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DMGT is an international business built on entrepreneurism and innovation. Strategic Report
DMGT manages a portfolio of companies that provide businesses and consumers with compelling information, analysis, insight, events, news and entertainment. The Group takes a long-term approach to investment and has market-leading positions in Governance consumer media, insurance risk, property information, education technology and events & exhibitions. In total, DMGT generates revenues of around £1.2 billion.
Strategic Report Chairman’s Statement 02 02 10 DMGT at a Glance 05 Chairman’s Statement CEO Review Our Business Model 06 Financial Statements Market Overview 08 Maintaining a strong Delivering against CEO Review 10 portfolio of businesses clear strategic Key Performance Indicators 14 priorities Operating Business Reviews 16 Insurance Risk 17 Property Information 17 EdTech 18 Events and Exhibitions 19 Energy Information 19 Consumer Media 20 JVs, associates and dmg ventures 22 Financial Review 23 Our Stakeholders 32 Section 172 statement 38 Shareholder Information Shareholder Principal Risks 40 06 16 Our Business Model Operating Business Governance Board of Directors and Company Secretary 48 Proprietary Innovative Reviews content technology Chairman’s Statement on Governance 50 Corporate Governance 51 Remuneration Report 68 Statutory Information 92 Annual General Meeting 2021: Resolutions 95
Financial Statements Independent Auditor’s Report 97
Data Consumer Financial Statements 107 science know-how
Shareholder Information 219
1 Strategic Report Daily Mail and General Trust plc Annual Report 2020
Navigating through turbulence Chairman’s Statement Strategic Report
We have managed our businesses prudently to ensure we are well positioned for recovery.
The Viscount Rothermere Chairman Governance
The 12 months covered by our 2020 At the business, employee and community Annual Report have been among the levels, DMGT has demonstrated the breadth Financial Statements most challenging that DMGT has faced and depth of its operations. Our range of since our business was founded more businesses, from B2B information to one than a century ago. Our Group and the of the world’s highest-reach online news wider business world are grappling with platforms, helped us to offset weakness disruption caused by a global Covid-19 in some parts of the Group with strong pandemic, for which the only precedent performances elsewhere. Although we have was the Spanish Influenza of 1918–20. not been immune to pandemic volatility, DMGT has our results show that DMGT is well placed DMGT, which was first created to manage my to benefit from the economic recovery that responded both family’s newspaper assets, has demonstrated we expect to materialise in due course. in the intervening century the value of constructively long-term patient capital. Over that period, Ahead of that anticipated recovery, we have and resiliently to we have traded and continued to grow worked hard to stabilise your Group in a through a world war, through economic period when the global economy has been the coronavirus recessions, multiple changes of government, shaken by Covid-19. Throughout, the health the onset of the digital age, globalisation, and wellbeing of our employees and their Shareholder Information Shareholder disruption.” market volatility and dramatically changing families around the world has been a priority consumer and business demand. Throughout, and we have endeavoured to safeguard jobs. we have deployed capital, managed our In parallel, we also implemented measures assets and developed a strategy to deliver to secure the health of DMGT. This saw a sustained shareholder value. significant investment of management time and capital to strengthen areas of growth These have been our guiding principles for while also seeking additional efficiency many years and they have been a consistent savings across the Group. backdrop in addressing the headwinds faced in the 12 months to 30 September 2020, DMGT benefits from a strong balance sheet, the year of Covid-19. As Paul Zwillenberg, with a net cash position, that allows us to your CEO, outlines on pages 10 to 13, continue to invest in both our B2B and DMGT has responded both constructively Consumer Media operations and to and resiliently to the disruption. consider meaningful acquisitions when opportunities arise.
2 Daily Mail and General Trust plc Annual Report 2020 Strategic Report
Group revenue Pro forma net cash§ MailOnline’s average daily audience -10% £168 million 17 million underlying growth^
^ See footnote shown on page 15. § See footnote shown on inside front cover.
The underlying financial strength of your advertising market, reduced newspaper of the portfolio over the past few years. Group enabled us to avoid the pronounced circulation volumes and a significant These measures, combined with other cutbacks that have impacted some of our slowdown in the UK property markets. aspects of the strategy being executed by peers. Although some headcount reduction Paul Zwillenberg and his team, including We saw relative resilience in areas such as was unavoidable, we strove to minimise improving operational execution and our subscription businesses, Insurance Risk, job losses in our businesses. We also maintaining financial flexibility, have
US Property Information and EdTech, Governance implemented a temporary salary substitution positioned DMGT to be able to capitalise together representing about a third of our plan at some businesses where trading on rising demand when it returns. Group revenues. This could not compensate, was particularly affected by Covid-19, however, for the sharply reduced performance For these reasons, your Board is able compensating our staff with share awards. of our consumer print businesses, where to recommend an increase in the total Alongside the business and financial there were substantial declines in advertising dividend for the year to 24.1 pence per share, discipline that is a hallmark of DMGT, revenues, and our UK Property Information reaffirming our commitment to generating we played our part in supporting the UK’s and Events and Exhibitions businesses. returns for our shareholders and reflecting pandemic response efforts. The newly DMGT’s long-term approach to capital Although we traded strongly in the first five established Mail Force Charity provided vital management and allocation. months of the financial year, our generally medical supplies to frontline workers and robust renewal rates and new subscription other essential staff. Mail Force sourced Governance sales were not enough to prevent reduced personal protective equipment internationally DMGT is overseen by a strong and revenues as some of the markets were to supplement official UK medical experienced Board that remains committed effectively shut down due to Covid-19. procurement, organising airlifts to fill the gap to the high governance standards its Nevertheless, we continued to launch new as the pandemic threatened to overwhelm shareholders expect. The Board and its
products and services across our B2B Financial Statements health and social care providers. The efforts of committees ensure that the Group is operations, aiming to benefit from the the Charity were hailed by Sir Simon Stevens, governed with sound planning, strong digitisation of our sectors. Chief Executive of the NHS, who said: “It’s internal control systems, proper accounting been an enormous boost, coming on top The online operations of our Consumer and compliance with statutory and of the Government’s efforts to get us the kit Media division remained relatively resilient, regulatory obligations. At the meetings we in the NHS need. It’s helped our doctors, with declines in digital advertising being throughout the financial year, and in regular nurses, porters, therapists, cleaners, significantly less marked than in print. interactions between the Board and scientists and countless other staff to so I am pleased to report that MailOnline, management, we have continued to review brilliantly care for 90,000 hospital patients one of our flagship media platforms, DMGT’s performance in light of the Group’s desperately ill with Covid-19, as well as continued to grow its revenues and profits, strategic aims, objectives, business plans continuing to provide essential services such as well as extending its market presence. and changing economic conditions. as cancer, A&E and mental health care.” As we reported during the course of The Board has continued to prioritise the Such proactive steps, agreed wholeheartedly the financial year, our teams worked competent and prudent management by your Board, reflect the shared values of extraordinarily hard to adapt to pandemic strategy led by Paul Zwillenberg, your CEO, this Group. I take pride in what has been trading conditions, which gives me and Tim Collier, your Group Chief Financial achieved, but I know that our businesses and confidence that our businesses will be Officer. We are fortunate to have Directors Information Shareholder our people face continued uncertainty in the both resilient and agile in a post-Covid-19 with experience of an extensive range of months ahead. We have taken a number of environment. This resilience is not fully businesses and international markets, measures to mitigate this uncertainty and we reflected by the financial results for the which supports rigorous and high-quality have managed our businesses prudently to 12-month period, which show revenues debate of DMGT’s strategic opportunities. ensure we are well positioned for recovery. down by an underlying 10% at £1,211 million The Board reconsidered the dividend policy and adjusted earnings per share decreasing Business highlights carefully during the year and resolved to to 26.1 pence. The results include the benefit leave it unchanged. The policy aims to Metaphorically, the 2020 financial year was of a diversified portfolio, with businesses in deliver a reliable and predictable dividend ‘a game of two halves’. For most of the first Insurance Risk, US Property Information and growth trajectory, unaffected by fluctuations half, we traded successfully and delivered EdTech helping to offset volatility elsewhere. in earnings or capital gains, while also being sustained growth. In March 2020, however, sufficiently prudent to retain the flexibility the financial impact of Covid-19 began Similarly, we have come through this to make significant investments in the to bite. This included the cancellation period with a strong balance sheet, having long-term future growth of the business. or postponement of events, a weaker disposed of assets and increased the focus
3 Strategic Report Daily Mail and General Trust plc Annual Report 2020
Navigating through turbulence Chairman’s Statement
I would like to thank Tessa Keswick who Remuneration Strategic Report stood down from the DMGT Board on DMGT aims to reward senior management Adjusted revenue by business 1 October 2020. appropriately for the performance of the FY 2020 (%) Filippa Wallestam joined DMGT’s Board as Group, its businesses and the individuals Insurance Risk 21 an Independent Non-Executive Director in concerned, in light of the international Property Information 15 November 2020. Filippa brings extensive marketplace for executive talent. We are EdTech 7 knowledge and experience in the fields of conscious that remuneration remains an Events and Exhibitions 7 broadcasting and digital media strategy. issue of importance for DMGT’s shareholders and the wider community of stakeholders Consumer Media 50 Read more in the Governance report, that we serve. Our remuneration policy pages 48 to 67 mandates that no Director or manager shall be involved in any decisions as to People and culture their own remuneration. In more than two decades as your Chairman, I have been proud of the investments we Read more in Remuneration Report, have made in the people and the culture pages 68 to 91 Governance that represent the beating heart of DMGT. Our people share a common passion for Outlook the entrepreneurism and innovation The past financial year was defined by that shapes our different business units. challenges and uncertainty. Fortunately, The success and growth of those businesses we were able to navigate this turbulence depend crucially on the quality of people due to both the quality of our businesses that work for them, which requires the and the quality of the people working provision of opportunities for continued in them. learning, training and the development We also ended the year with strong pro Dividend per share of new skills. We have also continued to forma net cash of £168 million and The Board’s policy is to grow the refresh our complement of people with £373 million of committed undrawn bank dividend in real terms and, in the apprenticeships and graduate intakes, facilities. Notwithstanding this financial medium term, to aim to distribute ensuring that our human capital continues strength, the continued disruption caused around one-third of the Group’s to evolve and grow. by Covid-19 has weighed on both our B2B adjusted earnings. Culturally, we balance an absolute and Consumer Media operations. At a Financial Statements commitment to business performance and business and at a personal level, your 2 2 p Board very much hopes the worst is competitiveness with a readiness to go the 20 extra mile for the communities and markets behind us and that further waves of the that we serve. In this financial year, that pandemic can be avoided in the coming extensive community commitment included winter. I know, however, that DMGT the Mail Force Charity, discussed above, has the core strength to address these 0 through to volunteering by many of our staff challenges, even if precise guidance on p to help the disadvantaged. These efforts our likely financial performance in FY 2021 2 p have been made possible, in part, due to the is difficult to provide. 0 effectiveness of our Corporate Responsibility We have entered the new financial year 0 2020 Champions network. I want to thank with strong foundations in place and Di idend n lation everyone at DMGT who has supported this I remain confident that DMGT can vital work in the past year. withstand a sustained period of global So, while we will maintain a business economic uncertainty to emerge culture of continually seeking to improve resilient and able to deliver continued Shareholder Information Shareholder commercial performance, we will also shareholder value. preserve a wider cultural commitment to extending DMGT’s values of teamwork and civic service through charitable activities in the UK and around the world. Read more in Our Stakeholders, pages 32 to 39 The Viscount Rothermere Chairman
4 Daily Mail and General Trust plc Annual Report 2020
Who we are DMGT at a Glance
DMGT’s portfolio of companies operates across B2B and consumer markets Strategic Report and has become more focused, positioning the Group for long-term growth and value creation.
Our sectors
B2B
Insurance Risk RMS produces risk models and software applications, and provides analytical data services used by the global risk and insurance industry to quantify and manage catastrophe risk. Read more, page 17 Governance Property Information Our Property Information companies provide technology, data and workflow solutions to clients involved in commercial and residential property markets as well as risk and valuation services to the Commercial Mortgage-Backed Securities market. The disposal of BuildFax occurred in October 2019. Read more, page 17
EdTech Hobsons is the leading provider of student success solutions in the US through its Naviance, Intersect and Starfish platforms. Read more, page 18
Events and Exhibitions
dmg events is an international B2B exhibitions and conference organiser, focusing on Financial Statements the energy, construction, interiors, hotel, hospitality and leisure sectors, operating across several geographies. Read more, page 19
Consumer
Consumer Media dmg media is a modern news media company with two of the UK’s most-read paid-for newspapers and one of the world’s most popular free newspapers. It includes MailOnline, whose readers spend a total 145 million minutes on the site and apps each day. In November 2019, the ‘i’, the UK national newspaper and website, was added to the portfolio.
Read more, page 20 Information Shareholder
JVs, associates and dmg ventures
dmg ventures invests in disruptive consumer propositions that need to scale and which can leverage DMGT’s assets to do so. These include Cazoo, which aims to change the way people buy used cars in the UK, and Yopa, the UK hybrid estate agent. The Group also invests in B2B businesses, including Praedicat in the Insurance Risk sector. Read more, page 22
Go online to www.dmgt.com for more information about our businesses
5 Strategic Report Daily Mail and General Trust plc Annual Report 2020
How we create value Our Business Model
Satisfying the Which we monetise Strategic Report need to know through five revenue models Governance DMGT’s market-leading businesses Subscription Our B2B operating companies have a strong subscription deliver products and solutions with revenue component with a track record of delivering engaging content, combining data, growth and high renewal rates, demonstrating the technology and consumer know-how. strength of our customer relationships.
We provide businesses and consumers with compelling information, analysis, insight, events, news Circulation and entertainment. Circulation revenues are generated from sales of the Daily Mail, The Mail on Sunday and ‘i’ newspapers, with the Mail titles continuing to hold market-leading positions and gain market share in a declining market. Financial Statements
Proprietary Innovative content technology Advertising Our Consumer Media business generates advertising revenue both in print and digital formats. Growth in our digital advertising revenues usually helps to offset structural declines in print advertising. Enhanced user engagement drives advertiser interest in increasingly sophisticated advertising formats.
Events attendance and sponsorship Information Shareholder Exhibitor fees, sponsorship revenues and delegate fees are earned from the portfolio of B2B shows run by dmg events.
Data Consumer Transactions science know-how Our Property Information revenues are influenced by UK residential and commercial property transaction volumes.
Read more about our operating companies’ business models in Operating Business Reviews, pages 16 to 22 Read more in Financial Review, pages 23 to 31
6 Daily Mail and General Trust plc Annual Report 2020
Drawing upon Enabling us to Strategic Report create value for our stakeholders Governance Culture and values For our shareholders DMGT has developed a performance We have a track record of investing for the long term to management culture underpinned by core deliver value creation across a diversified portfolio of values that we believe are integral to the entrepreneurial operating companies. Our strategy aims to Group’s identity: achieve sustainable long-term earnings and dividend growth. Entrepreneurism Total shareholder return FY 1990 – FY 2020 As a home for entrepreneurs, working at the cutting edge of technology, DMGT fosters constant 9% CAGR innovation, growth and talent development across our international businesses. For our employees Purpose We nurture entrepreneurial talent and encourage our people Long-term perspective and businesses with a clear to make their own mark on DMGT, a diverse international sense of purpose for their customers and society. portfolio with over 120 years of heritage. Financial Statements Excellence Employees worldwide Commitment to quality, craftsmanship and delivering excellence. We seek the best talent, 5,698 leadership and expertise.
For our customers People Our deep understanding of customer needs enables us to innovate constantly and create content, products and The expertise and passion of our employees. solutions that provide our operating companies with a competitive edge and make us even more relevant to our customers. Organic investment as a percentage of revenues FY 2020 Technology 10% Technology enables DMGT’s businesses to Shareholder Information Shareholder provide compelling products and solutions. For our communities usto er DMGT operating companies have helped establish, relations ips and developed strategic partnerships with a number Customer relationships of charitable organisations, most recently Mail Force Charity. These initiatives focus on making a difference DMGT values the relationships we have in the communities where our people work and live. fostered with our customers, consistent with our long-term approach. Amount donated to charity FY 2020 including employee volunteering hours £1.6 million
Read more in Our Stakeholders, pages 32 to 39 Read more in Our Stakeholders, pages 32 to 39
7 Strategic Report Daily Mail and General Trust plc Annual Report 2020
Adapting to continuous change Market Overview Strategic Report DMGT comprises a portfolio of businesses working across diverse markets. While each sector has its own individual characteristics, some common features exist:
• Content and information-driven • Fast-paced and evolving to adopt new technology and business models • Technology-enabled with high degrees of innovation • Enduring and resilient over the long term
Increased Political Cyber volatility uncertainty security Governance
Context to DMGT Context to DMGT Context to DMGT • As a provider of proprietary, hard-to- • Political policy decisions have direct • As a provider of business-critical data, obtain information, DMGT benefits from and often unexpected impacts on the analytic tools for global industries and growing uncertainty in the world as its geographies and sectors in which news media, DMGT is exposed to cyber customers rely more heavily on data DMGT operates and will continue to security risks across its operations. and analysis to inform critical decisions. shape where and how DMGT pursues Market trend commercial and strategic opportunities. Market trend • Cyber security threat is a permanent • Global economic uncertainty, political Market trend business risk in the digital age. tensions and supply and demand • There is still long-term geopolitical and Governments and regulatory bodies disruptions continue to influence our trading uncertainty for UK companies’ are increasingly alert to the threat customers and their markets. There is operations abroad. posed to individuals and society by uncertainty about the impact on economies security breaches. • Changing political landscapes throughout globally of Covid-19, the measures to the world add to the climate of political • As customer confidence is easily eroded, Financial Statements control it and the management of national uncertainty. enforcing the highest possible cyber debt levels. The UK economy continues security standards is critical for to be unsettled by uncertainty about Our approach maintaining customer and market trust. the impact of Brexit. • DMGT closely follows political changes and implications for the geographies and Our approach • Pandemics, extreme weather events, sectors in which it participates. In many • DMGT continues to strengthen its fluctuations in the pricing of financial instances, the uncertainty of changing information security controls. The Group securities and continued exchange-rate political and regulatory norms presents Chief Information Security Officer leads a swings have directly impacted the commercial opportunities, as we help continuous review of the cyber security economic and social environments for our customers anticipate implications landscape in order to roll out enhanced both investment and business operations. for their business. information security standards, Our approach compliance roadmaps and perform • We continually review our operations • Our diversified portfolio provides balance regular cyber security audits. against changes to global sanctions in an increasingly volatile world: as one and diplomatic relations. • The Executive Committee ensures sector may be facing headwinds, another
senior-level engagement across the Information Shareholder may benefit. Group and appropriate investment • DMGT is providing its customers with in risk reduction. fundamental content, data, analytics • Incident reports, responses and best and insights. This enables them to move practices are shared across the Group away from decisions based on instinct to help ensure appropriate mitigation and embrace data as a means to of any threat. navigate volatility. • DMGT’s businesses are not dependent on trade between the UK and the remaining EU members, other than the sourcing of newsprint for the Consumer Media business. Notwithstanding a period of political and macroeconomic uncertainty, the future is viewed with confidence.
8 Daily Mail and General Trust plc Annual Report 2020 Strategic Report Our businesses are constantly looking to the future to identify and manage current and future trends. The most significant of these are identified here, as well as DMGT’s approach to the trends. Read more on the trends affecting the Group in Principal Risks, pages 40 to 47
Continuous Artificial A competitive innovation intelligence talent pool Governance
Context to DMGT Context to DMGT Context to DMGT • Technological change and customer • There is an increasing prevalence of • Across the global workforce, top talent adoption rates of new technologies systems and devices that are designed to is drawn to companies that offer a in our key sectors are accelerating, act intelligently. There is also continued compelling employee value proposition. changing and erasing traditional growth in the amount of data being This includes purpose beyond profit, business models. generated, stored and made available competitive remuneration and continuing for analysis. With the benefit of artificial learning and development opportunities. Market trend intelligence, a smart system can quickly • The speed of technology evolution is Market trend process and use data to inform and increasing the capital intensity of IT • Demand for top talent is always fierce, change its future behaviour. These investment and product development, particularly in the critical areas of big data developments create opportunities reducing business investment horizons. analytics, artificial intelligence and data for DMGT and its businesses. science, where demand in many labour Our approach Market trend markets outstrips supply. • As an entrepreneurial Group focused Financial Statements • Artificial intelligence, including machine on digital growth, DMGT stays ahead Our approach learning, enables businesses to perform by continually fostering innovation and • In competing for key employees, especially analysis on immense quantities of data embracing new ideas. This is reflected critical technology talent, DMGT is and derive insights that were previously by DMGT’s expectation of investing at committed to enhancing its employee impossible to see. least 5% of revenue in organic initiatives proposition. each year. Our approach • The central technology function • DMGT’s businesses help their customers • DMGT has a family heritage which coordinates Group-wide communication to identify which information provides encourages long-term thinking and and mobility for technological talent. strategic value, access data from different the application of patient capital. sources and explore how algorithms • DMGT supports training and development Consequently, the Group can invest can be used to improve processes and in order to enhance employees’ capabilities for the future, seeding, incubating and understanding. This area is evolving and transfer skills throughout the nurturing innovative opportunities. quickly and DMGT’s businesses are businesses. We also provide initiatives such • Throughout DMGT’s history, innovation embracing the opportunity to develop as our talent development programmes
and diversification have been essential new products to increase efficiency. to encourage rising talent within DMGT. Information Shareholder elements of how we do business and • Statistical analytics are integral to many • Our Board of Directors meets emerging have given us a wealth of experience of the products and services that we leaders at the operating companies as to draw on in order to adapt to continue to develop across our businesses. part of the schedule of Board meetings. market changes. • We have a central technology function • DMGT’s investment approach enables us with expertise in artificial intelligence, to remain close to customers through which is leveraged by the operating our portfolio of businesses. This provides companies. greater insight into exactly what our customers value, engage with and, ultimately, want to buy.
9 Strategic Report Daily Mail and General Trust plc Annual Report 2020
Delivering against clear strategic priorities CEO Review
Overview Strategic Report 2020 will forever be defined by the Key strategic priorities Covid-19 pandemic and the extreme disruption and change that it brought to Delivering on our potential people and businesses across the world. In this context, I am immensely proud of the way that everyone at DMGT responded. Our people reacted to the situation with calm and compassion and demonstrated an impressive level of adaptability in unique circumstances. Our transition to working remotely was Improving operational Increasing portfolio Maintaining financial smooth and we continued to deliver our execution focus flexibility products to customers seamlessly across the portfolio, other than the necessary Governance cancellation of events. Of particular note, We have also been actively involved in Finally, we worked closely with each of our in March 2020 the Mail newspapers were supporting our communities. We have businesses to put contingency plans in place. produced remotely for the first time, an always taken our role in society seriously Any short-term decisions were balanced extraordinary achievement by our team. and I am proud of the Group’s response, against the opportunity to create value in Throughout this period, our customer which I believe is testament to that. the long term. We, together with Salesforce, launched relationships strengthened as we worked Read more in Our Stakeholders, Mail Force Charity to provide the NHS closely to understand how best to meet their pages 32 to 39 needs in a rapidly changing environment. with supplies of PPE. We remain immensely grateful for our At Metro, we continued to print the Business highlights customers’ support. newspaper for key workers on their daily Our performance over the last year was DMGT’s portfolio approach, combining commute. For those who were not able to significantly impacted by Covid-19. The first travel to a newsagent, we strengthened high-quality, market-leading businesses, five months of trading were, in fact, very our home delivery service and augmented is a real source of strength and is helping encouraging but the onset of the pandemic ‘Mail+’, providing enhanced digital versions us to manage through a challenging caused severe disruption to some of of the Daily Mail’s content. our businesses.
macroeconomic environment. Each business Financial Statements has been affected differently, depending At Landmark, we assisted the NHS by Importantly, however, as a Group we on its sector and revenue model. In general, providing free environmental reporting continued to execute against our strategic during the year, our subscription B2B to support the design of the Nightingale priorities. We also benefitted from the businesses proved to be largely resilient, hospitals, whilst at Hobsons, we provided diversity of our portfolio which now while our Consumer Media, UK Property Naviance Curriculum free of charge comprises a more focused set of businesses Information and Events and Exhibitions to schools across the US, to the benefit with leading market positions in attractive businesses were all significantly impacted. of more than three million students. segments. We remain confident that these Encouragingly, we have continued to execute We also made a conscious decision, businesses are well placed to realise their well against our three key strategic priorities supported by the strength of our balance potential over the medium to long term. of increasing portfolio focus, improving sheet, to prioritise the Group’s self- At the operating level, the Group delivered a sufficiency. We believed it was responsible operational execution and maintaining mixed performance. Across the B2B portfolio, not to take government support, allowing financial flexibility. Our experience through our subscription businesses proved resilient much-needed national resources to be Covid-19 is an important proof point of the while UK Property Information and Events applied elsewhere. progress made over the past few years. and Exhibitions were both significantly
DMGT responded with agility, benefitting As a business, DMGT responded quickly and impacted. Although events continue to be Information Shareholder from the more focused portfolio of adapted to the uncertainty that we faced. affected by social distancing restrictions, businesses and our performance We introduced a salary substitution plan, it has been encouraging to see Landmark management culture, and the Group is issuing equity for our higher earners. This deliver an improvement in recent months. more operationally and financially resilient. was an innovative approach which we felt Consumer Media experienced a particularly was fair for everyone, aligning employees’ Response to Covid-19 difficult advertising market, as well as and shareholders’ interests, and the reduced circulation volumes during the UK The wellbeing of our people has been a response from employees was very positive. lockdown, but it continued to outperform its priority since the onset of Covid-19 and market and has been profitable since June. swift action was taken to ensure a seamless Our businesses were quick to make measured reductions in costs, reducing and safe transition to remote working. In Insurance Risk, the RMS team continues to overheads and discretionary spend across execute well and product delivery remains the portfolio. We also reprioritised DMGT’s on track. Risk Modeler 2.0 was made organic investment initiatives, realigning our available on the Risk Intelligence platform in priorities in light of the changing economic June, a major milestone as customers can circumstances and accelerating digitisation now run all of RMS’s natural catastrophe in many of our sectors. 10 Daily Mail and General Trust plc Annual Report 2020 Strategic Report
Paul Zwillenberg CEO
2020 will forever be defined by the Covid-19 pandemic and the extreme disruption and change that it brought to people and businesses across the world. In this context, I am immensely proud of the way that everyone at DMGT responded. Governance models on a single platform. This enables to manage the operations during the Cash operating income (cash OI) decreased complex analysis across multiple perils, pandemic and it is testament to their 29% on an underlying basis, reflecting the significantly faster run times and, very ability that the business quickly returned impact of the Covid-19 pandemic on importantly, allows customers to move to the to profitability and maintained the quality revenues, investment in the B2B businesses cloud, reducing their total cost of ownership. of its content throughout. and reduced Corporate costs. Adjusted profit before tax was £72 million, an underlying Other releases include advanced We also continued to optimise our portfolio decrease of 36%, and adjusted earnings per applications for the Risk Intelligence through the course of the financial year. share decreased 32%, including reduced platform as well as new and upgraded The disposal of Genscape in November 2019 operating profits from associates, following models, reflecting RMS’s continued reduced our sector exposure from six to five the April 2019 distribution of DMGT’s stake investment in model development. The and we also sold BuildFax, the US Property in Euromoney, and a reduction in the importance of high-quality science, analytics Information business, in October 2019. number of shares. and tools becomes even more apparent Our position in existing sectors has been during uncertain times and we remain Statutory profit for the year increased strengthened by bolt-on acquisitions. confident that RMS is well placed to create £98 million to £189 million, including a gain In Consumer Media, we acquired the ‘i’
significant long-term value for shareholders. on the disposal of Genscape, and statutory Financial Statements newspaper and website in November 2019. earnings per share increased 171%. Trepp, our US Property Information business, Landmark, our UK Property Information has benefitted from increased demand as business, acquired OneSearch Direct in Throughout the year, DMGT continued to customers seek to understand the risk and December 2019, while 12 small shows maintain a strong balance sheet with a cash flow profile associated with the debt were added to the Events and Exhibitions substantial pro forma net cash position. instruments they hold. portfolio during the year. In October 2020, Tim Collier, Group Chief Financial Officer, the Consumer Media business acquired three In EdTech, Hobsons has continued to describes DMGT’s financial performance in printing plants, strategically strengthening grow and deliver margin improvement, further detail in the Financial Review (pages its position in the market. benefitting from portfolio focus and 23 to 31). An update on the progression of improved operational execution. We increased our investment in Cazoo DMGT’s Key Performance Indicators, used in March and October 2020. Our stake in as a measure of our performance at a Group Our Events and Exhibitions business has the online start-up business, which is level, can be found on pages 14 and 15 of the been severely affected by travel and social transforming the UK used car market, was Strategic Report. distancing restrictions across the world and, valued at over £400 million in October 2020. as a result, we cancelled or postponed all Strategy update physical shows that were scheduled from The performance in FY 2020 across our The Group adjusted quickly to the changing Information Shareholder March to September 2020. Importantly, Consumer Media and B2B businesses market conditions. Importantly, our strategy we have insurance cover in place, reflecting demonstrates the benefits of a well-balanced remains the same and we continued to DMGT’s prudent approach, and this helped and diversified portfolio of businesses across make good progress against our priorities. to partially offset the financial impact. different sectors. The actions taken over In recent years, we have materially the past few years stood us in good stead The impact of Covid-19 on Consumer Media streamlined the portfolio and focused on for the environment we faced in the year. resulted in lower circulation revenues and the assets with most potential. We have also a pronounced reduction in advertising Financial performance strengthened the balance sheet significantly over that time and, as a result, we are well revenues across both print and digital Group revenues decreased 10% on an positioned to continue to manage through formats. Growth in online traffic helped underlying basis despite continued growth the ongoing crisis of the pandemic and its to mitigate the impact on digital, with from Insurance Risk, US Property Information economic repercussions. MailOnline delivering revenue growth and and EdTech, reflecting the extremely increased profits for the year. The team challenging market conditions in the DMGT is continuing its transformation to at dmg media worked exceptionally hard other sectors. become a higher‑performance business with higher-quality revenue streams. 11 Strategic Report Daily Mail and General Trust plc Annual Report 2020
Delivering against clear strategic priorities CEO Review
Covid-19 has presented challenges but it ‘Businesses for the future’, notably increasing 3. Businesses for the future. This remains Strategic Report has also enabled us to accelerate change our holding in Cazoo. a unique strength of DMGT; our ability to across our businesses. Going forward, take a long-term approach to create the As a result, the Group remains diversified by we will continue to focus on the three ‘Growing and delivering’ businesses of sector, geography and revenue stream and strategic priorities which have served the future. These are essentially start-up I am confident that our balanced portfolio DMGT well in its transformation to date. businesses where technological changes remains well positioned. We also remain create opportunities for us. This group focused on ensuring we have a good balance Increasing portfolio focus includes Cazoo and Yopa. dmg ventures, across our three portfolio roles: Since my appointment as CEO four years our venture and early‑stage investment ago, we have made good progress increasing 1. Predictable performers. These are division, will continue to play an the focus of our portfolio. Our emphasis in among our largest businesses, are important role in expanding our the current economic climate is to prioritise typically more mature and predictable, investments in this area. within our existing businesses. and form the economic bedrock of the Improving operational execution In recent months, we have taken the Group. They include the Daily Mail, The second area of strategic focus is opportunity to undertake a thorough The Mail on Sunday, Metro, the ‘i’, Landmark and Trepp. Whilst some of improving operational execution. I am
review across the portfolio to ensure that Governance very pleased by how our businesses our businesses have been performing as these businesses have been significantly performed operationally in response to expected, have appropriate contingency impacted by Covid-19, they are strong Covid-19. We have consistently taken a plans in place and remain well positioned for brands and have generally outperformed long-term approach, investing to position a post-Covid-19 world. Having completed the their respective markets this year. ourselves for a more digital future. Our review, I am satisfied that the businesses 2. Growing and delivering. These are actions this year, realigning priorities in some responded as we would have expected and businesses that are well positioned in areas but continuing to invest, are testament that their plans are robust and fit for purpose. attractive markets with long runways to that. While we increased portfolio focus through for future growth. Over the longer term, It is clear that one trend that will dominate the disposals of Genscape and BuildFax, they are expected to deliver the majority this era is the acceleration of digitisation we also invested selectively, acquiring to of our revenue and profit growth. across many industries. This is playing to strengthen our capabilities in Consumer This group includes RMS, MailOnline, DMGT’s strengths. We will continue to invest Media, UK Property Information and Events dmg events and Hobsons. in upgrading platforms and in our core and Exhibitions. We also invested in our Financial Statements Clear portfolio roles We have established clear roles for each business within the portfolio and the expectations for each business reflect their role.
Predictable performers Growing and delivering Businesses for the future
Predictable profit and cash generation Revenue growth and margin Option value for the future, tomorrow’s to meet DMGT’s obligations, fund improvement driving value creation ‘Growing and delivering’ businesses investment and incubate ‘Businesses for the future’ Shareholder Information Shareholder
• Innovate and extend core; • Scale breakthrough products. • Exploit niche opportunities. seed ‘Businesses for the future’. • Harness operational gearing to • Establish scalable processes • Optimise efficient operations. drive margin. and infrastructure. • Leverage scale. • Prioritise customer retention; • Innovate and act on rapid grow market share. market feedback.
12 Daily Mail and General Trust plc Annual Report 2020 Strategic Report Delivering sustainable returns over the long term DMGT’s businesses have market-leading positions in growing sectors that are digitising. The strategy is built around a long-term philosophy and is comprised of three priorities: increasing portfolio focus, improving operational execution and maintaining financial flexibility. Although the combination of disposals and challenging market conditions has impacted financial performance, we continue to expect this position and strategy to drive sustainable revenue, profit, cash and EPS growth over the long term.
Pe r o r an s ce le o r a Revenue, o o n li p a e o r t s a e profit and Governance r in u t p o c io s o n r e Market-leading p a o n r a cash growth e v t a o r i l i c e l n l c e u positions o n l t t e u
r c r o u e p t Sustained EPS i Satis ing o n and dividend Growing, the need growth digitising to know sectors Strong balance sheet
aintainin i nancial le i ilit n io na at Financial Statements l oc in l all ala pita nce an le i le ca
strength: quality, proprietary content Our capital allocation framework remains Outlook combined with data science to deliver the same and underpins our strategy. Whilst the outlook remains uncertain, market-leading products. We believe that Organic investment will continue to be our strategy remains the same. We will using sophisticated analytics to provide the priority and was equivalent to 10% of continue to invest, in a disciplined manner, insights about risk is a notable opportunity. revenues in FY 2020. DMGT has capacity for through the cycle where we are confident meaningful acquisitions and will remain During the year, we also applied a laser focus of the returns. highly disciplined. We will prioritise the on operational execution, reducing potential allocation of capital towards opportunities Our businesses are all market leading and cost commitments. This included headcount that build on our skills in combining we have significant financial flexibility. I am reduction at some of our businesses, to proprietary content, data science and highly confident that DMGT will come out of enhance the future profitability of individual the current global crisis stronger and fitter. sophisticated analytics, particularly those Information Shareholder product lines and support their margins. that deliver insights about risk. We remain committed to ensuring that The dividend remains the primary a high-performance culture pervades mechanism for delivering returns to everything that we do, through a clear return shareholders and, despite the adverse on investment (ROI) mindset and a focus on impact of Covid-19, disposals and organic cash OI. Paul Zwillenberg investment on short-term earnings, we have CEO Maintaining financial flexibility announced continued real dividend growth Although the outlook is uncertain, we are this year. This decision reflects the Group’s well positioned to weather the storm, not long-term approach to capital management least because of our strong balance sheet and allocation as well as the Board’s and commitment to maintaining financial confidence in DMGT’s ability to deliver flexibility. At the year end, we had earnings growth over time, underpinned £168 million pro forma net cash on the by a strong balance sheet. balance sheet. 13 Strategic Report Daily Mail and General Trust plc Annual Report 2020
Measuring our performance Key Performance Indicators
The Board seeks to deliver sustained long-term growth and value creation Strategic Report for DMGT’s shareholders.
Due to DMGT holding a changing portfolio of different companies, many Key Performance Indicators (KPIs) that are targeted by individual businesses are not appropriate at a consolidated Group level. Examples include customer numbers, revenue per customer, employee productivity and employee engagement. The KPIs shown below, however, are considered to be good indicators of the Group’s overall progress against its strategic priorities.
Key strategic priorities Governance
Improving operational execution Increasing portfolio focus Maintaining financial flexibility
Description Relevance Performance Narrative Strategic priority
Underlying Underlying revenue growth 0 2020 Underlying revenue growth revenue compares revenues on a like-for-like basis and is an 20 2 growth^ important indicator of the health and trajectory of the 20 0 (10)% individual businesses and the 2019: +2% Group as a whole. 20 The underlying revenue 20 0 performance reflects the adverse impact of the Covid-19 pandemic on the trading of the Consumer
Media, UK Property Information Financial Statements and Events and Exhibitions businesses.
Group DMGT actively manages its 2020 2 Group adjusted profit adjusted* portfolio and allocates capital before tax to increase adjusted profit 20 profit before tax over the long term. before tax 20 2 £72m 20 22 2019: £145m 20 2 0 Group adjusted profit before tax decreased by £73 million, an underlying 36%, reflecting challenging trading conditions due to Covid-19 as well as the disposal of B2B businesses and associates. Shareholder Information Shareholder
Adjusted* Management seeks sustained 2020 2 p Adjusted earnings per share earnings long-term growth in adjusted earnings per share to 20 p per share maximise overall returns for DMGT’s shareholders. 20 2 2p 26.1p 2019: 38.6p 20 p Adjusted earnings per share 20 0p decreased by 32%, reflecting the reduction in adjusted profit before tax, partially offset by a reduction in the number of shares in issue that occurred in April 2019.
14 Daily Mail and General Trust plc Annual Report 2020
Description Relevance Performance Narrative Strategic priority Strategic Report
Group This metric adds back 2020 0 Group adjusted cash adjusted* depreciation and amortisation operating income and deducts capital 20 2 cash expenditure from Group operating adjusted operating profit. 20 It reflects the cash generation £110m 20 income of the Group’s businesses. 2019: £162m 20 2 Group adjusted cash operating income decreased by £52 million due to the substantial adverse impact of the Covid-19 pandemic on operating profit.
§ Net cash / Management aims to maintain 2020 Net cash/(debt):EBITDA (debt): a strong balance sheet and Governance retain DMGT’s investment- 20 2 EBITDA grade status and consequently ratio targets the net (debt):EBITDA 20 0 1.4x ratio to be no more than (2.0) 2019: 1.2x throughout the year. 20 Despite the challenges of Covid-19, 20 DMGT continues to maintain significant financial flexibility and remains in a net cash position.
Dividend The Board’s policy is 2 2 p Dividend per share to maintain dividend growth per share in real terms and, in the 20 medium term, to distribute about one-third of the 24.1p Financial Statements Group’s adjusted earnings. 0 2019: 23.9p We have proposed a total full-year p 2 p dividend of 24.1 pence, up by 1% 0 from last year, continuing our 0 2020 strong track record of dividend growth and delivering an 8% Di idend n lation cumulative annual growth rate over the past 30 years.
Organic Investing back into the 2020 0 Organic investment investment¥ businesses to support product as a % of revenues innovation and effective use 20 as a of technology is key to percentage delivering DMGT’s sustained 20 long-term growth. The Board 10% 20 of revenues expects at least 5% of 2019: 9%
revenues to be used for Information Shareholder organic investment. 20 DMGT continued to reinvest in the businesses during the year, notably in the B2B portfolio.
^ Underlying revenue growth is on a like-for-like basis, adjusted for constant exchange rates, the exclusion of disposals and business closures, the inclusion of the year-on-year organic growth from acquisitions and for the consistent timing of revenue recognition. For events, the comparisons are between events that were scheduled to be held in the year and the same events held the previous time, so are adversely affected by the cancellation or postponement of events. For Consumer Media, underlying revenues exclude low-margin newsprint resale activities. See pages 29 and 31. § See inside front cover. * Before exceptional items, other gains and losses, impairment of goodwill and intangible assets, amortisation of intangible assets arising on business combinations, pension finance charges or credits and fair value adjustments; see Consolidated Income Statement on page 107 and the reconciliation in Note 13 to the Accounts. ¥ Organic investment is expenditure that is incurred with the objective of delivering long-term growth. It includes expenditure on product development, whether capitalised or expensed directly, and the adjusted operating losses of early-stage subsidiary businesses. 15 Strategic Report Daily Mail and General Trust plc Annual Report 2020
Operating Business Reviews B2B
Summary Strategic Report Our B2B companies operate in four sectors: Insurance Risk, Property Information, Adjusted revenueµ (%) EdTech and Events & Exhibitions. Insurance Risk 42 Property Information 31 2020 2019 Movement Underlying^ EdTech 14 Total B2B £m £m % % Events and Exhibitions 13 Revenue* 606 738 (18)% (7)% Cash operating income* 79 126 (37)% (27)% Operating profit* 69 117 (41)% (32)% Cash operating income margin* 13% 17% Operating margin* 11% 16%
* Adjusted results rather than statutory; see pages 28, 30 and 31 for details. ^ Underlying growth rates give a like-for-like comparison; see pages 29 and 31 for details.
Performance Outlook Governance Revenues from B2B totalled £606 million for The B2B financial performance in FY 2021 the year, down 7% on an underlying basis, is expected to continue to be affected by compared to 4% underlying growth during Covid-19, particularly that of the Events and the first five months of the year. This Exhibitions business where events have been reflected the severe impact of the Covid-19 cancelled or postponed and social distancing µ pandemic on the UK Property Information precautions are expected to affect exhibitor Adjusted operating profit (%) and Events and Exhibitions businesses. The and delegate attendance. Insurance Risk 50 EdTech, Insurance Risk and US Property There will continue to be significant organic Property Information 35 Information businesses continued to deliver investment, reflecting the opportunities to EdTech 9 revenue growth and collectively grew create value over time. The cash OI margin Events and Exhibitions 6 revenues by an underlying 3%. and operating margin will depend on the Total B2B revenues decreased by 18% in rate at which UK Property Information and absolute terms including the impact of Events and Exhibitions revenues recover disposals. The Energy Information business, during the year.
Genscape, was disposed of in November Financial Statements 2019, reducing the number of B2B sectors Read more on the risks affecting our B2B businesses in Principal Risks, from five to four, and the On-geo and pages 40 to 47 BuildFax Property Information businesses were also disposed of in 2019. B2B cash operating income (cash OI) decreased by an underlying 27% to £79 million, reflecting reduced revenues from Events and Exhibitions and UK Property Information, as well as planned investment µ Figures exclude Energy Information which in Insurance Risk, Property Information and was disposed of in November 2019. EdTech. Similarly, B2B adjusted operating profits were down an underlying 32% to £69 million. The overall B2B cash OI margin and operating margin decreased to 13% and 11%, from 17% and 16% respectively. Information Shareholder
16 Daily Mail and General Trust plc Annual Report 2020
Insurance Risk RMS continues to expense these development remains important to customers and helped Strategic Report costs as they are incurred and the cash OI to expand long-term commercial relationships Move- Under- 2020 2019 ment lying^ margin and adjusted operating margin during the year, as well as win new customers. £m £m % % reflected this, both decreasing to 14% Revenue 248 244 +2% +2% from 17% in the prior year. Priorities in the year ahead Given the strength of the business’s Cash operating 2020 was a milestone year for RMS. In income* 35 41 (14)% (14)% customer proposition, the Board of DMGT September, the company launched Risk Operating profit* 34 40 (17)% (16)% remains confident that RMS is well placed to Modeler 2.0 on the cloud-based Risk create good long-term value for shareholders. Cash operating Intelligence platform. The launch enables, income margin* 14% 17% The focus for FY 2021 is on building on the for the first time, a truly unified model and Operating margin* 14% 17% strong foundation of the core business and analytics platform, a goal that has been supporting customers as they deploy on * Adjusted results rather than statutory; see pages 28, 30 and important to RMS’s customers. Through Risk 31 for details. the cloud-based Risk Intelligence platform. ^ Underlying growth rates give a like-for-like comparison; see Modeler 2.0, RMS’s RiskLink models and seven RMS is expected to deliver modest revenue pages 29 and 31 for details. high-definition (HD) models now run on the growth over the next year before a gradual platform, alongside the new ‘IQ’ applications. The Insurance Risk business, RMS, is acceleration as the new products and This significantly enhances the capabilities Governance focused on technological and risk model services gain further traction with customers. of Risk Intelligence, which is offered as SaaS innovation, which continues to underpin its Accelerated investment to deliver the and first launched in May 2019. It opens up market-leading position in the catastrophe product roadmap will continue, albeit at opportunities for those customers requiring risk modelling market. During FY 2020, a slightly reduced level to FY 2020. The a fully unified platform, as well as enabling RMS increased its investment in research FY 2021 operating margin is expected to further adoption of HD models. and development across software, reflect the benefit of the business having data, data analytics, models and RMS announced the unified model product passed peak investment and subsequent applications, accelerating elements of its roadmap to its market at a virtual version of profitability is expected to improve as product roadmap. RMS’s Risk Intelligence its annual customer conference, Exceedance, revenue growth accelerates. software as a service (SaaS) platform in May 2020. Risk Modeler 2.0 combines Property Information was enhanced during the year and is familiar features with an enhanced, intuitive expected to be an important enabler in user interface. It delivers significantly faster Move- Under- 2020 2019 ment lying^ the delivery of unified model analytics, model execution, enables real-time model £m £m % % as well as new products and services, analytics and improves the price-performance Revenue 187 222 (16)% (6)% metric for customers, targeting lower particularly for the large and high- Cash operating growth Insurance Risk Analytics market total cost of ownership. Customers that income* 29 44 (34)% (35)% Financial Statements that the business is expanding into. have signed up for Risk Modeler 2.0 are Operating profit* 24 41 (42)% (42)% now deploying. Business model Cash operating income margin* 16% 20% RMS’s solutions help insurers, reinsurers, Risk Intelligence also offers a suite of new brokers, financial markets and public advanced applications that are tailored for Operating margin* 13% 19% agencies evaluate and manage catastrophe specific analytics in support of portfolio * Adjusted results rather than statutory; see pages 28, 30 and management and underwriting tasks. 31 for details. risks throughout the world. RMS leads the ^ Underlying growth rates give a like-for-like comparison; catastrophe risk modelling industry that it ExposureIQ 1.3 was released in September see pages 29 and 31 for details. helped to pioneer, delivering models, data, 2020, helping customers gain a quicker The Property Information portfolio is analytical services and software to its assessment of potential losses before, during comprised of two businesses: Landmark customers, mainly through multi-year and after a catastrophic event, and the first Information Group (Landmark), which subscriptions. RMS also offers a variety customers have been onboarded. TreatyIQ, operates in the UK and Ireland; and of managed and hosted services. which is being made available in December 2020 and is in ‘Preview’ currently, harnesses Trepp in the US. Both companies are Insurers, reinsurers, brokers and other Risk Intelligence’s scale and architecture to market leaders in their sectors and play an financial institutions trust RMS’s solutions enable the analysis of complex reinsurance important role as strong cash generators Information Shareholder to improve their understanding and manage portfolios. The ‘IQ’ products support RMS’s for DMGT, although Landmark’s FY 2020 the risks of natural and human-made expansion into the high-growth Insurance performance was significantly affected catastrophes, including hurricanes, Risk Management Analytics market, by exceptionally weak conditions in the earthquakes, floods, wildfires, cyber attacks which is approaching US$2.0 billion in size. UK property market due to Covid-19. and terrorism. RMS continues to invest in model Business model Performance highlights development, reflecting an ongoing Landmark derives revenues from providing Insurance Risk revenues grew by 2% on an commitment to build upon its market-leading services across the value chain, using underlying and reported basis to £248 million, position. A new HD Europe Convective Storm technology, data and workflow to streamline reflecting high contract renewal rates as model was released in the year and updated and help reduce the risk associated with well as sales to new customers. versions of four other existing HD models commercial and residential property were made available on Risk Modeler 2.0: Investment increased as planned, to transactions. The majority of Landmark’s Japan Typhoon, Japan Earthquake, accelerate new product releases and revenues are generated from volume-related European Flood and New Zealand Earthquake. unlock exciting long-term growth potential. transactions. Trepp provides risk, valuation RMS’s continued investment in models and data solutions for the commercial 17 Strategic Report Daily Mail and General Trust plc Annual Report 2020
Operating Business Reviews B2B
mortgage-backed securities (CMBS) market Trepp The business delivered continued Strategic Report as well as tools, analytics and models for Trepp’s revenue growth was driven by underlying revenue growth during commercial real estate (CRE) investors and increased demand for its analytics and the year and made good progress lenders. The majority of Trepp’s revenues are research, particularly in the banking and CRE with the modernisation of the core from subscriptions. sectors. New subscription bookings were product platforms. Performance highlights particularly strong during the second half Business model of the year, including for CMBS products, Property Information revenues for the year Hobsons offers college, career and life reflecting customers’ desire to understand decreased 6% on an underlying basis, with readiness tools to middle and high schools; the risk and cash flow profile associated with continued growth from Trepp insufficient to student match and fit solutions for college debt instruments at a time of heightened offset reduced revenues at Landmark, which admissions offices; and a student success market uncertainty. Significant product is the significantly larger business. During the platform for colleges and universities to help development in new market opportunities first five months of the year, prior to the guide students from enrolment through to continued in the year to support Trepp’s onset of Covid-19, revenues were stable. degree completion. Hobsons’ revenues are strong position with its customers. Trepp In absolute terms, Property Information mainly derived from subscription contracts launched TreppCLO, its collateralised loan revenues decreased 16% due to the with schools and colleges, with the balance
obligations (CLO) product, on a new Governance disposal of On-geo, the German business, from training and consulting services. integrated platform and continues to in June 2019 and BuildFax, the US business, enhance the product. Trepp’s new data lake, in October 2019. Performance highlights application programming interface (API) and EdTech revenues continued to grow, There was an underlying decrease in business intelligence tools are expected to increasing 7% on an underlying and reported Property Information cash OI and adjusted form the foundation, over the coming years, basis. Growth was achieved across each of operating profit, as well as a reduction in of both its unified technology infrastructure Hobsons’ three product lines: Naviance, the margins, as a result of the lower UK revenues and its delivery platform for customers. K-12 college and career readiness solution; and increased investment across both Priorities in the year ahead Intersect, the higher education match and fit businesses. business; and Starfish, the higher education In FY 2021, there will be continued student retention and success platform. Landmark investment to enhance Landmark’s and Property transaction volumes in the UK Trepp’s market-leading positions and drive The US higher education and K-12 markets reduced as a result of the Covid-19 pandemic. future revenue growth. Notable initiatives have been unsettled by the potential social The lockdown restrictions affected physical include the integration of technology and economic ramifications of the Covid-19 viewings of properties as well as the ability across Landmark’s businesses, facilitating pandemic. Customer budgets have come of estate agents, conveyancers and valuers cross-selling opportunities, and the under pressure, affecting renewal rates as Financial Statements to deliver their services. Landmark’s revenues development of a centralised data lake at well as new bookings, and this resulted in decreased accordingly. We consider there to Trepp. Market conditions for Landmark are slower revenue growth during the second be an inherent minimum transaction volume likely to remain volatile because of the half of the financial year. in a UK residential market that is functioning Covid-19 pandemic and its economic The cash OI and adjusted operating profit normally, due to death, divorce and default. repercussions, although its revenues may margins increased, even with ongoing This was breached, with volumes falling grow following a particularly weak FY 2020. investment in technology and products. significantly below this floor from March Trepp is expected to grow sales and benefit Hobsons has partially completed a product through to June 2020, reflecting the from increased demand from its customers. platform modernisation programme which distorting impact of the lockdown. Market is expected to reduce future operating costs activity has increased in recent months, EdTech and enable faster product development. supported by reductions in stamp duty Move- Under- The business also invested in customer- introduced in July 2020, although volumes 2020 2019 ment lying^ £m £m % % facing features and functionality to drive are expected to remain volatile. Revenue 85 80 +7% +7% future revenue growth and enhance its Landmark made encouraging strategic and Cash operating strong market position. operational progress during the year, income* 10 8 +21% +19% Information Shareholder The Naviance product was improved during strengthening its product lines and market Operating profit* 6 4 +34% +31% the year by the development of enhanced position. The business continues to invest in Cash operating analytics in respect of student readiness. technology to make the processes involved income margin* 12% 10% Over 13,000 schools subscribe to the in property transactions more efficient and Operating margin* 7% 6% Naviance platform, with the product transparent. Landmark amended its product * Adjusted results rather than statutory; see pages 28, 30 and available to over 10 million pupils, including roadmap, following the onset of Covid-19, to 31 for details. over 40% of US high school students. accelerate initiatives that are most likely to ^ Underlying growth rates give a like-for-like comparison; see pages 29 and 31 for details. Enhancements were also made to the benefit from the digitisation of the sector. Intersect and Starfish product suites, with The EdTech business, Hobsons, is a In December 2019, Landmark made a small over 1,100 US colleges and universities now leading provider of college and career bolt-on acquisition, OneSearch Direct, to using these higher education products, readiness and student success solutions strengthen its conveyancing capabilities. driving better customer relationships to the North American education market. The business provides property information and growth opportunities. and conveyancing solutions to solicitors and other customers in England and Wales. 18 Daily Mail and General Trust plc Annual Report 2020
Priorities in the year ahead Performance highlights Similarly, several of the smaller events in the Strategic Report Significant investment to modernise the core Events and Exhibitions revenues decreased portfolio will not be held in FY 2021. Sales EdTech product platforms will continue and by 35% on an underlying basis for the year, bookings for the larger events are generally this is expected to affect profitability in compared to 8% growth in the first five encouraging at this early stage. However, FY 2021. Revenue growth is expected but months of the financial year prior to the social distancing measures, exhibitors’ and at a slower rate, due to weaker customer onset of Covid-19. ADIPEC and Big 5 Dubai, delegates’ willingness to travel internationally budgets. Over the medium term, the two of the three largest events, occurred in and challenging conditions in the oil, gas and business is well positioned to deliver growth November 2019 and collectively delivered construction sectors are likely to result in and improved cash generation, supported by stable underlying revenues despite reduced revenues and profitability for those a continued focus on operational execution challenging conditions in the Middle East, events that are held in FY 2021. and the benefits of platform modernisation. notably in the construction sector. Gastech, DMGT believes the longer-term outlook for the third large event, was postponed a year Events and Exhibitions Events and Exhibitions is strong, as the to September 2021 and is still expected to importance of face-to-face events increases Move- Under- be held in Singapore. in a digitising world, and the business will 2020 2019 ment lying^ £m £m % % The business acted quickly to reduce its cost continue to launch new events where Revenue 79 119 (33)% (35)% base, including payroll and discretionary opportunities arise. Governance Cash operating items, but continued to incur overhead costs Energy Information income* 4 22 (81)% (51)% throughout the year. dmg events also Operating profit* 4 22 (83)% (52)% recognised £18 million of committed costs Move- Under- 2020 2019 ment lying^ Cash operating relating to events that were cancelled or £m £m % % income margin* 5% 19% postponed, of which £7 million was Revenue* 7 74 (90)% N/A Operating margin* 5% 19% accelerated into FY 2020 in respect of events Cash operating scheduled for FY 2021. * Adjusted results rather than statutory; see pages 28, 30 and income* 1 12 (88)% N/A 31 for details. Operating profit* 2 8 (81)% N/A ^ Underlying growth rates give a like-for-like comparison; The business does, however, have insurance see pages 29 and 31 for details. cover for communicable diseases, of up Cash operating to US$20 million per financial year until income margin* 20% 16% The Events and Exhibitions business, September 2022, and the FY 2020 results Operating margin* 23% 11% dmg events, is an organiser of B2B include the full benefit of £16 million in exhibitions and conferences with * Adjusted results rather than statutory; see pages 28, 30 and respect of insurance. Both the cash OI 31 for details. industry-leading events in the energy, ^ Underlying growth rates give a like-for-like comparison; margin and operating profit margin were 5%, see pages 29 and 31 for details. construction, interiors, hotel, hospitality Financial Statements reflecting the non-occurrence of events and leisure sectors. The business has partially offset by insurance. DMGT no longer operates an Energy been severely affected by the impact Information division, following the of Covid-19. To ensure the safety of The acquisition of 11 small events from disposal of Genscape for US$364 million customers, employees, delegates and CWC Group, in April 2020, strengthened in November 2019. visitors, no physical events were held in dmg events’ position in the energy sector, the last seven months of the financial especially in LNG and in Africa. Ethiopia’s year. Prior to Covid-19, dmg events leading construction event, Addisbuild, was hosted over 50 events each year, acquired in February 2020, strengthening attracting over 300,000 visitors the Big 5 construction portfolio. and exhibitors from more than Several virtual conferences and events have 100 different countries. been run and are planned. Although not Business model financially significant, they help to maintain dmg events has strong market and brand the brand profiles, expand audiences and positions, emerging market experience and sustain customer relationships. an entrepreneurial culture. This creates Priorities in the year ahead Information Shareholder opportunities for growth through geo- dmg events has worked closely with its cloning existing events into new locations major customers and sponsors regarding and by creating spin-off sections to become the timing of scheduled events to ensure stand-alone events. Conversely, when the they are well attended and safely managed exhibition sector or end markets are in the new environment. challenged, events can be combined to save costs and support attendance. The key Big 5 Dubai and ADIPEC have been branded events are Big 5, ADIPEC, Gastech, rescheduled from November 2020 to INDEX and The Hotel Show, which all provide September 2021 and November 2021 opportunities to develop the spin-off and respectively. Consequently, the ADIPEC geo-clone strategy. dmg events derives its exhibition, the business’s largest event, will revenues from exhibitor, sponsorship and not be held in FY 2021, although the adverse delegate fees, with the top three events impact on operating profit is expected to be usually generating over half of the revenues. largely offset by the Group’s insurance cover.
19 Strategic Report Daily Mail and General Trust plc Annual Report 2020
Operating Business Reviews Consumer Media
Move- Under- Performance highlights The newspapers’ competitive position Strategic Report 2020 2019 ment lying^ remains strong, with large and growing UK £m £m % % Covid-19 affected trading from March 2020. In the first five months, revenues grew retail market shares held by the Daily Mail Revenue 604 672 (10)% (13)% an underlying 1% but decreased by an and The Mail on Sunday, estimated to be Cash operating underlying 13% over the full year to 26.4% and 23.7% for the year respectively. income* 64 78 (18)% (27)% £604 million. Full year underlying growth of The Mail newspapers’ circulation revenues Operating profit* 56 67 (17)% (27)% 3% from MailOnline was more than offset by decreased by 7% to £264 million, with lower Cash operating a 7% decrease in circulation revenues and volumes partly offset by the benefit of income margin* 11% 12% a 30% decline in print advertising revenues. a 10 pence cover price increase of the Operating margin* 9% 10% Saturday edition to £1.10 in January 2020. Circulation volumes were impacted by the * Adjusted results rather than statutory; see pages 28, 30 and 31 for details. UK lockdown and the pandemic resulted Demand for digital versions of the ^ Underlying growth rates give a like-for-like comparison; in a pronounced reduction in advertising newspapers’ content increased significantly see pages 29 and 31 for details. revenues. The impact on print advertising during the year. The ‘Mail+’ briefings service, The Consumer Media business, was exacerbated by reduced readership of which offers readers additional insight, news dmg media, is focused on delivering Metro, whilst the effect on digital advertising and entertainment via video, podcast and high‑quality, popular journalism to a was partly offset by increased traffic. articles, was launched in October 2019 and Governance large global audience. dmg media has by September 2020 attracted over 120,000 Total Consumer Media revenues decreased prospered in an increasingly digital- unique visitors a week. Similarly, subscribers 10% in absolute terms, benefitting from oriented consumer media market. to ‘The Digital Edition’, a paid-for enhanced the inclusion of the ‘i’, which was acquired The combined strength of the Mail, Metro digital version of the newspaper, have more at the end of November 2019. and ‘i’ brands creates innovative and than doubled to over 80,000. exciting opportunities for advertisers The cash OI margin and the adjusted MailOnline continued to focus on attracting through a sophisticated and targeted operating margin reduced to 11% and 9% traffic directly to its homepages, on desktop multi‑channel approach. respectively, with the benefit of the ‘i’ and mobile, or its apps. There was good acquisition, and improved margins from Business model audience growth in the year, with total MailOnline, more than offset by the average daily global unique browsers, dmg media’s portfolio of news media challenging trading conditions. Cash OI and excluding other platforms such as Snapchat businesses includes two of the UK’s most adjusted operating profit both decreased and Facebook video, increasing by 38% to read paid-for newspapers, the Daily Mail by an underlying 27% to £64 million and 17.3 million. This audience growth included and The Mail on Sunday; Metro, its free £56 million respectively. The focus on the benefit of indirect traffic, primarily via newspaper, which was the UK’s highest managing costs increased further following social media and search platforms, driven Financial Statements circulation weekday newspaper pre Covid-19; the onset of Covid-19 and total adjusted by interest in the Covid-19 pandemic. Total the ‘i’, the UK national newspaper and costs were down 9%, or £57 million, minutes spent on the site, excluding time website; and MailOnline, one of the world’s despite the addition of the ‘i’. viewing videos, increased 14% to a daily leading English-language newspaper websites. In October 2020, three printing plants average of 145 million. The direct audience The Mail brand reaches an average of over were acquired, strategically strengthening accounted for 79% of minutes spent, 30 million UK adults each month across its dmg media’s position in the market. reflecting continued high levels of print and digital platforms. It has also engagement with these valuable and achieved scale in other geographic markets, Mail businesses loyal consumers. including the US and Australia. Combined, Revenues from the combined newspaper, DailyMailTV continues to raise awareness of the Mail, Metro and ‘i’ brands reach over 65% website and TV businesses (the Daily Mail, MailOnline in the US, though the business’s of the UK’s adult population on average each The Mail on Sunday, MailOnline and own revenues decreased to £8 million in the month, or one in five of UK adults each day. DailyMailTV) decreased by an underlying 9% year, compared to £13 million in the prior to £508 million, of which £144 million was dmg media’s revenues are generated mainly year, and costs were managed appropriately. generated by MailOnline. from circulation and advertising revenues. The show is currently in its fourth season
Strong profits and cash flow continue Total advertising revenues across the Mail and attracts an average of 1.1 million viewers Information Shareholder to be generated by the paid-for newspapers businesses decreased by an underlying 9% a day. and MailOnline. dmg media’s future to £231 million, including a 26% decline in growth is expected to be driven by the print advertising revenues, reflecting the digital businesses. impact of Covid-19 as well as the continued structural and competitive challenges facing the UK national newspaper advertising market. Digital advertising accounted for 65% of total advertising across the Mail businesses.
20 Daily Mail and General Trust plc Annual Report 2020
Metro Response to Covid-19 Strategic Report Following the onset of Covid-19 and the Swift action was taken to ensure a implementation of lockdown measures, seamless and safe transition to remote Metro’s circulation volumes were initially working and product delivery was reduced to approximately a quarter of uninterrupted, including the newspapers. the usual pre-Covid-19 level. Readership The titles play an important role in keeping has increased as more commuters have readers informed and the decision was returned to using public transport but as made to operate Metro at a loss to ensure at September 2020, volumes were still the provision of free newspapers for less than half of the pre-Covid-19 level. key workers. Revenues decreased by 40% to £47 million Mail Force Charity was established in the for the year, reflecting a particularly year to provide equipment for the NHS and challenging print advertising market as charities. It received considerable support well as the reduced readership. Prior to from readers of the Mail titles. Covid-19, Metro was read by an average of
2.3 million people each day and had the Across the Consumer Media portfolio, the Governance largest Monday to Friday share by volume titles have supported advertisers, providing of the UK newspaper advertising market, small businesses with £5 million worth of excluding supplements. Revenues would free space. benefit from increased usage of public Read more in Our Stakeholders, transport and a recovery in the print pages 32 to 39 advertising market. The ‘i’ Priorities in the year ahead The ‘i’, the UK national newspaper and dmg media will continue to harness the website, was acquired for £50 million value of the Mail and ‘i’ brands for both in late November 2019. The business has readers and advertisers and invest in the an established reputation for quality quality of their popular journalism to drive journalism, with a loyal and engaged and engage audiences. The cost base of the readership, and DMGT is committed to newspaper businesses will continue to be preserving its distinctive and politically well managed with a measured approach independent editorial style. Revenues that ensures the quality of the content is Financial Statements decreased an underlying 10% to £27 million not compromised, consistent with DMGT’s in the 10 months of ownership to strategy of supporting the longevity of the September 2020, reflecting the impact of newspapers’ strong cash generation. lockdown measures on circulation and the The advertising market inherently lacks particularly challenging advertising market. visibility and conditions are likely to remain Following a review of the acquisition by the both challenging and volatile until UK Competition and Markets Authority, the economic confidence returns. Circulation business was integrated into dmg media’s volumes of the Mail and ‘i’ are expected existing infrastructure during the second to decline from current levels. The cash OI half of the year, realising all the planned margin and operating margin will reflect cost savings. There is also scope, as the a mix of the revenue dynamics and the advertising market recovers, for revenues benefit of continued cost efficiencies within to benefit from the combined reach of the newspapers. dmg media’s titles. Read more on the risks affecting our Consumer Media businesses in Information Shareholder Principal Risks, pages 40 to 47
21 Strategic Report Daily Mail and General Trust plc Annual Report 2020
Operating Business Reviews Joint ventures, associates and dmg ventures
As well as a diverse portfolio of operating Investments and dmg ventures Strategic Report companies, DMGT holds minority stakes As well as joint ventures and associates, in early-stage businesses. DMGT invests in and develops early-stage Joint ventures and associates businesses in which the Group holds smaller stakes. As the percentage holdings are too Move- Under- small or DMGT’s level of influence insufficient 2020 2019 ment lying^ £m £m % % for the companies to be associates, the Euromoney Group does not recognise a share of profits Institutional or losses from these investments. Investor PLC – 23 (100)% N/A dmg ventures is responsible for DMGT’s Other joint ventures and minority and early-stage investments, associates (8) (10) (25)% (25)% including some associates. It focuses on Total share investing in companies with disruptive of adjusted consumer propositions which need to scale operating and can leverage the Group’s assets to do so. (losses)/profits* (8) 13 N/A (25)% In some cases, equity stakes are acquired by Governance
* Adjusted results rather than statutory; see pages 28, 30 and providing advertising in DMGT’s Consumer 31 for details. Media products, reflecting the extensive ^ Underlying growth rates give a like-for-like comparison; see pages 29 and 31 for details. reach of the Mail and Metro brands. Current notable associates include: DMGT’s most significant investment is Cazoo, which aims to transform the way people buy • c.45% stake in Yopa, a UK hybrid estate used cars in the UK and has the potential agent; to develop into a major business. Cazoo • c.27% stake in Praedicat, which is successfully launched its services to dedicated to improving the underwriting customers in December 2019 and DMGT and management of casualty risk; and increased its stake from c.19% to c.23% in March 2020. DMGT participated in a • c.24% stake in Excalibur, which operates subsequent funding round on 7 October 2020 the online discount businesses Wowcher and its stake of c.22%, or c.20% on a fully and LivingSocial UK. diluted basis, was valued at £409 million, There were no profits in the year from compared to a total cost of £117 million. Financial Statements Euromoney Institutional Investor PLC Other notable investments include Kortext, (Euromoney), the UK-listed company that the leading supplier to UK universities of DMGT founded. This followed the digital textbook and learning solutions, and distribution in April 2019 of all of DMGT’s Farewill, the UK-based provider of a legal c.49% stake to DMGT’s shareholders. and financial services platform intended DMGT holds a portfolio of early-stage to deal with all paperwork after death. associates and the Group’s net share of The year ahead adjusted operating losses from its joint ventures and associates was £8 million in DMGT’s joint ventures and associates are the year. This compared to a £13 million net primarily investment-stage businesses profit, including Euromoney, and £10 million and DMGT does not control them, unlike net loss from other joint ventures and subsidiaries. The current expectation is that associates in FY 2019. Yopa made good they will continue to generate significant operational progress in the year, cumulative net losses in FY 2021. disrupting the estate agency sector Information Shareholder and strengthening its position within a particularly challenged market.
22 Daily Mail and General Trust plc Annual Report 2020
Focused on driving long-term shareholder value Financial Review Strategic Report
DMGT has a strong balance sheet and the foundations in place to deliver long‑term growth.
Tim Collier Group Chief Financial Officer Governance
DMGT’s clear portfolio roles, strong The recommended final dividend of balance sheet and clear and disciplined 16.6 pence per share gives a total for the Financial highlights: approach to value creation, position the year of 24.1 pence, up 1% on the prior year, statutory results Group well to invest in opportunities continuing DMGT’s track record of delivering and to deliver sustained growth over annual real dividend per share growth. The Revenue Financial Statements the long term. recommendation reflects DMGT’s long-term approach to capital management and The Financial Review details DMGT’s £1,203m allocation as well as the Board’s confidence 2019: £1,337m performance during a year when some in the Group’s ability to deliver earnings of DMGT’s businesses faced particularly growth and value creation over time, Operating profit challenging market conditions because underpinned by a strong balance sheet. of the Covid-19 pandemic. £15m The Board and management team use 2019: £67m The statutory results reflect the exclusion of adjusted results and measures, rather discontinued operations, namely Genscape, than statutory results, as the primary basis Profit before tax the Energy Information business, from for providing insight into the financial revenue, operating profit and profit before performance of the Group and the way it £52m tax. They include gains on disposals and is managed. Similarly, adjusted results are 2019: £134m exceptional items. Profit for the year was used in setting management remuneration. £189 million, a £98 million increase on the Adjusted results exclude certain items which, Profit for the year prior year, including a gain on the disposal if included, could distort the understanding of Genscape. Similarly, statutory earnings £189m of comparative performance of the business 2019: £91m Information Shareholder per share increased 171%. during the year. Consequently, the rest of Maintaining financial flexibility remains a key this Financial Review focuses on adjusted Earnings per share strategic priority and DMGT’s balance sheet measures. The explanations for the was strong throughout the year, with pro adjustments and the reconciliations to 83.1p forma net cash of £168 million and statutory statutory results are shown on pages 28, 2019: 30.7p net cash of £185 million at the year end. 30 and 31. Dividend per share When assessing revenue and profit growth, the Board and management focus on 24.1p underlying growth rates as the most 2019: 23.9p meaningful like-for-like comparison between the current year and the prior year. A more Go online to www.dmgt.com detailed explanation and the calculations to read more about our are shown on pages 29 and 31. Financial highlights
23 Strategic Report Daily Mail and General Trust plc Annual Report 2020
Focused on driving long-term shareholder value Financial Review
Performance highlights Revenue performance Strategic Report Financial highlights: The Group’s overall financial performance in Group revenues in the financial year adjusted measures* the year includes a strong first five months decreased 10% on an underlying basis. of trading followed by seven months of Adjusted revenues decreased 14% in Underlying^ revenue growth weakness due to the Covid-19 pandemic, absolute terms to £1,211 million as the albeit with some improvement towards the benefit of acquisitions was more than offset (10)% end of the year. The Consumer Media, Events by the impact of disposals. The average 2019: +2% and Exhibitions and UK Property Information exchange rate during the year was £1:$1.28, businesses were particularly affected by the same as the prior year. Underlying^ cash operating Covid-19 whilst Insurance Risk, EdTech Revenues from B2B businesses decreased income growth and US Property Information businesses 7% on an underlying basis, to £606 million. continued to grow revenues. The financial Growth from Insurance Risk, EdTech and (29)% performance also reflects the impact of 2019: +10% the US Property Information business, disposals and investment in the B2B Trepp, was more than offset by Events and portfolio, consistent with DMGT’s long-term Underlying^ operating Exhibitions and the European Property approach to value creation.
profit growth Information business, Landmark Information Governance Group revenue decreased 10% on an Group, as the scheduling of shows and (35)% underlying basis. Subscription revenue grew UK property transaction volumes were 2019: +6% by an underlying 3%, with growth across the particularly affected by the Covid-19 Operating margin Insurance Risk, EdTech and US Property pandemic. B2B revenues decreased by 18% Information businesses. The Covid-19 crisis on an absolute basis, following the disposal 7% resulted in significant underlying decreases of the Energy Information business and 2019: 10% in revenues with events down 35%, print certain Property Information businesses advertising down 30% and transaction in 2019. Underlying^ PBT growth revenues down 13%, reflecting lower Revenues from the Consumer Media transaction volumes in the UK property business, dmg media, decreased 13% on (36)% market. Circulation revenues recovered 2019: +19% an underlying basis to £604 million. The well following the easing of UK lockdown Covid-19 pandemic resulted in a significantly restrictions and decreased by an underlying EPS growth weaker advertising market and reduced 7% over the year. Despite a significantly circulation volumes, though MailOnline’s weaker advertising market, digital revenues (32)% revenues continued to grow, benefitting grew an underlying 4% including the benefit Financial Statements 2019: (8)% from increased traffic. of increased online traffic. Net cash§ The charts on page 25 demonstrate the Cash operating income (cash OI) and diverse profile of DMGT’s revenues. £168m adjusted operating profit decreased by 29% 2019: £247m and 35% respectively on an underlying basis. Read more on each operating business’s The performance reflected the impact of the revenue performance, pages 16 to 21 Net cash§:EBITDA Covid-19 pandemic on revenues, investment in the B2B businesses and reduced 1.4x Corporate costs. Group adjusted operating 2019: 1.2x margin was 7%, compared to 10% in the prior year. Adjusted profit before tax was Footnotes in this Financial Review are defined on the inside front cover with the exception of that below. £72 million, a 50% decrease on the prior ^ Underlying growth rates are on a like-for-like basis, see pages 29 and 31. Underlying revenues, year, reflecting the benefit of reduced cash operating income and operating profits are finance costs being more than offset by a adjusted for constant exchange rates, the exclusion of disposals and business closures, the inclusion of reduction in the share of operating profits the year-on-year organic growth from acquisitions
from associates. On an underlying basis, Information Shareholder and for the consistent timing of revenue recognition. Cash operating income, operating profits and finance adjusted profit before tax decreased 36%. costs are also adjusted in respect of IFRS 16, so the calculation methodology is consistent across years. DMGT continues to maintain significant For events, the comparisons are between events held in the year and the same events held the previous financial flexibility, consistent with the time and underlying growth includes the adverse Group’s key strategic priorities, and was in impact of event cancellations and postponements. Consequently, underlying growth rates include all a net cash position throughout the year. costs for events that were scheduled in FY 2020 and were cancelled or postponed, but exclude all costs DMGT ended the year with pro forma net associated with events originally scheduled in FY 2021. cash§ of £168 million. The year end pro forma For Consumer Media, underlying revenues exclude low-margin newsprint resale activities. The underlying net cash to adjusted earnings before interest, change in the share of operating profits from joint tax, depreciation and amortisation (EBITDA) ventures and associates excludes Euromoney Institutional Investor PLC. ratio, which is stated after adjusting EBITDA to include lease costs, was 1.4.
24 Daily Mail and General Trust plc Annual Report 2020 Strategic Report Adjusted revenue profile µ By business (%) By type (%) By destination (%)
Insurance Risk 21 Subscriptions 30 UK 57 Property Information 15 Circulation 24 North America 28
EdTech 7 Events 6 Rest of the World 15 Governance Events and Exhibitions 7 Digital advertising 13 Consumer Media 50 Print advertising 11 Transactions and other 16
µ Revenue figures exclude Energy Information which was disposed of in November 2019.
Cash operating income the adoption of IFRS 16, the lease accounting year, and the beneficial impact on cash OI Cash OI is a performance metric used by standard, is not added back when calculating was largely offset by a £9 million reduction DMGT to assess the cash generation of its cash OI. In the financial year, cash OI for in depreciation and amortisation. Cash OI businesses. It is calculated by adding back the Group as a whole was £110 million, decreased by 29% on an underlying basis depreciation and amortisation expenses, a £52 million decrease compared to the as reduced Corporate costs were more which are non-cash items, to adjusted prior year, primarily due to a £54 million than offset by the B2B businesses and operating profit and then deducting capital reduction in adjusted operating profit. Consumer Media. expenditure. The depreciation charge on Capital expenditure was £18 million in the right-of-use assets, which has resulted since year, a £12 million reduction on the prior Financial Statements
Business performance
Revenues Cash operating income* Operating profit* FY 2020 FY 2019 Growth FY 2020 FY 2019 Growth FY 2020 FY 2019 Growth £m £m Reported Underlying^ £m £m Reported Underlying^ £m £m Reported Underlying^ Insurance Risk 248 244 +2% +2% 35 41 (14)% (14)% 34 40 (17)% (16)% Property Information 187 222 (16)% (6)% 29 44 (34)% (35)% 24 41 (42)% (42)% EdTech 85 80 +7% +7% 10 8 +21% +19% 6 4 +34% +31% Events and Exhibitions 79 119 (33)% (35)% 4 22 (81)% (51)% 4 22 (83)% (52)% Energy Information 7 74 (90)% N/A 1 12 (88)% N/A 2 8 (81)% N/A B2B 606 738 (18)% (7)% 79 126 (37)% (27)% 69 117 (41)% (32)% Shareholder Information Shareholder Consumer Media 604 672 (10)% (13)% 64 78 (18)% (27)% 56 67 (17)% (27)% Corporate costs (34) (43) (21)% (21)% (35) (40) (12)% (12)% DMGT 1,211 1,411 (14)% (10)% 110 162 (32)% (29)% 90 144 (38)% (35)%
Cash operating income
£ million Source FY 2020 FY 2019 Adjusted Group operating profit Tables on page 28 90 144 Add: Depreciation of tangible fixed assets Note 3 23 25 Add: Amortisation of intangible fixed assets (e.g. products and software) Note 3 15 22 Less: Purchase of tangible fixed assets Cash flow (12) (16) Less: Expenditure on intangible fixed assets (e.g. products and software) Cash flow (6) (14) DMGT Cash operating income 110 162
Amounts in the tables are stated rounded to the nearest million pounds, consequently totals may not equal the sum of the component integers. 25 Strategic Report Daily Mail and General Trust plc Annual Report 2020
Focused on driving long-term shareholder value Financial Review
Operating profit performance Taxation The pro forma net cash:EBITDA ratio was 1.4 Strategic Report Adjusted operating profit of £90 million The adjusted tax charge for the year, after at the year end. decreased by 35% on an underlying basis excluding the effect of exceptional items, The Group’s cash OI of £110 million is stated and 38% on a reported basis, reflecting was £13 million, see Note 11, compared to after £18 million of capital expenditure, the impact of the Covid-19 pandemic on £29 million in the prior year. The adjusted a significant reduction on £30 million in revenues as well as investment in the B2B tax rate was 18%, a slight reduction on 20% the prior year which reflects product portfolio, with product development and in the prior year and less than previously development and technology costs largely technology costs largely being expensed expected, primarily due to a reduced being expensed rather than capitalised. The rather than capitalised. US tax charge, reflecting the benefit from Group remains committed to investing for the Foreign-Derived Intangibles Income The adjusted operating profit of the Group’s the long term and organic investment was (FDII) incentive. B2B operations decreased by an underlying equivalent to 10% of revenues in the year. 32% to £69 million, reflecting the impact of The statutory tax credit for the year was Other operating cash net outflows totalled Covid-19 on Events and Exhibitions and the £1 million and there was also a statutory £11 million including £18 million of funding UK Property Information business, as well tax charge of £11 million on discontinued into the Employee Benefit Trust. Group as planned investment in Insurance Risk, operations, giving a total charge of operating cash flow was £99 million and the conversion rate of operating profits to Property Information and EdTech. The £10 million. There were £3 million Governance adjusted operating profit from Consumer of net exceptional tax credits in total. operating cash flow was 110%, compared Media decreased by an underlying 27% to 109% in the prior year. to £56 million as the adverse impact Go online to www.dmgt.com to read our tax policy Pro forma net expenditure on acquisitions of Covid-19 on revenues, particularly and investments, including proceeds from advertising, more than offset the benefit Profit after tax disposals, was £84 million. Proceeds from of reductions in the Mail Newspapers and Adjusted Group profit after tax and minority the disposal of the Energy Information Metro cost bases. Corporate costs decreased business, Genscape, were included in the pro interests was £59 million, a decrease of 48%. by an underlying 12% to £35 million, forma net cash at the start of the year and so including reduced remuneration costs Earnings per share are excluded from the pro forma cash flow. as well as management of the cost base. Adjusted basic earnings per share were The net expenditure included £50 million to Joint ventures and associates 26.1 pence, down 32%. The weighted acquire the ‘i’ newspaper and website and £37 million invested in Cazoo, the early-stage The Group’s share of the adjusted operating average number of shares in issue during business accounted for as an investment. losses* from its joint ventures and associates the year, excluding shares held in Treasury There were proceeds of £20 million from was £8 million, a £21 million change and the Employee Benefit Trust, was 227.8 million, a significant reduction the disposal of BuildFax, the US Property compared to net profits of £13 million in Financial Statements Information business. the prior year. There were no profits from from 296.4 million in the previous year, Euromoney Institutional Investor PLC in the following the April 2019 Euromoney Payments in the year included dividends of year, compared to £23 million in the prior distributions and special dividend. £55 million, pension funding payments of year, as all of the Euromoney shares held Net cash and cash flow £16 million, taxation of £8 million and net by DMGT were distributed to DMGT’s interest of £6 million. The weaker US dollar Pro forma net cash§ at the end of the year shareholders in April 2019. at year end, relative to the prior year end, was £168 million, a decrease of £79 million resulted in an adverse cash revaluation compared to the start of the year. Pro forma Read more on our JVs and associates’ of £9 million. performance, page 22 net cash is stated after adjusting to exclude cash that was made available to the Group’s The Group’s cash, cash equivalents and Financing costs pension schemes in April 2019, but which short-term deposits, net of overdrafts, Adjusted net finance costs were £10 million, currently remains as cash on DMGT’s balance totalled £480 million at year end. On a a 17% reduction on the prior year, primarily sheet; and exclude lease liabilities that are pro forma basis, excluding £117 million due to the maturing of £219 million of bond included in statutory net cash following the made available for the pension schemes, debt in December 2018. The decrease in net adoption of IFRS 16. The lease liabilities the Group’s pro forma gross cash, cash finance costs was 36% on an underlying largely reflect the future operating costs of equivalents and short-term deposits Shareholder Information Shareholder basis, after adjusting for £2 million of finance renting office space and are not considered totalled £363 million. costs recognised following the adoption of a component of net debt when the Board At year end, bond debt was £204 million, IFRS 16. reviews the Group’s available capital. with £1 million maturing in April 2021 Consequently, they are excluded from and £203 million maturing in June 2027. The pension finance credit, which is excluded pro forma net cash. from adjusted results, was £4 million compared to £7 million in the prior year. Net cash Results before taxation Adjusted profit before tax was £72 million, £ million FY 2020 FY 2019 an underlying decrease of 36%, with the Statutory net cash as at 30 September 185 82 decrease in adjusted operating profit Include proceeds from November 2019 disposal of Energy Information – 282 partly offset by reduced net finance costs. Exclude cash made available to pension schemes (117) (117) Including the impact of the Euromoney Exclude IFRS 16 lease liabilities 100 – distributions, adjusted profit before tax was £73 million less than the prior year. Pro forma net cash as at 30 September 168 247 26 Daily Mail and General Trust plc Annual Report 2020
There was also £8 million of net cash Strategic Report in respect of collateral and derivatives. Viability Statement The Group’s committed bank facilities were In accordance with provision 31 of the 2018 UK Corporate Governance Code, the £373 million, which were completely unutilised. Directors have assessed the prospects of the Company. The Board has determined that Fitch reaffirmed DMGT’s BBB- investment a three year period is an appropriate term to assess DMGT’s viability because this is grade corporate credit rating in May 2020 consistent with near-term visibility of certain market trends and previous viability and Standard & Poor’s BB credit rating as at assessments. This period also coincides with the maturity of the Group’s committed April 2019 remains unchanged. The Group’s bank facilities. preferred upper limit for gearing remains The Board’s assessment of the Company’s future prospects and viability determined a net debt to EBITDA ratio of 2.0, below the the Group’s overall risk capacity by considering banking and bond covenants, other requirements of the Group’s bank covenants. financial commitments and borrowing capacity to determine the maximum loss from Capital allocation framework risk events that the Group could endure whilst remaining viable. The assessment has DMGT prioritises organic investment also been made with reference to the Group’s current position and prospects, the Group opportunities and takes a long-term strategy, the Board’s risk appetite and principal risks, which the Directors review at approach, investing through the cycle as least annually. The key factors affecting the Group’s future prospects and viability are: Governance demonstrated during the year. The dividend • DMGT manages a portfolio of operating companies with diversity across sector, remains DMGT’s second capital allocation revenue stream and geography. See page 25 for the Group’s revenue profile; priority and is the primary mechanism for returning capital to shareholders. • financial flexibility through a strong balance sheet with continued good cash flow generation and a net debt to EBITDA ratio comfortably below our preferred The Group adopts a balanced and flexible upper limit; approach to uses of capital across the two remaining categories: acquisitions and • the Group’s ability to restructure quickly through the portfolio management shareholder returns. DMGT has capacity of operating company subsidiaries; and for meaningful acquisitions and will remain • the long-term view of the Company afforded by the family shareholding. highly disciplined. We will prioritise the Group forecast revenue, operating profit, EBITDA and cash flows were subject to allocation of capital towards opportunities robust downside stress testing over the assessment period, which involved modelling that build on our skills in combining the impact of a combination of hypothetical and severe adverse scenarios. This was proprietary content, data science and focused on the impact of a number of severe but plausible principal risks crystallising, sophisticated analytics, particularly including: those that deliver insights about risk.
• the impact of successive key product investment failures across the Group; Financial Statements DMGT has always taken a long-term approach to capital management, avoiding issuing new • the impact of a significantly accelerated decline in circulation volumes and print equity to shareholders. Maintaining financial advertising and lower growth in digital advertising affecting profits from the flexibility remains a strategic priority, Consumer Media businesses; enabling the Group to be acquisitive in • the impact of a significant decline in UK housing transaction volumes affecting profits the future, as opportunities arise. from the UK Property Information business; Pensions • the impact of a severe cyber attack resulting in the loss of high volumes of personal The Group’s defined benefit pension data, considering both the reputational impact, recovery costs and regulatory fines; schemes provide retirement benefits for UK staff, largely in dmg media. These schemes • the impact of macroeconomic factors including large foreign exchange fluctuations, are closed to new entrants. The pro forma significant increases in interest rates and corporation tax increases; and net surplus on the schemes decreased • the impact of continued disruption caused by the Covid-19 pandemic on the Group’s from £332 million at the start of the year Consumer Media, UK Property Information and Events and Exhibitions businesses. to £240 million at 30 September 2020, The Group has also considered the specific uncertainties of Brexit on its future viability calculated in accordance with IAS 19 by modelling scenarios which include the impact of a reduction in the number of Information Shareholder (Revised). The pro forma surplus includes housing transactions on its UK Property Information business and increases in the £117 million that has been made available cost and reductions in the availability of newsprint on its Consumer Media business. to the pension schemes but which currently remains as cash on DMGT’s balance sheet, Mitigations considered as part of the stress testing included a number of cost reduction as well as the statutory net surplus of programmes and disposals of operating company subsidiaries. £123 million. During the year, there was an In addition to the mitigation actions described above, the Group has access to undrawn increase in the value of the defined benefit committed bank facilities of £373 million which expire in March 2023 and, as at obligation, caused by lower discount rates, September 2020, has pro forma net cash of £168 million. This provides the Group with and a decrease in the value of the assets. £541 million of committed funds available to it. Funding payments into the main schemes Based on the analysis described above, the Directors confirm that they have a were £16 million in the year. The actuarial reasonable expectation that the Group will continue to operate and meet its liabilities valuation of the pension schemes as at as they fall due over the next three years. 31 March 2019 showed that the schemes remain in deficit on an actuarial basis.
27 Strategic Report Daily Mail and General Trust plc Annual Report 2020
Focused on driving long-term shareholder value Financial Review
Reconciliation of statutory revenue to adjusted revenue Strategic Report
£ million FY 2020 FY 2019 Explanation Statutory revenue 1,203 1,337 Discontinued operations 7 74 i Adjusted revenue 1,211 1,411
Reconciliation of statutory operating profit to adjusted operating profit: FY 2020
Insurance Property Events and Energy Consumer Corporate JVs and £ million Risk Information EdTech Exhibitions Information Media costs Associates Group Explanation Statutory operating profit 13 15 5 (10) – 43 (40) (11) 15 Discontinued operations – – – – 13 – – – 13 i Exceptional operating costs 20 1 – 2 (11) 7 5 – 24 ii Intangible impairment and amortisation – 8 1 13 – 6 – 4 31 iii
Exclude JVs and associates (8) 8 Governance Adjusted operating profit 34 24 6 4 2 56 (35) 90
Reconciliation of statutory operating profit to adjusted operating profit: FY 2019
Insurance Property Events and Energy Consumer Corporate JVs and £ million Risk Information EdTech Exhibitions Information Media costs Associates Group Explanation Statutory operating profit 40 15 3 21 – 65 (50) (28) 67 Discontinued operations – – – – (26) – – – (26) i Exceptional operating costs – – – – 31 2 10 (7) 36 ii Intangible impairment and amortisation – 26 2 1 3 – – 36 69 iii Exclude JVs and associates 1 (1) Adjusted operating profit 40 41 4 22 8 67 (40) 144
Reconciliation of statutory profit before tax to adjusted profit before tax Financial Statements
£ million FY 2020 FY 2019 Explanation Statutory profit before tax 52 134 Discontinued operations 147 (33) i Exceptional operating costs 24 36 ii Intangible impairment and amortisation 31 69 iii Profit on sale of assets (177) (67) iv Pension finance credit (4) (7) v Other adjustments (1) 13 vi Adjusted profit before tax 72 145
Reconciliation of adjusted operating profit to cash operating income
FY 2020 FY 2019
Adjusted Depreciation Purchase Cash Adjusted Depreciation Purchase Cash Information Shareholder operating and of fixed operating operating and of fixed operating £ million profit amortisation¹ assets¹ income profit amortisation¹ assets¹ income Insurance Risk 34 5 (4) 35 40 5 (5) 41 Property Information 24 7 (2) 29 41 9 (6) 44 EdTech 6 8 (4) 10 4 8 (4) 8 Events and Exhibitions 4 – – 4 22 – (1) 22 Energy Information 2 – – 1 8 7 (3) 12 B2B 69 20 (10) 79 117 29 (20) 126 Consumer Media 56 16 (7) 64 67 17 (6) 78 Corporate costs (35) 2 (1) (34) (40) 1 (4) (43) DMGT 90 38 (18) 110 144 47 (30) 162
1. Amortisation of intangible assets and expenditure on purchasing intangible assets refers to products and software, not assets acquired as part of business combinations. The depreciation charge on the additional right-of-use assets, which has resulted since 1 October 2019 from the adoption of IFRS 16, the lease accounting standard, is not added back when calculating cash OI. Amounts in the tables are stated rounded to the nearest million pounds, consequently totals may not equal the sum of the component integers. 28 Daily Mail and General Trust plc Annual Report 2020
Underlying performance Strategic Report
FY 2020 FY 2019 Exchange Underlying £ million Reported1 M&A Other Underlying Reported1 M&A rates Other Underlying growth Revenue Insurance Risk 248 – – 248 244 – (1) – 244 +2% Property Information 187 1 – 188 222 (21) – – 201 (6)% EdTech 85 – – 85 80 – – – 80 +7% Events and Exhibitions 79 4 – 83 119 8 – 2 128 (35)% Energy Information 7 (7) – – 74 (74) – – – N/A B2B 606 (2) – 604 738 (88) (1) 2 652 (7)% Consumer Media 604 6 (20) 590 672 36 – (32) 676 (13)% DMGT 1,211 4 (20) 1,195 1,411 (52) (1) (30) 1,328 (10)% Governance Cash operating income Insurance Risk 35 – – 35 41 – – – 40 (14)% Property Information 29 – – 29 44 – – – 44 (35)% EdTech 10 – – 10 8 – – – 8 +19% Events and Exhibitions 4 1 7 12 22 2 – 1 25 (51)% Energy Information 1 (1) – – 12 (12) – – – N/A B2B 79 – 7 86 126 (10) – 1 118 (27)% Consumer Media 64 3 – 67 78 14 – – 92 (27)% Corporate costs (34) – – (34) (43) – – – (43) (21)% DMGT 110 2 7 119 162 4 – 1 167 (29)%
Adjusted operating profit and profit before tax
Insurance Risk 34 – – 34 40 – – – 40 (16)% Financial Statements Property Information 24 – – 24 41 – – – 41 (42)% EdTech 6 – – 6 4 – – – 4 +31% Events and Exhibitions 4 1 7 12 22 2 – 1 25 (52)% Energy Information 2 (2) – – 8 (8) – – – N/A B2B 69 (1) 7 75 117 (7) – 1 111 (32)% Consumer Media 56 3 – 59 67 14 – – 81 (27)% Corporate costs (35) – – (35) (40) – – – (40) (12)% DMGT adjusted operating profit 90 2 7 99 144 7 – 1 152 (35)% Income from JVs and associates (8) – – (8) 13 (23) – – (10) (25)% Net finance costs (10) – 2 (8) (12) – – – (12) (36)% DMGT adjusted profit before tax 72 2 9 84 145 (16) – 1 130 (36)%
1. Reported figures are the adjusted* results, as defined on the inside front cover. Amounts in the tables are stated rounded to the nearest million pounds, consequently totals may not equal the sum of the component integers. Shareholder Information Shareholder
29 Strategic Report Daily Mail and General Trust plc Annual Report 2020
Focused on driving long-term shareholder value Financial Review
A new funding plan has been agreed with the The Board reconsidered the dividend policy Outlook Strategic Report Trustees. In FY 2021, £121 million will be paid carefully during the year and, despite the The duration and severity of the Covid-19 into escrow, including the £117 million that weaker profit outcome and deteriorating pandemic remains unclear, with a range has been made available to the pension global economy, resolved to leave it of possible outcomes over different schemes, and direct funding payments unchanged. The decision reflects the timeframes. Consequently, it is prudent not into the schemes will be £14 million. From Board’s conviction in the appropriateness to provide formal quantitative guidance. FY 2022 to FY 2025 inclusive, payments of of the policy, its long-term approach and What is certain is that we will remain alert, £11 million p.a. will be made directly into the confidence in the Group’s ability to deliver adjusting our behaviour and actions as schemes and, in addition, payments of earnings growth over time, underpinned circumstances change. £7 million p.a. will be paid into escrow. Also, by a strong balance sheet. in certain circumstances, a contribution of The underlying financial performance in The recommended FY 2020 full year dividend up to 20% of any share buy-backs shall be FY 2021, for the Group as a whole, will is equivalent to 92% of the adjusted earnings contributed to the schemes. Contributions depend on the dynamics of the individual per share for the year since short-term will be discontinued should the schemes’ businesses, as described in the Operating earnings have been adversely affected actuary agree the schemes are no longer Business Reviews on pages 16 to 22. by the impact of Covid-19, disposals and in deficit, calculated on an actuarial basis. organic investment. There will be continued significant organic Governance A portion of the funds in escrow will be investment in the B2B businesses, reflecting used to fund the schemes between FY 2021 Exceptional items, impairments the opportunities to create value over time. and FY 2027, with the amounts dependent and amortisation Net finance costs are expected to increase on the actuarial deficit, interest rates and As explained in more detail below, in FY 2021 as a result of significantly other factors. In FY 2027, some or all of the certain items, including exceptional costs, reduced interest income on DMGT’s gross amount in escrow may be used to fund the impairments and some amortisation cash deposits due to lower interest rates. schemes, depending on the actuarial deficit, are excluded from adjusted results. The The adjusted tax rate will depend on and the remainder will be returned to DMGT. exceptional cash costs in the year were the impact of the Covid-19 pandemic, The next actuarial valuation is scheduled £15 million, compared to £9 million in the including on the geographical mix of profits. for 31 March 2022. prior year. Total exceptional operating costs, The FY 2021 rate is currently expected to including discontinued operations and be in the low twenties. Dividends associates, were £24 million (2019 £36 million). The recommended final dividend is The Board is confident that DMGT is 16.6 pence which, if approved, would make There were £9 million of exceptional positioned to withstand the uncertainties of the total dividend for the year 24.1 pence, severance costs in the year, as headcount the period ahead and to continue to adopt 1% growth over the prior year, excluding the was reduced in the Consumer Media, Events a long-term approach. The Group benefits Financial Statements £200 million special dividend paid in April & Exhibitions and Property Information from a diversified portfolio of market-leading 2019, and continuing DMGT’s track record of businesses, to enhance the future businesses that operate across multiple increasing the dividend in excess of inflation. profitability of individual product lines and sectors, geographies and business models. support the businesses’ margins. The costs The dividend policy is to grow the dividend also included a £20 million non-cash charge Our strategy, combined with a balanced per share in real terms and, in the medium as a result of amendments to the existing and flexible approach to capital allocation, term, to distribute around one-third of RMS 2015 Equity Incentive Plan to ensure positions us to deliver on the Group’s the Group’s adjusted earnings. This policy the scheme works appropriately for the long-term revenue, profit and cash flow reflects DMGT’s long-term approach to broader employee base in light of the potential. capital management and allocation. It aims current business plan. Read more on the outlook for our to deliver a reliable and predictable dividend The charge for amortisation of intangible businesses in Operating Business growth trajectory, unaffected by fluctuations Reviews, pages 16 to 22 in earnings or capital gains, while also being assets arising on business combinations, including the share from joint ventures sufficiently prudent to retain the flexibility Adjusted results to make significant investments in the and associates, was £11 million (2019 The Board and management team use long-term future growth of the business. £20 million). Total impairment charges
in the year were £19 million, primarily adjusted results and measures, rather than Information Shareholder in respect of Events and Exhibitions, statutory results, to give greater insight to compared to £49 million in the prior year. the financial performance of the Group and the way it is managed. The tables on page 28 The Group recorded other net gains on show the full list of adjustments between disposal of businesses and investments, statutory operating profit and adjusted including discontinued operations, of operating profit by business, as well as £177 million, primarily in respect of between statutory profit before tax and the disposal of Genscape, the Energy adjusted profit before tax at Group level Information business (2019 £67 million). for both FY 2020 and FY 2019.
30 Daily Mail and General Trust plc Annual Report 2020
Note 13 shows the full list of adjustments v. Pension finance credit: the finance credit In FY 2020, on a reported basis, DMGT’s Strategic Report between statutory and adjusted results. on defined benefit schemes is a formulaic revenues decreased by 14%, cash OI by 32%, calculation that does not necessarily adjusted operating profit by 38% and The explanation for each type of adjustment reflect the underlying economics adjusted profit before tax by 50%. The is as follows: associated with the relevant pension growth rates were adversely affected by i. Discontinued operations: the adjusted assets and liabilities. It is effectively a disposals and the distribution of Euromoney results include the pre-disposal results notional credit and is excluded from shares but benefitted from the acquisition of discontinued operations, namely adjusted results. of the ‘i’. After adjusting for these factors Genscape, the Energy Information as well as others, such as foreign exchange vi. Other adjustments: other items that are business, whereas statutory results only rates, other acquisitions and the timing excluded from adjusted results include include continuing operations. The gain of events, the underlying decreases were changes in the fair value of certain on the disposal of Genscape in FY 2020 10% for revenues, 29% for cash OI, 35% financial instruments and changes to is excluded from both statutory and for adjusted operating profit and 36% future acquisition payments. They are adjusted profit before tax. for adjusted profit before tax, as shown considered to be unrelated to the ongoing in the tables on page 29. ii. Exceptional operating costs: businesses cost of doing business. The share of joint occasionally incur exceptional costs, ventures’ and associates’ tax charges is Governance including severance and consultancy included in statutory profit before tax fees, in respect of a reorganisation that but, since it is a tax charge, is excluded is incremental to normal operations. from adjusted profit before tax. The share These are excluded from adjusted results. of joint ventures’ and associates’ interest iii. Intangible impairment and amortisation: charges is reclassified to financing costs Tim Collier when acquiring businesses, the premium in the adjusted results. Group Chief Financial Officer paid relative to the net assets on the Underlying growth balance sheet of the acquired business When assessing the performance of the is classified as either goodwill or as an different businesses, the Board considers intangible asset arising on a business the adjusted results. The year-on-year combination and is recognised on DMGT’s change in adjusted results may not, however, balance sheet. This differs to organically be a fair like-for-like comparison as there developed businesses where assets are a number of factors which can influence such as employee talent and customer growth rates but which do not reflect relationships are not recognised on underlying performance. the balance sheet. Impairment and Financial Statements amortisation of intangible assets and When calculating underlying growth, goodwill arising on acquisitions are adjustments are made to give a like-for-like excluded from adjusted results as they comparison. For example, adjustments relate to historical M&A activity and are made to exclude disposals from both future expectations rather than the FY 2019 and FY 2020 years completely. trading performance of the business When businesses are acquired, the prior during the year. Software, including year comparatives are adjusted to include products, is also recognised as an the acquisition. intangible asset on the balance sheet but The timing of events within Events and the ongoing amortisation of software is Exhibitions can also be a distortion. similar to the depreciation of tangible To give a fair like-for-like comparison when assets and is an everyday cost of doing calculating underlying growth, the FY 2019 business, so is included in both statutory comparative is amended to include the and adjusted results. performance from the previously held
iv. Profit on sale of assets: the Group makes events for each FY 2020 show. Underlying Information Shareholder gains or losses when disposing of growth includes the adverse impact of businesses, for example on the disposal event cancellations and postponements. of BuildFax, the US Property Information Consequently, underlying growth in FY 2020 business, in FY 2020. These items are includes all costs for events that were excluded from adjusted results as they scheduled in the year but excludes costs reflect the value created since the associated with events originally scheduled business was formed or acquired rather in FY 2021. than the operating performance of the business during the year. Similarly, the gains or losses made by joint ventures or associates when disposing of businesses are excluded from adjusted results.
31 Strategic Report Daily Mail and General Trust plc Annual Report 2020
Entrepreneurism, Purpose and Excellence Our Stakeholders
Introduction from our CEO Our culture During FY 2020 these courses focused on Strategic Report We have never been a business to stand on DMGT encourages curiosity and innovation support programmes for employees whilst the sidelines if there is an opportunity to give amongst its people, and is built around a working remotely. support. We have always tried to play an set of values that are common across our We also offer work experience and active role in the communities in which we portfolio of operating companies. Our culture professional development support to all work, as any business of our size should, combines entrepreneurism, purpose, our staff, including external training and and have considerable strengths as a Group excellence and performance management. qualifications, and the opportunity to that can be applied on the ground. As a home for entrepreneurs, seeking to apply for additional funding for these. take advantage of market disruption, DMGT Despite all the change we have been part of, fosters constant innovation, growth and Keeping our people informed DMGT has five core values that remain the talent development. Businesses have a clear One of the challenges of a geographically same. Each one was brought to life in sense of delivering for their customers and diverse organisation, we have c. 40 locations tangible ways during 2020: society whilst also improving operational internationally, is ensuring that we can • People: we supported our staff to help execution. We live out these values through effectively communicate with all of them stay as safe as possible – supplying our relationships with our stakeholders, our people.
new kit for people to work remotely, employees, and suppliers. We continue to enhance employee Governance buying PPE early and implementing Our people collaboration by using platforms such as a Salary Substitution Plan in the UK. instant messaging, video conferencing, We believe that talented, motivated • Purpose: we supported our communities, developing a Group-wide microsite to share people are the key to our success and in particular through the tremendous policies and information, refining our are committed to providing a working impact of Mail Force Charity, donating internal newsletters, circulating a daily email environment that allows people to reach testing equipment for NHS and care staff. news bulletin and holding regular ‘Town Hall’ their full potential. • Patience: we continued to invest in all meetings, whether virtually or in person. our businesses through the cycle. We invest in our people, developing Wellbeing • Product: we adapted products quickly to high-potential leaders at early stages in their answer our customers’ changing needs. careers. Our leadership programmes, run We have a suite of policies designed to • Performance: we showed our resilience at operating company level, are designed promote the health and wellbeing of our with strong recovery from Landmark and to equip talented people with stretching employees, including a range of fitness and dmg media. Both returned to profitability experiences to accelerate their development mindfulness programmes. This was critical quickly due to an immense effort from and realise their potential. Our ambition this year with employees working remotely our teams. is to enable people to be the best they can during the Covid-19 pandemic. Groupwide there were numerous examples of Financial Statements A wonderful example of our community be, to deliver today and build for tomorrow. programmes to support employee wellbeing engagement is the establishment of Mail Our people have the chance to develop at and good mental health, including ‘mental Force Charity in response to the Covid-19 DMGT doing meaningful and interesting health’ days off work, bespoke Covid-19 pandemic, where the charity has acted as a work that will stretch them, taking learning and wellbeing workshops, contact business playing a pivotal role in delivering advantage of all the opportunities that tracing and medical support, Town Hall PPE to the NHS. This year we also founded our diverse group of businesses can offer. meetings at all levels across the business, DMGT Cares, a Group-wide central hub to DMGT holds a wealth of top leadership talent free access to home exercise programmes, enable our staff to engage with their local and sector expertise at Group level and and a number of virtual social activities. communities. It ranges from raising money across its operating companies. Our people while on lockdown to being in touch with are supported by a range of tailored local Diversity and inclusion those forced to be on their own, as well as learning and development programmes. Our Equal Opportunities Policy is designed information on volunteering opportunities Staff have access to a wide range of training to comply with the Equality Act 2010 and and essential local initiatives to support and development programmes and the Equality and Human Rights Commission and promote the work of staff teams wellbeing support, including courses such as: Employment Statutory Code of Practice, and across the business. to promote best practice. Managers must set • coaching for managers, including an appropriate standard of behaviour, lead Information Shareholder Read more in CEO Review, performance management; pages 10 to 13 by example and ensure that those they • stakeholder management; manage adhere to this policy. This policy • career development planning; applies to all aspects of the employee • digital marketing essentials; relationship. All decisions must be based • mindfulness and wellbeing workshops; on merit. This includes but is not limited to: • public speaking, presenting and assertion workshops; and • recruitment and selection; Paul Zwillenberg • technical skill training (Excel, • job adverts; CEO PowerPoint etc). • training and development; • opportunities for promotion; • conditions of service; • pay and benefits; and • conduct at work.
32 Daily Mail and General Trust plc Annual Report 2020
DMGT’s Human Resources Information Gender breakdown of our employees The Audit & Risk Committee is provided with Strategic Report System enables us to monitor the levels of The table below sets out the gender a summary of any incidents and the Board diversity in our business, and also promote breakdown of our employees. Our aim is to informed through the regular report from an inclusive culture. Diversity data including promote equality and diversity in accordance the Committee chairman. gender, ethnicity, race and disability is tracked with our Group Code of Conduct and Code of Conduct and Group policies across job levels and assessed against a Diversity Policy. Our Code of Conduct sets the standards number of key areas, including recruitment for our corporate and individual conduct. processes, attrition and promotions. At 30 September 2020 The Code of Conduct includes standards for We regularly ask employees for their feedback Male Female equal opportunities, anti-bribery, conflicts of on diversity and inclusion, supported with Board Directors 10 83% 2 17% interest, share dealing and fair competition, regular internal communications on a range Operating company among other topics. The Code of Conduct of activities that promote a collaborative CEOs and direct reports contains clear guidance regarding equality, and inclusive culture. to the Group CEO*† 4 44% 5 56% diversity and inclusion. Many of the topics All employees* 3,353 59% 2,341 41% in the Code of Conduct are supported Diversity workshop * Excluding Executive Directors. by detailed policies and procedures for † In accordance with section 414C of the Companies Act 2006 Governance DMGT runs a number of training this is how DMGT reports senior managers. our employees. programmes on equality, diversity and In addition, stand-alone policies regarding Gender pay reporting inclusion, as well as providing tools equal opportunities, entertainment and DMGT’s UK-based operating companies, and resources for hiring managers to gifts, information security, data privacy and Landmark Information Limited and Associated assist them in ensuring an objective health and safety apply to DMGT employees. Newspapers Limited, are required to report hiring process that attracts the best These policies, as well as our Code of Conduct, on their Gender Pay Gap. Due to Covid-19, talent regardless of background. safeguard the welfare of our employees and the government took the decision to suspend the integrity of our businesses. All DMGT This year we piloted diversity and reporting deadlines for 2019/2020, however, policies are available for employees to access inclusion training for managers both companies published data this year. on a Group-wide Policy Microsite. Where and HR staff, led and facilitated by DMGT as an employer believes in ‘Equal pay an external provider. This training for equal work’, is committed to equal pay appropriate, certain policies are housed included unconscious bias, and conducts ongoing reviews to ensure we on the DMGT website. discrimination awareness, leadership have the best possible processes in place. We have a rolling review programme to and business roles. Responsible business update DMGT policies and deliver continuous training to reinforce compliance. We partner with a number of external DMGT is a responsible business that adheres Financial Statements programmes and take part in to strong ethical standards with a clear, robust DMGT’s equal opportunities statement can volunteering activities to support Code of Conduct (see below). We encourage be found on the DMGT website and applies diversity in media; one of our new responsible business practice and respond to to both employees and supervisory bodies. programmes connects women from the needs of our stakeholders in several ways: BAME backgrounds in the media Go online to industry with experienced female • promoting strong governance and www.dmgt.com mentors. leadership which encourages responsible business attitudes and actions across Human rights the Group; DMGT believes that our exposure to the Our Career Boards ensure job opportunities • maintaining our Code of Conduct and associated risks in the context of human are open to internal candidates, with training supporting Group policies; rights frameworks is minimal. DMGT does and mentoring offered to support • ensuring DMGT employees understand not have a specific human rights policy but promotions and internal mobility. key legal and reputational issues through has a number of policies that cover areas in person training and e-learning; such as health and safety, modern slavery, For our UK-based businesses, we also bribery and corruption. In addition, new provide an inclusive apprenticeship • operating effective risk management and internal controls; and suppliers are evaluated with a questionnaire Information Shareholder programme for new talent and existing to ensure they are ethical and lawful. employees, with development opportunities • encouraging business-level participation ranging up to MBA level. We believe this is in corporate responsibility (CR) and Flexible working a highly effective and sustainable way to community support. DMGT supports its employees to maintain a support the progression of more people Whistleblowing work-life balance. Policies and guidance to in our business. Employees who have concerns regarding enable this are in place across the Group, criminal activity, gross misconduct and/or including special leave policies to support a breach of the DMGT Code of Conduct or employees with various family circumstances, supporting policies have a duty to report and an Employee Assistance Programme that such activity. DMGT operates a confidential offers a family care service. This programme Speak Up facility to aid any such reports. offers various services to help staff achieve The Speak Up facility is actively promoted a healthy balance between work and home. to employees and managed externally by a specialist third party. All incidents are tracked to ensure appropriate follow-up. 33 Strategic Report Daily Mail and General Trust plc Annual Report 2020
Entrepreneurism, Purpose and Excellence Our Stakeholders
Our partners Our customers Strategic Report Supporting our employees during Payments practices reporting Our customers are at the heart of our Covid-19 In April and May 2020, DMGT’s UK-based success and each business across the Group DMGT moved to a remote working operating companies, Landmark and dmg seeks to invest in relationships with their model seamlessly. Extensive guidance media published their payment practices market and audience. and support was provided on working data. DMGT is committed to ensuring well remotely, along with toolkits, that all of its suppliers are paid within Supporting our customers during virtual podcasts and advice services the agreed terms. for physical and mental health and Covid-19 wellbeing. As we considered the Go online to www.gov.uk/check-when- Our engagement with our customers businesses-pay-invoices transition back to the office, great can also be seen through our Covid-19 response. emphasis was placed on how the More information on how we work with our businesses could be more flexible suppliers can be found on dmgt.com. • The first interactive Virtual RMS and different models for working Exceedance was held in May 2020, considered. receiving very positive feedback
Supporting our partners during Governance DMGT’s ‘Return to the office’ plan was from customers. Covid-19 developed with guidance from both • Hobsons provided its Naviance medical and legal experts, with During Covid-19, a marketing support Curriculum free to schools across government advice at the forefront scheme was run for UK small and the US during lockdown, to the of all decisions. As journalism was medium-sized enterprises, adapted benefit of more than three million designated as an essential service, from a similar scheme originated in students. dmg media was the first business dmg media Ireland, in conjunction with • Metro, in consultation with to successfully have a small number the Federation of Small Businesses. Transport for London, continued of employees return to the office. All dmg media titles, print and online, printing the paper specifically for The plans to facilitate this included were fully behind the scheme that key workers on their daily commute. adjusting office spaces to adhere saw £5 million of advertising value • dmg media donated thousands to social distancing guidelines, new available for businesses that applied of copies of the ‘i’ newspaper to seating plans, PPE and temperature and were selected to promote their NHS hospitals every day to provide checks for staff entering the office business. Within only a few weeks the NHS staff with newspapers for their and enhanced cleaning schedules. scheme was oversubscribed. These hospital breaks, pushed home businesses will be a new source of delivery of newspapers, and
The safety of our employees is key, Financial Statements which is why they were all required revenue in the future, particularly for continued to deliver the digital to complete a risk assessment Metro’s regional editions and online. subscription service of Mail+. questionnaire prior to returning to work. • Landmark supported the NHS with environmental reports for Salary Substitution Plan the Nightingale hospitals. It also Alongside the flexible working and supported the continued wellbeing support provided, DMGT functioning of the market via its introduced a Salary Substitution Plan remote valuation and service across DMGT Centre, dmg media and capabilities, while other providers Landmark. This innovative scheme were impacted by lockdown. enabled us to avoid using government grants and ‘furlough’ schemes. Under the scheme, staff above a minimum salary exchanged a percentage of their salary for the purchase of shares equal
in value for a period of three months. Information Shareholder This scheme was well received and appreciated by staff.
34 Daily Mail and General Trust plc Annual Report 2020
Our communities Strategic Report Through a range of local partnerships within the communities our operating companies serve, and Group-wide programmes such Mail Force Charity Contributions from philanthropists, as our Corporate Responsibility (CR) foundations and Daily Mail readers Champions network, DMGT supports and DMGT has always played an active role reached over £11 million. Over 55,000 encourages purpose within our community. in the communities in which we work. We take our role in society seriously, readers contributed an incredible We believe that supporting our operating and recognise our responsibilities £2.5 million, many of whom sent moving companies’ local communities is particularly and abilities. This is why, when the letters about why they donated. important as it allows our employees to choose dangerous shortages of PPE for the NHS Employees also contributed generously, a cause close to their heart. This is actioned became apparent, we decided to act. donating £27,000 which was matched by the CR Champions network which has by DMGT. volunteers from across the operating We put together a team from across companies. More information about our the business and set up a charity in The charity was able to provide involvement with our communities, including record time to source additional PPE. approximately 40 million items of PPE to the NHS, partner charities Mencap, Group-wide community initiatives can be We partnered with Salesforce, who Governance found on our website. Group charitable already had experience in procuring Sue Ryder, the Salvation Army and donations during the year were £1.6 million and shipping PPE for US hospitals. Marie Curie, many care homes (2019 £1.2 million). In April 2020, Mail Force Charity and various charitable organisations. was founded. Examples of our Group-wide community Go online to initiatives can be found on our website. The initial donations from DMGT, www.mailforcecharity.co.uk Salesforce and DMGT’s Chairman, Go online to Lord Rothermere, kick-started a www.dmgt.com campaign which enabled Mail Force Charity to airlift 20 tonnes of PPE from Supporting our communities China as its first contribution. The charity during Covid-19 worked directly with the central NHS The Covid-19 pandemic had a global distribution team in Daventry to deliver effect on thousands of businesses, the PPE to the hospitals and care homes societies and individuals. During where it was most needed.
this time of devastating impact on Financial Statements people’s lives, DMGT pooled efforts to help those helping others on the front line of community action for the vulnerable, whether caring for the elderly, providing mental health support, combating economic hardship, or keeping people safe. Our operating companies stepped up to support the communities around them, and we are proud of the selfless contributions that so many of our people have made. DMGT Cares: Our business-wide community response to Covid-19
The website ‘DMGT Cares’ was Information Shareholder launched to provide a hub of practical ways that volunteers within our businesses could help the communities in which DMGT works. It included information about volunteering opportunities, fundraising, our charity partners, match funding employee donations and news updates on how colleagues were helping others. Go online to www.dmgt.com
35 Strategic Report Daily Mail and General Trust plc Annual Report 2020
Entrepreneurism, Purpose and Excellence Our Stakeholders
Environmental Social Governance Strategic Report (ESG) Waste and recycling initiatives Water usage We continue to recognise and address We seek to recycle waste materials dmg media can demonstrate its water the environmental and social impact of wherever possible. Printed and non- usage reduction over previous years; our portfolio of companies and how this printed paper waste is 2,437 tonnes a trend that is likely to continue. is linked to our approach to governance. (2,853 in 2019). Core waste is 313 tonnes dmg media’s water usage is currently We believe our governance policies are (373 in 2019), and cardboard waste is 20 cubic metres per 24 hour period; effective and support ESG values. We have 396 tonnes (578 in 2019). All of this is sent 5,900 cubic metres (7,300 in 2019). Waste already made significant progress in for recycling. 20 tonnes each of scrap water from the platemaking process is reducing the environmental impact of metal and timber is also segregated for recycled for re-use. We produce 25 cubic our printing operations and we continue recycling (20 in 2019). metres of waste water per day (30 in 2019). Approximately 90% of this water is to take action to minimise our impact Any toxic chemicals used in the printing re-cycled and re-used (85% in 2019). across our other business activities. process are minimal. Initiatives are in Go online to www.dmgt.com place with our suppliers to reduce Rainwater is also collected, and when where ESG content is regularly updated reliance on biocides in ink, such as UV available can be used to replenish the filtration of water for ink make-up. Our platemaking supply after filtration. Governance Environmental impact printing press site is constantly working We have a 100 cubic metre rainwater At DMGT, we evaluate and manage our with ink suppliers to reduce use of storage capacity. biocides. Our waste process water plant is environmental impact by measuring and Energy efficiency reporting on our greenhouse gas (GHG) continuously being upgraded to increase Our Thurrock printing site recycles its emissions. As a minimum, our operating efficiency. 90% of water used in the waste process water with 90% efficiency companies comply with current regulations printing process is currently recovered (85% in 2019), harvests rainwater for of the country that they operate in and are (85% in 2019). A de-ionised water plant use in the process and has free cooling prepared for future legislation. However, we is used to improve waste water recovery algorithms designed into its Building expect our operating companies to further rates. Domestic waste water is also Management System to minimise cooling mitigate against the negative impacts from sent to a treatment plant, and has no energy costs. Domestic water heating their activities wherever possible. connection to main drains. All our waste and office cooling is via energy efficient streams are fully traceable. DMGT’s most significant environmental heat recovery systems (air source heat impact comes from the printing plants in pumps) which re-use excess heat in the our Consumer Media businesses. press room. Gas use for space heating Financial Statements At Harmsworth Printing, 100% of our waste is minimised by warm air recycling paper, cardboard and packaging is recycled. algorithms utilising excess heat generated Our printed production waste from the from the printing press. presses has been reduced to only 4% Read more in our Energy and Carbon on average. This is due to our use of Disclosures, page 37 flexographic printing, which enables lower production waste and less energy use. We have been systematically reducing With the acquisition of JPI’s printing assets our specialist waste streams, through in October 2020, we recognise our absolute improvements in the recycling process. Scope 1 Carbon Footprint may increase in Our waste from this stream has been FY 2021. As the assets are integrated, work reduced by 5% in FY 2020. At Harmsworth will be undertaken to ensure the impact Printing, we have a 100-tonne rainwater is minimised, in line with our existing harvesting tank which meets approximately printing operations. 80% of our water demand, reducing our reliance on mains water. Information Shareholder We endeavour to ensure that the paper we buy is sourced from PEFC and FSC certified forests. We ensure our paper matches the industry standard ratio for Combined Waste Paper and Certified Virgin Fibre Content, ensuring that raw material use is as low as possible, whilst producing high-quality newspapers.
36 Daily Mail and General Trust plc Annual Report 2020 Strategic Report Energy and Carbon Disclosures
Methodology sources are used for the emission factors Footprint Results DMGT is committed to comprehensive for the electricity consumed in non-UK Our FY 2020 carbon footprint totalled and transparent reporting of our operations. This report is in alignment with 17,000 tCO2e (2019 21,900). Emissions environmental performance. Our the requirements of the Streamlined Energy from UK operations corresponded to baseline year for carbon emissions is & Carbon Reporting (SECR) regulation for 74% of it and amounted to 12,500 tCO2e FY 2015 and we use an operational UK businesses. (2019 15,300). control consolidation approach. For the purpose of this report, the Scope 1, 2 The table below shows our carbon The data supporting our carbon and 3 emission sources included in our footprint for FY 2020, by scope, as well footprint is collated and independently footprint were: as our energy use. For the purposes of comparability, the FY 2018 and FY 2019 reviewed by environmental consultancy • Scope 1 (direct emissions): combustion ICF. The results of the footprint have of natural gas for heating purposes, figures have been restated to be consistent not been audited by a third-party use of diesel and gasoline in our fleet. with the businesses in the portfolio
during FY 2020. Governance assurance company. • Scope 2 (indirect emissions): production The footprint is developed in accordance of electricity imported from the grid with the GHG Protocol Corporate and consumed by DMGT globally. Accounting and Reporting Standards, • Scope 3 (other indirect emissions): and the methodology is also in line outsourced delivery of newspapers, with HMG Environmental Reporting as well as taxis, rail and air travel for Guidelines. Emission factors used are business purposes. predominately sourced from BEIS conversion factors 2020. Other data
FY 2020 FY 2019 FY 2018 Gross GHG emissions (in tCO2e) Global, incl. UK UK only Global, incl. UK UK only Global, incl. UK UK only Scope 1 1,000 900 1,400 1,200 1,300 1,200 Scope 2 8,300 5,000 10,500 6,300 11,700 7,000
Scope 3 7,700 6,600 10,000 7,800 11,500 8,600 Financial Statements Scopes 1 + 2 + 3 17,000 12,500 21,900 15,300 24,500 16,800 FY 2020 FY 2019 FY 2018 Energy Consumption (in kWh) Global, incl. UK UK only Global, incl. UK UK only Global, incl. UK UK only Scope 1 5,400 4,400 7,300 6,400 6,800 6,000 Scope 2 28,800 21,400 33,200 24,600 33,300 24,800 Scopes 1 + 2 34,200 25,800 40,500 31,000 40,100 30,800 FY 2020 FY 2019 FY 2018 GHG emissions intensity (tCO2e/£m) Global, incl. UK UK only Global, incl. UK UK only Global, incl. UK UK only Scope 1 + 2 7.7 4.9 8.4 5.4 9.1 5.7 Scope 1 + 2 +3 14 10.3 15.5 10.8 17.2 11.8
Comparison of historical emissions Energy management practices • We have relocated parts of the RMS We strive to reduce our impact on the At DMGT, we have actively reduced our datacentre and related IT equipment
environment wherever possible and energy consumption across our offices and to a colocation centre last year, Information Shareholder DMGT has succeeded in this by reducing printing facilities through implementing reducing the demand of electricity our gross GHG emissions by 22% and operational efficiency enhancements and for cooling and for the equipment. our GHG emissions intensity by 10% building modifications as recommended • We have been gradually upgrading in comparison to FY 2019. by ICF. Some of the initiatives undertaken, the lighting systems by replacing which have helped us reduce our impact on conventional light bulbs with LEDs These reductions can largely be the environment and our carbon footprint and installing sensors and building attributed to our energy management during FY 2020, include: management systems in our head practices and to the impact of Covid-19 office and printing sites. on our operations in FY 2020. The • Solar panels installed by Landmark in reduced use of office spaces in the past previous years continue to contribute Go online to months or the termination of tenancy to the generation of renewable energy, www.dmgt.com contracts has affected Scopes 1 and 2, replacing electricity that would otherwise and disruption of travel has reduced be purchased from the grid. Scope 3 emissions.
37 Strategic Report Daily Mail and General Trust plc Annual Report 2020
Entrepreneurism, Purpose and Excellence Our Stakeholders Strategic Report Section 172 Statement The Board of Directors are mindful of their duty to promote the success of the Company. They believe they have acted in the way they consider, in good faith, would be most likely to promote the success of the Company for the benefit of its shareholders. How the Board engages with our stakeholders The Board is committed to generating continued sustainable value for shareholders, considering the interests of DMGT’s employees, and maintaining positive relationships with our customers, suppliers and other stakeholders. Here are some examples:
Stakeholder group How the Board engages Employees Directly via Company events, Board and Committee meetings. Through regular reports on initiatives and employee feedback. Customers Updates included in Board presentations and reports. Partners Updates included in Board presentations and reports. Shareholders Direct through one-to-one meetings, when relevant, at Company events such as the Investor Briefings and regular reports to the Board. Governance Communities, the environment Updates included in Board presentations and reports.
The table below shows where more information can be found on the matters referred to in section 172 CA 2006.
(a) Long-term results – the likely consequences Strategic Report: of any decision in the long term • Business Model (pages 6 to 7) • Chairman’s Statement (pages 2 to 4) • CEO Review (pages 10 to 13) • Key Performance Indicators (pages 14 to 15) • Viability Statement (page 27) Corporate Governance: • Audit & Risk Committee Report (pages 60 to 66)
(b) Our workforce – the interests of the Strategic Report: Financial Statements Group’s employees • Business Model (pages 6 to 7) • Chairman’s Statement (pages 2 to 4) • CEO Review (pages 10 to 13) • Our Stakeholders and Response to Covid-19 (pages 32 to 39) Corporate Governance Report: • Chairman’s Statement on Governance (pages 2 to 4) • Board of Directors and Company Secretary (pages 48 to 49) • Directors’ Remuneration Report (pages 68 to 91) (c) Our business relationships – the importance Strategic Report: of developing the Group’s business relationship • Business Model (pages 6 to 7) with suppliers, customers and others • Our Stakeholders and Response to Covid-19 (pages 32 to 39) (d) The community and our environment – Strategic Report:
the impact of the Group’s operations on • Our Stakeholders and Response to Covid-19 (pages 32 to 39) Information Shareholder the community and the environment (e) Our reputation/our desire to maintain Strategic Report: our reputation for high standards of • Our Stakeholders and Response to Covid-19 (pages 32 to 39) business conduct • Non-Financial Information Statement (page 39) (f) Fairness between our shareholders – Strategic Report: our aim to act fairly as between members • Chairman’s Statement – dividend policy (pages 2 to 4) of the Company • Our Stakeholders and Response to Covid-19 (pages 32 to 39) Corporate Governance Report: • Board activities and stakeholder engagement – Shareholders (page 55) • Directors’ Remuneration Report (pages 68 to 91) • Board of Directors and Company Secretary (pages 48 to 49)
38 Daily Mail and General Trust plc Annual Report 2020 Strategic Report Non-Financial Information Statement We aim to comply with the non-financial reporting requirements contained in sections 414CA and 414CB of the CA 2006. The table below, and the information it refers to, is intended to help stakeholders understand our position on key non-financial matters.
Reporting requirement Policies and standards which govern our approach Risk management and additional information Environmental matters • Carbon footprint • Our Stakeholders, • Environment Policy pages 32 to 39 Our people • Code of Conduct • Directors’ Report, pages 48 to 91 • Equal Opportunities Policy • Our Stakeholders, • Health and Safety Policy pages 32 to 39 • Whistleblowing Policy Human rights • Modern Slavery Statement • Audit & Risk Committee Report, pages 60 to 66 • Privacy Policy • Directors’ Report, pages 48 to 91 • Information Security Policy Governance Social matters • Code of Conduct • Our Stakeholders, pages 32 to 39 Anti-bribery and anti-corruption • Anti-Bribery and Corruption Policy • Directors’ Report, pages 48 to 91 • Code of Conduct • Financial Review, pages 23 to 31 • Tax Policy Policy embedding, due diligence • Principal Risks, pages 40 to 47 and outcomes • Financial Review, pages 23 to 31 • Directors’ Report, pages 48 to 91 • Our Stakeholders, pages 32 to 39 • Audit & Risk Committee Report, pages 60 to 66 Description of principal risks • Principal Risks, pages 40 to 47 and impact of business activity Description of the business model • DMGT at a Glance, page 5 • Our Business Model, pages 6 and 7 Financial Statements Shareholder Information Shareholder
39 Strategic Report Daily Mail and General Trust plc Annual Report 2020
Actively monitoring and managing our risks Principal Risks
Board oversight of risk Risk management function The Board formally evaluated the system Strategic Report management and internal controls Care has been taken to avoid the threat of of risk management and internal control in The Board delegates day-to-day oversight self-review across our ‘three lines of defence’ conjunction with the Audit & Risk Committee of management’s operations of internal model (see page 41). The Risk function, led during the year. This evaluation focused controls and risk management to the Audit by the Company Secretary, provides an on material controls relating to principal & Risk Committee. The Board considers increased focus on priority risk areas. It is risks and entity-level controls, as well as that the Audit & Risk Committee possesses responsible for maintaining the Group risk additional controls and processes required the requisite skills and experience to meet management process, facilitating change to support the Company’s Viability its obligations and provide the relevant for selected risks, evolving our approach to Statement (see page 27). The evaluation assurance to the Board. Operating and operational compliance, and working with also considered any control weaknesses investment decisions are delegated to the other Group functions. The Risk function identified by Internal or External Audit, or as Investment & Finance Committee. Further engages specialist external expertise a result of incidents of fraud. Controls over details of the activities of these Committees to maintain best practice approaches. the recording of amounts in the Group’s are on pages 59 to 67. To ensure an open discussion of emerging consolidated financial statements relating risks, the Chairman of the Audit & Risk to investments have also been assessed The Board has overall responsibility for Committee met separately with the and considered as appropriate. establishing, monitoring and maintaining Governance Company Secretary during the year, Monitoring and oversight an effective system of risk management independent of operational management. and internal controls. This system provides The Group operates a ‘three lines of defence’ reasonable rather than absolute assurance Internal Audit model. The benefits of this approach are that the Group’s business objectives will The Internal Audit function undertakes shown in the table on page 41. The Board be achieved within the risk tolerance levels an agreed programme of independent delegates day-to-day responsibility for defined by the Board. assurance reviews. The function sources internal controls to operational management external expertise as required. Internal Audit with oversight by the Executive Committee It is the responsibility of the Group’s seeks to comply with relevant professional and the Audit & Risk Committee. operating companies to ensure that they standards, notably those issued by the have established an appropriate level of risk During the year it was noted that there Institute of Internal Auditors. and internal control systems, but which were no detected breakdowns in material are overseen by the Executive Committee. The Internal Audit Charter (the Charter) sets controls that protect against the Group’s Certain functions are undertaken centrally, out the purpose and objectives of Internal principal risks. including: Group Accounting; Investor Audit. The Charter takes a systematic and Relations; Strategy; Risk; Internal Audit; disciplined approach to both the evaluation Corporate Tax; Treasury; and Insurance. of and improvements in control and Financial Statements governance processes. It strengthens the The Board has established an ongoing function’s independence and objectivity by process for identifying, evaluating and means of the function’s reporting lines and managing the principal risks faced by the access to all records, personnel, property Group. This process has been updated during and operations of the Group. To ensure his the year and up to the date of approval of the independence from management, the Group financial statements. Monitoring is an ongoing Assurance Director reports directly to the process and principal risks are reviewed at Chairman of the Audit & Risk Committee. operating company Board meetings, the The Charter confirms the high-level Executive Committee and at half year and responsibilities of operational management year end by the Audit & Risk Committee. (first line of defence) and ensures that the Internal Audit function undertakes its third line of defence duties, avoiding any first or second line duties. The Charter is reviewed
annually and updated as required to Information Shareholder take account of changing practices and standards. The most recently approved Charter was updated to reflect the change in auditing approach and processes as a consequence of remote working due to Covid-19 containment measures. The Audit & Risk Committee is satisfied that the provisions of the Charter have been achieved in the year.
40 Daily Mail and General Trust plc Annual Report 2020
Three lines of defence table Strategic Report
First line of defence Second line of defence Third line of defence Each operating company is responsible for The Executive Committee and Company Internal Audit provides independent and the identification and assessment of risks, Secretary, supported as appropriate by other objective assurance on the robustness of understanding the Group’s risk strategy functional areas, particularly information the risk management framework and the and operating appropriate controls. technology, legal, tax and finance, reviews effectiveness of internal controls. the completeness and accuracy of risk assessments, reporting and adequacy of mitigation plans. Benefits Benefits Benefits • Ownership and responsibility remains • Understand aggregated risk positions. • Independent assurance on the system close to the operating companies and • Objective oversight and challenge to the of risk management and internal controls. their performance. business areas and internal control and • Assessment of the appropriateness • Promotes a strong culture of adhering risk management framework used in the and effectiveness of internal controls.
to limits and managing risk exposures first line. • Internal Audit provides assurance to Governance in accordance with each business’s risk • Provide ongoing training and support the Audit & Risk Committee. appetite and the regulatory environment. on Group-wide risks to the operating • Promotes a healthy risk culture and companies. long-term approach to risk management.
Key features of the risk management 2. Review of relevant and timely and internal controls system financial information The main features of the system of risk Each of the operating companies and DMGT management and internal controls in executive management regularly review relation to the financial reporting process relevant and timely financial information. are described below: This is produced from a financial information system operated across the Group. It is 1. Confirmation of key internal controls supported by a framework of forecasts as and the fraud and bribery assessment well as annual budgets that are approved Each operating company confirms the by the Executive Committee and confirmed operation of key internal controls to Financial Statements by the Investment & Finance Committee. Internal Audit annually. The purpose of the assessment is to confirm the operation of 3. Senior Accounting Officer sign-off a framework of internal controls, including The Group Chief Financial Officer is the anti-fraud controls, which are expected to be Senior Accounting Officer and is required, in place in each business unit. These internal by HMRC, to certify that the Company, controls are intended to provide standards and its subsidiaries, have established and against which the control environments of maintained appropriate arrangements to DMGT’s business units can be monitored. ensure that tax liabilities are calculated An annual fraud and bribery risk assessment accurately in all material respects. is completed simultaneously, detailing risks and mitigating controls. In each case, the Internal Audit team reviews and follows up on these submissions, as appropriate. Shareholder Information Shareholder
41 Strategic Report Daily Mail and General Trust plc Annual Report 2020
Actively monitoring and managing our risks Principal Risks
The Directors confirm that they have completed a robust assessment of the Strategic Report Group’s principal risks and a thorough review of risk management processes.
The Group’s risks are categorised as either strategic or operational. Strategic risks are linked to the Group’s strategic priorities and impact the whole Group. Operational risks are those arising from the execution of the business functions and typically impact one or more of the principal businesses. In light of the Covid-19 pandemic, ‘Business continuity event’ has been added as a new principal operational risk. Such events would include pandemics, epidemics and natural or man-made disasters. Previously, the exposure to such an event has been reflected within other principal risks, including ‘Reliance on key third parties’ and ‘Economic and geopolitical uncertainty’. Despite the Group’s resilience during the Covid-19 pandemic and the benefit of mitigating factors, such as insurance cover, it is considered appropriate to identify a specific principal risk due to the significant potential operational and financial impact. Further details of the Group’s risk management process, the governance structure surrounding risk and the Audit & Risk Committee can be found in the Governance Report on pages 50 to 67.
Strategic risks Governance Description and impact Examples Mitigation Trend Market disruption Market disrupters include changes to customer behaviours and demands, • The Group’s presence in different market segments reduces the overall Group impact of any Market disruption creates opportunities as well as risks. Disruption new technologies, the emergence of competitors or structural changes single market disruption. enables us to move into new markets and geographies and to markets. Examples from the operating companies include: • Organic investment initiatives across the Group to innovate our products and services and to The significance of this risk has increased remain competitive in the markets we serve. Organic investment was 10% of total revenues encourages us to innovate to grow the business. • Consumer Media: decline in print advertising revenue. given the adverse impact of the Covid-19 in FY 2020. • Consumer Media: changes in algorithms and strategies of tech giants pandemic on the outlook for the global and Failure to anticipate and respond to market disruption may affect • The Executive Committee, supported by the operating companies’ management teams, materially impacting traffic and digital advertising revenue across UK economies. demand for our products and services and our ability to drive monitor markets, the competitive landscape and technological developments; regular dialogue properties, demanding constant oversight and agility. long-term growth. and in-person meetings ensure proactive, coordinated responses. • Insurance Risk: structural decline in client markets and consolidation • Analysis of the performance management dashboard and detailed financial management in insurance industry. Changing expectations of insurers’ utilisation information for each operating company to highlight and react to early indicators of market of technology. disruption. • EdTech: declining foreign student enrolment pressuring higher • DMGT executive membership of operating company boards. education budgets. • Events and Exhibitions, UK Property Information and Consumer Media: governments’ restrictions on the movement of people. Financial Statements
Success of new product launches and internal investments The Group is continually investing in our products and services, • The culture of the Group encourages an entrepreneurial approach to identifying growth A lack of innovation or failure to successfully evolve our products developing new offerings and enriching existing products and services. opportunities and new products. and services may compromise their appeal. Examples include: • Central capital allocation ensures focused investment in quality business cases. • A new innovation or business line is ring-fenced where required, to ensure it receives autonomous • Insurance Risk: launch of a unified platform across all of RMS’s model Some may fail to achieve customer acceptance and yield expected execution, dedicated talent, budget and undiluted management focus. and analytics products, to take advantage of the growing benefits of benefits. This could result in lower than expected revenue and/or • Direct engagement from DMGT functional leads and DMGT Board Directors contribute relevant new technology. impairment losses. expertise and guidance. • Consumer Media: increased monetisation of online user base and newly • Central Portfolio Solutions function partners with each operating company to support Uncertainty also results from geographic expansion into new and created products. achievement of key milestones, KPIs and financial plans. emerging markets. • Events and Exhibitions: innovation within and expansion of events • Significant investments are approved by the Investment & Finance Committee and/or the Board. and launches across new locations, including the launch of virtual events, which has increased following the onset of Covid-19.
Portfolio management • Growth opportunities and potential synergies lost through failure • The Executive Committee continues to evaluate the Group’s portfolio in order to optimise Increasing portfolio focus is key to the Group’s strategy. This could be to identify or succeed with acquisition and investment targets. resource allocation according to portfolio roles, business opportunities and risk-adjusted compromised by portfolio changes not delivering expected benefits, • Lost acquisitions may allow competitors to gain footholds in execution.
failure to deliver acquisition or operating targets, and/or delay or key markets. Information Shareholder • Investments and divestments are approved by the Investment & Finance Committee and, where delinquency in divesting from non-core businesses at the right time. • Underperforming acquisitions and investments may lead to reduced warranted, the Board. return on capital and/or impairment losses, as well as diversion of • Extensive due diligence conducted pre-acquisition and comprehensive integration plans management time and bandwidth. implemented post-acquisition by dedicated integration managers. • Optimal value may not be achieved from divestments. • Proactive, detailed divestment roadmaps, including sell-side narrative, seller due diligence and talent incentives/retention. • The Executive Committee and the Investment & Finance Committee supported by the Portfolio Solutions function monitor post-acquisition performance. • DMGT executive membership of operating company boards and the boards of associates and investments (e.g. Yopa, Cazoo).
42 Daily Mail and General Trust plc Annual Report 2020 Strategic Report
Risk increased Risk did not change Risk decreased
Strategic risks Governance Description and impact Examples Mitigation Trend Market disruption Market disrupters include changes to customer behaviours and demands, • The Group’s presence in different market segments reduces the overall Group impact of any Market disruption creates opportunities as well as risks. Disruption new technologies, the emergence of competitors or structural changes single market disruption. enables us to move into new markets and geographies and to markets. Examples from the operating companies include: • Organic investment initiatives across the Group to innovate our products and services and to The significance of this risk has increased remain competitive in the markets we serve. Organic investment was 10% of total revenues encourages us to innovate to grow the business. • Consumer Media: decline in print advertising revenue. given the adverse impact of the Covid-19 in FY 2020. • Consumer Media: changes in algorithms and strategies of tech giants pandemic on the outlook for the global and Failure to anticipate and respond to market disruption may affect • The Executive Committee, supported by the operating companies’ management teams, materially impacting traffic and digital advertising revenue across UK economies. demand for our products and services and our ability to drive monitor markets, the competitive landscape and technological developments; regular dialogue properties, demanding constant oversight and agility. long-term growth. and in-person meetings ensure proactive, coordinated responses. • Insurance Risk: structural decline in client markets and consolidation • Analysis of the performance management dashboard and detailed financial management in insurance industry. Changing expectations of insurers’ utilisation information for each operating company to highlight and react to early indicators of market of technology. disruption. • EdTech: declining foreign student enrolment pressuring higher • DMGT executive membership of operating company boards. education budgets. • Events and Exhibitions, UK Property Information and Consumer Media: governments’ restrictions on the movement of people. Financial Statements
Success of new product launches and internal investments The Group is continually investing in our products and services, • The culture of the Group encourages an entrepreneurial approach to identifying growth A lack of innovation or failure to successfully evolve our products developing new offerings and enriching existing products and services. opportunities and new products. and services may compromise their appeal. Examples include: • Central capital allocation ensures focused investment in quality business cases. • A new innovation or business line is ring-fenced where required, to ensure it receives autonomous • Insurance Risk: launch of a unified platform across all of RMS’s model Some may fail to achieve customer acceptance and yield expected execution, dedicated talent, budget and undiluted management focus. and analytics products, to take advantage of the growing benefits of benefits. This could result in lower than expected revenue and/or • Direct engagement from DMGT functional leads and DMGT Board Directors contribute relevant new technology. impairment losses. expertise and guidance. • Consumer Media: increased monetisation of online user base and newly • Central Portfolio Solutions function partners with each operating company to support Uncertainty also results from geographic expansion into new and created products. achievement of key milestones, KPIs and financial plans. emerging markets. • Events and Exhibitions: innovation within and expansion of events • Significant investments are approved by the Investment & Finance Committee and/or the Board. and launches across new locations, including the launch of virtual events, which has increased following the onset of Covid-19.
Portfolio management • Growth opportunities and potential synergies lost through failure • The Executive Committee continues to evaluate the Group’s portfolio in order to optimise Increasing portfolio focus is key to the Group’s strategy. This could be to identify or succeed with acquisition and investment targets. resource allocation according to portfolio roles, business opportunities and risk-adjusted compromised by portfolio changes not delivering expected benefits, • Lost acquisitions may allow competitors to gain footholds in execution. failure to deliver acquisition or operating targets, and/or delay or key markets. • Investments and divestments are approved by the Investment & Finance Committee and, where Information Shareholder delinquency in divesting from non-core businesses at the right time. • Underperforming acquisitions and investments may lead to reduced warranted, the Board. return on capital and/or impairment losses, as well as diversion of • Extensive due diligence conducted pre-acquisition and comprehensive integration plans management time and bandwidth. implemented post-acquisition by dedicated integration managers. • Optimal value may not be achieved from divestments. • Proactive, detailed divestment roadmaps, including sell-side narrative, seller due diligence and talent incentives/retention. • The Executive Committee and the Investment & Finance Committee supported by the Portfolio Solutions function monitor post-acquisition performance. • DMGT executive membership of operating company boards and the boards of associates and investments (e.g. Yopa, Cazoo).
43 Strategic Report Daily Mail and General Trust plc Annual Report 2020
Actively monitoring and managing our risks Principal Risks Strategic Report Strategic risks (continued) Description and impact Examples Mitigation Trend Economic and geopolitical uncertainty • The economic impact of Covid-19 containment measures directly • The Group’s diverse and balanced portfolio of businesses and products reduces the overall impact Group performance could be adversely impacted by factors beyond affecting Consumer Media, UK Property Information and Events of any single trend. our control such as the economic conditions in key markets and and Exhibitions. • Quarterly Emerging Risk papers provided to the Audit & Risk Committee ensure both DMGT and The significance of this risk has increased sectors and political uncertainty. • Continued uncertainty surrounding the conditions of Brexit operating company management consider and remain vigilant regarding emerging risks and their given the adverse impact of the Covid-19 and trade agreement negotiations directly impacts the UK potential impact. pandemic on the outlook for the global and macroeconomic climate (Consumer Media) and UK property UK economies. transaction volumes (Property Information). • Fluctuations in the global energy and commodity markets could be exacerbated by Covid-19 and impact revenue for associated trade shows once fully resumed (Events and Exhibitions). • Political and economic uncertainty, particularly in the Middle East, could negatively impact the exhibitors and attendees of events and exhibitions once fully resumed. • Sustained global low interest rate environment will continue to impact margins for global investors, including in insurance (Insurance Risk) and property (Property Information). Governance
Talent • Entrepreneurship and leadership skills are a priority for the Group • Local HR specialists focused on recruitment, critical skills planning, identifying and developing Our ability to identify, attract, retain and develop the right and key to the continued success of many of our operating companies. internal talent combined with central oversight of reward. people for senior and business-critical roles could impact the • Technology and software development skills remain crucial to many • Central Technology function with specialised expertise in artificial intelligence, machine learning, The increased prevalence of remote working, Group’s performance. of our businesses where there is significant investment in software data architecture and management, platform development and scaling. following the onset of Covid-19, may have platforms and technology infrastructure to support next-generation • Central Technology function oversight of technology hire. a detrimental impact on the learning and product development. • Central Portfolio Solutions function partners with operating companies’ management, advising on development of employees. • The strategy to build out our data analytics capabilities places focus critical skills to improve operational and commercial performance, including pricing and packaging on developing and attracting specialists in emerging technologies. strategies, go-to-market and sales execution and business case development and planning. However, an economic downturn resulting in These skills are in high demand, which makes attracting and • Executive management is involved in the recruitment of all operating company leadership roles increased unemployment is likely to reduce retaining people with these skills more competitive. and their ongoing development. employee turnover. • Enterprise sales and operational execution expertise with market • Payment of competitive rewards for key senior roles, developed using industry benchmarks The risk profile is unchanged as these two and product knowledge continue to be a strategic imperative. and external specialist input. factors are considered to largely offset each other.
Operational risks Financial Statements Description and impact Examples Mitigation Trend Business continuity event • Major disruption may prevent the delivery of products and services • All operating companies have business continuity plans in place and these have been updated to A pandemic, epidemic or disaster, whether natural or man-made, to customers, for example print newspapers (Consumer Media). reflect lessons learned from experiencing the Covid-19 pandemic. The successful uninterrupted could cause significant disruption. This could affect DMGT’s • Measures to prevent the spread of a pandemic could result in it not being delivery of products and services throughout FY 2020 demonstrated the effectiveness of the The risk was added to DMGT’s principal risks operating companies, customers, suppliers and/or end markets. possible to hold physical events (Events and Exhibitions) or distribute print business continuity plans. during the year. newspapers (Consumer Media). They could also disrupt the functioning • Technology capabilities have been enhanced to increase operating companies’ resilience if of the UK property market (Property Information). a business continuity event occurs. • Travel restrictions or disruption could adversely affect the attendance • The Group has insurance cover in place to help mitigate the financial impact of a business of exhibitors and delegates at events (Events and Exhibitions). continuity event. • The closure of offices could disrupt operating companies’ ability to deliver products and services, support customers and develop new products.
Information security breach or cyber attack The risk is relevant to all businesses in the Group due to the nature of • The Technology Council provides oversight of information security initiatives Group-wide. An information security breach, including a failure to prevent or products and services across the portfolio. Examples which could impact • Additional measures were implemented during the year to protect against the increased risk detect a malicious cyber attack, could cause reputational damage the Group include: of attack associated with a significant increase in remote working. The risk is considered to have increased as Shareholder Information Shareholder • The Group Chief Information Security Officer is responsible for reviewing and recommending a result of increases in remote working. and financial loss. The investigation and management of an • Loss or unauthorised access to personal information and sensitive actionable roadmaps to improve information security procedures and protections at each incident would result in remediation costs and the diversion client data. operating company. of management time. • Unavailability or disruption of online products and services. • Group Information Security Policy and detailed information security standards with regular • Integrity of online products, services and data compromised. A breach of data protection legislation could result in financial reviews reported to the Technology Council. Periodic reviews of the standards themselves • Disruption to critical systems that support business operations. penalties for the affected business and potentially the Group. are performed to ensure they keep pace with best practice. • Theft of intellectual property. • Information security is reviewed as part of every internal audit of an operating company. • Cyber insurance policies in place. • Dedicated budget for information security investments and access to third-party cyber security specialists.
44 Daily Mail and General Trust plc Annual Report 2020 Strategic Report Strategic risks (continued) Description and impact Examples Mitigation Trend Economic and geopolitical uncertainty • The economic impact of Covid-19 containment measures directly • The Group’s diverse and balanced portfolio of businesses and products reduces the overall impact Group performance could be adversely impacted by factors beyond affecting Consumer Media, UK Property Information and Events of any single trend. our control such as the economic conditions in key markets and and Exhibitions. • Quarterly Emerging Risk papers provided to the Audit & Risk Committee ensure both DMGT and The significance of this risk has increased sectors and political uncertainty. • Continued uncertainty surrounding the conditions of Brexit operating company management consider and remain vigilant regarding emerging risks and their given the adverse impact of the Covid-19 and trade agreement negotiations directly impacts the UK potential impact. pandemic on the outlook for the global and macroeconomic climate (Consumer Media) and UK property UK economies. transaction volumes (Property Information). • Fluctuations in the global energy and commodity markets could be exacerbated by Covid-19 and impact revenue for associated trade shows once fully resumed (Events and Exhibitions). • Political and economic uncertainty, particularly in the Middle East, could negatively impact the exhibitors and attendees of events and exhibitions once fully resumed. • Sustained global low interest rate environment will continue to impact margins for global investors, including in insurance (Insurance Risk) and property (Property Information). Governance
Talent • Entrepreneurship and leadership skills are a priority for the Group • Local HR specialists focused on recruitment, critical skills planning, identifying and developing Our ability to identify, attract, retain and develop the right and key to the continued success of many of our operating companies. internal talent combined with central oversight of reward. people for senior and business-critical roles could impact the • Technology and software development skills remain crucial to many • Central Technology function with specialised expertise in artificial intelligence, machine learning, The increased prevalence of remote working, Group’s performance. of our businesses where there is significant investment in software data architecture and management, platform development and scaling. following the onset of Covid-19, may have platforms and technology infrastructure to support next-generation • Central Technology function oversight of technology hire. a detrimental impact on the learning and product development. • Central Portfolio Solutions function partners with operating companies’ management, advising on development of employees. • The strategy to build out our data analytics capabilities places focus critical skills to improve operational and commercial performance, including pricing and packaging on developing and attracting specialists in emerging technologies. strategies, go-to-market and sales execution and business case development and planning. However, an economic downturn resulting in These skills are in high demand, which makes attracting and • Executive management is involved in the recruitment of all operating company leadership roles increased unemployment is likely to reduce retaining people with these skills more competitive. and their ongoing development. employee turnover. • Enterprise sales and operational execution expertise with market • Payment of competitive rewards for key senior roles, developed using industry benchmarks The risk profile is unchanged as these two and product knowledge continue to be a strategic imperative. and external specialist input. factors are considered to largely offset each other.
Operational risks Financial Statements Description and impact Examples Mitigation Trend Business continuity event • Major disruption may prevent the delivery of products and services • All operating companies have business continuity plans in place and these have been updated to A pandemic, epidemic or disaster, whether natural or man-made, to customers, for example print newspapers (Consumer Media). reflect lessons learned from experiencing the Covid-19 pandemic. The successful uninterrupted could cause significant disruption. This could affect DMGT’s • Measures to prevent the spread of a pandemic could result in it not being delivery of products and services throughout FY 2020 demonstrated the effectiveness of the The risk was added to DMGT’s principal risks operating companies, customers, suppliers and/or end markets. possible to hold physical events (Events and Exhibitions) or distribute print business continuity plans. during the year. newspapers (Consumer Media). They could also disrupt the functioning • Technology capabilities have been enhanced to increase operating companies’ resilience if of the UK property market (Property Information). a business continuity event occurs. • Travel restrictions or disruption could adversely affect the attendance • The Group has insurance cover in place to help mitigate the financial impact of a business of exhibitors and delegates at events (Events and Exhibitions). continuity event. • The closure of offices could disrupt operating companies’ ability to deliver products and services, support customers and develop new products.
Information security breach or cyber attack The risk is relevant to all businesses in the Group due to the nature of • The Technology Council provides oversight of information security initiatives Group-wide. An information security breach, including a failure to prevent or products and services across the portfolio. Examples which could impact • Additional measures were implemented during the year to protect against the increased risk detect a malicious cyber attack, could cause reputational damage the Group include: of attack associated with a significant increase in remote working. The risk is considered to have increased as • The Group Chief Information Security Officer is responsible for reviewing and recommending a result of increases in remote working. Information Shareholder and financial loss. The investigation and management of an • Loss or unauthorised access to personal information and sensitive actionable roadmaps to improve information security procedures and protections at each incident would result in remediation costs and the diversion client data. operating company. of management time. • Unavailability or disruption of online products and services. • Group Information Security Policy and detailed information security standards with regular • Integrity of online products, services and data compromised. A breach of data protection legislation could result in financial reviews reported to the Technology Council. Periodic reviews of the standards themselves • Disruption to critical systems that support business operations. penalties for the affected business and potentially the Group. are performed to ensure they keep pace with best practice. • Theft of intellectual property. • Information security is reviewed as part of every internal audit of an operating company. • Cyber insurance policies in place. • Dedicated budget for information security investments and access to third-party cyber security specialists.
45 Strategic Report Daily Mail and General Trust plc Annual Report 2020
Actively monitoring and managing our risks Principal Risks Strategic Report Operational risks (continued) Description and impact Examples Mitigation Trend Reliance on key third parties Key third parties include: • The Group’s diverse and balanced portfolio of businesses and products reduces the overall impact of the failure of an individual third party. Certain third parties are critical to the operations of our businesses. • Data centre and cloud service providers. • Operational and financial due diligence is undertaken for key suppliers on an ongoing basis. A failure of one of our critical third parties may cause disruption • Search engine traffic partners. • Close management of key supplier relationships including contracts, service levels and outputs. to business operations, impact our ability to deliver products • Technology and online advertising partners. • Robust business continuity arrangements for the disruption to key third parties. and services and result in financial loss. • IT development support. • Event cancellation and business interruption insurance policies. • Data providers for core product. The reputation of our businesses may be damaged by poor • The acquisition of three printing plants in October 2020 reduced the Consumer Media business’s • Newsprint, flexographic plate and ink suppliers. performance or a regulatory breach by critical third parties, reliance on third parties for producing newspapers. particularly outsourced service providers. • Newspaper distributors and wholesalers. • Event venues.
Compliance with laws and regulations Particular areas of focus for DMGT businesses are: • Changes in laws and regulations are monitored and potential impacts discussed with the relevant persons, Board, or Committee, or escalated as appropriate. The Group operates across multiple jurisdictions and sectors. • Data protection, including the EU General Data Protection Regulation • Developments in the legal and regulatory landscape are reviewed by the Audit & Risk Committee. Increasing regulation increases the risk that the Group is not (GDPR) and the proposed ePrivacy Regulation.
Governance • Implementation and monitoring of Group-wide policies to address new legislation and regulation compliant with all applicable laws and regulations across all of the • Competition and anti-trust legislation. where applicable. jurisdictions in which it operates, which could result in financial • EU Market Abuse Regulation. • Group-wide working groups for key compliance areas, such as the GDPR. penalties and reputational damage. • Libel legislation. • Monitoring and management of tax risks is performed by the DMGT Tax Sub-Committee. Increasing regulation also results in increasing costs of compliance. • Tax compliance. • Trade sanctions. • Entering regulated markets or sectors.
Pension scheme deficit Future pension costs and funding requirements could be increased by: • The agreed funding plan gives certainty over the financial commitment. • Monitoring and management of pension risks is performed by the DMGT Pensions Sub-Committee. Defined benefit pension schemes, although now closed to new • Adverse changes in investment performance. • Company-appointed Trustees. entrants, remain ultimately funded by DMGT, with Pension Fund • Valuation assumptions and methodology. Trustees (Trustees) controlling the investment allocation. • Inflation and interest rate risks. There is a risk that the funding of the deficit could be greater than expected. Financial Statements Shareholder Information Shareholder
46 Daily Mail and General Trust plc Annual Report 2020 Strategic Report Operational risks (continued) Description and impact Examples Mitigation Trend Reliance on key third parties Key third parties include: • The Group’s diverse and balanced portfolio of businesses and products reduces the overall impact of the failure of an individual third party. Certain third parties are critical to the operations of our businesses. • Data centre and cloud service providers. • Operational and financial due diligence is undertaken for key suppliers on an ongoing basis. A failure of one of our critical third parties may cause disruption • Search engine traffic partners. • Close management of key supplier relationships including contracts, service levels and outputs. to business operations, impact our ability to deliver products • Technology and online advertising partners. • Robust business continuity arrangements for the disruption to key third parties. and services and result in financial loss. • IT development support. • Event cancellation and business interruption insurance policies. • Data providers for core product. The reputation of our businesses may be damaged by poor • The acquisition of three printing plants in October 2020 reduced the Consumer Media business’s • Newsprint, flexographic plate and ink suppliers. performance or a regulatory breach by critical third parties, reliance on third parties for producing newspapers. particularly outsourced service providers. • Newspaper distributors and wholesalers. • Event venues.
Compliance with laws and regulations Particular areas of focus for DMGT businesses are: • Changes in laws and regulations are monitored and potential impacts discussed with the relevant persons, Board, or Committee, or escalated as appropriate. The Group operates across multiple jurisdictions and sectors. • Data protection, including the EU General Data Protection Regulation • Developments in the legal and regulatory landscape are reviewed by the Audit & Risk Committee. Increasing regulation increases the risk that the Group is not (GDPR) and the proposed ePrivacy Regulation.
• Implementation and monitoring of Group-wide policies to address new legislation and regulation Governance compliant with all applicable laws and regulations across all of the • Competition and anti-trust legislation. where applicable. jurisdictions in which it operates, which could result in financial • EU Market Abuse Regulation. • Group-wide working groups for key compliance areas, such as the GDPR. penalties and reputational damage. • Libel legislation. • Monitoring and management of tax risks is performed by the DMGT Tax Sub-Committee. Increasing regulation also results in increasing costs of compliance. • Tax compliance. • Trade sanctions. • Entering regulated markets or sectors.
Pension scheme deficit Future pension costs and funding requirements could be increased by: • The agreed funding plan gives certainty over the financial commitment. • Monitoring and management of pension risks is performed by the DMGT Pensions Sub-Committee. Defined benefit pension schemes, although now closed to new • Adverse changes in investment performance. • Company-appointed Trustees. entrants, remain ultimately funded by DMGT, with Pension Fund • Valuation assumptions and methodology. Trustees (Trustees) controlling the investment allocation. • Inflation and interest rate risks. There is a risk that the funding of the deficit could be greater than expected. Financial Statements Shareholder Information Shareholder
The Strategic Report was approved by the Board on 20 November 2020 and signed on its behalf by the Group Chief Financial Officer. By order of the Board
Tim Collier Group Chief Financial Officer 47