20th Sep 2007 07:01
Huntsworth PLC20 September 2007 Huntsworth PLC Interim results for the six months to 30 June 2007 On track for the full year - strong start to the second half Huntsworth PLC, the international public relations group, today announces itsinterim results for the six months to 30 June 2007. SUMMARY1 Like-for-like revenues2 • Up 5.7% in PR • Up 6.0% in Huntsworth Health • Down 9.4% in Events • Up 5.1% overall Key growth drivers • Net new business wins of £27.5 million in line with H1 2006 on a like-for-like basis • Average revenue per client up 19% to £60,000 • Network business up from 11% to 23% of revenues Operating margin3 • Pre central costs at 20.4% (H1 2006: 18.8%) • Post central costs at 16.1% (H1 2006: 14.3%) Profit before tax • Up 16.4% to £10.0 million (H1 2006: £8.6 million) • After highlighted items up 16.9% to £5.9 million (H1 2006: £5.0 million) Earnings per share • Up 15.6% to 3.7p (H1 2006: 3.2p) • After highlighted items up 29.4% to 2.2p (H1 2006: 1.7p) Interim dividend • Increased by 8.3% to 0.65p (H1 2006: 0.6p) Notes: 1. All results are stated before taking account of highlighted itemsunless otherwise stated. These comprise amortisation and impairment of goodwilland intangible assets, acquisition payments deemed as remuneration, and merger,re-structuring and other non-recurring costs. 2. Like-for-like revenues include pre-acquisition revenues for allcurrent businesses and are stated at constant currencies. 3. 2006 comparatives have been restated to allocate share-based paymentcharges to reporting segments in line with best practice. Previously thesecharges were reported as unallocated expenses. Peter Chadlington, Chief Executive of Huntsworth, said: "Huntsworth has made a good start to the year with continued growth in demandfor the range of our public relations services, a marked increase in clientsusing more than one of our offices for co-ordinated international communicationprogrammes and significantly rising recognition of our strengths in digitalcommunications. This has driven strong growth in margin, profit and earnings pershare. "Looking ahead, we view the Group's prospects with considerable confidence. Wewill benefit from our recent acquisitions and, as multi-office accounts come onstream, we expect the pace of organic growth to increase both in the second halfand in 2008. Indeed, this is already reflected in strong trading results in theseasonally quiet July and August months. In light of the Group's prospects andfinancial strength, the Board is proposing an interim dividend of 0.65p, anincrease of 8.3%." Contacts: Huntsworth PLC +44 (0)20 7408 2232 Peter Chadlington, Chief ExecutiveSally Withey, Finance Director Citigate Dewe Rogerson +44 (0)20 7638 9571 Simon RigbyBrett JacobsGeorge Cazenove A presentation to analysts will take place at 9.00am on 20 September 2007 at theoffices of Numis Securities Limited, 5th Floor, 10 Paternoster Square, London,EC4M 7LT. CHIEF EXECUTIVE'S STATEMENT Group Performance Huntsworth has produced a strong first half performance. Growth in demand for our services continues, based on clients' increasingrecognition of cost-effectiveness and the importance of reputation to allaspects of their businesses. In the first half we won £27.5 million of net newbusiness, which on a like-for-like basis equals the record level achieved lastyear. We are particularly pleased that 50% of this came from our existingclients - an endorsement of the quality of our service. Our largest client nowrepresents less than 3% of total revenues, the top ten under 13% and the top 25clients just over 22%. Our confidence in the future is underpinned by our achievement in the first halfof double digit revenue growth in some of our offices in Eastern Europe, WesternEurope and the Far East. Two trends are becoming increasingly noticeable - the growth in co-ordinated,cross-border public relations programmes and the rapid rise in digitalcommunications. Network Business Our established network in the UK, Continental Europe, North America and AsiaPacific is increasingly enabling us to meet the growing client interest indeveloping co-ordinated international programmes. In the first half 23% of ourrevenues came from clients undertaking co-ordinated multi-office programmesusing the Huntsworth network. Additionally a further 25% of our revenues camefrom clients who independently use more than one Huntsworth office. This givesus considerable scope to develop these relationships over the next few years. Digital Communications Our market is experiencing rapid and profound change as digital communicationsin all its forms drive forward corporate public relations strategies andprogrammes. The majority of all our new business pitches now include asignificant digital element and we estimate that more than half of our clientsturn to us for help with their digital and on-line communications. As digitalincreasingly becomes the standard communications practice, so we expect it tocontinue to become a larger and growing part of the overall spend by clients inall our business areas. Examples of leading edge digital communication programmes include Apple where welaunched their first podcasting seminar in the Czech Republic; Orizonia, theSpanish travel company, where we created a virtual tourism agency insecondlife.com; and we also developed a programme in the UK for NeuStar toencourage mass adoption of instant messaging. Huntsworth Health Our healthcare business is well-established in Europe and North America. Therecent acquisitions of Axis and Dorland have integrated well into the Group. Wehave relationships with 34 of the world's top 40 pharmaceutical companies -largely in relation to a single product - but we now have the opportunity todrive growth geographically, extending our work to existing clients' additionalbrands and by introducing our other specialist healthcare services. Outlook We believe we will build on the strong growth in margin, profit and earnings pershare achieved in the first half with continued organic growth in the secondhalf and in 2008, as multi-office accounts come on stream. Since the period end,we have achieved strong trading results in the seasonally quiet July and Augustmonths, which we believe confirm this underlying trend. Peter ChadlingtonChief Executive20 September 2007 SUMMARY OF FINANCIAL RESULTS Six months ended Six months ended 30 Growth 30 June 2007 June 2006 £000 £000Reported revenue 70,594 70,075 0.7% Operating profit before central costs 14,378 13,187 9.0%Central costs (3,001) (3,168)Operating profit 11,377 10,019 13.6% Operating margin (%) 16.1% 14.3% Profit before tax (before highlighted items) 10,009 8,597 16.4%Profit before tax as reported 5,875 5,024Basic EPS before highlighted items (pence) 3.7 3.2 15.6%Basic EPS as reported (pence) 2.2 1.7 Reported revenue was up 0.7% to £70.6 million (H1 2006: £70.1 million). Thisreflects the impact of the January 2007 disposal of a 51% interest in SardVerbinnen which is now shown as an associate, offset by growth in continuingbusinesses and acquisitions. On a like-for-like basis, revenue from the Group's Public Relations businesseswas up 5.7%, Huntsworth Health up 6.0% and Events down 9.4% (principally due toBroadstreet in the US), giving an overall like-for-like revenue growth of 5.1%.Excluding Broadstreet, which is under strategic review, overall growth was 5.8%. Group operating profits before central costs were up 9.0% to £14.4 million (H12006: £13.2 million) - up 18.0% on a constant currency basis. Group operating margin before central costs was 20.4% (H1 2006: 18.8%)reflecting a 20.7% margin for Public Relations businesses, 19.5% for HuntsworthHealth and 16.4% for Events. Operating margin after central costs was 16.1% (H1 2006: 14.3%). Operatingprofit after central costs for the period was up 13.6% to £11.4 million (H12006: £10.0 million) - up 18.0% at constant currency. Like-for-like operatingprofit growth after central costs was 8.9%. Profit before tax was £10.0 million (H1 2006: £8.6 million). Highlighted items of £3.1 million comprise amortisation of intangible assets andnon-cash share-based acquisition payments deemed as remuneration. After thesehighlighted items, statutory reported operating profit was up 28% to £8.2million (H1 2006: £6.4 million). Profits attributable to ordinary shareholders rose 21% to £7.4 million (H1 2006:£6.1 million). Profits after highlighted items attributable to ordinaryshareholders amounted to £4.4 million (H1 2006: £3.2 million). Basic earnings per share were up 15.6% to 3.7p (H1 2006: 3.2p). Diluted earningsper share were 3.6p (H1 2006: 3.1p). Basic earnings per share after highlighteditems were 2.2p (H1 2006: 1.7p). The interim dividend is increased by 8.3% to 0.65p per share (H1 2006: 0.6p). DIVISIONAL REVIEW Following the acquisition of two healthcare companies in March and July of thisyear, Huntsworth has reviewed its segmental split and will be reporting onPublic Relations, Huntsworth Health and Events. Public Relations Six months ended Six months ended Like-for-like 30 June 2007 30 June 2006 growth £000 £000 %Revenue 58,424 61,426* 5.7%Operating profit 12,089 12,259Operating margin 20.7% 20.0% *2006 includes Sard Verbinnen, which is shown as an associate in 2007 followingthe disposal of a 51% interest in January. In the half year, Public Relations business accounted for 83% of total revenuesand achieved 5.7% organic revenue growth and operating margins of 20.7%. 2,432clients generated half year revenues of £58.4 million. On a full year pro formabasis, Public Relations business now accounts for 71% of total Group revenue. Average annualised revenue per client was £48,000. The top client provided 1.5%of total half year Public Relations revenue and the top 10 clients represented9.1%. Since the Group's trading update in July, Public Relations has continued to winor extend important contracts around the world including: Nissan, Filofax,Europay, GE Plastics, Bruce Oldfield, Jeff & Maggie Cosmetics, 3M, British GasBusiness, World Vision, Panasonic, Mitsubishi, Lloyds Pharmacy, Abbey, AOL,Quorn, PIK Group, LaSalle Investment Management, Freight Transport Association,Scottish NHS and Experian. Huntsworth Health Six months ended Six months ended Like-for-like 30 June 2007 30 June 2006 growth £000 £000 %Revenue 9,528 4,957 6.0%Operating profit 1,854 533Operating margin 19.5% 10.8% Huntsworth further extended its reach into the USA with the acquisition of Axisin July 2007, following on from the acquisition of Dorland in March this year.The Group is now well positioned as a major player in the fast growing globalhealthcare communications market. Huntsworth Health generated half year revenues of £9.5 million through 117clients and achieved 6.0% organic revenue growth with operating margins at19.5%. Huntsworth Health now accounts for 26% of full year pro forma totalGroup revenue. Average annualised revenue per client, excluding Axis which was purchased inJuly, was £198,000. The top client provided 18.4% of total half year HuntsworthHealth revenue and the top 10 clients 71.2%. New Huntsworth Health wins in the first half include Baxter, GSK, Pharmion,Pfizer, Eisai, Sankyo-Daiichi, Wyeth and Novartis. Events The Group's events companies - RS Live in the UK and Broadstreet in the US -represent 3% of full year pro forma Group revenues. The UK business saw an improvement in results during the first six months of2007, showing both revenue growth and margin improvement. This momentum hascarried on into the second half. The US business suffered a significant drop inrevenues and profits and is under strategic review. BALANCE SHEET AND CASHFLOW Operating cash flow of £5.4 million and cash conversion of 48% reflected thepayment of over £6.0 million of bonuses in the first half relating to 2006, aswell the impact of cyclical flows from acquisitions. This is before a £2.7million cash impact relating to highlighted items, provided for in prior years.This figure has fallen significantly from last year (H1 2006: £5.5 million) andis expected to continue to reduce. For the full year, Huntsworth expects cash conversion to achieve the Group'starget of 100%. Other principal movements in net debt during the year were net payments forinterest, tax and tangible fixed assets of £4.8 million; acquisitions anddisposals of £12.4 million; and purchase of shares for share incentive schemesof £0.5 million, resulting in an overall increase in net debt of £13.8 millionto £52.7 million. The Group has refinanced its bank facilities ahead of expiry and secured arevolving credit facility and committed overdraft totalling £90 million in placeuntil July 2012. EBITDA interest cover (excluding highlighted items) was 5.3times (H1 2006: 7.6 times). Hedging has been used to limit upward movements on the interest rate on £40million of debt through a mixture of swaps and caps. Tax The tax charge of £1.2 million comprises an underlying tax charge of £2.4million less £1.2 million for tax credits on highlighted items. This is basedon the expected full year underlying tax rate of 24.3%. Dividend The interim dividend of 0.65p per share is up 8.3% (H1 2006: 0.6p). The dividendwill be paid on 9 November 2007 to those shareholders on the register at 5October 2007. Earn-out Payments Future earn-out payments as at 30 June 2007 are estimated at £22.8 million,comprising £9.3 million payable in cash, £9.2 million in cash/shares atHuntsworth's option and £4.3 million in shares. The timing of the aggregate ofthese payments is £10.7 million in 2007, £5.4 million in 2008, £4.3 million in2009, £1.6 million in 2010 and £0.8 million in 2011. Following the acquisitionof Axis in July 2007 total future earn-outs are estimated at £31.5 million. Notes to Editors: 1. Huntsworth PLC is an international public relations group with 70principal offices in 32 countries, and over 2,750 clients. The Group providesservices to 42 companies in the FTSE 100, 107 in the Fortune 500, 101 in theEurotop 300 and 51 of the top 100 global brands (Interbrand Best Global Brands2007). 2. The Group comprises some of the world's leading public relationsagencies including Citigate Dewe Rogerson, Grayling, Hudson Sandler, Red,Trimedia and Mmd. At June 30 the group employed over 1,700 staff with anaverage fee income per head of £84,000. 3. Group revenue comprises the following key areas of activity: CorporateCommunications and Public Affairs accounts for 30% of Group revenue; Consumerand B2B work accounts for 26%; Financial non-deal led Public Relations work is17%; Financial deal led Public Relations is 6%; Huntsworth Health is 16%; Eventsis 3% and other activities are 2%. 4. By industry sector the revenue profile is broadly 16% Pharmaceuticals;12% Financial Services; 12% Technology; 7% Retail and Leisure and 7% Food andDrink. 5. Geographically, 50% of Group revenue in the first half of 2007 was fromthe UK; 27% from other European countries; 20% from the US; and 3% from the Restof the World. Operating margins for the six months to 30 June 2007 were 21.3%in the UK; 21.1% in Europe; 17.0% in the US and 20.9% in the Rest of the World. 6. The Group now represents 248 clients in more than one country and 379 bymore than one company. The largest client represents 2.9% of continuing revenuewith the top 10 clients accounting for 12.9% and the top 25 clients 22.4%.Average fee income per client is £60,000. 23.5% of revenues were earned throughcompanies working together with other group companies. 7. As at August 2007 shareholdings of Directors, employees and employeetrusts represent approximately 14% of the Group's issued share capital.Institutional shareholdings hold 75% with the top 10 holding some 59% as ofAugust 2007. Unaudited consolidated income statement for the six months ended 30 June 2007 Six months Six months Year ended ended ended 30 June 30 June 31 December 2007 2006 2006 Notes £000 £000 £000 Turnover 94,995 96,022 192,323 Revenue 4 70,594 70,075 139,747Operating expenses - excluding highlighted items (59,217) (60,056) (119,526)Operating expenses - highlighted items (3,135) (3,573) (13,722) Operating expenses - total (62,352) (63,629) (133,248) Operating profit before highlighted items 4 11,377 10,019 20,221Highlighted items - operating expenses 5 (3,135) (3,573) (13,722) Operating profit 8,242 6,446 6,499Share of profit from associates 1,005 51 131Highlighted item - impairment of associates 5 (999) - -Finance income 6 108 86 298Finance costs 6 (2,481) (1,559) (2,939) Profit before tax and highlighted items 10,009 8,597 17,711Highlighted items 5 (4,134) (3,573) (13,722) Profit before tax 5,875 5,024 3,989Taxation 7 (1,239) (1,536) (986) Profit for the period 4,636 3,488 3,003 Attributable to:Parent company's equity shareholders 4,437 3,239 2,794Minority interests 199 249 209 4,636 3,488 3,003Earnings per share:Basic - pence 9 2.2 1.7 1.5Diluted - pence 9 2.1 1.6 1.4Adjusted basic - pence* 9 3.7 3.2 7.3Adjusted diluted - pence* 9 3.6 3.1 7.1 Dividends:Final dividend of 1.3p (2006: 1.2p) 8 2,628 - 2,328Interim dividend of 0.6p 8 - - 1,160Proposed final dividend of 1.3p - - 2,628Proposed interim dividend of 0.65p (2006: 0.6p) 1,364 1,160 - * Adjusted basic and diluted earnings per share is calculatedbased on the profit for the period adjusted for highlighted items and therelated tax effects (Note 9). Unaudited consolidated balance sheet as at 30 June 2007 30 June 30 June 31 December 2007 2006 2006 Notes £000 £000 £000Non-current assetsIntangible assets 10 223,202 192,453 212,796Property, plant and equipment 5,603 5,885 5,403Deferred tax 2,816 3,316 2,654Derivative financial assets 11(c) 180 - -Other investments 5,248 166 224 237,049 201,820 221,077Current assetsWork in progress 1,687 1,890 1,381Trade and other receivables 51,170 43,318 43,728Derivative financial assets 11(c) 4 - -Cash and short-term deposits 11(d) 8,946 11,062 10,439 61,807 56,270 55,548 Assets held for sale - 12,807 9,598Current liabilitiesBank overdrafts 11(d) (154) (100) (101)Loan notes payable - (1,534) -Derivative financial liabilities 11(c) (4) - -Obligations under finance leases 11(c) (38) (90) (30)Trade and other payables (45,699) (43,891) (48,502)Corporation tax payable (8,409) (8,444) (7,632)Provisions (21,119) (13,857) (17,148) (75,423) (67,916) (73,413)Non-current liabilitiesBank loans and overdrafts 11(c) (61,533) (40,872) (49,070)Obligations under finance leases 11(c) (64) (210) (116)Provisions (11,391) (11,577) (12,700)Other creditors (634) (778) (429)Deferred tax liabilities (6,610) (5,951) (6,806) (80,232) (59,388) (69,121)Liabilities held for sale - (2,392) (1,688) Net assets 143,201 141,201 142,001 EquityCalled up share capital 101,876 97,052 101,775Share premium account 23,237 22,960 23,162Merger reserve 48,088 74,464 48,088Foreign exchange translation reserve (5,627) (42) (3,670)Hedging reserve 200 - -Investment in own shares (4,195) (3,133) (4,000)Retained earnings (21,751) (51,256) (24,511) Equity attributable to equity holders of the parent 141,828 140,045 140,844Minority interests 1,373 1,156 1,157 Total equity 143,201 141,201 142,001 Unaudited consolidated cash flow statement for the six months ended 30 June 2007 Six months Six months Year ended ended ended 30 June 30 June 31 December 2007 2006 2006 Notes £000 £000 £000Cash (outflow)/inflow from operating activitiesCash inflow from operations 11(a) 2,729 5,316 18,167Interest paid (2,181) (1,060) (2,437)Interest received 108 43 298Corporation tax paid (1,806) (800) (2,281) Net cash (outflow)/inflow from operating activities (1,150) 3,499 13,747Cash outflow from investing activitiesAcquisitions of subsidiaries (12,334) (3,978) (18,197)Disposal of subsidiaries 1,603 (1,084) (1,271)Acquisition of minority interest (2) (3,711) (3,711)Disposal of minority interest - 78 78Purchases of property, plant and equipment (1,005) (1,477) (2,713)Proceeds from sale of property, plant and equipment 53 155 694Proceeds from sale of associates 3 - -Loans to associates (1,683) - -Dividends received from associates 872 144 146Net cash acquired with subsidiaries 610 810 2,516Net cash disposed of with subsidiaries (558) (83) (83) Net cash outflow from investing activities (12,441) (9,146) (22,541)Cash inflow from financing activitiesProceeds from issue of ordinary shares 180 232 361Purchase of own shares (466) (2,418) (3,626)Proceeds from sale of own shares to employees 38 - 317Repayment of finance lease liabilities (44) (85) (218)Repayment of loan notes - (1,266) (2,760)Net movement in borrowings 12,463 11,591 19,774Dividends paid to minority interests - (326) (326)Dividends paid to equity holders of the parent - - (3,058) Net cash inflow from financing activities 12,171 7,728 10,464 (Decrease)/increase in cash and cash equivalents (1,420) 2,081 1,670 Movements in cash and cash equivalentsNet (decrease)/increase in cash and cash equivalents (1,420) 2,081 1,670Effects of exchange rate fluctuations on cash held (113) 170 (496)Cash and cash equivalents at 1 January 10,325 9,151 9,151 Cash and cash equivalents at end of period 11(c),(d) 8,792 11,402 10,325 Unaudited consolidated statement of changes in equity for the six months ended 30 June 2007 Called Foreign Potential up Share currency Investment acquisition share premium Merger translation Hedging in own of minority Retained Minority Total capital account reserve reserve reserve shares interest earnings Total interests equity £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 At 1 January 2006 96,070 22,921 73,729 2,710 - (691) (4,168) (54,545) 136,026 1,188 137,214Currency - - - (2,752) - - - - (2,752) - (2,752)translation Total income and - - - (2,752) - - - - (2,752) - (2,752)expenserecognised inequityProfit for the - - - - - - - 3,239 3,239 249 3,488period Total recognised - - - (2,752) - - - 3,239 487 249 736income andexpense for theperiodShares issued for 185 47 - - - - - - 232 - 232cashAcquisition of 797 - 735 - - - - - 1,532 - 1,532subsidiariesMovement in - - - - - - 4,168 (450) 3,718 45 3,763minorityinterestsPurchase of own - - - - - (2,442) - - (2,442) - (2,442)sharesShare issue costs - (8) - - - - - - (8) - (8)Credit for - - - - - - - 500 500 - 500share-basedpaymentsDividends to - - - - - - - - - (326) (326)minorityinterests Balance at 30 97,052 22,960 74,464 (42) - (3,133) - (51,256) 140,045 1,156 141,201June 2006 Currency - - - (3,628) - - - - (3,628) - (3,628)translation Total income and - - - (3,628) - - - - (3,628) - (3,628)expenserecognised inequity(Loss)/profit for - - - - - - - (445) (445) (40) (485)the period Total recognised - - - (3,628) - - - (445) (4,073) (40) (4,113)income andexpense for theperiodTransfer from - - (29,901) - - - - 29,901 - - -merger reserveShares issued for 114 15 - - - - - - 129 - 129cashAcquisition of 4,370 - 3,525 - - - - - 7,895 - 7,895subsidiariesMovement in - - - - - - - - - (1) (1)minorityinterestsPurchase of own - - - - - (1,235) - - (1,235) - (1,235)sharesDisposal of - - - - - 368 - - 368 - 368purchased ownsharesShare issue costs - (8) - - - - - - (8) - (8)Credit for - - - - - - - 777 777 42 819share-basedpaymentsScrip dividend 239 195 - - - - - - 434 - 434Equity dividends - - - - - - - (3,488) (3,488) - (3,488) Balance at 31 101,775 23,162 48,088 (3,670) - (4,000) - (24,511) 140,844 1,157 142,001December 2006 Currency - - - (1,926) - - - - (1,926) - (1,926)translationDisposal of - - - (31) - - - - (31) - (31)subsidiariesGains on cash - - - - 200 - - - 200 - 200flow hedges takento equity Total income and - - - (1,957) 200 - - - (1,757) - (1,757)expenserecognised inequityProfit for the - - - - - - - 4,437 4,437 199 4,636period Total recognised - - - (1,957) 200 - - 4,437 2,680 199 2,879income andexpense for theperiodShares issued for 101 83 - - - - - - 184 - 184cashMovement in - - - - - - - - - (2) (2)minorityinterestsPurchase of own - - - - - (466) - - (466) - (466)sharesDisposal of own - - - - - 271 - (52) 219 - 219sharesShare issue costs - (8) - - - - - - (8) - (8)Credit for - - - - - - - 1,003 1,003 19 1,022share-basedpaymentsEquity dividends - - - - - - - (2,628) (2,628) - (2,628) Balance at 30 101,876 23,237 48,088 (5,627) 200 (4,195) - (21,751) 141,828 1,373 143,201June 2007 Notes to the financial statements for the six months ended 30 June 2007 1. Basis of preparation These interim financial statements have been prepared in accordance with theGroup's IFRS accounting policies set out in the Group's 2006 Annual Report andAccounts for the year ended 31 December 2006. The Group has not adopted thereporting requirements of IAS 34 'Interim Financial Reporting'. The information relating to the six months ended 30 June 2007 and 30 June 2006is unaudited and does not constitute statutory accounts. The comparative figuresfor the year ended 31 December 2006 are not the Company's statutory accounts forthat financial year as defined in section 240 of the Companies Act 1985. Thestatutory accounts for the year ended 31 December 2006 have been reported on bythe Company's auditors and delivered to the Registrar of Companies. The reportof the auditors on those accounts in accordance with section 235 of theCompanies Act 1985 was unqualified and did not contain a statement under section237(2) or (3) of the Companies Act 1985. The interim financial statements are unaudited but have been reviewed by theauditors and their report to the Board of Huntsworth PLC is set out at the endof this document. 2. Accounting policies The interim financial statements have been prepared under the historical costconvention, except for the revaluation of financial instruments. The accounting policies adopted are consistent with those followed in thepreparation of the Group's annual financial statements for the year ended 31December 2006, and are consistent with those that the directors anticipate willbe complied with in the annual financial statements for the year ending 31December 2007. However, the interim financial statements have been preparedwith the following changes in presentation. Changes in presentation Following the acquisition of Dorland in March 2007 and Axis in July 2007, theGroup now has a more significant presence in the healthcare sector, whereintegrated communications incorporating both Public Relations and Non-PublicRelations activities (e.g. advertising and medical education) are provided toour clients. Therefore, the directors have decided to expand the Group'ssegmental disclosures from Public Relations and Non-Public Relations to PublicRelations, Huntsworth Health, and Events. The comparative figures for 30 June 2006 and 31 December 2006 have been restatedaccordingly. For the period ended 30 June 2006, revenue of £2,117,000 andoperating profit of £337,000 has been transferred from Public Relations toHuntsworth Health, and revenue of £2,840,000 and operating profit of £233,000has been transferred from Non-Public Relations to Huntsworth Health. The balanceremaining in Non-Public Relations (revenue of £3,706,000 and operating profit of£395,000) relates to Events and has been renamed accordingly. For the yearended 31 December 2006, revenue of £4,093,000 and operating profit of £452,000has been transferred from Public Relations to Huntsworth Health, and revenue of£5,609,000 and operating profit of £776,000 has been transferred from Non-PublicRelations to Huntsworth Health. The balance remaining in Non-Public Relations(revenue of £6,206,000 and operating profit of £357,000) relates to Events andhas been renamed accordingly. In line with best practice following the transition to IFRS, the directors havealso decided to allocate share-based payment charges to the new reportingsegments. Previously, these charges were reported as unallocated expenses.The comparative figures for 30 June 2006 and 31 December 2006 have been restatedaccordingly. For the period ended 30 June 2006, share-based payment charges of£345,000 and £37,000 have been transferred from unallocated expenses to PublicRelations and Huntsworth Health respectively. For the year ended 31 December2006, share-based payment charges of £1,047,000 and £217,000 have beentransferred from unallocated expenses to Public Relations and Huntsworth Healthrespectively. For the geographical segments for the period ended 30 June 2006, share-basedpayment charges of £332,000, £17,000, £31,000, and £2,000 have been transferredfrom unallocated expenses to the United Kingdom, Other European, USA, and Restof World segments respectively. For the year ended 31 December 2006,share-based payment charges of £1,128,000, £49,000, £85,000, and £2,000 havebeen transferred from unallocated expenses to the United Kingdom, OtherEuropean, USA, and Rest of World segments respectively. 3. Acquisitions and disposals The following acquisition was made during the period: (i) Dorland Global Corporation On 9 March 2007 the Group acquired the entire share capital of Dorland GlobalCorporation ("Dorland") for initial cash consideration of US$20.7 million (£10.6million). Additional deferred consideration may be payable dependent on thefuture financial performance of Dorland and will be payable in cash. Themaximum total consideration payable is US$50.0 million (£25.5 million). The following disposals were made during the period: (ii) Citigate Sard Verbinnen On 15 February 2006 the Company announced that it had reached an agreement tosell Citigate Sard Verbinnen ('CSV') by the end of 31 December 2009.Shareholders approved the sale on 6 March 2006. Under the sale agreements, 51%was acquired by certain executives of CSV on 5 January 2007 for US$2.5 million(£1.4 million) and a fixed net asset payment of US$2.7 million (£1.5 million) isto be made by 30 September 2007. The remaining 49% will be acquired no laterthan 31 December 2009 for a total cash consideration of not less than US$17.5million (£10.2 million) (such amounts to have an aggregate present value ofUS$20.0 million (£11.6 million) as at 1 January 2006). This will be reduced bythe amount of cash distributions from CSV from 1 January 2006. The assets and liabilities of Citigate Sard Verbinnen were classified as heldfor sale as at 30 June 2006 and 31 December 2006. (iii) Citigate Demuth On 16 March 2007, Citigate Demuth GmbH was sold to Media Square plc for cashconsideration of €670,000 (£456,000), of which €86,000 (£59,000) was receivedafter the half year end. 4. Segmental analysis The Group's primary reporting segment is business divisions which correspondwith the way the operating businesses are organised and managed within the Groupand its secondary segment is geographical origin. The following table analysesthe revenue and operating profit before highlighted items from continuingoperations accordingly: As restated(1) As restated(1) Six months Six months Year ended ended ended 30 June 30 June 31 December 2007 2006 2006 £000 £000 £000RevenueBusiness segmentPublic Relations 58,424 61,426 123,977Huntsworth Health 9,528 4,957 9,702Events 2,651 3,706 6,206Eliminations (9) (14) (138) Total 70,594 70,075 139,747Geographical originUnited Kingdom 35,222 33,371 66,952Other European 19,109 15,419 31,610USA 14,177 19,115 37,030Rest of World 2,095 2,184 4,293Eliminations (9) (14) (138) Total 70,594 70,075 139,747 Operating profit before highlighted itemsBusiness segmentPublic Relations 12,089 12,259 25,337Huntsworth Health 1,854 533 1,011Events 435 395 357Unallocated expenses (3,001) (3,168) (6,484) Total 11,377 10,019 20,221 Geographical originUnited Kingdom 7,499 6,799 13,115Other European 4,027 2,810 5,899USA 2,415 3,162 6,776Rest of World 437 416 915Unallocated expenses (3,001) (3,168) (6,484)Total 11,377 10,019 20,221 Unallocated expenses comprise central head office costs. (1) See note 2. 5. Highlighted items Six months Six months Year ended ended ended 30 June 30 June 31 December 2007 2006 2006 £000 £000 £000Charged to operating profitAmortisation of intangible assets 2,764 1,908 4,051Impairment of goodwill and intangible assets - 1,665 7,926Acquisition payments to employees deemed as remuneration 371 - -Merger, restructuring and other non-recurring costs - - 1,745 3,135 3,573 13,722Charged to profit before taxImpairment of investment in associates 999 - - 4,134 3,573 13,722 The impairment of investment in associates of £1.0 million for the six monthsended 30 June 2007 relates to the write down of the investment in Citigate SardVerbinnen, and this amount is equivalent to the profits from this businessrecognised in the period. 6. Finance costs and income Six months Six months Year ended ended ended 30 June 30 June 31 December 2007 2006 2006 £000 £000 £000 Bank interest payable 2,135 1,265 2,414Loan note interest - 22 1Finance lease interest 4 7 12Other interest payable 42 20 23Discounting of provisions 109 150 283Imputed interest on deferred consideration 191 95 206 Finance costs 2,481 1,559 2,939 Finance income - bank interest receivable (108) (86) (298) 2,373 1,473 2,641 7. Taxation The tax charge for the six months ended 30 June 2007 has been based on anestimated effective tax rate on profit before highlighted items for the fullyear of 24.3% (the effective tax rate of the year ended 31 December 2006 was20.2%, which included the benefit of a £1.0 million credit for non-recurringitems and prior year adjustments, without which the underlying rate would havebeen 25.8%). Six months Six months Year ended ended ended 30 June 30 June 31 December 2007 2006 2006 £000 £000 £000 Current tax 2,651 2,108 1,761Deferred tax (1,412) (572) (775) 1,239 1,536 986 The tax charge/(credit) is further analysed below:UK tax 219 628 292Overseas tax 1,020 908 694 1,239 1,536 986 Tax charge on profit before highlighted items and share of 2,435 2,246 3,571profits from associatesTax credit on highlighted items (1,196) (710) (2,585) 1,239 1,536 986 8. Dividends Six months Six months Year ended ended ended 30 June 30 June 31 December 2007 2006 2006 £000 £000 £000Equity dividends on ordinary shares:Final dividend for year ended 2005 - 1.2p - - 2,328Interim dividend for year ended 2006 - 0.6p - - 1,160Final dividend for year ended 2006 - 1.3p 2,628 - - 2,628 - 3,488 The final dividend for the year ended 31 December 2006 was approved byshareholders at the Annual General Meeting on 12 June 2007 and was paid in July2007. The dividend is included in accruals as at 30 June 2007. The proposed 2007 interim dividend of 0.65 pence per share was approved by theBoard on 19 September 2007 and in accordance with IFRS has not been included asa deduction from equity at 30 June 2007. The dividend will be paid on 9 November2007 to those shareholders on the register at 5 October 2007. 9. Earnings per share The data used in the calculations of the earnings per share numbers issummarised in the table below: Six months ended Six months ended Year ended 30 June 2007 30 June 2006 31 December 2006 Weighted Weighted Weighted average average average number number number Earnings of shares Earnings of shares Earnings of shares £000 000's £000 000's £000 000's Basic 4,437 199,411 3,239 190,156 2,794 191,458Diluted 4,437 207,499 3,239 197,531 2,794 195,413Adjusted basic 7,375 199,411 6,102 190,156 13,931 191,458Adjusted diluted 7,375 207,499 6,102 197,531 13,931 195,413 The basic earnings per share calculation is based on the profit for the periodattributable to parent company shareholders divided by the weighted averagenumber of ordinary shares outstanding during the period. Diluted earnings per share is calculated based on the profit for the periodattributable to parent company shareholders divided by the weighted averagenumber of ordinary shares outstanding during the period adjusted for thepotentially dilutive impact of employee share option schemes and shares to beissued as part of deferred consideration on acquisitions of subsidiaries. Adjusted earnings per share is calculated in order to provide information toshareholders about continuing trading performance and is based on the profitattributable to parent company shareholders excluding discontinued operationsand highlighted items together with related tax effects as set out below: Six months Six months Year ended ended ended 30 June 30 June 31 December 2007 2006 2006 £000 £000 £000Earnings:Profit for the period attributable to parent 4,437 3,239 2,794company's shareholdersHighlighted items 4,134 3,573 13,722Tax on highlighted items (1,196) (710) (2,585) Adjusted earnings from continuing operations 7,375 6,102 13,931 10. Intangible fixed assets Customer Brands relationships Goodwill Total £000 £000 £000 £000CostAt 1 January 2007 18,333 12,963 208,780 240,076Arising on acquisitions in the period 1,420 2,565 10,006 13,991Adjustments to prior year acquisitions - - 609 609Arising on disposal of subsidiaries in the - - (3,659) (3,659)periodExchange differences (214) (166) (1,361) (1,741) At 30 June 2007 19,539 15,362 214,375 249,276 AmortisationAt 1 January 2007 4,423 5,754 17,103 27,280Charge for the period 439 2,325 - 2,764Arising on disposal of subsidiaries in the - - (3,659) (3,659)periodExchange differences (92) (94) (125) (311)At 30 June 2007 4,770 7,985 13,319 26,074 Net book value at 30 June 2007 14,769 7,377 201,056 223,202 Net book value at 31 December 2006 13,910 7,209 191,677 212,796 Brands and customer relationships are being amortised over their useful economiclives of between 3 and 20 years. The amounts recognised above for intangibleassets arising on acquisitions in the period are provisional awaiting finaldetermination in accordance with the time limit allowed in IFRS 3. Details ofacquisitions made during the period are set out in note 3. Adjustments to prior year acquisitions comprise changes to estimated contingentdeferred consideration and costs of acquisition. 11. Cash flow analysis (a) Reconciliation of operating profit to net cash inflow from operations Six months to Six months to Year ended 30 June 30 June 31 December 2007 2006 2006 £000 £000 £000 Operating profit 8,242 6,446 6,499Depreciation 1,102 1,134 2,381Share-based payment charge 1,376 602 1,839Loss/(profit) on disposal of property, plant and 38 3 (25)equipmentAmortisation of intangible assets 2,764 1,908 4,051Impairment of goodwill and intangibles - 1,665 7,926Other non-cash highlighted items 371 - -Increase in work in progress (242) (646) (186)(Increase)/decrease in debtors (4,176) (1,574) 1,722Decrease in creditors (5,207) (1,512) (1,300)Decrease in provisions (1,539) (2,710) (4,740) Net cash inflow from operations 2,729 5,316 18,167 Net cash inflow from operations is analysed as follows: Six months to Six months to Year ended 30 June 30 June 31 December 2007 2006 2006 £000 £000 £000 Before highlighted items and discontinued operations 5,421 10,849 26,371Highlighted items (2,692) (5,533) (8,204) 2,729 5,316 18,167 (b) Reconciliation of net cash flow to movement in net debt Six months to Six months to Year ended 30 June 30 June 31 December 2007 2006 2006 £000 £000 £000 (Decrease)/increase in cash and cash equivalents in (1,420) 2,081 1,670the periodCash inflow from increase in debt (12,463) (11,591) (19,774)Loan notes repaid - 1,266 2,760Repayment of capital element of finance leases 44 85 218 Change in net debt resulting from cash flows (13,839) (8,159) (15,126)Finance leases acquired with subsidiaries - (29) -New finance leases - (1) -Disposal/cancellation of finance leases - 8 -Non-cash movements 180 - -Translation differences (113) 255 (387) Increase in net debt (13,772) (7,926) (15,513)Net debt at beginning of period (38,891) (23,378) (23,378) Net debt at end of period (52,663) (31,304) (38,891) (c) Analysis of net debt 1 January Cash 30 June 2007 flow Other 2007 £000 £000 £000 £000 Cash and short-term deposits 10,426 (1,366) (114) 8,946Bank loans and overdraft (current) (101) (54) 1 (154) Net cash and cash equivalents 10,325 (1,420) (113) 8,792Derivative financial assets (non current) - - 180 180Derivative financial assets (current) - - 4 4Derivative financial liabilities - - (4) (4)Bank loans and overdrafts (non-current) (49,070) (12,463) - (61,533)Obligations under finance leases (146) 44 - (102) Net debt (38,891) (13,839) 67 (52,663) (d) Cash and cash equivalents Six months to Six months to Year ended 30 June 30 June 31 December 2007 2006 2006 £000 £000 £000 Cash and short-term deposits 8,946 11,062 10,439Bank loans and overdrafts (current) (154) (100) (101)Cash and short-term deposits included in assets held - 440 -for saleBank overdraft included in liabilities held for sale - - (13) Cash and cash equivalents 8,792 11,402 10,325 12. Post balance sheet events On 13 July 2007 the Group acquired the entire share capital of Axis HealthcareCommunications LLC, a company incorporated in the USA, and its subsidiaries(together "AXIS") for initial cash consideration of US$18.4 million (£9.1million). Additional consideration is payable dependent on the futureperformance of AXIS for the four years to 31 December 2010 and will be paid incash. The maximum total consideration payable is US$55.0 million (£27.1million). On 27 July 2007, the Group completed the refinancing of its bank facilities.The new facilities comprise an £85.0 million revolving multi-currency facilitywith Lloyds TSB Bank plc and The Royal Bank of Scotland plc, and a £5.0 millioncommitted overdraft facility with Lloyds TSB Bank plc. Both facilities are dueto expire in July 2012. Independent review report to Huntsworth PLC for the six months ended 30 June 2007 Introduction We have been instructed by the company to review the financial information forthe six months ended 30 June 2007 which comprises the Consolidated IncomeStatement, Consolidated Balance Sheet, Consolidated Cash Flow Statement,Consolidated Statement of Changes in Equity, and the related notes 1 to 12. Wehave read the other information contained in the interim report and consideredwhether it contains any apparent misstatements or material inconsistencies withthe financial information. This report is made solely to the company in accordance with guidance containedin Bulletin 1999/4 'Review of interim financial information' issued by theAuditing Practices Board. To the fullest extent permitted by law, we do notaccept or assume responsibility to anyone other than the company, for our work,for this report, or for the conclusions we have formed. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority which require that the accountingpolicies and presentation applied to the interim figures should be consistentwith those applied in preparing the preceding annual accounts except where anychanges, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4'Review of interim financial information' issued by the Auditing Practices Boardfor use in the United Kingdom. A review consists principally of makingenquiries of group management and applying analytical procedures to thefinancial information and underlying financial data, and based thereon,assessing whether the accounting policies and presentation have beenconsistently applied, unless otherwise disclosed. A review excludes auditprocedures such as tests of controls and verification of assets, liabilities andtransactions. It is substantially less in scope than an audit performed inaccordance with International Standards on Auditing (UK and Ireland) andtherefore provides a lower level of assurance than an audit. Accordingly we donot express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2007. Ernst & Young LLP London 19 September 2007 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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