Experian 2009 Annual Report Download - page 92

90 Experian Annual Report 2009
2. Basis of preparation and signicant accounting policies (continued)
The following are the key non-GAAP measures identied by the Group:
Benchmark prot before tax (‘Benchmark PBT’)
Benchmark PBT is dened as prot before amortisation of acquisition intangibles, goodwill impairments, charges in respect
of the demerger-related equity incentive plans, exceptional items, nancing fair value remeasurements and tax. It includes the
Group’s share of associates’ pre-tax prot.
Earnings before interest and tax (‘EBIT’)
EBIT is dened as prot before amortisation of acquisition intangibles, goodwill impairments, charges in respect of the
demerger-related equity incentive plans, exceptional items, net nancing costs and tax. It includes the Group’s share of
associates’ pre-tax prot.
Benchmark earnings per share (‘Benchmark EPS’)
Benchmark EPS represents Benchmark PBT less attributable tax and minority interests divided by the weighted average
number of shares in issue, and is disclosed to indicate the underlying protability of the Group.
Exceptional items
The separate reporting of non-recurring exceptional items gives an indication of the Group’s underlying performance.
Exceptional items are those arising from the prot or loss on disposal of businesses, closure costs of major business units or
costs of signicant restructuring programmes. All other restructuring costs are charged against EBIT in the segments in which
they are incurred.
Operating cash ow
Operating cash ow is calculated as cash generated from operations adjusted for outows in respect of the purchase of
property, plant and equipment and other intangible assets and adding dividends from associates but excluding any cash
inows and outows in respect of exceptional items. It is dened as EBIT less changes in working capital, plus depreciation/
amortisation, less capital expenditure, less prot retained in associates.
Net debt
Net debt is calculated as total debt less cash and cash equivalents and other highly liquid bank deposits with original
maturities greater than three months. Total debt includes loans and borrowings (and the fair value of derivatives hedging loans
and borrowings), overdrafts and obligations under nance leases. Accrued interest is excluded from net debt.
3. Financial risk management
Financial risk factors
The Group’s activities expose it to a variety of nancial risks: market risk (including foreign exchange risk, interest rate risk
and price risk), credit risk and liquidity risk. The Group’s nancial risk management focuses on the unpredictability of nancial
markets and seeks to minimise potential adverse effects on the Group’s nancial performance. The Group seeks to reduce its
exposure to nancial risks and uses derivative nancial instruments to hedge certain risk exposures. The Group also ensures
surplus funds are managed and controlled in a prudent manner which will protect capital sums invested and ensure adequate
short-term liquidity, whilst maximising returns.
Market risk
Foreign exchange risk
The Group operates internationally and is exposed to foreign exchange risk from future commercial transactions, recognised
assets and liabilities and investments in, and loans between, undertakings with different functional currencies. The Group
manages such risk, primarily within undertakings whose functional currencies are sterling, by borrowing in the relevant foreign
currencies and using forward foreign exchange contracts. The principal transaction exposures are to the US dollar and the euro.
In view of the prole of foreign exchange transaction exposures and an assessment of reasonable possible changes in the
principal exposures, the Group’s sensitivity to foreign exchange risk can be quantied as follows:
At 31 March 2009, if the US dollar had strengthened/weakened by 9% (2008: 6%) against sterling, with all other
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variables held constant, prot for the nancial year would have been unchanged (2008: US$1m higher/lower), and other
components of equity would have been unchanged.
At 31 March 2009, if the euro had strengthened/weakened by 8% (2008: 3%) against sterling, with all other variables held
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constant, prot for the nancial year would have been US$2m (2008: US$1m) higher/lower, and other components of
equity would have been unchanged.
The Group has investments in undertakings with other functional currencies, whose net assets are exposed to foreign
exchange translation risk. In order to reduce the impact of currency uctuations on the value of such entities, the Group has
a policy of borrowing in US dollars and euros, as well as in sterling and of entering into forward foreign exchange contracts in
the relevant currencies. The above sensitivity analysis excludes the impact of foreign exchange risk on the translation of the net
assets of such undertakings.
Notes to the Group nancial statements continued
Financial statements