22nd May 2008 07:00
Group results for the half year ended 30th March, 2008.
Financial Highlights
Adjusted results* Statutory results 2008 2007 Change 2008 2007 Change Revenue ‚£1,168 m ‚£1,116 m + 5 % ‚£1,168 m ‚£1,116 m + 5 % Operating profit ‚£166 m ‚£159 m + 5 % ‚£88 m ‚£111 m - 21 % Profit before ‚£144 m ‚£135 m + 7 % ‚£23 m ‚£133 m - 83 %tax Earnings per 27.8 p 21.9 p + 27 % 15.3 p 22.3 p - 31 %share Dividend per 4.80 p 4.45 p + 8 %share
*(before amortisation and impairment of intangible assets and exceptional items; see Consolidated Income Statement and reconciliation in Note 11).
RECORD RESULTS IN TOUGH TRADING CONDITIONS * First half operating result reflects continued growth from the Group's business to business divisions.
* Robust performance by Associated Newspapers despite start up costs of new
Didcot plant. * Northcliffe Media's profits reduced due to lower advertising revenue. * Underlying earnings per share boosted by lower tax charge and share purchases. * Dividend increased by 8%, supported by strong operating cash flows.
The Viscount Rothermere, Chairman, said
"Most of our businesses have performed well despite the conditions in theglobal financial and property markets. The economic outlook remains uncertainbut the Group's strong cash flow allows continued investment to ensure ourbusinesses achieve their full potential. We continue to believe that ourstrategy of creating a diversified portfolio of market-leading operationsacross both business and consumer media products leaves us well positioned todeliver long-term growth."A webcast of the Half Yearly Results presentation to City analysts will beavailable for viewing from 9.30 a.m. on 22nd May, 2008 at http://www.dmgt.co.uk.EnquiriesPeter Williams Tel: 020 7938 6631Nicholas Jennings Tel: 020 7938 6625
Andrew Honnor/ Lizzie Morgan, Tulchan Communications Tel: 020 7353 4200
Daily Mail and General Trust plc
Contents Page
Management report 3-10Condensed Consolidated Income Statement 11
Condensed Consolidated Statement of Recognised Income and Expenses 12
Condensed Consolidated Statement of Changes in Equity 12Condensed Consolidated Balance Sheet 13Condensed Consolidated Cash Flow Statement 14Notes to the Condensed Consolidated Financial Statements 15-27Principal risks and uncertainties 28Independent review report by the external auditors 30
Management report
This half-yearly management report focuses on the adjusted numbers to give amore comparable indication of the Group's underlying business performance. Adiscussion of other items included in the statutory results is set out afterthe divisional performance review. The adjusted results are summarised below:Adjusted results* 2008 2007 Change ‚£m ‚£m Revenue 1,168 1,116 +5% Operating profit 166 159 +5% Income from joint ventures 1 3 and associates Investment income - 1 Net interest payable (23) (28) -18% Profit before tax 144 135 +7% Tax charge (28) (39) -28% Minority interest (10) (11) -9% Group profit 106 85 +24% Adjusted earnings per share 27.8 p 21.9p +27%*Adjusted results are stated before amortisation and impairment of intangibleassets and exceptional items. For a reconciliation of Group profit to adjustedGroup profit, see Note 11.SummaryGroup revenue for the six months to 30th March, 2008 was ‚£1,168 millioncompared with ‚£1,116 million for the prior year, representing growth of 5%.Operating profit* was up 5% to ‚£166 million, with operating margin unchanged at14%. Adjusted profits* before tax were ‚£144 million, up 7% on the equivalentfigure for the previous half year.
The Group continued to follow its strategy of investing in product development to generate long-term growth with 53% of this half year's operating profit* generated from outside the Group's print newspaper titles, up from 52% last year. Further progress was made in building the Group's digital advertising channels.
The Group's non-newspaper divisions have all again produced increased profits*,despite economic conditions affecting DMG Information's property businesses andDMG World Media's consumer exhibitions. Associated almost matched its prioryear results, after bearing the start up costs of its new full colour printingfacility at Didcot. Display advertising revenues have again grown andcirculations have been maintained. Our local media business has experiencedtougher market conditions and this has reduced its first half profits. DMGRadio made progress, contributing a modest profit* for the half year.Statutory profit before tax for the period was ‚£23 million, after charging ‚£63million of foreign exchange losses on tax equalisation hedging transactions,which cause an equal and opposite reduction in the tax charge. Statutory profitbefore tax in 2007 was boosted by the profit of ‚£42 million on the deemeddisposal of a portion of our holding in Euromoney.
Outlook
We have had a good first half. It seems that economic conditions in the UK willbe tough in the second half and this is having an impact on our local mediadivision. To date, however, our national titles are holding up well, and weexpect to achieve growth in our business to business divisions, despite a highlevel of development expenditure.While achievement of growth in pre-tax profits will be dependent on tradingconditions in the later months of this financial year, we look to achieve fullyear growth in adjusted earnings* per share, although not at the same rate asthat achieved in the first half.Divisional ReviewAssociated Newspapers 2008 2007 Movement ‚£m ‚£m % Revenue 508 499 + 2% Operating profit* 44 46 - 4% Operating margin* 9% 9%
Associated Newspapers produced another solid trading performance across itsportfolio and increased its total advertising revenues by 4%. The period sawthe successful introduction of the new Didcot printing plant in October 2007and since 1st January, the Mail titles have been printed in full colour,resulting in strong display advertising revenues. Advertising was softer inApril, but has recovered well in May.
Associated's newspaper operations
Circulation revenues were unchanged at ‚£188 million. The circulation of theDaily Mail for the six-month ABC period to March 2008 fell by 0.6% and that ofThe Mail on Sunday by 1.5%. Both titles, however, grew year on year in Apriland continued to outperform the national newspaper market. The Mail on Sundayincreased its cover price by 10 pence on 18th November 2007. The circulation ofthe Evening Standard rose by 7%, Metro's distribution by 20% and that of LondonLite by 0.6%.Advertising revenues were up 4% to ‚£242 million with growth throughout theperiod. Display advertising was up by 7% to ‚£195 million. By sector, allcategories were up, with the exception of travel. Retail, our largest category,increased by 8%. Classified advertising fell by 10% to ‚£43 million. The lasttwelve months have seen significant investment for the first time into thetitles' companion websites. This has resulted in a substantial increase intraffic (Mail Online is currently the No. 2 UK newspaper website) and atrebling of revenues to ‚£4 million.Operating profits* were down just 1% to ‚£49 million, despite costs of the newDidcot plant coming on stream, as expected, a quarter before full colour wasavailable to the Mail titles. There was little change in the period in theoverall cost of the London publishing operations. The average price ofnewsprint was almost unchanged in the period with a reduction from January 2008offsetting the increase in January 2007. The benefit of the lower price will befelt in the second half.Since the end of the period, the Monday to Friday cover price of the Daily Mailrose by 5 pence to 50 pence on 21st April 2008. We also continue to winindustry awards. The new look two part The Mail on Sunday was named WeekendNewspaper of the Year at the 2008 Newspaper Awards and the Daily Mail was namedDaily Newspaper of the Year at the 2008 London Press Club Awards.
Associated Northcliffe Digital
AND's revenue grew by 12% to ‚£46 million, with revenues in its core classifiedportals in jobs (Jobsite), property (Findaproperty and Primelocation) andmotors (Motors.co.uk) up 20%. Operating profit* fell by ‚£3.6 million to ‚£2.2million due to development of the online motors portal, which only launchedtowards the end of the first half last year, and continued heavy marketing ofthe property sites.DMGT continues to focus its digital strategy on driving profitable growth fromsustainable business models and optimising its portfolio of assets. While AND'skey sites are now facing tougher market conditions, they are growing marketshare in the digital arena. The utility switching business, Simply Switch, wasclosed in February and an exceptional provision has been made for the resultingclosure costs.TeletextTeletext's operating loss* was unchanged at ‚£3 million on revenues which fellby 16% to ‚£17 million. The results were affected by the delay in the rollingout of Teletext Extra, although Teletext's online business has now moved intoprofit*. Seasonal factors mean that we expect the business overall to move backtowards breakeven in the full year.Northcliffe Media 2008 2007 Movement ‚£m ‚£m % Revenue 216 219 - 1% Operating profit* 40 42 - 5% Operating margin* 18% 19% Our UK local media businesses have seen tougher trading conditions since thestart of the second quarter. Excluding the results of acquisitions anddisposals, UK operating profits* fell by ‚£4.9 million (13%) to ‚£33.8 million.On a similar basis, revenues were down 2% to ‚£179 million, with advertisingrevenues down by 3.8% to ‚£131 million (quarter one-1.0%, quarter two-6.2%).By category, retail revenues grew by 1.5% and notices were up 0.3%, but allother major categories fell with property down 6.8%, recruitment down 1.4% andmotors down by 12.5%. Residential property advertising was 9% lower than lastyear and new homes advertising was down 4%. For the two months to April 2008(aggregated to eliminate distortions caused by the earlier occurrence of Easterin 2008), underlying UK advertising revenues were down 6.7% with recruitmentdown 4.7%, property down 12.7%, motors down 9.2% and retail down 3.6%. Thefirst weeks of May indicate worsening trends in these sectors.UK circulation revenues of ‚£37 million fell by 3%. In the July to December 2007ABC period, Northcliffe's evening titles marginally outperformed the industry,when adjusted for the closure of certain of its Saturday sports editions.Excluding acquisitions and disposals, operating costs were just 0.6% higherthan in the previous period.
Northcliffe grew its operating profits* in Central Europe by 13% to ‚£3.6 million, aided by acquisitions, a favourable exchange rate and a 42% increase in underlying digital revenues.
DMG Information 2008 2007 Movement ‚£m ‚£m % Revenue 150 135 + 11% Operating profit* 32 31 + 4% Operating margin* 21% 23%
DMG Information continued its growth with an increase in underlying revenue (atconstant exchange rates, but including acquisitions) of 10%, despite a slowdownin its property businesses. Its companies continue to invest in productdevelopment and this meant that underlying operating profits* were down by 2%.The overall profit growth was due to acquisitions by Landmark and Hobsons inthe second half of the prior year which contributed ‚£4 million.Despite the tougher trading conditions for some of DMGI's companies, which arelikely to continue through the second half of the year, the ambitious internaldevelopment programmes that will fuel longer term growth continue to be pursuedconfidently. We continue to anticipate full year underlying profit* growthbeing achieved.
Insurance & Financial
Operating profit* from DMGI's insurance and financial division was unchanged at‚£17 million on revenues up 19% to ‚£61 million. Risk Management Solutions,Lewtan and particularly Trepp again grew revenues strongly, but extensiveinvestment in new product development left operating profit* at a similar levelto last year. Whilst revenue investment will continue in the second half, weanticipate margins returning to in excess of 30% and an increase in full yearprofits*.PropertyOperating profit* from the property division fell by ‚£2 million to ‚£12 millionon revenue down 6% to ‚£47 million. Underlying profits (excluding Quest whichwas acquired in July 2007) were down 30% and revenues by 15%. Tradingconditions deteriorated in the property information markets, with significantdeclines in the US commercial property market and historically low levels of UKhousing transactions.Other B2B
Operating profit* from DMGI's other business information companies rose by ‚£4million to ‚£5 million on revenue up 38% to ‚£42 million including organic growthof 24%. Hobsons, Genscape and Sanborn all performed well with margins improvingand market conditions remaining favourable.
Euromoney Institutional Investor
2008 2007 Movement ‚£m ‚£m % Revenue 155 144 + 7% Operating profit* 34 32 + 6% Operating margin* 21% 22% Euromoney announced excellent first half results last week which reflect thecontinued success of its strategy to drive profit growth and build a morerobust subscription-driven business. Subscription revenues increased by 15% to‚£58 million and the proportion of revenues derived from subscriptions increasedfrom 35% to 37%. Advertising revenues rose by 4% to ‚£29 million, but nowaccount for only 18% of total revenues.The problems in global credit markets had a limited impact on its results.Growth in advertising and sponsorship revenues slowed, as expected, butdelegate and training revenue remained strong and demand for subscriptionproducts, particularly databases and electronic information services such asBCA's economic research and ISI's emerging market information, has proved veryresilient. Emerging markets remain a key driver of Euromoney's growth and havein general continued to perform well, helped by strong commodity prices andrelatively little exposure to the credit crisis.
BCA, acquired as part of Metal Bulletin, performed exceptionally well, and the increased investment in the marketing of Metal Bulletin subscriptions and delegates is achieving higher returns than expected and starting to drive revenue growth in this part of the business.
Bookings for Euromoney's third quarter are strong, but there is very limitedvisibility for key September sales. It remains well placed to meet whateverchallenges lie ahead.DMG World Media 2008 2007 Movement ‚£m ‚£m % Revenue 113 100 + 12% Operating profit* 23 20 + 14% Operating margin* 21% 20%
DMG World Media had a good half year, with underlying revenue and operatingprofit* up by 5% and 4% respectively year on year. These results were driven bya strong performance from B2B, its largest division, offsetting falls withinB2C.
Business to business (`B2B')
B2B's operating profits* were up 21% to ‚£14 million on revenues up 16% to ‚£43million. There was an exceptional performance from the Oil & Gas sector whereGastech was successfully held in Dubai in March. The Technology sector was wellup on last year with particularly good results coming from its Evanta businessdue to organic growth and new launches in Philadelphia and Vancouver. Thesecond half will see the holding of the biennial Global Petroleum Show inCalgary in June.
Business to Retail (`B2R')
B2R's operating profits* grew by ‚£4 million to ‚£8 million on revenues up 110%to ‚£25 million due to the inclusion of George Little Management from the startof the year. Excluding this acquisition, organic revenue growth was 2%. The NewYork International Gift Fair, GLM's premier brand, performed well with bothrevenue and profit above last year's result. Surf Expo continues to performstrongly.
Business to Consumer (`B2C')
B2C's operating profits* fell by ‚£3 million to ‚£4 million on revenues down 19%to ‚£44 million. Performance was mixed in a challenging environment with theNorth American Home Shows performing well, but the UK businesses downsignificantly, due primarily to lower stand sales.DMG Radio Australia 2008 2007 Movement ‚£m ‚£m % Revenue 26 19 + 42% Operating profit* - (2) N/A Operating margin* 0% -12% DMG Radio Australia achieved break-even, excluding its two 50% owned profitablestations in Brisbane and Perth. The Nova network has again achieved the numberone position for All People 18-39 across Australia in the first three 2008surveys. Nova Brisbane and 5AA in Adelaide retained their number one rankingsfor their cities. The Vega stations made some progress, reducing their losses,but their performance continues to be disappointing.Unallocated central costs 2008 2007 Movement ‚£m ‚£m % Operating loss* (7) (10) - 30% The fall in unallocated central costs was due to a lower financing component asa result of the surplus on the Group's defined benefit pension schemes at thestart of the year.Other income statement items * Net interest payable 2008 2007 Movement ‚£m ‚£m % Net interest (39) (37) +5% payable and similar charges Swap premia income 16 9 + 78% Total (23) (28) - 18%
Net interest payable and similar charges (excluding swap premia but including deemed finance charges and interest receivable) rose by ‚£2 million to ‚£39 million due to higher average net debt.
Income from tax equalisation swap premia will this year be significantly weighted to the first half of the year due to market movements which enabled us to crystallise profits early.
The tax equalisation swap premia structure includes foreign exchange hedgeswhich generate foreign exchange movements with an equal and opposite movementin the Group's tax position. Last year, this resulted in a ‚£3 million credit tonet interest and a corresponding charge to tax. This year, due to the weaknessof sterling, it has resulted in a ‚£63 million charge to net interest and anequal credit to taxation. We have treated both items as exceptional andexcluded them from underlying results.During the period, the Group negotiated an additional ‚£90 million of committedshort-term bank facilities. The Group's ratio of net debt to forecast EBITDAremains comfortable at 2.88 (on a rolling 12 month basis), although this isabove the Group's target of 2.5 times. We are accordingly looking to reduce
ourdebt over the coming months. * Other items
The Group's share of the results* of its joint ventures and associates fell by‚£2.5 million to ‚£0.3 million. Following the reclassification of GLM as asubsidiary from the start of the year, the main item is DMG Radio Australia'sjoint ventures which increased their contribution. This was offset by a shareof the losses of Mail Today in India.
The Group has charged ‚£2 million as exceptional operating costs. This charge comprised reorganisation costs within Associated and Northcliffe, net of a credit within Euromoney.
The charge for amortisation of intangible assets rose by ‚£3 million to ‚£46million. The Group has also made an impairment charge of ‚£35 million,principally relating to a number of consumer and gift shows, but including awrite down of ‚£14 million of the Group's original investment in GLM, arisingpurely from the Group's IFRS transition election on 4th October, 2004 andmatched by an equal and opposite credit to reserves.An exceptional gain of ‚£10 million arose within income from associates on thesale of the main business of Centurion (formerly Indigo Holidays). The Grouprecorded other gains and losses of ‚£15 million, compared to ‚£46 million in theprior period. This comprised mainly an exceptional profit of ‚£12 million on thesale of businesses, principally that of Dolphin Software by DMG Information,and a gain of ‚£5 million on the sale of surplus properties.
* Taxation
The adjusted tax charge of ‚£28 million (2007 ‚£39 million) is stated afteradjusting for the effect of exceptional items. The adjusted tax rate for thehalf year fell to 19.7 % from 26.4% in the 2007 full year. The fall reflectstax reductions from tax-efficient financing and increased tax deductibleamortisation in the US that are expected to recur. Efficiencies arising fromtax equalisation arrangements which are not necessarily sustainable alsoreduced the rate. Excluding the latter, the underlying rate of tax would havebeen approximately 24% which is also our best estimate of the Group'sunderlying rate for the full year.
Pensions
The surplus on the Group's defined benefit pension schemes fell slightly from ‚£81 million at the beginning of the year to ‚£80 million at the half year(calculated in accordance with IAS 19). There was a slight increase on the mainschemes due primarily to higher bond yields reducing the value of liabilitiesmore than the fall in asset values in the period.
Net debt and cash flow
Net debt at the end of the period was ‚£1,141 million, an increase of ‚£191million since the year end. Total acquisition spend was ‚£163 million, capitalexpenditure ‚£41 million, taxation and interest ‚£53 million and dividends andshare repurchases totalled ‚£134 million. These were offset partly by operatingcash flows of ‚£173 million and disposals of investments and businesses of ‚£27million.The main acquisitions were the cost of buying the balance of GLM for ‚£77million and the purchase of 6.8 million Euromoney shares for ‚£27 million,increasing the Group's stake from 61.2% to 66.6%. Other smaller acquisitionswere made of Inframation, a German property information business, Enva Power,which provides power market traders with trading insight based on complexanalytics and real-time market data, Oilcareers, an online job-board for theoil industry principally focused on UK jobs and an investment in a US basedadvertising solutions business, Spot Runner. The main disposal was of DolphinSoftware by DMG Information.The Group acquired 18.4 million of its `A' Ordinary shares for ‚£88 million,using 2.8 million of them to settle exercised share options in RMS. Followingthese purchases, DMGT's weighted average number of shares in issue for the fullyear is estimated at 377.6 million (2007 390.3 million). No purchases have beenmade since February as the Group has concentrated on reducing its debt. TheBoard will consider making further share repurchases where this continues tocreate value for shareholders.
Subsequent events
Since the half year, the Group has made disposals totalling ‚£58 million.Hobsons' European graduate recruitment businesses in Germany, Belgium and theUK have been sold for ‚£28 million. The Group has also sold 9.8 million sharesin GCap Media, which is subject to an agreed takeover bid, for ‚£22 million. Itsremaining 8.337% holding in GCap Media, valued at around ‚£30 million, isexpected to be realised shortly.
Dividend
The Board has declared an interim dividend of 4.80 pence per Ordinary `A' Ordinary Non-Voting share (2007 4.45 pence) which will be paid on 4th July, 2008 to shareholders on the register at the close of business on 6th June, 2008.
Statement of Directors' responsibilities
The Directors are responsible for preparing the half-yearly financial report, in accordance with applicable law and regulations.
The Directors confirm that to the best of their knowledge, this condensed set of financial statements which should be read in conjunction with the annual financial statements for the year ended 30th September, 2007:
a) has been prepared in accordance with IAS 34 `Interim financial reporting' as adopted by the European Union; and
b) includes a fair review of the information required by the Financial Services Authority's Disclosure and Transparency Rules 4.2.7R and 4.2.8R.
By order of the Board of Directors
The Viscount RothermereChairman21st May, 2008*References to operating profit or loss or share of the results of jointventures and associates in the narrative above are to adjusted operating profitor loss or adjusted share of the results of joint ventures and associatesbefore amortisation and impairment of intangible assets and exceptional items);see notes 2 and 3.
The average ‚£:$ exchange rate for the half year was ‚£1: $2.01 (against ‚£1:$1.94 for the first half of last year).
For further information
For analyst and institutional enquiries:
Peter Williams 020 7938 6631
Nicholas Jennings 020 7938 6625
For media enquiries:
Andrew Honnor, Tulchan Communications 020 7353 4200
Analysts' presentation and webcast
A presentation of the Half Year results will be given to investors and analystsat 9.30 a.m. on 22nd May, 2008 at the offices of JP Morgan Cazenove, 20Moorgate, London, EC2R 6DA. There will also be a live webcast available on ourwebsite: http://www.dmgt.co.uk.
Next trading update
The Group's next scheduled announcement of financial information will be its third quarter interim management statement on 23rd July 2008.
Condensed consolidated income statement For the period ended 30th March, 2008
Unaudited Unaudited Audited Half year Half year Year ended ended 30th ended 1st March, 2008 April, 30th September, 2007 2007 Note ‚£m ‚£m ‚£m Continuing operations Revenue 3 1,167.8 1,116.1 2,235.1 Operating profit before 3 166.1 159.0 322.4exceptional operating costs and amortisation and impairment of goodwill and intangible assets
Exceptional operating costs 4 (1.8) (6.5) (28.1)
Amortisation and impairment of 3 (76.4) (41.3) (134.9) goodwill and intangible assets
Operating profit before share of 3 87.9 111.2 159.4 results of joint ventures and
associates Share of results of joint 5 5.5 1.0 1.8ventures and associates Total operating profit 93.4 112.2 161.2 Other gains and losses 6 15.4 45.6 35.7 Profit before net finance costs and 108.8 157.8 196.9tax Investment income 7 1.7 2.5 7.0 Finance costs 8 (87.9) (27.5) (61.8) Net finance costs (86.2) (25.0) (54.8) Profit before tax 22.6 132.8 142.1 Tax 9 44.1 (38.1) (20.3) Profit after tax from continuing 66.7 94.7 121.8operations Discontinued operations Profit from discontinued 0.2 0.4 0.5operations Profit for the period 66.9 95.1 122.3 Attributable to : Equity shareholders 58.5 87.1 107.0 Minority interests 8.4 8.0 15.3 Profit for the period 66.9 95.1 122.3 Earnings per share 12 From continuing operations Basic 15.3 p 22.3 p 27.3 p Diluted 15.3 p 22.2 p 27.1 p From discontinued operations Basic - p - p 0.1 p Diluted - p - p 0.1 p From continuing and discontinued operations Basic 15.3 p 22.3 p 27.4 p Diluted 15.3 p 22.2 p 27.2 p Adjusted earnings per share From continuing and discontinued operations Basic 27.8 p 21.9 p 49.3 p Diluted 27.8 p 21.9 p 49.2 p
Condensed consolidated statement of recognised income and expense
For the period ended 30th March, 2008 Unaudited Unaudited Audited Half year Half year Year ended ended 30th ended 1st 30th March, April, September, 2007 2008 2007 Note ‚£m ‚£m ‚£m Profit for the period 66.9 95.1 122.3 Foreign exchange differences on 26.8 23.0 1.8translation of foreign operations Fair value movements on - 2.4 0.2available-for-sale investments (Losses)/gains on cash flow (4.9) 2.5 6.4hedges Change in value of other (24.9) (0.9) 13.4hedges recorded in equity Actuarial gains on defined 4.6 120.7 207.1benefit pension schemes Current tax on items - - 0.3recognised in equity Deferred tax on actuarial (1.3) (36.2) (60.9)movement Deferred tax on other items 3.4 (0.7) 1.2recognised directly in equity Net income recognised 65.0 205.9 291.8directly in equity Transfers Impairment of GCap Media plc - - 24.4recognised in income statement Translation reserves - - (0.1)recycled to income statement on disposals Transfer of gain on cash (2.1) - (2.7)flow hedges from translation reserves to income statement (2.1) - 21.6 Total recognised income and 62.9 205.9 313.4expense for the period Attributable to : Equity shareholders 56.2 192.4 296.0 Minority interests 8.5 13.5 17.4 68.5 205.9 313.4 Condensed consolidated reconciliation of movements in equity For the period ended 30th March, 2008 Unaudited Unaudited Audited Half year Half year Year ended ended 30th ended 1st 30th March, April, September, 2007 2008 2007 Note ‚£m ‚£m ‚£m Total recognised income and 68.5 205.9 313.4expense for the year Dividends paid 10 (38.4) (35.3) (53.2) Issue of share capital - 2.1 2.7 Exercise of acquisition option 7.0 - 7.2commitments Movement in losses - - 5.4attributable to minorities which are borne by Group Initial recording of put - (13.9) (18.5)options granted to minority interests in subsidiaries Transactions with minorities (9.3) 20.8 11.2 Settlement of exercised share (16.5) (13.0) (13.2)options of subsidiary Credit to equity for 6.9 4.7 18.1share-based payments Shares purchased to be held in (88.3) (18.6) (32.8)treasury Own shares released on vesting 16.8 - 4.9of share options Revaluation of previously held 18 27.0 - -interest in associate on acquisition of control Adjustment to equity following (7.3) - -increased stake in controlled entity Total movement in equity for (33.6) 152.7 245.2the period Equity at the beginning of the 720.5 475.3 475.3period Equity at the end of the period 686.9 628.0 720.5Condensed consolidated balance sheet As at 30th March, 2008 Unaudited Unaudited Audited Half year Half year Year ended ended 30th ended 1st 30th March, April, September, 2007 2008 2007 restated * Note ‚£m ‚£m ‚£m ASSETS Non-current assets Goodwill 972.0 868.9 887.4 Other intangible assets 674.6 574.2 592.7
Property, plant and equipment 14 521.1 513.8 520.7
Investments Joint ventures 24.6 17.3 19.2 Associates 14.1 71.4 64.7 Available-for-sale 70.8 54.9 52.3investments Deferred tax assets 10.4 13.7 8.0 Derivative financial assets 1.5 19.3 14.4 Trade and other receivables 4.7 6.1 4.8 Retirement benefit assets 82.7 - 82.0 2,376.5 2,139.6 2,246.2 Current assets Inventories 34.7 27.1 25.5 Trade and other receivables 512.9 473.7 429.5 Derivative financial assets 56.3 40.3 16.1 Cash and cash equivalents 79.3 85.0 70.4 683.2 626.1 541.5 Total assets of subsidiaries held for - 14.4 -sale Total assets 3,059.7 2,780.1 2,787.7 LIABILITIES Current liabilities Trade and other payables (695.5) (612.3) (621.0) Current tax payable (121.5) (176.1) (157.4) Acquisition put option 15 (20.1) (8.4) (21.8)commitments Other financial liabilities 16 (37.3) (29.1) (43.2) Derivative financial (89.3) (4.9) (4.8)liabilities Provisions (25.9) (20.6) (22.7) (989.6) (851.4) (870.9) Non-current liabilities Acquisition put option 15 (14.2) (34.4) (18.8)commitments Other financial liabilities 16 (1,167.1) (1,066.1) (982.7) Retirement benefit (3.2) (19.9) (1.4)obligations Derivative financial (26.6) (5.4) (8.1)liabilities Provisions (41.6) (47.3) (49.0) Deferred tax liabilities (128.9) (122.7) (135.6) Other non-current liabilities (1.6) (1.2) (0.7) (1,383.2) (1,297.0) (1,196.3) Total liabilities of subsidiaries held - (3.7) -for sale Total liabilities (2,372.8) (2,152.1) (2,067.2) Net assets 686.9 628.0 720.5 SHAREHOLDERS' EQUITY Called up share capital 17 49.1 50.3 49.4 Share premium account 12.4 11.8 12.4 Share capital 61.5 62.1 61.8 Capital redemption reserve 1.1 - 0.8 Revaluation reserve 44.5 48.9 46.0 Shares held in treasury (97.7) (81.7) (44.4) Translation reserve 24.5 39.5 27.0 Retained earnings 623.1 541.9 601.7 Equity shareholders' funds 657.0 610.7 692.9 Equity minority interests 29.9 17.3 27.6 686.9 628.0 720.5 Approved by the Board of Directors on 21st May, 2008.
* restated following a reclassification of derivatives (note 2).
Condensed consolidated cash flow statement For the period ended 30th March, 2008 Unaudited Unaudited Audited Half year Half year Year ended ended 30th ended 1st 30th March, April, September, 2008 2007 2007 Note ‚£m ‚£m ‚£m Operating profit before share of 87.9 111.2 159.4results of joint ventures and associates - continuing Operating profit - discontinued 0.2 0.8 0.8 Adjustments for : Share based payments 6.9 4.7 18.1 Depreciation 31.0 28.1 59.0 Impairment of property, plant and - - 6.0equipment Amortisation of intangible assets 45.2 41.3 82.2 Impairment of goodwill and 31.2 - 52.7intangible assets Operating cash flows before movements 202.4 186.1 378.2in working capital (Increase)/decrease in (7.0) 4.4 5.9inventories Increase in trade and other (68.4) (89.5) (64.2)receivables Increase in trade and other 43.6 54.1 59.8payables (Decrease)/increase in provisions (0.5) 3.4 3.4 Cash generated by operations 170.1 158.5 383.1 Taxation paid (18.3) (31.4) (43.8) Taxation received 7.8 - - Net cash from operating 159.6 127.1 339.3activities before payment into pension scheme Payment into Group pension scheme - (26.3) (25.9)following sale of Aberdeen Journals in 2006 Net cash from operating 159.6 100.8 313.4activities Investing activities Interest received 1.9 3.9 5.7
Dividends received from joint ventures 3.0 4.4 6.6 and associates
Dividends received from 0.4 0.8 1.5available-for-sale investments Purchase of property, plant and (34.9) (40.1) (72.2)equipment Purchase of available-for-sale (19.9) (1.3) (0.6)investments Proceeds on disposal of property, 7.9 7.3 5.3plant and equipment Proceeds on disposal of - 0.1 2.1available-for-sale investments Purchase of subsidiaries 18 (91.8) (192.1) (305.2)
Purchase of additional interests 19 (33.4) (1.6) (7.1) in controlled entities
Expenditure on internally generated (6.5) (6.4) (14.0) intangible fixed assets
Treasury derivative activities (1.0) 5.6 32.8 Investment in joint ventures and (6.2) (13.4) (14.5)associates Loans to joint ventures and 4.1 - 5.0associates repaid Proceeds on disposal of 20 14.2 5.0 37.0businesses Proceeds on disposal of - - 1.1associates Net cash used in investing (162.2) (227.8) (316.5)activities Financing activities Equity dividends paid 10 (38.4) (35.3) (52.6) Dividends paid to minority (7.5) (7.1) (8.9)interests Issue of share capital - 2.2 2.7
Issue of shares by Group companies to 0.1 0.8 0.5 minority interests
Purchase of own shares 17 (88.3) (21.8) (32.8) Settlement of subsidiary share - (6.0) (8.7)option plan Interest paid (14.5) (44.0) (56.6) Proceeds on issue of bonds - - 197.8 Premium on repurchase of bonds - (2.8) (2.6) Bonds redeemed - (9.4) (9.4) Loan notes repaid (20.5) (0.7) (2.8) Increase in/(repayment of) bank 174.7 235.9 (54.7)borrowings Net cash from/(used in) financing 5.6 111.8 (28.1)activities Net increase/(decrease) in cash and 3.0 (15.2) (31.2)cash equivalents
Cash and cash equivalents at beginning 64.0 96.1 96.1 of period
Exchange gain/(loss) on cash and 2.5 (0.8) (0.9)cash equivalents
Net cash and cash equivalents at 13 69.5 80.1 64.0 end of period
1 Basis of preparation
The information for the six months ended 30th March, 2008 and 1st April,
2007 and for the twelve months ended 30th September, 2007 does not
constitute statutory accounts for the purposes of section 240 of the
Companies Act 1985. A copy of the accounts for the year ended 30th
September, 2007 has been delivered to the Registrar of Companies. The
auditors' report on those accounts was not qualified and did not contain
statements under section 237 (2) or (3) of the Companies Act 1985.
The Annual Report and Accounts of DMGT plc are prepared in accordance
with International Financial Reporting Standards issued by the
International Accounting Standards Board as adopted by the European
union. These condensed consolidated financial statements have been
prepared in accordance with IAS 34, Interim Financial Reporting as
adopted by the European Union. 2 Accounting policies and presentation
These condensed consolidated financial statements have been prepared in
accordance with the accounting policies set out in the 2007 Annual
Report and Accounts. These policies are expected to be followed in the
preparation of the full financial statements for the financial year
ending 28th September, 2008. Impact of new accounting standards
At the date of authorisation of these financial statements, the
following standards have been issued but not applied to the information
in these condensed consolidated financial statements since they do not
apply to this reporting period or are not relevant to disclosures in
these condensed consolidated financial statements.
IFRS 7, Financial Instruments : Disclosures (effective for periods
beginning on or after 1st January, 2007). IFRS 7 requires discussion of
the significance of financial instruments for an entity's financial
position and performance and of qualitative and quantitative information
about exposure to risks arising from financial instruments, including
specified minimum disclosures about credit risk, liquidity risk and
market risk. Adoption of this standard will not cause any change to the
Group's results or financial position but will result in additional
disclosures.
Amendment to IAS 1, Presentation of Financial Statements (effective for
periods beginning on or after 1st January, 2007). The amendment to IAS 1
introduces disclosures about the level of an entity's capital and how it
manages capital. Adoption of this amendment is not expected to change
the presentation of the Group's financial statements significantly.
Amendment to IAS 1, Presentation of Financial Statements (effective for
periods commencing on or after 1st January, 2009). This amendment
introduces changes to the way in which movements in equity must be
disclosed and requires an entity to disclose each component of other
comprehensive income not recognised in profit or loss. The amendment
also requires disclosure of the amount of income tax relating to each
component of other comprehensive income as well as several other minor
disclosure amendments.
IFRS 8, Operating Segments (effective for periods beginning on or after
1st January, 2009). IFRS 8 sets out disclosure requirements concerning
an entity's operating segments, products, services, geographical areas
in which it operates and its major customers. IFRS 8 replaces IAS 14,
Segmental Reporting. Adoption of this standard is not expected to change
the disclosures already made in the DMGT plc Annual Report and Accounts
significantly.
Amendment to IAS 23, Borrowing Costs (effective for periods commencing
on or after 1st January, 2009). This standard requires all borrowing
costs which are directly attributable to an acquisition construction or
production of a qualifying asset to form part of the cost of that asset.
The Group does not expect a significant impact from the adoption of this
standard.
Amendment to IFRS 2, Share-based Payment (effective for periods
commencing on or after 1st January, 2009). The amendment clarifies that
vesting conditions are service conditions and performance conditions
only. It also specifies that all cancellations, whether by the entity or
by other parties, should receive the same accounting treatment. The
Group does not expect a significant impact from the adoption of this
standard.
Amendments to IAS 32, Puttable financial instruments and obligations
arising on liquidation (effective for periods beginning on or after 1st
January, 2009). The amendments are relevant to entities that have issued
financial instruments that are (i) puttable financial instruments, or
(ii) instruments, or components of instruments that impose on the entity
an obligation to deliver to another party a pro-rata share of the net
assets on liquidation only. As a result of the amendments, some
financial instruments that currently meet the definition of a financial
liability will be classified as equity because they represent the
residual interest in the net assets of the entity. The amendments set
out extensive detailed criteria to be met in order to be able to
classify these instruments as equity. The impact of these amendments is
restricted to specific cases and no analogies can be made. The Group
does not expect a significant impact from the adoption of this standard.
IFRS 3 (Revised), Business Combinations (effective for periods
commencing on or after 1st July, 2009). The amendment introduces changes
that will require all acquisition related costs to be expensed and
adjustments to contingent consideration to be recognised in income and
will allow the full goodwill method to be used when accounting for
non-controlling interests.
Amendment to IAS 27, Consolidated and Separate Financial Statements
(effective for periods commencing on or after 1st July, 2009). The
amendment introduces changes to the accounting for partial disposals of
subsidiaries, associates and joint ventures. Adoption of these
amendments is not expected to significantly impact the measurement,
presentation or disclosure of future disposals.
The following interpretation of international accounting standards has
been issued and is applicable to the Group for the year ended 28th
September, 2008. The adoption of this interpretation has not had a
significant impact on the Group's financial statements :
IFRIC 11, IFRS 2 Group and Treasury Share Transactions (effective for
periods beginning on or after 1st March, 2007)
The following interpretations have been issued which are not yet
applicable to the Group since they are only effective for accounting
periods beginning after 1st October, 2007 although the Group has
followed the guidance in IFRIC 12 and IFRIC 14 :
IFRIC 12, Service Concession Agreements (effective for periods beginning
on or after 1st January, 2008)
IFRIC 13, Customer Loyalty Programmes (effective for periods beginning
on or after 1st July, 2008)
IFRIC 14, The Limit on a Defined Benefit Asset, Minimum Funding
Requirements and their Interaction (effective for periods beginning on
or after 1st January, 2008) 2 Other changes
In light of the IASB's decision to revisit IAS 1, Presentation of
Financial Statements, in respect of the presentation of derivatives in
the balance sheet, the Group has reclassified its derivative financial
assets and liabilities from current to non-current where the maturity of
these contracts is greater than twelve months from the balance sheet
date. This has resulted in an increase in non current assets amounting
to ‚£19.3 million and an increase in non-current liabilities amounting to
‚£5.4 million together with a decrease in current assets amounting to ‚£ 19.3 million and a decrease in current liabilities amounting to ‚£5.4 million for the period ended 1st April, 2007. In the prior period the income statement heading "Profit before net finance costs and tax" was named "Profit from operations". This change was made for the clarification of the reader. Critical accounting judgements and key sources of estimation uncertainty In addition to the judgements taken by management in selecting and applying the accounting policies as set out in the Group's Annual Report and Accounts, management has made the following critical judgements and estimates concerning the amounts recognised in the condensed consolidated financial statements. Acquisitions and intangible assets The Group's accounting policy on the acquisition of subsidiaries is to allocate purchase consideration to the fair value of identifiable assets, liabilities and contingent liabilities acquired with any excess consideration representing goodwill. In determining the fair value of assets, liabilities and contingent liabilities acquired, significant estimates and assumptions, including assumptions with respect to cash flows and unprovided liabilities and commitments, particularly in respect of tax, are often used. The Group recognises intangible assets acquired as part of a business combination at fair values at the date of the acquisition. The determination of these fair values is based upon management's judgement and includes assumptions on the timing and amount of future cash flows generated by the assets and the selection of an appropriate discount rate. Additionally, management must estimate the expected useful economic lives of intangible assets and charge amortisation on these assets accordingly. Acquisition option commitments The Group is party to a number of put and call options over the remaining minority interests in some of its subsidiaries. IAS 39, Financial Instruments : Recognition and Measurement, requires that the fair value of these acquisition option commitments is recognised as a liability on the balance sheet with a corresponding decrease in reserves. Subsequent changes in fair value of the liability are reflected in the income statement. Key areas of judgement in calculating the fair value of the options are the expected future cash flows and earnings of the business and the discount rate. At 30th March, 2008 the fair value of these acquisition option commitments is ‚£34.3 million (2007 ‚£42.8 million). Deferred consideration Estimates are required in respect of the amount of deferred contingent consideration, which is determined according to formulae agreed at the time of the business combination, and normally related to the future earnings of the acquired business. The Directors review the amount of contingent consideration likely to become payable at each balance sheet date, the major assumption being the level of future profits of the acquired business. At 30th March, 2008 the Group has outstanding deferred consideration payable amounting to ‚£51.9 million (2007 ‚£52.1 million). Deferred consideration is discounted to its fair value in accordance with IFRS 3 and IAS 37. The difference between the fair value of these liabilities and the actual amounts payable is charged to the income statement as a notional finance cost. Impairment of goodwill and intangible assets Determining whether goodwill and intangible assets are impaired requires an estimation of the value in use of the cash generating units to which goodwill has been allocated. The value in use calculation requires the entity to estimate the future cash flows expected to arise from the cash generating unit and compare to the net present value of these cashflows using a suitable discount rate to determine if any impairment has occurred. A key area of judgement is deciding the long-term growth rate of the applicable businesses and the discount rate applied to those cash flows. The carrying amount of goodwill and intangible assets at the
balance sheet date was ‚£1,646.6 million (2007 ‚£1,443.1 million) after an
impairment loss of ‚£31.2 million (2007 ‚£nil) recognised during the
period. Adjusted profits and exceptional items
The Group presents adjusted earnings by making adjustments for costs and
profits which management believe to be exceptional in nature by virtue
of their size or incidence including tax items. Such items would include
one off gains and losses on disposal of businesses, properties and
similar items of a non-recurring nature together with reorganisation
costs and similar charges, and by adding back impairment of goodwill and
amortisation and impairment of intangible assets. See note 11 for a
reconciliation of profit before tax to adjusted profit. Share-based payments
The Group makes share-based payments to certain employees. These
payments are measured at their estimated fair value at the date of
grant, calculated using an appropriate option pricing model. The fair
value determined at the grant date is expensed on a straight-line basis
over the vesting period, based on the estimate of the number of shares
that will eventually vest. The key assumptions used in calculating the
fair value of the options are the discount rate, the Group's share price
volatility, dividend yield, risk free rate of return, and expected
option lives. Management regularly perform a true-up of the estimate of
the number of shares that are expected to vest; this is dependent on the
anticipated number of leavers. Taxation
Being a multinational Group with tax affairs in many geographic
locations inherently leads to a highly complex tax structure which makes
the degree of estimation and judgement more challenging. The resolution
of issues is not always within the control of the Group and is often
dependent on the efficiency of legal processes. Such issues can take
several years to resolve. The Group takes a prudent view of unresolved
issues. However the inherent uncertainty regarding these items means
that the eventual resolution could differ significantly from the
accounting estimates and therefore impact the Group's results and future
cash flows. In the period to 30th March, 2008 there have been no
material changes to the estimates of tax payable in relation to
uncertain tax positions. Retirement benefit obligations
The cost of defined benefit pension plans is determined using actuarial
valuations prepared by the Group's actuaries. This involves making
certain assumptions concerning discount rates, expected rates of return
on assets, future salary increases, mortality rates and future pension
increases. Due to the long term nature of these plans, such estimates
are subject to significant uncertainty. The assumptions and the
resulting estimates are reviewed annually and, when appropriate, changes
are made which affect the actuarial valuations and, hence, the amount of
retirement benefit expense recognised in the income statement and the
amounts of actuarial gains and losses recognised in the statement of
recognised income and expense. The net carrying amount of the retirement
benefit obligation at 30th March, 2008 was a surplus of ‚£79.5 million
(2007 deficit ‚£19.9 million). Further details are given in note 21.
3 Segment analysis
For management purposes, the Group's business activities are split into
six operating divisions - National newspapers, Local media, Business
information, Euromoney, Exhibitions and Radio. These divisions are the
basis on which the Group reports its primary segment information.
Analysis of revenue by business segment Unaudited Unaudited Audited Half year Half year Year Ended ended ended 30th 1st April, 30th March, September, 2007 2007 2008 ‚£m ‚£m ‚£m National newspapers 547.4 533.9 1,060.5 Local media 216.8 221.9 450.7 Business information 150.2 135.0 293.3 Euromoney 154.8 149.1 310.2 Exhibitions 112.7 100.8 164.1 Radio 26.3 18.5 39.8 Revenue - continuing operations 1,208.2 1,159.2 2,318.6 Unaudited Unaudited Audited Half year Half year Year Ended ended ended 30th 1st April, 30th March, 2007 September, 2008 2007 ‚£m ‚£m ‚£m National newspapers (39.3) (35.2) (74.3) Local media (0.9) (2.8) (3.6) Business information (0.2) (0.2) (0.6) Revenue - inter-segment (40.4) (38.2) (78.5)
Inter-segment sales are charged at prevailing market prices other than the sale of newsprint from the National newspaper to the Local media division which is at cost. The amount of newsprint sold during the period amounted to ‚£18.6 million (2007 ‚£17.8 million).
Unaudited Unaudited Audited Half year Half year Year Ended ended ended 30th 1st April, 30th March, 2007 September, 2008 2007 ‚£m ‚£m ‚£m Euromoney - (4.9) (5.0) Revenue - discontinued operations - (4.9) (5.0) Unaudited Unaudited Audited Half year Half year Year Ended ended ended 30th 1st April, 30th March, 2007 September, 2008 2007 ‚£m ‚£m ‚£m National newspapers and related 508.1 498.7 986.2activities Local media 215.9 219.1 447.1 Business information 150.0 134.8 292.7 Euromoney 154.8 144.2 305.2 Exhibitions 112.7 100.8 164.1 Radio 26.3 18.5 39.8 Revenue - total 1,167.8 1,116.1 2,235.1 Analysis of revenue by geographic origin Unaudited Unaudited Audited Half year Half year Year Ended ended ended 30th 1st April, 30th March, 2007 September, 2008 2007 ‚£m ‚£m ‚£m UK 829.8 826.9 1,655.9 Rest of Europe 36.1 31.6 58.9 North America 233.8 201.5 404.5 Australia 30.0 20.8 52.1 Rest of the World 38.1 35.3 63.7 Revenue - total 1,167.8 1,116.1 2,235.13 Segment analysis (continued) Analysis of operating profit before exceptional operating costs and amortisation and impairment of goodwill and intangible assets by business segment Unaudited Unaudited Audited Half year Half year Year Ended ended ended 30th 1st April, 30th March, September, 2008 2007 2007 Note ‚£m ‚£m ‚£m National newspapers and related 44.1 45.8 83.3activities Local media 40.0 42.5 92.5 Business information 31.6 30.5 70.6 Euromoney 33.5 31.6 68.4 Exhibitions 23.4 20.6 27.0 Radio 0.3 (2.3) (3.7) Unallocated central costs (6.8) (9.7) (15.7) Operating profit before 166.1 159.0 322.4exceptional operating costs and amortisation and impairment of goodwill and intangible assets
Less : exceptional operating 4 (1.8) (6.5) (28.1) costs
Less : amortisation of intangible (45.2) (41.3) (82.2)assets Less : impairment of goodwill and (i) (31.2) - (52.7)intangible assets Operating profit 87.9 111.2 159.4 Analysis of operating profit after exceptional operating costs and amortisation and impairment of goodwill and intangible assets by businesssegment Unaudited Unaudited Audited Half year Half year Year Ended ended ended 30th 1st April, 30th March, September, 2008 2007 2007 ‚£m ‚£m ‚£m National newspapers and related 28.3 29.6 17.1activities Local media 32.2 35.0 70.3 Business information 26.3 26.9 59.0 Euromoney 25.9 19.4 44.7 Exhibitions (13.4) 16.8 (3.2) Radio (4.6) (6.8) (12.8) Unallocated central costs (6.8) (9.7) (15.7) Operating profit after 87.9 111.2 159.4exceptional operating costs and amortisation and impairment of goodwill and intangible assets (i) The Group tests goodwill annually for impairment, or more frequently if
there are indicators that goodwill might be impaired. The impairment recognised for the period was ‚£31.2 million (2007 ‚£nil). Of the impairment charge for the period, ‚£30.1 million relates to the
Exhibition division in relation to their gift sector businesses whilst ‚£
1.1 million is an adjustment to goodwill in Euromoney. At 30th March, 2008 Euromoney re-assessed the recoverability of tax losses acquired with Metal Bulletin and as a result recognised a deferred tax asset of ‚£1.1 million. In accordance with IAS 12, Income Taxes, the Group is required to reduce its previously capitalised goodwill to offset this deferred tax asset. Included within the gift sector charge is an amount of ‚£14.4 million relating to George Little Management LLC (GLM) (note 18). GLM was an associate on October 3rd, 2004, the Group's transition date to IFRS. On transition to IFRS, the Group elected not to apply IFRS 3, Business Combinations, retrospectively to past business combinations and the carrying value of goodwill, intangible assets and other assets and liabilities associated with the Group's stakes in its subsidiaries, associates and joint ventures. As a result of the application of IFRS 3
on acquiring control of GLM a double count of goodwill in respect of the
Group's acquisition of its initial 25% stake has occurred as under UK GAAP the majority of this stake was attributed to goodwill and no
separately identifiable assets were recorded. As a result of this double
count the Group has been required to record an impairment charge of ‚£ 14.4 million immediately following acquisition of control and this is included in the charge for the period. The balance of the gift sector charge reflects a downturn in the gift sector markets they support.
When testing for impairment, the recoverable amounts for all the Group's
cash-generating units (CGUs) are measured at their value in use by
discounting future expected cash flows. These calculations use cash flow
projections based on management approved budgets and projections which reflect management's current experience and future expectations of the markets in which the CGU operates. Risk adjusted discount rates used by the Group in its impairment tests range from 8.4% to 15.0%, the choice of rates depending on the market and maturity of the CGU; the growth rates used in the projections range between 0% and 5% and vary with
management's view of the CGU's market position, maturity of the relevant
market, and do not exceed the long term average growth rate for the market in which it operates. 4 Exceptional operating costs Unaudited Unaudited Audited Half year Half year Year Ended ended ended 30th 1st April, 30th March, 2007 September, 2008 2007 ‚£m ‚£m ‚£m National newspapers and related (1.1) - (13.3)activities Local media (1.4) (2.2) (6.0) Euromoney 0.7 (4.3) (5.9) Exhibitions - - (2.9) (1.8) (6.5) (28.1)
Following reorganisation and restructuring within the National newspaper and Local media divisions the Group incurred an exceptional charge of ‚£ 2.5 million and a related tax credit of ‚£0.7 million. Euromoney successfully surrendered a lease on a vacant building previously utilised by Metal Bulletin and released other reorganisation and restructuring provisions, set up following the acquisition of Metal Bulletin, which are no longer required. This resulted in an exceptional credit to the Group of ‚£0.7 million and a related tax charge of ‚£0.2 million.
In the prior period the Group's exceptional operating costs comprised restructuring and strategic review costs within Local media, together with reorganisation costs within Euromoney arising from the acquisition of Metal Bulletin plc.
5 Share of results of joint ventures and associates
Unaudited Unaudited Audited Half year Half year Year Ended ended ended 30th 1st April, 30th March, September, 2008 2007 2007 Note ‚£m ‚£m ‚£m Share of profits from operations of 0.4 1.4 2.4joint ventures Share of (losses)/profits from (0.1) 1.9 3.6operations of associates Share of associates' other (i) 9.8 - 0.6gains Before amortisation, impairment of 10.1 3.3 6.6goodwill, interest and tax Share of amortisation of intangibles of (0.4) (0.5) (0.7)joint ventures Share of amortisation of - (1.3) (3.2)intangibles of associates Share of associates' interest - 0.1 0.1receivable Share of joint ventures' tax (0.3) (0.3) (0.5) Share of associates' tax (0.1) (0.3) (0.5) Impairment of carrying value (ii) (3.8) - -of associate 5.5 1.0 1.8 Share of results from operations of (0.3) 0.6 1.2joint ventures Share of results from 5.8 0.4 0.6operations of associates 5.5 1.0 1.8
(i) Represents the Group's share of Centurion Holiday Group Limited's
(formerly Indigo Holidays Limited) profit on disposal of Hotels4u.com.
(ii) Centurion Holiday Group Limited was liquidated following the period end. The Group's carrying value has been written down to the proceeds received on liquidation. 6 Other gains and losses Unaudited Unaudited Audited Half year Half year Year Ended ended ended 30th 1st April, 30th March, September, 2008 2007 2007 ‚£m ‚£m ‚£m Profit on sale of trading - - 0.7investments Profit on sale of property, 5.3 - 1.2plant and equipment Profit on sale of 11.7 3.3 15.2businesses Impairment of (1.5) - -available-for-sale assets Recycled impairment loss of GCap - - (24.4)Media plc Profit on deemed part disposal - 42.3 42.4of Euromoney Institutional Investor plc (Loss)/profit on sale and (0.1) - 0.6deemed disposal of joint ventures and associates 15.4 45.6 35.7
The profit on sale of businesses mainly comprises the sale of Dolphin Software Inc., a provider of information on hazardous chemicals within the Business information division.
In the prior period the profit on sale of businesses was mainly represented by the sale of Raven Fox by Euromoney, whilst the profit on deemed part disposal of Euromoney arose following Euromoney's issue of ‚£65.0 million new share capital to the shareholders of Metal Bulletin, thereby reducing the Group's interest in Euromoney.
7 Investment revenue Unaudited Unaudited Audited Half year Half year Year Ended ended ended 30th March, 1st April, 30th 2008 September, 2007 2007 ‚£m ‚£m ‚£m Dividend income The Press Association Limited - - 0.2 AMI - - 0.3 GCap Media plc 0.4 0.8 1.0 Interest receivable Short-term deposits 1.3 1.7 5.5 1.7 2.5 7.08 Finance costs Unaudited Unaudited Audited Half year Half year Year Ended ended ended 30th March, 1st April, 30th 2008 September, 2007 2007 ‚£m ‚£m ‚£m
Interest and commitment fees payable on (38.9) (37.9) (72.0) loans and bonds
(Loss)/gain on derivatives, or portions (46.9) 12.5 16.5 thereof, not designated for hedge
accounting Finance charge on discounting of (1.3) (1.2) (2.8)deferred consideration Other (0.8) (0.9) (3.5) (87.9) (27.5) (61.8) Analysed as follows :
Interest and commitment fees payable on (38.9) (37.9) (72.0) loans and bonds
Finance charge on discounting of (1.3) (1.2) (2.8)deferred consideration Change in fair value of non 1.4 - -designated portion of derivatives designated as net investment hedges Change in fair value of (1.2) (0.1) (0.3)interest rate caps not designated for hedge accounting Change in fair value of 2.5 (2.9) (3.0)derivative hedge of bond Change in fair value of hedged (2.5) 2.8 3.0portion of bond (40.0) (39.3) (75.1) Tax equalisation swap income 8.7 9.5 30.5 Non foreign exchange gain/ 7.4 - (3.4)(loss) on tax equalisation options 16.1 9.5 27.1 Foreign exchange (loss)/gain (63.2) 3.1 (10.3)on tax equalisation arrangements Foreign exchange loss on - (4.7) (4.7)intra-group financing
Change in fair value of acquisition put (0.8) 3.6 3.8 options
Premium on repurchase of bonds - (2.8) (2.6) Fair value of short life - 3.1 -options (64.0) 2.3 (13.8) (87.9) (27.5) (61.8)
The comparative figures in the above table have been re-analysed in order to assist the reader's understanding of the Group's finance costs.
Tax equalisation swap income and the gain/(loss) from tax equalisation options totalling ‚£16.1 million (2007 ‚£9.5 million) arises from the economic hedging of tax on foreign exchange movements. The foreign exchange loss on tax equalisation arrangements of ‚£63.2 million (2007 profit ‚£3.1 million) is excluded from adjusted profit since it is equal to a (reduced)/increased tax charge (see note 9). In addition, the foreign exchange loss on intra-group financing, premium on repurchase of bonds and the change in fair value of acquisition put options are also excluded from adjusted profits.
The finance charge on the discounting of deferred consideration arises from the requirement under IFRS 3 Business Combinations to discount deferred consideration back to current values.
9 Tax Unaudited Unaudited Audited Half year Half year Year Ended ended ended 30th 1st April, 30th March, September, 2008 2007 2007 ‚£m ‚£m ‚£m The credit/(charge) on the profit for the period consists of : UK Corporation tax at 29% (2007 36.2 (31.7) (41.9)30%) Adjustments in respect of prior 0.6 1.6 29.4period 36.8 (30.1) (12.5) Overseas taxation Corporation taxes (9.3) (7.0) (18.8) Adjustments in respect of prior (0.7) (0.7) 0.2period Total current taxation 26.8 (37.8) (31.1) Deferred tax Origination and reversals of timing 17.8 (0.9) 13.7differences Adjustments in respect of prior (0.5) 0.6 (2.9)period 44.1 (38.1) (20.3)
Corporation tax for the interim period is charged at 29% (2007 30%), representing the weighted average annual corporation tax rate expected for the full financial year.
Adjusted tax on profit before amortisation and impairment of intangible assets, restructuring costs and non-recurring items (adjusted tax charge) amounted to ‚£28.4 million (2007 ‚£39.0 million) and the resulting rate is 19.7 % (2007 28.8%). The differences between the tax credit/(charge) and the adjusted tax charge are shown in the reconciliation below, and are mainly the tax on exceptional items and a ‚£63.2 million tax credit (2007 ‚£3.1 million tax charge) relating to exchange (losses)/gains (see note 8). In calculating the adjusted tax rate, the Group excludes the potential future deferred tax effects of goodwill and intangibles as it prefers to give readers of its accounts a view of the tax charge based on the current status of such items.
Adjusted tax credit/(charge) for the period Unaudited Unaudited Audited Half year Half year Year Ended ended ended 30th 1st April, 30th March, September, 2008 2007 2007 ‚£m ‚£m ‚£m
Total tax credit/(charge) on the profit 44.1 (38.1) (20.3) for the period
Deferred tax on intangible assets and (9.0) (2.5) (14.0) goodwill
Current tax on foreign exchange on tax (63.2) 3.1 (10.3) equalisation arrangements
Credit on finalisation of open issues - - (27.4)with HM Revenue and Customs Tax on other exceptional items (0.3) (1.5) (3.9) Adjusted tax charge for the (28.4) (39.0) (75.9)period The adjusted tax rate for the period of 19.7% includes efficiencies arising from the tax equalisation swap arrangements which are not necessarily sustainable. Excluding these efficiencies, the adjusted tax rate would have been 24%. 10 Dividends paid Unaudited Unaudited Audited Half year Half year Year Ended ended ended 30th 1st April, 30th March, September, 2008 2007 2007 ‚£m ‚£m ‚£m Amounts recognisable as distributions to equity holders in the period `A' Ordinary Non-Voting shares - final 36.4 - -dividend for the year ended 30th September, 2007 Ordinary shares - final dividend for 2.0 - -the year ended 30th September, 2007 `A' Ordinary Non-Voting shares - - - 16.7interim dividend for the year ended 30th September, 2007 Ordinary shares - interim dividend for - - 0.9the year ended 30th September, 2007 `A' Ordinary Non-Voting shares - final - 33.5 33.2dividend for the year ended 1st October, 2006 Ordinary shares - final dividend for - 1.8 1.8the year ended 1st October, 2006 38.4 35.3 52.6
The Board has declared an interim dividend of 4.80p per 'A' Ordinary Non-Voting share (2007 4.45p) which will reduce an estimated ‚£17.9 million of shareholders' funds which has not been recognised in these financial statements. It will be paid on 4th July, 2008 to shareholders on the register at the close of business on 6th June, 2008. This dividend was approved by the Board on 21st May, 2008 and has not been included as a liability as at 30th March, 2008.
11 Adjusted profit
(before exceptional operating costs and amortisation and impairment of goodwill and intangible assets, other gains and losses and exceptional financing costs, after taxation and minority interests) Unaudited Unaudited Audited Half year Half year Year Ended ended ended 30th 1st April, 30th March, September, 2008 2007 2007 ‚£m ‚£m ‚£m Profit before tax - continuing 22.6 132.8 142.1 Profit before tax - 0.2 0.8 0.8discontinued Add back :
Amortisation of intangible assets in 45.6 43.1 86.0 Group profit from operations and in
joint ventures and associates Impairment of goodwill and intangible 31.2 - 52.7assets Exceptional operating costs 1.8 6.5 28.1 Share of associates' other (9.8) - (0.6)gains Impairment of carrying value of 3.8 - -associate Other gains and losses : Profit on sale of trading - - (0.7)investments Profit on sale of property, plant and (5.3) - (1.2)equipment Profit on sale of businesses (11.7) (3.3) (15.2) Impairment of available-for-sale 1.5 - -assets Recycle impairment loss of GCap Media - - 24.4plc Profit on deemed part disposal of - (42.3) (42.4)Euromoney Loss/(profit) on sale and deemed 0.1 - (0.6)disposal of joint ventures and associates Finance costs :
Foreign exchange losses/(profits) on 63.2 (3.1) 10.3 tax equalisation arrangements
Foreign exchange losses intra group - 4.7 4.7balances Change in fair value of put 0.8 (3.6) (3.8)options Premium on repurchase of bonds - 2.8 2.6 Change in fair value of short - (3.1) -life options Taxation : Share of taxation in joint ventures 0.4 - 1.0and associates
Profit before exceptional operating 144.4 135.3 288.2 costs, amortisation and impairment of
goodwill and intangible assets, other gains and losses and exceptional financing costs, taxation and minority interests Total tax credit/(charge) on 44.1 (38.1) (20.3)the profit for the period Adjust for :
Deferred tax on intangible assets and (9.0) (2.5) (14.0) goodwill
Current tax on foreign exchange on tax (63.2) 3.1 (10.3) equalisation arrangements
Agreed open issues with HM Revenue and - - (27.4)Customs Tax on other exceptional items (0.3) (1.5) (3.9) Interest of minority (9.9) (10.7) (19.8)shareholders
Adjusted profit before exceptional 106.1 85.6 192.5 operating costs, amortisation and
impairment of goodwill and intangible assets, other gains and losses and exceptional financing costs after taxation and minority interests
The adjusted minority share of profits for the period of ‚£9.9 million (2007 ‚£10.7 million) is stated after eliminating a credit of ‚£1.2 million (2007 ‚£2.7 million), being the minority share of exceptional items.
12 Earnings per share
Basic earnings per share of 15.3p (2007 22.3p) is calculated, in accordance with IAS 33 Earnings per Share, on Group profit for the financial period of ‚£58.5 million (2007 ‚£87.1 million) and on the weighted average number of ordinary shares in issue during the period, of 381.7 million (2007 391.3 million) as set out below. Diluted earnings per share of 15.3p (2007 22.2p) are calculated using the weighted average number of ordinary shares during the period of 381.7 million (2007 391.6 million) as set out below.
As in previous periods, adjusted earnings per share have also been disclosed since the Directors consider that this alternative measure gives a more comparable indication of the Group's underlying trading performance. Adjusted earnings per share of 27.8p (2007 21.9p) is calculated on profit before exceptional operating costs, amortisation and impairment of goodwill and intangible assets, other gains and losses and exceptional financing costs, after charging the taxation and minority interests associated with those profits, of ‚£106.1 million (2007 ‚£85.6 million), as set out in note 11 above, and on the basic weighted average number of ordinary shares in issue during the period.
Unaudited Unaudited Audited Half year Half year Year Ended ended ended 30th 1st April, 30th March, September, 2008 2007 2007 Pence Pence Pence per share per share per share Basic earnings per share from 15.3 22.3 27.3continuing operations Adjustment to exclude earnings of - - 0.1discontinued operations Basic earnings per share from 15.3 22.3 27.4continuing and discontinued operations Add back:
Amortisation of intangible assets in 11.9 11.0 22.0 Group profit from operations and in
joint ventures and associates Impairment of goodwill and intangible 8.2 - 13.5assets Exceptional operating costs 0.5 1.7 7.2 Share of associates' other (2.6) - (0.2)gains Impairment of carrying value of 1.0 - -associate Other gains and losses : Profit on sale of trading - - (0.2)investments
Profit on sale of property, plant and (1.4) - (0.3) equipment
Profit on sale of businesses (3.1) (0.8) (3.9) Impairment of available-for-sale assets 0.4 - - Recycle of impairment loss of GCap - - 6.3Media plc Profit on deemed part disposal of - (10.8) (10.9)Euromoney Loss/(profit) on sale and deemed - - (0.2)disposal of joint ventures and associates Finance costs :
Foreign exchange losses/(profits) on 16.7 (0.8) 2.7 tax equalisation arrangements
Foreign exchange losses intra group - 1.2 1.2balances Change in fair value of put 0.2 (0.9) (1.0)options Premium on repurchase of bonds - 0.7 0.7 Change in fair value of short - (0.8) -life options Taxation :
Share of taxation in joint ventures and 0.1 - 0.3 associates
Profit before exceptional operating 47.2 22.8 64.6costs, amortisation and impairment of goodwill and intangible assets, other gains and losses and exceptional financing costs, taxation and minority interests Adjust for :
Deferred tax on intangible assets and (2.4) (0.6) (3.6) goodwill
Current tax on foreign exchange on tax (16.7) 0.8 (2.6) equalisation arrangements
Agreed open issues with HM Revenue and - - (7.0)Customs Tax on other exceptional items - (0.4) (1.0) Interest of minority (0.3) (0.7) (1.1)shareholders Adjusted earnings per share (before 27.8 21.9 49.3exceptional operating costs, amortisation and impairment of goodwill and intangible assets, other gains and losses and exceptional financing costs after taxation and minority interests)
The weighted average number of ordinary shares in issue during the period for the purpose of these calculations is as follows:
Unaudited Unaudited Audited Half year Half year Year Ended ended ended 30th March, 1st April, 30th 2008 September, 2007 2007 No. No. No. million million million Weighted average number of shares Number of ordinary shares in 402.6 402.6 396.6issue Shares held in treasury (20.9) (11.3) (6.3)
Basic earnings per share denominator 381.7 391.3 390.3
Effect of dilutive share - 0.3 0.7options
Dilutive earnings per share denominator 381.7 391.6 391.0
13 Analysis of Net Debt Unaudited Unaudited Audited Half year Half year Year Ended ended ended 30th 1st April, 30th March, September, 2008 2007 2007 ‚£m ‚£m ‚£m Net debt at start (950.4) (738.2) (738.2) Cash flow (150.8) (238.8) (162.8)
Loan notes issued on acquisition of (10.8) (12.6) (21.5) subsidiaries
Debt arising with acquisitions - (12.9) (12.6) Foreign exchange movements (23.9) 3.0 2.4 Other non-cash movements (5.5) 0.4 (17.7) Net debt at period end (1,141.4) (999.1) (950.4) Analysed as : Cash and cash equivalents 79.3 85.0 70.4 Cash and cash equivalents included - 2.4 -within assets held for resale Bank overdrafts (9.8) (7.3) (6.4) Net cash and cash equivalents 69.5 80.1 64.0 Bank loans due within one year - (0.2) - Bonds (840.6) (641.3) (838.5) Loan notes (27.5) (21.6) (36.8) Bank loans (326.5) (424.8) (144.2) Effect of derivatives on bank (16.3) 8.7 5.1loans Net debt at period end (1,141.4) (999.1) (950.4)14 Property, plant and equipment
During the period the Group spent ‚£34.9 million (2007 ‚£40.1 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 (2007 ‚£7.3 million) for proceeds
of ‚£7.9 million (2007 ‚£7.3 million). 15 Acquisition put option commitments
Unaudited Unaudited Audited Half year Half year Year Ended ended ended 30th 1st April, 30th March, September, 2008 2007 2007 ‚£m ‚£m ‚£m Current 20.1 8.4 21.8 Non-current 14.2 34.4 18.8 34.3 42.8 40.6
Written put options to acquire further stakes in subsidiaries, associates and joint ventures written at the time of business combinations, unless so deeply in the money that they represent in-substance ownership interests, are considered financial instruments under IAS 32 and IAS 39. Put options over a minority stake in a subsidiary give rise to a financial liability under IAS 32. Put options over an associate are within the scope of IAS 39 and are accounted for as derivatives at fair value through profit and loss. Where put options over associates have a fair value of nil, no accounting is required. Written put options are classified within current liabilities if exercisable within one year.
16 Other financial liabilities
Unaudited Unaudited Audited Half year Half year Year Ended ended ended 30th 1st April, 30th March, September, 2008 2007 2007 ‚£m ‚£m ‚£m Current liabilities Bank overdrafts 9.8 7.3 6.4 Bank loans - 0.2 - Loan notes 27.5 21.6 36.8 37.3 29.1 43.2 Non-current liabilities Bank loans 326.5 424.8 144.2 Bonds 840.6 641.3 838.5 1,167.1 1,066.1 982.716 Other financial liabilities (continued) During the period the Group obtained new unsecured short-term 364 day
bank facilities amounting to ‚£90.0 million. The Group's bank facilities
and their maturity dates are as follows : Unaudited Unaudited Audited Half year Half year Year Ended ended ended 30th 1st April, 30th March, September, 2008 2007 2007 ‚£m ‚£m ‚£m Expiring in less than one year 210.0 260.0 120.0 Expiring in more than one year but not 300.0 - -more than two years Expiring in more than two - 300.0 300.0years Total bank facilities 510.0 560.0 420.0
The Group's bank facilities are all unsecured and bear interest based on LIBOR plus a margin based on the Group's ratio of net debt to EBITDA. Additionally each facility contains a covenant based on a minimum interest cover ratio.
The following undrawn committed bank facilities were available to the Group as at 30th March, 2008 in respect of which all conditions precedenthad been met : Unaudited Unaudited Audited Half year Half year Year Ended ended ended 30th 1st April, 30th March, September, 2008 2007 2007 ‚£m ‚£m ‚£m Expiring in less than one year 65.0 105.5 120.0 Expiring in more than one year but not 69.1 - -more than two years Expiring in more than two - 27.6 149.5years Total 134.1 133.1 269.517 Share capital Share capital as at 30th March, 2008 amounted to ‚£49.1 million. During the period, 18,389,672 'A' Ordinary Non-Voting shares were purchased having a nominal value of ‚£2,298,709 as part of a review of opportunities to buy back shares and to match obligations under an incentive plan. The consideration paid for these shares was ‚£88.3 million. Shares repurchased during the period represented 4.93% of the called up 'A' Ordinary Non-Voting share capital at 30th March, 2008. The Company disposed of 2,984,450 of these shares, representing 0.80% of
the called up 'A' Ordinary Non-Voting share capital, in order to satisfy
incentive schemes. The Company also cancelled 2,727,146 'A' Ordinary Non-Voting shares, representing 0.73% of its called up 'A' Ordinary non-Voting share capital at the date of cancellation. 18 Business combinations On 1st October 2007, the Group acquired the remaining 51% of the membership interests of George Little Management LLC (GLM) for cash consideration of ‚£77.1 million (US$155 million). Costs incurred were ‚£ 0.2 million. GLM is the largest producer and marketer of tradeshows for consumer goods in the US, serving industries as diverse as giftware, social stationery, home textiles, tabletop, gourmet housewares, contemporary furniture and wellness. GLM is involved in the production of nearly 40 tradeshows in 15 cities across the US and Canada. GLM was accounted for as an associate in the September 2007 financial
statements. The final acquisition of 51% of GLM was accounted for by the
purchase method of accounting and GLM presented as a subsidiary undertaking from 1st October, 2007. IFRS 3 requires the fair value of
100% of the net assets acquired on gaining control to be recorded in the
consolidated balance sheet. Provisional fair value of net assets acquired:
GLM at Provisional Provisional GLM at book accounting fair value provisional value policy adjustments fair value alignments ‚£m ‚£m ‚£m ‚£m Goodwill 0.7 - 69.7 70.4 Intangible assets - - 98.1 98.1 Property, plant and 0.8 - - 0.8 equipment Interests in 0.2 - - 0.2 associates Prepaid show expenses 0.6 1.3 - 1.9 Trade and other 1.9 - - 1.9 receivables Cash and cash 1.2 - - 1.2 equivalents Trade and other (5.3) (0.1) - (5.4) payables Deferred taxation - - (10.2) (10.2) Total net assets 0.1 1.2 157.6 158.9 acquired 18 Business combinations (continued) Cost of acquisition Non-cash Cash paid Total in current period Note ‚£m ‚£m ‚£m Reclassification of investment in 54.6 - 54.6associate Deferred consideration - - - Cash - 77.1 77.1 Consideration at fair value 54.6 77.1 131.7 Directly attributable costs - 0.2 0.2 Revaluation of previously held (i) 27.0 - 27.0interest in associate on acquisition of control Total cost of acquisition 81.6 77.3 158.9
The principal provisional fair value adjustments relate to intangible assets recognised relating to the exhibition brands, the related deferred tax liability and ‚£69.7 million attributable to goodwill which represents future synergies. The provisional fair values above have been adjusted from those disclosed at the year end following due diligence work to identify and value the intangible assets acquired.
The fair values set out above remain provisional as the Group is currently finalising the purchase price allocation.
Since the acquisition took place on the first day of the financial period, Group revenues and profit attributable to equity holders of the parent already include the full effect of the acquisition.
(i) The provisional fair value adjustments include a credit to retained
earnings of ‚£27.0 million. This represents a revaluation of the Group's
previously held interest in GLM on acquisition of control. Other notable acquisitions completed during the period, the percentage of voting rights acquired and the dates of acquisition were as follows :Name of acquisition % voting Business Consideration Intangible Goodwillrights Date of acquired acquisition description fixed acquired assets acquired ‚£m ‚£m ‚£m Oil Careers 100% December Online 6.8 2.0 3.72007 recruitment Enva Power 81.5% December Power 8.3 3.3 6.52007 trading data provider Inframation 100% December Land, 5.4 1.3 5.22007 property and mapping information provider
Provisional fair value of net assets acquired with all other acquisitions
Book value Provisional Provisional fair value Fair value adjustments ‚£m ‚£m ‚£m Goodwill - 15.4 15.4 Intangible assets - 6.6 6.6 Property, plant and 0.1 - 0.1equipment Trade and other receivables 1.0 - 1.0 Cash and cash equivalents 1.7 - 1.7 Trade and other payables (2.1) - (2.1) Deferred taxation - (2.2) (2.2) Total net assets acquired 0.7 19.8 20.5 Cost of all other acquisitions Non-cash Cash paid Total in current period ‚£m ‚£m ‚£m Deferred consideration 7.0 - 7.0 Cash - 13.4 13.4 Consideration at fair value 7.0 13.4 20.4 Directly attributable costs - 0.1 0.1 Total cost of acquisition 7.0 13.5 20.5 If all other acquisitions had been completed on the first day of the financial year, contribution to Group revenues for the year would have been ‚£2.5 million and contribution to Group profit attributable to equity holders of the parent would have been a loss of ‚£0.1 million. This information takes into account the amortisation of acquired intangible assets for a full year, 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 year. 18 Business combinations (continued)
Purchase of subsidiaries ‚£m Cash consideration including GLM 77.3acquisition expenses Others 13.5 Cash paid in respect of consideration deferred 3.9from prior years Cash and cash equivalents acquired with (2.9)subsidiaries Cash movements on purchase of subsidiaries 91.819 Purchase of additional shares in controlled entities During the period the Group acquired additional shares in controlled
entities amounting to ‚£33.4 million (2007 ‚£1.6 million). This includes ‚£
26.7 million acquiring a further 5.4% of the issued ordinary share capital of Euromoney. Under the Group's accounting policy for the purchase of shares in controlled entities, no adjustment has been
recorded to the fair value of assets and liabilities already held on the
balance sheet. The difference between the cost of the additional shares,
goodwill arising and the carrying value of the minority share of net assets is adjusted directly in equity. The adjustment to equity in the period was a charge of ‚£7.3 million (2007 ‚£nil). 20 Disposals of businesses During the period the Group disposed of several businesses, the most noteable being Dolphin Software Inc, a provider of information on hazardous chemicals. The sale took place in March 2008 and the proceeds received were ‚£10.1 million. The impact of all disposals of businesses on net assets was : ‚£m Goodwill 2.3 Property, plant and equipment 0.2 Trade and other receivables 1.3 Cash at bank and in hand 0.8 Trade and other payables (1.4) Deferred taxation 0.1 Total net assets disposed 3.3 Profit on sale of businesses 11.7 Satisfied by : Cash received 15.0 Proceeds on disposal of businesses ‚£m Cash consideration including disposal costs 15.0 Cash and cash equivalents disposed with subsidiaries (0.8) 14.221 Retirement benefit schemes Defined benefit schemes
The newspaper divisions of the Group operate a number of pension schemes
covering most major UK group companies under which contributions are paid by the employer and employees. The schemes for most employees are funded defined benefit pension arrangements, providing service-related benefits, based on final pensionable salary. In addition, a number of defined contribution pension plans are operated by certain divisions of the Group where this type of pension provision aligns with the business model. The assets of all the schemes are held independently from the Group's finances and in the UK are administered by trustees or trustee companies. The total net pension costs of the Group's defined benefit schemes for the 6 months ended 30th March, 2008 were ‚£5.2 million (2007 ‚£11.6 million). The defined benefit obligation is calculated on a year-to-date basis, using the latest actuarial valuation as at 30th March, 2008. The assumptions used in the valuation are summarised below: Unaudited Unaudited Audited Half year Half year Year Ended ended ended 30th 1st April, 30th March, September, 2008 2007 2007 % pa % pa % pa Inflation rate 3.6 3.1 3.3 Discount rate 6.9 5.4 5.9 Expected rate of salary 4.9 4.6 4.6increases Rate of pension increases 3.6 3.1 3.3 Overall expected return on n/a n/a 7.1assets 22 Events after the balance sheet date Material post balance sheet events are set out in the management report on page 9. 23 Contingent liabilities The Group is exposed to libel claims in the ordinary course of business and makes provision for the estimated costs to defend such claims. There have been no material changes in contingent liabilities since 30th September, 2007. 24 Related party transactions
Transactions between the Company and its subsidiaries, which are related
parties, have been eliminated on consolidation and are not disclosed in this note. Material transactions between the Group and its joint ventures and associates are disclosed below. Transactions with Joint Ventures and Associates The Company sold its 41.75% share in Centurion Holidays Limited (formerly Indigo Holidays Limited) during the period. The Company had funded the ongoing costs of Centurion by way of loans during the period which were repaid in full. The total amount due from Centurion on 30th March, 2008 was ‚£nil (2007 ‚£13.3 million). Transactions with Directors Other than remuneration, there were no material transactions with Directors of the Company. Other related party disclosures
At 30th March, 2008, the Group owed ‚£2.1 million (2007 ‚£1.4 million) to
the pension schemes which it operates. This amount comprised employees' and employer's contributions in respect of March 2008 payrolls which were paid to the pension schemes in April 2008. The Group's potential obligations to its pension schemes are guaranteed by ‚£40.0 million of standby letters of credit issued by various relationship banks against the Group's committed bank facilities. The net carrying amount of the retirement benefit obligation at 30th March, 2008 was a surplus of ‚£79.5 million (2007 deficit ‚£19.9 million). Further details are given in note 21.
25 Ultimate Controlling Party The Company's ultimate controlling party is the Viscount Rothermere, the Company's Chairman. Copies of the half yearly report will be posted on the Company's web site at www.dmgt.co.uk on or before 30th May, 2008. Highlights of this announcement will be advertised on 22nd May, 2008 in the Evening Standard and London Lite, on 23rd May, 2008 in the Daily Mail, Metro, Western Morning News and the Western Daily Press and on 25th May, 2008 in The Mail on Sunday.
Regulatory matters
As newly required by the UK Listing Authority's Disclosure and Transparency Rules, we set out below a summary of the principal risks and uncertainties facing the Group.
Principal risks and uncertainties
The principal risks and uncertainties that affect the Group on an ongoing basisare described in our 2007 annual report at www.dmgt.co.uk. These are stillconsidered to be the most relevant risks and uncertainties at this time. Anumber of these risks and uncertainties, discussed below, could have an impacton the Group's performance over the remaining six months of the financial yearand could cause actual results to differ from expected and historical results.A summary has also been provided where a risk that was disclosed in the annualreport is unchanged, or is not expected to have a specific impact in theremaining period.
Risks specific to the remaining six month period of the year
Exposure to changes in the economy and customer spending patterns
General economic conditions and the financial health of our customers canpositively or negatively affect the performance of all of our businesses. Thecurrent uncertainty in global financial markets increases the risk of economicslowdown, especially in the UK and US economies, and this remains a significantrisk to the Group. Our commitment to investment in our core brands and productsand the diverse nature of the Group's revenues helps us to reduce the effect ofthese fluctuations.
Other risks disclosed in the annual report
The following is a summary of the other risks and uncertainties that were disclosed in the 2007 annual report.
Treasury Risk
The Group's financing and treasury operations manage a number of risksincluding currency exchange rate fluctuations, liquidity risk and interest raterisk. The current level of uncertainty in global financial markets as a resultof the credit crunch heightens the risk in this area, but there is no specificrisk to the Group in the second half of the year.
Impact of a major disaster or outbreak of disease
Any disaster, such as a geopolitical event or a pandemic, such as influenza,which significantly affects the wider environment or infrastructure in a sectorwhere the Group has material operations, could adversely affect the Group.Plans and procedures are in place to manage the impact of such risks.
Pension scheme shortfalls
We operate defined benefit schemes for our newspaper divisions and certainsenior executives. Reported earnings may be affected by changes in our pensioncosts and funding requirements due to lower than expected investment returnsand changes in bond yields. Defined contribution pension plans in all otherdivisions and overseas, have helped to control overall pension liabilities andcosts incurred by the Group.
Reliance on key management and staff
In order to pursue our strategy, we are reliant on key management and staffacross all our businesses. We cannot predict with certainty that we will enjoycontinued success in our recruitment and retention of high quality managementand creative talent. With this in mind we have created the role of Group HRDirector and we have a number of measures in place in each division to addressthis risk.Tax riskThe Group operates within many jurisdictions; our earnings are thereforesubject to taxation at differing rates across these jurisdictions and due to anever more complex international tax environment there will always be a level ofuncertainty when provisioning for our tax liabilities. This risk is managed byan in-house team of specialists who work with divisional management andexternal tax experts to review all tax arrangements in the Group.
Legal and regulatory
DMGT businesses are subject to varying legislation and regulation across several jurisdictions. Changes to this legislation or regulations could affect the results of the business.
Reader/listener promotions
Many reader and listener promotions and competitions are run by companies within the Group. This is inherently an area which could significantly impact the Group's reputation; however, competitions and promotions within the newspaper and radio divisions are closely reviewed and monitored.
Price volatility of newsprint
Newsprint represents a significant proportion of our costs within the Newspaperdivisions. Newsprint prices are subject to volatility arising from variationsin supply and demand. The Group's newsprint requirements on price, volume andquality are monitored by the Newsprint Committee.
Reliance on key suppliers
The loss of a key supplier due to disaster or economic downturn, or asignificant worsening of commercial terms with key suppliers could adverselyaffect the Group's results. In addition to our own business continuity plans,resources are devoted to ensure that relationships with key suppliers aremaintained and upheld.
Acquisition and disposal risk
A number of risks are inherent within any strategy to acquire. However, the majority of acquisitions considered are smaller add-on businesses, which reduces the size of the risk of each acquisition to the Group. There are also risks to our ability to achieve optimal value from disposals. These are monitored and managed by each divisional board with oversight from the DMGT board.
For further details of these risks and mitigating controls which are in place, please refer to the 2007 Annual Report.
Independent review report to Daily Mail and General Trust plc
We have been engaged by the company to review the condensed set of financialstatements in the half-yearly financial report for the six months ended 30thMarch, 2008 which comprise the income statement, the balance sheet, thestatement of recognised income and expense, the cash flow statement and relatednotes 1 to 25. We have read the other information contained in the half-yearlyfinancial report and considered whether it contains any apparent misstatementsor material inconsistencies with the information in the condensed set offinancial statements.This report is made solely to the Company in accordance with InternationalStandard on Review Engagements 2410 issued by the Auditing Practices Board. Ourwork has been undertaken so that we might state to the Company those matters weare required to state to them in an independent review report and for no otherpurpose. To the fullest extent permitted by law, we do not accept or assumeresponsibility to anyone other than the company, for our review work, for thisreport, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.
As disclosed in note 1, the annual financial statements of the Group areprepared in accordance with IFRSs as adopted by the European Union. Thecondensed set of financial statements included in this half-yearly financialreport has been prepared in accordance with International Accounting Standard34, "Interim Financial Reporting," as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensedset of financial statements in the half-yearly financial report based on ourreview.Scope of Review
We conducted our review in accordance with International Standard on ReviewEngagements (UK and Ireland) 2410, "Review of Interim Financial InformationPerformed by the Independent Auditor of the Entity" issued by the AuditingPractices Board for use in the United Kingdom. A review of interim financialinformation consists of making inquiries, primarily of persons responsible forfinancial and accounting matters, and applying analytical and other reviewprocedures. A review is substantially less in scope than an audit conducted inaccordance with International Standards on Auditing (UK and Ireland) andconsequently does not enable us to obtain assurance that we would become awareof all significant matters that might be identified in an audit. Accordingly,we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us tobelieve that the condensed set of financial statements in the half-yearlyfinancial report for the six months ended 30th March, 2008 is not prepared, inall material respects, in accordance with International Accounting Standard 34as adopted by the European Union and the Disclosure and Transparency Rules ofthe United Kingdom's Financial Services Authority.
Deloitte & Touche LLP
Chartered Accountants and Registered Auditors
21st May, 2008LondonUnited Kingdom Not for public release until 7am on 22nd May, 2008 11 Not for public release until 7am on 22nd May, 2008 1
DAILY MAIL & GENERAL TRUST PLCRelated Shares:
DMGT.L