REG - Pearson PLC - Final Results <Origin Href="QuoteRef">PSON.L</Origin> - Part 3
24/02/2017 07:06
- Part 3: For the preceding part double click ID:nRSX7401Xb
2016
Investment in unlisted securities - - - 65 - 65
Marketable securities 10 - - - - 10
Derivative financial instruments - 171 - - - 171
Total financial assets held at fair value 10 171 - 65 - 246
Derivative financial instruments - (264) - - - (264)
Total financial liabilities held at fair value - (264) - - - (264)
2015
Investment in unlisted securities - - - 143 - 143
Marketable securities 28 - - - - 28
Derivative financial instruments - 110 - - - 110
Total financial assets held at fair value 28 110 - 143 - 281
Derivative financial instruments - (165) - - - (165)
Total financial liabilities held at fair value - (165) - - - (165)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2016
15. Classification of assets and liabilities measured at fair value
continued
The fair values of level 2 assets and liabilities are determined by reference
to market data and established estimation techniques such as discounted cash
flow and option valuation models. Within level 3 assets and liabilities, the
fair value of available for sale assets is determined by reference to the
financial performance of the underlying asset and amounts realised on the sale
of similar assets, while the fair value of other liabilities represents the
present value of the estimated future liability. There have been no transfers
in classification during the year.
The market value of Pearson's bonds is £2,381m (2015: £2,245m) compared to
their carrying value of £2,420m 2015: £2,284m). For all other financial assets
and liabilities, fair value is not materially different to carrying value.
Movements in fair values of level 3 assets and liabilities are shown in the
table below:
2016 2015
all figures in £ millions
Investments in unlisted securities
At beginning of year 143 45
Exchange differences 8 3
Additions 6 101
Fair value movements - -
Disposals (92) (6)
At end of year 65 143
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2016
16. Cash flows
2016 2015
all figures in £ millions
Reconciliation of (loss) / profit for the year to net cash (used in) / generated from operations
(Loss) / profit for the year (2,335) 823
Income tax (222) (24)
Depreciation, amortisation and impairment charges 2,912 1,200
Net loss / (profit) on disposal of businesses and fixed assets 40 (1,194)
Net finance costs 60 29
Share of results of joint ventures and associates (97) (68)
Share-based payment costs 22 26
Net foreign exchange adjustment 43 22
Pre-publication (19) (57)
Inventories 17 10
Trade and other receivables 156 (99)
Trade and other liabilities 61 (80)
Retirement benefit obligations (106) (57)
Provisions (10) (13)
Net cash generated from operations 522 518
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2016
16. Cash flows continued
2016 2015
all figures in £ millions note
Reconciliation of net cash generated from operations to closing net debt
Net cash generated from operations 522 518
Dividends from joint ventures and associates 131 162
Net purchase of PPE including finance lease principal payments (90) (85)
Net purchase of intangible assets (157) (160)
Add back: cost of major restructuring paid 167 -
Add back: special pension contribution 90 -
Operating cash flow 663 435
Operating tax paid (63) (129)
Net operating finance costs paid (51) (51)
Operating free cash flow 549 255
Cost of major restructuring paid (167) -
Special pension contribution (net of tax) (72) -
Non-operating tax paid - (103)
Free cash flow 310 152
Dividends paid (including to non-controlling interests) (424) (423)
Net movement of funds from operations (114) (271)
Acquisitions and disposals 19 1,395
Purchase of treasury shares (27) (23)
Loans repaid 14 7
New equity 7 11
Other movements on financial instruments 4 (1)
Net movement of funds (97) 1,118
Exchange movements on net debt (341) (133)
Total movement in net debt (438) 985
Opening net debt (654) (1,639)
Closing net debt 14 (1,092) (654)
Operating cash flow and free cash flow are non-GAAP measures and have been
disclosed as they are part of Pearson's corporate and operating measures.
These measures are presented in order to align the cash flows with
corresponding adjusted profit measures.
Special pension contributions of £90m (£72m net of tax) in 2016 relate to the
sale of the FT Group.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTScontinued
for the year ended 31 December 2016
17. Return on invested capital (ROIC)
2016 2015
all figures in £ millions
Adjusted operating profit 635 723
Less: operating tax paid (63) (129)
Return 572 594
Average: Goodwill 6,987 6,419
Average: Other non-current intangibles 2,481 2,296
Average: Intangible assets - Pre-publication 926 821
Average: Tangible fixed assets and working capital 1,070 781
Average: Total invested capital 11,464 10,317
ROIC 5.0% 5.8%
5.0%
5.8%
ROIC is a non-GAAP measure and has been disclosed as it is part of Pearson's
key business performance measures. ROIC is used to track investment returns
and to help inform capital allocation decisions within the business. Average
values for total invested capital are calculated as the average monthly
balance for the year.
18. Contingencies
There are contingent Group liabilities that arise in the normal course of
business in respect of indemnities, warranties and guarantees in relation to
former subsidiaries and in respect of guarantees in relation to subsidiaries,
joint ventures and associates. In addition there are contingent liabilities of
the Group in respect of legal claims, contract disputes, royalties, copyright
fees, permissions and other rights. None of these claims are expected to
result in a material gain or loss to the Group.
19. Related parties
At 31 December 2016 the Group had loans to Penguin Random House (PRH) of £33m
(2015: £47m) which were unsecured with interest calculated based on market
rates. The loans are provided under a working capital facility and fluctuate
during the year. The loans outstanding at 31 December 2016 were repaid in
their entirety in January 2017. At 31 December 2016, the Group also had a
current asset receivable from PRH of £21m (2015: £27m) arising from the
provision of services. Service fee income from PRH was £4m in 2016 (2015:
£16m).
Apart from transactions with the Group's associates and joint ventures noted
above, there were no other material related party transactions and no
guarantees have been provided to related parties in the year.
20. Events after the balance sheet date
On 18 January 2017, Pearson announced the intention to issue an exit notice to
Bertelsmann regarding the 47% associate investment in PRH with a view to
selling the stake or recapitalizing the business and extracting a dividend.
On 24 February 2017, Pearson announced the intention to trigger the early
repayment option on its $550m 6.25% Global Dollar bonds 2018. There were no
other significant post balance sheet events.
This information is provided by RNS
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