Trader Media Group 3rd and 4th Floor 41-47 Hartfield Road Wimbledon London SW19 3RQ Telephone +44 (0)20 8544 7000 www.tradermediagroup.com Annual report and financial statements 2012 Trader Media Group Annual report and financial statements 2012 Driving Innovation through data and peoplE You can view our 2012 annual report online at tradermediagroup.com Overview 01 02 04 06 08 10 12 14 16 How we performed Leading digital What we’ve done with our data Using data responsibly Our people What we’re planning on doing A deep understanding of our markets What keeps us in front Chairman’s statement Business review 18 20 24 26 28 30 32 34 36 Year of achievement Operating review Goodwood motor show Segmental commentary Q&A with the Chief Executive Officer Key performance indicators Financial review Principal risks and uncertainties Corporate social responsibility Against the economic backdrop, the group has had another successful year with strong digital growth in the UK driving revenue growth and margin improvements. This can be seen by the 10% EBITDA growth the group has achieved over last year. Governance 38 Executive Committee 40 Corporate governance 42 Directors’ report 44Statement of directors’ responsibilities 45 Independent auditors’ report Financial statements 46 Consolidated income statement 47Consolidated statement of comprehensive income 48 Consolidated balance sheet 49Consolidated statement of changes in equity 50 Consolidated cash flow statement 51Notes to the consolidated financial statements Company financial statements 86 87 88 Independent auditors’ report Company balance sheet Notes to the financial statements Note: car images are for information purposes only. The cover and pages 1 to 40 are printed on paper made from virgin wood fibre with pulp which is bleached using a mixture of Total Chlorine Free and Elemental Chlorine Free processes. Pages 41 to 92 are printed on paper made from 100% de-inked post consumer waste. Both papers are certified by the Forest Stewardship Council, which supports the responsible use of forest resources. The printer and paper mills are both accredited with ISO14001, the environmental management system. Designed and produced by The College www.the-college.com Trader Media Group how we performed Financial highlights Operational highlights Revenue Digital UK revenue Stock of vehicles on website (continuing operations) £ million £ million (average through the year) �000 233.7 254.4 257.2 182.8 202.0 344 367 380 2010 2011 2012 UK International 2010 Overview 147.9 2011 2012 2010 2011 2012 2012 2012 2012 The group’s revenue has grown 1% over last year which is a fantastic achievement in the economic environment. The Digital division has driven revenue growth of 11%. Behind this is the group’s strategy of continued investment in its market-leading website, autotrader.co.uk and generating growth through the new car, RAZSOR and mobile products. The group has also grown the average stock of vehicles held on autotrader.co.uk, up 4% over last year showing the group’s resilience despite the tough economy. EBITDA Covenant net debt (continuing operations) £ million (defined on page 30) £ million +1% 111.1 2010 129.8 2011 +11% 142.9 2012 605.7 UK International 2010 +4% 637.1 511.2 2011 2012 2012 2012 EBITDA has grown by 10% year-on-year. With revenue growth at 1%, this has been driven by an improved margin and focus on the group’s cost-base. Operating cash conversion (cash generated from operations before tax over EBITDA) remained strong at 90% (2011: 103%). +10% +25% External net debt has increased following the successful refinancing during the year when an additional £150 million was raised. Annual report and financial statements 2012 01 Trader Media Group leading digital We’re a leader in the digital world and our brands are available on every platform. 10m Unique users per month (WEBSITE) autotrader.co.uk is the UK’s leading motoring website with unique users of up to 10 million per month. With an average of 833,000,000 p age views per month we offer the UK’s leading online route to market and the largest audience for used vehicle advertising. 90% DEALER PENETRATION Serving the online, print and mobile markets, we help our consumers buy and sell vehicles on multiple platforms. It’s no wonder that the vast majority of UK dealers choose Auto Trader. 602,000 Our New Car marketplace reached 602,000 unique users in its first year. 02 Annual report and financial statements 2012 Trader Media Group 2.2m Unique users per month (Mobile) Increasingly, buyers and sellers come together on mobile platforms – up from 0.4 million in January 2010 to 2.2 million in January 2012. (Source: Omniture) non-car Growth of online revenue year-on-year. 5,000 Over websites hosted Our expertise in the automotive industry means we can provide high quality websites to dealers of all sizes using cutting edge search engine optimisation tools to drive response. 70,000 Friends We have a well-defined social media strategy, directing high levels of traffic to Auto Trader from Facebook, Twitter and Open Web. 380,000 Average stock of vehicles listed each month. Annual report and financial statements 2012 03 Overview +43% Trader Media Group What WE’VE DONE WITH OUR DATA We’ve been using our data to build a resilient and innovative business – a market leading digital marketplace for the automotive industry which consistently delivers results. >400,000 LEADS GENERATED FOR DEALERS EACH MONTH RAZSOR EMPOWERING DEALERS RAZSOR provides dealers with manageable car dealer marketing packages created specifically for the automotive industry. Built upon extensive consumer, dealer and competitor research, RAZSOR websites help dealers sell more cars by generating and converting leads. All of the cost-effective web-build packages offer simple, effective design aimed at increasing sales and boosting profitability through greater stock visibility across search engines and improved online conversion rates. RAZSOR websites are powered by Auto Trader and work alongside the dealer’s presence on autotrader.co.uk. This allows potential buyers to click through to the dealer site from the originating advertisement on Auto Trader, automatically seeing relevant content and ensuring that buyers obtain relevant information to increase lead generation. The Auto Trader used car price index helps provide additional insight into the used car market for buyers and sellers alike.” Tim Peake Group Strategy Director 04 Annual report and financial statements 2012 Trader Media Group AUTO TRADER PRICE INDEX The Index highlights opportunities to improve UK dealers’ performance, pinpointing sectors of the used car market which offer profits and even price increases in an otherwise squeezed British economy. PULSE REPORTS PULSE is a regular report that provides a snapshot of a dealer’s response from Auto Trader advertising in the previous month. It can be used to highlight opportunities for the dealer to increase lead generation by using data on advert response through the internet, mobile, vehicle pricing and stock turnover. 9,500 DEALERS The Dealer Portal is an Auto Trader tool which provides dealers with online access to a range of products and services that help them manage and maintain their stock on both autotrader.co.uk and their dealer website. Annual report and financial statements 2012 05 Overview In August 2011, Auto Trader launched its new Quarterly Price Index which monitors the movement in advertised prices for second hand cars on autotrader.co.uk. The report has been designed to help dealers compete in a busy marketplace and to keep ahead of the market conditions. Trader Media Group USING DATA RESPONSIBLY Our people have been using our data to empower both buyers and sellers and to add value to our business – and they will continue to do so. However we use our data in the future you can be sure we will continue to use it responsibly. Empowering buyers • Stock volumes – Simply put, we have more vehicle stock than anybody else. Our range of vehicles to suit all needs gives unparalleled choice to the buyer. • Price comparison – This volume of stock gives a good yardstick for buyers to use when comparing vehicles and making a purchase. • Owner reviews – With over 35,000 owner reviews on autotrader.co.uk, buyers can get independent opinions on their potential purchases. >35,000 owner reviews Empowering sellers •P rice Index – The Auto Trader Price Index was launched in August 2011 and equips sellers with data to make better informed decisions about what type of stock to sell. • Pulse reports – Help sellers decide which Auto Trader products they can use to give them the most effective response. •D ealer Portal – Gives dealers online access to all information relating to their Auto Trader relationship, be it reporting, invoicing or product information, at their fingertips. 06 Annual report and financial statements 2012 Responsible Use of data • Security – We are founding members of industry forum VSTAG.co.uk that focuses on reducing online crime. We also work directly with the National Fraud Intelligence Bureau (“NFIB”) and the Metropolitan police. • Support – We offer buying and selling advice to consumers and have a dedicated team working seven days a week to offer support and advice. • Compliance – We have a direct relationship with Trading Standards to ensure that we are aware of and act on relevant regulations and legislation. We monitor changes in legislation in DPA (“Data Protection Act”) or consumer rights via OFT (“Office of Fair Trading”) or ICO (“Information Commissioner’s Office”) and communicate and action accordingly. Where appropriate we offer advice to customers, both Private and Trade, to ensure they are aware of their responsibilities. • Risk – We have an established Risk Management Policy and framework that is reviewed annually. We are fully compliant with PCI DSS (“Payment Card Industry Data Security Standards”) and conduct mid-year and annual audits to continually check this. Annual report and financial statements 2012 07 Overview Trader Media Group Trader Media Group OUR PEOPLE PASSIONATE “I’m a really demanding consumer myself and believe that good service is a differentiator when it comes to choosing who to buy from. TMG1 is like no other company I’ve worked for – we genuinely believe in putting the customer at the heart of our business. Our Customer Value Promise is testament to that and the culture of our employees supports it. We are passionate about helping our customers – their success is our business.” Vicki Wells Operations Director – Service First car: Fiat 128, canary yellow My first car: The first car that I owned was a very old canary yellow Fiat 128. My then boyfriend – now husband – bought it for me for my 18th birthday and it cost about £100. It was a wreck to be honest! The passenger window wouldn’t open and neither would the boot but it did get me from A to B! I had it for about a year before backing it into a skip – it was dark and I was trying to turn around in a narrow street. This did force the boot open, which I thought was great until the garage told me that the damage was so bad it would have to be scrapped! Proud “I have worked for TMG for almost ten years now and have seen at first-hand what an incredibly successful transition the business has made to our online and mobile platforms. I take pride in my job because I truly believe I am adding value to our dealers. By helping them to identify the best stock to buy, assisting them to price and manage their stock better and providing credible sources for them to purchase good quality stock from, I can help drive more response to their business and make them more successful.” Wahid Hussain Area Sales Manager First car: Vauxhall Astra 1.6, F Reg 1 Trader Media Group Ltd and subsidiary undertakings (“TMG”) 08 Annual report and financial statements 2012 My first car: I had just passed my driving test (first time!) and was keen on getting a souped-up Vauxhall Astra GTE as I quite fancied turning heads with a car that I could drive fast! After trying hard to convince my father I ended up meeting him in the middle and agreeing to a more “sensible” version of the car with a smaller engine and cheaper insurance – which my father paid for – what a great guy! I loved driving it and was the envy of all of my friends who were at the time either queuing up for buses to and from College or trying to blag a lift! Trader Media Group Talented “We know that having the right talent in the business is vital if we are going to achieve our business goals. It’s important that we recruit the right people but also that we focus on developing and retaining the people we have. That’s why we’ve put a big focus on promoting career opportunities internally – giving our employees the chance to apply for new roles or promotions to further their careers. In total, we made 56 promotions last year and 36% of our vacancies were filled internally.” My first car: I was 20 when I got my mini and I absolutely loved it! I actually found it through the Auto Trader magazine, having saved up so that I could pay for it in full. My Dad made me change every tyre on it before he’d let me drive it anywhere just in case I got a flat tyre! Overview Jayne Dummer Resourcing Manager First car: Original flame red Mini Innovative “One of the best things about working at TMG is the continual ambition to innovate and find new ways to deliver for our customers and consumers. I’ve been lucky to be involved in the Dealer Portal Mobile project – it’s an iPhone app that allows dealers to upload and edit stock, including photos, from their iPhone. They can manage their advertising and pricing wherever they are using “Profit Indicator”, a global first, which uses real-time, market based intelligence that indicates potential margin, suggested price and average number of days to sell a particular car.” Polly Littlewood Product Manager First car: Ford Ka 2001 series My first car: My first car is the one I currently share with my fiancé – I only learned to drive at 28! Living in a city most of my life has meant that I’ve always used public transport, but I thought it was about time that I joined all the other motorists on the road. It’s a very sympathetic car – little and nippy, and great for parking easily. Until I started driving I never thought I needed to but I wouldn’t go back because of the freedom it gives me. Annual report and financial statements 2012 09 Trader Media Group What we’re planning on doing We continue to innovate and invest for growth. We have a dynamic business model and talented people who are dedicated to delivering results. >400,000 leads generated each month Trust The group has built trusted brands that consumers and customers alike turn to across our markets and they’ve being doing so for more than 30 years. We will build on this trust by being the single most useful, professional, reliable and financially vital supplier our customers have. Value Our aim is to give value back to our customers, both B2C and B2B. The group’s products will continue to offer unrivalled response rates and be as easy to use as we can make them. In this way we will drive more car buyers to our customers. 10 Annual report and financial statements 2012 Trader Media Group The best solutions Overview We constantly research the market to enable us to deliver the best solutions possible to our customers. Following the launch of New Car, Video reviews, Owner reviews and the mobile platform products we will seek to capitalise on new technologies and ever-evolving markets as quickly as they change. Staying ahead Combining our trusted brands with proven response and innovation means we are ahead of the competition. By continuing the group’s focus on all these things we will stay at the forefront of what we do. More than 30 years of industry experience and innovation Annual report and financial statements 2012 11 Trader Media Group a deep understanding of our markets Squeezed margins Auto Trader Market Share of the Top four Competitors, measured by Page Views There is clear evidence of recessionary effects on the used car market. Following a general historical trend of an increasingly younger vehicle parc, the latest figures suggest that the ageing of the car parc that began in 2009 has continued through 2011. A reduction in the volume of 0-3 year old vehicles available for sale, led to an increase in prices. This contrasted with a fall in the prices for cars aged over 10 years old. Lack of new car registrations and a desire by consumers, driven by pressures on household budgets, to hold onto vehicles for longer have been major contributory factors in this ageing process. With trade car prices also increasing significantly in Q4 2011, as reported by British Car Auctions (“BCA”), and likely to continue to rise through 2012, the potential impact of these dynamics on dealers is the triple effect32 of less natural consumer demand, less quality stock coming into the market and, when it does, higher trade prices that 28 reduce profit margins. 24 8.5 Number of cars (m) 20 Parc16 12 8 4 0 -4 Auto Trader 76% Pistonheads 21% eBay Motors 2% Motors.co.uk 1% Source: Hitwise, March 2012 7.0 5.5 4.0 10.0 8.5 7.0 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011e 2012f Percentage 2013f 32 28 24 20 16 12 8 4 0 -4 10.0 5.5 2.5 Car Parc Car Parc YOY % Source: SMMT and TMGand Analysis Source: SMMT TMG Analysis 1.0YOY % -0.5 -2.0 4.0 2.5 1.0 -0.5 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011e 2012f 2013f Number of cars (m) UK Car Auto Trader 76% Pistonheads 21% eBay Motors 2% Motors.co.uk 1% Source: Hitwise, March 2012 Flat Car Parc Declining new car registrations in the last few years have had a knock-on-effect on the size of the Car Parc. -2.0 Low registrations in 2009-2011 have an impact on the size of the UK Car Parc for vehicles 1-3 years old in 2012 as the reduced supply of good quality, young stock makes sourcing vehicles more difficult to dealers. Auto Trader asking prices vs. bca auction prices Jan 2010 Jan 2010 Feb 2010 Feb 2010 Mar 2010 Mar 2010 Apr 2010 Apr 2010 May 2010 May 2010 Jun 2010 Jun 2010 Jul 2010 Jul 2010 Aug 2010 Aug 2010 Sep 2010 Sep 2010 Oct 2010 Oct 2010 Nov 2010 Nov 2010 Dec 2010 Dec 2010 Jan 2011 Jan 2011 Feb 2011 Feb 2011 Mar 2011 Mar 2011 Apr 2011 Apr 2011 May 2011 May 2011 Jun 2011 Jun 2011 Jul 2011 Jul 2011 Aug 2011 Aug 2011 Sep 2011 Sep 2011 Oct 2011 Oct 2011 Nov 2011 Nov 2011 Dec 2011 Dec 2011 Jan 2012 Jan 2012 Feb 2012 Feb 2012 Mar 2012 Mar 2012 £9,500 £9,500 £9,000 £9,000 £8,500 £8,500 £8,000 £8,000 £7,500 £7,500 £7,000 £7,000 £6,500 £6,500 £6,000 £6,000 £5,500 £5,500 12 Annual report and financial statements 2012 Auto Trader Average asking prices Auto Trader Average asking prices BCA Auction Values BCA Auction Values Linear (Auto Trader Average asking prices) Linear (Auto Trader Average asking prices) Linear (BCA Auction Values) Linear (BCA Auction Values) Source: Auto Trader Price Index, BCA Source: Auto Trader Price Index, BCA Trader Media Group Truck, Plant & Farm CSI Score Used car transactions Million 6.8 2011 6.7 2010 6.7 2009 6.7 2008 This year we measured our Customer Satisfaction Index (“CSI”) in the Truck, Plant and Farm sectors for the first time and we achieved some excellent results. 7.1 2007 7.5 Current situation – flat market As the economy entered recession, new car registrations and used car transactions declined to settle at c. 2 million for new and 6.7 million used. Source: SMMT, DVLA (supplied by CallCredit Group) and TMG Analysis New car registrations Million 2012f 2011 1.9 2.0 2009 2.0 2008 2007 Business area Farmers Trader CSI score Truck & Plant Trader CSI score 83 78 80 78 71 74 75 75 78 77 67 72 Overall experience Recommendation Loyalty Sales rep/Account manager Products and services Brand Continually striving to improve our customer service will ensure that we increase these scores in the future. 2.0 2010 For industry standard CSI scores, anything over 70 is good and anything over 80 is great, so to achieve an overall experience of 83 and 75 in the two sectors is superb and proves that we put the customer at the heart of our business and look after their needs. This is reflected in the high loyalty scores of 80 and 78, indicating our customers believe in our products and will continue to use them. 83% 2.1 2.4 Future – slow recovery A modest growth of the UK economy as well as pent up demand in the market are expected to lead to slow recovery in new car registrations and used car transactions. overall experience farmers trader 80% loyalty farmers trader Annual report and financial statements 2012 13 Overview 2012f Trader Media Group what keeps us in front TMG is the market leader in automotive classified advertising in all its markets and continues to be so year after year. This continues because of the successful blend of qualities we have. Knowledge and experience Our market is ever-changing; whether it’s the over-arching economic climate or how the pace of technological change impacts, we have decades of experience in our field. This makes us a trusted name for our customers and consumers to rely on. Another year of achievement proves this. Find out more page 18 Heritage and brand recognition Our brands are highly recognised and are go-to choices for our customers. They have been built on the back of proven response which, in turn, has led to a larger market share. Find out more page 12 Value This year we made the Customer Value Promise which we started by asking our customers what they wanted from us. Key amongst the answers was value and we can prove that, by spending their money with us, we will generate money for them through wide exposure of their vehicles and a high number of leads. Find out more page 22 Innovation Our commitment to our customers continues into the future and this means being at the forefront of new technology to maximise opportunities to connect buyers and sellers in a digital world. Find out more page 10 14 Annual report and financial statements 2012 Trader Media Group This TMG solution helped Jaguar sell all of their excess stock.” Your success is our business: Overview putting it into practice with Jaguar Our customer value promise is not just lip service – adding value to our customers’ businesses is central to our success, as proven by our relationship with Jaguar. Our work with Jaguar helped to identify areas of their used car stock where the introduction of newer models had slowed down turnover. The manufacturer decided to hold a used car event in February 2012 to help sell these vehicles and this is where the TMG Account team came into play. The Groups and Manufacturers team recognised that bringing together the various departments and products offered by TMG could help make this event a success: we could support this specific requirement via promotion on the Used Vehicle Locator (“UVL”) managed by 2nd Byte and through display advertising in our magazines and on our website. Key to this was our ability to target key customer types through the use of TMG data so that Jaguar’s budget was optimised in order to generate the best return on investment. The result was a front cover takeover on the Auto Trader and Top Marques magazines, online display activity and UVL content. This TMG solution, supported by radio and press activity, helped Jaguar sell all of their excess stock. Jaguar were also struggling to measure the impact of their investment in terms of the ultimate measure of “Dealer Sales”. However through the data generated through 2nd Byte’s UVL we were able to show them not only the uplift in vehicles purchased by dealers from the manufacturer but also vehicles purchased by the consumer. Our contribution has further cemented our position as a partner with Jaguar and they continue to use our solutions to help drive their used car strategy. Annual report and financial statements 2012 15 Trader Media Group Chairman’s Statement We have focused on creating a deeper partnership with dealers through sharing the data we have with them.” Tom Hall Chairman Progress The group has delivered another year of strong performance, recording double digit organic growth in both revenue and EBITDA in its core Digital business. This performance, in a tough economic climate, is great testimony to the strength and resilience of the business, the value that the group’s products provide to its customers, and to the talent and commitment of TMG’s management and employees. On behalf of the Board, I would like to thank the team for their hard work through the year and to congratulate them on what they have achieved. Following this, TMG has recorded year-on-year improvement in both revenue and profit from continuing operations with double digit EBITDA growth for the second successive year. The tougher trading climate due to market conditions in the second half of the year meant dealers and private customers have been more considered in their spending and this has led to a slowdown in the group’s performance through the latter half of 2011 and into 2012. 16 Annual report and financial statements 2012 Trader Media Group 18 million Throughout the 2011/12 financial year, the used car market in the UK was impacted by a shortage of used vehicles, following significantly reduced output by car manufacturers three years previously in response to the economic crisis of 2008. Alongside this owners are holding onto their cars for longer, moving from an average of five to eight years of ownership. This delay in used cars entering into the market means less stock is being advertised. In spite of the current economic conditions the group continues to be in a strong, market leading position by demonstrating to its customers that it offers the best response and the best value for money across its products generating more than 400,000 leads for UK dealers each month. The investment in products, customer relationships and brands has continued to make us the number one choice amongst consumers and customers. The group has continued to improve the car and non-car websites in the UK, Ireland and South Africa, notably in the latter as the country migrates its advertising online from a traditional magazine base. Continued investment in the group’s brands through marketing campaigns across all media means that we are the consumer’s first choice whenever they are making automotive decisions. There has been increased investment in developing the group’s products to give vehicle dealers access to our knowledge and technology. With this in mind we launched Digital Marketing Solutions (“DMS”) in the The group has focused on its customers’ UK this year bringing together the RAZSOR, needs and therefore innovated by building on 2nd Byte and Autotrade-mail brands the wide range of products it offers. We have and offering products to dealers and also focused on creating a deeper partnership manufacturers that mean they can design with dealers through sharing the data we their own digital marketing strategy with have with them, for example through Pulse us as their partner. A key success during the reports and the Auto Trader Price Index. year has been the growth of RAZSOR websites with the group now hosting over Through this we have seen an increase in 3,000 additional websites since RAZSOR customer satisfaction scores. We continue to began and achieving 18 million page views reach more consumers across all platforms across all RAZSOR websites3. compared to our competition and autotrader. Part of the group’s reorganisation has been co.uk remains one of the most searched for the sale in November 2011 of its magazinewebsites in the United Kingdom2. focused Italian subsidiary, Edizeta srl in order to Strategic activity better focus on its online offerings. Meanwhile, The group reorganised towards the end of the group has increased its stake in IAUTOS 2011 into three new divisions recognising Company Limited, which operates Chinese the on-going changes the business faces as automotive classified advertising, to 22.7%. it continues to win in its marketplace. It has restructured its divisions to support its digital and offline product offerings in the most effective and efficient way with separate Digital, Magazines and International divisions. 2 Source: Hitwise The group is always looking for new ways to drive value for its customers and consumers. In line with this, TMG has launched in the UK its quarterly Price Index which tracks changes in advertised used car prices and gives the level of detailed information that only the market leader can provide. We have also leveraged the information we have on response rates by product, by sharing this information with dealers in the form of monthly branded Pulse reports which we use together with our customers to help them make the right buying and selling decisions. The group continues to have excellent cash conversion and used its increased EBITDA and operating cash to deliver a successful refinancing during the summer that incorporated amending existing facilities and raising £150 million from a new term loan. Cash raised from the refinancing was used to part fund a £210 million distribution to the shareholders. Outlook The Board is proud of the group’s achievements during the year. TMG enters the new financial year facing further uncertain trading conditions having experienced some slow-down in growth in the second half of the last fiscal year. Nonetheless given its strong suite of products, a dedicated workforce and a market leading position, we are very confident of continued strong performance. We will continue to provide data and assistance to our customers which will help them make the right decisions in challenging times. Continued investment in innovation to create products and service will allow the group to grow into the future and remain the number one choice for motorists and dealers alike. Tom Hall Chairman of the Board Trader Media Group 3 April 2012; source – TMG management data Annual report and financial statements 2012 17 Overview page views across razsor Trader Media Group Year of Achievement Revolutionising Digital Marketing Paul O’Donoghue Director of Product and Strategy, Digital Marketing First car: Nissan 100 NX Targa My first car: I didn’t buy a car until I was 27 – I was a late starter, having had company cars until then. It cost me £4,800 and I chose it as it was the closest thing to a Porsche I could afford – and it had Targa in its name! Sadly it wasn’t as exciting a choice as I’d hoped – it was a dull driving experience with heavy steering and girls didn’t dig it! Price Index The Price Index report is a quarterly report generated from the wealth of data TMG holds. It positions us as the authority on the used car market to both consumers and the trade. It is also a key deliverable of our Customer Value Promise, working smarter for our dealer customers (see page 22 for more information). The Price Index report looks at the state of the market and identifies current trends over a three month period including what’s hot and what’s not. Ultimately it provides dealers with an insight as to what to stock to maximise profit. 18 Annual report and financial statements 2012 Research demonstrates that increasing numbers of buyers are using the internet to research and find cars. Buyers have reduced the number of dealer forecourts they visit from seven in 2000 to one or two in 2010. This provides us with a significant opportunity to deliver high quality digital marketing solutions while evolving the overall TMG proposition. Digital marketing services are delivered through RAZSOR, Autotrade-mail and 2nd Byte. These services include a range of dealer websites, best in class search engine optimisation, live chat to stimulate customer dialogue at the earliest opportunity, user friendly used car locators and management systems. Social Media solutions will be launched in 2012 to help dealer customers harness the opportunities of social networks. Leading “Introduced in August 2011, we have seen strong coverage in both national and trade press and, importantly, we have seen the report downloaded by dealers.” “We service over 3,400 dealer website customers through RAZSOR and are currently making great strides in providing SEO support to our franchised dealers.” Perran Moon B2B Marketing Director First car: Holden Kingswood My first car: My first car was a dark brown Holden Kingswood circa 1978 bought for $120AUD from a New Zealander late one night in a pub in Sydney. I was 19 and had gone to Australia for a six month back-packing trip. I was going to take a Greyhound bus, but I met a Kiwi who was flying home and wanted to get rid of his car. I travelled for six months around Oz in it. It had no reverse gear so each time I wanted to go backwards, I had to get out and push it – not good in 45 degree heat! Even now, when I think of Oz, I think of that car. Trader Media Group Supporting dealers Dealer Seminars We have a huge amount of research and data and we can break this down at a local level – we know what car buyers are looking for in each area. Attending a seminar helps dealers improve their understanding of their local market, makes the money they spend with us work harder for them, helps them reach more customers and, ultimately, helps them to convert more leads into sales. Nick King Market Research Director First car: Mini Clubman My first car: My mum and dad bought me my first car for my 18th birthday. It cost £800 and was the single most exciting thing in my life. It had a racing chunky steering wheel and wood trim on the windows. I drove it to art college for three years. At one point I had six friends in it with me, all crammed in the boot. New products New Car Tom White Head of New Product Development Auto Trader First car: Mini Park Lane My first car: I used to love this car, not only was it great for nipping around London, it had sentimental value too as it was my grandma’s old mini. I remember driving it back non-stop from Cornwall once, what an epic journey that was, and it must have cost all of £5! “We currently have more demand than supply for our display formats, and consistently have more than 8,000 deals for new and nearly new cars. We have the perfect platform for customers to promote their latest offers and sell more new cars.” The Auto Trader brand is synonymous with used cars with up to 10 million unique users per month. Implementing our new cars strategy helps us extend beyond this core, shift the perception of our brand to all cars, and reduce our reliance on growth coming from used dealer revenues. Our aim was to launch a unique new car showroom with market leading content and functionality, aiding decision making and providing the most new car deals in the UK. Auto Trader New Cars launched in March 2011, and since then we’ve signed up over 1,400 dealers to the New Cars package, with over half a million unique users a month engaging with the site. Annual report and financial statements 2012 19 Business review “So far we have presented to over 180 dealers across the country. The feedback has been glowing – dealers like the advice and the chance to network with other dealers – and we have a full schedule of seminars planned for the year ahead.” Trader Media Group Operating review Overview The group provides classified advertising of motor vehicles and an expanding list of related products within the automotive value chain, primarily through its websites, mobile platforms and magazines. It operates primarily in the UK, with a branch and subsidiary company located in the Republic of Ireland and a subsidiary company in South Africa. This strong position means TMG operates the number one UK marketplace for motorists and offers unrivalled response to customers’ advertisements. The group operates through similar market leading brands in Ireland and South Africa. We are the recognised route to market for vehicle dealerships in almost all of the areas in which we operate and have continued to offer market leading quality, information and The Auto Trader branded website sits at the services to our customers. We have created core of the group’s business; autotrader.co.uk brands recognised by tens of millions of is the UK’s leading motoring website with consumers and both vehicle dealers and unique users of up to 10 million per month4. private sellers benefit from our expanding set Auto Trader is also one of the most of tools to help them access those in market, recognised online brands in the UK5. car shopping consumers. As shown below, autotrader.co.uk has over half of the page views of all automotive classified sites and by far the largest market share of used vehicle stock and unique visitors6: The group entered the 2011/12 financial year benefitting from increasing advertising spend across the UK economy. As the year progressed it became clear that the global recovery was incomplete and we were still operating in uncertain times. The used car market in the UK was hit by a shortage of vehicles during the second half of the year, following reduced output by car manufacturers three years previously in response to the economic crisis of 2008. In 2011 used car transactions in the UK were flat year-on-year at c. 6.7 million units and this is set to continue through 2012 into 2013 with modest growth of c. 1% expected over the year ahead7. Despite this the average number of vehicles on autotrader.co.uk increased 4% on the prior year to 380,000 and was some 93% ahead of the nearest competitor. This further demonstrates a “flight to quality” in tough times and yet another example of our business resilience. Given this background, TMG delivered impressive 10% EBITDA growth over last year, reporting double digit earning progression in a tough climate for a second successive year. Stock, unique visitors and PAGE VIEWS 8,000 Average unique visitors 7,000 Auto Trader 6,000 5,000 4,000 3,000 2,000 1,000 0 Pistonheads Vcars 100,000 eBay Motors Motors 200,000 4 Source: Hitwise 5 Source: Hitwise 6 Source: ComScore March 2012, TMG data 20 Annual report and financial statements 2012 300,000 Stock 400,000 500,000 7 Source: SMMT, DVLA (supplied by CallCredit Group) and TMG Analysis Trader Media Group John King Chief Executive Officer First car: Datsun 200B, canary yellow Digital UK – We have brought the non-car and car websites under the same management for the first time, bringing all the group’s UK digital assets together encompassing online classified automotive advertising, principally through the autotrader.co.uk website, Auto Trader Mobile and other digital marketing services provided to automotive dealers and manufacturers. The division’s focus is on growing the core autotrader.co.uk business by adding more quality and functionality to its market-leading website. The division continues to innovate through developing further complementary products for UK digital customers. In this way, the division will build on its virtuous circle (see below). Magazines – Encompassing classified automotive advertising in magazine titles in Great Britain and Ireland. The division seeks to manage the decline in its UK and Irish publishing businesses by maximising profitability and cash generation through consolidation of all its UK and Irish magazine titles under a single management team. International – Encompassing both online and magazines automotive classified advertising in South Africa and online only in the Republic of Ireland. Given the different dynamics of operating in the South African and Irish geographies, the division seeks to complement local management by leveraging the successful UK model. Our Virtuous circle Reach Brand Enhanced Brand & Position Trust Advertiser 1st Choice Stock Usage Leading Market Share Consumer 1st Choice The reorganisation means Digital UK will continue to lead TMG’s growth through further strengthening our digital presence and developing innovative products. The Magazines division focuses on managing the structural decline in the UK publishing sector and is increasingly immaterial to the group, whilst the International business is positioned to maximise available opportunities for growth in its relevant markets. Group resources The group keeps delivering outstanding results because of the strength of our brand and the amazing talent of our people. It’s our people who are behind the brilliant ideas that create and improve our products, they provide the fantastic service that our customers see, and they strive to do it better every day. I’m proud to say TMG’s employees are more engaged than ever before – our employee opinion survey was responded to by 93% of all UK staff with an industryleading engagement score of 86%. I’d like to thank our people across the group for another successful year. Well done team! We know our valued customers receive the best marketing solutions from us and that we have consistently offered them the best route to market for classified automotive advertising. We provide more response, generate more leads and move more cars than anyone else in the UK. We continue to strive to be more helpful and deliver more value to our customers so we canvass our customer’s needs through ongoing surveys. It helps us put the customers’ needs at the heart of our business. They’re always engaged in developing our new products and, this year we are offering them more choice as we introduced Flexible Packages to market. The new Flexible Packages allow dealers to build on our core stock advertising products by selecting the additional products they want to complement them at the best prices with an inherent discount for volume built in. Response Annual report and financial statements 2012 21 Business review Group structure and strategy During the year the management team restructured the group into three divisions to ensure that each part of the business is managed in the most effective way. The new divisions are: Trader Media Group Operating review continued As well as providing quality products, at TMG we make sure we have a deep understanding of our markets and customers and we have leveraged this by providing insight to our customers more than ever before. The group’s innovations over the last year include: Customer Value Promise – The Customer Value Promise is central to our ambitions of putting our customers at the heart of our business. Our starting point was simple – ask our customers what is important to them and what they expect from us and then deliver this to them. This research also underpins our regular Customer Satisfaction Index survey. Customers told us that they expect us to: ...be a trusted business partner – where we take the time to understand their needs so that we can provide them with robust solutions that add value to their business. We also have to provide a safe environment in which they can trade and ensure that our brand is trusted and front of mind for all consumers. And, as the market leader we’re expected to know most about consumers’ needs; ...drive valuable response – advertising with us will give them high levels of exposure and give them quality leads that they can then convert into sales, regardless of the platform used; ...innovate to help them do business – they expect us to be at the forefront of relevant technology and invest in new developments so that they can maximise the opportunities that exist in connecting them with consumers in a digital world without them having to make the initial investment; ...have a flexible approach – where we give them options, solutions and flexibility so that they can differentiate themselves from their competition. And also want more flexibility in how they do business with us; As a result of this feedback we created our Customer Value Promise. This is core to how we design our business: our products, services and technology and how we work with our customers. It will evolve as our customers’ expectations do. For example, we’ve extended access to our customer service desk to seven days a week. Auto Trader Price Index – This quarterly index started in August 2011 and offers in depth information on the market place utilising the unique data the group has at its fingertips. The data includes the pricing and trends of used cars in the current marketplace, the impact of economic conditions and the pricing differentials throughout different regions of the UK. Pulse reports – Throughout the year the group has offered branded Pulse reports to its UK dealers. The free report provides dealers with data specific and relevant to them on lead generation, lead conversion and return on investment for all the TMG products the dealer purchases. The group utilises tracking data and consumer usage statistics to demonstrate high response rates which are well in excess of those offered by TMG’s competitors. Owner reviews – this year anybody who visits autotrader.co.uk has been able to submit a review of a vehicle they’ve owned. We had a target of reaching 35,000 reviews by the end of March to put us on a par with Parker’s for user generated content and achieved this ahead of schedule by February. 90% of UK vehicle dealers advertise vehicles on autotrader.co.uk, with high levels of customer satisfaction. This level of penetration has provided a robust platform for significant growth opportunities within those relationships. As a result, TMG’s Dealer Portal is now being used by c. 75% of dealers across the UK every month, the most used dealer desktop application in the UK automotive industry. Through its advertising platforms (autotrader.co.uk, RAZSOR, mobile and magazines), market intelligence tools and extended audience reach via its syndication partnerships with Facebook and MSN, TMG helps dealers sell cars more profitably; source the right cars at the right price; sell their cars faster, and turnover stock as soon as possible. The group has continued to invest in its brands with high profile television, online and radio campaigns complemented by social media throughout the year. Auto Trader is also the sole sponsor of the Moving Motor Show at the Goodwood Festival of Speed for the second year running. This has helped keep Auto Trader among the most searched for brands on the internet in the UK8. This exposure ensures the group’s core Auto Trader brand is widely recognised and means our customers have access to the largest audience and response for their advertisements. All of these things together have made the last year the success it was. With all of them in place, we have been able to help our customers reach millions of their customers, and quickly and easily complete millions of vehicle transactions. Through all of these things, we will continue to support our customers and consumers to do business over the years ahead. ...be easy to work with, easy to use – our people and ways of doing business are straightforward and easy, and our technology is easy for them and their potential customers to use. 8 Source: Hitwise 22 Annual report and financial statements 2012 Trader Media Group Trader Media Group has further invested overseas, increasing its minority stake in IAUTOS Company Limited, a business that offers online classified automotive advertising in China. The increased investment means the group is well positioned to be part of the growing Chinese automotive market and support the business in its growth via our years of experience and expertise in automotive classified advertising. During the year, the group has refinanced its syndicated debt which has meant amending and extending the majority of the existing facilities from maturity at June 2015 to June 2017 and raising £150 million of additional borrowings. As the group continues to generate high levels of cash, this has enabled a shareholder distribution of £210 million. Using further cash, TMG repurchased £48.4 million of debt at below par value which shows its ability to manage its liabilities while offering a great return to its investors. Outlook The year ahead will hold challenges for many businesses, and, given the projected shortage of new and used vehicle stock in the market, ours is no exception. We are expecting used car transactions to be largely flat in the year ahead, with a slow recovery in calendar year 2013. TMG will continue its strategy of increasing profitability by maximising its revenue through partnering with its customers. We will deliver to our customers a compelling proposition through improved service, information and functionality and by offering them greater choice via Flexible Packages. Responding to the needs of our customers sits at the heart of our business and will continue to do so. By leveraging its capability, brand and digital experience, the group will consolidate its position in existing international businesses. We will continue to use social media such as Facebook and Twitter effectively by using it to generate leads and act as a marketing tool. We have proven how well the group can capitalise on new technologies by the continued growth of our mobile products, now representing c. £9 million of revenues this year, and we will continue to keep an eye on new technology and social developments so that we can move quickly to make the most of these opportunities. Business review Corporate activity On 7 November 2011, the group sold its interest in Edizeta srl, a subsidiary trading in the Italian automotive classified sector. The business is largely magazine-focused and does not have a significant online presence and the sale reflects TMG’s strategy of being a primarily digital group. The sale was for a profit of £0.2 million. Management will keep a watchful eye on its costs throughout. While choosing to invest in its customers, products, people and brand, TMG remains committed to controlling its cost base. The group has proven its ability to do this by another year of EBITDA margin growth, from 51% to 56%9. Overall the group will focus on customer needs, building on its customer satisfaction scores and partnering with our customers to help them perform. In this way we will continue to drive good results in a challenging environment. John King Chief Executive Officer 9 For its continuing operations Annual report and financial statements 2012 23 Trader Media Group Innovative marketing at Goodwood motor show Auto Trader at the goodwood motor show June 2011 saw us sponsor Goodwood’s Moving Motor Show, the preview day to its well established Festival of Speed. More and more frequently, car manufacturers were using the Goodwood Festival of Speed to showcase new products as well as celebrate the old. In response to this the Moving Motor Show was launched in 2010 to give manufacturers an opportunity to showcase their new models in a stunning setting and allow car buyers to see and experience the latest cars first hand. It is fast becoming recognised as one of the best new car events on the international motoring calendar – and provided us with a fantastic opportunity to showcase our brand and promote the New Car area on our website. The stats: • 181,000 visitors attended Goodwood across the four days of the Moving Motor Show and Festival of Speed • T he Goodwood hub on our website received 47,075 monthly unique visitors •1 1,500 consumers entered our competition to win tickets to the Moving Motor Show and 2,000 pairs of tickets were won •O ur Goodwood iPhone App achieved 3,000 downloads over the four days it was available • 2,280 visitors completed an owner review while visiting the Auto Trader stand • The Auto Trader Cars section of our website received an additional +12% year on year weekly unique visitors right after the Goodwood festival, as well as an increase of +25% year on year in car searches. 24 Annual report and financial statements 2012 Trader Media Group Business review After last year’s success, we are once again sponsoring the Goodwood Moving Motor Show.” Annual report and financial statements 2012 25 Trader Media Group Segmental commentary 1 Digital UK Following the successful migration of the UK business online for all vehicle types, this division now contributes the majority of the group’s revenue (79%) and EBITDA (85%). The Digital division has shown growth despite the economic backdrop with revenue and EBITDA increasing by 11% and 20% year-on-year respectively. With used vehicle stock reducing in the second half of the year, much of the growth has come through the Spring and Summer of 2011 but the division’s newer products, primarily Mobile, RAZSOR, New Car and the non-car websites have also driven much of this with £9.6 million of incremental revenue over the last financial year and continued growth throughout the year. TMG has invested in autotrader.co.uk during the year to provide the best possible search functionality and content as evidenced by the improved consumer satisfaction scores this year from buyers, sellers and browsers. The investment has also benefitted monthly page views of autotrader.co.uk which averaged 1.1 billion in March 201210 and peaked at 1.5 billion page impressions during February 2012. Consumer revenues for private customers have suffered from the same declines seen amongst the division’s dealer customers due to economic pressures with volumes down year-on-year. Despite this, primarily following the strong first half of the year, private revenues showed growth of £1.2 million (4%) for the year. 10 Source: Omniture 11 Source: Omniture 26 Annual report and financial statements 2012 TMG continues to develop its mobile device offerings to provide search and targeted advertising wherever and whenever needed. Following this investment, unique visitors using the Auto Trader mobile app grew over 100% through the year to 2.3 million in March 201211. We are the clear market leader in mobile solutions to the automotive classified sector and usage will continue to grow at a rapid rate, delivering even more, highly qualified leads for our customers. TMG has also leveraged its role as an integral provider of tools and data to expand its offering beyond the autotrader.co.uk website into digital marketing solutions including RAZSOR, which provides websites using unparalleled search engine optimisation to the automotive industry. RAZSOR is the market leader with TMG hosting over 3,000 RAZSOR dealer websites and now expanding into offering dealers the opportunity to develop their own mobile RAZSOR sites as well. In 2011, TMG began operating in the £900 million new car advertising market by building a digital marketplace for new cars where great deals are highlighted and richer editorial content and reviews provided. Through this they have empowered consumers to make informed decisions on new, nearly new and used purchases. With £0.8 million of incremental revenue generated during the year it remains an exciting area of future growth. With a tough trading environment, the division has controlled its cost base accordingly. The Digital cost base is £1.6 million (2%) lower than last year despite developing new products and investing in the data and customer service we provide. Looking forward, the business will continue to keep doing what it does well; provide a suite of market leading products that offer unrivalled response complemented by fantastic service. The Digital UK division is focused on developing new products that will enable it to leverage its leading position and fully utilise the data that results from this. In digital advertising, we will look to boost advertising yields through improved service, flexibility and functionality, which will in turn boost dealer usage. Digital continues to capitalise on new, fast-growing markets, including the new car advertising market, digital marketing and mobile. We will also continue to use all platforms and opportunities to drive traffic and revenue using social media platforms and real time information, as the routes to market continue to expand. Digital UK revenue £ million 182.8 202.0 147.9 2010 2011 2012 2012 +11% Stock of vehicles on website (average through the year) �000 344 2010 2012 367 2011 +4% 380 2012 Trader Media Group Magazines With the classified automotive advertising market migrating online, the group’s published titles retain a strong presence on shelves throughout the United Kingdom and Ireland with circulation figures averaging over 87,000 copies per week across all magazines12 throughout the year. This keeps the Auto Trader magazine as number one in the classified automotive market albeit with divisional revenues of £27.8 million, down £16.3 million on last year. With rigorous focus on its cost base, the division has restricted the decline in EBITDA to £6.6 million. Examples include reducing print costs by removing glossy pages and editorial from the magazines with no detriment in product quality as well as constantly challenging the working practices and schedules as demand falls. The focus for Magazines is to slow the decline in its trade and private advertising by continuing to demonstrate value for money and maintaining quality products for its customers. In addition, the division will continue to promote its AdTrader website thereby increasing traffic and facilitating the transition online. 3 International Despite the difficult global trading environment also impacting South Africa and Ireland, the division as a whole has revenues flat at £27.4 million year-on-year. The division has invested in the future growth of both countries’ digital operations and this has led to a decline in the division’s EBITDA of 8% over last year as we have looked to drive long term growth in the business. In South Africa, TMG is a clear market leader through its Auto Trader and Commercial Trader magazines and has initiated the transition to online operations with the launch of an improved website in January 2012. Use of mobile is also growing rapidly in South Africa and TMG is seeking to capitalise on this as it seeks to grow revenues and profit. The digital launch and the already successful magazine business are performing well in a declining market with revenues down only £0.6 million over the previous year. In Ireland, TMG has faced a difficult economic environment with vehicle stock much reduced in the marketplace but has nevertheless maintained its number one brand and market penetration via carzone.ie. In this climate, revenues were up £0.4 million over 2011 through developing new online product opportunities with display advertising, mobile listings and website hosting. These products have all grown over the last year and Ireland is well placed for further growth when the economy recovers. Business review 2 International revenue of £27.4 million Results were impacted by unfavourable foreign exchange translation effects of £0.5 million as the South African Rand weakened against Sterling. There was no gain or loss as a result of fluctuations in the Euro-Sterling rate. 12 Including Auto Trader, AdTrader and national magazines Annual report and financial statements 2012 27 Trader Media Group Q&A with the Chief Executive officer, john king Trader Media Group has migrated its operations to digital platforms and continues to be the clear market leader in the UK’s automotive classifieds market, with its flagship brand autotrader.co.uk TMG brings automotive buyers and sellers together via its digital platforms providing the most comprehensive choice of vehicles, delivering a great consumer experience and generating more leads to dealers than any of its competitors. At TMG, innovation is key to success with a wide range of products and services across the automotive value chain being provided to dealers. In this section John King, the Chief Executive Officer of Trader Media Group, responds to questions about the business and its prospects. Watch the video at www.ar2012.tradermediagroup.com Q. How has the business been performing over the past year? A. Our on-going strategy of revenue diversification has resulted in another strong performance in the year to 1 April 2012. Despite the tough economic climate revenues have grown 1% year-on-year, with double digit EBITDA growth of 10% as we have focused on the cost base of the business and benefited from higher margins as Digital revenues represent 83% of TMG. Operating cash conversion has remained high at 90%. Find out more on page 20 Q. Has TMG been hit by the economic uncertainty we’ve been seeing across Europe over the past few years? A. The used car market in the UK was hard hit by a shortage of vehicles during the second half of the year. This was the result of reduced output by car manufacturers three years previously in response to the economic crisis of 2008. Used car transactions were flat year-on-year at around 6.7 million units and this trend of low growth is set to continue into 2013. Despite this, the average number of vehicles on autotrader.co.uk increased 4% on the prior year to 380,000 and was some 93% ahead of the nearest competitor. Find out more on page 12 28 Annual report and financial statements 2012 Q. You have a decisive lead over all your rivals. How have you managed to do that? A. The 35-year history of the Auto Trader brand – both online and offline – means it has a strong reputation and is considered trustworthy by consumers and customers alike. The core website autotrader.co.uk is the UK’s busiest online vehicle marketplace helping sellers reach more buyers than anywhere else – with up to 10 million visitors per month. As market leaders, we continue to invest and innovate in our products and services. We constantly monitor the buying and selling needs of consumers and are always first to market with products that respond to their evolving requirements. Trader Media Group 83% of group revenue comes from digital A. TMG first embarked on its migration to digital platforms some 15 years ago. While our magazines have shown the expected decline in circulation, it has followed the successful migration online of the car site by profitably transitioning the non-car magazine titles online. We have also invested in autotrader.co.uk during the year to provide the best possible search functionality and content as evidenced by the improved consumer satisfaction scores this year from buyers, sellers and browsers. Monthly page views of autotrader.co.uk averaged 1.1 billion in March 2012 (Omniture) and peaked at 1.5 billion page impressions during February. Q. What benefits have you seen from the process of taking the business digital? A. Around 90% of UK vehicle dealers advertise vehicles on autotrader.co.uk, with high levels of customer satisfaction. This level of penetration has provided a robust platform for significant growth opportunities. As a result, our Dealer Portal is now being used by around 75% of dealers across the UK every month, the most used dealer desktop application in the UK automotive industry. We help dealers sell cars more profitably, providing market intelligence tools, helping them source the right cars at the right price, sell their car faster, and turn over stock as soon as possible on our advertising platforms, such as autotrader.co.uk, RAZSOR, Mobile and magazines, and reach extended audiences through our syndication partnerships with Facebook and MSN. Q. Smartphone and tablet penetration has exploded in the past year. What have you been doing to capitalise on this phenomenon? A. We are continuing to develop mobile products to provide search and targeted advertising wherever and whenever needed. Following our investment in this area, unique visitors using the Auto Trader mobile app grew 100% to 2.3 million13 in March 2012. To date 28 million vehicles have been viewed on our mobile app. Q. What other products and services have you introduced? A. We have leveraged our role as an integral provider of tools and data to expand our offering beyond the autotrader.co.uk website into digital marketing solutions including RAZSOR, which provides websites using unparalleled search engine optimisation to the automotive industry. RAZSOR has quickly become the market leader with TMG hosting over 3,000 dealer websites. Q. Have you considered a new car offering? A. Yes we have and in fact we started to do this last year. In 2011, we began operating in the £900 million new car advertising market by building a digital marketplace for new cars where we highlight great deals with richer editorial content and reviews. Through this we have empowered consumers to make informed decisions on new, nearly new and used purchases. It remains an exciting area of future growth. Q. How are the overseas divisions performing? A. In South Africa, TMG is a clear market leader in magazines and we have initiated the transition to online operations with the launch of an improved website in January 2012. Use of mobile is also growing rapidly in South Africa and we are seeking to capitalise on this as we continue to grow revenues and profit. In Ireland, we have faced a difficult economic environment but have nevertheless maintained our number one brand and market penetration via carzone.ie and developed new online product opportunities with display advertising, mobile listings and website hosting products all growing over the last year. In China, we increased our stake in IAUTOS Company Limited to 22.7% and see significant market potential as the used car market continues to grow rapidly. Find out more on page 27 Q. What’s coming next for TMG? A. We are focused on developing new products that will enable us to leverage our leading position and fully utilise the data that results from this. In digital advertising, we will look to boost advertising yields through improved service and functionality, which will in turn boost dealer usage. We have also moved into new, fast-growing markets, including the new car advertising market, digital marketing and mobile. We also continue to use all platforms and opportunities to drive traffic and revenue using social media platforms and real time information, as we continue to expand. 13 Source: Omniture Annual report and financial statements 2012 29 Business review Q. You have been moving your operations on to digital platforms. Has that process now been completed? Trader Media Group Key Performance Indicators The Board and Executive Committee team have set operational KPIs which are tracked, and reviewed, at each Board and Executive meeting in order to assess performance. Revenue £ million 233.7 254.4 257.2 2011 2012 Measures the level of continuing operating activity and growth of the business. Revenue for the year is as stated in note 3 to the financial statements. 2012 +1% 2010 EBITDA £ million Measures earnings before interest, tax, amortisation, depreciation, impairments and exceptional costs and provides a measure of the underlying profitability of the business. EBITDA is as stated in note 3 to the financial statements. 111.1 2010 129.8 2011 142.9 2012 2012 +10% Covenant net debt £ million Measures the indebtedness of the business and when compared with EBITDA provides a measure of balance sheet leverage. Defined as syndicated bank loans gross of unamortised debt issue costs less cash and other financial assets. The balances constituting covenant net debt are as reported in notes 18 and 19. 2012 +25% 30 Annual report and financial statements 2012 605.7 2010 637.1 511.2 2011 2012 UK International Trader Media Group Average monthly unique users million This KPI represents the number of unique users* that log onto autotrader.co.uk on a monthly basis. 2012 2012 2010 +7% 9.4 8.8 2011 8.1 * Source: Omniture Stock of vehicles on website �000 This provides a KPI that illustrates the number of vehicles being advertised on autotrader.co.uk on average through each year. 2012 2012 380 2011 367 2010 344 +4% Page views million (Average page views in the year) 2012 This provides a KPI to indicate how many pages within the website are being accessed by the users of autotrader.co.uk 2011 914 833 2010 667 +10% Business review 2012 * Source: Omniture Average weekly circulation �000 This provides a measure of the average circulation of the Auto Trader magazine in the UK and Ireland. 2012 2012 2010 -42% 2011 52 89 136 Headcount This represents the average number of full time equivalent employees during each financial year. 2012 2012 2010 -8% 2011 1,514 1,640 1,980 Annual report and financial statements 2012 31 Trader Media Group Financial Review Overview The group has achieved revenue growth of £2.8 million (1%) through a tough trading environment across all of its markets during the year. The management team has also reacted to the difficult market by driving efficiencies and has sought to balance the investment in staff and technology required for development of new products, restructuring and removal of costs from non-core activities. The benefit of this activity can be seen in the group’s operating profit. The table below shows this growth when the impact of restructuring and other one-off costs is removed: Continuing activities Revenue 2012 £m 2011 Change £m +/(-) 257.2 254.4 Operating profit 105.9 107.5 Impairment charges and exceptional items (note 4) 22.8 11.1 Like-for-like operating profit 128.7 118.6 1% 9% The group has built on its reputation as the leader in its market during the year by: • maintaining revenues well ahead of its competition through depth of stock, brand strength and successful new products; •p roviding data to its customers to help them make timely and well-informed decisions during difficult trading times; and • proving the response delivered by its advertising products and thereby remaining a trusted partner of dealers. 32 Annual report and financial statements 2012 Discontinued activities and restructuring During the year, the group sold its interest in Edizeta srl, its Italian subsidiary for £0.2 million profit (note 7). Restructuring costs in the group relate primarily to the refinancing conducted during the year and related group restructuring. Other restructuring relates mainly to redundancies and property exit costs as the group continues to refine its cost base and realise efficiencies. Acquisitions TMG has continued to invest in growth, increasing its minority stake to 22.7% in IAUTOS Company Limited, which operates a Chinese company offering online classified automotive advertising similar to that provided by TMG in the UK. The additional investment will further enable the group to capitalise on a huge used car market in the world’s fastest growing economy with a well-established partner. The business operates as a standalone entity but is able to draw on the resources and expertise of the wider group. Impairment The group has incurred an impairment charge of £18.2 million (2011: £18.1 million) in the year against some of its publishing related business units. As goodwill does not amortise under IFRS, the impairment reflects the ongoing decline in the profitability of its magazines businesses and therefore effectively represents the amortisation of the magazine division. Interest and taxation Following several years of growth and proven cash generation the group was successfully refinanced during the year, increasing its syndicated bank debt by £150 million. Finance costs have increased by 4% to £89.2 million (2011: £86.0 million) in the year following the refinancing and subsequent increase in the margins payable on the group’s syndicated debt (note 19). To mitigate its exposure to interest rate risk, the group continues to hedge its exposure to fluctuations in LIBOR on its borrowings through an interest rate cap and interest rate swaps as detailed in note 14. A relatively low level of non-exceptional finance income of £0.5 million was primarily generated from cash deposits, consistent with 2011 levels (£0.6 million) due to the low LIBOR rate throughout both years. The group’s sensitivity to fluctuations in LIBOR has been considered in note 2 to the financial statements. The group has continued its strategy of buying back its syndicated debt at below par value. This has led to exceptional gains through finance income of £4.5 million (2011: £3.5 million). The group will continue to explore suitable opportunities to repurchase its own debt in the future. The group’s taxation charge has increased to £14.7 million during the year (2011: £12.0 million). This increase stems from the increased profitability of the group. The effective tax rate of 68% is higher than the standard corporation tax rates in the group’s operating countries due to the non-taxable nature of certain costs, mainly amortisation and impairments on intangible assets. Trader Media Group The group continues to have strong operating cash conversion (>90%) which has allowed it to generate £129.3 million (2011: £134.0 million) cash from operating activities. It has used this cash to service its syndicated debt (£29.0 million) and pay down or repurchase debt (£43.9 million) thus reducing its future interest commitment. There is continued investment in the future with £14.7 million (2011: £12.2 million) spent to acquire tangible and intangible fixed assets. Following the successful refinancing during the year the group has made a distribution of £210 million to its shareholders in the form of dividends and repayment of capital. This has been enabled by the consistently strong cash generation seen every year. The high level of operating cash and free cash flow conversion enables the group to cover its debt interest repayments as well as being able to deleverage where possible (as shown in the table) reducing the margin on the group’s syndicated debt. The terms of the group’s borrowings are such that repayment is required between June 2015 and December 2017 and as a “covenant-lite” debt package the group has no mandated covenant tests until this point. The group ended the year in a strong position and the directors are therefore confident that the group should be accounted for as a going concern. £m Covenant net debt at 28 March 2010 Repurchase of syndicated debt Repayment of syndicated debt Increase in cash and cash equivalents and other financial assets Exchange loss on cash Covenant net debt at 3 April 2011 Repurchase of syndicated debt Repayment of syndicated debt Refinancing of syndicated debt Increase in cash and cash equivalents and other financial assets14 Exchange loss on cash Covenant net debt at 1 April 2012 (605.7) 5.3 13.7 75.6 (0.1) (511.2) 4.5 584.2 (734.2) 20.3 (0.7) Business review Cash flow and debt On 20 June 2011 the group completed a financial restructuring with its syndicated debt providers. The refinancing gave a £150 million cash injection to the business, amended certain terms and extended the term of much of the debt to 2017. The group maintained its “covenant-lite” terms on the syndicated debt through the refinancing. (637.1) Zillah Byng-Maddick Chief Financial Officer operating cash conversion >90% 14 Excluding the cash used to repurchase and repay debt Annual report and financial statements 2012 33 Trader Media Group Principal Risks and Uncertainties The principal risks and uncertainties facing the business that could have a material impact on the group include the items noted below. More detail relating to the financial risks in particular is contained within note 2 to the accounts. Market risk The group operates primarily in the UK automotive market place which has experienced a difficult trading environment over most of the last few years. Consumer demand for vehicles and new car production have been low leading to dealers cutting back on volumes of stock, thereby impacting on advertising spend. The group also holds a similar market position in Ireland and South Africa, whose markets have also contracted and where the economic factors may lead to further decline. The group’s share of total advertising spend in the automotive market is under constant threat from new and incumbent competitors, especially as the business is predominantly online where barriers to entry are lowest. These risks are mitigated by continual monitoring of overall market conditions and investment in products and marketing to ensure the group not only delivers the best response to advertisers, but better value for money than its competitors. Even in declining markets, this allows the group to maximise its return and maintain strong market share. All group products have been impacted by the shift to the online delivery channel and the group is therefore exposed to the rapid pace of change in this area. To mitigate this, the group has allocated extra investment and people to this channel and continues to monitor its own and competitor performance closely. 34 Annual report and financial statements 2012 Interest rate risk The group has interest bearing assets, primarily cash, which are at risk of fluctuations in interest rates. Cash levels and market interest rates available are monitored by the group treasury function to ensure risks are minimised. The group’s interest rate risk also arises from long term borrowings with the syndicated bank loan and shareholder loans subject to floating rates of interest linked to LIBOR. The group manages its cash flow interest rate risk on the bank borrowings by using interest rate swap and a cap agreements to convert a proportion of the debt from floating to fixed rates. Under the interest rate swaps the group agrees with the other party to exchange on a monthly basis the difference between the fixed contract rate and the floating rate interest amounts calculated by reference to the agreed notional amounts. On the cap agreements the group received the difference between the cap rate and the current floating rate should the latter be higher in the month in question, again calculated with reference to agreed notional amounts. When the floating rate is lower than the cap rate, no cash flows arise under this agreement. Credit risk Credit risk arises from deposits with banks and financial institutions, as well as credit exposure to customers. The group minimises its risk by dealing with only a limited range of financial institutions with secure credit ratings. A reduction in the amount of credit provided to those purchasing vehicles has reduced activity in the market and over the longer term will continue to adversely impact dealer profitability. This combined with the current global economic climate is expected to impact all areas of the business. With the slowdown in the automotive market place, dealer margins have been placed under pressure and the risk to the group of non-payment of invoices increases. The bad debt risk also rises with customers who provide financial services and are unable to obtain funding for their products. Policies and procedures exist to ensure that customers have an appropriate credit history and a significant number of balances are prepaid or collected via direct debit. Overall the group considers that it is not exposed to a significant amount of either customer credit or bad debt risk due to the diversified and fragmented nature of the customer base. A single UK customer services team is in place to give focus on debt collection. The cost of bad debts remains at a low 1.1% of revenue (2011: 0.7%). Trader Media Group This structure, when taken in conjunction with the projected cash flows, is considered sufficiently flexible to ensure that the group can continue to service its obligations as they fall due even if the group suffered a significant reduction in trading performance. Employee engagement Each year we ask all of our employees in the UK, Ireland and South Africa to complete an employee opinion survey. We listen to the feedback our employees give us in this survey and work with them to produce action plans to continually improve their working experience at TMG. We take the results very seriously and managers are measured against their results as part of our annual performance review process. We value and act on employee feedback; in response to the survey results we have launched a flexible benefits package for all employees, made big improvements to our internal communications plan and also enhanced our maternity/paternity policy. Year on year we have seen good improvement in these results, both in terms of participation and the feedback received. In 2009, 70% of employees completed the survey. This grew to 89% in 2010 and reached 91% in 2011. In 2011 we also achieved an employee engagement score of 86%. This is 10% higher than the benchmark score for other organisations in the survey group and an increase of 6% on our score from 2010. Annual report and financial statements 2012 35 Business review Capital risk management The group’s objectives when managing capital are to safeguard its ability to continue as a going concern. The risk that the leveraged nature of the group affects the future development and going concern has been mitigated through the structure of its financing. Neither the cumulative irredeemable £1 preference shares nor the shareholder loans require performance conditions to be met. Likewise the terms of the Senior Facilities Agreement (“SFA”) are such that the borrower group is not required to adhere to performance related leverage or interest cover ratios or to restrict capital expenditure. Whilst repayments can be made without penalty under the shareholder loan agreements and the SFA, there is no requirement to settle all or part of these debt instruments earlier than their termination dates between 2015 and 2017. Restrictions exist to limit the level of additional indebtedness incurred and the extent of dividends payable and there is a requirement to repay a proportion of any excess cash flow but these are not expected to materially impact the planned growth of the group. Trader Media Group Corporate Social Responsibility In conducting business the Board recognises its responsibility to deliver quality to customers, recruit and reward people on merit alone, minimise health and safety risks, maintain stringent environmental protection standards and honour agreements with partners and suppliers. The CSR Steering Committee, which is chaired by the Chief Executive Officer, has a remit that includes health, safety and environment, sustainability, financial governance (information covered in the Corporate Governance section on pages 40 to 41), community, customer and people within its terms of reference. This report outlines the group’s progress during the year ended 1 April 2012. The TMG vision All TMG employees are guided by the group’s vision to be the Number 1 marketplace for motorists. This objective is embodied in the group’s Top 5 Priorities which are: • Put the consumer at the heart of everything the group does; • Accelerate growth through new and existing products and services; • Maximise and demonstrate value to customers; • Defend the group’s market leading position; and • Attract, develop and retain talent. As an integral part of achieving this vision the group works to standards that promote integrity, fairness and honesty. The group focuses on the needs of its customers respects its suppliers, respects the environment, interacts within the community and promotes and rewards solely on merit. needs. As well as our company funded benefits, we offer a wide range of voluntary benefits including childcare vouchers, cycle to work schemes and critical illness insurance that are proving popular amongst our employees. We are always looking to evolve our package of benefits and therefore this year we have introduced travel season ticket loans, pension salary sacrifice and a wine club. Occupational Health & Safety and Managing Occupational Road Risk (MORR) for five and three years respectively, in recognition for the continued excellence in this area. The group is committed to pursuing training programmes which equip all employees with the necessary skills to help them perform to the best of their ability and this investment in people is core to our aim to motivate and retain employees. Community A key focus for the group within its community-based activities is charity partnership initiatives. Each year the group selects a designated charity and encourages fund-raising and sponsorship events to support them. The charity is supported through a corporate donation, staff fundraising and volunteer efforts. The group is committed to treating all its employees and job applicants fairly and equally. It is our policy not to discriminate on the basis of their gender, sexual orientation, marital or civil partner status, gender reassignment, race, religion or belief, colour, nationality, ethnic or national origin, disability or age, pregnancy or trade union membership or the fact that they are a part-time worker or a fixed-term employee. The equal opportunities policy operated by the group ensures all workers have a duty to act in accordance with this. The average number of staff employed by the group on a full time equivalent basis during the year was 1,514 (2011: 1,640). Health, safety and environment The group’s policy of ensuring safe and pleasant working conditions for all employees as far as possible within the constraints imposed by the working environment has continued to operate. A full time health and The group’s people safety team is employed by the group and People are the group’s most valuable is managed through a sub-committee resource and the success of the group is to of the CSR Steering Committee which the credit of all our employees. The continued meets three times a year and is chaired success of TMG and its brands is something by the Chief Executive Officer. The group of which everyone associated with the regularly benchmarks its health and safety business can be enormously proud. In performance against similar organisations in recognition of the diverse needs of TMG’s order to help maintain an environment that employees, our flexible benefits scheme, My continues to promote a healthy and safe Benefits, enables employees to tailor their working environment. The group has benefits package to meet their own specific received gold awards from RoSPA for 36 Annual report and financial statements 2012 During the year there were no major injuries (2011: none) reported under the Reporting of Injuries, Diseases and Dangerous Occurrences Regulations. TMG’s charity partner for the last two years has been Help the Hospices. The partnership gives staff the benefit of working with a national charity with national resources while directly supporting hospices in the communities where employees live and work, which can be very rewarding. The group has also endorsed a Community Involvement Policy which supports its employees who wish to work with communities across the UK both as private individuals and also as employees of TMG. Beyond these initiatives TMG supports other national and local charities through a corporate match funding bursary provided for individual employee charitable commitments. Donations to Help the Hospices and other charities during the year totalled £0.1 million (2011: £0.1 million). Customer We are committed to putting our customers at the heart of everything we do and in July 2011 we carried out an extensive piece of customer research, interviewing over 2,000 customers. Our starting point was simple – ask our customers what is important to them and what they expect from us. This research also underpins our regular Customer Satisfaction Index survey. Trader Media Group Responsibility Agreement with DEFRA (the Department of Environment, Food and Rural Affairs). This agreement commits the magazine industry to encourage the final consumer to put purchased magazines into the recycling process that ends up with copies being recycled as newsprint and not landfill. TMG has a group-wide, environmental remit with a primary focus on carbon management. The fleet management Sustainability processes have been improved with the Paper for the group’s magazines is sourced provision of monthly fuel data for review by responsibly from sustainable resources. the Executive Team. The group has worked Through its arrangement with COMAG, the with the Carbon Trust to identify energy group benefits from COMAG’s contracts that efficiency measures that can be implemented have strict guidelines for the secure disposal at all office locations and used fuel efficiency and recycling of returned copies in data to help drive both carbon emission accordance with agreed industry wide reduction and improve health and safety as standards in the Periodical Publishers the group worked with drivers to review their Association (“PPA”) Best Practice Guidelines driving habits. TMG’s environmental impact for Wholesale Stock Control and Returns has also reduced through the group Systems Document. The PPA, via its magazine rationalising the number of properties it publisher members, has in conjunction with maintains and through the printing of less the Government entered into a Producer magazines. In the current financial year TMG has used this data to manage its emissions, substantially reducing its total to 2,161 (2011: 5,909) tonnes of carbon from its premises’ use of electricity, gas and car fleet fuel. Carbon footprint of TMG’s car fleet, offices and print sites Print (gas) Print (electricity) Offices (gas) Offices (electricity) Fleet fuel Tonnes CO2 Tonnes CO2 2012 2011 – – 103 923 1,135 2,161 1,147 2,287 135 1,172 1,168 5,909 Hadrian’s wall challenge TMG is extremely proud to have sponsored 38 TMG employees to take part in the Hadrian’s Wall challenge in April 2012 in support of Help the Hospices. The walk took in 25 miles over two days alongside the remaining sections of the wall. The team has raised £30,000 for the charity. Annual report and financial statements 2012 37 Business review This research resulted in the development of our “Customer Value Promise” – our promise to work harder and smarter for our customers going forward (see page 22 for more information). The promise is not just a pledge on a piece of paper; it is core to how we design our business – our products, services and technology – and work with our customers. It will evolve as our customers’ expectations do. Trader Media Group executive Committee John King Chief Executive Officer First car: Datsun 200B, canary yellow Zillah Byng-Maddick Chief Financial Officer First car: Peugeot 1.0L 106, red Craig Stevens Group Director (Digital Marketing) First car: Ford Cortina 1.6L, brown John O’Connell MD International First car: 1981 Renault 14 Tim Peake Group Strategy Director First car: MG Maestro, red Tim Jones Chief Information Officer First car: Peugeot 205 1.9GTI, graphite grey Nathan Coe Group Director (Auto Trader) First car: 1987 Nissan Pulsar, white David McMinn Group Sales Director First car: Ford Cortina TE 1979, white Joanne Walker Group HR Director First car: Ford Fiesta 1.1L 38 Annual report and financial statements 2012 Trader Media Group John King Chief Executive Officer Zillah Byng-Maddick Chief Financial Officer Craig Stevens Group Director (Digital Marketing) John O’Connell MD International Tim Peake Group Strategy Director Tim Jones Chief Information Officer Nathan Coe Group Director (Auto Trader) David McMinn Group Sales Director Joanne Walker Group HR Director Since joining in 2004, John has had responsibility for TMG’s digital and publishing businesses in South Africa, Ireland and Italy. He was initially appointed as Regional Managing Director for Ireland, where he oversaw strong growth of the business and its successful migration from publishing to digital. Previously, he was CEO of a magazine/ print-based communications group and held senior roles with leading Irish newspapers. My first car: 1981 Renault 14 I bought this car for £2,400 in 1985. It was an odd shape – like a pear – and for some reason I took a liking to it. The original advertising campaign for it in France was a disaster due to this comparison – in France, the Renault 14 is still known as “la Poire”. Nathan joined TMG in 2007 as Managing Director of Strategy & Business Transformation. Currently Nathan is responsible for the Auto Trader digital business. Prior to this he was responsible for developing growth initiatives in Mobile and Automotive Digital Marketing. Previous roles include Corporate Development at Sensis, M&A at Telstra Corporation and consulting at PriceWaterhouseCoopers. My first car: 1987 Nissan Pulsar, white My most memorable moment in it was the first time I met my future in-laws. I was driving them along when the engine blew up. I tried to fix it by wrapping some cloth around the leaking part – I’m no mechanic but I wanted to make a good impression! Unfortunately that backfired too – a short way down the road, we saw smoke coming out of the bonnet – the cloth had caught alight and the whole engine was on fire! A qualified accountant, Zillah joined TMG in 2009. She currently has responsibility for the finance, business change and service functions and is passionate about delivering best in class service to all customers, be they internal or external. She also has a non-executive role at Mecom PLC, a European Media business. Prior to joining TMG she held executive roles at Fitness First Group (as CFO, MD Germany and Group Commercial Director) and Thresher Group (CFO), and a non-executive role at Pizza Express. My first car: Peugeot 1.0L 106, red I was 18 when I bought this car. It was brand new and had denim interior seats. I paid £5,000 for it – it was on a deal (I’m always looking for a deal) – and paid it off on finance. I took it to France once and managed to get it towed away! Tim joined TMG in August 2005 and has held several director level roles including Group Strategy Director, focused on M&A, new business initiatives and digital trends, MD of the overseas businesses and Head of Pricing for the UK, where he helped transition the business into a leading online player. Prior to joining TMG, Tim worked at Cadbury’s as Commercial Strategy Manager and was a Management Consultant with A.T. Kearney working across the automotive sector. Tim started his career at Goldman Sachs. My first car: MG Maestro, red I was 17 and it was given to me by my grandfather. Unfortunately I only had the one trip in it – the first day I received it, I went to see my friends, only to crash it after I had picked them up... Turned out it didn’t go round bends as fast as I thought it would, and goes to show that passing your test doesn’t mean you can necessarily drive! David joined TMG in 2008 as Group Operations Director responsible for overseeing the transformation of the Auto Trader Publishing Business and its approach to the market, as well as steering TMG Operations and Change Management. In 2009, David was appointed Managing Director (Trader Publishing), and then became Group Sales Director in October 2011. Prior to joining TMG, David was CFO and then National Sales Director at Sensis. My first car: Ford Cortina TE 1979, white I bought this car for $3,000AUD from a mate I played football with. I was 19 and chose it as it had a bullet proof engine, 4.1L. As my first set of wheels, it meant I was mobile and could do what I wanted. I had many memorable times in it – including being stuck in a traffic jam listening to Meatloaf for seven hours and a 360 degree spin on an oil patch. Craig joined TMG in 1996 as a General Manager for the National Magazine division. He has worked for eleven years at management and directorial level, with responsibility for the development of TMG’s digital strategy and consumer digital products and services. Craig is now the Director of Digital Marketing Solutions and sits on the board of our Chinese investment, IAUTOS Company Limited. My first car: Ford Cortina 1.6L, brown I bought this car for £400 and learnt to drive in it when I was 17. I might not have chosen brown but it was in the family and the only car I could afford. Despite the colour, it still seemed to have a positive effect on my attractiveness to the girls! A chartered engineer by trade, Tim has held numerous Technology and Business roles in organisations such as IBM, BT and ICI/Astra Zeneca prior to joining TMG in 1996 to lead the launch of autotrader.co.uk. With a broad spectrum of hands-on technology experience incorporating virtually all technology disciplines at some point in his career, in this role as CIO he provides the leadership of TMG’s technology capability with a firm focus on the commercial outcome. My first car: Peugeot 205 1.9GTI, graphite grey I got this car when I was 18 years old. It cost me £4,600. I chose it as it was the iconic “hot hatch” of its time. It was a great car – I had a lot of good times in it, from terrorising my local streets to a Scotland to South of France road trip. Joanne joined TMG as HR Director in 2000 just after the formation of the Group. Prior to this she held various HR positions at ExxonMobil and had spent six years at British Airways. After a two year career break, Joanne returned to TMG in January 2009. During her time in the role, Joanne has helped to restructure the business and drive increased employee productivity and engagement. My first car: Ford Fiesta 1.1L I was 21 when I bought my first car, a 1.1L Ford Fiesta and only 3 years old. I remember my Dad having sleepless nights, as I’d only just passed my test and had to set off on my own to my first job after university. The trip from Warrington, where I lived, to work – on an oil refinery in Essex – was both terrifying and exhilarating. That trusty car set me on my way in life and I’ll never forget it! Annual report and financial statements 2012 39 Governance John joined Trader Media Group (TMG) as CEO in 2007. Previously, he was CEO of Australia’s leading specialist classifieds business, Trading Post, where he developed a strategy to grow simultaneously the core print business and online classified verticals. John’s previous roles have included Chief Operating Officer of Sensis Classifieds and General Manager of Online Advertising at Sensis Pty Ltd. John is also Executive Chairman of Trader Corporation (Canada), since 2011. My first car: Datsun 200B, canary yellow I was 17 when I bought it and I paid $2,000AUD – but it always broke down. It was the most unreliable car ever, canary yellow, but it inspired me to make more money so I could buy better cars in the future. I can honestly say it was the first and worst car of my life. Trader Media Group Corporate Governance Compliance The group is committed to principles of good corporate governance and the values of transparency contained in the Walker Report. This statement describes how the principles of corporate governance are applied to the business. Board constitution and procedures During the year, the Board comprised the following members: John King Chief Executive Officer of TMG Zillah Byng-Maddick Chief Financial Officer of TMG Tom Hall Apax Representative Irina Hemmers Apax Representative Andrew Miller GMG15 Representative Darren Singer GMG Representative (appointed 6 May 2011) Ed Williams Non-executive Director The Chief Executive Officer is responsible for the day-to-day operations of the group and the development of strategic plans for consideration by the Board. The group has in place appropriate insurance cover in respect of legal action against its directors and officers. In the year ended 1 April 2012 the Board met 11 times. All Board members were present except as follows: August 2011 – Tom Hall, Andrew Miller and Ed Williams; November 2011 – John King, Andrew Miller and Ed Williams; December 2011 – Ed Williams; January 2012 – Andrew Miller. To enable the Board to discharge its duties, all directors receive appropriate and timely information. Briefing papers are distributed to all directors in advance of Board meetings. The Board has two principal committees: an Audit Committee and a Remuneration Committee, whose terms of reference are approved by the Board. Audit Committee The Audit Committee is chaired by Darren Singer, an accountant with relevant financial experience. Its other member is Tom Hall. The Chief Financial Officer and the external auditors are invitees at all meetings of the Committee which meets at least twice a year. The Audit Committee met twice during this financial year with all members in attendance. In addition to monitoring the integrity of the financial statements and the effectiveness of internal controls (including determining relevant action in respect of any control issues raised by the internal and external auditors) the Committee is also responsible for considering the need for an internal audit function, monitoring the external auditors, approving their terms of engagement and remuneration, and advising the Board on the appointment of the external auditors. 15 Guardian Media Group plc and its subsidiary undertakings (“GMG”) 40 Annual report and financial statements 2012 Remuneration Committee The Remuneration Committee is chaired by Andrew Miller. Its other member is Irina Hemmers. The HR directors from TMG and GMG are invitees of all meetings of the Committee which meets at least twice a year. The Remuneration Committee met twice during this financial year with all members in attendance. The Committee is responsible for monitoring and approving the remuneration of senior executives and board members. Whistle blowing policy The group has a whistle blowing policy which seeks to establish an open environment in which serious concerns about malpractice within the group may be dealt with in a constructive manner with the aim of providing a rapid means under which genuine concerns made in good faith can be raised internally without fear of repercussions to the individual. The policy is designed to comply with the provisions of the Public Interest Disclosure Act 1998. Internal control The directors acknowledge that they are responsible for the group’s system of internal control and for reviewing its effectiveness. The system is designed to manage rather than eliminate the risk of failure to achieve the group’s stated objectives, and can only provide reasonable, and not absolute, assurances against material (including financial) misstatement or loss. The procedures used to review the effectiveness of the system of internal (including financial) control are reviewed by the Board. Key features of the procedures are as follows: • Business risks are managed to minimise probability of occurrence and impact, and the actions taken are reported regularly to the Board. The group maintains a risk register which is used to regularly identify and evaluate risks as well as documenting controls and responses to these risks. • Purchasing is conducted in accordance with published procedures and authority limits. Authority for entering into contracts is controlled by seniority, and must be approved by the Board above a certain level. • Budgets are set annually and reviewed and approved by the Board. Reporting of results includes a comparison to budget. • Management accounts are reviewed by the Board and Executive Committee on a monthly basis. The management accounts contain detailed trading financial information, KPI’s and economic data as well as the group’s cash and debt position. •D uties are segregated, so that one person does not perform processing from beginning to end of financial transactions. Preparation of documentation is separated from authorisation and execution of a transaction. • Investments and capital expenditure above a certain level must be approved by the Board. • Appointment of external advisors must be approved by the Board where fees are above a certain level. • The Audit Committee considers and determines relevant action in respect of any significant control issues raised by the internal or external auditors. Trader Media Group The Board is committed to ensuring that the group’s data and information, and its information technology systems, are as secure as practicable. Security controls and procedures are in place to prevent unauthorised access to the group’s premises. Regular backups of electronic information are taken with copies securely stored. Management has established disaster recovery plans which would be implemented in the event that facilities were unavailable for prolonged periods. The group is committed to attracting and retaining people of high calibre, and a culture of integrity and honesty is promoted by the Board which permeates through every level of the organisation. These procedures are reinforced by reports from internal and external auditors submitted to the Audit Committee. Identification and evaluation of business risk The Board regularly reviews and evaluates significant risk areas in terms of probability of occurrence and likely impact. The Board is responsible for assessing these risks and for implementing control and reporting procedures to ensure the risks are properly managed, again in terms of minimisation of probability of occurrence and impact. The Board receives regular updates on the key risks and the related controls. Governance Going concern The directors, after making enquiries and on the basis of current financial projections and the facilities available, believe that the group has adequate financial resources to continue in operation for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements. Annual report and financial statements 2012 41 Trader Media Group Directors’ report For the year ended 1 April 2012 The directors present their report and the audited financial statements of the group and parent company for the year ended 1 April 2012. Principal activities The principal activity of the group is the classified advertising of motor vehicles and other related products, both online and through magazines. The Operating Review, Financial Review, principal risks and uncertainties, KPIs, future developments, charitable donations and financial risk management objectives are considered in the previous pages of the Annual Report. Trader Media Group Limited is a private limited company registered in the UK. Its registered office is Auto Trader House, Cutbush Park Industrial Estate, Danehill, Lower Earley, Reading, Berkshire, RG6 4UT. The group operates primarily in the UK, with a branch located in the Republic of Ireland and subsidiary companies in the Republic of Ireland and South Africa. Results and dividends The group’s profit for the financial year was £7.5 million (2011: £71.5 million). The future developments of the group are considered within the Operating Review on pages 20 to 23. The group’s profit before taxation included exceptional items for impairments of £18.2 million (2011: £9.6 million), the restructuring of group operations of £4.6 million (2011: £1.5 million) the cancellation of accrued preference share interest of £nil (2011: £68.0 million credit), profit on purchase of debt of £4.5 million (2011: £3.5 million) and debt refinancing fees of £7.5 million (2011: £nil). Ordinary dividends of £100.4 million in respect of the year ended 1 April 2012 (2011: £nil) were paid during the year (note 27). £73.0 million of rolled up interest on the preference shares and £26.6 million of preference shares was also paid to shareholders in the year for total consideration of £36.6 million and subsequently cancelled (2011: £nil). During the year the group repurchased 968 (2011: 1,734) 10p ordinary C shares from leavers for aggregate consideration of £5. This represented 0.1% of the total ordinary issued share capital. Directors The directors who served during the year and up to the date of the signing of the financial statements were, unless otherwise stated, as follows: John King Chief Executive Officer Zillah Byng-Maddick Chief Financial Officer Andrew Miller Non-executive Darren Singer Non-executive Tom HallNon-executive Irina Hemmers Non-executive Ed Williams Non-executive 42 Annual report and financial statements 2012 Andrew Miller and Darren Singer are representatives of Guardian Media Group plc. Tom Hall and Irina Hemmers are representatives of Apax Partners, a private equity firm who manage and advise funds controlling 48.79% of the shares in the group. Ed Williams holds 0.09% of the shares of the group. Management executive committee at 1 April 2012 John King Chief Executive Officer Zillah Byng-Maddick Chief Financial Officer David McMinn Group Sales Director Nathan Coe Group Director Autotrader Craig Stevens Group Director Digital Marketing Tim Jones Chief Information Officer Joanne Walker Group HR Director John O’Connell MD International Tim Peake Group Strategy Director Post balance sheet events On 18 May 2012 the company issued 1,296 ordinary D shares of 10p each for cash consideration at fair value of £0.3 million. Creditor payment policy The group’s policy is to settle terms of payment with all suppliers when agreeing the terms of each transaction, ensure that suppliers are made aware of the terms of payment and abide by the terms of payment. Trade payables of the group at 1 April 2012 were equivalent to 33 (2011: 33) days’ purchases, based on the average daily amount invoiced by suppliers during the year. Key suppliers The group works closely with a number of key suppliers. The majority of the group’s websites, equipment and networks are hosted in data centres managed by Getronics UK Limited and Telecity Group UK Limited. The contracts for these sites run until December 2013 and July 2014 respectively. NWIX Group Limited provide the internet connection for the majority of the group’s hosting environment and resilient connectivity between the data centres. This contract runs until April 2014. Condé Nast and National Magazine Distributors Limited (“COMAG”) manages the flow of all the group’s magazines through the magazine supply chain in the UK and Ireland. In addition to the contract that extends to 2013, TMG and COMAG operate a service level agreement (“SLA”) that addresses in detail each element of the supply agreement. The provision of services under the SLA is formally evaluated each year but joint monthly and quarterly business reviews are also conducted. Following the sale of Apple Web Offset, the group has contracted with a subsidiary of the buyer, Walstead Investments Limited, to provide the magazine print services for the group up to 2014. Trader Media Group Disabled employees Applications for employment by disabled persons are always fully considered, bearing in mind the aptitudes of the applicant concerned. In the event of members of staff becoming disabled every effort is made to ensure that their employment within the group continues and that appropriate training is arranged. It is the policy of the group that the training, career development and promotion of disabled persons should, as far as possible, be identical with that of other employees. Employee consultation The group places considerable value on the involvement of its employees and has continued to keep them informed on matters affecting them as employees and on the various factors affecting the performance of the group. Employee representatives are consulted on a wide range of matters affecting their current and future interest. Information relevant to employees and the wider business is posted on the group intranet. TMG sees the relationship with its employees as key to its success. The group also has a universal employee development scheme, focused on developing the potential of all staff members. Health and safety The group’s policy of ensuring safe and pleasant working conditions for all employees as far as possible within the constraints imposed by the working environment, has continued to operate. A full time health and safety team is employed by the group and is managed through a sub-committee of the Executive team which meets three times a year and is chaired by the Chief Executive Officer. This team was established ten years ago and has created a solid health and safety framework and culture within TMG. Land and buildings The market value of land and buildings is estimated by the directors to be approximately £1.3 million greater than its balance sheet value of £3.6 million (2011: £1.9 million greater than balance sheet value of £5.4 million). Governance Directors indemnities The group maintains an appropriate level of directors’ and officers’ insurance in respect of legal action against the directors. This policy does not provide cover in the event that a director or officer has acted fraudulently. Independent auditors The auditors, PricewaterhouseCoopers LLP, have indicated their willingness to continue in office and have confirmed their independence. The appointment of auditors is considered annually by the Audit Committee. Although PricewaterhouseCoopers LLP have been the group’s auditors for a number of years, the Committee is satisfied with their effectiveness and independence. The Committee did not consider it necessary this year to conduct a tender process for the appointment of auditors. Annual report and financial statements 2012 43 Trader Media Group Statement of directors’ responsibilities For the year ended 1 April 2012 The directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations. Statement of disclosure of information to auditors In the case of each director in office at the date the directors’ report is approved, the directors confirm that: Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have prepared the group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union, and the parent company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the group and the company and of the profit or loss of the group for that period. In preparing these financial statements, the directors are required to: a) so far as the director is aware, there is no relevant audit information of which the company’s auditors are unaware; and b) he/she has taken all the steps that he/she ought to have taken as a director in order to make himself/herself aware of any relevant audit information and to establish that the company’s auditors are aware of that information. • select suitable accounting policies and then apply them consistently; • make judgements and accounting estimates that are reasonable and prudent; • state whether IFRSs as adopted by the European Union and applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the group and parent company financial statements respectively; • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group and company will continue in business. The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and the group and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and the group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The directors are responsible for the maintenance and integrity of the group’s websites. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. 44 Annual report and financial statements 2012 On behalf of the Board, Z Byng-Maddick Director 15 June 2012 Registered address: Auto Trader House Cutbush Park Industrial Estate Danehill Lower Earley Reading Berkshire RG6 4UT Trader Media Group Independent auditors’ report to the members of Trader Media Group Limited We have audited the group financial statements of Trader Media Group Limited for the year ended 1 April 2012 which comprise the consolidated income statement, the consolidated statement of comprehensive income, the consolidated balance sheet, the consolidated statement of changes in equity, the consolidated cash flow statement and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. Opinion on financial statements In our opinion the group financial statements: Respective responsibilities of directors and auditors As explained more fully in the statement of directors’ responsibilities set out on page 44 the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors. Opinion on other matter prescribed by the Companies Act 2006 In our opinion the information given in the Directors’ report for the financial year for which the group financial statements are prepared is consistent with the group financial statements. This report, including the opinions, has been prepared for and only for the company’s members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. • c ertain disclosures of directors’ remuneration specified by law are not made; or •w e have not received all the information and explanations we require for our audit. Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: Other matter We have reported separately on the parent company financial statements of Trader Media Group Limited for the year ended 1 April 2012. Alan Kinnear (Senior Statutory Auditor) For and on behalf of PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors Reading 15 June 2012 Governance Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the group’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Annual report to identify material inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. • give a true and fair view of the state of the group’s affairs as at 1 April 2012 and of its profit and cash flows for the year then ended; •h ave been properly prepared in accordance with IFRSs as adopted by the European Union; and •h ave been prepared in accordance with the requirements of the Companies Act 2006. Annual report and financial statements 2012 45 Trader Media Group Consolidated income statement For the year ended 1 April 2012 Note Continuing operations: Revenue Cost of sales Gross profit Administrative expenses Operating profit/(loss) Finance income Finance costs Finance costs – net Profit before taxation Income tax expense Profit for the year from continuing operations Discontinued operations: Profit/(loss) for the year from discontinued operations 3 3, 4 8 8 Before exceptional items 2012 £m Exceptional items 2012 £m Total 2011 £m – – – (22.8) (22.8) 257.2 (30.2) 227.0 (121.1) 105.9 254.4 (39.5) 214.9 (96.3) 118.6 – – – (11.1) (11.1) 254.4 (39.5) 214.9 (107.4) 107.5 0.5 (81.7) (81.2) 4.5 (7.5) (3.0) 5.0 (89.2) (84.2) 0.6 (86.0) (85.4) 71.5 – 71.5 72.1 (86.0) (13.9) 0.3 21.7 (14.7) 93.6 (12.0) 7.0 81.6 0.2 Profit for the year attributable to equity shareholders of the company The notes on pages 51 to 85 are an integral part of these consolidated financial statements. 46 Annual report and financial statements 2012 Exceptional items 2011 £m 257.2 (30.2) 227.0 (98.3) 128.7 9 7 Total 2012 £m Before exceptional items 2011 £m 0.5 7.5 1.0 (11.1) (10.1) 71.5 Trader Media Group Consolidated statement of comprehensive income For the year ended 1 April 2012 Note Profit for the year Other comprehensive income: Actuarial loss on post employment benefit obligations, net of tax Cash flow hedges, net of tax IFRS 2 – share based payments credit/(charge) Currency translation differences Other comprehensive (loss)/income for the year, net of tax Total comprehensive income for the year attributable to equity shareholders of the company 9, 23 9 29 9, 26 2012 £m 2011 £m 7.5 71.5 (0.7) 0.6 0.1 (1.6) (1.6) (0.5) 8.3 (1.1) 0.1 6.8 5.9 78.3 Items in the statement above are disclosed net of tax. The taxation relating to each component of other comprehensive income is disclosed in note 9. Financial statements The notes on pages 51 to 85 are an integral part of these consolidated financial statements. Annual report and financial statements 2012 47 Trader Media Group Consolidated balance sheet As at 1 April 2012 2012 £m 2011 £m 366.8 5.5 3.2 4.9 1.4 381.8 387.1 7.7 1.9 4.9 2.2 403.8 – 35.8 48.7 84.5 1.8 86.3 0.3 36.9 73.0 110.2 1.8 112.0 (74.4) (6.3) – (1.6) (82.3) 4.0 (70.8) (0.4) (2.6) (1.9) (75.7) 36.3 19 20 14 22 23 21 (1,157.3) (0.9) (2.4) (1.0) (0.8) (3.9) (1,166.3) (780.5) (1,011.3) (1.8) – (1.8) – (1.7) (1,016.6) (576.5) 24 24 24 25 26 0.1 177.3 1.2 (1,054.0) 94.9 (780.5) 0.1 363.6 1.2 (945.3) 3.9 (576.5) Note Assets: Non-current assets Intangible assets Property, plant and equipment Investments Deferred taxation assets Financial assets at fair value through profit or loss 10 11 12 22 15 Current assets Inventories Trade and other receivables Cash and cash equivalents 16 18 Assets of disposal group classified as held for sale 17 Liabilities: Current liabilities Trade and other payables Current taxation liabilities Derivative financial instruments Provisions for other liabilities and charges 20 14 21 Net current assets Non-current liabilities Borrowings Trade and other payables Derivative financial instruments Deferred taxation liabilities Retirement benefit obligations Provisions for other liabilities and charges Net liabilities Equity attributable to equity holders of the company Ordinary shares Preference shares Share premium account Retained deficit Other reserves Total equity deficit The notes on pages 51 to 85 are an integral part of these consolidated financial statements. The financial statements on pages 46 to 85 were authorised for issue by the Board of Directors on 15 June 2012 and were signed on its behalf by: Z Byng-Maddick Director Registered number: 4768833 48 Annual report and financial statements 2012 Trader Media Group Consolidated statement of changes in equity For the year ended 1 April 2012 Share capital £m Share premium £m 0.1 0.9 – – 71.5 – 71.5 – – – – – – – – – – (0.5) 8.3 (1.1) – 6.7 – – – 0.1 0.1 (0.5) 8.3 (1.1) 0.1 6.8 – – 78.2 0.1 78.3 – 363.6 363.7 0.3 – 1.2 – – 3.9 0.3 363.6 (576.5) – – 7.5 – 7.5 – – – – – – – – – – (0.7) 0.6 0.1 – – – – – (1.6) (1.6) (0.7) 0.6 0.1 (1.6) (1.6) – – 7.5 (1.6) 5.9 24 24 24 430.0 (430.0) (10.7) – – – – – 10.8 24, 25, 26 24, 25, 26 25, 27 (99.6) (76.0) – 177.4 – – – 1.2 Note Balance at 28 March 2010 Comprehensive income: Profit for the year Other comprehensive income: Actuarial loss on post employment benefit obligations, net of tax Cash flow hedges, net of tax IFRS 2 – share based payments charge Currency translation differences Total other comprehensive income 9 9 9, 29 9, 26 Total comprehensive income Transactions with owners Issue of share capital Reclassification of preference shares Balance at 3 April 2011 24 24 Comprehensive income: Profit for the year Other comprehensive income: Actuarial loss on post employment benefit obligations, net of tax Cash flow hedges, net of tax IFRS 2 – share based payments credit Currency translation differences Total other comprehensive loss 9 9 9, 29 9, 26 Total comprehensive income/(loss) Transactions with owners Bonus issue of deferred shares Reduction in value of deferred shares Roll up and waiver of preference share dividend Payment of principal and dividend on preference shares Reserves transfer Dividends paid to equity holders of the company Balance at 1 April 2012 Retained deficit £m (1,023.5) – – (945.3) (36.6) 10.0 (100.4) (1,054.0) Other reserves £m 3.8 Total £m (1,018.7) – – – 430.0 (430.0) 0.1 26.6 66.0 – 94.9 (109.6) – (100.4) (780.5) Financial statements The notes on pages 51 to 85 are an integral part of these consolidated financial statements. Annual report and financial statements 2012 49 Trader Media Group Consolidated cash flow statement For the year ended 1 April 2012 Note Cash flows from operating activities Cash generated from operations Tax paid Net cash generated from operating activities 28 Cash flows from investing activities Investment in shares of overseas company Proceeds from/(payment on) disposal of subsidiaries and business units, net of cash disposed Purchases of property, plant and equipment Purchases of intangible assets Proceeds from sale of property, plant and equipment Receipt of deferred consideration Bank deposit and other interest received Net cash used in investing activities Cash flows from financing activities Proceeds from issue of ordinary shares Repayment of syndicated bank debt Drawdown of syndicated bank debt Purchase of own syndicated bank debt Payment of refinancing fees Investment in other financial assets Payment of interest on syndicated bank debt and hedging instruments Ordinary dividends paid to company’s shareholders Preference dividends and capital paid to company’s shareholders Redemption of Shareholder loan A Issue of Shareholder loan C Payment of other interest Net cash used in financing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at beginning of year Exchange losses on cash Cash and cash equivalents at end of year The notes on pages 51 to 85 are an integral part of these consolidated financial statements. 50 Annual report and financial statements 2012 18 2012 £m 2011 £m 138.9 (9.6) 129.3 141.3 (7.3) 134.0 (1.3) (1.9) 1.1 (2.5) (12.2) 1.7 0.3 0.5 (12.4) (2.4) (1.2) (11.0) 0.6 – 0.6 (15.3) – (584.2) 734.2 (43.9) (7.5) – (29.0) (100.4) (109.6) (0.5) 0.5 (0.1) (140.5) 0.3 (13.7) – (77.6) – 21.4 (29.7) – – – – – (99.3) (23.6) 73.0 (0.7) 48.7 19.4 53.7 (0.1) 73.0 Trader Media Group Notes to the consolidated financial statements For the year ended 1 April 2012 1. Accounting policies Basis of preparation The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (“IFRS”), IFRIC Interpretations and the Companies Act 2006 applicable to companies reporting under IFRS. The consolidated financial statements have been prepared on the going concern basis and under the historical cost convention, as modified by the revaluation of financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss. Critical accounting estimates and judgements The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates and assumptions. It also requires management to exercise its judgement in the process of applying the group’s accounting policies. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying value of assets within the next financial year relate to goodwill. The group tests annually whether goodwill has suffered any impairment in accordance with the accounting policy stated on page 54. The recoverable amounts of cash generating units have been determined based on value in use calculations. These calculations require the use of estimates (note 10). New accounting standards and IFRIC interpretations (a) New and amended standards adopted by the group There are no IFRSs or IFRIC interpretations that are effective for the first time for the financial year beginning on 4 April 2011 that would be expected to have a material impact on the group. (b) New standards, amendments and interpretations issued but not effective for the financial year beginning 4 April 2011 and not early adopted • IAS 19 (amendment) Employee benefits • IFRS 9 Financial instruments • IFRS 10 Consolidated financial statements • IFRS 12 Disclosures of interests in other entities • IFRS 13 Fair value measurement There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the group. Basis of consolidation The group financial statements consolidate the financial statements of Trader Media Group Limited (the company) and all of its subsidiary undertakings for the year ended 1 April 2012. The company is domiciled and incorporated in the United Kingdom. The consolidated financial statements are based on financial statements which are coterminous with those of the parent company and accounting policies have been applied consistently across the group. Financial statements Subsidiaries are all entities over which the group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are de-consolidated from the date that control ceases. Annual report and financial statements 2012 51 Trader Media Group Notes to the consolidated financial statements CONTINUED For the year ended 1 April 2012 1. Accounting policies continued Basis of consolidation continued The purchase method of accounting is used to account for the acquisition of subsidiaries by the group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange. Costs directly attributable to the acquisition are expensed. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the group’s share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised immediately in the income statement. Intercompany transactions and balances between group companies are eliminated on consolidation. Associates are all entities over which the group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Where significant influence is not demonstrated but the shareholding is between 20% and 50% the group would account for its interest as an investment. Investments in associates are accounted for using the equity method of accounting and are initially recognised at cost. The group’s investment in associates includes goodwill identified on acquisition, net of any accumulated impairment loss. The group’s share of post acquisition profits or losses is recognised in the income statement, and its share of post acquisition movements in reserves is recognised in reserves. The cumulative post acquisition movements are adjusted against the carrying amount of the investment. When the group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate. All other investments are initially recognised at cost and the carrying value is reviewed for impairment. Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Executive Committee that makes strategic decisions. Revenue recognition Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the group’s activities. Revenue is stated net of discounts, returns and value added tax and after eliminating sales within the group. The group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and when specific criteria have been met for each of the group’s activities as described below. The group bases its estimates on historical results, taking into consideration the type of customer, the type of transactions and the specifics of each arrangement. Revenue comprises: • fees for advertising on the group’s websites and web related activities, which are recognised as the service is provided; • fees for advertising in the group’s publishing titles and the sale of the publication, which are recognised on publication date; • amounts invoiced for print services provided which are recognised on dispatch of the goods to the customer; • fees for the supply of computer software, which are recognised on the date of supply; and • maintenance contracts, subscription and licence fees, which are recognised on a straight line basis over the period to which they relate. Barter transactions are recognised when there is an exchange of dissimilar goods or services, and the transaction is measured at the fair value of the goods or services received in accordance with the recognition policies above. Dividend distribution Dividend distribution to the company’s shareholders is recognised as a liability in the group’s financial statements in the period in which the dividends are approved by the company’s shareholders. 52 Annual report and financial statements 2012 Trader Media Group 1. Accounting policies continued Employee benefits The group operates several pension schemes and all except one are defined contribution schemes. Within the UK all pension schemes set up prior to 2001 have been closed to new members and only one defined contribution scheme is now open to new employees. (a) Defined contribution scheme The assets of the defined contribution scheme are held separately from those of the group in independently administered funds. The costs in respect of this scheme are charged to the income statement as incurred. (b) Defined benefit scheme The group operates one closed defined benefit pension scheme. The liability recognised in the balance sheet in respect of the defined benefit scheme is the present value of the defined benefit obligation at the balance sheet date less the fair value of the scheme’s assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating those of the related pension liability. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise. (c) Share based payments Equity settled awards are valued at grant date, and the difference between the grant date fair value and the consideration paid by the employee is charged as an expense in the income statement spread over the vesting period. The credit side of the entry is recorded in equity. Cash settled awards are revalued at each reporting date with the fair value of the award charged to the profit and loss account over the vesting period and the credit side of the entry recognised as a liability. Movements in provisions for bad leavers are taken through reserves. Exceptional items Significant non-recurring items of income and expense are disclosed in the income statement as “exceptional items”. Examples of items that may give rise to disclosure as exceptional items include costs of restructuring and reorganisation of the business, gains on the early extinguishment of borrowings, writing down inventories by material amounts to net realisable value, or impairments of intangible assets, property, plant and equipment, as well as the reversal of such write downs or impairments, material disposals of property, plant and equipment and litigation settlements. A full analysis of exceptional items is provided in note 4. Foreign currency translation (a) Functional and presentation currency Items included in the financial statements of each of the group’s entities are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The consolidated financial statements are presented in sterling (£) which is the group’s functional and presentation currency. (b) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement within administrative expenses. • assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet; • income and expenses for each income statement are translated at average exchange rates; and • all resulting exchange differences are recognised as a separate component of equity. On the disposal of a foreign operation, the cumulative exchange differences that were recorded in equity are recognised in the income statement as part of the gain or loss on sale. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate. Annual report and financial statements 2012 53 Financial statements (c) Group companies The results and financial position of all group entities (none of which has the currency of a hyper-inflationary economy) that have a functional currency other than sterling are translated into sterling as follows: Trader Media Group Notes to the consolidated financial statements CONTINUED For the year ended 1 April 2012 1. Accounting policies continued Intangible assets (a) Goodwill Goodwill represents the excess cost of an acquisition over the fair value of the group’s share of the net identifiable assets of the acquired subsidiary at the date of acquisition. In respect of acquisitions prior to 29 March 2004 goodwill is included on the basis of its deemed cost, which represents the amount recorded under previous GAAP. Goodwill is tested annually for impairment and is carried at cost less accumulated impairment losses. Impairment losses are charged to the income statement and are not reversed. The gain or loss on the disposal of an entity includes the carrying amount of goodwill relating to the entity sold. Goodwill is allocated to cash generating units for the purpose of impairment testing. The allocation is made to those cash generating units that are expected to benefit from the business combination in which the goodwill arose identified according to operating segment. (b) Trademarks, trade names, technology and customer relationships Separately acquired trademarks, trade names and customer relationships are shown at historical cost. They have a finite useful life and are carried at cost less accumulated amortisation. Amortisation is calculated using the straight line method to allocate the cost over their estimated useful lives of between 1 and 15 years. (c) Software Acquired computer software is capitalised at cost, including any costs to bring it into use, and is carried at cost less accumulated amortisation. Amortisation is calculated using the straight line method to allocate the cost over the estimated useful life of 3 to 5 years. (d) Software and website development costs Development costs that are directly attributable to the design and testing of identifiable and unique software products and websites controlled by the group are recognised as intangible assets when the following criteria are met: • it is technically feasible to complete the software product or website so that it will be available for use; • management intends to complete the software product or website and use or sell it; • there is an ability to use or sell the software product or website; • it can be demonstrated how the software product or website will generate probable future economic benefits; • adequate technical, financial and other resources to complete the development and to use or sell the software product or website are available; and • the expenditure attributable to the software product or website during its development can be reliably measured. Directly attributable costs that are capitalised as part of the software product or website include employee and contractor costs. Other development expenditures that do not meet these criteria are recognised as an expense as incurred. Development costs for software and websites are carried at cost less accumulated amortisation and are amortised over their useful lives not exceeding five years at the point in which they came into use. Property, plant and equipment All property, plant and equipment is stated at historical cost less accumulated depreciation and impairment losses. Historical cost comprises the purchase price of the asset and expenditure directly attributable to the acquisition of the item. Freehold land is not depreciated. Depreciation on other assets is calculated using the straight line method to allocate their cost less their estimated residual values over the estimated useful lives as follows: Land, buildings and leasehold improvements: Freehold buildings 50 years Leasehold land and buildings life of lease Leasehold improvements life of lease Motor vehicles Plant and equipment 5 years 3 – 10 years 54 Annual report and financial statements 2012 Trader Media Group 1. Accounting policies continued Property, plant and equipment continued Assets in the course of construction are recorded within property, plant and equipment and are transferred to the appropriate classification when complete and depreciated from the date they are brought into use. The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. The carrying value of assets is reviewed for impairment if events or changes in circumstances suggest that the carrying value may not be recoverable. Assets will be written down to their recoverable amount, if lower than the carrying value, and the impairment is charged to the income statement. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in the income statement within administrative expenses. Impairment of non-financial assets Assets that have an indefinite useful life, for example goodwill, are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation and depreciation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash flows, the recoverable amount is determined for the cash generating unit to which the asset belongs. Impairment losses recognised in respect of cash generating units are allocated first to reduce the carrying amount of any goodwill allocated to the cash generating unit (or group of units) and then to reduce the carrying amount of other assets in the unit (or group of units) on a pro rata basis. In respect of assets other than goodwill an impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. Assets and liabilities (or disposal groups) held for sale Assets and liabilities (or disposal groups) are classified as held for sale when their carrying amount is to be recovered principally through a sale transaction and a sale is considered highly probable. On classification as held for sale, they are stated at the lower of carrying amount and fair value less costs to sell. Impairment losses are included in the income statement, as are any gains and losses on subsequent re-measurement. Financial assets The group classifies its financial assets in the categories of loans and receivables and at fair value through profit or loss. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition. Financial assets at fair value through the profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term. Derivatives are also categorised as held for trading unless they are designated as hedges. Assets in this category are classified as current assets. Financial assets carried at fair value through the profit or loss are initially recognised at fair value, and transaction costs are expensed in the income statement. They are subsequently re-measured to fair value and gains or losses arising from changes in the fair value are recognised in the income statement in the period in which they arise. Annual report and financial statements 2012 55 Financial statements Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the balance sheet date which are classified as non-current assets. The group’s loans and receivables comprise trade and other receivables and cash and cash equivalents in the balance sheet. Loans and receivables are initially recognised at fair value and subsequently carried at amortised cost using the effective interest method. Trader Media Group Notes to the consolidated financial statements CONTINUED For the year ended 1 April 2012 1. Accounting policies continued Financial assets continued Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously. The group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset is impaired only if there is objective evidence of impairment as a result of one of more events that occurred after the initial recognition of the asset and that this event has an impact on the estimated future cash flows of the financial asset that can be reliably estimated. The amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in the income statement. If, in a subsequent period, the amount of the impairment loss decreased and the decrease can be related objectively to an event occurring after the impairment was recognised, the reversal of the previously recognised impairment loss is credited to the income statement. Derivative financial instruments and hedging The group uses derivative financial instruments to hedge its exposure to foreign exchange and interest rate risks arising from operational, financing and investment activities. The group does not use derivative financial instruments for speculative purposes. Derivatives are initially recognised at fair value on the contract date and are subsequently re-measured at their fair value. Changes in the fair value of instruments that do not qualify for hedge accounting are recognised in the income statement as they arise. The group documents at the inception of the transactions the relationship between the hedging instrument and the hedged item. The group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivative used in the hedging transactions is highly effective in offsetting changes in the cash flows of the hedged item. The fair value of the derivative instrument used for hedging purposes is disclosed in note 14. The full fair value of a hedging derivative is classified as a non-current asset or liability when the remaining maturity of the hedged item is more than 12 months, and a current asset or liability when the remaining maturity of the hedged item is less than 12 months. The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recognised in other comprehensive income. The gain or loss relating to the ineffective portion is recognised immediately in the income statement within finance costs. Amounts accumulated in equity are recycled in the income statement in the periods when the hedged item affects the profit or loss. Inventories Inventories are stated at the lower of cost and net realisable value. Cost is determined using the first-in, first-out (FIFO) method. For work in progress and finished goods manufactured by the group, cost is taken as production cost which includes an appropriate portion of attributable overheads based on normal levels of activity. Trade receivables Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy and the instigation of legal proceedings against the debtor are considered to be indicators that a trade receivable is impaired. Cash and cash equivalents Cash and cash equivalents include cash in hand, short term deposits held at call with banks and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the balance sheet. Trade payables Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. 56 Annual report and financial statements 2012 Trader Media Group 1. Accounting policies continued Borrowings Borrowings are recognised initially at fair value, net of transaction costs incurred and are subsequently stated at amortised cost with any difference between the proceeds (net of transaction costs) and the redemption value being recognised in the income statement over the period of the borrowings using the effective interest method. Finance and issue costs associated with the borrowings are charged to the income statement using the effective interest rate method from the date of issue over the estimated life of the borrowings to which the costs relate. The buy back of bank borrowings represents the discharge of the obligation to repay the debt. The difference between the carrying amount of the financial liability extinguished and the consideration paid is recognised as an exceptional gain in the income statement, as it is a significant non-recurring item. Preference shares are treated as borrowings where in substance they have the features of debt instruments, otherwise they are classified as equity. The related dividends are recognised as an interest expense for debt instruments and as dividends for equity instruments. Borrowings are classified as current liabilities unless the group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date. Provisions A provision is recognised when a present legal or constructive obligation exists at the balance sheet date as a result of a past event; it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate of that obligation can be made. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. If the effect is material provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and where appropriate the risks specific to the obligation. Contingent liabilities are not recognised but are disclosed unless an outflow of resources is remote. Contingent assets are not recognised but are disclosed where an inflow of economic benefits is probable. Leases Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight line basis over the period of the lease. Taxation The tax expense for the period comprises current and deferred taxation. Tax is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case the tax is also recognised in other comprehensive income or directly in equity, respectively. Current taxation is provided at amounts expected to be paid (or recovered) calculated using the rates of tax and laws that have been enacted or substantively enacted at the balance sheet date in the countries where the group operates and generates taxable income. Deferred taxation assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred taxation is provided on temporary differences arising on investments in subsidiaries except where the timing of the reversal of the temporary difference is controlled by the group and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred taxation assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred taxation assets and liabilities relate to taxes levied by the same taxation authority on either the taxable entity or different taxable entities where there is an intention to settle the balance on a net basis. Annual report and financial statements 2012 57 Financial statements Deferred taxation is provided in full, using the liability method, on temporary differences arising between the tax base of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred taxation is determined using tax rates and laws that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled. Trader Media Group Notes to the consolidated financial statements CONTINUED For the year ended 1 April 2012 1. Accounting policies continued Share capital Ordinary shares are classified as equity. Preference shares are classified as liabilities where in substance they have features of debt instruments, otherwise they are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction from the proceeds. Where the company purchases its own equity share capital, the consideration paid is deducted from equity attributable to the company’s equity holders until the shares are cancelled or reissued. Where such shares are subsequently reissued, any consideration received is included in equity attributable to the company’s equity holders. 2. Financial risk management (a) Financial risk factors In the course of its business the group is exposed to market risk (including foreign exchange risk and interest rate risk), credit risk, liquidity risk, price risk and technology risk. The group’s overall risk management strategy is to minimise potential adverse effects on the financial performance and net assets of the group. These policies are set and reviewed by senior finance management and all significant financing transactions are authorised by the board of directors. Market risk The group operates primarily in the UK automotive market place which has experienced a difficult trading environment over most of the last few years. Consumer demand for vehicles and new car production have been low leading to dealers cutting back on volumes of stock, thereby impacting on advertising spend. The group also holds a similar market position in Ireland and South Africa, whose markets have also contracted and where the economic factors may lead to further decline. The group’s share of total advertising spend in the automotive market is under constant threat from new and incumbent competitors, especially as the business is predominately online where barriers to entry are lowest. These risks are mitigated by continual monitoring of overall market conditions and investment in products and marketing to ensure the group not only delivers the best response to advertisers, but better value for money than its competitors. Even in declining markets, this allows the group to maximise its return and maintain strong market share. All group products have been impacted by the shift to the online delivery channel and the group is therefore exposed to the rapid pace of change in this area. To mitigate this, the group has allocated extra investment and people to this channel and continues to monitor its own and competitor performance closely. Consumer protection is also crucial and the group continues to play a leading role in this area. i) Foreign exchange risk The group operates in overseas regions being Ireland and South Africa. Foreign currency denominated net assets of overseas operations are not hedged as they represent a relatively small proportion of the group’s net assets. The group operates a dividend policy across these regions ensuring any surplus cash is remitted to the UK thereby minimising the impact of exchange volatility. Forward currency contracts are entered into when appropriate to eliminate exposures on this dividend income. At 1 April 2012, if the Pound had weakened/strengthened by 20% against the Euro with all other variables held constant, post-tax profit/(loss) for the year would have been £0.1 million higher/£0.1 million lower (2011: £0.1 million higher/£0.1 million lower). There is no impact to other elements of equity as a result of changes to the exchange rate with the Euro. There is no significant exposure to foreign exchange risk for the group on amounts being held in South African Rand. 58 Annual report and financial statements 2012 Trader Media Group 2. Financial risk management continued ii) Interest rate risk The group has interest bearing assets, primarily cash, which are at risk of fluctuations in interest rates. Cash levels and market interest rates available are monitored by the group treasury function to ensure risks are minimised. The group’s interest rate risk also arises from long term borrowings with the syndicated bank loan and shareholder loans subject to floating rates of interest linked to LIBOR. The group manages its cash flow interest rate risk on the bank borrowings by using interest rate swaps and a cap agreement to convert a proportion of the debt from floating to fixed rates (note 14). Under the interest rate swaps the group agrees with the other party to exchange on a monthly basis the difference between the fixed contract rate and the floating rate interest amounts calculated by reference to the agreed notional amounts. On the cap agreement the group received the difference between the cap rate and the current floating rate should the latter be higher in the month in question, again calculated with reference to agreed notional amounts. When the floating rate is lower than the cap rate, no cash flows arise under this agreement. At 1 April 2012, if the interest rates affecting the group had varied as shown below with all other variables held constant, post-tax profit for the year would have been higher by £1.9 million or lower by £27.6 million (2011: £3.6 million higher/£18.4 million lower). Significant fluctuations in global interest rates have impacted the interest accruing on the syndicated bank loans and shareholder loans (note 19). Interest rate fluctuations on loans are offset by fluctuations on interest on cash balances (note 18) held largely in the UK at both balance sheet dates. The cash impact of these fluctuations would have been £1.4 million higher/£0.1 million lower (2011: £1.8 million higher/£0.5 million lower). Other components of equity would have been £0.0 million higher/£0.1 million lower (2011: £0.1 million higher/£0.1 million lower) as a result of the increase/decrease in the fair value of the interest rate swap (note 14). Interest rate Potential variance in interest rate 2012 (basis points) UK LIBOR Euro LIBOR South African Central Bank rate + 300/- 20 + 80/- 80 + 170/- 170 Potential variance in interest rate 2011 (basis points) + 270/- 50 + 60/- 60 + 170/- 170 Credit risk Credit risk arises from deposits with banks and financial institutions, as well as credit exposure to customers. The group minimises its risk by dealing with only a limited range of financial institutions with secure credit ratings (note 18). With the slowdown in the automotive market place, dealer margins have been placed under pressure and the risk to the group of non-payment of invoices increases. The bad debt risk also rises with customers who provide financial services, for example vehicle loans, and are unable to obtain funding for their products. Policies and procedures exist to ensure that customers have an appropriate credit history and a significant number of balances are prepaid or collected via direct debit. Overall the group considers that it is not exposed to a significant amount of either customer credit or bad debt risk due to the diversified and fragmented nature of the customer base. A single customer services team is in place in the UK to give the group focus on debt collection. The cost of bad debts remain at a low 1.1% of revenue (2011: 0.7%). The group does not consider its exposure to credit risk as high beyond the cost of bad debts. Annual report and financial statements 2012 59 Financial statements A reduction in the amount of credit provided to those purchasing vehicles has reduced activity in the market and over the longer term will continue to adversely impact dealer profitability. This combined with the current economic environment is expected to impact all areas of the business. Trader Media Group Notes to the consolidated financial statements CONTINUED For the year ended 1 April 2012 2. Financial risk management continued Liquidity risk Cash flow forecasting is performed centrally by group treasury. Rolling forecasts of the group’s liquidity requirements are monitored to ensure it has sufficient cash to meet operational needs. Such forecasting takes into consideration the group’s debt financing plans and minimising the need to carry significant external net debt over the medium term. Surplus cash held by operating entities over and above the balance required for working capital management is invested centrally in interest bearing current accounts and money market deposits with appropriate maturities or sufficient liquidity as required by the above mentioned forecasts. At the balance sheet date the group held money market deposits of £32.0 million (2011: £46.9 million) that are expected to generate cash inflows for managing liquidity risk. The table below analyses the group’s financial liabilities and undrawn commitments into relevant maturity groupings based on the remaining period at the balance sheet date to contractual maturity date. Derivative financial instruments are included in the analysis if their contractual maturities are essential for an understanding of the timing of the cash flows. The amounts disclosed in the table are the contractual undiscounted cash flows. At 1 April 2012 Borrowings Derivative financial instruments Trade payables Undrawn revolving credit facility At 3 April 2011 Borrowings Derivative financial instruments Trade payables Undrawn revolving credit facility Less than Between Between 1 year 1 and 2 years 2 and 5 years £m £m £m – 1.3 65.5 35.0 – 0.9 0.9 – 721.7 0.2 – – Over 5 years £m 435.6 – – – Less than 1 year £m Between 1 and 2 years £m Between 2 and 5 years £m Over 5 years £m – 2.6 59.5 35.0 – – 0.9 – 584.2 – 0.9 – 427.1 – – – Of the £721.7 million disclosed in the 1 April 2012 borrowings payable between 2 and 5 years, the group has repurchased £1.9 million of its own debt in the first quarter of the next financial year. Derivative financial instruments comprise the interest rate swap used by the group to manage the interest rate profile. Price risk The group is exposed to commodity risk as a result of its operations. However given the size and nature of the group’s operations, the cost of managing exposure to commodity risk exceeds any potential benefits. The directors will revisit the appropriateness of this policy should the group’s operations change in the future. The group has no exposure to equity securities as it holds no significant listed or other equity investments. An internal procurement team continually reviews all significant contracts and renegotiates where applicable. Technology risk The group is exposed to technological risks to its websites which could manifest themselves in a variety of ways such as: • Malicious intrusion for theft of data; • Virus infection to cause disruption; • Bogus advertisers using the site for criminal activities; and • Attempts to harvest customer credit card data. Through effective use of technology solutions and strict adherence to industry standards the group deploys tools and processes that automatically intercept, identify and effectively mitigate the vast majority of the threats above. In order to provide the group with additional assurance a small team of security experts are employed who are continually monitoring these activities outside the group to ensure new known threats are mitigated before they attempt to approach our infrastructure. In addition the group has established external relationships with acknowledged experts in this field to ensure where there is improved best practice we are ready to adopt it. 60 Annual report and financial statements 2012 Trader Media Group 2. Financial risk management continued (b) Capital risk management The directors consider the group’s capital to include its share capital and long term debt. The group’s objectives when managing capital are to safeguard its ability to continue as a going concern. The risk that the leveraged nature of the group affects the future development and going concern has been mitigated through the structure of its financing. Neither the cumulative irredeemable £1 preference shares nor the shareholder loans require performance conditions to be met. Likewise the terms of the £985 million Senior Facilities Agreement (“SFA”) are such that the borrower group is not required to adhere to performance related leverage or interest cover ratios or to restrict capital expenditure. Whilst repayments can be made without penalty under the shareholder loan agreements and the SFA, there is no requirement to settle all or part of these debt instruments earlier than their termination dates in 2016 for the shareholder loan and 2015 and 2017 under the SFA. Restrictions do exist to limit the level of additional indebtedness incurred, the extent of dividends payable and there is a requirement to repay a proportion of any excess cash flow but these are not expected to materially impact the planned growth of the group. This structure, when taken in conjunction with the projected cash flows and undrawn revolving credit facility, is considered sufficiently flexible to ensure that the group can continue to service its obligations as they fall due even if the group suffered a significant reduction in trading performance. Over the last few years the group has utilised some of its excess cash to buy back its syndicated debt at below par to help effectively manage its capital risk. (c) Fair value estimation The group has applied the amendment to IFRS 7 for financial instruments that are measured in the balance sheet at fair value. This requires disclosure of fair value measurements by level of the following fair value measurement hierarchy: • Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1). • Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2). • Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3). The following table presents the group’s assets and liabilities that are measured at fair value: Level 2 £m Total £m Assets Financial assets at fair value through profit and loss 1.4 1.4 Liabilities Derivative financial instruments (used for hedging) (2.4) (2.4) As at 1 April 2012 Level 2 £m Total £m Assets Financial assets at fair value through profit and loss 2.2 2.2 Liabilities Derivative financial instruments (used for hedging) (2.6) (2.6) As at 3 April 2011 • The fair values of the interest rate swap and cap agreements (derivative financial instruments) are calculated at the present value of the estimated future cash flows. • A specific contractual rate is used to determine the fair value of the financial asset at fair value through profit or loss. Annual report and financial statements 2012 61 Financial statements Specific valuation techniques used to value financial instruments include: Trader Media Group Notes to the consolidated financial statements CONTINUED For the year ended 1 April 2012 3. Segmental information Management has determined the operating segments based on the reports reviewed by its Chief Operating Decision Maker (the Executive Committee) that are used to make strategic decisions. Following internal restructuring the group has changed its segmental structure with the major change to prior year being a move of the printed magazine titles in Ireland from International to Magazines. The segments have also been renamed as detailed below: • Digital UK (previously Trader Digital) – classified automotive advertising online for cars and other vehicles, principally through the autotrader.co.uk website, Auto Trader Mobile and other digital services provided to car and non-car automotive dealers and manufacturers. • Magazines (previously Trader Publishing) – classified automotive advertising principally in magazine titles in Great Britain and Ireland as follows: regional Auto Trader and AdTrader publications and the national titles Top Marques, Truck and Plant Trader, Farmers Trader, Bike Trader and Motorhome and Caravan Trader. This segment also includes the online elements of AdTrader. • International (previously Trader International) – automotive classified advertising online and in magazines in South Africa and online automotive classified advertising in Ireland. Digital UK and Magazines have been combined into the one reportable segment of UK Titles as they both have the following characteristics with the only difference being the route to market: • provide classified automotive advertising through photographs and adverts that have the same look and feel; • sell within the same geographic markets and therefore operate in an economic climate with the same risks; • sell to the same trade and private customers, through the same sales team; and • use the Trader branding. The segmental information in the prior year has been restated to reflect the current segmental structure of the business. The group disposed of its Italian subsidiary, Edizeta srl, during the year and it has been classified within discontinued operations in the income statement and is excluded from the segmental information. The trade and assets of Apple Web Offset, the printing business, were sold in the prior year. It has been classified within discontinued operations in the income statement as it primarily performed printing for external customers. This printing business is excluded from the segmental information. The Executive Committee evaluates the performance of the operating segments based on revenue and EBITDA (earnings before interest, tax, depreciation and amortisation). The measurement basis excludes the effects of goodwill impairments and other exceptional items however these items have been included separately in the segmental information. The segment information provided to the Executive Committee for the reportable segments is as follows: 2012 UK Titles International £m £m Total £m Total segment revenue 229.8 27.4 257.2 Underlying EBITDA Restructuring costs 132.5 (1.1) 11.5 – 144.0 (1.1) EBITDA Depreciation and amortisation Exceptional items: impairments Exceptional items: restructuring Segment operating profit 131.4 (13.7) (18.2) (4.5) 95.0 11.5 (0.5) – (0.1) 10.9 142.9 (14.2) (18.2) (4.6) 105.9 Segment assets 383.3 31.2 414.5 62 Annual report and financial statements 2012 Trader Media Group 3. Segmental information continued UK Titles £m 2011 International £m Total £m Total segment revenue 226.9 27.5 254.4 Underlying EBITDA Restructuring costs 118.7 (2.0) 13.1 – 131.8 (2.0) EBITDA Depreciation and amortisation Exceptional items: impairments Exceptional items: restructuring Segment operating profit 116.7 (10.7) (9.6) (1.4) 95.0 13.1 (0.5) – (0.1) 12.5 129.8 (11.2) (9.6) (1.5) 107.5 Segment assets 403.4 31.4 434.8 The revenue from external parties reported to the Executive Committee is measured in a manner consistent with that in the income statement. Where costs are incurred by one segment on behalf of another, the costs are recharged. A reconciliation of the total segment operating profit to the profit before tax and discontinued operations is provided as follows: Total segment operating profit Finance costs – net Profit before tax and discontinued operations 2012 £m 2011 £m 105.9 (84.2) 21.7 107.5 (13.9) 93.6 Finance income and finance costs are not allocated to segments as this type of activity is driven by the central treasury function which manages the cash and borrowings position of the group. The Executive Committee do not review any balance sheet information by segment and as such only segment assets as required by IFRS 8 are disclosed in the segmental information. Segment assets are presented in a manner consistent with that of the financial statements and are allocated based on the operations of the segment and the physical location of the assets. Cash and cash equivalents, certain financial assets at fair value through profit or loss and deferred tax assets are excluded from the segments as these are managed and calculated centrally. Reportable segments’ assets are reconciled to total assets per the consolidated balance sheet as follows: 2011 £m 414.5 434.8 – 4.9 48.7 468.1 3.1 4.9 73.0 515.8 Financial statements Segment assets Unallocated: Segment assets – discontinued operations Deferred taxation assets Cash and cash equivalents Total assets per the consolidated balance sheet 2012 £m Annual report and financial statements 2012 63 Trader Media Group Notes to the consolidated financial statements CONTINUED For the year ended 1 April 2012 3. Segmental information continued The group is domiciled in the UK and the following table details external sales by location of customers and non-current assets (excluding deferred tax) by geographic area: 2012 £m 2011 £m Revenue: UK Rest of world Total 228.6 28.6 257.2 226.3 28.1 254.4 Non-current assets: UK Rest of world Total 369.4 7.5 376.9 357.9 39.4 397.3 Due to the large number of customers the group serves, there are no individual customers whose revenue is material compared to the group’s total revenue in either year. 4. Operating profit/(loss) The following items have been included in arriving at operating profit/(loss): 2012 £m 2011 £m Staff costs (note 5) Depreciation of property, plant and equipment (note 11) Amortisation of intangibles (note 10) Operating lease payments Net foreign exchange losses 63.0 2.3 11.9 2.9 0.2 67.3 3.0 8.3 4.0 0.2 Exceptional items: Impairment charges: goodwill (note 10) Restructuring of group operations Total exceptional items 18.2 4.6 22.8 9.6 1.5 11.1 Restructuring of group operations relates to costs incurred on the capital structure and financing of the group, back office consolidation in the UK and overseas and the continued development of a single sales structure. Services provided by the company’s auditor During the year the group (including overseas subsidiaries) obtained the following services from the company’s auditors: Fees payable for the audit of the company and consolidated financial statements Fees payable for other services: – The audit of the company’s subsidiaries pursuant to legislation – Tax services – Services relating to corporate finance transactions entered into by the company or any of its associates Total Fees for the audit of the group’s circulation statistics were paid to Audit Bureau of Circulation of £11,000 (2011: £13,000). 64 Annual report and financial statements 2012 2012 £m 2011 £m 0.1 0.1 0.2 0.1 0.2 0.2 1.0 1.4 0.1 0.6 Trader Media Group 5. Employees and directors Wages and salaries Social security costs Pension costs – defined contribution schemes (note 23) Pension costs – defined benefit scheme (note 23) Total 2012 £m 2011 £m 55.4 5.8 1.9 (0.1) 63.0 61.7 5.6 1.8 – 69.1 Within restructuring of group operations in note 4 is £1.5 million (2011: £1.5 million) of redundancy costs which has been included in wages and salaries. The average monthly number of employees (including executive directors) employed by the group was as follows: Administration Sales Production Total Full time equivalent 2012 2011 Number Number 532 803 179 1,514 517 831 292 1,640 2012 £m 2011 £m 1.3 0.1 1.4 1.2 0.1 1.3 2012 £m 2011 £m 0.8 – 0.8 0.7 – 0.7 6. Directors and key management remuneration Directors’ emoluments Aggregate directors’ emoluments Pension contributions Total 1 director (2011: 1) was a member of the group’s defined contribution scheme. All the above remuneration was paid by Trader Publishing Limited. The remuneration of the highest paid director was as follows: Aggregate emoluments Pension contributions Total Andrew Miller, Darren Singer, Carolyn McCall (resigned 30 June 2010), Tom Hall and Irina Hemmers received no remuneration in respect of their services as directors of the company. Guardian Media Group plc and Apax Partners received a total of £0.1 million (2011: £0.1 million) for the provision of directors’ services to the group (note 31). John King, Zillah Byng-Maddick and Ed Williams hold shares in the company. Tom Hall and Irina Hemmers each have an indirect economic interest in the shares of the company held by funds managed by Apax Partners. Annual report and financial statements 2012 65 Financial statements John King and Zillah Byng-Maddick received remuneration in respect of their services as directors of the company and subsidiary undertakings. Ed Williams received remuneration in respect of his services as a director of the company. Trader Media Group Notes to the consolidated financial statements CONTINUED For the year ended 1 April 2012 6. Directors and key management remuneration continued Key management compensation Key management comprises the members of the Executive Committee. The aggregate emoluments of all key management (including directors) were as follows: 2012 £m 2011 £m 3.9 0.2 4.1 3.3 0.1 3.4 2012 £m 2011 £m 3.2 (2.8) – – 0.4 (0.1) 0.3 11.1 (7.7) (10.7) (0.3) (7.6) (0.6) (8.2) Profit/(loss) on disposal of discontinued operations 0.2 (1.9) Profit/(loss) for the year from discontinued operations 0.5 (10.1) Salaries and short term employee benefits Post employment benefits Total 7. Discontinued operations The analysis of the result of discontinued operations is as follows: Revenue Expenses Expenses: exceptional items – impairment charges: property, plant and equipment and goodwill Expenses: exceptional items – restructuring Profit/(loss) before tax of discontinued operations Taxation charge Profit/(loss) after tax of discontinued operations The profit/(loss) on sale of subsidiary undertakings relates to the sale of wholly owned subsidiaries and business units as detailed below: Date disposed Trader Media (TNT) Limited Acorn Web Offset Limited Apple Web Offset Edizeta srl Total 66 Annual report and financial statements 2012 26 February 2008 28 August 2009 28 October 2010 7 November 2011 2012 Net proceeds £m 2012 Gain on sale £m 2011 Net proceeds £m 2011 Gain/(loss) on sale £m – – – 1.4 1.4 – – – 0.2 0.2 0.1 0.3 1.8 – 2.2 0.1 0.3 (2.3) – (1.9) Trader Media Group 8. Finance income and finance costs 2012 £m 2011 £m Finance income On bank balances Exceptional: net gain on debt buy back Exceptional: cancellation of accrued preference share interest Total 0.5 4.5 – 5.0 0.6 3.5 68.0 72.1 Finance costs On bank loans and overdrafts On shareholders’ loans Dividend on preference shares Net losses on derivative financial instruments Ineffectiveness on derivatives designated as cash flow hedges Unwinding of discount on provisions Other interest payable Exceptional: debt issue costs Total 29.0 48.7 – 3.1 0.8 – 0.1 7.5 89.2 17.4 44.8 11.3 12.4 – 0.1 – – 86.0 At various times during the financial year, the group purchased part of the debt issued by Trader Media Corporation Limited, a subsidiary undertaking. The purchase of this debt, while an arms length transaction from parties external to the group, was at a discount to the debt’s nominal value and resulted in a profit to the group of £4.5 million (2011: £3.5 million). Transaction costs associated with the purchase of this debt were £0.4 million (2011: £0.2 million). Debt issue costs incurred during the year ended 1 April 2012 relate to the extinguishment of the Syndicated Term Loan and subsequent refinancing (note 19). 9. Income tax expense 2011 £m Current taxation UK corporation taxation Foreign taxation Relief for double taxation Adjustments in respect of prior years Total current taxation 11.9 3.4 – 0.5 15.8 3.4 3.3 (0.1) (0.4) 6.2 Deferred taxation Origination and reversal of temporary differences Adjustments in respect of prior years Effect of rate changes on deferred taxation Total deferred taxation (0.9) (0.5) 0.3 (1.1) 6.0 (0.2) – 5.8 Total taxation charge 14.7 12.0 Financial statements 2012 £m Annual report and financial statements 2012 67 Trader Media Group Notes to the consolidated financial statements CONTINUED For the year ended 1 April 2012 9. Income tax expense continued The differences between the total taxation shown above and the amount calculated by applying the standard rate of UK corporation taxation to the profit before taxation on continuing operations are as follows: 2012 £m 2011 £m Profit before taxation 21.7 93.6 Tax on profit on ordinary activities at the standard UK corporation tax rate of 26% (2011: 28%) Expenses not deductible for taxation purposes Income not included for taxation purposes Adjustments in respect of foreign tax rates Temporary differences Effect of rate changes on deferred taxation Adjustments to taxation charge in respect of prior years Total taxation charge 5.6 8.4 – (0.1) 0.5 0.3 – 14.7 26.2 5.3 (19.1) 0.2 – – (0.6) 12.0 The group earns its profits primarily in the UK, therefore the rate used for taxation is the standard rate for UK corporation tax. The group’s overseas tax rates are lower than those in the UK, primarily because the profits earned in Ireland are taxed at a rate of 12.5%. The tax charge relating to components of other comprehensive income is as follows: Note Actuarial loss on post employment benefit obligations Cash flow hedges IFRS 2 – share based payments credit/(charge) Currency translation differences Other comprehensive income Before tax £m 23 29 26 (0.9) 0.9 0.1 (1.6) (1.5) 2012 Tax (charge)/ credit £m 0.2 (0.3) – – (0.1) After tax £m (0.7) 0.6 0.1 (1.6) (1.6) Before tax £m (0.5) 11.5 (1.1) 0.1 10.0 2011 Tax credit £m – (3.2) – – (3.2) After tax £m (0.5) 8.3 (1.1) 0.1 6.8 The income tax charged directly to equity during the year is as follows: Note Deferred taxation 68 Annual report and financial statements 2012 22 2012 £m 2011 £m (0.1) (3.2) Trader Media Group 10. Intangible assets Goodwill £m Cost At 28 March 2010 Additions Disposals Reclassification Exchange differences At 3 April 2011 Additions Disposals Reclassification Exchange differences At 1 April 2012 Software & website development costs £m Customer relationships £m Technology £m Trade names and trademarks £m Total £m 1,107.1 – (19.4) – (0.1) 1,087.6 – (22.2) – (0.4) 1,065.0 28.7 10.4 (1.4) (0.3) – 37.4 11.4 (0.4) 0.5 – 48.9 7.5 – – – – 7.5 – (0.3) – (0.1) 7.1 1.9 – – – – 1.9 – – – – 1.9 2.1 – – – – 2.1 – (0.2) – – 1.9 1,147.3 10.4 (20.8) (0.3) (0.1) 1,136.5 11.4 (23.1) 0.5 (0.5) 1,124.8 Accumulated amortisation and impairments At 28 March 2010 Amortisation charge Impairment Reclassification Disposals At 3 April 2011 Amortisation charge Impairment Disposals At 1 April 2012 726.7 – 18.1 – (19.4) 725.4 – 18.2 (20.9) 722.7 11.3 7.2 – 0.3 (1.2) 17.6 10.7 – (0.2) 28.1 3.6 0.8 – – – 4.4 0.8 – (0.2) 5.0 1.1 0.3 – – – 1.4 0.2 – – 1.6 0.4 0.2 – – – 0.6 0.2 – (0.2) 0.6 743.1 8.5 18.1 0.3 (20.6) 749.4 11.9 18.2 (21.5) 758.0 Net book value at 1 April 2012 Net book value at 3 April 2011 342.3 362.2 20.8 19.8 2.1 3.1 0.3 0.5 1.3 1.5 366.8 387.1 The amortisation charge of £11.9 million (2011: £8.5 million) has been charged in administrative expenses in the income statement. Goodwill is allocated to the group’s cash generating units (“CGUs”) identified according to the operating segment. UK Titles International 2012 £m 2011 £m 315.1 27.2 342.3 323.8 38.4 362.2 An impairment loss of £18.2 million (2011: £18.1 million) was charged in the year after an impairment review. The impairment loss was measured by reference to the calculated value in use of each CGU based on pre-tax cash flow projections in the most recent three year plan approved by the directors. Cash flows beyond the three year period were extrapolated using the growth rates shown below, which have been applied to the individual CGUs. These growth rates do not exceed the long term average growth rates for the sectors in which the CGUs operate. The growth rates which have been applied to the CGUs are as follows: UK Titles International 2012 % 2011 % 0.0 to 0.5 0.0 to 0.5 0.0 to 2.0 0.0 to 2.0 Annual report and financial statements 2012 69 Financial statements An operating segment-level summary of the goodwill allocation is presented below. Trader Media Group Notes to the consolidated financial statements CONTINUED For the year ended 1 April 2012 10. Intangible assets continued Goodwill has been allocated to CGUs using an earnings before interest, tax, depreciation and amortisation weighting except where new CGUs arise as a result of an acquisition, in which case the goodwill arising on that acquisition is allocated to the CGU. Accordingly, CGUs relate to separate business operations. The pre-tax discount rates which have been applied in determining value in use for individual CGUs for potential impairments are as follows: 2012 % 2011 % 13.7 to 18.0 13.0 to 13.7 17.0 to 18.3 13.0 to 18.3 UK Titles International Impairment charges arose in the UK Titles segment of £18.2 million (2011: £9.6 million) and the International segment of £nil (2011: £8.5 million). 11. Property, plant and equipment Land, Assets buildings under and leasehold construction improvements £m £m Cost At 28 March 2010 Additions Disposals Assets brought into use Reclassification At 3 April 2011 Additions Disposals Reclassification Exchange differences At 1 April 2012 Depreciation At 28 March 2010 Charge for the year Impairment Disposals Reclassification At 3 April 2011 Charge for the year Disposals At 1 April 2012 Net book value at 1 April 2012 Net book value at 3 April 2011 Plant and equipment £m Motor vehicles £m Total £m 0.7 – – (0.2) – 0.5 – – (0.5) – – 11.0 – (4.9) – – 6.1 – (1.8) – – 4.3 53.5 0.9 (36.0) 0.2 0.3 18.9 2.5 (1.0) – (0.2) 20.2 0.5 – (0.4) – – 0.1 – – – – 0.1 65.7 0.9 (41.3) – 0.3 25.6 2.5 (2.8) (0.5) (0.2) 24.6 – – – – – – – – – 5.1 0.2 0.9 (3.7) – 2.5 0.2 (0.2) 2.5 47.4 2.9 1.3 (36.0) (0.3) 15.3 2.1 (0.9) 16.5 0.4 – – (0.3) – 0.1 – – 0.1 52.9 3.1 2.2 (40.0) (0.3) 17.9 2.3 (1.1) 19.1 – 0.5 1.8 3.6 3.7 3.6 – – 5.5 7.7 Depreciation expense of £0.3 million (2011: £0.6 million) has been charged in cost of sales and £2.0 million (2011: £2.5 million) charged in administrative expenses in continuing operations. An impairment of £nil (2011: £2.2 million) has been recorded against certain assets in the print business based on recent valuations obtained. 70 Annual report and financial statements 2012 Trader Media Group 12. Investments Shares in other undertakings Cost and net book value At beginning of year Additions At end of year 2012 £m 2011 £m 1.9 1.3 3.2 – 1.9 1.9 In November 2011, the group increased its 14.9% interest in the preferred share capital of IAUTOS Company Limited to 22.7%. IAUTOS Company Limited is an intermediate holding company through which are held trading companies incorporated in the People’s Republic of China. Subsidiary undertakings The principal trading and holding subsidiaries of the group are as follows: Subsidiary undertakings Country of registration or incorporation Principal activity The Car Trader (Pty) Limited Trader Finance (2009) Limited Trader Media Corporation Limited Trader Publishing Limited Webzone Limited South Africa England and Wales England and Wales England and Wales Republic of Ireland Publishing Financing company Holding company Publishing Publishing Class of shares held Percentage owned Ordinary Ordinary Ordinary Ordinary Ordinary 100% 100% 100% 100% 100% Edizeta srl was sold on 7 November 2011. The trade and assets of Auto Trade-mail Limited were divisionalised into Trader Publishing Limited during the year and Trademail Holdings Limited became dormant in the year. The directors consider the value of the investments to be supported by their underlying assets and the discounted present value of their future cash flows. A guarantee exists in respect of the three wholly owned subsidiaries that are incorporated in the Republic of Ireland (Webzone Limited, Trader Media Ireland and Trader Media (Holdings) Ireland Limited) and consolidated within these financial statements. They have availed themselves of an exemption from filing their individual financial statements as set out in Section 17 of the Companies (Amendment) Act, 1986, Ireland. 2012 Financial assets as per balance sheet: Financial assets at fair value through profit or loss Trade and other receivables Cash and cash equivalents Total 2012 Financial liabilities as per balance sheet: Borrowings Trade and other payables Derivative financial instruments Total Fair value Loans and through profit receivables and loss £m £m Non financial assets £m Total £m – 28.8 48.7 77.5 1.4 – – 1.4 – 7.0 – 7.0 1.4 35.8 48.7 85.9 Other financial liabilities £m Derivatives used for hedging £m Non financial liabilities £m Total £m (1,157.3) (66.4) – (1,223.7) – – (2.4) (2.4) – (8.9) – (8.9) (1,157.3) (75.3) (2.4) (1,235.0) Annual report and financial statements 2012 71 Financial statements 13. Financial instruments by category The accounting policies for financial instruments have been applied to the line items below: Trader Media Group Notes to the consolidated financial statements CONTINUED For the year ended 1 April 2012 13. Financial instruments by category continued Fair value Loans and through profit receivables and loss £m £m 2011 Financial assets as per balance sheet: Financial assets at fair value through profit or loss Trade and other receivables Cash and cash equivalents Total 2011 Financial liabilities as per balance sheet: Borrowings Trade and other payables Derivative financial instruments Total Non financial assets £m Total £m – 30.3 73.0 103.3 2.2 – – 2.2 – 6.6 – 6.6 2.2 36.9 73.0 112.1 Other financial liabilities £m Derivatives used for hedging £m Non financial liabilities £m Total £m (1,011.3) (61.3) – (1,072.6) – – (2.6) (2.6) – (11.3) – (11.3) (1,011.3) (72.6) (2.6) (1,086.5) 14. Derivative financial instruments 2012 2011 Assets £m Liabilities £m Assets £m Liabilities £m Interest rate swap – cash flow hedge Total current portion – – – – – – 2.6 2.6 Interest rate swap – cash flow hedge Total non-current portion – – 2.4 2.4 – – – – The fair values of derivative interest rate contracts are estimated by discounting expected future cash flows using current market interest rates and yield curves over the remaining term of the instrument. The full fair value of a hedging derivative is classified as a non-current asset or liability if the remaining maturity of the hedged item is more than 12 months, and as a current asset or liability, if the maturity of the hedged item is less than 12 months. The ineffective portion recognised in the income statement that arises from the cash flow hedges amounts to a loss of £0.8 million (2011: £nil). The notional principal amount of the outstanding interest rate swap contracts at 1 April 2012 was £190.0 million (2011: £191.2 million). The fixed interest rate was 1.35% (2011: 6.187%) and the floating rate is based on 1 month LIBOR (2011: 1 month LIBOR). The gain or loss recognised in equity on the interest rate swap contracts as of 1 April 2012 will be released to the income statement over the remaining life of the instrument. The interest rate cap contract expired in June 2011 and the cap rate was 6.3%. 15. Financial assets at fair value through profit or loss Customer list 2012 £m 2011 £m 1.4 2.2 Changes in fair values of customer lists are presented within operating activities and are recorded in administrative expenses in the income statement. The customer list represents the right to purchase the customer list and is valued based on the number of customers in place at the end of the financial year, valued at a contractual rate. 72 Annual report and financial statements 2012 Trader Media Group 16. Trade and other receivables Trade receivables Less: provision for impairment of trade receivables Trade receivables – net Amounts owed by related undertakings (note 31) Other receivables Prepayments and accrued income Total 2012 £m 2011 £m 30.8 (2.8) 28.0 0.2 0.6 7.0 35.8 29.9 (1.7) 28.2 0.1 2.0 6.6 36.9 As of 1 April 2012, trade receivables of £22.4 million (2011: £25.8 million) were fully performing. As of 1 April 2012 trade receivables of £5.2 million (2011: £2.0 million) were past due but not impaired. These relate to customers for whom there is no history of default but market factors are causing late payment. The ageing analysis of these trade receivables is as follows: Up to 30 days Between 31 and 60 days Between 61 and 90 days Over 90 days Total 2012 £m 2011 £m 4.1 0.9 0.1 0.1 5.2 1.1 0.2 0.6 0.1 2.0 Trade receivables are only classified as impaired when the debt meets one or more of a specific list of criteria. Otherwise all debts are deemed to be collectible. These criteria are: • The debt has been handed over to lawyers for legal action; • A final letter of demand has been sent to the customer; • The customer has gone into liquidation or receivership; • The customer’s cheque has not cleared. As at 1 April 2012 trade receivables of £3.2 million (2011: £2.1 million) were impaired. It was assessed that a portion of the receivables is expected to be recovered. Movements on the provision for impairment of trade receivables are as follows: At beginning of year Provision for receivables impairment Receivables written off during the year as uncollectible Total 2012 £m 2011 £m 1.7 2.6 (1.5) 2.8 3.2 1.8 (3.3) 1.7 The other classes within trade and other receivables do not contain impaired assets, except where indicated. The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable included within trade and other receivables. The group does not hold any collateral as security. Due to the large number of customers the group services, the credit quality of trade receivables is not deemed a significant risk. Annual report and financial statements 2012 73 Financial statements The creation and release of the provision for impaired receivables is included in administrative expenses in the income statement. Trader Media Group Notes to the consolidated financial statements CONTINUED For the year ended 1 April 2012 16. Trade and other receivables continued The carrying amount of the group’s trade receivables is denominated in the following currencies: UK pound Euro South African rand Total 2012 £m 2011 £m 28.5 1.3 1.0 30.8 26.7 3.0 0.2 29.9 2012 £m 2011 £m 1.8 1.8 2012 £m 2011 £m 16.7 32.0 48.7 26.1 46.9 73.0 17. Assets of disposal group classified as held for sale A property formerly used by the Wiltshire printing division was placed for sale at its open market value in 2008. Non-current assets held for sale: Property, plant and equipment 18. Cash and cash equivalents Cash at bank and in hand Short-term bank deposits Total The group’s credit risk on cash and cash equivalents is limited as the counterparties are well established banks with high credit ratings. 19. Borrowings Non-current Syndicated bank loans Series A, B and C shareholder loan notes Total 2012 £m 2011 £m 685.8 471.5 1,157.3 584.2 427.1 1,011.3 2012 £m 2011 £m 721.7 435.6 1,157.3 584.2 427.1 1,011.3 Syndicated bank loans and shareholder loan notes are repayable as follows: Two to five years More than five years Total The carrying amounts of borrowings approximate their fair values. On 23 March 2007, the subsidiary undertakings Trader Media Corporation (2003) Limited and Trader Media Corporation Limited, entered into an £835 million Senior Facilities Agreement. This agreement was amended and restated on 29 May 2007 and the first utilisation was made on 8 June 2007 when £800 million was drawn to repay in full the previous bank borrowings and fund the financial restructuring of the group. On 20 June 2011 the group refinanced and raised an additional £150 million of debt from a new term loan B3 which will expire in December 2017. As well as this additional funding, the maturities of part of the new £985 million Senior Facilities Agreement have been extended by 24 months. This refinancing resulted in the extinguishment of the original borrowings. Interest is charged at LIBOR plus a margin of between 2% and 5% (2011: 2% and 2.125%) depending on the consolidated leverage ratio of Trader Media Corporation (2003) Limited and its subsidiaries. The margins changed during the current year as a result of the refinancing detailed above. 74 Annual report and financial statements 2012 Trader Media Group 19. Borrowings continued During the year a subsidiary undertaking purchased £48.4 million (2011: £82.9 million) of the syndicated bank loans. The purchase of this debt, while an arms length transaction from parties external to the group, was at a discount to the debt’s nominal value and a gain of £4.5 million (2011: £3.5 million) after transaction costs has been recognised in the income statement (note 8). A £35.0 million Revolving Credit Facility is available but undrawn at the balance sheet date. If utilised it would incur interest at LIBOR plus a margin of between 1.25% and 3% (2011: 2% and 2.125%). Debt issue costs of £7.5 million were incurred in connection with the refinancing in 2011. These costs have been charged to the income statement (note 8). The group has elected to hedge a proportion of the interest obligation relating to the bank borrowings and details are set out in note 14. On 8 June 2007 the company issued to GMG (TMG) Limited: • Unsecured Series A shareholder loan notes falling due 7 June 2016 with consideration of a dividend in specie of £283.5 million; and • 204 million cumulative irredeemable £1 preference shares with a nominal value of £204.0 million through the reclassification of existing ordinary shares with a nominal value of £52.0 million and the bonus issue out of profit and loss and capital contribution reserves of £152.0 million. The preferences shares were initially recorded at their fair value on the date of issue of £280.0 million. All of the preference shares are authorised, allotted, called up and fully paid. Since June 2010 the preference shares have been classified as equity (note 24). On 8 June 2007 GMG (TMG) Limited sold 49.9% of its interest in the ordinary shares, preference shares and Series A shareholder loan notes to Crystal A Holdco Sà rl and Crystal B Holdco Sà rl. Unsecured Series B shareholder loan notes totalling £6.5 million falling due 7 June 2016 were issued to GMG (TMG) Limited, Crystal A Holdco Sà rl and Crystal B Holdco Sà rl for cash consideration. On 26 March 2012, £0.5 million of the Series A shareholder loan notes was repaid to the shareholders. On the same day Series C shareholder loan notes of £0.5 million were issued to Ed Williams, a non-executive director of the company. The Series C shareholder loan notes have the same terms and interest rate as the Series A and Series B shareholder loan notes. Interest is charged at LIBOR plus a margin of 9% on both the Series A, B and C shareholder loan notes. Interest is payable annually in arrears on the anniversary of the issue date however the interest has been rolled up into the principal every year since issue. The exposure of the group’s borrowings (excluding debt issue costs) to interest rate changes and the contractual repricing dates at the balance sheet date are as follows: 1 month or less 1 to 3 months Total 2012 £m 2011 £m 471.5 685.8 1,157.3 584.2 427.1 1,011.3 2012 £m 2011 £m 6.1 8.4 0.5 59.4 74.4 0.9 75.3 4.7 10.9 0.4 54.8 70.8 1.8 72.6 Trade payables Other taxes and social security Other payables Accruals and deferred income Current liabilities Non-current liabilities: trade payables Total Annual report and financial statements 2012 75 Financial statements 20. Trade and other payables Trader Media Group Notes to the consolidated financial statements CONTINUED For the year ended 1 April 2012 21. Provisions for other liabilities and charges Current At 3 April 2011 Charged to the income statement Utilised in the year Released in the year Disposal in the year At 1 April 2012 Non-current At 3 April 2011 Reclassification from accruals Charged to the income statement Credited to other comprehensive income Utilised in the year Released in the year At 1 April 2012 Onerous lease and dilapidations provision £m 0.8 0.1 (0.4) – – 0.5 Restructuring provision £m 0.7 1.1 (0.7) (0.4) – 0.7 Onerous lease and dilapidations provision £m 1.7 – 0.4 – (0.2) (0.1) 1.8 Holiday pay provision £m 0.4 0.4 (0.2) – (0.2) 0.4 Restructuring provision £m – 1.7 0.5 (0.1) – – 2.1 Total £m 1.9 1.6 (1.3) (0.4) (0.2) 1.6 Total £m 1.7 1.7 0.9 (0.1) (0.2) (0.1) 3.9 The onerous lease provision has provided for future payments under property leases in respect of unoccupied properties no longer suitable for the group’s use. Dilapidations have been provided for on all United Kingdom and Ireland properties based on the estimate of costs at the end of the lease. The restructuring provision relates to the reorganisation of the group’s business in the United Kingdom. The holiday pay provision relates to liabilities for statutory holiday pay in South Africa, and a provision in relation to the UK and Ireland operations for leave days accrued and not yet taken at the end of the financial year. These provisions are expected to reverse in the short term and have not been discounted. 22. Deferred taxation Deferred taxation assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred taxation relates to the same fiscal authorities. The recoverability of deferred tax assets and liabilities are as follows: 2012 £m 2011 £m Deferred tax asset to be recovered after more than 12 months Deferred tax asset to be recovered within 12 months Total deferred tax assets 4.6 0.3 4.9 1.7 3.2 4.9 Deferred tax liability to be recovered after more than 12 months Deferred tax liability to be recovered within 12 months Total deferred tax liabilities 0.7 0.3 1.0 0.7 1.1 1.8 76 Annual report and financial statements 2012 Trader Media Group 22. Deferred taxation continued The movement in deferred taxation assets and liabilities during the year, without taking into consideration the offsetting of balances within the same tax jurisdiction, is as follows: Deferred tax assets At 28 March 2010 Credited/(charged) to the income statement Charged directly to equity At 3 April 2011 Credited/(charged) to the income statement On disposal of subsidiary undertaking Charged directly to equity At 1 April 2012 Deferred tax liabilities At 28 March 2010 and 3 April 2011 Credited to the income statement At 1 April 2012 Accelerated capital allowances £m 3.3 0.6 – 3.9 (0.1) – – 3.8 Accelerated capital allowances £m – – – Other temporary differences £m 10.7 (6.5) (3.2) 1.0 0.4 (0.2) (0.1) 1.1 Other temporary differences £m 1.8 (0.8) 1.0 Total £m 14.0 (5.9) (3.2) 4.9 0.3 (0.2) (0.1) 4.9 Total £m 1.8 (0.8) 1.0 Deferred taxation liabilities are not recognised on unremitted earnings of overseas group companies as the dividends by which these are remitted are expected to be tax exempt. Unremitted earnings totalled £3.6 million (2011: £9.6 million). During the year, the relevant deferred tax balances have been re-measured as a result of a change in the UK main corporation tax rate to 24% which was substantively enacted on 26 March 2012 and will be effective from 1 April 2012. Further reductions to the UK corporation tax rate were announced in the March 2012 Budget. The changes, which are expected to be enacted separately each year, propose to reduce the rate by 1% per annum to 22% by 1 April 2014. The changes had not been substantively enacted at the balance sheet rate and therefore not recognised in these financial statements. 23. Retirement benefit obligations Across the UK and overseas the group operates several pension schemes. All, except one, are defined contribution schemes. Within the UK, all pension schemes set up prior to 2001 have been closed to new members and only one defined contribution scheme is now open to new employees. The pension contributions to the group defined contribution scheme for the year amounted to £1.9 million (2011: £1.8 million). There are £0.2 million (2011: £nil) pension contributions outstanding relating to the group defined contribution scheme. The defined benefit pension scheme provides benefits based on final pensionable pay and this scheme was closed to new joiners with effect from May 2002. New employees after that date have been offered membership of the group’s defined contribution scheme. Financial statements The most recent actuarial valuation was performed as at 1 May 2009 and updated to 1 April 2012 by a qualified independent actuary. Annual report and financial statements 2012 77 Trader Media Group Notes to the consolidated financial statements CONTINUED For the year ended 1 April 2012 23. Retirement benefit obligations continued The amounts recognised in the balance sheet are determined as follows: Present value of defined benefit obligation – fully funded Fair value of plan assets Effect of surplus cap Net liability recognised in the balance sheet 2012 £m 2011 £m 15.2 (14.4) – 0.8 13.9 (14.0) 0.1 – 2012 £m 2011 £m 0.7 (0.8) (0.1) 0.7 (0.8) (0.1) 2012 £m 2011 £m (0.9) – (0.9) (0.8) 0.3 (0.5) The amounts recognised in the income statement within administrative expenses (note 4) are as follows: Interest cost Expected return on plan assets Total The amounts recognised in the statement of other comprehensive income are as follows: Actuarial losses recognised in the year (before tax) Reversal of surplus cap Total The cumulative actuarial losses recognised in the statement of other comprehensive income (before tax) amount to £2.4 million (2011: £1.5 million). The movement in the defined benefit obligation over the year is as follows: At beginning of year Interest cost Actuarial losses Benefits paid At end of year 2012 £m 2011 £m 13.9 0.7 0.8 (0.2) 15.2 12.6 0.7 0.9 (0.3) 13.9 2012 £m 2011 £m 14.0 0.8 (0.2) – (0.2) 14.4 13.0 0.8 0.1 0.4 (0.3) 14.0 The movement in the fair value of plan assets over the year is as follows: At beginning of year Expected return on plan assets Actuarial (losses)/gains Employer contribution Benefits paid At end of year The actual return on plan assets was a gain of £0.6 million (2011: £0.9 million). 78 Annual report and financial statements 2012 Trader Media Group 23. Retirement benefit obligations continued The principal actuarial assumptions used were as follows: 2012 2011 Discount rate Rate of increase in deferred pensions Inflation rate 4.90% 2.60% 3.40% 5.50% 3.75% 3.75% Expected return on plan assets: Equities Property Corporate bonds Gilts Cash 5.30% 5.30% 4.90% 3.30% 3.30% 6.40% 6.40% 5.50% 4.40% 4.00% The group has assumed that mortality will be in line with nationally published PMA92 and PFA92 mortality tables related to members’ years of birth and incorporating projected medium-term improvements to life expectancy. The average life expectancies in years of members are as follows: Member age 65 (current life expectancy) Member age 45 (life expectancy at age 65) 2012 2011 Male Years Female Years Male Years Female Years 88 90 91 93 88 90 91 93 The group does not expect to contribute to this defined benefit scheme in the next financial year. The scheme’s assets are comprised as follows: Equities Corporate bonds Total 2012 2011 £m % £m % 9.6 4.8 14.4 66.7 33.3 100.0 9.1 4.9 14.0 65.4 34.6 100.0 Present value of defined benefit obligation Fair value of plan assets Deficit/(surplus) Experience adjustments on scheme liabilities Experience adjustments on scheme assets 2012 £m 2011 £m 2010 £m 2009 £m 2008 £m 15.2 (14.4) 0.8 13.9 (14.0) (0.1) 12.6 (13.0) (0.4) 9.7 (9.5) 0.2 11.5 (12.2) (0.7) (0.2) (0.2) (0.1) 0.1 0.3 3.3 – (3.2) (2.0) (1.3) Annual report and financial statements 2012 79 Financial statements The expected return on assets is determined by considering the current level of expected returns on risk free investments (primarily government bonds), the historical level of the risk premium associated with the other asset classes in which the portfolio is invested and the expectations for future returns of each asset class. The expected return for each asset class was then weighted based on the target asset allocation to develop the expected long-term rate of return on assets assumption for the portfolio. Trader Media Group Notes to the consolidated financial statements CONTINUED For the year ended 1 April 2012 24. Shares and share premium account Allotted, called up and fully paid 501,000 A ordinary shares of 10p each (2011: 501,000) 488,796 B ordinary shares of 10p each (2011: 487,908) 10,204 C ordinary shares of 10p each (2011: 11,092) 10,204 deferred B ordinary shares of 10p each (2011: 11,092) 430,000,000 deferred shares of £0.0001 each (2011: nil) 177,287,048 cumulative irredeemable preference shares of £1 each (2011: 204,000,000) Total 2012 Share capital £m 2012 Share premium account £m 2011 Share capital £m 2011 Share premium account £m 0.1 – – – – – – 1.2 – – 0.1 – – – – – – 1.2 – – 177.3 177.4 – 1.2 363.6 363.7 – 1.2 During the year the company issued 80 (2011: 2,826) of the 10p ordinary C shares for cash consideration (note 29). These were issued at a premium of £99.90 per share, all of which had been received by the year end. The group repurchased 968 (2011: 1,734) 10p ordinary C shares for aggregate consideration of £5. These shares are within those issued above. Until 7 June 2010 interest on the preference shares was charged at 15% of their fair value at their date of issue and rolled up into the principal twice a year in December and June. From 8 June 2010 interest has been charged at 0.05% and the preference shares have been reclassified as equity. During the year, £73.0 million of the rolled up interest on the preference shares was paid to the shareholders and £26.6 million preference shares were repurchased for total consideration of £36.6 million and subsequently cancelled. £26.6 million relating to the cancellation of the nominal value of preference share capital has led to the creation of a capital redemption reserve (note 26). The premium on repurchase of £10.0 million has been recorded against profit and loss reserves. Simultaneously £10.8 million of the rolled up interest was waived. Following the reclassification of preference share capital from liabilities to equity, the fair value uplift previously recognised on issue has been reversed and transferred through reserves (note 26). On 5 July 2011 the company issued 430,000,000 deferred shares of £1 each for £nil consideration. On 3 August 2011 in the High Court of Justice, the deferred share capital was reduced by the cancellation of £0.9999 per share issued. 25. Retained deficit £m At 28 March 2010 Profit for the year Actuarial loss on post employment benefit obligations, net of tax Cash flow hedges, net of tax IFRS 2 – share based payments charge At 3 April 2011 Profit for the year Actuarial loss on post employment benefit obligations, net of tax Cash flow hedges, net of tax IFRS 2 – share based payments credit Dividends paid to equity holders of the company Transfer to other reserve – premium on preference shares repurchased Payment of preference share capital Preference dividend waived At 1 April 2012 80 Annual report and financial statements 2012 (1,023.5) 71.5 (0.5) 8.3 (1.1) (945.3) 7.5 (0.7) 0.6 0.1 (100.4) 10.0 (36.6) 10.8 (1,054.0) Trader Media Group 26. Other reserves Other reserve £m At 28 March 2010 Currency translation differences on foreign currency net investments At 3 April 2011 Currency translation differences on foreign currency net investments Currency translation differences on sale of foreign subsidiary Transfer to capital redemption reserve Transfer of fair value uplift on preference shares Premium on preference shares repurchased At 1 April 2012 Capital redemption reserve £m – – – – – – 76.0 (10.0) 66.0 – – – – – 26.6 – – 26.6 Translation reserve £m 3.8 0.1 3.9 (1.0) (0.6) – – – 2.3 The capital redemption reserve has been created to maintain capital for the nominal value of preference shares cancelled. The other reserve relates to the premium payable on redemption of the preference shares. 27. Dividends Ordinary dividends of £100.4 million (2011: £nil) were paid in respect of the year ended 1 April 2012 (£100.26 per ordinary 10p share). Rolled up preference dividends and preference share capital, including premium, of £109.6 million (2011: £nil) were also paid during the year (note 24). Profit before taxation including discontinued operations Adjustments for: Depreciation Amortisation Goodwill and other impairment charges Loss on disposal of property, plant and equipment (Profit)/loss on sale of businesses Increase in retirement benefit obligations Fair value loss on customer list asset Cancellation of preference share interest Finance costs Finance income Gain on debt buy back Foreign exchange losses Changes in working capital (excluding the effects of acquisitions, disposals and exchange differences on consolidation): Inventories Trade and other receivables Trade and other payables Provisions Cash generated from operations 2012 £m 2011 £m 22.3 84.1 2.3 11.9 18.2 – (0.2) (0.1) 0.8 – 89.2 (0.5) (4.5) 0.2 3.1 8.5 20.3 0.2 1.9 – 0.5 (68.0) 86.0 (0.6) (3.5) 0.2 0.2 (0.1) (1.1) 0.3 138.9 (0.4) 6.6 3.9 (1.5) 141.3 Annual report and financial statements 2012 81 Financial statements 28. Cash generated from operations Trader Media Group Notes to the consolidated financial statements CONTINUED For the year ended 1 April 2012 28. Cash generated from operations continued The cash flows of discontinued operations are as follows: Operating cash flows Financing cash flows Total cash flows 2012 £m 2011 £m 0.5 (0.6) (0.1) 0.3 – 0.3 The aggregate cash flows arising on the disposal of Edizeta srl are as follows: 2012 £m Intangible assets Property, plant and equipment Current assets Current liabilities Net assets disposed of Currency translation differences (note 26) Net gain on disposal Sales proceeds (net of fees) Less: cash and cash equivalents Net cash inflow on sale (net of disposal costs) 1.4 0.3 1.7 (1.6) 1.8 (0.6) 0.2 1.4 (0.3) 1.1 29. Share based payments A number of the group’s senior managers have been invited to become shareholders in the company and during the year 80 (2011: 2,826) ordinary C shares were issued for cash consideration at fair value. The Articles of Association of the company define “Good Leavers” and “Bad Leavers” where a Bad Leaver is an employee-shareholder leaving the business because of voluntary resignation, summary dismissal or breach of restrictive covenants within 12 months of leaving. All other employee-shareholders leaving the business are Good Leavers. On leaving the business, the Articles require that a C shareholder sell their shares to such persons as may be nominated by the Board of Directors. A Bad Leaver receives the lower of fair value and the cost for which the shares were acquired. A Good Leaver receives a value determined as follows: (a) if the Good Leaver leaves within eighteen months of acquiring the shares, they will receive the lower of fair value and the cost for which the shares were acquired; (b) if the Good Leaver leaves between eighteen months and four years of acquiring the shares, they will receive the lower of fair value and cost between 62.5% and 0% of their shares, determined on a straight line basis by reference to the period of months before leaving. They will receive fair value for the remainder of their shares; (c) if the Good Leaver leaves after four years from acquiring the shares, they will receive fair value for their total shareholding. During the year, the group has repurchased shares from 5 leavers (2011: nil). This repurchase is considered to be cash settled. The remaining shares are deemed to be equity settled and the shares are deemed to have vested on issue. No expense was recognised in the year as the consideration received for the ordinary C shares was equal to or greater than the fair value of the shares. During the previous year, the group recorded a bad leaver provision of £1.1 million through reserves. During the current year the provision reduced by £0.1 million. 82 Annual report and financial statements 2012 Trader Media Group 30. Commitments and contingencies Capital expenditure contracted for at the end of the reporting period but not yet incurred is as follows: Property, plant and equipment Intangible assets Total 2012 £m 2011 £m – 0.5 0.5 0.6 2.0 2.6 The future aggregate minimum lease payments under non-cancellable operating leases are as follows: No later than 1 year Later than 1 year and no later than 5 years Later than 5 years Total Land and buildings Other 2012 2011 2012 £m £m £m 2.3 5.9 – 8.2 2.6 7.5 0.6 10.7 1.2 2.3 3.5 2011 £m 0.7 1.0 – 1.7 31. Related party transactions The group is jointly owned by GMG (TMG) Limited, Crystal A Holdco Sà rl and Crystal B Holdco Sà rl. These companies have made shareholder loans to, and hold preference shares in, the group. Ed Williams, a director of the company, has also made a shareholder loan to and holds preference shares in the group. The balances at the end of the year including accrued interest and dividends payable on these debt instruments are disclosed below: 2012 £m 2011 £m Shareholder loans and accrued interest GMG (TMG) Limited Crystal A Holdco Sà rl Crystal B Holdco Sà rl Ed Williams (256.4) (97.1) (158.4) (0.5) (232.3) (87.9) (143.4) – Preference shares and accrued dividends GMG (TMG) Limited Crystal A Holdco Sà rl Crystal B Holdco Sà rl Ed Williams (121.9) (46.1) (75.1) (0.2) (182.2) (69.0) (112.5) – (24.4) (9.2) (15.1) – 6.0 2.3 3.7 – Interest (charged)/credited to the income statement (2011: interest and dividends payable) GMG (TMG) Limited Crystal A Holdco Sà rl Crystal B Holdco Sà rl Ed Williams Financial statements Guardian Media Group plc and Apax Partners received £0.1 million each for the provision of directors’ services to the group (2011: £0.1 million). The balance outstanding at the end of the year was £nil (2011: £0.1 million). Annual report and financial statements 2012 83 Trader Media Group Notes to the consolidated financial statements CONTINUED For the year ended 1 April 2012 31. Related party transactions continued During the course of the year certain group companies have traded with companies in which Guardian Media Group plc and Apax have an interest. Trading was in the normal course of operations and on an arm’s length basis. Transactions during the year and balances outstanding at the year end are as follows: 2012 £m 2011 £m Guardian Media Group plc and subsidiary undertakings Sales – printing Purchases – advertising and other purchases Recharges from – salaries and other costs – – – 2.8 (0.1) (0.1) Net balance outstanding at the year end – 0.1 2012 £m 2011 £m 0.2 (0.5) 0.2 0.3 – – Apax Sales – advertising and other Purchases Recharges to – salaries and other costs Net balance outstanding at the year end 0.2 – Transactions with directors and key management On 5 July 2011 the company issued 3,293,800 deferred shares of £1 each for £nil consideration to directors and key management. On 3 August 2011 in the High Court of Justice, the deferred share capital was reduced by the cancellation of £0.9999 per share issued (note 24). During the previous year, the company issued loans to certain directors and key management on an arms’ length basis. The balance outstanding at the year end was £53,958 (2011: £54,852). During the year the group repurchased 669 (2011: nil) ordinary C shares of 10p each held by senior management, for aggregate cash consideration of £3 (note 29). The following key management hold ordinary C shares: 2012 2011 No of C shares No of C shares Directors: Zillah Byng-Maddick John King 1,000 3,000 1,000 3,000 Other key management 3,660 3,660 84 Annual report and financial statements 2012 Trader Media Group 32. Ultimate controlling parties The company is jointly controlled by Guardian Media Group plc (indirectly holding 50.1% of the ordinary shares), Crystal A TopCo Sà rl (indirectly holding 18.54% of the ordinary shares) and Crystal B TopCo Sà rl (indirectly holding 30.25% of the ordinary shares). Crystal A TopCo Sà rl and Crystal B TopCo Sà rl (companies operated by Apax Partners, a private equity firm) are incorporated under the laws of Luxembourg and Guardian Media Group plc is incorporated in Great Britain. Financial statements 33. Post balance sheet events On 18 May 2012 the company issued 1,296 ordinary D shares of 10p each for cash consideration at fair value of £0.3 million. Annual report and financial statements 2012 85 Trader Media Group Independent auditors’ report to the members of Trader Media Group Limited We have audited the parent company financial statements of Trader Media Group Limited for the year ended 1 April 2012 which comprise the balance sheet and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice). Respective responsibilities of directors and auditors As explained more fully in the statement of directors’ responsibilities set out on page 44 the directors are responsible for the preparation of the parent company financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the parent company financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors. This report, including the opinions, has been prepared for and only for the company’s members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the parent company’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Annual report to identify material inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. Opinion on financial statements In our opinion the parent company financial statements: • give a true and fair view of the state of the company’s affairs as at 1 April 2012; • have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and • have been prepared in accordance with the requirements of the Companies Act 2006. Opinion on other matters prescribed by the Companies Act 2006 In our opinion the information given in the Directors’ report for the financial year for which the parent company financial statements are prepared is consistent with the parent company financial statements. Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: • adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or • the parent company financial statements are not in agreement with the accounting records and returns; or • certain disclosures of directors’ remuneration specified by law are not made; or • we have not received all the information and explanations we require for our audit. Other matter We have reported separately on the group financial statements of Trader Media Group Limited for the year ended 1 April 2012. Alan Kinnear (Senior Statutory Auditor) For and on behalf of PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors Reading 15 June 2012 86 Annual report and financial statements 2012 Trader Media Group Company balance sheet As at 1 April 2012 Note 2012 £m 2011 £m 4 997.9 499.4 Current assets Debtors Cash at bank and in hand 5 11.9 – 11.9 10.6 0.3 10.9 Creditors: Amounts falling due within one year 6 (42.1) (36.7) Net current liabilities (30.2) (25.8) Total assets less current liabilities 967.7 473.6 (471.5) (427.1) 496.2 46.5 177.4 1.2 26.6 68.5 222.5 496.2 287.7 1.2 – – (242.4) 46.5 Fixed assets Investments Creditors: Amounts falling due after more than one year 7 Net assets Capital and reserves Called up share capital Share premium account Capital redemption reserve Revaluation reserve Profit and loss account Total equity shareholders’ funds 8 9 9 9 9 10 The financial statements on pages 87 to 92 were approved by the board of directors on 15 June 2012 and were signed on its behalf by: Financial statements Z Byng-Maddick Director Annual report and financial statements 2012 87 Trader Media Group Notes to the financial statements For the year ended 1 April 2012 1. Accounting policies Basis of preparation These financial statements are prepared on the going concern basis, under the historical cost convention, in accordance with the Companies Act 2006 and applicable accounting standards in the United Kingdom. This is deemed appropriate due to status of the consolidated group as a going concern. The principal accounting policies are set out below all of which have been applied consistently throughout the year and the preceding year except for the change to the investments policy. During the year, the company has changed its accounting policy for investments from one of historic cost to revaluation once every three years. This change means the company’s investments are carried at an amount more closely related to their market value. As the revaluation exercise is conducted once every three years there is no adjustment required to previous years. In accordance with Section 408 of the Companies Act 2006, the company is exempt from the requirement to present its own profit and loss account. The result of the company for the financial year is disclosed in note 9. Cash flow statement The cash flows of the company are included in the consolidated statements of the group, which are publicly available. Consequently the company has taken advantage of the exemption available under paragraph 5 of Financial Reporting Standard 1 Cash Flow Statements (revised 1996) from preparing a cash flow statement. Debt Debt is initially stated at the amount of the net proceeds after deduction of issue costs. The carrying amount is increased by the interest cost in respect of the accounting period and reduced by payments made in the year. Interest and issue costs associated with debt are charged to the profit and loss account at a constant rate over the period from the date of issue to the point where there is a genuine commercial possibility that the commercial life of the instrument will expire. Preference shares are treated as debt where in substance they have the features of debt instruments, otherwise they are classified as equity. The related dividends are recognised as an interest expense for debt instruments and as dividends for equity instruments. Investments Fixed asset investments are shown at revalued cost less any provision for impairment. Dividends received are credited to the profit and loss account in the period in which they are approved by shareholders. The directors have a policy of revaluing investments every 3 years. Where a revaluation occurs, the amounts are taken to a revaluation reserve. Annually, the directors consider whether any events or circumstances have occurred that could indicate that the carrying amount of fixed asset investments may not be recoverable. If such circumstances do exist, a full impairment review is undertaken to establish whether the carrying amount exceeds the higher of net realisable value or value in use. If this is the case, an impairment charge is recorded to reduce the carrying value of the related investment. Related party transactions The company is exempt from the requirements to disclose details of related party transactions as these are disclosed in the consolidated financial statements of the group. Taxation UK corporation tax is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted or substantially enacted by the balance sheet date. Deferred taxation Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date, where transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred on the balance sheet date. A net deferred tax asset is regarded as recoverable and therefore recognised only when, on the basis of all evidence available, it can be regarded as more likely than not that there will be suitable taxable profits against which to recover carried forward tax losses and from which the future reversal of underlying timing differences can be deducted. Deferred tax is measured at the average rates that are expected to apply in the periods in which the timing differences are expected to reverse based on the tax rates and laws that have been enacted or substantively enacted by the balance sheet date. Deferred tax is measured on an undiscounted basis. 88 Annual report and financial statements 2012 Trader Media Group 1. Accounting policies continued Share based payments Equity settled awards are valued at grant date, and the grant date fair value is charged as an expense in the profit and loss account spread over the vesting period. The credit side of the entry is recorded in equity. Cash settled awards are revalued at each reporting date with the fair value of the award charged to the profit and loss account over the vesting period and the credit side of the entry recognised as liability. Where awards are granted to employees of subsidiary companies, instead of a charge being recognised as an expense in the company’s individual financial statements, it is debited to investments as the award represents a further investment in the company’s subsidiaries. 2. Employee information and directors remuneration The average number of persons (excluding directors) employed during the year was nil (2011: nil). As such, no staff costs arose during either year. Directors remuneration is disclosed in the consolidated financial statements of Trader Media Group Limited. The remuneration of the directors was paid by Trader Publishing Limited and not recharged. The allocation of this remuneration in relation to their services as directors of the company is £0.1 million (2011: £0.1 million). 3. Services provided by the company’s auditor Fees payable for the audit of the company and consolidated financial statements are £0.1 million (2011: £0.1 million). 4. Fixed asset investments Shares in subsidiary undertakings £m Cost/revalued cost At beginning of year Revaluation At end of year 499.4 708.7 1,208.1 Impairment At beginning of year Charge for year At end of year – 210.2 210.2 Net book value at end of year Net book value at beginning of year 997.9 499.4 The company owns 100% of the ordinary share capital of Trader Media Group (2003) Limited, a holding company registered in England and Wales. Subsidiary undertakings Country of registration or incorporation Principal activity The Car Trader (Pty) Limited Trader Finance (2009) Limited Trader Media Corporation Limited Trader Publishing Limited Webzone Limited South Africa England and Wales England and Wales England and Wales Republic of Ireland Publishing Financing Holding company Publishing Publishing Class of shares held Percentage owned Ordinary Ordinary Ordinary Ordinary Ordinary 100% 100% 100% 100% 100% Edizeta srl was sold on 7 November 2011. The trade and assets of Auto Trade-mail Limited were divisionalised into Trader Publishing Limited on 30 March 2012. The directors consider the value of the investments to be supported by the value of their future cash flows. Annual report and financial statements 2012 89 Financial statements The company holds the following principal subsidiaries through its interest in Trader Media Group (2003) Limited: Trader Media Group Notes to the financial statements CONTINUED For the year ended 1 April 2012 5. Debtors Amounts owed by group undertakings 2012 £m 2011 £m 11.9 10.6 2012 £m 2011 £m Amounts owed by group undertakings are unsecured, non-interest bearing and are repayable on demand. Deferred taxation is provided as follows: Other timing differences At beginning of year Charged to the profit and loss account At end of year – – – 8.1 (8.1) – 6. Creditors: Amounts falling due within one year Amounts owed to group undertakings Accruals Total 2012 £m 2011 £m 1.2 40.9 42.1 – 36.7 36.7 2012 £m 2011 £m 471.5 427.1 Amounts owed to group undertakings are unsecured, non-interest bearing and are repayable on demand. 7. Creditors: Amounts falling due after more than one year Series A, B and C Shareholder loan notes On 8 June 2007, the company issued to GMG (TMG) Limited: • Unsecured Series A Shareholder loan notes falling due 7 June 2016 with consideration of a dividend in specie of £283.5 million; and • 204 million cumulative irredeemable £1 preference shares with a nominal value of £204.0 million through the reclassification of existing ordinary shares with a nominal value of £52.0 million and the bonus issue out of profit and loss and capital contribution reserves of £152.0 million. The preference shares were initially recorded at their nominal value. The fair value of the preference shares at the date of issue was £280.0 million. All 204 million of the preference shares are authorised, allotted, called up and fully paid. Since June 2010 the preference shares have been reclassified as equity (note 8). On the same day GMG (TMG) Limited sold 49.9% of its interest in the ordinary shares, preference shares and Series A Shareholder loan notes to Crystal A Holdco Sà rl and Crystal B Holdco Sà rl. Unsecured Series B Shareholder loan notes totalling £6.5 million falling due 7 June 2016 were issued to GMG (TMG) Limited, Crystal A Holdco Sà rl and Crystal B Holdco Sà rl for cash consideration. On 23 March 2012, £0.5 million of the Series A shareholder loan notes was repaid to the shareholders. On the same day Series C shareholder loan notes of £0.5 million were issued to Ed Williams, a non-executive director of the group. The Series C shareholder loan notes have the same terms and interest rate as the Series A and Series B shareholder loan notes. Interest is charged at LIBOR plus a margin of 9% on the Series A, Series B and Series C shareholder loan notes. Interest is payable annually in arrears on the anniversary of the issue date however the interest has been rolled up into the principal every year since issue. 90 Annual report and financial statements 2012 Trader Media Group 8. Called up share capital Allotted, called-up and fully-paid 501,000 A ordinary shares of 10p each (2011: 501,000) 488,796 B ordinary shares of 10p each (2011: 487,908) 10,204 C ordinary shares of 10p each (2011: 11,092) 10,204 deferred B ordinary shares of 10p each (2011: 11,092) 430,000,000 deferred shares of £0.0001 each (2011: nil) 177,287,048 (2011: 204,000,000) cumulative irredeemable preference share of £1 each Total 2012 £m 2011 £m 0.1 – – – – 177.3 177.4 0.1 – – – – 287.6 287.7 During the year the company issued 80 (2011: 2,826) of the 10p ordinary C shares for cash consideration. These were issued at a premium of £99.90 per share, all of which had been received by the year end. The group repurchased 968 (2011: 1,734) 10p ordinary C shares for aggregate consideration of £5. These shares are within those issued above. Until 7 June 2010 interest on the preference shares was charged at 15% of their fair value at their date of issue and rolled up into the principal twice a year in December and June. From 8 June 2010 interest has been charged at 0.05% and the preference shares have been reclassified as equity. During the year, £73.0 million of the rolled up interest on the preference shares was paid to the shareholders and £26.6 million preference shares were repurchased for total consideration of £36.6 million and subsequently cancelled. £26.6 million relating to the cancellation of the nominal value of preference share capital has led to the creation of a capital redemption reserve (note 9). The premium on repurchase of £10.0 million has been recorded against profit and loss reserves together with the nominal value of the preference shares. Simultaneously £10.8 million of the rolled up interest was waived. On 5 July 2011 the company issued 430,000,000 deferred shares of £1 each for £nil consideration. On 3 August 2011 in the High Court of Justice, the deferred share capital was reduced by the cancellation of £0.9999 per share issued. 9. Reserves Capital redemption reserve £m At beginning of year Revaluation of fixed asset investment Impairment of fixed asset investment Bonus issue of deferred shares Cancellation of deferred shares Profit for the financial year Dividend paid Preference capital redeemed and cancelled Preference dividend waived At end of year – – – – – – – 26.6 – 26.6 Revaluation reserve £m Share premium account £m – 708.7 (210.2) (430.0) – – – – – 68.5 1.2 – – – – – – – – 1.2 Profit and loss account £m (242.4) – – – 430.0 161.1 (100.4) (36.6) 10.8 222.5 Financial statements The capital redemption reserve has been created to maintain capital for the nominal value of preference shares cancelled. Annual report and financial statements 2012 91 Trader Media Group Notes to the financial statements CONTINUED For the year ended 1 April 2012 10. Reconciliation of movements in total equity shareholders’ funds/(deficit) 2012 £m Opening total equity shareholders’ funds/(deficit) Premium on shares issued in the financial year Reclassification of preference shares Revaluation and impairment of fixed asset investment Bonus issue of deferred shares Reduction in value of deferred shares Profit for the financial year Dividend paid Preference share capital and dividend paid Preference share dividend rolled up Closing total equity shareholders’ funds 46.5 – – 498.5 (430.0) 430.0 161.1 (100.4) (109.6) 0.1 496.2 2011 £m (245.1) 0.3 287.6 – – – 3.7 – – 46.5 11. Share based payments A number of the group’s senior managers have been invited to become shareholders in the company and during the year 80 (2011: 2,826) ordinary C shares were issued for cash consideration at fair value. The Articles of Association of the company define “Good Leavers” and “Bad Leavers” where a Bad Leaver is an employee-shareholder leaving the business because of voluntary resignation, summary dismissal or breach of restrictive covenants within 12 months of leaving. All other employee-shareholders leaving the business are Good Leavers. On leaving the business, the Articles require that a C shareholder sell their shares to such persons as may be nominated by the Board of Directors. A Bad Leaver receives the lower of fair value and the cost for which the shares were acquired. A Good Leaver receives a value determined as follows: (a)if the Good Leaver leaves within eighteen months of acquiring the shares, they will receive the lower of fair value and the cost for which the shares were acquired; (b)if the Good Leaver leaves between eighteen months and four years of acquiring the shares, they will receive the lower of fair value and cost between 62.5% and 0% of their shares, determined on a straight line basis by reference to the period of months before leaving. They will receive fair value for the remainder of their shares; (c)if the Good Leaver leaves after four years from acquiring the shares, they will receive fair value for their total shareholding. During the year, the company has repurchased shares from 5 leavers (2011: nil). This repurchase is considered to be cash settled as the value paid for the shares was less than or equal to fair value. The remaining shares are deemed to be equity settled and the shares are deemed to have vested on issue. No expense was recognised in the year as the consideration received for the ordinary C shares was equal to or greater than the fair value of the shares. 12. Post balance sheet events On 18 May 2012 the company issued 1,296 ordinary D shares of 10p each for cash consideration at fair value of £0.3 million. 92 Annual report and financial statements 2012 You can view our 2012 annual report online at tradermediagroup.com Overview 01 02 04 06 08 10 12 14 16 How we performed Leading digital What we’ve done with our data Using data responsibly Our people What we’re planning on doing A deep understanding of our markets What keeps us in front Chairman’s statement Business review 18 20 24 26 28 30 32 34 36 Year of achievement Operating review Goodwood motor show Segmental commentary Q&A with the Chief Executive Officer Key performance indicators Financial review Principal risks and uncertainties Corporate social responsibility Against the economic backdrop, the group has had another successful year with strong digital growth in the UK driving revenue growth and margin improvements. This can be seen by the 10% EBITDA growth the group has achieved over last year. Governance 38 Executive Committee 40 Corporate governance 42 Directors’ report 44Statement of directors’ responsibilities 45 Independent auditors’ report Financial statements 46 Consolidated income statement 47Consolidated statement of comprehensive income 48 Consolidated balance sheet 49Consolidated statement of changes in equity 50 Consolidated cash flow statement 51Notes to the consolidated financial statements Company financial statements 86 87 88 Independent auditors’ report Company balance sheet Notes to the financial statements Note: car images are for information purposes only. The cover and pages 1 to 40 are printed on paper made from virgin wood fibre with pulp which is bleached using a mixture of Total Chlorine Free and Elemental Chlorine Free processes. Pages 41 to 92 are printed on paper made from 100% de-inked post consumer waste. Both papers are certified by the Forest Stewardship Council, which supports the responsible use of forest resources. The printer and paper mills are both accredited with ISO14001, the environmental management system. Designed and produced by The College www.the-college.com Trader Media Group 3rd and 4th Floor 41-47 Hartfield Road Wimbledon London SW19 3RQ Telephone +44 (0)20 8544 7000 www.tradermediagroup.com Annual report and financial statements 2012 Trader Media Group Annual report and financial statements 2012 Driving Innovation through data and peoplE
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