Notes 4-7
4. Segment reporting
Business segments
The Group operates in two business sectors: media communications and market research. These divisions are the basis on which the Group reports its primary segment information. The Group provides a broad range of services in the areas of media communications and market research.
An analysis of revenue and segment result by these business sectors is set out below:
| 2007 £m |
2006 £m |
|
|---|---|---|
| Revenue: | ||
| Media communications | 673.4 | 595.7 |
| Market research | 433.0 | 401.2 |
| Revenue | 1,106.4 | 996.9 |
| £m Underlying |
£m Adjustments |
2007 £m Statutory |
£m Underlying |
£m Adjustments |
2006 £m Statutory |
|
|---|---|---|---|---|---|---|
| Segment result: | ||||||
| Media communications | 134.4 | (2.8) | 131.6 | 121.1 | (5.5) | 115.6 |
| Market research | 34.9 | (1.3) | 33.6 | 30.8 | (0.2) | 30.6 |
| Corporate costs | (23.1) | - | (23.1) | (19.3) | - | (19.3) |
| Operating profit | 146.2 | (4.1) | 142.1 | 132.6 | (5.7) | 126.9 |
| Share of results of associates | 3.2 | 3.2 | 6.4 | 1.2 | - | 1.2 |
| Impairment of goodwill on associates | - | - | - | - | (3.9) | (3.9) |
| Share of results of associates | 3.2 | 3.2 | 6.4 | 1.2 | (3.9) | (2.7) |
| Profit before interest and tax | 149.4 | (0.9) | 148.5 | 133.8 | (9.6) | 124.2 |
| Investment income | 13.6 | - | 13.6 | 11.8 | - | 11.8 |
| Finance costs | (30.3) | 1.7 | (28.6) | (29.4) | 6.9 | (22.5) |
| Net financial items | (16.7) | 1.7 | (15.0) | (17.6) | 6.9 | (10.7) |
| Profit before tax | 132.7 | 0.8 | 133.5 | 116.2 | (2.7) | 113.5 |
| Tax | (35.2) | (3.9) | (39.1) | (33.3) | (0.1) | (33.4) |
| Profit after tax | 97.5 | (3.1) | 94.4 | 82.9 | (2.8) | 80.1 |
Further details of the underlying adjustments are provided in note 5.
An analysis of revenue and segment result on a constant currency basis is set out below:
| 2007 £m |
2006 £m Constant Currency |
|
|---|---|---|
| Revenue: | ||
| Media communications | 673.4 | 585.7 |
| Market research | 433.0 | 383.3 |
| Revenue | 1,106.4 | 969.0 |
| £m Underlying |
£m Adjustments |
2007 £m Statutory |
£m Constant Currency Underlying |
£m Constant Currency Adjustments |
2006 £m Constant Currency Statutory |
|
|---|---|---|---|---|---|---|
| Segment result: | ||||||
| Media communications | 134.4 | (2.8) | 131.6 | 120.1 | (5.5) | 114.6 |
| Market research | 34.9 | (1.3) | 33.6 | 29.5 | (0.2) | 29.3 |
| Corporate costs | (23.1) | - | (23.1) | (19.4) | - | (19.4) |
| Operating profit | 146.2 | (4.1) | 142.1 | 130.2 | (5.7) | 124.5 |
| Share of results of associates | 3.2 | 3.2 | 6.4 | 1.2 | - | 1.2 |
| Impairment of goodwill on associates | - | - | - | - | (3.9) | (3.9) |
| Share of results of associates | 3.2 | 3.2 | 6.4 | 1.2 | (3.9) | (2.7) |
| Profit before interest and tax | 149.4 | (0.9) | 148.5 | 131.4 | (9.6) | 121.8 |
Further segment disclosures, including certain asset and liability information for the Group's business sectors, are set out below:
| 2007 £m |
2006 £m |
|
|---|---|---|
| Segment assets: | ||
| Media communications | 2,787.7 | 2,156.6 |
| Market research | 599.6 | 546.3 |
| 3,387.3 | 2,702.9 | |
| Investment in eVerger joint venture | 0.5 | 2.8 |
| Corporate operations | 8.2 | (25.1) |
| Total assets | 3,396.0 | 2,680.6 |
| Segment liabilities | ||
| Media communications | (2,321.1) | (1,847.3) |
| Market research | (198.6) | (166.3) |
| (2,519.7) | (2,013.6) | |
| Corporate operations | (562.9) | (450.4) |
| Total liabilities | (3,082.6) | (2,464.0) |
| Net assets | 313.4 | 216.6 |
| Capital expenditure: | ||
| Media communications | 12.2 | 13.8 |
| Market research | 6.4 | 6.0 |
| Corporate operations | 0.4 | 0.8 |
| Capital expenditure | 19.0 | 20.6 |
| Depreciation of property, plant and equipment: | ||
| Media communications | 13.2 | 12.6 |
| Market research | 5.4 | 6.0 |
| Corporate operations | 0.5 | 0.5 |
| Depreciation of property, plant and equipment | 19.1 | 19.1 |
| Amortisation of intangible assets: | ||
| Media communications | 4.7 | 3.8 |
| Market research | 1.8 | 2.0 |
| Corporate operations | 1.1 | 1.2 |
| Amortisation of intangible assets | 7.6 | 7.0 |
| Impairment losses: | ||
| Media communications | 2.0 | 5.3 |
| Market research | - | - |
| Corporate operations | - | - |
| Impairment losses | 2.0 | 5.3 |
Geographical segments
The Group's two business segments operate in three geographical areas. The geographical segment analysis is based on the location of assets. These geographical areas are the basis on which the Group reports its secondary segment information.
An analysis of revenue and segment result by these geographical areas is set out below:
| 2007 £m |
2006 £m |
|
|---|---|---|
| Revenue: | ||
| Europe, Middle East & Africa | 677.5 | 601.3 |
| Americas | 286.2 | 267.2 |
| Asia-Pacific | 142.7 | 128.4 |
| Revenue | 1,106.4 | 996.9 |
| £m Underlying |
£m Adjustments |
2007 £m Statutory |
£m Underlying |
£m Adjustments |
2006 £m Statutory |
|
|---|---|---|---|---|---|---|
| Segment result: | ||||||
| Europe, Middle East & Africa | 122.9 | (0.4) | 122.5 | 107.3 | (4.1) | 103.2 |
| Americas | 32.4 | (0.6) | 31.8 | 30.5 | (0.3) | 30.2 |
| Asia-Pacific | 14.0 | (3.1) | 10.9 | 14.1 | (1.3) | 12.8 |
| Corporate costs | (23.1) | - | (23.1) | (19.3) | - | (19.3) |
| Operating profit | 146.2 | (4.1) | 142.1 | 132.6 | (5.7) | 126.9 |
| Share of results of associates | 3.2 | 3.2 | 6.4 | 1.2 | - | 1.2 |
| Impairment of goodwill on associates | - | - | - | - | (3.9) | (3.9) |
| Share of results of associates | 3.2 | 3.2 | 6.4 | 1.2 | (3.9) | (2.7) |
| Profit before interest and tax | 149.4 | (0.9) | 148.5 | 133.8 | (9.6) | 124.2 |
| Investment income | 13.6 | - | 13.6 | 11.8 | - | 11.8 |
| Finance costs | (30.3) | 1.7 | (28.6) | (29.4) | 6.9 | (22.5) |
| Net financial items | (16.7) | 1.7 | (15.0) | (17.6) | 6.9 | (10.7) |
| Profit before tax | 132.7 | 0.8 | 133.5 | 116.2 | (2.7) | 113.5 |
| Tax | (35.2) | (3.9) | (39.1) | (33.3) | (0.1) | (33.4) |
| Profit after tax | 97.5 | (3.1) | 94.4 | 82.9 | (2.8) | 80.1 |
Further details of the underlying adjustments are provided in note 5.
There is no material difference between revenue determined by origin and that determined by destination.
An analysis of revenue and segment result by these geographical areas on a constant currency basis is set out below:
| 2007 £m |
2006 £m Constant Currency |
|
|---|---|---|
| Revenue: | ||
| Europe, Middle East & Africa | 677.5 | 599.8 |
| Americas | 286.2 | 246.5 |
| Asia-Pacific | 142.7 | 122.7 |
| Revenue | 1,106.4 | 969.0 |
| £m Underlying |
£m Adjustments |
2007 £m Statutory |
£m Constant Currency Underlying |
£m Constant Currency Adjustments |
2006 £m Constant Currency Statutory |
|
|---|---|---|---|---|---|---|
| Segment result: | ||||||
| Europe, Middle East & Africa | 122.9 | (0.4) | 122.5 | 107.6 | (4.0) | 103.6 |
| Americas | 32.4 | (0.6) | 31.8 | 28.1 | (0.2) | 27.9 |
| Asia-Pacific | 14.0 | (3.1) | 10.9 | 13.9 | (1.5) | 12.4 |
| Corporate costs | (23.1) | - | (23.1) | (19.4) | - | (19.4) |
| Operating profit | 146.2 | (4.1) | 142.1 | 130.2 | (5.7) | 124.5 |
| Share of results of associates | 3.2 | 3.2 | 6.4 | 1.2 | - | 1.2 |
| Impairment of goodwill on associates | - | - | - | - | (3.9) | (3.9) |
| Share of results of associates | 3.2 | 3.2 | 6.4 | 1.2 | (3.9) | (2.7) |
| Profit before interest and tax | 149.4 | (0.9) | 148.5 | 131.4 | (9.6) | 121.8 |
Further segment disclosures, including certain asset and liability information for the Group’s geographical segments, are set out below:
| 2007 £m |
2006 £m |
|
|---|---|---|
| Segment assets: | ||
| Europe, Middle East & Africa | 2,221.8 | 1,680.9 |
| Americas | 742.0 | 695.1 |
| Asia-Pacific | 423.5 | 326.9 |
| 3,387.3 | 2,702.9 | |
| Investment in eVerger joint venture | 0.5 | 2.8 |
| Corporate operations | 8.2 | (25.1) |
| Total assets | 3,396.0 | 2,680.6 |
| Segment liabilities | ||
| Europe, Middle East & Africa | (1,783.5) | (1,360.7) |
| Americas | (461.5) | (451.0) |
| Asia-Pacific | (274.7) | (201.9) |
| (2,519.7) | (2,013.6) | |
| Corporate operations | (562.9) | (450.4) |
| Total liabilities | (3,082.6) | (2,464.0) |
| Net assets | 313.4 | 216.6 |
| Capital expenditure: | ||
| Europe, Middle East & Africa | 11.5 | 10.9 |
| Americas | 4.4 | 5.9 |
| Asia-Pacific | 2.7 | 3.0 |
| Corporate operations | 0.4 | 0.8 |
| Capital expenditure | 19.0 | 20.6 |
5. Underlying results
Underlying results are stated before the following items:
| 2007 £m |
2006 £m |
|
|---|---|---|
| VAT liability in Germany | - | (3.8) |
| Impairment of goodwill | (2.0) | (1.4) |
| Loss on disposal of subsidiaries | (0.9) | - |
| Amortisation of purchased intangible assets | (1.2) | (0.5) |
| Impact on operating profit | (4.1) | (5.7) |
| Profit on deemed disposal of part of shareholding in associate | 3.6 | - |
| Loss on disposal of associate | (0.4) | - |
| Impairment of goodwill on associates | - | (3.9) |
| Impact on profit before interest and tax | (0.9) | (9.6) |
| Unrealised gains/(losses) on non-hedge derivatives | 3.2 | (0.1) |
| Fair value (losses)/gains on liabilities in respect of put option agreements | (1.5) | 7.0 |
| Impact on profit before tax | 0.8 | (2.7) |
| Deferred tax on goodwill | (3.9) | (1.5) |
| Tax credit on VAT liability in Germany | - | 1.4 |
| Impact on profit after tax | (3.1) | (2.8) |
Impairment of goodwill relates to the write-off of the goodwill of two of the Group's subsidiaries, one in China and one in Asia (2006: India). The loss on disposal of subsidiaries relate to the disposal of Chusen Media in Japan and Posterscope India. The loss on disposal of associate relates to the disposal of Percept D'Mark in India.
In 2006, The VAT liability in Germany related to VAT previously deducted by Aegis Media Germany in its VAT returns in respect of invoices received which have subsequently been identified as falsified invoices.
6. Operating profit
Operating profit has been arrived at after charging/(crediting):
| 2007 £m |
2006 £m |
|
|---|---|---|
| Net foreign exchange gains | (3.1) | (3.1) |
| Impairment of goodwill | 2.0 | 5.3 |
| Depreciation of property, plant and equipment | 19.1 | 19.1 |
| Amortisation of intangible assets included in operating expenses | 7.6 | 7.0 |
| Staff costs (see note 7) | 533.4 | 470.8 |
A detailed analysis of auditors' remuneration charged to operating profit is provided below:
| 2007 £m |
2007 % |
2006 £m |
2006 % |
|
|---|---|---|---|---|
| Audit fees | ||||
| - Fees payable to the Company's auditors for the audit of the Company's annual accounts |
0.5 | 15.6% | 0.2 | 5.6% |
| - Fees payable to the Company's auditors and their associates for other services to the Group |
1.4 | 43.8% | 1.3 | 36.1% |
| - The audit of the Company's subsidiaries pursuant to legislation |
0.9 | 28.1% | 0.9 | 25.0% |
| Total audit fees | 2.8 | 87.5% | 2.4 | 66.7% |
| Non-audit fees | ||||
| - Other services pursuant to legislation (interim review) | 0.1 | 3.1% | 0.1 | 2.8% |
| - Tax services | 0.1 | 3.1% | 0.8 | 22.2% |
| - Corporate finance services | 0.0% | 0.1 | 2.8% | |
| - Other services | 0.2 | 6.3% | 0.2 | 5.5% |
| Total non-audit fees | 0.4 | 12.5% | 1.2 | 33.3% |
| Total fees paid to the Company's auditors | 3.2 | 100.0% | 3.6 | 100.0% |
A description of the work of the Audit Committee is set out in the corporate governance statement and includes an explanation of how auditor objectivity is safeguarded when non-audit services are provided by the auditors.
7. Staff costs
The average monthly number of employees was:
| 2007 Number |
2006 Number |
|
|---|---|---|
| Media communications | 8,475 | 7,614 |
| Market research | 5,773 | 5,905 |
| Central | 46 | 47 |
| 14,294 | 13,566 |
Staff costs consist of:
| 2007 £m |
2006 £m |
|
|---|---|---|
| Wages and salaries | 461.1 | 402.2 |
| Social security costs | 62.0 | 59.0 |
| Other pension costs | 10.3 | 9.6 |
| 533.4 | 470.8 |