7th Mar 2005 07:00
Incisive Media PLC07 March 2005 Embargoed until 07.00 07 March 2005 INCISIVE MEDIA PLC PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2004 Incisive Media plc announces full year results for the year ended 31 December2004. Incisive Media is a fast growing specialist business information provideroperating in six core high value, growth markets: risk management, retailinvestment, insurance, mortgage, financial IT/market data and private equity.The Group delivers key information to defined target audiences across a varietyof platforms including magazines, conferences and exhibitions, websites,newsletters and databases. Incisive Media is focused on building new and innovative products and developingstrong partnerships with clients. Incisive Media's market-leading brands includeRisk, Investment Week, Post Magazine, Your Mortgage and Unquote. FINANCIAL AND OPERATING HIGHLIGHTS 2004 2003 Change £'000 £'000 % Turnover 46,492 35,365 +31% PROFIT AS REPORTED ON A STATUTORY BASIS Profit before interest and tax 7,659 5,127 +49% Operating margin 16.5% 14.5% Profit before tax 5,304 3,554 +49% Profit after tax and minority interests 2,523 1,745 +45% Basic earnings per share 2.85 2.42 +18%Diluted earnings per share 2.79 2.39 +17% PROFIT AS REPORTED ON AN ADJUSTED* BASIS Adjusted profit before interest and tax 12,093 8,223 +47% Adjusted operating margin 26.0% 23.3% Adjusted profit before tax 9,738 6,650 +46% Adjusted profit after tax and minority interests 7,212 4,841 +49% Adjusted basic earnings per share 8.13 6.72 +21%Adjusted diluted earnings per share 7.96 6.62 +20% Adjusted* = before goodwill DIVIDENDS Final dividend 1.25 1.00 +25%Total dividend 2.00 1.60 +25% • Underlying growth in all core divisions • Turnover increased by 31% to £46.5m • Profit before tax and goodwill up 47% to £9.7m • Increased operating margin before goodwill to 26% • Basic earnings per share before goodwill up 21% • 25% increase in total dividend • Continued organic growth with further new launches in the year • Acquisition of Initiative Europe, the leading data provider to theprivate equity sector Mike Masters, Chairman of Incisive Media plc, commented: "Incisive Media's results are built on strong market leading brands serving highvalue, growth markets. We continue to ensure that we deliver need to knowinformation, and to provide measurable marketing solutions to our clients. Weexpect to continue to achieve strong levels of organic growth again in 2005, andwe will also actively look for value building acquisitions which fit within thetight definition of our acquisitions strategy. I have every reason to believe that, within a continuing favourable environment,these strengths will deliver further growth in 2005." Tim Weller, Chief Executive of Incisive Media plc, commented: "I am delighted that the performance of the Group in 2004 has again proven thestrength of our business model and strategy, as we have successfully deliveredanother year of very strong EPS growth. This performance could not have been delivered without the excellent staff atIncisive Media. We take great pride in the high quality products that areconsistently produced around the whole Group, not only in terms of editorial anddesign excellence, but also in terms of the innovation and commercial relevancefor our clients. I would like to add my personal thanks to all the staff fortheir continued hard work and loyalty. After difficult trading conditions in 2003, we have seen recovery in the RiskManagement, Retail Investment and Financial IT divisions as well as continuedgrowth in the Insurance and Mortgage divisions. All of the core divisionsshowed growth year on year, and the opening months of 2005 have also startedpositively. Having added another related division in Private Equity, whichended the year strongly, the outlook is certainly encouraging with growth andrecovery continuing steadily. We continue to develop our business model and this, along with the diversity ofthe specific markets served, means we have a solid platform from which to growthe business further through both organic means and acquisition. I thereforefeel very positive about the future prospects for the Company in 2005 and beyond." END For further information, please contact: Tim Weller Chief Executive +44 (0) 20 7484 9970 Incisive Media Plc [email protected] www.incisivemedia.com Anthony Peregrine +44 (0) 20 7484 9983Payne Communications +44 (0) 7930 643 983 [email protected] Notes: • There will be an analyst briefing at 11.00am on Monday 07 March, 2005at the offices of Investec, 2 Gresham Street, London EC2V 7QP. • Photographs of Tim Weller and Jamie Campbell-Harris are available atwww.incisivemedia.com INCISIVE MEDIA PLC Preliminary Results for the Year Ended 31 December 2004 Incisive Media plc announces full year results for the year ended 31 December2004. Incisive Media is a fast growing specialist business informationprovider, delivering key information to defined target audiences across avariety of platforms including magazines, conferences and exhibitions, websites,newsletters and databases. Incisive Media is focused on high value, growthmarkets, building new and innovative products and developing strong partnershipswith our clients. Incisive Media's market leading brands include Risk,Investment Week, Post Magazine, Your Mortgage and Unquote. CHAIRMAN'S STATEMENT I am delighted to announce another year of strong growth for the Group, withdiluted earnings per share before goodwill up 20% at 7.96p (2003: 6.62p). Overthe past four years we have increased earnings before goodwill at a compoundannual growth rate of 22% and taken operating margins to 26%, two key measuresthat are well ahead of our listed peer group. On a statutory reporting basis,diluted earnings per share after goodwill increased in the year by 17% from2.39p to 2.79p. Revenues were up 31% to £46.5m (2003: £35.4m). While this includes the effectof acquisitions made in 2003 and 2004, underlying revenues increased by 8%, withpositive growth in all core divisions. Highlights included growth of more than25% in the mortgage division, an almost 20% increase in advertising revenues forInvestment Week (our principal title in the Retail Investment division) and astrong end to the year for our newly acquired Private Equity business. Organic growth, as you will read in your Chief Executive's report, is extremelyimportant to the business. If, over the same four-year period acquired anddiscontinued revenues are excluded, we have demonstrated compound annual growthin organic revenues of 10%. In 2004 we launched Structured Products, a newmonthly magazine, a web based conference series, "Conjecture", as well as anumber of new events, and increased the frequency of several titles. Operating profit before goodwill was up 47% to £12.10m (2003: £8.22m) andoperating profit after goodwill was up 49% to £7.66m (2003: £5.13m). As statedabove, Incisive Media's ability to continue to grow margins year on year hasalso differentiated the Company from its immediate peer group. This year was noexception, with margins improved by 3 percentage points to 26%. This wasdespite continued substantial investment both in new products, and in new staffto support the existing leading products in the Group as recovery continues. With a net interest charge of £2.36m (2003: £1.57m), profit before tax andgoodwill increased by 47% to £9.74m (2003: £6.65m) and profit before tax by 49%to £5.30m (2003: £3.55m). On the back of these strong results, the directors arepleased to propose a 25% increase in the final dividend to 1.25p (2003: 1.00p),which if approved at the Annual General Meeting will be paid on 18 May 2005 toshareholders on the register as at 1 April 2005. This will bring the full yeardividend to 2.00p (2003: 1.60p), an increase of 25%. The acquisition of Initiative Europe, the pre-eminent provider of data to theprivate equity sector in Europe, was a major highlight of the year. We aredelighted to have added this high quality business to the Incisive Media stableas it brings to the Group new publishing disciplines, with a strong data drivensubscription base. The private equity market sector it addresses iscomplementary to the financial sectors already served by the Group. We willapply our usual business model and expand further into the private equity andalternative asset markets by extending the market-leading brands we haveacquired into adjacent territories and market sectors using a variety of media.For example, we held our first successful private equity conference in January2005. The acquisition of Initiative Europe was made for an initial cash payment of£16m, with a further £2m now payable in 2005 following the successfulachievement of their earn out targets in 2004. Matching Hat, acquired in 2001,also met their final earn out targets in 2004 which will result in a finalpayment of £2.2m in April 2005, through the issue of loan notes. There are nofurther earn-out payments, but including these final deferred considerationpayments, net debt has increased to £32.8m at the year end (2003: £28.9m). Cashconversion for the year at just below 100% is a significant improvement on 2003(2003: 63%) and interest cover in the year was a comfortable 5.14 times (2003:5.23). Following a difficult year in 2003, trading conditions have improved,particularly in the investment and mortgage divisions. Having said that, theperformance this year goes beyond purely economic factors and is a tribute tothe talented and hard working staff at Incisive Media. I thank them, on behalfof the Board and shareholders, for their outstanding effort and loyalty. Incisive Media's results are built on strong market leading brands serving highvalue, growth markets.. We continue to ensure that we deliver need to knowinformation, and to provide measurable marketing solutions to our clients. Weexpect to continue to achieve strong levels of organic growth again in 2005, andwe will also actively look for value building acquisitions which fit within thetight definition of our acquisitions strategy. I have every reason to believe that, within a continuing favourable environment,these strengths will deliver further growth in 2005. Mike Masters Chairman CHIEF EXECUTIVE'S REPORT I am delighted that the performance of the Group in 2004 has again proven thestrength of our business model and strategy, as we have successfully deliveredanother year of very strong EPS growth. It is now ten years since we foundedthe Company to launch Investment Week, and now is a good point at which toreview our longer-term strategy and achievements before moving on to a moredetailed review of progress in 2004. Since our foundation, but particularly since floating the Company four yearsago, we have concentrated on delivering value to our shareholders by producinghigh profit growth with a major focus on both operating margins and EPS. Thereare four key aspects of our business that enable us to achieve this: • We have high quality, market leading brands operating in high valuegrowth sectors; • We have a very experienced management team at Board level and in eachdivision of the business, with many years in business to business publishingbetween them; • We have a very strong record of organic growth and have consistentlyinvested in the business to ensure that this flourishes; • We have strict acquisition criteria, both financial and qualitative,that ensure that we do not dilute the high quality nature of the assets that wecurrently have in the portfolio. Each of these factors helps us to grow the business, and continue to operate athigh and sustainable margins despite the investments we continually make in thebusiness. High quality markets, high quality brands Our 'surround' strategy is to serve large, growing and information hungrymarkets with focused brands that will provide measurable marketing solutions.We have no preference towards a specific delivery platform for these brandswhich can be in print, in person or online. Our objective is to apply a market focused approach and to deliver to ourtargeted communities high quality need to know information via a number ofdifferent platforms. We aim to publish narrow and deep, surrounding the marketsector with traditional as well as newer information vehicles. Our brands arealready delivered through a variety of different media. For example, in printwe publish magazines, books, newsletters, journals, directories and contractmagazines; in person we organise conferences and seminars, forums, awardsevenings and training courses, and online we publish via websites, e-mailbulletins, online research and data analysis tools. The core communities that we currently serve in Risk Management, RetailInvestment, Insurance, Mortgage, Private Equity and Financial IT are clearlylarge, growth and long-term markets, and while Incisive Media currently focuseson financial markets, we are also keen to expand into other informationintensive sectors where we can apply our successful business model. Experienced, high quality team The most important part of our business is without doubt our staff. We takegreat pride in the high quality products that are consistently produced aroundthe whole Group, not only in terms of editorial and design excellence, but alsoin terms of the innovation and commercial relevance for our clients. The factthat our brands and editorial teams consistently win awards year after year is atestament to this quality. Supporting the Chairman's comments, I would like toadd my personal thanks to all the staff of Incisive Media for their continuedhard work and loyalty. The quality of our personnel is achieved through attracting and retaining thevery best people. All of the Group's senior management, including thedivisional managing directors and publishers have been with Incisive Media (oran acquired company) for at least five years, and in most cases a lot longer.The combined experience in business-to-business publishing extends into manyhundreds of years! Strong organic growth Whilst we have successfully integrated acquisitions which have supplemented ourgrowth, and have provided us with fresh opportunities, we continue to deliverorganic revenue growth at a rate of 10% per annum, and after ten years, onethird of total group revenues is home grown. We actively develop new productsand brand extensions from our existing portfolio. In the past two years, forexample, our new product innovation includes the magazine launches of US Creditand Structured Products, the launch of an internet based research tool -Incisive Research, and an online conference facility - Conjecture. We have alsolaunched several new events with the result that, across all divisions in theGroup, we now organise over 150 events in total. Strict acquisition criteria We have consistently applied our strict qualitative and financial criteria toany potential acquisition. On a qualitative basis we look for high quality brands or assets that are marketleading and serve attractive vertical sectors. The core of the business willhave robust earnings and extensive brand reach. Whilst historically the mediumfor us has been a magazine, we are platform neutral so long as the keyacquisition criteria are met. An example of this approach is the acquisition ofInitiative Europe, a data driven business. On a financial basis we use a number of different measures to assess anacquisition, including discounted cash flows and precedent transactions. Wealso look to ensure, even without factoring in potential soft synergies, thatearnings are enhanced in the first full financial year post acquisition. Wehave rejected potential acquisitions on the basis that we could not, against ourfinancial criteria, justify the asking price despite the high quality of assets. But likewise we have turned down potential purchases due to lack of long termquality in the assets, even when a short-term financial case could be made. Sustainable high margins Most of the strategic factors referred to above are key to our ability todeliver, now and in the future, consistently high margins. By publishing narrowbut deeply into a given market, and by serving a focused audience, we can reducethe cost of production, while at the same time justifying a premium ratedproduct. The result is high gross margins by brand which give us the ability todeliver higher total operating margins across the Group. We have also avoidedloss making titles and a portfolio of small products, which has also helped usdeliver strong margins, while enabling us to invest in new products in acontrolled way. While I have illustrated above the long-term strategy and the macro achievementsof the Group over the last ten years, the divisional review below gives a morespecific micro picture of the performance of the Group through 2004. Withinthis I concentrate predominantly on revenue performance and trends on the basisthat all divisions are profitable and contribute to the high margins of theGroup as a whole. Divisional review Risk Management division This division, in revenue share, represented 33% of the Group, with the largestbrand, Risk, more than half of that. Whilst the division has shown a growth inreported revenue year on year of 43%, 2003 included most of the brands in thedivision only from May, following the acquisition of Risk Waters. The actualunderlying growth in like for like revenue was 6%, which excludes the effect ofStructured Products. Structured Products was a new magazine launched in Octoberfor the wholesale structured product market and has already found strong supportin this niche area. Publication revenue on Risk magazine itself was approximately 2% better than theprevious year. It delivered growth in each of the first three quarters, but,with a very strong final quarter in 2003, the equivalent quarter in 2004 didshow some contraction. We saw some excellent growth in smaller magazines and newsletters in thedivision, notably Operational Risk up 56%, Hedge Funds Review up 24% and AsiaRisk up 29%. To take advantage of the expanding corporate governance/riskmarket, Operational Risk was re-launched in May 2004 to be more appealing to thegrowing advertiser market, and we have also re-invested in our Asian office withimproved local management and infrastructure that has enabled us both to takeAsia Risk monthly from bi-monthly, and launch new events in the region. FXWeekhad a good year with 7% growth in advertising revenue and a successful firstconference in the USA. After a difficult two years following the collapse of Enron, Energy Risk had avery strong second half to the year, and 10% growth in publication revenuethrough the full year. It was re-launched at the end of 2003 to include morefinance based editorial content which helped widen its target audience, thebenefits of which are now being clearly seen. The credit derivative market, onthe other hand, continued to be tough throughout the year. We saw particularpressure on Credit and US Credit, although we have made significant progress incementing the latter, which was originally launched in 2003, within this market,and the prospects for these titles look good. The division has both a substantial book business and a large event/conferencearm. The book business delivered 28% revenue growth through a mix of bothincreased sponsorship and higher volume of unit sales, but conference revenue inthe division was effectively flat year on year. Retail Investment division This division, in revenue share, represented 23% of the Group, and is againdominated by its major brand Investment Week. In revenue terms the division saw 8% growth overall. While Investment Weekmagazine saw real recovery and delivered 18% growth on publication revenue,event revenue dropped year on year as some 2003 events were not repeated.However, with better margins on the remaining events, operating profit wasbarely affected. International Investment strengthened its position in themarket, with the closure of yet another competitor. We used this improvedposition effectively in the conference market in particular, with a 41% increasein event revenue. IFAOnline also consolidated its position in the market as one of the leadingwebsites for independent financial advisers, and revenue growth was a verystrong 26%. Innovation has always been strong in the division and in 2004 we saw both thelaunch of "Conjecture" - a web based conference facility - and the furthergrowth and development of Incisive Research - a web based research tool. Insurance division This division, in revenue share, represented 18% of the Group, and like the twodivisions above is again dominated by its major brand Post. Total revenue in the division increased by 10%, as we benefited from the fullyear of Insurance Age which was acquired in July 2003. Publication revenue onPost increased by 6%, and we also saw strong growth on Cover. While we sawgrowth in publication revenue on both ReInsurance and Professional Broking, theevents for each of these brands fell behind last year, leaving events revenuefor the division as a whole essentially flat year on year. Mortgage division The mortgage division has both business to business and business to consumerpublishing interests. The division, which contributed 12% of group revenue in2004, consists of the mortgage titles acquired with Matching Hat in 2001 and thetitle, Mortgage Solutions, launched by Incisive Media in 1999. Mortgage Solutions and Mortgage Edge are both business-to-business titles thathave prospered in 2004, most notably due to the change in regulation and theneed for advisers to be authorised. We took Mortgage Solutions weekly in June,and with further growth on its Mortgage Event the brand has seen substantialrevenue growth of more than 40% in the year. Your Mortgage is a consumer title sold on the newsstand. The magazine and itsassociated website, yourmortgage.co.uk, have also benefited from the change inregulation, as well as from interest rate changes in the year, which havecreated the need for lenders both to advertise new products and to attract newborrowers as the housing market slows. The Your Mortgage awards at the end ofthe year were very strong and saw a 19% growth on 2003. The division also houses the Group's main contract publishing arm. Over thepast two years, this part of the business has performed below par, and thiscontinued in 2004. Considerable time and effort has been invested to reversethis situation with a large number of fruitful new business presentations beingmade during the year and we now have good reason to feel that the outlook for2005 will be more positive. Financial IT and Market Data division The division, which contributed 6% of group revenue, achieved 6% underlyinggrowth delivered through strong event growth particularly on the Waters andInside Market Data brands. These are the major brands in the division, whichtogether represent approximately 64% of the divisional revenue. Waters, whichserves the IT sector for financial services predominantly in the USA, saw morebuoyancy returning to its market after a very difficult three year period, bothin advertising and with the return of its event, Waters Congress. The outlookis therefore a lot more positive. Inside Market Data held very successfulconferences both in the USA and, for the first time, in Europe. At the end of December 2003 the Group acquired the outstanding 50% of a jointventure exhibition, Dealing with Technology (DWT). This event brand is a closefit for our newsletter, Trading Technology Week, and we have since re-brandedTrading Technology Week as Dealing with Technology in order to furtherleverage the DWT brand. Private Equity division The Private Equity division is comprised of the assets, including Unquote andDAT, acquired with Initiative Europe in April 2004. While only including eightmonths of trading, the division still contributed 6% of total group revenue.The quality of the assets acquired has already been referred to above, but itwas encouraging that trading in the final quarter of the year was very strong,giving us confidence for positive growth in 2005. This will be further enhancedby new events, not a platform used by the previous owners to reach theiraudience and the first private equity conference was successfully launched inJanuary 2005. Photographic division Having disposed of AG+, the small supplement to British Journal of Photography,revenues in 2004 were marginally behind 2003. However, on a like for likebasis, they were effectively flat year on year as we expected. Outlook After difficult trading conditions in 2003, we have seen recovery in the RiskManagement, Retail Investment and Financial IT divisions as well as continuedgrowth in the Insurance and Mortgage divisions. All of the divisions showedgrowth year on year, and the opening months of 2005 have started positively.Having added another related division in Private Equity, which ended the yearstrongly, the outlook is certainly encouraging with growth and recoverycontinuing steadily. We continue to develop our business model and this, along with the diversity ofthe specific markets served, means we have a solid platform from which to growthe business further through both organic means and acquisition. I thereforefeel very positive about the future prospects for the Company in 2005 andbeyond. Tim Weller Chief Executive FINANCIAL REVIEW Basis of consolidation The group accounts include the consolidated results of Incisive Media plc andits subsidiaries. Accounting policies have been applied consistently, year onyear, across all companies in the Group. Turnover The Group's turnover can be further analysed between continuing and acquiredbrands as follows in tables 1 and 2. TABLE 1 Turnover by division 2004 2004 2003 2003 Change Change £'000 % £'000 % £'000 % Continuing brandsRisk Management 15,539 33.4% 10,890 30.8% 4,649 42.7%Retail Investment 10,872 23.4% 10,092 28.5% 780 7.7%Insurance 8,180 17.6% 7,449 21.1% 731 9.8%Mortgage 5,466 11.8% 4,340 12.3% 1,126 25.9%Financial IT and Market 2,888 6.2% 1,504 4.2% 1,384 92.0%DataPhotographic 1,008 2.2% 1,090 3.1% (82) -7.5% 43,953 94.5% 35,365 100.0% 8,588 24.3%Acquired brandsPrivate Equity 2,539 5.5% - - 2,539 - Total 46,492 100.0% 35,365 100.0% 11,127 31.5% While table 1 illustrates that turnover has increased by 31.5%, this is impactedby the effect of acquisitions, both in 2003 and 2004. Initiative Europe,acquired at the end of April, contributed 5.5% of total revenue for the year,for which no comparative is given. If the four month revenue to April 2003 of £4.7m is included for Risk WatersGroup and an assumed additional £0.6m for Insurance Age and DWT Conferences,then underlying revenues for the existing businesses in 2004 have increased by8%. How this has been achieved is described more fully within the Chief Executive'sreport, but we have seen strong growth in the Mortgage division, good recoveryin the Retail Investment division and continuing steady growth in the RiskManagement, Insurance and Financial IT and Market Data divisions. With the acquisition of Initiative Europe, a data driven business, we have seena further rise in the revenues achieved from both subscriptions and on lineactivities. This has therefore reduced the percentage of revenue achieveddirectly from advertising to 43%, as illustrated in table 2. TABLE 2 Turnover by source 2004 2004 2003 2003 Change Change £'000 % £'000 % £'000 % Continuing brandsDisplay advertising 13,129 28.2% 11,152 31.5% 1,977 17.7%Other advertising and 6,727 14.5% 5,009 14.2% 1,718 34.3%sponsorshipOther publication 9,721 20.9% 7,966 22.5% 1,755 22.0%revenueEvents 12,218 26.3% 10,137 28.7% 2,081 20.5%Internet 2,158 4.6% 1,101 3.1% 1,057 96.0% 43,953 94.5% 35,365 100.0% 8,587 24.3% Acquired brandsDisplay advertising 200 0.4% - - 200 -Other advertising and 66 0.1% - - 66 -sponsorshipOther publication 1,527 3.3% - - 1,527 -revenueInternet 746 1.6% - - 746 - 2,539 5.5% - - 2,539 - TotalDisplay advertising 13,329 28.7% 11,152 31.5% 2,177 19.5%Other advertising and 6,793 14.6% 5,009 14.2% 1,784 35.6%sponsorshipOther publication 11,248 24.2% 7,966 22.5% 3,282 41.2%revenueEvents 12,218 26.3% 10,137 28.7% 2,081 20.5%Internet 2,904 6.2% 1,101 3.1% 1,803 163.8% 46,492 100.0% 35,365 100.0% 11,127 31.5% Profit reconciliation Table 3 illustrates the profit performance of the Group before the amortisationof goodwill and acts as a reconciliation between the statutory profits and theadjusted profits reported in the financial highlights. TABLE 3 Profit reconciliation 2004 2003 £'000 £'000 Turnover 46,492 35,365 Group operating profit 7,659 5,127 Add back:- goodwill amortisation on subsidiaries 4,434 3,096 Operating profit before goodwill 12,093 8,223 Operating margin before goodwill 26.0% 23.3% Net interest and similar items - on ordinary activities (2,355) (1,573) Profit before tax and goodwill 9,738 6,650 Taxation - on ordinary activities (2,532) (1,809) Net profit before goodwill 7,206 4,841 Minority interests 6 - Net profit before goodwill and after minority interests 7,212 4,841 Less:- goodwill amortisation (4,434) (3,096)- deferred tax effect on US goodwill (255) - Reported profit after tax and minority interests 2,523 1,745 Operating profit before goodwill Table 3 illustrates that operating profit before goodwill has risen from £8.22mto £12.09m, an increase of 47% with operating margins improving to a very strong26%. The Group has clearly benefited from the acquisition of Initiative Europe duringthe year, which contributed £1.3m of operating profit before goodwill at amargin of 47%. Approximately £1.0m of the increase in operating profit is due to the full yeareffect of acquisitions made in 2003, namely Risk Waters Group in May, InsuranceAge in July and DWT Conferences in December. Risk Waters Group adjusted profitin 2003 has been calculated by extracting the actual profits achieved by them inJanuary to April 2003 and adding back a pro-rata amount for the annualised £1.5msavings identified and achieved in 2003. On this basis they would havedelivered an operating profit for the period of £0.7m. Excluding the effect of acquisitions, the underlying operating profitperformance of the Group has improved by 17% which has been achieved through acombination of market recovery and innovation, as reported within the ChiefExecutive's report. Goodwill The goodwill charge in administrative expenses relates to the amortisation ofgoodwill that has arisen both from the consolidation of acquired subsidiarycompanies and from the acquisition of other assets. The charge of £4.4m (2003:£3.1m) includes a full year charge (2003: 8 months) following the acquisition ofRisk Waters Group in 2003, which amounted to £2.1m (2003: £1.4m). There is alsoan eight month charge amounting to £0.6m following the acquisition of InitiativeEurope at the end of April 2004. Interest and similar charges Total interest and similar charges have increased to £2.36m (2003: £1.57m), anincrease of 50%. This increase has arisen due to the full year effect of the£22.5m increase in bank debt in April 2003 to part fund the acquisition of RiskWaters Group and a further increase of £7.0m in April 2004 to part fund theacquisition of Initiative Europe. The net interest charge is covered 5.14 times (2003: 5.23 times) by theoperating profit before goodwill (including non cash items). Taxation The unadjusted tax charge of £2.79m represents a charge of 29% on the profitbefore goodwill. If the tax charge is adjusted for the exchange rate differenceon the deferred tax liability on US goodwill, then the revised charge is reducedto 26% of profit before goodwill. The Group continues to benefit in tax savingsresulting from the re-organisation of the Group following the acquisition ofRisk Waters Group in 2003. Profit after tax and minority interests The Group launched its new web based conference activity, "Conjecture" inpartnership with a technology company, BrightTALK Limited. BrightTALK Limitedown 25% of the entity Conjecture Limited, and as Conjecture Limited made atrading loss of £24,000 in the year, there is a £6,000 credit to the profitafter tax for the year. Profit after tax and minority interests increased by 45% to £2.52m (2003:£1.75m). Dividends An interim dividend of 0.75 pence per share (2003: 0.60 pence) was paid inNovember 2004. The directors are proposing a final dividend for the year of1.25 pence per share (2003: 1.00 pence). This represents a 25% increase in thedividend, and, if approved at the Annual General Meeting, the final dividendwill be paid on 18 May 2005, to the shareholders on the register at 1 April2005. Earnings per share Following the issue of a further 8,300,000 share in April as part of the fundraising for the acquisition of Initiative Europe, and with the full year effectof 32,107,455 shares issued in May 2003 as part of the funding of theacquisition of Risk Waters Group, the average number of shares in issue duringthe year increased to 88,659,460 (2003: 72,071,983). Despite this increase inshares in issue, basic earnings per share has increased by 18% to 2.85 pence(2003: 2.42 pence) and diluted earnings per share by 17% to 2.79 pence (2003:2.39 pence). Excluding the effect of goodwill, basic earning per share increased by 21% to8.13 pence (2003: 6.72 pence) and diluted earnings per share by 20% to 7.96pence (2003: 6.62 pence). Cash Flow and net debt Operating cash flow of £11.9m (2003: £5.2m) represents a 99% (2003: 63%)conversion of operating profit before goodwill to cash. This is clearly asignificant improvement on 2003, which had an abnormally high working capitaloutflow for a number of reasons, but principally strong 4th quarter tradingafter weak trading in the 2nd and 3rd quarters. In 2004, however we havereturned to a more normal working capital cycle. Net debt at the year end was £32.8m (2003: £28.9m). During the year, the Groupdrew down new bank debt of £7.0m which was used to part fund the acquisition ofInitiative Europe. Loan notes for £2.1m were redeemed in the year andadditional bank debt was drawn to fund these redemptions. At the year end therewas deferred consideration outstanding of £4.2m (2003: £0.6m), which representsthe final payments due to the vendors of Matching Hat (£2.2m) and InitiativeEurope (£2.0m) on the completion of their earn outs. During the year £3.0m(2003: £1.7m) of bank debt was repaid and cash in the bank increased by £3.7m. Capital and reserves The number of shares in issue at the year end was 91,393,093 (2003: 82,937,793)following the issue of 8,300,000 shares to fund the acquisition of InitiativeEurope, and the exercise by some staff of share options during the year. Sharecapital increased to £0.9m (2003: £0.8m) and share premium to £35.9m (2003:£25.0m). At 31 December 2003, it was anticipated that the final earn out payment to thevendors of Matching Hat would be £1.2m and that 50% of this would be paid inIncisive Media shares. Contingent share capital, at that date, thereforeamounted to £0.6m. As a result of a strong performance in 2004, the actualamount owed is £2.2m as reported above, but it is agreed now that this will bepaid wholly in loan notes. Contingent share capital at 31 December 2004 istherefore zero. The reported minority interest represents BrightTALK Limited's share in the netliability of Conjecture Limited. International Financial Reporting Standards The Group is due to report its 2005 results under the new InternationalFinancial Reporting Standards, commencing with the interim results for the halfyear to 30 June 2005. The Group is well progressed in achieving the necessarytimetable and understanding the impact of these new reporting requirements. Themain areas of change to affect the Group's primary financial statements relateto the treatment of goodwill and intangible assets, the reporting of share basedpayments and deferred tax. The Group will also need to expand its segmentalreporting disclosures. The Group does not operate a company pension scheme,other than a money purchase GPP, so will not be materially effected by changesin accounting for pensions. Similarly the Group does not expect to bematerially effected by the reporting of financial instruments or leases. Jamie Campbell-Harris Group Finance Director INCISIVE MEDIA PLC Preliminary results for the year ended 31 December 2004 Consolidated Profit and Loss Account 2004 2003 £'000 £'000 TurnoverTurnover - existing 43,953 35,365Turnover - acquired 2,539 -------- --- --- Group turnover 46,492 35,365------- --- ---- cost of sales- existing (25,994) (19,777)- acquired (1,087) -------- --- ---Cost of sales (27,081) (19,777)------- --- --- Gross profit 19,411 15,588 --- ---- administrative expenses before goodwill amortisation- existing (7,119) (7,365)- acquired (199) -- amortisation of goodwill- existing (3,829) (3,096)- acquired (605) -------- --- ---Administrative expenses (11,752) (10,461)------- --- --- - group operating profit- existing 6,995 5,127- acquired 664 -------- --- --- Group operating profit 7,659 5,127 Interest receivable and similar income 130 104Interest payable and similar charges (2,485) (1,677)------- --- --- Profit on ordinary activities before taxation 5,304 3,554Taxation of profit on ordinary activities (2,787) (1,809)------- --- --- Profit on ordinary activities after taxation 2,517 1,745Minority interests 6 -------- --- --- Profit on ordinary activities after taxation and minority 2,523 1,745interestsDividend (1,827) (1,326)------- --- --- Retained profit for the year 696 419------- --- --- Pence pence Earnings per share - basic 2.85 2.42Earnings per share - diluted 2.79 2.39Earnings per share - basic before goodwill 8.13 6.72Earnings per share - diluted before goodwill 7.96 6.62Dividends per share 2.00 1.60 The profit and loss account has been prepared on the basis that all operationsare continuing operations. Incisive Media plc Preliminary Results for the year ended 31 December 2004 Consolidated Statement of Total Recognised Gains and Losses 2004 2003 £'000 £'000 Profit for the financial year 2,523 1,745---------------------------------- -------- -------- Total recognised gains relating to the year 2,523 1,745Exchange differences arising on translation of netinvestment in overseassubsidiary undertaking 12 7 -------- --------Total gains since last annual report 2,535 1,752---------------------------------- -------- -------- Incisive Media plc Preliminary Results for the year ended 31 December 2004 Consolidated Balance Sheet 2004 2003 £'000 £'000Fixed assetsIntangible assets 86,806 69,754Tangible assets 841 741---------------------------------- -------- -------- 87,647 70,495 Current assetsStocks 467 306Debtors 10,235 10,470Cash at bank and in hand 5,334 1,633---------------------------------- -------- -------- 16,036 12,409Creditors -Amounts falling due within one year (27,065) (22,558)---------------------------------- -------- -------- Net current liabilities (11,029) (10,149)---------------------------------- -------- -------- Total assets less current liabilities 76,618 60,346 Creditors - amounts falling due after one year (26,500) (21,486)Provisions for liabilities and charges (169) ----------------------------------- -------- -------- Net assets 49,949 38,860================================== ======== ======== Capital and reservesCalled up share capital 914 829Contingent share capital - 600Share premium account 35,903 25,001Merger reserve 7,769 7,769Other reserves 1,184 1,184Profit and loss account 4,185 3,477---------------------------------- -------- -------- Equity shareholders' funds 49,955 38,860 Minority interests (6) ----------------------------------- -------- -------- Capital employed 49,949 38,860================================== ======== ======== Incisive Media plc Preliminary Results for the year ended 31 December 2004 Consolidated Cash Flow Statement 2004 2003 £'000 £'000 Net cash inflow from operating activities 11,932 5,163 Returns on investment and servicing of finance---------------------------------- ------- --------Interest received 124 89Interest paid (2,435) (1,466)Dividends received - 15Issue costs of new bank loans (196) (544)---------------------------------- ------- -------- Net cash outflow for returns on investments and servicing (2,507) (1,906)of finance Taxation (1,843) (786) Capital Expenditure---------------------------------- ------- --------Payments to purchase tangible assets (430) (405)Receipts from sale of tangible assets 8 ----------------------------------- ------- -------- Net cash outflow for capital expenditure (422) (405) Acquisitions and disposals---------------------------------- ------- --------Purchase of subsidiary undertakings (22,150) (39,429)Net cash acquired with subsidiary undertakings 5,299 95---------------------------------- ------- -------- Net cash outflow for acquisitions (16,851) (39,334) Equity dividends paid (1,514) (873)---------------------------------- ------- -------- Net cash outflow before financing (11,205) (38,141)---------------------------------- ------- -------- FinancingIssue of ordinary share capital 10,987 16,228Increase in borrowings 3,919 20,817 ------- --------Increase/(decrease) in cash in year 3,701 (1,096)---------------------------------- ------- -------- Reconciliation to net debtNet debt at 1 January (28,933) (6,521)Increase/(decrease) in cash in the year 3,701 (1,096)Movement in borrowings (3,919) (20,817)Non cash items- loan notes issued - (1,800)- movement in deferred consideration (3,647) 855- other 47 446---------------------------------- ------- --------Net debt at 31 December (32,751) (28,933)---------------------------------- ------- -------- Incisive Media plc Preliminary Results for the year ended 31 December 2004 Notes to the accounts 1. Basis of preparation The financial statements have been prepared in accordance withapplicable accounting standards under the historical cost convention. 2. Basis of consolidation The group financial statements consolidate the Company and itssubsidiary undertakings. Profits or losses on intra group transactions areeliminated in full. On acquisition of a subsidiary, all of the subsidiary'sassets and liabilities which exist at the date of acquisition are recorded attheir fair values reflecting their condition at that date. 3. Earnings per share 2004 2003 £'000 £'000 ---------------------------------- -------- --------- Net profit attributable to ordinary shareholders 2,523 1,745 Number number ---------------------------------- -------- --------- Weighted average number of shares in issue in period 88,659,460 72,071,983- basicEffect of dilutive securities- options to staff 1,889,186 1,041,623---------------------------------- -------- ---------Weighted average number of shares in issue in period 90,548,646 73,113,606- diluted Pence pence ---------------------------------- -------- --------- Earnings per share - basic 2.85 2.42Earnings per share - diluted 2.79 2.39 ---------------------------------- -------- ---------Supplementary earnings per share to exclude goodwill £'000 £'000amortisation: Net profit attributable to ordinary shareholders 2,523 1,745Effect of:- goodwill amortisation 4,434 3,096- exchange rate difference on deferred tax liability 255 -on US goodwill -------- -------------------------------------------Net profit attributable to ordinary shareholders 7,212 4,841before goodwill Pence pence ---------------------------------- -------- --------- Earnings per share before goodwill - basic 8.13 6.72Earnings per share before goodwill - diluted 7.96 6.62 -------- 4. Taxation 2004 2003 £'000 £'000 ------------------------------- -------- -------- United Kingdom corporation tax at 30% (2003: 30%) 2,414 1,764Prior year adjustment for over provision (65) (24)------------------------------- -------- -------- 2,349 1,740Overseas tax 134 51------------------------------- -------- --------Total current tax 2,483 1,791------------------------------- -------- -------- Origination and reversal of timing differences 49 18Exchange rate difference on deferred tax liability on US 255 -goodwill -------- ---------------------------------------Total deferred tax 304 18 ------------------------------- -------- --------Total tax on profit on ordinary activities 2,787 5,163 -------- 5. Reconciliation of operating profit to net cash flow from operatingactivities 2004 2003 £'000 £'000 -------- -------- Group operating profit 7,659 5,127Amortisation of goodwill 4,434 3,096Amortisation of other intangible assets 6 4Depreciation of tangible assets 360 339Profit on disposal of tangible assets (3) -(Increase)/decrease in stock (162) (24)Decrease/(increase) in debtors 556 (2,507)Decrease in creditors (918) (872)------------------------------- -------- -------- 11,932 5,163 6. Report and Accounts Copies of the Company's Annual Report and Accounts will be sent toshareholders in due course. The Board of Directors approved the report andaccounts and this preliminary announcement on 7 March 2005. The auditors havecompleted their audit for the year ended 31 December 2004 and the preliminaryannouncement represents an extract from those audited accounts upon which theauditors have issued an unqualified opinion. 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