WORLD TELEVISION DMGT Investor Briefing 2014 Growth through Digital Innovation Investor Briefing 2014 Growth through Digital Innovation Introduction Martin Morgan, Chief Executive, DMGT Good afternoon ladies and gentleman it’s my very great pleasure to welcome you to the DMGT Investor Day. We have I’m sure a full and varied afternoon for you which hopefully will provide a useful distraction from worrying about how the vote’s going to go up north. Our agenda today is going to continue the tradition that we established a little while ago, to not to try to present all the businesses across DMGT, but to focus on a few very key businesses which are very important to us and we know from conversations with you you’re really interested in. But this year with the successful IPO of Zoopla and the near completion of the disposal of the businesses within the Evenbase digital recruitment business, the completion of the £100m share buyback programme and the announcement just this week that we are going to embark on a new share buyback programme we felt that we would start this afternoon with a presentation from Stephen Daintith talking about our approach to capital allocation. Following that we’re going to hear from Hemant Shah the founder and CEO of RMS and he will be joined by Matthew Grant and there will be a panel discussion following that. Following RMS we have Euromoney who hasn’t presented for a while so I’m sure you’ll find that particularly interesting and led by Christopher Fordham the Group Managing Director and his team. And finally we’ve got a tremendous presentation as you will expect from last time, from MailOnline to round out the afternoon. Just a few words from me on the topic of DMGT’s strategy and in the middle of this chart you will see that little graphic that we usually present. And just as a reminder our long term ambition and hopefully today is as much about the long term as about the short term, is to become an ever more global and growth company. And the three companies presenting this afternoon are already global businesses with a lot more global potential. It’s also the case of course that we’ve been making the transition in parts of the business from a print world to digital world and you’re going to hear more about that and the success that we’re achieving on that front. And also from businesses of course that were born in the digital world and are themselves going transitions through to the newer technologies and the growth opportunities that that represents. And I think you’ll also find this afternoon there’s something as very close to our DNA, there’s three presentations that are very representative of the kind of innovative spirit that we so cherish at DMGT and of course is the foundation for our long term growth prospects to which acquisitions have their part. But I’m a passionate believer unless you have that gene of innovation as the foundation for acquisitions then you are the less for it. And finally and coming back to Stephen’s presentation all this is enabled of course by the fact that DMGT is in a very strong position financially and allows us to invest for the Page 2 Investor Briefing 2014 Growth through Digital Innovation future. And on that note it’s my pleasure to ask Stephen to come up and talk to us. Thank you Stephen. Balanced Capital Allocation Stephen Daintith, Finance Director, DMGT Thank you Martin. Good afternoon everybody and just repeat Martin’s words of welcome again to you to this afternoon’s briefing on DMGT. So I’m going to run through in the next sort of 15 to 20 minutes or so, capital allocation and then just to sort of recap on RMS leading into the RMS presentation that will follow immediately there afterwards. So DMGT balanced capital allocation, our capital allocation approach is a balance approach, we don’t have one particular area that we sort of you know it’s all in that one thing, we like to look across our shareholder base and come up with a package of capital allocation activities that we think best fit the way we approach capital and how we can best use it. Our priority is to invest in organic growth, I’ll talk about that a little later, then we look at targeted acquisitions after that. Real dividend growth remains very important to us, pension fund contributions, share buy backs and then finally bond buy backs. And I’ll just run through those each in order. What drives our amount and how we determine how much capital we have, well we target to finish at each year end no more than two times EBITDA and throughout the year in fact to operate broadly at that level. And there isn’t sort of any massive great science being applied to get to that number, it just kind of makes sense to us, we’ve been a lot higher in the past. It certainly helped us get back our investment grade status, S&P have told us that one of the key reasons why they returned us to investment grade was the fact that we had this sensible level as far as they were concerned and we stayed within it for the last sort of three/four years so that helped us in that respect. So what we do is we target to finish it no more than two times at the end of the year and from that we work backwards looking at our operating cash flow, which remains very strong, as we’ll see in the full year results and look at our cash conversion. And then this particular year we’ve benefited from the Zoopla proceeds, £197m has come in from Zoopla, if you’ll recall we used to own 100% of the digital property group, we merged with Zoopla, we moved to 53% of Zoopla and we’re now at around 32% of the public company Zoopla after having floated the company in June of this year at £920m and it’s trading very nicely. Evenbase proceeds we sold over our digital jobs business and expect the final receipts from Jobsite to come in in the month of October, that’s £150m in total. Acquisitions during the year now at £175m in the current financial year and I’ll show the breakdown of that in a couple of slides. This sort of run rate is the sort of run rate I think that we’re now at within DMGT having for quite a few years been around sort of no more than £100m or so and certainly if you go back four or five years we were, well not really in a position to make any acquisitions. Page 3 Investor Briefing 2014 Growth through Digital Innovation So to Martin’s earlier comments we’re well placed now to drive acquisitions going forward and I’ll talk about those a little later as well. We completed our £100m share buyback programme and that cost us £31m this financial year, just announced the second one I’ll talk about that a little later. And then we bought in some of our bonds at the start of this financial year as well and there was a premium attached to that of £24m. So as we look at where we are today with our balance sheet when we think about the sort of the two times EBITDA level that we set ourselves as the level we don’t wish to go beyond, we’ve got around £300m of capital available to us, at least £300m of capital available to us for these sort of activities, we’re very much organic investments and the M&A remaining our key priorities. So on that note what are our investment preferences. We do favour organic investment over anything else and indeed the businesses that you’re going to hear about this afternoon are putting this into practice in the initiatives that you’ll hear about in MailOnline in RMS and Euromoney. We target around 5% of our revenues in organic investment, we’re comfortably exceeding that number at this stage particularly with the investment going into RMS. Bolt-on acquisitions is our next preference, you’ll see on the following slide how much we’ve done these things over the last few years and we get good synergies out of them. We tend to get good management talent coming in as well and that’s worked particularly well in businesses like Hobsons and Landmark and in fact in Genscape in recent times as well. Then we look at adjacencies, business in the same sector but not necessarily bolt- ons that complement the businesses that we have. And then finally we remain open minded to new sector so you should not be surprised if DMGT makes a move one day into a brand new sector like for example we did back in 1998 with RMS, we may do that in the near term, we’re particularly well placed now to do that so you shouldn’t be surprised if we choose to do that. And when we’re looking for a new sector that displays the characteristics for the sort of growth that we look for, the high growth levels that we look for from early stage businesses. Portfolio management, going back to my earlier comments in fiscal '10 we were really in a position where we could spend no more than £37m on acquisitions, you can see how that number has crept upwards to the £175m that we’ve spent in this current financial year.