23rd Nov 2011 07:00
Daily Mail and General Trust plc (`DMGT')
Group unaudited preliminary results for the year ended 2nd October,2011.
Adjusted results* Statutory results~ 2011 2010 Change 2011 2010 (restated)+ (restated)+Revenue £1,990 m £1,968 m +1% £1,990 m £1,968 mOperating profit £286 m £300 m -5% £167 m £228 mProfit before tax £237 m £230 m +3% £125 m £146 mEarnings per share 47.0 p 46.3 p +2% 29.2 p 52.1 pDividend per share 17.0 p 16.0 p +6% RESILIENT PERFORMANCE
- Revenues up 1%, an underlying# increase of 3%;
- Strong B2B performance with revenues up 8%, an underlying# increase of 10%;
- Resilience at Associated; revenues down 2%, but stable on an underlying# basis;
- Challenging year for Northcliffe; revenues down 10%;
- Operating profit* of £286m, down 5%, but stable on an underlying# basis;
- Underlying# operating margin* unchanged at 16%;
- Profit* before tax of £237m, up 3%;
- Active portfolio management: purchase of Ned Davis Research and sale of George Little Management, RMSI, Sanborn and shares in CoStar Group, Inc.;
- Net debt reduced by £143 million to £719 million; net debt: EBITDA of 1.99 times;
- Earnings per share* up 2% to 47.0p; full year dividend increased by 6% to 17.0p.
Martin Morgan, Chief Executive, said:
"DMGT has delivered a solid set of results. Our international B2Bcompanies have increased their revenues and profits* by 10% and 13% on anunderlying# basis respectively. Our UK consumer businesses have been impactedby the weak advertising environment, particularly in the third quarter, andhigher newsprint costs resulting in profits* down 20% for the year.Notwithstanding the challenging trading conditions, the underlying# revenuesof Associated Newspapers were unchanged. Furthermore, Mail Online is now aglobal name in news and on course to become the world's biggest Englishlanguage newspaper website. Whilst first quarter trading to date has beenreasonable, we remain cautious about the medium term outlook, given continuingexternal uncertainties, particularly for UK advertising.
Our strategy remains focused on innovation-led growth, talent development and improved operating effectiveness. We are a more focused and financially stronger Group today, which makes us confident that we can make real progress in 2012."
Enquiries
Stephen Daintith, Finance Director Tel: 020 7938 6631
Nicholas Jennings, Company Secretary Tel: 020 7938 6625
Susanna Voyle/James Macey White, Tulchan Communications Tel: 020 7353 4200
Analysts' presentation and webcast
A presentation of the Preliminary Results will be given to investors and analysts at 9.30 a.m. on 23rd November, 2011 at American Square Conference Centre, 1 America Square, 17 Crosswall, London, EC3N 2LB. There will also be a live webcast available on our website: http://www.dmgt.com.
Next trading update
The Group's next scheduled announcement of financial information will be its first quarter interim management statement on 8th February, 2012.
Notes to Editors
DMGT is a multi-media and information company providing essential news, entertainment and information services on both business to business (B2B) and consumer platforms. We operate in many different markets, in over 40 countries providing high-quality content, information, analytics and events.
Our B2B arm comprises Risk Management Solutions, dmg information,dmg events and Euromoney Institutional Investor. Our consumer media division,A&N Media, comprises Mail Newspapers, our free newspaper division, principallyMetro, our central European operations, our digital only businesses andNorthcliffe Media. We also own 50% of dmg radio Australia, a joint venture.Our strategy is to remain the owner of high-quality, sustainable,market-leading media and information assets across both the B2B and consumersectors and to become a more global growth company with sustainable earningsand dividend growth.Notes
*before exceptional items, impairment of goodwill and intangible assets, and amortisation of intangible assets arising on business combinations. Other than revenue and operating profit, these adjusted results are for total operations, including those treated as discontinued.
#Underlying revenue or profit* is revenue or profit* on alike-for-like basis, adjusted for acquisitions, disposals, closures andnon-annual events in the current and prior year and at constant exchangerates. For RMS, underlying percentage movements exclude RMSI and for dmginformation Sanborn. For dmg events, the comparison is between events held inthe year and the same events held the previous time. For Euromoney thecomparisons exclude Ned Davis Research and underlying profit excludes its CAPcharges in both years. For A&N Media, the underlying percentage movementsexclude London Lite, the discontinued television activities of Teletext, thedigital dating and data businesses, the Slovakian print production companiesand the disposal and closure of titles within Northcliffe.
+ restated for the change of presentation of amortisation of internally generated and acquired computer software as a charge against adjusted operating profit*; see Note 1.
~ These statutory highlights are for continuing operations only (excluding from the prior year dmg radio Australia up to 16th December, 2009), other than for Group profit and earnings per share which are the total statutory figures.
†Percentages are calculated on actual numbers to one decimal place.
Daily Mail and General Trust plc
Contents
Management report
Condensed Consolidated Income Statement
Condensed Consolidated Statement of Comprehensive Income
Condensed Consolidated Statement of Changes in Equity
Condensed Consolidated Statement of Financial Position
Condensed Consolidated Cash Flow Statement
Notes to the Condensed Consolidated Financial Statements
Management report
This management report focuses principally on the adjusted results to give a more comparable indication of the Group's underlying business performance. All year-on-year comparisons are on a like-for-like basis after adjusting the prior year results* for the change of presentation of amortisation of internally generated and acquired computer software as a charge against adjusted operating profit*.
An explanation of restructuring and impairment charges and otheritems included in the statutory results is set out after the divisionalperformance review and in the segmental note. In the prior year statutoryresults, the Group's radio division is shown within discontinued operationsfor the period to 16th December, 2009. The adjusted results are summarisedbelow: Adjusted results* 2011 2010 Change†£m (restated)+ £mRevenue 1,990 1,968 +1%Operating profit 286 300 -5%Income from JVs andassociates 5 2Net finance costs (54) (75)Discontinued operations - 3Profit before tax 237 230 +3% Tax charge (35) (31)Minority interest (22) (21)Group profit 180 178 +1% Adjusted earnings per share 47.0p 46.3 p +2%
*Adjusted results are stated before exceptional items, impairment of goodwill and intangible assets, and amortisation of intangible assets arising on business combinations. For a reconciliation of Group profit to adjusted Group profit, see Note 10. Other than revenue and operating profit, these adjusted results are for total operations, including those treated as discontinued.
#Underlying revenue or profit* is revenue or profit* on a like forlike basis, adjusted for acquisitions, disposals, closures and non-annualevents made in the current and prior year and at constant exchange rates. ForRMS, underlying percentage movements exclude RMSI and for dmg informationSanborn. For dmg events, the comparison is between events held in the year andthe same events held the previous time. For Euromoney the comparisons excludeNed Davis Research and underlying profit excludes its CAP charges in bothyears. For A&N Media, the underlying percentage movements exclude London Lite,the discontinued television activities of Teletext, the digital dating anddata businesses, the Slovakian print production companies and the disposal andclosure of titles within Northcliffe.
+ Adjusted operating profit*, the adjusted tax charge and adjusted earnings per share for the prior year have been restated for the change of presentation of amortisation of internally generated and acquired computer software as a charge against adjusted operating profit*. For the prior year, £17 million has been reclassified as a charge against adjusted operating profit; see Note 1.
†Percentages are calculated on actual numbers to one decimal place.
The average £: US$ exchange rate for the year was £1: $1.61 (against £1:$1.56 last year). The rate at the year end was $1.56 (2010 $1.63).
Summary
- Group performance: Group revenue for the year was £1,990 million comparedwith £1,968 million for the prior year, an increase of 1% on a reported basisand an underlying# increase of 3%. Operating profit* was down 5% on theequivalent figure for the prior year at £286 million, but unchanged on anunderlying# basis. Overall operating margin* fell from 15% to 14% due tomargin pressure in our consumer businesses. On an underlying# basis, includingadjustment for an additional charge of £12 million for Euromoney's managementincentive Capital Appreciation Plan, it was stable at 16%.The Group's B2B companies increased their overall profit* by 4%, anunderlying# increase of 13%. Euromoney's outstanding performance led to theacceleration of its management incentive Capital Appreciation Plan (CAP)charge, resulting in an additional expense of £12 million, when compared withthe prior year, all of which has been charged in arriving at adjustedprofits*. Within consumer media, the profits* of A&N Media were down 20%. As aconsequence, 74% of this year's operating profit* was generated from theGroup's B2B operations and 26% from consumer, compared to 67% and 33% lastyear. More than half of the Group's operating profits* were again derived fromoutside the UK.Adjusted profit* before tax rose by 3% to £237 million, benefiting fromreduced net finance costs. The statutory profit before tax for the year was£125 million, after charging £71 million of amortisation charges andimpairment losses and £41 million of net exceptional charges. Adjusted Groupprofit* after tax and minority interests was up 2% to £180 million. Statutoryprofit was £112 million, down from £178 million, due to higher exceptionalcharges and lower tax credits in the current year.
- Net debt and financing: net debt fell by £143 million to £719 million due to continued strong cash flow generation and disposal proceeds from businesses sold during the year. At the year end, most of the Group's debt remained in the form of long-term Eurobonds, with a cash balance of £172 million. The Group's ratio of year end net debt to EBITDA was 1.99 times, well below the Group's internal limit of 2.4 times.
Outlook
- Group: we have entered the new financial year with our businessesin our diversified portfolio performing in line with our expectations.Overall, we expect underlying# growth in revenue and profit* to be deliveredby all our B2B divisions, with A&N Media's progress primarily dependent on theadvertising environment and on cost reduction.- RMS: has started the year strongly with a solid sales pipelineand a range of significant development programmes including its new softwaresolution platform for which 2011/12 will be a peak investment year withincremental capital expenditure of £10 million. RMS expects to achieve revenuegrowth in the high single digits and maintain operating margins* of around30%.- dmgi: expects to drive continued solid organic growth, due to thestrength of market positions and through new launch initiatives. Growth wouldbe enhanced by any sustainable improvements in the economic environment,particularly for our property and financial businesses. Overall, dmgi expectsto achieve high single digit revenue growth and to maintain operating margins*at around 20%.- dmg events: the positive momentum experienced through 2011 hascontinued into the Autumn, with bookings for key events showing encouragingtrends. The reported results for 2011/12 will be affected by the disposal ofGeorge Little Management (`GLM') and by only one of our three major biennialshows taking place. On an underlying# basis, and fuelled by our launch plans,revenue growth is expected to continue in the high single digits, withoperating margins* of around 20%.- Euromoney: in spite of the continuing volatility and uncertaintyin financial markets, the broad outlook for the first quarter of the newfinancial year is reasonably positive. The trading environment after that isexpected to be more challenging with forward revenue visibility limited otherthan for subscriptions. Overall, Euromoney expects to achieve mid single digitrevenue growth and to maintain its operating margins*.- Associated: national advertising revenues in the first sevenweeks of the new year were down 2% on last year, with continued limitedvisibility on future trends. Circulation revenues will be boosted by the fullyear impact of the Monday to Friday cover price rise for the Daily Mail inJuly 2011 and that for the Saturday edition in October 2011. Overall,Associated expects to achieve low single digit revenue growth due in part tothe Olympics and operating margins in the region of 10%, with costefficiencies helping to protect profitability.- Northcliffe: is going through a substantial change programme andwill benefit from significant savings made in the previous six months.Advertising revenues have continued to track the year on year trendsexperienced in 2010/11 with a decline of 7% on a like-for-like basis on lastyear in the first seven weeks of the new financial year (10% on a reportedbasis). The first quarter and outlook for the year as a whole are not expectedto improve on this trend. Cost reduction initiatives will continue and marginsare expected to be stable. Northcliffe is now focused on building new revenueopportunities from its print and digital products.
Divisional Review
Business to business (B2B)
Revenues from the B2B group totalled £892 million, 8% higher thanlast year, with an underlying# increase of 10%. Operating profits* increasedby £8 million (4%) to £226 million. The underlying# increase, including afteradjustment for an additional charge of £12 million for Euromoney's managementincentive CAP, was 14%. The overall B2B margin* was 25% (2010 26%).
Risk Management Solutions
2011 2010 Movement Underlying £m £m % (restated )+Revenue 159 153 +4% +11%Operating profit* 47 45 +6% +21%Operating margin* 30% 30%+ The results for the prior year to 3rd October, 2010 have been restated forthe change of presentation of amortisation of internally generated andacquired computer software as a charge against adjusted operating profit*. Forthe prior year, £2 million has been reclassified as a charge against adjustedoperating profit*.RMS had a solid year of revenue and profit* growth. Revenuesincreased by 4% on a reported basis, with an underlying# increase of 11%.Operating profit* rose by 6% in spite of the inclusion of RMSI's £4 millionloss up until the disposal of its non-core elements in August 2011; underlyingprofit* grew by 21%. Subscriptions continued to grow well, with a renewal rateof approximately 95% during the year.RMS continues to focus primarily on its core commercial catastrophemodelling business, which includes modelling of natural hazards risks such asearthquake, hurricane and flood, as well as terrorism risk and risk frompandemic diseases. During the year, it released substantial updates to two ofits core peril models, Atlantic Hurricane and European Windstorm, whichreflected the incorporation of significant new hazard and loss data, as wellas advances in research and technology since the models were last updated. RMSalso continued to pursue selected growth areas in its Data, Life and CapitalMarkets initiatives.In addition, RMS began a significant new development programme in2011, which is expected to generate future, multi-year revenue growth. Thisnew software platform is designed to provide complete solutions for clientsacross the re/insurance value chain, including access to sophisticated models,an ability to integrate those models into enterprise-wide business processes,as well as analytics to help clients make better decisions. RMS is workingwith a limited number of joint development partners to develop "best in class"capabilities and preparing an early access programme to be offered to clientsprior to rollout.Outlook
For 2011/12, RMS expects to achieve high single digit revenue growth and to maintain operating margin* at around 30%.
dmg::information 2011 2010 Movement Underlying £m £m % % (restated)+Revenue 238 231 +3% +7%Operating profit* 47 47 - +9%Operating margin* 20% 20%+ The results for the prior year to 3rd October, 2010 have been restated forthe change of presentation of amortisation of internally generated andacquired computer software as a charge against adjusted operating profit*. Forthe prior year, £6 million has been reclassified as a charge against adjustedoperating profit*.Summary
dmgi had a good year, with reported revenue up 3% at £238 million. Underlying# revenues grew by 7%, which is a good performance given the economic backdrop. Operating profits* were unchanged at £47 million, but with an underlying# increase of 9% year on year.
Property information 2011 2010 Movement £m £m Revenue 89 82 +8%Operating Profit 21 20 +6%
In the US, Environmental Data Resources (`EDR`) increased both revenues and profits* against the challenging backdrop of the fragile commercial real estate market as it continued to deepen its market penetration and enhance product offerings.
Landmark Information Group also increased both revenues and operating profits*. This robust performance was particularly pleasing as transaction activity levels in the UK remain significantly below the historic norm. Landmark has successfully expanded its product range, increasingly serving the lenders in addition to solicitors and consultants. In June, it completed the acquisition of On-Geo in Germany and, through combining the On-Geo and Inframation businesses, Landmark now enjoys a market leading position in the German market.
Financial, Education and Energy
2011 2010 Movement £m £m % RevenueContinuing 133 126 +5%Discontinued 16 23 -28%Total 149 149 -Operating Profit 30 31 -3%
The other markets of financial, education and energy account for 60% of underlying revenues in aggregate. Sanborn, operating in the geospatial market, was sold to management in September 2011 with dmgi retaining a non-controlling interest in the company.
- Financial: Trepp is the market leader providing information to the Commercial Mortgage-Backed Securities (`CMBS') market and produced positive revenue growth in the year. The market place was particularly volatile during the year, with speculative investors, seeking a high yield, exiting the market. At the same time, new issuance remains muted and longer-term investors are holding off on re-building their activity. Fortunately the need for Trepp's analysis and insight continues to grow. Trepp has also expanded, largely offsetting the difficult near-term market environment.
Lewtan, offering products to both investors and issuers in the Asset-Backed Securities market, released a major upgrade of its core ABSNet product in the year and saw good growth following the launch of its ABSNet Loan product line. Market conditions remained challenging, with one major client affecting overall performance.
- Education: Hobsons increased underlying# revenues by 17% with margins* improving slightly. Hobsons' higher education division provides products to professionals in higher education institutions to assist in the preparation, recruitment, management and advancement of students and continues to increase its market share. The US high school division, Naviance, again grew particularly strongly during the year.
- Energy: the energy trading markets served by Genscape remained turbulent. Genscape grew modestly with an expanding product range and growth in particular coming from the recent oil market product launches.
Outlook
For 2011/12, dmgi expects to achieve high single digit revenue growth and to maintain its operating margin* at around 20%.
dmg::events 2011 2010 Movement Underlying £m £m % % Revenue 132 110 +20% +14%Operating profit* 39 30 +29% +14%Operating margin* 29% 27%dmg events had a good year with both underlying revenues and underlyingprofits* increasing by 14%. The strong momentum that started in the latterhalf of 2010 has continued through the past year due to exhibitions and eventsbeing a late-cycle media sector. The reported revenues and profits* benefittedfrom two of our large biennial shows taking place in the year and were up 20%to £132 million and up 29% to £39 million respectively. Both Gastech andADIPEC were held during 2010/11, while only one large biennial event, theGlobal Petroleum Show, occurred in 2009/10.The sale of George Little Management (`GLM'), our business serving the retail(Gift, Surf & Jewellery) markets, including the bi-annual New YorkInternational Gift Fair, was completed in September 2011. GLM reportedoperating profits* for the year of £16 million on revenues of £45 million. dmgevents is now organised into four operating units, covering the sectorsEnergy, Leadership Conferences (Evanta), Digital Marketing and a regionalbusiness in the Middle East.In the Energy sector, the Gastech event, held in Amsterdam, washighly successful, generating revenues 30% higher than the previous show. Thenext event is scheduled to be held in London in October 2012 after the LondonOlympics and will fall into our 2012/13 financial year.
Although the economic uncertainties in the Middle East have presented challenges, our Middle East business was able to increase both revenues and profits*. The Big 5 show in Dubai, which is our largest individual event, was similar in scale to prior years and ADIPEC, a large biennial show held in Abu Dhabi, increased significantly in both revenue and profit* terms.
New launches are playing an increasing role in the dmg::eventsdivision and, during the year, the Big 5 franchise was successfully expandedwith a launch in Saudi Arabia. Further launches are planned for next year inboth the Energy and Middle East businesses.
Evanta, our Leadership Conferences brand, also expanded aggressively with revenues growing by 42% through regional events across the US targeted at Chief Information Officers and at Finance and Human Resource professionals.
Our Digital Marketing unit, where the main events are operated under the Ad:tech brand, grew revenues by 19%, fuelled by growth of the established events in both London and New York and a successful launch in Tokyo.
Outlook
For 2011/12, dmg events expects to achieve high single digit underlying# revenue growth. The reported results will be affected by the disposal of George Little Management (`GLM') and by the absence of Gastech and ADIPEC. Only one of our three major biennial shows will be taking place, the Global Petroleum Show in June 2012. As a consequence, dmg events expects a low single digit decline in reported revenues with operating margin* of around 20%.
Euromoney Institutional Investor
2011 2010 Movement Underlying £m £m % %Revenue 363 330 +10% +12%Operating profit* 109 100 +9% +11%before CAP chargesOperating profit* 93 96 -3% +11%Operating margin* 26% 29%Euromoney released its preliminary results on 10th November,achieving an operating profit* of £93 million on revenues up 10% to £363million. This operating performance is stated after deducting a higher chargefor its management incentive scheme, the CAP, due to the earlier than expectedachievement of its profit target. The CAP cost was £12 million higher than theprior year including an additional accelerated CAP expense of £7 million.Underlying# revenue growth was 12%. This, combined with tight control ofheadcount, helped Euromoney maintain its margin (before the CAP) at 30% evenafter significant investment in new products and technology.Underlying subscription revenues, which account for nearly halfEuromoney's revenue, increased at a rate of 14%. This double digitsubscription growth continues to be generated by premium online research anddata services such as BCA Research and CEIC Data, contrasting with the lowergrowth rates of the traditional print publishing businesses.The quality of Euromoney's event portfolio has been demonstrated by a 20%growth in sponsorship revenues. The event businesses have been a key driver ofEuromoney's strong recovery over the two years since the global credit crisis.Revenues broadly comprise an equal mix of both sponsorship and payingdelegates, and the growth in the year reflects the success of Euromoney'sstrategy of building large, must-attend annual events in niche markets, andcontinually investing to grow these events while adding new, smaller events asmarkets improve. The recent market uncertainty has had limited impact onEuromoney's event businesses, while delegate bookings for training courseshave held up well.Advertising revenues came under pressure towards the end of the year but theincreased investment in digital publishing has contributed to an increasingproportion of advertising revenues from online rather than print, and a strongperformance from products less dependent on advertising.
Outlook
In spite of the continuing volatility and uncertainty in financial markets,the broad outlook for the first quarter of the new financial year isreasonably positive. Euromoney expects the trading environment after that tobe more challenging and, as usual at this time, forward revenue visibilitybeyond the first quarter is limited other than for subscriptions. For 2011/12,it expects to achieve mid-single digit revenue growth and to maintain itsoperating margin*.Consumer media 2011 2010 Movement Underlying £m £m % % (restated)+Revenue 1,098 1,144 -4% -2%Operating profit* 93 116 -20% -26%Operating margin* 8% 10%A&N Media's revenues for the year were £1,098 million, anunderlying# decrease of 2%. Revenues were 4% lower on a reported basis; prioryear revenues included some £28 million of revenues from variousunderperforming businesses that have been either closed or sold. The testingeconomic conditions adversely affected both Northcliffe's classified revenuesand the Mail titles' display advertising revenues. Together with discountedprice related marketing activity for The Mail on Sunday, and a further hike inthe price of newsprint, this meant that underlying operating profits*decreased by £32 million (-26%) to £93 million.The pursuit of cost efficiencies continued during 2011 withsizeable savings delivered through print operations, finance shared services,technology and the integration of strategy with customer insight. A&N Media'sunderlying margins* fell from 11% to 8%. Headcount reduced by 740 (10%) duringthe year from 7,613 to 6,873.An exceptional operating charge of £42 million (£19 million ofwhich was non-cash) was made for restructuring and closure costs, the largestportion relating to print site restructuring and closures. During the year,plans to relocate the Group's print operations from Surrey Quays to a new sitein Thurrock were announced. The process is on track and significant costsavings have already been made as print operations are streamlined in advanceof the transition.As reported in November 2010, A&N International now reportsdirectly to A&N Media and its results are shown within Associated, rather thanwithin Northcliffe. The prior year figures have been re-stated for this changeof presentation.Associated Newspapers 2011 2010 Movement Underlying £m £m % % (restated)+Revenue 862 883 -2% -Operating profit* 76 89 -15% -22%Operating margin* 9% 10%
The prior period results include losses* made by London Lite and the discontinued television activities of Teletext prior to their closure.
+ The results for the prior year to 3rd October, 2010 have been restated forthe change of presentation of amortisation of internally generated andacquired computer software as a charge against adjusted operating profit*. Forthe prior year, £9 million has been reclassified as a charge against adjustedoperating profit*. The prior year results also include £3 million for theCentral European operations.
Summary
It is encouraging to note that in what has been a very challengingyear for the UK consumer, underlying# revenues were in line with last year.This was primarily due to strong growth from Metro, Mail Online and therecruitment and property digital businesses. Total revenues were down £21million mainly due to the impact of closed or sold businesses and lowerdisplay revenues from the two Mail titles. Total underlying advertisingrevenues of £442 million were unchanged from last year. After a strong firstquarter, challenging economic conditions affected the second and in particularthe third quarter, with an improvement seen towards the end of the year.
Operating profit* for the year fell by £13 million to £76 million due to the fall in revenues and to the increased price of newsprint. Continued control of costs helped to mitigate these adverse variances, although operating margins* decreased to 9% from 10%.
UK Newspaper operations
Underlying# circulation revenues fell by 2% to £343 million due inpart to the temporary price discounting by The Mail on Sunday in an initiativeto attract new readers following the closure of The News of the World in July2011. This was partly offset by the impact of the weekday cover price increaseof 5p to 55p in the same month. Circulation revenues of the Daily Mail fell by0.8%, while those of The Mail on Sunday fell by 5.7%, although it firmlyestablished itself as the market leader during the last quarter of the year.Both titles continued to improve their market share with strong outperformanceof both the daily and Sunday markets.
In May 2011, the Mail titles launched a new promotional initiative, the Mail Rewards Club, with the twin objectives of building sales more efficiently and the retention of existing readers. This has helped to attract new readers and to date 600,000 members have registered.
Underlying# advertising revenues were 2% lower at £340 million,with a strong performance by Metro and Mail Online in particular, offset bylower display revenues at both Mail titles. Our two largest categories, retailand travel saw revenues decline by 5% and 6% respectively, but there was 2%growth in total from other categories. Underlying print advertising revenuesdeclined by 4% this year, but underlying# digital revenue from the newspapertitles' companion sites increased by 56% to £19 million. After a difficultthird quarter, which saw advertising 10% lower than the prior year, the finalquarter saw revenues only 1% lower, with September marginally ahead of theprior year.
Metro had another strong year. Revenue growth of over £10 million, up 14%, and good cost control resulted in record profits.
Mail Online had another strong year of growth, recording a 65%improvement in revenue. There was also a significant rise in traffic, with aUK daily average of 1.7 million unique visitors in September 2011, up 51% yearon year thereby extending its position as the UK's most popular `newspaper'website with a 37% market share (measured by Hitwise). Our US operation waslaunched during the year, contributing towards a 48% increase in US dailyunique visitors to 1.1 million in September 2011. On a global basis, trafficto Mail Online grew to 4.1 million daily average unique visitors during thesame month, up 52% on last year, making Mail Online the world's second largestEnglish language online newspaper website.
Digital-only businesses
Underlying# revenues from the portfolio of digital companies wereup 5% year on year to £89 million. The recruitment and property sectors bothgrew strongly, offset by challenging markets in the motors and travel sectors.Profits* of £6 million fell marginally on prior year levels. The benefit ofthe closure of loss-making businesses in the prior year helped to improve themargin* despite continued investment in products, marketing and internationalexpansion in the recruitment sector.
Central Europe
A&N International's operating profits* grew by £0.5 million to £3.7million on revenues down 10% to £30 million. Underlying# profits were in linewith the prior year, with print advertising revenues declining by 13%, butcirculation and digital revenues growing by 1% and 10% respectively. Contractprinting revenues have also grown strongly. Headcount has been reduced andsignificant cost savings were made. The year on year decline in print revenuesslowed towards the end of the year. The performance of digital revenues hasimproved significantly and unique visitor engagement has continued to grow.
Outlook
For 2011/12, Associated currently expects to achieve low single digit revenue growth, due in part to the positive impact of the Olympics, and an operating margin* of around 10%.
Northcliffe Media 2011 2010 Movement Underlying £m £m % % (restated)+Revenue 236 261 -10% -7%Operating profit* 17 27 -37% -37%Operating margin* 7% 10%
+ The results for the prior year to 3rd October, 2010 have been restated to exclude the Central European operations. For the prior year, £3 million are included in those of Associated Newspapers above.
Summary
Northcliffe continued its restructuring and process innovation anddelivered year-on-year cost savings of £15 million or 7%. Total headcountreduced by a further 19%, or 602 people. Greater efficiency has been deliveredacross all departments. Northcliffe's titles continued to be affected by weakadvertising markets, with total revenues down by 10% to £236 million, thoughdown only 7% on a like-for-like basis[1]. Operating profits of £17 million andan operating margin of 7% were in line with our expectations.
Management Changes
In the early part of the financial year, the Northcliffe managementteam drew up a three-year strategy incorporating plans to reshape the costbase further and drive revenue growth. As part of the strategic plan,Northcliffe Publishing and Digital operations were separated to improve focusand to increase the pace of development. Northcliffe dismantled its regionaloperating structure and changed the senior management team.Steve Auckland, formerly managing director of Metro, was appointed managingdirector of Northcliffe's print publishing business. He has appointed two newNorthcliffe executives from Metro, two non-executive directors with extensiveregional newspaper experience in commercial and editorial and four newPublishers to the businesses in Hull, Leicester, Bristol and Nottingham, whereperformances have come under greatest pressure. There have also been a numberof editorial changes. Roland Bryan runs the local digital operations.
Advertising
After a more modest 6% year-on-year decline in the first quarter,reported advertising down 12% in the second quarter, and down 10% in the thirdand fourth quarters, resulting in a 10% full year decline. Underlying#advertising revenues were down 8% for the year. The decline in revenues wasdriven in particular by recruitment (down 29%) and property (down 5%). Retailadvertising, Northcliffe's largest category in 2011, fell by 3% in the fullyear. Motors advertising declined by 8% in the year and all the otheradvertising categories combined fell by 7%. In response to the challenge inthe recruitment category, Northcliffe has restructured its rate andadvertising package to help improve its position in this very competitivemarket place. The strength of our digital offering and continued audiencegrowth has enabled revenue increases in all of our key categories, apart fromrecruitment (down 17%) and notices (down 12%), where market pressures wereuniversally felt - revenues from other categories were up 6% in total.
Circulation
Headline newspaper sales revenues fell by 6% or £4 million. On alike-for-like basis (excluding a change in accounting treatment fordistribution costs), revenues were down 2%. Cover price increases wereimplemented for the majority of titles where prices had historically beenbelow the industry average. Our weekly paid-for portfolio continues to performahead of the industry average. For the January to June 2011 ABC period,circulation was down 4.7%, outperforming the average of the top four regionalpublishers which were down 6.3%. Circulation of the dailies was down 8.2%,compared with an average decline of 7.2% experienced by the top four regionalpublishers. During the year, three daily paid-for titles, in Exeter, Torquayand Scunthorpe, were converted to weeklies with sales significantly ahead ofthe best performing day (when in daily format). In October 2011, the dailytitle In Lincoln also converted to a weekly. During the full financial year,Northcliffe sold seven titles and closed a further seven free titles.
Costs
Northcliffe Media has continued to deliver operational costsavings, largely driven by the change programme, reducing them by £15 millionor 6%. Some savings were as a consequence of lower activity levels. However,more significant reductions have been made through further rationalisation ofthe product portfolio, product format and distribution changes.
Outlook
For 2011/12, we expect a continuation of Northcliffe's current underlying revenue trends, but to maintain its operating margin* in high single digits through continued cost reduction initiatives. The ambition for Northcliffe is to be operating a simplified portfolio of titles with a customer focused structure and a modern culture.
Other income statement items- Net finance costs 2011 2010 Movement £m £m %Net interest (69) (74) +6%payable and similarchargesPension finance 12 (2)itemInvestment Income 3 1Total (54) (75) +28%
Net interest payable and similar charges (including deemed finance charges and interest receivable) fell by £5 million to £69 million due to lower average debt levels and management of the debt portfolio.
There was a £14 million movement in the pension finance item due tothe lower pension fund deficit arising from a growth in assets and the higherrate of return used. Other investment revenue rose by £2 million due largelyto dividends from an internet investment fund.
- Other items
The Group's share of the results* of its joint ventures and associates rose by£2 million to £5 million. It includes income from dmg radio Australia, offsetby our share of the losses of Mail Today, the Delhi-based daily newspaper.Though still loss-making, Mail Today has grown revenues by over 50% year onyear in the last 6 months.The Group has charged £53 million as exceptional operating costs,principally within A&N Media. This charge includes reorganisation costs of £29million and accelerated depreciation of property, plant and equipment of £24million, principally relating to the move to Thurrock.
The charge for amortisation of intangible assets fell by £13 million to £46 million. The Group also made an impairment charge of £25 million, relating to A&N Media.
The Group recorded other net gains on disposal of businesses andinvestments of £15 million, compared to £0.1 million last year. These includethe sales of RMSI, the Indian-based geographic information services divisionof RMS, Sanborn, George Little Management, and dmgi's stake in CoStar Group,Inc. Profit attributable to operations treated as discontinued amounted to£Nil (2009/10 £33 million).
- Taxation
The adjusted tax charge of £35 million (2010 £31 million asrestated) is stated after adjusting for the effect of exceptional items. Theadjusted tax rate for the year rose to 15.0% from 13.6% in the 2009/10 fullyear due to a change in the mix of chargeable profits. The continued low ratereflects tax reductions from tax-efficient financing and tax deductibleamortisation in the USA that are expected to be in place for the next fewyears.There were net exceptional tax credits of £38 million (2010: £69million as restated), arising on disposals, operating exceptional costs, theaccelerated depreciation of property and equipment and the recognition of taxlosses.PensionsThe Group's defined benefit pension schemes provide retirementbenefits for UK staff, largely in A&N Media. The deficit in these schemes rosefrom £271 million at the beginning of the year to £336 million at 2nd October,2011 (calculated in accordance with IAS 19). This change is primarily due tothe lower return achieved on the schemes' investments.In June 2011, the Company formally reached agreement with the Trustees onfunding arrangements as part of the process associated with the triennialactuarial valuation of the main schemes as at 31st March, 2010. The deficitrecovery plan, outlined in May 2011, will lead to payments of £37 million inOctober 2011, £36 million in October 2012, £23 million in October 2013, £21million in October 2014 and £17 million for each of the following nine years.The Company has also entered into an additional funding agreement with theTrustees that will supplement these amounts by payments between £5 million and£10 million calculated annually but payable shortly after the 2016, 2019 and2022 triennial valuations of the main schemes, subject to those schemes thenbeing in deficit by an amount greater than the payment due. These fundingagreements will be revisited after the next actuarial valuation as at 31stMarch, 2013.
Having previously closed its defined benefit schemes to new employees, the Board introduced a series of measures during the year to help secure the financial health of these plans into the future. All new employees of A&N Media are now being offered a defined contribution pension plan, which has brought this division into line with our other newer and more internationally focused divisions where we have long believed in this type of pension plan.
Net debt and cash flow
Net debt has fallen by £143 million during the year from £862million to £719 million and by £130 million since the half year, with disposalproceeds of £125 million. The Group generated operating cash flows of £325million, a 114% conversion rate of operating profits*. These fundedacquisitions of £125 million, taxation of £47 million, interest of £69million, pension funding of £11 million and dividends totalling £70 million.Operating cash flows are stated after capital expenditure of £56 million.Acquisitions were principally that by Euromoney of an 85% interestin Ned Davis Research Group for approximately US$112 million (£68 million).Disposals were of properties and businesses, principally the sale of GLM inSeptember for a total consideration of US$173 million (£108 million),including $154 million (£96 million) cash, and of dmgi's equity investment inCoStar Group, Inc, acquired in exchange for Property & Portfolio Research inJuly 2009, for US$35 million (£23 million).The Group's principal debt remains in long-term bonds. At the yearend, the Group had £832 million of Bonds due for repayment in 2013, 2018, 2021and 2027. The Group acquired £25 million of the 5.75% Bonds 2018 prior to theyear end and will consider acquiring further bonds where financially sensible.In April 2011, the Group raised approximately £300 million of new bankfacilities for a five year period to April 2016 with only minor changes tobasic financial covenants. These were available at the year end, together with£90 million of existing facilities maturing in the year to September 2013.Consequently, the Group has sufficient committed debt facilities to meet itsforeseeable requirements. It had unutilised committed facilities of £328million at the year end and surplus cash of £172 million.
The Group's ratio of year end net debt to adjusted profits* before interest, depreciation and amortisation (EBITDA) was 1.99 times, well below the Group's internal limit of 2.4 times and comfortably within the requirements of the Group's bank covenants. The Group's corporate credit ratings are BBB- from Fitch, and BB+ from Standard & Poor's.
The Directors consider that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing this preliminary announcement.
Other financingThe Company acquired 2.3 million `A' Ordinary shares in Treasuryfor £12 million, using 2.2 million of them, valued at £11 million, to provideshares under various incentive plans. Following these transfers, DMGT has382.9 million shares in issue, together with 9.7 million `A' Ordinary sharesheld in Treasury to meet further obligations that may arise.DMGT took its share of dividends from Euromoney in the form of ascrip. It is the Board's intention also to take Euromoney's forthcoming finaldividend in the form of a scrip. In November 2011, DMGT increased its interestin Euromoney to 67.4%. These actions were taken in order to enable it tooffset the dilutive effect of the vesting of Euromoney's CAP.
Dividend
The Board is recommending payment on the issued Ordinary and 'A'Ordinary Non-Voting shares of the Company of a final dividend of 11.7 penceper share for the year ended 2nd October, 2011 (2010 11.0 pence). This willmake a total for the year of 17.0 pence (2010 16.0 pence per share). The finaldividend will be paid on 10th February 2012 to shareholders on the register atclose of business on 2rd December 2011.
Board Change
Charles Dunstone has indicated that he will not stand for re-election to the Board at the Annual General Meeting on 8th February, 2012. He has provided us with sound advice over his ten years as an independent non-Executive Director and we would like to thank him for his service.
Principal risks and uncertainties
The principal risks and uncertainties the Group faces vary acrossthe different businesses and are the focus of the Risk Committee. These risksare identified in the DMGT Group Risk Register. The materiality of each riskis assessed against a framework to determine its significance and likelihoodof occurrence. The Risk Register is used to determine the agenda and activityof the Risk Committee. The most material risks identified in the RiskRegister, together with the steps taken to mitigate them, are described below.
The geographic spread and diverse portfolio of businesses within the Group help to dilute the impact of some of the Group's key risks. Certain of these risks are interdependent and should not be considered in isolation.
1) Failure to respond effectively to changes in our key markets
The way in which our businesses deliver information to customers and the types of information provided are subject to constant change. This can result in structural market changes that have the potential to redefine or eliminate current markets served by our businesses. Technological innovations such as tablet and other mobile devices, cloud computing and the proliferation of social media impact all of our businesses. Our products and services, and their means of delivery, are also affected by competitor activity and changing customer behaviour.
Potential impact Mitigation
The impact is both positive and negative. The Group's strategy of Failure to identify and respond to diversification and its changes in the key markets in which the willingness to take a long-term Group operates increases the risk of view enables it to react to being left behind by both competitors and these challenges and our customers with a resultant direct opportunities when they arise. impact on Group results.
The autonomous culture of theThe transition from traditional Group encourages an
publishing and print advertising to entrepreneurial approach to the online and mobile products is an example development of new of the challenges faced by the Group. opportunities in response to This affects a number of businesses these threats. This is overseen including Euromoney and Associated by the DMGT senior management Newspapers, but can be seen most acutely team. in Northcliffe.
In particular, internetConversely, new technologies and cloud strategies, including mobilesolutions present opportunities for the solutions, have been developedGroup. A good example of this is RMS for each of the main segmentswhich through its new software solution of advertising revenue and asproject will offer clients improvements such, the print and onlinein data management, automation and businesses are working closelyoperating efficiencies. together to maximise the synergies that exist between these two formats. As far as possible, each division manages its costs in line with changes to revenue. An example of this is the significant reductions to the cost base within Northcliffe.
2) Exposure to changes in the economy
A significant (although decreasing) proportion of the Group's revenue (especially in the UK newspaper divisions) is derived from advertising which is impacted by fluctuations in the wider economy. A similar, although reduced, effect has been seen in group businesses that rely on non-advertising revenues, especially in the financial and property markets.
Potential impact Mitigation
Advertising revenues have been heavily Experience has demonstrated affected by the downturn in the global that the long-term strategy of economy in the last three years. diversifying the Group's
portfolio into business information and subscription revenue streams, along withA continued recession, or a downturn in investment in strong brands,the economy or market sectors served by makes the Group's results boththe Group, gives rise to a risk of not more strategically andachieving forecast results. commercially robust. As noted above, each division manages its cost base as far as possible in line with changes to revenue.
3) 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 impact the Group cover areas such as bribery and corruption, competition, data protection, privacy (including e-privacy), health and safety and employment law. Additionally, specific regulations from the Press Complaints Commission and the Audit Bureau of Circulation apply to the newspaper divisions.
The Group generates a significant amount of its revenue from publishing, be it newspapers, magazines, trade journals or information and data published online. As a result, there is an inherent risk of error which, in some instances, may give rise to claims for libel.
The recent high profile events in the UK newspaper industry and the accusations of illegal news gathering practices have raised questions over press regulation, media ownership and relationships between the press, police and politicians. The Board has received assurances from the Editor-in-Chief, so far as he is aware, that such practices do not, and have not, taken place within Associated Newspapers. The Leveson Inquiry, which began on 14th November, is considering regulation of the industry and will conclude by September 2012. There is uncertainty as to how the Inquiry's conclusions might affect our newspaper and other publishing businesses.
Potential impact Mitigation
A breach of legislation or regulations Compliance with laws and could have a significant impact on the regulations is taken seriously Group both in terms additional costs, throughout the Group. The DMGT management time and reputational damage. Code of Conduct (and supporting Equally, the management time and cost of policies) sets out appropriate defending libel cases can be significant. standards of business behaviour
and highlights the key legal and regulatory issues affecting group businesses. DivisionalIncreasing regulation of the newspaper and local management areindustry could limit our editorial output responsible for compliance withand have a corresponding commercial applicable local laws andimpact on the business. regulations, overseen by the Risk Committee. All of our publications have controls in place, including legal review, to approve content that that may carry a libel risk. Journalists have received communications and training on the PCC Code, Data Protection and the Bribery Act. Controls are also in place surrounding compliance with the Audit Bureau of Circulation's regulations and other regulatory bodies to which we adhere.4) Pension scheme shortfalls
Although closed to new employees in 2009, we continue to operate defined benefit (DB) pension schemes for our newspaper divisions and certain senior executives. The triennial valuation, completed earlier in 2011, identified deficits in the schemes, a primary cause of which is the lower bond yields driven by Quantitative Easing measures. A new funding arrangement has since been agreed with the trustees of the schemes under which the company will provide a series of funding payments aimed at reducing the deficit in the main DB scheme over the next thirteen years.
Potential impact Mitigation Reported earnings may be adversely Measures to mitigate the risksaffected by changes in our pension costs that impact the company'sand funding requirements due to lower balance sheet are underthan expected investment returns or continuous review by the Groupchanges made to the risk profile of our and there is an on-goinginvestment portfolio. dialogue with the trustees of the pension schemes. A joint group, the Risk Management Committee, regularly reviews proposals that could achieve this aim. Recent amendments to the scheme have reduced the longevity risk exposure by arranging for future accruals to be taken as cash or transferred at retirement to an insurance company to provide an annuity.
5) Successfully managing change projects
At any given time there is a number of active capital and IT projects underway around the Group. The two most significant change projects currently are RMS's new software solution project and A&N Media's new print site at Thurrock. Potential impact
Mitigation If a project is successful, it delivers Every active capital projectimprovements in product offerings, around the Group is subject toefficiency gains and cost savings. There a rigorous planning processis however a risk of increased costs or involving all key stakeholders.lost revenues as a result of delays, Significant capital projectsunforeseen problems, loss of access to are approved by the Investmentsystems and data or production and and Finance Committee. On-goingdelivery issues. project management is in place to ensure that plans are delivered to timetable and specification. All key projects are monitored by the local board to ensure that risks and opportunities are managed throughout the process.
6) Data integrity, availability and security
The quality and availability of the information products that DMGT businesses provide their clients is key to their success. This is true for many businesses in the group, most notably within dmg::information and Euromoney.
Information security has always been a key focus across DMGT. However, changing technology, mobile working, cloud based technologies, the consumerisation of IT and the growing use of social media create opportunities but also threats to information security and the protection of our data, and that of our customers.
Potential impact Mitigation
Any challenge to the integrity of Every DMGT business understands information within a DMGT product could that quality and availability damage the reputation of that business of data is key to the resulting in lost revenue and potentially reputation and on-going success increased costs of remediation. A similar of the Group. Quality controls impact would be felt if a product was including rigorous checks, unavailable for a period of time. review and restricted access to
amend and publish exist in every business with information products. Availability isAn information security incident managed through detailed andresulting in the loss, theft, corruption, tested business continuityinappropriate use or unavailability of plans.sensitive information held by the Groupcould lead to operational and regulatorychallenges, and could have an impact onfinancial results. Information security risks are managed locally by the individual businesses, with support from divisional
Inadequate disclosure of information management and DMGT Risk & security breaches could have a
Assurance. The Risk Committeesignificant reputational impact on the monitor and overseesGroup. information security and data protection risks and controls around the Group. Businesses are expected to comply with the information security policy and minimum baseline standards.
7) Impact of a major disaster or outbreak of disease
There is a risk of disruption of Group operations as a result of a major disaster, outbreak of disease or other external threat. The Groups operations are geographically diversified which limits the impact of any given incident. The largest locations are Northcliffe House and Harmsworth Quays in London, Euromoney's offices in London and New York, and RMS's headquarters in California. Northcliffe House is the Group's headquarters as well as housing Associated Newspapers and some businesses within dmg::events. Harmsworth Quays is A&N Media's main printing centre and a contingency location for Northcliffe House.
The events and training businesses within dmg::events and Euromoney rely to some extent on the confidence in, and ability of, delegates and speakers to travel internationally.
Potential impact Mitigation A major incident (particularly in a key Business continuity plans,location) could affect the operations of which are tested regularly, arethe business at that location and affect in place across all business.their ability to produce or deliver itsproducts, which could reduce the demandfor them or increase costs. Contingency planning is in place in the events businesses and virtual events alternatives
Any disaster which significantly affects are being developed. Where the wider environment or the
appropriate, cancellation
infrastructure in an area in which the insurance is taken out. group operates could have an adverse impact on Group results.
Significant disruptions to, or reductionsin, international travel for an extendedperiod of time could lead to multipleevents and training courses beingpostponed or cancelled which could havean impact on the Group's performance.
8) Reliance on key management and staff retention
DMGT is reliant on the talented and successful management and staff across all of its businesses. Many businesses and products are dependent upon specialist, technical expertise. Potential impact
Mitigation
The inability to recruit and retain The DMGT Human Resources talented people could affect the Group's Director works with divisional ability to maintain its performance and and executive management across deliver growth.
the Group on a formal approach to talent management and succession planning. This includes payment of competitiveWhen key staff leave or retire, there is rewards, employee performancea risk that knowledge or competitive and turnover monitoring and aadvantage is lost. variety of approaches to staff communication. Succession planning and long-term incentive plans are in place for senior management.
9) Commercial relationships, including volatility of newsprint prices
The Group is reliant on a number of commercial relationships with key customers, suppliers and third parties. The most significant of these relationships is with the newsprint suppliers. Other key examples include large advertising agencies and major retailers in A&N Media, key venues and agents in dmg::events and Euromoney and data providers in dmg::information.
Newsprint continues to represent a significant proportion of our costs and prices are subject to volatility arising from variations in supply and demand.
Potential impact Mitigation
The loss of, or damage to, any key Significant time and resources are commercial relationship could have a dedicated to managing and material impact on the Group's ability to developing these relationships to produce and deliver its products. ensure they continue to operate
satisfactorily. An increase in newsprint prices wouldaffect the cost base of A&N Media. The Group's newsprint requirements are managed by a dedicated newsprint buying team and monitored by the board of Harmsworth Printing. Where possible, long-term arrangements are agreed with suppliers to limit the potential for volatility.
10) Acquisition and disposal risk
As well as launching and building new businesses, an integral part of the Group's strategy has, and will continue to be, the acquisition (and successful integration) of businesses that expand expertise whilst supporting existing products. The strategy also results in the disposal of businesses that no longer fit the Group's investment criteria.
Potential impact Mitigation
Failure to identify acquisition targets The majority of acquisitions could result in an opportunity cost to are in related markets and are the business.
smaller businesses with a high potential for growth. This reduces the risk from any one acquisition.Equally, an unsuccessful integration ofacquired subsidiaries, or an acquiredbusiness that fails to generate theexpected returns, could result in the Acquisitions are approved byunderperformance of the Group or the Investment and Financeimpairment losses. This could also divert Committee and managed bymanagement time from other operational divisional and local managementmatters. with oversight from the centre. Detailed due diligence is performed by internal teams and external advisors on allOur ability to achieve optimal value from potential acquisitions.disposals as well as the failure torealise other anticipated benefits of adisposal could also affect financialresults. The retention of key employees in the acquired business is often required as part of the purchase. Board level monitoring is performed post-acquisition. Disposals, including the decision to divest, are overseen by the Board and by the director of Strategy Development.11) Treasury operations
The Group Treasury function is responsible for executing treasury policy which seeks to manage the Group's funding, liquidity and treasury derivatives risks. More specifically, these include currency exchange rate fluctuations, interest rate risks, counterparty risk and liquidity and debt levels.
Potential impact Mitigation If the treasury policy does not The Investment and Finance
adequately mitigate the financial risks Committee is responsible for summarised above or is not correctly reviewing and approving Group executed, it could result in unforeseen Treasury policies which are derivative losses or higher than expected executed by the Group Treasury finance costs.
department, overseen by the Deputy Finance director.
The Treasury Function undertakes high value transactions hence there is an Segregation of duties and inherent high risk of payment fraud or authorisation limits are in error having an adverse impact on Group place for all payments made. results.
The Treasury Function is subject to an annual internal audit.
12) Unforeseen tax liabilities
The Group's operations are global and therefore earnings are subject to taxation at differing rates across a number of jurisdictions. Whilst endeavouring to manage the Group's tax affairs in an efficient manner, there will always be a degree of uncertainty when provisioning for tax liabilities due to an ever more complex international tax environment.
Potential impact Mitigation
Changing tax laws could increase tax The team of in-house liabilities and have an adverse impact on specialists, in conjunction financial results.
with divisional management and external experts, review all tax arrangements within the Group and keep abreast ofDue to the diverse and global nature of changing legislation.the group, internal or external factorscould give rise to unplanned taxliabilities.The Viscount RothermereChairmanFor further information
For analyst and institutional enquiries:
Stephen Daintith, Finance Director 020 7938 6631
Nicholas Jennings, Company Secretary 020 7938 6625
For media enquiries:
Susanna Voyle/James Macey White, Tulchan Communications 020 7353 4200
Analysts' presentation and webcast
A presentation of the Preliminary Results will be given to investors and analysts at 9.30 a.m. on 23rd November, 2011 at American Square Conference Centre, 1 America Square, 17 Crosswall, London EC3N 2LB. There will also be a live webcast available on our website: http://www.dmgt.com.
Next trading update
The Group's next scheduled announcement of financial information will be its first quarter interim management statement on 8th February, 2012.
Notes
*Adjusted results are stated before exceptional items, impairment of goodwill and intangible assets, and amortisation of intangible assets arising on business combinations. For a reconciliation of Group profit to adjusted Group profit, see Note 9. Other than revenue and operating profit, these adjusted results are for total operations, including those treated as discontinued.
#Underlying revenue or profit* is revenue or profit* on a like forlike basis, adjusted for acquisitions, disposals, closures and non-annualevents in the current and prior year and at constant exchange rates. For RMS,underlying percentage movements exclude RMSI and for dmg information Sanborn.For dmg events, the comparison is between events held in the year and the sameevents held the previous time For Euromoney the comparisons exclude Ned DavisResearch and underlying profit excludes its CAP charges in both years. For A&NMedia, the underlying percentage movements exclude London Lite, thediscontinued television activities of Teletext, the digital dating and databusinesses, the Slovakian print companies and the disposal and closure oftitles within Northcliffe.+ Adjusted operating profit*, the adjusted tax charge and adjustedearnings per share for the prior periods have been restated for the change ofpresentation of amortisation of internally generated and acquired computersoftware as a charge against adjusted operating profit*. For the prior year,£17 million has been reclassified as a charge against adjusted operatingprofit; see Note 1.
The average £: US$ exchange rate for the year was £1: $1.61 (against £1:$1.56 last year). The rate at the year end was $1.56 (2010 $1.63).
CONSOLIDATED INCOME STATEMENTfor the 52 weeks ending 2nd October, 2011 Unaudited Audited 52 weeks 52 weeks ending 2nd ending October, 3rd 2011 October, 2010 Restated (note 2) Note £m £mCONTINUING OPERATIONSRevenue 3 1,989.8 1,968.0
Operating profit before exceptional operating costs and 3 286.3 300.7amortisation and impairment of goodwill and acquired intangibleassetsExceptional operating costs, impairment of internally generated 3 (52.7) (39.0)and acquired computer software, investment property andproperty, plant and equipmentAmortisation and impairment of goodwill and acquired intangible 3 (66.9) (34.2)assets arising on business combinations Operating profit before share of results of joint ventures and 3 166.7 227.5associatesShare of results of joint ventures and associates 4
(2.4) (5.3)Total operating profit 164.3 222.2Other gains and losses 5 14.8 0.1
Profit before net finance costs and tax
179.1 222.3Investment revenue 6 17.1 1.4Finance costs 7 (71.7) (77.4)Net finance costs (54.6) (76.0) Profit before tax # 124.5 146.3Tax 8 3.0 39.6
Profit after tax from continuing operations
127.5 185.9
DISCONTINUED OPERATIONSProfit from discontinued operations 21
- 33.1PROFIT FOR THE PERIOD # 127.5 219.0 Attributable to:Owners of the company 111.6 199.8Non-controlling interests * 15.9 19.2Profit for the period 127.5 219.0 Earnings per share 11From continuing operationsBasic 29.2p 43.5pDiluted 29.1p 43.5pFrom discontinued operationsBasic 0.0p 8.6pDiluted 0.0p 8.6pFrom continuing and discontinued operationsBasic 29.2p 52.1pDiluted 29.1p 52.1pAdjusted earnings per shareBasic 47.0p 46.3pDiluted 46.9p 46.3p* All attributable to continuing operations
CONSOLIDATED STATEMENT OF COMPREHENSIVE (EXPENSE)/INCOME for the 52 weeks ending 2nd October, 2011
Unaudited Audited 52 weeks 52 weeks ending 2nd ending October, 3rd 2011 October, 2010 £m £mProfit for the period 127.5 219.0
Fair value movements on available- 4.6 2.9for-sale investmentsRevaluation reserves recycled to (8.5) -Consolidated Income Statement on disposalsLosses on hedges of net investments (17.1) (3.6)in foreign operationsCash flow hedges :(Losses)/gains arising during the period (1.2) 0.7Transfer of loss on cash flow hedges 6.8 4.3from translation reserve toConsolidated Income StatementTranslation reserves recycled to (21.6) (39.1)Consolidated Income Statement on disposalsForeign exchange differences on 10.6 14.3translation of foreign operationsActuarial (loss)/gain on defined (89.6) 146.9benefit pension schemes Other comprehensive (expense)/ (116.0) 126.4income before taxTax relating to components of 15.8 (44.5)other comprehensive income Other comprehensive (expense)/
(100.2) 81.9income for the period Total comprehensive income 27.3 300.9for the period Attributable to :Owners of the Company 8.2 279.2Non-controlling interests 19.1 21.7 27.3 300.9
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the 52 weeks ending 2nd October, 2011
Called Share Capital Re- Shares
Translation Retained Total Non- Total
up premium redemption valuation held in reserve earnings controlling equity share account reserve reserve treasury interests capital £m £m £m £m £m £m £m £m £m £mBalance as at 49.1 12.4 1.1 4.1 (46.8) 9.8 (164.0) (134.3) 46.8 (87.5)4th October,2009 auditedProfit for the - - - - - - 199.8 199.8 19.2 219.0periodOther - - - 2.9 - (26.1) 102.6 79.4 2.5 81.9comprehensiveincome/(loss) for theperiodTotal - - - 2.9 - (26.1) 302.4 279.2 21.7 300.9comprehensiveincome/(loss)for theperiodIssue of share - 0.1 - - - - - 0.1 4.1 4.2capitalDividends - - - - - - (57.1) (57.1) (6.6) (63.7)Own shares - - - - (12.3) - - (12.3) - (12.3)
acquired
in the periodOwn shares - - - - 14.1 - - 14.1 - 14.1
released
on vesting ofshare optionsExercise of - - - - - - 1.3 1.3 (1.3) -acquisitionput optioncommitmentsAdjustment to - - - - - - 10.0 10.0 (10.0) -equity followingincreasedstake incontrolledentityAdjustment to - - - - - - (2.3) (2.3) 2.3 -
equity followingdecreased stakein controlledentityCredit to - - - - - - 16.2 16.2 0.7 16.9equity forequity settledshare basedpaymentsSettlement of - - - - - - (9.3) (9.3) - (9.3)exercised shareoptions ofsubsidiariesCorporation - - - - - - 0.5 0.5 - 0.5tax onshare basedpaymentsDeferred tax - - - - - - (0.3) (0.3) (0.3) (0.6)on sharebased paymenttransactionsBalance as 49.1 12.5 1.1 7.0 (45.0)
(16.3) 97.4 105.8 57.4 163.2at 3rd October,2010 auditedUnauditedProfit for - - - - - - 111.6 111.6 15.9 127.5the periodOther - - - (3.9) - (26.0) (73.5) (103.4) 3.2 (100.2)comprehensiveincome forthe periodTotal - - - (3.9) - (26.0) 38.1 8.2 19.1 27.3comprehensiveincome forthe periodIssue of share - 0.2 - - - - - 0.2 1.9 2.1capitalDividends - - - - - - (62.4) (62.4) (7.8) (70.2)Own shares - - - - (11.7) - - (11.7) - (11.7)acquiredin the periodOwn shares - - - - 10.4 - - 10.4 - 10.4releasedon vesting ofshare optionsFair value - - - 0.2 - - - 0.2 - 0.2adjustmentto contingentconsiderationAdjustment - - - - - - (5.5) (5.5) 4.3 (1.2)to equityfollowingincreasedstake incontrolled entityAdjustment - - - - - - 0.5 0.5 (0.5) -to equityfollowingdecreasedstake incontrolledentityCredit to - - - - - - 16.9 16.9 2.7 19.6equity forshare-basedpaymentsSettlement of - - - - - - (12.7) (12.7) - (12.7)exercisedshare options ofsubsidiariesInitial recording of - - - - - - (7.1) (7.1) (3.2) (10.3)put optionsgranted tonon-controllinginterests insubsidiariesNon-controlling - - - - - - - - 6.0 6.0interestrecognisedon acquisitionDeferred tax - - - - - - 1.4 1.4 0.4 1.8on otheritemsrecognisedinequityBalance as at 49.1 12.7 1.1 3.3 (46.3) (42.3) 66.6 44.2 80.3 124.52nd October, 2011CONSOLIDATED STATEMENT OF FINANCIAL POSITIONas at 2nd October, 2011
Unaudited Audited Audited
As at
2nd As at 3rd As at 4th
October, October, October,
2011 2010 2009 Note £m £m £mASSETSNon-current assetsGoodwill 747.0 735.8 734.2Other intangible assets 288.2 377.9 460.9Property, plant and equipment 13 305.4 366.2 440.4Investment property 14 21.6 11.6 -Investments in joint ventures 16.3 20.4 16.8Investments in associates 13.0 12.7 11.3Available-for-sale investments
4.2 23.2 18.1Trade and other receivables 47.0 27.9 11.7Derivative financial assets 8.6 8.7 5.5Deferred tax assets 191.1 151.3 164.6 1,642.4 1,735.7 1,863.5Current assetsInventories 23.1 27.5 23.6Trade and other receivables 356.9 368.9 377.5Current tax receivable 9.1 0.9 12.8Derivative financial assets 1.1 2.3 17.9Cash and cash equivalents 174.3 65.7 47.4 564.5 465.3 479.2 Total assets 2,206.9 2,201.0 2,342.7 LIABILITIESCurrent liabilitiesTrade and other payables (654.2) (632.1) (640.1)Current tax payable (53.2) (69.4) (97.0)Acquisition put option commitments (1.1) (1.1) (11.2)Borrowings (29.3) (14.3) (20.5)Derivative financial liabilities (5.9) (6.6) (9.5)Provisions (49.7) (37.7) (38.7) (793.4) (761.2) (817.0)Non-current liabilitiesTrade and other payables (11.9) (1.5) (0.6)Acquisition put option commitments (10.7) - (0.7)Borrowings (832.0) (870.6) (1,040.7)Derivative financial liabilities (60.9) (79.8) (82.2)Retirement benefit obligations 22 (336.2) (271.4) (430.4)Provisions (13.5) (27.6) (34.4)Deferred tax liabilities (23.8) (25.7) (24.2)
(1,289.0) (1,276.6) (1,613.2)
Total liabilities
(2,082.4) (2,037.8) (2,430.2)
Net assets 124.5 163.2 (87.5) DMGT plcCONSOLIDATED STATEMENT OF FINANCIAL POSITION(Continued)as at 2nd October, 2011
Unaudited Audited Audited
As at
2nd As at 3rd As at 4th
October, October, October,
2011 2010 2009 Note £m £m £m SHAREHOLDERS' EQUITYCalled up share capital 49.1 49.1 49.1Share premium account 12.7 12.5 12.4Share capital 18 61.8 61.6 61.5Capital redemption reserve 1.1 1.1 1.1Revaluation reserve 3.3 7.0 4.1Shares held in treasury (46.3) (45.0) (46.8)Translation reserve (42.3) (16.3) 9.8Retained earnings 66.6 97.4 (164.0)
Equity attributable to owners of the company
44.2 105.8 (134.3)Non-controlling interests 80.3 57.4 46.8 124.5 163.2 (87.5) Approved by the Board on 2nd, November 2011.CONSOLIDATED CASH FLOW STATEMENTfor the 52 weeks ending 2nd October, 2011 Unaudited Audited 52 weeks 52 weeks ending 2nd ending October, 3rd 2011 October, 2010 Note £m £m
Operating profit before share of results of joint ventures and 166.7 227.5associates - continuing operationsOperating profit before share of results of joint ventures and - 0.7associates - discontinued operationsAdjustments for :Share-based payments 19.7 16.9Pension curtailments - (9.5)
Pension charge (less than)/in excess of cash contributions (1.9) 4.0Depreciation 3 62.7 50.8Impairment of internally generated and acquired computer software, 3
8.6 26.3 property, plant and equipment and investment property Impairment of goodwill and impairment charge/(reversal) of
3
24.4 (19.9) intangible assets arising on business combinations Amortisation on internally generated and acquired computer software
18.4 16.5Amortisation of intangible assets arising on business combinations 3 42.5 55.9Operating cash flows before movements in working capital 341.1 369.2Decrease/(increase) in inventories 2.0 (3.8)Increase in trade and other receivables (23.6) (8.6)Increase/(decrease) in trade and other payables 52.7 (7.7)Increase in provisions 4.1 1.5Additional payment into pension schemes
(11.0) (7.7)Cash generated by operations 365.3 342.9Taxation paid (48.6) (27.7)Taxation received 1.9 19.2
Net cash from operating activities 318.6 334.4Investing activitiesInterest received 2.0 0.9Dividends received from joint ventures and associates 15.6 3.7Dividends received from available-for-sale investments 2.9 0.6Purchase of property, plant and equipment 13 (33.0) (35.2)Expenditure on internally generated intangible fixed assets (23.2) (16.8)Purchase of available-for-sale investments (0.1) (1.4)Proceeds on disposal of property, plant and equipment 13 3.2 4.2Proceeds on disposal of available-for-sale investments 23.0 0.1Purchase of subsidiaries 19 (81.3) (18.3)Purchase of additional interests in controlled entities 19 (2.7) (12.8)Treasury derivative activities (25.3) 11.9Investment in joint ventures and associates (10.1) (6.1)Loans advanced to joint ventures and associates - (2.3)Loans to joint ventures and associates repaid 0.6 65.0Proceeds on disposal of businesses 20 94.8 8.5Proceeds on disposal of joint ventures and associates
0.1 0.1
Net cash (used in)/generated by investing activities
(33.5) 2.1
DMGT plcCONSOLIDATED CASH FLOW STATEMENT (continued)for the 52 weeks ending 2nd October, 2011 Unaudited Audited 52 weeks 52 weeks ending 2nd ending October, 3rd 2011 October, 2010 Note £m £mFinancing activitiesEquity dividends paid 9 (62.4) (57.1)
Dividends paid to non-controlling interests (7.8) (6.6)Issue of share capital 0.2 0.1Issue of shares by Group companies to non-controlling interests 1.9 4.1Purchase of own shares (11.7) (12.3)Net receipt on exercise/settlement of subsidiary share options
(2.0) 4.8Interest paid (68.5) (66.8)Bond issue costs - (0.4)Loan notes repaid (4.0) (8.5)
Repayments of obligations under hire purchase agreements (20.3) (4.7)Decrease in bank borrowings
(3.1) (172.4)
Net cash used in financing activities (177.7) (319.8)Net increase in cash and cash equivalents 107.4 16.7Cash and cash equivalents at beginning of year 64.3 46.9Exchange gain on cash and cash equivalents - 0.7Net cash and cash equivalents at end of year
171.7 64.3DMGT plcNOTES1 BASIS OF PREPARATION
While the financial information contained in this unaudited preliminary announcement has been prepared in accordance with the recognition and measurment criteria of International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board as adopted by the European Union, this announcement does not itself contain sufficient information to comply with IFRS.
These financial statements have been prepared for the 52 weeks ending 2nd October, 2011 (2010 52 weeks ending 3rd October, 2010). The Group and its national and local media divisions, prepare financial statements for a 52 or 53 week financial period ending on a Sunday near to the end of September.
The Group's remaining divisions prepare financial statements for a financialyear to 30th September and do not prepare additional financial statementscorresponding to the Group's financial year for consolidation purposes as itwould be impracticable to do so. The Group considers whether there have beenany significant transactions or events between the end of the financial yearof the other divisions and the end of the Group's financial year and makes anymaterial adjustments as appropriate.The information for the 52 weeks ended 2nd October, 2011 does not constitutestatutory accounts for the purposes of section 435 of the Companies Act 2006.A copy of the accounts for the 52 weeks ended 3rd October, 2010 has beendelivered to the Registrar of Companies. The auditors' report on thoseaccounts was not qualified and did not contain statements under section 498(2)or 498(3) of the Companies Act 2006. The audit of the statutory accounts forthe 52 weeks ended 2nd October, 2011 is not yet complete. These accounts willbe finalised on the basis of the financial information presented by theDirectors in this preliminary announcement and will be delivered to theRegistrar of Companies following the Company's annual general meeting.The Group's business activities, together with the factors likely to affectits future development, performance and position are set out in the managementreport on pages 4 to 25. The company has long term financing in the form ofEurobonds and meets its day-to-day working capital requirements through bankfacilities which expire in two to five years. Current economic conditionscreate uncertainty particularly over the future performance of those parts ofthe business that derive a significant proportion of revenue from advertising.The Board's forecasts and projections, after taking account of reasonablypossible changes in trading performance, show that the company is expected tooperate within the terms of its current facilities. After making enquiries,the Directors have a reasonable expectation that the Group will have access toadequate resources to continue in operational existence for the foreseeablefuture. Accordingly, they continue to adopt the going concern basis inpreparing the financial statements.These financial statements have been prepared in accordance with theaccounting policies set out in the 2010 Annual Report and Accounts, with theexception of the change in accounting policy described below and as amended bythe new accounting standards set out below.The Group financial statements incorporate the financial statements of theCompany and all of its subsidiaries together with the Group's share of all ofits interests in joint ventures and associates. The financial statements havebeen prepared on the historical cost basis, except for the revaluation offinancial instruments.
The principal accounting policies used in preparing this information are set out below.
2 SIGNIFICANT ACCOUNTING POLICIES
Change in accounting policy
The Group no longer adds back to its adjusted results the amortisation chargedon internally generated and acquired computer software unless it wasrecognised as part of the accounting for a business combination. The effect ofthis change in accounting policy is an additional post tax charge charge of£17.6 million (2010: £14.0 million 2009 £10.5 million) in arriving at adjustedprofit.Change in presentation
As reported in November 2010, the central European operations of the localmedia segment now report directly to the national media segment and thepresentation of the results from these segments has been aligned accordingly.The impact of this change is to increase revenue in the national media segmentand decrease revenue in the local media segment by £29.9 million (2010 £33.1million 2009 £43.4 million) and to increase the segment result of the nationalmedia segment and decrease the segment result of the local media segment by£4.2 million (2010 £3.6 million 2009 £4.7 million).
Impact of new accounting standards
The following new and revised Standards and Interpretations have been adoptedin the current year. Their adoption has not had any significant impact on theamounts reported in the financial statements but may impact the accounting forfuture transactions and arrangements:
- IFRS 2 (2009) Group Cash-settled Share-based Payment Transactions
Amendments to IFRS 2 clarify that an entity which receives goods or servicesin a share-based payment arrangement must account for those goods or servicesno matter which entity in the group settles the transaction, and no matterwhether the transaction is settled in shares or cash. The Standard iseffective for periods beginning on or after 1 January 2010 and is appliedretrospectively. The amendment does not affect the reported results nor thefinancial position.
- IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments
If a debtor issues equity instruments to a creditor to extinguish all or partof a financial liability, those equity instruments are 'consideration paid'and should be measured at fair value or fair value of the financial liability,whichever is more reliably determined. Any difference between the carryingvalue of the financial liability extinguished and the initial measurement ofthe equity instrument is included in the entity's profit and loss for theperiod. This interpretation does not affect the reported results nor thefinancial position.
- Amendment to IAS 32 Financial Instruments Presentation - Rights Issues
This amendment has no impact on the Group's financial statements.
- Improvements to IFRS 2009 (various amendments)
Improvements to IFRS 2009 included various amendments, some of which were required to be adopted in the prior year. In the current year, the remaining amendments have been adopted. None of these amendments affect the reported results nor the reported financial position.
- Improvements to IFRSs 2010 (relating to IFRS 3 and IAS 27). None of these amendments affect the reported results nor the reported financial position.
At the date of authorisation of the combined financial information, thefollowing Standards and Interpretations, which have not been applied in thecombined financial statements, were in issue but not yet effective (and insome cases had not yet been adopted by the EU). Other than IAS 19 EmployeeBenefits, which will change the presentation and measurement of pensions inthe Consolidated Financial Statements, their adoption is not expected to havea significant impact on the amounts reported in the financial statements butmay impact the accounting for future transactions and arrangements:
- Amendments to IAS 1 Presentation of Items of Other Comprehensive Income
- IAS 19 Employee Benefits
- IFRS 13 Fair Value Measurement
- IFRS 12 Disclosures of Interests in other entities
- IFRS 11 Joint Arrangements
- IFRS 10 Consolidated Financial Statements
- IAS 28 Investments in Associates and Joint Ventures
- IAS 27 Separate Financial Statements
- Amendments to IAS 12 Deferred Tax : Recovery of Underlying Assets
- Amendments to IFRS 7 Disclosures - Transfers of Financial Assets
- IFRS 9 Financial Instruments
- IAS 24 Related Party Disclosures
- Improvements to IFRSs 2010
- Amendments to IFRIC 14 Prepayments of a Minimum Funding Requirement
DMGT plc
NOTES
2 Critical accounting judgements and key sources of estimation uncertainty
In addition to the judgement taken by management in selecting and applying the accounting policies set out above, management has made the following judgements concerning the amounts recognised in the consolidated financial statements :
Forecasting
The Group prepares medium-term forecasts based on Board approved budgets andthree year outlooks. These are used to support judgements made in thepreparation of the Group's financial statements including the recognition ofdeferred tax assets in different jurisdictions, the Group's going concernassessment and for the purposes of impairment reviews. Longer term forecastsuse long-term growth rates applicable to the relevant businesses.
Impairment of goodwill and intangible assets
Determining whether goodwill and intangible assets are impaired or whether areversal of an impairment of intangible assets should be recorded requires anestimation of the value in use of the relevant cash generating units. Thevalue in use calculation requires management to estimate the future cash flowsexpected to arise from the cash generating unit and compare the net presentvalue of these cash flows using a suitable discount rate to determine if anyimpairment has occurred. A key area of judgement is deciding the long-termgrowth rate of the applicable businesses and the discount rate applied tothose cash flows. The carrying amount of goodwill and intangible assets at theperiod end date was £1,035.2 million (2010 £1,113.7 million 2009 £1,195.1million) after a net impairment charge of £24.4 million (2010 reversal of£19.9 million 2009 charge £346.6 million) was recognised during the year.
Acquisitions and intangible assets
The Group's accounting policy on the acquisition of subsidiaries is toallocate purchase consideration to the fair value of identifiable assets,liabilities and contingent liabilities acquired with any excess considerationrepresenting goodwill. Determining the fair value of assets, liabilities andcontingent liabilities acquired requires significant estimates andassumptions, including assumptions with respect to cash flows and unprovidedliabilities and commitments, including in respect to tax, are often used. TheGroup recognises intangible assets acquired as part of a business combinationat fair values at the date of the acquisition. The determination of these fairvalues is based upon management's judgement and includes assumptions on thetiming and amount of future cash flows generated by the assets and theselection of an appropriate discount rate. Additionally, management mustestimate the expected useful economic lives of intangible assets and chargeamortisation on these assets accordingly.
Contingent consideration payable
Estimates are required in respect of the amount of contingent considerationpayable on acquisitions, which is determined according to formulae agreed atthe time of the business combination, and normally related to the futureearnings of the acquired business. The Directors review the amount ofcontingent consideration likely to become payable at each period end date, themajor assumption being the level of future profits of the acquired business.The Group has outstanding contingent consideration payable amounting to £11.8million (2010 £17.8 million 2009 £23.5 million).Contingent consideration payable is discounted to its fair value in accordancewith applicable International Financial Reporting Standards. For acquisitionscompleted prior to 4th October, 2009, the difference between the fair value ofthese liabilities and the actual amounts payable is charged to theConsolidated Income Statement as notional finance costs with remeasurement ofthe liability being recorded against goodwill. For acquisitions completed inthe current period, movements in the fair value of these liabilities arerecorded in the Consolidated Income Statement in Financing.
Contingent consideration receivable
Estimates are required in respect of the amount of contingent considerationreceivable on disposals, which is determined according to formulae agreed atthe time of the disposal and is normally related to the future earnings of thedisposed business. The Directors review the amount of contingent considerationlikely to be receivable at each period end date, the major assumption beingthe level of future profits of the disposed business. The Group hasoutstanding contingent consideration receivable amounting to £1.6 million(2010 £4.9 million 2009 £nil).Contingent consideration receivable is discounted to its fair value inaccordance with applicable International Financial Reporting Standards. Fordisposals completed prior to 4th October, 2009, the difference between thefair value of these liabilities and the actual amounts payable is charged tothe Consolidated Income Statement as notional finance costs with remeasurementof the liability being recorded against goodwill. For acquisitions completedin the current period, movements in the fair value of these liabilities arerecorded in the Consolidated Income Statement in Financing.
Adjusted profit
The Group presents adjusted earnings by making adjustments for costs andprofits which management believe to be exceptional in nature by virtue oftheir size or incidence or have a distortive effect on current year earnings.Such items would include costs associated with business combinations, one offgains and losses on disposal of businesses, properties and similar items of anon-recurring nature together with reorganisation costs and similar charges,tax and by adding back impairment of goodwill and amortisation and impairmentof intangible assets arising on business combinations. See note 10 for areconciliation of profit before tax to adjusted profit.
Share-based payments
The Group makes share-based payments to certain employees. These payments aremeasured at their estimated fair value at the date of grant, calculated usingan appropriate option pricing model. The fair value determined at the grantdate is expensed on a straight-line basis over the vesting period, based onthe estimate of the number of shares that will eventually vest. The keyassumptions used in calculating the fair value of the options are the discountrate, the Group's share price volatility, dividend yield, risk free rate ofreturn, and expected option lives. Management regularly perform a true-up ofthe estimate of the number of shares that are expected to vest, this isdependent on the anticipated number of leavers.
Taxation
Being a multinational Group with tax affairs in many geographic locationsinherently leads to a highly complex tax structure which makes the degree ofestimation and judgement more challenging. The resolution of issues is notalways within the control of the Group and is often dependent on theefficiency of legal processes. Such issues can take several years to resolve.The inherent uncertainty regarding these items means that the eventualresolution could differ significantly from the accounting estimates and,therefore, impact the Group's results and future cash flows. As describedabove, the Group makes estimates regarding the recoverability of tax assetsrelating to losses based on forecasts of future taxable profits which are, bytheir nature, uncertain.
Retirement benefit obligations
The cost of defined benefit pension plans is determined using actuarialvaluations prepared by the Group's actuaries. This involves making certainassumptions concerning discount rates, expected rates of return on assets,future salary increases, mortality rates and future pension increases. Due tothe long-term nature of these plans, such estimates are subject to significantuncertainty. The assumptions and the resulting estimates are reviewed annuallyand, when appropriate, changes are made which affect the actuarial valuationsand, hence, the amount of retirement benefit expense recognised in theConsolidated Income Statement and the amounts of actuarial gains and lossesrecognised in the Statement of Changes in Equity. The carrying amount of theretirement benefit obligation at October 2nd, 2011 was a deficit of £336.2million (2010 £271.4 million 2009 £430.4 million). Further details are givenin note 22.3 SEGMENT ANALYSIS
Within these consolidated financial statements the Group's radio operating segment (up to and including 16th December, 2009) has been treated as discontinued operations. Further details are set out in note 21.
The Group's business activities are split into seven operating divisions :RMS, business information, events, Euromoney, national media, local media andradio. These divisions are the basis on which information is reported to theGroup Board. The segment result is the measure used for the purposes ofresource allocation and assessment and represents profit earned by eachsegment, including share of results from joint ventures and associates butbefore exceptional operating costs, amortisation and impairment charges, othergains and losses, net finance costs and taxation.
Details of the types of products and services from which each segment derives its revenues are included within the management report on pages 4 to 25.
The accounting policies applied in preparing the management information for each of the reportable segments are the same as the Group's accounting policies described in note 2.
Inter-segment sales are charged at prevailing market prices other than thesale of newsprint and related services from the national media to the localmedia division which is at cost to the Group plus a margin where relevant. Theamount of newsprint sold between segments during the year amounted to £23.6million (2010 £22.0 million).
Unaudited 52 weeks ending 2nd October, 2011
Note External Inter- Total Segment Less Operating revenue segment revenue result operating profit revenue profit of before joint exceptional ventures operating and costs and associates amortisation (note i) and impairment of goodwill and acquired intangible assets £m £m £m £m £m £m RMS 158.7 1.2 159.9 47.5 - 47.5 Business information 237.5 0.3 237.8 47.0 0.1 46.9 Events 132.1 - 132.1 38.8 - 38.8 Euromoney 363.1 - 363.1 93.4 0.5 92.9 National media 862.3 38.8 901.1 73.4 (2.4) 75.8 Local media 236.1 0.2 236.3 16.9 - 16.9 Radio - - - 6.7 6.7 - 1,989.8 40.5 2,030.3 323.7 4.9 318.8 Corporate costs (32.5) Operating 286.3 profit before exceptional operating costs and amortisation and impairment of goodwill and acquired intangible assets Exceptional (52.7) operating costs, impairment of internally generated and acquired computer software, investment property and property, plant and equipment Impairment (24.4) of goodwill and intangible assets Amortisation (42.5) of acquired intangible assets arising on business combinations Operating 166.7 profit before share of results of joint ventures and associates Share of (2.4) result of joint ventures and associates Total 164.3 operating profit Other gains 14.8 and losses Profit before 179.1 net finance costs and tax Investment 17.1 revenue Finance costs (71.7) Profit 124.5 before tax Tax 3.0 Profit for 127.5 the period
Operating profit before exceptional operating costs and amortisation and impairment of goodwill and intangible assets within the national media division comprised £103.7 million from newspapers, a loss of £0.9 million from digital and unallocated divisional central costs of £27.0 million.
Included within corporate costs is a credit of £1.9 million which adjusts thepensions charge recorded in each operating segment from a cash rate to the netservice cost in accordance with IAS 19, Employee benefits.
An analysis of the amortisation and impairment of goodwill and intangible assets, depreciation and impairment of property, plant and equipment, exceptional operating costs, investment income and finance costs by segment is as follows :
Unaudited 52 weeks ending 2nd October, 2011
Amortisation Amortisation Impairment Exceptional
Exceptional Depreciation Investment Finance
of of of goodwill operating
depreciation of property, revenue costs
intangible intangible and intangible costs, of property, plant and assets not assets arising assets impairment plant and equipment arising on on business of equipment business combinations investment combinations property and impairment of property, plant and equipment Note 6 Note 7 £m £m £m £m £m £m £m £m RMS (1.9) - - - - (5.3) 0.2 - Business (7.0) (7.5) - (1.3) - (6.8) - (0.2) information Events - (11.7) - 0.9 - (0.7) 1.3 - Euromoney (0.3) (13.1) (0.1) (3.2) - (2.7) 0.3 (2.9) National (9.2) (9.4) (10.6) (16.9) (14.8) (23.9) 0.2 (2.2) media Local media - (0.8) (13.7) (10.4) (0.3) (3.5) - - (18.4) (42.5) (24.4) (30.9) (15.1) (42.9) 2.0 (5.3) Corporate - - - (6.7) - (4.7) 15.1 (66.4)
costs
Group total (18.4) (42.5) (24.4) (37.6) (15.1) (47.6) 17.1 (71.7)
The Group's exceptional operating costs represent closure and reorganisationcosts in national and local media amounting to £24.9 million. In Euromoney,restructuring costs of £2.6 million follow the closure and reorganisation ofunderperforming businesses, £1.0 million relates to the acquisition of NedDavis Research offset by an exceptional credit of £0.4 million followingresolution of a US legal dispute. Included in corporate costs is an impairmentcharge of £6.7 million on investment property and property, plant andequipment. The Group's tax charge includes a related credit of £12.2 millionin relation to these items.DMGT plcNOTES3 SEGMENT ANALYSIS CONTINUED
Audited 52 weeks ending 3rd October, 2010
External Inter- Total Segment Less Operating revenue segment revenue result operating profit revenue profit of before
joint exceptional operating
ventures costs and and amortisation and associates impairment of goodwill and acquired intangible assets Note £m £m £m £m £m £m RMS 152.6 1.6 154.2 45.0 - 45.0 Business information 230.8 1.6 232.4 47.3 0.1 47.2 Events 110.5 - 110.5 30.1 - 30.1 Euromoney 330.0 - 330.0 96.1 0.4 95.7 National media 883.0 63.4 946.4 87.4 (1.9) 89.3 Local media 261.1 1.3 262.4 26.9 - 26.9 Radio (i) 15.9 - 15.9 5.9 3.4 2.5 1,983.9 67.9 2,051.8 338.7 2.0 336.7 Corporate costs (33.5) Discontinued operations 21, (i) (15.9) (2.5) 1,968.0 Operating profit 300.7 before exceptional operating costs and amortisation and impairment of goodwill and acquired intangible assets Exceptional (39.0) operating costs, impairment of internally generated and acquired computer software, investment property and property, plant and equipment Impairment of goodwill 20.2 and intangible assets Amortisation (54.4) of acquired intangible assets arising on business combinations Operating profit 227.5 before share of results of joint ventures and associates
Share of results of joint (5.3)
ventures and associates
Total operating profit
222.2 Other gains 0.1 Profit before net 222.3
finance costs and tax
Investment revenue 1.4 Finance costs (77.4) Profit before tax 146.3 Tax 39.6
Profit from discontinued
33.1 operations Profit for the period 219.0
(i) Revenue and Group profit before exceptional operating costs and amortisation and impairment of goodwill and intangible assets relating to the discontinued operations of Radio has been deducted in order to reconcile to Group profit before tax from continuing operations.
Operating profit before exceptional operating costs and amortisation and impairment of goodwill and intangible assets within the national media division comprised £124.0 million from newspapers, £6.0 million from digital offset by unallocated divisional central costs of £34.8 million.
Operating profit before exceptional operating costs and amortisation and impairment of goodwill and intangible assets within the national media division included £3.2 million from operations in central Europe.
Included within corporate costs is a charge of £4.0 million which adjusts thepensions charge recorded in each operating segment from a cash rate to the netservice cost in accordance with IAS 19, Employee benefits.
An analysis of the amortisation and impairment of goodwill and intangible assets, depreciation and impairment of property, plant and equipment, exceptional operating costs, investment income and finance costs by segment is as follows :
Audited 52 weeks ending 3rd October, 2010
Amortisation Amortisation Impairment Exceptional
Impairment Depreciation Investment Finance
of intangible of intangible of goodwill operating of
investment of property, revenue costs
assets assets arising and intangible costs
property plant and
not on business assets and
impairment equipment
arising on combinations of property, business plant and combinations equipment Note 6 Note 7 Note £m £m £m £m £m £m £m £m RMS (2.0) - - - - (3.9) 0.2 - Business (5.6) (7.8) - (0.6) - (7.6) - (0.5) information Events - (12.6) 26.8 (0.8) - (1.3) 0.3 - Euromoney (0.2) (14.6) (1.8) 1.8
(0.2) (2.5) 0.2 (1.6)
National media (8.7) (17.6) (4.7) (10.4)
(9.8) (16.1) 0.1 (2.4) Local media - (1.6) - (5.7) (9.1) (17.2) - - Radio - (1.7) (0.4) - - (0.6) - - (16.5) (55.9) 19.9 (15.7) (19.1) (49.2) 0.8 (4.5)
Corporate costs - - - 3.0
(7.2) (1.6) 0.6 (72.9) (16.5) (55.9) 19.9 (12.7) (26.3) (50.8) 1.4 (77.4) Relating to - 1.5 0.3 - - 0.6 - - discontinued operations 21 Group total (16.5) (54.4) 20.2 (12.7)
(26.3) (50.2) 1.4 (77.4)
The Group's exceptional operating costs represent closure and reorganisationcosts in business information, events, national media and local mediaamounting to £17.3 million offset by a net credit of £3.0 million in corporatecosts comprising restructuring costs of £6.5 million less a pensioncurtailment gain of £9.5 million. In Euromoney the exceptional operatingincome is represented by restructuring charges of £0.6 million followingfurther reductions in headcount and an exceptional credit of £2.2 millionfollowing the successful resolution of a US legal dispute. The Group's taxcharge includes a related credit of £4.2 million in relation to these items.DMGT plcNOTES
3 SEGMENTAL INFORMATION CONTINUED
The Group's revenue comprises sales excluding value added tax, less discounts and commission where applicable and is analysed as follows :
Unaudited Unaudited Unaudited Unaudited
Audited Audited Audited Audited
52 weeks 52 weeks 52 weeks 52 weeks 52
weeks 52 weeks 52 weeks 52 weeks
ending ending ending ending
ending ending ending ending
2nd October, 2nd October, 2nd October, 2nd October, 3rd
October, 3rd October, 3rd October, 3rd October,
2011 2011 2011 2011 2010 2010 2010 2010 Total Discontinued Inter- Continuing Total Discontinued Inter- Continuing operations segment operations operations segment operations (note 21) (note 21) £m £m £m £m £m £m £m £m Sale of 576.7 - - 576.7 587.9 - - 587.9 goods Rendering 1,453.6 - (40.5) 1,413.1 1,463.9 (15.9) (67.9) 1,380.1 of services 2,030.3 - (40.5) 1,989.8 2,051.8 (15.9) (67.9) 1,968.0
The Group includes circulation and subscriptions revenue within sales of goods, the remainder of the Group's revenue, excluding investment revenue is included within rendering of services. Investment revenue is shown in note 6.
By geographic area
The majority of the Group's operations are located in the United Kingdom, the rest of Europe, North America and Australia.
The geographic analysis below is based on the location of companies in theseregions. Export sales and related profits are included in the areas from whichthose sales are made. Revenue in each geographic market in which customers arelocated is not disclosed as there is no material difference between the two.
Revenue is analysed by geographic area as follows :
Unaudited Unaudited Unaudited Audited
Audited Audited
52 weeks 52 weeks 52 weeks 52 weeks
52 weeks 52 weeks
ending ending ending ending
ending ending
2ndOctober, 2nd October, 2nd October, 3rd October, 3rd
October, 3rd October,
2011 2011 2011 2010 2010 2010 Total Discontinued Continuing Total Discontinued Continuing operations operations operations operations (note 21) (note 21) £m £m £m £m £m £m
UK 1,288.6 - 1,288.6 1,305.2
- 1,305.2 Rest of Europe 42.6 - 42.6 46.8 - 46.8 North America 555.3 - 555.3 527.7 - 527.7 Australia 11.9 - 11.9 26.3 (15.9) 10.4 Rest of the World 91.4 - 91.4 77.9 - 77.9 1,989.8 - 1,989.8 1,983.9
(15.9) 1,968.0
The closing net book value of goodwill, intangible assets, plant and equipment and investment property is analysed by geographic area as follows :
Unaudited Audited Audited Unaudited
Audited Audited
Closing net Closing net Closing net Closing net Closing net Closing net book value book value book value book value book value book value of goodwill of goodwill of goodwill of of of intangible intangible intangible assets assets assets As at 2nd As at 3rd As at 4th As at 2nd As at 3rd As at 4th October, October, October, October, October, October, 2011 2010 2009 2011 2010 2009 £m £m £m £m £m £m UK 259.0 275.2 294.4 76.3 96.6 114.3 Rest of Europe 10.5 7.1 3.9 4.7 4.8 15.2 North America 457.2 433.4 413.4 199.8 267.1 263.3 Australia 1.5 1.5 1.9 0.8 0.8 57.2 Rest of the World 18.8 18.6 20.6 6.6 8.6 10.9 747.0 735.8 734.2 288.2 377.9 460.9 Unaudited Audited Audited Unaudited Audited Audited Closing net Closing net Closing net Closing net Closing net Closing net book value book book value book value book value book value of property, value of of of of of plant and property, property, investment
investment investment
equipment plant and plant and property
property property
(note 13) equipment equipment (note 14) (note 14) (note 14) (note 13) (note 13) As at 2nd As at 3rd As at 4th As at 2nd As at 3rd As at 4th October, October, October, October, October, October, 2011 2010 2009 2011 2010 2009 £m £m £m £m £m £m UK 258.3 311.8 374.9 21.6 11.6 - Rest of Europe 14.8 17.3 19.9 - - - North America 30.1 31.2 25.2 - - - Australia 0.2 0.3 15.6 - - - Rest of the World 2.0 5.6 4.8 - - - 305.4 366.2 440.4 21.6 11.6 - The Group tests goodwill annually for impairment, or more frequently if thereare indicators that goodwill might be impaired. Intangible assets, all ofwhich have finite lives, are tested separately from goodwill only whereimpairment indicators exist. The total impairment credit recognised for theperiod was £24.4 million (2010 credit £19.9 million). Of the impairment chargefor the period, £13.7 million relates to the local media segment and £10.6million relates to the national media segment following a continued decline inadvertising revenues in these segments. There is a deferred tax credit of £0.8million and a current tax credit of £0.9 million in relation to thisimpairment charge (2010 deferred tax charge of £10.7 million).
DMGT plc
NOTES
4 SHARE OF RESULTS OF JOINT VENTURES AND ASSOCIATES
Unaudited Audited 52 weeks 52 weeks ending ending 2nd October, 3rd October, 2011 2010 Note £m £m Share of profits 4.4 1.9 from operations of joint ventures Share of profits 0.5 0.1 from operations of associates Share of profits 4.9 2.0 before amortisation, impairment of goodwill, interest and tax Share of (3.4) (2.4) amortisation of intangibles of joint ventures Share of (0.3) (0.3) amortisation of intangibles of associates Share of joint (1.7) (1.0) ventures' interest payable Share of joint (1.3) (0.7) ventures' tax Share of associates' - (0.1) tax Adjustment to the 3.0 - carrying value of j oint venture on acquisition Impairment of (i) (3.2) (1.2) carrying value of joint venture Impairment (ii) (0.4) (1.6) of carrying value of associate (2.4) (5.3) Share of results from (2.0) (2.2) operations of joint ventures Share of results 0.2 (0.3) from operations of associates Impairment of carrying (0.2) (1.2) value of joint venture net of fair value adjustment on acquisition Impairment of c (0.4) (1.6) arrying value of associates (2.4) (5.3)
(i) Represents a write down in the carrying value of the Group's investment inMail Today Newspapers Pvt. Limited (£0.2 million) and the Sanborn Map Company(£3.0 million).(ii) Represents a write down in the carrying value of the Group's investmentin Posvanete AD. In the prior year this represented a write down in the valueof the Group's investment in InfoStud, Fortune Green Limited and InviewInteractive Limited.5 OTHER GAINS AND LOSSES Unaudited Audited 52 weeks 52 weeks ending ending 2nd October, 3rd October, 2011 2010 Note £m £m Profit on disposal (i) 8.6 - of available-for- sale investments Impairment of (0.2) - available-for-sale assets Profit on disposal of 0.6 - property, plant and equipment Profit on disposal (ii) 5.7 0.4 of businesses Profit/(loss) on 0.1 (0.3) disposal of joint ventures and associates 14.8 0.1
(i) Represents the profit on disposal of the Group's interest in CoStar, Inc.
(ii) Represents a £23.3 million profit on sale of George Little Management,LLC together and £0.8 million profit on disposals of various exhibitionbusinsesses in the events segment together with a loss of £10.7 millionfollowing the sale of 51.0 % of The Sanborn Map Company in the businessinformation segment, a profit of £1.7 million from the sale of businesses inthe local media segment and a loss of £9.5 million on the sale of RMSI in theRMS segment. In the prior period, the profit on disposal of businesses mainlycomprises the profit on disposal of various exhibition businesses in theevents segment.6 INVESTMENT REVENUE Unaudited Audited 52 weeks 52 weeks ending ending 2nd October, 3rd October, 2011 2010 £m £m Expected return on pension 12.3 - scheme assets less interest
on pension scheme liabilities
Dividend income 2.9 0.6 Interest receivable 1.9 0.8 from short-term deposits 17.1 1.4 DMGT plcNOTES7 FINANCE COSTS Unaudited Audited 52 weeks 52 weeks ending ending 2nd October, 3rd October, 2011 2010 Note £m £m Interest, arrangement (70.8) (72.8) and commitment fees payable on bonds, bank loans and loan notes Interest on pension scheme - (2.2)
liabilities less expected return
on pension scheme assets Change in fair value of 0.1 3.8 derivative hedge of bond Change in fair value of (0.1) (3.8) hedged portion of bond Profit/(loss) on derivatives, 1.7 (0.4)
or portions thereof, not
designated for hedge accounting
Finance charge on (i) (0.4) (0.7) discounting of contingent consideration Fair value movement on (1.7) - contingent consideration Change in fair value of (0.5) (1.3) acquisition put options (71.7) (77.4) (i) The finance charge on the discounting of contingent consideration arisesfrom the requirement under IFRS 3 (2004), Business Combinations, to recordcontingent consideration at fair value using a discounted cash flow approach.8 TAX Unaudited Audited 52 weeks 52 weeks ending ending 2nd October, 3rd October, 2011 2010 Note £m £m
The credit on the profit
for the period consists of :
UK tax
Corporation tax at 27.0 % (2010 28.0 %) (2.4) (6.3) Adjustments in respect of prior periods (i) 0.4 32.3 (2.0) 26.0
Overseas tax
Corporation tax (19.3) (21.7) Adjustments in respect of prior periods (i) (0.9) 3.6 Total current tax (22.2) 7.9
Deferred tax
Origination and reversals of 18.2 (0.5)
timing differences
Adjustments in respect of prior periods (i) 7.0 32.2
Total deferred tax 25.2 31.7 Total Tax 3.0 39.6 Discontinued operations - (1.4) 3.0 38.2
(i) The net prior year credit of £6.5 million (2010 £67.6 million), which includes a charge of £nil (2010 £0.5 million) relating to discontinued operations, arose largely from a reassessment of prior year capital allowance claims.
Being a multinational Group with tax affairs in many geographic locations inherently leads to a highly complex tax structure. The tax charge is reviewed and measured on a Group total basis only.
Adjusted tax on profits before amortisation and impairment of intangibleassets, restructuring costs and non-recurring items (adjusted tax charge)amounted to a charge of £35.5 million (2010 £31.2 million) and the resultingrate is 15.0 % (2010 13.7 %). The differences between the tax credit and theadjusted tax charge are shown in the reconciliation below : Unaudited Audited 52 weeks 52 weeks ending ending 2nd October, 3rd October, 2011 2010 Restated (note 2) £m £m Total tax credit on the 3.0 38.2 profit for the period Tax on intangible assets (0.9) 11.4 and goodwill Agreement of open issues 1.0 (46.2) with tax authorities
Tax on other exceptional items (38.7) (34.6)
Adjusted tax charge on the (35.6) (31.2)
profit for the period
In calculating the adjusted tax rate, the Group excludes the potential futuredeferred tax effects of intangible assets and goodwill (other than internallygenerated and acquired computer software) as it prefers to give the users ofits accounts a view of the tax charge based on the current status of suchitems.Tax on other exceptional items includes a credit of £29.6 million (2010 creditof £30.4 million) relating to the recognition of further tax losses and othertemporary differences which are treated as exceptional due to their materialimpact on the Group's adjusted tax charge.
The deferred tax assets disclosed in the Consolidated Statement of Financial Position in respect of tax losses and tax credits are analysed as follows :
Unaudited Audited Audited As at As at As at 2nd October, 3rd October, 4th October, 2011 2010 2009 £m £m £m UK 19.4 31.1 18.3 North America 62.4 55.1 59.1 Australia 6.8 3.7 1.9 88.6 89.9 79.3 These losses have been recognised on the basis that the Directors are of theopinion based on recent and forecast trading, that sufficient suitable taxableprofits will be generated in the relevant territories in future accountingperiods, such that it is considered probable that these assets will berecovered. Of these assets, £45.0 million will expire between 2018 and 2027.The remaining assets have no expiry date.DMGT plcNOTES9 DIVIDENDS PAID Unaudited Unaudited Audited Audited 52 weeks 52 weeks 52 weeks 52 weeks ending ending ending ending 2nd October, 2nd
October, 3rd October, 3rd October,
2011 2011 2010 2010 Pence Pence per per share £m share £m
Amounts recognisable as distributions
to equity holders in the period
Ordinary shares - final dividend for 11.00 2.0 - -
the year ended 3rd October, 2010
`A' Ordinary Non-Voting shares - 11.00 40.1 - -
final dividend for the year ended 3rd October, 2010
Ordinary shares - final dividend for -
- 9.90 2.0
the year ended 4th October, 2009
`A' Ordinary Non-Voting shares - -
- 9.90 35.9
final dividend for the year ended 4th October, 2009
42.1 37.9 Ordinary shares - interim dividend 5.30 1.1 - -
for the year ended 2nd October, 2011
`A' Ordinary Non-Voting shares - 5.30 19.2 - -
interim dividend for the year ended 2nd October, 2011
Ordinary shares - interim dividend -
- 5.00 1.0
for the year ended 3rd October, 2010
`A' Ordinary Non-Voting shares - -
- 5.00 18.2
interim dividend for the year ended 3rd October, 2010
20.3 19.2 16.30 62.4 14.90 57.1 The Board has declared a final dividend of 11.7 p per Ordinary / 'A' OrdinaryNon-Voting share (2010 11.0 p) which will absorb an estimated £44.8 million ofshareholders' funds for which no liability has been recognised in thesefinancial statements. It will be paid on 10th February, 2012 to shareholderson the register at the close of business on 2nd December, 2011.10 ADJUSTED PROFIT Unaudited Audited 52 weeks 52 weeks ending ending 2nd October, 3rd 2011 October, 2010 Restated (note 2) £m £m Profit before tax - 124.5 146.3 continuing operations Profit before tax - - 1.3 discontinued operations Profit on disposal of - 33.2 discontinued operations Add back : Amortisation of 46.2 58.6 intangible assets in Group profit from operations and in joint ventures and associates arising on business combinations Impairment/(reversal) 24.4 (19.9) of goodwill and intangible assets arising on business combinations Exceptional operating 52.7 39.0 costs, impairment of internally generated and acquired computer software, investment property and property, plant and equipment Impairment of carrying 0.2 1.2 value of joint venture net of fair value adjustment on acquisition Impairment of carrying 0.4 1.6 value of associate Other gains and losses : (8.6) - Profit on disposal of
available-for-sale investments
(0.6) -
Profit on disposal of
property, plant and equipment
(5.7) (0.4) Profit on disposal of businesses 0.2 - Impairment of available-for-sale assets (0.1) 0.3 Profit/(loss) on disposal
of joint ventures and associates
Finance costs : 0.5 1.3 Change in fair value of acquisition put options 1.7 - Fair value movement on contingent consideration Tax : 1.3 0.8 Share of tax in joint ventures and associates Profit from discontinued operations - (33.2) Profit on disposal of discontinued operations Adjusted profit 237.1 230.1 before tax and non-controlling interests Total tax credit on the 3.0 38.2 profit for the period Adjust for : (0.9) 11.4 Deferred tax on
intangible assets and goodwill
1.0 (46.2) Agreed open issues with tax authorities (38.7) (34.6) Tax on other exceptional items Non-controlling interests (21.8) (21.1) Adjusted profit 179.7 177.8 after taxation and non-controlling interests The adjusted non-controlling interests share of profits for the period of£21.8 million (2010 £21.1 million) is stated after eliminating a credit of£6.0 million (2010 £1.9 million), being the non-controlling interests share ofadjusting items.DMGT plcNOTES11 EARNINGS PER SHAREBasic earnings per share of 29.2 p (2010 52.1 p) and diluted earnings pershare of 29.1 p (2010 52.1 p) are calculated, in accordance with IAS 33,Earnings per share, on Group profit for the financial period of £111.6 million(2010 £199.8 million) and on the weighted average number of ordinary shares inissue during the period, as set out below.As in previous years, adjusted earnings per share have also been disclosedsince the Directors consider that this alternative measure gives a morecomparable indication of the Group's underlying trading performance. Adjustedearnings per share of 47.0 p (2010 46.3 p) are calculated on profit forcontinuing and discontinued operations before exceptional operating costs,impairment of goodwill and intangible assets, amortisation of intangibleassets arising on business combinations, other gains and losses andexceptional financing costs after taxation and non-controlling interestsassociated with those profits, of £179.7 million (2010 £177.8 million), as setout in note 10 above, and on the basic weighted average number of ordinaryshares in issue during the period.
Basic and diluted earnings per share
Unaudited Unaudited Audited Audited 52 weeks 52 weeks 52 weeks 52 weeks ending ending ending ending 2nd October, 2nd October, 3rd October, 3rd October, 2011 2011 2010 2010 Restated Restated (note 2) (note 2) Basic Diluted Basic Diluted pence pence pence pence per share per share per share per share Earnings per share from 29.2 29.1 43.5 43.5 continuing operations Adjustment to - - 8.6 8.6 include earnings of discontinued operations Basic earnings per share 29.2 29.1 52.1 52.1 from continuing and discontinued operations Adjusted earnings per share Unaudited Unaudited Audited Audited 52 weeks 52 weeks 52 weeks 52 weeks ending ending ending ending 2nd October, 2nd October, 3rd October, 3rd October, 2011 2011 2010 2010 Restated Restated (note 2) (note 2) Basic Diluted Basic Diluted pence pence pence pence per share per share per share per share Profit before tax - 32.5 32.5 38.2 38.2 continuing operations Profit before tax - - - 0.3 0.3 discontinued operations Profit on disposal of - - 8.7 8.7 discontinued operations Add back : Amortisation of intangible 12.1 12.1 15.2 15.2 assets in Group profit
from operations and in joint
ventures and
associates arising on business
combinations Impairment/(reversal) of 6.4 6.4 (5.2) (5.2) goodwill and intangible assets arising on business combinations Exceptional operating costs, 13.8 13.7 10.2 10.2 impairment of internally generated and acquired computer software, investment property and property, plant and equipment Impairment of carrying 0.1 0.1 0.3 0.3 value of joint venture net of fair value adjustment on acquisition Impairment of carrying 0.1 0.1 0.4 0.4 value of associate Other gains and losses : (2.2) (2.2) - - Profit on disposal of
available-for-sale investments
(0.2) (0.2) - -
Profit on disposal of
property, plant and equipment
(1.5) (1.5) (0.1)
(0.1)
Profit on disposal of businesses
0.1 0.1 - - Impairment of available-for-sale assets - - 0.1 0.1 Profit/(loss) on disposal
of joint ventures and associates
Finance costs : 0.1 0.1 0.3 0.3 Change in fair value of acquisition put options 0.4 0.4 - - Fair value movement on contingent consideration Tax : 0.3 0.3 0.2 0.2 Share of tax in joint ventures and associates
Profit from discontinued operations
- - (8.7) (8.7) Profit on disposal of discontinued operations
Adjusted profit before tax and 62.0 61.9 59.9
59.9 non-controlling interests Total tax (charge)/credit on 0.8 0.8 10.0 10.0 the profit for the period Adjust for : (0.2) (0.2) 3.0 3.0 Deferred tax on
intangible assets and goodwill
0.3 0.3 (12.1) (12.1) Agreed open issues with tax authorities (10.2) (10.2) (9.0) (9.0) Tax on other exceptional items Non-controlling interests (5.7) (5.7) (5.5) (5.5)
Adjusted profit after taxation and 47.0 46.9 46.3
46.3
non-controlling interestsThe weighted average number of ordinary shares in issue during the period forthe purpose of these calculations is as follows : Unaudited Audited 52 weeks 52 weeks ending ending 2nd October, 3rd October, 2011 2010 Number Number m m Number of ordinary 392.6 392.6 shares in issue Shares held in Treasury (9.8) (9.6) Basic earnings 382.8 383.0 per share denominator Effect of dilutive share options 0.5 0.7 Dilutive earnings 383.3 383.7 per share denominator DMGT NOTES12 ANALYSIS OF NET DEBT Unaudited Audited As at As at 2nd October, 3rd October, 2011 2010 £m £m Net debt at start (862.0) (1,048.6) including derivatives Cash flow 109.3 190.1 Debt with acquisitions - (1.0) Foreign exchange movements 35.6 1.0 Other non-cash movements (2.5) (4.3) Net debt at year end (719.6) (862.0) including derivatives Analysed as : Cash and cash equivalents 174.3 65.7 Unsecured bank overdrafts (2.6) (1.4) Cash and cash equivalents 171.7 64.3 in the cash flow statement Debt due within one year Bank loans - (0.5) Other short term debt (23.4) - Loan notes (3.3) (7.3) Hire purchase obligations - (5.1) Debt due in more than one year Bonds (832.0) (853.2) Hire purchase obligations - (15.2) Loans - (2.2) Net debt at year end (687.0) (819.2) Effect of derivatives (32.6) (42.8) on bank loans Net debt including derivatives (719.6) (862.0)
(i) The net cash inflow of £107.4 million includes a cash outflow of £16.5 million in respect of operating exceptional items.
(ii) During the period the Group bought back £25.0 million nominal of 2018 bonds which had a carrying value of £23.4 million. The settlement of this liability occurred following the year end and as such this short term obligation has been included in debt due within one year.
(iii) The effect of derivatives on bank debt is the net currency gain or losson derivatives entered into to with the intention of economically convertingthe currency of drawn debt to an alternative currency.
13 PROPERTY, PLANT AND EQUIPMENT
During the year the Group spent £33.0 million (2010 £35.2 million) on property, plant and equipment.
The Group also disposed of certain of its property, plant and equipment with a carrying value of £2.6 million (2010 £41.0 million) for proceeds of £3.2 million (2010 £4.2 million).
14 INVESTMENT PROPERTY
During the year a number of the Group's freehold properties ceased to be owner occupied and became subject to letting activity. In accordance with the Group's accounting policy these properties have been transferred out of property, plant and equipment and into investment property at net book value.
The fair value of the Group's investment properties as at 2nd October, 2011 was £25.0 million (2010 £13.6 million 2009 £nil). This was arrived at by reference to market evidence for similar properties and was carried out by an officer of the Group's property department.
15 ACQUISITION PUT OPTION COMMITMENTS
Unaudited Audited Audited As at As at As at 2nd October, 3rd October, 4th October, 2011 2010 2009 £m £m £m Current 1.1 1.1 11.2 Non-current 10.7 - 0.7 11.8 1.1 11.9
16 OTHER FINANCIAL LIABILITIES
Unaudited Audited Audited As at As at As at 2nd October, 3rd October, 4th October, 2011 2010 2009 £m £m £m Current liabilities Bank overdrafts 2.6 1.4 0.5 Bank loans - 0.5 0.5 Other short term debt 23.4 - - Finance leases - 5.1 4.7 Loan notes 3.3 7.3 14.8 29.3 14.3 20.5 Non-current liabilities Bonds 832.0 853.2 847.1 Bank loans - 2.2 173.3 Finance leases - 15.2 20.3 832.0 870.6 1,040.7 DMGT NOTES 17 BANK LOANSThe Group's bank loans bear interest charged at LIBOR plus a margin based onthe Group's ratio of net debt to EBITDA. Additionally each facility contains acovenant based on a minimum interest cover ratio. EBITDA for these purposes isdefined as the aggregate of the Group's consolidated operating profit beforeshare of results of joint ventures and associates before deductingdepreciation, amortisation and impairment of goodwill, intangible and tangibleassets, before exceptional items and before interest and finance charges.These covenants were met at the relevant test dates during the period.During the period the Group renewed certain of its bank facilities for afurther five year term. The new acilities amount to £300.0 million and aredenominated in sterling and US dollars. The terms of the new facilities aresubstantially the same as those of the existing facilities other than the netdebt : EBITDA ratio is capped at 3.75 times. The Group also has access to£90.0 million of facilities, £30.0 million of which mature in 2012 and £60.0million which mature in the year to 30th September, 2013.
The Group's facilities and their maturity dates are as follows :
Unaudited Audited Audited As at As at As at 2nd October, 3rd October, 4th October, 2011 2010 2009 £m £m £m Expiring in one year or less - 180.0 -
Expiring in more than one year 90.0 -
180.0
but not more than two years
Expiring in more than two years - 240.0
-
but not more than three years
Expiring in more than three years - -
240.0
but not more than four years
Expiring in more than four years 300.0 -
- but not more than five years Total bank facilities 390.0 420.0 420.0
The following undrawn committed borrowing facilities were available to the Group in respect of which all conditions precedent had been met :
Unaudited Audited Audited As at As at As at 2nd October, 3rd October, 4th October, 2011 2010 2009 £m £m £m
Expiring in one year or less - 153.6
-
Expiring in more than one year 36.4 -
105.7
but not more than two years
Expiring in more than two years - 201.6
-
but not more than three years
Expiring in more than three years - -
98.2
but not more than four years
Expiring in more than five years 291.1 -
- but not more than six years Total undrawn 327.5 355.2 203.9 committed bank facilities
The above undrawn committed borrowing facilities are stated net of letters ofcredit drawn in favour of the Trustees of the Group's defined benefit pensionfund amounting to £53.6 million (2010 £54.5 million 2009 £32.1 million)together with other guarantees of £9.3 million (2010 £8.1 million 2009£5.3million).
18 SHARE CAPITAL AND RESERVES
Share capital as at 2nd October, 2011 amounted to £49.1 million which was unchanged during the period.
During the year the Company disposed of 2,189,854 `A' Ordinary non-Voting shares, in order to satisfy incentive schemes. This represented 0.59% of the called up `A' Ordinary Non-Voting share capital at 2nd October, 2011.
The Company also purchased 2,340,214 `A' Ordinary Non-Voting shares having anominal value of £292,527 to match obligations under incentive plans. Theconsideration paid for these shares was £11.7 million. Shares repurchasedduring the period represented 0.63% of the called up `A' Ordinary Non-Votingshare capital at 2nd October, 2011.At 2nd October, 2011 options were outstanding under the terms of the Company's1997 and 2006 Executive Share Option Schemes, together with nil cost options,over a total of 5,399,633 (2010 5,557,567 2009 6,380,067) `A' OrdinaryNon-Voting shares.DMGTNOTES
19 SUMMARY OF THE EFFECTS OF ACQUISITIONS
In July, 2011 the Group acquired 84.99% of the equity share capital of Ned Davis Research (NDR).
The remaining interest in NDR is subject to a put and call option under anearn-out agreement, in two equal nstalments, based on the profits of NDR forthe years to 31st December, 2012 and 2013. The total discounted amount thatthe Group expects to pay under this option agreement is US$15.7 million (£10.1million). The maximum amount payable for 100% of NDR is US$173.0 million(£111.0 million). Book Accounting Provisional Provisional value policy fair fair alignments value value adjustments £m £m £m £m Goodwill - - 34.3 34.3 Intangible assets - - 37.7 37.7 Property, plant 2.9 (1.4) - 1.5 and equipment Current assets 0.6 2.6 - 3.2 Cash and cash equivalents 3.7 - - 3.7 Trade creditors (2.1) (4.1) - (6.2) and other payables Net assets acquired 5.1 (2.9) 72.0 74.2 Non-Controlling (6.0) Interest share of net assets acquired Group share of 68.2 net assets acquired Cost of acquisition: Non- Cash Total cash paid in current period £m £m £m Contingent consideration 1.1 - 1.1 Receivable from (1.4) - (1.4) Non-Controlling Interest Cash (US$112.0 million) - 68.5 68.5 Total consideration (0.3) 68.5 68.2 at fair value A summary of the notable acquisitions completed during the period were asfollows : Name of Segment % Business Date Consideration Intangible Goodwill acquisition voting description of paid fixed arising rights acquisition assets acquired acquired £m £m £m Ned Davis Euromoney 85% Provider July, 68.5 37.7 34.3 Research of 2011 Group financial research On-Geo Business 100% German June, 4.9 1.5 3.4 information property 2011 information provider
Provisional fair value of net assets acquired with all acquisitions :
Book Accounting Provisional Provisional value policy fair value fair alignments adjustments value £m £m £m £m Goodwill - - 41.4 41.4 Intangible assets - - 41.2 41.2 Property, plant 3.0 (1.4) - 1.6 and equipment Current assets 0.5 2.6 - 3.1 Cash and cash equivalents 4.8 - - 4.8 Trade creditors and (5.3) (4.1) - (9.4) other payables Deferred tax - - (0.8) (0.8) Net assets acquired 3.0 (2.9) 81.8 81.9
Non-Controlling Interest share
(6.0) of net assets acquired Group share of net 75.9 assets acquired Cost of acquisitions: Non-cash Cash paid in Total current period £m £m £m Contingent consideration 3.2 - 3.2 Receivable from Non- (1.4) - (1.4) Controlling Interest Cash - 74.1 74.1 Total cost of acquisition 1.8 74.1 75.9
(i) The amount of goodwill which is deductible for the purposes of calculating the Group's tax charge amounts to £39.5 million.
(ii) The contingent consideration is based on future business valuations andprofit multiples and has been estimated on an acquisition by acquisition basisusing available data forecasts.
Directly attributable costs in relation to the above acquisitions amounted to £5.5 million.
The contingent consideration has been discounted back to current values in accordance with IFRS 3, Business Combinations. In each case, the Group has used acquisition accounting to account for the purchase.
If all acquisitions had been completed on the first day of the financial period, Group revenues for the period would have been £2,017.0 million and Group profit attributable to equity holders of the parent would have been £134 million. This information takes into account the amortisation of acquired intangible assets together with related income tax effects but excludes any pre-acquisition finance costs and should not be viewed as indicative of the results of operations that would have occurred if the acquisitions had actually been completed on the first day of the financial period.
Total loss attributable to equity holders of the parent since the date of acquisition for companies acquired during the period amounted to £0.8 million.
Goodwill arising on the acquisitions is principally attributable to the anticipated profitability relating to the distribution of the Group's products in new and existing markets and anticipated operating synergies from the business combinations.
Purchase of additional shares in controlled entities
Unaudited Audited 52 weeks 52 weeks ending ending 2nd October, 3rd October, 2011 2010 £m £m Cash consideration 2.7 12.8 (including acquisition
expenses of £nil (2010 £nil))
During the period, the Group acquired additional shares in controlled entitiesamounting to £2.7 million (2010 £12.8 million). In addition, the Group optedto receive a scrip dividend from Euromoney Institutional Investor PLC(Euromoney) amounting to £14.2 million (2010 £10.7 million) thereby acquiringa further 0.5 % (2010 0.9 %) of the issued ordinary share capital ofEuromoney. Under the Group's accounting policy for the acquisition of sharesin controlled entities, no adjustment has been recorded to the fair value ofassets and liabilities already held on the Consolidated Statement of FinancialPosition. The difference between the cost of the additional shares and thecarrying value of the non controlling interests share of net assets isadjusted in retained earnings. The adjustment to retained earnings in theperiod was a charge of £4.3 million (2010 £2.8 million).Reconciliation to purchase of subsidiaries as shown in the Consolidated CashFlow Statement : Unaudited Audited 52 weeks 52 weeks ending ending 2nd October, 3rd October, 2011 2010 £m £m
Cash consideration excluding 74.1 13.5
acquisition expenses
Cash paid to settle 12.0 6.3
contingent consideration
in respect of acquisitions
Cash and cash equivalents acquired (4.8) (1.5)
with subsidiaries
Purchase of subsidiaries 81.3 18.3
Cash paid in respect of contingent consideration relating to prior year acquisitions includes £6 million within Business information, £2.4 million within Euromoney and £3.6 million within National media.
The businesses acquired during the year absorbed £0.6 million to the Group'snet operating cash flows, £nil attributable to investing and £nil attributableto financing activities.DMGTNOTES
20 SUMMARY OF THE EFFECTS OF DISPOSALS
In September 2011 the Group sold its interest in George Little Management (GLM) - an organiser of trade exhibitions in the Events segment.
The net assets disposed were as follows :
£m Goodwill 12.9 Intangible assets 89.2
Property, plant and equipment 0.4
Interests in joint ventures 0.3 Inventories 2.4
Trade and other receivables 10.0
Trade creditors and other payables (16.4)
Deferred tax 2.6 Net assets disposed 101.4 Profit on sale of businesses 23.3 124.7 Satisfied by : Cash received 95.9 Interest bearing loan note 11.8 Recycled cumulative 19.5 translation differences Directly attributable costs (2.5) 124.7
During the period GLM generated £16.7 million of the Group's net operating cash flows, paid £nil in respect of investing activities and paid £nil in respect of financing activities.
A summary of notable disposals is as follows :
Name of disposal Segment Date of disposal Disposal proceeds £m GLM Events September, 2011 107.7 Sanborn Business Information September, 2011 6.1 RMSI RMS August, 2011 1.8
The impact of all disposals of
businesses on net assets was :
£m Goodwill 18.9 Intangible assets 89.4
Property, plant and equipment
10.3 Interests in joint ventures 0.3 Inventories 2.4 Trade and other receivables 34.0 Cash at bank and in hand 3.4 Corporation tax 0.0 Trade creditors and other payables (25.9) Deferred tax (0.2) Net assets disposed 132.6
Profit on disposal of businesses
5.7 138.3 Satisfied by: Cash received 101.0 Interest bearing loan note 12.6
Investment in Sanborn Map Company
5.9 Recycled cumulative translation differences 21.6 Directly attributable costs (2.8) 138.3 Reconciliation to disposal of businesses as shown in the Consolidated Cash Flow Statement : £m
Cash consideration net of disposal costs
98.2
Cash and cash equivalents
disposed with subsidiaries
(3.4)
Proceeds on disposal of businesses
94.8
In addition, the Group's interest in Euromoney was diluted during the periodby 0.29 % (2010 1.65 %). Under the Group's accounting policy for the disposalof shares in controlled entities, no adjustment has been recorded to the fairvalue of assets and liabilities already held on the Consolidated Statement ofFinancial Position. The difference between the Group's share of net assetsbefore and after this dilution is adjusted in retained earnings. Theadjustment to retained earnings in the period was a credit of £0.5 million(2010 charge £2.3 million).All of the businesses disposed of during the year generated £14.0 million ofthe Group's net operating cash flows, had £nil attributable to investing and£nil attributable to financing activities.DMGTNOTES21 DISCONTINUED OPERATIONSIn December 2009, the Group sold a 50.0 % interest in dmg radio Australia toIllyria Radio Investments Limited (Illyria). As required by IFRS 3 (2008) thistransaction was accounted for as a disposal of dmg radio Australia andsubsequent acquisition of a 50.0 % interest in the jointly controlledbusiness. As part of this transaction Illyria invested A$37.5 million ofequity which corresponded with the acquisition fair value of the Group's 50.0% stake. In addition, both the Group and Illyria subscribed A$15.0 millioneach in redeemable preference shares at the time of the transaction. As aresult of the funding and borrowings established during the transaction, abalance of A$112.5 million owed to the Group was repaid. Since the Group hasjoint control over the management of this business, the Group's remaining 50.0% interest has been accounted for as a joint venture. The revenue of the Radiosegment was £38.4 million from 17th December, 2009 to 3rd October, 2010. Therewas no inter-segment revenue for this segment.The Group's Consolidated Income Statement includes the following results fromdiscontinued operations : Unaudited Audited 52 weeks 52 weeks ending ending 2nd October, 3rd October, 2011 2010 £m £m Revenue - 15.9 Expenses - (12.8) Depreciation - (0.6) Operating profit - before exceptional operating costs and amortisation and impairment of goodwill and intangible assets 2.5 Impairment of goodwill - and intangible assets (0.3)
Amortisation of intangible assets -
(1.5)
Operating profit/(loss) -
before share of results of
joint ventures and associates
0.7 Share of results of joint - ventures and associates 0.6 Profit/(loss) before tax - 1.3 Tax - (1.4) Loss after tax attributable - (0.1) to discontinued operations Profit on disposal of - 33.2 discontinued operations Profit/(loss) attributable - 33.1 to discontinued operations
There was no tax associated with the profit on disposal of discontinued operations.
Cash flows associated with discontinued operations comprises operating cash flows of £nil (2010 £0.7 million), investing cash flows of £nil (2010 £nil million) and financing cash flows of £nil (2010 £nil).
22 RETIREMENT BENEFITS
The Group operates a number of pension schemes primarily in its newspaper businesses under which contributions are paid by the employer and employees.
The schemes include funded defined benefit pension arrangements, providingservice-related benefits, in addition to a number of defined contributionpension arrangements. The defined benefit schemes in the UK and some definedcontribution plans are administered by trustees or trustee companies and areclosed to new employees.
The assets of all the pension schemes and plans are held independently from the Group's finances.
The total net pension costs of the Group for the year ended 2nd October, 2011 were £22.4 million (2010 £27.7 million).
The defined benefit obligation is calculated on a year-to-date basis, using the latest actuarial valuation as at 29th March, 2009. The assumptions used in the valuation are summarised below:
Unaudited Audited Audited 52 weeks 52 weeks 52 weeks ending ending ending 2nd October, 3rd October, 4th October, 2011 2010 2009 % pa % pa % pa Price inflation 3.0 3.1 3.1 Salary increases 2.9 2.9 3.0 Pension increases 2.9 2.9 3.0 Discount rate for 5.2 5.0 5.4 scheme liabilities Expected overall rate 6.7 6.6 7.0 of return on assets
The discount rate for scheme liabilities reflects yields at the period end date on high quality corporate bonds. The assumption for salary growth has been adjusted to take account of the limit on the extent to which expected future pay increases will count towards pension accrued and being earned in the schemes. All assumptions were selected after taking actuarial advice.
Mortality assumptions take account of scheme experience, and also allow forfurther improvements in life expectancy based on `medium cohort' projectionsbut with a minimum rate of reduction in mortality rates in future of 1% perannum. Allowance is made for the extent to which employees have chosen tocommute part of their pension for cash at retirement and for the proportion ofmembers with dependants at retirement eligible for a pension.
23 CONTINGENT LIABILITIES
The Group has issued stand by letters of credit in favour of the Trustees of the Group's defined benefit pension fund amounting to £53.6 million (2010 £54.5 million 2009 £37.8 million) together with other guarantees of £9.3 million (2010 £8.1 million 2009 £5.3million).
The Group is exposed to libel claims in the ordinary course of business and vigorously defends against claims received. The Group makes provision for the estimated costs to defend such claims when incurred and provides for any settlement costs when such an outcome is judged probable.
Four writs claiming damages for libel were issued in Malaysia against thecompany and three of its employees in respect of an article published in oneof the company's magazines, International Commercial Litigation, in November1995. The writs were served on Euromoney Institutional Investor PLC on 22ndOctober, 1996. Two of these writs have been discontinued. The totaloutstanding amount claimed on the two remaining writs is Malaysian Ringgits82.0 million (£16.5 million) (2010 Malaysian Ringgits 82.0 million (£14.8million)). No provision has been made for these claims in these financialstatements as the Directors do not believe Euromoney Institutional InvestorPLC has any material liability in respect of these writs.DMGTNOTES24 ULTIMATE HOLDING COMPANY
The Company's ultimate holding company and immediate parent company is Rothermere Continuation Limited, a company incorporated in Bermuda.
25 RELATED PARTY TRANSACTIONS
Transactions between the Company and its subsidiaries, which are relatedparties, have been eliminated on consolidation and are not disclosed in thisnote. The transactions between the Group and its joint ventures and associatesare disclosed below.
The following transactions and arrangements are those which are considered to have had a material effect on the financial performance and position of the Group for the period.
Ultimate Controlling Party
The Company's ultimate controlling party is the Viscount Rothermere, the Company's Chairman.
Transactions with Directors
There were no material transactions with Directors of the Company during the year, except for those relating to remuneration.
For the purposes of IAS 24, Related Party Disclosures, Executives below the level of the Company's Board are not regarded as related parties.
Transactions with joint ventures and associates
Associated Newspapers Limited has a 33 % (2010 33.3 % 2009 45.0 %)shareholding in Fortune Green Limited. During the period the Group receivedrevenue for newsprint, computer and office services of £0.5 million (2010 £0.5million 2009 £0.9 million). The amount due from Fortune Green Limited at 2ndOctober, 2011 was £0.2 million (2010 £0.1 million 2009 £0.2 million).Associated Newspapers Limited has a 12.5 % (2010 12.5 % 2009 12.5 %) share inthe Newspapers Licensing Agency (NLA) from which royalty revenue of £3.1million was received (2010 £2.9 million 2009 £2.5 million), and £0.4 milliondue at year end. Commissions paid on this revenue total £0.6 million (2010£0.6 million 2009 £0.3 million). The amount due from the NLA at 2nd October,2011 was £nil (2010 £0.1 million 2009 £0.1 million). Interest bearing loans of£0.4 million are due to Associated Newspapers from NLA at 2nd October, 2011.Daily Mail and General Holdings Limited has a 15.6 % (2010 15.6 % 2009 15.8 %)shareholding in The Press Association. During the period the Group receivedservices amounting to £3.7 million (2010 £3.5 million 2009 £1.3 million) andthe net amount due from the Press Association as at 2nd October, 2011 was £0.1million (2010 £0.2 million 2009 £33,000).The Group has a 24.9 % (2010 24.9 % 2009 24.9 %) shareholding in the EveningStandard. During the year, the Group has received revenue of £28.0 million(2010 £25.6 million 2009 £5.6 million) and incurred charges of £9.4 million(2010 £9.3 million 2009 £13.3 million). The net amount due to the Group at 2ndOctober, 2011 was £8.1 million (2010 £2.3 million 2009 £1.0 million).
During the period the Group received a dividend of £0.3 million (2010 £0.3 million 2009 nil) from Hasznaltauto kft a joint venture.
During the period, Landmark Information Group Limited (Landmark) chargedmanagement fees of £0.3 million (2010 £0.3 million 2009 £0.3 million) to PointX Limited, and recharged costs of £0.1 million (2010 £0.1 million 2009 £0.1million). Point X Limited received royalty income from Landmark of £0.1million (2010 £0.1 million 2009 £0.1 million) and the amount owed to Landmarkat 3rd October, 2010 was £47,298 (2010 £39,000 2009 £0.1 million).
On 31st August, 2011 Trepp and Rockport PA, LLC made an investment in TreppPort, LLC as a joint venture. Both companies hold equal voting and distribution rights, and a 50 % shareholding each in the joint venture. During the period, Trepp and Rockport made cash contributions of £0.6 million and £0.1 million respectively to TreppPort LLC.
During the period RMS paid a royalty of £0.3 million to Sanborn Map Companyfor the use of geospatial maps. The amount RMS owed to Sanborn Map Company at30 September, 2011 was £nil.Associated Newspapers Limited also has a 50.0 % shareholding in GlobrixLimited (Globrix) and 50.0 % shareholding in Artirix Limited (Artirix). Duringthe period, the group recharged £0.2 million staff costs to Globrix (2010£nil) and Globrix recharged the Group £0.6 million (2010 £nil) for websitedevelopment costs. At 3rd April, 2011 Globrix owed £1.1 million to Artirix(2010 £nil) and £0.2 million to various A&N Media companies (2010 £31,000),and £nil was due from Artirix (2010 £18,000) to Globrix. During the period,Artirix received revenues of £0.6 million from Globrix (2010 £nil). At 3rdApril, 2011 Artirix owed £1.9 million to various A&N Media companies (2010£nil) and £nil to Globrix (2010 £18,000).
Other related party disclosures
At 2nd October, 2011, the Group owed £1.2 million (2010 £3.3 million 2009 £1.6million) to the pension schemes which it operates. This amount comprisedemployees' and employer's contributions in respect of September 2011 payrollswhich were paid to the pension schemes in October 2011.
The Group recharges its principal pension schemes with costs of investment management fees. The total amount recharged during the year was £1.7 million (2010 £0.7 million 2009 £0.7 million).
26 POST BALANCE SHEET EVENTS
On October 14th, the announced that it had agreed to merge the online propertybusiness of its Digital Property Group ("DPG"), which includesFindaProperty.com and Primelocation.com, with those of Zoopla Limited("Zoopla") operator of Zoopla.co.uk. Zoopla is a privately-owned company whichhas venture capital interests as its largest shareholders. Under the proposedmerger, A&N Media will retain a 55% interest in the newly merged entity.
Since the year end the Group has increased its investment in Euromoney Institutional investor PLC by 1% for cash consideration of £10.0 million.
XLONRelated Shares:
DMGT.L