10th Mar 2005 07:01
T&F Informa PLC10 March 2005 10 March 2005 T&F Informa plc GOOD ORGANIC GROWTH MERGER BENEFITS COMING THROUGH AS EXPECTED Highlights of 2004 Constant 2004 2003 Reported Currency £'000 £'000 Growth Growth---------------------------------------------Turnover 504,225 441,676 14% 19% Adjusted operating profit1 108,343 79,309 37% 50% Total operating profit 48,639 46,170 5% Adjusted pre tax profit2 91,324 69,937 31% Pre tax profit 12,384 32,976 (62%) Adjusted diluted earnings per share3 24.50p 18.28p 34% Diluted earnings per share 0.04p 5.89p (99%)--------------------------------------------- • Adjusted pre tax profit2 up 31% to £91.3m on turnover up 14% to£504.2m. • Turnover and adjusted operating profit1 grew organically4 5.3% and23.5% respectively at 2003 exchange rates. • Merger of Informa and Taylor & Francis completed - benefits comingthrough. • Good contribution from recent acquisitions - including CRC Press, PJBPublications, MMS and Dekker. • Solid platform to drive further profitable growth. • Confident of prospects for 2005. Commenting on the Group's performance, Peter Rigby, CEO of T&F Informa said: "2004 was a transforming year for the business. The Group's excellent resultscombine organic growth with a good contribution from the businesses acquired in2003. Our three operating divisions produced good organic growth reflecting thestrength of the portfolio as well as our ability to respond to improving marketconditions. "The momentum seen in 2004 has been maintained into the current year and therevenue and cost synergies from the merger are coming through as expected. Withthe company performing in line with our expectations, the Board is confident ofdelivering another good financial performance in 2005." 1 Excludes exceptional operating costs of £10.0m (2003: £11.8m) and goodwillamortisation and impairment of £49.7m (2003: £21.3m). 2 Excludes exceptional operating and non-operating items of £44.2m (2003:£15.7m) and goodwill amortisation of £34.7m (2003: £21.3m). 3 Excludes exceptional items after tax of £38.3m (2003: £13.1m) and goodwillamortisation of £34.7m (2003: £21.3m). 4 Excludes acquisitions made since 1 January 2003. Enquiries: T&F Informa plc Tel: 020 7017 5000Peter Rigby, Chief ExecutiveDavid Gilbertson, Managing DirectorTony Foye, Finance Director Financial Dynamics Tel: 020 7831 3113Tim Spratt / Charles Palmer Operating and Financial Review 2004 Introduction T&F Informa traded strongly during the year ended 31 December 2004, withturnover up 14% to £504.2m from £441.7m and adjusted operating profit1 up 37% to£108.3m from £79.3m. Adjusted pre tax profit2 increased 31% to £91.3m from£69.9m. Adjusted diluted earnings per share3 increased 34%, to 24.50p from18.28p. These are the first full year results of the enlarged Group, which was formedfrom the merger of Informa Group plc and Taylor & Francis Group plc on 10 May2004. The results have been prepared under merger accounting principles, underwhich the financial statements are presented as if the two groups had beenmerged from 1 January 2003. The 2004 results have been achieved during a period of considerable change,including the integration of three major acquisitions, a number of officerelocations and the merger of two highly successful groups. The Group's performance for the year was impacted by the adverse effects ofexchange rate movements and, in particular, the relative weakness of the USdollar. In 2004 the Group received approximately 50% of its revenues andincurred approximately 35% of its costs in US dollars and hence exchange ratemovements had an adverse effect on translated turnover and profit. Had exchangerates remained constant at their 2003 levels, reported consolidated turnoverwould have been £20.8m higher and operating profit £10.6m higher. In constantcurrency terms therefore reported turnover would have grown by 19% and adjustedoperating profit by 50%. The Group is highly cash generative, converting 110% of its 2004 adjustedoperating profit into cash (2003: 112%). Strong cash flow, particularly in thesecond half of the year, enabled net debt to be reduced at the year end to £302mfrom £356m at 30 June 2004. The Group's three operating divisions - Academic & Scientific, Professional andCommercial - all performed well, combining organic growth with goodcontributions from recent acquisitions, including CRC Press, PJB Publications,MMS and Dekker. The Group saw improved trading conditions in most of itsoperating sectors, with particularly good growth in the Scientific, Technicaland Medical (STM), Telecoms and Financial Information market segments. The integration of the two groups is now largely complete and the enlarged Grouphas started to benefit from the revenue and cost benefits which the mergerbrings. The £9m of revenue synergies announced in September 2004 will berealised in 2005 alongside the £9m of cost savings. In recognition of the encouraging performance in 2004 and the Group's futureprospects, the Board has decided to recommend an increased final dividend of5.33p per ordinary share, making a total dividend for the year of 8.13p. Adjusted figures, which exclude exceptional items and goodwill amortisation arepresented as additional performance measures: 2004 2003 £'000 £'000 ---- ----Adjusted operating profit1 108,343 79,309Adjusted pre-tax profit2 91,324 69,937Adjusted diluted earnings per share3 24.50p 18.28pAdjusted operating cash flow4 119,587 88,803Adjusted operating cash flow conversion5 110% 112% 1 Excludes exceptional operating costs of £10.0m (2003: £11.8m) and goodwillamortisation and impairment of £49.7m (2003: £21.3m). 2 Excludes exceptional operating and non-operating items of £44.2m (2003:£15.7m) and goodwill amortisation of £34.7m (2003: £21.3m). 3 Excludes exceptional items after tax of £38.3m (2003: £13.1m) and goodwillamortisation of £34.7m (2003: £21.3m). 4 Adjusted operating cash flow is measured after adjusting for exceptional itemson a cash flow basis. 5 Adjusted operating cash flow conversion expresses adjusted operating cash flowas a percentage of adjusted operating profit. Financial Performance As noted above, the results covered by this review have been produced undermerger accounting principles, which combine the results of the Taylor & FrancisGroup with those of the Informa Group as if the two groups had been merged since1 January 2003. During 2004 turnover grew by 14% (£62.5m) to £504.2m (2003: £441.7m), despiteadverse exchange rate movements which reduced reported revenue by £20.8m (5%)compared to 2003. Dekker, acquired on 2 January 2004, contributed £24.4m inturnover. At constant exchange rates and after adjusting for acquisitions madesince 1 January 2003, the organic turnover growth was 5%. Adjusted operating profit was £108.3m in the period, up 37%, or £29.0m, over2003 (£79.3m). Excluding the £10.6m adverse effect of exchange rate movements,this operating profit growth was 50%. Dekker contributed £7.6m to this result inits first period of ownership. Trading was stronger across all three operating divisions compared to 2003, withacquisitions, organic growth, good subscription renewal rates and higher averagedelegate numbers combining to increase revenue and profitability. This growth inrevenue, together with good cost control and the successful integration ofacquisitions, was reflected in increased adjusted operating margins of 21.5% in2004 compared with 18.0% in 2003. At constant exchange rates the organic growthin adjusted operating profit was 23.5%. Total operating profit after exceptional items and goodwill amortisationincreased by 5% to £48.6m from £46.2m. The combined Group will be required to adopt International Financial ReportingStandards (IFRS) in producing its results for 2005 and beyond. The adoption ofIFRS will necessitate material changes to both the bases and format of financialreports sent to shareholders. To help shareholders better understand the impactof adopting IFRS, prior to the Annual General Meeting in May 2005 the Boardintends to issue a separate report showing the 2004 results prepared under IFRS. Exceptional Operating Items Over the last 12 months the Group has completed significant integration ofacquisitions resulting in exceptional operating costs of £10.0 million (2003:£11.8m). Of this total £4.5m represented integration costs relating to theacquisitions of Cass (July 2003), SZP (October 2003), MMS (September 2003), PJB(December 2003) and Dekker (January 2004). £4.2m was incurred in respect of therelocation of the UK academic books businesses from London to Oxford, thesetting up and transferring of the US books warehousing and distributionoperations to Kentucky and the move of PJB from its former Richmond offices toexisting Group premises in central London. £1.3m was provided in relation to themerger integration. Goodwill Amortisation and Impairment As a result of acquisitions made over the last two years, goodwill amortisationincreased by £13.4m in 2004 to £34.7m from £21.3m. Following the merger we have also undertaken a review of goodwill and as aresult have reduced the carrying value related to certain pre-2001 acquisitionsby £15m. Merger Costs As previously reported in September 2004, merger costs were £15.7m (2003: £nil),consisting of professional and other fees incurred in connection with the mergerbetween Taylor & Francis Group plc and Informa Group plc on 10 May 2004. On the merger the previous bank loan facilities of both groups were terminatedand replaced by new enlarged Group facilities and unamortised loan arrangementfees of £2.4m were written off to the profit and loss account. Net Interest Net interest payable for 2004 increased by £7.6m to £17.0m as a result ofincreased bank debt used to fund recent acquisitions. Over 2003 and 2004 we havespent £311m on acquisitions, funded mainly by bank debt. Net interest cover (based on adjusted operating profit) was a comfortable 6.4times in 2004 (2003: 8.5 times). Profit Before Taxation Adjusted profit before taxation increased by 31% to £91.3m (2003: £69.9m).Profit before taxation and after exceptional items and goodwill amortisation was£12.4m (2003: £33.0m). Taxation Tax has been provided at an underlying rate of 26.6% (2003: 28.0%). Theeffective tax rate is influenced by goodwill amortisation, which in the maindoes not attract tax relief, and the partial deductibility of certainexceptional items and merger costs. The Group also benefited from the release ofprior year tax provisions no longer required. Earnings Per Share Adjusted diluted earnings per share increased 34% to 24.50p per ordinary sharecompared to 18.28p in 2003. Basic earnings per share were 0.04p (2003: 5.89p). Dividend The Board has recommended a final dividend of 5.33p per ordinary share, makinga total dividend for the year of 8.13p. The final dividend will be payable on 31May 2005 to shareholders registered as at the close of business on 29 April2005. Balance Sheet Intangible assets increased by £21.1m to £504.2m. Of this increase, £88.2m wasin respect of the provisional goodwill arising on the acquisition of Dekker,offset by ongoing amortisation, impairment and the effect of exchange ratemovements. Net debt increased by £42.8m, to £302.0m compared with £259.2m at 31 December2003, reflecting £86.2m spent on acquisitions in 2004, offset by positive cashgeneration. Cash conversion was strong with adjusted operating cash inflow as apercentage of adjusted operating profit at 110% (2003: 112%). On the merger the Group entered into a new five year, £440m multi-currencysyndicated bank loan facility. Accruals and deferred income increased by £18.9m (11%) compared with 2003.Within this increase, deferred income was up 12% compared with 31 December 2003. Divisional Performance 2004 was a transforming year for the Group. The successful merger of twocomplementary groups and the integration of recent acquisitions have created abusiness which has entered 2005 with confidence and in good financial health. Academic & Scientific Division 2004 2003 £'m £'m ---- ----TurnoverSTM 152.0 109.5Humanities & Social Sciences (HSS) 92.3 87.8 ---- ---- 244.3 197.3 ======= =======Adjusted operating profitSTM 43.0 27.0Humanities & Social Sciences 21.3 18.8 ---- ---- 64.3 45.8 ======= =======Adjusted operating margin % 26.3 23.2 ======= ======= Highlights • Turnover up 24%, adjusted operating profit up 40%. Organic growth atconstant exchange rates 5% and 17%, respectively. • 74 new journals launched, including 38 new academic society publishingcontracts. • Good performance from PJB, acquired December 2003, and Dekker,acquired January 2004. • STM adjusted operating margin increased to 28.3% (2003: 24.7%) and HSSto 23.1% (2003: 21.3%). The Academic & Scientific division had a strong year. Turnover increased by 24%to £244.3m and adjusted operating profit by 40% to £64.3m. The divisionbenefited from STM acquisitions including PJB (acquired December 2003) andDekker (acquired January 2004) but was adversely affected by exchange ratemovements, which reduced reported turnover by £10.8m and adjusted operatingprofit by £7.6m. At constant exchange rates organic turnover growth was 5% andadjusted organic operating profit growth was 17%. The STM business saw robust turnover and profit growth both organically and fromacquisitions, offset slightly by some weakness in US Life Science advertisingand events and exchange rate movements. Turnover grew 39% to £152.0m from£109.5m. At 2003 exchange rates excluding acquisitions turnover was up by 4% andadjusted operating profit up by 16% We also saw good underlying turnover growth from our Humanities and SocialScience lists which did not benefit from any major acquisitions, although thisgrowth was masked by adverse exchange rate movements. Overall turnover increasedby 5% and adjusted operating profit by 14%, helped by efficiencies fromintegrating prior acquisitions. At 2003 exchange rates turnover was up 5% andadjusted operating profit up 17%. We have rationalised our academic publishing brands and will now use the Taylor& Francis imprint for STM publishing and the Routledge imprint for Humanitiesand Social Sciences publishing. Since the merger the Academic & Scientific division has accelerated its effortsto acquire more academic society and other third party publishing business.2004 was a most successful year in this respect, with 38 new third partypublishing contracts signed. The division also launched or acquired 36 journaltitles and discontinued 26. As a result of this activity, in 2005 the divisionwill be publishing 1,075 journal titles. There has been much discussion around "open access" and academic journalpublishing models. Recently the Department of Trade and Industry (DTI) on behalfof the UK government has issued its response to the House of Commons SelectCommittee's report on scientific publishing. The DTI appears to us to have takena pragmatic line, broadly accepting the maintenance of the current publishingsystem. The Group will continue to monitor the situation carefully and positionitself to respond appropriately to any changes in the academic market'sinformation requirements. PJB had a good year despite having been adversely affected by £0.7m at theadjusted operating profit line by the relative weakness of the US dollar. PJB'score products, Scrip, Pharmaprojects, Clinica and Agrow, which between themrepresent some 90% of its operating profit, all performed strongly in 2004, withsolid subscription volumes and high renewal rates. Almost 55% of PJB's revenuesare generated by electronic products and this proportion is growing quickly ascustomers migrate from traditional hard copy products. In the Life Sciences events area, the flagship annual Drug Discovery Technologyevent was held in Boston in August. While it was again successful, there wassome decline in attendance in 2004 compared with 2003, reflecting a generalreduction in investment in drug discovery. However the establishment ofspin-off events in Singapore, India and Europe is encouraging and provides apartial offset. While the drug discovery sector has become more challenging,the area of bio-processing has grown and our Bio-Process International magazinehas moved more quickly into profit than we had expected. Taking advantage ofthis market strength, we have launched a Bio-Process International trade showand conference, which in 2004 became the largest event worldwide in thebio-manufacturing area. This event format has also been rolled out into Europeand Asia. Following the acquisition of PJB, we have diversified our Life Sciencesconference business through the launch of a pharmaceutical development series,both in the US and Europe. This series concentrates on clinical developmenttechnologies, regulatory issues and business strategies and complements thepublished products of PJB, particularly Scrip and Pharmaprojects. Professional Division 2004 2003 £'m £'m ---- ----TurnoverFinancial Information 60.2 49.1Insurance, Law and Tax 33.1 39.6 ---- ---- 93.3 88.7 ======= =======Adjusted operating profitFinancial Information 16.3 10.3Insurance, Law and Tax 5.5 4.5 ---- ---- 21.8 14.8 ======= ======= Adjusted operating margin % 23.3 16.7 ======= ======= Highlights • Turnover up 5%, adjusted operating profit up 47%. Organic growth atconstant exchange rates 5% and 43%, respectively. • Good performance from combination of MCM/MMS, with MMS subscriberretention rate over 65%. • Both Financial Information and legal conference businesses performedstrongly. • Advertising recovery in key insurance publications. The Professional division, which consists of our US-based Financial Informationbusinesses and our UK-led professional information business, covering Insurance,Law and Tax, performed well in 2004. Turnover and adjusted operating profit in the Financial Information businesswere up 23% and 59% respectively compared with 2003. The 2004 results includethe acquisitions made in 2003 of MMS and two smaller businesses - Barry Leedsand Net Decide. The reported results of the US-based business were adverselyaffected by exchange rate movements. At constant exchange rates the FinancialInformation business produced organic growth in turnover of 24% and adjustedoperating profit growth of 55%. The adjusted operating margin of the FinancialInformation business increased to 27.1%, from 20.9%, aided by good overheadcontrol. The growth of our Financial Information business was led by the acquisition ofMMS and its successful integration with MCM, to create a market-leading servicefor the international corporate bond, sovereign fixed income and foreignexchange markets, under the new brand Informa Global Markets (IGM). In combiningthe two businesses and creating a single consolidated offering we successfullyretained more than 65% of the MMS subscribers, exceeding our pre-acquisitionexpectations. As part of this integration exercise we established a single sales team acrossboth businesses as well as a single content authoring and contribution system.This system, known as Market Work Station, allows content to be seamlesslypublished across the multiple channels we utilise, including Reuters andBloomberg, our own website and where we co-brand with other clients. iMoneyNet, the leading provider of information for the US money market fundsector, also had a good year in 2004, despite some weaknesses in the money fundmarket sector. As the sector improves our new analytical products for money fundfamilies, including browser-based applications, look to have excitingpossibilities. During 2004 the Insurance, Law and Tax business saw good performances throughoutits portfolio. The largely subscription-based legal publishing business remainedresilient and we saw particularly strong underlying improvement in the eventsbased business, which covers both legal and financial topics. This improvement,coupled with the elimination of events which had proved unprofitable or marginalin 2003, helped drive a 20% increase in adjusted operating profit, despite areduction in revenue of 16%. The adjusted operating margin rose to 16.5% from11.5%. Within the Insurance, Law and Tax business, the financial services areaexperienced a marked rebound reflecting the return to positive tradingconditions in the underlying markets after two years of cutbacks andconsolidation. The recovery fed through into improved advertising income led bya 10% improvement in the flagship title Insurance Day. Commercial Division 2004 2003 £'m £'m ---- ----TurnoverTelecoms & Media 37.7 35.0Maritime, Trade & Transport 39.4 37.7Commodities 17.2 13.0International Conferences 72.3 70.0 ---- ---- 166.6 155.7 ======= =======Adjusted operating profitTelecoms & Media 8.9 7.9Maritime, Trade & Transport 4.0 1.6Commodities 2.2 1.4International Conferences 7.2 7.8 ---- ---- 22.3 18.7 ======= ======= Adjusted operating margin % 13.4 12.0 ======= ======= Highlights • Turnover up 7% and adjusted operating profit up 19%. Organic growth atconstant exchange rates 6% and 25%, respectively. • Continuing recovery in mobile Telecoms sector enabling new eventlaunches. • Strong trading in Maritime with adjusted operating profit up by 154%. • Commodities boosted by 2003 acquisition of Sparks. The Telecoms business saw strongly improving underlying trends, with confidencereturning to the mobile sector as a result of the expansion of 3G services andapplications. The 2004 3GSM World Congress in Cannes produced profit ahead ofthe previous year, although increased royalty payments under a revised agreementwith our event partners largely offset the underlying gain. The increase inmarket activity continued into the 2005 3GSM event, which attracted a record43,000 pre-registered attendants. The growth of this flagship event has meantthat the conference has outgrown the Cannes venue and in 2006 we are relocatingit to Barcelona. There are positive signs that 2005 may prove to be another strong year for themobile telecoms sector. As the leading international provider of information tothis market sector we began to see the results of increased confidence in 2004and this has continued into 2005. As the sector improves we are aiming to doubleour event output and especially concentrate in areas where 3G services are beinglaunched or expanding quickly. Our new partnership with the leading industrytrade association GSMA saw us establish a new 3G event for the Asian marketwhich was held in Singapore last September. Alongside other 3G events for 2005covering India, Africa, the Americas, Russia, China and the Middle East, we arewell placed to benefit from improvement in the mobile telecoms market. The Maritime & Transport business, which encompasses the leading daily newspaperLloyd's List, maritime and logistics information and conferences in thetransport and energy sectors, traded strongly in the year, exceeding the 2003full year adjusted operating profit by 154%. Prosperity in shipping is being boosted by strong trade demand from China whichhas helped push up freight rates and, with oil prices also strong, this hashelped to increase demand for advertising space and boosted delegate attendancesat our maritime and energy events. Maritime & Transport's leading publicationsLloyd's List and its associated maritime magazines (most of which are alsodelivered electronically) performed well and saw subscription revenues andrenewal rates improve and advertising yields rise. Data and consultancyservices are also growing in importance. We are also developing and expanding our corporate training and distancelearning programmes in the Maritime and Transport sector. As Asia becomesincreasingly important as a world maritime trade centre we are expanding ourregional publishing programme there and emphasising Asia-focused exhibitions andawards events, especially in the logistics area, which has proved a majorsuccess in Hong Kong. We ran an inaugural Greek shipping awards event in Athensin 2004 which sold out, with more than 700 delegates attending. This event willbe repeated in 2005 and a similar new event run for the Turkish market. Commodities, the smallest of our sectors within the Commercial Division, had agood 2004 boosted by the 2003 acquisition of Sparks, a Memphis based informationbusiness, now renamed Informa Economics. Commodities turnover was up 32%, or£4.2m. Adjusted operating profit was up 54% (£0.8m), again due mainly to theSparks acquisition. The Commodities business delivered a record number of eventsin 2004, with the average number of delegates attending reaching 67. Our International Conferences business comprises domestic language conferencesand courses in Germany, the Netherlands, Asia, Australia, Brazil, France, Swedenand Denmark. In addition, through a partnership with Expomedia Group plc, wehave established joint venture conference arrangements in Russia, Hungary,Poland and India. The Asian events operation has recently opened a satelliteoffice in Shanghai. The International Conferences business typically has astrong second half performance and full year turnover ended up 3%, with anunderlying increase in overall profits offset, as expected, by costs of £1.6m(2003: £0.3m) in relation to the new products and territories including China,India, Russia, Poland and Hungary. In 2004 the International Conferences business ran more than 2,000 events acrossa broad variety of subject areas. Our existing International Conferenceoperations performed better in 2004 than in 2003, demonstrating a better climatefor our conference product. Business Integration 2004 saw significant premises rationalisation. In the UK, the academic bookpublishing business was relocated from London and consolidated with our existingjournal publishing operations in Didcot, Oxfordshire. The move brings STM andHumanities and Social Science (HSS) publishing operations into one site, leadingto significant management and operational efficiency. PJB was moved from itsprevious five offices in Richmond into one of the Group's existing offices incentral London. A single Group head office was also established in centralLondon immediately following the merger. In the US, the acquired Dekker business was integrated into existing offices inPhiladelphia and Boca Raton and two New York offices were consolidated into one.We also combined two sites in Boca Raton into one office and began consolidatingthree separate US book warehouse and distribution operations into a singlefacility in Kentucky, which we expect will yield considerable efficiencies inbook order fulfilment. In the area of operating systems, we are well advanced in our integrationstrategy, having completed the installation of a single Group-wide accountingsystem and we will shortly move to a single sales order fulfilment platform forthe UK-based business, centred on our existing SAP system. We have also combined our two marketing databases, giving our divisions greateraccess to customers and the ability to target them more precisely. In additionwe consolidated our UK mailing house operations into our facility in Weybridge,Surrey, thus saving on the use of third party providers. Merger Highlights The merger integration process has gone smoothly and to plan. We are on trackto deliver the previously reported cost savings of £9m per year and revenuesynergies of £9m in 2005. The revenue synergies are in four principal areas: Publishing The market previously addressed by Informa, from Maritime to Telecoms to LifeSciences, has proved to be fertile ground for extending the former Taylor &Francis (T&F) publishing portfolio. Many initiatives have resulted in thecreation of new titles in areas such as drug discovery, drug technology,wireless security, IT technical texts, broadband implementation and portmanagement. In 2005 these new publications are scheduled to deliver £2m ofsales. Events The leveraging of T&F's subject expertise and academic connections has allowedthe events teams to explore opportunities through a new range of conferences andevents. We have established dedicated teams in both the UK and the US to exploitthese connections. The 80 new events planned for 2005 are expected to generate£2.5m of additional revenues. Initial events will cover topics such as Stress inthe Workplace, Sustainable Development, Nanotechnology and Eating Disorders. In addition, we can now approach academic and professional societies with whomwe already have established contacts to launch new journal publications or tooffer event management capabilities where we had not previously offered thoseservices. An example is in Sweden, where the newly combined T&F and Informaoffice has signed a four year agreement with the Swedish Association ofGraduates in Social Science, Personnel and Public Administration, Economics andSocial Work (an organisation of some 45,000 members) to organise all of theassociations major meetings and education programmes and also for us to publisha new journal in the field of management and leadership. Distance Learning All of our market sectors share the need for high quality education andprofessional development. Much of this can be met through distance learning,either in the form of e-learning or written courses. Prior to the merger wegenerated some £7m of turnover from this source and the enlarged Group's contentpool facilitates expansion into topics such as self-study courses on projectmanagement and employment law and MBA programmes delivered in partnership withleading universities. The combined marketing reach of the merged Group, coupledwith its wealth of published material and author access, allows us to constructbrand new and powerful course offerings. We have established a dedicatede-learning team whose job it is to grow this part of the business, which webelieve will be a significant element of future turnover in the medium term. Areas where distance learning initiatives are proving particularly promisinginclude: System Biology, Nanotechnology, Nanotoxicology, Electrical Engineering,IT Security, Forensic Science, Remote Sensing, Occupational Health andIndustrial Hygiene. Cross Marketing and Cross Selling We have also been working to identify business intersects between publishing andevents. Where these exist such as in pharmaceuticals, health sciences,chemistry, engineering, maritime security, counter terrorism and telecoms,marketing teams have come together to cross-promote each of their products atlittle or no extra cost. Publications are displayed at conferences andseminars, web services carry banners for related products, advertisements areplaced in sister publications, internet links have been established,complementary products are mailed jointly and free samples are offered todelegates and subscribers. The result is a growing network of new salesopportunities and a healthy increase in the reach of many of our products. Weexpect to generate £4.5m of additional revenue from these efforts in 2005. The revenue plans outlined above will develop and grow as we begin to drive theopportunities which the merger has created. Informa itself resulted from amerger in 1998 and some six years later we are still finding new opportunities.We expect the same to happen as T&F Informa grows. Cost Savings At the time of the merger we had identified potential annual cost savings of£4.6m resulting from the merger. As a result of more detailed analysis and thecompletion of integration steps we have identified a total of £9m of recurringannual savings. This £9m of identified savings is expected to come from theareas of IT (£2.5m), premises (£2.1m), print and distribution (£1.5m), financeand related areas (£1.3m) and corporate overheads (£1.6m). Strategy T&F Informa is a global information provider across a broad portfolio ofacademic, professional and commercial market sectors. We aim, wherever possible,to be the leading provider in the niche sectors we select and to provide highvalue information in the many media formats our customers demand. The subscription model is a cornerstone of our business however we seek tomaintain a well balanced product portfolio combining a number of revenue streamswith differing dynamics, including copy sales, events and the more cyclicalrevenue streams of advertising and sponsorship. We also look to develop newrevenue streams through a combination of product development and geographicalexpansion. Following the merger we will continue to look for ways to develop new productsaround our leading brands. We will continue to exploit the interplay betweenpublications and events that gives our business a distinctive strength. Strongpublishing brands provide our events with added market leverage, yieldinggreater access to important speakers and market segments. T&F Informa has strong positions within the US market, which accounts for some50% of revenue. These activities are currently focused on relatively few of ourmarket sectors and intend to develop our US presence through a combination oforganic growth and well planned acquisitions. We have conference businesses in Eastern Europe, China and India and in SouthAmerica, (through our Brazilian operation) - markets which have higher medium tolong term growth prospects. It is our intention to build associated publishingactivities in these regions, and we are already establishing a publishingpresence in Beijing and in New Delhi. The Group is well placed in electronic product delivery, with some 25% of ourpublishing revenues and 17% of our total revenues coming from standaloneelectronic publishing activities in 2004. Generally these revenues, which aresubscription based, enjoy renewal rates slightly higher than for hard copyproducts. Looking forward it is clear that our customers will increasinglydemand information to be delivered electronically in succinct and fullysearchable forms. Current Trading and Prospects Although it is still relatively early in the year, 2005 has started well. We arebeginning to crystallise the opportunities provided by the merger and T&FInforma is well placed to grow organically and through selective acquisitions ata time where there is evidence that many of our markets are in recovery. Themomentum seen in 2004 has been maintained into the current year and the revenueand cost synergies from the merger are coming through as expected. With theGroup performing in line with our expectations, the Board is confident ofmeeting our demanding targets and delivering another good financial performancein 2005. We are delighted with the way the two groups have come together and thank ourstaff for their professionalism and enthusiasm in embracing the many newopportunities the enlarged Group now enjoys. Peter RigbyChief Executive 9 March 2005 Consolidated Profit and Loss AccountFor the Year Ended 31 December 2004 2004 Before 2004 exceptional items Exceptional items 2003 and goodwill and goodwill 2004 Total amortisation amortisation Total Restated* Note £'000 £'000 £'000 £'000Turnover: Total turnover including Joint 504,666 - 504,666 441,676Ventures Less: Share of Joint Ventures' (441) - (441) -turnover Group turnover 2 504,225 - 504,225 441,676 Continuing operations 478,993 - 478,993 441,676 Acquisitions 25,232 - 25,232 - Net operating costsOperating costs before goodwillamortisation and impairment (395,882) (9,963) (405,845) (374,196)Goodwill amortisation - (34,741) (34,741) (21,310)Goodwill impairment - (15,000) (15,000) -Total net operating costs 3 (395,882) (59,704) (455,586) (395,506)Operating profitContinuing operations 101,123 (53,929) 47,194 46,170Acquisitions 7,491 (5,775) 1,716 -Operating profit 108,614 (59,704) 48,910 46,170Share of Joint Ventures' operating (271) - (271) -resultTotal operating profit 2,3 108,343 (59,704) 48,639 46,170 Merger costs - (15,703) (15,703) -Loss on disposal of tangible fixed - (921) (921) -assetsProfit / (loss) on sale ortermination of a business - 3 3 (3,822)Amounts written off investments - (200) (200) -Net interest payable and similar (17,019) - (17,019) (9,372)chargesBank loan facility fees expensed on merger - (2,415) (2,415) -Total net interest cost (17,019) (2,415) (19,434) (9,372)Profit on ordinary activities before taxation 91,324 (78,940) 12,384 32,976Tax on profit on ordinary activities 5 (18,149) 5,865 (12,284) (16,543)Profit on ordinary activities after taxation 73,175 (73,075) 100 16,433Minority interest - equity 26 - 26 (84)Profit for the financial period attributable to shareholders 73,201 (73,075) 126 16,349Dividends 6 (24,211) (15,203)(Loss) / profit for the financial year transferred to reserves (24,085) 1,146 Earnings per ordinary shareBasic (p) 7 0.04 5.91Diluted (p) 7 0.04 5.89Diluted (adjusted) (p) 4,7 24.50 18.28 *Comparative figures have been restated in accordance with merger accountingprinciples. Note: Operating profit for the year ended 31 December 2003 includes charges forexceptional items of £11,829,000 as detailed in Note 4. Consolidated Balance SheetAt 31 December 2004 Group ---- 2003 2004 Restated* Note £'000 £'000Fixed assetsIntangible assets 504,244 483,185Tangible assets 33,400 33,456Investments 10,605 9,957 548,249 526,598Current assetsStocks 42,638 42,414Debtors due within one year 92,102 91,017Debtors due after more than one year - 784Cash at bank and in hand 19,126 23,586 153,866 157,801Creditors: amounts falling due within one year (74,047) (70,312)Net current assets 79,819 87,489 Total assets less current liabilities 628,068 614,087Creditors: amounts falling due after more (306,186) (276,276) than one yearProvisions for liabilities and charges (6,561) (10,903) Accruals and deferred income (184,081) (165,156) Minority interests - equity (53) (79) 131,187 161,673 Capital and reservesCalled up share capital 29,946 29,790Share premium account 187,755 184,494Reserve for own shares 1,267 1,267Other reserve 37,398 37,399Merger reserve 34,540 34,540ESOP trust shares (3,641) (3,641)Profit and loss account (156,078) (122,176)Equity shareholders' funds 8 131,187 161,673 *Comparative figures have been restated in accordance with merger accountingprinciples. Consolidated Cash flow StatementFor the Year Ended 31 December 2004 2004 2003 Note £'000 £'000 Net cash inflow from operating activities 9 88,184 79,065 Returns on investments and servicing of financeInterest received 1,117 1,490Interest paid (15,994) (10,773)Net cash outflow from returns on investments and servicing of finance (14,877) (9,283) TaxationCorporation tax paid (9,752) (6,965)Overseas taxes paid (4,235) (6,220)Net cash outflow from taxation (13,987) (13,185) Capital expenditure and financial investmentPurchase of publishing goodwill (1,665) (3,469)Tangible fixed assets acquired (10,828) (5,689)Tangible fixed assets sold 3,220 267Purchase of unlisted investments (joint ventures) (1,427) (8,810)Disposal of unlisted investments 1,151 -Net cash outflow from capital expenditure and financial investment (9,549) (17,701) Acquisitions and disposalsPurchase of businesses/subsidiary undertakings (net of cash and (86,250) (225,854)overdrafts acquired)Disposal of business/subsidiary undertakings - 1,045Net cash outflow from acquisitions and disposals (86,250) (224,809) Equity dividends paid (18,575) (13,787) Net cash outflow before use of liquid resources and financing (55,054) (199,700) Management of liquid resources - 11,988 FinancingRepayment of loans (120,156) (66,248)New loans 165,218 214,784Repayment of capital element of finance leases (40) (54)Issue of ordinary share capital - 53,124Issue costs - (1,553)Proceeds from share options 3,416 1,009 Net cash inflow from financing 48,438 201,062 (Decrease) / increase in cash 10 (6,616) 13,350 Notes to the Financial Statements 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. Statutory accounts for the yearended 31 December 2003 have been delivered to the Registrar of Companies andthose for the year ended 31 December 2004 will be delivered following theCompany's Annual General Meeting. The statutory accounts for the year ended 31December 2004 will be despatched to shareholders by 1 April 2005 for approval atthe Annual General Meeting on 18 May 2005. The auditors have reported on thoseaccounts, their reports were unqualified and did not contain statements underSection 237(2) or (3) of the Companies Act 1985. The preliminary announcement has been prepared in accordance with accountingpolicies consistent with the financial statements for the year ended 31 December2004 and in accordance with applicable United Kingdom accounting standards. 2 Segmental Analysis Analysis by market sector Operating profit before exceptional items and goodwill amortisation Turnover 2004 2003 2004 2003 £'000 £'000 £'000 £'000 Academic & Scientific DivisionScientific, Technical & Medical 151,978 109,445 42,966 27,017Humanities & Social Sciences 92,334 87,822 21,302 18,754 244,312 197,267 64,268 45,771Professional DivisionFinancial Information 60,212 49,130 16,339 10,251Insurance, Law & Tax 33,136 39,570 5,455 4,555 93,348 88,700 21,794 14,806Commercial DivisionTelecoms & Media 37,695 34,982 8,882 7,943Maritime, Trade & Transport 39,395 37,737 3,964 1,558Commodities 17,181 13,020 2,208 1,437International Conferences 72,294 69,970 7,227 7,794 166,565 155,709 22,281 18,732 504,225 441,676 108,343 79,309 Amounts written off goodwill (49,741) (21,310)Exceptional items (26,784) (15,651)Total net interest cost (19,434) (9,372)Profit before tax 12,384 32,976 Geographical analysis by location of business Operating profit before exceptional items and goodwill amortisation Turnover 2004 2003 2004 2003 £'000 £'000 £'000 £'000 United Kingdom 268,241 230,900 65,761 52,191North America 136,294 121,747 28,957 14,171Continental Europe 75,214 71,147 9,327 9,330Rest of World 24,476 17,882 4,298 3,617 504,225 441,676 108,343 79,309 Amounts written off goodwill (49,741) (21,310)Exceptional items (26,784) (15,651)Total net interest cost (19,434) (9,372)Profit before tax 12,384 32,976 Geographical analysis of turnover by location of customer 2004 2003 £'000 £'000United Kingdom 93,851 89,235North America 167,460 134,565Continental Europe 157,439 146,694Rest of the World 85,475 71,182 504,225 441,676 3 Operating Profit Continuing Total Total operations Acquisitions 2004 2003 3 (a) Net operating costs £'000 £'000 £'000 £'000 Increase in stock of finished goods and work in progress (977) (65) (1,042) (2,635)Raw materials and consumables 154,225 4,421 158,646 162,745Depreciation and other amounts written off tangible and intangible fixed assets 53,943 4,616 58,559 29,996Staff costs in total 146,969 3,676 150,645 133,307Other operating charges(including exceptional items (note 4)) 77,910 10,868 88,778 72,093 432,070 23,516 455,586 395,506 The acquisition of Dekker represents the only material acquisition in the year.The impact on operating costs is shown above. 4 Exceptional Items 2004 2003 £'000 £'000Exceptional operating costs 9,963 11,829Goodwill impairment 15,000 -Exceptional items charged to operating profit 24,963 11,829Merger costs 15,703 -Loss on disposal of tangible fixed assets 921 -(Profit) / loss on sale or termination of a business (3) 3,822Amounts written off investments 200 -Bank loan facility fees expensed on merger 2,415 - 44,199 15,651Tax on operating exceptional items (2,486) (2,576)Tax on non-operating exceptional items (3,379) -Related Shares:
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