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WORLD TELEVISION

DMGT

Half Year Results Presentation

21st May 2015

DMGT - Half Year Results Presentation - 21st May 2015

DMGT

Martin Morgan, Chief Executive

Stephen Daintith, Finance Director

QUESTIONS FROM

William Packer, Exane BNP Paribas Gareth Davies, Numis Steve Liechti, Investec Nick Dempsey, Barclays Capital Alex DeGroote, Peel Hunt Ian Whittaker, Liberum Capital Patrick Wellington, Morgan Stanley Chris Collett, Deutsche Bank


Introduction


Well good morning everybody it’s a pleasure to see you here and welcome you back to

this marvellous hall. I hope you will find the presentation as equally enjoyable as the

surroundings. So this is our presentation on the half year results up to the period to

March the 31st.

And this morning we have a simple agenda, I will touch on the highlights of the results

following which Stephen Daintith our Finance Director will take you through the details

and I’ll return to give you a brief update of what’s going on in the operating companies

and then of course we’ll have Q&A.

So as to the highlights. Group underlying revenue was up 1% with underlying operating

profit down 7% and we came in at an operating margin of 16%. Adjusted operating

profit before tax was down 4% but EPS was up 7%. And the interim dividend was 6.5p

up 5%.

We continued to be an active manager of our portfolio of businesses, as you know that’s

very much a priority for us. Acquisitions were made within dmg::information,

dmg::media and Euromoney and we completed the disposal of Jobsite which was the

last remaining business in the former Evenbase digital recruitment company and we

disposed Lewtan.

Net debt to EBITDA ratio was 1.9 and Stephen will explain why that is expected to come

down towards the end of the year. And we completed a bond buyback in October 2014.

We made good progress with a £100m share buyback programme we announced last

November with £71m of shares being purchased to date.

And importantly the outlook for the full year is unchanged and in line with market

expectations; although EPS - our expectations of EPS are somewhat ahead of current

market expectations. So that concludes the highlights and it’s now my pleasure to hand

over to Stephen. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Financial Performance


Thank you Martin, morning everybody. I think and Martin mentioned this, one of the

key messages for today is that the first half was very much in line with our expectations

and indeed the full year remains in line with our expectations.

This is a slide that we put up back in November of last year and just to remind ourselves

of the things that we flagged then which very much hold true today, some of the key

things that are happening in the first half numbers, and there’s a lot of thing happening

in our first half numbers, but this slide just sort of summarises those one by one. So the

investment in RMS(one) and the reduction in margin and profit in RMS as a


consequence, the absence of the Gastech event which took place in March 2014 has not

taken place in this fiscal year.

The Evenbase disposal, Martin mentioned that, but we have a reduced stake in Zoopla,

we IPO’d Zoopla back in June last year and our share went from 52% down to 32% of

Zoopla so that’s a driver of the numbers that we see today. We have a reduced finance

charge, we’ve bought in quite a lot of our bonds over the last 18 months or so and

reduced our interest charge as a consequence. Other M&A, Martin mentioned that. And

finally the exchange rate, last year’s average was 1.66 and as we’ll see later on the

average so far this year has been somewhat lower than that.

So a quick summary of the numbers before I get into the detail, underlying revenue

growth of 1% and operating profits down 7%, the profit declined despite the revenue

growth driven by the absence of Gastech and the investments in RMS.

And then I just highlight down the bottom here that if we were to adjust the operating

profits for the timing of events in Euromoney in fact the underlying decline would be

somewhat smaller at 5%. It’s a small point but Euromoney do not adjust in their

underlying calculation for the timing of events whereas we do. So I’m just pointing that

out, it’s a slight point of detail but it’s just useful to know.

Profit before tax down 4% and then earnings per share growing by 7%, I’ll get into that

later explaining why there’s a difference there between the 4% decline and the 7%

growth. And we are happy to declare a 5% growth in our dividends which is of course in

today’s days of zero inflation CPI is a 5% real growth as well.

So as we look at DMGT it is important I think just for a little while just to reflect on the

diversity of the group and this is something we’ve been pursuing over the last, you know

quite some time now. We are very much a good balance I think of B2B and consumer.

B2B representing 59% of our revenues and 67% of our profits. B2B is growing its

revenues at 2%, we’ll get into the detail of that shortly. Consumer down 2% and we’ll

understand that a little better later on as well.

What’s happening within the profits is interesting, B2B up until recently has represented

a higher proportion of our profits than consumer; but one of the things that we are

seeing today in our numbers is a resurgence in the profitability of our UK consumer

business and the 15% margin that we’re reporting today, and again we’ll get into that

detail as we progress through this presentation. B2B declining at 20% in profits largely

driven by Gastech and RMS, so again not surprised by that number but just highlighting

its impact, and consumer growing by a very healthy 33%.

So I think what this also demonstrates is the importance of a portfolio like DMGT where

one part of the group for whatever reasons sees a decline in its profits the other part can

take up that slack and that works well for us right now and has done for quite some

time.

Similarly the geographical diversity of DMGT often seen as a UK business with just 51%

of our revenues are out of the UK, 49% from the rest of the world. And you can see

there in the UK on the profit side whilst 50% of the profits, the underlying growth of the


UK profitability up by 23%. So a very nice performance from our consumer business in

the UK. North America down, driven by RMS largely.

And again going back to the diversity of the portfolio very much diverse and well

balanced revenue streams as well. Print advertising is now just 16% of our portfolio,

that’s the one that we know and expect to decline over the years ahead, it’s just 16% of

our Group revenues. And we’ve highlighted here that what we are doing across the

group, this is taking into account the Euromoney print advertising revenues and the

Daily Mail and Metro, the declines there, albeit Metro is in fact growing, but the declines

there are being equally offset by the growth in digital advertising that we get from a

small portion from Euromoney but from Mail Online in the UK, US, rest of the world and

also from Wowcher which has grown very well as we’ll see later.

So moving through our divisions one by one, first of all B2B, RMS again there are no

surprises in these numbers, very much in line with our expectations. The core business

flat year on year, the 2% decline that we see in RMS revenues, Group revenues, very

much driven by the absence of RMS(one) consultancy revenues where we saw around

$3m of consultancy revenues in the first half of fiscal ’14 in anticipation of the then

planned launch for April 2014. It's been pretty much a complete absence of those in

fiscal ’15 and that’s the big driver of the 2% decline across the board.

We do expect an acceleration in the growth of the core business and we’ll get into the

reasons for those I’m sure during the Q&A. Essentially driven by RiskLink 15.0 and two

new versions of North American Hurricane and European Windstorm.

2% revenue decline I’ve just mentioned that. And the operating margin of 14%, we

gave guidance back in November of between 10 and 15% so we’re very much in the

range of our guidance that we gave, what is it now, 6/7 months ago.

Dmg::information, revenue growth of 6% in dmg::information, good revenue growth.

Growth a little bit below perhaps what one might have expected at the half year largely

driven by a decline in UK mortgage approvals in the first half of this year down 14% on

the same period last year. Just as a reminder the same period last year was up 34% on

the first six months of fiscal ’13 so they were always going to be tough comparatives.

The second half of ’14 grew by only 4% so we are expecting an improvement in growth

rates in mortgage approvals and implicitly therefore in the UK property information

business in the second half of this year. And I’m talking there especially about

Landmark and SearchFlow. Notwithstanding that though good growth in Education and

even more impressive growth in Energy as we’ll see in a second.

Profits down in dmg::information largely on the back of increased investment in

Xceligent which is growing very well, its revenues but the investment we’re putting in

there is largely driving down that operating profit decline in the first half of the year. We

do see some seasonality in Hobsons, as a reminder of that the profits in the second half

in Hobsons, the profits sorry within Hobsons are very much more aligned to the second

half than the first half.


So look at the margin of last year at 14% for the first half which subsequently improved

to a 17% on the full year basis, we’re expecting much the same for the 13% margin in

the first half.

This breaks down dmg::information into a little more detail, there’s the 2% growth, the

European property businesses which is largely a reflection of that Landmark and

SearchFlow revenues driven by UK mortgage approvals. US however growing very well

at 11% and you can see there the stand out performance by Energy, that’s the

Genscape business growing at 17%. And the growth in Education will accelerate in the

second half for the reasons that I just mentioned earlier through our Hobsons business.

Dmg::events continue good growth in dmg::events with 13% underlying growth largely

driven by very impressive performance out of two large events that took place in the

first half in the Middle East, ADIPEC and Big 5. What else would I say about this one,

again good profit growth 27%, operating margin of 30%. That shouldn’t be taken as a

guide for the full year of course because the big events taking place in the first half are

very much the high margin events so that we will see, we’re maintaining our margin

guidance of 20 to 25% on the full year basis, notwithstanding that 30% margin in the

first half.

Euromoney, Euromoney reported its numbers last week, 1% growth of revenues across

the portfolio and an operating margin of 27%. Euromoney continues to operate in

challenging markets, you’ll have read their statements, some of you may have attended

their release so I won’t add much more to that.

Dmg::media so stand out performance for us I think in the portfolio on a profit basis,

underlying revenue growth of 2%, this is very much in line with our expectations, you’ll

recall that we used the word stable when we described our expectations for revenue in

dmg::media and we give that as a range as either minus 2 or plus 2. Advertising, print

advertising remains volatile and of course cover price increases, if we were to introduce

any, can result in big spikes in growth when they, or if, they were to take place.

The Mail on Sunday’s increased £1.50 to £1.60 recently, on a half year basis that gives

us around £2m so a slight impact on revenue trajectory for our UK consumer business.

There a 15% margin, very pleased with that, it’s a reflection of the continued cost

reductions that we’re able to find in the business. We very much streamlined the

portfolio of dmg::media, not so long ago we had probably over 20 businesses within

dmg::media, we’re very much now down to the stable of 4 or 5 businesses.

At the same time our printing and distribution has rationalised significantly down to two

printing plants, we had eight. Our marketing spend is not what it once was, we found

more better and more effective ways of marketing Daily Mail and growing market share

as a consequence. So put all those things together we’re pleased with the 15% margin

that we see today.

A bit more detail on the revenue streams in dmg::media, circulation revenues down 4%

that’s in the absence of the cover price increase so holding up pretty nicely actually

particularly compared to the rest of the market. And then on the advertising side, digital

growth exceeding the print decline, digital growth coming from MailOnline and Wowcher


and the print essentially from the Daily Mail and Metro, 2% revenue growth across the

consumer business.

And then looking at it by business, a little bit more detail there, Daily Mail down 6% but

MailOnline growing strongly 20% and indeed in the US growing at 46% so a very good

growth that we expected out of the US and introducing new blue chip brands to the

advertising customer list in the US which we’ll talk about a little later. 4% across the

Mail businesses decline by Metro, really pleased with Metro’s first half performance of

4%, traditionally it’s very strong in retail and telecoms and that’s been reflected in that

first half performance.

Wowcher very good growth again out of Wowcher, it’s now got a subscriber database of

seven million people that we have information on for Wowcher that have accessed

Wowcher and registered for Wowcher. Wowcher in the first half moved into profitability

that we expected so we’re pleased about that, it’s a small profit but we’re in profitable

territory and we will be on a full year basis so we’re very pleased with the way Wowcher

is progressing, 2% across dmg::media.

And then just a little bit of clarity on the profit growth. Mail businesses growing 21% so

for a business that is you know one might think with the challenges for the print industry

really pleased with this performance. And on the expected profitability to remain at

these sorts of levels for at least a little while. And it will very much depend on how print

advertising plays out; our circulation revenues go up and down depending on cover price

increases, but also on the resilience and growth of our digital advertising play as well.

Sorry I should have said Metro, 7 days, Wowcher, Elite Daily growing at 30%.

And then this slide and the next slide really just summarises all the numbers we’ve just

gone through it’s just a nice convenient snapshot of the revenues across the Group and

profits.

Corporate costs we see that number in there for the first time, down £4m on a half year

basis, I wouldn’t read that as a permanent rebasing of corporate costs, a large chunk of

our corporate costs are driven by professional fees and it can often be around the timing

of those fees and timing of the consultancy exercises that take place that are a large

driver of that sort of intrinsic cost.

Joint Ventures and Associates, Zoopla, Property Group, £7m or as that reduction reflects

that reduced proportion of profits of Zoopla, it went from 52% to 32%, we remain strong

supporters of Zoopla, we were happy to support the uSwitch acquisition and we remain

very hopeful for Zoopla’s prospects in the future.

Just a quick word on Local World, Local World just a reminder that used to be called

Northcliffe combined with the Iliffe Newspapers and continues to be a resilient generator

of profits and cash, in fact growing its profits during the half year compared to last year.

And that reflects our 39% holding in Local World. There's the Zoopla change in holding.

Net finance costs have come down nicely from 26 down to £19m, a reflection of our

reduced net debt, but also our restructuring of debt. You’ll recall that over the last 18

months we’ve bought in about £250m worth of bonds and we’ve largely replaced that as


we’ll see in a second with less expensive bank facilities so a good reduction in interest

costs in the first half of the year.

Pretty good altogether, you’ll recognise those numbers, I think the one number that may

be the pleasant surprise this morning is earnings per share growing at 7%. That is

largely a reflection of two things; number one a more simple one to explain is a

reduction in the number of our shares as we continue our share buyback programme.

But also in reduction of the effective tax rate which is now at 14.1%.

Driven on the back of three factors, number one - the proportion of our UK profits is

higher in this half than it was last year, driven by the decline in RMS but also the growth

out of our UK consumer business. Two, we’ve had the two big events businesses in the

Middle East which have attractive tax rates attached to them. And thirdly as we look at

our UK profits and the trajectory for UK profits we can take a less cautious view than we

did last year on the use of our deferred tax assets and the usability of that asset to

offset the chargeable tax profits in our UK business.

Put all those things together we’re down to 14%, we still expect to head towards 20%

over the next three or four years, but as it we’re happy to take that number right now.

Exceptional items down a little bit on last year £11m, this is the only cash number in this

table and largely driven by headcount reductions in dmg::media, a little bit of

refurbishment of Northcliffe House, but also as preparation for new tenants coming in on

an empty floor, a bit of detail but there you go and we expect this number to be lower in

the second half of the year.

Net debt finishing the half at 1.9 times, no surprises there the end of March is

traditionally our highest net debt situation. We still remain on track to be no more than

two times at the end of the year. Cash conversion during the first half is just 47%, it

will be higher on a full year basis. We tend to see items like our incentives schemes and

bonus schemes paying out in the first half of the year and that’s largely one of the key

drivers for the reduced conversion for the first half of the year, EBITDA 1.9 times.

Just a reminder where we are, our trajectory we target less than two times of the year

at the year end, the last two years we’ve comfortably achieved that and I expect to do

the same again.

Just a couple of words on buy-backs, the share buyback programme that we announced

in September of last year, we’ve progressed through this at a fair old pace, £71m all the

way through at an average price of £8.24. It remains a good and effective use of capital

where M&A remains our priority but rather than having cash sitting on our balance sheet

when we look at our share price we think it represents a good investment and so we’ve

been very happy with the progress we’ve made so far.

And again bond buy-backs we had £149m bond buyback in October 2014, we did one

again a little earlier than one around £100m or so the year or so before and that has

resulted in that reduced interest charge that we saw a little while ago which is a pretty

useful bridge to explain the first half of last year to the first half of this year.


Again highlighting the negative impacts of RMS(one) investments and Gastech on our

half year numbers, £17m investment in RMS(one) largely due to reduced capitalisation

of software development spend. But also the introduction of the data centre costs that

we’ve brought onto the books that we plan to be using right now for RMS(one) and

waiting for RMS(one) to become available as it will do in the final quarter of calendar

2015 and in the absence of the Gastech even as well.

But aside from that you can see good growth elsewhere across the Group. So those are

those two big stand out numbers.

So what are the considerations you ought to have on your mind for the second half of

the year? I think we would expect to see a stronger year on year performance for RMS

profitability and dmg::i UK property information business. We expect to see a revenue

growth of the core business is RMS driven on the back of that RiskLink 15.0 release but

also the new versions of those two big models, which coincidentally represent about a

quarter of RMS’s catastrophic risk modelling business, those two models alone.

We do however have a smaller global petroleum show which is on an annual basis versus

the biannual from beforehand. We sold the Jobsite business, cover price increase, the

reduced financial charge will continue, the reduced tax charge that we saw in the first

half. And of course whatever happens with the exchange rate will have an impact as

well, right now the average is 1.54 to where we are yesterday and 1.66 on a full year

basis last year.

Just reiterating a very key message this is the slide that we showed back in November

and it is unchanged so we’re pleased to maintain our guidance. That’s it from me, back

to Martin. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Business Update


Thanks Stephen. It is our custom to talk quite extensively about strategy at the time of

the full year results and I will certainly be doing that when we come to next November.

But I thought just as a quick reminder what our priorities are I’ve listed them out here

and those of you who follow us regularly will recognise them.

Our priority in terms of investment is to drive organic growth through innovation in the

company and I’ll touch on a number of those initiatives that are going on right now. I’ve

already mentioned rigorous and active portfolio management and I’m going to show you

a table next to talk a little bit about the M&A and disposals that have taken place in the

first half.

And we continue to be very focussed on DMGT becoming an ever more international

business, I’m glad to say we’ve made good progress in Asia recently. Technology we

see actually as an enabler of growth, that’s a high priority for us and of course attracting

and developing entrepreneurial talent which we think thrives in the way we operate

DMGT on a light touch decentralised basis.


So enough on strategy so let’s come to active portfolio management. You’ll be familiar

with the layout of this slide but just to remind you those companies that are mentioned

here that are on a green background we consider bolt-on acquisitions to existing

businesses and the red indicates investments or adjacent investments, which really are

companies that operate in markets where we already have a business and therefore

have extensive market knowledge but aren’t directly bolt-on.

So you see we made four bolt on acquisitions in the first half, Starfish was added to

Hobsons a really excellent acquisition I think, which provides additional customers and

product to help universities and colleges and America deal with a very difficult problem

they have which is to do with low retention rates. And as funding in American

universities and colleges moves more to an output or a results based system rather than

simply by headcount it becomes crucial for universities to hold on to students because

after all that’s their revenue and it’s a very nice addition to the Hobsons business.

Energy Fundamentals and Petrotranz are two further acquisitions for Genscape and

Stephen has already called out how fast Genscape is growing on an underlying basis and

we continue to see a great pipeline of small entrepreneur earlier stage businesses that

can actually add to that growth rate and build our product for Genscape.

Gulf Glass and GulfSol were two small bolt-on acquisitions for our Middle East Events

business which is a very successful business indeed and so those are nice additions and

add to our sort of construction portfolio.

In the adjacent category we invested and acquired Elite Daily which is a US based

business and its focus in terms of demographics very much at the millennials and

therefore is a very good complement to the demographic profile of MailOnline. And the

two businesses joining together to sell advertising across both platforms where

advertisers are looking for a broader and bigger reach. So I think a very interesting and

exciting investment acquisition there.

Dealogic you will have heard of from Euromoney, Euromoney now has a 15.5% stake in

Dealogic and I think we are very enthusiastic about that because it takes Euromoney

another step into being involved, if you like, in the digital work flow, in this particular

case for investment banks on a pretty global basis and it’s a very impressive business

and we have a seat, well Euromoney has a seat on the board.

And finally dmg::i made an investment in an early stage business in property

information in the US called Compstak. And actually sticking with property for a minute

since the half year close in fact earlier this week dmg::i completed its first investment in

a Chinese business, an early stage Chinese business which is also in the real estate

information sector. And I don’t want to tempt fate but we’re looking forward to actually

closing one at least of a similar style of transaction in India in a property information

business there. And India has very exciting prospects I think in the coming

sophistication of how real estate is dealt with in that country.

So a very nice set of acquisitions and investments I think the first half. And if you look

right down the bottom of the page where we’ve referred to the disposals we actually


raised more money through disposals in the first half than we spent on acquisitions

which is something we’ve done in previous years.

So let me know just move on to talking about each of the main operating businesses in

DMGT starting with RMS. News out of RMS is good, Stephen’s referred to the roll out of

RiskLink 15 which is the latest iteration of the RiskLink software that delivers the models

for RMS. It’s an important upgrade dealing with US Hurricane and European Wind, it

also includes very extensive updates to databases to do with hazard and geo information

across I think 46 countries, it’s been very well received by the industry, adoption rates

are good.

And interestingly enough many, many clients are now taking the software online and

downloading and inviting the software online which is a nice precursor to what RMS(one)

will do.

Now talking of RMS(one) very much on track for the scheduled roll out that we have laid

out previously with the first HD models coming by the end of the calendar year, further

models going into ’16, exposure manager, risk manager, other components of the

RiskLink platform - excuse me, the RMS platform to be rolled out through ’16.

So that all led to the latest RMS Client Conference which we attended in Miami recently,

being a very successful and no doubt that clients are reassured and pleased by the

progress RMS is making. So I think we’re quietly confident that we are on firm

foundations, significantly firmer foundations than we were this time last year.

I did mention in November that RMS was facing some headwinds in the reinsurance

industry, it’s been well written about since then that premiums are under a lot of

downward pressure amongst re-insurers. And that does put sort of budgetary

constraints on them in terms of their ability to increase their expenditure on models and

data and other such things so that is a continuing factor in the marketplace.

However on the upside and it’s early days here of course, the primary insurers are

obviously benefiting from the falling insurance rates and the growth of capital markets

and I think those are new opportunities for RMS to actually increase potentially in the

time its revenues coming in from primary insurers as compared to the re-insurers. But

as I say that is a potential future trend on the upside.

Let me turn to dmg::information, we feel very pleased that dmg::information that that

strategy we had for investing in organic growth supplemented by well-chosen

acquisitions is really working. There were some special factors that affected growth

rates in the first which Stephen has taken you through and I won’t repeat. But in terms

of innovation a lot of innovation in the property information businesses, Stephen has

mentioned Xceligent which is in the process of building out a national database of

properties and information about tenants in the US, that’s growing very quickly but it is

an investment business.

In the UK Landmark recently launched a new product and service for dealing with flood

insurance to residential properties and of course it’s a pretty big issue in the UK, those

being just two examples.


Hobsons we’ve mentioned the acquisition but in terms of innovation it’s had a very

successful launch of a new platform to deal with their higher education service and

products for those customers, major upgrades and contents to the Naviance school

system where we are market leader by a very long shot. So I think Hobsons growth rate

prospects are very sound and as Stephen said I think we expect them to pick up in the

second half.

Genscape is just a hive of entrepreneurial activity with lots more products, in fact a very

small acquisition we didn’t list here that’s also been completed over a business called

Vessel Tracker which helps us monitor what’s happening on the seas in terms of the

movement of liquid national gas and oil and so on. And it’s ever adding to the richness

of the information that Genscape can provide traders as they figure out the balance

between supply and demand.

I won’t go over the acquisitions again because I’ve already talked about them, which

takes me to dmg::events, the highest growing business of course in DMG at the moment

and continues its excellent track record of the last few years. And with the Global

Petroleum Show which is coming in Calgary I think in July it will be the last of the

changes to increasing the frequency of our large events. And as Stephen has indicated

it will therefore be a somewhat smaller event given the change of frequency.

I’m sure you’re interested in our view on the impact of the lower oil price on our energy

events. So far stand bookings have held up very well for the Global Petroleum Show, it’s

just too early to tell what’s going to happen with visitor numbers, we have no indications

yet that they’re going to be majorly affected but we can’t bank that yet it’s too early.

Stand sales for Gastech which this year will take place in October in Singapore equally

stand sales are looking pretty good. But again there’s inevitably this far out some

uncertainty about visitor numbers and then we’ll have ADIPEC again Abu Dhabi in I think

it’s November.

But I think we have to be a little bit cautious about how '15/'16 is going to play out in

terms of growth rates in the energy business, I just think it’s prudent to be cautious and

I’ve got no firm numbers to give you at this early stage.

We continue to expand geographically and you will know that one of our big events is

called Big 5, it takes place, it’s the largest trade show in the Middle East, it’s been geo

cloned into Saudi Arabia and other locations. And now had also moved into Indonesia,

which is a nice step forward in our ambitions to do more trade shows in that part of the

world, in Asia in general.

Euromoney well you will have had information directly from them and I suppose we all

know that Euromoney continues to face rather challenging markets in the investment

banking capital markets sector of their business. I hope I’m not clutching at straws and

I know there are some investment bankers in this room but it’s been somewhat

encouraging to see some of the investment banks actually producing some pretty good

results I think at the end of the first quarter. Again, it’s not something we can, no pun

intended, bank, but maybe one can start hoping there might be a bit of an upturn in that

part of Euromoney’s business to come.


Very pleased with the way Euromoney is handling its technology, the Delphi platform has

been very successfully rolled out initially to BCA the international research business and

new products have been launched, customers are buying them and Delphi has been

rapidly rolled out in many other parts of the business. We remain very excited about the

prospects for the Institution and Investor network, there was an extensive presentation

in September on that and investment has continued to go in there and building out the

staff and the talent to underpin their ambitions.

And of course Euromoney remains on the lookout for acquisitions and we support that

and it’s a very competitive M&A market out there and we very much respect

Euromoney’s tradition of being a disciplined buyer, but of course with a very strong

balance sheet they’re in a good position to buy companies when they find them.

And finally we were delighted to be able to announce that Andrew Rashbass is going to

join as Euromoney Executive Chairman when Richard Ensor retires at the end of

September. He’s a man obviously with a tremendous track record and I’m sure that he

will be a tremendous addition to the Euromoney team and we look forward to meeting

Andrew, if you haven’t already in his other careers when he steps up at Euromoney.

So finally to the sort of star performer I suppose in the first half dmg::media. Our

papers continue to be really resilient and increasing market share, which I think is a very

good sign of how good and how strong they are and the effectiveness of the marketing

programmes that Stephen alluded to that we bought in recently and which we were able

to successfully introduce a cover price increase with very little adverse effect on the

circulation of the Mail on Sunday.

And we are seeing the benefits of those cost reductions and the efficiency initiatives that

you know we started a few years ago flowing fully into the results in the first half.

MailOnline continues to make terrific progress I think growing its international audience

very strongly around the world advertising is following, I think rates of advertising

increase are obviously down a little but that is obviously because of a larger number and

we’re very much on track I think to achieve our objectives in terms of advertising

revenue this year and into next year.

And I’ve talked about Elite Daily so perhaps I’ll say no more about that other than it

does strengthen the advertising story for a combination of MailOnline, now called

Dailymail.com in the US and Elite Daily.

So just to wrap up notwithstanding the sort of specific factors that we’ve gone into that

have impacted certain parts of the group in the first half I still think we’re very well

placed to deliver good consistent growth looking out. And we see no reason to change

our strategy which we’ve laid out to you before.

I think the portfolio is pretty nicely balanced and our balance sheet is in good shape and

has enabled us and will continue to enable us to focus on driving shareholder returns

which is of course at the end of the day what we’re all interested in.


So that brings to an end the formal part of our presentation and Stephen and I will be

delighted to take your questions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Questions and Answers

William Packer, Exane BNP Paribas

Just a couple of questions from me please. Firstly in terms of the dmg::media

profitability in H2, if we look back in previous years there hasn’t been a huge amount of

seasonality. Could you just take me through why we shouldn’t expect an upgrade to full

year guidance for that division?

Secondly I think you covered it at the previous trading update but apologies, could you

just refresh us in your thinking as to what the sustainable growth rate at the MailOnline

is going forward? Obviously there's been a bit of a slowdown versus previous quarters.

It would be good to get your thoughts on where it can go from here?

And then finally on RMS(one) you've made it very clear that you don’t want to talk about

financial specifics looking forward. One element from here is the rollout of a couple of

HD models in H2. Just can we have a kind of qualitative flavour of the kind of

requirements for a client that they need to make in order to take the jump with those

models? How significant an investment is it? How big a risk for them is it moving to

those models? And how big a take up do you think there’ll be?

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Do you want to do the margin one first?

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Yeah. Okay so on the margin it’s a fair question. I think the one key thing to remember

is that dmg::media sees 2% underlying revenue decline at the moment and of course we

expect that decline to continue into the second half. So you would naturally see a

deterioration in margin with revenue decline, so we have that very much on the horizon.

I think it is a fair point though that when you look back the guidance that we have given,

you know the outlook - the actual outlook number isn’t likely to be more - it’s slightly

ahead of that rather than behind it if anything. So I wouldn’t expect the 15% but it

might be something that’s not far short of that.

Next question was on MailOnline growth.

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Well I think we’ve indicated before a sort of target to get to £100m in ‘16, end of ‘16,

and I would say that given the current trajectory that looks like a pretty fair target still.


I think it would be a brave person in the changing world of digital media to forecast

much beyond that but yeah, I think if we hit this year’s number it’s a nice step forward

towards that.

In terms of RMS that’s a really interesting question about the cost to the client. Well our

analysis continues to show that actually moving to the software as a service model will

reduce client costs. Will there be transition costs for some clients? Yes I suspect there

will be. I'm struggling a bit to know quite how to generalise across a diverse client base

that has quite different internal IT systems. I think with the nature of now the sort of

rollout being sort of in stages, I think we will see clients adopting in different stages. I

think you'll see for example some clients continuing to run RiskLink and embrace

RMS(one) for other reasons, and some of them will move much more quickly. So I think

the cost profile is going to vary.

What we will do to your question is RMS are going to be presenting at our investor day

in September. I suggest we make sure that we address that question in a bit more

depth then.

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And so just to confirm, if someone does decide to take the European flood model they’d

take RMS(one), and if they kept the hurricane Florida model they'd have RiskLink as

well?

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Yeah.

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They'd take both?

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Yeah.

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Okay thanks.

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Yeah I mean I think one of the key goals of RMS is to make it as easy as possible for its

customers to migrate onto RMS(one) and as straightforward as possible. And they will


need RMS(one) if they are to use the high definition models that become available

starting with European flood in the final quarter of this year.

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That’s final calendar quarter.

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Yeah, calendar year. And then I think you've got Japan typhoon into 2016 and New

Zealand earthquake beyond that. That’s the rollout plan.

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Just commenting on that, the significance of that rollout is so the net first period you'll

have each of the major perils on an HD platform. So some people have said well New

Zealand earthquake, you know that doesn’t sound like a particularly significant one,

although it’s a big deal, earthquake is a big deal in New Zealand obviously for the New

Zealanders. But actually it’s proving that technology can work because the science is

broadly similar earthquake to earthquake so you'll have flood, hurricane, wind and quake

all onto the new platform in ‘16.

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Thank you.

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Gareth Davies, Numis

Morning. Two for me. Just going back to dmg::media again, in terms of investment

certainly the wording in the statement implies that you’re still putting quite a lot of

investment into the US. Can you talk around the investment, the specific sort of

projects you've got going on there? And is that something we should expect to sort of

ease off through ‘16 and ‘17 and give additional margin benefit? Or - just a little bit

around that dynamic.

And then secondly sort of another margin related question. dmg::information are

looking to pick up quite a bit in H2, can you talk about some of the specifics driving that?

And then also specifically on Hobsons. I think from memory it’s sort of been a standout

laggard really in margin terms relative to the rest of the Group and I know you had

some initiatives ongoing there that could sort of help drive that. Can you give us an

update around that?

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Yeah well in terms of investments in MailOnline and the US it’s really people. And don’t

want to be a hostage to fortune but it looks as though that substantial step up in people

is really behind us. I mean there might be some additional people but I'm not hearing

any great demands for any significant increases in headcount there.

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No I mean it’s essentially the desire for a true US product requires US journalists writing

US stories. So naturally you would expect a pickup in headcount to achieve that.

And the other big driver is video of course. The CPMs, the yields on video advertising

are much higher than the static display advertising. So developing the video capabilities

requires the investment to get to that stage. So those are the two big things really.

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Dmg::i margin?

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Dmg::i margin. Yeah last year we moved from 14% first half to 17% full year. This

year we’re at 13% so we expect a similar sort of improvement. Big drivers of that as I

mentioned the Hobsons higher education revenues are very much towards the second

half of the year driven by the seasonal marketing activity that takes place in Hobsons in

the universities for of course the applicants during the summer and into enrolment in the

sort of September, October time as it is in the UK.

Similarly we expect the benefits of the Radius software platform that’s been introduced

in Hobsons to flow through into the second half. And also the - shall we say Xceligent

revenue growth being sufficient to see some sort of say decline in its investment phase if

that makes sense, in the second half of the year as well.

So you put all those things together and then add onto that what we expect [gap in

audio] was quite rightly a little bit of uncertainty about the prospects of a coalition

government and the uncertainty that might bring. That’s been removed and the early

signs are that UK consumers are now ready to start applying for mortgages and moving

house and so on. So put all those things together, kind of explain why we expect to see

an improved margin in the second half.

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Steve Liechti, Investec

Morning. Two questions please. First of all on RMS(one) you've talked about the HD

model rollout. It looks to me as though two of those models slipped a quarter, in that

you said at the pre-close update you expected three HD models launched in calendar

fourth quarter. Are my notes incorrect? And if they have slipped why have they


slipped? And I know you’re saying RMS(one) is on track, but is there anything sort of I

should be worried about by that slippage?

Second question is on RMS core. You talked about the reinsurance market and the

pressure there on the margins; obviously one of the effects there is the cap bond sort of

coming through there. I'm just trying to understand why you are not getting a benefit

from the cap bond side in terms of assessing risk? And I believe your competitor is

outperforming in that area. Can you explain to me why I guess you’re missing that

opportunity?

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I'm just checking, is it a slip in terms of what we said before?

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There's no slippage on RMS(one).

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No, I didn’t think so.

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I mean I think the point is we’ve got more detail now as to how we think it’s going to roll

out and we think it’s sensible to do a big model, European flood first, and then the other

two to follow shortly after. I mean they really are, I don’t want to say back to back but

not too far apart. So we’re talking - you know this is detail so there's no slippage, very

much on track. And this is what we think is a sensible plan for the rollout of those high

definition models.

And indeed if you were to take a longer view and look at the two, three year horizon, the

amount of activity in those two, three years, it will outweigh anything of the last sort of

ten years in terms of model rollout, HD model rollout, assuming all goes well with the

RMS(one) software platform.

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Yeah in terms of RMS’ sort of market share in the cap bond market yeah it’s true that

going back a few years ago, I hate to have to raise it, we had considerable difficulties

when we had version 11 of RiskLink. The market didn’t like the view of risk we took.

But to a certain extent we were definitely vindicated when Hurricane Sandy came.

And in that case the market, in terms of the cap bond market, chose at that time to

move more to a competitor that had a view that the risk was low, i.e. prices were low for


the risk. Well you can take a view of what makes most sense from the point of view of

the insured, but anyway RMS has been somewhat in a catch up in terms of participating

in cap bond securitisations.

We have a pretty strong product there. We also have a licensed product which is doing

very well which is helping people who hold the securities to actually manage them once

they have bought them and, you know, as they increase the size of the portfolio and

that’s doing pretty well and that’s a subscription product. And cap bonds are fine but

they’re kind of one off consultancy fees that you get to do a model for an investment

bank who’s putting out a bond. It’s kind of nice business to have, but it’s not really -

because it’s not licensing revenue, it’s fine, but it’s not the high grade revenue you get

from a licensed product.

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Nick Dempsey, Barclays Capital

Just two questions left please. So just in terms of the tax I understand the benefits are

mostly non-cash, so if we were talking about theoretical cash EPS would you not be

upgrading your expectations on EPS?

And second question, at Hobsons did you have any exposure to the Corinthian for profit

college chain which had to close a bunch of university campuses?

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Yeah I’ll do the second one first. Actually Hobsons has not been active in terms of

selling to the private education market. And the market has tended to bifurcate between

the sort of non-profit university sector which can be private and public, and we’d not

actually focused on the full profit sector. So that’s a long winded answer saying we

weren’t affected.

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And the first one yeah there would be a modest additional benefit there on a cash basis

for the tax rate so you’re not wrong.

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Alex DeGroote, Peel Hunt

Thanks guys, morning. Two quick questions please. Firstly just on the cash funding into

the pension, have you overpaid or brought forward some funding there? That 38 looks a

bit higher I think than the full year guidance so a bit of a heads up there would be great.

And then secondly just on Zoopla actually acquiring uSwitch. I seem to recall about

seven years ago DMGT dipped its toes in the price comparison market. I think

SimplySwitch was the asset and I think that was closed fairly short order after the

purchase. So I just wondered if you have any observations about what might be

different this time round? Thanks.


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Well because of the corporate memory being as good as yours, when it was first

proposed by Alex it caused us to pause for a moment. But given the - given his strategy

if you like for, you know, providing people who are homeowners moving home, people

who are interested in home with a range of services if you like that are relevant to the

home I think it’s pretty compelling.

And you know that’s one that DMGT got wrong for a variety of reasons. I'm afraid I

wasn’t CEO at the time so I really don’t know the ins and outs of it, but that was then

and now is now. And you know obviously we have a tremendous respect of Alex and his

very strong management team and I think a very interesting strategy that he's put

together that’s justified the buying of uSwitch.

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Yeah very much so. And then on the pensions, yeah our recovery plan and we continue

paying that in line with what we’ve agreed with the trustees of the pension fund. And

what we shouldn’t forget is there is often a little top up to that in respect of any share

buybacks that take place. So the difference is the agreement that we have with the

trustees to pay in a proportion of any share buybacks into the pension fund to reflect

that effectively sort of leakage of cash out of the Group.

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Ian Whittaker, Liberum Capital

Good morning. Just two questions. First of all just in terms - coming back on the tax

rate. You mentioned in terms of you decided to sort of look at more optimisation of

some of your losses. Was that down - a direct result of the UK general election result?

Laughter

And if so is that something that could be sustained moving forward?

And then the second question just has to do with events. If you look at the sort of

longer term oil price, there's increasingly a question as to whether there is sustained

deflation in that market, whether oil prices will ever increase significantly again at least

in the medium term. Is that changing your view of whether you want to be in the

events business or not?

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No it’s definitely not. But I'm certainly not willing to make forecasts in terms of where

energy prices are going to be. I mean I think the benefit of our position in energy is that

we have very successful, very substantial trade shows and I think it’s - would typically

be the case that secondary shows, more marginal shows, are the ones that are going to


be in more difficulties. Because there's also politics involved. You know in a show like

Abu Dhabi, it’s a showcase for Abu Dhabi in the whole energy industry there and what

they’re doing, very strong conference programme for example. So it certainly wouldn’t

change our view about being in events generally, no.

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And then on the first question no, the tax rate had nothing to do with the outcome of the

UK election. It was very much the growth in UK profits and our ability to use tax losses

that we thought would previously be more difficult to use. And then as we looked to the

near future our ability to continue to use those tax losses. And the drivers there are you

know continued growth in MailOnline as it moves out of its investment phase and into

that sort of £100m of revenue in fiscal ‘16 that we’ve guided to for quite a while now.

As we look at Wowcher moving into profitability, look at the resilience of Metro but also

in particular the improved margin in the newspaper business. All of those things put

together make us feel more confident about the use of those tax losses that we have

stored up.

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Question

On Elite Daily, first of all how much overlap is there between MailOnline and Elite Daily’s

audience? Are you planning to integrate the two and does it offer a significant

monetisation opportunity?

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Yeah I think I'm right in saying that the overlap in terms of traffic is only 10%.

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That’s right, less than 10%.

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So it’s highly complementary. I think the audience is still predominantly female, yeah?

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It’s affluent females.

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Yeah, the younger so that’s very good. And yes we do believe and it’s one of the main

justifications for the acquisition is that you can buy in the traffic that you’re getting from


Elite Daily with the traffic from Dailymail.com and the demographic complementarity,

there are advertisers who want to buy large numbers across a broad demographic.

That’s not going to suit all advertisers but there's plenty of advertising opportunities and

that’s really one of the fundamental rationale for doing the investment.

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They’re very much sort of different audience sets to Martin’s point. And one of the key

stats is that when you look at MailOnline in the US and Elite Daily combined, together

they reach over half of the 18 to 40 year olds in the US. So there's a good sort of

advertising yield play there with that. But we’re learning a lot from them on their social

networking skills.

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Yeah, and video.

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And video capabilities. So it’s -

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So we didn’t really answer your question. In terms of the way the businesses are run,

they’re run sort of day to day and certainly from a content perspective they’re run by

two different management teams, two different editorial teams, but they’re joined

together at the hip in terms of the sort of B2B side of the business which is dealing with

advertisers and agencies.

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Patrick Wellington, Morgan Stanley

Morning. I'm going to plug away at RMS. Hemant Shah at Exceedance was quoted as

saying the first RMS HD model would come in the fall. I don’t know whether the fall is

the same as the end of the year, and I kind of agree with Steve on the other two models

as well. So it does look as though there has been a degree of movement on those model

production.

Secondly on RMS when we have seen some big new models in the past it has caused a

bit of customer disruption as customers got used to the different findings of those

models. You seem very confident that that’s not going to happen this time round.

And then just an easy one. On the tax charge does it pop up, you know, 16, 18, 20 or

do we move further back towards 20? Give us a bit of a feel for that.


And corporate costs, I mean you’re still on the full year guidance although you had the

big half year. Are you leaving yourself a bit of spare on corporate costs for the full year?

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Well in terms of - you’re right and I alluded to it before, we had problems with version

11. Well there was a lot of hard learnings from that. One is preparing the industry

better and more in advance for any significant change in the view of risk, and that’s sort

of become practice with RMS now. And it’s just a fact that the version 15 rollout is going

very well. And that’s because the product was well designed, Q&A was done, the

testing, the clients were prepared; it’s been well organised and well received.

Well I don’t know if we’ve got anything further to say on the timing difference. I think

you know quite frankly in the scheme of things I don’t think there's any real slippage to

RMS. We want to make sure that the - in terms of the rollout of the HD models that

they come at a pace that the clients can adopt. It’s the same thing, they have to be sold

in, the view of - I mean there is this transitioning needs to be handled. I'm much rather

it was done at a steady, well organised pace, you know and a few weeks here or there I

don’t think is material. I really don’t think it’s material. I don’t see any significant

slippage at all.

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Yeah you’re dead right. Hemant said fall but that’s autumn so final quarter calendar. I

think we’re splitting hairs.

Tax charge 14.1% now, I think sort of 15% on the full year is more likely. And I think

we ought to see that sort of trajectory heading towards 20% over the next three, four

years. But just to make the point though that it might be more spiky and a bit more

volatile in light of that usability of those UK losses. So I'm not suggesting this is going

to happen but if there were a dramatic decline in print advertising for example, profits

would naturally come down and therefore the usability would be less and the tax rate

might go higher. So I'm just flagging that that volatility may exist, but that’s the broad

trajectory that we’re expecting to increase over time to that level.

And then was the final question around corporate costs I think? Yeah, so £17m for the

half year compared to £21m or so last year. I think we may come in slightly lower than

we did last year, but there will be that pickup in the second half so I wouldn’t necessarily

just double the £17m to get to the full year basis. I think we’ll be closer to last year’s

full year number, but maybe slightly lower than that.

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Chris Collett, Deutsche Bank

Just two questions. One was just on Dealogic and really what your aspirations are along

with Euromoney to really expand in work flow solutions in the investment banking

space?


And then second again on RMS. Can you just remind us about the timing of the

additional investment in the data centres and the product development? Is there

additional step up in the second half of this year compared to the second half of last

year?

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Well in terms of Dealogic interesting question. I think if you think about investment, the

investment network, investor intelligence network that I talked about earlier on, you

know taking what an institutional investor has done traditionally and the relationships

they have with both asset owners and asset managers and turning that into a digital

system whereby assets can be transacted in terms of owners finding managers, you

know that’s a workflow application. So Dealogic is not the only example of that.

They’re perhaps less headline grabbing examples even at a company like BCA using the

Delphi platform. You know if you think about where the research was previously

published, well it used to be in printed form but then it was a PDF, and of course what a

lot of clients want, I imagine some of you in the room, is often you actually just want to

imbibe the data and you want to be able to manipulate and do things with the data so

you now through the application of the Delphi content management system etc. you

know you can start to offer clients a whole variety of services where you’re putting - you

know you’re allowing the client to be in control of how they use the information you

have. So I think the sort of workflow development and being more engaged in the

workflow, we’re going to see it in multiple businesses at Euromoney over time.

Are you going to deal with the other question about the developments?

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I don’t think you’re going to see in the second half a pickup in the RMS cost base. It’s

pretty much as it is now and those investments in data centres were first started - where

are we now - first started towards the back end of fiscal ’13. And as we’ve got to the

stage that we’re at now, there is capital that’s on the balance sheet in respect of those

which is now being released to the income statement. And there are lease costs which

are being incurred that were - those leases being set up in anticipation of the launch in

April ‘14 so they’re costs that we’re incurring effectively in respect of the postponement

or the delay of RMS(one).

Any more questions?

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Well thank you very much for your questions and thank you very much for coming.

Good morning. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .


END

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