AR17Future plcAnnual Report and Accounts2017
Annual R
eport and Accounts 2017
Future plc
1 Future plc
Strategic Report
01 Group overview02 Chairman’sstatement03 ChiefExecutive’sreview 05 Strategicoverview07 Whatwedo09 Risksanduncertainties11 Corporateresponsibility
Financial Review 13 Financialreview
Corporate Governance
17 BoardofDirectors19 Directors’report23 CorporateGovernancereport29 Directors’remunerationreport43 Independentauditors’report
Financial Statements
49 Financialstatements 87 NoticeofAnnualGeneralMeeting92 Investorinformation
Continuing Adjusted Operating Profit
£8.9m 2016: £2.8m
Continuing Revenue
£84.4m 2016: £59.0m
Continuing Adjusted EBITDA
£11.0m 2016: £5.2m
Continuing Digital Advertising
76% of total continuing advertising revenues (2016: 78%)
-AdjustedEBITDArepresentsearningsbeforesharebasedpaymentsandrelatedsocialsecuritycosts,interest,tax,depreciation,amortisation,impairment,andexceptionalitems.
-AdjustedoperatingprofitrepresentsadjustedEBITDAlessdepreciationandamortisationofacquiredintangibles.
Net Debt
£(10.0)m 2016: Net cash £0.5m
Unique Users
53.3ma month (Q4 up 18% on Q3)
Continuing Exceptional items
£(3.7)m 2016: £(16.5)m
Continuing Profit Before Tax
£0.2m 2016: Loss £(14.9)m
Continuing Recurring Revenues
£23.0m 2016: £15.0m
-RecurringrevenuesencompasseCommerceandsubscriptions.
-Exceptionalitemsfor2016aboveincludesimpairmentofintangibleassetsof£13.0m.
Future plc is an international media group, listed on the London Stock Exchange (symbol: FUTR). These highlights refer to the Group’s annual results for the year ended 30 September 2017.
Group overview
2Annual Report and Accounts 2017Strategic R
eport
Chairman’s statement
IampleasedtoreportthattheGrouphashadanoutstandingyearandthebusinesshasgainedstrongmomentum.Overthepastyear,theGrouphasmadematerialprogressinexpandingthebusiness.Therehasbeensignificantgrowth,bothorganicallyandthroughacquisition,whichhasresultedinafantasticsetofresults.
A global specialist media platform with diversified revenue streams
TheGroup’sfullyearresultsareextremelypositive,withyear-on-yeargrowthinrevenueof43%andexceptionalgrowthinadjustedoperatingprofitof218%.Inadditionthere hasbeenstrongcashconversion throughouttheyear.
LastyeartheGrouplauncheditsstrategytobeaglobalspecialistmediaplatformbusinesswithdiversifiedrevenuestreams.Thisyearhasproducedclearmomentumonthisstrategy,withstrongprogressinbothrevenuediversificationanddevelopmentoftheplatform.
BothMediaandMagazinedivisionsareperformingwellwithfastrevenuegrowthinMediarevenuestreams,particularlyineCommerceandevents,andsignificantaddedscaleandoperationalefficienciesintheMagazinedivisionfromacquisitions.
TheGrouphasmadeanumberofacquisitionsduringtheyear,havingcompletedtheacquisitionofImaginePublishinginOctober2016,acquiredTeamRockatthebeginningof2017andacquiredthehomeinterestdivisionofCentaurMediainAugust2017.Theintegrationofhomeinterestiswellontrack.
TheBoardandIwereshockedbythetragicnewsthatManjitWolstenholme,theGroup’sseniorindependentnon-executiveDirectorandChairmanoftheAuditandRemunerationCommittees,passedawaysuddenlyon23November2017.Manjitwasatowerofstrengthandsupporttomeandmycolleagues,bothpersonallyandprofessionally,formanyyearsandshewillbesadlymissed.
IwillbesteppingdownfromtheFutureBoardon1February2018.IhavebeenChairman
ofFutureforoversixyears.DuringthattimetheCompanyhashadtoconfrontahugelychallengingmarketplaceandhasnowcomethroughasasignificantlychangedbusiness,wellpositionedtooffervaluegrowthtoshareholders.Withtheacquisitionsoverthelast18monthsandtheexecutivemanagementleadership,theCompanyisenteringanewphase.IbelievethetimehascomeforanewChairmantotakeover,toensurestabilityandcontinuityduringthisexcitingnextphase.IhaveeveryconfidencethatFuturewillprosperinthecomingyears.
Afterarigoroussearchformysuccessor,andontherecommendationoftheNominationCommittee,theBoardhasappointedRichardHuntingfordasmyreplacement.RichardbringsextensivemediaindustryandpubliccompanyexperiencefromhisCEOroleatChrysalisplcandhisChairmanrolesatVirginRadio,WirelessGroupplc(formerlyUTVMediaplc)andCrestonplc.RichardwillinitiallyserveasactingChairmanoftheAuditandRemunerationCommitteesandwilltakeoverfrommeasChairmanoftheBoardon1February.
ThehardworkandprofessionalismofFuture’semployeeshasbeenthedriverbehindtheamazingresultsthisyear.OnbehalfoftheBoard,Iwouldliketothankeveryonefortheircommitmentthisyear.
Peter Allen Chairman
“ TheGroup’sfocusonitsstrategyhasproducedclearmomentum,withstrongprogressinbothrevenuediversificationanddevelopmentof theplatform.”
Peter Allen Chairman
3 Future plc
Strategic reportChief Executive’s review
Futureisaglobalplatformforspecialistmediawithscalable,diversifiedbrands.Wehavemadesignificantprogressagainstourstrategicobjectivesthisyearandhavedeliveredsomestrongresults,withrevenuegrowthof43%year-on-yearandadjustedoperatingprofitgrowthof218%year-on-year.Theacquisitionswehavemadethisyearhaveaddedsignificantscaleandoperationalefficiencies.
Futurehasdeliveredanotheryearofgrowth,withrevenueup43%year-on-yearto£84.4m(2016:£59.0m),drivenbyorganicgrowthof8%andacquisitions,adjustedEBITDAup112%year-on-yearto£11.0m(2016:£5.2m),withadjustedEPSup144%.Inaddition,adjustedfreecashflowstotalled£15.3m(2016:£4.6m)andreportedEPSincreasedto4.3p(2016:lossof59.6p). TheGrouphasdeliveredgrowthinbothoperatingprofitabilityandcashgeneration,drivenbystrongrevenuegrowthineCommerce,digitaladvertisingandevents.
Futurehasseenclearbenefitsinoperationalgearingfromtheinvestmentincentralfunctionsandtechnologyinfrastructure,evidentinthesignificantimprovementinadjustedEBITDAmarginto13%(2016:9%).Theinvestmenthasalsoallowedanumberofnewbrandlaunchestobedeliveredquicklywithminimalincrementalinvestmentcost.
TheMediadivisionisperformingwellwithfastrevenuegrowthinallareas;eCommercerevenuehasmorethandoubledyear-on-year,whileeventshavegrown58%year-on-year.Inaddition,digitaldisplayadvertisingrevenuehasincreasedby21%year-on-yearasaresultofvaluingthequalityofouraudience,combinedwiththeinvestmentwehavemadeinatechnologystackthatcapitalisesonthegrowthinprogrammaticadvertisingwhilemaximisingdigitalyields.
TheMagazinedivisionhasbenefitedfromaddedscaleandoperationalefficienciesthroughtheacquisitionsofImaginePublishing,TeamRockandthehome interestportfolio.
Thegrowthinrevenuesandoperatingprofitabilityandresultingstrongcashconversionintheperiodledtoyear-endnetdebtoflessthan1xadjustedEBITDA.
Inlightofthecontinuedfocusondebtreduction,confidenceintheGroup’sgrowthstrategyandthecontinueddevelopmentofthebusinessleadingtomoreconsistentcashflowsanddiversifiedrevenuestreams,theBoardisnowinapositiontoconsiderreturningtopayingadividendtoshareholders,whilstmaintaining sufficientresourcestocontinueinvesting inthebusiness.
Global platform business for specialist media
In2016Futureoutlineditsstrategyofbecomingaglobalplatformbusinessforspecialistmediawithdiversifiedrevenuestreams.ClearmomentumonthisstrategygainedthroughouttheyearisreflectedintheGroup’sfinancialperformance.
TheGroupcontinuestodiversifyitsrevenuestreams;eCommercerevenuescontinueto
“ Wehavedeliveredsignificantgrowthinbothoperatingprofitabilityandcashconversion,drivenbystrongrevenuegrowthineCommerceandevents.Thethreeacquisitionswehavemadethisfinancialyearhavefurtherstrengthenedanddiversifiedourrevenuestreams.”
Zillah Byng-Thorne ChiefExecutive
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eport
Wehave31msocialmediafollowers
75.6kpeopleattend ourevents
growwellorganicallyandgrowthineventshasbeenbolsteredbytheacquisitionsofTeamRockandthehomeinterestportfolio.Withtheintroductionofanewcontentverticalthroughthehomeinterestacquisition,audiencediversificationhasincreasedtosevenaudiencecommunities.
Investmentindigitalassetsandthecontinuedtightmanagementofcostshasincreasedoperatingmarginsandhelpeddeliveron thisstrategy.
Loyal communities
Futureattractsalargepassionateaudienceacrossonline,eventsandprintof85million;theGroup’sinfluentialandmarket-leadingbrandsofferouraudiencestheopportunitytodothethingstheylove,throughanexcitingcombinationofexperiences,uniquecontentandeCommerceofferings.
Futureisfocusedonmeetingitsaudience’sneedswithspecialisedandhigh-qualitycontentandexperiences.Thisconnectioncanoccurwherevertheaudienceis,withstrongengagementwithusersthroughalargesocialmediareachof31millionfollowersacrossFacebook,TwitterandYouTubeandgeneratingsevenmillionsessionstothedigitalpropertiesfromsocialmedia.
HighengagementwasevidentatThePCGamingShowatE3inJune,whichwaswatchedliveonspecialistgamingchannelTwitchbyanaudienceofindustry-leadingscale,withovertwomillionuniqueviewersand630,000concurrentvideoviewersacrossallplatforms.
Thebrandsaremarket-leadingandhaveseensignificantaudiencegrowthof18%year-on-year,reaching53.3milliononlineusers.IntheUS,the10%year-on-yeargrowthinonlineusersto20.4millionhasresultedinan
increaseinourmarketshare,particularly intechnology.
Acquisitions
Futurehasmadethreeacquisitionsthisyear,inlinewiththeGroup’sstrategytoexpandglobalreachthroughacquisitions.Theseacquisitionshaveaddedsignificantscaletothebusinessandwehavebenefitedfromtheresultingoperationalefficiencies.
Theacquisitionshavefurtherdiversifiedrevenuestreamsbyaddingnewverticalsincludingknowledge,musiclisteningandhomeinterest.
Current trading and outlook
Tradinginthecurrentfinancialyearhasstartedwelland,atthisearlystage,isperforminginlinewiththeBoard’sexpectations.
TheintegrationsofbothImagineandTeamRockhavebeencompletedwithsynergiesdeliveredinlinewithexpectationsandbotharetradinginlinewithexpectations.
Theintegrationofthehomeinterestportfolio,acquiredinearlyAugust,isprogressingwellandisexpectedtobefullycompletedbytheendofthiscalendaryear,withthelaunchofRealhomes.cominNovember2017akeypartoftheacquisitionstrategy.
Zillah Byng-ThorneChiefExecutive
Wesell960kmagazinesandbookazines permonth
Wereach53.3musersthroughourwebsites
Keydetailsoftheacquisitionswehavemadein2017areincludedbelow:
Acquisition Revenue*
ImaginePublishing £16.4m
TeamRock £2.8m
CentaurMedia’shomeinterestdivision** £12.8m
*Revenuefiguresobtainedfrommostrecentannualfinancialinformationor,inthecaseofCentaurMedia’shomeinterestdivision,financialinformationrelatingtotheacquiredassets**CentaurMedia’shomeinterestdivisioncomprisedAscentPublishingLtdandCentaurConsumerExhibitionsLtd
5 Future plc
Our strategy
Lastyearwelaunchedourstrategywhichisfocusedonbecomingaglobalplatformbusinesswithscalable,diversifiedbrands.Buildingaplatformbusinessallowsustounlockandcreatesignificantnewrevenuestreams,expandingourbrandsandreachingouraudienceindifferentways.
Thisyearwehaveclearmomentumonthisstrategywithstrongprogressinbothrevenuediversificationanddevelopmentoftheplatform.Wehaveachievedthisthroughorganicgrowth,acquisitionsandstrategicpartnershipswhichhavealsoexpandedourglobalreach.
Theinvestmentwehavemadeoverthelastcoupleofyearshascreatedaninfrastructurethatwecanscaleandthatisunderpinnedbymarket-leadingglobalbrandsindiversifiedverticals.Wehavescalabletechnologywhichwecombinewithdatainsighttosupportorganicgrowth.
Wecontinuetoinnovatewithourmagazinebrands,withre-launchesofAirgunShooterandTotalGuitarin2017andT3magazineinthecurrentfinancialyear.Wehavefocusedongrowingouronlineandprintsubscriptionsandclubsinordertodriverecurringrevenuestreamsandfurtherengagewithourpassionateaudiences.
Our highly-engaged audience
Weareproudofourpurposewhichissimple;changingpeople’slivesthroughsharingourknowledgeandexpertisewithotherstomakeiteasierandmorefunforthemtodowhattheywant.Ouraudienceiskeytoeverythingwedo;weunderstandtheimportanceandvalueofourhighlyengagedaudienceandourcontentandexperiencesarespecificallytailoredtothesecommunities.
Reachingaglobalaudienceof85millionthroughourwebsites,events,socialmediaandmagazines,wecontinuetocreateloyalcommunitiesbygivingthemaplacetheywanttospendtheirtimeandwheretheygotomeettheirneeds.
Wearefocusedonenhancingandbuildingtherecurringrevenuestreamsofonlineandprintsubscriptionsandmemberships,suchasTeamRock+,PCGamerClubandphotographypremiumsubscriptions.Membershipgivesusersaccesstoexclusivemembercontentandoffers.Acrossouronlineandprintproductswehaveover500,000subscribers,up26%year-on-year.
A global platform for specialist media
Strategic overview
AtFuture,weprideourselvesontheheritageofourbrandsandloyaltyofourcommunities.Offeringcoreexpertise,wehelpdedicatedenthusiastsfollowtheirpassionthroughhigh-qualitycontent,uniqueexperiencesandinnovativetechnology.
Our brands
Futuretodayboastsaportfolioofover120brandsacrossonline,magazinesandevents.OurspecialistmediabrandscoverabroadrangeofsectorsenablingtheGrouptomitigateriskandlessenitscyclicalexposuretoanyonevertical.
Oureventsconnectourcommunitiesthroughmeaningfulexperiences;smallandintimatetotrulynationalevents.Wenowhave24annualeventsacrosstwocountries,10ofwhichweacquiredthisyear.
Wehavealsoseenstrongorganicrevenuegrowthfromourcoreglobalsuperbrands–TechRadarrevenueisup37%year-on-year,PCGamer.comrevenueisup52%year-on-year,GamesRadarrevenueisup33%year-on-yearandT3.comrevenueisup88%year-on-year.
Ourbrandscontinuetobemarketleaders,holdingthenumberonemarketpositionsintheUKinonlineconsumertechnology,onlinecreative&designandtheglobalnumberonepositioninPCgaming.
Inadditionwearecapitalisingonemergingopportunitiesthroughbookazines,whichisalowcostinnovationmodel,withover430bookazinesproducedintheyeartotallingrevenueof£10.1m.
Data-led innovation through content and technology
Ourglobalplatformbusinessenablesustofacilitateandaccelerategrowthopportunitiesandunlocksignificantnewsourcesofrevenue.
Thisyearwehaveseenstrongorganicgrowth,particularlyfromeCommerceandevents.Thishasbeendrivenbyanumberofnewinitiatives,includingnewcontentgenreswithinthecurrentbrandssuchasbroadbandorT3Homeandusingdatatooptimiseconversionrates.
FollowingthesuccessfultestlaunchofT3Babyduringthecourseof2017,wehavelaunchedanumberofnewsitesincludingDigitalCameraWorldandTheRadar.LaunchedinOctober2017,TheRadarisaneCommerce-ledwebsiteaimedatallowinguserstofind,reviewandbuyproductsacrossanumberofcategoriesincludingtech,homeware andbeauty.
Followingtherecentacquisitionofthehomeinterestportfoliowelaunched Realhomes.comduringNovember2017,ahomeinteriorswebsiteaccompaniedbybuyingguidestotakeadvantageofcurrenttrendsinouraudience’sonlinesearchandpurchaseintent.
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Byscalinginvestmentinourplatformbusinesscoupledwithourleadingcontent,weareexpandingourglobalreachthroughdigitalandprintlicensing.Thesestrategicpartnershipsleverageouruniqueplatformpropositionbyofferinghigh-marginlicensingandfranchisingofkeybrands.Wehavesignedatotalof10newlicensingpartnersthisyearincludingPaniniinSpain,BeijingMuchuanCultureDevelopmentinChinaandTbreakintheMiddleEast.
Thedigitallicensingopportunitiesthatweofferenableglobalpartnerstooptimisetheirlocalofferingbyaccessingtrustedbrandsandauthoritativecontent,andleveragingauniquecommercialmodeldevelopedbyFuture.Twoofthe10licensingpartnerssignedthisyear,oneinIndiaandtheotherintheMiddleEast,arestrategicinnature,whereourpartnerislicensingourdigitalcontentand technologyplatform.
Acquisitions
Ourinvestmentsthisyearinourplatformanddata-leddecisionmakingtoolsunderpinourbuyandbuildstrategy,aswecreateadditionaldiversifiedrevenuestreamsfortheseacquiredbrandstogeneratefurtherorganicgrowth.
InOctober2016,wecompletedtheacquisitionofImaginePublishing,theintegrationofwhichisnowcomplete.TheacquisitionofImaginehasresultedinsignificantcostsynergiesandcashgeneration.IthasalsoaddedsignificantscaletoourMagazinedivisionandintroducedanothervertical,knowledge,toourportfolio.Theknowledgeverticalprovidesspecialistcontentonscience,history,wildlifeandcrime.
InJanuary2017,FutureacquiredTeamRock,aportfolioofmusiclisteningmagazines,websiteandevents.Thenewmusiclisteningvertical
complementsourexistingmusicmakingassetsaswellasexpandingoureventsportfolio.TheacquisitionofTeamRockbringsscalablebrandswithaloyalfanbase.
InAugust2017,weacquiredthehomeinterestdivisionfromCentaurMedia.Theacquisitionhassignificantlyenhancedthescaleofoureventsbusiness,withtheadditionofmarket-leading,nationalhomeinterestshows,andhaspresenteduswithgrowthopportunitiesacrossourplatformbusinesswiththelaunchofanewdigitalbrandtomaximisedigitaladvertisingandeCommerceopportunities.
Theseacquisitionshaveallowedustoexpandoureventsprofiles,whilststrengtheningtheMagazinedivisionandcontinuingtoprovidesynergisticbenefits.
7 Future plc
Media
TheMediadivisionfocusesonbeingattheforefrontofdigitalinnovationwiththreecomplementaryrevenuestreams:eCommerce,eventsanddigitaladvertising.Itoperatesinanumberofsectors,includingthegrowingtechnologyandgamesmarkets,andhasanumberofleadingbrands,includingTechRadar,PCGamer,GamesRadar+,ThePhotographyShow,GenerateandGoldenJoysticks.
Ourflagshiptechnologywebsite,TechRadar,istheUK’slargestconsumertechnologywebsiteandaleadingauthorityonproducts.Ourtechnologybrandscombinedreachover30millionusersaswellasahugereachof4.3millionacrosssocialmedia.
LeveragingdataandSEOexpertisemeansthatwecanprovidecontentandeCommercefunctionalitysuitedtoouraudience’sneeds.
InOctober2017welaunchedTheRadar,aneCommerce-ledtechnologycontentwebsiteaimedatallowinguserstofind,reviewandbuyproducts.InNovember2017welaunchedRealhomes.com,ahomeinteriorsandhomebuildingwebsite.
Ourgamingportfolioisthevoiceofauthorityforgamersacrosstheglobe,guidingplayersandinfluencingcultureforover30years.OurtwocoregamingbrandsareGamesRadar+andPCGamer.Theportfoliocoversthegames,filmsandTVourmediaaudienceloveandhasanengagedsocialmediaaudienceof23.8millionandreached18.5millionmonthlyusersthisyear,itslargestevermonth.
PCGameristhebiggestPCgamingbrandintheworld,includingtwosuccessfulevents,ThePCGamingShowandPCGamerWeekender.InJune2017ThePCGamingShowwaswatchedby630,000concurrentviewersharnessingourvideoexpertiseformulti-channelforclientsandlivestreaming.
OneofourcorephotographybrandsisThePhotographyShow,whichistheUK’slargestlivephotographyexhibition.Theaward-winningshowtookplaceagaininMarchandattracted32,000visitors.
InJulywelaunchedDigitalCameraWorld,aglobalphotographywebsitededicatedtohelpingphotographersofallskilllevelsimprovetheirimages,buythebestgearandgetinspiredbyotherphotographers.
Ourcreativeanddesignwebsite,CreativeBloq,isthenumberonecreativeanddesigncontentwebsiteintheUKandtheUS,reachinganaudienceofover2.9million.WealsohosttheGenerateconferences,theeventforwebdesignersanddevelopers,whichtakeplaceinLondonandNewYork.
Theacquisitionsmadethisyearhaveaddedanumberofneweventstoourportfolio,includingthenationalHomebuilding&RenovatingShow,aswellasanumberofmusiceventsfromTeamRock,includingMetalHammerGoldenGods.
Magazine
TheMagazinedivisioncreatesspecialistmagazinesandbookazines,with60magazinesandover430bookazinespublishedayear,withatotalglobalcirculationofoveronemillion.TheMagazineportfoliospanstechnology,gamesandentertainment,music,creativeandphotography,fieldsports,knowledgeandhomeinterestverticals.ItstitlesincludeT3,TotalFilm,HowItWorks,EdgeandAllAboutHistory.
WeareoneofthelargestspecialistmagazineandbookazinepublishersintheUK,apositionthathasbeenstrengthenedbytheImaginePublishing,TeamRockandhomeinterestacquisitionsthisyear.Theacquisitionsalsointroducedthenewverticalsofknowledge,musiclisteningandhomeinterest.
Ourgamingmagazinesandbookazinesare aleadingauthorityonalltypesofvideo gaming,includingourofficialPlayStation andXboxtitles.
Future’stechnologytitlescoverallaspectsofconsumertechnologyfromtheverybesttechproductsinT3magazinetospecialistareascoveredbyMacFormatandLinuxFormat.
OurfilmandTVtitles,TotalFilmandSFX,takeapassionateandauthoritativelookateverypartofthefilmandTVworld,fromallthelatestblockbusters,comicbooksandsci-fiextravaganzastotheverybestOscarbaiters,arthousemasterpieces,hiddengemsandfestivalhits.
FutureistheUK’sleadingpublisherofphotographymagazines.Ourportfolioofspecialisedphotographybrandsallowsleadingbrandstoaccessandtosimultaneouslyengagevaluablein-marketconsumers.
OurmusicportfolioistheUK’sleadingandmostinfluentialmusicnetworkreachingpassionateconsumersthroughtheworld’sfavouritemusicmakingbrands.
Ourextensivecreativeanddesignportfolioismarket-leading,providingcreativeinspirationfortheglobaldesigncommunity.
Our divisionsWhat we do
Futureplcisaninternationalmediabusinessorganisedintotwodivisions,MediaandMagazine.
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Brands
Technology brandsTechRadarT3TheRadarGizmodoUKLifehackerUKITProPortalMobileIndustryAwardsMacFormatMaximumPCLinuxFormatMacLife
Games & entertainment brandsGamesRadar+PCGamerKotakuUKGoldenJoysticksOfficialPlayStationSFXTotalFilmOfficialXboxGamesTMEdge
Creative & photography brandsCreativeBloqDigitalCameraWorldThePhotographyShowGenerateconferencesDigitalCameraN-PhotoPhotoPlusDigitalPhotographerComputerArtsNetImagineFXPhotoshopCreative
Music brandsMusicRadarTeamRockTheLondonAcousticShowTheLondonDrumShowMetalHammerGoldenGodsAwardsProgressiveMusicAwardsClassicRockMetalHammerProgGuitaristTotalGuitarGuitarTechniquesRhythmComputerMusicBassGuitarMagazine
Home interest brandsHomebuilding&RenovatingHomebuilding&RenovatingShowRealHomesPeriodLiving
Field sports brandsAirgunShooterSportingRifleBowInternationalClayShooting
Knowledge brandsHowItWorksAllAboutHistoryHistoryofWarWorldofAnimalsAllAboutSpace
Business review
Business review
Key Performance IndicatorsThekeyperformanceindicatorsarepresentedonacontinuingbasis.
2017 2016
Corporate KPIsAdjustedEBITDA(£m): 11.0 5.2Adjustedoperatingprofit(£m): 8.9 2.8Media Division KPIsNumberofusersvisitingourwebsites(monthly) 53.3m 45.2mNumberofeventattendees(thousands) 75.6 38.3NumberofeCommercetransactions(thousands) 1,982 1,128Magazine Division KPIsNumberofcopiessoldpermonth(thousands) 961 739Subscriberbase(thousands) 461 399Copiessoldasapercentageofcopiesprinted (includingsubscriptions)
40% 45%
9 Future plc
Risks and uncertainties
Likeallbusinesses,ourbusinessfacesrisksanduncertaintiesthatcouldimpacttheGroup’sachievementofitsobjectives.Riskisacceptedasbeingapartofoperatinganybusinessandwehavethereforeestablishedacontinuousprocessofidentifying,evaluatingandmanagingrisk.
Risks and uncertainties
Risk management
Risks Description Mitigation
Operating environment Thestructuralchangeinouroperatingenvironmentandthepaceofthetransitionfromprintremainarealrisk.Thereisariskthatprintcirculationvolumesandprintadvertisingrevenuesdeclineatafasterratethananticipatedanddigitalrevenuesdonotgrowataratetooffsetthedecline.
Futurecontinuestoinnovate,makingavailableitsspecial-interestcontenttoconsumersinanumberofformats,inprint,onlineandatevents.Thediversificationofrevenueshelpsprotectagainstrapidchangesinoperatingenviroment.Wecreatebest-in-classcontenttocreateanemotionalconnectionwithouraudiencesofengagedenthusiasts,whorepresentanattractiveaudienceforadvertisers.WehavebecomeanintegralpartofthepurchasecyclewhichcanbemonetisedviaeCommerce.
Intellectual property Futureuses,andgrantslicencestoitslicenseesallowingthemtouse,varioustypesofthird-partycontentincludingmusic,audiovisualmaterial,photos,imagesandtext.Asapublisher,Futureisresponsibleforanyintellectualpropertyorotherinfringementrelatingtothesameandaslicensor,Futureisresponsibletoitslicensees.
Futureproducesguidanceandin-housetrainingtoeducateitsstaffontheimportanceofobtainingappropriaterightsorlicencesandhasadedicatedin-houserightsmanagementteam.Future’slegalteamreviewsallsignificantlicencesrelatingtothird-partycontentand,whereappropriate,seekswarrantiesandindemnitiesrelatingtothesame.FuturelicensescontenttothirdpartiesbasedonstandardcontractswhichseektolimitFuture’sliability.
Financial Thelonglagtimeforreportingonsalesofexportedprintedcopiescontinuestobeanareaofforecastinguncertainty.
Forecastingremainsdifficultinallconsumermarkets.Aswediversifyourrevenuestreams,newactivitiesareinherentlymoredifficulttoforecastaccurately.
Advertisingpipelinescanbesubjecttoslippage,withtheriskthatresultingrevenueispushedintolateraccountingperiods.
Futurehasavailablebankfacilitiestotalling£25.4mat30September2017.Failuretocomplywiththefinancialcovenantsofthesefacilitiescouldresultinadditionalfinancecostsandthepossiblewithdrawalofthefacilities.
Thesignificantissuesconsideredinrelationtothefinancialstatementsfortheyearended30September2017aresetoutintheAuditCommitteesectionoftheCorporateGovernancereportonpages26to28.
Onprintedproducts,inparticularbookazines,amoreconservativeinitialviewonsalesestimatescontinues,withemergingtrendsbecomingmoreapparent.
Future’sforecastinginrespectofinnovativeproductswillbecomeeasierasthoseproductsdevelopamoreconsistentcustomerbaseandstablebusinessmodel.
Carefulmonitoringoftheadvertisingpipelineandbookingstoclosethegapintheeventofanyshortfall.
Futurecontinuallymonitorsitscashflowsandcovenantsandhasoperatedwithinallitscovenantsthroughouttheyear.TheGroupnegotiatedincreasedfacilities(upfrom£5.0min2016)followingtheacquisitionsofImagineandthehomeinterestdivisionwhichexpireinJune2021.Thereiscurrentlysignificantheadroomonthesefacilities.Seenote18tothefinancialstatementsformoredetail.
ReviewbyAuditCommitteewithexternalauditors.
IT Thebusinessisincreasinglydependentontechnology.
Intheeventofatotalnetworkorserverfailure,ordataloss,therewouldbeamajorimpactontheproductionofmagazines,operationofwebsitesandtheoperationaleffectivenessofthebusiness.
Future’snetworkhasatleasttwodiverseroutesforallkeyofficesandbusiness-criticaldataisheldonthreehighlyresilientstoragedevicesindifferentlocations.Inaddition,allcoreswitchesareduplicatedindifferentbuildingssotherearenosinglepointsoffailure.ServersaredistributedacrosstwomaindatacentrelocationsandseveralcontrolledserverroomsindifferentbuildingsinBathandSanFrancisco.Futurecanswitchservicesfromoneservertoanotherwithinafewhours.Inaddition,allmission-criticalserviceshavemorethanoneserversothereisnosinglepointoffailure.FurtherinvestmentintheITinfrastructurehasbeenmadein2017andmoreisalreadyunderwayin2018.
Staff TheGroup’sstrongreputationasaleadingcontentprovidermakesitsstaffpotentiallyattractivetocompetitors.ThereisariskthatkeystaffwillmoveelsewhereifofferedsignificantincreasesinremunerationwithwhichFutureisunabletocompete.
Futureemployspeoplewhoarepassionateabouttheirsubject.Futureoffersanumberofstaffbenefitsandincentiveprogrammestoattractandretainkeystaff,andstepsaretakentoensurethattheGroupisnotexcessivelyreliantuponanyoneemployee.
Personal data and cyber fraud
AlossofpersonaldataoracyberattackwouldtriggertheneedtonotifyusersandtheInformationCommissioner’sOffice(ICO)andFuturemaysufferreputationalrisk,aswellasasignificantfinancialpenalty,ifitisresponsibleforthebreach.
TheGeneralDataProtectionRegulation(GDPR)comesintoforceinMay2018.GDPRextendsthescopeofEUdataprotectionlawbygivingdatasubjectsadditionalrightsandincreasingtheaccountabilityobligationsoncompaniesprocessingdata.ThemaximumpenaltiesunderGDPRaresignificantlyhigherthanunderthecurrentregime.
Futureseekstoensureallofitssystemscomplywithbestpracticeasregardstosecurityandhasinplaceaplantomitigatetheeffectsofanyhack.TheGroupiscontinuallyinvestingandupgradingitsITsystemsandprocessestoensurethattheyaresufficientlyrobustandappropriateforthedigitalage.
AGDPRsteeringcommitteehasbeenestablishedtoensureFuture’sreadinessforGDPRwhenitcomesintoforce.DatapoliciesandproceduresarebeingreviewedandlegislativeupdatesandICOguidancearebeingmonitoredregularly.
Major supplier or retailer fails Majordistributororretailergoesintoadministrationresultinginlossofmagazinesalesandassociatedrevenue.
Futurecarefullyselectsitssuppliers,takingintoaccountanumberoffactorsincludingfinancialstability.NewsstandsalesarespreadacrossanumberofretailersintheUKandUS.Inaddition,thegrowthinbookazinescontinuestodiversifytheretailersweworkwith.
Acquisitions TheGroupcontinuestosearchforopportunitiestogrowthroughacquisition.Thereisariskthatanysuchacquisitionoritssubsequentintegrationfailstocreatevalueforshareholders.
TheGrouphassuccessfullycompletedandintegratedseveralacquisitionsoverthelast18months.Themanagementteamhasbecomeexperiencedandadeptatidentifyingsuitableacquisitionopportunities,executingthedealandintegratingtheacquiredbusinessintothewiderFuturegroup.Theriskisfurthermitigatedthroughtheperformanceofduediligenceappropriatetothesizeandscaleoftheacquisitionandthepreparationofaclearanddetailedintegrationplan.
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Risk management
Risks Description Mitigation
Operating environment Thestructuralchangeinouroperatingenvironmentandthepaceofthetransitionfromprintremainarealrisk.Thereisariskthatprintcirculationvolumesandprintadvertisingrevenuesdeclineatafasterratethananticipatedanddigitalrevenuesdonotgrowataratetooffsetthedecline.
Futurecontinuestoinnovate,makingavailableitsspecial-interestcontenttoconsumersinanumberofformats,inprint,onlineandatevents.Thediversificationofrevenueshelpsprotectagainstrapidchangesinoperatingenviroment.Wecreatebest-in-classcontenttocreateanemotionalconnectionwithouraudiencesofengagedenthusiasts,whorepresentanattractiveaudienceforadvertisers.WehavebecomeanintegralpartofthepurchasecyclewhichcanbemonetisedviaeCommerce.
Intellectual property Futureuses,andgrantslicencestoitslicenseesallowingthemtouse,varioustypesofthird-partycontentincludingmusic,audiovisualmaterial,photos,imagesandtext.Asapublisher,Futureisresponsibleforanyintellectualpropertyorotherinfringementrelatingtothesameandaslicensor,Futureisresponsibletoitslicensees.
Futureproducesguidanceandin-housetrainingtoeducateitsstaffontheimportanceofobtainingappropriaterightsorlicencesandhasadedicatedin-houserightsmanagementteam.Future’slegalteamreviewsallsignificantlicencesrelatingtothird-partycontentand,whereappropriate,seekswarrantiesandindemnitiesrelatingtothesame.FuturelicensescontenttothirdpartiesbasedonstandardcontractswhichseektolimitFuture’sliability.
Financial Thelonglagtimeforreportingonsalesofexportedprintedcopiescontinuestobeanareaofforecastinguncertainty.
Forecastingremainsdifficultinallconsumermarkets.Aswediversifyourrevenuestreams,newactivitiesareinherentlymoredifficulttoforecastaccurately.
Advertisingpipelinescanbesubjecttoslippage,withtheriskthatresultingrevenueispushedintolateraccountingperiods.
Futurehasavailablebankfacilitiestotalling£25.4mat30September2017.Failuretocomplywiththefinancialcovenantsofthesefacilitiescouldresultinadditionalfinancecostsandthepossiblewithdrawalofthefacilities.
Thesignificantissuesconsideredinrelationtothefinancialstatementsfortheyearended30September2017aresetoutintheAuditCommitteesectionoftheCorporateGovernancereportonpages26to28.
Onprintedproducts,inparticularbookazines,amoreconservativeinitialviewonsalesestimatescontinues,withemergingtrendsbecomingmoreapparent.
Future’sforecastinginrespectofinnovativeproductswillbecomeeasierasthoseproductsdevelopamoreconsistentcustomerbaseandstablebusinessmodel.
Carefulmonitoringoftheadvertisingpipelineandbookingstoclosethegapintheeventofanyshortfall.
Futurecontinuallymonitorsitscashflowsandcovenantsandhasoperatedwithinallitscovenantsthroughouttheyear.TheGroupnegotiatedincreasedfacilities(upfrom£5.0min2016)followingtheacquisitionsofImagineandthehomeinterestdivisionwhichexpireinJune2021.Thereiscurrentlysignificantheadroomonthesefacilities.Seenote18tothefinancialstatementsformoredetail.
ReviewbyAuditCommitteewithexternalauditors.
IT Thebusinessisincreasinglydependentontechnology.
Intheeventofatotalnetworkorserverfailure,ordataloss,therewouldbeamajorimpactontheproductionofmagazines,operationofwebsitesandtheoperationaleffectivenessofthebusiness.
Future’snetworkhasatleasttwodiverseroutesforallkeyofficesandbusiness-criticaldataisheldonthreehighlyresilientstoragedevicesindifferentlocations.Inaddition,allcoreswitchesareduplicatedindifferentbuildingssotherearenosinglepointsoffailure.ServersaredistributedacrosstwomaindatacentrelocationsandseveralcontrolledserverroomsindifferentbuildingsinBathandSanFrancisco.Futurecanswitchservicesfromoneservertoanotherwithinafewhours.Inaddition,allmission-criticalserviceshavemorethanoneserversothereisnosinglepointoffailure.FurtherinvestmentintheITinfrastructurehasbeenmadein2017andmoreisalreadyunderwayin2018.
Staff TheGroup’sstrongreputationasaleadingcontentprovidermakesitsstaffpotentiallyattractivetocompetitors.ThereisariskthatkeystaffwillmoveelsewhereifofferedsignificantincreasesinremunerationwithwhichFutureisunabletocompete.
Futureemployspeoplewhoarepassionateabouttheirsubject.Futureoffersanumberofstaffbenefitsandincentiveprogrammestoattractandretainkeystaff,andstepsaretakentoensurethattheGroupisnotexcessivelyreliantuponanyoneemployee.
Personal data and cyber fraud
AlossofpersonaldataoracyberattackwouldtriggertheneedtonotifyusersandtheInformationCommissioner’sOffice(ICO)andFuturemaysufferreputationalrisk,aswellasasignificantfinancialpenalty,ifitisresponsibleforthebreach.
TheGeneralDataProtectionRegulation(GDPR)comesintoforceinMay2018.GDPRextendsthescopeofEUdataprotectionlawbygivingdatasubjectsadditionalrightsandincreasingtheaccountabilityobligationsoncompaniesprocessingdata.ThemaximumpenaltiesunderGDPRaresignificantlyhigherthanunderthecurrentregime.
Futureseekstoensureallofitssystemscomplywithbestpracticeasregardstosecurityandhasinplaceaplantomitigatetheeffectsofanyhack.TheGroupiscontinuallyinvestingandupgradingitsITsystemsandprocessestoensurethattheyaresufficientlyrobustandappropriateforthedigitalage.
AGDPRsteeringcommitteehasbeenestablishedtoensureFuture’sreadinessforGDPRwhenitcomesintoforce.DatapoliciesandproceduresarebeingreviewedandlegislativeupdatesandICOguidancearebeingmonitoredregularly.
Major supplier or retailer fails Majordistributororretailergoesintoadministrationresultinginlossofmagazinesalesandassociatedrevenue.
Futurecarefullyselectsitssuppliers,takingintoaccountanumberoffactorsincludingfinancialstability.NewsstandsalesarespreadacrossanumberofretailersintheUKandUS.Inaddition,thegrowthinbookazinescontinuestodiversifytheretailersweworkwith.
Acquisitions TheGroupcontinuestosearchforopportunitiestogrowthroughacquisition.Thereisariskthatanysuchacquisitionoritssubsequentintegrationfailstocreatevalueforshareholders.
TheGrouphassuccessfullycompletedandintegratedseveralacquisitionsoverthelast18months.Themanagementteamhasbecomeexperiencedandadeptatidentifyingsuitableacquisitionopportunities,executingthedealandintegratingtheacquiredbusinessintothewiderFuturegroup.Theriskisfurthermitigatedthroughtheperformanceofduediligenceappropriatetothesizeandscaleoftheacquisitionandthepreparationofaclearanddetailedintegrationplan.
There are a number of general business risks to which Future is naturally exposed in the UK and US. In addition, the range of industry-specific risks faced by Future has increased since last year, due to the increasingly digital focus of the media landscape and the increasing number of evolving business models.
Ourinternalcontrolsseektominimisetheimpactofrisks,asexplainedinourCorporateGovernancereportonpage25,andduringtheyearwehavecontinuedtodevelopthosecontrolsinresponsetothewiderrangeofrisks.
11 Future plc
Corporate responsibility
CorporateresponsibilityisintegraltothewayFutureconductsitsbusiness.Wefocusoureffortsaroundfivekeyareaswherewethinkwecanmakeadifference.
Responsible business
1. The environment
Aresponsibleapproachtotheenvironmentisessentialtoensurethefuturesustainabilityofourbusiness.
Sourcing paperPaperisthelargestrawmaterialweuseasaGroup.Weworkhardtomakesurethatwhateverweconsume,wedoinawaythatisethicallyresponsibleandenvironmentallysustainable.In2017,100%ofourpaperacrosstheGroupwassourcedfromeitherrecycledfibreorsustainableforestswhereatleastonetreeisplantedforeverytreefelled.
Allofourpaperissourcedandproducedfromsustainable,managedforests,conformingtostrictenvironmentalandsocio-economicstandards.OurpapermillsandpapermerchantsallholdfullFSC(ForestStewardshipCouncil)certificationandaccreditationshowingourcommitmenttosourcingpapersuppliesfromsustainablesources.
In2017,over90%ofthepaperweusedintheUKwasFSCcertified.WeactivelyencourageoursupplierstoworktowardsFSCcertificationoroneoftheotherinternationallyrecognisedandindependentlyauditedcertificationschemesforenvironmentalcareinforestmanagementandconservation.
Recycling and wasteTheGroupisstronglyincentivisedtominimisethenumberofunsoldmagazinesandweemploysophisticatedtechniquestohelpachievethis.IntheUK,Future’sunsoldmagazinesarerecycled.WealsosupportthePPA’sinitiativeencouragingreaderstorecycletheirmagazinesafteruseandwecomplywithourobligationsundertheProducerResponsibilityObligations(PackagingWaste)Regulations.Thedisposalofwastematerialsisalsoincludedinourprintsupplieraudit.
Supplier auditsWeundertakeenvironmentalandethicalauditsonourmainsupplierswhichincludeaspectssuchastheprocessinganddisposalofeffluents,emissionsandwastematerials,andtheuseoflabour.
2. Our people
Future’semployeesareourmostimportantassets;theyarethedrivingforcebehindoursuccessasabusiness.
Health and safetyThehealthandsafetyofallemployeesisakeypriorityfortheGroup.Futureislargelyanoffice-basedenvironment.AllcompaniesacrosstheGroupcomplywithrelevantlegislationandwecommunicateourhealthandsafetypolicytoallemployees.IntheUK,duringtheyearto30September2017,therewerenofatalities,onereportable(RIDDOR)injuryandtwominorinjuries.TherewerenofatalitiesorinjuriesintheUSorAustraliaduringtheyear.
DiversityWearecommittedtocreatinganinclusiveculturewhichgiveseveryonethefreedomtosucceed,irrespectiveoftheirgender,race,religion,disability,ageorsexualorientation.Wetreateachotherwithrespect.Weareproudofthefactthat50%ofourBoardwerefemaleduring2017andthegapbetweenthefemale:maleemployeesplithasreducedconsiderablyinrecentyears.
Future’sbusinessisunderpinnedbysixcorevalues,thefirstofwhichisthat‘wearepartoftheaudienceandtheircommunity’.Westrivetoensurethatourworkforcereflectstheconsumersacrossourportfoliostomaximiseengagementwithourpassionateaudience.
Policy on disabilityTheGroupaimstoensurethatwhenconsideringrecruitment,training,careerdevelopment,promotionoranyotheraspectofemployment,noemployeeorjobapplicantisdiscriminatedagainst,eitherdirectlyorindirectly,onthegroundsofdisability.
Ifanemployeebecamedisabledwhileinemploymentandasaresultwasunabletoperformtheirduties,wewouldmakeeveryefforttooffersuitablealternativeemploymentandassistancewithretraining.
Internal communicationFuturehaspoliciesonemployeecommunication,acceptableuseofIT,healthandsafetyandwhistle-blowing,andwehaveacommitmenttodiversityandopportunity.
Weholdregulartownhallsessionsforallemployees,andextendedleadershipteammeetingswherewediscusskeystrategicinitiativesandtheperformanceofthebusiness.InOctober2017weheldanallcompanyconferenceintheUK,USandAustralia.Theseinitiativesensurethatcommunicationisconstantlyimprovingacrossthebusiness,reinforcethebuildingofapositiveworkingenvironmentwherewecelebratesuccessesandalsohelptoensurethereisalignmentacrossthebusiness.Ourenvironmentisonewhereweencourageemployeestogivetheirviewsfreelyandcontributetoinitiatives,asthiscontinuouslydevelopsandimprovesourofferingforthebenefitofourconsumersandclients.
Whistle-blowing and anti-bribery policiesItisFuture’spolicytoconductallofourbusinessinanhonestandethicalmanner,andwetakeazero-toleranceapproachtobriberyandcorruption.Wearecommittedtoactingprofessionally,fairlyandwithintegrityinallourbusinessdealingsandrelationships,whereverweoperate,andweareimplementingandenforcingeffectivesystemstocounterbriberyandcorruption.Wehavewhistle-blowingandanti-briberypolicieswhichareupdatedregularlyandpublishedonourintranettoencourageemployeestoreport,ingoodfaith,anygenuinesuspicionsoffraud,briberyormalpractice.Thewhistle-blowingpolicyisalsodesignedtoensurethatanyemployeewhoraisesagenuineconcernisprotected.Inaddition,toensureFutureisadoptingbestpracticewithanti-corruptionlegislation,andtopromotetransparency,aReviewKit,TripsandGiftsLogisinplacetotrackthewhereaboutsofproductssenttousforreviewandtheacceptanceofgiftsandtripsbyouremployees.
Employment data across the Group 2017
Splitoffemale:maleemployeesasat30September2017 40%:60%Splitoffemale:maleDirectorsoftheCompanyasat30September2017 3:3Splitoffemale:malemembersoftheExecutiveCommitteeasat30September2017 1:6Earningsmeetatleastlegalminimumorminimumsetbyindustry YesCasesofreportedandprovendiscriminationorharassment NoneConsultationandcommunicationproceduresinplaceforallareasofthebusiness YesCodeofconductcirculatedtoallexistingandnewemployees YesEmploymentofyoungpeopleundertheageof15 None
WearemembersoftheProfessionalPublishersAssociation(PPA)andsupportitsinitiativeencouragingreaderstorecycletheirmagazinesafteruse.WeincorporatetherecyclelogoinallourUKmagazines.
WeworkinpartnershipwithBath-basedcharitablefoundation,Quartet.
12Annual Report and Accounts 2017Strategic R
eport
Statement of Greenhouse Gas (GHG) Emissions for the Group
Global GHG emissions in tonnes of CO2 equivalent:
Emissions from 2013 (base year) 2017
Total Total
Thecombustionoffuel:gasforheatingandfuel; forvehicles(Scope1)
UK 470 73US 102 -Total 572 73
Thepurchaseofelectricity:heat,steamorcooling bytheGroupforitsownuse(Scope2)
UK 1,310 385US 376 4Total 1,686 389
Total Emissions (CO2e Tonnes) 2,258 462Total Revenue £112.3m £84.4mIntensity Ratio (CO2e Tonnes per £1m) 20.1 5.5
WehavereportedonalloftheemissionsourcesrequiredundertheCompaniesAct2006(StrategicReportandDirectors’Reports)Regulations2013.
Theemissionssourcesfallwithinourfinancialstatements.Wedonothaveresponsibilityforanyemissionsourcesthatarenotincludedinourfinancialstatements.
Methodology:WehaveusedtheUKGovernment’sEnvironmentalReportingGuidance.Wehaveappliedthe2017DEFRAGHGConversionFactorRepositorytocalculatetheCO2e.AsaGroupwithonlyoffice-basedactivitiesandnomanufacturingactivities,undertheGHGProtocolCorporateStandard,ouremissionsfallunderScope1(thecombustionoffuel)andScope2(thepurchaseofelectricity).
Notes:• Scope1–Timeperiodsforcombustionofgasforheating–figuresforallofficesareforthefinancialyear.Allfiguresareestimatesbasedon%shareofofficespacewithinleasedbuildingsexceptforUKBathofficeswhichareactualconsumptionwherewholebuildingsorfloorswithinbuildingshavetheirownmeters.
• Scope1–Timeperiodsforcombustionoffuelinvehicles–onlytheUKoperatesleasedvehiclesandfiguresfortheconsumptionoffuelarebasedonaveragedannualmileage.
• Scope2–Timeperiodsforconsumptionofelectricity–figuresfortheUKandUSofficesareforthefinancialyear.FiguresfortheAustralianofficearepro-ratedfromtypical(August2017)monthlyconsumption.Allfiguresareestimatesbasedon%shareofofficespacewithinleasedbuildingsexceptfortheUSofficein2017andUKBathofficeswhichareactualconsumptionwherewholebuildingsorfloorswithinbuildingshavetheirownmeters.
• Scope2–ElectricitySources–Noelectricitywaspurchasedfromownedorcontrolledsources.• FugitiveEmissions–theGroupbenefitsfromairconditioninginsomeofitsleaseholdbuildings.Thescaleofemissionsfromleaksisverysmall(estimatedtobelessthan0.5%oftotalemissions)andisdeemedtobeimmaterialtooverallreportingandtrends.
• BaseYear-Financialyear2013isourbaselineyear.• IntensityRatio-weareusing‘Tonnesper£1millionrevenue’.• Wehavemaintainedourfocusonotherenvironmentalimpacts,particularlyinitiativestoreducewasteandtocontinuesourcingallourmagazinepaperfromsustainableforestry.
3. The community
Giving something back IntheUKtheGrouphasworkedinpartnershipwithBath-basedcharitablefoundationQuartet,whomakedonationstolocalcharitiesonourbehalf,andSpecialEffect,acharitywhichusesvideogamesandtechnologytoenhancethequalityoflifeofpeoplewithdisabilities.
Future in the wider communityFuturepeoplehavebeenactivelyinvolvedintheyearwithanumberofnationalorganisationsincludingtheProfessionalPublishersAssociation,EuropeanMagazineMediaAssociation,AssociationofOnlinePublishers,NABS,European&LeisureSoftwarePublishersAssociation,theIPA,theMarketingSocietyandtheInternationalFederationofthePeriodicalPress.
4. Modern slavery
TheModernSlaveryAct2015isaimedatcombatingcrimesofslaveryandhumantraffickingandaddressestherolewhichacommercialorganisationhastoplayinpreventingthesecrimes,bothwithinitsownbusinessandwithinitssupplychains.Wearecommittedtodoingbusinessethicallyandhaveazero-toleranceapproachtomodernslavery.Future’sModernSlaveryActstatementispublishedonourcorporatewebsite,www.futureplc.com.
5. Human rights
Futureiscommittedtorespectinghumanrights.Webelieveourbusinesspositivelyimpactshumanrightsby,forexample,promotingfreedomofopinionandexpressionandfacilitatingtheabilitytoseek,receiveandimpartinformationandideasthroughallmediaandacrossborders.Inaddition,weprovideameanstoparticipateintheculturallifeofthecommunityandenjoythearts.
Asaninternationalcompany,Futureisalsoawareofthepotentialforadverselyimpactinghumanrightsandweseektomitigateanysucheffectsthrough,forexample,oureffortstocombatbribery,corruptionandforcedlabourinourbusinessorinoursupplychain.
13 Future plc
Financial review
ThefinancialresultsdemonstratethattheGroupisprogressingwellwithexcitingtimesaheadasthebusinessbuildsscaleandincreasingprofitability.
Growth
Financial summary
Thefinancialreviewisbasedprimarilyonacomparisonofcontinuingresultsfortheyearended30September2017withthosefortheyearended30September2016.Unlessotherwisestated,changepercentagesrelatetoacomparisonofthesetwoperiods.
Continuingoperations2017
£m2016£m
Revenue 84.4 59.0AdjustedEBITDA 11.0 5.2Depreciation (0.3) (0.4)Adjustedamortisation (1.8) (2.0)Adjustedoperatingprofit 8.9 2.8Adjustednetfinancecosts (0.6) (0.5)Adjustedprofitbeforetax 8.3 2.3
Operatingprofit/(loss) 0.8 (14.2)Profit/(loss)beforetax 0.2 (14.9)
Earnings/(loss)pershare(p) 4.3 (59.6)Adjustedearningspershare(p) 23.2 9.5
Areconciliationofadjustedoperatingprofittoprofit/(loss)beforetaxisshownbelow:
2017£m
2016£m
Adjustedoperatingprofit 8.9 2.8Adjustednetfinancecosts (0.6) (0.5)Adjustedprofitbeforetax 8.3 2.3Adjustingitems:Share-basedpayments(includingrelatedsocialsecuritycosts) (2.1) (0.5)Exceptionalitems (3.7) (3.5)Amortisationofacquiredintangibles (2.3) -Impairmentofintangibleassets - (13.0)Non-tradingforeignexchangeloss - (0.2)Profit/(loss)beforetax 0.2 (14.9)
Revenue
Grouprevenuewasup43%to£84.4m(2016:£59.0m),whichwasachievedbothorganically(increaseof8%)andthroughacquisition.UKrevenuewasup50%to£67.2m(2016:£44.7m)withUSrevenueup26%to£19.1m(2016:£15.2m).
TheGroup’sstrategyistocontinuetobuildrecurringrevenuestreams.TheseencompasseCommerceandsubscriptions,andnowrepresent27%oftheGroup’stotalrevenue(2016:25%).
“ AdjustedEPShas grown144%to 23.2p.”
Penny Ladkin-Brand ChiefFinancialOfficer
andCompanySecretary
14AnnualReportandAccounts2017Financial R
eview
Group revenue 2016
1:Media41%2:Magazine59%
Media
Mediarevenuehasincreasedby43%to£34.1m(2016:£23.9m),drivenbytheGroup’sfastgrowingrevenuestreams;eCommerce,eventsandthroughacquisition.Onanunderlyingbasis,excludingtheimpactof2017acquisitions,Mediarevenuesincreasedby34%.
IntheUK,Mediarevenuesincreasedby50%to£21.1m(2016:£14.1m),drivenbyeCommercegrowthof88%to£4.9m(2016:£2.6m)andeventsgrowthof58%to£5.2m(2016:£3.3m).
TheUSalsoexperiencedexceptionalgrowth,up41%year-on-yearto£14.7m(2016:£10.4m),witheCommercerevenuesbeingthebiggestdriverofthisgrowth–up135%to£4.0m(2016:£1.7m).DigitaladvertisingintheUSnowrepresents90%(2016:88%)ofUSadvertisingrevenues.
Magazine
Magazinerevenueincreasedby43%to£50.3m(2016:£35.1m)largelydrivenbyacquisitions.Onanunderlyingbasis,excludingtheimpactof2017acquisitions,Magazinerevenuesdeclined9%to£31.9m.
Thedivisionisconstantlylookingforwaystoinnovateandpublishedover430bookazinesintheyeartotallingrevenueof£10.1m.
EBITDA and operating profit
TheGroup’sadjustedEBITDAwasup112%to£11.0m(2016:£5.2m),ofwhich£6.9m(2016:£3.2m)wasUKand£4.1m(2016:£2.0m)wasUS.Operatingprofitincreased£15.0mto£0.8m(2016:lossof£14.2m).
Future’sheadcountincreasedto634from449employeesasadditionalstaffjoinedtheGroupthroughacquisition.RationalisationoftheGroup’soverheadbasecontinueswithafocusonprocessre-engineering.Theglobalcontentmanagementsystemmigration(CMS)wascompletedinearly2017,whichputstheGroupinastrongpositiontobenefitfromeconomiesofscaleasthenumberofbrandsincreases.TheTeamRockandImagineacquisitionshavebeenfullyintegratedandthehomeinterestacquisitionisexpectedtobefullyintegratedintotheGroup’soperationsandsystemsbytheendofthecalendaryear.
Exceptional items and impairment
Exceptionalcostswere£3.7m(2016:£3.5m).Restructuringcostsof£1.1mincludeheadcountreductionandtransformationrelatedactivity.Thevacantpropertyprovisionmovementduringtheyearof£1.2mmainlyrelatestosurplusofficespaceintheUS.
Acquisitionrelatedcostsincludedealfeesandsubsequentintegrationrelatedactivityandtotal£1.4m(2016:£2.3m)andrelatetotheacquisitionsofImagine,TeamRockandhomeinterest.
Anon-cashimpairmentchargeof£13.0mwasrecognisedintheprioryearagainstgoodwillattributabletotheUKbusiness,whichreflectedashiftintheunderlyingprofitabilityandcashflowsoftheGroupandthecontinueddeclineofprint.
Net finance costs
Netfinancecostsfellto£0.6m(2016:£0.7m)asstrongcashconversionallowedtheGrouptorepayadditionaldebtfacilitiesarrangedtofundacquisitionsandduetolowerinterestonthelegacyHMRCsettlementagreementwhichwillbefullyrepaidduring2018.
TheGroup’sadjustedpre-taxprofitwas£8.3m(2016:£2.3m)andreportedpre-taxprofitwas£0.2m(2016:lossof£14.9m)reflectingsignificantlyimprovedperformance.
Group revenue 2017
1:Media40%2:Magazine60%
1
2
1
2
15 Future plc
Financial review
Taxation
Thetaxcreditfortheyearamountedto£1.4m(2016:£0.5m),comprisingacurrenttaxchargeof£0.8m(2016:£1.3m)andadeferredtaxcreditof£2.2m(2016:£1.8m)predominantlyrelatedtotherecognitionoffurtherUSlosses,acquiredintangibleassetsandshareschemes.ThecurrenttaxchargearisesintheUKwherethestandardrateofcorporationtaxis19.5%.
Earnings/(loss) per share
2017 2016
Basicearnings/(loss)pershare(p) 4.3 (59.6)Adjustedearningspershare(p) 23.2 9.5
Adjustedearningspershareisbasedontheprofit/(loss)aftertaxationwhichisthenadjustedtoexcludeshare-basedpayments(includingrelatedsocialsecuritycosts),exceptionalitems,amortisationofacquiredintangibleassets,impairmentofintangibleassets,non-tradingforeignexchangeandrelatedtaxeffects.
Thecontinuingadjustedprofitaftertaxamountedto£8.6m(2016:£2.3m)andtheweightedaveragenumberofsharesinissuewas37m(2016:24m).
Dividend
TheBoardisnotrecommendingafinaldividendfortheyearended30September2017.
Inlightofthecontinuedfocusondebtreduction,confidenceintheGroup’sgrowthstrategyandthecontinueddevelopmentofthebusinessleadingtomoreconsistentcashflowanddiversifiedrevenuestreams,theBoardisnowinapositiontoconsiderreturningtopaymentofadividendwhilstmaintainingsufficientresourcestocontinueinvestinginthebusinessin2018.
Cash flow and net debt
Netdebtat30September2017was£10.0m(2016:netcashof£0.5m),whichreflectstheadditionaldebttakenontofundtheImagineandhomeinterestacquisitions.
Duringtheyear,therewasacashinflowfromoperationsbeforeexceptionalitemsof£17.1m(2016:£6.5m)reflectingasignificantfocusonimprovingtheGroup’sworkingcapitalcycleandtradingperformance.
Areconciliationofadjustedoperatingcashinflowtocashinflowfromoperationsisincludedbelow:
2017£m
2016£m
Adjustedoperatingcashinflow 17.1 6.5
Cashflowsrelatedtoexceptionalitems (5.1) (3.4)
Cash inflow from operations 12.0 3.1
Othersignificantmovementsincashflowsincludeexceptionalpaymentsof£5.1m(2016:£3.4m),£1.8m(2016:£1.9m)ofcapitalexpenditure,netproceedsfromissuingsharesof£21.0m,drawdownofbankloans(netofrepaymentsandarrangementfees)of£10.6mandpaymentsof£32.6m(netofcashacquired)tofundacquisitions.Foreignexchangeandothermovementsaccountedforthebalanceofcashflows.
Credit facility and covenants
TheGrouphadavailablefacilitiesof£25.4mat30September2017,expiringinJune2021.Furtherdetailsofthesenewfacilitiesareincludedwithinnote18tothefinancialstatements.
Going concern
Afterdueconsideration,theDirectorshaveconcludedthatthereisareasonableexpectationthattheGrouphasadequateresourcestocontinueinoperationalexistencefortheforeseeablefuture.ForthisreasontheDirectorscontinuetoadoptthegoingconcernbasisinpreparingtheconsolidatedfinancialstatementsfortheyearended30 September2017.
Key performance indicators (KPIs)
ManagementusesanumberofKPIstomeasuretheGroup’soperationalandfinancialperformance,themostimportantofwhicharesetoutonpage8.
Conclusion
TheGrouphascompletedseveraltransformationalacquisitionsinthelast12monthsandmovesintoanewexcitingphaseofitsdevelopment.TheGroupiswellplacedtoachieveitsambitionsfor2018andbeyond.
TheStrategicReport(whichcomprisestheGroupoverview,Chairman’sstatement,ChiefExecutive’sreview,Strategicoverview,Whatwedo,RisksanduncertaintiesandCorporateresponsibilitysections)andtheFinancialReviewareapprovedbytheBoardofDirectorsandsignedonitsbehalfby:
Penny Ladkin-BrandChiefFinancialOfficerandCompanySecretary8December2017
16AnnualReportandAccounts2017Financial R
eviewFinancial R
eview
17 Future plc
Strong leadershipBoard of Directors
Peter AllenIndependentnon-executiveChairman
Zillah Byng-ThorneChiefExecutive
Penny Ladkin-Brand ChiefFinancialOfficerandCompanySecretary
Hugo DraytonIndependentnon-executive
Richard HuntingfordIndependentnon-executiveandChairmanDesignate
James HanburyDeputyChairman
18Annual Report and Accounts 2017C
orporate Governance
Peter Allen Chairman sln
PeterwasnamedChairmaninAugust2011.HewasChiefFinancialOfficerofCelltechGroupplcbetween1992and2004.In2003hewasalsoappointedDeputyChiefExecutiveOfficerofCelltechuntilthecompanywassoldin2004.HewasChiefFinancialOfficeroftheelectronicscompanyAbacusGroupplcfrom2005untilthecompanywassoldtoAvnetIncinJanuary2009.PeteriscurrentlyChairmanofClinigenplc,AdvancedMedicalSolutionsGroupplc,OxfordNanoporeTechnologiesLimitedandDiurnalLimitedandanon-executiveDirectorofIstessoLimited.Peterhasdecidednottoseekre-electiontotheBoardandwillstepdownon1February2018.
Richard Huntingford Independentnon-executiveand ChairmanDesignate sln
RichardwasappointedtotheBoardon1December2017andwilltakeoverasChairmanon1February2018.Richardhada20yearcareeratChrysalisplcandwasCEOfrom2000to2007,followingwhichhewasChairmanofVirginRadiountilitssalein2008.Morerecently,hehasbeennon-executiveChairmanofWirelessGroupplc(formerlyUTVMediaplc)from2012to2016andnon-executiveDirector/ChairmanofCrestonplcfrom2011to2016.HeiscurrentlyChairmanofCrownPlaceVCTplcandnon-executiveDirectorofJPMorganInvestmentTrustplc.Heisacharteredaccountant,havingqualifiedwithKPMG.
James Hanbury DeputyChairman sl
JameswasappointedDeputyChairmaninOctober2016astherepresentativeofDisruptiveCapitalInvestmentsLimited.PriortohisappointmenthewasChairmanofImaginePublishing,whichwasacquiredbyFutureinOctober2016.JamesjoinedtheBoardofImagineinMarch2014soonafterleavingIncisiveMedia,apublishingbusinessheco-foundedin1994.HehasalsopreviouslychairedtheBusinessMediaCouncilofthePPA.JamesalsoactsasanadvisertoanumberofVCbackedbusinesses,isatrusteeforacharitabletrustandhassetupandchairsWARpaint,afundraisingorganisationforseveralarmedforcescharities.
Zillah Byng-Thorne ChiefExecutive
ZillahwasappointedasChiefExecutiveon1April2014.ShejoinedFutureinNovember2013asChiefFinancialOfficerandCompanySecretary.PriortoherappointmenttotheFutureplcBoard,shewasCFOofTraderMediaGroup–ownerofAutoTrader–from2009to2012,andinterimCEOofTraderMediafrom2012to2013.Beforethis,ZillahwasCommercialDirectorandCFOatFitnessFirstLimitedandChiefFinancialOfficeroftheThresherGroup.Zillahiscurrentlyanon-executiveDirectorofPaddyPowerBetfairplcandGocompare.comGroupplc.Zillahisaqualifiedaccountantandcorporatetreasurer.
Penny Ladkin-Brand ChiefFinancialOfficer andCompanySecretaryPennywasappointedasChiefFinancialOfficerandCompanySecretaryon3August2015,havingjoinedthebusinessasinterimChiefFinancialOfficerinJune2015.PriortothisshewasCommercialDirectoratAutoTraderGroupplc.Pennyisacharteredaccountantwithabackgroundindigitalmediaandexpertiseindigitalmonetisationmodels.Pennyiscurrentlyanon-executiveDirectorofNextFifteenCommunicationsGroupplc.
Hugo Drayton Independentnon-executive sl
HugojoinedFutureon1December2014.HeisCEOoftheadvertisingtechnologybusiness,InskinMedia.PriortoInskin,hespenttwoyearsasCEOofbehaviouraltargetingspecialist,Phorm,followingtwoyearsasEuropeanManagingDirectorofAdvertising.com.Hespent10yearsatTheTelegraphGroup,asGroupManagingDirector,andpreviouslyasMarketing&NewMediaDirector.HugoisaTrusteeoftheBritishSkinFoundation,chairedtheBritishInternetPublishers’Alliance,andisaregularcontributortotradepressandpublishingconferences.
s
MemberoftheNominationCommittee
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MemberoftheRemunerationCommittee
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MemberoftheAuditCommittee
19 Future plc
Principal activity
TheprincipalactivityoftheCompanyanditssubsidiaries(the‘Group’)asawholeisthepublishingofspecial-interestconsumermagazinesandwebsitesandtheoperationofeventsnotablyintheareasof:technology;gamesandentertainment;music;knowledge;creativeandphotography;fieldsportsandhomeinterest.
TheCompanyisapubliccompanylimitedbyshareslistedontheLondonStockExchangeandisincorporatedanddomiciledintheUK.IthassubsidiariesoperatingintheUK,theUSandAustralia.
Business review
ThepurposeoftheAnnualReportistoprovideinformationtotheshareholdersoftheCompany.
ReviewsoftheGroup’sactivitiesduringtheyear,thepositionattheyear-endanddevelopmentssincethenaresetoutintheChairman’sstatement,theChiefExecutive’sreview,theCorporateGovernancereportandtheFinancialreview.TheFinancialreviewandStrategicreportexplainfinancialperformance,KPIs,thepositionattheyear-end,anypostbalancesheetevents,anylikelyfuturedevelopmentsandadescriptionoftheprincipalrisksanduncertaintiesfacingtheGroupandhowthesearemanaged.
TheAnnualReportcontainscertainforward-lookingstatementswithrespecttotheoperations,performanceandfinancialconditionoftheGroup.Bytheirnature,thesestatementsinvolveuncertaintysincefutureeventsandcircumstancescancauseresultstodifferfromthoseanticipated.Theforward-lookingstatementsreflectknowledgeandinformation
availableatthedateofpreparationofthisAnnualReportandtheCompanyundertakesnoobligationtoupdatethoseforward-lookingstatements.
Result of 2017 Annual General Meeting
AllresolutionsputtotheAnnualGeneralMeetingheldon1February2017werepassedunanimouslyonashowofhands.Shareholdersholdingmorethan50%ofallissuedsharessubmittedproxyvotesandofthose,morethan95%ofallproxyvotescastwereinfavourofallresolutions.
Reported financial results
Theauditedfinancialstatementsfortheyearended30September2017aresetoutonpages49to86.DetailsoftheGroup’sresultsaresetoutintheconsolidatedincomestatementonpage50andinthenotestothefinancialstatementsonpages60to86.
Dividends
TheBoard’spolicyisthatdividendsshouldbecoveredatleasttwicebyadjustedearningspershare.TheCompany’sEmployeeBenefitTrust(EBT)waivesitsentitlementtoanydividends.TheBoardisnotrecommendingafinaldividendfortheyear.
Share capital
TheCompanyhasasingleclassofsharecapitalwhichisdividedintoOrdinarysharesoffifteenpenceeach.TherightsandobligationsattachingtotheCompany’sOrdinarysharesandprovisionsgoverningthe
appointmentandreplacementof,aswellasthepowersof,theDirectorsaresetoutintheCompany’sArticlesofAssociation,copiesofwhichcanbeobtainedfromCompaniesHouseintheUKorbywritingtotheCompanySecretary.SaveforrestrictionsthatmayfromtimetotimebesetoutintheCompany’sArticlesofAssociationorimposedbylawsandregulations(includingtheListingRulesoftheFinancialConductAuthority),therearenorestrictionsonthevotingrightsattachingtotheOrdinarysharesoronthetransferoftheOrdinaryshares.TheArticlesofAssociationmaybeamendedonlybyaspecialresolutionoftheCompany’sshareholders.
Detailsofallmovementsinsharecapitalaregiveninnote23onpage79.Asat30September2017,thenumberofsharesinissuewas45.4million.Thisrepresentsanincreaseof85%comparedwiththenumberofsharesinissueasat30September2016.InOctober2016,12.0millionshareswereissuedbytheCompanyasconsiderationfortheacquisitionofImagine.InJuly2017,8.8millionshareswereissuedbywayofaplacingofOrdinarysharesintheCompanytopartfundtheacquisitionofhomeinterest.ThebalanceofsharesissuedduringtheyearwereissuedinsatisfactionofemployeeshareawardsvestingorShareIncentivePlanmatchingshareawardsduringtheyear.
Directors
BiographicaldetailsoftheDirectorsholdingofficeasat8December2017aresetoutonpage18.
Directors’shareholdingsintheCompany’ssharecapitalaresetoutopposite.NoDirectorhasanyinterestinanyothersharecapitaloftheCompanyoranyotherGroupcompany,nor
Directors’ report
Fortheyearended30September2017
Significant shareholdings
At8December2017,theCompanyhadbeennotifiedofthefollowingsignificantinterestsinitsOrdinaryshares:
Shareholder NumberofsharesPercentageof
issuedsharecapital
AberforthPartnersLLP 8,498,699 18.62%HargreaveHale(Discretionary) 5,542,538 12.14%DisruptiveCapitalInvestmentsLimited 4,621,412 10.12%LombardOdierInvestmentManagers 3,457,051 7.57%RiverandMercantileAssetManagement 3,302,786 7.23%InvescoPerpetual 2,245,508 4.92%AXAFramlingtonInvestmentManagers 2,003,460 4.39%JOHambroCapitalManagement 1,768,029 3.87%HeraldInvestmentManagement 1,734,333 3.80%
33,173,816 72.66%Directors’holdings(seeopposite) 361,462 0.79%Totalofsignificantholdings 33,535,278 73.45%Totalnumberofsharesinissue 45,655,967 100%
TheinformationpresentedinthisDirectors’reportrelatestoFutureplcanditssubsidiaries.TheChairman’sstatement,ChiefExecutive’sreview,FinancialreviewandCorporateresponsibilitystatementareeachincorporatedbyreferenceinto,andformpartof,thisDirectors’report.
Directors’ report
20Annual Report and Accounts 2017C
orporate Governance
20
doesanyDirectorhaveamaterialinterestinanycontractofsignificancetotheGroup.
Significant agreements
TheprovisionsoftheEuropeanDirectiveonTakeoverBids(asimplementedintheUKintheCompaniesAct2006)requiretheCompanytodiscloseanysignificantagreementswhichtakeeffect,alterorterminateuponachangeofcontroloftheCompany.Incommonwithmanyothercompanies,theGroup’sbankfacility(detailsofwhicharesetoutinnote18onpage73)isterminableuponchangeofcontroloftheCompany.Incommonwithmarketpractice,awardsundercertainoftheGroup’slong-termincentiveplans(detailsofwhicharesetoutintheDirectors’remunerationreportonpage31andnote24onpage79)willvestorpotentiallybeexchangeableintoawardsoverapurchaser’ssharecapitaluponchangeofcontroloftheCompany.ThereisalsoachangeofcontrolprovisionintheserviceagreementsofthetwoexecutiveDirectors,exercisablewithinthreemonthsofachangeofcontrolbytheCompanyorononemonth’snoticebytheexecutivetoexpirenolaterthanthreemonthsfromthedateofthechangeofcontrol.
Financial instruments
InformationinrelationtotheGroup’suseoffinancialinstrumentsissetoutinnote22onpages75to78.
Corporate governance
TheBoard’sreportonthissubjectissetoutonpages23to28.
Political contributions
Nopoliticalcontributionsweremadeduringeitherthecurrentorprioryears.
Conflicts of interest
TheBoardhasasetofprocedurestoensurethat:(i)conflictsofinterestareraisedbyDirectors(andanypotentialDirectorspriortoappointment);(ii)appropriateguidelinesarefollowedbeforeanyconflictisauthorised(includingensuringthatonlyDirectorswhohavenointerestinthematterbeingconsideredwillbeabletotaketherelevantdecisionandintakingthedecisiontheDirectorsactinawaytheyconsider,ingoodfaith,willbemostlikelytopromotetheCompany’ssuccess);and(iii)recordsarekeptofconflictsofinterestandauthorisations.TheDirectorsaresatisfiedthattheBoard’spowersofauthorisationofconflictsareoperatingeffectivelyandthattheprocedureshavebeenfollowed.Theproceduresandanyauthorisationswillcontinuetobereviewedannually.
Corporate responsibility
TheBoardconsidersthatissuesofcorporateresponsibilityareimportant.TheBoard’sreport,includingtheGroup’spoliciesonemployeeinvolvementanddisability,andastatementonGreenhouseGasEmissionsfortheGroup,issetoutonpages11and12.
Annual General Meeting 2017
AttheCompany’snineteenthAnnualGeneralMeeting,whichwillbeheldonMonday5February2018at10:30amatFuture’sLondonofficeat1-10PraedMews,London,W21QY,anumberofresolutionswillbeproposed.TheresolutionsaresetoutintheNoticeofAnnualGeneralMeetingonpages87to88andanexplanationofallproposedresolutionsisprovidedbelow.
Ordinary resolution 1 – Financial statements
ShareholderswillbeaskedtoapprovethefinancialstatementsoftheCompanyforthefinancialyearended30September2017,togetherwiththereportsoftheDirectorsandauditors.Theauditedfinancialstatementsappearonpages49to86.
Notes:1. Allholdingsarebeneficial.2.Thepurchaseof4,615oftheseshareswaseffectedbytheexerciseof4,615Sharesaveoptionson1August2017.3. JamesHanburyreceived31,336sharesasconsiderationforhisshareholdinginMiura(Holdings)Limitedon21October2016.4.DetailsoftheshareoptionsandawardsforexecutiveDirectorsaresetoutonpage33.Nosuchoptionsorawardsaregrantedtonon-executiveDirectors.5.TheGroupcompletedashareconsolidationon2February2017whereby15OrdinarysharesofonepencewereexchangedforonenewOrdinaryshareof15pence.Allreferencestothenumberof
sharespriortothisdatehavebeenrestated.6.On27November2017,followingthefullvestingofthePSPawardgrantedon16July2014,ZillahByng-Thornereceived166,667Ordinaryshareswhichshesoldon29November2017.Alsoon27
November2017,followingtheachievementofthe2017AnnualBonusEBITDAtarget,ZillahByng-Thornereceivedabonusshareawardof56,022Ordinaryshares(ofwhich26,333sharesweresoldon29November2017tocoverthetaxandnationalinsurancearising).ZillahByng-Thorne’stotalshareholdingfollowingthesetransactionswas142,705Ordinaryshares.
7.On27November2017,followingtheachievementofthe2017AnnualBonusEBITDAtarget,PennyLadkin-Brandreceivedabonusshareawardof38,515Ordinaryshares,resultinginatotalholdingof70,295Ordinaryshares.
Directorsinofficeat30September2017
RestatedBalanceasat
30September2016 OnappointmentPurchases
duringtheyearBalanceasat
30September2017
ExecutiveZillahByng-Thorne 72,758 - 40,2582 113,016PennyLadkin-Brand 10,000 - 21,780 31,780Non-executivePeterAllen 73,333 - 12,834 86,167JamesHanbury - 31,3363 14,100 45,436ManjitWolstenholme 16,859 - - 16,859HugoDrayton - - - -Total 172,950 31,336 88,972 293,258
Directors’ shareholdings (audited)
Corporate G
overnance
21 Future plc
Ordinary resolution 2 – Directors’ remuneration implementation report
ShareholderswillbeaskedtoapprovetheDirectors’remunerationimplementationreportforthefinancialyearended30September2017,whichissetoutonpages30to36.
Ordinary resolution 3 – Directors’ remuneration policy report
ShareholderswillbeaskedtoapprovetheamendmentstotheDirectors’remunerationpolicyforthethreeyearperiodcommencing1October2016,whichareproposedwithintheDirectors’remunerationpolicyreportsetoutonpages38to41.
Ordinary resolutions 4 to 8 – Election of Richard Huntingford and annual re-election of other Directors
FollowingRichardHuntingford’sappointmenttotheBoardon1December2017,hestandsforelectiontoconfirmhisappointment.
Consistentwithourpolicysince2004,allDirectorswiththeexceptionofPeterAllen,whohaselectedtostanddownattheAGMinFebruary2018,andManjitWolstenholme,whosadlypassedawayon23November2017,areproposedforre-election.BiographicaldetailsofallDirectorsaresetoutonpage18.
Ordinary resolutions 9 and 10 – Auditors
AresolutionproposingthereappointmentofPricewaterhouseCoopersLLPasauditorsoftheCompanyandauthorisingtheDirectorstodeterminetheirremunerationwillbeproposedattheAnnualGeneralMeeting.AnexplanationregardingtheBoard’sproposaltoreappointPricewaterhouseCoopersLLPasauditorscanbefoundonpage28intheCorporateGovernancereport.
Ordinary resolution 11 – To authorise the Directors to issue and allot new Ordinary shares
Undertheprovisionsofsection551oftheCompaniesAct2006(the“Act”),theDirectorsmayallotandissueOrdinarysharesonlyifauthorisedtodosobytheCompany’sArticlesofAssociationorbyshareholdersatashareholders’meeting.ConsistentwithguidanceissuedbytheInvestmentAssociationthisresolutionwill,ifpassed,authorisetheDirectorstoallotsharesuptoamaximumnominalvalueof£4,565,590asfollows:
(a)inrelationtoapre-emptiverightsissueonly,equitysecurities(asdefinedbysection560oftheAct)uptoamaximumnominalamountof
£4,565,590whichrepresentsapproximatelytwothirdsoftheCompany’sissuedOrdinaryshares(excludingtreasuryshares)asat8December2017.Thismaximumisreducedbythenominalamountofanyequitysecuritiesallottedunderparagraph11.2oftheNoticeofAGM;and
(b)inanyothercase,equitysecuritiesuptoamaximumnominalamountof£2,282,795whichrepresentsjustunderonethirdoftheCompany’sissuedOrdinarysharesasat8December2017.Thismaximumisreducedbythenominalamountofanyequitysecuritiesallottedunderparagraph11.1oftheNoticeofAGMinexcessof£2,282,795.Ifgranted,thisauthoritywouldreplaceallpreviousauthoritiesgrantedinthisconnection.Theauthoritygrantedbythisresolutionwillexpireon31March2019or,ifearlier,followingtheconclusionofthenextAGMoftheCompany.IftheDirectorsexercisetheauthoritygrantedunderparagraph11.1oftheNoticeofAGM,theywillallstandforre-electionatthefollowingAGM.
TheDirectorsshallexercisethisauthorityinconnectionwithexercisesundershareincentiveschemes.Inaddition,theremaybecircumstanceswhereitwouldbeappropriatefortheCompanytoissuenewOrdinaryshares,suchasanacquisitionwhereitmightbeappropriatefortheconsiderationtobesettledinwhole,orinpart,bytheissueofnewOrdinaryshares.TheCompanydoesnotholdanysharesintreasury.
Ordinary resolution 12 – Approval of political donations
ItremainsthepolicyoftheCompanynottomakepoliticaldonationsortoincurpoliticalexpenditure,asthoseexpressionsarenormallyunderstood.However,followingbroaderdefinitionsintroducedbytheAct,theDirectorscontinuetoproposearesolutiondesignedtoavoidinadvertentinfringementofthesedefinitions.
TheActrequirescompaniestoobtainshareholders’authorityfordonationstoregisteredpoliticalpartiesandotherpoliticalorganisationstotallingmorethan£5,000inany12-monthperiod,andforanypoliticalexpenditure,subjecttolimitedexceptions.Thedefinitionofdonationinthiscontextisverywideandextendstobodiessuchasthoseconcernedwithpolicyreview,lawreformandtherepresentationofthebusinesscommunity.Itcouldalsoincludespecialinterestgroups,suchasthoseinvolvedwiththeenvironment,whichtheCompanyanditssubsidiariesmightwishtosupport,eventhoughtheseactivitiesarenotdesignedtosupportortoinfluencesupportforanyparticularpoliticalparty.
Special resolution 13 – Disapplication of statutory pre-emption rights
Resolution13will,ifpassed,authorisetheDirectorsincertaincircumstancestoallotequitysecurities(asdefinedbysection560oftheAct)orsellsharesforcashotherthaninaccordancewiththestatutorypre-emptionrights(whichrequireacompanytoofferallallotmentsforcashfirsttoexistingshareholdersinproportiontotheirholdings).Therelevantcircumstancesareeitherwheretheallotmenttakesplaceinconnectionwitharightsissueortheallotmentislimitedtoamaximumnominalamountof£342,420representingapproximately5%ofthenominalvalueoftheissuedOrdinarysharecapitaloftheCompanyasat8December2017beingthelatestpracticabledatebeforepublicationoftheNoticeofAGM.Unlessrevoked,variedorextended,thisauthoritywillexpireattheconclusionofthenextAGMoftheCompanyor31March2019,whicheveristheearlier.
Thefigureof5%reflectsthePre-EmptionGroup’sStatementofPrinciplesforthedisapplicationofpre-emptionrightsandtheDirectorswillhavedueregardtothePrinciplesinrelationtotheexerciseofthisauthority.
Special resolution 14 – Additional disapplication of pre-emption rights
Thisresolutionseeksafurtherpowerpursuanttotheauthoritygrantedbyresolution11toallotequitysecurities(asdefinedbysection560oftheAct)orsellsharesforcashotherthaninaccordancewiththestatutorypre-emptionrights(whichrequireacompanytoofferallallotmentsforcashfirsttoexistingshareholdersinproportiontotheirholdings)uptoamaximumnominalamountof£342,420,representingapproximately5%ofthenominalvalueoftheissuedOrdinarysharecapitaloftheCompanyasat8December2017,beingthelatestpracticabledatebeforepublicationoftheNoticeofAGM.Thisisinadditiontothe5%referredtoinresolution13aboveand,unlessrevoked,variedorextended,thisauthoritywillexpireattheconclusionofthenextAGMoftheCompanyor31March2019,whicheveristheearlier.
TheDirectorswillhavedueregardtothePre-EmptionGroup’sStatementofPrinciplesinrelationtotheexerciseofthisauthorityandconfirmtheyintendtousethispoweronlywherethatallotmentisinconnectionwithanacquisitionorspecifiedcapitalinvestment(withinthemeaninggiveninthemostrecentStatementofPrinciples)whichisannouncedcontemporaneouslywiththeallotment,orwhichhastakenplaceintheprecedingsix-monthperiodandisdisclosedintheannouncementoftheallotment.
Directors’ report
Fortheyearended30September2017
22Annual Report and Accounts 2017C
orporate Governance
Special resolution 15 – General meetings on 14 days’ notice
NoticeperiodsforAGMsmustgiveatleast21days’clearnotice.Forothergeneralmeetings,theoldminimumnoticeperiodof14dayswasincreasedto21daysbytheCompanies(Shareholders’Rights)Regulations2009,unlessshareholdersapproveashorterperiodofatleast14cleardays.Intheinterestsofgreaterefficiency,resolution15seekstorenewapprovalfornoticeperiodsofatleast14cleardays.
Action to be taken
AformofproxyisincludedwiththisAnnualReportforuseinconnectionwiththeAnnualGeneralMeeting.PleasecompleteandreturntheforminaccordancewiththeinstructionsprintedonittoComputershareInvestorServicesplc,ThePavilions,BridgwaterRoad,BristolBS996ZYassoonaspossibleand,inanyevent,nolaterthan10:30amon1February2018.ThereturnoftheformofproxywillnotpreventyoufromattendingtheAnnualGeneralMeetingandvotinginpersonifyouwishtodoso.FurtherinformationabouttheAGM,includingaboutelectronicappointmentofproxies,isprovidedonpages89to91.
Recommendations
TheBoardbelievesthateachoftheresolutionstobeproposedattheAnnualGeneralMeetingisinthebestinterestsoftheCompanyanditsshareholdersasawhole.Accordingly,theDirectorsunanimouslyrecommendthatyouvoteinfavourofalloftheresolutionsproposed,astheyintendtodoinrespectoftheirownbeneficialholdings.
Annual General Meeting procedures and result
Asinpreviousyears,theCompanywill:(a)indicatethelevelofproxieslodgedoneachresolution;(b)announcetheresultsofvotingtotheLondonStockExchange;and(c)posttheresultsofvotingonourcorporatewebsite,www.futureplc.com.
Statement of Directors’ responsibilities
TheDirectorsareresponsibleforpreparingtheAnnualReportandthefinancialstatementsinaccordancewithapplicablelawandregulations.
CompanylawrequirestheDirectorstopreparefinancialstatementsforeachfinancialyear.UnderthatlawtheDirectorshavepreparedtheGroupfinancialstatementsinaccordancewithInternationalFinancialReportingStandards(IFRSs)asissuedbytheInternationalAccountingStandardsBoard(IASB)and
CompanyfinancialstatementsinaccordancewithInternationalFinancialReportingStandards(IFRSs)asadoptedbytheEuropeanUnion.UndercompanylawtheDirectorsmustnotapprovethefinancialstatementsunlesstheyaresatisfiedthattheygiveatrueandfairviewofthestateofaffairsoftheGroupandCompanyandoftheprofitorlossoftheGroupandCompanyforthatperiod.Inpreparingthefinancialstatements,theDirectorsarerequiredto:
::selectsuitableaccountingpoliciesandthenapplythemconsistently;
:: statewhetherapplicableIFRSsasissuedbytheInternationalAccountingStandardsBoard(IASB)havebeenfollowedfortheGroupfinancialstatementsandIFRSsasadoptedbytheEuropeanUnionhavebeenfollowedfortheCompanyfinancialstatements,subjecttoanymaterialdeparturesdisclosedandexplainedinthefinancialstatements;
:: makejudgementsandaccountingestimatesthatarereasonableandprudent;and
:: preparethefinancialstatementsonthegoingconcernbasisunlessitisinappropriatetopresumethattheGroupandCompanywillcontinueinbusiness.
TheDirectorsareresponsibleforkeepingadequateaccountingrecordsthataresufficienttoshowandexplaintheGroupandCompany’stransactionsanddisclosewithreasonableaccuracyatanytimethefinancialpositionoftheGroupandCompanyandenablethemtoensurethatthefinancialstatementsandtheDirectors’remunerationreportcomplywiththeCompaniesAct2006and,asregardstheGroupfinancialstatements,Article4oftheIASRegulation.
TheDirectorsarealsoresponsibleforsafeguardingtheassetsoftheGroupandCompanyandhencefortakingreasonablestepsforthepreventionanddetectionoffraudandotherirregularities.
TheDirectorsareresponsibleforthemaintenanceandintegrityoftheCompany’swebsite.LegislationintheUnitedKingdomgoverningthepreparationanddisseminationoffinancialstatementsmaydifferfromlegislationinotherjurisdictions.
TheDirectorsconsiderthattheAnnualReportandAccounts,takenasawhole,isfair,balancedandunderstandableandprovidestheinformationnecessaryforshareholderstoassesstheGroupandCompany’sperformance,businessmodelandstrategy.
EachoftheDirectors,whosenamesandfunctionsarelistedintheBoardofDirectorssectiononpages17and18,confirmthattothebestoftheirknowledge:
::theCompanyfinancialstatements,whichhavebeenpreparedinaccordancewithIFRSsasadoptedbytheEuropeanUnion,giveatrueandfairviewoftheassets,
liabilities,financialpositionandlossoftheCompany;
::theGroupfinancialstatements,whichhavebeenpreparedinaccordancewithIFRSsasissuedbytheInternationalAccountingStandardsBoard(IASB),giveatrueandfairviewoftheassets,liabilities,financialpositionandprofitoftheGroup;and
::theDirectors’reportincludesafairreviewofthedevelopmentandperformanceofthebusinessandthepositionoftheGroupandCompany,togetherwithadescriptionoftheprincipalrisksanduncertaintiesthatitfaces.
InthecaseofeachDirectorinofficeatthedatetheDirectors’reportisapproved:
::sofarastheDirectorisaware,thereisnorelevantauditinformationofwhichtheGroupandCompany’sauditorsareunaware;and
::theyhavetakenallthestepsthattheyoughttohavetakenasaDirectorinordertomakethemselvesawareofanyrelevantauditinformationandtoestablishthattheGroupandCompany’sauditorsareawareofthatinformation.
ApprovedbytheBoardofDirectorsandsignedonitsbehalfby:
Penny Ladkin-BrandChiefFinancialOfficer andCompanySecretary8December2017
Corporate G
overnance
23 Future plc
Our approach to corporate governanceInthisreport,weprovidedetailontheroleoftheBoardofDirectors,followedbyamoredetailedfocusontheworkofeachofthethreekeycommittees:theAuditCommittee,theNominationCommitteeandtheRemunerationCommittee.Together,thesegiveaclearinsightintohowwemanagecorporategovernanceprinciplesandprocesseswithintheGroup.
AsaStandardListedentitytheGroupisnotrequiredtocomplywiththerequirementsoftheUKCorporateGovernanceCode(April2016)(the“Code”)andthereforetheGrouphasnotadoptedtheCode,howevertheDirectorscontinuetocomplywiththespiritoftheCode.
1. Board of Directors
Membership of the BoardTheBoardconsistsoftwoexecutiveandfournon-executiveDirectors.BiographiesofDirectorsanddetailsoftheirothertimecommitmentsaresetoutonpage18.
Board changes during the yearFollowingtheacquisitionofImagineJamesHanburywasappointedtotheBoardasDeputyChairmanon21October2016.TherewerenootherchangestotheBoardduringtheyearended30September2017.
Subsequenttotheyear-endPeterAllensignalledhisintentionnottoseekre-electiontotheBoardand,verysadly,theGroup’sseniorindependentnon-executiveDirector,ManjitWolstenholme,passedawayunexpectedlyinNovember2017.Inaddition,RichardHuntingfordwasappointedtotheBoardasanindependentnon-executiveDirectoron1December2017.RichardbringsawealthofmediaexperienceandwillsucceedPeterAllenasChairman.
Role of the non-executive DirectorsThenon-executivesplayacriticalroleontheBoardinoverseeingandscrutinisingtherunningofthebusinessandinensuringthatcorporategovernanceremainsatthetopoftheagenda.
Thenon-executiveDirectorsallservethree-yearterms,terminablebyeitherpartyonthreemonths’noticeatanytimeandsubjecttotheirelectionandannualre-electionorremovalbyshareholders.Althoughannualre-electionisnotarequirementforFuture,webelieveitisthebestwaytoensurenon-executivesaredirectlyaccountabletoshareholders.
Allofthenon-executiveDirectors,withtheexceptionofJamesHanbury,areconsideredtobeindependentbytheBoard.JamesHanbury
wasappointedtotheBoardasarepresentativeofDisruptiveCapitalInvestmentsLimited,theCompany’sthirdlargestshareholder,whichhastherighttoappointaDirectortotheBoarduntilsuchtimeasitsshareholdingintheCompanyfallsbelow10percentoftheissuedsharecapital.Consequently,theBoarddoesnotconsiderthatJamesHanburymeetstherelevantindependencecriteria.ManjitWolstenholmewastheseniorindependentnon-executiveDirectorduring2017andthesearchforhersuccessorisunderway.Thereisagenuinemixofviewsandinsights,aswellasexperience.
Eachnon-executiveDirectorisexpectedtocommit20daysayeartotheirroletoallowforpreparationfor,andattendanceat,BoardandCommitteemeetingsandkeepingintouchwiththeseniormanagementteam,shareholdersandotherstakeholders.
Roles of the Chairman and Chief ExecutiveThedutiesandresponsibilitiesoftheBoardareeffectivelydividedsothattheChairmanleadstheBoardandtheChiefExecutiveleadsthebusiness.
Board meetingsTheBoardhadsevenscheduledmeetingsduringthefinancialyearandattendanceissummarisedopposite.TheBoardhadfiveunscheduledtelephonemeetingstodiscussandapproveaspectsoftheImagineandhomeinterestacquisitions,duringwhichasufficientquorumofdirectorsincludingtheChairmanandChiefExecutivewerepresent.
AllDirectorsareawareoftheneedtobeavailableandthereisaclearcontactprocess.BoardmeetingsaresometimesprecededbyaninformaldinnerwhereBoardDirectorscanmeetwithanddiscussbusinessissueswiththeGroup’sseniormanagementteam.
ThereisaregularandcomprehensiveexchangeofinformationbetweenmeetingstoensureBoardmembersarewellinformedtoparticipateeffectivelyinmeetings.DirectorsreceiveaBoardpackbeforeeachmeetingwithminutesofthepreviousmeeting,allpapersforagendaitems,areportfromtheCompanySecretarysummarisinganykeylegalissuesandprovidinganyregulatory/legislativeupdates,andasummaryofshareownershipandrecentsharedealing.SimilarpacksareprovidedforallCommitteemeetings.Betweenmeetings,theBoardreceivesamonthlyBoardreportwrittenbytheexecutiveDirectorswhichsummarisesfinancialandoperationalperformanceandprovidesupdatesonkeyprogrammeswithinthebusiness.
ThereisawrittenscheduleofmattersreservedfortheBoardwhichsetsoutthosemattersthatrequireBoardapprovalincludingsetting
Effectivecorporategovernancerequiresnotjustcompliancewithlegislativeandregulatoryrequirements,butalsoapplyingtheprincipleofgoodgovernanceintheboardroomandthroughoutthebusiness.
Good PracticeCorporate Governance report
Quick find contents
Board of Directors Page23
Audit Committee Page26 Nomination CommitteePage28
Remuneration CommitteePage28
“ Goodcorporategovernanceisunderpinnedbyvalues,visionandstrategicleadership.”
Penny Ladkin-Brand ChiefFinancialOfficer andCompanySecretary
24Annual Report and Accounts 2017C
orporate Governance
strategy,approvingbudgetsandfinancialstatementsandsettinguppolicies.Itwasnotedthat42mattershadbeenconsideredbytheBoardduringtheyear.ThescheduleisavailableontheCompany’swebsiteatwww.futureplc.com.TheBoarddelegatesday-to-dayoperationalmatterstotheGroup’sseniormanagementteam.
DirectorAttendance
(7scheduledmeetings)
PeterAllen 7 of 7ZillahByng-Thorne 7 of 7ManjitWolstenholme 7 of 7 HugoDrayton 7 of 7PennyLadkin-Brand 7 of 7JamesHanbury(appointed21October2016) 7 of 7
Boarddecisionsaremadeunanimouslywheneverpossible,butcanbemadebymajority.IfDirectorshaveconcernsthatcannotberesolvedabouttherunningoftheCompanyoraproposedaction,theirconcernsarerecordedintheminutes.Nosuchconcernsaroseintheyear.TheBoardregularlyappointsasub-committeeconsistingofatleasttwoDirectorsinordertofinaliseandapprovethosemattersthathavebeenapprovedinprinciplebytheBoard,subjecttofinalamendmentsonly.Apermanentsub-committeeconsistingofatleasttwoDirectorsexiststoapprovetheissueandallotmentofnewsharesinsatisfactionofemployeeshareschemes.
TheBoardhasanumberofnominatedadvisers(aslistedonpage93).Duringthelastfinancialyearmeetingswereregularlyheldwithkeyadviserstokeepthemawareofissues,andPricewaterhouseCoopersLLPattendedAuditCommitteemeetingsandbriefingswithmembersoftheexecutiveandseniorfinanceteams.
Advice and supportAllDirectorshaveaccesstotheCompanySecretarywhocanadvisethemonissuesofgovernance,bestpracticeandanyotherlegislativeorregulatorymatters.
TheappointmentandremovaloftheCompanySecretaryisaBoarddecision.TheDirectorsmayalsotakeindependentprofessionaladviceattheCompany’sexpenseprovidedthattheygivenoticetotheChairman.Nosuchadvicewassoughtduring2017.TheCompanymaintainsappropriateinsuranceforitsDirectors.
Effective Development
Training and inductionTheBoard’straininganddevelopmentpolicyrequiresthatallnewDirectorsshouldreceiveappropriateinductiononjoiningtheBoard,bothinrespectoftheGroup’sactivitiesasawholeandofeachoperatingcompanyindividually.OngoingtrainingforDirectorsisavailableasappropriatewhetherbypresentationstotheBoardbyseniormanagementormoreformallywhereindividualDirectorsrequesttrainingonspecificissues.ThetraininganddevelopmentneedsofeachindividualDirectorareassessedanddiscussedaspartoftheannualBoardperformanceevaluationprocess.TheBoardencouragesappropriatetraining,andregularupdatesandrefreshersessionsareprovidedbytheCompanySecretaryandtheCompany’slegaladvisersandauditors,toinformtheBoardorrelevantCommitteesofimportantchangesinlegislation,regulationandbestpractice.
Performance evaluationTheDirectorscompletedadetailedBoardperformanceevaluationquestionnaireaspartoftheannualperformanceevaluationprocess.EachquestionnairewasanalysedandtheChairmandiscussedtheBoard’sperformanceduringtheyearandanyspecificrequirementsfortraininganddevelopmentwitheachDirector.TheBoardconsidersthisexercisetobeofsignificantvalueinensuringafunctionalandeffectiveBoardandCommittees.
TheChairmanalsometwiththenon-executiveDirectorsduringtheyearwithouttheexecutiveDirectors,inordertoassesstheperformanceoftheexecutiveDirectors.
Summary of performance evaluation
Objectivesfor2017 Stepstakenduring2017
Supportmanagementindevelopingthe ExecutiveLeadershipCommittee
ProvidedguidanceandadviceonsuccessionplanningandthecompositionoftheCommittee
Supportmanagementgrowthebusiness throughacquisition
SignificantacquisitionscompletedintheyearincludingImagineandhomeinterest
Corporate G
overnance
Terms of reference for the Audit, Remuneration and Nomination Committees
ThetermsofreferenceforallCommitteesareavailableon theCompany’swebsiteat www.futureplc.com
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Going concernTheDirectorsarerequiredtomakeanassessmentoftheGroup’sabilitytocontinuetotradeasagoingconcern.Afterdueconsideration,theDirectorshaveconcludedthatthereisareasonableexpectationthattheGrouphasadequateresourcestocontinueinoperationalexistencefortheforeseeablefuture.ForthisreasontheycontinuetoadoptthegoingconcernbasisinpreparingtheGroup’sfinancialstatements.
Financial covenant complianceKeycovenantsaretestedquarterlyandtheGroupwasinfullcompliancewithallcovenantsatalltestingdatesduringtheyear.TheGrouphascovenantsinrespectofnetdebt/bankEBITDAandbankEBITDA/interest.Furtherdetailsareincludedwithinnote18onpage73.
Risk management and internal controlsDetailsoftheprincipalrisksandtheGroup’sapproachtomanagingthemaresetoutonpages9and10.TheBoardconductedanannualreviewoffinancial,operational,legalandcomplianceriskswiththeassistanceofmembersoftheGrouplegalandfinanceteamsandtheExecutiveCommitteetoensurethatthereisasoundsystemofinternalcontrolsinplaceandthatthesearesufficienttomanage(ratherthaneliminate)thoseriskseffectively.Nosignificantfailingsorweaknesseswereidentifiedaspartofthisreview.
TheinternalcontrolsthatareinplacetoensureeffectiveriskmanagementarestructuredtoensureatimelyflowofinformationwithintheGroupandaclearstructureofdelegatedauthorityandresponsibility.ThemainfeaturesoftheGroup’sinternalcontrolandriskmanagementsystemsareexplainedfurtherinthefollowingparagraphs.
TheBoardreviewedandendorsedasummaryoftheGroup’sinternalcontrolframeworkduringtheyear.
TheGroupfinanceteammanagesthefinancialreportingprocessesensuringthatthereisappropriatecontrolandreviewofthefinancialinformationincludingtheproductionoftheconsolidatedfinancialstatements.GroupfinanceissupportedbycommercialfinancedirectorswhohavetheresponsibilityandaccountabilitytoprovideinformationinaccordancewiththeGroup’spoliciesandprocedures.
TheExecutiveCommitteeholdsmonthlymeetingswithseniormanagementinordertoprovideaproperopportunityforfinancialresultsandotherbusinessandoperationalissuestobeexploredandaddressedinatimelymanner.
Internal auditTheAuditCommitteeandtheBoardhaveagainduring2017reconsideredwhetherthereisaneedforaninternalauditfunction.Itwasconcludedthat,whilstanindependentinternalauditdepartmentwiththenecessarytechnicalskillsisnotcurrentlyjustified,theCommitteeshouldcontinuetoreviewthissubjecteachyear.
Whistle-blowing and anti-bribery policiesAspartofitsinternalcontrols,theGrouphaswhistle-blowingandanti-briberypolicieswhichareupdatedregularlyandpublishedontheGroup’sintranettoencourageemployeestoreport,ingoodfaith,anygenuinesuspicionsoffraud,briberyormalpracticeinordertoidentifyanyproblemswithintheGroupatanearlystage.Thewhistle-blowingpolicyisalsodesignedtoensurethatanyemployeewhoraisesagenuineconcernisprotected.
Relations with shareholders/communicationWeaimtohaveanopenrelationshipwithourshareholders,andshareholderscanfindup-to-dateinformationonGroupactivitiesontheCompany’swebsiteatwww.futureplc.com.ThereisaspecificInvestorRelationssectiononthatsitewhichincludeslinkstoalloftheGroup’spublicannouncementsmadeviatheRegulatoryNewsServiceoftheLondonStockExchangeincludingtheCompany’slatestannualandinterimresults.
AllDirectorsareavailabletomeetshareholdersattheAGMoronrequestbycontactingtheChairmanorCompanySecretary.Becausemorethan70%oftheCompany’ssharesareheldbysignificantshareholders,theexecutiveDirectorsholdaseriesofmeetingspresentingtheinterimandannualresultstotheseshareholdersinordertoupdatethemontheprogressofthebusinessandgaugetheirviewsfollowingtheanalystpresentationsof theresults.
InorderthatallDirectorsareawareoftheviewsofshareholders,BoardpacksincludeanoteofviewsasexpressedbyshareholdersduringmeetingsheldwithDirectorsorasreportedtoDirectorsthroughtheCompany’sbrokers,togetherwithcopiesofanalysts’notes,pressarticlesandotherrelevantinformation.
“ AtFuture,weremaincommittedtoensuringthatgoodcorporategovernanceisenshrinedattheheartofourbusiness.”
Peter Allen Chairman
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2. Audit Committee
MemberAttendance
(3scheduledmeetings)
ManjitWolstenholme(Chairmanin2017)1 3 of 3
PeterAllen 3 of 3
1.AstheChairmanoftheCommitteeduring2017,ManjitWolstenholmehadrecentandrelevantfinancialexperienceandtheactingChairman,RichardHuntingford(appointed1December2017),hasrecentandrelevantfinancialexperience.
TheAuditCommittee’sprimaryobjectiveistoprovideeffectivefinancialgovernanceandmonitortheintegrityoftheGroup’sfinancialstatementsandinternalcontrols.
TheAuditCommitteemeetsbeforetheinterimandannualresultsannouncementsandreviewstherelevantfinancialresultswiththeexecutivemanagementteamandtheexternalauditors.TheAuditCommitteealsomeetsseparatelyforthepurposesofplanningtheauditprocess,monitoringitseffectiveness,reviewingtheGroup’srelationshipwiththeexternalauditorsandundertakingadetailedreviewoftheGroup’sinternalcontrolsandriskmanagementsystems.Itconsideredwhetherthe2017AnnualReportwasfair,balancedandunderstandableandadvisedtheBoardaccordingly.
TheAuditCommitteecarriesoutthefunctionsrequiredbyrule7.1.3oftheDisclosureandTransparencyRules.
Significant financial reporting judgements TheAuditCommitteediscussedthekeyrisksandjudgementswithmanagementandtheauditorsaspartoftheauditplanningprocessinJuly2017.Atthesametimetheydiscussedandagreeduponappropriatelevelsofmaterialityinthecontextoftheanticipatedresultsfortheyear.Asaresultofthosediscussionsanauditplanwasagreedandsubsequentlyexecuted.
Thesignificantjudgementsconsideredinrelationtothefinancialstatementsfortheyearended30September2017,whichwereoriginallyidentifiedanddiscussedaspartoftheplanningprocessreferredtoabove,aresetoutbelowandwereaddressedasfollows:
1.RevenuerecognitionTheareaofrevenuewhichcarriesthemostjudgementisnewstraderevenue(bothdomesticandexport).Managementhascarefullyconsideredtheestimatesofreturnsmadeinrespectofnewstraderevenuesandtherecognitionofrevenuesonthelargeradvertisingcontractsandhaveconcludedthattheyareappropriate.TheestimatesandjudgementsmadehavebeendiscussedwiththeauditorsandtheAuditCommittee.
2.Carryingvalueofgoodwillandlong livedassetsIAS36requiresanimpairmenttesttobeperformedforgoodwillonanannualbasisorwherethereisanindicationofimpairment.ManagementpreparedadetailedimpairmentassessmentoftheUKbusinessat30September2017andconcludedthatnoimpairmentwasrequired. Thekeyassumptionsmadeinthatassessmentwereasfollows:
-Longtermgrowthratetoperpetuity2.0%
-EBITDAmarginsassumed12.0%to12.9%
-Discountrate(post-tax)7.7% TheAuditCommitteeagreedwithmanagement’sconclusionthatnoimpairmentisrequired.
3.ExceptionalitemsDuetothecontinuedrestructuringofthebusinessandsignificantacquisitionrelatedactivitythereareanumberofitemsconsideredexceptionalinnature.TheAuditCommitteehasdiscussedtheitemswiththeauditorsandagreeswiththeconclusionthattheseitemsshouldbepresentedasexceptional.
4.AcquisitionaccountingTheAuditCommitteehasreviewedtheacquisitionaccountingpreparedbymanagement,includingthefairvalueassessmentsperformedontheopeningbalancesheetsforboththeImagineandhomeinterestacquisitions,andagreeswiththejudgementsmade.
Audit feesTheAuditCommitteehasreviewedtheremunerationreceivedbyPricewaterhouseCoopersLLPfornon-auditworkconductedduringthefinancialyear.Thefeesfornon-auditworkwerehigherthantheauditfeeduetoworkperformedinareportingaccountantcapacityandduediligenceinrespectoftheImagineandhomeinterestacquisitions.Forfurtherdetailsregardingfeespaid,seenote3tothefinancialstatementsonpage61.
Auditors’ independenceTheAuditCommitteemonitorstheCompany’ssafeguardsagainstcompromisingtheobjectivityandindependenceoftheexternalauditorsbyperforminganannualreviewofnon-auditservicesprovidedtotheGroupandtheircost,reviewingwhethertheauditorsbelievethereareanyrelationshipsthatmayaffecttheirindependenceandobtainingwrittenconfirmationfromtheauditorsthattheyare
Corporate G
overnance
Re-election of Directors
WearenotrequiredtoofferallourDirectorsupforannualelection,however,allourDirectorstakeindividualandcollectiveresponsibilityforthedecisionsthattheBoardmakesandarehappytoletshareholdersjudgetheirperformancebystandingforannualre-election.WehavefollowedthispracticesincetheAGMin2005.
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independent.TheCommitteehasreviewedtheGroup’sauditindependencepolicyandiscomfortablethatitalignstotheFinancialReportingCouncil’slatestguidance.
Forthefinancialyearended30September2017,theAuditCommitteehasconducteditsreviewoftheauditors’independenceandconcludedthatnoconflictofinterestexistsbetweenPricewaterhouseCoopersLLP’sauditandnon-auditwork,andthattheirinvolvementinnon-auditmatters,which(asnotedonpage26)mainlycomprisedadviceinrespectoftheImagineandhomeinterestacquisitions,wasthemosteffectivewayofconductingtheGroup’sbusinessduringtheyear.
Auditors appointment policyTheAuditCommitteehasrevieweditspolicyforappointingauditorsandawardingnon-auditwork.
TheGrouphasusedPricewaterhouseCoopersLLPforreportingaccountantworkonboththeacquisitionsofImagineandhomeinterestandalsoworkingcapitaladvisoryworkontheacquisitionofhomeinterest.TheAuditCommitteeconsideredwhetherthisconstitutedathreattoindependenceandconfirmedthatitwascomfortablethattherewereappropriatesafeguardsinplace.
OntherecommendationoftheAuditCommittee,theBoardhasdecidedthatitisinthebestinterestsoftheCompanytoputaresolutiontoshareholdersthatPricewaterhouseCoopersLLP,whohavebeentheCompany’sexternalauditorsfor19years,bereappointedasauditorsfortheforthcomingyear.TheresolutiontoappointPricewaterhouseCoopersLLPwillproposethattheyholdofficeuntiltheconclusionofthenextAnnualGeneralMeetingatwhichaccountsarelaidbeforetheCompany,atalevelofremunerationtobedeterminedbytheDirectors.
3. Nomination Committee
MemberAttendance
(1scheduledmeeting)
PeterAllen(Chairman) 1 of 1ManjitWolstenholme 1 of 1HugoDrayton 1 of 1JamesHanbury 1 of 1
FollowingdiscussionoftheskillsandcontributionofeachDirector,theNominationCommitteesupportstheproposedre-electionofallDirectorsstandingforre-electionatthe2018AGM.Inlinewithbestpractice,eachCommitteememberseekingre-electionwasexcludedfromapprovingtheproposalfortheirre-election.
4. Remuneration Committee
MemberAttendance
(3scheduledmeetings)
ManjitWolstenholme(Chairmanin2017)1 3 of 3
PeterAllen 3 of 3
HugoDrayton 3 of 3JamesHanbury 3 of 3
1.RichardHuntingfordwasappointedactingChairmanoftheCommitteeon1December2017.
Therewerethreescheduledmeetingsduringtheyear.
TheRemunerationCommitteedeterminestheremunerationpackagesofexecutiveDirectors,includingperformance-relatedawardsandshare-basedincentives,remunerationpolicy,whichincludestheindividualbonustargetsforexecutiveDirectorsandperformancecriteriaattachedtoshare-basedincentives,theremunerationoftheChairman,recommendationsofremunerationlevelsfornon-executiveDirectorsandseniormanagementinlinewithindustryremunerationpackagesandtheimplementationofanynewshare-basedincentiveschemeproposedtobeimplemented.TheDirectors’remunerationreportissetoutonpages29to41.
ApprovedbytheBoardofDirectorsandsignedonitsbehalfby:
Penny Ladkin-BrandChiefFinancialOfficer andCompanySecretary8December2017
Corporate Governance report
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overnance
Investor Relations
ForcopiesofalloftheGroup’spublicannouncementsmade viatheRNSandcopiesof theCommittees’termsof referencevisit
www.futureplc.com/invest-in-future
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Dearshareholders,
IampleasedtopresenttheDirectors’remunerationreportforthefinancialyearended30September2017.ThisreporthasbeenpreparedonbehalfoftheFutureplcBoardbytheRemunerationCommittee,andhasbeenapprovedbytheFutureplcBoard.
AsrequiredundertheLargeandMedium-sizedCompaniesandGroups(AccountsandReports)(Amendment)Regulations2013(Sl2013/1981)Directors’RemunerationRegulations,thisreportissplitintothreesections:thisletter,anImplementationreport,settingoutdetailsofDirectors’remunerationforthefinancialyearended30September2017,andaRemunerationpolicyreport,settingouttheGroup’sremunerationpolicy(“Policy”)forexecutiveandnon-executiveDirectorsforthethree-yearperiodfrom1October2016.
ThekeychallengesfacedbytheRemunerationCommitteeduringtheyearinvolvedassessingthelevelandmake-upoftheexecutiveDirectors’remunerationpackages,includingthegrantofshare-basedincentiveawardsandthebasisofperformance-relatedbonuses,detailsofwhicharesetoutintheImplementationreportandthePolicy.InparticulartheCommittee,aftertakingadvicefromremunerationspecialistsatErnst&YoungfocuseditseffortsonensuringthattheremunerationpackagesreceivedbytheexecutiveDirectorsrecognisetheircontributiontotransformingtheGroup’sperformanceandmarketcapitalisationaswellascontinuetoincentivisegoingforwards.
TheCommitteealsoconsideredtheremunerationofnon-executiveDirectorsandhasproposedamendmentstothecurrentremunerationpolicytobetabledattheAGMinFebruary2018toensurethatthesefeesreflectprevailingmarketrates.TheamendmentstothepolicywillbesubjecttoabindingshareholdervoteattheCompany’sAGMon5February2018andwilltakeeffectimmediatelythereafter.
TheremunerationphilosophyisdesignedtoensurethatrewardforperformanceiscompetitiveandappropriatetothesignificantlyincreasedscaleandmarketcapitalisationoftheGroupfollowingthetransformationofthebusinesscombinedwiththesignificantacquisitionsofImagineandhomeinterestin2017,aswellasthefuturedevelopmentoftheGroup.Theremunerationpolicyseekstoalignremunerationwithshareholderinterestsbasedontheachievementofstrategicobjectivesandfinancialperformance.Asaresult,remunerationlevelsaredesignedtoreflecttherelativeperformanceofthebusinessfortherelevantperiod.
WebelievethatthePolicywillincentivisetheteamtodelivergrowthintheshort,mediumandlongtermandhopetoreceiveyourcontinuedsupportattheCompany’s2018AGM.
Peter Allen(onbehalfoftheRemunerationCommittee)8December2017
Directors’ remuneration report
Fortheyearended30September2017
Annual statementTheremunerationphilosophyisdesignedtoensurethatrewardforperformanceiscompetitiveandappropriateforthefuturedevelopmentof,andresultsdeliveredby,theGroup.Theremunerationpolicyseekstoalignremunerationwithshareholderinterestsbasedontheachievementofstrategicobjectivesandfinancialperformance.
Quick find contents
Implementation reportPage30
Remuneration policy report Page38
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Implementation report
Corporate G
overnance
Remuneration Committee
Threeindependentnon-executiveDirectorsservedontheRemunerationCommitteeduringtheyearto30September2017:ManjitWolstenholmechairedtheCommitteeduringtheyearandbothPeterAllenandHugoDraytonservedthroughouttheyear.JamesHanburyjoinedtheCommitteefollowinghisappointmenttotheBoardon21October2016.RichardHuntingfordwasappointedasactingChairmanoftheCommitteeinDecember2017.PennyLadkin-BrandactedasSecretarytotheCommitteethroughouttheyear.
TheCommitteeisresponsiblefordeterminingthebasicannualsalaries,incentivearrangementsandtermsofemploymentofexecutiveDirectors,formakingrecommendationsregardingnon-executiveDirectors’fees,thelevelandmake-upoftheremunerationpackagesofseniormanagers,
includingbonusschemesandshare-basedincentives,andensuringthatremunerationpoliciesandpracticesdonotencourageexcessiverisk-taking.TheCommitteeisalsoresponsibleforfixingtheChairman’sremunerationandapprovingthetermsofanynewshare-basedincentiveschemeforanyemployeesoftheGroup,subject,whereappropriate,toshareholderapproval.
ItistheBoardthatisresponsiblefordeterminingtheremunerationofnon-executiveDirectorsfollowingtherecommendationoftheCommitteeassetoutonpage32and35.
NoDirectorisinvolvedindecidinghisorherownremuneration.Asexplainedonpage24,thetermsofreferenceoftheRemunerationCommittee,reviewedannually,areavailableontheCompany’swebsite.
Performance-related bonus (Annual Bonus Scheme)
Operation of the scheme
Theperformance-relatedbonusissubjecttoprofitrelatedperformancecriteria,althoughtheCommitteehasdiscretiontovarythepotentialtotalmaximumbonus,theweightingofthevariableelementsandthestretchofthetargetsinordertoincentiviseorrecruitexecutiveDirectors,providedthatthetotalpotentialmaximumbonuspayableforanyyearshallnotexceed150%ofsalaryandthebonusshallonlybepayableforoverperformance.During2017,aprofitpoolbonuswasintroducedforallemployeesacrosstheGroup,includingtheexecutiveDirectors.Themaximumbonuspayableduring2017was95%ofcurrentbasicannualsalaryforbothZillahByng-ThorneasChiefExecutiveandPennyLadkin-BrandasChiefFinancialOfficer.
Single Total Figure of Remuneration (audited)
TheremunerationoftheDirectorsissetoutbelow:
Salary/fees Benefits1 Annualbonus2 PSP3 Pension Total
2017 £’000
2016 £’000
2017£’000
2016£’000
2017 £’000
2016 £’000
2017 £’000
2016 £’000
2017£’000
2016£’000
2017 £’000
2016 £’000
Executive Directors in office as at 30 September 2017ZillahByng-Thorne4 350 300 10 10 640 - 1,452 - 44 37 2,496 347PennyLadkin-Brand4 250 178 - - 324 - 921 - 11 8 1,506 186Total for executive Directors 600 478 10 10 964 - 2,373 - 55 45 4,002 533
Non-executive Directors in office as at 30 September 2017PeterAllen 95 101 - - - - - - - - 95 101ManjitWolstenholme 50 50 - - - - - - - - 50 50JamesHanbury5 60 - - - - - - - - - 60 -HugoDrayton 40 40 - - - - - - - - 40 40Total for non-executive Directors 245 191 - - - - - - - - 245 191
Total 845 669 10 10 964 - 2,373 - 55 45 4,247 724
Notes:1.BenefitsforexecutiveDirectorscompriseprincipallycarallowance,privatehealthinsuranceandlifeassurance.TherewerenotaxableexpensespaidtoanyDirectorintheyear.2.DetailsrelatingtotheAnnualBonusSchemearesetoutonpages30and31.InadditiontoamountsincludedinrespectoftheAnnualBonusSchemefor2017,bothZillahByng-ThorneandPenny
Ladkin-Brandreceivedtransactionbonusesof£350,000and£125,000respectivelyfollowingthesuccessfulcompletionandintegrationoftheImagineacquisitioninOctober2016.During2016,bothZillahByng-ThorneandPennyLadkin-Brandwaivedtheirentitlementtoanyperformancebonus(althoughthecriteriahadbeenpartlysatisfied)andasaresultnobonuspaymentwasmadein2016.
3.DetailsrelatingtothePerformanceSharePlan(“PSP”)aresetoutonpage31.TheamountincludedinthetableaboveinrespectofZillahByng-ThornerelatestothePSPawardgrantedon16July2014whichvestedinfullon27November2017,followingtheachievementofperformancecriteriaoverthethree-yearperiodended30September2017,and25%ofthePSPawardsgrantedon23November2016and2February2017whichwillveston23November2019,followingtheachievementoftheadjustedEBITDAtargetfortheyearended30September2017.ThevalueoftheJuly2014awardhasbeencalculatedusingthesharepriceonthedateofvestingof382pandthevalueoftheNovember2016andFebruary2017awardshasbeencalculatedusingtheaveragesharepriceforthelastthreemonthsofthefinancialyearof308p,astheawardhadnotvestedatthedateofthisreport.TheamountincludedinrespectofPennyLadkin-BrandrelatestothePSPawardgrantedon2August2015whichwillvestinfullon2August2018,followingtheachievementofperformancecriteriaoverthethree-yearperiodended30September2017,and25%ofthePSPawardsgrantedon23November2016and2February2017whichwillveston23November2019,followingtheachievementoftheadjustedEBITDAtargetfortheyearended30September2017.Astheseawardshadnotvestedatthedateofthisreport,thevalueabovehasbeencalculatedusingtheaveragesharepriceforthelastthreemonthsofthefinancialyearof308p.
4.ZillahByng-Thornereceivedacashsupplementinlieuofpensioncontributionwitheffectfrom1July2016andPennyLadkin-Brandreceivedacashsupplementinlieuofpensioncontributionwitheffectfrom1November2016.Theseadditionalcashpaymentsarenotincludedindeterminingtheirentitlementtoanybonus,share-basedincentiveorpensionentitlement.
5.JamesHanburywasappointedtotheBoardon21October2016.6.RichardHuntingfordwasappointedtotheBoardon1December2017andconsequentlynoremunerationisincludedinthetableabove.
ThefollowingreportprovidesdetailsofDirectors’remunerationfortheyearended30September2017.Insettingremunerationfortheyear,theCommitteeappliedtheprinciplessetoutintheRemunerationpolicyreport.
31 Future plc
Directors’ remuneration report
Fortheyearended30September2017
Paymentofanyperformance-relatedbonusundertheAnnualBonusSchemeisusuallymadeinDecember,followingannouncementofthepreliminaryresultsandconclusionoftheauditinrespectoftheprecedingfinancialyear.Paymentofanyperformance-relatedbonusisalsosubjecttotheexecutiveDirectorbeingintheCompany’semploymentatthetimeofpaymentofsuchperformance-relatedbonusandnothavinggivenorreceivednoticeofterminationofemploymentandcertainothereventsnothavingoccurred.
Performance targets
Theperformance-relatedbonusfortheexecutiveDirectorsduring2017comprisedtwoelements.Amaximumof45%ofcurrentbasicannualsalarywaspayableundertheprofitpoolbonussubjecttotheachievementoftargetEBITDAandafurther50%ofcurrentbasicannualsalarywaspayableinshares,whichmustbeheldforatleastoneyear,subjecttotheachievementoftargetEBITDA.
Theprofitcriteriaforpaymentoftheprofitpoolbonussetfor2017wasinarangefrom101%to120%targetEBITDA,asfollows:
::IfEBITDAisatorbelowtargetEBITDA,noprofit-relatedbonuswillbepayable.
::IfEBITDAtargetisexceededby10%ormore,50%ofthepotentialmaximumoftheprofit-relatedbonuswillbepayable.
::IfEBITDAtargetisexceededby20%ormore,100%ofthepotentialmaximumoftheprofit-relatedbonuswillbepayable.
::IfEBITDAfallsinbetweenanyoftheabovelevels,apercentageofthepotentialmaximumprofit-relatedbonuswillbepayable,onaproratabasistothelevelsexpressedabove,intheeventthattheCommitteedetermines,initsabsolutediscretion,thatsuchpaymentismeritedbytheindividual.
TheprofitcriteriainrespectofthesharesbonuswasaspecifiedtargetEBITDA,whichhadtobemetinfullinorderforthebonussharestobeissued.
TheEBITDAtargetisnotdisclosedasthisisbelievedtobeacommerciallysensitivenumberbutitissetbytheCommitteetobechallengingandissetbyreferencetothebudgetfortherelevantfinancialyear.
Actual performance against targets for the year
BasedonEBITDAperformanceachievedfor2017,theChiefExecutiveandtheChiefFinancialOfficerwereeachawardedaprofitpoolbonusof22.5%oftheircurrentsalaryandasharesbonusof50%oftheircurrentsalary.
2005 Performance Share Plan (PSP)
Operation of the schemeThePSPhasbeeninoperationsince2005andisdesignedtorewardperformance,usuallyoverathree-yearperiodinthecontextofperformancetargetswhicharedesignedtoaligntheinterestsoftheexecutiveDirectorswiththoseoftheshareholders.Thosetargetsaresetoutbelow.Themaximumamountofanawardinanyfinancialyearisnormally100%ofbasicannualsalary.However,inexceptionalcircumstances,whereitisfeltnecessarytoprovidefurtherincentivetotheexecutiveDirectors,awardsofupto400%ofbasicannualsalarymaybeapproved.AwardsunderthisschemearegrantedtoexecutiveDirectorsandcertainkeyemployees.ThePSPwillexpireinJanuary2025,followingitsrenewalinJanuary2015forafurther10years.
SubjecttotheexecutiveDirectorsremaininginemploymentatthevestingdate,awardsgrantedshallvestsubjecttothefollowingperformancecriteriahavingbeenmetattheendoftherelevantthree-yearmeasurementperiod.
Performance criteria in respect of awards granted during the year ended 30 September 2017
EBITDA (50% of award)
25%oftheawardwillvestiftheGroup’sadjustedEBITDAfortheyearended30September2017isatorabovetarget.IftheGroup’sadjustedEBITDAisbelowtarget,noneofthat25%oftheawardwillvest.
25%oftheawardwillvestiftheGroup’sadjustedEBITDAfortheyearending30September2018isatorabovetarget.IftheGroup’sadjustedEBITDAisbelowtarget,noneofthat25%oftheawardwillvest.
Share price performance (50% of award)
25%oftheawardwillvestiftheCompany’ssharepriceperformanceintheperiodfromthedateofgrantto30September2018isatorabovetarget.IftheCompany’ssharepriceperformanceisbelowtarget,noneofthat25%oftheawardwillvest.
25%oftheawardwillvestiftheCompany’ssharepriceperformanceintheperiodfromthedateofgrantto30September2019isatorabovetarget.IftheCompany’ssharepriceperformanceisbelowtarget,noneofthat25%oftheawardwillvest.
Performance criteria in respect of awards granted between 30 November 2015 and 30 September 2016
Earnings Per Share (50% of award)
AdjustedEPSforthelastfinancialyearoftheperformanceperiodofatleast18.0pforthispartoftheawardtovest(atthislevelthevested
amountis25%ofthispartoftheaward),withfullvestingat22.5pandonastraight-linebasisbetweentheseamounts.
Net Cash Flow (50% of award)
NetCashFlowforthelastfinancialyearoftheperformanceperiodofatleast£(0.25)mforthispartoftheawardtovest(atthislevelthevestedamountis25%ofthispartoftheaward),withfullvestingat£0.75mandonastraight-linebasisbetweentheseamounts.
Performance criteria in respect of awards granted between 16 July 2014 and 29 November 2015
InJuly2017,theRemunerationCommitteeexerciseditsdiscretiontochangetheperformancecriteriainrespectoftheawardgrantedtoZillahByng-ThorneinJuly2014fromTSRperformanceandEPSgrowthtoabsoluteEPSandnetcashflowinordertoaligntheperformancecriteriaforawardsmadetotheexecutiveDirectors.TheCommitteealsoextendedthevestingdatefrom16July2017to27November2017.Theperformancecriteriaareasfollows:
Earnings Per Share (50% of award)
AdjustedEPSforthelastfinancialyearoftheperformanceperiodofatleast15.0pforthispartoftheawardtovest(atthislevelthevestedamountis25%ofthispartoftheaward),withfullvestingat21.0pandonastraight-linebasisbetweentheseamounts.
Net Cash Flow (50% of award)
NetCashFlowforthelastfinancialyearoftheperformanceperiodofatleast£0.25mforthispartoftheawardtovest(atthislevelthevestedamountis25%ofthispartoftheaward),withfullvestingat£1.25mandonastraight-linebasisbetweentheseamounts.
Performance against targets in respect of the 16 December 2013 awards
ThemovementinEPSfortherelevantmeasurementperiodwas-33%forthetotalGroupandTSRperformanceplacedtheCompany13thwithinthegroupof16comparatorcompanies.Consequently,thePSPawardgrantedtoZillahByng-Thorneon16December2013lapsedinitsentiretyon16December2016.
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Performance against targets in respect of the awards granted on 16 July 2014 and 2 August 2015
TheadjusteddilutedEPSfortherelevantmeasurementperiodwas21.0pfortheGroupandthenetcashflowwas£8.9m(aftermakingadjustmentsfornetdebtacquiredwithImagineanddebtdrawndowntofundtheacquisitionofhomeinterest).Consequently,thePSPawardgrantedtoZillahByng-Thorneon16July2014vestedinfullon27November2017andthePSPawardgrantedtoPennyLadkin-Brandon2August2015willvestinfullon2August2018.
Non-executive Directors’ remuneration
Non-executiveDirectorsdonotparticipateinanyoftheCompany’sshareincentivearrangements,nordotheyreceiveanybenefits.Theirfeesarereviewedeverythreeyears.TheChairman’sfeesaresetbytheCommittee,andthoseforthenon-executiveDirectorsaresetbytheBoardasawhole.
Pension entitlements (audited)
Theonlyelementofremunerationthatispensionableisbasicannualsalary,excludingperformance-relatedbonusesandbenefitsinkind.Duringtheyearended30September2017,employer’spensioncontributionswerepayablefortheexecutiveDirectorsatarateof12.5%fortheChiefExecutiveandupto6%fortheChiefFinancialOfficer.Theentitlementtoemployer’spensioncontributionswaspaidincashasasalarysupplementtoZillahByng-Thorne,witheffectfrom1July2016,andtoPennyLadkin-Brand,witheffectfrom1November2016.Thisadditionalcashpaymentisnotincludedindeterminingtheirentitlementtoanyperformance-relatedbonus,share-basedincentiveorpension.TheCompanyhadnoliabilityinrespectoftheexecutiveDirectors’pensionsasat30September2017.Normalretirementageundertheschemerulesis75.
Payments to past Directors (audited)
NopaymentsweremadetoanypastDirectorsduringthefinancialyearended30September2017.
Payments for loss of office (audited)
Duringthefinancialyearto30September2017nopaymentsinrespectoflossofofficeweremade.
Statement of Directors’ shareholding and share interests (audited)
TheCompanyhasapolicyonshareownershipbyexecutiveDirectorswhichrequiresthatanysuchDirectorshouldaccumulateaholdinginsharesoverafiveyearperiodfromappointmentwherethevalueofthosesharesrepresentsatleastonetimessalary.
InrespectofZillahByng-Thorne,therelevantfiveyearperiodcommencedon1November2013andwillendon31October2018.Asat30September2017,ZillahByng-Thornehadaholdingof113,016shareswhich,atthesharepriceonthesamedate,wereworth£349,785.
InrespectofPennyLadkin-Brand,theperiodcommencedon3August2015andwillendon2August2020.Asat30September2017,PennyLadkin-Brandhadaholdingof31,780shareswhich,atthesharepriceonthesamedate,wereworth£98,359.
DetailsofDirectors’shareholdingsaresetoutonpage20oftheDirectors’report.
Share incentives awarded during the year (audited)
PSP Grants
Date of award % salary Value (£)% vesting at min performance
No. shares awarded Performance period
ZillahByng-Thorne 23November2016 200% 700,000 75% 529,702 1October2016–30September2019
PennyLadkin-Brand 23November2016 200% 500,000 75% 378,358 1October2016–30September2019
ZillahByng-Thorne 2February2017 200% 700,000 75% 529,702 1October2016–30September2019
PennyLadkin-Brand 2February2017 200% 500,000 75% 378,358 1October2016–30September2019
Notes:1. ThevalueofthePSPawardsareusuallycalculatedusingthesharepriceatthedateofgrant,whichwas132.15ppershareforthe23November2016awardstoZillahByng-ThorneandPenny
Ladkin-Brand.ThevalueoftheawardsgrantedtoZillahByng-ThorneandPennyLadkin-Brandon2February2017wasbasedonthesamesharepriceastheawardsgrantedon23November2016astheywereconsideredtobepartofthesameshareaward.
2.ThePSPawardsareexercisableatnilvalue.3.Theperformanceconditionsattachedtothegrantoftheaboveawardsarethesameassetoutonpage31.4. Thepercentagevestingatminimumperformancerepresentsthe50%vestingoftheEBITDAelementandthe100%vestingofthesharepriceperformanceelementoftheawardastherelevant
criteriahavebeenmetinfullat8December2017.
33 Future plc
Directors’ remuneration report
Fortheyearended30September2017
Company performance
TheperformancegraphoppositeshowstheTSRonaholdingofsharesintheCompanycomparedwiththeFTSEAllShareMediaIndex(UKcompanies).
ThefollowingisalistofthecompaniescurrentlyincludedintheFTSEAllShareMediaIndex(UKcompanies):
4 Imprint GroupAscentialAuto Trader GroupBloomsbury PublishingEntertainment One Euromoney Instl. InvestorGocompare.comHuntsworthInformaITE GroupITV
Moneysupermarket.com GPPearsonRELXRightmoveSkySTV GroupTarsus GroupTrinity MirrorUBMWPP Zoopla Property Group
Notes:1. TheperformancecriteriawhichapplytoawardsgrantedunderthePSPschemearesetoutonpage31.2. DetailsoftheSharesavescheme,whichhasnoperformanceconditions,aresetoutinnote24onpage81.3. ThemarketpriceatthetimeofgrantofthePSPawardon23November2016was132.15ppershareandthispricewasalsousedforthegrantofthePSPawardon2February2017astheywere
consideredtobepartofthesameshareaward.4.InJuly2017theRemunerationCommitteeexerciseditsdiscretiontochangetheperformancecriteriainrespectoftheawardgrantedtoZillahByng-ThorneinJuly2014fromTSRperformanceand
EPSgrowthtoabsoluteEPSandnetcashflowinordertoaligntheperformancecriteriaforawardsmadetotheexecutiveDirectors.TheCommitteealsoextendedthevestingdatefrom16July2017to27November2017.
5.ZillahByng-Thorneexercised4,615optionsundertheSharesaveschemeon1August2017.Theexercisepriceoftheoptionswas195ppershareandthemarketpriceonthedateofexercisewas320ppershare.
6.TheawardsgrantedtoZillahByng-Thorneon16December2013lapsedon16December2016,sincetherelevantperformancecriteriawerenotmet.7.Balancesat1October2016inthetableabovehavebeenrestatedtoreflecttheshareconsolidationinFebruary2017.
Directors’ interests in share schemes (audited)
DetailsofoptionsandothershareincentivesheldbyexecutiveDirectorsandmovementsduringtheyeararesetoutbelow,includingdetailsoftheawardsmadeduringtheyear.
Dateofgrant
Pricepaid
for grant
Earliest exercisedate
Expiry date
RestatedExerciseprice per share(p)
RestatedBalanceat
1Oct2016
Grantedduringthe
year3
Vestedduringthe
year
Lapsed unexercised
during theyear
Balance at 30 Sept
2017
PSP1
ZillahByng-Thorne4 16Dec2013 Nil 16Dec2016 N/A Nil 133,334 - - (133,334) -16Jul2014 Nil 27 Nov 2017 N/A Nil 166,667 - - - 166,667
30 Nov 2015 Nil 30 Nov 2018 N/A Nil 166,667 - - - 166,66723 Nov 2016 Nil 23 Nov 2019 N/A Nil - 529,702 - - 529,7022Feb2017 Nil 23 Nov 2019 N/A Nil - 529,702 - - 529,702
PennyLadkin-Brand 3Aug2015 Nil 3Aug2018 N/A Nil 109,856 - - - 109,85630 Nov 2015 Nil 30 Nov 2018 N/A Nil 83,334 - - - 83,33423 Nov 2016 Nil 23 Nov 2019 N/A Nil - 378,358 - - 378,3582Feb2017 Nil 23 Nov 2019 N/A Nil - 378,358 - - 378,358
Sharesave2
ZillahByng-Thorne 13Dec2013 Nil 1Feb2017 1Aug2017 195.0 4,615 - (4,615) - -
34AnnualReportandAccounts2017C
orporate Governance
Corporate G
overnance
Graph: Past nine financial years ended 30 September 2017Total Shareholder Return: Rebased to Future plc as of 1 October 2008
Chief Executive pay during last nine years
Year
Chief Executive single figure
£’000Bonus paid as %
of maximumShare based incentives
vesting as % of maximum
2009(StevieSpring) £423 0% 100%1
2010(StevieSpring) £746 40% 48%2
2011(StevieSpring) £546 0% 100%3
2012(MarkWood) £430 50% 0%4
2013(MarkWood) £331 0% 0%4
2014(ZillahByng-Thorne) £3066 20% 0%5
2015(ZillahByng-Thorne) £471 36% 0%5
2016(ZillahByng-Thorne) £347 0%7 0%5
2017(ZillahByng-Thorne) £2,496 88%8 100%
Notes:1. Thisrepresentsshareswhichweregrantedaspartofanexceptionalone-offawardintendedtoaidrecruitmentandretention.Theawardwasnotsubjecttoperformancecriteria.2. ThisrepresentsthefirsttrancheofadeferredbonusshareawardwhichwasnotsubjecttoperformancecriteriaandthePSPawardgrantedinDecember2006whichpartiallyvestedinDecember2009
followingthepartialsatisfactionofTSRperformancecriteria.3. Thisrepresentsthesecondtrancheofadeferredbonusshareawardwhichwasnotsubjecttoperformancecriteria.ThePSPawardgrantedinDecember2007lapsedinDecember2010.4. ThefirstawardsgrantedtoMarkWoodunderthePSPweregrantedinJanuary2012andlapsedon18January2015,sincetherelevantperformancecriteriawerenotmet.5. ThefirstawardsgrantedtoZillahByng-ThorneunderthePSPweregrantedinDecember2013andlapsedon16December2016,sincetherelevantperformancecriteriawerenotmet.6. ThesinglefigureforZillahByng-Thornefor2014includesfivemonthsofherChiefFinancialOfficersalaryandsixmonthsofhersalaryasChiefExecutive.7.ZillahByng-Thornewaivedherperformance-relatedbonusfor2016.8.ZillahByng-Thornereceivedatransactionbonusof£350,000followingthesuccessfulcompletionoftheImagineacquisitioninOctober2016.Therighttoaperformance-relatedbonuswaswaivedin
2016asaresultofthistransactionbonusbeingpaid.The88%inthetablereflectsthecombinationofthistransactionbonus,theprofitpoolbonuswhichwasawardedasaresultofEBITDAperformanceachievedfor2017andthefurtherbonusof50%ofcurrentsalary(tobesatisfiedinsharesthatmustbeheldforatleastoneyear)fortheachievementof2017targetEBITDA.
Future(rebasedto100) FTSEAll-ShareMediaIndex(UKcompanies)(rebasedto100)
50
100
150
200
250
300
350
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
400
35 Future plc
Directors’ remuneration report
Fortheyearended30September2017
Percentage change in remuneration of Chief Executive
Salary Benefits (inc pension) Bonus
2017 2016 % change 2017 2016 % change 2017 2016 % change
Chief Executive £350,000 £300,000 +16.7% £54,000 £47,000 +14.9% £640,000 - +100%All employees £38,758 £38,491 +0.7% £1,777 £3,022 -41.2% £1,551 - +100%
Relative importance of spend on pay
Therelativeimportanceofspendonpayforthebusinessisshowninthetablebelow.
2017£m
2016£m
Grouppay 28.8 24.0GroupoperatingcostsexcludingGrouppay&exceptionalcosts 52.6 34.3Capitalexpenditure 1.8 1.9Dividends - -
ThetableshowstheactualexpenditureoftheGroup,andchangebetweenthecurrentandpreviousyears,onremunerationpaidtoallemployeescomparedtothetotaloperatingcostsfortheGroupexcludingexceptionalcostsandremuneration,andinvestmentincapitalexpenditureanddividends.
Shareholder voting
AtthelastAnnualGeneralMeeting,votescastontheDirectors’remunerationreportbeginningon1October2016to30September2019wereasfollows:
For % Discretionary % Against %
ApprovalofDirectors’remunerationreportfor2017* 18,578,620 99.93 1,732 0.01 11,690 0.06
*ThenumbersofsharesstatedabovehavebeenrestatedtoreflecttheshareconsolidationinFebruary2017.
Implementation of remuneration policy in the year to 30 September 2018
TheRemunerationCommitteedoesnotproposetomakeanychangestotheremunerationpolicythatwasoutlinedintheAnnualReportfortheyearended30September2016andapprovedattheCompany’sAnnualGeneralMeetinginFebruary2017,acopyofwhichissetoutonpages38to41,otherthanasdetailedbelowinrespectofnon-executiveDirectors’fees.
TheRemunerationCommitteeproposesthefollowingchangestotheremunerationpolicyfor2018fornon-executiveDirectors,asoutlinedintheRemunerationpolicyreportonpages38to41,subjecttoshareholderapprovalattheCompany’sAGMon5February2018.
Non-executive Directors
Element Operation of element Max. potential valuePerformance, weighting & time
Fees Non-executiveDirectors’feesarereviewedeverythreeyearsandpaidin12monthlyinstalments.
Chairman:£120,000DeputyChairman:£65,000Othernon-executiveDirectors:£40,000Additionalfeespayable:ChairmanofCommittee:£5,000SeniorindependentDirector:£5,000MemberofCommittee:Nil
TheChairman’sfeewillincreaseto£120,000 from1October2017.
SubjecttoshareholderapprovalattheAGMinFebruary2018thefollowingchangesareproposed:
1.Anincreaseinthebasefeefornon-executiveDirectorsby£5,000to£45,000effectivefrom1February2018.
2.Anadditionalfeeof£7,500fortheroleofSeniorIndependentDirectorand£5,000foreachChairmanofRemunerationandAuditCommitteeroleheld.
36Annual Report and Accounts 2017C
orporate Governance
Executive Directors:
Asdetailedopposite,theoverallremunerationpolicyforexecutiveDirectorsremainsunchanged,howeverthechangestoremunerationthathavetakenplaceinrespectof2018inaccordancewiththepolicyaredetailedbelow:
Element Operation of element Max. potential valuePerformance, weighting & time
Basesalary Nochange ZillahByng-Thorne’ssalaryasChiefExecutiveincreasedto£400,000andPennyLadkin-Brand’ssalaryasChiefFinancialOfficerincreasedto£275,000,bothwitheffectfrom1October2017.
Nochange
Benefits Nochange ZillahByngThorne’stotalbenefitsincreasedto£17,000andPennyLadkin-Brand’stotalbenefitsincreasedto£15,000,bothwitheffectfrom1October2017.
Nochange
AnnualBonus Nochange Nochangetotheprofitpoolbonusthatwasintroducedin20171.
Nochange
PSP Nochange TheExecutiveDirectorsreceivedanawardof100%ofsalaryinNovember2017which,subjecttotheachievementofcertainperformanceconditions,willvestinNovember2020.
Nochange
Pension Nochange Employers’pensioncontributionswereincreasedtoarateof15%forboththeChiefExecutiveandtheChiefFinancialOfficerfrom1October2017.
Nochange
Notes:1.PerformancetargetsfortheAnnualBonusfor2018arenotdisclosedduetotheircommercialsensitivity.IntheeventthatthereisanincreaseintheexecutiveDirectors’basesalariesduringtheyear,the
potentialmaximumvalueoftheAnnualBonusandpensionshallincreaseaccordingly.
Advisers to the Remuneration Committee
Ernst&YoungLLP(‘EY’)advisetheCommitteeinrespectofvariousshareincentivesandexecutiveremunerationandwerepaid£9,000intheyearforprovidingtheseservicestotheCommittee.
Compliance with the UK Corporate Governance CodeTheBoardhascompliedfullywiththeprovisionsofSectionDoftheUKCorporateGovernanceCodeinrelationtoDirectors’remunerationpolicyandpractice,andhasfollowedScheduleAtotheCodeinrelationtoperformance-relatedremunerationpolicy.FurtherinformationregardingtheCompany’sapproachtocorporategovernanceissetoutonpages23to28.
37 Future plc
38AnnualReportandAccounts2017C
orporate Governance
Remuneration policy report
Corporate G
overnance
Thepolicysetoutbelowappliesforallfinancialyearsbeginningonorafter1October2016to30September2019followingshareholderapprovalattheCompany’sAnnualGeneralMeetingon1February2017.
TheCommitteeconsiderstheremunerationpolicyannuallytoensurethatitremainsalignedwiththeGroup’sbusinessneedsandisappropriatelypositionedrelativetothemarket.TheCommitteedoesnotproposetomakeanychangestothepolicythatwasapprovedbyshareholdersattheCompany’sAnnualGeneralmeetinginFebruary2017inrespectofexecutiveDirectors’remunerationhoweveritseekstoamendthelevelofnon-executiveDirectors’feestoreflectprevailingmarketratesandthereforeintendstoputtheproposedamendmentstothepolicyinrespectofnon-executiveDirectors’remunerationforwardtoshareholdersforapprovalattheCompany’sAnnualGeneralMeetingtobeheldon5February2018.
Approach to recruitment remuneration for executive and non-executive DirectorsTheCommittee’sobjectiveatthetimeofanappointmenttoanewroleistoweightexecutiveDirectors’remunerationpackagestowardsperformance-relatedpay,withperformance-relatedtargetslinkedtofinancialperformanceoftheGroupagainstbudgetandtheGroup’sperformanceagainstbusinessobjectivesanditsstatedstrategy.
AnynewexecutiveDirector’sremunerationpackagewouldincludethesameelementsasthoseoftheexistingexecutiveDirectors,asshowninthenextcolumn.
Element of remuneration Maximum % of salary
Salary Nothigherthanmarketvalue
Benefits Dependentoncircumstances
Pension 15%ofbasicannualsalary
Performance- relatedbonus2 150%
Shareincentiveschemes1 100%
Notes:1.PSPschemerulesprovideforawardsofupto100%of
basicannualsalary,saveinexceptionalcircumstanceswheretheCommitteeisalloweddiscretiontoawardupto400%ofbasicannualsalary.
2.Intheeventofaninternalpromotion,anycommitmentsmadebytheCompanytoaninternalcandidateshallbehonouredevenifitwouldotherwisebeinconsistentwiththepolicy.
3.IftheDirectorisrequiredtorelocatethenthepolicyistoprovidereasonablerelocation,travelandsubsistencepaymentsatthediscretionoftheCommittee.
Indeterminingthelevelandmake-upofexecutiveDirectors’remuneration,theCommitteecarefullyconsidersthefollowingissues:
(a)RemunerationpackagesofferedtoexecutiveDirectorsshouldbecompetitivewiththoseavailableforcomparablerolesincompaniesoperatinginsimilarmarketsandonasimilarscale.Theyshouldbesufficientlydesirablesoastoattract,retainandmotivatehighcalibreDirectorstoperformatthehighestlevels,whilstatthesametimeensuringthatrecruitmentand
remunerationexpenditureisnotexcessiveanddoesnotencourageexcessiverisk-taking.
(b)TheinterestsofexecutiveDirectorsshouldbealignedwiththoseofshareholdersbyensuringthatasignificantproportionofremunerationislinkedtoGroupperformance.
(c)RemunerationpackagesandemploymentconditionsofexecutiveDirectorsareconsideredinconjunctionwithboththoseofkeyseniormanagers(keepingsuccessionplanninginmind)andallemployeesintheGroupinordertoachieveaconsistentremunerationpolicyacrosstheGroup.TheCommitteehasgivenparticularattentiontoensuringthattheremunerationpackagesofthekeyseniormanagersrecruitedduringtheyeararealignedwiththoseoftheexecutiveDirectors.
(d)Bonuspotentialandshareschemeawardsthatarecappedatapercentageofsalaryarerestrictedifsalariesarelow.
(e)Subjectivecriteriaareappliedtotheperformance-relatedbonusoftheChiefExecutiveandChiefFinancialOfficerinordertoensurethattheCommitteeretainsdiscretionandtoensurenoperformance-relatedbonusisunjustlyreceived.
Service contracts and payments for loss of office
Executive Directors Contract provision Policy Details
Noticeperiods DirectororCompanyshallbeentitledtoserve6months’notice(inPennyLadkin-Brand’scase)or12months’notice(inZillahByng-Thorne’scase).
ADirectormayberequiredtoworkduringtheirnoticeperiodorbeputongardenleave.
Compensationforlossofoffice Directorshallbeentitledtoreceive6months’salary(inPennyLadkin-Brand’scase)or12months’salary(inZillahByng-Thorne’scase)andbenefitsduringanyunexpirednoticeperiod.
Whileserviceagreementsallowformonthlypaymentsduringnoticeperiodwhicharesubjecttomitigation,theCommitteeretainsdiscretiontomakepaymentsinsuchmannerasisdeemedappropriate,particularlybyreferencetothecircumstancesofthelossofoffice.
Treatmentofshareincentivesontermination
IncentiveswilllapseorvestattheCommittee’sdiscretion,subjecttoperformancecriteriabeingmetandtherulesofthescheme.
TheCommitteehasdiscretiontoallowawardstovestpartiallyorinfullontermination,ortopreserveawards.
Changeofcontrol Intheeventofachangeofcontrol,aDirector mayterminatetheirappointmentonservingnolessthan1month’snotice.
IntheeventofterminationbyeithertheDirectorortheCompany,theDirectorwillbeentitledtoreceive6months’salary.
Non-executive Directors
Noticeperiods 3months’noticefromeitherCompanyorDirector.
Appointedforathreeyearterm,subjecttoannualre-electionbyshareholdersattheCompany’sAGM.
CopiesofDirectors’serviceagreementsandlettersofappointmentareavailableforinspectiononrequestattheCompany’sregisteredoffice.
39 Future plc
Directors’ remuneration report
Fortheyearended30September2017
Remuneration table
Executive Directors
Element Operation Objective & link to strategy Max. potential value Performance measures Changes for 2018Basic annual salary Basicannualsalaryispaidin12equalmonthlyinstalmentsduringtheyearandisreviewedannually.
Whenassessingthelevelofbasicannualsalary,theCommitteetakesintoaccountperformance,marketconditions,remunerationofequivalentroleswithincomparablecompanies,thesizeandscaleofthebusinessandpayintheGroupasawhole.
TheCommitteeretainsdiscretiontopayasalarysupplementtoanexecutiveDirectorforfulfillingtheroleofanotherhigherpaidexecutiveDirectorwhenthatexecutiveDirectorleavestheCompany.
Torecruit,retainandmotivateindividualsofhighcalibre,andreflecttheskills,experienceandcontributionoftherelevantDirector.
Salaryincreasesshallgenerallyreflectmarketconditions,performanceoftheindividual,newchallengesoranewstrategicdirectionforthebusiness.Similarly,theCommitteemayapproveahigherbasicannualsalaryforanewlyappointedDirectorthantheoutgoingDirectorreceivedwhereitconsidersitnecessaryinordertorecruitanindividualofsufficientcalibrefortherole.
Notapplicable. BasicannualsalaryofChiefExecutiveincreasedto£400,000andChiefFinancialOfficerto£275,000(bothwitheffectfrom1October2017)from£350,000and£250,000respectively.
Benefits CurrentbenefitsavailabletoexecutiveDirectorsarecarallowance,permanenthealthinsurance,healthcareandlifeassurance.AdditionalbenefitsmaybeofferedifapplicableandsubjecttothemaximumvalueofallbenefitsnotexceedingthemaximumpotentialvaluesetbytheCommittee.
Toensurebroadcompetitivenesswithmarketpractice. TheCompanyshallcontinuetoprovidebenefitstoexecutiveDirectorsatsimilarlevels;whereinsurancecoverisprovidedbytheCompany,thatcovershallbemaintainedatasimilarlevelandtheCompanyshallpaythethencurrentmarketratesforsuchcover.
Notapplicable. TotalbenefitsprovidedtotheChiefExecutiveincreasedto£17,000andtotheChiefFinancialOfficerto£15,000(bothwitheffectfrom1October2017).
Pension TheCompanyshallmakeacontributionuptoamaximumpercentageofbasicannualsalary. Toensurebroadcompetitivenesswithmarketpractice. Totalcostannuallyshallnotexceed15%ofbasicannualsalary. Notapplicable. Employers’pensioncontributionsincreasedto15%forboththeChiefExecutiveandChiefFinancialOfficer(from12.5%and6%respectively).
Performance- related bonus1
TargetsaresetannuallybytheCommittee,basedon(i)financialperformanceagainstbudgetand,attheCommittee’sdiscretion,(ii)individualsubjectiveperformancetargetswhicharedeterminedforeachexecutiveDirector.
TheCommitteeretainsdiscretiontosetthefinancialtargetsbasedontheperformanceduringthepreviousfinancialyearandthebudgetfortheforthcomingyear,andperformanceoftheindividualagainsttheirspecificsubjectiveperformancetargets.
DesignedtorewarddeliveryofshareholdervalueandimplementationoftheGroup’sstrategy.
ForboththeChiefExecutiveandChiefFinancialOfficertheCommitteeretainsdiscretiontovarythepotentialtotalmaximumbonus,theweightingofthevariableelementsandthestretchofthetargetsinordertoincentiviseorrecruitexecutiveDirectors,providedthatthetotalmaximumpotentialbonusforanyoneyearshallnotexceed150%ofbasicannualsalaryandthatthemaximumbonusshallonlybepayableforoverperformance.
Theperformancemeasures,relativeweightingsandtargetsaresetannuallybytheCommittee.DetailsofthemeasuresandtheirrelativeweightingsaredisclosedannuallyintheDirectors’remunerationreportwiththetargetsdisclosedprovidedtheyarenotdeemedtobecommerciallysensitive.TheCommitteeretainsdiscretiontoadjustthetargetsifeventsoccurwhichleadittoconcludethattheyarenolongerappropriate.
TheCommitteealsoretainsdiscretiontoadjusttheoutcomeoftheperformance-relatedbonusforanyperformancemeasureifitconsidersthattobeappropriate.
Nochange.
Long term share-based incentive2
AnnualawardstoexecutiveDirectorsofuptoamaximumof1xbasicannualsalary,withdiscretiontoawarduptoamaximumof4xbasicannualsalary,e.g.recruitmentofaDirectororto“buyout”awardsgrantedbyprioremployer.
TheschemerulesallowtheCommitteediscretiontochangetheperformancetargetsandtheCommitteeshallbeentitledtoexerciseitsdiscretiontochangeperformancecriteriatotheextentthatitreflectsmarketpracticeand/ortheCommitteeconsidersalternativeperformancetargetstobemoreappropriatetothebusiness.
Designedtorewarddeliveryofshareholdervalueinthemedium-to-longterm.
Valueofgrantasamaximumpercentageofsalaryis100%ofbasicannualsalary,howeverinexceptionalcircumstancestheCommitteeretainsdiscretiontograntone-offawardsofavalueupto400%ofbasicannualsalary.
TheperformancetargetsaresetannuallybytheCommitteeanddisclosedannuallyintheDirectors’remunerationreportprovidedtheyarenotdeemedtobecommerciallysensitive.
Awardsvestattheendofthethree-yearperformanceperiod,whentheCommitteewillassessperformanceagainstthetargetssetanddetermine,initsabsolutediscretion,theoveralllevelofvestingoftheaward.
ExecutiveDirectorsreceivedanawardof100%ofsalaryinNovember2017.
All-employee share plans TheCompanyoperatesaShareIncentivePlan(“SIP”)intheUKwhichqualifiesfortaxbenefits.
TheCommitteeretainsdiscretiontoallowexecutiveDirectorstoparticipateintheSIPonthesametermsasotheremployees.
Toencourageshareownershipbyemployeesandaligntheirinterestswiththoseoftheshareholders.
Themaximumparticipationlevelsforall-employeeshareplanswillbethelimitssetoutinUKtaxlegislation.
Notapplicable. Nochange.
Non-executive Directors
Element Operation Objective & link to strategy Max. potential value Performance measures Changes for 2018Fees1 Non-executiveDirectors’feesarereviewedeverythreeyearsandpaidin12monthlyinstalments. Reflectsthetimecommitmentandresponsibilitiesoftheroles. Chairman:£120,000
DeputyChairman:£65,000Othernon-executiveDirectors:£40,000Additionalfeespayable:ChairmanofCommittee:£5,000SeniorindependentDirector:£5,000MemberofCommittee:Nil
Notapplicable. TheChairman’sfeewillincreaseto£120,000from1October2017.
SubjecttoshareholderapprovalattheAGMinFebruary2018thefollowingfurtherchangesareproposed:
1.Anincreaseinthebasefeefornon-executiveDirectorsby£5,000to£45,000effectivefrom1February2018onwards.
2.Anadditionalfeeof£7,500fortheroleofSeniorIndependentDirector(increasedfrom£5,000)and£5,000foreachroleasChairmanofeitherRemunerationorAuditCommittee.
Notes to the table1.Feesarepaidatastandardannualratetoreflectthetime,commitmentandresponsibilitiesoftheroles,withadditionalfeespaidtothosewhochairBoardCommitteestoreflecttheiradditional
responsibilities.Separately,theBoardsetsthefeepayabletotheChairmanoftheBoard.CurrentlyadditionalfeesforchairingaCommitteeapplyonlyonce,regardlessofthenumberofCommitteesofwhichanon-executiveDirectorisChairman.SubjecttoshareholderapprovalitisproposedthatthisisamendedsothatafeeispayableforeachChairmanroleheld.Non-executiveDirectorsarenotincludedinanyperformance-relatedbonus,shareincentiveschemesorpensionarrangements.
Notes to the table1. Performance-relatedbonustargets:TheperformancetargetsaredeterminedannuallybytheCommitteeandaredesignedtoalignexecutiveDirectors’interestswiththoseoftheCompany’s
shareholdersandtorewardgoodperformancebytheCompany.FinancialtargetsaresetbyreferencetotheCompany’sbudgetfortherelevantfinancialyear,andindividualperformancetargetsaresetbyreferencetotheCompany’sstrategyandgoalsfortherelevantfinancialyear.Thetargetsforthefinancialyearto30September2018arenotdisclosedhereduetotheircommercialsensitivity.
2. PSPperformancetargets:AdditionaldetailsoftheperformancecriteriaattachingtoPSPawardsgrantedtodatearesetoutonpage31.
40Annual Report and Accounts 2017C
orporate Governance
Corporate G
overnance
Remuneration table
Executive Directors
Element Operation Objective & link to strategy Max. potential value Performance measures Changes for 2018Basic annual salary Basicannualsalaryispaidin12equalmonthlyinstalmentsduringtheyearandisreviewedannually.
Whenassessingthelevelofbasicannualsalary,theCommitteetakesintoaccountperformance,marketconditions,remunerationofequivalentroleswithincomparablecompanies,thesizeandscaleofthebusinessandpayintheGroupasawhole.
TheCommitteeretainsdiscretiontopayasalarysupplementtoanexecutiveDirectorforfulfillingtheroleofanotherhigherpaidexecutiveDirectorwhenthatexecutiveDirectorleavestheCompany.
Torecruit,retainandmotivateindividualsofhighcalibre,andreflecttheskills,experienceandcontributionoftherelevantDirector.
Salaryincreasesshallgenerallyreflectmarketconditions,performanceoftheindividual,newchallengesoranewstrategicdirectionforthebusiness.Similarly,theCommitteemayapproveahigherbasicannualsalaryforanewlyappointedDirectorthantheoutgoingDirectorreceivedwhereitconsidersitnecessaryinordertorecruitanindividualofsufficientcalibrefortherole.
Notapplicable. BasicannualsalaryofChiefExecutiveincreasedto£400,000andChiefFinancialOfficerto£275,000(bothwitheffectfrom1October2017)from£350,000and£250,000respectively.
Benefits CurrentbenefitsavailabletoexecutiveDirectorsarecarallowance,permanenthealthinsurance,healthcareandlifeassurance.AdditionalbenefitsmaybeofferedifapplicableandsubjecttothemaximumvalueofallbenefitsnotexceedingthemaximumpotentialvaluesetbytheCommittee.
Toensurebroadcompetitivenesswithmarketpractice. TheCompanyshallcontinuetoprovidebenefitstoexecutiveDirectorsatsimilarlevels;whereinsurancecoverisprovidedbytheCompany,thatcovershallbemaintainedatasimilarlevelandtheCompanyshallpaythethencurrentmarketratesforsuchcover.
Notapplicable. TotalbenefitsprovidedtotheChiefExecutiveincreasedto£17,000andtotheChiefFinancialOfficerto£15,000(bothwitheffectfrom1October2017).
Pension TheCompanyshallmakeacontributionuptoamaximumpercentageofbasicannualsalary. Toensurebroadcompetitivenesswithmarketpractice. Totalcostannuallyshallnotexceed15%ofbasicannualsalary. Notapplicable. Employers’pensioncontributionsincreasedto15%forboththeChiefExecutiveandChiefFinancialOfficer(from12.5%and6%respectively).
Performance- related bonus1
TargetsaresetannuallybytheCommittee,basedon(i)financialperformanceagainstbudgetand,attheCommittee’sdiscretion,(ii)individualsubjectiveperformancetargetswhicharedeterminedforeachexecutiveDirector.
TheCommitteeretainsdiscretiontosetthefinancialtargetsbasedontheperformanceduringthepreviousfinancialyearandthebudgetfortheforthcomingyear,andperformanceoftheindividualagainsttheirspecificsubjectiveperformancetargets.
DesignedtorewarddeliveryofshareholdervalueandimplementationoftheGroup’sstrategy.
ForboththeChiefExecutiveandChiefFinancialOfficertheCommitteeretainsdiscretiontovarythepotentialtotalmaximumbonus,theweightingofthevariableelementsandthestretchofthetargetsinordertoincentiviseorrecruitexecutiveDirectors,providedthatthetotalmaximumpotentialbonusforanyoneyearshallnotexceed150%ofbasicannualsalaryandthatthemaximumbonusshallonlybepayableforoverperformance.
Theperformancemeasures,relativeweightingsandtargetsaresetannuallybytheCommittee.DetailsofthemeasuresandtheirrelativeweightingsaredisclosedannuallyintheDirectors’remunerationreportwiththetargetsdisclosedprovidedtheyarenotdeemedtobecommerciallysensitive.TheCommitteeretainsdiscretiontoadjustthetargetsifeventsoccurwhichleadittoconcludethattheyarenolongerappropriate.
TheCommitteealsoretainsdiscretiontoadjusttheoutcomeoftheperformance-relatedbonusforanyperformancemeasureifitconsidersthattobeappropriate.
Nochange.
Long term share-based incentive2
AnnualawardstoexecutiveDirectorsofuptoamaximumof1xbasicannualsalary,withdiscretiontoawarduptoamaximumof4xbasicannualsalary,e.g.recruitmentofaDirectororto“buyout”awardsgrantedbyprioremployer.
TheschemerulesallowtheCommitteediscretiontochangetheperformancetargetsandtheCommitteeshallbeentitledtoexerciseitsdiscretiontochangeperformancecriteriatotheextentthatitreflectsmarketpracticeand/ortheCommitteeconsidersalternativeperformancetargetstobemoreappropriatetothebusiness.
Designedtorewarddeliveryofshareholdervalueinthemedium-to-longterm.
Valueofgrantasamaximumpercentageofsalaryis100%ofbasicannualsalary,howeverinexceptionalcircumstancestheCommitteeretainsdiscretiontograntone-offawardsofavalueupto400%ofbasicannualsalary.
TheperformancetargetsaresetannuallybytheCommitteeanddisclosedannuallyintheDirectors’remunerationreportprovidedtheyarenotdeemedtobecommerciallysensitive.
Awardsvestattheendofthethree-yearperformanceperiod,whentheCommitteewillassessperformanceagainstthetargetssetanddetermine,initsabsolutediscretion,theoveralllevelofvestingoftheaward.
ExecutiveDirectorsreceivedanawardof100%ofsalaryinNovember2017.
All-employee share plans TheCompanyoperatesaShareIncentivePlan(“SIP”)intheUKwhichqualifiesfortaxbenefits.
TheCommitteeretainsdiscretiontoallowexecutiveDirectorstoparticipateintheSIPonthesametermsasotheremployees.
Toencourageshareownershipbyemployeesandaligntheirinterestswiththoseoftheshareholders.
Themaximumparticipationlevelsforall-employeeshareplanswillbethelimitssetoutinUKtaxlegislation.
Notapplicable. Nochange.
Non-executive Directors
Element Operation Objective & link to strategy Max. potential value Performance measures Changes for 2018Fees1 Non-executiveDirectors’feesarereviewedeverythreeyearsandpaidin12monthlyinstalments. Reflectsthetimecommitmentandresponsibilitiesoftheroles. Chairman:£120,000
DeputyChairman:£65,000Othernon-executiveDirectors:£40,000Additionalfeespayable:ChairmanofCommittee:£5,000SeniorindependentDirector:£5,000MemberofCommittee:Nil
Notapplicable. TheChairman’sfeewillincreaseto£120,000from1October2017.
SubjecttoshareholderapprovalattheAGMinFebruary2018thefollowingfurtherchangesareproposed:
1.Anincreaseinthebasefeefornon-executiveDirectorsby£5,000to£45,000effectivefrom1February2018onwards.
2.Anadditionalfeeof£7,500fortheroleofSeniorIndependentDirector(increasedfrom£5,000)and£5,000foreachroleasChairmanofeitherRemunerationorAuditCommittee.
Notes to the table1.Feesarepaidatastandardannualratetoreflectthetime,commitmentandresponsibilitiesoftheroles,withadditionalfeespaidtothosewhochairBoardCommitteestoreflecttheiradditional
responsibilities.Separately,theBoardsetsthefeepayabletotheChairmanoftheBoard.CurrentlyadditionalfeesforchairingaCommitteeapplyonlyonce,regardlessofthenumberofCommitteesofwhichanon-executiveDirectorisChairman.SubjecttoshareholderapprovalitisproposedthatthisisamendedsothatafeeispayableforeachChairmanroleheld.Non-executiveDirectorsarenotincludedinanyperformance-relatedbonus,shareincentiveschemesorpensionarrangements.
3. AllemployeesoftheGroupreceiveabasicannualsalary,benefits,pensionandannualbonus(subjecttofinancialperformance).Themaximumvalueofremunerationpackagesisbasedontheseniorityandresponsibilitiesoftherelevantrole.DiscretionaryshareincentivesarenotawardedtoemployeesotherthanexecutiveDirectorsandcertainkeyindividuals,howevertheCompanyintroducedaShareIncentivePlanin2015inordertoencourageactiveemployeeshareownership.
41 Future plc
Directors’ remuneration report
Fortheyearended30September2017
Consideration of employee conditions within the Group
TheCommitteetakesintoconsiderationthepayandconditionsofemployeesacrosstheGroupwhendeterminingremunerationforexecutiveDirectors.
Allemployeesreceiveabasicannualsalary,benefitsandanentitlementtoreceiveabonus,subjecttofinancialperformance,undertheGroup’sprofitpoolbonusscheme.
DiscretionaryshareincentiveawardsaregrantedtocertainkeyemployeesunderthePSPandDABSschemes,thedetailsofwhicharesetoutatnote24onpage81.During2015theGroupintroducedaShareIncentivePlantoreplacetheSharesavescheme,inordertoencourageactiveemployeeshareownership.
Consideration of shareholder views
TheRemunerationCommitteeconsidersshareholderfeedbackreceivedaspartofanydiscussionswithshareholdersandconsultswithshareholdersonspecificmattersasandwhenappropriate.
ApprovedbytheBoardofDirectorsandsignedonitsbehalfby:
Peter Allen(onbehalfoftheRemunerationCommittee)8December2017
42AnnualReportandAccounts2017C
orporate Governance
Corporate G
overnance
43 Future plcFuture plc
Independent auditors’ report Independent auditors’ report to
the members of Future plc
Report on the audit of the financial statements
Opinion
Inouropinion,Futureplc’sGroupfinancialstatementsandCompanyfinancialstatements(the“financialstatements”):
• giveatrueandfairviewofthestateoftheGroup’sandoftheCompany’saffairsasat30September2017andoftheGroup’sprofitandtheGroup’sandtheCompany’scashflowsfortheyearthenended;
• havebeenproperlypreparedinaccordancewithIFRSsasadoptedbytheEuropeanUnionand,asregardstheCompany’sfinancialstatements,asappliedinaccordancewiththeprovisionsoftheCompaniesAct2006;and
• havebeenpreparedinaccordancewiththerequirementsoftheCompaniesAct2006and,asregardstheGroupfinancialstatements,Article4oftheIASRegulation.
Wehaveauditedthefinancialstatements,includedwithintheAnnualReportandAccounts(the“AnnualReport”),whichcomprise:theConsolidatedandCompanybalancesheetsasat30September2017;theConsolidatedincomestatement,theConsolidatedstatementofcomprehensiveincome,theConsolidatedandCompanycashflowsstatements,andtheConsolidatedandCompanystatementsofchangesinequityfortheyearthenended;theAccountingPolicies;andthenotestothefinancialstatements.
OuropinionisconsistentwithourreportingtotheAuditCommittee.
Basis for opinion
WeconductedourauditinaccordancewithInternationalStandardsonAuditing(UK)(“ISAs(UK)”)andapplicablelaw.OurresponsibilitiesunderISAs(UK)arefurtherdescribedintheAuditors’responsibilitiesfortheauditofthefinancialstatementssectionofourreport.Webelievethattheauditevidencewehaveobtainedissufficientandappropriatetoprovideabasisforouropinion.
IndependenceWeremainedindependentoftheGroupinaccordancewiththeethicalrequirementsthatarerelevanttoourauditofthefinancialstatementsintheUK,whichincludestheFRC’sEthicalStandard,asapplicabletolistedpublicinterestentities,andwehavefulfilledourotherethicalresponsibilitiesinaccordancewiththeserequirements.
Tothebestofourknowledgeandbelief,wedeclarethatnon-auditservicesprohibitedbytheFRC’sEthicalStandardwerenotprovidedtotheGrouportheCompany.
Otherthanthosedisclosedinnote3tothefinancialstatements,wehaveprovidednonon-auditservicestotheGrouportheCompanyintheperiodfrom1October2016to30September2017.
Our audit approach
The scope of our audit Aspartofdesigningouraudit,wedeterminedmaterialityandassessedtherisksofmaterialmisstatementinthefinancialstatements.Inparticular,welookedatwheretheDirectorsmadesubjectivejudgements,forexampleinrespectofsignificantaccountingestimatesthatinvolvedmakingassumptionsandconsideringfutureeventsthatareinherentlyuncertain.Asinallofourauditswealsoaddressedtheriskofmanagementoverrideofinternalcontrols,includingevaluatingwhethertherewasevidenceofbiasbytheDirectorsthatrepresentedariskofmaterialmisstatementduetofraud.
Key audit matters Keyauditmattersarethosemattersthat,intheauditors’professionaljudgement,wereofmostsignificanceintheauditofthefinancialstatementsofthecurrentperiodandincludethemostsignificantassessedrisksofmaterialmisstatement(whetherornotduetofraud)identifiedbytheauditors,includingthosewhichhadthegreatesteffecton:theoverallauditstrategy;theallocationofresourcesintheaudit;anddirectingtheeffortsoftheengagementteam.Thesematters,andanycommentswemakeontheresultsofourproceduresthereon,wereaddressedinthecontextofourauditofthefinancialstatementsasawhole,andinformingouropinionthereon,andwedonotprovideaseparateopiniononthesematters.Thisisnotacompletelistofallrisksidentifiedbyouraudit.
44Annual Report and Accounts 2017C
orporate Governance
Key audit matter How our audit addressed the key audit matter
The measurement of Magazine newsstand revenue (£26.9 million (2016: £16.9 million) within the Magazine segment) Refer to note 1 for further information
Magazinenewsstandrevenueisrecognisedatthedatethattherelatedpublicationgoesonsale.Theamountofrevenuerecognisedisbasedonthenumberofissuesprintedandanestimateofthenumberofreturns.
WefocusedonthisareabecauseoftheinherentsubjectivityinestimatingthenumberofreturnsandbecauseofthesignificanceofMagazinerevenuetotheGroup’sreportedresult.ChangestotheestimatednumberofreturnscanhaveamaterialimpactonMagazinerevenue.
Group
Weassessedwhethertheestimatednumberofreturnswasreasonablebycomparingtheestimatetohistoricaltrendsandbyconsideringtheaccuracyofmanagement’sforecastinginthepast.
Weconsideredwhethertherehadbeenanychangetothetypesofmagazinessoldorchangestothemarketenvironmentwhichcouldincreasethelevelofuncertaintyintheestimate.
Wealsoexaminedthenumberofreturnsprocessedaftertheyear-endandcomparedthatdatatothelevelofreturnsforecastbymanagement.
Basedontheworkperformed,wefoundthatthemethodsandassumptionsusedtoestimatethenumberofreturnswereappropriateandthattheestimatewassupportedbytheevidenceobtained.
The valuation of goodwill (£65.8 million (2016: £29.5 million))Refer to note 11 for further information
Goodwillisanintangibleassetthatarisesontheacquisitionofabusinessandreflectstheportionoftheconsiderationpaidwhichcannotbeallocatedtoseparatelyidentifiableacquiredassets.Goodwillisnotamortisedbuttestedforimpairmentatleastonceayearormorefrequentlywhenthereisanindicationthatitmaybeimpaired.
Wefocusedonthisareabecausegoodwillismaterialtotheconsolidatedfinancialstatementsandtheassumptionsusedintheimpairmentassessmentareinherentlysubjective.Inparticular,theassessmentishighlysensitivetochangesinforecastearningsbeforeinterest,tax,depreciation,amortisation,impairmentandexceptionalitems(EBITDA)margins.
Group
Ourworktoaddressthevaluationofgoodwillwassupportedbyourin-housevaluationexperts,andincludedthefollowingprocedures:
•WeassessedwhethertheforecastEBITDAmarginswerereasonablebycomparingthemtohistoricaltrendsandbyconsideringtheaccuracyofmanagement’sforecastinginthepast.Weconsideredwhethertherehadbeenanychangestothebusinessortothemarketenvironmentwhichcouldincreasethelevelofuncertaintyintheforecast.
•WeperformedsensitivitiestoconfirmthattheforecastEBITDAmargincontinuestoremainthekeyassumptiontowhichtheimpairmentassessmentismostsensitive.WealsoconsideredtowhatleveltheEBITDAmarginwouldneedtodeterioratetoinordertoindicateimpairment.
•Weusedourin-housevaluationexpertstocomparethediscountratetoourownestimateoftheGroup’scostofcapital,adjustedfortheeffectsoftax.
•Wealsoassessedthereasonablenessoftheassumedlong-termgrowthrateinlightofexternalgrowthforecastsfortheUKeconomy.
Basedontheworkperformed,wefoundthatthemethodsusedintheimpairmentassessmentwereappropriateandthattheconclusionsreachedweresupportedbytheevidenceobtained.
The classification of exceptional items (£3.7 million (2016: £3.5 million)) Refer to note 4 for further information
TheGroup’saccountingpolicyistoreportitemsofincomeandexpensesasexceptionalitemswheretheyrelatetoaneventthatfallsoutsidetheordinaryactivitiesofthebusinessandwhereindividuallyorinaggregatetheyhaveamaterialimpactonthefinancialstatements.
Exceptionalitemsprimarilyconsistedofredundancyandacquisitionrelatedcostsassociatedwiththerestructuringofthebusinessandothertransformationalactivity.Wefocusedonthisareabecauseexceptionalitemsarematerialtotheconsolidatedfinancialstatementsandthereisadegreeofjudgementintheirclassification.
Group
Wetestedtheclassificationofexceptionalitemsby;
•examiningsupportinginformationsuchasinvoices;•checkingthatredundancycostsagreedtothepaymentsmadetothoseemployees;and•confirmingthatthosepaymentsweredescribedasredundancypaymentsinwrittencommunicationswiththoseemployees.
Redundancyandacquisitionrelatedcostshavebeenincurredinboththecurrentyearandinprioryearssowechallengedmanagementastowhethersuchcostswereexceptionalinnature.Management’sviewwasthatwhilstthesechargeshavepersistedin2017,theyhavearisenfromasignificant,ongoingrestructuringandtransformationprogramme,assetoutinfurtherdetailintheChiefExecutive’sReviewonpage3.
Followingcompletionofthisprogrammethesechargeswillnotrecur.Giventhescaleoftherestructuringandtransformationprogramme,andthatonlyredundancyandacquisitioncostsspecifictoitarebeingseparated,weacceptedthistreatmentforthecurrentyear.
Fromtheevidenceobtained,weconcurredwithmanagement’sassessmenttoclassifyanddisclosethesecostsasseparatelyreportedexceptionalitems,inlinewiththedisclosedaccountingpolicy.
Corporate G
overnance
45 Future plc
Key audit matter How our audit addressed the key audit matter
The accounting for the acquisition of Imagine Publishing and the home interest division of Centaur Media Refer to note 29 for further information
On21October2016,theGroupcompleteditsacquisitionofImaginePublishingandon1August2017itsacquisitionofthehomeinterestdivisionofCentaurMedia.Wefocusedonthesetransactionsbecausetheyarematerialtotheconsolidatedfinancialstatementsandbecausethereisadegreeofjudgementintheidentificationandvaluationoftheassetsandliabilitiesacquired.
Group and parent
Ourworkovertheaccountingfortheacquisitionincludedthefollowingprocedures:
•Weagreedthecashconsiderationpaidtosupportingdocumentation.
•Wetestedthefairvalueadjustmentstotheassetsandliabilitiesacquiredand,basedonourunderstandingoftheacquiredbusiness,assessedwhetherallassetsandliabilitieshadbeenappropriatelyidentifiedandclassified.Wealsoconsideredanyrequiredalignmentofaccountingpoliciesandvaluationmethodologies.
•Were-performedthecalculationofgoodwill.
•Weassessedthesufficiencyofthedisclosuresrelatingtotheacquisition,takingintoaccounttherequirementsofrelevantfinancialreportingstandardsandtestedthecompletenessandaccuracyofthosedisclosures.
Basedontheworkperformed,wefoundthattheaccountingfortheacquisitionwasappropriateandthatthefairvalueoftheacquiredassetsandliabilitieswassupportedbytheevidenceobtained.
How we tailored the audit scope
Wetailoredthescopeofouraudittoensurethatweperformedenoughworktobeabletogiveanopiniononthefinancialstatementsasawhole,takingintoaccountthestructureoftheGroupandtheCompany,theaccountingprocessesandcontrols,andtheindustryinwhichtheyoperate.
TheGroupisstructuredalongtwogeographicallines,beingtheUKandUS.TheGroup’sfinancialstatementsconsistofaconsolidationof23statutoryentities;buttheGroupprimarilyoperatesthroughtwomaintradingentities;FuturePublishingLimitedandFutureUS,Inc.
InestablishingtheoverallapproachtotheGroupaudit,wedeterminethetypeofworkthatweneededtoperformateachentitytobeabletoconcludewhethersufficientappropriateauditevidencehadbeenobtainedasabasisforouropinionontheGroupfinancialstatementsasawhole.
Inourview,thetwomaintradingentitiesrequiredafullscopeauditoftheircompletefinancialinformation,duetotheirsizeandtheirriskcharacteristics.ThesewereauditedbytheUKGroupengagementteam.This,togetherwithourauditoftheparentholdingCompanyandtestingoftheconsolidationatGrouplevel,gaveustheevidenceweneededforouropinionontheGroupfinancialstatementsasawholeandaccountedfor94%oftheGroup’srevenue,80%oftheGroup’sreportedprofitbeforetaxand76%oftheGroup’snetassets.
Independent auditors’ report
46Annual Report and Accounts 2017C
orporate Governance
Materiality
Thescopeofourauditwasinfluencedbyourapplicationofmateriality.Wesetcertainquantitativethresholdsformateriality.These,togetherwithqualitativeconsiderations,helpedustodeterminethescopeofourauditandthenature,timingandextentofourauditproceduresontheindividualfinancialstatementlineitemsanddisclosuresandinevaluatingtheeffectofmisstatements,bothindividuallyandinaggregateonthefinancialstatementsasawhole.
Basedonourprofessionaljudgement,wedeterminedmaterialityforthefinancialstatementsasawholeasfollows:
Group financial statements Company financial statements
Overall materiality £840,000 £820,000
How we determined it 1% of revenue 0.86%oftotalassets
Rationale for benchmark applied
InarrivingatthisjudgementweconsideredthefinancialmeasureswhichwebelievedtobemostrelevanttotheshareholdersinassessingtheperformanceoftheGroup.
Profitbeforetaxisagenerallyacceptedbenchmarkforaprofitorientatedbusiness.However,duetorestructuringandcontinuedtransformationalactivity,theGrouphascontinuedtoreportlossesandtherehasbeenadegreeofvolatilityinthismeasure.Weconcludedthat,inisolation,thismetricdidnotappropriatelyreflectthescaleoftheGroup’songoingoperationsoritsunderlyingperformance.
Asaresult,revenuewasconsideredtobethemostappropriatemetric,butinquantifyingmaterialitywehavealsohadregardtootherperformancemeasuressuchasoperatingprofitandtheimpactofexceptionalitems.
Asaholdingcompany,theentityisnotconsideredtobeprofitorientated.Insuchcircumstances,totalassetsisagenerallyacceptedbenchmark.
ForeachcomponentinthescopeofourGroupaudit,weallocatedanequalmaterialityof£756,000,whichwaslessthanouroverallGroupmateriality.CertaincomponentswereauditedtoalocalstatutoryauditmaterialitythatwasalsolessthanouroverallGroupmateriality.
WeagreedwiththeAuditCommitteethatwewouldreporttothemmisstatementsidentifiedduringourauditabove£42,000(Groupaudit)and£40,000(Companyaudit)aswellasmisstatementsbelowthoseamountsthat,inourview,warrantedreportingforqualitativereasons.
Conclusions relating to going concern
WehavenothingtoreportinrespectofthefollowingmattersinrelationtowhichISAs(UK)requireustoreporttoyouwhen:
• theDirectors’useofthegoingconcernbasisofaccountinginthepreparationofthefinancialstatementsisnotappropriate;or
• theDirectorshavenotdisclosedinthefinancialstatementsanyidentifiedmaterialuncertaintiesthatmaycastsignificantdoubtabouttheGroup’sandCompany’sabilitytocontinuetoadoptthegoingconcernbasisofaccountingforaperiodofatleasttwelvemonthsfromthedatewhenthefinancialstatementsareauthorisedforissue.
However,becausenotallfutureeventsorconditionscanbepredicted,thisstatementisnotaguaranteeastotheGroup’sandCompany’sabilitytocontinueasagoingconcern.
47 Future plc
Reporting on other information
TheotherinformationcomprisesalloftheinformationintheAnnualReportotherthanthefinancialstatementsandourauditors’reportthereon.TheDirectorsareresponsiblefortheotherinformation.Ouropiniononthefinancialstatementsdoesnotcovertheotherinformationand,accordingly,wedonotexpressanauditopinionor,excepttotheextentotherwiseexplicitlystatedinthisreport,anyformofassurancethereon.
Inconnectionwithourauditofthefinancialstatements,ourresponsibilityistoreadtheotherinformationand,indoingso,considerwhethertheotherinformationismateriallyinconsistentwiththefinancialstatementsorourknowledgeobtainedintheaudit,orotherwiseappearstobemateriallymisstated.Ifweidentifyanapparentmaterialinconsistencyormaterialmisstatement,wearerequiredtoperformprocedurestoconcludewhetherthereisamaterialmisstatementofthefinancialstatementsoramaterialmisstatementoftheotherinformation.If,basedontheworkwehaveperformed,weconcludethatthereisamaterialmisstatementofthisotherinformation,wearerequiredtoreportthatfact.Wehavenothingtoreportbasedontheseresponsibilities.
WithrespecttotheStrategicReportandDirectors’Report,wealsoconsideredwhetherthedisclosuresrequiredbytheUKCompaniesAct2006havebeenincluded.
Basedontheresponsibilitiesdescribedaboveandourworkundertakeninthecourseoftheaudit,theCompaniesAct2006andISAs(UK)requireusalsotoreportcertainopinionsandmattersasdescribedbelow.
Strategic Report and Directors’ ReportInouropinion,basedontheworkundertakeninthecourseoftheaudit,theinformationgivenintheStrategicReportandDirectors’Reportfortheyearended30September2017isconsistentwiththefinancialstatementsandhasbeenpreparedinaccordancewithapplicablelegalrequirements.
InlightoftheknowledgeandunderstandingoftheGroupandCompanyandtheirenvironmentobtainedinthecourseoftheaudit,wedidnotidentifyanymaterialmisstatementsintheStrategicReportandDirectors’Report.
Directors’ RemunerationInouropinion,thepartoftheDirectors’RemunerationReporttobeauditedhasbeenproperlypreparedinaccordancewiththeCompaniesAct2006.
Responsibilities for the financial statements and the audit
Responsibilities of the Directors for the financial statements
AsexplainedmorefullyintheStatementofDirectors’responsibilitiessetoutonpage22,theDirectorsareresponsibleforthepreparationofthefinancialstatementsinaccordancewiththeapplicableframeworkandforbeingsatisfiedthattheygiveatrueandfairview.TheDirectorsarealsoresponsibleforsuchinternalcontrolastheydetermineisnecessarytoenablethepreparationoffinancialstatementsthatarefreefrommaterialmisstatement,whetherduetofraudorerror.
Inpreparingthefinancialstatements,theDirectorsareresponsibleforassessingtheGroup’sandtheCompany’sabilitytocontinueasagoingconcern,disclosingasapplicable,mattersrelatedtogoingconcernandusingthegoingconcernbasisofaccountingunlesstheDirectorseitherintendtoliquidatetheGrouportheCompanyortoceaseoperations,orhavenorealisticalternativebuttodoso.
Auditors’ responsibilities for the audit of the financial statements
Ourobjectivesaretoobtainreasonableassuranceaboutwhetherthefinancialstatementsasawholearefreefrommaterialmisstatement,whetherduetofraudorerror,andtoissueanauditors’reportthatincludesouropinion.Reasonableassuranceisahighlevelofassurance,butisnotaguaranteethatanauditconductedinaccordancewithISAs(UK)willalwaysdetectamaterialmisstatementwhenitexists.Misstatementscanarisefromfraudorerrorandareconsideredmaterialif,individuallyorinaggregate,theycouldreasonablybeexpectedtoinfluencetheeconomicdecisionsofuserstakenonthebasisofthesefinancialstatements.
AfurtherdescriptionofourresponsibilitiesfortheauditofthefinancialstatementsislocatedontheFRC’swebsiteat:www.frc.org.uk/auditorsresponsibilities.Thisdescriptionformspartofourauditors’report.
Use of this report
Thisreport,includingtheopinions,hasbeenpreparedforandonlyfortheCompany’smembersasabodyinaccordancewithChapter3ofPart16oftheCompaniesAct2006andfornootherpurpose.Wedonot,ingivingtheseopinions,acceptorassumeresponsibilityforanyotherpurposeortoanyotherpersontowhomthisreportisshownorintowhosehandsitmaycomesavewhereexpresslyagreedbyourpriorconsentinwriting.
Independent auditors’ report
48Annual Report and Accounts 2017C
orporate Governance
Other required reporting
Companies Act 2006 exception reporting
UndertheCompaniesAct2006wearerequiredtoreporttoyouif,inouropinion:
• wehavenotreceivedalltheinformationandexplanationswerequireforouraudit;or
• adequateaccountingrecordshavenotbeenkeptbytheCompany,orreturnsadequateforouraudithavenotbeenreceivedfrombranchesnotvisitedbyus;or
• certaindisclosuresofDirectors’remunerationspecifiedbylawarenotmade;or
• theCompanyfinancialstatementsandthepartoftheDirectors’RemunerationReporttobeauditedarenotinagreementwiththeaccountingrecordsandreturns.
Wehavenoexceptionstoreportarisingfromthisresponsibility.
Appointment
FollowingtherecommendationoftheAuditCommittee,wewereappointedbythememberson11May1999toauditthefinancialstatementsfortheyearended31December1999andsubsequentfinancialperiods.Theperiodoftotaluninterruptedengagementis19years,coveringtheyearsended31December1999to30September2017.
ColinBates(SeniorStatutoryAuditor)forandonbehalfofPricewaterhouseCoopersLLPCharteredAccountantsandStatutoryAuditorsBristol8December2017
49 Future plc
Contents
Consolidatedincomestatement 50
Consolidatedstatementof 50comprehensiveincome
Consolidatedstatementof 51changesinequity Companystatementof 51changesinequity
Consolidatedbalancesheet 52
Companybalancesheet 53
ConsolidatedandCompany 54cashflowstatements
NotestotheConsolidatedand 55Companycashflowstatements
Accountingpolicies 56
Notestothefinancialstatements 60
Financial statementsFinancial statements
50AnnualReportandAccounts2017Financial Statem
ents
Consolidated income statement fortheyearended30September2017
Note
Adjusted results
£m
2017
Adjusting items
£m
Statutory results
£m
Adjustedresults
£m
2016
Adjustingitems£m
Statutoryresults
£m
Continuing operationsRevenue 1 84.4 - 84.4 59.0 - 59.0Netoperatingexpenses 2 (75.5) (8.1) (83.6) (56.2) (17.0) (73.2)Operating profit/(loss) 8.9 (8.1) 0.8 2.8 (17.0) (14.2)Finance income 6 0.1 - 0.1 - - -Financecosts 6 (0.7) - (0.7) (0.5) (0.2) (0.7)Netfinancecosts (0.6) - (0.6) (0.5) (0.2) (0.7)Profit/(loss) before tax 1 8.3 (8.1) 0.2 2.3 (17.2) (14.9)Taxonprofit/(loss) 7 0.3 1.1 1.4 - 0.5 0.5Profit/(loss) for the year from continuing operations 8.6 (7.0) 1.6 2.3 (16.7) (14.4)Discontinued operations(Loss)/profitfortheyearfromdiscontinuedoperations - - - (0.1) 0.3 0.2Profit/(loss) for the year attributable to owners of the parent 8.6 (7.0) 1.6 2.2 (16.4) (14.2)
Earnings per 15p Ordinary share
Note
Adjusted resultspence
2017Adjusting
itemspence
Statutory resultspence
Adjustedresultspence
Restated2016*
Adjustingitems
pence
Statutoryresultspence
Basicearnings/(loss)pershare–TotalGroup 9 23.2 (18.9) 4.3 9.1 (67.9) (58.8)Dilutedearnings/(loss)pershare–TotalGroup 9 21.0 (17.1) 3.9 8.8 (67.6) (58.8)Basicearnings/(loss)pershare–Continuingoperations 9 23.2 (18.9) 4.3 9.5 (69.1) (59.6)Dilutedearnings/(loss)pershare–Continuingoperations 9 21.0 (17.1) 3.9 9.2 (68.8) (59.6)
* The prior year comparatives have been restated to reflect the 15:1 share consolidation completed on 2 February 2017.
AspermittedbytheexemptionunderSection408oftheCompaniesAct2006noCompanyincomestatementorstatementofcomprehensiveincomeispresented.
Consolidated statement of comprehensive incomefortheyearended30September2017
2017£m
2016£m
Profit/(loss) for the year 1.6 (14.2)Items that may be reclassified to the consolidated income statementContinuing operationsCurrencytranslationdifferences (0.2) 0.3Other comprehensive (loss)/income for the year from continuing operations (0.2) 0.3
Total comprehensive income/(loss) for the year attributable to continuing operations 1.4 (14.1)Total comprehensive income for the year attributable to discontinued operations - 0.2Total comprehensive income/(loss) for the year attributable to owners of the parent 1.4 (13.9)
Itemsinthestatementabovearedisclosednetoftax.
Financial Statements
51 Future plc
Consolidated statement of changes in equity fortheyearended30September2017
Group Note
Issuedshare
capital£m
Share premium account
£m
Merger reserve
£m
Treasury reserve
£m
Accumulated losses
£m
Total equity
£m
Balance at 1 October 2015 3.3 24.8 109.0 (0.3) (105.4) 31.4Loss for the year - - - - (14.2) (14.2)Currencytranslationdifferences - - - - 0.3 0.3Other comprehensive income for the year - - - - 0.3 0.3Total comprehensive loss for the year - - - - (13.9) (13.9)Sharecapitalissuedduringtheyear 0.4 2.8 - - - 3.2Shareschemes-Valueofemployees’services 5 - - - - 0.5 0.5Balance at 30 September 2016 3.7 27.6 109.0 (0.3) (118.8) 21.2Profit for the year - - - - 1.6 1.6Currencytranslationdifferences - - - - (0.2) (0.2)Other comprehensive loss for the year - - - - (0.2) (0.2)Total comprehensive income for the year - - - - 1.4 1.4Sharecapitalissuedduringtheyear 23 3.1 19.8 13.5 - - 36.4Shareschemes-Valueofemployees’services 5 - - - - 1.8 1.8-Deferredtaxonoptions 13 - - - - 0.5 0.5Balance at 30 September 2017 6.8 47.4 122.5 (0.3) (115.1) 61.3
Company statement of changes in equity fortheyearended30September2017
Company Note
Issuedshare
capital£m
Share premium account
£m
Merger reserve
£m
Retained earnings
£m
Total equity
£m
Balance at 1 October 2015 3.3 24.8 - 9.9 38.0Loss for the year - - - (6.4) (6.4)Total comprehensive loss for the year - - - (6.4) (6.4)Sharecapitalissuedduringtheyear 0.4 2.8 - - 3.2Shareschemes-Valueofemployees’services - - - 0.5 0.5Balance at 30 September 2016 3.7 27.6 - 4.0 35.3Loss for the year - - - (2.3) (2.3)Total comprehensive loss for the year - - - (2.3) (2.3)Sharecapitalissuedduringtheyear 23 3.1 19.8 13.5 - 36.4Shareschemes-Valueofemployees’services - - - 1.8 1.8-Deferredtaxonoptions 13 - - - 0.5 0.5Balance at 30 September 2017 6.8 47.4 13.5 4.0 71.7
Financial statements
52AnnualReportandAccounts2017Financial Statem
entsFinancial Statem
ents
Consolidated balance sheetasat30September2017
Note2017
£m2016£m
AssetsNon-current assetsProperty,plantandequipment 10 1.0 0.5Intangibleassets-goodwill 11 65.8 29.5Intangibleassets-other 11 26.5 3.7Investments 0.2 -Deferredtax 13 4.4 2.4Total non-current assets 97.9 36.1Current assetsInventories 14 0.7 0.4Corporationtaxrecoverable 0.1 0.1Tradeandotherreceivables 15 13.6 12.4Cashandcashequivalents 16 10.1 2.9Total current assets 24.5 15.8Total assets 122.4 51.9Equity and liabilitiesEquityIssuedsharecapital 23 6.8 3.7Sharepremiumaccount 25 47.4 27.6Mergerreserve 25 122.5 109.0Treasuryreserve 25 (0.3) (0.3)Accumulatedlosses (115.1) (118.8)Total equity 61.3 21.2Non-current liabilitiesFinancialliabilities-interest-bearingloansandborrowings 18 16.9 0.1Corporationtaxpayable - 2.6Deferredtax 13 4.6 0.9Provisions 20 2.6 1.5Othernon-currentliabilities 21 0.6 0.5Total non-current liabilities 24.7 5.6Current liabilitiesFinancialliabilities-interest-bearingloansandborrowings 18 3.2 2.3Financialliabilities-derivatives 19 0.1 -Tradeandotherpayables 17 29.9 21.4Corporationtaxpayable 3.2 1.4Total current liabilities 36.4 25.1Total liabilities 61.1 30.7Total equity and liabilities 122.4 51.9
Thefinancialstatementsonpages49to86wereapprovedbytheBoardofDirectorson8December2017andsignedonitsbehalfby:
Peter Allen Penny Ladkin-BrandChairman ChiefFinancialOfficer
53 Future plc
Company balance sheetasat30September2017
Note2017
£m2016£m
AssetsNon-current assetsInvestmentinGroupundertakings 12 19.5 1.0Deferredtax 13 0.8 -Total non-current assets 20.3 1.0Current assetsTradeandotherreceivables 15 74.4 43.5Cashandcashequivalents 16 0.7 -Total current assets 75.1 43.5Total assets 95.4 44.5Equity and liabilitiesEquityIssuedsharecapital 23 6.8 3.7Sharepremiumaccount 25 47.4 27.6Mergerreserve 25 13.5 -Retainedearnings 4.0 4.0Total equity 71.7 35.3Non-current liabilitiesFinancialliabilities-interest-bearingloansandborrowings 18 16.9 -Corporationtaxpayable - 2.6Total non-current liabilities 16.9 2.6Current liabilitiesFinancialliabilities-interest-bearingloansandborrowings 18 3.1 2.3Financialliabilities-non-interest-bearingoverdraft 18 - 1.0Financialliabilities-derivatives 19 0.1 -Tradeandotherpayables 17 0.9 2.4Corporationtaxpayable 2.7 0.9Total current liabilities 6.8 6.6Total liabilities 23.7 9.2Total equity and liabilities 95.4 44.5
Thefinancialstatementsonpages49to86wereapprovedbytheBoardofDirectorson8December2017andsignedonitsbehalfby:
Peter Allen Penny Ladkin-BrandChairman ChiefFinancialOfficer
FutureplcCompanyregistrationnumber:3757874
Financial statements
54AnnualReportandAccounts2017Financial Statem
ents
Consolidated and Company cash flow statementsfortheyearended30September2017
Group2017
£m
Company2017
£m
Group2016£m
Company2016£m
Cash flows from operating activitiesCashgeneratedfrom/(usedin)operations 12.0 (2.6) 3.1 (1.4)Taxreceived - - 0.1 -Interestpaid (0.6) (0.6) (0.4) (0.4)Taxpaid (1.4) (0.8) (0.8) (0.7)Net cash generated from/(used in) operating activities 10.0 (4.0) 2.0 (2.5)Cash flows from investing activitiesPurchaseofproperty,plantandequipment (0.6) - (0.2) -Purchaseofcomputersoftwareandwebsitedevelopment (1.2) - (1.7) -Purchaseofmagazinetitlesandevents (0.8) - (0.6) -Purchaseofsubsidiaryundertakings,netofcashacquired (31.8) - (0.3) -Disposalofmagazinetitlesandtrademarks 0.2 - - -Netmovementinamountsowedto/bysubsidiaries - (25.9) - 8.3Net cash (used in)/generated from investing activities (34.2) (25.9) (2.8) 8.3Cash flows from financing activitiesProceedsfromissueofOrdinarysharecapital 22.0 22.0 3.3 3.3Costsofshareissue (1.0) (1.0) (0.2) (0.2)Drawdownofbankloans 23.3 23.3 4.6 4.6Repaymentofbankloans (12.0) (12.0) (5.7) (5.7)Bankarrangementfees (0.7) (0.7) - -Repaymentoffinanceleases (0.1) - (0.1) -Net cash generated from financing activities 31.5 31.6 1.9 2.0Net increase in cash and cash equivalents 7.3 1.7 1.1 7.8Cashandcashequivalentsatbeginningofyear 2.9 (1.0) 1.6 (8.8)Exchangeadjustments (0.1) - 0.2 -Cash and cash equivalents at end of year 10.1 0.7 2.9 (1.0)Amountattributabletocontinuingoperations 10.1 0.7 2.9 (1.0)
Financial Statements
55 Future plc
Notes to the Consolidated and Company cash flow statementsfortheyearended30September2017
A. Cash generated from operationsThereconciliationofprofit/(loss)fortheyeartocashgeneratedfrom/(usedin)operationsissetoutbelow:
Group2017
£m
Company2017
£m
Group2016£m
Company2016£m
Profit/(loss)fortheyear–Continuingoperations 1.6 (2.3) (14.4) (6.4)–Discontinuedoperations - - 0.2 -Profit/(loss)fortheyear–TotalGroup 1.6 (2.3) (14.2) (6.4)Adjustmentsfor: Depreciationcharge 0.3 - 0.4 -Amortisationofintangibleassets 4.1 - 2.0 -Impairmentofintangibleassets - - 13.0 -Profitondisposalofmagazinetitlesandtrademarks - - (0.4) -Shareschemes-Valueofemployees’services 1.8 - 0.5 -ImpairmentofinvestmentinGroupundertakings - - - 131.4DividendreceivablefromGroupundertaking - (0.3) - (130.9)Netfinancecosts 0.6 0.6 0.7 2.9Tax(credit)/charge (1.4) 0.7 (0.5) 0.1Profit/(loss) before changes in working capital and provisions 7.0 (1.3) 1.5 (2.9)Movementinprovisions 1.0 - (0.6) -Decreaseininventories 0.1 - 0.1 -Decrease/(increase)intradeandotherreceivables 6.0 0.1 3.8 (0.1)(Decrease)/increaseintradeandotherpayables (2.1) (1.4) (1.7) 1.6Cash generated from/(used in) operations 12.0 (2.6) 3.1 (1.4)
B. Analysis of net cash/(debt)
Group
1 October 2016
£mCash flows
£mAcquisitions
£m
Finance leases entered into
£m
Other non-cash changes
£m
Exchange movements
£m
30 September 2017
£m
Cashandcashequivalents 2.9 5.6 1.7 - - (0.1) 10.1Debtduewithinoneyear (2.3) 6.0 (6.9) (0.1) 0.1 - (3.2)Debtdueaftermorethanoneyear (0.1) (17.2) - - 0.4 - (16.9)Net cash/(debt) 0.5 (5.6) (5.2) (0.1) 0.5 (0.1) (10.0)
Company
1 October 2016
£mCash flows
£mAcquisitions
£m
Other non-cash changes
£m
30 September 2017
£m
Cashandcashequivalents (1.0) 1.7 - - 0.7Debtduewithinoneyear (2.3) 6.0 (6.9) 0.1 (3.1)Debtdueaftermorethanoneyear - (17.3) - 0.4 (16.9)Net debt (3.3) (9.6) (6.9) 0.5 (19.3)
C. Reconciliation of movement in net cash/(debt)
Group2017
£m
Company2017
£m
Group2016£m
Company2016£m
Netcash/(debt)atstartofyear 0.5 (3.3) (1.8) (12.2)Increaseincashandcashequivalents 7.3 1.7 1.1 7.8Movementinborrowings (11.2) (11.3) 1.2 1.1Borrowingsacquiredwithsubsidiaries (6.9) (6.9) - -Financeleasesenteredinto (0.1) - (0.2) -Othernon-cashchanges 0.5 0.5 - -Exchangemovements (0.1) - 0.2 -Net (debt)/cash at end of year (10.0) (19.3) 0.5 (3.3)
Financial statements
56AnnualReportandAccounts2017Financial Statem
ents
Basis of preparation
Thesefinancialstatementshavebeenpreparedunderthehistoricalcostconvention,exceptforderivativefinancialinstrumentsandshareawardswhicharemeasuredatfairvalue.
Theprincipalaccountingpoliciesappliedinthepreparationoftheconsolidatedfinancialstatementspublishedinthis2017AnnualReportaresetoutonpages56to59.Thesepolicieshavebeenappliedconsistentlytoallyearspresented,unlessotherwisestated.
ThefinancialstatementsoftheGrouphavebeenpreparedinaccordancewithInternationalFinancialReportingStandards(IFRS)issuedbytheInternationalAccountingStandardsBoard(IASB)andtheIFRSInterpretationsCommittee’s(IFRSIC)interpretationsasadoptedbytheEuropeanUnion,applicableasat30September2017,andthosepartsoftheCompaniesAct2006applicabletocompaniesreportingunderIFRS.
ThegoingconcernbasishasbeenadoptedinpreparingthesefinancialstatementsasstatedbytheDirectorsonpage25.
Presentation of non-statutory measures
TheDirectorsbelievethatadjustedresultsandadjustedearningspershareprovideadditionalusefulinformationonthecoreoperationalperformanceoftheGrouptoshareholders,andreviewtheresultsoftheGrouponanadjustedbasisinternally.Theterm‘adjusted’isnotadefinedtermunderIFRSandmaynotthereforebecomparablewithsimilarlytitledprofitmeasurementsreportedbyothercompanies.Itisnotintendedtobeasubstitutefor,orsuperiorto,IFRSmeasurementsofprofit.
Adjustmentsaremadeinrespectof:
Share-basedpayments–share-basedpaymentexpensesorcredits,togetherwiththeassociatedsocialsecuritycosts,areexcludedfromtheadjustedresultsoftheGroupastheDirectorsbelievethatthevolatilityofthesechargescandistorttheuser’sviewofthecoretradingperformanceoftheGroup.Detailsofshare-basedpaymentsareshowninnote24.
Exceptionalitems–theGroupconsidersitemsofincomeandexpenseasexceptionalandexcludesthemfromtheadjustedresultswherethenatureoftheitem,oritssize,ismaterialandlikelytobenon-recurringinnature(inthemediumterm)soastoassisttheuserofthefinancialstatementstobetterunderstandtheresultsofthecoreoperationsoftheGroup.Detailsofexceptionalitemsareshowninnote4.
Amortisationofacquiredintangibleassets–theamortisationchargeforthoseintangibleassetsrecognisedonbusinesscombinationsisexcludedfromtheadjustedresultsoftheGroupsincetheyarenon-cashchargesarisingfromnon-tradinginvestmentactivities.Assuch,theyarenotconsideredreflectiveofthecoretradingperformanceoftheGroup.
Non-tradingforeignexchangelosses–certainotheritemsareexcludedfromadjustedresultswheretheirinclusiondistortsthecomparabilityofcoretradingresultsyear-on-year.
Thetaxrelatedtoadjustingitemsisthetax
effectoftheitemsabovethatareallowabledeductionsfortaxpurposescalculatedusingthestandardrateofcorporationtax.
Areconciliationofadjustedoperatingprofittoprofit/(loss)beforetaxisshownbelow:
2017 £m
2016£m
Adjustedoperatingprofit 8.9 2.8Adjustedfinancecosts (0.6) (0.5)Adjustedprofitbeforetax 8.3 2.3
Adjustingitems:Share-basedpayments (2.1) (0.5)Exceptionalitems (3.7) (3.5)
Amortisationofacquiredintangibles (2.3) -
Impairmentofintangibleassets - (13.0)
Non-tradingforeignexchangelosses - (0.2)
Profit/(loss) before tax 0.2 (14.9)
Areconciliationbetweenadjustedandstatutoryearningspersharemeasuresisshowninnote9.
Basis of consolidation
TheconsolidatedfinancialstatementsincorporatethefinancialstatementsofFutureplc(theCompany)anditssubsidiaryundertakings.SubsidiariesareallentitiescontrolledbytheGroup.ControlexistswhentheGroupiseitherexposedtoorhastherightstovariablereturnsfromitsinvolvementwiththeentityandhastheabilitytoaffectthosereturnsthroughitspowerovertheentity.SubsidiariesarefullyconsolidatedfromthedateonwhichcontrolistransferredtotheGroup.Theyaredeconsolidatedfromthedatethatcontrolceases.ThepurchasemethodofaccountingisusedtoaccountfortheacquisitionofsubsidiariesbytheGroup.
Thecostofanacquisitionismeasuredasthefairvalueoftheassetsgiven,equityinstrumentsissuedandliabilitiesincurredorassumedatthedateofexchange,andincludesthefairvalueofanyassetorliabilityresultingfromacontingentconsiderationarrangement.Acquisition-relatedcostsareexpensedasincurred.Identifiableassetsacquiredandliabilitiesandcontingentliabilitiesassumedinabusinesscombinationaremeasuredinitiallyattheirfairvaluesattheacquisitiondate.TheexcessofthecostofacquisitionoverthefairvalueoftheGroup’sshareoftheidentifiablenetassetsacquiredisrecordedasgoodwill.
Inter-companytransactions,balancesandunrealisedgainsontransactionsbetweenGroupcompaniesareeliminated.Unrealisedlossesarealsoeliminatedbutareconsideredanimpairmentindicatoroftheassettransferred.AccountingpoliciesofsubsidiarieshavebeenchangedwherenecessarytoensureconsistencywiththepoliciesadoptedbytheGroup.
Segment reporting
TheGroupisorganisedandarrangedprimarilybygeographicalsegment.OperatingsegmentsarereportedinamannerconsistentwiththeinternalreportingprovidedtotheChiefOperatingDecisionMakerswhoareconsideredtobetheexecutiveDirectorsofFutureplc.
Revenue recognition
Revenuefromthesaleofgoodsisrecognisedintheincomestatementwhenthesignificantrisksandrewardsofownershiphavebeentransferredtothebuyer.Revenuefromservicesrenderedisrecognisedintheincomestatementoncetheservicehasbeencompleted.
RevenuecomprisesthefairvalueoftheconsiderationreceivedorreceivableforthesaleofgoodsandservicesintheordinarycourseoftheGroup’sactivities.Revenue
Accounting policies
Financial Statements
57 Future plc
isshownnetofvalue-addedtax,estimatedreturns,rebatesanddiscountsandaftereliminatingsaleswithintheGroup.Thefollowingrecognitioncriteriaalsoapply:
•Magazinenewsstandcirculationandadvertisingrevenueisrecognisedaccordingtothedatethattherelatedpublicationgoesonsale.
•Onlineadvertisingrevenueisrecognisedovertheperiodduringwhichtheadvertisementsareserved.
•Revenuefromthesaleofdigitalmagazinesubscriptionsisrecogniseduniformlyoverthetermofthesubscription.
•Eventincomeisrecognisedwhentheeventhastakenplace.
•Licensingrevenueisrecognisedonthesupplyofthelicensedcontent.
•Otherrevenueisrecognisedatthetimeofsaleorprovisionofservice.
Foreign currency translation
(a) Functional and presentation currencyItemsincludedinthefinancialstatementsofeachoftheGroup’sentitiesaremeasuredusingthecurrencyoftheprimaryeconomicenvironmentinwhichtheentityoperates(‘thefunctionalcurrency’).Theconsolidatedfinancialstatementsarepresentedinsterling,whichistheGroup’spresentationcurrency.
(b) Transactions and balancesForeigncurrencytransactionsaretranslatedintothefunctionalcurrencyusingtheexchangerateprevailingatthedateofthetransaction.Foreignexchangegainsandlossesresultingfromthesettlementofsuchtransactionsandfromthetranslationatbalancesheetexchangeratesofmonetaryassetsandliabilitiesdenominatedinforeigncurrenciesarerecognisedintheincomestatement,withexchangedifferencesarisingontradingtransactionsbeingreportedinoperatingprofitandwiththosearisingonfinancingtransactionsreportedinnetfinancecostsunless,asaresultofcashflowhedging,theyarereportedinothercomprehensiveincome.
(c) Group companiesTheresultsandfinancialpositionofalltheGroupentitiesthathaveafunctionalcurrencydifferentfromthepresentationcurrencyaretranslatedintothepresentationcurrencyasfollows:
(i) Assetsandliabilitiesforeachbalancesheetaretranslatedattheclosingrateatthedateofthatbalancesheet.
(ii) Incomeandexpensesforeachincomestatementaretranslatedataverageexchangerates.
(iii)Allresultingexchangedifferencesarerecognisedasaseparatecomponent ofequity.
Onconsolidation,exchangedifferences arisingfromthetranslationofthenetinvestmentinforeignoperations,andofborrowingsandothercurrencyinstrumentsdesignatedashedgesofsuchinvestments,aretakentoshareholders’equity.Whenaforeignoperationissold,exchangedifferencesthatwererecordedinequityarerecognisedintheincomestatementaspartofthegainorlossonsale.
Employee benefits
(a) Pension obligationsTheGrouphasanumberofdefinedcontributionplans.FordefinedcontributionplanstheGrouppayscontributionsintoaprivatelyadministeredpensionplanonacontractualorvoluntarybasis.TheGrouphasnofurtherpaymentobligationsoncethecontributionshavebeenpaid.Contributionsarechargedtotheincomestatementastheyareincurred.
(b) Share-based compensationTheGroupoperatesanumberofequity-settled,share-basedcompensationplans. Thefairvalueoftheemployeeservicesreceivedinexchangeforthegrantoftheawardsisrecognisedasanexpense.Thetotalamounttobeexpensedovertheappropriateserviceperiodisdeterminedbyreferencetothefairvalueoftheawards.Thecalculationoffairvalueincludesassumptionsregardingthenumberofcancellationsandexcludestheimpactofanynon-marketvestingconditions(forexample,earningspershare).Non-marketvestingconditionsareincludedinassumptionsaboutthenumberofawardsthatareexpectedtovest.Ateachbalancesheetdate,theGrouprevisesitsestimatesofthenumberofawardsthatareexpectedtovest.Itrecognisestheimpactoftherevisionoforiginalestimates,ifany,intheincomestatement,withacorrespondingadjustmenttoequity.
ThegrantbytheCompanyofshareawardstotheemployeesofsubsidiaryundertakingsistreatedasacapitalcontribution.Thefairvalueofemployeeservicesreceived,measuredbyreferencetothegrantdatefairvalue,isrecognisedoverthevestingperiodasanincreasetoinvestmentinsubsidiaryundertakings,withacorrespondingcredittoequityintheCompany’sfinancialstatements.
SharesintheCompanyareheldintrusttosatisfytheexerciseofawardsundercertain oftheGroup’sshare-basedcompensationplansandexceptionalawards.ThetrustisconsolidatedwithintheGroupfinancialstatements.Thesesharesarepresented intheconsolidatedbalancesheetasa deductionfromequityatthemarketvalue onthedateofacquisition.
(c) Bonus plansTheGrouprecognisesaliabilityandanexpenseforbonusestakingintoconsiderationtheprofitattributabletotheCompany’sshareholdersaftercertainadjustments.TheGrouprecognisesaprovisionwherecontractuallyobligedorwherethereisapastpracticethathascreatedaconstructiveobligation.
Leases
LeasesinwhichtheGroupassumessubstantiallyalltherisksandrewardsofownershipoftheleasedassetsareclassifiedasfinanceleases.Allotherleasesareclassedasoperatingleases.
Assetsheldunderfinanceleasesareincludedeitherasproperty,plantandequipmentorintangibleassetsattheloweroftheirfairvalueatinceptionorthepresentvalueoftheminimumleasepaymentsandaredepreciatedovertheirestimatedeconomiclivesorthefinanceleaseperiod,whicheveristheshorter.Thecorrespondingliabilityisrecordedwithinborrowings.Theinterestelementoftherentalcostsischargedagainstprofitsovertheperiodoftheleaseusingtheactuarialmethod.
Paymentsmadeunderoperatingleases(netofanyincentivesreceivedfromthelessor)arechargedtotheincomestatementonastraight-linebasisovertheperiodofthelease.
Tax
Taxontheprofitorlossfortheyearcomprisescurrenttaxanddeferredtax.Taxisrecognisedintheincomestatementexcepttotheextentthatitrelatestoitemsrecogniseddirectlyinequityinwhichcaseitisrecognisedinequity.
Currenttaxispayablebasedontaxableprofitsfortheyear,usingtaxratesthathavebeenenactedorsubstantivelyenactedatthebalancesheetdate,alongwithanyadjustmentrelatingtotaxpayableinpreviousyears.Managementperiodicallyevaluatesitemsdetailedintaxreturnswherethetaxtreatmentissubjecttointerpretation.Taxableprofitdiffersfromnetprofitintheincomestatementinthatincomeorexpenseitemsthataretaxableordeductibleinotheryearsareexcluded–asareitemsthatarenevertaxableordeductible.Currenttaxassetsrelatetopaymentsonaccountnotoffsetagainstcurrenttaxliabilities.
Deferredtaxisprovidedinfull,usingtheliabilitymethod,ontemporarydifferencesarisingbetweenthetaxbasesofassetsandliabilitiesandtheircarryingamountsintheconsolidatedfinancialstatements.However,deferredtaxisnotaccountedforifitarisesfrominitialrecognitionofanassetorliabilityinatransactionotherthanabusinesscombinationthatatthetimeofthetransactionaffectsneitheraccountingnortaxableprofitorloss.Deferredtaxisdeterminedusingtaxrates(andlaws)thathavebeenenactedorsubstantivelyenactedbythebalancesheetdateandareexpectedtoapplywhentherelateddeferredtaxassetisrealisedorthedeferredtaxliabilityissettledintheappropriateterritory.
Deferredtaxassetsarerecognisedtotheextentthatitisprobablethatfuturetaxableprofitswillbeavailableagainstwhichthetemporarydifferencescanbeutilised.Deferredtaxisprovidedontemporarydifferencesarisingoninvestmentsinsubsidiaries,exceptwherethetimingofthereversalofthetemporarydifferenceis
Financial statements
58AnnualReportandAccounts2017Financial Statem
ents
controlledbytheGroupanditisprobable thatthetemporarydifferencewillnotreverse intheforeseeablefuture.
Deferredtaxassetsandliabilitiesareoffsetagainsteachotherwheretheyrelatetothesamejurisdictionandthereisalegallyenforceablerighttooffset.
Dividends
AlldividenddistributionstotheCompany’sshareholdersarerecognisedasaliabilityinthefinancialstatementsintheperiodinwhichtheyareapproved.
Property, plant and equipment
Property,plantandequipmentisstatedatcost(ordeemedcost)lessaccumulateddepreciationandimpairmentlosses.Costincludesexpenditurethatisdirectlyattributabletotheacquisitionoftheitems.
Depreciation
Depreciationiscalculatedusingthestraight-linemethodtoallocatethecostofproperty,plantandequipmentlessresidualvalueoverestimatedusefullives,asfollows:
•Landandbuildings–50yearsorperiodoftheleaseifshorter.
•Plantandmachinery–betweenoneand fiveyears.
•Equipment,fixturesandfittings–betweenoneandfiveyears.
Theassets’residualvaluesandusefullivesarereviewed,andadjustedifappropriate,ateachbalancesheetdate.Anasset’scarryingamountiswrittendownimmediatelytoitsrecoverableamountiftheasset’scarryingamountisgreaterthanitsestimatedrecoverableamount.
Gainsandlossesondisposalsaredeterminedbycomparingproceedswithcarryingamounts.Theseareincludedintheincomestatement.
Intangible assets
(a) GoodwillGoodwillrepresentsthedifferencebetweenthecostoftheacquisitionandthefairvalueofnetidentifiableassetsacquired.
Goodwillisstatedatcostlessany accumulatedimpairmentlosses.Goodwill isallocatedtoappropriatecashgeneratingunits(thoseexpectedtobenefitfromthebusinesscombination)anditisnotsubjecttoamortisationbutistestedannuallyforimpairment.
(b) Titles, trademarks, customer lists, advertising relationships, eCommerce technology and other ‘magazine and website related’ intangiblesMagazineandwebsiterelatedintangibleassetshaveafiniteusefullifeandarestatedatcostlessaccumulatedamortisation.Assetsacquiredaspartofabusinesscombinationareinitiallystatedatfairvalue.Amortisationiscalculatedusingthestraight-linemethodtoallocatethecostoftheseintangiblesovertheirestimatedusefullives(betweenoneandtenyears).
Expenditureincurredonthelaunchofnewmagazinetitlesisrecognisedasanexpense intheincomestatementasincurred.
(c) Computer software and website developmentNon-integralcomputersoftwarepurchasesarestatedatcostlessaccumulatedamortisation.Costsincurredinthedevelopmentofnewwebsitesarecapitalisedonlywherethecostcanbedirectlyattributedtodevelopingthewebsitetooperateinthemannerintendedbymanagementandonlytotheextentofthefutureeconomicbenefitsexpectedfromitsuse.Thesecostsareamortisedonastraight-linebasisovertheirestimatedusefullives(betweenoneandthreeyears).Costsassociatedwithmaintainingcomputersoftwareorwebsitesarerecognisedasanexpenseasincurred.
Impairment tests and Cash-Generating Units (CGUs)
ACGUisdefinedasthesmallestidentifiablegroupofassetsthatgeneratescashinflowsthatarelargelyindependentofthecashinflowsfromotherassetsorgroupsofassets.
Goodwillisnotamortisedbuttestedforimpairmentatleastonceayearormorefrequentlywhenthereisanindicationthatitmaybeimpaired.Therefore,theevolutionofgeneraleconomicandfinancialtrendsaswellasactualeconomicperformancecomparedtomarketexpectationsrepresentexternalindicatorsthatareanalysedbytheGroup,togetherwithinternalperformanceindicators,inordertoassesswhetheranimpairmenttestshouldbeperformedmorethanonceayear.
IAS36‘ImpairmentofAssets’requirestheseteststobeperformedatthelevelofeachCGUorgroupofCGUslikelytobenefitfromacquisition-relatedsynergies,withinanoperatingsegment.
Anyimpairmentofgoodwillisrecordedintheincomestatementasadeductionfromoperatingprofitandisneverreversedsubsequently.
Otherintangibleassetswithafinitelifeareamortisedandaretestedforimpairmentonlywherethereisanindicationthatanimpairmentmayhaveoccurred.
Recoverable amount
Todeterminewhetheranimpairmentlossshouldberecognised,thecarryingvalueof
theassetsandliabilitiesoftheCGUsor groupsofCGUsiscomparedtotheirrecoverableamount.
CarryingvaluesofCGUsandgroupsofCGUstestedincludegoodwillandassetswithfiniteusefullives(property,plantandequipment,intangibleassetsandnetworkingcapital).
TherecoverableamountofaCGUisthehigherofitsfairvaluelesscoststosellanditsvalueinuse.Fairvaluelesscoststosellisthebestestimateoftheamountobtainablefromthesaleofanassetinanarm’slengthtransactionbetweenknowledgeable,willingparties,lessthecostsofdisposal.Thisestimateisdetermined,on30September,onthebasisofthediscountedpresentvalueofexpectedfuturecashflowsplusaterminalvalueandreflectsgeneralmarketsentimentandconditions.
ValueinuseisthepresentvalueofthefuturecashflowsexpectedtobederivedfromtheCGUsorgroupofCGUs.CashflowprojectionsarebasedoneconomicassumptionsandforecasttradingconditionsdrawnupbytheGroup’smanagement, asfollows:
•cashflowprojectionsarebasedonfive-yearbusinessplans;
•cashflowprojectionsbeyondthattimeframeareextrapolatedbyapplyinga2.0%growthratetoperpetuity;and
•thecashflowsobtainedarediscountedusingappropriateratesforthebusinessandtheterritoriesconcerned.
IfgoodwillhasbeenallocatedtoaCGUandanoperationwithinthatCGUisdisposed,thegoodwillassociatedwiththatoperationisincludedinthecarryingamountoftheoperationindeterminingtheprofitorlossondisposal.Thegoodwillallocatedtothedisposalismeasuredonthebasisoftherelativeprofitabilityoftheoperationdisposedandtheoperationsretained.
Inventories
Inventoriesarestatedatthelowerofcostandnetrealisablevalue.Forrawmaterials,costistakentobethepurchasepriceonafirstin,firstoutbasis.Forworkinprogressandfinishedgoods,costiscalculatedasthedirectcostofproduction.Itexcludesborrowingcosts.Netrealisablevalueistheestimatedsellingpriceintheordinarycourseofbusiness,lessapplicablevariablesellingexpenses.
Trade and other receivables
Tradeandotherreceivablesareinitiallyrecognisedatfairvalueandsubsequentlymeasuredatamortisedcostusingtheeffectiveinterestmethod,lessaprovisionforimpairment.AprovisionforimpairmentoftradereceivablesismadewhenthereisobjectiveevidencethattheGroupwillnotbeabletocollectallamountsdueinaccordancewith theoriginaltermsofthereceivables.
Financial Statements
59 Future plc
Cash and cash equivalents
Cashandcashequivalentsincludecashinhand,depositsheldatcallwithbanksandbankoverdraftsforthepurposeofthecashflowstatement.Bankoverdraftsareshownwithinborrowingsincurrentliabilitiesonthebalancesheet.
Trade and other payables
Tradeandotherpayablesareinitiallyrecognisedatfairvalueandsubsequentlymeasuredatamortisedcostusingthe effectiveinterestmethod.
Borrowings
Borrowingsarerecognisedinitiallyatfairvalue,netoftransactioncostsincurred.Borrowingsaresubsequentlystatedatamortisedcostwithanydifferencebetweentheproceeds(netoftransactioncosts)andtheredemptionvaluerecognisedintheincomestatementovertheperiodoftheborrowingsusingtheeffectiveinterestmethod. BorrowingsareclassifiedascurrentliabilitiesunlesstheGrouphasanunconditionalrighttodefersettlementoftheliabilityforatleast12monthsafterthebalancesheetdate.
Provisions
ProvisionsarerecognisedwhentheGrouphasapresentlegalorconstructiveobligationasaresultofpastevents,anditismorelikelythannotthatanoutflowofresourceswillberequiredtosettletheobligation.
ProvisionsaremeasuredattheDirectors’bestestimateoftheexpenditurerequiredtosettletheobligationatthebalancesheetdate,andarediscountedtopresentvaluewheretheeffectismaterial.
Derivative financial instruments and hedging activities
TheGroupusesderivativefinancialinstrumentstoreduceexposuretoforeignexchangeandinterestraterisksandrecognisestheseatfairvalueinitsbalancesheet.TheGroupappliescashflowhedgeaccountingunderIAS39inrespectofcertaininstrumentsheld.Forinstrumentsforwhichhedgeaccountingisapplied,gainsandlossesaretakentoequity.Anychangestothefairvalueofderivativesnothedgeaccountedforarerecognisedintheincomestatement.AnynewinstrumentsenteredintobytheGroupwillbereviewedona‘casebycase’basisatinceptiontodeterminewhethertheyshouldqualifyashedgesandbeaccountedforaccordinglyunderIAS39.Inaccordancewithitstreasurypolicy,theGroupdoesnotholdorissueanyderivativefinancialinstrumentsfortradingpurposes.
Investments
TheCompany’sinvestmentsinsubsidiaryundertakingsarestatedatthefairvalue ofconsiderationpayable,includingrelatedacquisitioncosts,lessanyprovisions forimpairment.
Exceptional items
TheGroupclassifiestransactionsasexceptionalwheretheyrelatetoaneventthatfallsoutsidetheordinaryactivitiesofthebusinessandwhereindividuallyorinaggregatetheyhaveamaterialimpactonthefinancialstatements.ThisclassificationexcludesimpairmentchargesmadeonthecarryingvalueofCGUsorgroupsofCGUs.TheseparatereportingofexceptionalitemshelpsprovideabetterpictureoftheGroup’sunderlyingperformance.
Critical accounting assumptions, judgements and estimates
ThepreparationofthefinancialstatementsunderIFRSrequirestheuseofcertaincriticalaccountingassumptionsandrequiresmanagementtoexerciseitsjudgementandtomakeestimatesintheprocessofapplyingtheGroup’saccountingpolicies.TheareaswhichtheBoardbelievescontainthemostsignificantaccountingestimatesare:
(a) Carrying value of goodwill and other intangiblesTheGroupusesforecastcashflowinformationandestimatesoffuturegrowthtoassesswhethergoodwillandotherintangibleassetsareimpaired.Iftheresultsofanoperationinfutureyearsareadversetotheestimatesusedforimpairmenttesting,animpairmentmaybetriggeredatthatpoint,orareductioninusefuleconomiclifemayberequired.Furtherdetailsareincludedwithinnote11.
(b) Valuation of acquired intangible assetsAcquisitionsmayresultintherecognitionofintangibleassets,suchastitles,trademarks,customerlists,advertisingrelationships,publishingrightsandeCommercetechnology.Theseassetsarevaluedusingadiscountedcashflowmodelorarelieffromroyaltymethod.Inapplyingthesevaluationmethods,anumberofkeyjudgementsaremadeinrespectofdiscountrates,growthratesandroyaltyrates.
(c) TaxationTheGroupissubjecttotaxinallterritories,andjudgementandestimatesoffutureprofitabilityarerequiredtodeterminetheGroup’sdeferredtaxposition.Ifthefinaltaxoutcomeisdifferenttothatassumed,resultingchangeswillbereflectedintheincomestatementorstatementofchangesinequityasappropriate.TheGroupcorporationtaxprovisionreflectsmanagement’sestimationoftheamountoftaxpayableforfiscalyearswithopentaxcomputationswhereliabilitiesremaintobeagreedwithHerMajesty’sRevenueandCustomsandothertaxauthorities.Furtherdetailsareincludedwithinnote7.
(d) Revenue recognitionTheGroupmakesaprovisionforsalesreturnsattheendofeachmonth.TheUKestimateiscalculatedbylookingattheforecastsalesprojectionsforthefollowingmonthofthe titlesthatwereonsaleattheyear-endandprovidingforanyshortfall.TheUSestimateis madebasedonastudyofthehistoriclevels ofreturns.
(e) Recoverability of investmentsThecarryingamountoftheCompany’sinvestmentsinsubsidiaryundertakingsisreviewedannuallytodetermineifthereisanyindicationofimpairment.Ifanysuchindicationexists,theinvestments’recoverableamountsareestimated.Therecoverableamountisthehigheroffairvaluelesscosttosellandvalueinuse.Valueinuseisthepresentvalueoftheestimatedfuturecashflows.Impairmentlossesarerecognisedintheincomestatementwhenthecarryingamountofanassetexceedsitsestimatedrecoverableamount.
New or revised accounting standards and interpretations
TherehasbeennomaterialimpactfromtheadoptionofthefollowingneworrevisedstandardswhicharerelevanttotheGroup:
• AnnualimprovementstoIFRSs2012- 2014Cycle.
• AmendmenttoIAS1Presentationoffinancialstatementsonthedisclosureinitiative.
• AmendmenttoIAS16andIAS38Clarificationofacceptablemethodsofdepreciationandamortisation.
Certainnewstandards,amendmentsandinterpretationstoexistingstandardshavebeenpublishedthataremandatoryforaccountingperiodsbeginningonorafter1October2017orlaterperiodsbutwhichtheGrouphaschosennottoadoptearly.TheseincludethefollowingstandardswhicharerelevanttotheGroup:
• AmendmenttoIFRS2Share-basedpaymenttoclarifytheclassificationandmeasurementofshare-basedpaymenttransactions.
• IFRS9Financialinstruments.• IFRS15Revenuefromcontracts
withcustomers.• IFRS16Leases. TheGrouphasbeguntoassesstheimpactofadoptingbothIFRS15,whichwillbeeffectivefortheyearending30September2019,andIFRS16,whichwillbeeffectivefortheyearending30September2020.
TheGroupdoesnotexpectthattheotherstandardsandamendmentsissuedbutnotyeteffectivewillhaveamaterialimpactonresultsornetassets.
Financial statements
60AnnualReportandAccounts2017Financial Statem
ents
1. Segmental reporting
TheGroupisorganisedandarrangedprimarilybyreportablesegment.TheexecutiveDirectorsconsidertheperformanceofthebusinessfromageographicalperspective,namelytheUKandtheUS.TheAustralianbusinessisconsideredtobepartoftheUKsegmentandisnotreportedseparatelyduetoitssize.
(a) Reportable segment(i) Segment revenue
2017£m
2016£m
UK 67.2 44.7US 19.1 15.2Revenuebetweensegments (1.9) (0.9)Total continuing operations 84.4 59.0
Transactionsbetweensegmentsarecarriedoutatarm’slength.
(ii) Segment adjusted EBITDA
2017£m
2016£m
UK 6.9 3.2US 4.1 2.0Total segment adjusted EBITDA from continuing operations 11.0 5.2
AdjustedEBITDAisusedbytheexecutiveDirectorstoassesstheperformanceofeachsegment.
AreconciliationoftotalsegmentadjustedEBITDAfromcontinuingoperationstoprofit/(loss)beforetaxfromcontinuingoperationsisprovidedasfollows:
2017£m
2016£m
Total segment adjusted EBITDA from continuing operations 11.0 5.2Share-basedpayments(includingsocialsecuritycosts) (2.1) (0.5)Depreciation (0.3) (0.4)Amortisation (4.1) (2.0)Exceptionalitems (3.7) (3.5)Impairmentofintangibleassets - (13.0)Netfinancecosts (0.6) (0.7)Profit/(loss) before tax from continuing operations 0.2 (14.9)
(iii) Segment assets and liabilities
Segment assets Segment liabilities Segment net assets
2017£m
2016£m
2017£m
2016£m
2017£m
2016£m
UK 113.9 46.6 (56.5) (26.5) 57.4 20.1US 8.5 5.3 (4.6) (4.2) 3.9 1.1Total 122.4 51.9 (61.1) (30.7) 61.3 21.2
(iv) Other segment informationAdditions to
non-current assetsDepreciation
and amortisation Impairment charges Exceptional items
2017£m
2016£m
2017£m
2016£m
2017£m
2016£m
2017£m
2016£m
UK 64.5 4.6 4.3 1.9 - 13.0 2.4 2.8US - - 0.1 0.5 - - 1.3 0.7Continuingoperations 64.5 4.6 4.4 2.4 - 13.0 3.7 3.5Discontinuedoperations - - - - - - - (0.3)Total 64.5 4.6 4.4 2.4 - 13.0 3.7 3.2
Otherthantheitemsdisclosedaboveandashare-basedpaymentschargeof£1.8m(2016:£0.5m)therewerenoothersignificantnon-cashexpensesduringtheyear.
Notes to the financial statements
Financial Statements
61 Future plc
1. Segmental reporting (continued)
(b) Business segmentAftergeographicallocation,theGroupismanagedintwosegments.TheMediasegmentcompriseswebsitesandeventsandtheMagazinesegmentcomprisesmagazines.Anadditionalsegment,Other,wasretainedtoreflectunallocatedsalariesandotherdirectcostswhicharenotdirectlychargedtothebusinesssegmentsforinternalreportingpurposes.TheGroupconsidersthattheassetswithineachsegmentareexposedtothesamerisks.
(i) Revenue by business segment
2017£m
2016£m
Media 35.8 24.5Magazine 50.5 35.4Revenuebetweensegments (1.9) (0.9)Total continuing operations 84.4 59.0
(ii) Gross profit by business segment
2017£m
2016£m
Media 27.6 19.5Magazine 33.4 23.5Other (31.8) (24.8)Addback:distributionexpenses 4.7 3.6Total continuing operations 33.9 21.8
2. Net operating expenses Operatingprofit/(loss)fromcontinuingoperationsisstatedaftercharging:
Adjusted results
£m
2017Adjusting
items£m
Statutoryresults
£m
Adjustedresults
£m
2016Adjusting
items£m
Statutoryresults
£m
Costofsales (50.5) - (50.5) (37.2) - (37.2)Distributionexpenses (4.7) - (4.7) (3.6) - (3.6)Share-basedpayments(includingsocial securitycosts) - (2.1) (2.1) - (0.5) (0.5)
Exceptionalitems(note4) - (3.7) (3.7) - (3.5) (3.5)Depreciation (0.3) - (0.3) (0.4) - (0.4)Amortisation (1.8) (2.3) (4.1) (2.0) - (2.0)Impairmentofintangibleassets - - - - (13.0) (13.0)Otheradministrationexpenses (18.2) - (18.2) (13.0) - (13.0)
(75.5) (8.1) (83.6) (56.2) (17.0) (73.2)
3. Fees paid to auditors
2017£m
2016£m
AuditfeesinrespectoftheauditofthefinancialstatementsoftheCompanyandtheconsolidatedfinancialstatements 0.16 0.10Auditrelatedassuranceservices 0.02 0.02
0.18 0.12Taxcomplianceservices - 0.05Taxadvisoryservices - 0.03Otherassuranceservices 0.29 -Servicesrelatingtocorporatefinancetransactions 0.06 0.14Total fees 0.53 0.34
Financial statements
62AnnualReportandAccounts2017Financial Statem
ents
4. Exceptional items from continuing operations
2017£m
2016£m
Vacantpropertyprovisionmovements 1.2 (0.5)Restructuringandredundancycosts 1.1 1.8Acquisitionandintegrationrelatedcosts 1.4 2.3Profitondisposalofmagazinetitlesandtrademarks - (0.1)Total charge 3.7 3.5
ThevacantpropertyprovisionmovementduringtheyearrelatestosurplusofficespaceintheUKandtheUS.
Therestructuringandredundancycostsrelatemainlytostaffterminationpaymentsandotherrestructuringactivities.
TheacquisitionandintegrationrelatedcostsrepresentfeesincurredinrespectoftheacquisitionsandsubsequentintegrationsofMiura(Holdings)Limited,theultimateparentcompanyofImaginePublishingLimited,whichwascompletedon21October2016,andthehomeinterestdivisionofCentaurMediaplc,whichwascompletedon1August2017.Furtherdetailsinrespectoftheacquisitionsareshowninnote29.
5. Employee costs from continuing operations
Group 2017
£m
Company2017
£m
Group 2016 £m
Company2016£m
Wagesandsalaries 26.0 0.3 21.3 0.2Socialsecuritycosts 2.5 - 2.0 -Otherpensioncosts 0.6 - 0.7 -Shareschemes-Valueofemployees’services 1.8 - 0.5 -Total employee costs from continuing operations 30.9 0.3 24.5 0.2
Average monthly number of people for continuing operations (including Directors)
Group2017
No.
Company2017
No.
Group2016No.
Company2016No.
Production 471 - 399 -Administration 111 4 89 4Total 582 4 488 4
At30September2017,theactualnumberofpeopleemployedbytheGroupwas634(2016:449).Inrespectofourreportablesegments592(2016:390)wereemployedintheUKand42(2016:59)wereemployedintheUS.
Key management personnel compensation
Group 2017
£m
Company 2017
£m
Group 2016£m
Company2016£m
Salariesandothershort-termemployeebenefits 1.4 0.3 0.7 0.2Postemploymentbenefits 0.1 - - -Shareschemes-Valueofemployees’services 1.3 - 0.2 -Total 2.8 0.3 0.9 0.2
KeymanagementpersonnelaredeemedtobethemembersoftheBoardofFutureplc.ItisthisBoardwhichhasresponsibilityforplanning,directingandcontrollingtheactivitiesoftheGroup.
ZillahByng-ThorneandPennyLadkin-BrandwerepaidbyFuturePublishingLimited,asubsidiarycompany,fortheirservices.In2017£0.4m(2016:£0.3m)wasrechargedtoFutureplcbyFuturePublishingLimitedinrespectofZillahByng-Thorneand£0.2m(2016:£0.2m)wasrechargedinrespectofPennyLadkin-Brand.
FurtherdetailsontheDirectors’remunerationandinterestsaregivenintheDirectors’remunerationreportonpages29to41.ThehighestpaidDirectorduringtheyearwasZillahByng-Thorne(2016:ZillahByng-Thorne)anddetailsofherremunerationareshownonpage30.
Financial Statements
63 Future plc
6. Finance income and costs
2017£m
2016£m
Fairvaluegainoninterestratederivativenotinahedgerelationship 0.1 -Total finance income 0.1 -Interestpayableoninterest-bearingloansandborrowings (0.4) (0.1)Amortisationofbankloanarrangementfees (0.2) (0.1)Otherfinancecosts (0.1) (0.3)Adjustedfinancecosts (0.7) (0.5)Exchangelosses - (0.2)Total reported finance costs (0.7) (0.7)Net finance costs from continuing operations (0.6) (0.7)
7. Tax on profit/(loss)
Thetaxcreditedintheconsolidatedincomestatementforcontinuingoperationsisanalysedbelow:
2017£m
2016£m
UK corporation taxCurrenttaxat19.5%(2016:20%)ontheprofit/(loss)fortheyear 0.6 -Adjustmentsinrespectofpreviousyears 0.2 1.3Current tax 0.8 1.3Deferred tax origination and reversal of temporary differencesCurrentyearcredit (2.0) (1.6)Adjustmentsinrespectofpreviousyears (0.2) (0.2)Deferred tax (2.2) (1.8)Total tax credit on continuing operations (1.4) (0.5)
ThetaxassessedineachyeardiffersfromthestandardrateofcorporationtaxintheUKfortherelevantyear.Thedifferencesareexplainedbelow:
2017£m
2016£m
Profit/(loss)beforetax 0.2 (14.9)Profit/(loss)beforetaxatthestandardUKtaxrateof19.5%(2016:20%) - (3.0)Non-deductibleamortisation&impairment - 2.6Lossesnotpreviouslyrecognised (0.7) -LossesandothertimingdifferencesrecognisedinrespectoftaxintheUS (1.3) (1.4)Profitsrelievedagainstbroughtforwardlosses - (0.2)Othernetdisallowableitems 0.6 0.4Adjustmentsinrespectofpreviousyears - 1.1Total tax credit on continuing operations (1.4) (0.5)
In2013theGroupreachedagreementwithHMRCrelatingtothetaxtreatmentofcertainone-offtransactionswhichtookplacein2003.PartofthatagreementwillresultintheGrouppayingtaxof£6.2mplusinterest(comprisinginstalmentsof£85,000permonthoverfiveyearsfromJuly2013andafinalinstalmentof£2.0m).Thetaxpayablewasfullyprovidedforinprioryears’financialstatements.
Theprioryearadjustmentin2016reflectsareassessmentoftheavailabilityofEUGrouplossreliefavailabletotheGroupasaresultoftheadditionaluncertaintysurroundingtheimpactoftheBrexitvoteonthesuccessoftheclaims.
TheDirectorshaveassessedtheGroup’suncertaintaxpositionsandarecomfortablethattheprovisionsinplacearenotmaterialeitherindividuallyorinaggregateandthatareasonablypossiblechangeinthenextfinancialyearwouldnothavematerialimpactontheresultsoftheGroup.
Financial statements
64AnnualReportandAccounts2017Financial Statem
ents
8. Dividends
Equity dividends 2017Restated
2016*
Numberofsharesinissueatendofyear(million) 45.4 24.6Dividendspaidinyear(pencepershare) - -Dividends paid in year (£m) - -
* The prior year comparatives have been restated to reflect the 15:1 share consolidation completed on 2 February 2017.
9. Earnings per share
BasicearningspersharearecalculatedusingtheweightedaveragenumberofOrdinarysharesinissueduringtheyear.DilutedearningspersharehavebeencalculatedbytakingintoaccountthedilutiveeffectofsharesthatwouldbeissuedonconversionintoOrdinarysharesofawardsheldunderemployeeshareschemes.
On2February2017,theCompanyissuedonenewOrdinaryshareof15penceforeach15existingOrdinarysharesof1pencefollowingcompletionofashareconsolidation.Theweightedaveragenumberofsharesinissueforallperiodshasbeenadjustedfortheshareconsolidation.
Adjustedearningspershareremovetheeffectofshare-basedpayments,exceptionalitems,amortisationofintangibleassetsarisingonacquisitions,impairmentofintangibleassets,exchangelossesincludedinfinancecostsandanyrelatedtaxeffectsfromthecalculation.
Total Group 2017Restated
2016
Adjustmentstoprofit/(loss)aftertax:Profit/(loss) after tax (£m) 1.6 (14.2)Share-basedpayments(includingsocialsecuritycosts)(£m) 2.1 0.5Exceptionalitems(£m) 3.7 3.2Amortisationofintangibleassetsarisingonacquisitions(£m) 2.3 -Impairmentofintangibleassets(£m) - 13.0Exchangelossesincludedinfinancecosts(£m) - 0.2Taxeffectoftheaboveadjustments(£m) (1.1) (0.5)Adjusted profit after tax (£m) 8.6 2.2
Weightedaveragenumberofsharesinissueduringtheyear:-Basic 37,093,344 24,165,768-Dilutiveeffectofshareoptions 3,878,185 871,639-Diluted 40,971,529 25,037,407Basicearnings/(loss)pershare(inpence) 4.3 (58.8)Adjustedbasicearningspershare(inpence) 23.2 9.1Dilutedearnings/(loss)pershare(inpence) 3.9 (58.8)Adjusteddilutedearningspershare(inpence) 21.0 8.8
Theadjustmentstoprofit/(loss)aftertaxhavethefollowingeffect:Basic earnings/(loss) per share (pence) 4.3 (58.8)Share-basedpayments(includingsocialsecuritycosts)(pence) 5.7 2.1Exceptionalitems(pence) 10.0 13.3Amortisationofintangibleassetsarisingonacquisitions(pence) 6.2 -Impairmentofintangibleassets(pence) - 53.8Exchangelossesincludedinfinancecosts(pence) - 0.8Taxeffectoftheaboveadjustments(pence) (3.0) (2.1)Adjusted basic earnings per share (pence) 23.2 9.1
Diluted earnings/(loss) per share (pence) 3.9 (58.8)Share-basedpayments(includingsocialsecuritycosts)(pence) 5.2 2.1Exceptionalitems(pence) 9.0 13.3Amortisationofintangibleassetsarisingonacquisitions(pence) 5.6 -Impairmentofintangibleassets(pence) - 53.4Exchangelossesincludedinfinancecosts(pence) - 0.8Taxeffectoftheaboveadjustments(pence) (2.7) (2.0)Adjusted diluted earnings per share (pence) 21.0 8.8
Financial Statements
65 Future plc
9. Earnings per share (continued)
Continuing operations 2017Restated
2016
Adjustmentstoprofit/(loss)aftertax:Profit/(loss) after tax (£m) 1.6 (14.4)Share-basedpayments(includingsocialsecuritycosts)(£m) 2.1 0.5Exceptionalitems(£m) 3.7 3.5Amortisationofintangibleassetsarisingonacquisitions(£m) 2.3 -Impairmentofintangibleassets(£m) - 13.0Exchangelossesincludedinfinancecosts(£m) - 0.2Taxeffectoftheaboveadjustments(£m) (1.1) (0.5)Adjusted profit after tax (£m) 8.6 2.3
Weightedaveragenumberofsharesinissueduringtheyear:-Basic 37,093,344 24,165,768-Dilutiveeffectofshareoptions 3,878,185 871,639-Diluted 40,971,529 25,037,407Basicearnings/(loss)pershare(inpence) 4.3 (59.6)Adjustedbasicearningspershare(inpence) 23.2 9.5Dilutedearnings/(loss)pershare(inpence) 3.9 (59.6)Adjusteddilutedearningspershare(inpence) 21.0 9.2
Theadjustmentstoprofit/(loss)aftertaxhavethefollowingeffect:Basic earnings/(loss) per share (pence) 4.3 (59.6)Share-basedpayments(includingsocialsecuritycosts)(pence) 5.7 2.1Exceptionalitems(pence) 10.0 14.5Amortisationofintangibleassetsarisingonacquisitions(pence) 6.2 -Impairmentofintangibleassets(pence) - 53.8Exchangelossesincludedinfinancecosts(pence) - 0.8Taxeffectoftheaboveadjustments(pence) (3.0) (2.1)Adjusted basic earnings per share (pence) 23.2 9.5
Diluted earnings/(loss) per share (pence) 3.9 (59.6)Share-basedpayments(includingsocialsecuritycosts)(pence) 5.2 2.1Exceptionalitems(pence) 9.0 14.5Amortisationofintangibleassetsarisingonacquisitions(pence) 5.6 -Impairmentofintangibleassets(pence) - 53.4Exchangelossesincludedinfinancecosts(pence) - 0.8Taxeffectoftheaboveadjustments(pence) (2.7) (2.0)Adjusted diluted earnings per share (pence) 21.0 9.2
Financial statements
66AnnualReportandAccounts2017Financial Statem
entsFinancial Statem
ents
10. Property, plant and equipment
Group
Land and buildings
£m
Plant and machinery
£m
Equipment, fixtures and
fittings£m
Total£m
Cost At1October2015 1.6 5.2 1.8 8.6Additions - 0.3 - 0.3Disposals (1.1) (2.4) (1.6) (5.1)Exchangeadjustments - 0.2 0.1 0.3At30September2016 0.5 3.3 0.3 4.1Additionsthroughbusinesscombinations - 0.1 - 0.1Otheradditions 0.2 0.2 0.3 0.7At 30 September 2017 0.7 3.6 0.6 4.9
Accumulated depreciationAt1October2015 (1.4) (4.9) (1.7) (8.0)Chargefortheyear - (0.3) (0.1) (0.4)Disposals 1.1 2.3 1.6 5.0Exchangeadjustments - (0.2) - (0.2)At30September2016 (0.3) (3.1) (0.2) (3.6)Chargefortheyear - (0.2) (0.1) (0.3)At 30 September 2017 (0.3) (3.3) (0.3) (3.9)
Net book value at 30 September 2017 0.4 0.3 0.3 1.0Netbookvalueat30September2016 0.2 0.2 0.1 0.5Netbookvalueat1October2015 0.2 0.3 0.1 0.6
Depreciationisincludedwithinadministrationexpensesintheconsolidatedincomestatement.
67 Future plc
11. Intangible assets
GroupGoodwill
£m
Magazine and website
£mOther
£m Total
£m
Cost At1October2015 287.5 12.4 14.8 314.7Additionsthroughbusinesscombinations 1.5 1.1 - 2.6Otheradditions - - 1.7 1.7Disposals - (0.2) (0.2) (0.4)Exchangeadjustments 4.9 1.0 1.2 7.1At30September2016 293.9 14.3 17.5 325.7Additionsthroughbusinesscombinations 36.6 25.5 0.1 62.2Otheradditions - - 1.5 1.5Adjustmentstofairvalueonprioryearacquisitions (0.2) - - (0.2)Disposals - (1.4) - (1.4)Exchangeadjustments (1.1) (0.2) (0.3) (1.6)At 30 September 2017 329.2 38.2 18.8 386.2
Accumulated amortisationAt1October2015 (246.6) (12.4) (11.9) (270.9)Chargefortheyear - - (2.0) (2.0)Impairment (13.0) - - (13.0)Disposals - 0.2 0.2 0.4Exchangeadjustments (4.8) (1.0) (1.2) (7.0)At30September2016 (264.4) (13.2) (14.9) (292.5)Chargefortheyear - (2.3) (1.8) (4.1)Disposals - 1.1 - 1.1Exchangeadjustments 1.0 0.2 0.4 1.6At 30 September 2017 (263.4) (14.2) (16.3) (293.9)
Net book value at 30 September 2017 65.8 24.0 2.5 92.3Netbookvalueat30September2016 29.5 1.1 2.6 33.2Netbookvalueat1October2015 40.9 - 2.9 43.8
Magazineandwebsiterelatedassetsrelatemainlytotrademarks,advertisingrelationships,publishingrightsandcustomerlists.Theseassetsareamortisedovertheirestimatedeconomiclives,typicallyrangingbetweenoneandtenyears.
Anyresidualamountarisingasaresultofthepurchaseconsiderationbeinginexcessofthevalueofidentifiedmagazinerelatedassetsisrecordedasgoodwill.GoodwillisnotamortisedunderIFRS,butissubjecttoimpairmenttestingatleastannuallyormorefrequentlyontheoccurrenceofsometriggeringevent.Goodwillisrecordedandtestedforimpairmentonaterritorybyterritorybasis.
Furtherdetailsregardingtheintangibleassetsacquiredduringtheyearthroughbusinesscombinationsaresetoutinnote29.
Otherintangiblesrelatetocapitalisedsoftwarecostsandwebsitedevelopmentcosts.
Amortisationisincludedwithinadministrationexpensesintheconsolidatedincomestatement.
Impairment assessments for goodwill
Thenetbookvalueofgoodwillatboth30September2017and30September2016relatestotheUK.
Thebasisforcalculatingrecoverableamountsisdescribedintheaccountingpolicies.
Trendsintheeconomicandfinancialenvironment,competitionandregulatoryauthorities’decisions,orchangesincompetitorbehaviourinresponsetotheeconomicenvironmentmayaffecttheestimateofrecoverableamounts,aswillunforeseenchangesinthepolitical,economicorlegalsystemsofsomecountries.
Financial statements
68AnnualReportandAccounts2017Financial Statem
entsFinancial Statem
ents
11. Intangible assets (continued)
Otherassumptionsthatinfluenceestimatedrecoverableamountsaresetoutbelow:
At30September2017
UK
BasisofrecoverableamountSourceused
ValueinuseFiveyearplans
Discountedcashflow
Growthratetoperpetuity 2.0%EBITDAmarginsassumed 12.0%to12.9%Post-taxdiscountrate 7.7%Pre-taxdiscountrate 9.4%
At30September2016
UK
BasisofrecoverableamountSourceused
ValueinuseFiveyearplans
Discountedcashflow
Growthratetoperpetuity 2.0%EBITDAmarginsassumed 2.4%to3.7%Post-taxdiscountrate 8.2%Pre-taxdiscountrate 10.3%
Sensitivity of recoverable amountsAt30September2017theanalysisoftherecoverableamountsgaverisetothefollowingassessmentsofsensitivity:
ThevalueinuseoftheUKbusinessexceededthecarryingvalueby£43.3m.Achangeofplusorminus50basispointsinthepost-taxdiscountratewoulddecreaseorincreaserespectivelytherecoverableamountby£8.7m.Likewiseachangeofplusorminus10%intheforecastcashflowsoverthenextfiveyearswouldincreaseordecreaserespectivelytherecoverableamountby£11.7m.
Goodwillisnotconsideredtobeimpairedat30September2017.
Impairment At30September2016animpairmentchargeof£13.0mwastakenagainstthecarryingvalueoftheUKbusiness.ThisreflectedashiftintheunderlyingprofitabilityandcashflowsoftheUKandthecontinueddeclineofprint.
69 Future plc
Financial statements
12. Investments in Group undertakings
Company2017
£m2016£m
Shares in Group undertakingsAt1October 1.0 131.9Additions 18.5 -Provisionforimpairment - (130.9)At30September 19.5 1.0
Additionsof£16.7mduringtheyearrelatetotheacquisitionofMiura(Holdings)Limited,theholdingcompanyandultimateparentcompanyofImaginePublishingLimited,andthesubsequentcapitalisationofanintercompanybalanceowedtotheCompany.Followingtheacquisition,thetradeandassetsofImaginePublishingLimitedweretransferredtoFuturePublishingLimited,afellowsubsidiaryundertaking,andagroupre-organisationeffectedtosettleallintercompanybalancesbetweenthecompaniesacquiredandtherestoftheGroup.TheinvestmentheldbytheCompanywassubsequentlyre-designatedasaninvestmentinFutureHoldings2002Limited,theparentcompanyofFuturePublishingLimited.
Theremainingadditionof£1.8mrepresentsthefairvalueofsharebasedcompensationawardsgrantedtoemployeesofsubsidiaryundertakingsofFutureHoldings2002Limited,treatedasacapitalcontributiontothatcompany.
TheDirectorsbelievethatthecarryingvaluesoftheinvestmentsaresupportedbytheirunderlyingassets.
InSeptember2016,followingareviewofthevaluationoftheCompany’sinvestmentsandthereceiptofadividendof£130.9m,theCompany’sinvestmentinRhoHoldingsLimitedwaswrittendowntoacarryingvalueof£nilresultinginanimpairmentchargeof£130.9m.
13. Deferred tax
ThefollowingarethemajordeferredtaxassetsandliabilitiesrecognisedbytheGroup,andthemovementsthereon,duringthecurrentandprioryears.
Intangible assets
£m
Share-based payments
£m
Short term timing
differences£m
Depreciation vs tax allowances
£mTax losses
£mTotal
£m
At1October2015 (0.7) - - 0.4 0.1 (0.2)Acquisitions (0.3) - - - - (0.3)Creditedtoincomestatement–Continuingoperations 0.1 - 0.2 0.1 1.4 1.8
Exchangeadjustment - - - - 0.2 0.2At30September2016 (0.9) - 0.2 0.5 1.7 1.5Acquisitions (4.3) - - - - (4.3)Creditedtoincomestatement–Continuingoperations 0.6 0.3 - 0.1 1.2 2.2
Creditedtoequity - 0.5 - - - 0.5Exchangeadjustment - - - - (0.1) (0.1)At 30 September 2017 (4.6) 0.8 0.2 0.6 2.8 (0.2)
Certaindeferredtaxassetsandliabilitieshavebeenoffsetagainsteachotherwheretheyrelatetothesamejurisdiction.Thefollowingistheanalysisofdeferredtaxbalancesafteroffsetforbalancesheetpurposes:
2017£m
2016£m
Deferredtaxassets 4.4 2.4Deferredtaxliabilities (4.6) (0.9)Net deferred tax (liability)/asset (0.2) 1.5
Thedeferredtaxassetof£4.4m(2016:£2.4m)isdisclosedasanon-currentassetofwhichtheassetsduewithinoneyeartotal£0.4m(2016:£0.1m).Thedeferredtaxliabilityof£4.6m(2016:£0.9m)isdisclosedasanon-currentliabilityofwhichtheliabilitiesduewithinoneyeartotal£0.7m(2016:£nil).
Asat30September2017theGrouphas:•unprovidedtaxlossestotalling£33.1m(2016:£38.3m)ofwhich£29.0m(2016:£34.9m)aroseintheUS;and•unprovidedothertemporarydifferencesintheUStotalling£2.0m(2016:£2.8m).
Deferredtaxassetshavebeenrecognisedinrespectoftaxlossesandothertemporarydifferenceswhereitisprobablethattheseassetswillberecovered.
70AnnualReportandAccounts2017Financial Statem
entsFinancial Statem
ents
13. Deferred tax (continued)
Nodeferredtaxisrecognisedontheunremittedearningsofoverseassubsidiariesasanyremittedearningswouldnotgiverisetoataxliabilityintheforeseeablefuture.
Thedeferredtaxassetof£0.8m(2016:£nil)recognisedontheCompany’sbalancesheetisinrespectofshare-basedpayments.TheCompanyhasnounprovideddeferredtaxassetsorliabilitiesat30September2017(2016:£nil).
14. Inventories
2017£m
2016£m
Rawmaterials 0.2 0.1Workinprogress 0.5 0.3Total 0.7 0.4
Thecostofrawmaterialinventoriesrecognisedasanexpenseandincludedwithincostofsalesamountedto£5.4m(2016:£3.5m).
15. Trade and other receivables
Group2017
£m
Company2017
£m
Group2016£m
Company2016£m
Current assets:Tradereceivables 11.9 - 9.2 -Provisionsforimpairmentoftradereceivables (2.2) - (0.6) -Tradereceivablesnet 9.7 - 8.6 -AmountsowedbyGroupundertakings - 74.4 - 43.4Otherreceivables 0.4 - 0.3 -Prepaymentsandaccruedincome 3.5 - 3.3 0.1
13.6 74.4 12.2 43.5Non-current assets:Otherreceivables - - 0.2 -Total 13.6 74.4 12.4 43.5
TheDirectorsconsiderthatthecarryingamountoftradeandotherreceivablesapproximatestheirfairvalue.
ReceivablebalancesfromtheGroup’stwomainmagazinedistributors,oneintheUKsegmentandoneintheUSsegment,represented13%(2016:26%)oftheGroup’stradereceivablesbalanceat30September2017.
TheGrouphasprovidedforestimatedirrecoverableamountsinaccordancewithitsaccountingpolicydescribedonpage58ofthesefinancialstatements.
Creditchecksareobtainedand,ifapplicable,guaranteesputinplacebeforeanewcustomerisacceptedandtermsandcreditlimitsareagreed.Bookingsarenottakenbeforethesefactorshavebeenfulfilled.Inaddition,annualcreditchecksarecarriedoutandfullydocumented.Finaldecisionsoncredittermsaremadebyanappropriateseniormanagerwithinadvertisingorfinance.Intheeventofarequesttoincreaseacustomer’screditlimitthefollowingfactorswillbeconsidered:tradinghistorytodate,reviewofcreditstatusandreviewofthereasonfortheincrease.
IncludedwithintheGroup’stradereceivablesbalancearereceivableswithacarryingamountof£4.6m(2016:£3.0m)whicharepastdueatthereportingdatebutforwhichtheGrouphasnotprovidedastherehasnotbeenasignificantchangeincreditqualityandtheGroupbelievesthattheamountsarestillrecoverable.TheserelatetoadvertisingandlicensingdebtorsintheUKandUS.TheGroupdoesnotholdanysecurityoverthesebalances.Abreakdownoftheageingissetoutbelow:
Past due
Group2017
£m
Group2016£m
0-30days 2.9 1.631-60days 1.3 0.861-90days 0.3 0.391+days 0.1 0.3Total 4.6 3.0
71 Future plc
15. Trade and other receivables (continued)
Asat30September2017,tradereceivablesof£2.2m(2016:£0.6m)wereimpairedandprovidedfor.Theindividuallyimpairedreceivablesmainlyrelatetoadvertising,eventsandlicensingcustomers.Itisassessedthataportionofthereceivablesisexpectedtoberecovered.
ThemovementintheGroupprovisionfortradereceivablesduringtheyearisasfollows:
Group2017
£m
Group2016£m
At1October 0.6 0.6Provisionforreceivablesimpaired 0.5 0.1Onacquisition 1.3 -Receivableswrittenoffduringtheyear (0.2) (0.1)At 30 September 2.2 0.6
Thecreationandreleaseofprovisionsforimpairedreceivableshavebeenincludedinadministrationexpensesintheincomestatement.Amountschargedtotheprovisionarewrittenoffwhenthereisnorealisticexpectationofrecoveringadditionalcash.
Theotherassetclasseswithintradeandotherreceivablesdonotcontainimpairedassets.
Themaximumexposuretocreditriskatthereportingdateisthecarryingvalueofeachclassofreceivablementionedabove.TheGroupdoesnotholdanycollateralassecurityfortradereceivables.
AlltheCompany’sreceivablesarewithGroupundertakings,withtheexceptionof£0.1min2016relatingtoprepaidshareissuecosts,andnoadditionaldisclosureinrelationtocreditriskisrequired.Intereston£0.3m(2016:£0.3m)oftheamountsowedbyGroupundertakingshasbeenchargedatthree-monthLIBOR+2.6%.ThebalanceofamountsowedbyGroupundertakingsisinterest-freewithoutanytermsforrepayment.
16. Cash and cash equivalents
Group2017
£m
Company2017
£m
Group2016£m
Company2016£m
Cashatbankandinhand 10.1 0.7 2.9 -Cash and cash equivalents (excluding bank overdraft) 10.1 0.7 2.9 -
Cashandcashequivalentsincludethefollowingforthepurposesofthecashflowstatements:
Group2017
£m
Company2017
£m
Group2016£m
Company2016£m
Cashatbankandinhand 10.1 0.7 2.9 -Bankoverdraft(note18) - - - (1.0)Cash and cash equivalents 10.1 0.7 2.9 (1.0)
TheGrouphasanumberofauthorisedcounterpartieswithwhomcashbalancesareheldinthecountriesinwhichtheGroupoperates.Creditriskisminimisedbyconsideringthecreditstandingofallpotentialbankersbeforeselectingthembytheuseofexternalcreditratings.AlloftheGroup’scashatbankisheldatcounterpartieswithanS+PcreditratingofatleastBBB+.
Financial statements
72AnnualReportandAccounts2017Financial Statem
entsFinancial Statem
ents
17. Trade and other payables
Group2017
£m
Company2017
£m
Group2016£m
Company2016£m
Tradepayables 2.5 - 4.4 -AmountsowedtoGroupundertakings - 0.7 - 0.8Othertaxationandsocialsecurity 0.9 - 0.8 -Otherpayables 0.7 - 0.8 -Accrualsanddeferredincome 25.8 0.2 15.4 1.6Total 29.9 0.9 21.4 2.4
Tradepayablesandaccrualsprincipallycompriseamountsoutstandingfortradepurchasesandongoingcosts.TheGrouphasfinancialriskmanagementpoliciesinplacetoensureallpayablesarepaidwithintheagreedcreditterms.
TheDirectorsconsiderthatthecarryingamountoftradepayablesapproximatestotheirfairvalue.
18. Financial liabilities – loans, borrowings and overdrafts
Non-current liabilities
Interest rate at30 September
2017
Interestrateat30September
2016
Group2017
£m
Company2017
£m
Group2016£m
Company2016£m
Sterlingtermloan 2.8% - 10.0 10.0 - -Sterlingrevolvingloan 2.8% - 6.9 6.9 - -
16.9 16.9 - -Obligationsunderfinanceleases - 9.6% - - 0.1 -Total 16.9 16.9 0.1 -
Current liabilities
Interest rate at30 September
2017
Interestrateat30September
2016
Group2017
£m
Company2017
£m
Group2016£m
Company2016£m
Sterlingtermloan 2.8% - 1.8 1.8 - -Sterlingrevolvingloan 2.8% 2.5% 1.3 1.3 2.3 2.3
3.1 3.1 2.3 2.3Obligationsunderfinanceleases 0.0% - 0.1 - - -Total 3.2 3.1 2.3 2.3
Theinterest-bearingloansarerepayableasfollows:
Group2017
£m
Company2017
£m
Group2016£m
Company2016£m
Withinoneyear 3.2 3.1 2.3 2.3Betweenoneandtwoyears 3.3 3.3 0.1 -Betweentwoandfiveyears 13.6 13.6 - -Total 20.1 20.0 2.4 2.3
73 Future plc
Financial statements
18. Financial liabilities – loans, borrowings and overdrafts (continued)
On21October2016,followingtheacquisitionofImagine,theGroupnegotiatedanewbankfacilitywithHSBCBankplctoreplaceitspreviousfacilitywithSantanderplc.ThisnewfacilitywassubsequentlyamendedandrestatedinAugust2017followingthehomeinterestacquisition.ThetotalmulticurrencyrevolvingandoverdraftfacilityavailabletotheGroupat30September2017amountedto£25.4m,comprisinga£12.0mtermloan,atotalof£11.4mrevolvingcreditfacilitiesanda£2.0muncommittedoverdraftfacility.Thenewfacilitiesrunto23June2021.Repaymentsrequiredinrespectofthefacilitiesareasfollows:
Repayment date Repayment amount30September2017* £600,00030September2018 £2,600,00030September2019 £3,400,00030September2020 £4,850,00023June2021 £14,550,000
*£0.6m was due to be repaid on 30 September 2017 however this was not taken by the bank until October 2017.
TheGrouphasgrantedsecuritytothebankandtheavailabilityofthefacilityissubjecttocertaincovenants.
Totalfeesrelatingtothenewfacilityamountedto£0.7mandthesearebeingamortisedoverthetermofthefacility.ThebankborrowingsandinterestareguaranteedbyFutureplc,FutureHoldings2002Limited,FuturePublishingLimited,FutureUS,Inc,FuturePublishing(Overseas)LimitedandNextCommercePtyLtd.
Interestpayableunderthecurrentcreditfacilityiscalculatedasthecostofone-monthLIBOR(currentlyapproximately0.5%)plusaninterestmarginofbetween2.0%and2.5%,dependentonthelevelofBankEBITDA.
Thekeycovenantsaresetoutinthefollowingtablewherenetdebtisexclusiveofnon-currenttaxandotherpayablesandBankEBITDAisnotmateriallydifferenttostatutoryEBITDA.
Netdebt/BankEBITDA Periodsfrom31March2017–lessthan2.25times
BankEBITDA/Interest Periodsfrom31March2017–morethan4.00times
Thecovenantsaretestedquarterlyonthebasisofrollingfiguresforthepreceding12monthsandthecovenantpositionattheyear-endissetoutinthefollowingtable:
30 September 2017 Covenant
Netdebt/BankEBITDA 0.69times<2.25times
BankEBITDA/Interest 37.28times>4.00times
TheCompanyhadnotdrawndownonitsnon-interest-bearingoverdraftat30September2017(2016:£1.0m).AnydrawdownformspartoftheGroupcashpoolingaccountandcanbeoffsetagainstcashbalancesinotherGroupcompanies.
74AnnualReportandAccounts2017Financial Statem
ents
19. Financial liabilities – derivatives
TheGroupacquiredaninterestrateswapaspartoftheImagineacquisition.TheswapwasoriginallyenteredintobySkaro(Holdings)LimitedandwastransferredintothenameoftheCompanyfollowingtheacquisition.
Thefairvalueoftheswapat30September2017was£0.1musingLevel2–inputsthatareobservablefortheassetorliability,eitherdirectly(thatis,asprices)orindirectly(thatis,derivedfromprices).
20. Provisions
GroupProperty
£m
At1October2016 1.5Onacquisition 0.1Chargedintheyear 1.4Releasedintheyear (0.1)Utilisedintheyear (0.3)At 30 September 2017 2.6
Theprovisionforpropertyrelatestodilapidationsandobligationsundershortleaseholdagreementsonvacantproperty.Thevacantpropertyprovisionisexpectedtobeutilisedoverthenexttenyears.
ProvisionsfortheCompanywere£nil(2016:£nil).
21. Other non-current liabilities
Group2017
£m2016£m
Otherpayables 0.6 0.5
Otherpayablesconsistmainlyofdeferredpropertyleaseliabilities.
Financial Statements
75 Future plc
Financial statements
22. Financial instruments
Financial instruments by category
TheGroup’sfinancialassetsandfinancialliabilitiesaresetoutbelow:
Fair value Amortised cost 2017
Group NoteDerivatives
£m
Loans and receivables
£m
Other liabilities
£m
Total carrying value
£m
Total fairvalue
£m
Tradereceivablesnet 15 - 9.7 - 9.7 9.7Otherreceivables - 1.4 - 1.4 1.4Cashandcashequivalents 16 - 10.1 - 10.1 10.1Total financial assets - 21.2 - 21.2 21.2Tradepayables 17 - - (2.5) (2.5) (2.5)Otherliabilities - - (14.4) (14.4) (14.4)Currentborrowings 18 - - (3.2) (3.2) (3.2)Non-currentborrowings 18 - - (16.9) (16.9) (16.9)Derivatives 19 (0.1) - - (0.1) (0.1)Total financial liabilities (0.1) - (37.0) (37.1) (37.1)
Amortised cost 2016
Group Note
Loans and receivables
£m
Other liabilities
£m
Total carrying value
£m
Total fair value
£m
Tradereceivablesnet 15 8.6 - 8.6 8.6Otherreceivables 1.7 - 1.7 1.7Cashandcashequivalents 16 2.9 - 2.9 2.9Total financial assets 13.2 - 13.2 13.2Tradepayables 17 - (4.4) (4.4) (4.4)Otherliabilities - (10.3) (10.3) (10.3)Currentborrowings 18 - (2.3) (2.3) (2.3)Non-currentborrowings 18 - (0.1) (0.1) (0.1)Total financial liabilities - (17.1) (17.1) (17.1)
Totalfinancialliabilitiesareshownnetofunamortisedcostswhichamountedto£0.6m(2016:£0.1m).
76AnnualReportandAccounts2017Financial Statem
entsFinancial Statem
ents
22. Financial instruments (continued)
TheCompany’sfinancialassetsandliabilitiesaresetoutbelow:
Fair value Amortised cost 2017
Company NoteDerivatives
£m
Loans and receivables
£m
Other liabilities
£m
Total carrying value
£m
Total fair value
£m
Otherreceivables 15 - 74.4 - 74.4 74.4Cashandcashequivalents 16 - 0.7 - 0.7 0.7Total financial assets - 75.1 - 75.1 75.1Otherliabilities 17 - - (0.9) (0.9) (0.9)Currentborrowings 18 - - (3.1) (3.1) (3.1)Non-currentborrowings 18 - - (16.9) (16.9) (16.9)Derivatives 19 (0.1) - - (0.1) (0.1)Total financial liabilities (0.1) - (20.9) (21.0) (21.0)
Amortised cost 2016
Company Note
Loans and receivables
£m
Other liabilities
£m
Total carrying value
£m
Total fair value
£m
Otherreceivables 15 43.4 - 43.4 43.4Total financial assets 43.4 - 43.4 43.4Otherliabilities 17 - (2.4) (2.4) (2.4)Overdrafts 18 - (1.0) (1.0) (1.0)Currentborrowings 18 - (2.3) (2.3) (2.3)Total financial liabilities - (5.7) (5.7) (5.7)
Totalfinancialliabilitiesareshownnetofunamortisedcostswhichamountedto£0.6m(2016:£0.1m).
Thefairvalueistheamountforwhichafinancialinstrumentcouldbeexchangedbetweenknowledgeable,willingparties.Ifanactivemarketexists,themarketpriceisapplied.Ifanactivemarketdoesnotexistadiscountedcashfloworgenerallyacceptedestimationandvaluationtechniquebasedonmarketconditionsatthebalancesheetdateisusedtocalculateanestimatedvalue.
Themarketvalueoffinancialinstrumentsisdeterminedbytheuseofvaluationtechniquesincludingestimateddiscountedcashflows.
Treasury overviewTheGroupusesfinancialinstrumentstoraisefundingforitsoperationsandtomanagethefinancialrisksarisingfromthoseoperations.TheagreementsgoverningtheprincipalinstrumentsenteredintowereapprovedbytheBoard.
TheprincipalfinancingandtreasuryexposuresfacedbytheGrouparisefromforeigncurrencies,workingcapitalmanagement,thefinancingofcapitalexpenditureandacquisitions,themanagementofinterestratesontheGroup’sdebt,theinvestmentofsurpluscashandthemanagementoftheGroup’sdebtfacilities.TheGroupmanagesalloftheseexposureswithanobjectiveofremainingwithincovenantratiosagreedwiththeGroup’sbanks,andtheGrouphasbeenincompliancewithitscovenantsduringtheyear.Theseratiosaredisclosedinnote18.
77 Future plc
Financial statements
22. Financial instruments (continued)
Currency and interest rate profileThecurrencyandinterestrateprofileoftheGroup’sfinancialassetsandliabilitiesisshownbelow:
Financial assets Financial liabilities
Non- interest bearing
£mTotal
£m
Floating rate£m
Fixed rate£m
Non-interest bearing
£m Total
£m
Net financial (liabilities)/
assets£m
At 30 September 2017Currency:Sterling 12.1 12.1 (20.0) (0.1) (13.5) (33.6) (21.5)USDollar 7.6 7.6 - - (2.9) (2.9) 4.7Euro 0.2 0.2 - - (0.1) (0.1) 0.1Other 1.3 1.3 - - (0.5) (0.5) 0.8Total 21.2 21.2 (20.0) - (17.1) (37.1) (15.9)
At30September2016Currency:Sterling 4.1 4.1 (2.3) (0.1) (10.2) (12.6) (8.5)USDollar 7.5 7.5 - - (3.2) (3.2) 4.3Euro 0.4 0.4 - - (0.2) (0.2) 0.2Other 1.2 1.2 - - (1.1) (1.1) 0.1Total 13.2 13.2 (2.3) (0.1) (14.7) (17.1) (3.9)
Interest rate riskDetailsoftheinterestratesonborrowingsasat30September2017aresetoutinnote18.
TheGrouphasnosignificantinterest-bearingassetsbutisexposedtointerestrateriskasitborrowsfundsatfloatinginterestratesthroughitsbankfacilities.BorrowingsissuedatvariableratesexposetheGrouptocashflowinterestraterisk.TheGroupevaluatesitsriskappetitetowardsinterestraterisksregularlyandmayundertakehedgingactivities,includinginterestrateswapcontracts,tomanageinterestrateriskinrelationtoitsrevolvingcreditfacilityifdeemednecessary.TheGroupdidnotenterintoanyhedgingtransactionsduringthecurrentorprioryearsand,althoughitinheritedaninterestrateswapaspartoftheImagineacquisition,asat30September2017theonlyfloatingratetowhichtheGroupwasexposedisLIBOR.TheGroup’sexposuretointerestratesonfinancialassetsandfinancialliabilitiesisdetailedintheliquidityrisksectionofthisnote.
For2017,ifinterestratesonnetborrowingshadbeenonaverage0.5%higher/lowerwithallothervariablesheldconstant,thepost-taxprofitfortheyearwouldhavedecreased/increasedby£0.1m(2016:£nil).
Therewouldbenoimpactonequityexcludingretainedearnings.
Foreign exchange riskSomeoftheGroup’sactivitiesarecarriedoutincountriesoutsidetheUnitedKingdomwheretransactionsarecarriedoutinthatcountry’sownfunctionalcurrency.MovementsinexchangeratescanthereforehaveasignificantimpactontheGroup’stotalcashflows,whilstthetranslationoftheresults,assetsandliabilitiesofforeignoperationsintosterlingcanhaveasignificanteffectontheGroup’sreportedprofitsandbalancesheet.ThemainexposureistomovementsintheUSDollaragainststerling. TheGroup’spolicyformanagingexchangerateriskissummarisedasfollows:
Transactionexposure–theGroupmanagesthisbyensuringthattransactionsaredenominatedinthelocalfunctionalcurrencyoftheoperatingunitswhereverpossible.Wherethisisnotpossibletheuseofforwardcontractstohedgeexposureisconsidered.Theuseofforwardcontracts(oranyotherderivativefinancialinstrument)issubjecttoauthorisationbytheChiefFinancialOfficer.
Translationexposure–theGroupmatchescurrencyassetswithcurrencyliabilitieswhereverpossible.
78AnnualReportandAccounts2017Financial Statem
entsFinancial Statem
ents
22. Financial instruments (continued)
ThefollowingtablesummarisestheGroup’ssensitivitytotranslationalcurrencyexposuresat30September:
2017 currency risks expressed in Currency 1/Currency 2£m GBP/USD
Reasonableshift 10%ImpactonprofitaftertaxifCurrency1strengthensagainstCurrency2 (0.3)ImpactonprofitaftertaxifCurrency1weakensagainstCurrency2 0.3ImpactonequityexcludingretainedearningsifCurrency1strengthensagainstCurrency2 0.3ImpactonequityexcludingretainedearningsifCurrency1weakensagainstCurrency2 (0.3)
2016currencyrisksexpressedinCurrency1/Currency2£m GBP/USD
Reasonableshift 10%ImpactonlossaftertaxifCurrency1strengthensagainstCurrency2 (0.5)ImpactonlossaftertaxifCurrency1weakensagainstCurrency2 0.5ImpactonequityexcludingretainedearningsifCurrency1strengthensagainstCurrency2 0.5ImpactonequityexcludingretainedearningsifCurrency1weakensagainstCurrency2 (0.5)
Liquidity riskTheGroupfundsthebusinesslargelyfromcashflowsgeneratedfromoperationsandlong-termdebt.DetailsoftheGroup’sborrowingsaredisclosedinnote18.
TheGroupmonitorsandmanagesthecashfortheGroupandhasmaintainedcommittedbankingfacilitiesasnotedabovetomitigateanyliquidityriskitmayface.Ifnecessary,inter-companyloanswithintheGroupmeetshort-termcashneeds.ThefollowingtableshowstheGroup’sremainingcontractualmaturityforfinancialliabilitiesandderivativefinancialinstruments.ThetablehasbeendrawnupbasedontheundiscountedcashflowsoffinancialliabilitiesbasedontheearliestdateonwhichtheGroupisobligedtopay:
30 September 2017
Less than one year
£m
Between one and two years
£m
Between two and five years
£m
Over five years
£mTotal
£m
Tradepayables (2.5) - - - (2.5)Otherliabilities (12.6) (0.6) (0.9) (0.3) (14.4)Borrowings (3.2) (3.3) (13.6) - (20.1)Derivatives (0.1) - - - (0.1)Total financial liabilities (18.4) (3.9) (14.5) (0.3) (37.1)
30September2016
Less than one year
£m
Between one and two years
£m
Between two and five years
£m
Over five years
£mTotal
£m
Tradepayables (4.4) - - - (4.4)Otherliabilities (9.2) (0.1) (1.0) - (10.3)Borrowings (2.3) (0.1) - - (2.4)Total financial liabilities (15.9) (0.2) (1.0) - (17.1)
79 Future plc
Financial statements
23. Issued share capital
2017Restated
2016
Number of shares £m
Numberofshares £m
Allotted, issued and fully paid Ordinary shares of 15p eachAtbeginningofyear 24,583,908 3.7 22,296,085 3.3Issuedasconsiderationforacquisition 11,971,189 1.8 - -PlacingofOrdinaryshares 8,800,000 1.3 2,229,333 0.4Shareschemeexercises 37,392 - 57,460 -ShareIncentivePlanmatchingshares 325 - 1,030 -At end of year 45,392,814 6.8 24,583,908 3.7
On2February2017,theCompanyissuedonenewOrdinaryshareof15penceforeach15existingOrdinarysharesofonepencefollowingcompletionofashareconsolidation.Prioryearcomparativeshavebeenrestatedonthisbasis.
On21October2016,theCompanyissued11,971,189Ordinaryshareswithanominalvalueof£1,795,678asconsiderationfortheacquisitionofMiura(Holdings)Limited,theholdingcompanyandultimateparentcompanyofImaginePublishingLimited.On7July2017,theCompanycompletedaplacingof8,800,000Ordinaryshareswithanominalvalueof£1,320,000foratotalcashcommitmentof£22,000,000inordertofundthehomeinterestacquisition,furtherdetailsofwhichareshowninnote29.Duringtheyear37,392Ordinaryshareswithanominalvalueof£5,609wereissuedbytheCompanypursuanttoshareschemeexercisesandafurther325OrdinaryshareswereissuedundertheShareIncentivePlanforacombinedtotalcashcommitmentof£40,312,asdetailedinnote24.
In2016theCompanycompletedaplacingof2,229,333Ordinaryshareswithanominalvalueof£334,400foratotalcashcommitmentof£3,344,000,issued57,460Ordinaryshareswithanominalvalueof£8,619pursuanttoshareschemeexercisesandissuedafurther1,030OrdinarysharesundertheShareIncentivePlanforacombinedcashcommitmentof£nil,asdetailedinnote24.
24. Share-based payments
Theincomestatementchargefortheyearforshare-basedpaymentswas£1.8m(2016:£0.5m).Thischargehasbeenincludedwithinadministrationexpenses.
ThesechargesarisewhenemployeesaregrantedawardsundertheGroup’sshareoptionschemes,performanceshareplan(PSP),deferredannualbonusscheme(DABS)orShareIncentivePlan(SIP)andwhenemployeesaregrantedawardsbythetrusteesofTheFutureNetworkplc1999EmployeeBenefitTrust(EBT).ThechargeequatestothefairvalueoftheawardandhasbeencalculatedusingtheMonteCarloandBlack-Scholesmodels,usingthemostappropriatemodelforeachscheme.Assumptionshavebeenmadeinthesemodelsforexpectedvolatility,risk-freeratesanddividendyields.
Areconciliationofmovementsinshareoptionsandothershareincentiveschemesisshownbelow,whereprioryearcomparativeshavebeenrestatedtoreflecttheshareconsolidationinFebruary2017:
2017Number of
options/awards
2017Weighted average
exercise price
Restated2016
Numberofoptions/awards
Restated2016
Weightedaverageexerciseprice
Outstandingatthebeginningoftheyear 1,389,633 £0.049 1,078,814 £0.187Granted 3,956,118 £0.000 787,115 £0.000Shareawardsexercised–newshareissues (37,392) £1.078 (57,460) £0.000Lapsed (1,037,300) £0.026 (418,836) £0.320Outstandingat30September 4,271,059 £0.000 1,389,633 £0.049Exercisableat30September 13,121 £0.000 23,287 £0.000
Theweightedaveragesharepriceatthedateofexerciseofshareoptionsandothershareincentiveawardsduringtheyearwas£2.150(2016:£1.314).
80AnnualReportandAccounts2017Financial Statem
entsFinancial Statem
ents
24. Share-based payments (continued)
Foroptionsandothershareincentiveschemesoutstandingat30Septembertheweightedaverageexercisepricesandremainingcontractuallivesareasfollows:
Number of options/awards Weighted average exercise priceWeighted average remaining
contractual life in years
2017Restated
2016 2017Restated
2016 2017 2016
Sharesave PlanDecember2013 - 34,700 £1.950 £1.950 - 1PSPDecember2013 - 143,734 - - - -July2014 166,667 166,667 - - - 1February2015 127,889 247,824 - - - 1May2015 69,799 69,799 - - 1 2August2015 109,856 109,856 - - 1 2November2015 322,894 425,925 - - 1 2September2016 80,525 161,049 - - 2 3November2016 1,546,732 - - - 2 -February2017 1,833,576 - - - 2 -DABSNovember2009 69 69 - - - -December2010 393 393 - - - -January2012 1,686 1,686 - - - -December2012 470 470 - - - -December2013 1,706 6,803 - - - -November2015 8,797 20,658 - - - -Total outstanding at 30 September 4,271,059 1,389,633 - £0.049 2 2
Thefairvaluepershareforgrantsmadeduringtheyearandtheassumptionsusedinthecalculationareasfollows:
2017
PSP PSP DABS PSP PSP
Grantdate 23/11/16 02/02/17 30/11/15 30/11/15 01/09/16Sharepriceatgrantdate £1.3335 £1.7950 £1.6313 £1.6313 £1.3125Exerciseprice - - - - -Vestingperiod(years) 3 3 1 3 3Expectedvolatility 40% 37% 50% 50% 49%Optionlife(years) 3 3 1 3 3Expectedlife(years) 3 3 1 3 3Risk-freerate 0% 0% 0% 1% 0%Dividendyield - - - - -Fairvalue £0.8716 £1.3752 £1.6313 £1.6313 £1.3125Fairvalue–EBITDAelement £1.3335 £1.7950 - - -Fairvalue–sharepriceelement £0.4097 £0.9554 - - -Fairvalue–EPSelement - - - £1.6313 £1.3125Fairvalue–cashelement - - - £1.6313 £1.3125
Notes:1.TheexpectedvolatilityisbasedonFuture’shistoricalvolatility,averagedoveraperiodequaltotheexpectedlife,wherepossible.2.TheGrouphasusedtheBlack-Scholesmodeltovalueinstrumentswithnon-market-basedperformancecriteriasuchasearningspershare.Forinstrumentswithmarket-basedperformancecriteria,notablytotalshareholderreturnandsharepriceperformance,theGrouphasusedaMonteCarlomodeltodeterminethefairvalue.TheBlack-Scholesmodelhasbeenusedtovaluealloptionswiththeexceptionof50%ofcertainPSPgrantswhichhavemarket-basedperformancecriteria;theMonteCarlomodelhasbeenusedtovaluetheseawards.
3.InJuly2017,theperformancecriteriainrespectoftheawardgrantedinJuly2014werechangedfromTSRperformanceandEPSgrowthtonetcashflowandabsoluteEPS.Thefairvalueofthisawardhasbeenrecalculatedasatthedateofthechange.
4.PrioryearcomparativeshavebeenrestatedtoreflecttheshareconsolidationinFebruary2017.
FutureplcoperatesoneshareoptionschemebeingtheFutureplc2010ApprovedSharesavePlan(2010SharesavePlan)andat30September2017therewerenooptionsoutstandingunderthisscheme.
Restated2016
81 Future plc
Financial statements
24. Share-based payments (continued)
The 2010 Sharesave Plan (the Sharesave Plan)UndertheSharesavePlantheoptionentitlementgrantedtoparticipatingemployeesislinkedtothemonthlycontributionswhichsuchemployeeshaveagreedtopayintotheSharesavePlan(uptoamaximumamountof£250permonth).TheoptionsgrantedundertheSharesavePlanvestonthethirdanniversaryofthegrantofsuchoptions.Wherelegalandregulatoryconstraintspermit,theCompanyusesitsdiscretiontoofferoptionsgrantedundertheSharesavePlanatadiscounttothemarketpriceinforceatthedateoftheinvitationbeingmade.
Other share-based paymentsNofurthershareoptionsaretobegranted.Instead,theGrouphasputintoplaceanumberofalternativeshareincentiveschemes.
Performance Share Plan (PSP)ThePSPisashare-basedincentiveschemeopentotheexecutiveDirectorsandcertainotherkeyemployees,usuallybasedonapercentageoftheparticipant’ssalary.Awardsunderthisschemearesubjecttostretchingperformancecriteriameasuredagainstacombinationofearningspershare(EPS),totalshareholderreturn(TSR),netcashflow,adjustedEBITDAorsharepriceperformance,dependingonthedateofgrant.UnlesstheRemunerationCommitteedecidesotherwiseatthedateofgrant,awardswillvestthreeyearsafterthedateofgrantsubjecttotheparticipant’scontinuedemploymentwithintheGroupandachievementofthefollowingperformancecriteria:
PerformancecriteriainrespectofawardsgrantedinDecember2013
•Amaximumof50%ofanawardwillvestiftheGroup’sgrowthinadjustedEPSisequaltoRPIplus8%,0%willvestiftheGroup’sgrowthinadjustedEPSisequaltoRPIplus3%,andvestingwillbeonaproratastraight-linebasisbetweenthetwo.IfgrowthintheGroup’sadjustedEPSislessthanRPIplus3%,noneofthat50%oftheawardwillvest.
•Theremaining50%oftheawardwillvestiftheCompany’sTSRperformance,comparedtoagroupofsimilarcompanies,placesitinthetopquintileasagainstthecomparatorcompanies.IftheCompany’sTSRperformanceismedian,12.5%oftheawardwillvest,andvestingwillbeonaproratastraight-linebasisbetweenthetwopoints.IftheCompany’sperformanceisbelowmedian,noneofthat50%oftheawardwillvest.
Performancecriteriainrespectofawardsgrantedbetween16July2014and29November2015
InJuly2017,theRemunerationCommitteeexerciseditsdiscretiontochangetheperformancecriteriainrespectoftheawardgrantedinJuly2014fromTSRperformanceandEPSgrowthtonetcashflowandabsoluteEPSinordertoaligntheperformancecriteriaforawardsmadetotheexecutiveDirectors.TheCommitteealsoextendedthevestingdateoftheawardfrom16July2017to27November2017.Theperformancecriteriaareasfollows:
•Amaximumof50%ofanawardwillvestiftheGroup’sadjustedEPSfortheyearended30September2017(thelastfinancialyearoftheperformanceperiod)is21.0p,12.5%willvestiftheGroup’sadjustedEPSis15.0p,andvestingwillbeonaproratastraight-linebasisbetweenthetwo.IftheGroup’sadjustedEPSisbelow15.0p,noneofthat50%oftheawardwillvest.
•Theremaining50%oftheawardwillvestiftheGroup’snetcashflowfortheyearended30September2017(thelastfinancialyearoftheperformanceperiod)is£1.25m,12.5%willvestiftheGroup’snetcashflowis£0.25m,andvestingwillbeonaproratastraight-linebasisbetweenthetwo.IftheGroup’snetcashflowisbelow£0.25m,noneofthat50%oftheawardwillvest.
Performancecriteriainrespectofawardsgrantedbetween30November2015and30September2016
•Amaximumof50%ofanawardwillvestiftheGroup’sadjustedEPSfortheyearended30September2018(thelastfinancialyearoftheperformanceperiod)is22.5p,12.5%willvestiftheGroup’sadjustedEPSis18.0p,andvestingwillbeonaproratastraight-linebasisbetweenthetwo.IftheGroup’sadjustedEPSisbelow18.0p,noneofthat50%oftheawardwillvest.
•Theremaining50%oftheawardwillvestiftheGroup’snetcashflowfortheyearended30September2018(thelastfinancialyearoftheperformanceperiod)is£0.75m,12.5%willvestiftheGroup’snetcashflowis£(0.25)m,andvestingwillbeonaproratastraight-linebasisbetweenthetwo.IftheGroup’snetcashflowisbelow£(0.25)m,noneofthat50%oftheawardwillvest.
Performancecriteriainrespectofawardsgrantedduringtheyearended30September2017
•25%oftheawardwillvestiftheGroup’sadjustedEBITDAfortheyearended30September2017isatorabovetarget.IftheGroup’sadjustedEBITDAisbelowtarget,noneofthat25%oftheawardwillvest.
•25%oftheawardwillvestiftheGroup’sadjustedEBITDAfortheyearending30September2018isatorabovetarget.IftheGroup’sadjustedEBITDAisbelowtarget,noneofthat25%oftheawardwillvest.
•25%oftheawardwillvestiftheCompany’ssharepriceperformanceintheperiodfromthedateofgrantto30September2018isatorabovetarget.IftheCompany’ssharepriceperformanceisbelowtarget,noneofthat25%oftheawardwillvest.
•25%oftheawardwillvestiftheCompany’ssharepriceperformanceintheperiodfromthedateofgrantto30September2019isatorabovetarget.IftheCompany’ssharepriceperformanceisbelowtarget,noneofthat25%oftheawardwillvest.
GrantsweremadeunderthePSPinNovember2015,September2016,November2016andFebruary2017.
Deferred Annual Bonus Scheme (DABS)TheDABSisashare-basedincentiveschemeopentotheexecutiveDirectorsandcertainmanagersacrosstheGroup.ThemaximumvalueofanysharesgrantedundertheDABStoanyoneparticipantwillbeanamountwhichisequaltoafixedpercentageofthateligibleparticipant’sannualbonusforthepreviousfinancialyear.ThenumberofsharesoverwhichanawardistobegrantedtoeachparticipantwillusuallybecalculatedbyreferencetothemarketvalueofanOrdinaryshareintheCompanyonthedateoftheaward.UnlesstheRemunerationCommitteedecidesotherwiseatthedateof
82AnnualReportandAccounts2017Financial Statem
entsFinancial Statem
ents
24. Share-based payments (continued)
grant,thesharesawardedundertheDABSwillvestsixmonthsafterthedateoftheaward,subjectonlytotheemployeeremainingintheemploymentoftheGroupthroughoutthevestingperiod.
AgrantwasmadeundertheDABSinNovember2015.
Share Incentive Plan (SIP)TheSIPisopentoallUKemployeesincludingtheexecutiveDirectors.Itisataxefficientincentiveplanpursuanttowhichemployeesareeligibletoacquireupto£150(or10%ofsalary,ifless)worthofOrdinarysharesintheCompanypermonthor£1,800perannum.UndertheSIPemployeesareinvitedtosubscribeforPartnershipsharesviasalarydeductions.IfanemployeeagreestobuyPartnershipsharestheCompanycurrentlymatchesthenumberofPartnershipsharesboughtwithanawardofMatchingsharesonthebasisofoneMatchingshareforeveryfourPartnershipshares.MatchingshareawardstodatehavebeenmetbytheissueofOrdinarysharestoYorkshireBuildingSocietyasTrusteeoftheSIP.
25. Reserves
Share premium accountSharepremiumrepresentstheexcessofproceedsreceivedoverthenominalvalueofnewsharesissued.
Group and Company
2017£m
2016£m
At1October 27.6 24.8Premiumarisingonissueofequityshares 20.7 3.0Costsofshareissue (0.9) (0.2)At 30 September 47.4 27.6
Treasury reserveThetreasuryreserverepresentsthecostofsharesinFutureplcpurchasedinthemarketandheldbytheEBTtosatisfyawardsmadebythetrustees.
Group 2017
£m
Group 2016£m
At1Octoberand30September (0.3) (0.3)
The95,123(2016restated:95,123)sharesheldbytheEBTrepresent0.2%(2016:0.4%)oftheCompany’sissuedsharecapital.Thetreasuryreserveisnon-distributable.
Merger reserve
Group2017
£m
Company2017
£m
Group2016£m
Company2016£m
At1October 109.0 - 109.0 -Premiumarisingonequitysharesissuedasconsideration 13.6 13.6 - -Costsofshareissue (0.1) (0.1) - -At 30 September 122.5 13.5 109.0 -
ThemovementinthemergerreserveduringtheyearrelatestothepremiumonsharesissuedasconsiderationfortheacquisitionofMiura(Holdings)LimitedinOctober2016.Furtherdetailsoftheacquisitionaresetoutinnote29.
ThebroughtforwardbalanceintheGroupmergerreserveof£109.0m(2016:£109.0m)arosefollowingthe1999Groupreorganisationandisnon-distributable.
26. Pensions
TheGroupoperatesadefinedcontributionschemeforemployeesresidentintheUnitedKingdom.
IntheUS,theGroupoperatesasection401(K)profitsharingdefinedcontributionplaninrespectofpensions,whichcoverssubstantiallyallFutureUSemployees.Thesection401(K)planallowsemployeestoinvestin29registeredmutualfundssupportedbyT.RowePrice,theplan’sserviceprovider.Theemployees,nottheemployer,havecompletecontroloverwhichfundstheyinvestin,althoughtheyhavenocontroloverthestocksownedbythefunds.
Duringtheyear,£0.6m(2016:£0.7m)contributionsweremadetotheseplansandat30September2017theoutstandingbalanceduetobepaidovertotheplanswas£0.1m(2016:£0.1m).
83 Future plc
Financial statements
27. Commitments and contingent liabilities
(a) Operating lease commitmentsAt30September2017,theGrouphadthefollowingtotalfutureleasepaymentsundernon-cancellableoperatingleases:
Land and buildings
£mOther
£m
Total2017
£m
Landandbuildings
£mOther
£m
Total2016£m
Withinoneyear 2.1 - 2.1 2.2 - 2.2Betweenoneandfiveyears 7.4 - 7.4 6.4 - 6.4Afterfiveyears 6.5 - 6.5 7.0 - 7.0Total 16.0 - 16.0 15.6 - 15.6
Futureminimumsub-leasereceiptsexpectedundernon-cancellablesubleasesat30September2017total£0.8m(2016:£1.8m).
Duringtheyear,£1.7m(2016:£1.6m)wasrecognisedintheincomestatementinrespectofoperatingleaserentalpaymentsand£0.2m(2016:£0.4m)wasrecognisedinrespectofsub-leasereceipts.
TheGroupleasesvariousofficesundernon-cancellableoperatingleaseagreements.Theleaseshavevariousterms,escalationclausesandrenewalrights.TheGroupalsoleasesotherequipmentundernon-cancellableoperatingleaseagreements.
(b) Contingent liabilitiesTherearenocontingentliabilitiesexpectedtoresultinamateriallossfortheGroup.
(c) Capital commitmentsTherewerenomaterialcapitalcommitmentsasat30September2017(2016:£nil).
28. Related party transactions
TheGrouphadnomaterialtransactionswithrelatedpartiesin2017or2016whichmightreasonablybeexpectedtoinfluencedecisionsmadebyusersofthesefinancialstatements.
Duringtheyear,theCompanyhadmanagementchargespayableof£0.9m(2016:£0.5m)tosubsidiaryundertakings.Theoutstandingbalanceowedat30September2017was£0.9m(2016:£0.5m).
29. Acquisitions
Acquisition of Miura (Holdings) LimitedOn21October2016,Futureplcacquired100%ofthesharecapitalofMiura(Holdings)Limited,theholdingcompanyandultimateparentcompanyofImaginePublishingLimited,fortotalconsiderationof11,971,189newsharesintheCompanywhich,attheclosingpriceof129pon21October2016,representsconsiderationof£15.4m.
Theimpactoftheacquisitionontheconsolidatedbalancesheetwas:
Provisional fair value
£m
Intangibleassets-Publishingrights 6.8-Brands 2.0-Otherintangibles 0.1
Tangibleassets 0.1Inventories 0.3Tradeandotherreceivables 2.7Cashandcashequivalents 1.7Tradeandotherpayables (6.3)Corporationtax (0.1)Deferredtax (1.5)Loansandborrowings (6.9)Net liabilities acquired (1.1)Goodwill 16.6
15.5Consideration:Equityshares 15.4Cash 0.1Total consideration 15.5
84AnnualReportandAccounts2017Financial Statem
entsFinancial Statem
ents
29. Acquisitions (continued)
ThegoodwillisattributabletothesynergiesexpectedtoariseinintegratingthemagazinesintothewiderFuturegroupandthroughcombiningproductionandbackofficefunctions.Thepublishingrightsandbrandswillbeamortisedoverperiodsoffiveandtenyearsrespectively.
IncludedwithintheGroup’sresultsfortheyeararerevenuesof£14.8mandstatutoryprofitbeforetaxfortheperiodof£2.0m(excludingdealfeesandassociatedintegrationcosts)fromMiura(Holdings)Limitedanditssubsidiaries.
Iftheacquisitionhadbeencompletedonthefirstdayofthefinancialyear,itwouldhavecontributed£15.3mofrevenueandstatutoryprofitbeforetaxof£2.0mduringtheyear.
Acquisition of Ascent Publishing Limited and Centaur Consumer Exhibitions Limited (“home interest”)On1August2017,Futureplcacquired100%ofthesharecapitalofbothAscentPublishingLimitedandCentaurConsumerExhibitionsLimitedfortotalconsiderationof£32.8m.
Theimpactoftheacquisitionontheconsolidatedbalancesheetwas:
Provisional fair value
£m
Intangibleassets-Publishingrights 3.9-Brands 4.7-Customerlists 6.9
Inventories 0.1Tradeandotherreceivables 4.6Tradeandotherpayables (4.5)Deferredtax (2.6)Provisions (0.1)Net assets acquired 13.0Goodwill 19.8
32.8Consideration:Cash 32.8Total consideration 32.8
ThegoodwillisattributabletothesynergiesexpectedtoariseinintegratingthemagazinesandeventsintothewiderFuturegroup.Thepublishingrights,brandsandcustomerlistswillbeamortisedoverperiodsoffive,tenandeightyearsrespectively.
IncludedwithintheGroup’sresultsfortheyeararerevenuesof£2.5mandstatutoryprofitbeforetaxfortheperiodof£0.4m(excludingdealfeesandassociatedintegrationcosts)fromhomeinterest.
Iftheacquisitionhadbeencompletedonthefirstdayofthefinancialyear,itwouldhavecontributed£13.2mofrevenueandstatutoryprofitbeforetaxof£2.0mduringtheyear.
85 Future plc
Financial statements
29. Acquisitions (continued)
Acquisition of Team RockOn6January2017,FuturePublishingLimitedacquiredcertainassetsfromTeamRockLimitedforcashconsiderationof£0.8m.
Theimpactoftheacquisitionontheconsolidatedbalancesheetwas:
Provisional fair value
£m
Intangibleassets-Publishingrights 1.2
Tradeandotherpayables (0.4)Deferredtax (0.2)Net assets acquired 0.6Goodwill 0.2
0.8Consideration:Cash 0.8Total consideration 0.8
ThegoodwillisattributabletothesynergiesexpectedtoariseinintegratingthemagazinesandwebsitesintothewiderFuturegroup.Thepublishingrightswillbeamortisedoveraperiodoffiveyears.
IncludedwithintheGroup’sresultsfortheyeararerevenuesof£3.2mandstatutoryprofitbeforetaxfortheperiodof£0.6m(excludingdealfeesandassociatedintegrationcosts)fromtheTeamRockassets.
Iftheacquisitionhadbeencompletedonthefirstdayofthefinancialyear,itwouldhavecontributed£4.8mofrevenueandstatutoryprofitbeforetaxof£1.0mduringtheperiod.
Acquisition of Next Commerce Pty LtdOn15August2016,FuturePublishing(Overseas)Limitedacquired100%ofthesharecapitalofNextCommercePtyLtd.Theconsiderationpayableincludeddeferredconsiderationofupto£0.6m,intheformofsharesinFutureplc,payableby24January2017basedonrevenueperformance.At30September2016theprovisionalfairvalueofdeferredconsiderationwasmeasuredat£0.6m.InJanuary2017,FuturePublishing(Overseas)Limitedagreedwiththesellerstopaydeferredconsiderationof£0.7mincashinsteadofsharesinFutureplc.Asthischangetodeferredconsiderationoccurredwithinoneyearofthedateofacquisition,theprovisionalfairvalueofgoodwillrecognisedat30September2016hasbeenadjusted,asdetailedbelow:
Provisional fair value at 30 September 2016
£mFair value adjustment
£m
Fair value at 30 September 2017
£m
Goodwill 0.6 0.1 0.7
Acquisition of Blaze PublishingOn12May2016,FuturePublishingLimitedacquiredcertainassetsfromBlazePublishingLimitedforcashconsiderationof£0.4m.Theconsiderationpayableincludeddeferredconsiderationofupto£0.3mpayableby12May2017basedongrosscontributiontargets.At30September2016theprovisionalfairvalueofdeferredconsiderationwasmeasuredat£0.3m.Duringtheyearended30September2017itwasdeterminedthatnodeferredconsiderationwaspayable.Asthischangetodeferredconsiderationoccuredwithinoneyearofthedateofacquisition,theprovisionalfairvalueofgoodwillrecognisedat30September2016hasbeenadjusted,asdetailedbelow:
Provisional fair value at 30 September 2016
£mFair value adjustment
£m
Fair value at 30 September 2017
£m
Goodwill 0.6 (0.3) 0.3
Acquisition of Noble House Media LimitedOn5April2016,FuturePublishingLimitedacquired100%ofthesharecapitalofNobleHouseMediaLimitedforcashconsiderationof£0.1m.
86AnnualReportandAccounts2017Financial Statem
entsFinancial Statem
ents
30. Subsidiary undertakings
DetailsoftheCompany’ssubsidiariesat30September2017aresetoutbelow.Allsubsidiariesareincludedintheconsolidation.Sharesofthosecompaniesmarkedwithan*areindirectlyownedbyFutureplcthroughanintermediateholdingcompany.
Company name and registered number
Country of incorporation and
registered office Nature of business Holding % Class of shares
A&SPublishingCompanyLimited*01584580 EnglandandWales1 Non-trading 100 £1Ordinaryshares
AscentPublishingLimited*02561341 EnglandandWales1 Non-trading 100 £1Ordinaryshares
CentaurConsumerExhibitionsLimited*07276298 EnglandandWales1 Non-trading 100 £1Ordinaryshares
Fascination(Holdings)Limited*08464940 EnglandandWales1 Holdingcompany 100 £1Ordinaryshares
FutureHoldings2002Limited04387886 EnglandandWales1 Holdingcompany 100 £1Ordinaryshares
FuturePublishingLimited*02008885 EnglandandWales1 Publishing 100 £1Ordinaryshares
FuturePublishing(Overseas)Limited*06202940 EnglandandWales1 Publishing 100 £1Ordinaryshares
FuturePublishingHoldingsLimited03430449 EnglandandWales1 Holdingcompany 87.5 1penceOrdinaryshares
FutureUS,Inc*0513070 USA(StateofCalifornia)2 Publishing 100 Notapplicable
FutureVerlagGmbH*HRB125675 Germany3 Non-trading 87.5 €1Ordinaryshares
FutureFolioLimited*07956484 EnglandandWales1 Digitalpublishingsolutions 100 £1Ordinaryshares
ImaginePublishingGroupLimited*07375965 EnglandandWales1 Holdingcompany 100 1penceOrdinaryshares
ImaginePublishingLimited*05374037 EnglandandWales1 Non-trading 100 1penceOrdinaryshares
Miura(Holdings)Limited08464815 EnglandandWales1 Holdingcompany 100 £1Ordinaryshares
NextCommercePhilippinesInc*CS201517783 Philippines4 Dormant 100 ₱1Ordinaryshares
NextCommercePtyLtd*113 146 786 Australia5 Comparisonshopping
searchengine 100 $1Ordinaryshares
PricepandaGroupGmbH*HRB138471B Germany6 Dormant 100 €1Ordinaryshares
RhoHoldingsLimited00040056 Guernsey7 Investmentcompany 100 £1Ordinaryshares
SarraceniaLimited04582851 EnglandandWales1 Dormant 100 £1Ordinaryshares
Skaro(Holdings)Limited*08469998 EnglandandWales1 Holdingcompany 100 £1Ordinaryshares
1Registeredoffice:QuayHouse,TheAmbury,Bath,BA11UA,England2Registeredoffice:1390MarketSt,Suite200,SanFrancisco,CA94102,USA3Registeredoffice:c/oPorubaGbR,Clemensstraße32,80803Munich,Germany4Registeredoffice:2/FGCCorporatePlaza,150LegaspiStreet,LegaspiVillage,Makati,Manila,Philippines5Registeredoffice:Suite3,Level10,100WalkerStreet,NorthSydney,NSW2060,Australia6Registeredoffice:Charlottenstraße4,10969Berlin,Germany7Registeredoffice:AquitaineGroupLimited,POBox357,MillCourt,LaCharroterie,StPeterPort,GY13XH,Guernsey
A&SPublishingCompanyLimited,AscentPublishingLimited,CentaurConsumerExhibitionsLimited,Fascination(Holdings)Limited,FutureHoldings2002Limited,FuturePublishingLimited,FutureFolioLimited,ImaginePublishingGroupLimited,ImaginePublishingLimited,Miura(Holdings)LimitedandSkaro(Holdings)LimitedareexemptfromtherequirementtofileauditedfinancialstatementsbyvirtueofSection479AoftheCompaniesAct2006.SarraceniaLimitedisexemptfromtherequirementtofileauditedfinancialstatementsbyvirtueofSection480oftheCompaniesAct2006.
87 Future plc
Notice of Annual General Meeting
Ordinary Business
Ordinary resolutions
1. ToreceiveandadopttheauditedfinancialstatementsoftheCompanyforthefinancialyearended30September2017andthereportsoftheDirectorsandtheauditors(the“AnnualReport”).
2. ToapprovetheDirectors’remunerationimplementationreportassetoutinpages30to36oftheAnnualReportoftheCompanyforthefinancialyearended30September2017.
3.ToapprovetheamendmentstotheRemunerationpolicyforthethreeyearperiodcommencingon1October2016assetoutinpages38to41oftheAnnualReportoftheCompany.
4.ToelectasaDirectorRichardHuntingford.
5. Tore-electasaDirectorZillahByng-Thorne.
6. Tore-electasaDirectorPennyLadkin-Brand.
7.Tore-electasaDirectorHugoDrayton.
8.Tore-electasaDirectorJamesHanbury.
9.ToreappointPricewaterhouseCoopersLLP,CharteredAccountantsandRegisteredAuditors,asauditorsoftheCompanytoholdofficeuntiltheconclusionofthenextGeneralMeetingatwhichaccountsarelaidbeforetheCompany.
10.ToauthorisetheDirectorstodeterminetheremunerationoftheauditorsoftheCompany.
11.That,insubstitutionforanyexistingauthority,theDirectorsbeandareherebygenerallyandunconditionallyauthorisedinaccordancewithsection551oftheCompaniesAct2006(the‘Act’)toexerciseallthepowersoftheCompanytoallotsharesintheCompanyandtograntrightstosubscribefor,ortoconvertanysecurityinto,sharesintheCompany:
11.1 inconnectionwithanofferbywayofarightsissue(comprisingequitysecuritiesasdefinedbysection560oftheAct),uptoanaggregatenominalamountof£4,565,590(suchamounttobereducedbythenominalamountofanyrelevantsecuritiesallottedunderparagraph11.2below):
(a) toholdersofOrdinarysharesinthecapitaloftheCompanyinproportion(asnearlyasmaybepracticable)totheirrespectiveholdingsofOrdinarysharesinthecapitaloftheCompany;and
(b) toholdersofanyotherequitysecuritiesasrequiredbytherightsofthosesecuritiesorastheDirectorsotherwiseconsidernecessary,
butsubjecttosuchexclusionsorotherarrangementsastheBoardmaydeemnecessaryorexpedientinrelationtotreasuryshares,fractionalentitlements,recorddates,legalorpracticalproblemsinorunderthelawsofanyterritory,ortherequirementsofanyregulatorybodyorstockexchange;and
11.2 inanyothercase,uptoanaggregatenominalamountof£2,282,795(suchamounttobereducedbythenominalamountofanyequitysecuritiesallottedunderparagraph11.1aboveinexcessof£2,282,795),atanytimeortimesduringtheperiodbeginningonthedateofthepassingofthisresolutionandendingfollowingtheconclusionoftheCompany’snextAnnualGeneralMeeting
or,ifearlier,on31March2019(unlesspreviouslyrevokedorvariedbytheCompanyinGeneralMeeting)savethattheCompanymaybeforeexpiryofthisauthoritymakeanofferoragreementwhichwouldormightrequirerelevantsecuritiestobeallottedafteritsexpiryandtheDirectorsmayallotrelevantsecuritiespursuanttosuchanofferoragreementasiftheauthorityherebyconferredhadnotexpired.
12.ToauthorisetheCompany,andallcompaniesthatareitssubsidiaries,atanytimeduringtheperiodforwhichthisresolutionhaseffectforthepurposesofSection366oftheActto:
(a) makepoliticaldonationstopoliticalpartiesand/orindependentelectioncandidatesnotexceeding£50,000intotal;
(b)makepoliticaldonationstopoliticalorganisationsotherthanpoliticalpartiesnotexceeding£50,000intotal;and
(c)incurpoliticalexpenditurenotexceeding£50,000intotal,
duringtheperiodbeginningwiththedateofthepassingofthisresolutionandendingfollowingtheconclusionoftheCompany’snextAnnualGeneralMeetingor,ifearlier,on31March2019.
ThisNoticeofMeetingisimportantandrequiresyourimmediateattention.
Ifyouareinanydoubtastowhatactionyoushouldtake,youshouldconsultyourstockbroker,bankmanager,solicitor,accountantorotherindependentadviserauthorisedundertheFinancialServicesandMarketsAct2000.
IfyouhavesoldorotherwisetransferredallyoursharesinFutureplc,pleaseforwardthisnotice,togetherwiththeaccompanyingdocuments,assoonaspossibleeithertothepurchaserortransferee,ortothepersonwhoarrangedthesaleortransfersothattheycanpassthesedocumentstothepurchaserortransferee.
Notice of Annual General Meeting
NoticeisherebygiventhatthenineteenthAnnualGeneralMeetingofFutureplcwillbeheldonMonday5February2018atFuture’sLondonoffice,1-10PraedMews,LondonW21QYat10:30amatwhichthefollowingresolutionsnumbered1to12willbeproposedasordinaryresolutions,andresolutionsnumbered13to15willbeproposedasspecialresolutions.
88Annual Report and Accounts 2017Financial Statem
ents
Special resolutions
13.That,ifresolution11ispassed,theDirectorsbeauthorisedtoallotequitysecurities(asdefinedinsection560oftheAct)forcashundertheauthoritygivenbythatresolution(inaccordancewithsection570(1)oftheAct)and/ortosellOrdinarysharesheldbytheCompanyastreasuryshares(inaccordancewithsection573oftheAct)forcashasifsection561(1)oftheActdidnotapplytoanysuchallotmentorsale,suchauthoritytobelimitedto:
(a) theallotmentofequitysecuritiesinconnectionwithanofferof,orinvitationtoapplyfor,equitysecurities(butinthecaseoftheauthoritygrantedunderparagraph11.1ofresolution11,bywayofarightsissueonly):
(i) infavourofholdersofOrdinarysharesinthecapitaloftheCompany,wheretheequitysecuritiesrespectivelyattributabletotheinterestsofallsuchholdersareproportionate(asnearlyaspracticable)totherespectivenumberofOrdinarysharesinthecapitaloftheCompanyheldbythem;and
(ii) toholdersofanyotherequitysecuritiesasrequiredbytherightsofthosesecuritiesorastheDirectorsotherwiseconsidernecessary,
butsubjecttosuchexclusionsorotherarrangementsastheDirectorsmaydeemnecessaryorexpedienttodealwithtreasuryshares,fractionalentitlementsorlegal,regulatoryorpracticalproblemsarisingunderthelawsorrequirementsofanyoverseasterritoryorbyvirtueofsharesbeingrepresentedbydepositoryreceiptsortherequirementsofanyregulatorybodyorstockexchangeoranyothermatterwhatsoever;and
(b)theallotment,otherwisethanpursuanttosub-paragraph(a)above,ofequitysecuritiesuptoanaggregatenominalvalueequalto£342,420,
suchauthoritytoexpireattheendofthenextAGMoftheCompanyor,ifearlier,atthecloseofbusinesson31March2019(unlesspreviouslyrevokedorvariedbytheCompanyinGeneralMeetingbut,ineachcase,priortoitsexpirytheCompanymaymakeoffers,andenterintoagreements,whichwould,ormight,requireequitysecuritiestobeallotted(andtreasurysharestobesold)aftertheauthorityexpiresandtheBoardmayallotequitysecurities(andselltreasuryshares)underanysuchofferoragreementasiftheauthorityhadnotexpired.
14. That,ifresolution11ispassed,theBoardbeauthorisedinadditiontoanyauthoritygrantedunderresolution13toallotequitysecurities(asdefinedinsection560oftheAct)forcashundertheauthoritygivenbythatresolution(inaccordancewithsection570(1)oftheAct)and/ortosellOrdinarysharesheldbytheCompanyastreasuryshares(inaccordancewithsection573oftheAct)forcashasifsection561(1)oftheActdidnotapplytoanysuchallotmentorsale,suchauthoritytobe:
a) limitedtotheallotmentofequitysecuritiesorsaleoftreasurysharesuptoanominalamountof£342,420;and
b) usedonlyforthepurposesoffinancing(orrefinancing,iftheauthorityistobeusedwithinsixmonthsaftertheoriginaltransaction)atransactionwhichtheBoardoftheCompanydeterminestobeanacquisitionorothercapitalinvestmentofakindcontemplatedbytheStatementofPrinciplesonDisapplyingPre-EmptionRightsmostrecentlypublishedbythePre-EmptionGrouppriortothedateofthisnotice,
suchauthoritytoexpireattheendofthenextAGMoftheCompanyor,ifearlier,atthecloseofbusinesson31March2019but,ineachcase,priortoitsexpirytheCompanymaymakeoffers,andenterintoagreements,whichwould,ormight,requireequitysecuritiestobeallotted(andtreasurysharestobesold)aftertheauthorityexpiresandtheBoardmayallotequitysecurities(andselltreasuryshares)underanysuchofferoragreementasiftheauthorityhadnotexpired.
15. Thatageneralmeeting,otherthananAnnualGeneralMeeting,maybecalledonnotlessthan14cleardays’notice.
OnbehalfoftheBoard
Penny Ladkin-BrandChiefFinancialOfficerandCompanySecretary8December2017
Financial Statements
89 Future plc
Notes
Further information about the AGM
1. Informationregardingthemeeting,includingtheinformationrequiredbysection311AoftheAct,isavailablefrom:www.futureplc.com/invest-in-future
Attendance at the AGM
2. Ifyouwishtoattendthemeetinginperson,pleasebringtheattendancecardattachedtoyourformofproxyandarriveatFuture’sLondonoffice,1-10PraedMews,LondonW21QY,insufficienttimeforregistration.Appointmentofaproxydoesnotprecludeamemberfromattendingthemeetingandvotinginperson.Ifamemberhasappointedaproxyandattendsthemeetinginperson,theproxyappointmentwillautomaticallybeterminated.
Appointment of proxies
3. Anymemberentitledtoattendandvoteatthemeetingmayappointoneormoreproxiestoattend,speakandvoteintheirplace.Amembermayappointmorethanoneproxyprovidedthateachproxyisappointedtoexercisetherightsattachedtoadifferentshareorsharesheldbythatshareholder.Ifyouappointmultipleproxiesforanumberofsharesinexcessofyourholding,theproxyappointmentsmaybetreatedasinvalid.AproxyneednotbeamemberoftheCompany.Aproxycardisenclosed.Tobeeffective,proxycardsshouldbecompletedinaccordancewiththesenotesandthenotestotheproxyform,signedandreturnedsoastobereceivedbytheCompany’sRegistrars:
ComputershareInvestorServicesPLC,ThePavilions,BridgwaterRoad,BristolBS996ZY notlaterthan10:30amonThursday1February2018beingtwobusinessdaysbeforethetimeappointedfortheholdingofthemeeting.Ifyousubmitmorethanonevalidproxyappointment,theappointmentreceivedlastbeforethelatesttimeforthereceiptofproxieswilltakeprecedence.
Electronic appointment of proxies
4. Asanalternativetocompletingtheprintedproxyform,youmayappointaproxyelectronicallybyvisitingthefollowingwebsite:www.investorcentre.co.uk/eproxy.
YouwillbeaskedtoentertheControlNumber,theShareholderReferenceNumber(SRN)andPINasprintedonyourproxyformandtoagreetocertaintermsandconditions.Tobeeffective,electronicappointmentsmusthavebeenreceivedbytheCompany’sRegistrarsnotlaterthan10:30amonThursday1February2018.
Number of shares in issue
5. Asatthecloseofbusinesson8December2017(beingthelastbusinessdaypriortothepublicationofthisnotice)theCompany’sissuedsharecapitalconsistedof45,655,967Ordinarysharesof15penceeach.EachOrdinarysharecarriesonevote.Therearenosharesheldintreasury.ThetotalnumberofvotingrightsintheCompanyistherefore45,655,967.
Documents available for inspection
6. PrintedcopiesoftheservicecontractsoftheCompany’sDirectorsandthelettersofappointmentforthenon-executiveDirectorswillbeavailableforinspectionduringusualbusinesshoursonanyweekday(Saturdays,Sundaysandpublicholidaysexcluded)attheCompany’sLondonofficeat
1-10PraedMews, London, W21QY
andattheCompany’sregisteredofficeat QuayHouse, TheAmbury, Bath, BA11UA
includingonthedayofthemeetingfrom 10:15amuntilitscompletion.
Eligible shareholders
7. TheCompany,pursuanttoRegulation41ofTheUncertificatedSecuritiesRegulations2001,specifiesthatonlythosemembersontheregisteroftheCompanyasat6pmonThursday1February2018or,ifthismeetingisadjourned,intheregisterofmembers48hoursbeforethetimeofanyadjournedmeeting,shallbeentitledtoattendandvoteatthemeetinginrespectofthenumberofsharesregisteredintheirnameatthattime.ChangestoentriesontheRegisterafter6pmonThursday1February2018or,ifthismeetingisadjourned,intheregisterofmembers48hoursbeforethetimeofanyadjournedmeeting,shallbedisregardedindeterminingtherightsofanypersontoattendorvoteatthemeeting.
Indirect investors
8. Anypersontowhomthisnoticeissentwhoisapersonthathasbeennominatedundersection146oftheActtoenjoyinformationrights(a‘NominatedPerson’)doesnothavearighttoappointaproxy.However,aNominatedPersonmay,underanagreementwiththeregisteredshareholderbywhomtheywerenominated(a‘RelevantMember’),havearighttobeappointed(ortohavesomeoneelseappointed)asaproxyforthemeeting.Alternatively,ifaNominatedPersondoesnothavesucharight,ordoesnotwishtoexerciseit,theymayhavearightunderanysuchagreementtogiveinstructionstotheRelevantMemberastotheexerciseofvotingrights.
ANominatedPerson’smainpointofcontactintermsoftheirinvestmentintheCompanyremainstheRelevantMember(or,perhaps,theNominatedPerson’scustodianorbroker)andtheNominatedPersonshouldcontinuetocontactthem(andnottheCompany)regardinganychangesorqueriesrelatingtotheNominatedPerson’spersonaldetailsandtheirinterestintheCompany(includinganyadministrativematters).TheonlyexceptiontothisiswheretheCompanyexpresslyrequestsaresponsefromtheNominatedPerson.
Appointment of proxies through CREST
9. CRESTmemberswhowishtoappointaproxyorproxiesthroughtheCRESTelectronicproxyappointmentservicemaydosoforthemeetingandanyadjournment(s)thereofbyusingtheproceduresdescribedintheCRESTManual.CRESTpersonalmembersorotherCRESTsponsoredmembers,andthoseCRESTmemberswhohaveappointedavotingserviceprovider(s),shouldrefertotheirCRESTsponsororvotingserviceprovider(s),whowillbeabletotaketheappropriateactionontheirbehalf.
InorderforaproxyappointmentorinstructionmadeusingtheCRESTservicetobevalid,theappropriateCRESTmessage(a‘CRESTProxyInstruction’)mustbeproperlyauthenticatedinaccordancewithEuroclearUK&IrelandLimited’sspecificationsandmustcontaintheinformationrequiredforsuchinstructions,asdescribedintheCRESTManual.Themessage,regardlessofwhetheritconstitutestheappointmentofaproxyoranamendmenttotheinstructiongiventoapreviouslyappointedproxymust,inordertobevalid,betransmittedsoastobereceivedbytheissuer’sagent(ID3RA50)by10:30amonThursday1February2018or,ifthemeetingisadjourned,notlessthan48hoursbefore
Notice of Annual General Meeting
90Annual Report and Accounts 2017Financial Statem
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thetimefixedfortheadjournedmeeting.Forthispurpose,thetimeofreceiptwillbetakentobethetime(asdeterminedbythetimestampappliedtothemessagebytheCRESTApplicationsHost)fromwhichtheissuer’sagentisabletoretrievethemessagebyenquirytoCRESTinthemannerprescribedbyCREST.AfterthistimeanychangeofinstructionstoproxiesappointedthroughCRESTshouldbecommunicatedtotheappointeethroughothermeans.
CRESTmembersand,whereapplicable,theirCRESTsponsorsorvotingserviceprovidersshouldnotethatEuroclearUK&IrelandLimiteddoesnotmakeavailablespecialproceduresinCRESTforanyparticularmessages.NormalsystemtimingsandlimitationswillthereforeapplyinrelationtotheinputofCRESTProxyInstructions.ItistheresponsibilityoftheCRESTmemberconcernedtotake(or,iftheCRESTmemberisaCRESTpersonalmemberorsponsoredmemberorhasappointedavotingserviceprovider(s),toprocurethathisCRESTsponsororvotingserviceprovider(s)take(s))suchactionasshallbenecessarytoensurethatamessageistransmittedbymeansoftheCRESTsystembyanyparticulartime.Inthisconnection,CRESTmembersand,whereapplicable,theirCRESTsponsorsorvotingserviceprovidersarereferred,inparticular,tothosesectionsoftheCRESTManualconcerningpracticallimitationsoftheCRESTsystemandtimings. TheCompanymaytreatasinvalidaCRESTProxyInstructioninthecircumstancessetoutinRegulation35(5)(a)oftheUncertificatedSecuritiesRegulations2001.
Amending a proxy
10.Tochangeaproxyinstruction,amemberneedstosubmitanewproxyappointmentusingthemethodssetoutabove.Notethatthedeadlinesforreceiptofproxyappointments(seeabove)alsoapplyinrelationtoamendedinstructions;anyamendedproxyappointmentreceivedaftertherelevantdeadlinewillbedisregarded.Whereamemberhasappointedaproxyusingthepaperproxyformandwouldliketochangetheinstructionsusinganothersuchform,thatmembershouldcontacttheRegistrarson+44(0)3707071443.
Ifmorethanonevalidproxyappointment
issubmitted,theappointmentreceivedlastbeforethedeadlineforthereceiptofproxieswilltakeprecedence.
Revoking a proxy
11.Inordertorevokeaproxyinstruction,asignedletterclearlystatingamember’sintentiontorevokeaproxyappointmentmustbesentbypostorbyhandtotheCompany’sRegistrars:
ComputershareInvestorServicesPLC, ThePavilions,BridgwaterRoad, BristolBS996ZY. Notethatthedeadlinesforreceiptofproxyappointments(seeabove)alsoapplyinrelationtorevocations;anyrevocationreceivedaftertherelevantdeadlinewillbedisregarded.
Corporate members
12. Inthecaseofamemberwhichisacompany,anyproxyform,amendmentorrevocationmustbeexecutedunderitscommonsealorsignedonitsbehalfbyanofficerofthecompanyoranattorneyforthecompany.Anypowerofattorneyoranyotherauthorityunderwhichthedocumentsaresigned(oradulycertifiedcopyofsuchpowerofauthority)mustbeincluded.Acorporatemembercanappointoneormorecorporaterepresentativeswhomayexercise,onitsbehalf,allitspowersasamemberprovidedthatnomorethanonecorporaterepresentativeexercisespowersoverthesameshare.Membersconsideringtheappointmentofacorporaterepresentativeshouldchecktheirownlegalposition,thecompany’sarticlesofassociationandtherelevantprovisionoftheCompaniesAct2006.
Joint holders
13.Wheremorethanoneofthejointholderspurportstovoteorappointaproxy,onlythevoteorappointmentsubmittedbythememberwhosenameappearsfirstontheregisterwillbeaccepted.
Questions at the AGM
14. Undersection319AoftheAct,theCompanymustansweranyquestionyouaskrelatingtothebusinessbeingdealtwithatthemeetingunless:
(a) answeringthequestionwouldinterfereundulywiththepreparationforthemeetingorinvolvethedisclosureofconfidentialinformation;
(b) theanswerhasalreadybeengivenonawebsiteintheformofananswertoaquestion;or
(c) itisundesirableintheinterestsoftheCompanyorthegoodorderofthemeetingthatthequestionbeanswered.
Members’ right to require circulation of a resolution to be proposed at the AGM
15. Undersection338oftheAct,amemberormembersmeetingthequalificationcriteriasetoutatnote18onpage91,may,subjecttoconditionssetoutatnote19,requiretheCompanytogivetomembersnoticeofaresolutionwhichmayproperlybemovedandisintendedtobemovedatthatmeeting.
Members’ right to have a matter of business dealt with at the AGM
16.Undersection338AoftheAct,amemberormembersmeetingthequalificationcriteriasetoutatnote18onpage91,may,subjecttotheconditionssetoutatnote19,requiretheCompanytoincludeinthebusinesstobedealtwithattheAGMamatter(otherthanaproposedresolution)whichmayproperlybeincludedinthebusiness(amatterofbusiness).
Financial Statements
91 Future plc
Website publication of any audit concerns
17. PursuanttoChapter5ofPart16oftheAct,whererequestedbyamemberormembersmeetingthequalificationcriteriasetoutatnote18below,theCompanymustpublishonitswebsiteastatementsettingoutanymatterthatsuchmembersproposetoraiseattheAGMrelatingtotheauditoftheCompany’saccounts(includingtheauditors’reportandtheconductoftheaudit)thataretobelaidbeforetheAGM.
WheretheCompanyisrequiredtopublish
suchastatementonitswebsite:
(a) itmaynotrequirethemembersmakingtherequesttopayanyexpensesincurredbytheCompanyincomplyingwiththerequest;
(b) itmustforwardthestatementtotheCompany’sauditorsnolaterthanthetimethestatementismadeavailableontheCompany’swebsite;and
(c) thestatementmaybedealtwithaspartofthebusinessoftheAGM.
Therequest:
(d) maybeinhardcopyformorinelectronicformandmustbeauthenticatedbythepersonorpersonsmakingit(seenote19(d)and(e)below);
(e) shouldeithersetoutthestatementinfullor,ifsupportingastatementsentbyanothermember,clearlyidentifythestatementwhichisbeingsupported;and
(f) mustbereceivedbytheCompanyatleastoneweekbeforetheAGM.
Members’ qualification criteria
18.Inordertobeabletoexercisethemembers’rightssetoutinnotes15to17abovetherelevantrequestmustbemadeby:
(a) amemberormembershavingarighttovoteattheAGMandholdingatleast5%oftotalvotingrightsoftheCompany;or
(b) atleast100membershavingarighttovoteattheAGMandholding,onaverage,atleast£100ofpaidupsharecapital.
Conditions
19. Theconditionsarethat:
(a) anyresolutionmustnot,ifpassed,beineffective(whetherbyreasonofinconsistencywithanyenactmentortheCompany’sconstitutionorotherwise);
(b) theresolutionormatterofbusinessmustnotbedefamatoryofanyperson,frivolousorvexatious;
(c) therequest:
(i) maybeinhardcopyformorin electronicform;
(ii) mustidentifytheresolutionorthematter ofbusinessofwhichnoticeistobegivenbyeithersettingitoutinfullor,ifsupportingaresolution/matterofbusinesssentbyanothermember,clearlyidentifyingtheresolution/matterofbusinesswhichisbeingsupported;
(iii)inthecaseofaresolution,mustbeaccompaniedbyastatementsettingoutthegroundsfortherequest;
(iv)mustbeauthenticatedbythepersonorpersonsmakingit;and
(v) mustbereceivedbytheCompanynotlaterthansixweeksbeforethedateoftheAGM;
(d) inthecaseofarequestmadeinhardcopyform,suchrequestmustbe:
(i) signedbyyouandstateyourfullnameandaddress;and
(ii) senteither:bypostto
CompanySecretary, Futureplc, QuayHouse, TheAmbury, BathBA11UA;
orbyfaxto+44(0)1225732266
markedfortheattentionoftheCompanySecretary;and
(e) inthecaseofarequestmadeinelectronic
form,suchrequestmust:
(i) stateyourfullnameandaddress;and
(ii) [email protected].
Pleasestate‘AGM’inthesubjectlineoftheemail.YoumaynotusethiselectronicaddresstocommunicatewiththeCompanyforanyotherpurpose.
Notice of Annual General Meeting
92Annual Report and Accounts 2017Financial Statem
entsFinancial Statem
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Investor information
Registrar and transfer office
TheCompany’sshareregisterismaintainedby:
ComputershareInvestorServicesPLCThePavilionsBridgwaterRoadBristol BS138AETel:+44(0)3707071443
ShareholdersshouldcontacttheRegistrar,Computershare,inconnectionwithchangesofaddress,lostsharecertificates,transfersofsharesandbankmandateformstoenableautomatedpaymentofdividends.
Online information – www.investorcentre.co.uk
OurRegistrar,Computershare,hasaservicetoprovideshareholderswithonlineinternetaccesstodetailsoftheirshareholdings. Theserviceisfree,secureandeasytouse. Toregisterfortheservice,gotowww.investorcentre.co.uk
Unsolicited mail
Theshareregisterisbylawapublicdocument.Tolimitthereceiptofmailfromotherorganisations,pleaseregisterwiththeMailingPreferenceService,byvisitingwww.mpsonline.org.uk/mpsr/
Warning to shareholders – ‘boiler room’ scams
Inrecentyears,manycompanieshavebecomeawarethattheirshareholdershavereceivedunsolicitedphonecallsorcorrespondenceconcerninginvestmentmatters.Thesearetypicallyfromoverseas-based‘brokers’whotargetUKshareholders,offeringtosellthemwhatoftenturnouttobeworthlessorhigh-risksharesinUSorUKinvestments.Theseoperationsarecommonlyknownas‘boilerrooms’.These‘brokers’canbeverypersistentandextremelypersuasive.
Itisnotjustthenoviceinvestorthathasbeendupedinthisway;manyofthevictimshadbeensuccessfullyinvestingforseveralyears.Shareholdersareadvisedtobeverywaryofanyunsolicitedadvice,offerstobuysharesatadiscountoroffersoffreecompanyreports.Ifyoureceiveanyunsolicitedinvestmentadvice:
• Makesureyougetthecorrectnameofthepersonandorganisation
• CheckthattheyareproperlyauthorisedbytheFCAbeforegettinginvolvedbyvisiting www.fca.org.uk/register
• ReportthemattertotheFCAeitherbycalling0800 111 6768 orbycompletingthefraudreportingformontheFCAwebsiteat:www.fca.org.uk/consumers/scams/investment-scams/share-fraud-and-boiler-room-scams/reporting-form
• Ifthecallspersist,hangup.
Ifyoudealwithanunauthorisedfirm,youwillnotbeeligibletoreceivepaymentundertheFinancialServicesCompensationScheme.
DetailsofanysharedealingfacilitiesthattheCompanyendorseswillbeincludedincompanymailings.
Moredetailedinformationonthisorsimilaractivitycanbefoundat www.moneyadviceservice.org.uk
For enquiries of a general nature regarding the Company and for investor relations enquiries please contact Penny Ladkin-Brand at the Company’s Registered Office, or visit www.futureplc.com and select the investor relations section.
Registered office
FutureplcQuayHouseTheAmburyBathBA11UA
Tel+44(0)1225442244
www.futureplc.com/invest-in-future
i
93 Future plc
Directors and advisers
Directors
Peter Allen Chairman(until1February2018)
Richard HuntingfordChairman(witheffectfrom1February2018)
James HanburyDeputyChairman
Zillah Byng-ThorneChiefExecutive
Penny Ladkin-BrandChiefFinancialOfficerandCompanySecretary
Hugo DraytonIndependentnon-executiveDirector
Offices
Registered officeFutureplcQuayHouseTheAmburyBathBA11UATel+44(0)1225442244
London office1-10PraedMewsLondon W21QYTel+44(0)2070424000
www.futureplc.com
Companyregistrationnumber3757874RegisteredinEnglandandWales
Advisers
Independent auditorsPricewaterhouseCoopersLLPCharteredaccountantsandstatutoryauditors2GlassWharfBristolBS20FR
BrokersNumisSecuritiesLtd10PaternosterSquareLondonEC4M7LT
N+1Singer1BartholomewLaneLondonEC2N2AX
Principal bankersHSBCBankplc8CanadaSquareLondonE145HQ
SolicitorsSimmonsandSimmonsLLP1LinearParkAvonStreetTempleQuayBristolBS2OPS
Registrar ComputershareInvestorServicesPLCThePavilionsBridgwaterRoadBristol BS138AE
Financial calendar
Announcement of annual results 24November2017
Annual General Meeting5February2018
Half-year end31March2018
Announcement of interim resultsMay2018
Financial year-end30September2018
94AnnualReportandAccounts2017Financial Statem
ents
Future plc and Future Publishing LtdRegistered officeQuayHouseTheAmburyBathBA11UA
Tel+44(0)1225442244
Future US, Inc.1390MarketStreetSuite200SanFranciscoCA94102USA
Tel+16502382400
www.futureplc.com
London office1-10PraedMewsLondon W21QY
Tel+44(0)2070424000
Future Publishing (Overseas) LtdSuite3,Level10100WalkerStreetNorthSydneyNSW 2060Australia
Tel+61299552677
Bournemouth officeRichmondHouse33RichmondHillBournemouthBH26EZ
Bromsgrove officeSugarBrookCourt2AstonRoadBromsgroveB603EX
Contacts