1st Apr 2008 15:43
Publishing Technology PLC01 April 2008 1 April 2008 "Not for release, distribution or publication, in whole or in part, in or intothe United States of America, Canada, Ireland, Japan, South Africa or Australia." Publishing Technology plc announces preliminary results for 2007 Publishing Technology plc is pleased to announce its preliminary results for2007. Publishing Technology delivers information technology tools and servicesto publishers, undertaking a broad range of activities to cater for thewide-ranging requirements of publishers and information providers. The groupenjoys a strong position for its widely-employed print and online publishingplatforms. On 27 February 2007, Vista International Limited reversed into Ingenta plc andIngenta plc changed its name to Publishing Technology plc. Publishing Technologyplc is listed on the Alternative Investment Market of the London Stock Exchange(ticker: PTO). As a result of the reverse acquisition, this reporting period reflects thecontinuing operations of Vista International Limited, and therefore, as theVista group year end was 30 June, this report covers 18 months to 31 December2007 with 10 months trading of the former Ingenta group businesses incorporatedfrom the date of the reverse acquisition. As a result, this announcement doesnot show comparative figures as comparative figures would only be for 12 monthsof the Vista business. Highlights: • Revenue in the period of £18.4m • Gross profit of £6.2m • EBITDA profit (earnings before interest, tax, depreciation and amortisation) of £0.2m • Pre-Tax loss of £1.7m after adjusting, inter alia, for the amortisation of intangibles of £0.8m • Ingenta, Publishers Communication Group and Vista Europe operations performed strongly with growth post-acquisition • Annualised synergy cost reductions of over £1.5m • Positive sales synergy with Vista operations successfully implementing and selling Ingenta products Outlook: The merger of the businesses in early 2007 presented a number of integration andconsolidation challenges throughout the period. However, the combined objectivesof increasing revenue through cross-selling and cost savings from synergies andduplicated functions began to come to fruition in the last quarter. The grouphas ended the period on a stable revenue footing with considerably lower costs,Vista businesses successfully entering online publishing markets, and severalnew customers being acquired across all divisions. The value of the merger isbecoming apparent. In 2008, we will be focussing on: • Increasing high-margin revenue streams • Continuing to rationalise infrastructure costs • Extending the cross-selling of products across the group's 400 publisher clients. George Lossius, chief executive, said: "These maiden results are very encouraging. The merger in early 2007 presentednumerous integration and consolidation challenges, but the benefits of thetransaction have clearly begun to emerge. We have seen significant cross-sellingbetween operating divisions, as we successfully exploit the growing need withinthe publishing industry to integrate print and online platforms." Martyn Rose, chairman, said: "We have developed strong market position for both our online publishingproducts and services and our publisher's administration platforms, and areenjoying increasing synergy between these two parts of the business. Thiscompany is well positioned for future growth." For further information please contact: FinnCap, nominated adviserGeoff Nash/Rose Herbert : 020 7600 1658 The Communication Group plcRichard Evans Tel: 020 7630 1411 / 0775 108 7291Kit Bingham Tel: 020 7630 1411 / 0788 074 8672 Chairman's statement Finance and Operations The most significant event of the period was the reverse acquisition of Ingentaby Vista to create Publishing Technology in February 2007. As with many suchmergers, integration is complex and considerable time is required to bringtogether the combined operations into an efficient group; the inception ofPublishing Technology was no exception, but by the end of 2007 the benefits ofrevenues from cross-selling products and savings from synergies were apparent. Revenues of the combined group rose consistently post acquisition andconsiderable overheads were driven out of the operations, resulting in thebusiness finishing the period trading cash positive, and with positive EBITDA(earnings before interest, tax, depreciation and amortisation) and pre-taxprofits, before adjustment for IFRS amortisation of intangible assets. During the 2007 calendar year, each area of the business demonstrated positiveand satisfying advances. IngentaConnect continued to add new publishers to itsresearch platform, and also added sales of online advertising inventory to itsrange of e-content optimisation services. Vista has embraced the digital market,evolving from a business that dealt only with systems for print products toworking with six publishers on digital publication solutions. PublishersCommunication Group continued the trend of its 2006 growth, maintaining a highretention rate and working with 22 new publishers and considerably extending itsactivities in Europe. The financial reporting for this period is complicated by the reverseacquisition in February 2007. The results show an initial eight months of Vistaactivity and then ten months of the combined entity. During this period, revenuewas £18.4m and the gross margin was 34%. The EBITDA profit in this period was £0.2m. The loss before tax in the periodwas £1.7m which is inclusive of £3.1m invested in Research and Development allof which was expensed through the income statement as incurred, £0.3m of foreignexchange losses due to the fall in the US Dollar and a £0.8m amortisation ofintangible assets arising on the reverse acquisition of Ingenta. With thebenefit of a Research and Development tax credit of £0.3m for the period, thishas resulted in a net loss for the financial period of £1.6m. The group's netcash balance at 31 December 2007 was a deficit of £1.7m. Staff The contribution made by staff across the group enables us to enhance evenfurther our reputation for delivering high quality products and services. Theincreasing volume of work delivered by a leaner staff validates the rationalebehind the creation of Publishing Technology, and the Board wishes to thank allemployees for their work, enthusiasm and commitment. During the period to 31 December 2007, thanks to synergies in a number of areasof the group and the closure of one office, the number of people employeddeclined from a pre-merger level of 188 to 158. Current Trading and Prospects 2007 saw the group focus on integration synergies and consolidation to providethe group with a stable and growing revenue base and reduced overheads geared tomaximise profits. We are particularly pleased that the expertise andrelationships of the combined Publishing Technology sales team have successfullyenabled realisation of new business that the separate organisations hadpreviously lacked the authority to complete. The results of this greater market confidence in the Publishing Technologyorganisation is evident in the improvement in trading post merger, and the Boardhas no doubt that this can be carried forward into the new year by: • continuing to focus on increasing high-margin revenue streams • providing innovative products to the expanding publishing and information industries • using the breadth of the Publishing Technology tools and services to differentiate the group from its competition. Having completed vital integration and consolidation activities during 2007, thepotential for our business in the coming years is considerable. M C RoseChairman1 April 2008 Publishing Technology plc Chief executive's review We estimate that the publishing and information service sector PublishingTechnology targets is a $200billion global industry. It continues to growwhether that is in the traditional print publishing sector, or in alternativechannels created by new geographic markets coming on stream and emergingtechnologies. Many publishers have not yet scratched the surface of the digitalpotential of their content, while those who have made some progress arenonetheless challenged by the speed of technological evolution, which threatensto force them away from their core competences. Their future success lies injoining with a trusted partner, to whom they can outsource those technicalrequirements that distract them from their core business. In this changing environment, Publishing Technology is uniquely able to supportpublishers with a consistent, end-to-end service across the breadth of thepublishing supply chain. Our 400+ publisher clients benefit from ourcomprehensive capabilities and experience, allowing then to concentrate on thethings they do best. "The Publishing Technology package is a compelling prospect for an organisationseeking to enter new publishing sectors. We needed an organisation that couldprovide not only top-rate technology, but also the skills to ensure ourinvestment in it is optimised by well-timed and targeted sales campaigns. We'relooking forward to enabling new audiences to benefit from the valuableinformation we provide." Rosy Wolfe, Head of Business Development and Customer Relations, BBC Monitoring Our comprehensive suite of technologies includes website development; contentdigitisation, conversion and enhancement; online content distribution anddiscoverability; access management and information commerce; content sales andmarketing; production management; business intelligence; product informationmanagement; rights and royalties; customer care; distribution and fulfilment;and editorial management. Our online services are complemented by collectionmanagement, document delivery and content awareness services for libraries andend users. The majority of revenues consist of recurring annual fees andlong-term contracts derived through the following three principal activities: Ingenta Ingenta's well-established scholarly service IngentaConnect provides researcherswith immediate access to over 11,000 electronic publications. The robusttechnology that delivers the site regularly supports over 20 million usersessions a month. IngentaConnect enables publishers to deploy a variety ofbusiness models to reach audiences beyond their traditional target markets.Publishers can generate leads by implementing short-term free trials, andmonetise the high-level of traffic resulting from Ingenta's relationship withGoogle by selling individual articles or issues to non-subscription users.Ingenta also operates a small number of premium services of direct benefit toacademic, corporate, government and other institutional users of IngentaConnect,for which there is an annual charge. During 2007, Ingenta added another 21 new publishers to its customer base,including prestigious US journal The Charleston Advisor, which will help todevelop Ingenta's brand awareness and identity in North America. Clients weregiven the opportunity to carry advertisements alongside electronic publicationson a revenue-share basis, and the subscription tools used by publishers tocontrol user access benefitted from considerable re-engineering. Documentdelivery transactions were streamlined to drive higher conversion rates of newcustomers entering the site from its search engine partners. Recent appointmentsto Ingenta's business development teams can be expected to deliver renewedbusiness growth in both its publisher and library markets. Vista For three decades, Vista has provided management systems for print-basedpublishers in Europe and North America. Its comprehensive suite of softwareapplications is custom-built to meet publishing needs and can be deployedthroughout a publisher's workflow to undertake complex business operations andpromote products in the market. Vista serves major global publishing operationsas well as small independent players, helping them to realise cost-savings byintroducing efficiencies and ensuring interoperability with other key servicesand providers. A full 85% of books in UK high street book stores have beenprocessed by a Vista system at some point in their production or distribution,and Vista works directly with eight of the top ten publishers. During the period, Vista introduced new services for digital publications andwon six new publishers in this area, including major new projects with BritishMedical Journal and Netherlands' government publisher, Sdu for PublishingTechnology's market-leading Information Commerce Services (ICS). Vista's coreauthor2reader service remains embedded in the publishing supply chain, and thebusiness's sustainable growth to date points to substantial repeat business in2008. Publishers Communication Group (PCG) PCG provides a range of specialised marketing and business development servicesto meet the needs of professional and scholarly publishers. These includeservices in the areas of: market intelligence for planning and marketing newproducts; promotions to expand awareness; and local sales representation andcustomer service. The company delivers regular research reports which arewell-respected by the scholarly information community. Its market is growing aspublishers recognise the value of outsourcing sales and marketing activities tolocally-based experts. As a consequence, PCG has invested in developing itsEuropean business and now provides services to 85 North American and Europeanpublishers with programmes delivered in over 40 countries in eight languages ontheir behalf. During 2007, PCG performed strongly with 22 new publisher customers, includingNorth America's largest University Press, selecting its services despite anincrease in competition. Enhancements to its web presence, including newcustomer-specific micro-sites to augment its research and representationservices, have helped to differentiate PCG's proposition further and willsupport continued growth. Outlook 2007's solid performance reflects the group's considerable investment inintegration and in new product development, both of which can be expected tocontribute to strong financial progress in 2008. We anticipate continued growthbased on the potential for considerably expanded systems and services of thegroup, backed by our integrated and strengthened sales force, and the favourableprospects for our new 'Pub2web' publications platform, which has already beenselected by the OECD and World Bank amongst others. Additionally, we lookforward to our combined operations allowing us to offer a suite of services toboth trade and academic publisher customer bases. The group continues to explorepotential markets for development and acquisition opportunities that wouldcomplement its capabilities and increase its competitive strength. We arelooking forward to delivering solid growth in 2008 and beyond. G M LossiusChief Executive Officer1 April 2008Publishing Technology plc Financial reviewfor the 18 months ended 31 December 2007 Reverse acquisition accounting As a result of the business combination on 27 February 2007, the shareholders ofVista obtained control of the group. Accordingly the transaction was accountedfor as a reverse acquisition. The financial statements are issued under the name of the legal parent'Publishing Technology plc', but are a continuance of the financial statementsof Vista International Limited. On combination the balance sheets of both entities are combined with theexception that: • retained earnings and other reserve balances are those of Vista • shareholding is that of the acquired company (formerly Ingenta plc) plus shares issued as part of the combination. Vista year end was 30 June, therefore these financial statements are for an 18month period from 1 July 2006 to 31 December 2007. The income statementrepresents 18 months trading of the Vista group and 10 months trading of theformer Ingenta group businesses incorporated from 27 February 2007 (the date ofthe reverse acquisition) to 31 December 2007. Operating results Revenue for the 18 months ended 31 December 2007 was £18.4m. Gross profit for the period was £6.2m and the gross margin was 34%. Total operating costs in the period were £7.2m. This resulted in a loss beforetax of £1.7m. With the benefit of a tax credit of £0.3m the net loss for thefinancial period was £1.6m. Taxation A tax credit of £0.3m is included in the results for 2007 relating to amountsreceived and receivable under the Research and Development tax credit scheme.The claim has been prepared on the same basis as in prior years but is subjectto HM Revenue and Customs approval. The group has unutilised tax losses at 31 December 2007 in the UK and the USA of£13.3m and $15.5m respectively, which are yet to be agreed with the US taxauthorities. Shareholders' returns and dividends The Directors do not recommend the payment of a dividend. Balance sheet and cash Shareholders' deficit totalled £2.4m at the period end. Cash outflow from operating activities was £2.5m. At the period end, net bankoverdraft was £1.7m inclusive of a revolving credit facility of £1.5m. Cash absorbed by operations or for capital expenditure during the periodamounted to £0.2m. A tax credit of £0.3m in respect of Research and Developmentexpenditure was received in the period which related to the calendar year 2006claimed by Ingenta plc pre acquisition. Going concern and future funding The accounts are prepared on a going concern basis. In assessing whether thegoing concern assumption is appropriate, management have taken into account allavailable information about the future. As part of its assessment, management have taken into account the profit andcash forecasts, the continued support of the shareholders and directors, aplacing of shares to raise £1.1m, banking facilities and management ability toaffect costs and revenues. Treasury The group's policy with regard to cash balances is to monitor short and mediumterm interest rates and to place cash on deposit for periods that optimiseinterest earned while maintaining sufficient funds to meet day-to-dayrequirements. The group operates in a business which has marked seasonality in cash flows.This is expected to continue and has been taken into account in assessing theworking capital requirements. Publishing Technology plc has reported under IFRS for the financial periodending 31 December 2007. The main impacts of this are that the intangible assetsrecognised on the reverse acquisition of Ingenta will be amortised over threeyears at £0.8m per annum. Goodwill on transition in Vista was impaired in 2005reducing the goodwill brought forward to 2006 by £4.3m. A B Moug C.A.Chief Financial Officer1 April 2008Publishing Technology plc Consolidated Income StatementFor the 18 months ended 31 December 2007 18 months ended 31 Dec 07 Note £000's Continuing operationsRevenue 18,360Cost of sales (12,207) Gross profit 6,153 Sales and marketing expenses (1,925)Administrative expenses (4,596)Other expenses 2 (748) Other Income - rental income 92 Loss from operations 2 (1,024) Analysis of loss from operationsProfit before net finance costs, tax, depreciation, 236amortisation and foreign exchange losses (EBITDA)Depreciation (244)Amortisation of intangibles (748)Foreign exchange loss (268) Loss from operations (1,024) Finance income 187Finance costs (879) Loss before tax (1,716) Tax 3 128 Loss for the period (1,588) Attributable to:Equity holders of the parent (1,588) Retained loss for the period (1,588) Loss per shareFrom total and continuing operationsBasic and diluted (pence) 4 (0.35) All activities are classified as continuing Consolidated statement of recognised income and expenseFor the 18 months ended 31 December 2007 18 months ended 31 Dec 07 £'000s Exchange differences on translation of foreign (15)operations Net loss recognised directly in equity (15) Loss for the period (1,588) Total recognised income and expense for the (1,603)period Consolidated Balance Sheet As at 31 December 2007 Note 31 December 2007 £000'sNon-current assetsGoodwill and other Intangible assets 5,231Property, plant and equipment 307Available for Sale Investments 102 5,640Current assetsTrade and other receivables 2,539R & D tax credit receivable 3 315Cash and cash equivalents 581 3,435 Total assets 9,075 EquityShare capital 11,610Share premium 6 20,685Merger Reserve 6 11,055Reverse Acquisition reserve 6 (38,048)Translation reserves 6 (37)Retained earnings 6 (7,703)Investment in own shares (7)Total equity (2,445)Non-current liabilitiesBorrowings 1,000 1,000Current liabilitiesTrade and other payables 7,020Borrowings 3,323Provisions 177 10,520 Total liabilities 11,520 Total equity and liabilities 9,075 Consolidated Cash Flow StatementFor the 18 months ended 31 December 2007 18 months ended 31 Dec 07 £'000 Loss after taxation (1,588)Adjustments for Amortisation of intangibles 748Depreciation 244Investment income (187)Interest expense 879Taxation (189)Unrealised foreign exchange differences 115Decrease in stock 7Decrease in trade and other receivables (1,010)Decrease in trade and other payables (1,488)Increase in provisions 17 Cash used in operations (2,452) Interest paid (879) Net cash used in operating activities (3,331) Cash flows from investing activitiesPurchase of property, plant and equipment (231)Costs of reverse acquisition (228)Interest received 187 Net cash used in investing activities (272) Cash flows from financing activitiesNet proceeds from issue of share capital 1,967Proceeds from short term borrowings (revolving credit 1,500facility)Payment of finance long term borrowings (50) Net cash from financing activities 3,417 Net decrease in cash and cash equivalents (186) Cash and cash equivalents at beginning of period (56) Cash and cash equivalents at end of period (242) Notes to the preliminary announcementFor the 18 months ended 31 December 2007 1. Basis of preparation The principal accounting policies of the group are set out in the group's 2007annual report and financial statements. 2. Loss from Operations Loss from operations has been arrived at after charging/crediting): 18 months ended 31 Dec 07 £'000 Research and development costs 3,073Net foreign exchange losses/(gains) 268Depreciation of property, plant and equipment- owned assets 244Operating lease rentals:- land and buildings 633- other 312Amortisation of internally-generated intangible assets included in 748other operating expensesAuditor's remuneration 115 3. Tax 18 months ended 31 Dec 07 £'000Analysis of charge in period (continuing operations)Current tax:- Current Research and Development tax credit - UK (317)- Overseas 2 (315) Deferred tax 187 Taxation (128) The tax for the period is lower (2006: lower) than the standard rate of thecorporation tax in the UK (30%; 2006: 30%). The differences are explained below: 18 months ended 31 Dec 07Reconciliation of tax expense £'000 Loss on ordinary activities before tax (1,716) Tax at the UK corporation tax rate of 30% (2006: 30%) (515)Effect of:Expenses not deductible for tax purposes 240Adjustment to goodwill not deductible to taxation 217UK Losses in current year utilised (58)Difference in timing of allowances (199) Total taxation (continuing operations) (315) United Kingdom Corporation tax is calculated at 30 per cent of the estimatedassessable profit for the 18 month period. Taxation for other jurisdictions is calculated at the rates prevailing in therespective jurisdictions. A deferred tax asset has not been recognised in relation to tax losses due touncertainty over their recoverability. 4. Loss Per Share Basic loss per share is calculated by dividing the earnings attributable toordinary shareholders by the weighted average number of ordinary sharesoutstanding during the period. For diluted loss per share, the weighted average number of ordinary shares inissue is adjusted to assume conversion of all dilutive potential ordinaryshares. Since the group is loss making there is no dilutive impact 18 months ended 31 Dec 07 £'000 Attributable loss (1,588)Weighted average number of ordinary shares 452,480Loss Per Share (basic and dilutive) arising from (0.35) pboth total and continuing operations All potential ordinary shares including options and conditional shares areanti-dilutive. 5. Business Combinations On 27 February 2007, Vista International Limited acquired Publishing Technologyplc (formerly known as 'Ingenta plc'). The acquisition has been accounted for as a 'reverse acquisition' in accordancewith IFRS 3 'business combinations'. Publishing Technology provides technology and associated marketing services topublishers. The revenue and profit contribution from the acquired business isindistinguishable from that of the group as the Vista businesses were hived upinto the Ingenta trading businesses from the date of acquisition. Details of net assets acquired and goodwill are as follows: The acquisition had the following effects on the group's assets and liabilitieson the acquisition date. Pre-Acquisition Fair Value Recognised value carrying amount on acquisition £'000 £'000 £'000 Cash and cash equivalents (176) - (176)Property, plant and equipment 308 - 308Intangibles - Trade mark - 290 290 - Licences - 1,824 1,824 - Customer relationships - 128 128 Inventories & WIP 7 - 7Trade and other receivables 1,319 - 1,319Trade and other payables (4,663) (684) (5,347) Net liabilities acquired (3,205) 1,558 (1,647) Cash and cash equivalents in subsidiary acquired (176) Cash outflow on acquisition (176) £'000Purchase Consideration- Direct costs relating to the acquisition 228- Fair value of consideration 1,862 Total purchase consideration 2,090Fair value of net liabilities acquired (1,647)Goodwill 3,737 The pre-acquisition carrying amounts were determined, based on applicable IFRS'simmediately before the acquisition. The values of assets and liabilities are theestimated fair values. In determining the fair values of trade marks, licensesand customer relationships the group has applied a discount rate of 8.13%. The fair value adjustment on intangibles was calculated by an independent valuerwho under IFRS 3 identified the value of the intangible assets acquired by Vistaas part of the reverse takeover of Ingenta. Intangible assets were measured atthe reverse acquisition date. Only those assets which met the IAS 38 definitionof intangible assets and on which the fair value could be reliably measured wereincluded. Trade and other payables have been adjusted to reflect provisions which meet thecriteria within IFRS 3 for recognition. The fair value of consideration is equal to the value of the market capital ofIngenta plc at the date of the reverse acquisition as required by IFRS 3, being186,207,420 shares of 1p each. The combination was effected by the plc issuing260 million shares of 1p each. 6. Share Capital and Reserves Ordinary Deferred Share Capital Translation Reverse Merger Investment Retained Total shares Shares Premium Redemption Reserve Acquisition Reserve in own Earnings Reserves Reserve shares £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Balance at 30 June 2005 37 - 6 - - - - (6) (5,868) (5,831) Own shares acquired - - - - - - - (1) - (1)Shares redeemed in the - - - 756 - - - - - 756yearTotal recognised income - - - - (22) - - - (190) (212)and expensesNet loss on buy back of - - - - - - - - (35) (35)own shares Balance at 30 June 2006 37 - 6 756 (22) - - (7) (6,093) (5,323) Share movements pre deal 17 803 591 - - - - - (22) 1,389Acquisition Adjustments 11,556 (803) 20,088 (756) - (38,048) 11,055 - - 3,092under IFRS3Total recognised loss - - - - (15) - - - (1,588) (1,603) Balance as at 31 11,610 - 20,685 - (37) (38,048) 11,055 (7) (7,703) (2,445)December 2007 The IFRS 3 adjustment reflects the entries required under reverse acquisitionaccounting, whereby consolidated shareholders funds comprise the capitalstructure of the legal parent combined with the reserves of the legal subsidiaryand post acquisition reserves of the legal parent. 7. Publication of non-statutory accounts The financial information set out in this preliminary announcement does notconstitute statutory accounts as defined in section 240 of the Companies Act1985. The consolidated income statement, consolidated statement of recognised incomeand expense, consolidated balance sheet at 31 December 2007, consolidated cashflow statement and associated notes have been extracted from the group's 2007statutory financial statements upon which the auditors opinion is unqualifiedand which do not include any statement under section 237 of the Companies Act1985. Those financial statements have not been delivered to the registrar ofcompanies. The results for the financial period ended 31 December 2007 are available on theCompany's website www.publishingtechnology.com. Report and accounts for thefinancial period ended 31 December 2007 will be sent to Shareholders withdetails of the annual general meeting. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Ingenta