Final Results

14th Mar 2007 07:03

Informa PLC14 March 2007 Informa plc Preliminary Results for Year End 31 December 2006 RAPID GROWTH - POWERED ORGANICALLY Financial Highlights • Revenue up 42% to over £1 billion • Adjusted operating profit3 49% higher at £219 million • Total dividend increases 40% • Strong trading across all three divisions (Academic & Scientific, Professional and Commercial) and all three business streams (Publishing, Performance Improvement (PI)and Events) • Return on IIR acquisition exceeds cost of capital • Adjusted operating margin rises above 21% • Cash conversion more than 100% of adjusted operating profit • Confident of 2007 outlook 2006 2005 Increase Organic(1) Proforma(2) £m £m % % % Revenue 1,039.1 729.3 42 8 13 Operating profit 128.3 91.4 40 Adjusted(3) operating profit 219.1 147.3 49 13 22 Profit before tax 86.5 61.0 42 Adjusted(3) profit before tax 178.1 115.4 54 Profit for period 67.8 10.8 528 Adjusted(4) profit for period 132.1 86.5 53 Basic earnings per share (p) 16.0 2.8 471 Diluted earnings per share (p) 15.9 2.8 468 Adjusted(4) diluted earnings per share (p) 31.1 22.2 40 Dividend per share (p) 12.2 8.7 40 Cash conversion(5) 103% 113% 1. Adjusted for material acquisitions and effects of changes in foreign currency exchange rates. This excludes the results of IIR for both 2005 and 2006. 2. Proforma results include IIR Holdings Limited (acquired 6 July 2005) as if it were part of the Informa Group from 1 January 2005. 3. Excludes restructuring and reorganisation costs of £7.2m (2005: £8.3m), intangible asset amortisation of £83.1m (2005: £47.6m) and goodwill impairment of £0.5m (2005: £nil). 4. Excludes restructuring and reorganisation costs of £7.2m (2005: £8.3m), intangible asset amortisation of £83.1m (2005: £47.6m), goodwill impairment of £0.5m (2005: £nil) and related tax of £27.3m (2005: tax credit £21.4m). 5. Adjusted cash generated by operations (note 10) divided by adjusted operating profit. For further enquiries: Informa plc Peter Rigby, Chief Executive Tel: 020 7017 5000David Gilbertson, Managing DirectorTony Foye, Finance DirectorSusanna Kempe, Chief Marketing Officer Maitland William Clutterbuck Tel: 020 7379 5151Emma Burdett Chairman's Statement "Informa has demonstrated repeatedly that we are good at M&A. But of the manypleasing aspects of 2006 I am most satisfied by our underlying growth rate. On aproforma basis revenue increased by 13% and adjusted operating profit by 22%.This proves without doubt that we have built a strong engine for organicgrowth." Richard Hooper Over the last two years Informa has been transformed. Starting with the mergerwith Taylor & Francis in 2004, followed by the acquisition of IIR in 2005,Informa is now four times the size that it was three years ago. In 2006, we produced over 2,800 new book titles, 2,000+ subscription productsand 10,000+ events. Our marketing database has over 20 million contacts. The IIRacquisition has broadened our geographical reach, particularly in North Americawhich now represents over 38% of our revenue. We have over 7,500 employees andoffices in 43 countries. In last year's report I said that across our 150+ business units we werebuilding an ever more integrated Group underpinned by common goals and sharedvalues that guide us in our interactions with our customers and each other. Ithink we have achieved that integration. For Peter Rigby, our CEO, and David Gilbertson, our MD, to have integrated threebusinesses of similar size over the course of two years is an achievement fewcan rival. We now have a well balanced portfolio of revenue streams. Publishing,Performance Improvement (PI) and Events all display strong qualitiesindividually. Publishing in Informa is inherently a high margin business withlimited cyclical exposure. PI is a durable income stream hedged over many marketsectors including both private and public sector. It has high client retentionrates and enjoys strong relationships with most of the Fortune 100 companies andmany of the multi-national blue-chips. Events is our fastest growth capturer. Itis readily scalable. Our best practice blue prints and 20 million strongmarketing database mean that we can move quickly when we identify marketopportunities. Taken together we believe these three distinctive revenue streams put us in theenviable position of allowing us to capture growth quickly when economicconditions are strong but will also demonstrate superior defensive qualitiesduring tougher economic periods. It was this confidence in the strength of thebusiness and our independent future that led us to reject the unsolicited bidapproach we received from private equity interests in November. As we move ambitiously into 2007, I believe that we have the portfolio, thepeople and the passion to produce another strong set of results. I would like totake this opportunity to thank everyone within Informa for their dedication,hard work and commitment in creating this success. This will be my last statement as your Chairman. After full consultation withour major shareholders, I am delighted to announce the appointment of PeterRigby as my successor as Chairman, with David Gilbertson becoming ChiefExecutive effective from 15 May 2007. In deciding to request that Peter take up the role of Chairman, a step the Boardrecognises runs counter to the recommendations of the Combined Code, weconsidered the complexity of the Group's global operations, the need formanagement stability at the top of the Group following three years offundamental changes and the long-term and proven partnership of Peter and Davidsince 1998. The Board has also resolved to make certain governance changes which includeannual re-election of all directors from this year's AGM and the enhancement ofthe role of Senior Independent Director, Derek Mapp. Next year you will see astatement from Derek in the Annual Report. I have been closely associated with Informa since 1998 when I joined LLP as anon-executive director. I have been delighted to be a part of such a wonderfulgrowth story. I wish Peter, David, Tony Foye and the rest of Informa all thebest in continuing this sterling work during 2007 and beyond. Richard Hooper14 March 2007 CEO's and MD's Statement "We set ourselves an ambitious growth target for 2006. We beat it." Peter Rigby and David Gilbertson 2006 was our first full year as the new Informa: combining legacy Informa whichgrew out of IBC and Lloyd's of London Press, Taylor & Francis (the Scientificand Academic publishers) and IIR (the Events and Performance Improvement (PI)experts). We had a very ambitious growth target. And we beat it. Our headlinerevenue has grown by over 40% and our adjusted operating profits have grown byalmost 50%. More telling, in terms of confidence for the future, our proformarevenue increase was 13% and our proforma adjusted operating profit increase was22%. We believe this is the best measure for the like for like growth achievedin 2006. This growth shows the strength of our core business and the success of our M&Aactivity. We are not just bigger because of the corporate development we haveundertaken; we are stronger, at once more resilient and more dynamic. Informa's broad geographical reach creates a natural resilience, allowing us topursue growth aggressively in strong markets such as Dubai where we have seenexcellent operating profit in 2006, with a 74% increase on prior year; and SouthAfrica which in a turnaround situation grew by over 500%, whilst being morecautious in weaker markets such as Denmark and Poland which were flat on prioryear. Our local office structure means that we typically match costs to revenuesacross geographies mitigating foreign exchange exposure. The impact of currencymovement on Informa's 2006 results was minimal, despite the volatility of thedollar. Informa's extended geographical footprint has also enabled us to grow faster aswe leverage our winning brands by rolling them out globally. We have taken ourtop Large Scale Events (the "must attend" event in a market, which attracts bothhigh delegate numbers and large sponsorship and exhibition revenues) and heldregional versions in new territories particularly in Asian markets. We carried out an extensive review of the international opportunities for ourmarket-leading PI businesses and are in the process of significantly expandingtheir international reach. Royalty revenues from PI franchises grew by 25% in2006, demonstrating strong international demand for their intellectual property.This success reflects the PI companies' proven ability to improve theperformance of client business within specific operational disciplines such ascommunications, customer experience, leadership, project and programmemanagement and sales. Our strategy is to provide specialist information to niche, targeted communitiesof interest across multiple media formats. At the heart of all of our businessesand revenue streams is high value, proprietary content. In 2006, our customerspaid to receive premium content in books, journals, magazines, newspapers,events, training courses, exhibitions, PI engagements, data feeds, web sites andincreasingly through a full range of electronic media. Informa's publishing revenues are resilient. Our subscription revenues of which90% now flow from digitally delivered content, renew each year at 90+% and enjoyconsiderable visibility as subscribers pay up to one year in advance. We are nota B2B publisher dependent upon advertising income, indeed just 3% of ourrevenues in 2006 came from advertising. Our events businesses have benefited from a shift away from traditionaladvertising spend. As advertisers demand more targeted marketing and moremeasurable response they are increasingly attracted to sponsoring and exhibitingat events. Consequently, our proforma sponsorship and exhibition revenue grew by41% in 2006. All our markets saw good growth in 2006. Notably, Telecoms & Media adjustedoperating profit grew by 34% and Maritime, Trade & Transport's by 35%. Our newlyintegrated Life Sciences events businesses grew operating profit by 74%, againdemonstrating the benefits of the acquisition synergies. Across Informa, managers and their teams have seized the opportunities presentedby our increased scale and format expertise: implementing best practice fromaround the world; partnering with sister companies to expand their productranges and customer base; reducing costs through shared back offices. We are proud of the sort of Group Informa is - highly entrepreneurial, profitfocused, fast and individual yet strong, robust and responsible. It's acombination that we work hard to nurture because we know it sets us apart fromour peers. Chief Executive's and Managing Director's Review Business Streams Publishing Publishing constituted 39% of revenue, £409.0m, in 2006. On a proforma basisrevenue was up 8% with subscription sales growing by 7%, copy sales by 11% andadvertising revenues by 3%. Subscription revenues made up almost 60% of publishing turnover and continue toproduce high operating profit margins, fuelled by market leading positions,strong repeat revenues, brand roll-outs and increased yield and opportunity fromelectronic delivery. Sales to corporates in the commercial, professional and pharmaceutical marketsproduced approximately 60% of the subscription revenues. In Professional, where legal revenues as a whole grew by 6% and adjustedoperating profits by 15%, subscriptions contributed 45% of the divisionalexpansion. The two main drivers of this growth were bundling formats whichcreated additional value for customers and encouraged take-up of on-lineservices and sales of multi-user corporate licences with key client firms takingadvantage of a greater range of digital services. The launch of Informa Law'son-line service www.ilaw.com was pivotal to these results. Launched in November2005, i-law brings together the core law report archives and in-depth analysisfor the niche markets of shipping, insurance, arbitration, construction andintellectual property law. 2007 will see even greater content depth andfunctionality, moving it from a research tool to a daily work aid. Similarly in insurance, in 2006 Informa launched the new on-line service,www.idnewscentre.com. This leverages the leading Insurance Day brand and hascreated the opportunity to build subscription revenues from multi-user corporatelicences. It also reduces the historical reliance in this sector on hard copyadvertising revenues whilst opening a new opportunity to grow on-lineadvertising revenues in 2007. In the financial sector Informa's strategy to be the market leader in each ofits niche sectors and to produce expert proprietary content and then distributeit through multiple delivery vehicles, can be seen in action across the variousbusinesses. Informa Investment Solutions, the financial data and software provider,successfully completed the integration of the M Solutions business acquired inFebruary 2006. Its PSN investment manager database business and offering is nowthe market leader, driving increased subscription revenues and key customerusage. Informa Research Services, the US based financial services research business,benefited from the need for quality content by the growth of electronic deliveryvehicles. It increased revenues by leveraging the strength of its premiumcontent to re-sell it to on-line portals. In March 2006, iMoneyNet, the publishers of the Money Fund Report, releasedMoney Fund Analyzer, a browser-based analytical tool designed to help US-basedmutual fund companies, banks and insurance companies meet their business goals.It provides 24-hour access to iMoneyNet's entire US money market fund databasewhich includes more than 20 years of historical information on hundreds of datapoints. By the end of 2006, all but a handful of subscribers had upgraded fromthe desktop software database application to this new product resulting in a 32%sales increase in this area. Academic publishing continues to benefit from electronic capabilities bothimproving revenues and saving costs. Over 90% of subscriptions to our 1,200+ academic journals are now digitallydelivered. Informa launched 60 new journal titles in 2006 and enjoyed revenueincreases of circa 8% reflecting content growth and frequency increases in anumber of journals, particularly in the humanities and social sciences area. The rise in digital delivery means that new research no longer has to wait for afixed issue date. On-line updates can be made on a continuous basis adding evengreater value and consequently resilience, to the subscriber base and cementingeach journal's market leading position. Informa's 200 years' worth of premium journal content is a treasure trove ofauthoritative research. In 2006 Informa identified the core subject areas withthe greatest archive strength and digitised them. The first four of theseelectronic archives were on Education; Business Management and Economics;Chemistry; and Physics. They have already produced their first million dollarsin incremental revenue in 2006, all with limited associated costs, and 2007sales are going well. Additional sets will be launched in 2007 focused onMathematics and History of Science; Geography, Urban Planning, Environment andSport; Behavioural Sciences and Social Work; and Engineering. Academic books' focus on e-commerce continued in 2006 with the launch ofwww.taylorandfrancis.com in May. Market facing brands such as Routledge, havetheir own direct domains but use the same applications. All orders areconsolidated through one server, dramatically improving the business's abilityto promote and track sales. The system is updated daily with automatic newcontent feeds. It is designed so that products and services from bolt-onacquisitions can be added easily. The new functionality in the site hastransformed the customer buying experience. It allows the marketing teams to runand monitor intelligent promotions on-line and has consolidated a ratherfragmented web presence into a strong, unified brand. On-line sales revenuesince launch has increased by 26% compared with prior year. Increasingly imprints such as Routledge and Garland are adding digital and websupport to their academic textbooks. The bestselling Media Student's Book, usedat undergraduate, A Level and FE level was released in March 2006 with asupporting website which included course mapping to individual markets, studentproduction film work, student essays and links to other websites. In its firsteight months, the new fourth edition sold five times the number of units sold inthe same initial period in its previous edition, reflecting both its loyalcustomer following and the added attractiveness of full colour illustrations anduser-friendly digital support. This multi-media trend will continue in 2007 with new launches such asIntroduction to Global Politics, a textbook which has a supporting website withlecturers' materials, datasets and updates; Psychology of Physical Activity,supported by a website containing lecturer PowerPoints; and Quantitative DataAnalysis in Education, also accompanied by a web site that contains educationalinformation materials to download. Technological advances in printing mean that Informa can now print high qualitybooks on demand at comparable costs to bulk printing. This Print on Demand (POD)capability reduced costs, increased revenue and helped the environment in 2006. Holding 'virtual stock' rejuvenated back lists keeping out of print books onsale. Informa was able to produce even more niche, specialist publications andreduce the incidence of stock write-offs by avoiding the need for large printruns. Further savings were made by preparing the texts for POD in India and thenusing local print suppliers in the UK and US to avoid shipping costs. POD also reduces Informa's carbon footprint and paper usage. The number of booksbeing printed on demand increased in 2006 to over 9,000. This represents morethan 20% of all titles and is being added to at a rate of approximately 300 amonth so Informa will enjoy even greater benefits from POD in 2007. Performance Improvement ("PI") PI generated 22% of revenue, £225.8m, in 2006. It achieved proforma revenuegrowth of 11% and adjusted proforma operating profit growth of 12%. The PI businesses, working with corporate and government clients to solvebusiness issues in different operational disciplines, continue to experiencestrong global demand for their products and services. Their ability to drivebetter results for their clients using tailored intellectual property basedlearning programmes, coaching and measurement is generating strong repeatbusiness. Each of the seven brands is performing well. The focus on expanding the US-led PI businesses globally continues to producepromising results with £34m, 15% of PI revenues, generated from non-US basedoperations. The wholly owned non-US businesses grew revenue on a proforma basisby 16% in 2006 outstripping the US growth of 10%. Equally encouraging forfurther international growth, royalty revenues from franchises grew by 25%. AchieveGlobal (Achieve), one of the larger PI businesses which with 40% of itsrevenue from outside the US, has more global revenue than any of the other PIbusinesses. In 2006 Achieve continued to build its international position withthe purchase of its Taiwan and Greater China franchise operation. Achieve's world-wide reach means that it can deliver solutions in a variety ofmethods and languages. Among the many organisations Achieve has worked withinternationally is global printer RR Donnelley whose Achieve solution set wasdelivered to 1,500 new employees through online and classroom programmes inSpanish, Cantonese, Mandarin and English. Achieve also launched new programmes in its Professional Sales portfolio togreat success. Over 5,000 individuals worldwide have already been through thenew programmes. This significant investment in new intellectual property wasrecouped within nine months. ESI International (ESI), the Project Management specialists and another of thelarger PI businesses, also saw good global growth with proforma operating profitfrom its non US business increasing 28%. Throughout the year, ESI launched projects aimed at driving additional revenuefrom its multi-national client base, improving levels of customer service andcreating greater collaboration and cooperation within the global account teams.This has resulted in the win of a substantial EMEA account. This leadingmanufacturer of advanced technology systems for the semiconductor industry ispotentially ESI's largest ever EMEA client and will begin to trade in 2007.Similar team work is driving new opportunities in the Middle East. Sales, marketing and system integration projects were launched in July 2006designed to boost the newly acquired Asia business units. These have enabledESI to secure new revenues for this region and create operational efficienciesresulting in above plan operating profit for the operations in China, Singaporeand Hong Kong. Omega, one of the smaller PI brands, specialising in financial service clients,also produced noteworthy results delivering a 60% increase in proforma operatingprofit on a 16% jump in global revenue and a nearly 70% increase in averageyield per client. Omega clients include the National Australia Bank (NAB), with whom it has had arelationship for 18 years. NAB is rolling out a comprehensive Omega PI solutioncomprised of sales, sales management and coaching components to more than 1,000bank managers - in an effort to increase its share of the retail banking marketthrough improved branch and regional management practices. Another key Omega client is Standard Chartered Bank, with whom Omega has workedfor more than a decade. Standard Chartered, a global leader in emerging markets,employs Omega's credit skills assessment, training and coaching solutions inover 50 countries across Asia, Africa and Latin America. Each year, more than a1,000 Standard Chartered Bank employees graduate from Omega programmes.Initially focused on wholesale bank credit applications, the relationship hasexpanded to encompass the Small and Medium Enterprise sector - a driving forcefor Standard Chartered's international growth. Similarly, Barclays, who initially targeted 400 staff members for its CreditSkills Development programme, have to date had more than 1,200 participants inOmega's credit and risk management solutions. Events Events generated 39% of revenue in 2006 and saw excellent proforma growth of19%. The successful integration of IIR; a continued focus on developing Large ScaleEvents (LSEs), the "must attend" conferences in each sector which combine strongdelegate revenues with high margin sponsorship and exhibition income; andleveraging Informa's global footprint, have all contributed to the strongperformance. For example, combining the Informa and IIR events businesses in Australia tocreate one national business with two market facing brands, drove a 13% increasein proforma revenues and a 21% increase in proforma adjusted operating profit.Average delegates attending IIR branded events in Australia rose by almost 8% asthe business took advantage of access to the combined customer and prospectbase. Average yield per delegate for the Informa branded events in the countryrose by over 9% as they capitalised on the pricing strategy from theIIR model. The accelerated growth opportunities combined with integrationsynergies to raise margins above 20% in 2006. Much of the margin improvement wasachieved through the increased purchasing power of the integrated business andthe merger of the back office. Across Informa, a focus on LSEs and a small number of major exhibitions hasimproved the quality of earnings of the events portfolio. These events haveparticular resilience through the cycle as they become the prime meeting placefor a specific industry or sector. They attract the best speakers; delegatesattend and return to them annually because they provide an opportunity to meetthe full marketplace and they are a magnet for sponsors and exhibitors whorecognise a focused opportunity to engage proven purchasers and wish todemonstrate commitment to the sector. Our largest 200 events contribute more than 40% of our total events turnover.Advantages of scale mean that they enjoy significantly higher margins than ouraverage. They contribute approximately 70% of our events-derived adjustedoperating profit. The remainder of the events portfolio while contributing atlower margin, helps ensure we maximise profitable revenue from our structuresand cleans and builds our prime asset - our 20 million-strong database. Theyalso allow us to explore and develop the topics that will become tomorrow'sleading events. Dubai's Cityscape, which is now the world's largest international propertyinvestment & development event, is a notable example of just that process.Started five years ago as a standard conference, in 2006 the show welcomed35,000 participants from 90 countries and over 500 exhibitors from 55 countries,more than doubling its exhibitor base. Dubai's whole exhibition portfolio performed well. Palme, The Middle East'sProfessional Sound, Light, Music, Audio Visual and Systems IntegrationExhibition, grew exhibitors by almost 50%. Middle East Electricity, the largestpower and electricity event in the Middle East, grew its exhibitor base from 764to 969, a 27% increase. Bride, the wedding show, increased visitor numbers from11,000 in 2005 to 25,000 in 2006. Ambiente, the gift & homeware exhibition for the new bride and her first home,which is co-located at the Bride Show, demonstrates the success of leveragingexisting brands to drive further market penetration. Ambiente grew exhibitornumbers by 52% and visitor numbers by over 100% from 2005 to 2006. IIR USA posted strong results as its focus on LSEs, which have an average grossprofit almost eight times that of a standard conference, continued to pay off.In total, proforma adjusted operating profit grew by over 47% and the operatingprofit margin grew by 7%. Flag ship million dollar plus events included: GAIM,the Hedge Fund industry event; the brand extension GAIM Fund of Funds; CROs, themulti-million dollar clinical development outsourcing conference; NMHCC, theNational Managed Health Care Congress; The Market Research event and Front Endof Innovation, the only truly comprehensive event focused on all aspects offront end strategy and process. Front End of Innovation is another example of how Informa is building onexisting brands. It began as a small, niche conference with just 20 delegates.In 2006 it produced over $1m in revenue. Informa's expanded international footprint has allowed the business to leveragethese LSE brands globally. In 2006 IIR USA launched a regional version of itsGAIM event in the Cayman Islands, producing over $1m in revenue in its firstyear. Already in 2007 Front End of Innovation launched successfully in Germany,joining Euro Market Research in the portfolio of strong US brands beingprofitably replicated overseas. ICBI, (the specialists in financial LSEs) launched an Asian version ofSuperReturn, the largest private equity event in the world which attracts around1,000 delegates each year in Europe. Through rigorous local research, they wrotea programme which attracted over 200 paying delegates. By leveraging existingrelationships and quadrupling the Asian based investment in the event theydelivered significant sponsorship and exhibition revenues. ICBI is also illustrative of another successful 2006 strategy. In addition tothe focus on growing LSEs, Informa built revenue synergies between sistercompanies. The International Payments Systems event is a case in point. A legacyInforma event it was moved to ICBI, in order to grow it from an annual event toa LSE. Applying the best practice blueprint, delegate revenue rose by 49% andSponsorship and Exhibition revenue by 59%. Informa's Professional publishingteam also produced a highly profitable event supplement, the distance learningteam launched a new programme and two of the Performance Improvement businessesexhibited and won new business. Divisions Academic and Scientific Academic and Scientific 2006 2005 Increase Organic Proforma £'m £'m % % %Revenue STM 178.7 157.0 14 4 8HSS 116.5 103.5 13 10 13 ----------------- 295.2 260.5 13 6 10 ----------------- Adjusted Operating Profit STM 50.6 41.5 22 10 16HSS 27.0 24.0 12 9 12 ----------------- 77.6 65.5 18 10 15 ----------------- Adjusted Operating Margin 26.3 25.1 Revenues increased by 13% to £295.2m in 2006, driven by an organic increase of6% and by contributions from acquisitions including a full year from IIR.Adjusted operating profit was 18% higher at £77.6m, which included organicgrowth of 10%. On a proforma basis adjusted operating profits were up 15%. In2006 IIR contributed £18.9m (2005 from date of acquisition: £5.9m) to revenueand £3.2m (2005 from date of acquisition: £0.4m) to adjusted operating profit.On a proforma basis IIR for 2005 recorded turnover of £14.2m and adjustedoperating profit of £2.4m. The adjusted operating margin rose to 26.3% from 25.1%, benefiting from the 7%organic increase in books sales as well as the impact of cost savings andefficiencies associated with the integration of the IIR businesses. The Scientific and Medical business grew organic revenue by 4%. Within it,Informa Healthcare, which targets the medical, bioscience and pharmaceuticalsectors, with a full mix of delivery formats including books, journals,magazines and awards, had a particularly strong year, achieving organic revenuegrowth of 12% and operating profit growth of 8%. The team's ability to leverage brands and provide high quality content acrossmultiple delivery platforms can be seen by its 2006 re-launch of Agrow, theflagship publication providing opinions and analysis for the plant sciencesindustry. Agrow was re-launched as a comprehensive news service comprisingonline, magazine, and traditional newsletter formats positioned to complementeach other. This new package was designed to meet the diverse requirements ofAgrow's readership by developing the newsletter's widely acknowledged highquality editorial across an extended portfolio of offerings. This initiativeprovided a platform for Agrow to protect its leading market position and drivesignificant revenue and profit growth with a 48% increase in advertisingrevenue, 28% increase in subscription yields and a 38% increase in adjustedoperating profit. Using digital capabilities to support and transform high value content has beena theme throughout Informa in 2006. Informa Healthcare transformed its writtencourses from a paper-based product into a fully interactive service. Customerfeedback has been positive and the division has already seen a four fold returnon its initial investment. It has now transferred these events to the newlystrengthened Informa Life Sciences events business so that they can beseamlessly co-marketed with the rest of the events portfolio. The Life Sciences events businesses in both the UK and the US had a strong 2006.Revenue increased on a proforma basis by 12% and operating profit by 74%reflecting the benefits of a successful integration. The IBC and IIR Life Science conference teams in the UK were merged to form asingle team "Informa Life Sciences" in February. The operational changes and newinitiatives implemented since the initial merger saved costs, improvedproductivity and strengthened the business's market position considerably. Bycomparing working practices across research, marketing, sales and logistics,Informa Life Sciences was able to implement processes that drew from the bestpractices of each of the teams. The benefits of this exercise have includedproduct specialisation, roll-out of new marketing initiatives, particularly ine-marketing, optimised lead times, increased use of telesales and successful keyaccount sales. The combined effect of this has led to an increase in averagedelegate numbers of 16% along with 8% more events. Building on this success, Informa Life Sciences has gone on to expand itsportfolio by launching new events for markets that have not traditionally beencatered for by either of the Life Science events divisions but where Informaalready had a strong presence through its publications such as Scrip. These newareas such as veterinary medicines and medical devices provide an excitingblueprint for future brand extensions based on connecting events andpublications market presence and expertise. The division also saw excellent revenue growth in Humanities and Social Sciences(HSS) which increased 13% on a proforma basis and 10% organically. Booksbenefited from an increasing focus on two core aspects of the academic market -"teaching and learning" books for students, and high-level internationalresearch publishing for purchase by university libraries. The top subjects byrevenue size were Psychology & Behavioural Science, Education, Politics &International Relations and Media & Communication. In total more than 2,000 newbooks were published in the year. Significant new launches (new titles and new editions) of text books forstudents included: Constitutional and Administrative Law; The English LegalSystem; Media Students Book; Town and Country Planning in the UK; Handbook ofChild and Adolescent Clinical Psychology; Theatre Histories: An Introduction;Learning to Teach in the Primary School; Sport, Culture and Society. HSS journals continued to benefit in 2006 from strong content growth. Researchinvestment in the newer disciplines, such as strategic studies, terrorismstudies, music, media, sports sciences, environmental studies and diversity,continues to grow enabling us to produce larger and more frequent journals andto win more market share. The renewal rate at over 97% is outperforming theoverall journals' rate. The new electronic sales model, offering access to additional titles within adiscipline for a two year period, has increased customer yield and is being wellreceived by the academic community. We have always had a strong presence in HSS journals in Europe. The purchase ofLawrence Erlbaum towards the end of the year, with an impressive portfolio of100 titles particularly in behavioural sciences and education, has given us afirm platform for further expansion into North America in 2007. Professional Professional 2006 2005 Increase Organic Proforma £'m £'m % % %Turnover Performance Improvement 225.8 106.2 113 - 11Financial Data Analysis 63.6 60.8 5 -1 5Finance Insurance Law and Tax 83.3 50.8 64 0 22 ----------------- 372.7 217.8 71 0 12 ----------------- Adjusted Operating Profit Performance Improvement 34.7 17.6 97 - 12Financial Data Analysis 19.1 17.9 7 2 8Finance Insurance Law and Tax 22.0 9.9 122 29 38 ----------------- 75.8 45.4 67 10 17 ----------------- Adjusted Operating Margin 20.3 20.9 The Professional division's overall revenue increased by 71% to £372.7m andadjusted operating profit rose by 67%, driven by a strong contribution frombusinesses acquired with IIR, notably Performance Improvement (PI) and the IIRFinance events businesses. IIR businesses, which now account for three quartersof the division's sales, contributed £273.6m to revenue and £48.6m to adjustedoperating profit (2005: £122.0m and £21.0m respectively post acquisition). On aproforma basis revenue was up 12% and adjusted operating profit increased by17%. PI in 2006 represented over 60% of the revenue of this division and grew 11% ona proforma basis to £225.8m from £204.3m in 2005. This full year double digitgrowth has been consistent throughout 2006, with an equal 11% growth in bothhalves of the year on a constant currency basis. Solid revenue growth was achieved by six of the seven PI businesses, led byForum, Omega and Robbins-Gioia. Only Communispond, the smallest of the PIcompanies accounting for 2% of PI revenue, had a flat performance in 2006. Overall reported PI operating profit grew by 97% with a 12% increase on aproforma basis. Good operational gearing in AchieveGlobal, Forum and Omega ledto proforma operating profit growth in excess of 30%. Robbins-Gioia, theprogramme management specialists with a significant government client base, grewrevenue by 13% but as a result of a $4 million investment programme in newsolutions development which is expected to generate incremental revenue in 2007,saw a profit decline. The Financial Data Analysis businesses grew reported revenues and operatingprofit by 5% and 7% respectively and on a proforma basis by 5% and 8%respectively. The challenging market conditions for real-time trading-related information forthe banking community which we referred to in the mid-year impacted theperformance of the corporate and government bond information business IGM andcaused organic revenue to decline slightly. All other businesses within the unitproduced good increases. M Solutions acquired in February 2006, which addedwealth management solutions to the Informa Investment Solutions productoffering, contributed to the overall growth. The Finance, Insurance, Law and Tax (FILT) businesses produced exceptionalreported revenue growth of 64% and adjusted operating profit growth of 122%primarily due to a full year of the IIR financial events businesses includingthe ICBI portfolio. FILT revenues grew by £32.5m to £83.3m and adjustedoperating profit by £12.2m to £22m; with IIR contributing £48.6m to turnover and£13.7m to adjusted profit producing proforma growth of 22% in revenue and 38% inoperating profit. On an organic basis, legacy Informa FILT revenues were flat. Strong revenue andprofit growth of 6% and 22% respectively in the UK Professional legal andinsurance division, achieved despite transferring their financial eventsportfolio to the IIR events team, was offset by a weaker performance from theDutch publishing unit which specialises in written courses. The stronger UK Professional performance was led by increased legal subscriptionsales, particularly electronic sales through the new ilaw.com service. Inaddition, a strong focus on Large Scale Events (LSEs) and increasing eventyield, grew legal and insurance events adjusted operating profit by 25%. Financial events particularly under IIR's Tax and Accounting and ICBI brandstraded strongly in the period with: good performances from LSEs; internationalroll-out of existing event brands; leveraging of sister company publishingcapabilities to produce show dailies and event supplements; and good costcutting synergies from the integration of the legacy Informa finance events. Commercial Commercial 2006 2005 Increase Organic Proforma £'m £'m % % %Revenue Regional events 241.1 143.1 68 13 16Telecoms & Media 64.7 48.4 34 30 24Maritime & Commodities 65.4 59.5 10 10 10 ----------------- 371.2 251.0 48 16 16 ----------------- Adjusted Operating Profit Regional events 42.3 18.6 127 14 47Telecoms & Media 16.1 12.0 34 34 25Maritime & Commodities 7.3 5.8 26 25 25 ----------------- 65.7 36.5 80 25 38 ----------------- Adjusted Operating Margin 17.7 14.5 The Commercial division, which comprises 75% of Informa's events revenue,increased headline revenue by 48% (£120.2m) to £371.2m and adjusted operatingprofit by 80% (£29.2m). Organic revenue growth of 16% translated into a 25%improvement in organic adjusted operating profit, again reflecting the costsynergies of the enlarged Group and the benefits from increased yields resultingfrom the movement towards higher yielding event formats. The division's resultsbenefited from the acquisition of the quadrennial print exhibition IPEX from thetrade association PICON which added £17.0m to turnover and £4.4m to adjustedoperating profit. IIR businesses contributed £136.9m to the division's revenue and £28.1m to itsadjusted operating profit (2005: £64.6m and £10.1m respectively postacquisition). Overall on a proforma basis revenue was up 16% and operatingprofit 38%. Regional Events grew organically by 13% on a revenue basis and 14% on adjustedoperating profit. On a proforma basis revenues increased by 16% which translatedinto a 47% proforma adjusted profit increase reflecting the good operationalgearing of the combined events businesses and the cost synergies achievedthrough the IIR integration. The IIR Dubai events business which represents almost a third of the regionalevents profit had a particularly strong year in both exhibition and conferences& training. Dubai's ten strong exhibition portfolio which is led by Arab Health,Cityscape and Middle East Electricity grew its operating profit by 82% on 2005.The conference and training course output reached over 750 events with operatingprofit 57% higher than last year. The Informa and IIR German businesses which together represent the next biggestcomponent of the Regional Events unit traded strongly in the second half of theyear, offsetting the inhibiting impact of the Football World Cup on first halfgrowth, to achieve an adjusted operating profit increase of 11% for the fullyear. Telecoms and Media saw headline revenue and adjusted operating profit growth of34%. On an organic basis revenue and adjusted operating profit grew by 30% and34% respectively. Revenues increased through a focus on growing Large Scale Events as well ascapturing market growth with the development of new niche topics such as 3G LongTerm Evolution (known as 4G); the rapid repeats of hot topics such as MobileSearch; and the regional roll-out of strong brands within WiMax and IMS to theUS, Asia and EMEA where in Middle East Africa in particular Informa is perfectlyplaced to benefit from the explosive growth in technology. Telecoms Academy, the training division of Informa Telecoms & Media, has alsocontributed well to the operating profit of the division with good new productdevelopment, particularly the Telecoms Mini-MBA and Distance Learning Diplomaand Certificate. They too have benefited from the growing Middle East andAfrican markets where their focus on developing sales relationships in theseregions has produced an excellent return. The Maritime & Commodities businesses grew reported and organic revenue by 10%and adjusted operating profit by 26%. Maritime had particularly strong operating profit growth of 35%, capturinggrowth from the strong trading conditions in the international maritime marketsand continuing high energy prices. The flagship title Lloyd's List had a strong year boosting both subscription andadvertising revenues. Growth in the demand for specialised training in themaritime industry provided the perfect backdrop for programmes run by Lloyd'sMaritime Academy at its dedicated training centre in London and via an expandingdistance learning syllabus. Combined with conferences in maritime and energy,the Maritime & Transport division held more than 150 events during the year. Inexhibitions the highlight was the continued growth in the Terminal OperatorsConference (TOC) series which celebrated its 30th anniversary in 2006. Subscription based data services were particularly strong, boosted mid year bythe creation of a dedicated portal (www.Lloydsmiu.com) which brought togethervarious data streams / web sites relating to vessels and ownership information.This is tied into our own AIS network and provides the world's largest shiptracking system, currently capturing over 28 million vessel positions a day plusdetailed characteristics of over 120,000 vessels and comprehensive informationon 163,000 shipping companies. Over 12,000 credit reports on companies in themaritime, transportation and energy markets are available for immediatepurchase. Site traffic is 66% higher than the previous sites combined and hasbeaten all revenue expectations. Commodities also enjoyed high double digit profit growth and is illustrative ofInforma's niche market focus. It reflects our ability to identify new andemerging topics quickly and then build on them. Our strategy is to be first tomarket with a new subject area and then quickly expand the topic through allInforma's delivery formats. Informa identified the rising interest in alternative energy sources as early as2002 and has been steadily increasing its event and publication output on thissubject. In 2006 we produced 11 market leading events on ethanol and biofuels inEurope, the Americas and Asia. In addition, the World Ethanol and BiofuelsReport, spawned a whole series of additional products targeted at the globalbiofuels industry. These include the European Ethanol Prices Report and a weeklyBiodiesel Price Report. In 2006 subscribers were also able to access a dailyon-line news service, updating them with the latest news and comment throughoutthe day from all over the world including news direct from Agra conferences. Trading Outlook 2006 was an excellent year. 2007 has started the same way. All three of our business streams have started the year strongly and are tradingahead of last year both in real and constant currency terms. Publishing isperforming well and ahead of expectations. Our events and PerformanceImprovement (PI) businesses continue to enjoy the double digit revenue growthwhich they achieved in 2006. Publishing Publishing deferred income balances, which reflect subscription revenue receivedyet to be released to the revenue account, are 7% ahead of those at the sameperiod last year in constant currency terms. This is an important indicator ofpublishing trading strength. Electronic revenues continue to build as we leverage still more of our premiumcontent on-line. Sales of the new academic electronic archives are progressingwell with some $4m of bookings already this year compared with $1m in 2006.Digital developments in our Professional and Commercial divisions also show goodpromise. Events Events have had a good start to the year. The Large Scale Events (LSEs) alreadyheld have outperformed prior year and budget expectations. For example,SuperReturn 2007, the largest private equity conference in the world, celebratedits 10th anniversary in February with the largest event yet, attracting some1,500 attendees from around the world. Our Dubai business has also carried its excellent 2006 momentum forward into2007. Its largest event, the healthcare exhibition Arab Health, has just closedsignificantly ahead of prior year and budget. The regional roll-outs of itssecond largest event Cityscape to Singapore, China, Abu Dhabi and India were allplanned in 2006 and are on course to achieve significant profits in 2007. The 3GSM World Congress in Barcelona in February grew again. Under a newarrangement with the association GSMA, our attributable profit will be similarto last year although bookable revenues will be lower. Performance Improvement Total PI revenues in the first two months of this year are 11% ahead of lastyear with particularly strong starts from Huthwaite, the sales forceeffectiveness specialists, which have seen top line growth of 22% andRobbins-Gioia, the programme management experts, which is 18% ahead.International revenues continue to show encouraging expansion. Sales from non-USbased operations are 23% higher than this time last year. Acquisitions and disposals Our late 2006 acquisitions Lawrence Erlbaum, the behavioural science publishingbusiness; Citeline, the clinical trails database; and Junction, a specialistevent organiser in the field of IPTV, have all begun the year in line withexpectations and have already been integrated into the Group. In addition to our encouraging trading momentum, the Group will also benefitfrom the £38.9m cash proceeds, generating a non-trading profit of £33.4m, fromthe disposal of our investment in Blackwell Publishing following its recent saleto John Wiley. Summary We believe that successfully creating organic revenue synergies is a particularstrength of Informa. We work very hard at moving successful products around theworld, cross marketing across our divisions and encouraging our publishing,events and PI businesses to work together. Our broad product portfolio gives usmany opportunities to generate incremental revenues. Our attitude is that allsynergistic efforts are important even if we only generate an incremental poundof profit from the initiative. Such synergies, our expertise at leveraging premium content electronically, theinherent quality of the business and the energy, commitment and enthusiasm ofour employees underpins the on-going success of Informa. The strength of our underlying trading means that we are confident that we willcounter the current weakness of the dollar and achieve our targets for anothersuccessful year in 2007. Peter Rigby and David Gilbertson14 March 2007 Financial Review Informa's revenue in the period was £1,039.1m, 42 % higher than 2005, andadjusted operating profit increased by 49% to £219.1m. Adjusted operatingmargins increased to 21.1% from 20.2%. These results reflect the increased scale of the Group following the acquisitionof IIR in July 2005 and the superior growth rates and opportunities that havearisen from the combination. Including IIR on a proforma basis revenue growthwas 13%. Excluding IIR the legacy Informa business recorded strong organicrevenue growth of 8% (2005: 6%). Revenue growth across Informa was acceleratedby increasing collaboration between the three divisions of the business whichare now bringing their format expertise to bear on a wider range of marketopportunities. Adjusted operating profit including IIR on a proforma basis increased 22% andexcluding IIR adjusted organic operating profit grew by 13% (2005: 13%).Adjusted operating margins rose to 21.1% (2005: 20.2%) which compares to aproforma margin of 19.5% in 2005. This increase in organic and adjustedoperating profits and margins demonstrates the benefits across the Group arisingfrom the combination of the legacy Group with IIR as well as the effects ofoperational gearing and greater cost efficiency. Recent acquisitions traded strongly and contributed well to the year's results,particularly IIR which has achieved a post tax return on capital employed of8.4% in its first full year of ownership, exceeding our cost of capital asexpected. Other material acquisitions in the period contributed £28.4m toturnover and £7.5m to adjusted operating profit. Revenue Informa plc for the twelve months ended 31 December 2006 recorded revenue of£1,039.1m, up 42% from £729.3m in the same period a year earlier. IIR, which wasacquired on 6 July 2005, contributed £429.3m to revenue and a further £28.4m wascontributed by other material acquisitions in the period (mainly from IPEX, thequadrennial print exhibition, which contributed £17.0m). The translation impactof currency movements on the results was minimal despite some US dollar tosterling exchange rate volatility during the period. Operating Costs Operating profit increased by 40% (£36.9m) to £128.3m from an operating profitof £91.4m in 2005. Overall in support of this revenue growth operating costsincreased by 43% (£272.9m) with increases in amortisation of intangibles up 74%(£36.9m), raw materials up 46% (£110.5m) and staff costs up 41% (£86.5m). Theincrease in the year's amortisation of intangibles reflects principally thecharge in respect of intangible assets acquired with the IIR acquisition, withthe 2005 comparative reflecting only the 6 month period in which IIR was part ofthe Group. Included in other expenses is £7.2m of costs (2005: £8.3m) which were incurredin integrating acquisitions during the year including IIR, M Solutions andLawrence Erlbaum. Further details are given in note 3. Finance Costs Finance costs, which consist principally of interest costs net of interestreceivable increased by 26% to £45.7m from £36.2m. The increase reflects thefact that the Group increased its debt levels in July 2005 to help finance theacquisition of IIR and hence 2005 reflects only six months of this relatedinterest. During the year the Group has continued to use its strong cash flow toinvest in selective earnings enhancing acquisitions and to this end a further£136.2m was spent and financed from Group debt facilities during 2006. IIR Integration Update As previously reported the integration of IIR has been completed and thecombined Group has focused on and benefited from the increased scale andopportunities presented by the enlarged Group. As we had anticipated, we wereable to achieve savings relating to the combination of the two businesses of£8m. These savings were achieved across all businesses and arose in areasincluding senior management, marketing, shared services, venue costs, financeand distribution. The cumulative cost of achieving these savings was £7.6m incurred over the last18 months (2005: £4.8m) slightly above our budget of £7.0m. Details are includedwithin exceptional costs in note 3. Acquisitions As mentioned above the Group spent £136.2m during 2006 on acquisitions andrelated deferred consideration. As well as matching the Group's businesscriteria and strategy the Group continues to apply its rigorous financialinvestment criteria which are that acquisitions should pay back their initialinvestment within seven years, be earnings enhancing in the first full year andassociated cash flows must produce a positive Net Present Value within ten yearswhen discounted back at the Group's weighted average cost of capital plus asuitable premium for risk. The Group estimates its current weighted average costof capital at 8.2% (2005: 7.6%). Disposals Prior to February 2007, the Group held interests in shares in BlackwellPublishing (Holdings) Limited which had been acquired prior to the mergerbetween Informa and Taylor & Francis for £5,495,377 in aggregate plus costs. On2 February 2007, the Group received £38,943,000 upon the disposal of theseinterests. Taxation Across the Group tax has been provided for at an adjusted tax rate of 26.0%(2005: 25.0%). This adjusted tax rate benefits from profit generated in low taxjurisdictions as well as the use of intra Group debt to help finance theacquisition of overseas subsidiaries. The rate has increased slightly this yearcompared with 2005 inter alia due to the full utilisation of US tax losses andincreased profit earned out of the US, our biggest market which has tax rates inexcess of 40%. The effective Group tax charge was 21.6% (2005: 82%). The 2005 comparativeincludes a one write-off of a deferred tax asset that arose on an acquisitionmade in 2004 and subsequently de-recognised in accordance with IFRS. EPS Compared with 2005 basic EPS was up 471% and diluted EPS was up 468%. Adjusted Results Adjusted operating profit, which is shown in note 4 is calculated after removingcertain items not relating to the underlying trading operations of the Group.This adjusted operating profit increased by 49% to £219.1m from £147.3m. Adjusted profit before tax increased 54% to £178.1m from £115.4m and adjustedprofit for the period increased 53% to £132.1m from £86.5m. Adjusted Diluted EPS after deducting tax at 26.0% (2005: 25.0%) and minorityinterests was up 40% to 31.1p from 22.2p, reflecting higher profit after taxoffset by a partial dilution from the additional shares issued to help financethe acquisition of IIR. The board believes these adjusted operational figures provide additionalinformation to explain the underlying performance and associated trends of theGroup. Further details are given in note 4. Dividend In recognition of the continued good trading prospects, the Board hasrecommended a final dividend of 8.9p (2005: 6.0p), which together with theinterim dividend of 3.3p per share represents a total dividend of 12.2p (2005:8.7p). This represents an increase of 40% on the 2005 equivalent. The finaldividend which is subject to shareholder approval will be payable on 30 May 2007to ordinary shareholders registered as of the close of business on 27 April2007. The Board seeks to maintain a dividend payout cover of between 2.5 and 3.0 timesadjusted diluted earnings per share. Balance sheet Goodwill increased to £1,124.5m from £1,123.4m principally with additions fromthe acquisitions made during the period of £59.3m (2005: £501.8m) being offsetby currency movements. Other intangible assets decreased to £921.2m from £935.7m due mainly toacquisitions in the period of £123.9m (2005: £500.9m) offset by the normalamortisation charge which came to £86.7m and exchange rate effects on US dollardenominated assets. Included in this category is £13.9m in respect of softwarepurchases relating to increased levels of capital expenditure as the Group rollsout its enhanced sales order processing systems and finance systems. Property and Fixed Assets increased to £23.1m from £22.9m, reflecting additionsof £9.7m (2005: £9.5m) offset by deprecation and exchange effects. Available for sale investments shown under current and non-current assets,increased by £29.7m from £10.3m to £40.0m. The value increased following theacquisition of Blackwell Publishing by John Wiley on 2 February 2007. The Groupsubsequent to the year end received proceeds of £38.9m and will record a profitof £33.4m (£26.2m after attributable taxation) in its 2007 results in respect ofthis transaction. Trade and other receivables rose by £7.7m principally due to acquisitions in theperiod. Net debt rose £3.0m to £738.4m from £735.4m compared with 31 December 2005,reflecting inter alia increased operational cash inflows up 36% (£58.4m) offsetby higher taxation of £20.2m, higher capital expenditure including intangiblesoftware assets of £8.3m, interest payments which increased by £9.9m and £136.2mspent on acquisitions. In turn due to the structure of the Group's debt which isheld in sterling, Euros and US dollars, these net increases are offset byfavorable exchange impacts of £40.8m. The 2005 cash flow comparative reflectsIIR related cash flows from the date of its acquisition on 6 July 2005. Cash conversion (expressed as adjusted cash generated by operations as apercentage of adjusted operating profit, see note 10) was 103% (2005: 113%). The increase in the hedging and translation reserve of £60.4m relates to the netcurrency impact from retranslating assets held in foreign currencies(principally intangible fixed assets and goodwill) offset by the conversion ofliabilities (principally loans) also held in those same currencies. Current tax liabilities balances stood at £75.2m at the year end up from £58.6mreflecting the increased scale of the business. The Group's gross defined pension liabilities disclosed under "retirementbenefit obligations" have reduced by £6.5m compared with 31 December 2005 to£11.2m due mainly to actuarial gains of £6.8m. Deferred income, which represents income receivable in advance, was down £6.1m(3.2%) on the same period in 2005 to £181.4m from £187.4m, reflecting a delayedpayment of £10m from an academic subscription agent as well as the impact offoreign currency as a large proportion of the deferred income is denominated inUS dollars. Tony Foye14 March 2007 Consolidated Income StatementFor the Year Ended 31 December 2006 Year Year ended ended 2006 2005 Notes £'000 £'000Continuing operations Revenue 2 1,039,142 729,280 Change in inventories of finished 2,513 3,091goods and work in progress Raw materials and consumables used (349,930) (239,360)Employee benefit expense (297,248) (210,710)Depreciation expense (9,113) (8,175)Amortisation of intangible fixed (86,656) (49,755)assets Impairment of goodwill (515) -Other expenses (169,897) (132,953) ---------------------Operating profit 4 128,296 91,418 Non-operating income and expense - (28)Loss on disposal of available for (812) -sale investment Finance costs 5 (45,654) (36,247)Investment income 5 4,670 5,902 ---------------------Profit before tax 86,500 61,045 Deferred tax on UK restructuring - (35,224)Other tax charge (18,653) (15,054) ---------------------Tax charge 6 (18,653) (50,278) ---------------------Profit for the year from continuing 67,847 10,767operations --------------------- Discontinued operations Loss for the year from discontinued - (1,885)operations ---------------------Profit for the year 67,847 8,882 ---------------------Attributable to: - Equity holders of the parent 67,368 8,825- Minority interests 479 57 ---------------------Earnings per share 8 From continuing operations - Basic (p) 15.98 2.76- Diluted (p) 15.91 2.75 From continuing and discontinued operations - Basic (p) 15.98 2.27- Diluted (p) 15.91 2.26 Consolidated Statement of Recognised Income and ExpenseFor the Year Ended 31 December 2006 Year Year ended ended 2006 2005 Note £'000 £'000 Gains on cash flow hedges 4,800 3,373(Loss)/gain on translation of foreign (62,590) 4,367operations Actuarial gains/(losses) on defined benefit 6,817 (3,766)pension schemes Tax on items taken directly to equity 6 (8,871) (3,752)Revaluation of available for sale investment 33,390 - ---------------------Net (loss)/income recognised directly in (26,454) 222equity Transferred to profit or loss on cash flow (2,572) 416hedges Profit for the year 67,847 8,882 ---------------------Total recognised income and expense for the year 38,821 9,520 --------------------- Attributable to: - Equity holders of the parent 38,342 9,463 - Minority interests 479 57 Change in accounting policy to adopt IAS 32 and IAS 39 Attributable to: - Equity holders of the parent - (5,948) Consolidated Balance SheetAt 31 December 2006 2006 2005 Notes £'000 £'000ASSETS Non-current assets Goodwill 1,124,529 1,123,418Other intangible assets 921,229 935,687Property and equipment 23,143 22,868Available for sale investments 1,012 10,279Deferred tax assets 19,900 13,106Derivative financial instruments 6,339 - -------------------------- 2,096,152 2,105,358 --------------------------Current assets Inventory 33,601 31,138Available for sale investments 38,943 -Trade and other receivables 192,987 185,274Cash and cash equivalents 19,478 20,654Derivative financial instruments 1,357 2,425 -------------------------- 286,366 239,491 --------------------------Non-current assets classified as held 2,247 4,574 --------------------------Total assets 2,384,765 2,349,423 --------------------------EQUITY AND LIABILITIES Capital and reserves Called up share capital 9 42,327 42,152Share premium account 9 501,310 496,826Reserve for shares to be issued 9 2,803 1,124Merger reserve 9 496,400 496,400Other reserve 9 37,398 37,398ESOP trust shares 9 (3,332) (3,334)Revaluation reserve 9 26,190 -Hedging and translation reserve 9 (59,954) 408Retained losses 9 (111,742) (145,096) --------------------------Equity attributable to equity holders 931,400 925,878of parent Minority interests 589 110 --------------------------Total equity 931,989 925,988 --------------------------Non-current liabilities Long-term borrowings 654,841 692,500Deferred tax liabilities 244,320 240,431Retirement benefit obligation 11,219 17,729Provisions 11,769 1,847Trade and other payables 3,293 4,852 -------------------------- 925,442 957,359 --------------------------Current liabilities Short-term borrowings 103,033 63,521Current tax liabilities 75,227 58,620Provisions 1,558 2,014Trade and other payables 166,144 154,476Deferred income 181,372 187,445 -------------------------- 527,334 466,076 --------------------------Total liabilities 1,452,776 1,423,435 --------------------------Total equity and liabilities 2,384,765 2,349,423 -------------------------- Consolidated Cash Flow StatementFor the Year Ended 31 December 2006 Year Year ended ended 2006 2005 Note £'000 £'000Operating activities Cash generated by operations 10 219,358 160,929 Income taxes paid (32,466) (12,231)Interest element of finance lease payments - (1)Interest paid (42,845) (32,921) --------------------------Net cash from operating activities 144,047 115,776 --------------------------Investing activities Investment income 4,670 4,708Proceeds on disposal of property, 2,996 200equipment and non-current assets classified as held for sale Purchases of intangible software assets (13,936) (5,605)Purchases of property and equipment (9,705) (9,511)Purchases of available for sale investments - (89)Acquisition of subsidiaries and businesses (136,207) (812,787) --------------------------Net cash used in investing activities (152,182) (823,084) --------------------------Financing activities Dividends paid (39,160) (27,271)Repayments of borrowings (352,185) (617,287)New bank loans raised 397,514 1,035,914Repayments of obligations under finance leases (28) (23)Proceeds from the issue of share capital 4,659 316,935 --------------------------Net cash from financing activities 10,800 708,268 --------------------------Net increase in cash and cash equivalents 2,665 960 Cash and cash equivalents at beginning of year 16,085 15,125 --------------------------Cash and cash equivalents at end of year 18,750 16,085net of overdrafts -------------------------- Notes to the Consolidated Financial StatementsFor the Year Ended 31 December 2006 1 Basis of Preparation The financial information set out in the preliminary announcement does notconstitute statutory accounts within the meaning of Section 240 of the CompaniesAct 1985, but is derived from those accounts. While the financial information inthis preliminary announcement has been prepared in accordance with InternationalFinancial Reporting (IFRS), this announcement does not itself contain sufficientinformation to comply with IFRS. The IFRS accounting policies applied in respectof the current and prior years have previously been disclosed. Statutoryaccounts for the year ended 31 December 2005 have been delivered to theRegistrar of Companies and those for the year ended 31 December 2006 will bedelivered following the Company's Annual General Meeting. The statutory accountsfor the year ended 31 December 2006 will be despatched to shareholders by 16April 2007 for approval at the Annual General Meeting on 15 May 2007. Theauditors have reported on those accounts - their reports were unqualified anddid not contain statements under Section 237(2) or (3) of the Companies Act1985. 2 Business and Geographical Segments Analysis by market sector Revenue Operating profit 2006 2005 2006 2005 £'000 £'000 £'000 £'000Academic & Scientific Division Scientific, Technical & Medical 178,738 156,992 31,922 26,523Humanities & Social Sciences 116,511 103,545 15,906 16,425 ------------------------------------------------ 295,249 260,537 47,828 42,948Professional Division Performance Improvement 225,794 106,179 17,709 5,508Financial Data Analysis 63,641 60,767 15,823 17,074Finance, Insurance, Law & Tax 83,287 50,813 12,615 5,085 ------------------------------------------------ 372,722 217,759 46,147 27,667Commercial Division Regional Events 241,045 143,066 12,525 12,845Telecoms & Media 64,736 48,441 14,542 2,352Maritime & Commodities 65,390 59,477 7,254 5,606 ------------------------------------------------ 371,171 250,984 34,321 20,803 ------------------------------------------------Total from continuing 1,039,142 729,280 128,296 91,418operations ------------------------------------------------ Adjusted operating profit 2006 2005 £'000 £'000Academic & Scientific Division Scientific, Technical & Medical 50,618 41,461Humanities & Social Sciences 26,936 24,002 ------------------------------------------------ 77,554 65,463Professional Division Performance Improvement 34,726 17,613Financial Data Analysis 19,064 17,938Finance, Insurance Law & Tax 22,012 9,860 ------------------------------------------------ 75,802 45,411Commercial Division Regional Events 42,280 18,622Telecoms & Media 16,151 12,011Maritime & Commodities 7,304 5,822 ------------------------------------------------ 65,735 36,455 ------------------------------------------------Adjusted operating profit (Note 4) 219,091 147,329 ------------------------------------------------ Geographical segments The following table provides an analysis of the Group's revenue by geographicalmarket, irrespective of the origin of the goods/services: Revenue by geographical market 2006 2005 £'000 £'000 United Kingdom 193,902 116,225North America 396,099 277,180Continental Europe 279,636 211,869Rest of World 169,505 124,006 ------------------------ 1,039,142 729,280 ------------------------ 3 Restructuring Costs 2006 2005 £'000 £'000Board level changes - 1,200Acquisition 7,203 6,069integration costs Vacant property - 1,008 ------------------------ 7,203 8,277 ------------------------ In the year ended 31 December 2006, acquisition integration costs comprisereorganisation costs of £3,672,000, redundancy costs of £2,467,000 and vacantproperty provisions of £1,064,000. These items are included in the otherexpenses line on the Income Statement except for redundancies which are includedin employee benefit expense. Acquisition integration costs of £6,069,000 in theyear ended 31 December 2005 consist of reorganisation costs of £3,436,000,redundancies of £2,126,000 and vacant property provisions of £507,000. In 2005,there were also costs associated with Board level changes and £1,008,000 ofvacant property costs which relate to a dormant overseas subsidiary andadditional provisions in respect of the 2004 US Books reorganisation. 4 Adjusted Figures - Continuing Operations 2006 2005 £'000 £'000 Reconciliation of operating profit to adjusted operating profit: Operating profit 128,296 91,418 Adjusting operating profit items Restructuring and re-organisation costs (Note 3) 7,203 8,277Intangible asset amortisation(1) 83,077 47,634Impairment of goodwill 515 - -------------------Adjusting operating profit items 90,795 55,911 -------------------Adjusted operating profit 219,091 147,329 -------------------Reconciliation of statutory profit before tax to adjusted profit before tax: Profit before tax 86,500 61,045 Adjusting operating profit items 90,795 55,911 Loss on disposal of available for sale investment 812 - Finance (income) / costs Gain on exchange contract - (3,426)Bank facility fees written off on acquisition of - 1,827business ------------------- - (1,599) -------------------Adjusting profit before tax items 91,607 54,312 -------------------Adjusted profit before tax 178,107 115,357 ------------------- Reconciliation of profit for the year to adjusted profit for the year - from continuing operations: Profit for the year from continuing operations 67,847 10,767 Adjusted profit before tax items 91,607 54,312 Deferred tax adjustment on UK restructuring - 35,224Attributable tax expense on adjusting items (27,301) (13,802) ------------------- (27,301) 21,422 -------------------Adjusting profit for the year items 64,306 75,734 ------------------- Adjusted profit for the year from continuing 132,153 86,501operations ------------------- (1) Excludes software amortisation 5 Finance Costs and Investment Income 2006 2005 £'000 £'000 Interest on bank overdrafts and loans 43,311 31,728Fair value gain on interest rate swap previously (842) -recognised in equity Bank loan facility fees expensed on business combination* - 1,827Finance lease charges - 1Interest on pension scheme liabilities 3,185 2,691 ------------------Finance costs 45,654 36,247 ------------------ *In July 2005, bank loan facilities expired on the acquisition of IIR HoldingsLimited and the unamortised element of the related fees was written off at thatdate. 2006 2005 £'000 £'000 Interest on bank deposits 348 269Interest on unwinding of discounted loan 58 -Translation gain on foreign currency loan1 1,284 -Gain on exchange contract - 3,426Return on pension scheme assets 2,820 1,999Profit on disposal of non-current assets classified as 160 208held for sale ------------------Investment income 4,670 5,902 ------------------1 The Group has borrowings in Japanese Yen as part of the management of itsinterest profile. 6 Tax The tax charge comprises: Continuing Discontinued Total operations operations 2006 2005 2006 2005 2006 2005 £'000 £'000 £'000 £'000 £'000 £'000Current tax: UK corporation tax 20,555 18,912 - - 20,555 18,912Foreign tax 22,925 3,449 - 8 22,925 3,457Adjustments in respect of - 1,414 - - - 1,414prior years ----------------------------------------------------- 43,480 23,775 - 8 43,480 23,783 ----------------------------------------------------- Deferred tax: Current year (24,827) (8,729) - - (24,827) (8,729)Recognition of deferred - 35,224 - - - 35,224tax asset ----------------------------------------------------- Total tax on profit on 18,653 50,270 - 8 18,653 50,278ordinary activities ----------------------------------------------------- Corporation tax is calculated at 30 per cent (2005: 30 per cent) of theestimated assessable profit for the year. Taxation for other jurisdictions iscalculated at the rates prevailing in the relevant jurisdictions. The total charge for the year can be reconciled to the accounting profit asfollows: 2006 2005 £'000 % £'000 %Profit before taxation: Continuing operations 86,500 61,045 Discontinuing operations - (1,885) ------------------------------ 86,500 59,160 ------------------------------ Tax at the UK corporation tax rate of 30% 25,950 30 17,748 30(2005: 30%) Tax effect of expenses that are not 18,589 21 7,418 12deductible in determining taxable profit Effect of different tax rates of subsidiaries (10,747) (12) (3,716) (6)operating in other jurisdictions Deferred tax not previously recognised (15,139) (17) (6,396) (11)Deferred tax asset - - 35,224 60 ------------------------------ Tax expense and effective rate for the year 18,653 22 50,278 85 ------------------------------ Of the charge to current tax, £nil related to discontinued operations. In 2005,approximately £8,000 related to discontinued operations arising in the RegionalEvents division, which was disposed of during the year. No tax charge or creditarose on the disposal of the relevant subsidiary. In addition to the income tax expense charged to the Income Statement, a taxcredit of £8,871,000, all of which relates to deferred tax (2005: tax credit of£3,752,000 of which £3,808,000 related to current tax and £(55,000) related todeferred tax), has been recognised in equity during the year. 7 Dividends 2006 2005 £'000 £'000 Amounts recognised as distributions to equity holders in the year: Final dividend for the year ended 31 December 2004 of 5.33p per share (ex-rights issue 4.76p) - 15,926 Interim dividend for the year ended 31 December 2005 of 2.70p per share (ex-rights issue 2.41p) - 11,345 Final dividend for the year ended 31 December 2005 of 6.00p per share 25,275 -Interim dividend for the year ended 31 December 2006 of 3.3p per share 13,885 - --------------------- 39,160 27,271 --------------------- Proposed final dividend for the year ended 31 December 2006 of 8.90p per share (2005: 6.00p) per share 37,612 25,292 --------------------- Holders of 725,213 (2005: 635,617) ordinary shares of 10p each have waived theirrights to receive dividends. The proposed final dividend is subject to approval by shareholders at the AnnualGeneral Meeting and has not been included as a liability in these financialstatements. 8 Earnings per Share Basic The basic earnings per share calculation is based on a profit attributable toequity shareholders of the parent of £67,368,000 (2005 profit: £8,825,000). Thisprofit on ordinary activities after taxation is divided by the weighted averagenumber of shares in issue (less those non-vested shares held by employee shareownership trusts) which is 421,619,174 (2005: 388,230,732). Diluted The diluted earnings per share calculation is based on the basic earnings pershare calculation above except that the weighted average number of sharesincludes all potentially dilutive options granted by the Balance Sheet date asif those options had been exercised on the first day of the accounting period orthe date of the grant, if later, giving a weighted average of 423,346,817 (2005:390,003,685). The table below sets out the adjustment in respect of diluted potential ordinaryshares: 2006 2005 Weighted average number of shares 421,619,174 388,230,732used in basic earnings per share calculation Effect of dilutive share options 1,727,643 1,772,953Shares potentially to be issued or - -allotted -----------------------------Weighted average number of shares 423,346,817 390,003,685used in diluted earnings per share calculation ----------------------------- Adjusted earnings per share The basic and diluted adjusted earnings per share calculations have been made toallow shareholders to gain a further understanding of the trading performance ofthe Group. It is based on the basic and diluted earnings per share calculationsabove except that profits are based on continuing operations attributable toequity shareholders and are adjusted for items that are not perceived bymanagement to be part of the underlying trends in the business and the taxeffect of those adjusting items as follows: 2006 2005 £'000 £'000 Profit for the financial year from continuing 67,847 10,767operations Minority interests (479) (57)Adjusting items net of attributable taxation (Note 4) 64,306 75,734 ------------------- Adjusted profit for the year from continuing 131,674 86,444operations attributable to equity shareholders ------------------- Earnings per share: From continuing operations - Adjusted basic (p) 31.23 22.27- Adjusted diluted (p) 31.10 22.16 ------------------- 9 Capital and Reserves Reserve for Hedging Shares ESOP and Retained Share Share to be Merger Other Trust Revaluation Translation Retained Capital Premium Issued Reserve Reserve Shares Reserve Reserve Losses £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 At 1 January 2005 29,946 192,097 1,647 496,400 37,398 (4,731) - (7,748) (119,132) Profit for the period attributable to equity holders of the parent - - - - - - - - 8,825 Actuarial loss on defined benefit pension scheme - - - - - - - - (3,766) Tax on items taken directly to equity - - - - - - - - (3,752) Exchange differences on translation of foreign operations - - - - - - - 4,367 - Increase in fair value of derivatives - - - - - - - 3,373 - Transfer to income - - - - - - - 416 - Issue of share capital (net of £7,095,000 transaction costs) 12,030 299,657 - - - - - - - Dividends to shareholder - - - - - - - - (27,271) Share award expense - - 744 - - 1,397 - - - Options exercised 176 - - - - - - - - Premium arising on options exercised during year - 5,072 - - - - - - - Settlement of deferred consideration - - (1,267) - - - - - - ----------------------------------------------------------------------------------- At 1 January 2006 42,152 496,826 1,124 496,400 37,398 (3,334) - 408 (145,096) Profit for the period attributable to equity holders of the parent - - - - - - - - 67,368 Actuarial gain on defined benefit pension scheme - - - - - - - - 6,817 Tax on items taken directly to equity - - - - - - (7,200) - (1,671) Exchange differences on translation of foreign operations - - - - - - - (62,590) - Increase in fair value of derivatives - - - - - - - 4,800 - Transfer to income - - - - - - - (2,572) - Dividends to shareholders - - - - - - - - (39,160) Share award expense - - 1,681 - - - - - - Options exercised 175 - (2) - - 2 - - - Premium arising on options exercised during year - 4,484 - - - - - - - Revaluation of available for sale investment - - - - - - 33,390 - - -----------------------------------------------------------------------------------At 31 December 2006 42,327 501,310 2,803 496,400 37,398 (3,332) 26,190 (59,954) (111,742) ----------------------------------------------------------------------------------- As at 31 December 2006 the Informa Employee Share Trust held 618,718 (2005:632,775) ordinary shares in the Company at a cost of £3,639,000 (2005:£3,641,000) and a market value of £3,694,000 (2005: £2,744,000). Informa QuestLtd held 106,495 (2005: 2,842) ordinary shares at a book cost of £106,000 (2005:£nil) and a market value of £636,000 (2005: £12,000). These shares have not yetbeen allocated to individuals and accordingly, dividends on these shares havebeen waived. At 31 December 2006 the Group held 0.2% (2005: 0.2%) of its own called up sharecapital. 10 Notes to the Cash Flow Statement 2006 2005 £'000 £'000 Operating profit - continuing operations 128,296 91,418Discontinued operations - (1,885) -----------------------Profit from operations 128,296 89,533 Adjustments for: Depreciation of property and equipment 9,113 8,175Amortisation of intangible assets 86,656 49,755Impairment of goodwill 515 -Loss on disposal of property and equipment 23 100 -----------------------Operating cash flows before movements 224,603 147,563in working capital Decrease/(increase) in inventories 211 (2,421)Decrease/(increase) in receivables 9,866 (5,637)(Decrease)/increase in payables (15,185) 19,451Movement in other operating items (137) 1,973 -----------------------Cash generated by operations 219,358 160,929 ----------------------- Cash and cash equivalents (which are presented as a single class of assets on the face of the Balance Sheet) comprise cash at bank and other short-term highly liquid investments with a maturity of three months or less. Adjusted cash generated by operations 2006 2005 £'000 £'000 Adjusted operating profit (Note 4) 219,091 147,329 ----------------------- Cash generated by operations 219,358 160,929Restructuring costs (Note 3) 7,203 8,277 ----------------------- Adjusting items on a cash flow basis 226,561 169,206Accrued in prior year 4,426 2,500Accrued at year end (5,725) (4,426) ----------------------- Adjusted cash generated by operations 225,262 167,280 ----------------------- 2006 2005 % % Percentage of adjusted operating profit 103 113converted to adjusted cash generated by operations ----------------------- Analysis of Net Debt At 1 Non-cash Cash Exchange At 31 January items flow movement December 2006 2006 £'000 £'000 £'000 £'000 £'000 Cash at bank and in hand 20,654 - (1,176) - 19,478Overdrafts (4,569) - 3,841 - (728) ------------------------------------------------------Net cash 16,085 - 2,665 - 18,750Bank loans due in less than one year (58,659) - (43,601) 205 (102,055)Loan notes due in less than one year (293) - 43 - (250)Bank loans due in more than one year (692,500) (1,167) (1,771) 40,597 (654,841)Finance leases due in less than one year (23) - 15 - (8)Finance leases due in more than one year (20) - 14 - (6) ------------------------------------------------------ (735,410) (1,167) (42,635) 40,802 (738,410) ------------------------------------------------------ This information is provided by RNS The company news service from the London Stock Exchange

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