20th Sep 2006 07:03
Huntsworth PLC20 September 2006 Interim results for the six months to 30 June 2006 Focused strategy delivering strong results Huntsworth PLC, the international public relations group, today announces itsinterim results for the six months to 30 June 2006. Highlights (1) (2) (3) • Continuing revenue £70.1m (2005: £40.7m). • Underlying operating profit before highlighted items of £10.0m (2005: £4.6m). • Reported operating profit £6.4m (2005: £2.3m). • Profit before tax and highlighted items £8.6m (2005: £3.6m). • Underlying basic earnings per share up 60% to 3.2p (2005: 2.0p). • 20% rise in interim dividend to 0.6p per share. • £30m of net new business, 60% from existing clients. • Underlying operating margin before central costs and highlighted items for Public Relations businesses of 20.4%, Non Public Relations activities 9.6%. Overall Group operating margin before central costs of 19.4%. • Like-for-like revenue growth from Public Relations businesses up 6.0%, Non Public Relations activities down 18%. Overall like-for-like growth of 3.4%. • Cash flow from underlying operating activities of £10.8m, representing a cash conversion of 108%. • Net debt increased in the first half in line with expectations to £31.3m. • Launch of Huntsworth Health to unify the branding of the Group's healthcare communications businesses. (1) 2005 comparatives have been restated for discontinued operations as well asthe reclassification of share incentives and IFRS charges for holiday pay andimputed interest on deferred consideration which were previously treated ashighlighted items but have now been absorbed into profit before highlighteditems. (2) Highlighted items of £3.6m (2005: £2.3m) comprise amortisation andimpairment of goodwill and intangibles, and in 2005, merger, restructuring andother non-recurring costs. (3) Like-for like revenues include pre-acquisition revenues for all currentbusinesses. Peter Chadlington, Chief Executive of Huntsworth, said: "The first half has given us a strong start and a firm foundation for the fullyear. We have been encouraged after the summer months by the marked pick up innew business activity which gives us confidence for the full year". 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 at theoffices of Citigate Dewe Rogerson, 3 London Wall Buildings, London Wall, EC2M5SY. Notes to Editors: 1. Huntsworth PLC is an international Public Relations group which isrooted in local excellence. The Group has 45 principal offices in 20 countries,over 2,500 clients and provides services to 36 companies in the FTSE 100, 85 inthe Fortune 500, and 121 in the Eurotop 300. 2. The Group comprises some of the world's leading Public Relationsagencies including Citigate Dewe Rogerson, Grayling, Hudson Sandler, Red andTrimedia in three core sectors: Full Service Public Relations; Financial andCorporate Communications and Public Affairs; and Healthcare Communications. TheGroup employs over 1,500 staff with an average fee income per head of £93,000. 3. Group revenue comprises the following key areas of activity: FullService Public Relations work accounts for 31% of Group revenue; CorporateCommunications and Public Affairs accounts for 24%; Financial Public Relationsnon deal-led work is 21%; 11% is in Healthcare; 9% is Financial deal-led PublicRelations and the balance is in Non Public Relations activities. 4. The major industry sectors served by Huntsworth include Technology,representing 15% of revenues; Financial Services 14%; Pharmaceutical and Health12%; Retail and Leisure 12%; and Public Sector 7%. 5. Geographically, 48% of Group revenue is from the UK, 27% from the USA,22% from other European countries and 3% from the Rest of the World. Operatingmargins for the six months to 30 June 2006 were 21.4% in the UK, 16.7% in theUSA, 18.3% in Europe and 19.1% in the Rest of the World. 6. The Group now represents 179 clients in more than one country (2005:188) and 212 clients are serviced by more than one of our brands (2005: 118).The largest client represents 1.4% of continuing revenue with the top 10 clientsaccounting for 8.3% and the top 25 clients 24.3%. Average fee income per clientis £56,000. 7. Shareholdings of Directors, employees and employee trusts representapproximately 12% of the Group's issued share capital while institutionalshareholdings comprise 72%. In August 2006, the top 10 institutionalshareholders of Huntsworth held in aggregate approximately 50% of Huntsworth'sissued share capital. CHIEF EXECUTIVE'S STATEMENT Huntsworth is an international public relations consultancy operating in threemain practice areas - full service public relations; financial and corporatecommunications and public affairs; and healthcare communications. Some 90% of our annual revenues derive from public relations. The balance isfrom healthcare advertising and other specialist communications activities. Inthe first half, 70% of our Public Relations business and 40% of our Non PublicRelations business is from annual retainer or repeat business. The results for the last six months reflect solid like-for-like growth, strongmargins and excellent underlying momentum from new business wins. In the firsthalf, we won £30m of net new fees to be recognised in 2006, of which £18m (60%)came from existing clients. Our Public Relations revenues grew on a like-for-like basis by 6% in the firsthalf and Non Public Relations activities (primarily event management) declinedby 18% giving an overall like-for-like growth of 3.4%. Underlying operating margins before central costs for Public Relationsbusinesses were 20.4% with Non Public Relations activities delivering 9.6%,giving an overall margin of 19.4%. The Group has moved its event managementbusinesses (Non Public Relations) both in the UK and in the USA into ourrecovery programme and the Board expects them to make an increased contributionin 2007. Our people are key to delivering these results. The Group has a range ofincentive schemes including those which shareholders approved at the 2006 AGM.These schemes have been introduced in order to attract and retain the mosttalented individuals. In 2006 the Group is absorbing these costs in the centre.In 2007, non-cash charges associated with these schemes of up to £2.5m will beembedded into the operating company results and only that element which appliesto head office personnel will be included in central costs. Our target for public relations operating margins is 20%, and 15% or more afterthe deduction of central costs. In the six months to 2006, our operating marginafter the deduction of central costs was 14.3%. We aim to convert a minimum of100% of this into cash and in the period we achieved a cash conversion of 108%. Huntsworth is demonstrating that it can acquire public relations businesses,build them and improve their margins and performance. The Board mustdemonstrate the progress in managing the integration of each major acquisition.In the Group's 2006 full year results, the Board will therefore report on theperformance of the major acquisitions we have made. New Media has been a major driver of our growth across all businesses in theHealthcare, Financial, Consumer and Corporate sectors. The power of "user-generated content" is recognised and harnessed by all our operations. Wehave developed innovative new media techniques to respond to the challenge ofreaching targeted stakeholder groups. We also provide comprehensive monitoringand early warning processes for organisations within their reputation managementprogrammes. In the first six months to 30 June 2006 Huntsworth served 179 clients in morethan one country (2005: 188) and nearly 10% of all Group clients are now servedby more than one brand (2005: 5%). Building on this success we now need tocomplete the network while maintaining our margin target of 20%. A global network is the key platform for servicing the Group's existing 2,500clients and winning a greater share of international and regional business.Today through associates, affiliates and with the advance of technology, we candeliver for clients by working from key strategic hubs particularly in theUnited States, Asia Pacific and Eastern Europe. Future development of thatnetwork will be done with great care and only after a full understanding of theculture and the qualities of the businesses which we acquire. The Board has recently appointed a new Finance Director and expects to announcea new Non-Executive Chairman by the time of the Annual General Meeting of 2007. The first half has given us a strong start and a firm foundation for the fullyear. We have been encouraged after the summer months by the marked pick up innew business activity which gives us confidence for the full year. SUMMARY OF RESULTS Six months to 30 June 2006 Six months to 30 June 2005£'m Underlying Highlighted Statutory Underlying Highlighted Statutory Results Items Results Results Items Results Revenue 70.1 70.1 40.7 40.7Operating profit 10.0 (3.6) 6.4 4.6 (2.3) 2.3 Segmental analysis £'m Six months to 30 June 2006 Six months to 30 June 2005RevenuePublic Relations 63.5 34.9Non Public Relations 6.6 5.8Total Operations 70.1 40.7 Operating Profit and Margins (before central costs)Public Relations 13.0 20.4% 6.0 17.2%Non Public Relations 0.6 9.6% 1.5 25.0%Total Operations 13.6 19.4% 7.5 18.3% Notes : 2005 half year comparatives have been restated for discontinued operations aswell as the reclassification of non -cash share incentives and IFRS holiday paycharges which were previously treated as highlighted items but have now beenabsorbed into profit before highlighted items. Continuing revenue of £70.1m includes a full six months of contribution from thecontinuing operations acquired through the merger of Huntsworth and Incepta(2005 comparatives include two months of contribution from continuing Inceptabusinesses). Like-for-like revenue growth from Public Relations businesses was up 6.0% andNon Public Relations activities down 18% giving an overall like-for-like growthof 3.4%. Underlying operating profit of £10.0m (2005: £4.6m) is stated before highlighteditems of £3.6m (2005: £2.3m) comprising amortisation and impairment of goodwilland intangibles to give statutory operating profit of £6.4m (2005: £2.3m). Profit before tax and highlighted items was £8.6m (2005: £3.6m). Underlying operating margins before central costs and highlighted items forPublic Relations businesses were 20.4%, Non Public Relations activities of 9.6%and overall of 19.4%. Underlying operating margins after central costs were 14.3%. (2005:11.2%).Before share incentive charges which were absorbed at the centre in 2006, theywere 15.2% (2005: 11.8%). Highlighted items Highlighted items of £3.6m comprise £1.9m for the amortisation of intangiblesand £1.7m for the impairment of goodwill in respect of Citigate Sard Verbinnen(CSV). In February 2006, we reached an agreement to sell 51% of CSV to certainexecutives of the company on 1 January 2007 for $2.5m (£1.4m) and a net assetpayment of $2.7m (£1.5m) by 30 June 2007. The remaining 49% will be acquired nolater than 31 December 2009 for a total cash consideration of a further $17.5m(a total of $20m in present value terms as at 1 January 2006). In 2006, the Group income statement includes the trading results of CSV togetherwith an equal and opposite charge for the impairment of goodwill. The assets andliabilities of CSV, together with related goodwill, are shown in the Groupbalance sheet as assets and liabilities held for sale respectively and arevalued at the net recoverable amount expected from the disposal transaction. There were no net restructuring costs for the Group in the first six months of2006. Earnings Profits attributable to ordinary shareholders amounted to £3.2m (2005: £1.0m). Underlying basic earnings per share from continuing operations were up 60% to3.2p (2005: 2.0p). Unadjusted basic earnings per share were 1.7p (2005: 0.3p)and diluted earnings per share were 1.6p (2005:0.3p). Head office It is expected that core central costs will be less than £6m in 2006. Balance Sheet and Cash Flow The cash flow from underlying operating activities of £10.8m represents a cashconversion of 108%. This is before a £5.5m cash impact relating to highlighteditems provided for in prior years. These primarily relate to the Incepta mergerand are expected to reduce significantly in 2007. Other principal movements in net debt during the first six months were paymentsfor net interest, tax and tangible fixed assets of £3.1m, acquisitions and earnout payments of £8.0m, and purchase of shares for share incentive schemes of£2.4m, resulting in an overall increase in net debt of £7.9m, from £23.4m to£31.3m. Huntsworth has committed unsecured term, overdraft and guarantee facilitiestotalling £60m in place until April 2008. EBIT interest cover (excludinghighlighted items) was 6.8 times in the first half. Tax The tax charge of £1.5m comprises an underlying charge of £2.2m based on theexpected full year rate of 26%, less £0.7m for tax credits on highlighted items. Earn-out payments Future earn-out payments are estimated at £11.2m, comprising £6.5m payable incash or in shares at Huntsworth's option, £2.0m in shares and £2.7m in cash.The timing of the aggregate of these payments is £5.0m in 2006, £3.1m in 2007and £3.1m in 2008. REVIEW OF OPERATIONS Full Service Public Relations Our Full Service Public Relations agencies are EHPR, Grayling, Harrison Cowley,Haslimann Taylor, SCPR, The Red Consultancy and Trimedia. They all have strongreputations in their respective fields and have been very successful during thefirst six months of 2006 in winning new business in specialist practice areas. The Group's work in the public sector has been rewarded with a number of highprofile contracts recently. For example, The Department For Culture, Media andSport (DCMS) awarded a new contract to Harrison Cowley to support digitalswitchover amongst vulnerable audiences. The Red Consultancy has been appointedby The Department of Work and Pensions (DWP) to handle a three year campaign todeter current and potential benefit fraud. Recently The Department of Health(DoH) completed the six month review of its Public Relations agency roster andthree Huntsworth agencies - Grayling, Harrison Cowley and The Red Consultancy -have succeeded in winning a place on that roster. The Group continues to combine practice skills sets and multi-officepartnerships to meet clients' needs. Trimedia was recently awarded the 13country public relations programme for COLT Telecom Group plc, and Grayling hasbeen appointed by Royal Mint to handle both public relations and public affairs.In Singapore and Thailand, Grayling has recently landed the prestigiousBritish Airways account. Harrison Cowley has been awarded a contract by leadingreal estate company, Hammerson, to support two of its retail developments in abid to establish the Midlands as a premier shopping destination and BurgesSalmon, one of the UK's leading commercial law firms has appointed HarrisonCowley's South West and Wales team to provide a regional Public Relationsprogramme. New Media is an integral part of Huntsworth's full service offering and thepower of 'user-generated content' is recognised and harnessed by all of theGroup's operations. The strategic importance of New Media to Huntsworth has ledto the creation of two specialist divisions. The Red Consultancy has partneredwith UK-based blog innovators Shiny Media to form Shiny Red, which aims tobridge the gap between PR and direct-to-customer communications, while Trimediais making the most of podcasts, blogging and viral marketing for clients whichinclude Yuku and Yahoo! Italia. Best practice is a core principle driving every business within the HuntsworthGroup. Trimedia was recently recognised in the Holmes Report's 'BestMultinational Consultancies to Work For in Europe' and also in The Sunday Times'100 Best Companies to Work For' in the '100 Best Small Firms' category. All our full service businesses have been recognised and honoured in prestigiousindustry awards recently including the Chartered Institute of Public Relations(CIPR) Excellence Awards and the International Public Relations Association(IPRA) Golden World Awards. Financial and Corporate Communications and Public Affairs The buoyant M&A markets of last year have continued into the first half. Hudson Sandler advised on a wide variety of transactions including Lookers'offer for Reg Vardy and the subsequent defence against a hostile offer fromPendragon, EBS on its strategic review and sale to Lcap, Westbury on its sale toPersimmon and Telefonica on its disposal of TPI. At Citigate Dewe Rogerson, recently ranked top financial PR adviser in DealWatchby PRWeek, work included advising QinetiQ on its IPO, defending ITV against anunsolicited private equity bid and advising Ferrovial on the acquisition of BAA. GCG won projects from Koc Holding, Turkey's largest privately held company; ItauSecurities, the largest wholesale bank in Brazil; The Royal PharmaceuticalSociety of Great Britain; Capital One (UK), the leading international financialservices firm and Associated British Foods. In Hong Kong, Citigate Dewe Rogerson were communications advisors to Bank ofChina in the world's fourth largest IPO which raised US$11bn. They are currentlyadvising China's biggest bank ICBC in preparation for their IPO later this year.According to media reports it will be the world's biggest ever IPO which isestimated to raise US$19bn. Retainer programmes in Asia include Bank ofAmercia, Macquarie Bank and China Life. Deal-led transactions accounted for only 9% of Group revenues in the first half.Alongside this activity the financial group's retained client base continued toincrease. Healthcare Communications Huntsworth has always been committed to an integrated Healthcare offering. Weacquired PBC, a successful healthcare advertising business headed by DavidRowley in 2001. Since then the Healthcare group has grown to include VBCommunications (advertising) and Avenue HKM (PR) in 2004 and Context ResearchInternational and Brand Health International in 2005 to give the group acomplete healthcare offering in the UK. Now in 2006 with Broad Street in the USwe are shifting to a global presence in order to address client needs. During this time, revenues have grown to 11% of Group revenues and HuntsworthHealth has developed its position as the only truly integrated medicalcommunications agency in the UK. It is one of the top five Public Relationsagencies in the UK (based on PR Week league tables) and one of the largestspecialist healthcare advertising agencies. This reputation enables us toattract the industry's top talent with 100% of client facing staff among the 110strong team having a science degree or higher. Our commitment to an integrated offer is paying dividends as traditionaladvertising revenues decline and more targeted and effective communicationstechniques prevail. Another important development has been the use of New Mediain the Healthcare sector. Huntsworth Health has developed innovative solutionsto traditional healthcare briefing methods with the introduction of touch-screenmultimedia PC tablet technology. As a result, a number of key clients have nowarmed their sales force with the very latest interactive sales aids. Thisexciting new approach has proved so successful that new internationalopportunities have arisen as a result. We are strengthening our commitment to the integrated communications model bybringing our seven healthcare companies together under one brand - HuntsworthHealth - in two locations. Although this will result in an exceptional cost in the region of £2.5m in thesecond half, the Board believes that this is a necessary step to position thedivision for its next phase of growth. Major clients benefiting from Huntsworth Health's integrated approach includePfizer, Abbott, Biogen and Roche Diagnostics. The 'Best Professional Campaign'at the Communique Awards was won for work on behalf of Servier whilst 'Ad of theYear' at the PM Society Awards was won for ProStrakan. New clients won in 2006include Astellas, Abacus and Quintiles. Peter ChadlingtonChief Executive20 September 2006 Unaudited consolidated income statementfor the six months ended 30 June 2006 As restated As restated Six months Six months Year ended ended ended 30 June 30 June 31 December 2006 2005 2005 Notes £000 £000 £000 Continuing operations Turnover 96,022 59,501 154,872 Revenue 4 70,075 40,720 108,347 Operating expenses - excluding highlighted items (60,056) (36,157) (95,995) Operating expenses - highlighted items (3,573) (2,262) (42,382) Operating expenses - total (63,629) (38,419) (138,377) Operating profit before highlighted items 4 10,019 4,563 12,352 Highlighted items - operating expenses 5 (3,573) (2,262) (42,382) Operating profit/(loss) 6,446 2,301 (30,030) Finance income 6 86 90 710Finance costs 6 (1,559) (1,078) (3,753)Share of profit from associates 51 - 142Profit before tax and highlighted items 8,597 3,575 9,451 Highlighted items - operating expenses (3,573) (2,262) (42,382)Profit/(loss) on continuing operations before tax 5,024 1,313 (32,931) Taxation (charge)/credit 7 (1,536) (510) 2,947Profit/(loss) for the period from continuing operations 3,488 803 (29,984) Profit/(loss) from discontinued operations - 714 (5,451)Profit/(loss) for the period 3,488 1,517 (35,435) Attributable to: Parent company's equity shareholders 3,239 1,033 (36,034)Minority interests 249 484 599 3,488 1,517 (35,435) Earnings/(loss) per share from continuing operations: Basic - pence 9 1.7 0.3 (20.9)Diluted - pence 9 1.6 0.3 (20.9)Adjusted basic - pence* 9 3.2 2.0 5.7Adjusted diluted - pence* 9 3.1 1.9 5.5 Earnings/(loss) per share from continuing and discontinued operations: Basic - pence 9 1.7 1.0 (24.6)Diluted - pence 9 1.6 1.0 (24.6) * Adjusted basic and diluted earnings per share from continuing operations iscalculated based on the profit/(loss) for the period from continuing operationsadjusted for highlighted items charged to continuing operations and the relatedtax effects (Note 9). Unaudited consolidated balance sheetas at 30 June 2006 30 June 30 June 31 December 2006 2005 2005 Notes £000 £000 £000Non-current assets Intangible assets 10 192,453 270,655 194,641Property, plant and equipment 5,885 10,492 7,148Deferred tax 3,316 3,439 3,316Other investments 166 108 238 201,820 284,694 205,343Current assets Work in progress 1,890 5,696 1,277Trade and other receivables 43,318 73,358 45,326Cash and short-term deposits 11(c) 11,062 11,273 9,277 56,270 90,327 55,880 Assets held for sale 12,807 - - Current liabilities Bank overdrafts 11(c) (100) (2,086) (126)Loan notes payable 11(c) (1,534) (1,998) (2,790)Obligations under finance leases 11(c) (90) (127) (142)Trade and other payables (43,891) (63,753) (46,419)Corporation tax payable (8,444) (8,341) (7,074)Provisions (13,857) (11,027) (13,470) (67,916) (87,332) (70,021) Non-current liabilities Bank loans and overdrafts 11(c) (40,872) (80,658) (29,373)Loan notes payable - (1,434) -Obligations under finance leases 11(c) (210) (370) (224)Provisions (11,577) (16,397) (11,753)Other creditors (778) (5,687) (6,399)Deferred tax liabilities (5,951) (13,589) (6,239) (59,388) (118,135) (53,988) Liabilities held for sale (2,392) - - Net assets 141,201 169,554 137,214 Equity Called up share capital 97,052 91,572 96,070Share premium account 22,960 22,888 22,921Merger reserve 74,464 69,067 73,729Foreign exchange translation reserve (42) 2,068 2,710Shares to be issued - 4,864 -Investment in own shares (3,133) (710) (691)Potential acquisition of minority interests - (4,168) (4,168)Retained earnings (51,256) (17,373) (54,545) Equity attributable to equity holders of the parent 140,045 168,208 136,026Minority interests 1,156 1,346 1,188 Total equity 141,201 169,554 137,214 Unaudited consolidated cash flow statementfor the six months ended 30 June 2006 As restated Six months Six months Year ended ended ended 30 June 30 June 31 December 2006 2005 2005 Notes £000 £000 £000Cash inflow/(outflow) from operating activities Cash inflow from operations 11(a) 5,316 483 11,604Interest paid (1,060) (1,120) (3,750)Interest received 43 151 248Corporation tax paid (800) (632) (1,877) Net cash inflow/(outflow) from operating activities 3,499 (1,118) 6,225 Cash (outflow)/inflow from investing activities Acquisitions of subsidiaries (3,978) (3,416) (7,956)Special dividend paid to Incepta shareholders - (2,100) (2,100)Disposal of subsidiaries (1,084) - 53,817Acquisition of minority interest (3,711) - -Disposal of minority interest 78 - -Purchases of property, plant and equipment (1,477) (1,149) (3,649)Proceeds from sale of property, plant and equipment 155 361 186Proceeds from sale of fixed asset investments - 55 55Dividends received from associates 144 - -Net cash acquired with subsidiaries 810 24,854 25,920Net cash disposed of with subsidiaries (83) - (512) Net cash (outflow)/inflow from investing activities (9,146) 18,605 65,761 Cash inflow/(outflow) from financing activities Proceeds from issue of ordinary shares 232 13 62Purchase of own shares (2,418) - -Repayment of finance lease liabilities (85) (108) (199)Repayment of loan notes (1,266) (4,974) (5,636)Net movement in borrowings 11,591 (5,438) (58,048)Dividends paid to minority interests (326) (76) (163)Dividends paid to equity holders of the parent - (306) (1,231)Net cash inflow/(outflow) from financing activities 7,728 (10,889) (65,215) Increase in cash and cash equivalents 2,081 6,598 6,771 Movements in cash and cash equivalents Net increase in cash and cash equivalents 2,081 6,598 6,771Effects of exchange rate fluctuations on cash held 170 (43) (252)Cash and cash equivalents at 1 January 9,151 2,632 2,632 Cash and cash equivalents at end of period 11(c) 11,402 9,187 9,151 Unaudited consolidated statement of changes in equityfor the six months ended 30 June 2006 Foreign Potential Called currency Invest- acquisi- up Share trans- Shares ment tion of share premium Merger lation to be in own minority Retained Minority Total capital account reserve reserve issued shares interest earnings Total interests equity £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 At 1 January 2005 30,444 23,615 7,902 (183) - (8) - (18,388) 43,382 699 44,081 Impact of adoption of IAS 32 and IAS 39 on 1January 2005 - - - - - - (4,168) - (4,168) - (4,168) Currency translation differences - - - 2,251 - - - - 2,251 3 2,254 Total income andexpense recogniseddirectly in equity for the period - - - 2,251 - - (4,168) - (1,917) 3 (1,914) Profit for the period - - - - - - - 1,033 1,033 484 1,517 Total recognised income and expense forthe period - - - 2,251 - - (4,168) 1,033 (884) 487 (397) Shares issued for cash consideration 11 2 - - - - - - 13 - 13 Disposals of minority interests - - - - - - - - - (80) (80) Acquisition of subsidiaries forshares 61,117 - 61,165 - - - - - 122,282 240 122,522 Shares to be issued for acquisitions - - - - 4,864 - - - 4,864 - 4,864 Movement in investment in own shares - - - - - (702) - - (702) - (702) Share issue costs - (729) - - - - - - (729) - (729) Credit for share-based payments - - - - - - - 286 286 - 286 Deferred tax on share-based payments - - - - - - - 2 2 - 2 Equity dividends - - - - - - - (306) (306) - (306) Dividends to minority - - - - - - - - - -interests Balance at 30 June 2005 91,572 22,888 69,067 2,068 4,864 (710) (4,168) (17,373) 168,208 1,346 169,554 Currency translation differences - - - 642 - - - - 642 (7) 635 Total income and expense recogniseddirectly in equity for the period - - - 642 - - - - 642 (7) 635 (Loss)/profit for the period - - - - - - - (37,067) (37,067) 115 (36,952) Total recognised income and expense for the period - - - 642 - - - (37,067) (36,425) 108 (36,317) Shares issued for cash consideration 39 10 - - - - - - 49 - 49 Acquisitions of subsidiaries forshares 4,439 - 4,662 - (4,864) - - - 4,237 - 4,237 Disposal of minority interests - - - - - - - - - (103) (103) Movement in investment in own shares - - - - - 19 - - 19 - 19 Share issue costs - 8 - - - - - - 8 - 8 Credit for share-based payments - - - - - - - 878 878 - 878 Deferred tax on share-based payments - - - - - - - (23) (23) - (23) Scrip dividend 20 15 - - - - - (35) - - - Equity dividends - - - - - - - (925) (925) - (925) Dividends to minority interests - - - - - - - - - (163) (163) Balance at 31 December 2005 96,070 22,921 73,729 2,710 - (691) (4,168) (54,545) 136,026 1,188 137,214 Currency translation differences - - - (2,752) - - - - (2,752) - (2,752) Total income and expense recogniseddirectly in equity for the period - - - (2,752) - - - - (2,752) - (2,752) Profit for the period - - - - - - - 3,239 3,239 249 3,488 Total recognised income and expense for the period - - - (2,752) - - - 3,239 487 249 736 Shares issued for cash consideration 185 47 - - - - - - 232 - 232 Acquisitions of subsidiaries forshares 797 - 735 - - - - - 1,532 - 1,532 Movement in minority interests - - - - - - 4,168 (450) 3,718 45 3,763 Movement in investment in own shares - - - - - (2,442) - - (2,442) - (2,442) Share issue costs - (8) - - - - - - (8) - (8) Credit for share-based payments - - - - - - - 500 500 - 500 Dividends to minority interests - - - - - - - - - (326) (326) Balance at 30 June2006 97,052 22,960 74,464 (42) - (3,133) - (51,526) 140,045 1,156 141,201 Notes to the financial statementsfor the six months ended 30 June 2006 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 2005 Annual Report andAccounts for the year ended 31 December 2005. The Group has not adopted thereporting requirements of IAS 34 'Interim Financial Reporting'. The information relating to the six months ended 30 June 2006 and 30 June 2005is unaudited and does not constitute statutory accounts. The comparative figuresfor the year ended 31 December 2005 are not the company's statutory accounts forthat financial year. The statutory accounts for the year ended 31 December 2005have been reported on by the company's auditors and delivered to the Registrarof Companies. The report of the auditors was unqualified and did not contain astatement under section 237(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. In 2006 Huntsworth plc has decided to treat the holiday pay and share optioncharges as normal operating expenses rather than highlighted items, and thesecharges have been reclassified accordingly from 'Highlighted items - operatingexpenses' to 'Operating expenses - excluding highlighted items'. Imputedinterest on deferred consideration has also been treated as a normal financecost rather than a highlighted item, and has been reclassified accordingly from'Highlighted items - finance items' to 'Finance costs'. The directors considerthat these new classifications are in line with best practice which has beenestablished following the transition to IFRS over the past year. To allowcomparability against the present year disclosures, the comparatives for the sixmonth period ended 30 June 2005 and the year ended 31 December 2005 have beenrestated. The comparative information for 30 June 2005 has also been restated to reflectthe reclassification of operations discontinued in the second half of 2005 inaccordance with accounting standards. The accounting policies adopted are consistent with those followed in thepreparation of the Group's annual financial statements for the year ended 31December 2005, and are consistent with those that the directors anticipate willbe complied with in the annual financial statements for the year ending 31December 2006. 3. Acquisitions and disposals The following acquisitions were made during the period: (i) Eurotandem On 16 February 2006 the Group acquired 100% of the share capital in EurotandemSAS for initial cash consideration of €4.1 million (£2.8 million) and the issueof 1,469,455 new ordinary shares of 50 pence each in Huntsworth plc.Additional deferred consideration is payable dependent on the future financialperformance of Eurotandem and will be payable in cash or shares, at the Group'ssole discretion. The maximum total consideration payable is €8.65 million (£6.0million). (ii) Hudson Sandler On 26 April 2006, the Group acquired the 40% minority interest in Hudson SandlerLimited for cash consideration of £3.7 million. Huntsworth transferred the 100%investment into a new company in which a broader Hudson Sandler management teamhave a 20% interest. The following disposals were made during the period: (i) Citigate Dewe Rogerson India On 8 February 2006 the Group disposed of its 80% shareholding in Citigate DeweRogerson India, for cash consideration of £100,368. Included in theconsolidated income statement is operating revenue of £23,000 and profit beforetax of £1,000 for this business. (ii) nxtMOVE LLC On 6 March 2006 the Group disposed of the business and assets of nxtMOVE LLC toOptimisa plc for $1.55 million. Included in the consolidated income statement isoperating revenue of $435,000 and a loss before tax of $240,000 for thisbusiness. iii) 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%will be acquired by certain executives of CSV on 1 January 2007 for $2.5 million(£1.4 million) and a net asset payment of $2.7 million (£1.5 million) by 30 June2007. The remaining 49% will be acquired no later than 31 December 2009 for atotal cash consideration of a further $17.5 million (£10.2 million) (suchamounts to have an aggregate present value of $20 million (£11.6 million) as at1 January 2006). This will be reduced by the amount of cash distributions fromCSV from 1 January 2006. 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 As restated Six months Six months Year ended ended ended 30 June 30 June 31 December 2006 2005 2005 £000 £000 £000Revenue Business segment Public Relations 63,543 35,103 94,968Non Public Relations 6,546 5,806 13,472Eliminations (14) (189) (93) Total 70,075 40,720 108,347 Geographical origin United Kingdom 33,370 23,736 58,293Other European 15,419 8,912 22,857USA 19,116 7,270 24,035Rest of World 2,184 991 3,162Eliminations (14) (189) - Total 70,075 40,720 108,347 Operating profit before highlighted items Business segment Public Relations 12,941 5,999 18,164Non Public Relations 628 1,452 1,939Unallocated expenses (3,550) (2,888) (7,751) Total 10,019 4,563 12,352 Geographical origin United Kingdom 7,131 4,947 11,504Other European 2,827 1,251 4,000USA 3,193 1,074 3,945Rest of World 418 179 654Unallocated expenses (3,550) (2,888) (7,751) Total 10,019 4,563 12,352 Unallocated expenses comprise central head office costs and share-based paymentcharges. Operating profit before highlighted items has been restated to include thefollowing charges previously included as highlighted items: As restated Six months Six months Year ended ended ended 30 June 30 June 31 December 2006 2005 2005 £000 £000 £000 Share-based payment charge 602 252 576Holiday pay charge 475 538 - Total 1,077 790 576 5. Highlighted items As restated As restated Six months Six months Year ended ended ended 30 June 30 June 31 December 2006 2005 2005 £000 £000 £000 Amortisation of intangible assets 1,908 1,087 3,402Impairment of goodwill and intangible assets 1,665 - 29,571Merger, restructuring and other non-recurring costs - 1,175 9,409 3,573 2,262 42,382 The impairment of goodwill and intangible assets of £1.7 million for the sixmonths ended 30 June 2006 relates to the write down of goodwill classified asheld for sale for Citigate Sard Verbinnen, and this amount is equivalent to theprofits from this business recognised in the period. 6. Finance costs and income As restated Six months Six months Year ended ended ended 30 June 30 June 31 December 2006 2005 2005 £000 £000 £000 Bank interest payable 1,265 1,022 3,207Loan note interest 22 21 66Finance lease interest 7 15 30Other net interest payable 20 20 -Provision discount adjustment 150 - 240Imputed interest on deferred consideration 95 - 210 Finance costs 1,559 1,078 3,753 Bank interest receivable (86) (90) (227)Revaluation of put option over minority interest - - (450)Other net interest receivable - - (33) Finance income (86) (90) (710) 1,473 988 3,043 7. Taxation The tax charge for the six months ended 30 June 2006 has been based on anestimated effective tax rate on profit before highlighted items and share ofprofits from associates for the full year of 26% (year ended 31 December 2005:20%). Six months Six months Year ended ended ended 30 June 30 June 31 December 2006 2005 2005 £000 £000 £000 Current tax 2,108 972 2,027Deferred tax (572) (462) (4,974) 1,536 510 (2,947) The tax charge/(credit) is further analysed below: Tax charge on profit before highlighted items and share ofprofits from associates 2,246 1,081 1,851 Tax credit on highlighted items (710) (571) (3,490) Non-recurring tax credits - - (1,308) 1,536 510 (2,947) 8. Dividends Six months Six months Year ended ended ended 30 June 30 June 31 December 2006 2005 2005 £000 £000 £000Equity dividends on ordinary shares: Interim dividend for year ended 2005 - 0.5p - - 960Special second interim dividend for year ended 2004 - 0.1p - 306 306 - 306 1,266 The proposed 2006 interim dividend of 0.6 pence per share was approved by theBoard on 19 September 2006 and in accordance with IFRS has not been included asa deduction from equity at 30 June 2006. The dividend will be paid on 10November 2006 to those shareholders on the register at 29 September 2006. 9. Earnings/ (loss) per share The data used in the calculations of the earnings per share numbers issummarised in the table below: As restated As restated Six months ended Six months ended Year ended 30 June 2006 30 June 2005* 31 December 2005 Weighted Weighted Weighted average no average no average no Earnings of shares Earnings of shares Earnings of shares £'000 000's £'000 000's £'000 000's Continuing operations:Basic 3,239 190,156 319 102,846 (30,583) 146,579Diluted 3,239 197,531 319 106,168 (30,583) **146,579Adjusted basic 6,102 190,156 2,010 102,846 8,309 146,579 Continuing and discontinued operations:Basic 3,239 190,156 1,033 102,846 (36,034) 146,579Diluted 3,239 197,531 1,033 106,168 (36,034) **146,579 * The weighted average number of shares has been restated to reflect that theCompany's existing 10p ordinary shares were consolidated on the basis of one new50p ordinary share for five existing 10p ordinary shares on 14 July 2005. ** Because basic EPS results in a loss per share, the diluted EPS is calculatedusing the undiluted weighted average number of shares. 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 operations,and highlighted items together with related tax effects as set out below: (a) From continuing operations As restated As restated Six months Six months Year ended ended ended 30 June 30 June 31 December 2006 2005 2005 £000 £000 £000Earnings:Profit/(loss) for the year attributable to parent company's 3,239 1,033 (36,034)shareholders(Less)/add: (Profit)/loss from discontinued operations - (714) 5,451 Basic earnings from continuing operations 3,239 319 (30,583)Highlighted items 3,573 2,262 42,382Tax on highlighted items (710) (571) (3,490) Adjusted earnings from continuing operations 6,102 2,010 8,309 9. Earnings/ (loss) per share (continued) (b) From continuing and discontinued operations Earnings for basic and diluted earnings/(loss) per share from continuing anddiscontinued operations is the profit/(loss) for the year attributable to parentcompany shareholders. The number of shares is the same as those detailed forcontinuing operations. (c) From discontinued operations Basic earnings/(loss) per share for the discontinued operations is £nil(December 2005: loss of 3.7 pence per share; June 2005: earnings of 0.7 penceper share) and the diluted earnings per share is £nil (December 2005: loss of3.7 pence per share; June 2005: earnings of 0.7 pence per share), based on theprofit/(loss) for the year from discontinued operations of £nil (December 2005:loss of £5,451,000; June 2005: earnings of £714,000) and denominators above forboth the basic and diluted (loss)/earnings per share. 10. Intangible fixed assets Customer Brands relationships Goodwill Total £000 £000 £000 £000Cost At 1 January 2006 19,697 10,959 197,994 228,650Arising on acquisitions in the period - 896 8,012 8,908Adjustment to prior year acquisitions - - 2,413 2,413Arising on disposal of subsidiaries in the - - (1,613) (1,613)periodReclassified to assets held for sale - - (16,195) (16,195)Exchange differences (386) (249) (2,897) (3,532) At 30 June 2006 19,311 11,606 187,714 218,631 Amortisation At 1 January 2006 5,717 4,802 23,490 34,009Charge for the period 391 1,517 - 1,908Impairment - - 1,665 1,665Arising on disposal of subsidiaries in the - - (1,143) (1,143)periodReclassified to assets held for sale - - (9,033) (9,033)Exchange differences (230) (201) (797) (1,228) At 30 June 2006 5,878 6,118 14,182 26,178 Net book value at 30 June 2006 13,433 5,488 173,532 192,453 Net book value at 31 December 2005 13,980 6,157 174,504 194,641 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. 11. Cash flow analysis (a) Reconciliation of operating profit to net cash inflow from operatingactivities As restated Six months to Six months to Year ended 30 June 30 June 31 December 2006 2005 2005 £000 £000 £000Operating profit/(loss) from continuing operations 6,446 2,301 (30,030)Operating profit from discontinued operations - 1,023 283Depreciation 1,134 1,035 2,892Share-based payment charge 602 286 712Property, plant and equipment written off - 25 -Loss/(profit) on disposal of property, plant & equipment 3 (49) 744Amortisation of intangible assets 1,908 1,484 4,594Impairment of goodwill and intangibles 1,665 - 30,187(Increase)/decrease in work in progress (646) (1,655) 394(Increase)/decrease in debtors (1,574) (1,778) 2,781(Decrease)/increase in creditors (1,512) (805) 3,208Decrease in provisions (2,710) (1,384) (4,161) Net cash inflow from operations 5,316 483 11,604 Net cash inflow from operations is analysed as follows: As restated Six months to Six months to Year ended 30 June 30 June 31 December 2006 2005 2005 £000 £000 £000 Before highlighted items and discontinued operations 10,849 3,575 17,960Highlighted items (5,533) (3,163) (10,728)Discontinued operations - 71 4,372 5,316 483 11,604 (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 2006 2005 2005 £000 £000 £000 Increase in cash and cash equivalents in the period 2,081 6,598 6,771Cash (inflow)/outflow from (increase)/decrease in debt (11,591) 5,438 58,048Bank loans and overdrafts acquired - (78,535) (78,536)Loan notes acquired - (6,326) (6,325)Loan notes repaid 1,266 4,974 5,636Repayment of capital element of finance leases 85 108 199 Change in net debt resulting from cash flows (8,159) (67,743) (14,207)Finance leases acquired with subsidiaries (29) (159) (159)New finance leases (1) (148) (236)Disposal/cancellation of finance leases 8 - 131Translation differences 255 (878) (2,435) Increase in net debt (7,926) (68,928) (16,906)Net debt at beginning of period (23,378) (6,472) (6,472) Net debt at end of period (31,304) (75,400) (23,378) 11. Cash flow analysis (continued) (c) Analysis of net debt 1 January Cash 30 June 2006 flow Other 2006 £000 £000 £000 £000 Cash and short terms deposits 9,277 2,055 (270) 11,062Cash classified as held for sale - - 440 440 Bank overdraft (126) 26 - (100)Net cash and cash equivalents 9,151 2,081 170 11,402Bank loans and overdrafts (29,373) (11,591) 92 (40,872)Obligations under finance leases (366) 85 (19) (300)Loan notes payable (2,790) 1,266 (10) (1,534) Net debt (23,378) (8,159) 233 (31,304) Independent review report to Huntsworth PLC For the six months ended 30 June 2006 Introduction We have been instructed by the company to review the financial information forthe six months ended 30 June 2006 which comprises the Consolidated IncomeStatement, Consolidated Balance Sheet, Consolidated Cash Flow Statement,Consolidated Statement of Changes in Equity, and the related notes 1 to 11. 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. The accounting policies are consistent with those IFRS's adopted for use by theEuropean Union that the directors intend to use in the next financialstatements. 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 2006. Ernst & Young LLPLondon20 September 2006 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
HNT.L