Annual Report & Accounts 2012 - Euromoney Institutional Investor ...

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Euromoney Institutional Investor PLC Annual Report and Accounts 2012 www.euromoneyplc.com Directors’ Report continued average time spent online from 2011. The usage behaviour of mobile applications has been complementary to online site usage, engaging users whilst travelling or not at their desks. The applications have also provided an opportunity for greater advertising and sponsorship revenues. Customers remain at the heart of the group’s strategy – the group now request online customer feedback, provide prototype and beta stages of innovation and have invested in online segmentation and analytics through Webtrends across all sites. Efficiencies have continued within marketing services – with customer service, contact research and event sales, accounting for 48% of all event delegate revenue, now outsourced to Philippines and India. 4.4.10 Systems and information technology The group continues to increase its investment in technology with particular emphasis on cloud, mobile, social and data as well as the people that manage its delivery and management. A number of new products were launched as well as existing digital assets redesigned during the year to support continued business demand. Project Delphi was initiated in 2012 and is at the core of this digital strategy. The project will introduce a new digital application platform for authoring, storing and presenting content and data based upon a unified web content management system, standards based XML data repository and semantic engine. It will enable the repurposing of existing content and data with granular discovery and aggregation, remove existing barriers to product segmentation and increase speed to market. Responsive design and HTML5 have both been adopted within the digital development process with mobile versions of key websites launched as well as over 14 mobile applications. Continued investment has been made in migrating the digital and corporate infrastructure to a new supplier who will provide an enterprise class, service-orientated hybrid cloud architecture. Microsoft Office 365, remote working solutions and Windows 7 have all been successfully piloted and will be fully rolled out in 2013. The new CRM and events platform have continued to be rolled out across the group with increased functionality. Investment in the e-commerce, tax and permissioning systems also continued. The online store technology will provide a way to promote better cross-selling of products across the group. 16
Euromoney Institutional Investor PLC Annual Report and Accounts 2012 www.euromoneyplc.com A framework has been adopted for service management in order to minimise business disruption and generate cost efficiencies across the group. There has also been an increased focus on information security with frequent penetration tests and audits conducted. The group’s digital assets are compliant with the new Privacy and Electronic Communication Regulations. Policies regarding social media use have similarly been reviewed and Euromoney is actively building out capability in this area. These steps have increased the group’s flexibility, scalability and resilience allowing technical staff to instead focus on core front-office and revenue-generating activities rather than commodity maintenance. 4.4.11 Tax and treasury Committee The group’s tax and treasury committee normally meets twice a year and is responsible for recommending policy to the board. The committee members are the chairman, managing director and finance director of the company, and the finance director and the deputy finance director of DMGT. The chairman of the audit committee is also invited to attend tax and treasury meetings. The group’s treasury policies are directed to giving greater certainty of future costs and revenues and ensuring that the group has adequate liquidity for working capital and debt capacity for funding acquisitions. Treasury The treasury department does not act as a profit centre, nor does it undertake any speculative trading activity, and it operates within policies and procedures approved by the board. Interest rate swaps are used to manage the group’s exposure to fluctuations in interest rates on its floating rate borrowings. The maturity profile of these derivatives is matched with the expected future debt profile of the group. The group’s policy is to fix the interest rates on approximately 80% of its term debt looking forward over five years. The maturity dates are spread in order to avoid interest rate basis risk and also to mitigate short-term changes in interest rates. At September 30 2012, the group had 69% of its gross debt fixed by the use of interest rate hedges. The predictability of interest costs is deemed to be more important than the possible opportunity cost forgone of achieving lower interest rates and this hedging strategy has the effect of spreading the group’s exposure to fluctuations arising from changes in interest rates and hence protects the group’s interest charge against sudden increases in rates but also prevents the group from benefiting immediately from falls in rates. The group generates approximately twothirds of its revenues in US dollars, including approximately 30% of the revenues in its UKbased businesses, and approximately 60% of its operating profits are US dollar-denominated. The group is therefore exposed to foreign exchange risk on the US dollar revenues in its UK businesses, and on the translation of the results of its US dollar-denominated businesses. In order to hedge its exposure to US dollar revenues in its UK businesses, a series of forward contracts are put in place to sell forward surplus US dollars. The group hedges 80% of forecast US dollar revenues for the coming 12 months and up to 50% for a further six months. The group does not hedge the foreign exchange risk on the translation of overseas profits, although it does endeavour to match foreign currency borrowings with investments and the related foreign currency finance costs provide a partial hedge against the translation of overseas profits. As a result of this hedging strategy, any profit or loss from the strengthening or weakening of the US dollar will largely be delayed until the following financial year and beyond. Details of the financial instruments used are set out in note 19 to the accounts. Tax The adjusted effective tax rate based on adjusted profit before tax and excluding deferred tax movements on intangible assets, prior year items and exceptional items is 22% (2011: 26%). The group’s reported effective tax rate decreased to an expense of 24% compared to an expense of 33% in 2011. A reconciliation to the underlying effective rate is set out in note 9 to the accounts. The total net deferred tax balance held is a liability of £9.6 million (2011: £9.0 million) and relates primarily to capitalised intangible assets and rolled over capital gains, net of deferred tax assets held in respect of US tax losses and short-term timing differences and the future deductions available for the CAP. Directors’ Report Company Accounts Group Accounts Our Governance Our Performance 17
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