Results for the year ended 31 December 2015

UBM PLC - Results for the year ended 31 December 2015

PR Newswire

London, February 24

25 February 2016: for immediate release

Results for the year ended 31 December 2015

UBM reports significant strategic progress and performance ahead of expectations

1 Excludes PR Newswire (PRN)

* UBM uses a range of business performance indicators. All non-IFRS measures are noted with a * throughout this results announcement; additional information on these measures is set out on page 23

Highlights

Tim Cobbold, Chief Executive Officer, commented:

“UBM has taken significant steps in its transformation in 2015. We’ve integrated Advanstar, announced the sale of PRN, successfully begun implementing ‘Events First  ’ and delivered an operational performance ahead of expectations. Looking forward, UBM is now a focused business with more than 82% of revenues derived from events across a range of industry verticals and geographies.

“The Board expects continued good growth (excluding the impact of biennials and ongoing portfolio rationalisation) although it remains conscious of the global macroeconomic uncertainty. It also expects further margin progress although this will be offset by the even-year biennial effect.” 

“Our ‘Events First  ’ strategy will deliver growth, margin and, we believe, create the best platform in the industry.”

1 Excludes PR Newswire (PRN)

** ‘Major’ events defined as events which generate more than £1m of revenue in the year.

Contacts

UBM will host a presentation today at 10.30am at the London Stock Exchange, 10 Paternoster Square, EC4M 7LS. A live webcast of the results presentation will be made available via UBM’s website. To access the webcast please go to www.ubm.com. A recording of the webcast will also be available on demand from UBM’s website after 2.30pm.

Notes to Editors

UBM plc is a leading global marketing services and communications company, whose primary focus is events. We help businesses do business, bringing the world’s buyers and sellers together at events, online and in print. Our 5,100 staff in more than 20 countries are organised into specialist teams which serve commercial and professional communities, helping them to do business and their markets to work effectively and efficiently. Running over 400 events per year, UBM is the second largest exhibitions organiser globally and the largest independent organiser in the US and mainland China.

For more information, go to www.ubm.com; for UBM corporate news, follow us on Twitter at @UBM_plc and go to http://media.ubm.com/social for more UBM social media options.

SUMMARY STATEMENT

PRN disposal

On 15 December 2015 UBM announced the proposed disposal of PRN for $841m comprising $810m cash and $31m of preferred equity. On completion, £245m of proceeds will be returned to shareholders via a special dividend and accompanied by a share consolidation. The remaining cash proceeds will strengthen UBM’s capital position and provide funds to allow UBM to undertake further value-accretive bolt-on acquisitions.

Shareholder approval was obtained on 7 January 2016 and the disposal, which is subject to anti-trust clearance in the US, is expected to complete at the end of Q1 2016. PRN’s operations have been treated as a discontinued operation and held for sale in the financial statements for the year to 31 December 2015. 

Summary financial performance

These results reflect excellent progress in the implementation of UBM’s ‘Events First’ strategy. 

Continuing reported revenue in 2015 was £769.9m, up 39.9% (2014: £550.5m) due to the consolidation of Advanstar, a biennial ‘up’ year, and the favourable FX movement. Continuing revenue, on an underlying basis, declined 2.0%; principally the consequence of strategic margin-enhancing rationalisation and the expected decline in OMS revenues. Adjusting for the rationalisation, underlying continuing revenue growth for the Group was 2.2%. 

The continuing adjusted operating profit* rose by 46.0% to £197.1m (2014: £135.0m). The continuing adjusted operating margin grew to 25.6% (2014: 24.5%) with the impact of Advanstar (including synergies) and the benefits of rationalising lower-margin activities more than offsetting the strategic opex of £7.6m and the absence of the £11.0m of one-off corporate gains recorded in 2014. 

Total fully diluted adjusted EPS* increased 6.0% to 40.5p (2014: 38.2p) reflecting the inclusion of Advanstar and the strong operating performance of the business, partially mitigated by the full year impact of the increase in the number of shares following the rights issue. Continuing adjusted EPS* increased by 19.3% to 30.3p (2014: 25.4p), a more pronounced increase given the proportionately greater impact of Advanstar on the continuing Group.

Free cash flow (after capital expenditure and before discretionary investment) increased to £196.8m (2014: £85.4m) principally reflecting the inclusion of Advanstar, a stronger working capital performance, higher odd-year biennial inflows and a lower level of capital expenditure. Cash invested in acquisitions totalled £34.7m. We received £21.8m from the full repayment of the Delta Vendor Loan Note. Net debt at 31 December 2015 was £484.9m, 1.8 times EBITDA. Cash conversion* was 107% (2014: 70%).

Return on average capital employed* for the total Group in 2015 was 14.5% (2014: 13.3%). This increase year on year reflects the inclusion of Advanstar earnings in the 12 month period and the reduced average capital employed due to the £250m GBP bond becoming a current liability as at 31 December 2015. In the prior year, the closing capital employed included the equity issued to acquire Advanstar but no earnings as the acquisition took place at the end of 2014.

Advanstar

Advanstar performed well in 2015, ahead of the acquisition case and delivered a first year return* of 10.3%. Constant currency revenue growth was 3.0%, with the events business (c.74% of revenue) growing by 4.1% and OMS broadly flat.

Good progress has been made with the integration during 2015 and the remaining integration (of finance systems and processes, and other business systems) will take place over the next 18 months. During 2015 a new management structure has been put place within the Americas, HR functions and finance reporting have been integrated and the consolidation of office locations is substantially complete. Events operations are now managed as a single organisation within the US, and UBM Life Sciences has been created by successfully merging Advanstar’s Life Sciences business with UBM’s Medica business. UBM Life Sciences, which is principally OMS activities, generated revenues of $112.4m in 2015 with strong margins.

The integration synergies are running ahead of plan with $6.1m of cost synergies delivered in 2015 (at an annualised rate of $10m pa). Further cost synergies will be generated in 2016. Specific revenue synergy opportunities are being developed with the first modest impact expected during 2016. 

Implementation of ‘Events First’ strategy

The objective of our ‘Events First’ strategy is to drive sustainable, profitable growth by investing in people, systems and processes to ensure UBM performs consistently well across the business and delivers an outstanding experience for customers. This is how we will achieve our goal of leadership and excellence in the global Events market. 2015 was the first year of implementation and the early benefits of the strategy are reflected in the results for the year and in the outlook for 2016.

The acquisition of Advanstar and the disposal of PRN significantly increases UBM’s focus on the attractive, higher-margin, higher-growth events market with over 82% of continuing revenues derived from that market.

The refocusing is complemented by the rationalisation of smaller, lower-margin events and of OMS activities which are not aligned to events. This rationalisation, which will continue over the next two years, inevitably subdues revenue growth in the short term but increases profit and margin. Once the rationalisation is completed we expect events revenue growth will strengthen.

UBM runs 116 ‘major’ (more than £1m revenue) annual events which delivered 86% of annual event revenue in the year. Revenue growth of these major shows grew 5.0%, despite the challenges in Furniture China and Sign/LED, compared with 3.9% (underlying growth adjusted for rationalisation) for the portfolio as a whole. The seven biennial ‘major’ events grew by 34%, on a constant currency basis, compared with their 2013 editions. 

The improvement in the adjusted operating margin in 2015 principally reflects the addition of Advanstar together with the margin-accretive effect of rationalisation and operational excellence initiatives.

The ‘Events First’ strategy launched in November 2014 anticipated investment of £30m - £35m split between opex and capital expenditure over the period 2015-2017. In 2015 strategic opex, which includes the costs of portfolio rationalisation, restructuring charges, strategy implementation costs and costs relating to CRM and Marketing system development totalled £7.6m – of which £5.3m was in Events, £1.8m in OMS and £0.5m in corporate operations.

There were five key areas (referred to as strategic priorities) identified to focus the implementation of the strategy. Good progress has been made with each of these priorities:

1) Agile Growth

The priority is to manage the portfolio actively with a focus on acquiring, growing and developing events that are, or have clear potential to become larger and more profitable.

All ‘major’ events now have a new standard three year event plan. The plans, which include a balanced scorecard, are actively used to establish growth ambition and to drive a focus on customer experience in a measurable way.

A set of standard criteria, to aid decision-making over what should be rationalised, was established in 2015. During the year, two events (2014 revenue of £6.2m) were sold and 47 events (2014 revenue of £15.6m) were discontinued. In addition various OMS activities (2014 revenue removed £12.6m) were also discontinued. Using these criteria we expect a similar level of discontinuation of events during 2016 with a lower level in OMS.

Three events businesses were acquired during 2015, for a total consideration of £39.9m. The acquisition of Hospitalar enhances UBM’s presence in the healthcare sector. The show, which is the leading healthcare event in Brazil, is expected to experience good growth despite the weak macroeconomic backdrop. The acquisition also makes UBM the third largest organiser in Brazil. The buyout of the eMedia joint venture results in control of CIOE, a show that has been operating in Shenzhen for more than 20 years and which strengthens UBM’s portfolio in China. Both events are ‘major’ events while CSTPF, the third acquisition, is a small digital textile printing show in China. Following the PRN disposal we anticipate an increased level of acquisitions subject to there being opportunities that meet our strict financial criteria.

A more rigorous post acquisition process has been adopted during 2015 with greater clarity on the calculation of return on investment (see page 24 for definition). The overall return for acquisitions made since 2013 was 10.5% in 2015, including a first year return of 10.3% from Advanstar.

2) Operational Excellence

The priority is to improve ways of working and identifying common standard approaches, which deliver both cost improvement and boost growth.

The SX training programme, aimed at optimising and standardising the sales process, is a critical precursor to the roll-out of a standard sales model supported by a standard CRM solution. The training has been rolled out to all of EMEA and Asia and will extend to Americas in 2016.

Deployment of the VBP programme across ‘major’ events has continued and to date 36 events have completed the process. There is an ongoing review to ensure we optimise our pricing strategy across all our major events as appropriate with further roll outs planned across 2016.

The procurement programme was established with a target to deliver £5m savings over three years and remains on track to do so. Overall savings of £1.5m (including Advanstar procurement synergies) were delivered during 2015. The annualised impact of these savings was £2.3m. 

Direct venue and associated costs account for approximately one third of direct events costs. The contracting process is being reviewed to help ensure that the best value is delivered in this complex area and that our contractual liabilities are managed in the most effective way.

In 2015 a tighter focus resulted in lower Head Office costs (down by c£3.0m). This now reflects the changed profile of the group going forwards.

3) Standard Technology & Data

The priority is to adopt a phased approach to standardising business systems and data. These standard systems and processes will enable UBM to drive efficiency and effectiveness.

A global ERP finance, HR and management information system has now been fully implemented. It provides management with consistent and timely information to drive performance.

The focus has been on the activities that support revenue growth. A standard global sales model has been developed and agreed, incorporating a standard sales process. This standard model will be applied region by region, portfolio by portfolio to manage risk and accelerate implementation. The enabling CRM technology is in the final stage of configuration and testing. The first portfolio of events in EMEA are due to switch to the new platform in Q2 2016. Thereafter there will be a progressive roll out to the rest of the EMEA portfolio over the following 12 months. Work on the Americas and Asia roll-outs will commence in H1 2016. 

Consolidation of CMS platforms have led to 58% of our websites being based on a common platform.

4) Customer Insight & Innovation

Events are successful when they provide a financial and emotional return for our customers (exhibitors and attendees). The priority is to adopt a customer-centric and innovative approach, underpinned by customer insight.

Post show survey templates and processes have been standardised, as has reporting. Standard measures of customer and attendee satisfaction and loyalty are integral parts of the surveys and event plans for both reporting and forward planning. The success or otherwise of initiatives to improve the customer experience and return will be measured through these indicators.

To support the introduction and greater use of technology a marketing excellence programme has been created to develop a more systematic, standard, data-driven, digital approach to connecting with exhibitors and attendees.

5) High Performance Culture

The priority is to establish a culture that recognises, values and demands best-in-class performance in support of our strategy.

During 2015 three priority themes for investment were identified: Sales Excellence, Marketing Excellence and Leadership Development. These priorities received 65% of the training investment in 2015.

A suite of continuous improvement tools have been created and are being used increasingly across the Group to support a developing culture of continuous improvement.

A review of incentive arrangements across the Group has been completed. As a result changes are being made to short and long term incentive plans for leadership positions to support the strategy and to improve the link between revenue growth and remuneration. Incentive plans within sales organisations are also being reviewed and will be adjusted as part of the global sales model.

The use of the standardised HR modules on the new CORE platform, together with the enforcement of data standards now provides meaningful information through which to drive performance initiatives, training and process improvement.

Management

On 2 September Marina Wyatt joined UBM as CFO, succeeding Robert (Bob) Gray who was keen to return to the US. Marina is an experienced CFO and an important addition to the senior management team as the strategy is implemented.

Following Ninan Chacko’s departure, Bob Gray was appointed as CEO of PRN from 1 August. His main objective was to lead the business through the disposal process. Bob was well positioned given his M&A experience and knowledge of PRN’s business. Bob stepped down from the UBM plc Board on 31 July to take up the position and expects to leave PRN upon completion of the disposal. The Board is particularly grateful to him for his significant contribution to UBM during the last six years.

Simon Foster was appointed Interim CEO of UBM Americas when Sally Shankland accepted a significant position elsewhere. As he has demonstrated, Simon was well-placed to take this role, combining his 25 years of experience in the industry with specific knowledge of many of the constituent businesses in UBM Americas. In his absence Richard Kerr, UBM EMEA’s CFO, was appointed Acting CEO of UBM EMEA. The process to recruit a permanent CEO for UBM Americas is well underway and once complete Simon will return to his role as CEO UBM EMEA.

In January 2016 it was announced John Petevinos (JP) will join UBM as Group Strategy Director. JP joins from the strategy consulting practice at Deloitte where he was a senior Strategy Director. 

Dividend

Shortly after completion of the PRN disposal, expected at the end of Q1, there will be a special dividend and share consolidation. The completion announcement will include details of relevant record and payment dates.

Our progressive dividend policy, which targets two times cover through economic and biennial cycles, is unchanged. The Board is recommending a final dividend of 16.3p (2014: 16.0p), bringing the total dividend for the year to 21.6p (2014: 21.3p). This represents an increase of 1.4% in the full year dividend in line with our policy.

Subject to shareholder approval at the AGM, the final dividend on ordinary shares will be paid on 27 May 2016 to shareholders on the register on 29 April 2016.

OPERATING REVIEWS

EVENTS

Reported revenue rose 40.0% to £630.6m (2014: £450.5m) reflecting the inclusion of Advanstar, the odd-year biennial step up and beneficial currency movements, partially offset by the impact of product rationalisation. 

Annual Events reported revenue was up 35.6% to £582.0m (2014: £429.2m). On an underlying basis revenue grew 1.0% with growth moderated by the rationalisation of the portfolio. Adjusting for the effect of the rationalisation, revenue was up 3.9% on an underlying basis, despite notable declines at Interiors in the UK, Furniture China and Sign/LED Shanghai (which cumulatively reduced the growth rate by 2.0%pts). The mix of annual revenue remains broadly unchanged with 80% from stand sales, 12% from sponsorship, and 8% attendee paid. (2014: 75%/17%/8%) 

UBM ran 42 Biennial events during 2015 which contributed £48.6m of revenue and £19.3m of adjusted operating profit (2014: 26 events, £21.3m, £6.4m). Revenues were up 33.4%, on a constant currency basis, compared to 2013 on account of strong performances at Marintec and Food Ingredients Europe coupled with additional odd-year biennial events, most notably, Food Ingredients Asia and Sea Asia (which was acquired with the Seatrade acquisition).

The acquisition of Advanstar has re-balanced our geographic presence to be more in line with the global exhibitions industry. In 2015, North America accounted for 42.6% of Annual Events revenue (2014: 24.7%) and Emerging Markets, as a whole, accounted for 40.7% (2014: 50.8%), with China 30% of annual revenues (2014: 36%.)

North American revenue was broadly flat on an underlying basis, impacted by rationalisation and World Routes moving from Chicago to Durban. Adjusting for these effects the growth was 4.9% driven by good growth in the Advanstar events and particularly strong performances at BlackHat and GDC. These good performances offset slight softness in some of the regional medical device and manufacturing events, tech and chemical events.

Emerging Markets. Underlying revenue growth in Emerging Markets was 3.5% before adjusting for the rationalisation and the benefit of World Routes moving to Durban from Chicago. Adjusting for these effects underlying revenue growth was 4.4%. This rate of growth was slower than in 2014 principally because of specific challenges at Furniture China and Sign/LED Shanghai. Customer feedback from these two events has been positive and we are confident about their future prospects. In 2016 CBME is moving into the NECC, Cosmoprof will be run across two venues while in 2017 Hotelex will be run as two phases.

In the UK, a positive performance from IFSEC, with Ecobuild slightly ahead, was not enough to offset the effect of rationalisation and a significant decline in Interiors (which ran for the last time). In Continental Europe, the reported revenue fell significantly given the disposal of a low margin French event, however underlying growth was 4.1%.

Adjusted operating profit* was £202.5m (2014: £140.6m) with an operating margin of 32.1% (2014: 31.2%). This margin includes £5.3m of strategic opex incurred in 2015 in implementing ‘Events First’. The annual events margin (before strategic opex) was 32.4% (2014: 31.3%) reflecting the positive impact of Advanstar, the good synergy performance and the positive margin impact of rationalising the ‘tail’ events partially offset by increased depreciation, relating to investment in the business, and an additional charge on the Ecobuild onerous venue contract in light of the impact of the withdrawal of government subsidies for the solar industry. The biennial margin (before strategic opex) was 39.7% (2014: 30.2%) reflecting the portfolio of higher margin odd-year biennials.

OTHER MARKETING SERVICES (OMS)

OMS revenue rose 39.3% to £139.3m (2014: £100.0m), reflecting the inclusion of Advanstar’s OMS activities and favourable exchange rate movements partially offset by rationalisation and ongoing print declines. 

OMS revenue declined 12.9% on an underlying basis*. This includes the rationalisation of £12.6m of activities, principally Online. Adjusting for this rationalisation, the underlying* revenue decline was 4.8% with slight growth in online partially offsetting the expected declines in print. 

The ongoing management of the OMS portfolio towards greater alignment with Events will continue, with the pace partly determined by the rate at which it can be delivered in value-enhancing ways.

Adjusted operating profit* was £17.7m (2014: £11.0m) after £1.8m of strategic opex. This represents a 12.7% margin (2014: 11.0%) or 14.0% excluding the strategic opex.

PRN

PRN’s reported revenue rose 4.5% to £204.7m (2014: £195.8m) helped by a significant FX tailwind. On an underlying basis* revenue rose 0.2%, with good growth in the core US Distribution business, Asia and EMEA, offsetting declines due to specific issues in Vintage and CNW. 

US Distribution underlying revenue growth* was 2.6%. This performance reflects growth in text press release revenue and continued success in cross-selling of multimedia features. US Other revenue grew 0.6% on an underlying basis. US Vintage underlying revenue was down 15.7% driven by lower US IPO market activity and a significant reduction of activity by a key client where PRN’s share was stable. 

CNW revenue was down 4.2% on an underlying basis, reflecting the macroeconomic environment in Canada.

EMEA revenue was up 7.9% on an underlying basis. In Asia and Latin America underlying growth was 15.3%, with wire growth in Asia, especially China, more than offsetting softness in Brazil.

Adjusted operating profit* was £48.4m (2014: £44.8m) representing a 23.7% margin (2014: 22.9%). 

CFO Review

SUMMARY INCOME STATEMENT

The table below presents selected items from UBM’s consolidated income statement (which accompanies this summary), together with a reconciliation to International Financial Reporting Standard measures.

Discontinued operations

The PR Newswire operations have been disclosed as discontinued in the income statement and as an asset held for sale in the balance sheet in these 2015 accounts.

We have incurred the following exceptional items relating to the discontinued operations:

Strategic operating expense

In 2015 strategic opex, which includes the costs of portfolio rationalisation, restructuring charges, strategy implementation costs and costs relating to CRM and Marketing system development totalled £7.6m – of which £5.3m was in Events, £1.8m in OMS and £0.5m in corporate operations.

Corporate operations

Total corporate costs for 2015 were £23.9m (2014: £29.0m). Net corporate costs after internal cost recoveries from UBM’s operating businesses, results from joint ventures and associates and sundry income which is not attributable to any reporting segment, were £23.1m (2014: £16.6m). Non-recurring costs of £0.5m were incurred in 2015 relating to the strategic operating costs described below (2014: £4.0m in relation to CORE implementation). In the prior year, we reported two non-recurring items within corporate operations: £5.8m of pension settlement gain and £5.2m of gains on disposals of businesses that were not categorised as discontinued under IFRS5. Our share of pre-tax results from joint ventures and associates was £1.3m (2014: £1.4m).

Exceptional operating items (continuing)

Acquisition exceptional items

Advanstar integration costs of £8.7m were incurred in the year and related to redundancy costs (£4.6m), property integration costs (£1.3m), finance system integration costs (£1.3m) and other items (£1.5m). Integration costs will continue to be incurred over the next 18 months, as part of the $33m estimated total integration cost. Acquisition costs of £1.2m (2014: £8.0m) have been expensed as exceptional items. The charge includes £0.6m in relation to the 2014 acquisition of Advanstar (2014: £7.4m) and £0.6m for other acquisitions (2014: £0.6m). An exceptional charge of £0.2m (2014: £1.3m) was recognised relating to revised contingent consideration estimates for prior year acquisitions.

Associate gain

We received income of £2.1m from a former associate investment which had been previously impaired, resulting in the income being recognised as exceptional. In the prior year, PA Group, the parent company of the Press Association, sold its weather forecasting business, MeteoGroup. We report our 17% interest in PA Group as an associate and recognised our share of the MeteoGroup gain (£21.9m) as an exceptional gain from associates in 2014.

Impairment charges

We have reviewed the carrying value of goodwill and intangible assets (other than the assets held for sale) in light of current trading conditions, the ‘Events First’ strategy and future outlook. As a result of this review, we have recognised an impairment of £1.9m for the UBM Americas Print operations which continue to be rationalised as we align OMS activities to Events operations. In addition, we recognised a re-measurement loss of £4.2m on our initial 40% shareholding of eMedia Asia Limited following the acquisition of the remaining 60% in June 2015. Impairment charges in 2014 were £15.7m relating to the UBM Tech Online operations and two small joint ventures in Asia.

Interest and financing expense

Net interest expense represents interest payments on UBM’s bonds and bank loans, net of interest receipts on cash holdings and vendor loan notes. Net interest expense in 2015 was £26.0m, compared with £22.2m in 2014. The increase was primarily due a higher pension interest charge of £1.7m compared to £0.8m in 2014 and lower interest income from the Delta Vendor Loan Note after it was repaid in October 2015.

Net financing expense – other includes a net gain of £0.3m (2014: net gain £0.9m) in respect of ineffective fair value hedges and net investment hedges and a net loss of £0.5m (2014: net loss of £0.5m) in respect of foreign exchange losses on forward contracts and other fair value adjustments.

FOREIGN CURRENCY

We do not generally hedge our income statement currency exposure, although we do issue debt in certain of our trading currencies (principally the US Dollar). This debt is designated as a hedge against balance sheet exposure, and interest expense provides a modest hedge against operating earnings generated in those currencies. The following table outlines the currency profile of our continuing revenues and adjusted operating profits for 2015: 

Our income statement exposure to foreign exchange risk is shown for our most important foreign currency exposures in the sensitivity analysis below, based on 2015 operations:

The Group closely monitors its exposure to foreign currencies, and seeks to match revenue and costs when possible. The revolving credit facility may be drawn in currencies other than Pounds Sterling. We also hold cash and cash equivalents in Pounds Sterling, the Renminbi and US Dollars and other currencies closely linked to the US Dollar. Given our large and diverse customer base, there are no significant concentrations of credit risk.

TAX

As part of our focus on transparency in relation to taxation, the UBM plc Board has formally adopted the CBI’s Statement of Principles for responsible tax management. Our aim is to explain the amount of tax we pay and where we pay it in a clear and transparent manner.

Our contribution to government tax revenues

Our contribution to the economies in which we operate is predicated on our ability to run successful, profitable businesses that generate employment, stimulate economic growth and contribute to tax revenues. This is particularly important in Emerging Markets where the taxes which we pay to, and collect on behalf of, governments is an important part of our economic footprint.

Our relationship with tax authorities 

We believe that it is important to have transparent and positive engagement with the relevant tax authorities in the territories in which we operate. This approach is reflected in the tax policies and principles that have been adopted by the Board. We are committed to ensuring that we comply with all legal requirements and pay all taxes in the countries in which we operate and we engage in tax planning that is aligned with commercial and economic activity and does not lead to abusive results.

Current tax

UBM’s effective rate of taxation* for the total Group for the year was 12.7% (2014: 14.5%). Movements in our tax creditor balance during 2015 were as follows:

Overall our current tax liability increased from £42.1m as at 31 December 2014 to £56.4m as at 31 December 2015. The increase is predominantly due to a net increase in uncertain tax positions in various jurisdictions in which UBM operates. We have necessarily made judgements as to the outcome of tax matters not concluded. This creditor has been consistently classified as a short-term liability in accordance with our accounting policy.

Current tax liability analysed:

The total cash paid in respect of income taxes was £31.0m in 2015. We pay the majority of our tax in Emerging Markets. Of the total £31.0m paid, £19.6m was in Emerging Markets. A further breakdown is provided in Note 3.2.

The table below is a reconciliation of the 2015 expected tax charge to actual cash tax paid:

1 Profit arising in Luxembourg in relation to interest received is covered by Luxembourg tax losses. These losses arose in 2002 as a consequence of investment write downs

Our total tax contribution

In the year ended 31 December 2015, our total tax contribution was £57.1m (2014: £51.9m) – this includes corporate income tax on our profits as well as employee taxes and any other taxes that we bear. The geographical split of our total tax contribution is as follows:

In addition to this, in 2015 we collected taxes on behalf of governments (e.g. employee taxes and sales taxes) amounting to £73.1m (2014: £62.6m).

Deferred tax

During the year we have recognised additional deferred tax assets of £15.7m in respect of tax losses and other temporary differences, bringing the total to £18.2m. These have been recognised because the Group expects to generate taxable profits against which these will be used in the next 12 months. In addition, at 31 December 2015 the Group had unrecognised deferred tax assets, including relating to tax losses carried forward in the UK of £297.8m and the US of £201.6m, that are available to offset against future taxable profits.

CAPITAL STRUCTURE

Debt and liquidity

Our funding strategy is to maintain a balance between continuity of funding and flexibility through the use of capital markets, bank loans and overdrafts.

Our debt facilities include £250m of 6.5% Sterling bonds maturing November 2016; $350m of 5.75% US Dollar bonds maturing November 2020; and a £400m syndicated revolving credit facility maturing in April 2020. Our hedging arrangements and policies are detailed in the financial statements. At 31 December 2015, we had drawn £74.0m from the syndicated bank facility and all conditions precedent were met, leaving the unutilised commitment of £326.0m available.

The Group maintains a strong liquidity position. In addition to the unutilised commitment of £326.0m, we had cash on hand of £84.8m at 31 December 2015.

The Group’s treasury policy does not allow significant exposures to counterparties that are rated less than A by Standard & Poor’s, Moody’s or Fitch and we consistently monitor the concentration of risk.

The following table summarises our estimated payment profile for contractual obligations, provisions and contingent consideration on our balance sheet as of 31 December 2015:

1 Interest payable based on current year rates

Capital management

Our policy is to maintain prudent debt capital ratios to ensure continuing access to capital on attractive terms and conditions. Borrowings reduced year-on-year following the repayment of borrowings used to fund the Advanstar acquisition in December 2014. To support our ‘Events First’ strategy, UBM targets a leverage ratio of between 1.5–2.0 times net debt/EBITDA which provides flexibility for biennial cycles, will provide capacity to invest in the business through bolt-on acquisitions, and which is consistent with investment grade metrics.

UBM’s consolidated net debt at 31 December 2015 stood at £484.9m, down from £538.0m at the end of 2014. During 2015, cash generated from operations increased to £271.9m (2014: £169.8m). The business also received cash proceeds from the principal repayments of the Delta Vendor Loan Note of £21.8m, dividends from joint ventures and associates of £5.5m and proceeds from small disposals of £0.9m. We paid cash of £34.7m on the acquisition of Hospitalar, other acquisitions and earn out payments. Dividends to shareholders and non-controlling interests totalled £103.8m.

The ratio of net debt to earnings before interest, taxation, depreciation and amortisation was 1.8 times at 31 December 2015.

1 Includes fair value adjustments

2 Total group figure reflects continuing operations EBITDA of £215.1m and discontinued operations EBITDA of £55.1m

We have an investment grade rating from each of Moody’s and Standard & Poor’s. In assessing the leverage ratios of net debt to adjusted earnings before interest, taxation, depreciation and amortisation, both Moody’s and Standard & Poor’s take account of a number of other factors, including future operating lease obligations and the pension deficit.

Pensions

UBM operates a number of defined benefit and defined contribution schemes, based primarily in the UK. The most recent actuarial funding valuations for the majority of the UK schemes were carried out during 2014 and updated to 31 December 2015 using the projected unit credit method. At 31 December 2015, the aggregate deficit under IAS 19 was £24.7m, a decrease of £28.5m compared to the deficit of £53.2m at the previous year end, due to changes in actuarial assumptions and improved asset returns.

The pension interest expense of £1.7m was up from £0.8m reported for 2014 due to the higher net deficit at 31 December 2014 compared to 31 December 2013. Pension scheme operating costs decreased to £1.4m from £1.8m in 2014 owing to lower administration costs following the scheme merger.

CASH FLOW

Cash generated from operations was £271.9m (2014: £169.8m); cash conversion* of 107% (2014: 70%) of adjusted operating profit* increased due to the inclusion of Advanstar, a stronger working capital performance, higher odd-year biennial inflows and a lower level of capital expenditure compared to 2014. Free cash flow* prior to cash invested in acquisitions was £196.8m (2014: £85.4m). A reconciliation of net cash inflow from operating activities to free cash flow is shown below:

1 Includes fair value adjustments

Cash conversion* is calculated as follows:

We expect to continue to generate significant free cash flow in 2016 because of our business model and believe that our cash on hand, cash from our operations and available credit facilities will be sufficient to fund our cash dividends, service our debt and make acquisitions in the normal course of business.

Capital expenditure

Capital expenditure for the year was £28.3m (2014: £50.2m), reflecting investment in the final stages of CORE and expenditure on the new London office. 

We also capitalised costs in relation to the integration of Advanstar to UBM properties and the capital expenditure reflects the higher level of investment with Advanstar consolidated into the Group.

Acquisitions and disposals

Hospitalar was acquired on 2 June 2015 for total consideration of £31.1m. We also invested £8.8m on increasing our stake in eMedia Asia Limited, an optoelectronics event and media business, from 40% to 100% and in acquiring a digital printing textile business. 

Return on investment* for acquisitions made over the past three years is 10.5%. The 2015 acquisitions achieved a return on investment* of 9.5%. We target a return on investment in the first full year of ownership in excess of our weighted average cost of capital. The following table shows the performance of our acquisitions since 2013:

1 2015 Return on investment calculated on a full year pro forma basis

RETURN ON AVERAGE CAPITAL EMPLOYED (ROACE)

The return on average capital employed* for 2015 was 14.5% (2014: 13.3%). This increase year on year reflects the inclusion of Advanstar earnings in the 12 month period and the reduced average capital employed due to the £250m GBP bond becoming a current liability as at 31 December 2015. In the prior year, the closing capital employed included Advanstar equity but no earnings as the acquisition took place at the end of 2014. The table below shows our performance over time:

1 Including discontinued operations of £47.4m (2014: £43.6m).

RELATED PARTY TRANSACTIONS

Details of related party transactions in the 12 months ended 31 December 2015 are disclosed in Note 7.

GOING CONCERN

After making enquiries, the Directors have a reasonable expectation that UBM has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the financial statements. In reaching this conclusion, the Directors have had due regard to the following:

By order of the Board

Marina Wyatt

Chief Financial Officer

SUMMARY OF PRINCIPAL RISKS

Failure to attract and retain excellent people because of the competitive environment would impact on the ability of the organisation to achieve its strategic ambitions.

Explanation of non-IFRS measures

Consolidated income statement

for the year ended 31 December 2015

* Adjusted Group operating profit represents Group operating profit excluding amortisation of intangible assets arising on acquisitions, exceptional items and share of tax on profit in joint ventures and associates.

Consolidated statement of comprehensive income

for the year ended 31 December 2015

Consolidated statement of financial position

at 31 December 2015

These financial statements were approved by the Board of Directors and were signed on its behalf on 24 February 2016 by:

Consolidated statement of changes in equity

for the year ended 31 December 2015

Consolidated statement of cash flows

for the year ended 31 December 2015

Notes to the consolidated financial statements

at 31 December 2015

1. Basis of preparation

UBM plc is a public limited company incorporated in Jersey under the Companies (Jersey) Law 1991. The registered office is Ogier House, The Esplanade, St. Helier, JE4 9WG, Jersey. The principal activities of the Group are described in Section 2. 

The preliminary announcement was approved by the Board of Directors on 24 February 2016.

The figures and financial information for the year ended 31 December 2015 do not constitute the statutory financial statements for that year. Those financial statements have not yet been delivered to the Jersey Registrar of Companies, but include the auditor’s report which was unqualified. The figures and financial information for the year ended 31 December 2014 included in the preliminary announcement do not constitute the statutory financial statements for that year. Those financial statements have been delivered to the Registrar and included the auditor’s report which was unqualified.

They are prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). The consolidated financial statements comply with the Companies (Jersey) Law 1991 and are prepared under the historical cost basis except for derivative financial instruments and hedged items which are measured at fair value. The consolidated financial statements are presented in pounds sterling, which is the functional currency of the parent company, UBM plc. All amounts are rounded to the nearest £0.1m unless otherwise indicated.

The accounting policies adopted in the preparation of the consolidated financial statements are consistent with those used for the previous financial year.

Discontinued operations

On 15 December 2015, the Group announced the disposal of the PR Newswire business (PR Newswire) to Cision, a business controlled by GTCR Canyon Holdings (Cayman), L.P., for $841m comprising $810m in cash and $31m of preferred equity (on a fair value basis). The preferred equity constitutes 400,000 Class A limited partnership units in the purchaser parent with a par value of $40m and interest coupon of 8%. The agreement is subject to anti-trust clearance in the US and is expected to complete in March 2016. As a result, the Group has classified PR Newswire as held for sale and discontinued at 31 December 2015. Founded in 1954, PR Newswire is a global leader in press release distribution and related communications products and services. PR Newswire's customers are primarily professionals working in marketing, public relations, corporate communications and investor relations roles at firms spanning Fortune 1000 multinationals, small businesses, public relations companies and government agencies worldwide. These businesses constituted the entire PR Newswire operating segment.

Comparative information

The comparative information in the income statement and associated notes has been restated for the impact of the PR Newswire discontinued operations. In line with the requirements of IFRS 5 ‘Non-current assets held for sale and discontinued operations’, the statement of financial position has not been restated.

The comparative information for the year ended 31 December 2014 has also been restated for the finalisation of acquisition accounting for Advanstar, in accordance with IFRS 3 ‘Business Combinations’. The impact of this restatement is to increase goodwill (£13.7m), trade and other receivables (£1.2m), provisions (£0.3m) and deferred tax (£3.0m) and reduce intangible assets (£17.9m) and trade and other payables (£0.3m).

Going concern

After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. The consolidated financial statements are therefore prepared on the going concern basis.

2. Segment information

Operating segments

The Group considers that operating segments presented on a products and services basis are the most appropriate way to demonstrate the performance of the Group. This is consistent with the internal reporting provided to the Group Chief Executive Officer and the Group Chief Financial Officer, together the chief operating decision maker (CODM), and reflects the way in which resources are allocated.

The CODM considers there to be four operating segments:

As detailed in Section 1, the PR Newswire businesses which comprise the PR Newswire operating segment have been reported as discontinued operations as at 31 December 2015.

Marketing Services – Online and Marketing Services – Print has been aggregated to form one reportable segment ‘Other Marketing Services’. The two operating segments have similar economic characteristics and meet the aggregation criteria defined in IFRS 8 ‘Operating segments’.

Segment measures

The CODM assesses the performance of the operating segments and the allocation of resources using revenue and adjusted operating profit. Adjusted operating profit is IFRS operating profit excluding amortisation of intangible assets arising on acquisitions, exceptional items and share of tax on results of joint ventures and associates.

Finance income/expense and tax are not allocated to operating segments and are reported to the CODM only in aggregate. 

Segment assets and liabilities are not reported to the CODM. 

Transactions between segments are measured on the basis of prices that would apply to third-party transactions. 

Year ended 31 December 2015

Total corporate costs were £23.9m (2014: £29.0m). Corporate costs were offset by internal cost recoveries, and share of pre-tax results from joint ventures and associates of £1.3m (2014: £1.4m). Non-recurring costs of £0.5m relating to the implementation of the ‘Events First’ Strategy have been incurred in the year (2014: £4.0m in relation to CORE implementation). In the prior year, we reported two non-recurring items within corporate operations: the pension settlement gain of £5.8m and gains on disposals that were not categorised as discontinued under IFRS 5 totalling £5.2m, reported in Other operating income.

Year ended 31 December 2014 (restated)

Geographic information

Revenue is allocated to countries based on the location where the products and services are provided. Non-current assets are allocated to countries based on the location of the businesses to which the assets relate.

1 Emerging Markets comprise the non-G10 countries – most notably for the Group: Brazil, India, Indonesia, Malaysia, Mexico, Singapore, Thailand and Turkey.

There are no revenues derived from a single external customer which are significant.

Non-current assets consist of goodwill, intangible assets, property, plant and equipment, investments in joint ventures and associates and other investments.

3. Income Statement

3.1 Exceptional operating items

Certain items are recognised as exceptional items since, due to their nature or infrequency, such presentation is relevant to an understanding of the Group’s financial statements. These items are not part of the Group’s normal ongoing operations.

Acquisition exceptional items

The Group made significant progress in the integration of Advanstar and incurred exceptional costs of £8.7m relating to redundancy (£4.6m), property consolidations (£1.3m), finance system integration costs (£1.3m) and other items (£1.5m). This spend is included in the estimated integration costs of $33m announced on completion of the acquisition, which will be completed over the next 18 months. Acquisition costs of £0.6m have been expensed as exceptional items relating to the acquisition of Advanstar and a further £0.6m expensed in relation to other acquisitions. These relate mainly to due diligence and professional fees paid to various advisors. An exceptional charge of £0.2m was recognised relating to revised contingent consideration estimates for prior year acquisitions.

Exceptional items in joint ventures and associates

A dividend of £2.1m was received during the year from a joint venture which was previously impaired to nil. As a result, the income has been recognised as an exceptional item.

Impairment

The Group reviewed the carrying value of goodwill and intangible assets in light of current trading conditions and future outlook. As a result of this review, an impairment charge of £1.9m has been recognised for goodwill in the Americas Print cash generating unit. The Group has recognised a re-measurement loss of £6.2m on its initial 40% shareholding of eMedia Asia Limited during the year offset by £2.0m reclassification adjustment of foreign exchange previously recognised in other comprehensive income. The Group acquired the remaining 60% on 30 June 2015 and used the purchase price as an estimate for the fair value of the initial shareholding.

The taxation effect of the exceptional items reported above on the amounts charged to the income statement is nil.

3.2 Tax

Income statement

In 2014, as a consequence of the acquisition of Advanstar, deferred tax assets in certain US companies that had previously not been recognised were recognised. An exceptional tax credit of £29.9m was therefore taken through the income statement. £4.0m of the asset was released as an exceptional deferred tax charge in the current period.

Reconciliation of total tax expense to the accounting profit:

Reconciliation to adjusted tax charge

The Group has assessed the impact of changes in tax rates in various jurisdictions in which it operates and has determined that the changes do not have a significant impact on the current or future tax charges.

Other comprehensive income

No current or deferred tax relates to items reported in other comprehensive income (2014: nil).

Statement of financial position: current tax

During the year, tax has been paid in the following jurisdictions:

Statement of financial position: deferred tax

The movement in deferred tax balance during the year is:

The deferred tax assets of £18.2m (2014: £6.3m) relate to tax losses and other temporary differences. These have been recognised because the Group expects to generate taxable profits against which these will be used in the next 12 months.

The Group has the following unused tax losses for which no deferred tax assets have been recognised:

No deferred tax assets have been recognised in respect of any of these amounts as it is uncertain that these losses will be utilised.

In addition the Group has unrecognised deferred tax assets in relation to other deductible temporary differences of £19.0m (£7.1m in relation to the UK, £10.1m in relation to the US, and £1.8m in relation to other countries) (2014: £15.0m (£12.5m, nil and £2.5m respectively)). No deferred tax assets have been recognised in respect these assets as it is uncertain that they will be utilised.

At 31 December 2015, net deferred tax liabilities of £1.1m (2014: £1.1m) have been recognised for taxes that would be payable on the unremitted earnings of the Group’s subsidiaries. No other deferred tax liabilities have been recognised as the Group has determined that profits of subsidiaries will not be distributed in the foreseeable future.

The temporary differences associated with investments in subsidiaries for which a deferred tax liability has not been recognised amount in aggregate to £4.7bn (2014: £4.2bn). 

3.3 Earnings per share

Basic earnings per share is calculated by dividing net profit for the year attributable to owners of the parent entity by the weighted average number of ordinary shares outstanding during the year. 

Adjusted basic earnings per share excludes amortisation of intangible assets arising on acquisitions, deferred tax on amortisation of intangible assets, exceptional items and net financing expense adjustments.

Diluted earnings per share is calculated by dividing net profit for the year attributable to owners of the parent entity by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares. The impact of dilutive securities in 2015 would be to increase weighted average shares by 3.0 million shares (2014: 3.1 million shares).

The weighted average number of shares excludes ordinary shares held by the Employee Share Ownership Plan (the ESOP).

4. Statement of Financial Position

4.1 Goodwill

Goodwill is allocated and monitored by management at a CGU level, consisting of the five business units operating across the Group’s operating segments. Not all business units are active in all segments; there are 11 CGUs at 31 December 2015 (2014: 11 CGUs). For reporting purposes, the CGUs have been aggregated into the reportable segments, as shown in the tables below. The CGUs are individually tested for impairment each year.

31 December 2015

Within the Events segment, management considers the UBM Americas Events, UBM EMEA Events and Advanstar Events CGUs to be significant. The carrying amount of goodwill attributed to these CGUs at 31 December 2015 was £429.1m, £303.3m and £401.7m respectively. In 2014, UBM Tech Events (£171.7m), UBM Connect Events (£125.9m), UBM EMEA Events (£257.4m) and Advanstar Events (£313.5m) were considered significant.

The UBM Americas Print CGU has been impaired by £1.9m during the year ended 31 December 2015, following product rationalisation affecting the print business.

5. Capital structure and financial policy

5.1 Movements in net debt

Net debt reflects the Group’s cash and cash equivalents, borrowings and derivatives associated with debt instruments. This definition facilitates an accurate reflection of the estimated settlement at maturity and is consistent with reporting by other companies.

5.2 Net financing expense

The ineffectiveness on fair value hedges represents the difference between the fair value movement of the interest rate swaps designated as hedge instruments and the fair value movement of the hedged portions of the £250m 6.5% sterling bonds due November 2016 and the $350m 5.75% dollar bonds due 2020.

5.3 Equity and dividends

Share capital

The ESOP Trust owns 0.34% (2014: 0.05%) of the issued share capital of the Company in trust for the benefit of employees of the Group and their dependents. The ESOP Trust waives its dividend entitlement and abstains from voting at general meetings.

Share premium

The Company received £1.2m (2014: £0.7m) on the issue of shares in respect of the exercise of options awarded under various share option plans.

Dividends

There are no income tax consequences to the Group arising from the payment of dividends by the Company to its shareholders.

Other reserves

1 The amount included in the foreign currency translation reserve for 2014 represents the currency translation difference on foreign operations of Group subsidiaries of £28.8m (excluding £1.5m relating to non-controlling interests), on net investment hedges of £(18.8)m and on joint ventures and associates of £0.6m.

2 The amount included in the foreign currency translation reserve for 2015 represents the currency translation difference on foreign operations of Group subsidiaries of £60.3m (excluding £(0.4)m relating to non-controlling interests), on net investment hedges of £(17.5)m, on joint ventures and associates of £0.3m and a reclassification adjustment for foreign operations in period of £(2.0)m.

Merger reserve

The merger reserve is used to record entries in relation to certain reorganisations that took place in previous accounting periods. The majority of the balance on the reserve relates to the capital reorganisation that took place in 2008 which created a new holding company which is UK-listed, incorporated in Jersey and with its tax residence in the Republic of Ireland. The return of the Company’s tax residency to the United Kingdom has had no impact on these balances. 

Foreign currency translation reserve

The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries. It is also used to record the effect of hedging net investments of foreign operations. Of this balance, a loss of £10m will be recycled to the income statement in 2016 on completion of the disposal of the PRN businesses.

ESOP reserve

The ESOP reserve records ordinary shares held by the ESOP to satisfy future share awards. The shares are recorded at the cost of purchasing shares in the open market. During the year ended 31 December 2015, 4,364,749 shares were purchased by the ESOP (2014: 1,025,000 shares) at a cost of £23.4m (2014: £6.8m). The Company received contributions of £11.3m (2014: £4.0m) from employees relating to the exercise price of share options and awards granted in prior years.

6. Acquisitions and disposals

6.1 Acquisitions

Acquisitions

The fair value of the identifiable assets and liabilities acquired in respect of acquisitions (excluding equity transactions) made in 2015 and 2014 was:

Trade and other receivables acquired have been measured at fair value which is the gross contractual amounts receivable. All amounts recognised are expected to be collected. The intangible assets acquired as part of the acquisitions were:

The total consideration transferred on acquisitions is as follows:

Acquisition costs of £1.2m (2014: £8.0m) have been recognised as an exceptional operating item in the income statement and are included in operating cash flows in the statement of cash flows. £0.6m of these costs related to the acquisition of Hospitalar (2014: £7.4m).

2015 acquisitions

Each acquisition strengthens our exposure to certain industry verticals and are in line with the Group’s strategy to enhance and expand its international presence in geographic regions of significant growth. 

The Group has acquired 100% of the voting rights in all cases where acquisitions involved the purchase of companies unless otherwise stated below. 

The Hospitalar acquisition completed on 2 June 2015 and the purchase price allocation is preliminary on the date of issuing the consolidated financial statements.

The goodwill of £22.6m arising from this acquisition relates to the following factors:

None of the goodwill recognised on the acquisition of Hospitalar is expected to be deductible for tax purposes.

Cash flow effect of acquisitions

The aggregate cash flow effect of acquisitions was as follows:

The Group paid £0.5m of deferred consideration during 2015 in relation to the 2012 acquisition of Dentech China, £0.9m in relation to the 2014 acquisition of Centro Impulsor de la Habitacion y la Construccion, A.C. (CIHAC) and £1.4m in relation to the 2014 acquisition of Seatrade Communications Limited (Seatrade).

The Group paid £2.3m of contingent consideration during 2014 in relation to the 2013 acquisitions of Rotaforte International Trade Fairs & Media and Shanghai Tiansheng Exhibition Service Co., Ltd (Tiansheng). The Group also paid £2.1m of deferred consideration during 2014 in relation to the 2013 acquisitions of NTSR Fuar ve Gösteri Hizmetleri A.? (NTSR) and China (Shanghai) International Starch & Starch Derivatives Exhibition (Epica) and £0.1m of deferred consideration in relation to the 2012 acquisition of Eco Exhibitions Sdn Bhd (Greenbuild).

Put and call options

There is a call option in relation to the acquisition of Shanghai International Printing Industry Expo (CSTPF) on the remaining 30% interest which is exercisable after 3 years. The exit pricing mechanism will be calculated at fair market value to be agreed by both parties.

Acquisition performance

From their respective dates of acquisition to 31 December 2015, the acquisitions completed in 2015 contributed £7.7m to revenue and £2.6m to operating profit to the Group. If the acquisitions had taken place at the beginning of 2015, the acquisitions would have contributed £20.2m to revenue and £6.3m to operating profit of the Group.

Contingent and deferred consideration

The potential undiscounted amount for all future payments that the Group could be required to make under the contingent consideration arrangements for all acquisitions are £3.8m.

6.2 Disposals

The Group continues to make disposals in order to further progress towards a portfolio of integrated cross-media marketing and communication services designed to serve specific commercial and professional communities. These disposals have generated resources to invest in activities that are closely linked to the Group’s strategic priorities. Disposals are disclosed as part of the Group’s discontinued operations when they represent a single major line of business or geographical area of operations, as required by IFRS 5 ‘Non-current assets held for sale and discontinued operations’.

In April 2015, UBM disposed of its remaining 30% shareholding in the Channel Company for consideration of £1.9m for nil profit/loss. The investment was reported as a fixed asset investment.

The aggregate effect of the disposals on the Group’s assets and liabilities were as follows:

6.3 Discontinued operations and assets held for sale

As disclosed in Section 1, the Group has classified the PR Newswire businesses as held for sale and discontinued at 31 December 2015.

The results of the discontinued operations which have been included in the consolidated income statement were as follows:

Exceptional operating items include:

Assets held for sale measured at the lower of their carrying amounts and fair value less costs to sell