Results for the year ended 31 December 2016

Released : 22-Feb-2017 07:00

RNS Number : 4896X
UBM PLC
22 February 2017
 

22 February 2017: for immediate release

 

Results for the year ended 31 December 2016

 

 

Significant strategic progress and performance ahead of expectations

 

·      PR Newswire (PRN) disposal completed - £490m net cash proceeds - £243.7m special dividend

·      Allworld Exhibitions (Allworld) acquired for $485m (£392.9m)

·      Excellent progress implementing the Events First strategy:

·      £82.7m invested in bolt-on acquisitions

·      Disposal of the Electronics Media business, Light Reading and Ecobuild

·      Exit run rate of £11.5m of savings p.a. from operational initiatives

 

·      Continuing revenue up 12.1% at £863.0m (0.1% at constant currency)

·      Events revenue growth of 3.1% on an adjusted underlying basis*

·      Continuing adjusted operating profit* up 19.2% to £234.8m 

·      Continuing adjusted operating profit margin* up 1.6%pts to 27.2% (+1.0%pts excl. pension gain)

·      Continuing adjusted attributable profit up 23.4% to £166.3m

·      Continuing diluted adjusted EPS* up 31.0% to 39.7p (tax rate of 14.0%)

·      Free cash flow* of £159.6m and cash conversion* of 96%

·      Year-end net debt* at 2.4 times continuing EBITDA*

·      Final dividend declared of 16.6p per share - total 2016 ordinary dividend of 22.0p per share

 

*See page 3 and page 27 for definition of non-IFRS metrics 

 

Tim Cobbold, CEO of UBM plc said:

 

"During 2016 we made significant strategic progress and delivered performance ahead of expectations.

 

"We took further steps to focus UBM on the attractive B2B events sector by completing the PRN disposal and, in December, acquiring Allworld.  At the same time, we made excellent progress implementing the Events First strategy at an operational level and delivered a strong financial performance ahead of market expectations.  In a favourable FX environment reported revenues grew 12.1%, the operating margin was 1.6% points higher at 27.2% and earnings per share increased by 31.0%.

 

"While remaining conscious of the global macro-economic and geopolitical uncertainties, in 2017 the Board expects to see higher underlying revenue growth (excluding the impact of further portfolio rationalisation), enhanced by the consolidation of Allworld and the positive impact of odd-year biennials.  This growth coupled with Events First initiatives will drive further improvement in the margin and continued strong cash generation."

 

Key financial information

 


Revenue



Adjusted operating profit*


2016

£m

Underlying* change %

 Adjusted underlying*

change %



2016
£m

Margin

%

Margin
change %pt

Continuing operations








Annual

683.5

1.0%

3.1%



220.8

32.3%

+0.9%pts

- of which majors

589.3

3.9%

3.9%






Biennial

28.1

19.5%**

19.5%**



8.3

29.3%


Events

711.6

1.0%

3.1%



229.1

32.2%

+0.1%pts










Online

88.2

(4.2)%

(2.0)%



13.4

15.2%

+5.6%pts

Print

63.2

(6.4)%

(2.6)%



10.7

16.9%

+0.0%pts

OMS

151.4

(5.1)%

(2.3)%



24.1

16.0%

+3.3%pts

Corporate costs






(18.4)



Group

863.0

(0.1)%

2.1%



234.8

27.2%

+1.6%pts

 

Adjusted EPS*

 FY 2016

FY 2015

Change %

Continuing - Diluted1

39.7p

30.3p

31.0%

Continuing - Diluted, post share consolidation basis2

41.9p



Total - Diluted1

45.9p

40.5p

13.3%

         *      See page 3 and page 27 for definition of non-IFRS metrics 

**     Compared to 2014

1)   Uses weighted average number of shares over the period of 419.2m (2015: 445.5m)

2)   Uses post consolidation number of shares of 397.4m for 2016

 

Group IFRS results

 


 2016

2015



£m

£m

Change %

Continuing operations




Revenue

863.0

769.9

12.1%





Operating profit

152.7

144.7

5.5%

% margin

17.7%

18.8%






Profit after tax

97.3

92.3

5.4%





Diluted EPS

20.1p

18.2p

10.4%

Diluted weighted average no of shares

419.2m

445.5m






Total Group




Profit after tax

504.5

107.7

-





Diluted EPS

117.3p

21.7p

-

Diluted weighted average no of shares

419.2m

445.5m


 

 

Notes to business and financial review

Unless otherwise stated:

·      Underlying revenue growth measures are adjusted for the effects of acquisitions, disposals, foreign exchange movements and peripatetic and biennial events

·      Adjusted underlying growth measures additionally remove the impact of portfolio rationalisation

·      'Major' events refer to annual events generating more than £1m revenue

·      Biennial events occur once every two years   

·      Adjusted operating profit excludes amortisation of intangible assets arising on acquisitions, exceptional items and share of taxation on joint ventures and associates

·      Strategic opex relates to Events First strategy implementation 

 

See page 27 for explanation of non-IFRS items.

 

Contacts

Kate Postans

Head of Investor Relations & Corporate Communications

investorrelations@ubm.com communications@ubm.com

+44(0) 20 7921 5023

Jon Coles
Craig Breheny

Brunswick Group

ubm@brunswickgroup.com

+44(0) 20 7404 5959

 

UBM will host a presentation today at 10.30am at Lincoln Centre, 18 Lincoln's Inn Fields, London, WC2A 3ED.  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/investor/results-and-reports

A recording of the webcast will also be available on-demand from UBM's website after 4pm.

 

Notes to Editors

 

UBM plc is the largest pure-play B2B Events organiser in the world.

 

In an increasingly digital world, the value of connecting on a meaningful, human level has never been more important.  At UBM, our deep knowledge and passion for the industry sectors we serve allow us to create valuable experiences where people can succeed. At our events people build relationships, close deals and grow their businesses.

 

Our 3,750+ people, based in more than 20 countries, serve more than 50 different industry sectors - from fashion to pharmaceutical ingredients.  These global networks, skilled, passionate people and market-leading events provide exciting opportunities for business people to achieve their ambitions.  

 

For more information, go to www.ubm.com; for UBM corporate news, follow us on Twitter at @UBM.

 

Forward Looking Statements

 

This announcement may contain certain statements, statistics and projections that are or may be forward-looking. The accuracy and completeness of all such statements, including, without limitation, statements regarding the future financial position, strategy, projected costs, plans and objectives for the management of future operations of UBM plc ("UBM") and its subsidiaries (the "Group") are not warranted or guaranteed. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that may occur in the future. Although UBM believes that the expectations reflected in such statements are reasonable, no assurance can be given that such expectations will prove to be correct. There are a number of factors, many of which are beyond the control of the Group, which could cause actual results and developments to differ materially from those expressed or implied by such forward-looking statements. These factors include, but are not limited to, factors such as: future revenues being lower than expected; increasing competitive pressures in the industry; and/or general economic conditions or conditions affecting the relevant industry, both domestically and internationally, being less favourable than expected. We do not intend to publicly update or revise these projections or other forward-looking statements to reflect events or circumstances after the date hereof, and we do not assume any responsibility for doing so.

 

This announcement contains inside information for the purpose of Article 7 of Regulation (EU) No 596/2014.

 

END

 

 

BUSINESS REVIEW

For the twelve months ended 31 December 2016

 

Strategic progress

 

UBM is focused on delivering its Events First strategy, with the objective of becoming the world's leading events business. As a result, the Group's financial performance increasingly reflects the attractive characteristics of the events industry: organic growth supported by acquisitions, high margins and strong cash generation. Central to the strategy is the quality of the portfolio. The sectoral and geographic spread of the portfolio combined with its overall scale provides an inherent breadth and resilience which underpins the revenues and earnings of the business.

 

In line with the strategy a number of important and significant steps were taken in 2016 in refocusing the Group on the Events sector.  The disposal of PRN coupled with the acquisition of Allworld and four small bolt-ons have significantly increased UBM's focus on the attractive, higher-margin, higher-growth events sector. On a pro forma basis, 84% of UBM's continuing revenues and 92% of operating profits are now derived from the Events sector. This proportion will increase further as more bolt-on acquisitions are made and the alignment of OMS activities to the Events portfolio increases.

 

On 15 December 2015 we announced the disposal of PRN for $841m (comprising $810m cash and $31m preferred equity). Following anti-trust clearance in the US, the transaction completed on 16 June 2016 and in July we returned £243.7m of the cash proceeds to shareholders via a special dividend with an accompanying share consolidation.

 

On 13 December 2016 we announced the acquisition of Allworld for $485m. Allworld, which generated revenues and operating profits of $97.2m and $37.6m respectively in the year to 30 June 2016, is a pure-play events business focused in Asia and the Middle East, with a record of strong organic growth, averaging c.7% CAGR over the last ten years.  This is an important acquisition for UBM as it reinforces our market-leading position in Asia and secures a leadership position in the high-growth ASEAN region as well as improving the growth profile of the Events portfolio. Additionally, it provides useful market access to the Middle East, a region where UBM had only a small presence.

 

The UBM and Allworld portfolios are highly complementary, both geographically and sectorally and, over the next two-three years there are significant and exciting revenue synergy opportunities available.  Examples include, co-locating adjacent shows, cross-marketing between the two portfolios, introducing value based pricing and moving to operate some biennial shows annually.  Integration plans are already being implemented and we expect that in 2019 the acquisition will deliver a return on investment greater than our weighted average cost of capital.

 

We also enhanced the portfolio by spending a further £82.7m on four attractive bolt-on acquisitions. On 21 April 2016 we acquired Business Journals Inc (BJI), a New York-based portfolio of Fashion events and related media activities, for $69m in cash. This business complements UBM's existing Fashion portfolio exceptionally well, offering very significant cost synergies (relative to its size). BJI is being integrated and is performing in line with the business case with synergies coming through sooner than expected.

 

On 31 May 2016 we purchased Content Marketing Institute (CMI), the market-leading Content Marketing World event, conference and media business, based in Cleveland, Ohio for an initial consideration of $17.6m. CMI operates in a high-growth market segment and uses a format and approach to serving its community that has proven very successful in our existing technology shows. CMI is operating in line with the business plan. In addition, we acquired The Battery Show in Novi, Michigan for £14.3m and Secon in Korea for £2.2m.

 

The integration of Advanstar, which was acquired in late December 2014, continues to plan and will be concluded during 2017. Total synergies generated by the end of 2016 were $17.0m and a further $3m have been identified and will be realised in 2017. Despite some weakness in Fashion markets, Advanstar continues to deliver well ahead of the business plan established when it was acquired.  The 2016 return on investment for the transaction is 10.7%. For all acquisitions made in the last three years the total return on investment during 2016 was 11.0%.

 

This refocusing on events is complemented by the disposal and rationalisation of smaller, lower-margin, lower-growth events and of OMS activities that are not well aligned to events, in line with our strategy.  In 2016, 27 events and eight OMS properties, with revenues in 2015 of £11.7m and £3.8m respectively, were discontinued. We disposed of the US Electronics and eMedia business for £19.2m, the remaining investment in the Light Reading business for £16.1m, and some other small events and media properties. In December, we sold Ecobuild to its management for a nominal sum, incurring a total loss on disposal of £35.1m principally relating to the write-off of goodwill.

 

2016 was the second year of a three-year programme of portfolio rationalisation and although it subdued growth, it increased the operating profit and operating margin in 2016.  Furthermore, once the rationalisation has been completed in 2017 the revenue growth in the business will strengthen.

 

Operationally, Events First implementation remains the priority and the focus. The roll-out of a common sales model and supporting CRM platform is largely complete in EMEA, where approximately 76% of event revenues are operating the new sales processes. The preparation phase is well advanced in Asia, with roll-out commencing before the end of the first half, and has begun in the Americas.  The utilisation of Orbit and Touchplan, both of which improve the onsite rebooking experience, is increasing and the value-based pricing process has begun at MAGIC and Black Hat. Good progress has been made on the procurement programme with aggregate annualised savings of £6.6m secured (including synergies).  Full year savings under this programme are now expected to be £8m p.a. by the end of 2017. Event plans are becoming a key mechanism for the ongoing operational management of the business and have significantly improved the long term planning process for the Group. New long-term incentives, which incorporate organic revenue growth targets underpinned by profit-based incentives, have been implemented at the event leadership level and for senior divisional management.

 

In the year to 31 December 2016 strategic expenditure, which includes the costs of portfolio rationalisation, restructuring, strategy implementation and development of the common Sales, Marketing and Data platform, was £10.8m.  Of this £3.6m was capital expenditure and £7.2m opex of which £6.1m was in Events and £1.1m in OMS.  In aggregate the Events First programme has delivered savings of £9.2m in 2016 at an annualized run rate of £11.5m p.a., already well ahead of what had been anticipated when the strategy was launched in 2014. Further savings opportunities have been identified. These increased and accelerated savings reflect the continuing good progress in implementing the initiatives within each of the Events First strategic priorities.

 

The Events First investment was originally estimated at £30m-£35m (split between strategic opex and capital expenditure) over the period 2015 to 2017. Overall savings were expected to be £10m p.a., building from 2016. Savings have been realised significantly faster than was originally expected and we see further opportunities with the overall level of annual savings now expected to increase to £20m p.a. by the end of 2019. Commensurate with this, the level of investment will increase to £40m-£45m with a greater proportion of the total expenditure being opex in nature.  Post 2017 we will regard such as expenditure as "business as usual".

 

UBM has a strong, experienced and committed senior management team that share a common belief in what can be achieved through the Events First strategy.  During the year the team was strengthened with Scott Schulman joining as CEO of UBM Americas, John Petevinos as Group Strategy Director and Simon Hollins as Group CIO.  On 14 November 2016, Simon Foster resigned as CEO of UBM EMEA. In his absence, Tim Cobbold has taken responsibility for UBM EMEA, supported by its strong management team.  A full-time successor is expected to be appointed in the first half of 2017.

 

Outlook

 

While remaining conscious of the global macro and geopolitical uncertainties, in 2017 the Board expects to see higher underlying revenue growth (excluding the impact of portfolio rationalisation), enhanced by the consolidation of Allworld for the first time and the positive impact of odd-year biennials.  This growth coupled with Events First initiatives will drive further improvement in the margin and continued strong cash generation. Assuming current FX rates prevail, the performance will also benefit from a continued FX tailwind.

 

 

Events

 


FY

2016

FY

2015

Underlying*

Adjusted underlying*


£m

£m

change %

change %

Annual Events revenue





North America

295.3

247.0

(0.3)%

0.5%

Emerging Markets

278.7

236.8

3.0%

4.9%

UK

35.7

42.1

(12.2)%

(0.5)%

Continental Europe

59.0

43.9

8.4%

9.6%

RoW

14.8

11.2

5.1%

5.1%


683.5

581.0

1.0%

3.1%

Biennial Events revenue

28.1

49.6



Total Events revenue

711.6

630.6

1.0%

3.1%

 

Total Events revenue was £711.6m (2015: £630.6m), benefiting from an FX tailwind of £76.9m and £23.7m of revenue from the Hospitalar, BJI and CMI acquisitions (which did not contribute in 2015).  Adjusted underlying* revenue from Annual Events, which excludes the impact of portfolio rationalisation, grew 3.1% in 2016.  During the period £11.7m of Event revenues were rationalised.  Unless otherwise stated, all commentary below relates to adjusted underlying* revenue.

 

Biennial Events contributed £28.1m of revenue (2015: £49.6m). Revenues were up 19.5% compared with the 2014 biennials, reflecting particularly strong growth at KBB Birmingham and Health Ingredients Europe.

 

The Events portfolio as a whole continued to be strengthened during the period through acquisition and portfolio rationalisation and UBM's geographic and sectoral diversity continues to provide resilience to the overall performance.  In 2016  'Major' events grew by 3.9% on an underlying basis, with good performances at some of the larger events (top 20 +5.8%) moderated by some softness in fashion and jewellery, and weakness at Interop, Concrete Brazil, Sign China and Ecobuild.  We have taken action to address recent performance in some of these events - we have re-launched Interop to address a more focused niche market, Ecobuild has been sold and the European Gem and Jewellery show is being discontinued.

 

In 2016, North America accounted for 43% of Annual Events revenue (2015: 43%) and Emerging Markets, accounted for 41% (2015: 41%).

 

North American revenue was up 0.5% on an adjusted underlying basis, with good performances at large events such as Black Hat, Game Developers Conference and segments of LVMagic (previously MAGICWeek) offsetting the decline at Interop and softness in certain segments of fashion during the second half of the year. 

 

Emerging Markets revenue grew 4.9% with strong growth in events in China, notably CBME, Cosmoprof, Furniture China and Hotelex/Fine Foods offsetting softness at events such as Concrete Brazil, Sign China and the June Hong Kong Jewellery & Gem Fair.  Hospitalar performed well and grew despite the tough economic backdrop in Brazil.

 

Revenues in the UK fell 0.5%, principally driven by the anticipated weakness at Ecobuild and IFSEC with strong growth at Decorex and Brand Licensing Europe. In Continental Europe revenue rose 9.6% driven principally by CPhI and ICSE.  Rest of World events grew well, notably CPhI Japan.

 


FY 2016

FY 2015


Events

£m

£m


Annual - adjusted operating profit*

220.8

182.7


Annual - adjusted operating profit margin*

32.3%

31.4%






Biennial - adjusted operating profit*

8.3

19.8


Biennial - adjusted operating profit margin*

29.3%

40.0%






Total adjusted operating profit*

229.1

202.5


Total adjusted operating profit margin*

32.2%

32.1%


 

Adjusted operating profit* was £229.1m, up from £202.5m in 2015.  The Total Events adjusted operating margin* was 32.2% (2015: 32.1%) reflecting annual events margin progression plus an FX benefit (+0.7%pt) offset by the even-year biennial decline.  

 

The Annual Events margin* was 32.3% (2015: 31.4%) after strategic opex of £6.1m (2015: £5.3m). Before strategic opex, the Annual Events margin* of 33.2% was up 0.8%pt driven by FX and a combination of the Events First benefits and synergies.  The Biennial margin* was 29.3% (2015: 40.0%) reflecting the portfolio of lower-margin biennials in even-years.

 

 

Other Marketing Services (OMS)

 

OMS revenue declined by 2.3% on an adjusted underlying basis. In the period we rationalised £3.8m of OMS revenue, largely print, and completed the disposal of the Electronics Media business, which contributed £7.0m of revenues in 2016 prior to sale. The decline in online related to softness in the Americas technology portfolio and in Q4 we executed a restructuring to address this. This resulted in a rationalisation of OMS activities which contributed £9.6m of revenue in 2016.

 

Adjusted operating profit* was £24.1m (2015: £17.7m), representing an operating margin* of 16.0% (2015: 12.7%) driven higher by the positive effect of the rationalisation of lower margin OMS activities, procurement savings and synergies from the Advanstar integration. Strategic opex of £1.1m was slightly lower than in 2015.

 


FY 2016

FY 2015

Underlying*

Adjusted underlying*


£m

£m

change %

change %

OMS - Online

88.2

81.1

(4.2)%

(2.0)%

OMS - Print

63.2

58.2

(6.4)%

(2.6)%

Total OMS revenue

151.4

139.3

(5.1)%

(2.3)%

Adjusted operating profit*

24.1

17.7



Total adjusted operating profit margin*

16.0%

12.7%



Strategic opex

(1.1)

(1.8)



Total adjusted operating profit margin* (pre strategic opex)

16.7%

14.0%



 

 

PR Newswire (PRN)

 

PRN's reported revenues were £103.0m (2015: £104.2m) in 2016.  This reflects the inclusion of the results of PRN for the period prior to the completion of its disposal on 16 June.  The adjusted operating profit* contribution, prior to disposal, was £28.1m (2015: £23.8m), representing a 27.3% margin* (2015: 22.8%).   

 

 

FINANCIAL REVIEW

 

SUMMARY INCOME STATEMENT

 


Adjusted results* 2016

£m

Adjusting items

2016

£m

IFRS results

2016

£m

Adjusted results* 2015

£m

Adjusting items

2015

£m

IFRS results

2015

£m

Continuing







Revenue

863.0

-

863.0

769.9

-

769.9

Operating profit

234.8

(82.1)

152.7

197.1

(52.4)

144.7

Net financing expense

(26.3)

(6.3)

(32.6)

(26.0)

0.9

(25.1)

Profit before tax

208.5

(88.4)

120.1

171.1

(51.5)

119.6

Tax charge

(29.2)

6.4

(22.8)

(25.2)

(2.1)

(27.3)

Profit for the year continuing

179.3

(82.0)

97.3

145.9

(53.6)

92.3

Discontinued operations







Discontinued operations profit after tax

26.3

  -

26.3

45.7

(1.0)

44.7

Profit/(loss) on disposal

  -

380.9

380.9

-

(29.3)

(29.3)

Profit for the year total Group

205.6

298.9

504.5

191.6

(83.9)

107.7

Minority interest

(13.0)

  -

(13.0)

(11.1)

-

(11.1)

Attributable profit

192.6

298.9

491.5

180.5

(83.9)

96.6








Earnings per share (pence)







Continuing operations - basic

40.1

(19.8)

20.3

30.5

(12.2)

18.3

Continuing operations - diluted

39.7

(19.6)

20.1

30.3

(12.1)

18.2

Total Group - basic

46.4

72.1

118.5

40.8

(19.0)

21.8

Total Group - diluted

45.9

71.4

117.3

40.5

(18.8)

21.7

Weighted average no. shares (m)

414.9


414.9

442.5


442.5

Fully diluted weighted average no. shares (m)

419.2


419.2

445.5


445.5

Proforma diluted weighted average no. shares (m)

397.4


397.4




All non-IFRS measures are noted with a '*' and additional information on these measures is set out on page 27

 

Revenue - continuing

 


£m

2015 Revenue

769.9

Acquisitions and disposals

26.1

Strategic rationalisation

(15.5)

Annual events

17.1

OMS

(2.8)

Biennial Events

(23.8)

FX

92.0

2016 Revenue

863.0

 

Continuing revenue in 2016 was £863.0m, up 12.1% (2015: £769.9m) largely due to favourable FX movements, growth in the annual events portfolio and a positive contribution from acquisitions including Hospitalar, BJI and CMI net of disposal of Electronics.  This was partially offset by the biennial down year impact and by strategic rationalisation.  On an adjusted underlying basis, revenue grew 2.1% with 3.1% growth in Events offset in part by a 2.3% decline in OMS.   

 

Adjusted operating profit* - continuing

 


£m

2015 Adjusted operating profit

197.1

Acquisitions and disposals

5.3

Strategic opex / corporate operations

4.7

Annual events

6.4

OMS

2.3

Biennial Events

-12.3

FX

31.3

2016 Adjusted operating profit

234.8

 

Continuing adjusted operating profit* rose by 19.2% to £234.8m (2015: £197.1m) reflecting favourable FX, the contribution from acquisitions and a one-off pension gain of £5.0m which is included in Corporate operations.  This was partly offset by the biennial down year impact.  There was growth in the adjusted operating profit* of both Annual Events and OMS delivered in the main by the positive impact of product rationalisation, synergies and procurement initiatives. 

 

The continuing adjusted operating margin* grew to 27.2% (2015: 25.6%) with the benefit of FX, stronger Annual Events and OMS profitability and the one-off pension gain. 

 

On a reported basis, operating profit from continuing operations of £152.7m increased 5.5% (2015: £144.7m) owing to the above 19.2% increase in continuing adjusted operating profit*, offset by a higher amortisation charge, acquisition-related costs and net loss on disposals.

 

Diluted adjusted EPS* - continuing 

 


£m

2015

30.3

Share consolidation

1.9

Operating profit

1.7

Net interest

0.5

Minority interests

-0.5

FX

5.8

2016

39.7

 

 

 

Continuing diluted adjusted EPS increased by 31.0% to 39.7p (2015: 30.3p) reflecting the earnings growth in the period and the FX tailwind. The share consolidation completed on 27 June reduced the weighted average number of shares for 2016 to 419.2m (2015: 445.5m). 

 

On a reported basis, diluted EPS from continuing operations of 20.1p increased 10.4% (2015: 18.2p) in line with the increase in the adjusted measure (see above), offset by higher charges from adjusting items (amortisation, acquisition-related costs and a net loss on disposals).

 

Corporate operations and strategic operating expense

 

£m

2016

2015

Ongoing corporate costs

21.3

20.4

Pension administration and service cost

1.1

1.4

Non-cash share-based payments

3.2

2.1

Income from equity-accounted investments

(1.5)

(1.3)

Total

24.1

22.6

Non-recurring



Strategic operating expenses

-

0.5

Light Reading income

(0.7)

-

Pension curtailment and settlement credits

(5.0)

-

Total corporate costs

18.4

23.1

 

Total corporate costs decreased to £18.4m (2015: £23.1m).  Corporate costs before non-recurring items were up 6.6% at £24.1m (2015: £22.6m) due to the higher share-based payments charge.  Non-recurring items included:

-     Income from our Light Reading associate which returned to profit in H1.  On 13 July the holding (33%) was divested in full; and

-     Pension curtailment and settlement credits in relation to an initiative to allow members of the UBM Pension Scheme greater flexibility with regard to accessing their pension.

 

£m

2016

2015

Strategic operating expenses

7.2

7.6

Strategic capital expenses

3.6

-

 

Strategic operating and capital expenses relate to the implementation of our Events First strategy.  Strategic opex of £7.2m included costs relating to CRM and Marketing platform development, portfolio rationalisation and restructuring charges: £6.1m was in Events and £1.1m in OMS (2015: total costs of £7.6m of which £5.3m was in Events, £1.8m in OMS and £0.5m in corporate operations).  Strategic capital expenditure of £3.6m was invested in CRM platform development during the year.

 

Income statement adjusting items

 

The following table provides a summary of the income statement adjustments that have been excluded from the continuing adjusted operating profit* of £234.8m. The total charge to continuing operating profit for adjustments and exceptional items was £82.1m (2015: £52.4m).

 

£m

2016

2015

Amortisation - intangible assets on acquisition

(45.1)

(37.9)

Tax on share of profits from JVs and Associates

(0.5)

(0.4)

Exceptional items



Advanstar and BJI integration costs

(11.3)

(8.7)

Acquisition costs and earnout changes

(7.1)

(1.4)

Disposals



-     Investments and associates

11.2

2.1

-     Non-core businesses

9.2

-

-     Ecobuild

(35.1)

-

Impairment

(3.4)

(6.1)

Total exceptional items

(36.5)

(14.1)

Total income statement adjustments

(82.1)

(52.4)

 

Acquisition exceptional items

·      Advanstar integration costs of £8.1m were incurred in 2016 relating to the integration of the finance systems onto the Oracle platform and alignment and migration of processes.  Further costs of approximately $7m will be incurred during 2017 when the finance transition is completed along with further operations integration into the Americas.  The final costs are expected to be $33m.

·      BJI integration costs of £3.2m relate to the early exit of venue contracts and systems integration.  The total integration costs of $10m will continue to be incurred through 2017.

·      Acquisition costs in the year relate to due diligence and professional fees for the Allworld, BJI, CMI, The Battery Show and Secon acquisitions.  A charge of £0.4m (2015: £0.2m) has been recognised for changes in earnout estimates on prior year acquisitions.

 

Disposal gains and losses

·      Investment: we recognised income of £2.2m from Janus, a former investment, which had previously been impaired, resulting in the income being recognised as exceptional.

·      Associate: a gain on the disposal of our associate investment Light Reading of £9.0m was recognised.  We also held a vendor loan note asset of £7.8m from the previous divestment of the business which has been recovered in full though the disposal proceeds.  In 2015 income of £2.1m was received from an associate which had previously been impaired.

·      Non-core businesses: the disposal of the Electronics portfolio completed on 29 July resulting in a gain of £9.2m. 

·      In December we divested Ecobuild, recognising a loss of £35.1m including a non-cash write off of goodwill and intangible assets of £36.1m.

 

Impairment charges

The impairment charge of £3.4m reduces the net assets of the Index business in India to fair value less costs to sell, reflecting the disposal which was signed on 27 January 2017.  In the prior year, we recognised an impairment of £1.9m for the UBM Americas Print operations which continued to be rationalised as OMS activities are aligned to Events operations. In addition in the prior year, we recognised a re-measurement loss of £4.2m on the step acquisition of eMedia Asia Limited.

 

Net financing expense

 

Net interest expense of £26.3m (2015: £26.0m) represents interest payments on our bonds and bank loans and pension interest, net of interest receipts on cash holdings and vendor loan notes. The net expense is broadly flat against the prior year owing to a lower pension interest charge of £0.6m (2015: £1.7m) and repayment of the £250m sterling bond in November 2016. This reduction was offset by the lower interest income from the Delta and Light Reading vendor loan notes after repayment and interest on the new bridge financing put in place on 13 December to fund the Allworld acquisition.

 

Discontinued operations

 

The PRN disposal completed on 16 June 2016 and accordingly the adjusted operating profit*, for the period to 15 June, of £28.1m has been disclosed as discontinued operations in the income statement.

 

A profit on disposal of £389.1m has been recorded which is net of disposal costs of £34.8m, a loss on the deal contingent forward contract of £20.4m and the recycling of historic FX movements from reserves of £32.6m.

 

An exceptional charge of £8.2m has been recognised for the settlement agreed in April 2016 in relation to the Axio legal case, net of specific provisions, recoveries and legal costs.

 

 

TAX

 

Current tax

 

The tax charge on continuing adjusted operating profit* was £29.2m (2015: £25.2m), representing an effective rate of taxation* for the year of 14.0% (2015: 14.7%).  A bridge showing the main factors affecting the rate is shown below:

 


£m

UK tax rate

20.0

Higher rate on overseas earnings

9.6

Tax at statutory rates

29.6

US goodwill amortisation

-7.9

Effect of intragroup financing

-8.5

Other adjustments

3.3

Deferred tax and one-off settlements

-2.5

2016 Adjusted tax rate

14.0

 

Deferred tax and one-off settlements includes a credit of £4.9m following the successful conclusion of discussions with tax authorities on certain prior year matters.  The total cash paid in respect of income taxes in 2016 was £39.1m including £2.4m in respect of PRN profits (2015: £31.0m).  The table below is a reconciliation of the 2016 expected tax charge to actual cash tax paid:

 

 £m

Adjusted

Exceptional and other adjusting items

 

 

IFRS

Expected tax charge at UK rate

41.7

(17.7)

24.0

Different tax rate on overseas earnings

19.9

(5.2)

14.7

UBM tax charge at weighted average tax rate

61.6

(22.9)

38.7





US goodwill amortisation

(16.5)

-

(16.5)

Intragroup financing

(17.8)

-

(17.8)

Deferred tax and one-off settlement

(5.1)

(20.1)

(25.2)

Other adjustments

7.0

23.5

30.5

Exceptional deferred tax credit

-

13.1

13.1

Tax charge - continuing

29.2

(6.4)

22.8





Exclude deferred tax and JVs and Associates tax

1.8

7.5

9.3

Exclude accruals for uncertain tax positions

4.9

-

4.9

Tax paid in different period to charged

0.8

(1.1)

(0.3)

Tax paid in respect of PRN profits

2.4

-

2.4

UBM actual tax paid

39.1

-

39.1

 

A breakdown of the main geographies in which we pay tax is as follows:

 


£m

United States and Canada

3.1

Europe

12.1

China

18.0

Other Emerging Markets

4.7

Rest of World

1.2

Total

39.1

 

Our current tax liability as at 31 December 2016 was £61.9m (2015: £56.4m).  Movements in the balance during 2016 were as follows:

 


£m

Current tax liability at 1 January 2016

56.4

Current tax charge

33.2

Tax paid (continuing)

(36.7)

Acquisitions

7.4

Currency translation and other movements

1.6

Current tax liability at 31 December 2016

61.9

 

The current tax liability includes £45.6m (2015: £42.8m) in respect of accruals for uncertain tax positions in various jurisdictions in which UBM operates.  We have necessarily made judgements as to the outcome of tax matters not concluded.  The current tax liability has been consistently classified as a short-term liability in accordance with our accounting policy.  The current tax liability can be further analysed as follows:

 

By geography:



By year








%



%

United States and Canada

37.2


Up to 2012

5.7

Europe

18.6


2013

15.5

China

23.7


2014

17.8

Other Emerging Markets

16.7


2015

17.3

Rest of World

3.8


2016

43.7

Total

100.0


Total

100.0

 

Deferred tax

 

During the year we have recognised additional deferred tax assets of £4.7m in respect of tax losses and other temporary differences, bringing the total assets recognised to £27.2m.  These assets have been recognised because the Group expects to generate taxable profits against which they will be used in the future. In addition, at 31 December 2016 the Group had unrecognised deferred tax assets, including those relating to tax losses carried forward, further details of which are included in Note 3.2.

 

Our total tax contribution

 

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.

 

In the year ended 31 December 2016, the total tax contribution of our continuing business was £61.0m (2015: £47.8m) - 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:

 


Emerging Markets

US

Other

Total

Profit taxes borne

22.7

0.7

13.3

36.7

Employment taxes borne

3.5

7.7

7.0

18.2

Other taxes (e.g. business rates)

1.9

0.8

3.4

6.1

Total

28.1

9.2

23.7

61.0

 

In addition to the above, in 2016 we collected taxes on behalf of governments (e.g. employee taxes and sales taxes) amounting to £56.2m (2015: £49.1m).

 

CASH FLOW

 

Conversion of adjusted operating profit* into cash

 

The ability to turn our profits into cash is a key focus for management as it provides the funds necessary to invest in the business.  We track this using the cash conversion* measure which expresses our adjusted cash generated from operations* as a percentage of adjusted operating profit*.  Cash conversion* varies in line with our biennial cycle and event phasing.

 

£m

2016

2015

Adjusted operating profit*

262.9

245.5

Depreciation

17.5

24.7

Capital expenditure

(11.7)

(28.3)

Movement in working capital and other items

(15.8)

21.8

Adjusted cash generated from operations*

252.9

263.7

Cash conversion*

96%

107%

 

Cash conversion* at 96% (2015: 107%) decreased due to the less beneficial working capital movement in a down biennial year, partly offset by reduced capital expenditure.

 

Capital expenditure for the year was £11.7m (2015: £28.3m), reflecting the disposal of PRN and lower levels of spend after the completion of Project CORE and 240 Blackfriars in early 2015.  £3.6m of this expenditure related to the strategic spend on our new CRM platform.

 


£m

31 Dec 2015 Net Debt

484.9

Adjusted cash generated from operations

-252.9

Non-cash operating adjustments

13.8

Provisions & pensions

15.2

Interest & tax

64.3

Dividends & Share purchases

354.7

Net acquisitions

428.7

Disposal proceeds

-537.9

FX/Fair value

26

31 Dec 2016 Net Debt

596.8

 

We generated adjusted cash from operations* of £252.9m whilst free cash flow* was £159.6m. Cash invested in acquiring Allworld, BJI, CMI, The Battery Show and Secon and four minority interests totalled £428.7m (after costs).  Dividend payments and purchases of shares totalled £354.7m including the special dividend paid in July of £243.7m.  We received £494.7m from the disposal of PR Newswire and £43.2m from the disposals of the Electronics media portfolio, Light Reading, Ecobuild and the Janus investment (net of costs).

 

Free cash flow

 

Free cash flow* was £159.6m (2015: £196.8m).

 

£m

2016

2015

Adjusted cash generated from operations*

252.9

263.7

Non-cash operating adjustments

(13.8)

(3.7)

Payments against provisions

(11.9)

(7.8)

Pension deficit payments

(3.3)

(3.1)

Interest paid

(25.2)

(21.3)

Tax paid

(39.1)

(31.0)

Free cash flow*

159.6

196.8

 

Free cash flow* in 2016 has been impacted by negative working capital in a down biennial year and a higher level of spend on tax, integration costs and provisions, offset in part by lower capital expenditure.

 

 

Reconciliation of IFRS to adjusted cash generated from operations

 

£m

2016

2015

Adjusted cash generated from operations*

252.9

263.7

Dividends from JVs and associates

(0.5)

(5.5)

Capital expenditure

11.7

28.3

Payments against provisions

(11.9)

(7.8)

Pension deficit payments

(13.3)

(3.1)

Acquisition and disposal cost payments

(30.3)

-

Other adjustments

(13.8)

(3.7)

Cash generated from operations (IFRS)

194.8

271.9

 

 

ACQUISITIONS

 

We invested £379.7m in the acquisition of Allword excluding the Bahrain part of the business which completed in January 2017 and £82.7m in aggregate in the acquisition of four Events businesses: BJI, CMI, The Battery Show and Secon.  Had we owned these businesses from 1 January 2016 they would have contributed a further £18.0m of revenue. We also made payments for contingent and deferred consideration for acquisitions made in prior years totalling £0.8m.

 

The 2016 acquisitions contributed adjusted operating profit* of £4.4m from the date of acquisition.  The combined return on investment* from acquisitions made in the past three years is 11.0% with 2016 acquisitions contributing 9.9% in their first year.  Excluding Advanstar the three year return is 12.1%. 

 

Our return on investment* target framework requires acquisition returns in excess of our cost of capital in the first full year of ownership.  During 2016 the framework was refined to adjust, where appropriate, the cost of capital used and the period over which the return target must be reached to take into account the risk resulting from the scale, country, sector and complexity of the acquisition.

 

The table below shows the performance of our acquisitions since 2014:

 


Consideration3

Return on investment*


£m

2014

2015

2016

2014 acquisitions - excluding Advanstar

23.2

15.3%

17.0%

19.2%

2014 acquisitions - Advanstar

599.0

-

10.3%

10.7%

2015 acquisitions

34.6

-

9.5%

11.2%

2016 acquisitions4

62.2

-

-

9.9%

Total

719.0



11.0%

3 excluding working capital adjustments and including the latest estimate of expected contingent consideration.

4 2016 Return on investment only includes acquisitions where an event has traded under UBM ownership.

 

No trading for Allworld has been included in our 2016 results as the acquisition completed late in the year. We expect to incur exceptional integration costs of $20m over the next two-three years. 

 

 

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.

 

During the year, the revolving credit facility was extended by one year to April 2021, the £250m of 6.5% Sterling bonds matured in November 2016 and a $365m Bridge facility was put in place in December 2016 to part fund the acquisition of Allworld. The £250m bond repayment was made through surplus cash following the PRN disposal and drawings on the revolving credit facility. At 31 December 2016, we had drawn £106.1m from the revolving credit facility and £295.7m from the Bridge facility, leaving an unutilised commitment of £293.9m available. Our debt facilities and maturities as of 31 December 2016 are summarised below:

 

£m

Facility

Drawn

Undrawn

Maturity

Margin %

Fair value hedges

$365m Bridge facility

295.7

295.7

-

Dec 18

US LIBOR + 0.7%


$350m fixed rate Dollar bond

283.5

283.5

-

Nov 20

5.75% fixed

Floating rate swap for $100m
US LIBOR + 2.65%

£400m revolving credit facility

400.0

106.1

293.9

Apr 21

LIBOR + 0.6%


Total

979.2

685.3

293.9




 

Capital management

 

Our Financial Policy is to target a leverage ratio of between 1.5-2.0 times net debt/EBITDA which provides flexibility for biennial cycles, capacity to invest in bolt-on acquisitions, and is consistent with investment grade metrics. There is flexibility to move outside of the corridor (up to 2.5 times and down to 1.0 times), specifically due to M&A activity, with the intention of returning into the corridor within 12-18 months.  We continue to maintain investment grade ratings from each of Moody's and Standard & Poor's.

 

Our net debt at 31 December 2016 was £596.8m, up from £484.9m at the end of 2015 primarily due to increased borrowings to fund the Allworld acquisition.

 

The ratio of net debt to EBITDA was 2.4 times at 31 December 2016 up from December 2015 because of the acquisition of Allworld.  On a proforma basis assuming that Allworld was fully owned throughout 2016 the ratio would have been 2.3 times.

 

£m

Proforma

2016

2016

2015

Cash

(89.0)

(84.8)

(84.8)

Borrowings and associated derivatives

730.2

681.6

569.7

Net debt*5

641.2

596.8

484.9

EBITDA*6

275.8

252.3

270.2

Net debt to EBITDA ratio*

2.3 times

2.4 times

1.8 times

5 Includes fair value adjustments.

6 2015 reflects continuing operations EBITDA of £215.1m and discontinued operations EBITDA of £55.1m. 2016 includes continuing operations only.

 

Pensions

 

UBM operates defined benefit and defined contribution schemes, based primarily in the UK. A number of initiatives have taken place in 2016 to give members of the defined benefit section of the UBM Pension Scheme greater flexibility in accessing their pension.

 

At 31 December 2016, the aggregate accounting deficit was £50.6m, an increase of £25.9m compared to the deficit of £24.7m at the previous year end.  The increase was due to changes in actuarial assumptions and market conditions, partially offset by asset returns and the initiatives noted above.

 

RETURN ON AVERAGE CAPITAL EMPLOYED (ROACE)*

 

The return on average capital employed measure has been reviewed during the year and an updated definition has been adopted from 1 January 2016 which is in line with market practice. ROACE is defined as post tax adjusted operating profit* over average shareholders' funds plus net debt (average capital employed). Capital employed is adjusted for impairment charges from 1 January 2016 onwards and consequently at the end of 2016 has been adjusted to include both the Ecobuild goodwill write off and the 2016 impairment charge.

 

£m


Adjusted 20167

Adjusted

20157

Post tax adjusted operating profit* (£m)


205.6

171.9

Average capital employed (£m)


1,398.1

1,310.9

Return on average capital employed* (ROACE) (%)


14.7%

13.1%

7 Continuing operations and excluding Allworld capital employed at 31 December 2016

 

RELATED PARTY TRANSACTIONS

 

Details of related party transactions in the 12 months ended 31 December 2016 are disclosed in Note 7.1.

 

FOREIGN CURRENCY

 

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.

 

The following table outlines the currency profile of our revenues and adjusted operating profit* for 2016: 

 


Revenue

Adjusted operating

Average exchange rate

Year on year FX movement


£m

profit* £m

2016

2015

%

US Dollar8

408.4

117.8

1.3536

1.5302

-11.5%

Hong Kong Dollar8

106.3

46.8

10.1549

11.8616

-14.4%

Renminbi8

109.1

34.0

8.8480

9.6206

-8.0%

UK Pound Sterling

78.2

(19.4)

1.0000

1.0000

-

Euro

62.5

32.4

1.1471

1.3854

-17.2%

Indian Rupee

19.9

6.3

86.6128

98.0886

-11.7%

Japanese Yen

20.4

6.6

148.1978

184.9138

-19.9%

Brazilian Real

13.6

3.3

4.8732

5.1251

-4.9%

Other

44.6

7.0

-

-

-

Total

863.0

234.8




8 $ or quasi-$ pegged

 

Approximately 72% of UBM's continuing revenues and 85% of UBM's continuing adjusted operating profit* are generated in US Dollars or quasi Dollar-pegged currencies, which has benefited the Group's reported financials given FX movements during the year. During the year the FX tailwind added £92.0m to continuing revenue and £31.3m to continuing adjusted operating profit*. Had the current rates (USD 1.26) persisted throughout the entire year the total FX benefit would have been approximately £129.4m to continuing revenues and £42.7m to continuing adjusted operating profit*.

 

The income statement exposure to foreign exchange risk is shown for our most important foreign currency exposures in the sensitivity analysis below, based on 2016 operations:

 


Average exchange rate in 2016

Currency value rises/ falls by

Effect on revenue

+ / - £m

Effect on adjusted operating profit*9

+ / - £m

US Dollar

1.3536

1%

4.0

1.2

HK Dollar

10.1549

1%

1.1

0.5

Renminbi

8.8480

1%

1.1

0.3

Euro

1.1471

1%

0.6

0.3

9 The actual impact of currency on Group profit may be different to that implied due to the timing of profit

receipts, with financials translated on a monthly basis using the average for that month

 

 

STATEMENT OF GOING CONCERN AND DIRECTORS' RESPONSIBILITIES

 

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:

 

•     After taking account of available cash resources and committed bank facilities, none of UBM's borrowings fall due within the next 12 months that require refinancing from resources not already available.

•     The cash generated from operations, committed facilities and UBM's ability to access debt capital markets, taken together, provide confidence that UBM will be able to meet its obligations as they fall due.

•     Further information on the financial position of UBM, its cash flows, financial risk management policies and available debt facilities are described in my review on the preceding pages. UBM's business activities, together with the factors likely to impact its future growth and operating performance are set out in the Business review.

 

The Directors listed below (being all the Directors of UBM plc) confirm that the results in this preliminary announcement have been taken from the Group's 2016 Annual Report and Accounts which will be available on the Company's website in due course.  The consolidated financial statements have been prepared and approved by the Directors in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and the International Financial Reporting Interpretations Committee (IFRIC), give a true and fair view of the assets, liabilities, financial position and result of the Company and the undertakings included in the consolidation taken as a whole.  The management report contains:

 

·      an indication of important events that have occurred during the year ended 31 December 2016 and their impact on the consolidated financial statements, and a description of the principal risks and uncertainties facing the Group; and

·      material related party transactions in the year ended 31 December 2016 and any material changes to the related party transactions described in the 2015 Annual Report and Accounts.

 

The basis of preparation and summary of accounting policies applicable to the Group's consolidated financial statements can be found in the Accounting policies sections of the 2016 Annual Report and Accounts. The preliminary announcement for the year ended 31 December 2016 does not constitute statutory accounts as defined by the Companies (Jersey) Law 1991 or the Companies Act 2006.

 

Signed on behalf of the Board by

 

Marina Wyatt

Chief Financial Officer

 

 

21 February 2017

 

UBM plc Board of Directors:

Executive Directors:

Tim Cobbold (Group Chief Executive)

Marina Wyatt (Chief Financial Officer)

Non-Executive Directors:

Dame Helen Alexander (Chairman)

Dr Alan Gillespie CBE (Senior Independent Director)

Greg Lock

John McConnell

Mary McDowell

Terry Neill

Trynka Shineman (appointed 1 March 2016)

David Wei (appointed 1 November 2016)

 

 

Summary of principal risks

 

Macro-economic slowdown and/or exchange rate fluctuations

-     A slowdown in the macro-economic environment or changes to the geopolitical environment could adversely impact the Company's revenue, as exhibitor advertising, attendee, sponsorship and other discretionary revenue may decline. As an international business UBM is sensitive to this risk.

-     Foreign exchange rate fluctuations, particularly the US Dollar, could adversely affect our reported earnings and the strength of our balance sheet

Acquisition

-     Acquisitions are an important part of our strategy. Acquisitions may not deliver their expected returns. Integration issues or failure to realise operating benefits or synergies may also impact the expected returns from acquisitions

Specific country risk and emerging market exposure

-     The geopolitical environment remains dynamic and our business operates in many geographies, particularly Emerging Markets, which may present logistical and management challenges due to different business cultures, languages or unfavourable changes in applicable law or compliance requirements.

-     Expansion through joint ventures reduces logistical and management issues but can create governance challenges or affect our ability to extract value from our investment.

Factors and incidents affecting our ability to stage an event

-     A disaster or natural catastrophe, terrorism, political instability or disease could affect people's willingness to attend our events, which could have an adverse effect on our revenues

-     UBM utilises some of the largest global venues available creating the possibility of concentration where few or no alternatives exists.

-     A major incident at a venue during an event may give rise to significant contractual liabilities.

Changes in our business environment

-     We cannot predict all the changes and impacts that may affect the competitiveness of the business, such as changes in customer behaviour, or technological innovations which would increase competition or make some products or services less relevant. Social media platforms, search engines and other online technologies could all pose a competitive threat to our businesses, as could changes in legislation or compliance requirements where we operate

-     Similarly, additional venue capacity is introducing competition as well as enhancing opportunities for growth

Technological risk: data breach and cyber security

-     The increasing threat from unauthorised access to our systems by external parties could lead to reputational damage and regulatory action.

-     As part of its strategy, UBM has continued to invest in the technology platforms of the business. Having completed a system enhancement for UBM EMEA, progress has been made with UBM Americas. Failure to deliver these projects effectively could lead to increased costs, delays or erosion of UBM's competitive position

-     System failure could have a significant impact on our business. The collapse of the Cloud on which various products and systems are hosted could have negative consequences for our operational activity.

Access to capital

-     With the changing macro-environment and currency changes the availability or cost of financing may affect our acquisition strategy

People recruitment and retention

-     Changes in the operating model and competitive external landscape could see an increase in staff turnover.

 

 

Explanation of non-IFRS measures

 

Financial Measure

How we define it

Why we use it




Underlying revenue and underlying operating profit

Underlying measures are adjusted for the effects of acquisitions, disposals, foreign exchange movements, phasing and peripatetic and biennial events. Adjusted underlying also removes the impact of portfolio rationalisation

Underlying growth rates provide insight into the organic growth of the business




Adjusted operating profit

Operating profit excluding amortisation of intangible assets arising on acquisitions, exceptional items and share of taxation on joint ventures and associates

Provides insight into ongoing profit generation, individually and relative to other companies



Margin

Adjusted operating profit expressed as a percentage of revenue




EBITDA

Earnings before interest, tax, depreciation, amortisation and exceptional items

Measure of earnings and cash generative capacity




Adjusted profit before tax

Profit before tax before amortisation of intangible assets on acquisitions, exceptional items, share of taxation on profit from joint ventures and associates and net financing expense adjustments

Facilitates performance evaluation, individually and relative to other companies



Adjusted EPS

Adjusted basic EPS includes share of taxation on profit from joint ventures and associates but excludes movements on deferred tax balances recognised as a consequence of acquisition intangibles. Adjusted diluted EPS includes the impact of share options




Net debt

Net debt is current and non-current borrowings and derivatives associated with debt instruments, less cash and cash equivalents

Measure of indebtedness - includes benefit of current cash available to pay down debt




Free cash flow

Net cash provided by operating activities after meeting obligations for interest, tax, capital expenditure and pension deficit payments

Measure of cash available to repay debt, pay dividends and invest in acquisitions




Adjusted cash generated from operations

Adjusted to exclude non-operating movements in working-capital, such as expenditure against reorganisation and restructuring provisions and acquisition and disposal costs

Provides an understanding of our operating cash flows



Cash conversion

Cash conversion is the ratio of adjusted cash generated from operations to adjusted operating profit




Return on investment

Adjusted post tax incremental operating profit divided by the cost of acquisition calculated on a constant currency, biennial adjusted, pro forma basis, as if the business had been owned throughout the year

To assess returns on acquisitions relative to our cost of capital.  The measure was amended during 2015 to adjust for foreign exchange movements and incorporate the incremental operating result of the acquisition. This aligned the measure to our acquisition assessment criteria




Return on average capital employed (ROACE)

ROACE is post-tax adjusted operating profit over average capital employed.  Capital employed is shareholders' funds plus net debt. Shareholders' funds is adjusted for cumulative impairment charges from 1 January 2016

Provides a measure of the efficiency of our capital investment




Effective tax rate

The effective tax rate on adjusted profit before tax reflects the tax rate excluding movements on deferred tax balances recognised as a consequence of acquisition intangibles.

Provides a more comparable basis to analyse our tax rate

 

 

Consolidated income statement

for the year ended 31 December 2016

 











Before



Before





exceptional

Exceptional


exceptional

Exceptional




items

items

Total

items

items

Total



2016

2016

2016

2015

2015

2015

Notes


£m

£m

£m

£m

£m

£m


Continuing operations








Revenue

863.0 

863.0 

769.9 

769.9 


Other operating income

6.9 

6.9 

6.6 

6.6 


Operating expenses

(637.5)

(637.5)

(581.0)

(581.0)

3.1

Exceptional operating items

(45.5)

(45.5)

(12.0)

(12.0)


Amortisation of intangible assets arising on acquisitions

(45.1)

(45.1)

(37.9)

(37.9)


Share of results from joint ventures and associates (after tax)

1.9 

9.0 

10.9 

1.2 

(2.1)

(0.9)


Group operating profit from continuing operations

189.2 

(36.5)

152.7 

158.8 

(14.1)

144.7 









5.2

Financing income

2.8 

2.8 

2.9 

1.1 

4.0 

5.2

Financing expense

(28.3)

(7.1)

(35.4)

(29.1)

(29.1)

5.2

Net financing expense

(25.5)

(7.1)

(32.6)

(26.2)

1.1 

(25.1)










Profit before tax from continuing operations

163.7 

(43.6)

120.1 

132.6 

(13.0)

119.6 









3.2

Tax

(8.6)

(14.2)

(22.8)

(23.3)

(4.0)

(27.3)


Profit for the year from continuing operations

155.1 

(57.8)

97.3 

109.3 

(17.0)

92.3 










Discontinued operations







6.4

Profit for the year from discontinued operations

26.3 

380.9 

407.2 

44.7 

(29.3)

15.4 


Profit for the year

181.4 

323.1 

504.5 

154.0 

(46.3)

107.7 










Attributable to:








Owners of the parent entity



491.5 



96.6 


Non-controlling interests



13.0 



11.1 





504.5 



107.7 










Earnings per share (pence)







3.3

Continuing operations - basic



20.3p 



18.3p 

3.3

Continuing operations - diluted



20.1p 



18.2p 

3.3

Profit for the year - basic



118.5p 



21.8p 

3.3

Profit for the year - diluted



117.3p 



21.7p 













£m



£m


Group operating profit from continuing operations



152.7 



144.7 

3.1

Exceptional operating items



36.5 



14.1 


Amortisation of intangible assets arising on acquisitions



45.1 



37.9 


Share of tax on profit in joint ventures and associates



0.5 



0.4 

2

Continuing adjusted operating profit*



234.8 



197.1 

6.4

Discontinued adjusted operating profit*



28.1 



48.4 

2

Group adjusted operating profit*



262.9 



245.5 













£m



£m


Dividends







5.3

Special dividend of 55.3p (2015: nil)



243.7 



5.3

Interim dividend of 5.4p (5.3p)



21.2 



23.4 

5.3

Proposed final dividend of 16.6p (16.3p)



65.2 



72.0 

 

* 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 2016

 







2016

2015

Notes


£m

£m






Profit for the year

504.5 

107.7 






Other comprehensive income/(loss)








Other comprehensive income/(loss) to be reclassified to profit or loss in subsequent periods



5.3

Currency translation differences on foreign operations - Group

203.9 

60.5 

5.3

Net investment hedge

(39.0)

(17.5)

5.3

Available-for-sale investment

1.7 

5.3

Reclassification adjustment for foreign operations

32.6 

(2.0)

3.2

Income tax relating to components of other comprehensive income



199.2 

41.0 


Currency translation differences on foreign operations - joint ventures and associates

(0.3)

(0.3)



198.9 

40.7 






Other comprehensive (loss)/income not to be reclassified to profit or loss in subsequent periods




Remeasurement of defined benefit obligation

(43.9)

27.6 


Irrecoverable element of pension surplus

(0.1)

(0.1)

3.2

Income tax relating to components of other comprehensive income



(44.0)

27.5 


Remeasurement of defined benefit obligation of associates

(0.9)

(0.8)



(44.9)

26.7 






Other comprehensive income for the year, net of tax

154.0 

67.4 






Total comprehensive income for the year net of tax

658.5 

175.1 






Attributable to:




Owners of the parent entity

639.1 

164.4 


Non-controlling interests

19.4 

10.7 



658.5 

175.1 

 

 

 

Consolidated statement of financial position

at 31 December 2016

 







31 December

31 December



2016

2015

Notes


£m

£m


Assets




Non-current assets



4.1

Goodwill

1,644.5 

1,195.3 


Intangible assets

555.8 

371.3 


Property, plant and equipment

40.4 

40.4 


Investments in joint ventures and associates

16.5 

20.2 


Available-for-sale investments

26.8 


Trade and other receivables

1.7 


Vendor loan note

5.5 


Derivative financial instruments

5.4 

6.4 


Retirement benefit surplus

4.9 

4.6 

3.2

Deferred tax asset

27.2 

18.2 



2,323.2 

1,661.9 


Current assets




Trade and other receivables

229.7 

219.4 


Cash and cash equivalents

84.8 

76.5 


Vendor loan note

2.3 


Derivative financial instruments

0.2 

3.6 


Assets of disposal group classified as held for sale

166.3 



314.7 

468.1 






Total assets

2,637.9 

2,130.0 






Liabilities




Current liabilities



3.2

Current tax liabilities

61.9 

56.4 


Trade and other payables

522.7 

418.8 


Provisions

20.9 

11.6 


Borrowings

0.5 

255.9 


Derivative financial instruments

3.1 

17.0 


Liabilities associated with assets of disposal group classified as held for sale

79.1 



609.1 

838.8 


Non-current liabilities



3.2

Deferred tax liabilities

30.9 

7.4 


Trade and other payables

9.2 

12.9 


Provisions

8.5 

7.3 


Borrowings

686.5 

313.5 


Derivative financial instruments

12.7 

6.7 


Retirement benefit obligation

55.5 

29.3 



803.3 

377.1 






Total liabilities

1,412.4 

1,215.9 






Equity attributable to owners of the parent entity



5.3

Share capital

44.3 

44.3 

5.3

Share premium

535.3 

534.7 

5.3

Other reserves

(410.9)

(605.3)


Retained earnings

1,029.5 

927.6 


Put options over non-controlling interests

(7.8)

(17.5)


Total equity attributable to owners of the parent entity

1,190.4 

883.8 


Non-controlling interests

35.1 

30.3 


Total equity

1,225.5 

914.1 






Total equity and liabilities

2,637.9 

2,130.0 

 

These financial statements were approved by the Board of Directors and were signed on its behalf on 21 February 2017 by:

 

 

Marina Wyatt

Director

 

 

 

Consolidated statement of changes in equity

for the year ended 31 December 2016

 








Total equity



Put options

attributable







over non-

to owners

Non-




Share

Share

Other

Retained

controlling

of parent

controlling

Total



capital

premium

reserves

earnings

interests

 entity

interests

equity

Notes


£m

£m

£m

£m

£m

£m

£m

£m












At 1 January 2016

44.3 

534.7 

(605.3)

927.6 

(17.5)

883.8 

30.3 

914.1 


Profit for the year

491.5 

491.5 

13.0 

504.5 


Other comprehensive income/(loss)

192.5 

(44.9)

147.6 

6.4 

154.0 


Total comprehensive income for the year

192.5 

446.6 

639.1 

19.4 

658.5 

5.3

Equity dividends

(336.7)

(336.7)

(336.7)


Non-controlling interest dividends

(12.2)

(12.2)

6.1

Non-controlling interest arising on business combinations

1.5 

1.5 

6.2

Acquisition of non-controlling interests

(5.8)

9.7 

3.9 

(3.9)

5.3

Issued in respect of share option schemes and other entitlements

0.6 

0.6 

0.6 


Share-based payments

6.1 

6.1 

6.1 

5.3

Shares awarded by ESOP

26.3 

(26.3)

5.3

Own shares purchased by the Company

(24.4)

18.0 

(6.4)

(6.4)


At 31 December 2016

44.3 

535.3 

(410.9)

1,029.5 

(7.8)

1,190.4 

35.1 

1,225.5  
































At 1 January 2015

44.3 

533.5 

(640.1)

900.0 

(17.5)

820.2 

26.6 

846.8 


Profit for the year

96.6 

96.6 

11.1

107.7 


Other comprehensive income/(loss)

41.1 

26.7 

67.8 

(0.4)

67.4 


Total comprehensive income for the year

41.1 

123.3 

164.4 

10.7

175.1 

5.3

Equity dividends

(94.2)

(94.2)

(94.2)


Non-controlling interest dividends

(9.6)

(9.6)

6.1

Non-controlling interest arising on business combinations

2.9 

2.9 


Acquisition of non-controlling interests

0.3 

0.3 

(0.3)

5.3

Issued in respect of share option schemes and other entitlements

1.2 

1.2 

1.2 


Share-based payments

4.0 

4.0 

4.0 

5.3

Shares awarded by ESOP

17.1 

(17.1)

5.3

Own shares purchased by the Company

(23.4)

11.3 

(12.1)

(12.1)


At 31 December 2015

44.3 

534.7 

(605.3)

927.6 

(17.5)

883.8 

30.3 

914.1 

 

 

 

Consolidated statement of cash flows

for the year ended 31 December 2016

 







2016

2015

Notes


£m 

£m 


Cash flows from operating activities




Profit for the year from continuing operations

97.3 

92.3 

6.4

Profit for the year from discontinued operations

407.2 

15.4 


Profit for the year

504.5 

107.7 


Add back:




Exceptional operating items from continuing operations (excluding fair value adjustments below)

36.1 

13.9 


Fair value adjustments to contingent consideration

0.4 

6.4

Exceptional items relating to discontinued operations

(382.0)

29.3 

3.2

Tax

25.7 

30.0 


Amortisation of acquired intangible assets

45.1 

38.9 


Amortisation of website development costs and internally generated software

9.5 

14.7 


Depreciation

8.0 

10.0 


Share of results from joint ventures and associates (after tax)

(2.1)

(1.5)

5.2

Net financing expense

32.6 

25.1 


Other non-cash items (including disposal gain/loss and pension settlement gain)

5.6 



277.8 

273.7 


Payments against provisions

 

(11.9)

(7.8)


Pension deficit contributions

(13.3)

(3.1)


Decrease in trade and other receivables

32.1 

20.3 


Decrease in trade and other payables

(89.9)

(11.2)


Cash generated from operations

194.8 

271.9 


Interest and finance income received

1.8 

5.8 


Interest and finance costs paid

(27.0)

(27.1)

3.2

Tax paid

(39.1)

(31.0)


Dividends received from joint ventures and associates

0.5 

5.5 


Net cash flows from operating activities

131.0 

225.1 


Net cash flows from operating activities - continuing

110.1 

194.2 


Net cash flows from operating activities - discontinued

20.9 

30.9 






Cash flows from investing activities




Purchase of property, plant and equipment

(5.4)

(13.9)


Expenditure on intangible assets

(6.3)

(14.4)

6.1

Acquisition of interests in subsidiaries, net of cash acquired

(416.2)

(34.7)

6.3

Proceeds from sale of investments

2.1 


Proceeds from repayment of vendor loan note

8.7 

21.8 


Proceeds from sale of joint ventures and associates

14.9 

6.3

Proceeds from sale of businesses, net of cash disposed

545.8 

0.9 


Net cash flows from investing activities

143.6 

(40.3)


Net cash flows from investing activities - continuing

147.5 

(35.6)


Net cash flows from investing activities - discontinued

(3.9)

(4.7)






Cash flows from financing activities



5.3

Proceeds from issuance of ordinary share capital

0.6 

1.2 

6.2

Acquisition of non-controlling interests

(5.8)

5.3

Dividends paid to shareholders

(336.7)

(94.2)


Dividends paid to non-controlling interests

(12.2)

(9.6)


Investment in own shares - ESOP

(6.4)

(12.1)

5.1

Proceeds from borrowings

324.7 

5.1

Repayment of borrowings

(250.0)

(62.6)


Net cash flows from financing activities

(285.8)

(177.3)


Net cash flows from financing activities - continuing

(258.9)

(150.9)


Net cash flows from financing activities - discontinued

(26.9)

(26.4)






Net (decrease)/increase in cash and cash equivalents

(11.2)

7.5 






Net foreign exchange difference

12.6 

2.3 


Cash and cash equivalents including overdrafts at 1 January (including held for sale)

82.9 

73.1 


Cash and cash equivalents classified as held for sale

(8.3)


Cash and cash equivalents including overdrafts at 31 December

84.3 

74.6 





 

 

Notes to the consolidated financial statements

at 31 December 2016

 

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.  UBM plc is tax resident in the United Kingdom.  The principal activities of the Group are described in Section 2. 

 

The preliminary announcement was approved by the Board of Directors on 21 February 2017.

 

The figures and financial information for the year ended 31 December 2016 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 2015 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, except for the adoption of the following new and amended IFRSs.

 

Accounting standard

Requirements

Impact on financial statements

IAS 19 'Employee Benefits' (amended)

The amendment requires the high quality corporate bonds used in estimating the discount rate for post-employment benefits to be denominated in the same currency as the benefits to be paid.

Effective for annual periods beginning on or after 1 January 2016.

The amendment does not have a material impact.

IFRS 11 'Joint Arrangements' (amended)

This amendment requires an acquirer of an interest in a joint operation in which the activity constitutes a business to apply all of the business combinations accounting principles in IFRS 3 and other IFRSs, except for those principles that conflict with the guidance in IFRS 11, and disclose the information required by IFRS 3 and other IFRSs for business combinations.

Effective for annual periods beginning on or after 1 January 2016.

The amendment does not have a material impact.

 

The following new and amended standards have also been adopted but they do not impact the consolidated financial statements of the Group:

·     IFRS 14: Regulatory Deferral Accounts;

·     IAS 16 'Property, Plant and Equipment' (amended) and IAS 38 'Intangible Assets' (amended)

·     IAS 27 'Separate Financial Statements' (amended)

·     Amendments to IFRS 10, IFRS 12 and IAS 28: Investment Entities: Applying the Consolidation Exception;

·     Amendments to IAS 1: Disclosure Initiative;

·     Amendments to IAS 16 and IAS 41: Agriculture - Bearer Plants; and

·     Annual Improvements 2012-2014

-       IFRS 5: Non-current Assets Held for Sale and Discontinued Operations - Changes in methods of disposal;

-       IFRS 7: Financial Instruments: Disclosures - Servicing Contracts;

-       IFRS 7: Financial Instruments: Disclosures - Applicability of the offsetting disclosures to condensed interim financial statements;

-       IAS 34: Interim Financial Reporting - Disclosure of information 'elsewhere in the interim financial report'.

 

Discontinued operations

 

The sale of the PR Newswire businesses (PR Newswire) to Cision, a business controlled by GTCR Canyon Holdings (Cayman), L.P., completed on 16 June 2016 for $841m comprising $810m in cash and $31m of preferred equity (on a fair value basis at that date).  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%.  Having been subject to further regulatory clearance, the sale of the PR Newswire China business completed on 30 September 2016. PR Newswire is classified as discontinued for all periods in these consolidated financial statements.  As the disposal was announced on 15 December 2015 it was classified as held for sale at 31 December 2015.  These businesses constituted the entire PR Newswire operating segment.

 

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 a going concern basis.

 

Basis of consolidation 

 

The consolidated financial statements comprise those of UBM plc (the Company) and its subsidiaries (together referred to as the Group) and include the Group's interests in joint ventures and associates. 

 

 

2.  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:

·     Events which provide face-to-face interaction in the form of exhibitions, tradeshows, conferences and other live events;

·     Marketing Services - Online which provide website sponsorships and banner advertising as well as online directory and data products;

·     Marketing Services - Print which publishes magazines and trade press to specialist markets; and

·     PR Newswire which provides communications products and services to professionals working in marketing, public relations, corporate communications or investor relations roles - distributing messages, identifying target audiences and monitoring the impact.

 

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 2016 and 31 December 2015.

 

Marketing Services - Online and Marketing Services - Print have been aggregated to form one reportable segment 'Other Marketing Services'.  The products are similar with shared revenue characteristics (subscriptions, advertising and directories) and the production of material is the same, only the delivery method differs as online or printed. 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 2016



Other



PR Newswire


Marketing

Corporate

Continuing

discontinued

Events

Services

costs

total

operations

Total

£m

£m

£m

£m

£m

£m

Revenue







Total segment revenue

712.6 

151.4 

864.0 

103.2 

967.2 

Intersegment revenue

(1.0)

(1.0)

(0.2)

(1.2)

External revenue

711.6 

151.4 

863.0 

103.0 

966.0 








Result







Depreciation (including amortisation of website development costs and internally generated software)

(13.9)

(2.9)

(0.7)

(17.5)

(17.5)

Share of pre-tax results from joint ventures and associates

0.2 

2.2 

2.4 

0.2 

2.6 

Segment adjusted operating profit

229.1 

24.1 

(18.4)

234.8

28.1 

262.9 

Amortisation of intangible assets arising on acquisitions



(45.1)

(45.1)

Exceptional operating items



(36.5)

382.0 

345.5 

Share of tax on profit in joint ventures and associates




(0.5)

(0.5)

Group operating profit



152.7 

410.1 

562.8 

Net financing expense




(25.5)

(25.5)

Exceptional items relating to net financing expense



(7.1)

(7.1)

Profit before tax



120.1 

410.1 

530.2 

Exceptional tax items



(14.2)

(1.1)

(15.3)

Tax




(8.6)

(1.8)

(10.4)

Profit for the year




97.3 

407.2 

504.5 

 

Total corporate costs were £25.6m (2015: £23.9m).  Corporate costs were offset by internal cost recoveries, and share of pre-tax results from joint ventures and associates of £1.5m (2015: £1.3m).  Non-recurring credits of £5.7m include one-off pension credits of £5.0m and £0.7m income from a disposed associate. (2015: £0.5m one-off cost in relation to the implementation of the Events First strategy). 

 

 

Year ended 31 December 2015



Other



PR Newswire




Marketing

Corporate

Continuing

discontinued



Events

Services

costs

total

operations

Total


£m

£m

£m

£m

£m

£m

Revenue







Total segment revenue

635.0 

139.3 

774.3 

205.4 

979.7 

Intersegment revenue

(4.4)

(4.4)

(0.7)

(5.1)

External revenue

630.6 

139.3 

769.9 

204.7 

974.6 








Result







Depreciation (including amortisation of website development costs and internally generated software)

(13.9)

(3.0)

(1.1)

(18.0)

(6.7)

(24.7)

Share of pre-tax results from joint ventures and associates

0.3 

1.3 

1.6 

0.3 

1.9 

Segment adjusted operating profit

202.5 

17.7 

(23.1)

197.1 

48.4 

245.5 

Amortisation of intangible assets arising on acquisitions



(37.9)

(1.0)

(38.9)

Exceptional operating items




(14.1)

(29.3)

(43.4)

Share of tax on profit in joint ventures and associates



(0.4)

(0.4)

Group operating profit




144.7 

18.1 

162.8 

Net financing expense




(26.2)

(26.2)

Exceptional items relating to net financing expense



1.1

1.1 

Profit before tax




119.6 

18.1 

137.7 

Tax




(27.3)

(2.7)

(30.0)

Profit for the year




92.3 

15.4 

107.7 

 

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.

 


2016 

2015 

Continuing revenue

£m 

£m 

United Kingdom

69.0 

72.5 

Foreign countries



United States and Canada

404.7 

345.6 

Continental Europe

66.6 

61.7 

China (including Hong Kong)

218.6 

195.7 

Emerging Markets1

83.6 

79.7 

Rest of the world

20.5 

14.7 


794.0 

697.4 

External revenue

863.0 

769.9 

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

2016

2015


£m

£m

United Kingdom

300.5 

357.4 

Foreign countries



United States and Canada

1,470.7 

1,100.3 

Continental Europe

12.5 

10.9 

China (including Hong Kong)

115.1 

36.4 

Emerging Markets1

380.8 

116.2 

Rest of the world

4.9 

6.0 


1,984.0 

1,269.8 

Total non-current assets

2,284.5 

1,627.2 

 

Non-current assets for this purpose consist of goodwill, intangible assets, property, plant and equipment, investments in joint ventures and associates and available-for-sale 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 and are excluded from the Group's adjusted operating profit measure. They typically relate to costs associated with acquisitions, gains or losses on disposal of investments, material restructuring costs and impairments. Exceptional items are considered individually and assessed each reporting period.

 


                                2016

                                2015

 

(Charged)/credited to continuing operating profit

                                  £m

                                   £m

 

Advanstar integration costs

(8.1)     

(8.7)

Business Journals Inc integration costs

(3.2)     

-

Acquisition costs on Allworld Exhibitions

(4.7)     

-

Acquisition costs on Advanstar

-      

(0.6)

Acquisition costs on other business combinations

(2.0)     

(0.6)

Changes in estimates of contingent consideration

(0.4)     

(0.2)

Exceptional items relating to acquisitions

(18.4)     

(10.1)




Gain on disposal of investment (Note 6.3)

2.2      

Gain on disposal of associate (Note 6.3)

9.0      

Gain on joint venture previously impaired

-      

2.1 

Loss on disposal of Ecobuild (Note 6.3)

(35.1)     

Gain on disposal of non-core businesses (Note 6.3)

9.2      

Exceptional items relating to disposal of investments

(14.7)     

2.1 




Impairment of goodwill (Note 4.1) and intangible assets

(3.4)     

(1.9)

Impairment of joint ventures and associates

-      

(4.2)

Impairment charge

(3.4)     

(6.1)




Total charged to continuing operating profit

(36.5)     

(14.1)

 

Acquisition costs

Total acquisition costs of £6.7m have been expensed as exceptional items and relate mainly to due diligence and professional fees paid to various advisors.  Of these, £4.7m relate to the acquisition of Allworld Exhibitions, and £2.0m relate to fees incurred for the acquisitions of Business Journals Inc, Content Marketing Institute, The Battery Show and Secon (Note 6.1).

 

Advanstar integration costs

The integration costs incurred in 2016 relate to the integration of the finance systems onto the Oracle platform and alignment and migration of finance processes. Further costs of approximately $7m will be incurred in 2017 when the finance transition is completed along with further operational integration into the Americas division.  The final costs are expected to be approximately $33m.

 

Business Journals Inc (BJI) integration costs

The costs associated with the integration of BJI are estimated to be $10m in total. The costs are predominantly in respect of venue contracts and system integration. Costs will continue into 2017 to complete the integration.

 

Exceptional items relating to disposal of investments

The Group received £2.1m from the sale of Janus SAS, a French business which the Group exited five years ago, retaining a 9.5% investment. The gain on disposal of £2.2m has been reported as exceptional income as the investment value and associate vendor loan note were impaired in 2013.

 

The gain on disposal of associates and gain on disposal of non-core businesses includes £9.0m in relation to the disposal of Light Reading and £9.2m in relation to the electronics media portfolio, respectively. 

 

A loss on disposal of £35.1m was recognised on the disposal of Ecobuild, primarily representing a £36.1m write off of goodwill and intangible assets under a fair value less costs to sell valuation.  The assets had previously been carried at value in use as part of the EMEA Events portfolio, as permitted under IAS36 'Impairment of assets'.

 

Impairment

The impairment charge of £3.4m reduces the net assets of UBM Index Trade Fairs Private Limited to fair value less costs to sell, reflecting the disposal agreement entered in to on 27 January 2017.  £3.3m relates to goodwill and £0.1m to intangible assets, held in the Events segment.

 

A tax charge of £1.1m has been recognised in relation to the disposal of the electronics media portfolio. There is no other tax recognised in respect of the exceptional items reported above.

 

 

3.2  Tax

 

Income statement

 


2016

2015

Continuing

£m

£m

Current tax expense

(31.0)

(40.5)

Exceptional tax charge

(14.2)

(4.0)

Other deferred tax credit

22.4 

17.2 

Income tax expense

(22.8)

(27.3)

 

£13.1m of the exceptional tax charge relates to the unwind of the deferred tax asset recognised on acquisition of Advanstar in 2014.  The remaining £1.1m charge relates to the disposal of the electronics media portfolio (Note 3.1).

 

Reconciliation of total tax expense to the accounting profit:


2016

2015


£m

£m

Profit before tax from continuing operations

120.1 

119.6 

Profit before tax from discontinued operations (Note 6.4)

410.1 

18.1 

Profit before tax

530.2 

137.7 




Profit before tax multiplied by UK rate of corporation tax of 20.0% (2015: 20.25%)

106.0 

27.9 




Effect of:



Different tax rates on overseas earnings

15.2 

13.7 

Non-taxable gain on disposal of discontinued operations

(74.2)

Expenses not deductible for tax purposes

19.1 

13.9 

Non-taxable income

(9.7)

(3.2)

Net movement in uncertain tax positions

(4.9)

11.4 

Prior year adjustments

2.1 

0.4 

Benefit of intragroup financing

(17.8)

(17.2)

Exceptional deferred tax charge

13.1 

4.0 

Movement in deferred tax assets recognised as a consequence of acquisition intangibles

(6.7)

10.4 

Movement in other deferred tax assets recognised

(4.6)

(15.7)

Losses brought forward and utilised

(6.1)

(19.0)

Surplus losses carried forward

12.5 

9.9 

Deduction for amortisation

(18.8)

(16.1)

Effects of other unrecognised temporary differences

(3.3)

9.7 

Share of results from associates and joint ventures (after tax)

(0.4)

(0.4)

Other

4.2 

0.3 

Total tax expense

25.7 

30.0 

Tax expense reported in the consolidated income statement

22.8 

27.3 

Tax attributable to discontinued operations (Note 6.4)

2.9 

2.7 


25.7 

30.0 

 

Reconciliation to continuing adjusted tax charge


2016

2015


£m

£m

Income tax expense

25.7 

30.0 

Exceptional tax charge

(14.2)

(4.0)

Net deferred tax movement on acquisition intangibles

20.1 

1.5 

Share of tax on profit in joint ventures and associates

0.5 

0.4 

Tax attributable to discontinued operations

(2.9)

(2.7)

Continuing adjusted tax charge (Note 3.3)

29.2 

25.2 

 

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 (2015: nil).

 

Statement of financial position: current tax


2016

2015


£m

£m

Current tax liability at 1 January

56.4 

42.1 

Current tax expense - continuing

32.1 

40.5 

Current tax expense - discontinued operations

1.1 

2.7 

Acquisitions (Note 6.1)

7.4 

Tax paid

(36.7)

(31.0)

Classified as held for sale

0.7 

Currency translation and other movements

1.6 

1.4 

Current tax liability at 31 December

61.9 

56.4 

 

The current tax liability includes £45.6m (2015: £42.8m) in respect of accruals for uncertain tax positions.

 

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



2016



£m

China


18.0 

Netherlands


11.1 

Brazil


2.0 

US


1.7 

Other Emerging Markets


2.7 

Other


3.6 

Total


39.1 

 

Statement of financial position: deferred tax

Deferred tax liabilities/(assets)

Consolidated statement of financial position

Consolidated income          

          statement      


2016

2015

2016

2015


£m

£m

£m

£m

Intangibles

97.4 

59.8 

(0.7)

8.6 

Accelerated capital allowances

1.8 

(0.9)

2.6 

(1.3)

Tax losses

(78.8)

(48.7)

(19.0)

(4.5)

Other temporary differences

(16.7)

(21.0)

7.8 

10.4 


3.7 

(10.8)

(9.3)

(13.2)

 

The movement in deferred tax balance during the year is:


2016

2015


£m

£m

Net deferred tax asset at 1 January

(10.8)

(1.9)

Acquisitions (Note 6.1)

25.8 

4.9 

Amounts credited to net profit - continuing

(9.3)

(13.2)

Disposals (Note 6.3)

(1.1)

(0.2)

Classified as held for sale

1.6 

Currency translation

(0.9)

(2.0)

Net deferred tax liability/(asset) at 31 December

3.7 

(10.8)




Analysed in the statement of financial position, after offset of balances within countries, as:



Deferred tax assets

(27.2)

(18.2)

Deferred tax liabilities

30.9 

7.4 


3.7 

(10.8)

 

The deferred tax assets of £27.2m (2015: £18.2m) relate to tax losses and other temporary differences in the US of £18.1m (2015: £14.0m), Luxembourg of £8.4m (2015: £4.2m) and other countries of £0.7m (2015: nil).  These have been recognised because the Group expects to generate taxable profits in the future against which these will be used.

 

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

 

·      £321.8m (2015: £297.8m) in UK subsidiaries which are available to offset against future UK corporate tax liabilities;

·      £189.2m (2015: £201.6m) in US subsidiaries which are available to offset against future US federal tax liabilities.  Of these £173.0m expire between 2019 and 2036 (2015: £192.7m between 2019 and 2035);

·      £249.7m (2015: £254.5m) of UK capital losses which are only available for offset against future capital gains;

·      £7.2bn (2015: £6.2bn) that have arisen in Luxembourg holding companies as a result of revaluations of those companies' investments for local GAAP purposes; and

·      £7.4m (2015: £4.0m) in respect of companies in other countries.

 

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 £20.7m (£13.6m in relation to the UK, nil in relation to the US, and £7.1m in relation to other countries) (2015: £19.0m (£7.1m, £10.1m and £1.8m respectively)).  No deferred tax assets have been recognised in respect these assets as it is uncertain that they will be utilised.

 

At 31 December 2016, deferred tax liabilities of £3.9m (2015: £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 £5.0bn (2015: £4.7bn). 

 

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, movements on deferred tax balances recognised as a consequence of acquisition of intangibles, exceptional items and net financing expense adjustments (detailed in Note 5.2).

 

The weighted average number of shares used in the calculation of earnings per share reflects the share consolidation on 27 June 2016 of eight for every nine shares owned (as detailed in Note 5.3).  In accordance with IAS 33, the prior period weighted average number of shares has not been restated as the share consolidation was coupled with the payment of the special dividend (Note 5.3), which had the overall effect of a share repurchase at fair value.

 

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 2016 would be to increase weighted average shares by 4.3 million shares (2015: 3.0 million shares).

 

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

 

Continuing operations









Weighted



Weighted


average no.

Earnings

average no.

Earnings

Earnings

of shares

per share

Earnings

of shares

per share

2016

2016

2016

2015

2015

2015

£m

pence

£m

million

pence

Adjusted Group operating profit

234.8 



197.1 



Net interest expense

(25.7)



(24.3)



Pension schemes finance expense

(0.6)


(1.7)



Adjusted profit before tax

208.5 



171.1 



Adjusted tax (Note 3.2)

(29.2)



(25.2)



Non-controlling interests

(13.0)



(11.1)



Adjusted earnings per share

166.3 

414.9 

40.1 

134.8 

442.5 

30.5 

Adjustments







Amortisation of intangible assets arising on acquisitions

(45.1)


(10.9)

(37.9)


(8.6)

Net deferred tax movements on intangible assets

20.1 


4.8 

1.5 


0.3 

Exceptional items

(36.5)


(8.8)

(14.1)


(3.2)

Exceptional deferred tax charge

(14.2)


(3.4)

(4.0)


(0.9)

Net financing (expense)/income adjustments

(6.3)

(1.5)

0.9 


0.2 

Basic earnings per share

84.3 

414.9 

20.3 

81.2 

442.5 

18.3 

Dilution







Options

4.3 

(0.2)

3.0 

(0.1)

Diluted earnings per share

84.3 

419.2 

20.1 

81.2 

445.5 

18.2 








Adjusted earnings per share (as above)

166.3 

414.9 

40.1 

134.8 

442.5 

30.5 

Options

4.3 

(0.4)

3.0 

(0.2)

Diluted adjusted earnings per share

166.3 

419.2 

39.7 

134.8 

445.5 

30.3 

 

 

Total Group









Weighted



Weighted




average no.

Earnings


average no.

Earnings


Earnings

of shares

per share

Earnings

of shares

per share


2016

2016

2016

2015

2015

2015


£m

pence

£m

million

pence

Adjusted Group operating profit

262.9 



245.5 



Net interest expense

(25.7)



(24.3)



Pension schemes finance expense

(0.6)


(1.7)



Adjusted profit before tax

236.6 



219.5 



Adjusted tax (Note 3.2)

(31.0)



(27.9)



Non-controlling interests

(13.0)



(11.1)



Adjusted earnings per share

192.6 

 

414.9 

46.4 

180.5 

442.5 

40.8 

Adjustments







Amortisation of intangible assets arising on acquisitions

(45.1)


(10.9)

(38.9)


(8.8)

Net deferred tax movements on intangible assets

20.1 


4.8 

1.5 


0.3 

Exceptional items

344.4 


83.1 

(43.4)


(9.8)

Exceptional deferred tax charge

(14.2)


(3.4)

(4.0)


(0.9)

Net financing (expense)/ income adjustments

(6.3)

(1.5)

0.9 


0.2 

Basic earnings per share

491.5 

414.9 

118.5 

96.6 

442.5 

21.8 

Dilution







Options

4.3 

(1.2)

3.0 

(0.1)

Diluted earnings per share

491.5 

419.2 

117.3 

96.6 

445.5 

21.7 








Adjusted earnings per share (as above)

192.6 

 

414.9 

46.4 

180.5 

442.5 

40.8 

Options

4.3 

(0.5)

3.0 

(0.3)

Diluted adjusted earnings per share

192.6 

419.2 

45.9 

180.5 

445.5 

40.5 

 

4  Statement of Financial position

 

4.1  Goodwill

 

Goodwill is allocated and monitored by management at a CGU level, consisting of the three business units operating across the Group's operating segments.  Not all business units are active in all segments; there are 7 CGUs at 31 December 2016 (2015: 11 CGUs).  The reduction in CGUs in 2016 is due to the sale of PR Newswire and the integration of UBM Advanstar into UBM Americas.  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 2016




Other





Marketing




Events

 Services

Total



£m

£m

£m

Cost





At 1 January 2016


1,138.6 

129.9 

1,268.5 

Acquisitions (Note 6.1)


301.2 

3.1 

304.3 

Disposals (Note 6.3)


(29.7)

(8.8)

(38.5)

Currency translation


175.9 

13.1 

189.0 

At 31 December 2016


1,586.0 

137.3 

1,723.3 

Impairment





At 1 January 2016


4.7 

68.5 

73.2 

Charge for the year


3.3 

3.3 

Disposals (Note 6.3)


(1.8)

(1.8)

Currency translation


0.5 

3.6 

4.1 

At 31 December 2016


8.5 

70.3 

78.8 

Carrying amount





At 1 January 2016


1,133.9 

61.4 

1,195.3 

At 31 December 2016


1,577.5 

67.0 

1,644.5 

 

Within the Events segment, management considers the UBM Americas Events, UBM EMEA Events and UBM Asia Events CGUs to be significant.  The carrying amount of goodwill attributed to these CGUs at 31 December 2016 was £1,007.5m, £225.5m and £344.5m respectively.  In 2015, UBM Americas Events (£429.1m), UBM EMEA Events (£303.3m) and Advanstar Events (£401.7m) were considered significant.

 

 

 

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.

 


1 January

Non-cash


Currency

31 December


2016

items

Cash flow

translation

2016


£m

£m

£m

£m

£m

Cash and cash equivalents

84.8 

(12.6)

12.6 

84.8 

Bank overdrafts

(1.9)

1.4 

(0.5)

Net cash

82.9 

(11.2)

12.6 

84.3 







Bonds due in less than one year

(254.0)

4.0 

250.0 

Bank loans due in more than one year

(74.0)

(324.7)

(3.1)

(401.8)

Bonds due in more than one year

(239.5)

1.1 

(46.3)

(284.7)

Borrowings

(567.5)

5.1 

(74.7)

(49.4)

(686.5)







Derivative assets associated with borrowings

10.0 

(5.6)

1.0 

5.4 

Derivative liabilities associated with borrowings

(10.3)

10.3 

Net debt

(484.9)

(0.5)

(85.9)

(25.5)

(596.8)

 

5.2  Net financing expense

 

Net financing expense









Before



Before



exceptional

Exceptional

exceptional

Exceptional

items

items

Total

items

items

Total

2016

2016

2016 

2015

2015

2015

£m

£m

£m

£m

£m

£m

Financing expense







Borrowings and loans

(27.5)

(27.5)

(26.9)

(26.9)

Other

Total interest expense for financial liabilities not classified at fair value through profit or loss

(27.5)

(27.5)

(26.9)

(26.9)

Pension schemes net finance expense

(0.6)

(0.6)

(1.7)

(1.7)

Fair value movement on interest rate swaps

(1.5)

(1.5)

(0.2)

(0.2)

Fair value movement on $350m bond

1.8 

1.8 

0.2 

0.2 

Ineffectiveness on fair value hedges

0.3 

0.3 

Fair value movement on put options over non-controlling interests

(7.1)

(7.1)

Forward exchange loss on forward contract

(0.1)

(0.1)

Other fair value movements

(0.5)

(0.5)

(0.4)

(0.4)


(28.3)

(7.1)

(35.4)

(29.1)

(29.1)








Financing income







Cash and cash equivalents

1.5 

1.5 

1.0 

1.0 

Vendor Loan Note

0.3 

0.3 

1.6 

1.6 

Total interest income

1.8 

1.8 

2.6 

2.6 

Fair value movement on interest rate swaps

(3.6)

(3.6)

(3.8)

(3.8)

Fair value movement on £250m bond

4.4 

4.4 

4.1 

4.1 

Ineffectiveness on fair value hedges

0.8 

0.8 

0.3 

0.3 

Fair value movement on put options over non-controlling interests

1.1 

1.1 

Forward exchange gain on forward contract

0.2 

0.2 


2.8 

2.8 

2.9 

1.1 

4.0 








Net financing expense

(25.5)

(7.1)

(32.6)

(26.2)

1.1 

(25.1)

 

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 which matured in November 2016 and the $350m 5.75% dollar bonds due 2020. 

 

The exceptional financing expense on the fair value movement on put options over non-controlling interests is a result of improved performance in the related businesses using updated forecast results in line with the Events First strategy.

 

 

5.3  Equity and dividends

 

Share capital


2016

2015

Authorised

£m

£m




1,081,888,657 (2015: 1,217,124,740) ordinary shares of 11.25 pence each

121.7 

121.7 

 


Ordinary

Ordinary


shares

shares

Issued and fully paid

Number

£m

At 1 January 2015

442,652,520 

44.3 

 

Issued in respect of share option schemes and other entitlements

 

325,018 

At 31 December 2015

442,977,538 

44.3 

 

Issued in respect of share option schemes and other entitlements prior to the share consolidation

Share consolidation

(49,219,727)

Issued in respect of share option schemes and other entitlements after the share consolidation

151,042 

At 31 December 2016

393,908,858 

44.3 

 

 

The ESOP Trust owns 0.21% (2015: 0.34%) 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.

 

On 27 June 2016, in conjunction with the special dividend of 55.3p per share, a share consolidation was carried out to convert nine existing ordinary shares with a nominal value of 10p each to eight new ordinary shares with a nominal value of 11.25p each.  The share consolidation converted the 442,997,543 existing issued and fully paid ordinary shares into 393,757,816 new issued and fully paid ordinary shares.  In accordance with IAS 33, the prior period weighted average number of shares has not been restated as the share consolidation was coupled with the payment of the special dividend.

 

Share premium


2016

2015


£m

£m

In issue at 1 January

534.7 

533.5 

Premium on shares issued, net of costs

0.6 

1.2 

In issue at 31 December

535.3 

534.7 

 

The Company received £0.6m (2015: £1.2m) on the issue of shares in respect of the exercise of options awarded under various share option plans.

 

Dividends


2016

2015


£m

£m

Declared and paid during the year



Equity dividends on ordinary shares



Final dividend for 2015 of 16.3p (2014: 16.0p)

71.8 

70.8 

Special dividend for 2016 of 55.3p (2015: nil)

243.7 

Interim dividend for 2016 of 5.4p (2015: 5.3p)

21.2 

23.4 


336.7 

94.2 




Proposed (not recognised as a liability at 31 December)



Equity dividends on ordinary shares



Final dividend for 2016 of 16.6p (2015: 16.3p)

65.2 

72.0 

 

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

 

 

Other reserves



Foreign







currency


Available-


Total


Merger

translation

ESOP

for-sale

Other

other


reserve

reserve

reserve

reserve

reserves

reserves


£m

£m

£m

£m

£m

£m

Balance at 1 January 2015

(732.2)

(31.7)

(1.5)

125.3 

(640.1)

Total comprehensive income for the year1

41.1 

41.1 

Shares awarded by ESOP

17.1 

17.1 

Own shares purchased by the Company

(23.4)

(23.4)

Balance at 31 December 2015

(732.2)

9.4 

(7.8)

125.3 

(605.3)

Total comprehensive income for the year2

190.8 

1.7 

192.5 

Shares awarded by ESOP

26.3 

26.3 

Own shares purchased by the Company

(24.4)

(24.4)

Balance at 31 December 2016

(732.2)

200.2 

(5.9)

1.7 

125.3 

(410.9)

 

1  The amount included in the foreign currency translation reserve for 2015 represents the currency translation difference on foreign operations on Group subsidiaries of £60.9m (excluding £(0.4)m relating to non-controlling interests), on net investment hedges of £(17.5)m on joint ventures and associates of £(0.3)m and on the reclassification adjustment for foreign operations in period of £(2.0)m.

 

2  The amount included in the foreign currency translation reserve for 2016 represents the currency translation difference on foreign operations on Group subsidiaries of £197.5m (excluding £6.4m relating to non-controlling interests), on net investment hedges of £(39.0)m, on joint ventures and associates of £(0.3)m and on the reclassification adjustment for foreign operations in period of £32.6m, relating to disposals (Note 6.4).

 

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 in November 2012 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.

 

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 2016, 3,787,951 shares were purchased by the ESOP (2015: 4,364,749 shares) at a cost of £24.4m (2015: £23.4m). The Company received contributions of £18.0m (2015: £11.3m) from employees relating to the exercise price of share options and awards granted in prior years.

 

Available-for-sale reserve

The available-for-sale reserve is used to record fair value movements on the preferred equity issued to the Group as part of the consideration for the disposal of the PR Newswire business.

 

6  Acquisitions and disposals

 

6.1  Acquisitions

 

2016 acquisitions

 

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

 





Initial and

Maximum


2016



deferred

contingent


acquisition



consideration

consideration

Acquisition

date

Activity

Segment

£m

£m

Business Journals Inc. (BJI)

21 April

Fashion events and associated online and print products

Events, Online and Print

50.0 

Content Marketing Institute

31 May

Content marketing events and online

Events and Online

11.3 

13.7 

Smarter Shows (Power) Holdings Limited (The Battery Show)

31 October

Battery (power and technology) event

Events

12.0 

2.3 

Boannews Co., Ltd (Secon) 60%

31 October

Integrated security exhibition

Events

1.8 

0.4 

Allworld Exhibitions (Allworld)

19 December

Events operator in multiple industries

Events

379.7 





454.8 

16.4 

The initial and deferred consideration amounts are after working capital adjustments.

 

 

Allworld Exhibitions

On 19 December 2016, the Group acquired Allworld for £379.7m, after working capital adjustments and excluding £49m consideration for the Bahrain business.  The Bahrain business was subject to separate close conditions and completed on 13 January 2017. As control was not obtained until 13 January 2017, the Bahrain business was not consolidated at 31 December 2016.

 

Net assets of £131.3m, including cash of £28.9m and intangible assets of £145.8m have been recognised. These amounts have been based on a preliminary valuation, and are subject to change once the full purchase price allocation and fair value analysis has been completed, as permitted under IFRS 3 Business Combinations (revised 2008).

 

Allworld is the leading privately owned Asian exhibitions business operating 51 tradeshows in 11 countries, with approximately 250 employees and international sales teams based in London and Singapore. Allworld is a pure-play event business that serves business professionals and consumers in nine industry sectors, and has industry leading events in the attractive Food & Hospitality, Packaging, Manufacturing, TMT and Oil & Gas sectors.

 

In 2016, Allworld generated 90% of its revenue from its 28 major events and 52% of revenue from annual events. It has consistently delivered strong organic growths over the past 10 years with high profit margins and cash conversion rate.

 

The preliminary goodwill of £248.4m arising from the acquisition of Allworld relates to the following factors:

·      the acquisition strengthens UBM's market-leading position in Asia, creating the leading events business in the ASEAN region, and provides UBM with entry into the Middle East;

·      the acquisition operates in complementary sectors to UBM's existing portfolio, particularly in Food & Hospitality, Packaging and Manufacturing, and with entry into Oil & Gas; and

·      the acquisition provides a significant opportunity to accelerate growth through operational initiatives and application of Events First best practices.

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

 

Business Journals Inc.

The goodwill of £33.7m arising from the acquisition of BJI relates to the following factors:

·      BJI is a well-established player in the US market for fashion trade shows, allowing UBM to benefit from expected growth in this sector;

·      the acquisition is highly complementary to UBM's existing fashion tradeshow portfolio, providing UBM with scope to generate material synergies in areas such as event operations, property and cross-marketing opportunities;

·      revenue synergies from New York venue optimisation where UBM can combine BJI-controlled space which is under-utilised with UBM's existing space during key market periods; and

·      cost synergies from combining show management structures, scale efficiencies and overhead cost reductions.

 

The goodwill arising on the acquisition of BJI is expected to be deductible for tax purposes.

 

Acquired net assets

 

The fair value of the identifiable assets and liabilities acquired in respect of acquisitions (excluding equity transactions) made in 2016 and 2015 was:

 


Allworld

BJI

Other acquisitions

All acquisitions

Hospitalar

Other acquisitions

All acquisitions


2016

2016

2016

2016

2015

2015

2015


£m

£m

£m

£m

£m

£m

£m

Intangible assets arising on acquisition

145.8 

15.1 

13.1 

174.0 

12.2 

2.8 

15.0 

Property, plant and equipment

0.2 

0.2 

Trade and other receivables

12.7 

2.9

2.1 

17.7 

0.5 

1.6 

2.1 

Deferred tax asset

0.4 

0.4 

Cash and cash equivalents

28.9 

3.7 

1.1 

33.7 

7.6 

7.6 


188.0

21.7 

16.3 

226.0 

12.7 

12.0 

24.7 

Trade and other payables

(24.3)

(5.4)

(3.1)

(32.8)

(6.9)

(6.9)

Current tax liability

(7.3)

(0.1)

(7.4)

Deferred tax liability

(25.1)

(1.1)

(26.2)

(4.2)

(0.7)

(4.9)


(56.7)

(5.4)

(4.3)

(66.4)

(4.2)

(7.6)

(11.8)

Identifiable net assets

131.3 

16.3 

12.0 

159.6 

8.5 

4.4 

12.9 

Goodwill arising on acquisition

248.4 

33.7 

22.2 

304.3 

22.6 

11.1 

33.7 

Fair value of previously held interests

(3.8)

(3.8)

Non-controlling interests

(1.5)

(1.5)

(2.9)

(2.9)


379.7 

50.0 

32.7 

462.4 

31.1 

8.8 

39.9 

 

 

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:


Allworld

BJI

Other acquisitions

All acquisitions

Hospitalar

Other acquisitions

All acquisitions


2016

2016

2016

2016

2015

2015

2015


£m

£m

£m

£m

£m

£m

£m

Brands

107.5 

11.2 

6.0 

124.7 

6.2 

1.5 

7.7 

Software

0.1 

0.1 

Order backlog

3.2 

0.1 

0.8 

4.1 

Customer relationships

31.2 

2.8 

4.0 

38.0 

6.0 

1.2 

7.2 

Customer contracts and relationships

34.4 

2.9 

4.8 

42.1 

6.0 

1.2 

7.2 

Databases

3.9 

0.9 

2.3 

7.1 

0.1 

0.1 

Total

145.8 

15.1 

13.1 

174.0 

12.2 

2.8 

15.0 

 

The total consideration transferred on acquisitions is as follows:

 


     Allworld

BJI

Other acquisitions

All acquisitions

Hospitalar

Other acquisitions

All acquisitions


2016

2016

2016

2016

2015

2015

2015


£m

£m

£m

£m

£m

£m

£m

Cash and cash equivalents

376.1 

49.0 

24.0 

449.1 

31.1 

8.3 

39.4 

Fair value of contingent consideration

7.6 

7.6 

0.4 

0.4 

Deferred consideration

3.6 

1.0 

1.1 

5.7 

0.1 

0.1 

Total consideration transferred

379.7 

50.0 

32.7 

462.4 

31.1 

8.8 

39.9 

 

Acquisition costs of £6.7m (2015: £1.2m) 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. £4.7m and £0.7m of these costs related to the acquisition of Allworld and BJI respectively (2015: £0.6m related to Hospitalar).

 

Cash flow effect of acquisitions

 

The aggregate cash flow effect of acquisitions was as follows:


Allworld

BJI

Other acquisitions

All acquisitions

Hospitalar

Other acquisitions

All acquisitions


2016

2016

2016

2016

2015

2015

2015


£m

£m

£m

£m

£m

£m

£m

Net cash acquired

(28.9)

(3.7)

(1.1)

(33.7)

(7.6)

(7.6)

Cash paid to acquire

376.1 

49.0 

24.0 

449.1 

31.1 

8.4 

39.5 

Contingent consideration paid:








  2012 acquisitions

0.8 

0.8 

Deferred consideration paid:








  2012 acquisitions

0.5 

0.5 

  2014 acquisitions

2.3 

2.3 

Net cash outflow on acquisitions

347.2 

45.3 

23.7 

416.2 

31.1 

3.6 

34.7 

 

The Group paid £0.8m of contingent consideration during 2016 in relation to the 2012 acquisition of UBM ICC Fuarcilik ve Organizasyon Ticaret A.Ş.

 

Acquisition performance

 

From their respective dates of acquisition to 31 December 2016, the acquisitions completed in 2016 contributed £21.5m to revenue and £4.4m to adjusted operating profit to the Group. If the acquisitions had taken place at the beginning of 2016, the acquisitions would have contributed £107.7m to revenue and £31.8m to adjusted operating profit of the Group, of which £68.2m of revenue and £23.2m of adjusted operating profit would have been contributed by Allworld.

 

 

6.2  Equity transactions

 





2016

2015





£m

£m

Cash paid




5.8 

Put option liability




(5.8)

Carrying amount of non-controlling interest at acquisition date




(3.9)

(0.3)

Recognised in equity




3.9 

0.3 

 

On 29 February 2016, the Group acquired the remaining 25% minority shareholding of Sienna Interlink for total cash consideration of £2.3m.  This equity purchase brings the Group's total shareholding in Sienna Interlink to 100%.

 

On 9 June 2016, the Group acquired the remaining 25% minority shareholdings of Intermodal Organizacao de Eventos S.A. Ltda and UBM Brazil Feiras e Eventos Ltda for total cash consideration of £2.7m. This equity purchase brings the Group's total shareholdings in Intermodal Organizacao de Eventos S.A. and UBM Brazil Feiras e Eventos Ltda to 100%.

 

On 8 September 2016, the Group acquired a further 15% shareholding of UBM ICC Fuarcilik ve Organizasyon Ticaret A.Ş (ICC) for total cash consideration of £0.8m. This equity purchase brings the Group's total shareholding in ICC to 85%.

 

On 1 March 2015, the Group acquired the remaining 40% minority shareholding of UBM Novomania Limited for total cash consideration of HKD 1 as the business had ceased trading. This equity purchase brings the Group's total shareholding in UBM Novomania Limited to 100%.

 

 

6.3  Disposals

 

2016 disposals





Initial and


Gain/(loss)

2016

deferred

on

disposal

consideration

 disposal

Disposal

date

Activity

Segment

£m

£m

PR Newswire

16 June

PR Newswire

595.1 

389.1 

Electronics Media portfolio

29 July

Electronics media

Online

19.2 

9.2 

Ecobuild

12 December

UK sustainable construction show

Events

(35.1)





614.3 

363.2 

 

The Group disposed of its PR Newswire businesses on 16 June 2016 for cash consideration of $810m and preferred equity of $40m, measured at $31m (£21.9m) on a fair value basis at that date. 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%. At 31 December 2016, the fair value of the preferred equity is £26.8m and is reported within 'Available-for-sale investments'. The interest income is calculated on a compound basis and will only be recognised in the income statement when the right to receive the payment is established on recoupment following an exit event.

 

The Group also disposed of the following investments:

·      on 22 April 2016, UBM disposed of its 9.5% investment in Janus SAS for consideration of £2.1m. A profit of £2.2m has been recognised within Exceptional operating items (Note 3.1).

·      on 13 July 2016, UBM disposed of its investment in Light Reading LLC for consideration of £16.1m and a profit of £9.0m has been recognised in Exceptional operating items (Note 3.1)

 

Disposed net assets

 

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







PRN

Other

Total

Total


2016

2016

2016

2015


£m

£m

£m

£m

Goodwill

94.7 

36.7 

131.4 

0.5 

Intangible assets

6.6 

6.5 

13.1 

1.0 

Property, plant and equipment

13.1 

0.1 

13.2 

Deferred tax assets

1.6 

1.6 

Investment in joint ventures and associates

2.1 

2.1 

Trade and other receivables

47.0 

3.8 

50.8 

2.8 

Cash and cash equivalents

5.2 

5.2 

1.2 

Total assets

170.3 

47.1 

217.4 

5.5

Trade and other payables

(53.2)

(3.6)

(56.8)

(3.9)

Deferred tax liability

-   

(1.1)

(1.1)

(0.2)

Total liabilities

(53.2)

(4.7)

(57.9)

(4.1)

Identifiable net assets

117.1

42.4 

159.5 

1.4

Costs associated with disposal

35.9 

2.7 

38.6 

0.2

Loss on deal contingent forward

20.4 

20.4 

Cumulative exchange loss reclassified to profit and loss on disposal

32.6 

32.6 

Profit/(loss) on disposal

389.1 

(25.9)

363.2 

0.6 

Consideration received

595.1 

19.2 

614.3 

1.0 

Less cash disposed and deferred consideration

(5.2)

(5.2)

(1.8)

Cash received for sale of fixed asset investment net of disposal costs

1.7 

Less preferred equity

(21.9)

(21.9)

Translation difference using deal contingent forward

(41.4)

(41.4)

Net cash inflow

526.6 

19.2 

545.8 

0.9 

 

 

6.4  Discontinued operations and assets held for sale

 

As disclosed in Section 1, the sale of the PR Newswire businesses was completed during 2016.  PR Newswire was recognised as held for sale at 31 December 2015 and discontinued at 31 December 2016 and 2015.

 

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



PR Newswire

PR Newswire



2016

2015



£m

£m

Revenue


103.0 

204.7 

Other operating income


0.1 

0.1 

Operating expenses


(75.2)

(156.7)

Share of results from joint ventures and associates


0.2 

0.3 

Adjusted operating profit from discontinued operations


28.1 

48.4 

Amortisation of intangible assets arising on acquisitions


(1.0)

Exceptional operating items


390.2

(29.3)

Profit before tax from discontinued operations


418.3 

18.1 

Attributable tax


(1.8)

(2.7)

Exceptional tax items


(1.1)

Profit for the year from discontinued operations


415.4 

15.4 





Earnings per share for discontinued operations




Basic


98.2 

3.5 

Diluted


97.2 

3.5 





Net cash flows attributable to discontinued operations




Net cash from operating activities


20.9 

30.9 

Net cash from investing activities


(3.9)

(4.7)

Net cash from financing activities


(26.9)

(26.4)

Net cash flows attributable to discontinued operations


(9.9)

(0.2)

 

The PR Newswire exceptional item is the profit on disposal of £389.1m which includes:

·      £34.8m of disposal costs for services incurred relating to the disposal. The costs include broker fees, management transaction bonuses, legal advice and warranties and indemnities recognised in accordance with specific clauses in the sale agreement.

·      £20.4m foreign exchange loss on the fair value measurement of a deal contingent forward used to fix the US dollar proceeds into sterling which is in addition to a £21.0m loss recognised in 2015. Consistent with the accounting treatment adopted for a similar instrument taken out for the Advanstar acquisition, hedge accounting has not been applied.

 

In addition, included in discontinued operations is an £8.2m charge for the settlement of the Axio legal dispute in respect of the Delta disposal after specific provisions, recoveries and legal costs. The total net exceptional credit for discontinued operations is £380.9m.

 

 

7.  Other notes

 

7.1  Related party transactions

 

Transactions with related parties are made at arm's length. Outstanding balances at year-end are unsecured and settlement occurs in cash.  There are no bad debt provisions for related party balances as at 31 December 2016, and no debts due from related parties have been written off during the year.  Unless otherwise stated, there are no amounts owed by or due to the Group at 31 December 2016. 

 

The Group entered into the following transactions with related parties during the year:

 




Balances


Balances





(owed by)/


(owed by)/





due to


due to





the Group at

Value of

the Group at

Value of




31 December

transactions

31 December

transactions

Related party and



2016

2016

2015

2015

Relationship

Nature of transactions

£m

£m

£m

£m

GML Exhibitions (Thailand) Co Limited - Joint Venture

Dividend income, advances and management fees

-1

-1

Guangzhou Beauty Fair - Joint Venture

Dividend income, commission and management fees

2.1 

Guzhen Lighting Expo Company Limited - Joint Venture

Dividend income and marketing expenses

-2

0.5 

Light Reading LLC - Joint Venture

Vendor loan note and transitional services

7.8 

0.3 

 

1 The Group received a dividend of £52,000 from GML Exhibitions (Thailand) Co Limited and is owed nil as at 31 December 2016 (2015: £4,000).

2 The Group is owed £7,000 by Guzhen Lighting Expo Company Limited as at 31 December 2016 (2015: nil).

 

 

The Group disposed of its interest in Light Reading LLC on 13 July 2016. Vendor loan notes were fully repaid, and from this date, it ceased to be a related party.

 

Compensation of key management personnel of the Group

 

Key management personnel are the Group's Executive Directors and Non-Executive Directors and the following is the aggregate compensation of these Directors:


2016

2015


£m

£m

Short term employee benefits

2.6 

2.9 

Contributions to defined contribution plans

0.2 

0.2 

Share-based payments

2.1 

3.0 


4.9 

6.1 

 

 

7.2  Events after the reporting period

 

On 13 January 2017, the Group completed the acquisition of the Bahrain business relating to Allworld Exhibitions.

 

On 27 January 2017, the Group entered into an agreement to dispose of its remaining 70% majority shareholding in UBM Index Trade Fairs Private Limited for total cash consideration of INR 70,000 (£800). Completion of the transaction is subject to obtaining foreign currency transfer of shares approval.

 

On 2 February 2017, the Group acquired the LED & Lighting Exhibition, the LED Conference, LED Awards, the Electricity Exhibition and the Electronic Components Exhibition from Marmara Tanıtım Fuarcılık Organizasyon Reklam ve Ticaret A.Ş. for consideration of 4m TRL (£0.9m).

 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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