Experian 2012 Annual Report Download - page 46

44 Experian Annual Report 2012 Business review
Capital risk management
Our objectives in managing capital are:
•To safeguard the ability to continue as a
going concern in order to provide returns
for shareholders and benefits for other
stakeholders; and
•To maintain an optimal capital structure
and cost of capital.
We remain committed to:
•A prudent but efficient balance sheet; and
•A target gearing ratio of 1.75 to 2.0 times
EBITDA, consistent with a desire to retain
a strong investment grade credit rating.
To maintain or adjust the capital structure,
we may:
•Adjust the amount of dividends paid to
shareholders;
•Return capital to shareholders;
•Issue or purchase shares; or
•Sell assets to reduce net debt.
Going concern
The Board formed a judgment at the time
of approving the Group and the parent
company financial statements that there
was a reasonable expectation that the Group
and the Company had adequate resources
to continue in operational existence for
the foreseeable future. In arriving at this
conclusion the Board took account of:
•Current and anticipated trading
performance which is the subject of
detailed comment in the business review;
•Current and anticipated levels of
borrowings and the availability of the
committed borrowing facilities which are
stated above; and
•Exposures to and management of financial
risks which are summarised above and
detailed in the notes to the Group financial
statements.
For this reason, the going concern basis
continues to be adopted in the preparation of
the Group and the parent company financial
statements.
Use of non-GAAP
financial information
We have identified certain measures that
we believe will assist understanding of
the performance of the Group. As these
measures are not defined under IFRS,
they may not be directly comparable with
other companies’ adjusted measures. The
non-GAAP measures are not intended to
be a substitute for, or superior to, any IFRS
measures of performance but management
has included them as these are considered
to be important comparables and key
measures used within the business for
assessing performance. Such non-GAAP
measures that are included within the Group
financial statements are detailed in note 7 to
those financial statements. Further non-
GAAP measures and reconciliations of those
measures are set out below.
Earnings before interest, tax, depreciation and
amortisation (‘EBITDA’):
EBITDA is defined as profit before
amortisation of acquisition intangibles,
acquisition expenses, goodwill impairments,
adjustments to contingent consideration,
charges in respect of the demerger-related
equity incentive plans, exceptional items, net
finance costs, tax, discontinued operations,
depreciation and other amortisation. It
includes the Group’s share of continuing
associates’ pre-tax results.
Discontinuing activities:
Experian defines discontinuing activities
as businesses sold, closed or identified
for closure during a financial year. These
are treated as discontinuing activities for
both revenue and EBIT purposes. The prior
period, where shown, is restated to disclose
separately the results of discontinuing
activities. This financial measure differs from
the definition of discontinued operations set
out in IFRS 5, which defines a discontinued
operation as a component of an entity that
has either been disposed of, or is classified
as held for sale, and is: (i) a separate major
line of business or geographical area of
operations; (ii) part of a single plan to dispose
of a major line of business or geographical
area of operations; or (iii) a subsidiary
acquired exclusively with a view to resale.
Continuing activities:
Businesses trading at 31 March 2012 that
have not been disclosed as discontinuing
activities are treated as continuing activities.
Total growth:
This is the year-on-year change in the
performance of Experian’s activities. Total
growth at constant exchange rates removes
the translational foreign exchange effects
arising on the consolidation of Experian’s
activities.
Organic growth:
This is the year-on-year change in the
revenue of continuing activities, at constant
transactional and translation exchange rates,
excluding acquisitions (other than affiliate
credit bureaux) until the first anniversary date
of consolidation.
Constant exchange rates:
In order to illustrate its organic performance,
Experian discusses its results in terms of
constant exchange rate growth, unless
otherwise stated. This represents growth
calculated as if the exchange rates used
to determine the results had remained
unchanged from those used in the previous
year.
Free cash flow:
Free cash flow is derived from operating
cash flow by excluding net interest and tax
paid together with dividends paid to non-
controlling interests. Operating cash flow
is defined in note 7 to the Group financial
statements.
Comparative financial information
The comparison shopping and lead
generation businesses are now classified as
discontinued operations and the comparative
information in this report has been re-
presented as appropriate.
Roundings
Certain financial data have been rounded
within this report. As a result of this rounding,
the totals of data presented may vary slightly
from the actual arithmetic totals of such data.
Financial review continued