16th Nov 2006 13:12
Euromoney Institutional InvestorPLC16 November 2006 The following amends the final results announcement released today at 7.00amunder reference 1716M. The amendment relates to the following lines in the 2005comparative cash flow statement: purchase available for sale investments haschanged from £12,231,000 to £nil; purchase of additional interest insubsidiaries undertakings has changed from £4,017,000 to £12,231,000; andacquisition of associate and joint ventures has changed from £2,080,000 to£6,097,000. In all other respects the original announcement is unchanged. Euromoney Institutional Investor PLC Preliminary AnnouncementSeptember 30 2006 Chairman's statement Record Profits and Dividend in 2006 -------------------- ------- ---- ------- --- -------Highlights 2006 2005 ^ changeRevenue £220.5 m £194.8 m +13%Operating profit* £43.8 m £39.3 m +11%Profit before tax £35.2 m £34.4 m +2%Diluted earnings a share 41.9 p 34.1 p +23%Adjusted diluted earnings a 28.6 p 26.3 p +9%share++Dividend 17.0 p 16.2 p +5% ^ 2005 comparatives have been restated in accordance with InternationalFinancial Reporting Standards. • Operating profit* exceeds £40m for first time • Organic revenue growth drives profitability higher • Record cash generated from operations £60m • All business units contribute to improved performance • Capital Appreciation Plan continues to drive growth • £230m acquisition of Metal Bulletin completed post year-end HIGHLIGHTS Euromoney Institutional Investor PLC, the international publishing, events andelectronic information group, reports an increase in 2006 operating profit* to£43.8 million for the year to September 30, against £39.3 million for theprevious year. Adjusted diluted earnings a share were 28.6p, against 26.3p in2005, and the directors recommend a 5% increase in the final dividend to 11.6p,making a total for the year of 17.0p. These record results reflect further progress in the group's strategy to buildone of the world's leading international business media groups. All divisionsachieved strong revenue growth, with group operating profit* exceeding £40million for the first time. The group also benefited from record operating cashflows of £59.6 million in 2006, after an increase of £8 million in deferredsubscription revenue. Commenting on the results, Padraic Fallon, Chairman, said: "It was another year of record performance, driven by strong organic revenuegrowth across all divisions. Our objectives remain the same: to delivercontinued top-line growth from new and existing products; to diversify ourrevenues while improving the operating margin; and to invest selectively inacquisitions that strengthen the Company's market position. The acquisition ofMetal Bulletin, which was completed after the year-end, is a big step forward inimplementing our strategy for creating one of the world's leading internationalbusiness media groups." TRADING BACKGROUND Revenue increased by 13% to £220.5million. The trading environment has remainedgood throughout the year, with financial institutions continuing to benefit froma strong performance in almost every asset class. Another year of brisk M&Aactivity has helped increase profitability for many of the group's keycustomers, while ample liquidity within the secondary and private equity marketshas driven capital flows and investment. Consistent with management's strategy, most of the growth in operating profit*has been generated organically. The performance of the print subscriptiontitles has been particularly pleasing, with subscriber numbers, subscriptionrates and renewal rates all ahead of the previous year. This growth has beendriven by the group's continued investment in direct marketing, with spendincreasing by 19% to £10 million in the year. Operating profits* from conferences and seminars were affected by timingdifferences: two of IMN's biggest events were run twice in 2005, but have sincereturned to their usual timing in the first quarter of 2007; this was partlycompensated for by Adhesion's biennial Vinisud wine exhibition which was held in2006. Excluding these timing differences, underlying group operating profits*increased by 20%. The training businesses have also been an importantcontributor to volume and margin improvements, helped by the launch of newcourses. MARGIN The group's operating margin* was slightly lower than last year at 19.9%,compared to 20.2% in 2005, due to timing differences on some of the group'slargest events. As expected, the positive benefit from operational gearing seenin 2005 moderated this year, as the group continued to invest in the long-termsustainable growth of its businesses. The focus remains on building high margin,repeat annual revenues and the elimination of low margin products. BUSINESS REVIEW Operating profits* from Financial Publishing increased by 17% to £13.1 million,as a result of strong growth in both advertising and subscription revenues.Nearly all titles increased profits: Euromoney had an impressive year, achieving17% growth in advertising revenues and publishing its biggest IMF issue for tenyears; Institutional Investor - International Edition improved its performancesharply on 2005; and the specialist tiles Euroweek and Project Finance deliveredstrong growth from advertising and new products. Business Publishing had a good year with operating profits* increasing by 25% to£6.8 million. Encouragingly, this was a broad-based improvement: the US energypublications delivered record profits; the legal titles benefited from stronggrowth in subscription and advertising revenues including a record IFLR 1000directory; and the transport and telecoms titles sharply increased profits bydiversifying away from advertising into new revenue streams. Operating profits* from Conferences and Seminars increased by 5% to £20.3million and underlying profits, after adjusting for timing differences,increased by 23% continuing the excellent growth record achieved over the pastfive years. The continued interest in alternative assets has supported revenueand profit growth, and most of the businesses achieved an increase in both thenumber of events held and the average revenue per event, in line with thegroup's strategy. II Memberships had an excellent year, with a record number ofmembers at year-end and subscription revenues increasing by 21%. New membershiporganizations for private wealth managers and legal and compliance officers arebeing launched in 2007. IMN continued to grow through the launch of successfulnew events for the securitization and real estate markets. The Training businesses delivered operating profits* of £7.0 million, anincrease of 13% and an all-time high. The growth mainly came from the volume ofcourses offered and an increase in the average yield. The full year result isparticularly pleasing to management when compared to the half year, and reflectsthe decisive actions taken at that time to improve performance, and an increasein marketing investment. Operating profits* from Databases and Information Services improved by 38% to£5.4 million. CEIC, consolidated from April 2006, continues to perform ahead ofits forecasts at acquisition, and £0.5 million was invested in accelerating theroll out of CEIC's economic data service to other emerging markets. Revenuegrowth from ISI, the emerging markets information provider, maintained itsmomentum, with a client retention rate in excess of 90%. The number of ISIcustomers, products and data providers all increased during the year. CASH FLOW AND NET DEBT Year-end net debt was £73.4 million, down from £75.5 million at the half year.While the level of debt is usually higher in the first half following thepayment of dividends and profit shares, net debt at year-end increased by only£7.0 million from 2005. This is after investing £3.4 million in the acquisitionof Asia Business Forum, £19.7 million on the purchase of a 9% interest in MetalBulletin, and a further £14.5 million increasing the group's investments in IMN,ISI and CEIC under earn-out agreements. The significant gap between what hasbeen paid out and the increase in net debt has largely been met by the verystrong cash generated from operations of £59.6 million, demonstrating the robustorganic performance of the business and reflecting a key strength of the group'sbusiness model. In addition deferred revenue at year end was £45.3 million,against £37.5 million at the end of 2005. MANAGEMENT INCENTIVE Operating profit* exceeded £40 million for the first time, reflecting furtherevidence of the benefits of the Capital Appreciation Plan. This highly-gearedequity incentive was introduced to drive profit** to a target of £50 million by2008 against a base of £21 million in 2003. Approximately 150 managersparticipate in this incentive which encourages investment in new products anddirectly rewards each participant for the organic profit growth achieved bytheir business. The non-cash cost of the CAP is being expensed over the life of the plan. For2006, the first full year of amortizing the CAP cost, an expense of £4.3 million(2005: £1.3 million) has been charged. ACQUISITIONS In March 2006, the group acquired a 47.5% stake in Asia Business Forum, aleading business conference and training organizer in the Asian region, for £3.4million. A further 42.5% interest will be acquired in 2007 under the earn-outagreement. In October 2006 the group acquired a 67% stake in Total Derivatives, a leadingprovider of real-time news and analysis about the global fixed incomederivatives markets, for £6.7 million. This is an exciting acquisition, takingthe group further into the provision of electronic information services andproviding an excellent platform for the launch of new products. The acquisitionwas funded from the group's existing borrowing facility and is expected to beearnings enhancing in 2007. Euromoney's acquisition of Metal Bulletin plc was declared unconditional onOctober 5 2006, after the financial year-end. The acquisition cost ofapproximately £230 million was funded by a mix of debt (£163 million) loan notes(£12 million) and up to 14 million new shares (£55 million). The debt wasprovided by a new £375 million three year multi-currency facility. In additionthe Company assumed £14 million of Metal Bulletin net debt. The issue of newshares increased the Company's issued share capital by 16%, and willsignificantly increase the free float in the Company's shares. Daily Mail andGeneral Trust plc now owns 61% of the Company. The acquisition of Metal Bulletin is consistent with the group's long-termstrategy of building subscription and repeat revenues, reducing its dependenceon advertising revenue, investing further in growing financial informationproducts, and establishing critical mass in non-financial information products.The integration of Metal Bulletin is underway, and while it is too early tocomment in detail, the Company is confident that the significant growthopportunities and cost savings identified at the time of acquisition areachievable. DIVIDEND The increase in the final dividend is consistent with the Company's strategy ofmoving gradually to a dividend cover of two times, while still delivering realdividend growth. The total payment to shareholders for the 2006 financial yearwill be £16.7 million, bringing the dividends returned to shareholders over thepast five years to over £70 million, all financed from operating cash flows. TAX The group has traditionally had a low tax rate due to the tax amortization ofgoodwill available on US acquisitions and the availability of brought-forwardtax losses for use against its US profits. In 2006, the group recognized adeferred tax credit of £13.6 million in respect of US tax losses and taxdeductible US goodwill as the group's US businesses are now expected to generatetaxable profits for the foreseeable future. After adjusting for this deferredtax credit, the group's underlying tax rate was 27% against 28% in 2005. Themajority of the group's tax losses and deferred tax assets have been recognizedand the group's underlying tax rate for 2007 and subsequent years is nowexpected to be at least 30%. OUTLOOK The Company has benefited from a healthy financial environment in 2006, and anymarked reversal in the performance of financial markets in 2007 will presentchallenges. However, the Company's strategy has been to diversify its revenueswhile investing in the quality of its products and services to ensurecompetitive advantage irrespective of the trading environment. The opportunitiesthat the Metal Bulletin acquisition presents, along with the group's continuedorganic growth, leave the Company optimistic about its prospects for 2007. Forthe new financial year, the first quarter is generally the least significant inprofit terms, and visibility for the second quarter is always limited at thisstage. However, current trading is encouraging, with advertising, sponsorshipand delegate sales all ahead of the same period in 2005. Padraic FallonChairman November 15 2006 NOTE TO EDITORS About Euromoney Institutional Investor PLC Euromoney Institutional Investor PLC is listed on the London Stock Exchange anda member of the FTSE-250 share index. It is a leading internationalbusiness-to-business media group focused primarily on the international financesector. It publishes more than 100 magazines, newsletters and journals,including the leading financial market titles Euromoney and InstitutionalInvestor. It also runs an extensive portfolio of conferences, seminars andtraining courses and is a leading provider of electronic information and datacovering international finance and emerging markets. Its main offices are inLondon, New York and Hong Kong and nearly half its revenues and profits aremanaged from the United States. On October 5 2006 the Company completed theacquisition of Metal Bulletin plc for £230 million. The acquisition was fundedpartly by the issue of 14 million new shares, following which the Daily Mail andGeneral Trust plc now owns 61% of the Company. For further information please contact: Euromoney Institutional InvestorPadraic Fallon, Chairman 020 7779 8556 [email protected] Ensor, Managing Director 020 7779 8845 [email protected] Jones, Finance Director 020 7779 8556 [email protected] LuxtalAlex Money or Tom Allison 020 7936 9790 [email protected] Or visit our website at www.euromoneyplc.com * Operating profit before acquired intangible amortisation, share optionexpense, exceptional items and share of results in associates and joint venturesas set out in the group income statement. ++ Diluted earnings a share before acquired intangible amortisation, exceptionalitems, imputed interest on acquisition option commitments and deferred taxassets recognised, as set out in note 6. ** Profit before tax excluding acquired intangible amortization, share optionexpense, exceptional items and imputed interest on acquisition optioncommitments. Group Income Statementfor the year ended September 30 2006 2006 2005 Notes £000's £000'sRevenue 2--------------------------------------------- ----- --------- ---------Continuing operations 222,276 196,266Less: share of revenue of joint ventures (1,800) (1,434)--------------------------------------------- ----- --------- ---------Total revenue 220,476 194,832--------------------------------------------- ----- Operating profit before acquired intangible 2 43,812 39,348amortisation, share option expense and exceptionalitemsAcquired intangible amortisation (144) -Share option expense (4,428) (1,380)Exceptional items 3 (716) (315) --------- ---------Operating profit before associates and joint 2 38,524 37,653ventures --------------------------------------------- ----- --------- ---------Share of results in associates and joint 1,208 624ventures --------- ---------Operating profit 39,732 38,277Finance income 772 340--------------------------------------------- ----- --------- ---------Imputed interest on acquisition option (916) -commitmentsOther finance costs (4,354) (4,183)--------------------------------------------- ----- --------- ---------Finance costs (5,270) (4,183) --------- ---------Net finance costs (4,498) (3,843)Profit before tax 35,234 34,434--------------------------------------------- ----- --------- ---------Tax on profit (10,137) (9,657)Deferred tax asset recognition 13,649 7,240--------------------------------------------- ----- --------- ---------Tax credit/(expense) on profit on ordinary 4 3,512 (2,417)activities --------- ---------Profit after tax 38,746 32,017 ========= =========Attributable to:Equity holders of the parent 37,430 30,181Equity minority interests 1,316 1,836 --------- --------- 38,746 32,017 ========= =========Basic earnings per share 6 42.11p 34.19pDiluted earnings per share 6 41.90p 34.10pDividend per share (including proposed dividends) 5 17.00p 16.20p Group Balance Sheetas at September 30 2006 2006 2005 £000's £000'sNon-current assetsIntangible assetsGoodwill 68,452 66,029Other intangible assets 3,146 479Property, plant and equipment 14,643 10,747Investments 25,846 7,080Deferred tax asset 22,917 9,820 ---------- ----------- 135,004 94,155 ---------- -----------Current assetsTrade and other receivables 73,512 54,927Cash and cash equivalents 27,503 25,071Derivative financial instruments 3,069 - ---------- ----------- 104,084 79,998Current liabilitiesTrade and other payables (95,515) (75,935)Accruals (29,478) (23,225)Deferred income (45,324) (37,491)Bank overdrafts (1,235) (139) ---------- ----------- (171,552) (136,790)Net current liabilities (67,468) (56,792) ---------- -----------Total assets less current liabilities 67,536 37,363Non-current liabilitiesAcquisition option commitments (24,332) -Deferred consideration - (8,689)Other non-current liabilities (597) -Committed facility (65,530) (62,518)Deferred tax liabilities (3,074) (981)Provisions (777) (1,125) ---------- ----------- (94,310) (73,313) ---------- -----------Net liabilities (26,774) (35,950) ========== ===========Shareholders' equityCalled up share capital 223 222Share premium account 38,081 37,351Capital redemption reserve 8 8Own shares (74) (74)Liability for share based payments 5,907 1,479Fair value reserve 6,618 -Translation reserve (244) (1,300)Retained earnings (78,642) (75,245) ---------- -----------Equity shareholders' deficit (28,123) (37,559)Equity minority interests 1,349 1,609 ---------- -----------Total equity (26,774) (35,950) ========== =========== Group Cash Flow Statementfor the year ended September 30 2006 2006 2005 £000's £000'sCash flow from operating activitiesOperating profit 39,732 38,277Share of operating profit in associates and joint (1,208) (624)venturesLoss on disposal of business 1,483 315Intangible amortisation 381 -Goodwill impairment 519 -Share option expense 4,428 1,380Depreciation of property, plant and equipment 2,925 1,745Utilisation of property rental provision (348) (148)(Gain)/loss on disposal of property, plant and equipment (1,286) 87 --------- ---------Operating cash flows before movements in working capital 46,626 41,032Increase in receivables (9,822) (4,395)Increase in payables 22,754 6,181 --------- ---------Cash generated by operations 59,558 42,818Income taxes paid (6,884) (6,797) --------- ---------Net cash from operating activities 52,674 36,021 --------- ---------Investing activitiesDividends paid to minorities (1,724) (943)Dividends received from associate 756 -Interest received 662 345Purchases of property, plant and equipment (7,694) (5,387)Proceeds on disposal of property, plant and equipment 1,975 20Purchase of available for sale investments (19,741) -Purchase of additional interest in subsidiaries (14,507) (12,231)undertakingsAcquisition of associate and joint ventures (3,424) (6,097)Disposal of subsidiary 150 500 --------- ---------Net cash used in investing activities (43,547) (23,793) --------- ---------Financing activitiesDividends paid (14,563) (13,376)Interest paid (696) (3,756)Issue of new share capital 730 2,960Increase in borrowings 3,336 42,932Repayment of borrowings - (39,540)Loan repaid to DMGT group company (71,991) (15,384)Loan received from DMGT group company 76,399 15,622 --------- ---------Net cash used in financing activities (6,785) (10,542) --------- ---------Net increase in cash and cash equivalents 2,342 1,686Cash and cash equivalents at beginning of year 24,932 23,099Effect of foreign exchange rate movements (1,006) 147 --------- ---------Cash and cash equivalents at end of year 26,268 24,932 --------- --------- Note to the Group Cash Flow Statement A Net Debt 2006 2005 £000's £000's Net debt at beginning of period (66,430) (62,389)Increase in cash and cash equivalents 2,342 1,686Decrease in loans (15,716) (18,907)Decrease in amounts owed to DMGT group company 7,972 15,384Other non cash changes (4,973) (106)Effect of foreign exchange rate movements 3,367 (2,098) --------- ---------Net debt at end of period (73,438) (66,430) ========= ========= Net debt comprises cash at bank and in hand, bank overdrafts, bank loans andother borrowings. Cash and cash equivalents in the cash flow statement includes banks overdrafts. Group Statement of Changes in Equityfor the year ended September 30 2006 2006 2005 Note £000's £000's Profit for the year 37,430 30,181Dividends paid 5 (14,563) (13,376) ------- ------- 22,867 16,805Proceeds from issue of shares for cash 731 2,960Credit to equity for share based payments 4,428 1,380Fair value gains on cash flow hedges 3,629 n/aFair value gains on available for sale 405 n/ainvestmentsNet exchange difference on foreign currency loans 3,183 -Changes in acquisition commitments (4,728) -Tax on items going through reserves (265) (264)Exchange differences on translation of foreign 1,056 (1,300)operationsOther movements (23) - ------- -------Net decrease in equity shareholders' deficit 31,283 19,581Impact of adoption of IAS 39 on October 1 2005 (21,847) -Opening equity shareholders' deficit as restated/ (37,559) (57,140)previously stated ------- ------- Closing equity shareholders' deficit (28,123) (37,559) ======= =======Total equity attributable to:Equity holders of the parent (28,123) (37,559)Equity minority interests 1,349 1,609 -------- -------- (26,774) (35,950) ======== ======== IAS 39 requires unrealised fair value gains/(losses) on certain financialinstruments to be recognised in equity; when realised, these fair value gains/(losses) are recognised in the income statement. In accordance with thetransition rules for first time adoption of IFRSs, 2005 comparatives have notbeen restated. The impact of the adoption of IAS 39 is shown above and in note7. Notes to the Preliminary Announcement 1 Basis of preparation The preliminary results have been prepared in accordance with the recognitionand measurement principles of International Financial Reporting Standards('IFRS') as adopted by the European Union, and those parts of the Companies Act1985 applicable to companies reporting under IFRS. The group is complying withIFRS for the first time for the year ended September 30 2006 and the accountingpolicies applicable to the group from October 1 2004 are those that are set outin a separate document, "Adoption of International Financial Reporting Standards- Preliminary restatement of 2005 financial information" which was published onMarch 22 2006, and is available on the group's website at www.euromoneyplc.com/reports/IFRS_Restatement_2005.pdf. The same accounting policies have beenconsistently applied to the preliminary financial statements except where theGroup has taken advantage of the exemption in International Financial ReportingStandard 1: "First-time Adoption of International Financial Reporting Standards"('IFRS 1') from the requirement to restate comparative information forInternational Accounting Standard 32: "Financial Instruments: Disclosure andPresentation" ('IAS 32') and International Accounting Standard 39: "FinancialInstruments: Recognition and Measurement" ('IAS 39'). These standards have beenadopted from October 1 2005 and the impact is set out in note 7. The financial information set out in this announcement does not constitute thecompany's statutory accounts for the year ended September 30 2006 but is derivedfrom those accounts. The financial information for the year ended September 302005 is based on information extracted from the group's statutory accounts forthat period prepared under UK GAAP, and restated in accordance with IFRS.Statutory accounts for 2005, prepared under UK GAAP, have been delivered to theRegistrar of Companies, and those for 2006 will be delivered following thecompany's annual general meeting. The auditors have reported on those accounts;their report was unqualified and did not contain statements under section 237(2) or (3) of the Companies Act 1985. 2 Segmental analysis Primary reporting format Segmental information is presented in respect of the group's business divisionsand represent the group's management and internal reporting structure. The groupis currently organised into five business divisions: Financial publishing;Business publishing; Training; Conferences and seminars; and Databases andinformation services. This is considered to be the primary reporting format.Financial publishing and Business Publishing consist primarily of advertisingand subscription revenue. The Training division consists primarily of delegaterevenue. Conferences and seminars consists of both sponsorship income anddelegate revenue. Databases and information services consists of subscriptionrevenue. A breakdown of the group's revenue by type is set out below. Secondary reporting format The group divides the operation of its businesses across three main geographicalareas: United Kingdom; North America; and Rest of World (which primarilyincludes Asia). These geographical areas are considered as the secondaryreporting format. Inter segment sales are charged at prevailing market rates. United Kingdom North America Rest of World Eliminations Total 2006 2005 2006 2005 2006 2005 2006 2005 2006 2005 £000's £000's £000's £000's £000's £000's £000's £000's £000's £000'sRevenueBy divisionand source: Financial 31,905 29,425 31,637 28,365 1,605 1,408 - - 65,147 59,198publishingBusiness 15,829 14,610 8,362 7,038 1,292 1,155 - - 25,483 22,804publishingTraining 19,831 16,342 7,143 6,580 2,243 2,140 (390) (358) 28,827 24,704Conferences 28,021 22,101 41,200 38,994 11,959 7,976 (4,220) (4,313) 76,960 64,758and seminarsDatabases 5,201 4,894 5,349 4,304 10,689 7,344 - 5 21,239 16,547andinformationservicesClosed 1,721 4,053 - 344 146 1,420 (21) (44) 1,846 5,773businessesUnallocated 1,980 1,718 - - - - (1,006) (670) 974 1,048corporate costs ------- ------- ------- ------- ------- ------- ------- ------- ------- -------Group 104,488 93,143 93,691 85,626 27,934 21,443 (5,637) (5,380) 220,476 194,832revenueJoint 915 1,434 - - 885 - - - 1,800 1,434ventures (sale ofgoods) -------- ------- ------- ------- ------- ------- ------- ------- -------- -------- 105,403 94,577 93,691 85,626 28,819 21,443 (5,637) (5,380) 222,276 196,266 ======== ======= ======= ======= ======= ======= ======= ======= ======== ======== The joint venture revenues of £1,800,000 (2005: £1,434,000) can be allocated asfollows; Business publishing £915,000 (2005: £1,434,000); Databases andinformation £885,000 (2005: £nil). 2006 2005 £000's £000'sRevenue by type:Advertising 58,589 53,328Sponsorship 37,176 32,705Subscriptions 56,300 48,017Training, delegates and events 57,442 46,786Other 9,123 8,224Closed businesses 1,846 5,772 --------- ---------Total revenue 220,476 194,832Investment income 733 340 --------- ---------Total revenue and investment income 221,209 195,172 ========= ========= United Kingdom North America Rest of World Eliminations Total 2006 2005 2006 2005 2006 2005 2006 2005 2006 2005 £000's £000's £000's £000's £000's £000's £000's £000's £000's £000'sRevenueBydestination: Sale of 24,334 23,212 59,303 52,853 38,606 32,697 (4,844) (3,414) 117,399 105,348goodsSale of 12,562 9,736 42,857 37,893 46,585 38,005 (773) (1,922) 101,231 83,712servicesClosed 489 1,703 464 1,126 914 2,987 (21) (44) 1,846 5,772businesses (sale ofgoods) ------- ------- ------- ------- ------- ------- ------- ------- -------- --------Group 37,385 34,651 102,624 91,872 86,105 73,689 (5,638) (5,380) 220,476 194,832revenueJoint 60 57 152 270 1,588 1,107 - - 1,800 1,434ventures (sale ofgoods) ------- ------- -------- ------- ------- ------- ------- ------- -------- --------Total 37,445 34,708 102,776 92,142 87,693 74,796 (5,638) (5,380) 222,276 196,266revenueInvestment 284 119 366 189 83 32 - - 733 340income ------- ------- -------- ------- ------- ------- ------- ------- -------- --------Total 37,729 34,827 103,142 92,331 87,776 74,828 (5,638) (5,380) 223,009 196,606revenue (includingshare ofjointventurerevenue) andinvestmentincome ======= ======= ======== ======= ======= ======= ======= ======= ======== ======== United Kingdom North America Rest of World Total 2006 2005 2006 2005 2006 2005 2006 2005 £000's £000's £000's £000's £000's £000's £000's £000'sOperating profit1By division and source: Financial publishing 8,526 8,413 4,637 2,664 (13) 141 13,150 11,218Business publishing 5,020 3,861 1,560 1,475 204 89 6,784 5,425Training 5,069 3,906 1,460 1,619 456 632 6,985 6,157Conferences and 7,486 5,871 11,091 13,291 1,708 158 20,285 19,320seminarsDatabases and information services 3,792 2,768 (121) 1,551 1,721 (427) 5,392 3,892Closed businesses (108) (182) - (248) 8 (66) (100) (496)Unallocated corporate costs (7,548) (5,652) (1,097) (516) (39) - (8,684) (6,168) ------- ------- ------- ------- ------- ------- ------- ------- 22,237 18,985 17,530 19,836 4,045 527 43,812 39,348Acquired intangible amortisation 2 - - - - (144) - (144) -Share option expense (2,241) (830) (1,944) (508) (243) (42) (4,428) (1,380)Exceptional items (note 3) (716) (315) - - - - (716) (315) ------- ------- ------- ------- ------- ------- ------- -------Operating profit before 19,280 17,840 15,586 19,328 3,658 485 38,524 37,653associates and joint ventures ------- ------- ------- ------- ------- ------- ------- -------Share of results in 1,208 624associates and jointventuresNet finance costs (4,498) (3,843) ------- -------Profit before tax 35,234 34,434Tax 3,512 (2,417) ------- -------Profit after tax 38,746 32,017 ======= ======= The exceptional items of £716,000 (2005: £315,000) can be allocated as follows:Business publishing £2,002,000 (2005: £315,000); Unallocated corporate costs,profit £1,286,000 (2005: £nil). Share option expense of £4,428,000 (2005:£1,380,000) can be allocated as follows: Financial publishing £1,198,000 (2005:£373,000); Business publishing £464,000 (2005: £145,000), Training £577,000(2005: £180,000); Conferences and seminars £1,253,000 (2005: 390,000), Databases£302,000 (2005: £94,000); Unallocated corporate costs £634,000 (2005: £198,000).Acquired intangible amortisation of £144,000 (2005: £nil) is allocated entirelyto Databases. 1. Operating profit before acquired intangible amortization, share option expense and exceptional items. 2. Intangibles amortisation represents amortisation on acquisitions related non goodwill assets such as brands, database content and trademarks. 3 Exceptional items Exceptional items are items of income or expense considered by the directors,either individually or if of a similar type in aggregate, as being eithermaterial or significant and which require disclosure in order to provide a viewof the group's results excluding these items. 2006 2005 £000's £000'sProfit on sale of property 1,286 -Loss on disposal of business (1,483) (315)Goodwill impairment (519) - ------- ------- (716) (315) ======= ======= In September 2006, the group sold the freehold of one of its London propertieswith a net book value of £629,000 for £1,975,000 resulting in a profit on sale,after related sale costs, of £1,286,000. The group has capital losses broughtforward from prior years available to relieve this gain. In the absence ofthese losses a tax charge of approximately £386,000 would have arisen. In August 2006 the group sold Office Products International Limited (previouslynamed Mondiale Limited) ("OPI"), the publisher and events organiser for£150,000. At the date of disposal OPI's net assets were £nil and the groupwrote off goodwill held on its balance sheet of £1,651,000 resulting in a losson disposal, after related transaction costs, of £1,483,000. There is no taxeffect. The group regularly performs a review of its portfolio of businesses and in 2006the review resulted in goodwill impairment of £519,000. In 2005, no suchimpairment was required. There is no tax effect. 4 Tax on profit on ordinary activities 2006 2005 £000's £000'sCurrent tax expenseUK corporation tax 6,119 5,194Foreign tax 1,533 1,531Adjustments in respect of prior years 107 544 ------- ------- 7,759 7,269Deferred tax (credit)/expenseCurrent year (11,361) (4,701)Adjustments in respect of prior years 90 (151) ------- ------- (11,271) (4,852) ------- -------Total tax (credit)/expense in income statement (3,512) 2,417 ======= ======= The effective rate of tax for the year is negative, at (10%) (2005: positive7%). The actual total tax charge for the year is different from 30% of profitbefore tax for the reasons set out in the following reconciliation: 2006 2005 £000's £000'sProfit before tax 35,234 34,434 ------- -------Tax at 30% 10,570 10,330Factors affecting tax charge:Lower rates of tax on overseas profits (338) (599)Joint venture and associate income reported net of tax (362) (187)US State taxes 756 1,283US goodwill (13,120) (1,809)Disallowable expenditure 136 246UK Goodwill 161 -Recognition of previously unrecognised tax losses (1,957) (7,240)Non deductible loss on sale of business 445 -Prior year adjustments 197 393 ------- -------Total tax (credit)/expense for the year (3,512) 2,417 ======= ======= Of the charge to current tax £nil (2005: £18,000) related to profits arising inMondiale, which was disposed of during the year. No tax charge or credit aroseon the disposal of the relevant subsidiary. Following a reassessment of therecoverability of the potential US deferred tax asset, an additional asset of£13,649,000 (2005: £7,240,000) was recognised during the year. The actual tax charged directly to equity was £265,000 (2005: £264,000). 5 Dividends 2006 2005 £000's £000'sAmounts recognisable as distributable to equity holders in periodFinal dividend for the year ended September 30 2005 of 9,767 8,79811.0p (2004: 10.0p)Interim dividend for year ended September 30 2006 of 5.4p 4,806 4,587(2005: 5.2p) --------- --------- 14,573 13,385Employees' Share Ownership Trust dividend (10) (9) --------- --------- 14,563 13,376 ========= ========= Proposed final dividend for the period ended September 11,907 9,76730Employees' Share Ownership Trust dividend (10) (10) --------- --------- 11,897 9,757 ========= ========= The final dividend of 11.6 pence per ordinary share (2005: 11.0 pence) will,subject to shareholder approval at the Annual General Meeting, be paid onFebruary 6 2007 to shareholders on the register on November 24 2006. It isexpected that the shares will be marked ex-dividend on November 22 2006. Holdersof International Depositary Receipts can receive their dividend on February 62007 by presentation of coupon number 39 to Dexia Banque a Luxembourg or to oneof their agents. The final dividend is subject to approval at the Annual General Meeting onFebruary 1 2007 and has not been included as a liability in these financialstatements in accordance with IAS 10 "Events after the balance sheet date". 6 Earnings per share 2006 2005 £000's £000'sBasic earnings 37,430 30,181 --------- ---------Intangible amortisation 144 -Exceptional items 716 315Deferred tax assets recognition (13,649) (7,240)Imputed interest on acquisition option 916 -commitments --------- --------- Adjusted earnings 25,557 23,256 ========= ========= Number Number 000's 000'sWeighted average number of shares 88,943 88,336Shares held by the Employees' Share Ownership (59) (59)Trust --------- --------- 88,884 88,277Effect of dilutive share options 456 231 --------- ---------Diluted weighted average number of shares 89,340 88,508 ========= ========= 2006 2005 Pence per Pence per share share Basic earnings per share 42.11 34.19Effect of dilutive share options (0.21) (0.09) --------- ---------Diluted earnings per share 41.90 34.10Effect of intangible amortisation 0.16 -Effect of exceptional items 0.80 0.36Effect of deferred tax assets recognition (15.28) (8.18)Effect of imputed interest on acquisition option 1.03 -commitments --------- --------- Adjusted diluted earnings per share 28.61 26.28 ========= ========= The adjusted diluted earnings per share figure has been disclosed since thedirectors consider it to give a meaningful indication of the underlying tradingperformance. 7 First time adoption of IAS 39 "Financial Instruments: Recognition andMeasurement" As permitted by IFRS 1 "First time Adoption of International Financial ReportingStandards", the group has elected to defer the implementation of IAS 39 untilthe year ended September 30 2006. The effect of the adoption of IAS 39 atOctober 1 2005 is to reduce net assets by £21.9 million, due to the followingadjustments: Forward exchange contracts and interest rate swaps IAS 39 requires that derivative financial instruments are recognised on thebalance sheet at their fair value. At October 1 2005 the effect on the groupbalance sheet was to reduce net assets by £0.6 million. Derecognition of liabilities IAS 39 sets out specific criteria in relation to when a financial liabilityshould be derecognised. Application of this resulted in an increased liabilityof £1.6 million which was recognised on the balance sheet from October 1 2005. Acquisition option commitments The group is party to a number of put options over the remaining minorityinterests in its subsidiaries. IAS 39 requires the recognition of a liabilityin respect of these acquisition option commitments. As at October 1 2005, thediscounted present value of these options is £20.1 million. From October 1 2005these discounts are unwound as a notional interest charge to the incomestatement. Deferred tax A deferred tax asset of £0.4 million has been recognized on the aboveadjustments. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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