Going concern

Our going concern assessment focuses on immediately available sources of liquidity to fund our anticipated trading pattern, plus anticipated acquisition spend, returns to shareholders and capital investment, ensuring we always maintain a comfortable margin of headroom in case of the unexpected. We also perform a review of indicators typical of emerging going concern issues, and have identified none.

Viability

The Group has continued to demonstrate its resilient business model and diverse strategy, both of which are described earlier in the Strategic report. They exemplify our underlying purpose to create a better tomorrow, how we create value for our stakeholders and communities, and how our data and analytics are helping address the changing needs of consumers and businesses. Our strategy has enabled our business to grow and achieve consistently good financial results over the last decade, despite changes in the economic cycle.

Our viability assessment focuses on the expected future solvency of the Group in the face of more severe, but plausible, unexpected events. We use the liquidity modelling as a base, and layer on the effects of downside scenarios to assess the magnitude and practicality of measures we could take to continue to trade in the face of such events. We are not expecting the current economic environment, under any plausible scenario, to develop into a scenario that could threaten our viability.

We consider current-year business performance and our future prospects by conducting a regular cycle of strategic planning, budgeting and forecasting. These processes appraise revenue, Benchmark EBIT, cash flows, dividend cover, committed and forecast funding, liquidity positions and other key financial ratios, including those relevant to maintaining our investment-grade credit ratings.

Solvency

The Group had:

• undrawn committed bank borrowing facilities of US$2.6bn at 31 March 2022
• only one borrowing facility covenant, requiring Benchmark EBIT to exceed three times net interest expense before financing fair value remeasurements (as at 31 March 2022 our cover is 16 times)
• Benchmark operating cash inflows of US$1.8bn and Benchmark interest expense of US$0.1bn for FY22.

Assessment period

There are a wide variety of time horizons relevant to managing our business and some of these are highlighted in the chart below. In conducting our viability assessment, we have focused on a three-year timeline because we believe our three-year financial planning process provides the strongest basis for reviewing the outlook for our business beyond the current financial year.

The assessment process

While we assess our prospects throughout our planning cycle, we specifically review our three-year growth expectations and the external environment as part of the annual strategic planning process. The Board participates in this review, using the January Strategy meeting as a focal point.

Assessment of viability

The Group continues to be subject to its principal risks, which we submit to a robust process of continuous reassessment (see the principal risks section in the Strategic report).

To assess the Group’s resilience to adverse outcomes, its forecast performance over the three-year period was sensitised to reflect a series of scenarios based on the Group’s principal risks. This assessment included reasonable worst-case scenarios in which certain of the Group’s principal risks manifest to a ‘severe but plausible’ level. The scenarios for which the impacts were applied, are shown below.

Our modelling shows that:

• under our harshest ‘severe but plausible’ scenario (which could cost us around US$1bn over three years), we would comfortably maintain sufficient drawn and undrawn borrowing capacity and satisfy all borrowing facility covenants.
• further significant headroom could be made available by scaling back capital investment or operating expenditure, reducing returns to shareholders, or increasing our target leverage range.
• in all scenarios our debt covenants would be comfortably satisfied.

The results of the scenario-testing show that, due to our diversified nature – which includes significant counter-cyclical protection, the resilience of the core business, its substantial free cash flows and its strong investment-grade credit rating – we would withstand the considered scenarios were these to occur during the forecast period.

The reverse stress-test showed that the level of fall in cash flows required during the viability assessment period before we would become unviable was over eight times the fall modelled in the most severe plausible downturn scenario.

Viability statement and key assumptions

Based on their assessment of prospects and viability, and the Board’s robust assessment of the emerging and principal risks, the directors confirm that they have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the three-year period ending 31 March 2025. Looking further forward, the directors have considered whether they are aware of any specific relevant factors beyond the three-year horizon that would threaten the long-term financial stability of the Group and have confirmed that, other than some residual uncertainty surrounding COVID-19, they are not aware of any.

In making this statement, the directors have made the following key assumptions:

• the Group continues to achieve strong cash flow conversion, and maintains its investment-grade credit rating such that funding in the form of capital markets debt, committed bank borrowing facilities or alternatives is available in all plausible market conditions.
• effective tax rates remain broadly stable (before the impact of any changes of legislation) over the medium term.
• in assessing viability, it is assumed that the detailed risk-management process as outlined on page 86 captures all plausible risks, and that the mitigating actions are implemented on a timely basis and have the intended impact.
• impacts of future waves of COVID-19 – lock-downs and trading restrictions – will not be more prolonged or significant than those already experienced.

Strategic report

This Strategic report was approved by a duly authorised committee of the Board of directors on 17 May 2022 and signed on its behalf by:

Charles Brown
Company Secretary

17 May 2022