18th Oct 2005 07:01
Thomson Intermedia PLC18 October 2005 Thomson Intermedia plc Thomson Intermedia, a leading provider of media intelligence, today announcesits interim results for the six months ended 31 July 2005 • Turnover increased by 26% to £3.46m (2004: £2.74m) • Total sales contracts increased by 26% to £3.91m (2004: £3.11m) • Deferred income up 33% to £3.6m (2004:£2.7m) • Renewal rate improved to 88% (2004: 83%) • Gross margin continues to rise 72% (2004: 68%) • Underlying profit* before tax increased to £638,000 (2004: £248,000) • Underlying eps** increased to 2.22p (2004: 0.86p) • Exclusive long-term deals signed with three out of four regional media: Northcliffe, Johnston Press and Newsquest • Germany: 23 subscription clients secured as well as adhoc analysis for 64 advertisers • Acquisition of Billetts, the UK market leader in media and marketing performance consultancy, in August 2005 - integration progressing well *pre-amortisation and share incentives** pre amortisation, share incentives and deferred tax Sarah Jane Thomson, Joint Chief Executive Officer of Thomson Intermedia, said: "During the first half we have continued to see strong organic growth of ourcore products and client base, which has resulted in a 26% increase in totalsales contracts - our key measure. With our high operational gearing, this hasresulted in more than doubling our profits. "The acquisition of Billetts, coupled with the marketing industry's drivetowards increased accountability, is providing the catalyst for our increasedpenetration into the UK market as well as the international markets. "The introduction of Billetts media expertise to our technology significantlyenhances Thomson Intermedia's offering. As our unique combination of data andtechnology rapidly becomes the industry standard, we look forward to theexciting additional opportunities that this presents to us." 18 October 2005 Enquiries: Thomson Intermedia Sarah Jane Thomson, Joint Chief Executive Today 020 7457 2020 David Trendle, Finance Director Thereafter 020 8466 2906 College Hill Adrian Duffield/Clare Warren 020 7457 2815/2055 Strategic overview Thomson Intermedia's aim is to become the leading UK provider of advertising andmedia transparency and intelligence. The earnings enhancing acquisition ofBilletts in August was an important step and considerably accelerated theGroup's development. The addition of Billetts to Thomson Intermedia enables the Group to marry itsdata and technology with Billetts' media consulting skills and to move theenlarged Company into a unique and powerful position in both the UK and theglobal market place. The Board anticipates as the integration process progressesfurther, synergies across the companies will be achieved.The enlarged Group is now providing a complete, one-stop suite of advertising,media and marketing accountability products (vouching, competitive monitoring,media performance management and ROI analysis) delivered directly to the desktopand in person by media experts. The strategy going forward is to combine areas of performance management to theexisting Thomson Intermedia interfaces to provide an end to end picture of theimpact and performance of advertisers' entire marketing spend. This combinedsuite of fundamental tools will then be targeted to the top 5,000 UKadvertisers. Financial Results Turnover increased by 26% to £3.46m (2004: £2.74m) with total sales increasing26% to £3.91m (2004: £3.11m) and including fees of £200,000 (2004: £200,000)from the Group's German investment. New business growth continued at a strongpace, up 31%, with £1.66m (2004: £1.27m) new contracts secured. Gross margins continue to improve, up from 68% to 72%, with direct costsincreasing by 4.4% compared to the average half yearly cost in 2004/05. Operating margins, before long term incentives, increased sharply to 17.6%(2004: 8.3%) as a consequence of the Group's high operational gearing. Thisimprovement was achieved despite a 13.7% increase in overheads, as the Groupinvested in technology and increased its client facing staff numbers. Underlying pretax profit increased to £638,000 (2004: £248,000) and pretaxprofit was £517,000 (2004: £189,000). Underlying EPS increased to 2.22p from0.86p. Adjusted fully diluted earnings per share improved to 2.11p from 0.84p. The Group has a tax credit of £248,000 due to the recognition of an increase inthe deferred tax asset, which has been provided to the extent that trade losseswill be recoverable against future profits in the foreseeable future. The Board is not paying an interim dividend. The Group's cash flow is marginally seasonal with higher net inflows weighted tothe second half of the financial year. The Group's net cash position at 31 July2005 was £1.46m compared to £1.60m at the financial year ended 31 January 2005. On 23 August 2005 the Group completed its acquisition of Billetts, with aninitial purchase price of £7.5m and maximum potential deferred consideration of£5.6m, payable in loan notes dependent on performance between 1 May 2005 and 30April 2007. This was funded through consideration shares, a vendor placing,existing cash and new banking facilities. Operational Review Thomson Intermedia delivers complete advertising data across Press, TV, Radio,Direct Mail, Door Drops, Internet, Outdoor and Cinema markets, making it themost comprehensive and timely information available to advertisers in the UKmarketplace. The Group's systems capture data on the entire UK advertisingmarket incorporating over 20,000 advertisers and capturing more than 20,000advertisements per day. Thomson Intermedia introduced new branding as well as a whole host of front-endimprovements to meet clients developing needs. The Group has developed furtherautoreporting to extract and analyse data in a powerful and user friendlyformat. Thomson Intermedia also continued to strengthen its breadth of data byadding Directory information, Agency attribution and ambient media to continueto provide the most accurate and powerful database of Advertising. A total of 60 contracts were secured in the first half, 36 from new clients and24 existing clients buying additional products. The Group continues to focus onorganic growth and penetration of the UK market in terms of gaining new clientsand increasing average revenue per client. The average value of subscriptioncontracts secured with new clients increased to £28,000 (2004: £22,000). Over 28% of the Group's total new sales were secured, through retrospectivevouching, with fees based on a percentage of error value identified. The Groupcontinues to focus on delivering the essential tools to meet the needs of itsclients, the success of this strategy is evident from a renewal rate of 88%across all clients. Excluding agency clients from this list increases thecorporate renewal rate above 90%. Client VouchingDuring the first half Thomson Intermedia has continued to develop a clientfacing audit system proving correct placement of press advertising. The Groupprovides both a retrospective analysis of clients press advertising as well as asystem which provides ongoing verification. The retrospective system is proving successful for clients in recovering valuefor lost advertising. The process involves a number of parties and a significantamount of reconciliation once the automatic report is generated. ThomsonIntermedia takes a percentage of the findings and has made good initial progressin this area with a growing number of the UK's largest advertisers now in theprocess. Industry Vouching - Thomson Intermedia e-vouchThomson Intermedia secured exclusive long term contracts with three of the fourlargest regional press owners to develop bespoke technology for an e-vouchsolution. The initiative led by the Newspaper Society will use the Group'stechnology to integrate hundreds of live newspapers and advertising placementdata in an online system, which will be provided to every media agency in theUK. The Group has exclusive rights to the use of the 'PDFs' within its products andservices which provides them with the most comprehensive press advertisingdatabase in the UK and will reduce costs of capture and delivery of this data. ROI ToolsROI tools are an essential part of the Group's strategy. The expertise andability in this area has been significantly enhanced by the addition of theBilletts Marketing Services, see below, which comprises 14 experienced mediaconsultants and proven IP in modelling and econometrics. The integrated Groupstrategy will combine Thomson Intermedia's technology with Billetts' modellingskills and experience, in order to identify the opportunities and datasetsrequired to develop new products. GermanyThe joint venture in Germany has secured 23 ongoing clients in the first eightmonths this year, with further revenue from ad hoc work with 64 advertisers. TheGerman database incorporates nearly a year's data, which combined withincreasing sales resources is driving strong and increasing penetration into theGerman market. Billetts The acquisition of Billetts was completed on 23 August 2005. This is the Group'sfirst major acquisition and presents exciting opportunities for the enlargedbusiness. Billetts is the UK's leading media and marketing performanceconsultancy with revenues for the year ended 30 April 2005 of £7.6m and anunderlying EBITDA of £1m. Billetts consists of two core divisions; Billetts Media Consulting and BillettsMarketing Sciences. Billets Media Consulting provides benchmarking services tomajor advertisers assessing price and quality metrics against a pool ofcomparable companies. These metrics feed into 'The Rack' which has become theindustry standard value for money benchmarking tool. This division accounts for80% of total revenue and has a market leading position in the UK with a 40%share of the top 100 advertisers. Billetts Marketing Sciences provides a consultancy service to measure andimprove clients' ROI from their advertising. This division accounts for 16% oftotal revenue and has delivered considerable savings through optimisation ofmarketing strategy for both above and below the line activity. The Group can develop this area with the introduction of technology to provide ascalable and portable solution which will be economical to a wider client base.The combination of technology and media consultancy expertise will provide anunparalleled independent service to Advertisers enabling them access to realtime, impartial and transparent media intelligence. This places the Group in aunique and powerful position in both the UK and the global market place. Much of the recent growth in Billetts business is due to the globalisation ofits products and services. International business represents 20% of the revenuesof Billetts Media Consultancy in addition to the 4% provided by its subsidiaryin the United States (Media Performance Management America ('MPMA'), which wasset up in September 2003. The enlarged Group will develop the network of international partners tostrengthen its global position and expand the reach of Thomson Intermedia'stechnology. MPMA has gained traction in the developing US marketplace securingcontracts with three of the top 10 advertisers which are now in their secondyear. MPMA continues to win new business in the US as well as forming part ofinternational contract wins. The enlarged Group has the platform to provide the essential work flow toolswhich meet the fundamental need of advertisers throughout the marketing cycle.Through a powerful combination of technology and consultancy the Group will beable to extend these services to not only the elite advertisers but to a widerbase of the top 5,000 advertisers. The barriers to entry are significant with atleast five years trend data across all media, an unparalleled benchmarkingdatabase, an independent and impartial position and significant proprietaryIntellectual Property. Current trading and outlook Thomson Intermedia now has relationships with more than 70 of the top 100advertisers in the UK providing a platform for growth as well as significantcross selling opportunities. Both Thomson Intermedia's original products andservices and Billetts' have strong new business pipelines including a growingnumber of joint opportunities. Thomson Intermedia has significantly strengthened its strategic position throughthe acquisition of Billetts and the Board remains confident that the enlargedGroup will continue to grow. Profit and Loss Account Unaudited Unaudited Audited Six months Six months ended Year ended ended 31 July 2004 31 January 2005 31 July 2005 Notes £'000 £'000 £'000 £'000 Turnover 3,457 2,741 5,924 Cost of sales (976) (868) (1,870) Gross Profit 2,481 1,873 4,054 Overheads (1,871) (1,646) (3,475) Long Term Incentives (115) (53) (258) Administrative Expense (1,986) (1,699) (3,733) Operating Profit 495 174 321 Interest receivable 22 15 39 Profit on ordinary 517 189 360activities beforetaxation Taxation 2 248 - 588 Profit on ordinary 765 189 948activities aftertaxation Dividends 3 - - - Retained Profit 765 189 948transferred toreserves Earnings per share, 4pence - basic 2.66 0.66 3.29- adjusted basic 2.22 0.86 2.56- adjusted diluted 2.11 0.84 2.45 All amounts relate to continuing activities. No separate statement of Total recognised Gains & Losses has been presented asall such gains and losses have been dealt with in the profit and loss account. Balance Sheet Unaudited Unaudited Audited As at As at As at 31 July 2005 31 July 2004 31 January 2005 £'000 £'000 £'000 Fixed assetsIntangible fixed assets 25 37 31Investment in Associate 36 - -UndertakingTangible fixed assets 616 560 518 Total Fixed Assets 677 597 549 Current assetsDebtors (note 5) 3,477 1,735 2,292Deferred tax (note 2) 728 - 480Cash at bank and in hand 1,455 1,030 1,598 5,660 2,765 4,370 Creditors: Amounts falling (657) (603) (848)due within one year Net Current Assets 5,003 2,162 3,522 Total assets less current 5,680 2,759 4,071liabilities Accruals & deferred Income (4,379) (3,240) (3,535)(note 6) Net Assets/Liabilities 1,301 (481) 536 Capital and ReservesShare capital 7,186 7,186 7,186Share premium 5,064 5,064 5,064Merger reserve (5,250) (5,250) (5,250)Profit and loss (5,699) (7,481) (6,464) Equity shareholders' funds 1,301 (481) 536 Cash Flow Statement Unaudited Unaudited Audited Six months Six months Year ended ended ended 31 January 31 July 2005 31 July 2004 2005 £'000 £'000 £'000 Cash inflow / (outflow) from 52 (129) 381operating activities Returns on investments andservicing of financeInterest received 22 15 32 TaxationResearch & development tax - 136 251credit received Capital expenditurePurchase of tangible fixed (217) (221) (295)assets Net cash inflow / (outflow)before management of liquid (143) (199) 369resources and financing Management of liquidresourcesIncrease in short term (317) (173) (91)deposits (Decrease) / increase in cash (460) (372) 278 Notes to the Cash Flow Statement (a) Reconciliation of Unaudited Unaudited Auditedoperating profit to operating Six months Six months Year endedcash flow: ended ended 31 January 31 July 2005 31 July 2004 2005 £'000 £'000 £'000 Operating Profit 495 174 321Depreciation & Amortisation 125 119 240Investment (36) -- -Phantom share non-cash - - 230movementIssue of share options under 115 - 28UITF17(Increase) in debtors (1,185) (434) (853)Increase / (decrease) in (191) (34) 211creditorsIncrease in accruals and 729 46 204deferred incomeNet cash flow from operating 52 (129) 381activities (b) Analysis of net funds Opening balance Cash flow Closing 1 February 2005 balance 31 July 2005 £'000 £'000 £'000 Cash 748 (460) 288Liquid resources 850 317 1,167Cash at bank and in hand 1,598 (143) 1,455 Net Cash 1,598 (143) 1,455 Notes to the Accounts 1. Basis of preparation The financial information set out above is extracted from the consolidatedfinancial statements of Thomson Intermedia plc and its subsidiary ThomsonIntermedia Associates Limited (together referred to as the "Group"). Theaccounts of the Group for the six months ended 31st July 2005, which areunaudited, were approved by the Board on 17 October 2005. These accounts havebeen prepared in accordance with the accounting policies set out in the Reportand Accounts of Thomson Intermedia plc for the year ended 31st January 2005. This interim statement does not constitute the company's statutory accounts. Thefinancial information presented for the 6 months ended 31 July 2004 and 2005 hasnot been audited. Statutory accounts for the year ended 31 January 2005 havebeen delivered to the Registrar of Companies. The auditors report on thosestatutory accounts was unqualified and did not contain a statement under section237(2) or (3) of the Companies Act 1985. The consolidated financial statements incorporate the results of ThomsonIntermedia plc and its subsidiary undertaking as at 31st July 2005 using themerger method of accounting. Goodwill is the difference between the cost of an acquired entity and theaggregate of the fair value of that entity's identifiable assets andliabilities.Positive goodwill is capitalised, classified as an asset on the balance sheetand amortised on a straight line basis over its useful economic life. It isreviewed for impairment at the end of the first full financial year followingthe acquisition and in other periods if events or changes in circumstancesindicate that the carrying value may not be recoverable. Acquisitions that entail significant market positions and which are of long-termstrategic significance to the Group's operations are classified as strategicacquisitions, with goodwill amortised over 20 years. For acquisitions ofcomplementary operations in markets where the Group is already established, theamortisation period for goodwill is between 5 and 10 years. 2. Taxation on profit on ordinary activities During the period the deferred tax asset has been increased by £248,000 toprovide for the extent that trade losses will be recoverable against futureprofits in the foreseeable future. 3. Dividends No interim dividend is being proposed. 4. Earnings per share Unaudited Unaudited Six months ended Six months ended 31 July 2005 31 July 2004 £'000 Weighted Earnings £'000 Weighted Earnings / average / (Loss) average (Loss) per number of per share number of share shares pence shares penceBasic Earnings per 765 28,744,247 2.66 189 28,744,247 0.66shareAdjustment for (248) - - - - -deferred taxAdjustment for 6 - - 6 - -amortisationAdjustment for share 115 - - 53 - -incentivesAdjusted Basic Earning 638 28,744,247 2.22 248 28,744,247 0.86per shareEffect of options - 1,437,212 - - 934,966 -Diluted Adjusted Basic 638 30,181,459 2.11 248 29,679,213 0.84Earnings per share 5. Debtors Debtors include £447,000 falling due after more than one year (2004: £9,000) 6. Accruals & Deferred Income Accruals & deferred income includes £507,000 falling due after more than oneyear (2004: £44,000) 7. Post balance sheet events On 23rd August 2005 the company purchased the entire issued share capital of'Billetts' (BCMG Ltd). Initial consideration is £7.5 million. Maximum potentialdeferred consideration of £3.85 million is dependent upon performance up to 30thApril 2006 and a further £1.75m on performance up to 30th April 2007. Initialconsideration was financed by £6.65m in cash and £0.85m equity. Deferredconsideration will be financed through loan notes. Billetts is the UK market leader in media and marketing performance consultingwith turnover of over £7 million and 80 staff operating from offices in London,Birmingham, Dublin and New York, as well as partners in most of Europe. Billettsservices are complimentary to Thomson Intermedia's and bring us nearer to thevision of creating a suite of essential tools and services for the advertiser tomaximise their return on investment for their marketing spend. 8. Interim report Copies of this interim report for the six months ended 31st July 2005 will besent to shareholders. Further copies will be available from the CompanySecretary at the registered office. 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