Regulatory Announcements
Interim Results
Released: 30/07/2010
Solid first half performance; on track for full year Results for the Six Months Ended 30 June 2010 Key Results H1 2010 H1 2009 Change Revenue £434.3m £435.0m (0.2)% Adjusted operating profit 1 £83.2m £78.3m 6.3% Adjusted EPS 24.9p 26.7p (6.7)% Dividend per share 6.0p 6.0p 0.0% Statutory operating profit £67.0m £55.2m 21.4% Statutory profit after tax £49.6m £51.3m (3.3)% Statutory EPS 18.7p 19.9p (6.0)% Statutory EPS (diluted) 18.6p 19.6p (5.1)% Financial Highlights: * Solid first half performance - adjusted operating profit up 6.3% on revenues unchanged year on year * EBITDA up 7.3% to £91.1m (H1 2009 - £84.9m)
* Balance sheet remains strong - debt / LTM EBITDA 1.6 times (H1 2009 - 1.3
times); cash & undrawn facilities of £395.0m (H1 2009 - £267.6m)
* Strong operating cash flow generation in H1 - £76.9m (H1 2009 - £74.5m)
* 12 businesses acquired for £43.5m (H1 2009 - 0 acquisitions) - £28.2m invested in tradeshows, £27.2m in emerging markets * Interim dividend maintained at 6.0p
Operating Highlights:
- Robust performance in Events: 48.9% of H1 adjusted operating profits (H1 2009 -
48.3%)
* Revenues up 1.5%, adjusted operating profit up 7.7%, margins up 1.6 points
to 29.2%
* Robust Events performance in positive biennial half: strong in Asia; stable
in Europe; late cycle effects on stand revenues in US and UK
* H1 attendee revenues up 6.0%, reflecting recovery at US technology shows
* Forward bookings for exhibition stand space at Top 20 events running in
next 12 months up 12%
- Overall, solid performance in Data, Services & Online: 23.8% of H1 adjusted
operating profits (H1 2009 - 20.4%)
* Revenues up 2.3%, adjusted operating profit up 23.8%, margins up 2.7 points
to 15.3%
* Data & Services revenues down by 1.2% to £98.6m (H1 2009 - £99.8m),
reflecting late cycle effects on subscriptions and softer service revenues
* Online revenues up 15.3% to £30.9m (H1 2009 - £26.8m) driven by strong
online advertising growth
- Ongoing Print - magazine portfolio management: 4.4% of H1 adjusted operating
profits (H1 2009 - 4.2%) * Revenues down 13.9%, adjusted operating profit up 12.1%, margins up 1.2 points to 5.0%
* Continued action to address impact of shift from print - four titles closed
in H1 (H1 2009 - 15 titles)
- Resilient Targeting, Distribution & Monitoring performance: 28.1% of H1
adjusted operating profits (H1 2009 - 29.4%)
* Revenues up 7.4%, adjusted operating profit up 1.7%, margins down 1.4
points to 25.7%
* News distribution revenues up 2.7%, US volumes up 5.1%; good China revenue
growth 14.6%
* Targeting, Monitoring and multimedia product revenues up 15.9% to £35.0m
* Margins constrained by continued investment in product development and IT
infrastructure Outlook
- Overall, UBM is on track to meet our expectations for the full year.2
Note 1: We provide a number of adjusted financial measures to facilitate performance comparisons across periods. Definitions of these measures are provided in Section 1.
Note 2: A more detailed Outlook statement for each of UBM's business segments is given in the Business review, section 2.3.
David Levin, Chief Executive Officer of UBM said:
"UBM has delivered a solid performance in the first half of the year, achieving a 6% improvement in operating profit on revenues unchanged on last year's first half. The progressive reshaping of UBM over the last five years has built a resilient business which is on track to meet our expectations for 2010 and is increasingly well placed for profitable growth. While we see evidence of improved trading conditions in many of the markets and geographies in which we operate, we remain cautious regarding the pace, depth and sustainability of the wider macro-economic recovery." "We have continued to invest in our people and in key organic business developments, such as taking our successful event brands into new, fast-growing economies and transitioning our leading print and data products into the digital environment. We are also developing the products and IT infrastructure to enable our Targeting, Distribution & Monitoring business to offer a broader set of web-based communications service solutions. We also drive UBM's evolution with targeted acquisitions, focusing on events and data businesses operating in high growth sectors and economies. During the first half we made 12 acquisitions for a total of £43.5m (including performance-based contingent consideration of £20.2m), investing £28.2m in tradeshows and £27.2m in emerging markets. China now contributes more than 16% of our profit (H1 2009 - 14.2%) and we have today announced the acquisition of the Hangzhou-based Children-Baby-Maternity Expo for £9.9m (see separate announcement), further leveraging our business infrastructure in China. We aim to make further acquisitions in line with our established strategy through the second half of the year." "Our Events business is performing well, particularly our shows in Asia and our large tradeshows worldwide. Attendee revenues, notably at our US technology tradeshows, recovered well during the first half of the year and the outlook for tradeshows is improving. Forward bookings for exhibition stand space at our top 20 tradeshows scheduled to run in the next 12 months are 17% ahead of the same point last year although this figure is 12% when adjusted for differences in booking cycle phasing between 2009 and 2010. We believe this latter figure is a more accurate reflection of our forward bookings." "The positive overall revenue and profit result from our Data, Services and Online segment masks contrasting performances in the business's Online and Data & Services components. Strong website advertising sales drove Online revenues 15.3% higher while, by contrast, Data & Services revenues fell by 1.2%, reflecting late cycle effects on subscriptions and softer demand for some services." "In the first half we launched one new print title and closed four others. In line with our established strategy, we continue to take advantage of opportunities for print products in fast-growing economies and sectors, while also managing our print magazine portfolio towards a smaller, more profitable and commercially sustainable set of leading titles. We anticipate that each of our titles will become a component of an integrated, cross-media product portfolio which serves a specific commercial or professional community." "Targeting, Distribution & Monitoring's US news distribution volumes and revenues grew modestly during the first half while international revenues and revenues generated from non-wire products and services such as filing services and MultiVu grew strongly. The on-going investment in IT infrastructure and in developing a wider set of web-based communications products and services will continue to constrain margins."
"Assuming the improvement in wider economic conditions is sustained, we anticipate our solid first half performance will continue, allowing UBM to deliver full year results in line with our expectations." 2
David Levin Chief Executive Officer, UBM 30 July 2010 Contacts Media Peter Bancroft Director of Communications E-mail communications@ubm.com Direct telephone +44 20 7921 5961 Nicola Smith Citigate Dewe Rogerson E-mail nicola.smith@citigatedr.co.uk Direct telephone +44 20 7282 2993 Analysts / Investors E-mail investorrelations@ubm.com Direct telephone +44 20 7921 5095 Robert Gray +44 20 7921 5019 Andrew Crow +44 20 7921 5940 A live webcast of the results presentation will be made available from UBM's website from around 9.00am, 30 July 2010. To access the webcast please go to www.ubm.com.
A recording of the webcast will also be available on demand from UBM's website, www.ubm.com.
Notes to Editors About UBM UBM is a leading global provider of events; data, marketing and information products; print products; and targeting, distribution and monitoring services to specialist business communities. Our 5,900 staff in more than 30 countries are organised into specialist teams that serve these communities, helping them and their markets to work effectively and efficiently.
For more information, go to www.ubm.com.
1 Summary group income statement
The table below presents selected items from UBM's consolidated income statement (which accompanies this summary), together with a reconciliation to non-GAAP measures, which we provide to assist in the comparison of the results between periods. Period ended H1 2010 H1 2009 £m £m % Revenue 434.3 435.0 (0.2) Group operating profit 67.0 55.2 Add back:
- Amortisation of intangible assets arising 12.2 15.0
on acquisition - Depreciation 7.9 6.6
- Share of tax on profit in JVs and 0.2 0.2
associates 87.3 77.0 13.4 Add back: - Exceptional Items 3.8 7.9 EBITDA 3 91.1 84.9 7.3 Depreciation (7.9) (6.6) Adjusted operating profit 4 83.2 78.3 6.3 Net interest expense (8.6) (6.3) Financing income: - Pension schemes 1.4 1.0
- Foreign exchange gain on forward contracts 0.1 6.8
Adjusted profit before tax 5 76.1 79.8 (4.6) Financing income - other 1.9 3.1 Financing expense - other (3.7) (0.3)
Amortisation of intangible assets (12.2) (15.0)
Exceptional items:
- Reorganisation and restructuring (3.1) (7.9)
- Relating to acquisitions (0.7) - Profit before tax 58.3 59.7 (2.3) Taxation (8.7) (8.4) Profit after tax 49.6 51.3 (3.3) Non-controlling interest (4.1) (3.3) Attributable profit 45.5 48.0 (5.2) Dividend (pence) 6.0 6.0 - Adjusted EPS (pence) 4 24.9 26.7 (6.7) Adjusted EPS (diluted) - (pence) 4 24.7 26.4 (6.4) EPS (pence) 18.7 19.9 (6.0) EPS (diluted) - (pence) 18.6 19.6 (5.1)
Note 3: EBITDA is defined as group operating profit excluding amortisation of intangible assets arising on acquisitions, exceptional items, share of taxation on profit from joint ventures and associates and depreciation. Note 4: Adjusted operating profit is group operating profit excluding amortisation of intangible assets arising on acquisitions, exceptional items and share of taxation on profit from joint ventures and associates. Adjusted EPS is based on adjusted operating profit before deferred tax on intangible assets and tax relating to exceptional items and net financing expense - other. Adjusted diluted EPS is adjusted EPS after adjusting for the impact of share options.
Note 5: Adjusted profit before tax is based on adjusted operating profit after net interest and financing expense.
2 Review of H1 2010
2.1 Summary of operating results for H1 2010
The table below presents the revenue and adjusted operating profit for our business segments - Events; Data, Services & Online; Print - magazines; and, Targeting, Distribution & Monitoring.
Revenue H1 2010 H1 2009 Change Constant Underlying currency change 6 change £m £m % % % Events 139.3 137.2 1.5 3.3 (1.5) Data, Services & 129.5 126.6 2.3 4.6 2.6 Online Print - magazines 74.3 86.3 (13.9) (11.9) (4.0) Targeting, 91.2 84.9 7.4 6.6 3.6 Distribution & Monitoring Total 434.3 435.0 (0.2) (0.0) 0.4 Adjusted operating profit 4 H1 2010 H1 2009 Change Constant Underlying currency change 6 change £m £m % % % Events 40.7 37.8 7.7 9.8 (4.8) Data, Services & 19.8 16.0 23.8 27.8 19.1 Online Print - magazines 3.7 3.3 12.1 14.0 (5.5) Targeting, 23.4 23.0 1.7 0.5 (1.0) Distribution & Monitoring
Corporate operations 7 (4.4) (1.8) n/a n/a n/a
Total 83.2 78.3 6.3 5.3 0.8
Note 6: Underlying: adjusted for the effects of acquisitions, discontinued products, foreign exchange and biennial events.
Note 7: Corporate operations comprise net central operating costs, together with those equity accounted investments not allocated to the group's business segments.
2.2 Strategy summary We continue to implement a clearly defined strategy to drive UBM's profitable growth. UBM organises live events and provides marketing services, data, communications and media products and services which support the business activities of specialist communities in a wide range of countries worldwide. By operating close to these communities, our businesses have gained the deep market insight which enables them to develop the best possible products and services. We deploy our core skills across and between markets, transferring best practice and innovation across communities, geographies and different types of product. Our strategy for profitable growth targets products and markets which will prosper in the emerging digital age and which provide us with worldwide growth opportunities. Our focus is on developing our live events (particularly tradeshows), our specialist data and online businesses, and our targeting, distribution and monitoring business. We are building our businesses in fast-growing, emerging markets, with a particular emphasis on China, India and Brazil. We invest in acquiring businesses which help accelerate our growth in our chosen markets, communities and geographies. We actively manage our remaining print magazines in a challenging structural context but we continue to see a long term role for leading print titles within the overall marketing services mix. 2.3 H1 2010 business review 2.3.1. Events H1 2010 H1 2009 Reported Underlying £m £m change % growth % Turnover 139.3 137.2 1.5 (1.5) Operating Profit 40.7 37.8 7.7 (4.8)
In H1 2010 our Events business generated 32.1% of UBM's total revenue (H1 2009 - 31.5%) and 48.9% of total adjusted operating profit (H1 2009 - 48.3%).
As anticipated in our May Interim Management Statement, our Events business traded in line with expectations during the first half of the year. During the period we ran more than 100 tradeshows, 35 conferences and 10 award events in 15 countries around the world. These events generated revenues up 1.5% to £ 139.3m (H1 2009 - £137.2m), with margins improving to 29.2% (H1 2009 - 27.6%), generating adjusted operating profit 7.7% higher at £40.7m (H1 2009 - £37.8m). On a constant currency basis revenues and adjusted operating profit were up 3.3% and 9.8% respectively. On an underlying basis (adjusting for the effects of acquisitions, discontinued products, foreign exchange and biennial events), revenues were down 1.5%, with operating profit down by 4.8%. Year on year comparisons for the first half benefited from the scheduling pattern of our biennial tradeshows. Our `even' year biennial shows (which generated £18.0m in revenue in 2008) take place principally in the first half of the year. By contrast our `odd' year biennial shows (which generated £29.7m in 2009) are weighted towards the second half of the year. Biennial shows in the first half of 2010 contributed £2.6m of revenue and £1.6m of profit. In 2009, second half biennial revenues and profits exceeded those of 2008 by £ 15.8m and £9.5m. Stand revenues, accounting for around 70% of overall Events revenues, were up by 1.6% to £96.7m (H1 2009 - £95.2m). This modest growth reflects the impact of difficult economic conditions in 2009 in some markets (notably the US) which affected rebookings for 2010 events. However the outlook for stand space bookings is improving with forward bookings for our top 20 events taking place in the next twelve months 17% ahead of the same point last year (see the Events outlook below for further information). The first half stand revenue performance varied by geography: the majority of our top 20 annual events taking place in the UK and US during the first half recorded declines in stand revenue. By contrast, all but one of our top 20 events taking place in Asia grew, with strong growth at the June edition of the Hong Kong Jewellery & Gem Show (stand revenues up 16%) and Hotelex Shanghai (stand revenues up 9%). The performance of the seven biennial shows which ran in the first half - whose revenues are largely exhibition stand-related - also reflected the impact of difficult trading conditions during their key rebooking periods in 2008 and 2009. In constant currency terms, aggregate revenues were down by 21.3% on the prior H1 2008 events. As anticipated in our May Interim Management Statement first half attendee revenues grew 6.0% to £17.8m (H1 2009 - £16.8m), accounting for 12.8% of overall Events revenue in H1 2010. Reflecting the more positive economic outlook, we have seen particularly strong growth in attendee revenues at our US technology events such as Game Developers Conference, Interop Las Vegas (corporate IT) and most recently Black Hat (IT Security). Sponsorship and other revenues - accounting for 17.8% of overall Events revenue in H1 2010 - fell by 1.6% to £24.8m in the half (H1 2009 - £25.2m). The performance of our UK events during the first half of the year was mixed. Tradeshows such as Interiors (UK furniture & interior design), IFSEC (UK fire & security) and our biennial KBB (UK kitchens and bathrooms) reflected the uncertain recovery in the UK economy and, in particular, the depressed levels of activity in the building and construction industries. However aggregate rebooking trends for our UK events in the remainder of 2010 and into 2011 are reassuring. Almost all of our continental European events run during the second half of the year and bookings for these events have been encouraging. We continue to geoclone our successful event brands into new markets with FI Indonesia (food ingredients), Black Hat Abu Dhabi (IT security) and Technology for Marketing China scheduled to take place during the second half of 2010. We have also announced the launch of fire and security shows IFSEC West Africa and IFSEC South India for 2011.
In addition we are investing in the development of new events. In the first half we launched a total of four new tradeshows and eight new conferences and award events, of which four were launched in India, the remainder being launched in the USA and Canada.
During the first half we invested a total of £28.2m in acquiring outright or a majority interest in five event businesses, of which two were in Brazil (Navalshore, the Concrete Show), and one each in China (Sign China), the UK (E-Commerce Expo) and the USA (DesignCon). In July we also acquired the Children Baby Maternity Expo for £9.9m (see separate announcement for details).
Events Outlook
We expect the robust performance of our Events business to continue, particularly in Asia and in high growth emerging markets. Rebooking rates for exhibition space at our tradeshows are improving, with indications that the recovery in attendee and sponsorship revenues which we noted in our May Interim Management Statement is also continuing. As at 30 June, forward bookings for exhibition space at our top twenty tradeshows (excluding biennial shows) taking place in the next twelve months - these events contributed around half of our total events revenue and over two thirds of total events adjusted operating profits in 2009 - are 17% ahead of the same point last year. When adjusted for differences in booking cycle phasing between 2009 and 2010, this figure is 12%. We believe this latter figure is a more accurate reflection of our forward bookings. We anticipate that events which serve markets and geographies that are expected to be slower to recover from the downturn, such as the UK furniture and construction industries and our events in Japan, will stabilise during the second half of 2010. Forward bookings for events in these markets in 2011 are encouraging. For example, revenues at our UK furniture show Interiors, which ran in January 2010, were lower by 7.3% but forward bookings for exhibition space at the January 2011 event are 12.6% up on the same point in the booking cycle for the 2010 event. As noted above, the positive biennial effect on year on year first half comparisons is reversed for the second half of the year, making second half revenue and profit comparisons harder. Biennial events in the second half of 2009 contributed £20.3m and £10.6m to revenues and profits respectively. The corresponding figures for the second half of 2008 were £4.0m and £1.0m. We believe our Events business is well placed to generate medium term growth in excess of GDP. Given our focus on emerging markets, we continue to anticipate that the Events business will generate aggregate annual growth of around GDP plus 3-5% over the course of a full economic cycle.
2.3.2. Data, Services & Online
Turnover H1 H1 Reported Underlying 2010 2009 change growth £m £m % % Data and Services 98.6 99.8 (1.2) (1.3) Online 30.9 26.8 15.3 17.7 Total 129.5 126.6 2.3 2.6 Operating profit H1 H1 Reported Underlying 2010 2009 change growth £m £m % % Data and Services 20.3 19.1 6.3 5.4 Online (0.5) (3.1) n/a n/a Total 19.8 16.0 23.8 19.1
Our Data, Services and Online business traded in line with expectations in the first half, generating 29.8% of UBM's total revenue (H1 2009 - 29.1%) and 23.8% of total adjusted operating profit (H1 2009 - 20.4%). First half revenues rose by 2.3% to £129.5m (H1 2009 - £126.6m) with margins growing by 2.7 percentage points to 15.3% (H1 2009 - 12.6%), taking adjusted operating profit to £19.8m (H1 2009 - £16.0m), up 23.8% on prior year. On a constant currency basis, revenues and adjusted operating profit were up 4.6% and 27.8% respectively. Revenues and adjusted operating profit were up by 2.6% and 19.1% on an underlying basis. The positive overall revenue and profit performance from our Data, Services and Online segment masks contrasting performances in its Online and Data & Services components. Data & Services revenues - representing 76.1% of overall revenues of this segment - fell by 1.2% to £98.6m (H1 2009 - £99.8m). This performance reflects varying economic conditions in the different markets we serve. UBM TechInsights - which provides data, analysis and consultancy services to the consumer electronics and semiconductor industries - benefited both from much improved market conditions and from its leading innovative online data products to drive revenue growth of more than 19% in the first half. Our businesses serving markets which remain under economic pressure - for example, the UK construction sector, the global trade and aviation industries - continue to experience difficult trading conditions. Revenues have been affected by late cycle effects on subscriptions and softer demand for consultancy and analytical services. Reflecting the continuing cautious environment for discretionary corporate spending, demand during the first half has also been subdued in areas such as training and membership services, affecting our IPED (professional development), HDI (help desk) and ICMI (call centre management) businesses.
Our Online activities saw a strong first half recovery in online marketing revenues, with headline revenues growing 15.3% to £30.9m (H1 2009 - £26.8m). This growth, particularly in online advertising, reflected a more positive economic environment in the information technology and semiconductor industries, our largest online product markets which we serve with leading brands such as InformationWeek (www.informationweek.com) and EE Times (www.eetimes.com).
Custom products which can demonstrate audience and customer engagement as well as return on investment continue to perform well. Our virtual events business continued to expand during the first half of the year. UBM Studios aims to develop a portfolio of innovative virtual products to service the growing demand for this new medium. In the first half of the year we provided 29 events (H1 2009 - 15 events) on behalf of both internal UBM divisional clients as well as a number of external third party customers. We are running virtual events for an increasingly wide range of purposes, markets and geographies. In the first half our virtual events included recruitment fairs (e.g. Psychiatric Times Careers Fair for UBM Medica in April, MBA Wired in June in Asia) and virtual tradeshows running simultaneously with, and as a complement to, an `in person' tradeshow (e.g. Interop). We expect the number of UBM virtual events this year to be more than double the 38 events run in 2009. We continue to invest to support the development of internal systems and to drive organic product development. For example UBM Global Trade completed key infrastructure improvements to support its new Trade Intelligence and iPIERS products, as well as to update the PIERS Enterprise System. Following investment in the development of our healthcare business's global Drug Information System capabilities, we are progressing the transition of our print data products such as Vidal to digital service products. Revenues from Vidal-based digital products grew 10.9% in the first half.
During the first half we acquired three businesses for a total of £9.1m: Game Advertising Online as a bolt-on complement to our Game Developer franchise; SharedVue to support the development of Everything Channel's marketing solutions business; and, CenTradeX to improve UBM Global Trade's salesforce capability.
Outlook for Data, Services & Online
Overall we continue to anticipate modest revenue growth in our Data, Services and Online segment. As noted in May's Interim Management Statement, full year margins will reflect continuing investment.
2.3.3. Print - magazines
H1 2010 H1 2009 Reported Underlying £m £m change % growth % Turnover 74.3 86.3 (13.9) (4.0) Operating Profit 3.7 3.3 12.1 (5.5)
Our Print - magazines business traded broadly at the levels experienced at the end of 2009. The business generated 17.1% of UBM's total revenue (H1 2009 - 19.8%) and 4.4% of total adjusted operating profit (H1 2009 - 4.2%).
Revenues fell by 13.9% to £74.3m (H1 2009 - £86.3m) but margins improved to 5.0%, increasing adjusted operating profit by 12.1% to £3.7m (H1 2009 - £3.3m). On an underlying basis, revenues and operating profit fell by 4.0% and 5.5% respectively. On a constant currency basis revenues were down 11.9% and adjusted operating profit was up 14.0%. The business's improved profitability in the first half of the year resulted in part from a cyclical improvement in print advertising revenues, but more significantly from our strategy to mitigate the impact of long term structural shift away from print by closing, merging and reducing the publication frequency of weaker titles. We continued to implement this strategy, closing four titles and reducing the publication frequency of two other titles during the first half of 2010. We believe there will continue to be sufficient demand in mature markets to support one or two leading print titles, a position which each market will reach by means of a "last man standing" process. We are managing our print portfolio towards a smaller, more commercially sustainable and more profitable set of leading titles. We anticipate that each of these titles will operate as a complementary component of an integrated, cross-media product portfolio which serves a specific commercial or professional community. As noted in previous statements, our strategy is also to take advantage of opportunities for print products in fast-growing sectors and economies. In the first half of the year we launched a print title targeting the Indian luxury travel market.
Outlook for Print - magazines
We will continue to implement our portfolio management strategy during the second half of 2010. We expect the proportion of UBM's revenues generated by print magazine products to continue to decline.
2.3.4. Targeting, Distribution & Monitoring
H1 2010 H1 2009 Reported Underlying £m £m change % growth % Turnover 91.2 84.9 7.4 3.6 Operating Profit 23.4 23.0 1.7 (1.0)
Our Targeting, Distribution & Monitoring business generated 21.0% of UBM's total revenue (H1 2009 - 19.5%) and 28.1% of total adjusted operating profit (H1 2009 - 29.4%).
The business showed headline revenue growth of 7.4% to £91.2m (H1 2009 - £ 84.9m). In underlying terms revenue growth was 3.6% and 6.6% on a constant currency basis. Margins fell 1.4 percentage points to 25.7%, resulting in headline adjusted operating profit growth of 1.7% at £23.4m (H1 2009 - £23.0m), down 1.0% on an underlying basis. Newswire distribution revenues - which account for 61.6% of Targeting, Distribution & Monitoring revenues (H1 2009 - 64.4%) - rose 2.7% in the first half, reflecting generally higher levels of corporate and market activity. US wire volumes and revenues rose by 5.1% and 0.9% respectively. Outside North America, wire revenues grew strongly by 14.4% to £6.1m during the half to account for 10.9% of overall wire revenues (H1 2009 - 9.8%). Revenue growth was modest in the UK and the rest of Europe but revenues grew faster, albeit from a small base, in newer emerging markets such as the Middle East, India, Russia and Latin America. We also saw good revenue growth in Asia, particularly in China. During the first half we broadened the range of corporate communications solutions we are able to offer our Asian customers with the acquisition of Hong Kong-based Corporate360 for £0.9m. We also acquired the remaining equity interest in our PR Newswire businesses in Argentina and Brazil for a total of £0.8m. Revenues generated by products and services other than traditional newswire distribution rose 15.9% to £35.0m or 38.4% of overall revenues (H1 2009 - £ 30.2m, 35.6%). In particular revenues at our multimedia unit MultiVu (including worldwide Multimedia News Release distribution), grew strongly by 18.3% to £ 10.4m (H1 2009 - £8.8m). MultiVu is well positioned to benefit from the growing volume of MNRs as well as more from the increasingly widespread use of multimedia content as part of standard corporate communications practice. Our financial printing and filing services also showed strong growth in the half, a reflection of rising activity in financial markets. In the first half we continued our investment in the new product and service development in order to provide a broader web-based corporate communication product and service offering. We are also investing in the business's IT infrastructure to support the business's online service delivery capability. As previously highlighted, this continuing investment is reflected in the business's margins, which fell from 27.1% in H1 2009 to 25.7% in H1 2010.
Targeting, Distribution & Monitoring outlook
As noted in our Interim Management Statement in May, we expect that the performance of our Targeting, Distribution & Monitoring business will be closely aligned to the pace and extent of economic recovery, particularly in the United States. We anticipate continued competitive pressure in the US news distribution market, particularly in lower value text-only releases. We also anticipate continued growth in international revenues and in non-wire, multimedia and online products and services. However the continuing levels of investment in new product development and IT infrastructure will constrain margins in the second half and into 2011.
3 Acquisitions
In the first half of 2010 we invested £43.5m in 12 acquisitions. These acquisitions were closely aligned to our strategic priorities, with the most significant investment being made in China and Brazil. In terms of type of business, five of the acquisitions, totalling £28.2m, were of Events, four were of businesses relating to Targeting, Distribution & Monitoring (£6.2m) and the remaining three were Data, Service & Online businesses (£9.1m).
We continue to seek to use our strong balance sheet to take advantage of the growing availability of attractive acquisition opportunities, particularly tradeshows and other events, and businesses in higher growth sectors and economies.
Our investment comprised cash of £23.3m (net of cash acquired) and deferred contingent consideration of £20.2m. We also made payments totalling £4.3m in respect of earnouts relating to acquisitions made in prior years. H1 2010 Acquisitions Initial Estimated Estimated total consideration contingent consideration net of cash consideration acquired* £m £m £m Game Advertising Online 0.6 3.0 3.6 E Commerce Expo 0.6 1.2 1.8 Sign China 7.1 4.0 11.1 DesignCon 0.9 0.0 0.9 SharedVue 0.2 4.9 5.1 DNA-13 4.0 0.5 4.5 CenTradeX 0.3 0.1 0.4 The Concrete Show / Restaubar 7.6 5.7 13.3 Navalshore 1.1 0.0 1.1 PR Newswire Brazil 0.7 0.1 0.8 PR Newswire Argentina 0.0 0.0 0.0 Corporate 360 0.2 0.7 0.9 23.3 20.2 43.5
* Excluding working capital adjustments and acquisition costs.
Contingent and deferred consideration Total £m At 1 January 2010 25.1 Change in estimate 2.6
Contingent consideration on acquisitions
20.2
Deferred consideration on acquisitions
0.1
Contingent consideration paid
(3.8)
Deferred consideration paid (0.5) Foreign exchange gain 1.7 At 30 June 2010 45.4 Acquisition performance Consideration Pre-tax return on investment £m 2008 2009 2010 2008 acquisitions 51.2 12.4% 6.5% 8.9% 2009 acquisitions 27.7 - 14.8% 12.9% 2010 acquisitions* 43.5 - - 10.0% Total 122.4** 10.0%
* 2010 Return on Investment has been calculated on a proforma basis and consideration includes contingent consideration of £20.2m.
** Consideration is net of cash acquired and includes contingent consideration of £37.8m.
2010 acquisitions contributed adjusted operating profit of £2.5m since their acquisition and are expected to achieve a pre-tax return of 10.0% on a pro forma basis.
4 Dividend The Board has declared an interim dividend of 6.0 pence per share, maintaining the dividend at the level set this time last year. The interim dividend on ordinary shares will be paid on 14 October 2010 to shareholders on the register on 27 August 2010.
5 Cash flow and cash conversion
Cash generated from operations rose to £76.9m from £74.5m in H1 2009, reflecting continued tight discipline in cost control and working capital generation.
Cash conversion was 100.1% of adjusted operating profits (H1 2009 - 113.8%). Free cash flow was £6.1m, compared with £53.6m in H1 2009, principally reflecting the £46.5m tax settlement paid in H1 2010.
During the first half of 2010, we paid £27.3m for acquisitions (net of cash acquired) and earnout payments in relation to acquisitions made in prior years. Following the payment of £44.3m of dividends to shareholders and a foreign exchange movement of £5.6m, consolidated net debt at 30 June 2010 stood at £302.8m, up from £226.4m at the end of 2009.
6 Financing and interest expense
Our £325m multi-currency revolving credit facility matures in July 2012. At 30 June 2010 UBM had drawn £63.2m from the facility, leaving £261.8m available. Cash and equivalents totalled £133.2m at 30 June 2010.
Our balance sheet remains strong, with net debt at 30 June 2010 of £302.8m, representing 1.59 times the last twelve months' EBITDA.
Net finance expense for the six months to 30 June 2010 was £8.9m. The composition of the net expense was as follows:
H1 2010 H1 2010 H1 2009 H1 2009 £m £m £m £m
Interest income - cash and cash 0.2 1.3
equivalents Interest expense (8.8) (7.6) Financing income: 1.5 7.8 Pension schemes 1.4 1.0 Foreign exchange gain on forward 0.1 6.8 contracts Financing income - other 1.9 3.1 Financing expense - other (3.7) (0.3)
Net finance (expense) / income (8.9) 4.3
7 Currency
Our revenue and adjusted operating profit in H1 2010 were generated principally in currencies other than Sterling, as follows:
H1 2010 H1 2010 Revenue % Adjusted operating profit % US Dollar 50.1 58.7 Euro 16.7 18.4 UK Pound Sterling 17.4 7.2 Canadian Dollar 3.7 - Japanese Yen 2.6 6.1 Renminbi 5.0 8.4 Indian Rupee 0.8 - Brazilian Real 0.8 0.9 Other 2.9 0.3 Total 100 100
In the following table, we provide an estimate of the sensitivity of our revenue and adjusted operating profit to fluctuations in exchange rates of the key foreign currencies in which we operate for the balance of the year:
Average Exchange rate Effect on Effect on exchange rate varies by revenue adjusted in H1 2010 operating profit +/- +/- US Dollar 1.52 1 cent £1.9m £0.3m Euro 1.15 1 cent £1.0m £0.2m 8 Tax
UBM's effective rate of tax in the first half of 2010 was 15.0% (31 December 2009 - 15.0%).
As previously disclosed, in March 2010 UBM made a payment of £46.5m to HMRC in settlement of historic tax issues. Subsequent to this payment, on 30 June 2010 UBM's tax creditor stood at £68.1m (31 December 2009 - £109.0m).
9 Pensions
At 30 June 2010, the aggregate deficit under IAS 19 was £42.4m, an increase of £15.8m on the deficit of £26.6m at 31 December 2009.
The IAS 19 interest credit was £1.4m, representing the excess expected asset growth over the interest accretion on the scheme liabilities during the first half of the year. 10 Exceptional items
10.1 Restructuring and business reorganisation costs
During the first half of 2010 we closed four print magazine titles and reduced the frequency of two further titles. We also made further progress in the restructuring of a number of our businesses, particularly at UBM Aviation where the migration away from traditional print data products continues. The exceptional charge of £3.1m (H1 2009 - £7.9m) includes £1.0m redundancy costs for 28 staff and £0.4m relating to the restructuring and business reorganisation costs. Of the charge, £0.7m has been incurred in H1 and the balance is expected to be incurred in H2 2010. The charge also includes costs in respect of vacant property which will be incurred over the remainder of the respective lease terms.
10.2 Exceptional items relating to acquisitions
Following the adoption of IFRS 3 (revised) from 1 January 2010, acquisition costs of £0.7m have been expensed, rather than included in the calculation of goodwill on acquisition. Details of acquisitions made in the six months ended 30 June 2010 are given in Note 12 of the Interim Financial Report.
11 Risks and uncertainties
The principal risks and uncertainties affecting the business activities were detailed on pages 28 to 31 of the 31 December 2009 Annual report and accounts. These remain unchanged since the Annual report was published, a copy of which is available on the Company's website www.ubm.com.
UBM has a business-wide risk management process, monitored by the Board, to ensure a consistent and coherent approach to the principal risk factors and to those other risk factors that may arise or which may become material in the future. The following list is a summary of the risks and uncertainties that were included in the 2009 Annual report and accounts:
* UBM operates in a highly competitive environment that is subject to rapid
change and must continue to invest and adapt to remain competitive; * making acquisitions is a key component of UBM's strategy, consequently exposing us to risks associated with acquisitions; * UBM's continued expansion into new geographic regions subjects our businesses to specific risks of operating in these regions; * attracting and retaining key management personnel across all of our businesses;
* structural market change and the economic downturn may affect our results;
* as UBM moves away from print advertising towards online and digital products, risks around IT security increase significantly; * several of UBM's businesses have a strategy which is dependent upon the successful execution of major projects;
* our businesses are required to comply with tightening and increasingly high
profile legislation on data protection issues; * decentralisation and de-layering of UBM's organisational structure increases pressure on control resources, systems and capabilities; * fluctuations in exchange rates may affect our reported results; * future tax payments may exceed recorded liabilities;
* the cost of providing pension benefits to existing and former employees is
subject to change in pension fund values and changing mortality; and
* our exhibitions business may be adversely affected by incidents which
curtail travel, such as major terrorist attacks or outbreaks of disease,
such as Swine Flu, Avian Flu or Severe Acute Respiratory Syndrome.
The narrative review contained in this half-yearly financial report includes a commentary on the outlook for the business for the remaining six months of the year. The Board expects the risks and uncertainties listed above to continue to affect UBM for the remaining six months of the year. Interim consolidated income statement for the six months ended 30 June 2010 Before Before exceptional Exceptional exceptional Exceptional items items Total items items Total 30 June 30 June 30 June 30 June 30 June 30 June 2010 2010 2010 2009 2009 2009 Notes £m £m £m £m £m £m 4 Revenue 434.3 - 434.3 435.0 - 435.0 Other operating income 2.1 - 2.1 2.9 - 2.9 Operating expenses (355.0) - (355.0) (360.7) - (360.7) Amortisation of (12.2) - (12.2) (15.0) - (15.0) intangible assets arising on acquisitions 5 Exceptional - (3.1) (3.1) - (7.9) (7.9) reorganisation and restructuring costs 5 Exceptional items - (0.7) (0.7) - - - relating to acquisitions Share of profit in joint 1.6 - 1.6 0.9 - 0.9 ventures and associates (after tax) Group operating profit 70.8 (3.8) 67.0 63.1 (7.9) 55.2 Finance income/(expense) 6 Interest income 0.2 - 0.2 1.3 - 1.3 6 Interest expense (8.8) - (8.8) (7.6) - (7.6) 6 Financing income 1.5 - 1.5 7.8 - 7.8 6 Financing income - other 1.9 - 1.9 3.1 - 3.1 6 Financing expense - (3.7) - (3.7) (0.3) - (0.3) other Profit before tax 61.9 (3.8) 58.1 67.4 (7.9) 59.5 Taxation (8.5) - (8.5) (8.2) - (8.2) Profit for the period 53.4 (3.8) 49.6 59.2 (7.9) 51.3 Attributable to: Equity holders of the 45.5 48.0 parent entity - ordinary shares Non-controlling 4.1 3.3 interests 49.6 51.3 Earnings per share (pence) 7 Basic 18.7p 19.9p 7 Diluted 18.6p 19.6p £m £m 4 Adjusted Group operating 83.2 78.3 profit* Amortisation of (12.2) (15.0) intangible assets arising on acquisitions 5 Exceptional (3.1) (7.9) reorganisation and restructuring costs 5 Exceptional items (0.7) - relating to acquisitions Share of taxation on (0.2) (0.2) profit in joint ventures and associates 4 Group operating profit 67.0 55.2 £m £m Dividends 8 Second interim dividend 44.3 44.0 of 18.20p (2009: 18.20p) 8 Proposed interim 14.6 14.6 dividend of 6.00p (2009: 6.00p) *Adjusted Group operating profit represents Group operating profit excluding amortisation of intangible assets arising on acquisitions, exceptional items and share of taxation on profit in joint ventures and associates. Consolidated income statement for the year ended 31 December 2009 Before exceptional Exceptional Total items items 31 31 December 31 December December 2009 2009 2009 Notes £m £m £m 4 Revenue 847.6 - 847.6 Other operating income 9.7 - 9.7 Operating expenses (688.8) - (688.8) Amortisation of intangible assets arising (26.8) - (26.8) on acquisitions 5 Exceptional reorganisation and - (16.5) (16.5) restructuring costs 5 Impairment charge - (153.0) (153.0) Share of results from joint ventures and 2.0 - 2.0 associates (after tax) Group operating loss 143.7 (169.5) (25.8) Finance income/(expense) 6 Interest income 1.8 - 1.8 6 Interest expense (14.8) - (14.8) 6 Financing income 6.9 - 6.9
6 Financing income - other 2.9 -
2.9
6 Financing expense - other - (6.7)
(6.7) Loss before tax 140.5 (176.2) (35.7) Taxation (17.7) - (17.7)
5 Exceptional taxation net credit - 135.2
135.2 (17.7) 135.2 117.5 Profit for the year 122.8 (41.0) 81.8 Attributable to: Equity holders of the parent entity - 75.2 ordinary shares Non-controlling interests 6.6 81.8 Earnings per share (pence) 7 Basic 30.9p 7 Diluted 30.5p £m
4 Adjusted Group operating profit*
171.2
Amortisation of intangible assets arising (26.8) on acquisitions 5 Impairment charge (153.0)
5 Exceptional reorganisation and (16.5) restructuring costs Share of taxation on profit in joint
(0.7) ventures and associates 4 Group operating loss (25.8) £m Dividends 8 Interim dividend of 6.00p
14.6
8 Proposed second interim dividend of 18.20p
44.3
*Adjusted Group operating profit represents Group operating profit excluding amortisation of intangible assets arising on acquisitions, exceptional items and share of taxation on profit in joint ventures and associates. Interim consolidated statement of comprehensive income for the six months ended 30 June 2010 Notes Six Six Year months months ended ended ended 31 30 June 30 June December 2010 2009 2009 £m £m £m Profit for the period 49.6 51.3 81.8 Other comprehensive losses: Currency translation differences on foreign (4.1) (54.7) (50.3) operations - Group Cash flow hedges: Gains on cash flow hedges arising during the - 2.5 0.2 period Add reclassification adjustments for losses - - 7.7 included in profit or loss - 2.5 7.9 Actuarial losses recognised in the pension (19.3) (26.6) (63.9) schemes
Irrecoverable element of pension surplus 1.2 9.9 13.8
Share of other comprehensive income/(expense) of joint ventures and associates: Currency translation differences on foreign 0.8 (1.4) (1.5) operations Actuarial losses recognised in the pension - (3.9) (3.9) schemes of associates 0.8 (5.3) (5.4) Income tax relating to components of other - - - comprehensive income Other comprehensive losses for the period (21.4) (74.2) (97.9) net of tax 11 Total comprehensive income/(losses) for the 28.2 (22.9) (16.1) period net of tax Attributable to: Equity holders of the parent entity - 23.3 (25.1) (22.6) ordinary shares Non-controlling interests 4.9 2.2 6.5 28.2 (22.9) (16.1) Interim consolidated statement of financial position at 30 June 2010 Notes As restated 31 30 June 30 June December 2010 2009 2009 £m £m £m Assets Non-current assets Goodwill 877.5 935.8 820.5 Intangible assets 115.7 115.1 110.6 Property, plant and equipment 41.6 35.0
38.2
Investments in joint ventures and associates 18.7 19.2 17.0
14 Retirement benefit surplus - 12.0
- Other investments 0.6 1.8 0.6 1,054.1 1,118.9 986.9 Current assets Inventories 4.2 4.3 7.7 Trade and other receivables 199.6 179.3
169.9
Derivative financial assets 6.9 7.4 0.3 Cash and cash equivalents 133.2 188.6
158.9 343.9 379.6 336.8 Total assets 1,398.0 1,498.5 1,323.7 Liabilities Current liabilities 10 Borrowings 1.3 18.4 0.3 Trade and other payables 362.7 324.6
315.5
Derivative financial liabilities 30.5 5.2 10.9 Provisions 11.1 26.7 23.4 Current tax liabilities 68.1 240.4 109.0 473.7 615.3 459.1 Non-current liabilities 10 Borrowings 434.7 399.0 385.0 14 Retirement benefit obligation 42.4 11.7
26.6
Trade and other payables 17.2 9.5 12.9 Provisions 30.5 33.9 26.6 Deferred tax liabilities 28.3 28.8 27.7 553.1 482.9 478.8 Total liabilities 1,026.8 1,098.2 937.9 Equity attributable to owners of the parent entity Share capital 24.4 24.4 24.4 Share premium 1.3 1.2 1.2 11 Other reserves (605.0) (608.0) (597.7) 11 Retained earnings 929.9 975.4 948.4 Total equity attributable to owners of the 350.6 393.0 376.3 parent entity 11 Non-controlling interests 20.6 7.3 9.5 Total equity 371.2 400.3 385.8 Total equity and liabilities 1,398.0 1,498.5 1,323.7 Interim consolidated statement of changes in equity for the six months ended 30 June 2010 Notes Share Share Other Retained Non-controlling Total capital premium reserves earnings interests equity £m £m £m £m £m £m At 1 January 2010 24.4 1.2 (597.7) 948.4 9.5 385.8 Profit for the period - - - 45.5
4.1 49.6
Other comprehensive - - (4.1) (18.1) 0.8 (21.4) (losses)/income Total comprehensive - - (4.1) 27.4
4.9 28.2
(losses)/income for the period Issued in respect of - 0.1 - - - 0.1 share option schemes and other entitlements Share-based payments - - - 1.5 - 1.5 8 Equity dividends - - - (44.3) - (44.3) 11 Non-controlling - - - - (3.1) (3.1) interest dividends 12 Non-controlling - - - -
9.3 9.3
interest arising on business combinations
11 Shares awarded by ESOP - - 3.1 (3.1)
- -
Own shares purchased by - - (6.3) - - (6.3) the company At 30 June 2010 24.4 1.3 (605.0) 929.9 20.6 371.2 At 1 January 2009 24.4 1.0 (567.5) 1,005.7 7.6 471.2 Profit for the period - - - 48.0 3.3 51.3 Other comprehensive - - (52.5) (20.6) (1.1) (74.2) losses Total comprehensive - - (52.5) 27.4 2.2 (22.9)
(losses)/income for the period Issued in respect of - 0.2 - - - 0.2 share option schemes and other entitlements Share-based payments - - - (1.7) - (1.7) 8 Equity dividends - - - (44.0) - (44.0) Non-controlling - - - - (2.5) (2.5) interest dividends Shares awarded by ESOP - - 12.0 (12.0) - - At 30 June 2009 24.4 1.2 (608.0) 975.4 7.3 400.3 At 1 January 2009 24.4 1.0 (567.5) 1,005.7 7.6 471.2 Profit for the year - - - 75.2 6.6 81.8 Other comprehensive - - (43.8) (54.0) (0.1) (97.9) losses Total comprehensive - - (43.8) 21.2 6.5 (16.1) (losses)/income for the year Issued in respect of - 0.2 - - - 0.2 share option schemes and other entitlements Share-based payments - - - 2.4 - 2.4 8 Equity dividends - - - (58.8) - (58.8) Non-controlling - - - - (4.4) (4.4) interest dividends Acquisition of - - - (8.5) (0.2) (8.7) non-controlling interests Shares awarded by ESOP - - 13.6 (13.6) - - At 31 December 2009 24.4 1.2 (597.7) 948.4 9.5 385.8 Interim consolidated statement of cash flows for the six months ended 30 June 2010 Notes Six Six Year months months ended ended ended 31 30 June 30 June December 2010 2009 2009 £m £m £m Cash flows from operating activities Reconciliation of profit to operating cash flows Profit for the period 49.6 51.3 81.8 Add back: Taxation 8.5 8.2 (117.5) Depreciation 7.5 6.2 12.3
Amortisation of website development costs 0.4 0.4 0.9
Amortisation of intangibles arising on 12.2 15.0 26.8 acquisitions 6 Interest income (0.2) (1.3) (1.8) 6 Interest expense 8.8 7.6 14.8 6 Financing income (1.5) (7.8) (6.9) 6 Financing income - other (1.9) (3.1)
(2.9)
6 Financing expense - other 3.7 0.3 6.7 Share of results from joint ventures and (1.6) (0.9) (2.0) associates (after tax) 5 Non-cash exceptional items and charges to 3.8 7.9 169.5 provisions Other non-cash items 1.7 (1.4) 2.9 91.0 82.4 184.6 Payments against provisions (13.9) (21.2)
(41.3)
Pension deficit contributions (1.6) - (3.7) Decrease in inventories 3.2 4.2 0.9 (Increase)/decrease in trade and other (20.6) 5.8 25.5 receivables Increase/(decrease) in trade and other 18.8 3.3 (23.3) payables Cash generated from operations 76.9 74.5
142.7
Interest and finance income received 0.4 2.2 7.8 Interest and finance costs paid (8.5) (7.9) (22.3) Taxation paid (52.1) (8.6) (16.5) Dividends received from joint ventures and 0.4 0.1 1.5 associates
Net cash flows from operating activities 17.1 60.3 113.2
Cash flows from investing activities 12 Acquisition of interests in subsidiaries, net (27.3) (9.8) (25.6) of cash acquired Purchase of property, plant and equipment and (11.0) (6.7) (14.5) intangibles Proceeds from sale of investments - - 3.4
Net cash flows from investing activities (38.3) (16.5) (36.7)
Cash flows from financing activities Proceeds from the issuance of ordinary share 0.1 0.2 0.2 capital Acquisition of non-controlling interests - -
(8.7)
8 Dividends paid to shareholders (44.3) (44.0)
(58.8)
Dividends paid to non-controlling interests (3.1) (2.5) (4.4)
Investment in own shares - ESOP (6.3) - - 10 Increase/(decrease) of borrowings 43.5 31.1
(254.5)
Issue of £250m fixed rate sterling bonds 2016 - - 247.1
Net cash flows from financing activities (10.1) (15.2) (79.1)
Net (decrease)/increase in cash and cash (31.3) 28.6 (2.6) equivalents Net foreign exchange difference 4.6 (9.1)
(7.3)
Cash and cash equivalents at beginning of 158.8 168.7 168.7 period
Cash and cash equivalents at end of period 132.1 188.2 158.8
Cash at bank and in hand 72.1 173.2
61.9
Short-term liquid funds 61.1 15.4
97.0
Bank overdrafts (included in borrowings) (1.1) (0.4) (0.1)
Cash and cash equivalents at end of period 132.1 188.2 158.8 Notes to the interim consolidated financial statements for the six months ended 30 June 2010
1. General information
United Business Media Limited (`UBML') is a company incorporated in Jersey under the Companies (Jersey) Law 1991. The address of the registered office is Whiteley Chambers, Don Street, St. Helier, JE4 9WG, Jersey. UBML is tax resident in the Republic of Ireland. The nature of the Group's operations and its principal activities are detailed in Note 4. The interim condensed consolidated financial statements of the Group for the six months ended 30 June 2010 were authorised for issue in accordance with a resolution of the directors on 30 July 2010. The interim condensed consolidated financial statements are unaudited but have been reviewed by the auditors as set out in their report. The comparative information for 31 December 2009 has been restated for acquisition accounting adjustments which have been finalised in relation to certain acquisitions made in 2009. The comparative information has been restated in accordance with IFRS 3 `Business Combinations' (revised 2008). The impact of this restatement is to reduce goodwill and accruals and deferred income by £0.4m and £0.3m respectively, with a corresponding increase in
trade receivables of £0.1m. 2. Basis of preparation
The interim condensed consolidated financial statements for the six months ended 30 June 2010 have been prepared in accordance with IAS 34 `Interim financial reporting' and with the Disclosure and Transparency Rules of the Financial Services Authority. The interim condensed consolidated financial statements do not constitute the Group's statutory financial statements. The Group's most recent statutory financial statements, which comprise the annual report and audited financial statements for the year ended 31 December 2009, were approved by the directors on 5 March 2010 and have been filed with the Jersey Registrar of Companies. The auditors have reported on those financial statements and have given an unqualified report which does not contain a statement under Article 113B(3) or Article 113B(6) of the Companies (Amendment No 4) (Jersey) Regulations 2009. The interim condensed consolidated financial statements should be read in conjunction with the Annual Report and Accounts for the year ended 31 December 2009, which have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board. The directors of UBML, having made appropriate enquiries, consider that adequate resources exist for the business to continue in operational existence for the foreseeable future and that, therefore, it is appropriate to adopt the going concern basis in preparing the financial information for the six months ended 30 June 2010.
3. Accounting policies and estimates
The accounting policies, significant judgments made by management and key sources of estimation adopted in the preparation of the interim condensed consolidated financial statements are consistent with those applied in the preparation of the Group's annual financial statements for the year ended 31 December 2009, except for the adoption of new standards and interpretations, noted below: IFRS 3 `Business Combinations' (revised 2008) - which makes significant changes to the treatment of acquisition costs and performance-related consideration and other contingent consideration relating to an acquisition and provides an option (the `full goodwill method') to recognise 100% of the goodwill of an acquired entity, rather than just the entity's acquired portion of goodwill, with corresponding increases to goodwill and non-controlling interests. The revised standard has been adopted prospectively to business combinations for which the acquisition date is on or after 1 January 2010. The adoption of this revised standard has resulted in acquisition costs on such business combinations being expensed in the income statement and classified as cash flows from operations in the statement of cash flows. Contingent consideration relating to acquisitions made in the six months ended 30 June 2010 has been estimated at the date of acquisition; any subsequent revisions to these estimates will be recorded in the income statement. The Group policy is to present acquisition costs and changes in contingent consideration as acquisition exceptional items as they do not relate to underlying business operations. Further details of business combinations made in the six months ended 30 June 2010 are given in Note 12. IAS 27 `Consolidated and Separate Financial Statements' (revised 2008) - which requires non-controlling interests (formerly minority interests) to be presented within equity which has been Group policy for several years. It also no longer restricts the allocation to non-controlling interests of losses incurred by a subsidiary to the amount of the non-controlling equity investment in the subsidiary. As a result, a partial acquisition or disposal of equity interest in a subsidiary that does not result in a gain or loss of control will be accounted for as an equity transaction and will not impact goodwill or give rise to any gain or loss. When there is loss of control of a subsidiary, any retained interest will have to be remeasured to fair value, which will impact the gain or loss recognised on disposal. The revised standard has been adopted prospectively from 1 January 2010. It has had no effect on the financial position or performance of the Group, but it may lead to changes in accounting for subsidiaries in the future. Improvements to IFRSs 2009 - none of the improvements have resulted in changes to the financial position or performance of the Group. The improvement to IAS 7 `Statement of Cash Flows' states that only expenditure that results in the recognition of an asset can be classified as a cash flow from investing activities. As a result of this change and the adoption of IFRS 3 `Business Combinations' (revised 2008), acquisition costs and payments of changes in contingent consideration on business combinations for which the date of acquisition is on or after 1 January 2010 will be classified as operating cash flows. These transactions are detailed in Note 12.
The following standards and interpretations have also been adopted in the interim condensed consolidated financial statements, but have had no impact on the financial position or performance of the Group or presentation of the financial statements:
* IAS 39 `Financial Instruments: Recognition and Measurement' - Eligible hedged items (amendment), adopted from 1 July 2009 * IFRS 2 `Share based payments' - Group Cash-settled Share Based Payment Transactions (amendment), adopted from 1 January 2010
* IFRIC 17 `Distribution of Non-cash Assets to Owners', adopted from 1 July
2009 * IFRIC 18 `Transfer of Assets from Customers', adopted from 1 July 2009
4. Operating segment information
Business segments
The chief operating decision maker (`CODM') for the purpose of IFRS 8 reporting is the executive management team - the Group Chief Executive Officer and the Group Chief Financial Officer. Consistent with the last annual report and audited financial statements for the year ended 31 December 2009, the Group considers there to be four reportable operating segments organised around products and services. The Group operates in a number of different markets and communities and considers that presentation of financial results on a products and services basis is the most appropriate way to demonstrate the performance of the Group. For the purpose of resource allocation and assessment of performance, the CODM regularly reviews information based on the products and services at a revenue and adjusted operating profit level.
* Events which provide face to face interaction in the form of exhibitions,
trade shows, conferences and other live events; * Data, Services and Online which provide a range of services including data-based workflow products, intellectual property consultancy and
analytical services, sales lead generation programmes, website sponsorships
and banner advertising as well as print and online directory products;
* Print - Magazines which publishes magazines and trade press to specialist
markets; and
* Targeting, Distribution and Monitoring which operates in the targeting and
distribution of company information and the evaluation of its impact on
targeted audiences.
No operating segments have been aggregated to form the above reportable segments. The Group's management reporting and controlling systems use the same accounting policies as those referred to in Note 3.
Segment measures
The Group measures the performance of its operating segments through a measure of segment profit or loss which is referred to as adjusted operating profit, as defined in the footnote to the income statement. Adjusted operating profit represents operating profit excluding amortisation of intangible assets arising on acquisitions, exceptional items and share of taxation on results of joint ventures and associates. This measure is reported to the CODM for the purposes of resource allocation and assessment of performance and is consistent with the measure used in the annual report and audited financial statements for the year ended 31 December 2009. Interest income, interest expense and income tax expense are not included in the adjusted operating profit measure which is reviewed by the CODM. Treasury and tax balances are managed centrally.
Intersegment revenue is recorded at values that represent estimated third-party selling prices.
Segment assets and liabilities are not regularly provided to the CODM. The Group has elected, as provided under IFRS 8 `Operating segments' (amended 2009), not to disclose a measure of segment assets or liabilities where these amounts are not regularly provided to the CODM.
With respect to geographical regions, revenue is generally allocated to countries based on the location where the products and services are provided. Non-current assets are disclosed according to the location of the businesses to which the assets relate. Six months ended 30 June 2010 Depreciation (including Share of amortisation pre-tax Segment of website results adjusted External Intersegment Total development from JVs operating revenue revenue revenue costs) and profit/ associates (loss) £m £m £m £m £m £m Events 139.3 0.1 139.4 (2.0) 0.5 40.7 Data, Services 129.5 - 129.5 (1.9) 0.1 19.8 and Online Print - 74.3 - 74.3 (1.1) 0.3 3.7 Magazines Targeting, 91.2 0.2 91.4 (2.6) 0.6 23.4 Distribution and Monitoring Total segments 434.3 0.3 434.6 (7.6) 1.5 87.6 Other - - - (0.3) 0.3 (4.4) corporate Eliminations - (0.3) (0.3) - - - 434.3 - 434.3 (7.9) 1.8 83.2 Amortisation of intangibles arising on acquisitions
(12.2)
Exceptional reorganisation and restructuring costs
(3.8)
Share of taxation on profit in joint ventures and associates (0.2) Group operating profit 67.0 Interest income 0.2 Interest expense (8.8) Financing income 1.5 Financing income other 1.9 Financing expense other (3.7) Profit before tax 58.1 Total corporate costs for the period ended 30 June 2010 were £8.2m (30 June 2009: £7.2m; 31 December 2009: £15.5m). The corporate costs are offset by a level of internal cost recoveries from the Group's operating businesses and by sundry income which is not attributable to any of the Group's operations. Six months ended 30 June 2009 Depreciation Share of (including pre-tax Segment amortisation results adjusted of website from JVs operating External Intersegment Total development and profit/ revenue revenue revenue costs) associates (loss) £m £m £m £m £m £m Events 137.2 0.1 137.3 (1.7) 0.4 37.8 Data, Services 126.6 - 126.6 (1.6) 0.1 16.0 and Online Print - 86.3 - 86.3 (1.1) 0.1 3.3 Magazines Targeting, 84.9 0.3 85.2 (2.0) 0.6 23.0 Distribution and Monitoring Total segments 435.0 0.4 435.4 (6.4) 1.2 80.1 Other corporate - - - (0.2) (0.1) (1.8) Eliminations - (0.4) (0.4) - - - 435.0 - 435.0 (6.6) 1.1 78.3 Amortisation of intangibles arising on acquisitions
(15.0)
Exceptional reorganisation and restructuring costs
(7.9)
Share of taxation on profit in joint ventures and associates
(0.2)
Group operating profit profit
55.2 Interest income 1.3 Interest expense (7.6) Financing income 7.8 Financing income - other 3.1 Financing expense - other (0.3) Profit before tax 59.5 Year ended 31 December 2009 Depreciation (including Share of amortisation pre-tax Segment of website results adjusted External Intersegment Total development from JVs operating revenue revenue revenue costs) and profit/ associates (loss) £m £m £m £m £m £m Events 287.5 0.4 287.9 (3.6) 0.8 87.2 Data, Services 232.9 - 232.9 (2.9) 0.1 37.9 and Online Print - 165.8 - 165.8 (2.1) 0.2 8.9 Magazines Targeting, 161.4 0.5 161.9 (4.2) 1.1 44.8 Distribution and Monitoring Total segments 847.6 0.9 848.5 (12.8) 2.2 178.8 Other corporate - - - (0.4) 0.5 (7.6) Eliminations - (0.9) (0.9) - - - 847.6 - 847.6 (13.2) 2.7 171.2 Amortisation of intangibles arising on (26.8) acquisitions Impairment charge (153.0) Exceptional reorganisation and (16.5) restructuring costs
Share of taxation on profit in joint
(0.7) ventures and associates Group operating (25.8) loss Interest income 1.8 Interest expense (14.8) Financing income 6.9 Financing income 2.9 - other Financing (6.7) expense - other Loss before tax (35.7)
Revenue by products and services
Revenue from external customers analysed by products and services is given in the above segment tables. The Group's reportable segments are organised around products and services provided to external customers.
Geographic information
Revenues from external customers Six Six
Year months months ended ended ended 31 30 June 30 June December 2010 2009 2009 £m £m £m United Kingdom 69.5 74.3 129.6 Foreign countries United States and Canada 207.7 211.6 386.6 Other Americas 6.1 2.8 6.1 Europe, Middle East and Africa 77.7 80.4 163.8 China 44.6 39.4 101.4 Japan 8.7 10.0 18.5 Other Asia/Pacific 20.0 16.5 41.6 364.8 360.7 718.0 Total revenue 434.3 435.0 847.6 Non-current assets As restated 31 30 June 30 June December 2010 2009 2009 £m £m £m United Kingdom 252.1 244.3 236.6 Foreign countries United States and Canada 474.3 511.2 425.7 Other Americas 41.5 33.8 33.9 Europe, Middle East and Africa 227.0 277.0 248.8 China 18.2 7.1 7.2 Japan 6.7 7.1 6.1 Other Asia/Pacific 34.3 26.4 28.6 802.0 862.6 750.3 Total non-current assets 1,054.1 1,106.9 986.9 Non-current assets for this purpose consist of goodwill, intangible assets, property, plant and equipment, investments in joint ventures and associates and other investments. 5. Exceptional items Six Six Year months months ended ended ended 31 30 June 30 June December 2010 2009 2009 £m £m £m Charged to operating profit Redundancy (1.0) (5.6) (10.5) Restructuring and business reorganisation costs (0.4) (0.8) (2.1) Vacant property costs (1.7) (1.5) (3.9) Exceptional reorganisation and restructuring (3.1) (7.9) (16.5) costs Acquisition costs on business combinations (Note (0.7) - - 12)
Exceptional items relating to acquisitions (0.7) -
- Impairment of goodwill - - (149.8) Impairment of joint ventures and associates - -
(1.9)
Impairment of other investments - - (1.3) Impairment charge - - (153.0) Total charged to operating profit (3.8) (7.9)
(169.5)
Charged to profit/(loss) before tax Fair value adjustment - early settlement of - -
(6.7)
interest rate swaps contracts (Note 6) Credited to profit after tax Exceptional taxation credit - -
135.2
Total charged to profit for the period (3.8) (7.9)
(41.0)
Charged to operating profit
Six months ended 30 June 2010
Management of the UBM product portfolio has continued during 2010 in order to mitigate the effects of the difficult economic climate. This involved a headcount reduction of approximately 28 people. Of the £1.4m redundancy and restructuring costs charged, £0.6m has been incurred in the six months ended 30 June 2010 and the balance is expected to be incurred in the second half of 2010. The property costs of £1.7m relate to vacant property and other property costs, which will be incurred over the remainder of the lease term as well as the expected relocation costs of certain offices. Following the adoption of IFRS 3 (revised 2008), acquisition costs of £0.7m on business combinations for which the acquisition date is on or after 1 January 2010 have been expensed, rather than included in the total consideration and, hence, the calculation of goodwill arising on acquisition. Details of the acquisitions made in the six months ended 30 June 2010 are given in Note 12.
Year ended 31 December 2009
During 2009, UBM continued to actively manage its product portfolio. This included the closure and merging of a number of print titles, and a headcount reduction of approximately 500 people. The exceptional charge of £16.5m includes £10.5m relating to redundancy, £2.1m relating to restructuring and business reorganisation costs and £3.9m relating to vacant property. The redundancy and restructuring and business reorganisation costs will be substantially incurred by 31 December 2010, and the amount relating to vacant property will be incurred over the remainder of the lease terms. Total impairment losses of £153.0m were recognised during the year ended 31 December 2009 of which £149.8m related to goodwill. The carrying value of investments in joint ventures and associates and other investments were impaired by £1.9m and £1.3m respectively. Full details are given in the Annual Report and Accounts for the year ended 31 December 2009.
Charged to profit/(loss) before tax
Year ended 31 December 2009
The fair value adjustment of £6.7m related to early settlement of six interest rate swap contracts which were previously designated as cash flow hedges of expected payments under $300m of borrowing from the Group's £325m variable rate multi-option facility. Further details are given in Note 6.
Credited to profit after tax
Year ended 31 December 2009
At 31 December 2008 the current tax liability of £237.2m included an assessment of the Group's uncertain tax positions in various jurisdictions, including the dispute with HMRC in relation to the sale of the Regional Newspapers business in 1998 where the tax in dispute was estimated at £80m. During 2009 the Group resolved a large number of outstanding items in various jurisdictions. This included:
* The dispute in relation to the sale of the Regional Newspapers business,
for which a payment (including interest) of £36.4m has been paid in March
2010;
* Other UK issues for accounting periods up to 31 December 2007 for which a
payment (including interest) of £10.1m has been paid in March 2010, and
* Non-UK issues for which a payment of £3.0m was made during 2009.
The £46.5m paid in March 2010 was included in the current tax liabilities at 31 December 2009. The amounts included in the current tax liability at 31 December 2008 in relation to these issues, over and above the amounts paid and payable above, were therefore released in 2009. As a consequence there was a net exceptional tax credit of £135.2m. 6. Finance income/(expense) Six Six Year months months ended ended ended 31 30 June 30 June December 2010 2009 2009 £m £m £m Interest Interest income 0.2 1.3 1.8 Interest expense (8.8) (7.6) (14.8) (8.6) (6.3) (13.0) Financing income Pension schemes 1.4 1.0 2.2
Foreign exchange gain on forward contracts 0.1 6.8
4.7 1.5 7.8 6.9 Financing income - other
Foreign exchange gain on forward contracts - 1.4
1.0
Ineffective portion of net investment hedges - 1.4
1.3
Ineffective portion of cash flow hedges - 0.3
0.1
Ineffective portion of fair value hedges 1.9 -
0.2 Net foreign exchange gain - - 0.3 1.9 3.1 2.9 Financing expense - other Fair value adjustments - early settlement of - - (6.7) interest rate swap contracts
Ineffective portion of net investment hedges (2.1) -
- Net foreign exchange loss (1.6) - - Other fair value adjustments - (0.3) - (3.7) (0.3) (6.7) Net finance (expense)/income (8.9) 4.3 (9.9) Foreign exchange gain on forward contracts within financing income represents realised gains on foreign currency contracts against profits of the overseas operations. The ineffective portion of fair value hedges is the difference between the fair value movement of the interest rate swaps designated as the hedge and the fair value movement of the hedged portion of the fixed rate sterling bonds (see Note 10). In December 2009, the Group settled early six interest rate swap contracts which were previously designated as cash flow hedges of expected payments under $300m of borrowing from the Group's £325m variable rate multi-option facility. Following the issue of the £250m fixed rate sterling bonds in November 2009, that $300m of borrowings was repaid. Three of the swap contracts totalling $150m were due to mature in January 2011 with the other three contracts totalling $150m were due to mature in July 2012. The early settlement resulted in a loss of £6.7m which has been included as an exceptional item.
7. Earnings per share
Basic earnings per share amounts are calculated by dividing net profit for the period attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the period. Diluted earnings per share amounts are calculated by dividing the net profit attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the period (adjusted for the effects of dilutive options). The net profit for the period attributable to ordinary equity holders of the parent is £45.5m (period ended 30 June 2009: £48.0m; year ended 31 December 2009: £75.2m). The weighted average number of ordinary shares for the period was 243,516,180 (30 June 2009: 241,910,442; 31 December 2009: 243,077,889). The weighted average number of shares excludes ordinary shares held by the Employee Share Ownership Plan (ESOP) and the Quality Employee Share Ownership Trust (QUEST). The Group has one category of dilutive potential ordinary shares: those share options granted to employees where the exercise price is less than the average market price of the Company's ordinary shares during the period. The impact of dilutive securities in the six months to 30 June 2010 would be to increase weighted average shares by 1.5 million shares (30 June 2009: 2.6 million shares; year to 31 December 2009: 3.4 million shares) for employee share options. Adjusted earnings per share is calculated on the net profit for the period attributable to ordinary equity shareholders before amortisation of intangible assets arising on acquisitions, certain exceptional items, deferred tax on amortisation of intangible assets, taxation relating to exceptional items and net financing income/(expense) - other, divided by the weighted average number of ordinary shares outstanding during the period. Certain exceptional items, net financing income/(expense) - other, taxation related to exceptional items and deferred tax on amortisation of intangible assets are excluded from this calculation, as due to their nature and the infrequency of the events giving rise to them, separate presentation allows shareholders to understand better the elements of financial performance for the period, so as to facilitate comparison with prior periods and to assess better the trends of financial performance.
The following reflects the income and share data used in basic and diluted earnings per share computations (all operations are continuing):
Six months ended Six months ended Year ended 30 June 2010 30 June 2009 31 December 2009 Earnings Earnings Earnings per per per Earnings share Earnings share Earnings share £m p £m p £m p From operations Adjusted Group operating 83.2 78.3 171.2 profit Net interest expense (8.6) (6.3) (13.0) Financing income 1.5 7.8 6.9 Adjusted profit before tax 76.1 79.8 165.1 Taxation (11.4) (12.0) (24.8) Non-controlling interests (4.1) (3.3) (6.6) Adjusted earnings per share 60.6 24.9 64.5 26.7 133.7 55.1 Adjustments Amortisation of intangible (12.2) (5.0) (15.0) (6.2) (26.8) (11.0) assets Deferred tax on amortisation 2.7 1.1 3.6 1.5 6.4 2.6 of intangible assets Non-tax exceptional items (3.8) (1.6) (7.9) (3.3) (169.5) (69.8) Tax exceptional item - - - - 135.2 55.6 Net financing (expense)/ (1.8) (0.7) 2.8 1.2 (3.8) (1.6) income - other Basic earnings per share 45.5 18.7 48.0 19.9 75.2 30.9 Dilution - Options - (0.1) - (0.3) - (0.4) Diluted earnings per share 45.5 18.6 48.0 19.6 75.2 30.5 Adjusted earnings per share 60.6 24.9 64.5 26.7 133.7 55.1 (as above) Options - (0.2) - (0.3) - (0.9) Diluted adjusted earnings 60.6 24.7 64.5 26.4 133.7 54.2 per share 8. Dividends Six Six Year months months ended ended ended 31 30 June 30 June December 2010 2009 2009 £m £m £m
Declared and paid during the period Equity dividends on ordinary shares Second interim dividend for 2008 of 18.20p - 44.0
44.2
Interim dividend for 2009 of 6.00p - -
14.6
Second interim dividend for 2009 of 18.20p 44.3 -
- Dividends 44.3 44.0 58.8
Proposed (not recognised as a liability at the
end of the period)
Equity dividends on ordinary shares Interim dividend for 2009 of 6.00p - 14.6
-
Second interim dividend for 2009 of 18.20p - -
44.3
Interim dividend for 2010 of 6.00p 14.6 -
-
Pursuant to the Dividend Access Plan, shareholders may elect to receive their dividend from a UK source. Shareholders who hold more than 50,000 shares and who wish to receive their dividend from a UK source must make an election. Shareholders who held 50,000 or fewer UBM shares on the date of admission of the Company's shares to the London Stock Exchange or (if later) on the first dividend record date after they became shareholders in the Company, will be automatically deemed to have elected to receive a UK-sourced dividend. All elections remain in force indefinitely unless revoked. Unless shareholders have made, or are deemed to have made, an election under the Dividend Access Plan, their dividends will be paid from an Irish source and will be taxed accordingly.
9. Tangible and intangible assets
During the six months ended 30 June 2010, the movements on tangible and intangible assets were: Six Six Year months months ended ended ended 31 30 June 30 June December 2010 2009 2009 £m £m £m Net book value at 1 January 148.8 183.5
183.5
Acquired with subsidiaries 15.1 -
6.4 Additions 11.0 6.7 14.5 Disposals (2.5) (0.9) (1.6) Depreciation and amortisation (20.1) (21.6) (40.0) Foreign exchange 5.0 (17.4) (14.0) Net book value at 30 June/ 31 December 157.3 150.1 148.8 10. Borrowings 31 30 June 30 June December 2010 2009 2009 £m £m £m Non-current 434.7 399.0 385.0 Current 1.3 18.4 0.3 436.0 417.4 385.3
Movements in borrowings are analysed as follows:
Six months ended 30 June 2010 £m At 1 January 2010 385.3 Increase in borrowings 43.5 Increase in overdraft 1.0
Fair value adjustment on £250m fixed rate sterling bonds 2016
7.2 Foreign exchange (1.0) At 30 June 2010 436.0 Six months ended 30 June 2009 £m At 1 January 2009 432.8 Increase in borrowings 31.1 Decrease in overdraft (3.2) Foreign exchange (43.3) At 30 June 2009 417.4 Year ended 31 December 2009 £m At 1 January 2009 432.8 Decrease in borrowings (254.5) Decrease in overdraft (3.6) Issue of £250m fixed rate sterling bonds 2016
247.1
Fair value adjustment on £250m fixed rate sterling bonds 2016
(1.3) Foreign exchange (35.2) At 31 December 2009 385.3
During the period ended 30 June 2010, a fair value adjustment on the £250m fixed rate sterling bonds of £7.2m was recognised (period ended 30 June 2009: nil; year ended 31 December 2009: £(1.3m)). £150m of the fixed rate sterling bonds is subject to a fair value hedge with interest rate swaps, under which the Group receives 6.50% to match the bond coupon and pays six month sterling LIBOR plus 2.90%. The fair value movement on the bond is partially offset against the fair value movement of the swaps and the ineffective element is recognised in the income statement within "Financing income - other" as "Ineffective portion of fair value hedges" (see Note 6).
11. Reserves
Merger Foreign ESOP Other Total
Retained Non-controlling
reserve currency reserve reserve other earnings interests translation reserves reserve £m £m £m £m £m £m £m Balance at 1 January (732.2) 15.1 (5.9) 125.3 (597.7) 948.4 9.5 2010 Profit for the period - - - - - 45.5 4.1 Other comprehensive - (4.1) - - (4.1) (18.1) 0.8 (losses)/income Total comprehensive - (4.1) - - (4.1) 27.4 4.9 (losses)/income for the period Share-based payment - - - - - 1.5 - Equity dividends - - - - - (44.3) - Non-controlling - - - - - - (3.1) interest dividends Non-controlling - - - - - - 9.3 interest arising on business combinations (Note 12) Shares awarded by ESOP - - 3.1 - 3.1 (3.1) - Own shares purchased by - - (6.3) - (6.3) - - the company
Balance at 30 June 2010 (732.2) 11.0 (9.1) 125.3 (605.0) 929.9
20.6
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.
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 cost. During the six months ended 30 June 2010, 1,200,000 shares were purchased by the ESOP (period ended 30 June 2009: nil; year ended 31 December 2009: nil).
Other reserve
This reserve includes the unrealised gains and losses reserve which records the portion of the gain or loss on a hedging instrument in a cash flow hedge that is determined to be an effective hedge.
12. Acquisitions
The Group has completed 12 acquisitions in the six months ended 30 June 2010.
23 February 2010, the Group acquired Game Advertising Online (`GAO'), a banner advertising agency working for publishers in the online video game industry, for an initial cash consideration of $0.9m (£0.6m), deferred consideration of $0.1m (£0.1m) and a further performance-related consideration of up to $7.0m (£ 4.4m) payable over the next year. GAO will diversify the games industry revenue stream within the Data, Services and Online segment and extend the business relationships to online game publishers and to consumer-orientated games websites. 5 March 2010, the Group acquired 70% of Sign China, a fast growing and international tradeshow in the Chinese sign industry, for an initial cash consideration of $10.7m (£7.1m) with a further performance-related consideration of up to $3.9m (£2.6m) payable over the next three years. The acquisition of Sign China will add another industry leading event to the Group's portfolio, as well as provide a springboard for expansion into South China for the Events segment. 5 March 2010, the Group also acquired E Commerce Expo Limited for an initial cash consideration of £0.6m with a further performance-related consideration of up to £1.2m payable after the October 2010 event. E Commerce Expo is a two day exhibition with an associated conference and awards ceremony, dedicated to e-commerce and online retailing. The acquisition advances the presence of the Events segment in the e-commerce, internet retailing and digital marketing sectors, which are identified as offering sustainable long-term growth potential.
12 April 2010, the Group acquired DesignCon, an exhibition and conference serving the electronic design and semiconductor industry, for total cash consideration of $1.4m (£0.9m). DesignCon will strengthen international presence of the Events segment in the electronic design and semiconductor industry.
21 April 2010, the Group acquired SharedVue, a web-based marketing business, for an initial cash consideration of $0.4m (£0.2m), with a further performance-related consideration of up to $30.0m (£19.5m) payable over the next three years. The acquisition within the Data, Services and Online segment is consistent with the Group strategy to enhance and expand presence in the fast growing web-based marketing space. 29 April 2010, a Group subsidiary, CNW Group Limited, acquired dna13 for an initial cash consideration of $6.1m (£4.0m) and a further performance related consideration of up to $0.9m (£0.5m). dna13 owns unique software allowing public relations practitioners to manage, monitor and measure the success of their communications campaigns. The acquisition is part of the Targeting, Distribution and Monitoring segment. 6 May 2010, the Group acquired selected assets of CenTradeX Inc., a provider of market intelligence tools, for an initial cash consideration of $0.5m (£0.3m) with further performance-related consideration of up to $0.1m (£0.1m) payable over the next two years. The acquisition will enable the Data, Services and Online segment to enhance the user interface and analytical tools for its market leading PIERS Global Intelligence product portfolio.
14 June 2010, the Group announced the following acquisitions:
* the Group acquired a 60% interest in Navalshore, a Brazilian shipbuilding
industry tradeshow and conference for a total cash consideration of R$2.9m
(£1.1m). The acquisition of a majority stake in Navalshore within the Events segment gives UBM greater exposure to the Brazilian maritime industry, one of the fastest growing markets in the world. * the Group acquired a 75% interest in Sienna Interlink, a Brazilian
exhibition company based in Sao Paulo for an initial cash consideration of
R$19.8m (£7.6m) with a further performance-related consideration of up to
R$20.2m (£7.7m) payable over the next year. In addition to contributing
profitable revenue growth and expanding the Events segment's presence in
Brazil, the acquisition provides exposure to the fast-growing South
American concrete market which is benefiting from significant construction
activity taking place ahead of the 2014 FIFA World Cup in Brazil and the
2016 Rio de Janeiro Olympics.
* the Group acquired the remaining 62.03% equity interest in PR Newswire do
Brasil for an initial cash consideration of $1.0m (£0.7m) with a further
performance-related consideration of up to $0.2m (£0.1m), payable over the
next two years. PR Newswire do Brasil was previously accounted for as an
associate. The acquisition is part of the Targeting, Distribution and Monitoring segment. * the Group acquired the remaining 10% equity interest in PR Newswire Argentina for a total cash consideration of $40,000 (£27,000). The
acquisition is part of the Targeting, Distribution and Monitoring segment.
28 June 2010, the Group acquired Corporate360, a Hong Kong based corporate communications solution provider, for an initial cash consideration of $0.4m (£ 0.2m) with a further performance-based consideration of up to $1.0m (£0.7m) payable over the next three years. The acquisition of Corporate360 will allow expansion of the Targeting, Distribution and Monitoring segment in Asia, by expanding service delivery capability and by offering a more sophisticated and engaging set of communication tools. The sterling figures quoted above are derived from the month end exchange rates for the month of acquisition. All acquisitions have been accounted for using the acquisition method under IFRS 3 `Business Combinations' (revised 2008) with the exception of PR Newswire Argentina which has been accounted for as an equity transaction in accordance with IAS 27 `Consolidated and Separate Financial Statements' (revised 2008) since control was held by the Group prior to the acquisition of the remaining 10% interest. The Group has acquired 100% of the voting rights in all cases where acquisitions involved the purchase of companies unless otherwise stated above. All acquisitions listed above where less than 100% of the voting rights of a company were purchased have been accounted for using the full goodwill method, as permitted by IFRS 3 (revised 2008). The fair value of the non-controlling interest for each acquisition has been estimated using a multiples approach with assumed adjustments for the lack of control that market participants would have by reference to the purchase price paid by the Group. The acquisition accounting for dna13, Navalshore, Sienna Interlink, PR Newswire do Brasil and Corporate360 have been determined on a preliminary basis as the valuation exercise at the date of publishing the interim financial statements is ongoing. The following table sets out the carrying amounts of the identifiable assets and liabilities acquired and their fair value to the Group in respect of the acquisition of businesses during the period (excluding PR Newswire Argentina): 2010 2010 Fair Acquiree's value carrying to group amount £m £m Intangible assets 15.1 - Current assets 5.0 4.9 20.1 4.9 Creditors and other current (3.0) (2.4) liabilities Deferred tax liability (3.3) - (6.3) (2.4) Fair value of net assets 13.8
Goodwill arising on acquisition 41.7
Fair value of previously held (0.3) interests Non-controlling interests (9.3) 45.9
The total consideration paid and payable on acquisitions is shown below:
30 June 2010 £m Consideration: Cash paid to acquire subsidiaries 23.0 Contingent consideration on 20.2 acquisitions
Deferred consideration on acquisitions
0.1
Contingent consideration adjustments on
2.6 prior year acquisitions Total consideration 45.9 The potential undiscounted amount for all future payments that the Group could be required to make under the contingent consideration arrangements are between nil and the maximum amounts disclosed on the previous page; £36.9m in aggregate. The contingent consideration for each acquisition made during the period is based on the terms set out in the relevant purchase agreements. The amounts recognised above as the fair value of contingent consideration have been determined by reference to the projected financial performance in relation to the specific contingent consideration criteria for each acquisition. The goodwill of £41.7m recognised above relates to certain intangible assets that cannot be individually separated and reliably measured. These items include customer loyalty, skilled workforce and synergies expected to arise after the acquisition completion. The movement in goodwill during the period was: Six months ended 30 June 2010 £m Cost At 1 January 2010 970.3 Acquisitions 39.1
Contingent consideration adjustments on
2.6 prior year acquisitions Currency translation 15.3 At 30 June 2010 1,027.3 Impairment At 1 January 2010 and 30 June 2010 149.8 Carrying value At 1 January 2010 820.5 At 30 June 2010 877.5 From their respective dates of acquisition to 30 June 2010, the acquisitions made have contributed £2.5m to the operating profit and £5.2m to revenue of the Group. If the acquisitions had taken place at the beginning of the period, they would have contributed £2.1m to the operating profit of the Group and £8.1m to revenue for the six months ended 30 June 2010.
Acquisition costs of £0.7m on business combinations have been expensed as exceptional items in the income statement (see Note 5) and are included in operating cash flows in the statement of cash flows.
The aggregate cash flow effect of the acquisitions was as follows:
30 June 2010 £m Net cash acquired with subsidiaries
(0.6)
Cash paid to acquire subsidiaries
23.6
Net cash outflow on 2010 acquisitions
23.0
Payment of contingent consideration on prior
3.8 year acquisitions
Payment of deferred consideration on prior year
0.5 acquisitions Total cash outflow on acquisitions
27.3
Contingent and deferred consideration
The movement in the contingent and deferred consideration payable during the period was: Contingent Deferred consideration consideration Total £m £m £m Balance at 1 January 2010 24.6 0.5 25.1 Acquisitions 20.2 0.1 20.3 Consideration paid (3.8) (0.5) (4.3) Changes in estimates 2.6 - 2.6 Currency translation 1.7 - 1.7 Balance at 30 June 2010 45.3 0.1 45.4 The Group paid £3.8m of contingent consideration during the six months ended 30 June 2010 in relation to the 2006 acquisition of MediReach Healthcare Communications, the 2007 acquisition of Energy Solutions Expo and the 2008 acquisitions of Aerostrategy's aviation business and Global Games Media. None of the contingent consideration balances are individually material. The Group also paid £0.5m of deferred consideration during the six months ended 30 June 2010 in relation to the 2008 acquisition of Sanguine Microelectronics.
13. Share-based payments
The Group's management awards share options to directors and employees, from time to time, on a discretionary basis. During the six months ended 30 June 2010, the Group awarded 3,335,516 (six months ended 30 June 2009: 3,673,359; year ended 31 December 2009: 5,049,133) shares under the Group's share incentive plans.
14. Retirement benefit obligations
The Group operates a number of defined benefit and defined contribution pension schemes in the UK and overseas. The most recent actuarial valuations were carried out at various dates in 2008 and updated to 30 June 2010 by independent qualified actuaries using the projected unit method.
The amounts recognised in the income statement were as follows:
Six Six Year months months ended ended ended 31 30 June 30 June December 2010 2009 2009 £m £m £m Current service cost 0.6 0.6 1.0 Past service cost - - - Curtailments - - - Interest cost 12.9 12.0 23.7 Expected return on plan assets (14.3) (13.0) (25.9) Total pension credit (0.8) (0.4) (1.2)
The amounts recognised in the balance sheet were as follows:
31 30 June 30 June December 2009 2009 2009 £m £m £m Fair value of plan assets 429.2 387.6 439.2
Present value of defined benefit obligations (470.3) (380.9) (463.3)
Irrecoverable element of pension surplus (1.3) (6.4)
(2.5)
Net (deficit)/surplus in the balance sheet (42.4) 0.3 (26.6)
15. Commitments and contingencies
Capital expenditure contracted for but not provided in the financial statements amounts to £2.8m (30 June 2009: £2.0m; 31 December 2009: £6.8m).
16. Related party transactions
The Group entered into the following transactions with related parties during the period: Balances Balances (owed (owed by)/ by)/ due to due to the Group the Group Transactions Nature of Nature of at Value of at Value of
with relationship transactions 30June transactions 30June
transactions related 2010 2010 2009 2009 parties £m £m £m £m CMP Weka Joint Distribution 0.1 0.1 0.7 0.1 Verlag GmbH venture sales PR Newswire do Associate* Newswire - (0.2) (0.2) (0.1) Brasil service Guangzhou Joint Commission 0.1 - 0.1 - Beauty Fair Venture and management fees GML Joint Commission 0.1 - - - Exhibitions Venture and (Thailand) Co management Limited fees Balances (owed by) / due to the Group Transactions Nature of Nature of at with relationships transactions 31 Value of related parties December transactions 2009 2009 £m £m
CMP Weka Verlag Joint Venture Distribution 0.2
0.2 GmbH sales PR Newswire do Associate* Newswire (0.2) (0.3) Brasil service
Guangzhou Joint Venture Commission -
0.1 Beauty Fair and management fees
* PR Newswire do Brasil was an associate until 14 June 2010, when it became a subsidiary as the remaining 62.03% equity interest was purchased by the Group (see Note 12). The related party disclosures above relate to transactions whilst PR Newswire do Brasil was an associate. Leaders Quest, a non-profit organisation, organised various management conferences for the Group during the period ended 30 June 2010 for a fee of £ 15,000 (period ended 30 June 2009: nil; year ended 31 December 2009: £7,000). Lindsay Levin, wife of David Levin, Chief Executive Officer of the Group, is a partner of Leaders Quest.
The Group has provided services to
Oxford University Press, a university publisher, during the period ended 30 June 2010 for fees of $4,600 (period ended 30 June 2009: $4,600; year ended 31 December 2009: $4,795). David Levin was a member of theOxford University Press Finance Committee until 30 September 2009.Convera Inc., an IT consultancy specialising in search technologies, is party to a five year contract with the Group under which it is entitled to receive a share of revenues from certain related products. Payments under this contract in the period were £15,393 (period ended 30 June 2009: £190,501; year ended 31 December 2009: £39,204). The Group also provided services to Convera Inc. during the period for fees of $2,595 (period ended 30 June 2009: $1,790; year ended 31 December 2009: $3,285). John Botts, non-executive director of the Group, is a director of Convera Inc.
The Group has provided services to Euromoney Institutional Investor Plc, an international publishing, events and electronic information group, during the period for fees of $3,916 (period ended 30 June 2009: nil; year ended 31 December 2009: $3,858). John Botts is a director of Euromoney Institutional Investor Plc.
The Group has provided service to SpinVox Limited, a voice-to-text conversation application company during the period for fees of nil (period ended 30 June 2009: $195; year ended 31 December 2009: $195). Additionally, SpinVox Limited has provided services to the Group during the period at a cost of £150 (period ended 30 June 2009: £175; year ended 31 December 2009: £300). John Botts was a director of SpinVox Limited until 31 December 2009. Microland, an IT infrastructure management outsourcing services provider, has provided services to the Group during the period for fees of £64,170 (period ended 30 June 2009: £77,149; year ended 31 December 2009: £162,048). During the period, the Group provided advertising services and event sponsorship to Microland for nil (period ended 30 June 2009: nil; year ended 31 December 2009: £14,936). At 30 June 2010, the Group had a trade payable with Microland of nil (period ended 30 June 2009: $127,056; year ended 31 December 2009: $63,528). Pradeep Kar, a non-executive director of the Group, is founder, chairman and managing director of Microland. IQ Resource, a strategic outsourcing company specialising in business media and information services, provides services to the Group for which the Group paid fees of nil (period ended 30 June 2009: $190,171; year ended 31 December 2009: $216,066). At 30 June 2010, the Group had a trade payable with IQ Resource of nil (period ended 30 June 2009: $138,619; year ended 31 December 2009: $3,804). Jonathan Newcomb, a non-executive director of the Group, holds an option over equity shares in IQ Resource. The Group has provided services to the Bank of Ireland, a financial services provider, during the period for fees of nil (period ended 30 June 2009: nil; year ended 31 December 2009: £12,000). Terry Neill, a non-executive director of the Group, is a non-executive director of the Bank of Ireland. Computacenter plc, a provider of IT infrastructure services, provided services to the Group during the period for fees of £139,021 (period ended 30 June 2009: nil; year ended 31 December 2009: nil). Greg Lock, a non-executive director of the Group, is the chairman of Computacenter plc. Nigel Wilson, Chief Financial Officer of the Group until 7 May 2009, was the Senior Independent Director of Halfords Group Plc. During the period ended 30 June 2009, the Group participated in the Cycle to Work scheme operated by Halfords Group Plc, with total transactions of £18,574. Transactions were made on behalf of employees and recharged in full to employees through monthly payroll. 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 30 June 2010, and no related party transactions have been written off during the period. Unless otherwise stated above, there are no amounts owed by or due to related parties by the Group at 30 June 2010.
17. Events after the balance sheet date
On 22 June 2010 the UK government announced that legislation will be introduced to bring a phased decrease in the UK rate of corporation tax commencing with a reduction to 27% on 1 April 2011 and further reducing it by 1% per annum until it reaches 24% on 1 April 2014. As the rate changes were not substantively enacted at 30 June 2010, no effect has been recorded in the interim figures presented. The Group is currently assessing the impact of the changes, although they are not expected to have a significant impact on the deferred tax assets and liabilities recognised. On 30 July 2010, the Group announced the acquisition of the Shanghai International Children-Baby-Maternity Products Expo and related businesses for an initial cash consideration of $9.7m and a further performance-related consideration of up to $6.4m payable over the next two years. This market represents an attractive sector for UBM with strong growth potential underpinned by current economic and demographic trends. The acquisition is part of the Events segment.
Statement of directors' responsibilities
The directors confirm that the interim condensed consolidated financial statements for the period ended 30 June 2010 have been prepared in accordance with IAS 34 as issued by the International Accounting Standards Board, and that the interim management report herein includes a fair review of the information required by Rules 4.2.7 and 4.2.8 of the Disclosure and Transparency Rules of the United Kingdom Financial Services Authority.
The directors of United Business Media Limited are listed on the United Business Media Limited website: www.ubm.com.
By order of the Board David Levin Group Chief Executive 30 July 2010
Independent review report to United Business Media Limited
Introduction
We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2010 which comprises the Interim consolidated income statement, Interim consolidated statement of comprehensive income, Interim consolidated statement of financial position, Interim consolidated statement of changes in equity, Interim consolidated statement of cashflows and the related explanatory notes 1 to 17 that have been reviewed. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements. This report is made solely to the Company in accordance with guidance contained in International Standard on Review Engagements (UK and Ireland) 2410 `Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our work, for this report, or for the conclusions we have formed.
Directors' Responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.
As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34 `Interim Financial Reporting'.
Our Responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review. Scope of Review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 `Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2010 is not prepared, in all material respects, in accordance with International Accounting Standard 34 and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority. Ernst & Young LLP London 30 July 2010
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