average number of ordinary shares
Dividend per share
50.04p
49.47p
53.50p
117,451,228
18.00p
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
59.49p
59.15p
70.60p
127,236,311
23.00p
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
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
545,443
18,707
(47,973)
(122,263)
47,354
(84,745)
356,523
23612.04 - 17 December 2014 12:23 PM - Proof 8
Annual Report and Accounts 2014 146
Shareholder Information
Thursday November 20 2014
Thursday November 27 2014
Friday November 28 2014
Thursday January 29 2015*
Thursday January 29 2015
Thursday February 12 2015
Thursday May 14 2015*
Thursday May 21 2015*
Friday May 22 2015*
Thursday June 18 2015*
Thursday July 23 2015*
Thursday November 19 2015*
Wednesday December 31 2014
Tuesday June 30 2015
Financial calendar
2014 final results announcement
Final dividend ex dividend date
Final dividend record date
Interim Management Statement
2015 AGM (approval of final dividend and remuneration policy)
Payment of final dividend
2015 interim results announcement
Interim dividend ex dividend date
Interim dividend record date
Payment of 2015 interim dividend
Interim Management Statement
2015 final results announcement
Loan note interest paid to holders of loan notes on
* Provisional dates and are subject to change
Company secretary and registered office
Bridget Hennigan
Nestor House
Playhouse Yard
London
EC4V 5EX
England registered number: 954730
From January 1 2015, the company’s registered office will change to 6–8 Bouverie Street, London, EC4Y 8AX.
Shareholder enquiries
Administrative enquiries about a holding of Euromoney Institutional Investor PLC shares should be directed in the first instance to the company’s
registrar, Equiniti.
Telephone: 0871 384 2951 (Calls cost 8p per minute plus network extras. Lines open 8.30 a.m. to 5.30 p.m. 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.
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.
Advisors
Auditor
Deloitte LLP
2 New Street Square,
London EC4A 3BZ
Brokers
UBS
1 Finsbury Avenue,
London EC2M 2PP
Solicitors
Nabarro
125 London Wall,
London EC2Y 5AL
Registrars
Equiniti
Aspect House,
Spencer Road, Lancing,
West Sussex BN99 6DA
23612.04 - 17 December 2014 12:23 PM - Proof 8
Euromoney Institutional Investor PLC www.euromoneyplc.com October
Acquisition of Infrastructure
Journal (IJ) for £12.5m
April
Disposal of MIS Training
Launch of IJGlobal — merger of
Project Finance and IJ
June
Decision to move London
headquarters to Bouverie Street
after 40 years in Nestor House
March
Delphi project with investment
of £10m completed on time and
on budget
BCA and GlobalCapital first products
launched on Delphi content platform
July
Acquisition of Mining Indaba
for £45m
23612.04 - 17 December 2014 12:23 PM - Proof 8
www.euromoneyplc.com
Euromoney Institutional Investor plc
Nestor House, Playhouse Yard,
London EC4V 5EX
23612.04 - 17 December 2014 12:23 PM - Proof 8