18th Oct 2006 07:01
Thomson Intermedia PLC18 October 2006 18 October 2006 Thomson Intermedia plc Adjusted pretax profits up 143% Thomson Intermedia plc ("Thomson Intermedia" or the 'Group', AIM: THN), aleading provider of media intelligence, today announces its interim results forthe six months ended 31 July 2006, under international financial reportingstandards. Highlights - Revenue increased by 144% to £8.4m (2005: £3.5m) - Adjusted pretax profit* increased by 143% to £1.7m (2005: £0.7m) - Pretax profit £1.1m (2005: £0.6m) - Adjusted earnings per share** doubled to 4.81p (2005: 2.41p); Basic earnings per share 3.39 pence - Gross sales contracts significantly increased to £9.0m from £3.8m - The Group's forward visibility remains strong with future contracted revenue of £5.7m. - Contracts renewal rate of 90% - Successful integration of the billetts business - Two new on line products developed and launched: Auditlive and Newslive - Exclusive long-term deals secured with over 90% of regional publications *pre amortisation of purchased intangibles, exceptional items and share basedexpenses ** pre amortisation of purchased intangibles, exceptional items, share basedexpenses and deferred tax Sarah Jane Thomson, Joint Chief Executive Officer of Thomson Intermedia plc,said: "This has been a very important period for us. We have not only developed allour businesses but seen a good operating performance across the Group. Inaddition we have seen our presence in the market considerably increased due toour acquisition and integration of the billetts business. "The scale and offerings of the enlarged Group have enabled us to develop somevery exciting new products during this period and we look forward to reaping thebenefits of these. Thomson Intermedia is now a significant force in the UKmedia landscape and I am confident we are now well positioned to maintain ourconsiderable momentum." Enquiries: Thomson IntermediaSarah Jane Thomson, Joint Chief Executive Today 020 7457 2020David Trendle, Finance Director Thereafter 020 8466 2906 College HillAdrian Duffield/Ben Way 020 7457 2815/2055 Financial Performance Following the IFRS restatement of the Group's financial results, the Grouppresents its interim results for the period ended 31 July 2006, under IFRS forthe first time. Group revenue in the six months to 31 July 2006 increased by 144% to £8.4m(2005: £3.5m) with gross sales more than doubling to £9.0m (2005: £3.8m). Newsales contracts continued at a strong pace amounting to £2.4m, with consultancyand project work securing a further £1.2m of revenue. Renewals of onlineadvertising monitoring products and billetts media audit products maintained ata satisfying level of 90%. Gross profit increased by 97% to £4.9m (2005: £2.5m), providing a gross marginacross the Group of 58.1% (2005 Thomson Intermedia only: 71.8%). Adjusted operating profit increased by 171% to £1.8m (2005: £0.7m), before sharebased expenses (£124,000), amortisation of purchased intangibles (£194,000), andone off restructuring costs (£101,000). Adjusted operating margins improved to21.6% (2005: 19.4%). Adjusted Group pretax profit increased by 143% to £1.7m (2005: £0.7m). Grouppretax profit was £1.1m (2005: £0.6m), after net financing costs of £133,000. The Group has a nil net tax charge with tax on profits offset by deferred taxassets. Adjusted earnings per share improved by 100% to 4.81p from 2.41p. Basicearnings per share improved from 2.78p to 3.39p. The Board is not recommending the payment of a dividend, reflecting the highgrowth nature of the Group and the numerous opportunities available for furtherdevelopment. However, given the cash generative nature of the Group's businessmodel this policy will be reviewed on an ongoing basis. The Group has moved to a net debt position of £1.0m as at 31 July 2006. TheBoard expects cash flow in the second half to improve sharply as the net cashfrom operating activities is expected to be significantly stronger as a resultof increased profitability and an improvement in working capital. The first halfhad an unusually high negative working capital movement during the integrationprocess. Thomson Intermedia is pleased to announce that billetts achieved the maximumearn out for its results for the year ended 30 April 2006. As a result, on 8August, the Group issued loan notes to the value of £3.7m, net of shareholderbonuses paid, with a maturity date of April 2008. Following the integration of the businesses, one small office was closedresulting in a one off restructuring costs of £101,000 in the first half, butwill result in annualised cost savings of approximately £230,000. Operational Highlights Thomson Intermedia has completed very successfully a notable period of change.Integrating the billetts business has significantly strengthened the managementteam, enabled us to develop new and revolutionary online media performanceproducts and considerably enhanced the position of the Group in the marketplace. The enlarged and fully integrated Group had not only a good sales performancefor the first half but notably benefited from the combination of the twocomplementary businesses. The fully integrated Group now operates via fourdivisions, benefiting from the expertise within each area as well as crossselling within the Group's customer base. These are: o Online systems o Media Owner platforms o Consultancy o International UK Business The Group is recognised as a leading provider of products and services to themedia industry, providing information to enhance the impact and performance ofcompanies' media expenditure. The Group's strength is based on thecomprehensiveness and accuracy of its media data, technical expertise andconsiderable knowledge of the media industry which provide the springboard forthe opportunities. This is set against an industry valued at £14 billion whosedemands for this data are ever increasing. Online Systems Thomson Intermedia's online systems in the UK represent 39% of Group revenue(£3.3m). This area of the business is characterised by high operationalgearing, significant barriers to entry and is internationally scaleable. Thecore data captured for these products is substantial with more than 40,000adverts being added per day and a history of more than eight years of data. Themarket opportunity for these products is considerable with a largely fixed costbase to produce them. The three products, Advertising Monitoring and the newly developed AuditLive andNewslive, are based on the same set of core data feeds. Advertising Monitoring: The flagship online product, represents 88% of currentturnover in this division and has a renewal rate of 83%. Its strong momentumhas been considerably enhanced by the inclusion of 'accuracy of expendituremodules', the billetts team's knowledge, and by increasing the capture ofregional media data, Thomson Intermedia has secured exclusively more than 90% ofregional media data. This product enables the division's 235 clients to have a real time view oftheir competitors advertising and understand the impact of their own media spendand propositions on the target market. As expected the focus for vouching has moved from retrospective to ongoing andtherefore the vouching product has been amalgamated within the billetts mediaaudits product suite as part of an enhanced offering to clients. The Group alsocontinues to have success in securing media owners to sign up for the e-vouchingproduct (see Media Owner Platforms below). AuditLive: This new product has been developed to provide media audit servicesto companies who have not before been able to afford the services of an auditconsultancy. In today's environment of increased management accountability,marketers need more than ever to be able to demonstrate the effectiveness oftheir media budgets and to be confident that they are spending the budget asefficiently as possible. Auditlive enables them to do this in real time astheir campaign runs. It provides clear and actionable results and provides the following crucialfacts to Marketing and Finance Directors: Have all your ads run as expected,have you paid a fair price for your media and have you received good qualityplacement of your media? The Group's statistics demonstrate to clients that access to our audit productscan save them up to 20% year on year. Newslive: This product has been developed to benefit from the editorial datawhich is captured in the process of monitoring advertising and the exclusive pdfeditorial data which has been secured via our Media Owner platform. Thisproduct is the first in the UK to monitor real time mentions of any entity,company or person, across TV, Radio, Print and the Internet. In addition to allof this print capturing, we utilise speech to text technology in conjunctionwith close caption technology to provide links to the broadcast clip within TVor Radio and to automate a transcript and monitor the full spectrum of theInternet including sites, blogs and Webcasts. The clippings market in the UK is estimated to be worth £80m and is dominated bylargely print based serviced solutions. This new service will provide themarket with the first comprehensive and real time view of the stories whichimpact their business and will be delivered within Thomson Intermedia's easy touse interface. In addition the Group is currently developing Resultslive - the first of a suiteof return on investment products. Resultslive is a powerful test and controlsystem, allowing companies to test a strategy in a controlled environment and toevaluate the impact the strategy would have on a wider role out. Media Owner Platform The business impact in securing the tender for Press vouching is felt over theentire Group, having secured exclusive contracts with all significant regionalmedia owners, which account for more than 90% of regional publications.Clients, and the media owners, use the technical system which has been developedto provide instant proof to agencies and direct advertisers of their advertappearing. The system provides significant cost efficiencies to media owners asit negates the need for them to send out a voucher copy to every advertiserwithin the publication. This Thomson Intermedia system is now operational in 108 agencies and used dailyto ensure the placement of their spend. The completion of the rollout will thenenable further services to be implemented providing media owners with improvedsystems and further cost reductions and efficiency gains. In addition to the revenue that the Group receives from this division, ThomsonIntermedia also benefits considerably from the exclusive access to the data foruse in its systems. Consultancy This division, made up of billetts media audits and billetts marketing sciences,contributes 40% of Group turnover (£3.4m). These two strong areas of thebusiness work for 165 large blue chip clients providing products and services todemonstrate the value of their media spend. billetts media audits has further consolidated its position as the UK marketleader in this field. Growth has come from increased activity in interactivemedia as well as winning new clients and ad hoc projects Improvements havealso been made with better data provision and technology introduced by theoriginal Thomson Intermedia business. Its data pool of cost and quality metricsis by far the most extensive and comprehensive in the UK, enabling the mostrobust and impartial viewpoint on the media performance of its clients. Inaddition to the contracted income which is recurring for the 157 clients,consultancy income is also received through ad hoc projects. billetts marketing sciences provides consulting to assist the advertiser inachieving their maximum ROI by optimising payback and allocation of marketingspend across geographies, brands and marketing methods. This unit draws onadvanced analytical techniques, marketing experience, benchmarks and tools todeliver improved and fact based marketing strategies. With increasing importanceon return on investment and additional technological tools further growth isexpected in this area. International International revenue now represents 21% of Group revenue (£1.8m). The Grouphas a number of significant international contracts for media auditing where itutilises international partners to secure required local data and to help insome elements of the service. Over the last three years the Group has seenrevenue treble from this area with contracts extending to all key marketsincluding Europe, North America and Asia. MPMA, the US Auditing division, has made steady progress with an additional fournew clients, increasing the client base to 14 with average values in excess of$100k. MPMA contributed £0.5m of revenue in the first half, with a smallpositive contribution to operating profit. The joint venture in Germany with Media Control which provides the advertisingmonitoring products to the German market, continues to move towards a breakevenposition with further wins and maintaining a average contract value of €49k. Whilst the Group has excellent relations with its various internationalpartners, it is looking to invest further in key markets to establish operationswhich will provide the international content, and therefore improved margins, aswell as growth in the local market. The Group continues to review itsinternational strategy and are currently investigating a number of markets. Integration During the second half of the period the restructure of the business took effectwith a number of senior personnel moving to new roles. One of the significantbenefits of the acquisition was the high calibre additional management resourcewhich existed in the billetts business. The restructure maximises the potentialof this resource within the Group to drive the integrated business forward. The development team have been working extremely hard applying technology to thebilletts business which provides integrated databases across the Group business.They have developed powerful and impressive new systems. The Group's streamlining of some operations resulted in a one off restructuringcost of £101,000, but ongoing cost savings in office and personnel costs. Current trading and outlook The Group has had a successful first half both in overall performance,integration of the businesses and the significant new product developments andlaunches. The Board is confident that the integrated business is with its new managementstructure is in a very strong position to continue its UK penetration, with bothexisting and new products. The Group has had a good start to the third quarter in line with Boardexpectations and have a strong pipeline of business across the entire productsuite. The Group's forward visibility remains strong with future contractedrevenue, secured as at 31 July 2006, of £5.7m. This, coupled with the new andpowerful products, provides a very good platform for continued growth. Consolidated Income Statement for the six months ended 31 July 2006 Unaudited Unaudited *Audited 6 months ended 6 months ended Year ended 31 July 06 31 July 05 31 January 06 £'000s £'000s £'000sRevenue 8,428 3,457 11,136Cost of Sales (3,532) (976) (4,129)Gross Profit 4,896 2,481 7,007Overheads (2,773) (1,543) (4,131)Share based expenses (124) (125) (249)Amortisation of intangible assets (498) (266) (694) Performance bonus (176) - -Restructuring costs (101) - -Total administrative expenses (3,672) (1,934) (5,074) Operating profit 1,224 547 1,933Finance income 30 22 49Finance expenses (163) - (55)Net financing income (133) 22 (6) Profit before taxation 1,091 569 1,927 Income tax (190) - (126)Deferred tax 153 231 396 Tax (expense)/income (37) 231 270 Profit for the period 1,054 800 2,197 Attributable to:Equity holders of the parent 1,062 800 2,207Minority interests (8) - (10) 1,054 800 2,197 Earnings per shareBasic 3.39p 2.78p 7.48pDiluted 3.26p 2.65p 7.13p *UK GAAP Figures were audited/extracted from the audited financial statement for31 January 2006 prepared under UK GAAP, and converted to IFRS as disclosed inour statement of transition to IFRS, with a subsequent amendment to deferred taxas described in note 8 below. Consolidated Balance Sheet as at 31 July 2006 Unaudited Unaudited *Audited as at as at as at 31 July 06 31 July 05 31 January 06 £'000s £'000s £'000sNon current assetsGoodwill 7,905 31 7,905Other intangible assets 4,958 1,807 5,096Property, plant & equipment 644 616 706Investments 115 36 122Deferred tax asset 504 186 351 14,126 2,676 14,180 Current assetsTrade & other receivables: Duewithin one year 8,655 3,030 5,926Trade & other receivables: Dueafter one year 1,448 447 1,235Cash & cash equivalents 1,821 1,455 2,774 11,924 4,932 9,935 Current liabilitiesTrade & other payables (1,390) (657) (2,041)Current tax liabilities (175) - (126)Bank overdrafts & loans (250) - (312)Provisions (3,850) - (3,850)Accruals & deferred income (5,230) (3,872) (3,979) (10,895) (4,529) (10,308) Net current assets/(liabilities) 1,029 1,131 (373) Non current liabilitiesBank loans (2,562) - (2,687)Provisions (325) - (269)Accruals & deferred income (1,628) (507) (1,374) (4,515) (507) (4,330) Total liabilities (15,410) (5,036) (14,638) Net assets 10,640 2,572 9,477 Capital & ReservesShare capital 7,828 7,186 7,823Share premium 8,896 5,064 8,869Merger reserve (4,504) (5,250) (4,504)Retained earnings (1,464) (4,428) (2,603)Minority interest (116) - (108)Shareholders' funds 10,640 2,572 9,477 *UK GAAP Figures were audited/extracted from the audited financial statement for31 January 2006 prepared under UK GAAP, and converted to IFRS as disclosed inour statement of transition to IFRS, with a subsequent amendment to deferred taxas disclosed in note 8 below. Consolidated Cashflow Statement for the six months ended 31 July 2006 Unaudited Unaudited *Audited 6 months ended 6 months ended Year ended 31 July 06 31 July 05 31 January 06 £'000s £'000s £'000s £'000s £'000s £'000sCashflows from operating activitiesProfit before taxation 1,091 569 1,927Adjustments for:Depreciation 166 119 276Amortisation 498 266 694Investment - (36) -Share option charges 124 125 249Investment income (30) (22) (49)Interest expense 163 55 2,012 1,021 3,152 Increase in trade receivables (2,909) (1,185) (2,654)Increase in trade payables 801 538 1,385 Cash generated from operations (96) 374 1,883Interest expense (107) - (71)Income taxes paid (126) - (6) Net cash from operating activities (329) 374 1,806 Cashflows from investing activitiesPurchase of subsidiary, net of cash acquired - - (7,012)Purchase of property, plant & equipment (97) (217) (264)Purchase of intangible assets (361) (322) (644)Purchase of investments - - (87)Investment income 30 22 43 Net cash used in investing activities (428) (517) (7,964) Cashflows from financing activitiesProceeds from issue of share capital - - 4,343Proceeds from longterm borrowings - - 3,000Repayment of bank loans (124) - (63) Net cashflow used in financing activities (124) - 7,280 Net (decrease)/increase in cash & cashequivalents (881) (143) 1,122Effect of foreign exchange rate changes (9) - (8)Cash & cash equivalents at beginning of period 2,712 1,598 1,598Cash & cash equivalents at end of period 1,822 1,455 2,712 *UK GAAP Figures were audited/extracted from the audited financial statement for31 January 2006 prepared under UK GAAP, and converted to IFRS as disclosed inour statement of transition to IFRS, with a subsequent amendment to deferred taxas disclosed in note 8 below. Basis of preparation The financial information presented in this documentation has been prepared inaccordance with International Financial Reporting Standards (IFRS) andInternational Financial Reporting Interpretations Committee (IFRIC)interpretations that are expected to be applicable for the period ended 30 April2007 (the Group's new period end). These are subject to ongoing review andendorsement by the European Commission, or possible amendment by theInternational Accounting Standards Board (IASB), and are therefore subject topossible change. Further standards or interpretations may also be issued thatcould be applicable for the period ended 30 April 2007. These potential changescould result in the need to change the basis of accounting or presentation ofcertain financial information from that presented in this document. The Group may need to review some accounting treatments used for the purpose ofthis document as a result of emerging industry consensus on practicalapplication of IFRS and further technical opinions. This could mean that thefinancial information in this document may require modification until the Groupprepares its first complete set of IFRS financial statement for the period ended30 April 2007. The comparative figures for the year ended 31 January 2006 do not amount to fullstatutory accounts within the meaning of S240 of the Companies Act 1985. Thoseaccounts which were prepared under UK GAAP have been reported on by the Group'sauditors and delivered to the registrar of companies. Those accounts receivedan unqualified audit report which did not contain statements under sections 237(2) or (3) (accounting record or returns inadequate, accounts not agreeing withrecords and returns or failure to obtain necessary information and explanations)of the Companies Act 1985. As permitted, the group has not applied IAS 34' Interim Reporting' in preparingthis interim report. Basis of accounting The financial statements have been prepared in accordance with all adoptedInternational Financial Reporting Standards (IFRSs) for the first time. Thedisclosures required by IFRS 1 concerning the transition from UK GAAP to IFRSsare given above. The financial statements have also been prepared in accordancewith IFRSs adopted for use in the European Union and therefore comply withArticle 4 of the EU IAS Regulation. IFRS1: First time adoption of International Financial Reporting Standards The rules for first-time adoption of IFRS are set out in IFRS 1, which requiresthat the Group establishes its IFRS accounting policies at its date oftransition, 1 February 2005, and apply these prospectively. The standard allowsa number of optional exemptions on transition to help companies simplify themove to IFRS. The exemptions selected by Thomson Intermedia Plc are set outbelow: Business Combinations (IFRS3) The Group has elected to apply IFRS 3 prospectively from the date of transitionto IFRS rather than to restate previous business combinations. Share based payments The Group has adopted the exemption to apply IFRS 2 'Share based payments' onlyto awards made after 7 November 2002 that had not vested by 1 January 2005. Financial instruments The Group has adopted the exemption not to restate comparatives for IAS 32 andIAS 39 and therefore the comparative information in the 2007 financialstatements will be presented on the existing UK GAAP basis and will not berestated in line with IAS 32 and IAS 39. Cumulative translation differences Cumulative translation differences in respect of foreign operations have beendeemed to be nil at the date of the transition. Presentation of financial information The layout of the primary financial information has been amended in accordancewith IAS1 'Presentation of financial information' from that presented under UKGAAP. This format and presentation may require modification as practice andindustry consensus develops. 1 Significant Accounting Policies The principal accounting policies adopted are set out below. Basis of consolidation The consolidated interim financial statements incorporate the financialstatements of the Company and entities controlled by the Company (itssubsidiaries) made up to 31 July 2006. Control is achieved where the Companyhas the power to govern the financial and operating policies of an investeeentity so as to obtain benefits from its activities. Where necessary, adjustments are made to the financial statements ofsubsidiaries to bring the accounting policies used into line with those used bythe Group. All intra-group transactions, balances, income and expenses areeliminated on consolidation. Business combinations • Acquisition method of accounting The cost of the acquisition is measured at the aggregate of the fair values, atthe date of exchange, of assets given, liabilities incurred or assumed, andequity instruments issued by the Group in exchange for control of the acquiree,plus any costs directly attributable to the business combination. Theacquiree's identifiable assets, liabilities and contingent liabilities that meetthe conditions for recognition under IFRS 3 are recognised at their fair valueat the acquisition date. The interest of minority shareholders in the acquiree is initially measured atthe minority's proportion of the net fair value of the assets, liabilities andcontingent liabilities recognised. • Merger method of accounting Although IFRS 3 outlawed merger accounting, under IFRS 1, the Group is notrequired to re-state acquisitions or business combinations prior to the date oftransition. Therefore the Group is permitted to retain their historical mergeraccounting position in the consolidated accounts. Goodwill Goodwill arising on consolidation represents the excess of the cost ofacquisition over the Group's interest in the fair value of the identifiableassets and liabilities of a subsidiary. Goodwill is initially recognised as anasset at cost and is subsequently measured at cost less any accumulatedimpairment losses. Goodwill which is recognised as an asset is reviewed forimpairment at least annually. Any impairment is recognised immediately inprofit and loss and is not subsequently reversed. For the purpose of impairment testing, goodwill is allocated to each of theGroup's cash-generating units expected to benefit from the synergies of thecombination. Cash-generating units to which goodwill has been allocated aretested for impairment annually, or more frequently when there is an indicationthat the unit may be impaired. If the recoverable amount of the cash-generatingunit is less than the carrying amount of the unit, the impairment loss isallocated first to reduce the carrying amount of any goodwill allocated to theunit and then to the other assets of the unit pro-rata on the basis of thecarrying amount of each asset in the unit. An impairment loss recognised forgoodwill is not reversed in a subsequent period. Goodwill arising on other acquisitions before the date of transition to IFRS hasbeen retained at the previous UK GAAP amounts subject to being tested forimpairment at that date. Revenue recognition Revenue is measured at the fair value of the consideration received orreceivable and represents amounts receivable for services provided in the normalcourse of business, net of discounts, VAT and other sales related taxes. Incomeis recognised evenly over the period of the contract for subscription to systemsand in accordance with the stage of completion of the contract activity forconsultancy income. If the outcome of a contract could not be estimated reliably, the contractrevenue would be recognised to the extent of contract costs incurred that it isprobable would be recoverable. Costs are recognised as an expense in the periodin which they are incurred. Foreign currencies For the purposes of the consolidated financial statements, the results andfinancial position of each Group company are expressed in pounds sterling, whichis the functional currency of the Company, and the presentation currency for theconsolidated financial statements. In preparing the financial statements of the individual companies, transactionsin currencies other than the entity's functional currency (foreign currencies)are recorded at the rates of exchange prevailing on the dates of transactions.At each balance sheet date, monetary assets and liabilities that are denominatedin foreign currencies are retranslated at the rates prevailing on the balancesheet date. For the purpose of presenting consolidated financial statements, the assets andliabilities of the Group's foreign operations are translated at exchange ratesprevailing on the balance sheet date. Income and expense items are translatedat the average exchange rates for the period, approximating to rates applicableat the dates of the transactions. The exchange differences arising from the retranslation of the opening balancesheet amounts of subsidiaries and the difference on translation of the resultsof subsidiaries are dealt with through equity. All other exchange differencesare dealt with through the income statement. Operating profit Operating profit is stated after charging restructuring costs, but beforeinvestment income and finance costs. Taxation The tax expense included in the Consolidated Income Statement comprises currentand deferred tax. Current tax is the expected tax payable on the taxable incomefor the period, using tax rates enacted or substantively enacted by the balancesheet date. Tax is recognised in the Consolidated Income Statement except to the extent thatit relates to items recognised directly in equity, in which case it isrecognised in equity. Deferred tax is provided using the balance sheet liability method, providing fortemporary differences between the carrying amounts of assets and liabilities forfinancial reporting purposes and the amounts used for taxation purposes.Deferred tax is calculated at the tax rates that are expected to apply in theperiod when the liability is settled or the asset is realised. Deferred tax ischarged or credited in the Consolidated Income Statement, except when it relatesto items charged or credited directly to equity, in which case deferred tax isalso dealt with in equity. Deferred tax liabilities are recognised for all taxable temporary differencesand deferred tax assets are recognised to the extent that it is probable thattaxable profits will be available against which deductible temporary differencescan be utilised. The carrying amount of deferred tax assets is reviewed at each balance sheetdate and reduced to the extent that it is no longer probable that sufficienttaxable profits will be available to allow all or part of the asset to berecovered. Deferred tax assets and liabilities are offset against each other when theyrelate to income taxes levied by the same tax jurisdiction and when the groupintends to settle its current tax assets and liabilities on a net basis. Internally-generated intangible assets - research and development expenditure An internally-generated intangible asset arising from the Group's developmentexpenditure is recognised only if all of the following conditions are met: • An asset is created that can be identified (such as software); • It is probable that the asset created will generated future economic benefits; and • The development cost of the asset can be measured reliably. Internally-generated intangible assets are amortised on a straight-line basisover their useful lives. Where internally-generated intangible asset can not berecognised, development expenditure is recognised as an expense in the period inwhich it is incurred. Purchased intangible assets Externally acquired intangible assets are initially recognised at cost andsubsequently amortised on a straight-line basis over their useful economiclives. The amortisation expense is included within the administrative expensesline in the income statement. Intangible assets are recognised on businesscombinations if they are separable from the acquired entity or give rise toother contractual/legal rights. The amounts ascribed to such intangibles arearrived at by using appropriate valuation techniques. In-process research anddevelopment programmes acquired in such combinations are recognised as an asseteven if subsequent expenditure is written off because the criteria specified inthe policy for research and development costs above are not met. The significantintangibles recognised by the group, their useful economic lives and the methodsused to determine the cost of intangibles acquired in a business combination areas follows: billetts Media Consulting - customer Straight line over 10 years Estimated discounted cash flowrelationshipsbilletts Marketing Sciences - Straight line over 5 years Estimated discounted cash flowcustomer relationshipsMPMA Customer relationships Straight line over 2 years Estimated discounted cash flowTrade name Straight line over 10 years Estimated royalty stream if rights were to be licensedNon-compete agreement Straight line over 1.5 years Estimated discounted cash flow of potentially lost revenue Plant and equipment Fixtures and equipment are stated at cost less accumulated depreciation and anyrecognised impairment loss. Depreciation is charged so as to write off the cost or valuation of assets overtheir estimated useful lives, the rates generally applicable are: Motor vehicles 25% per annum reducing balanceFurniture & fittings 25% per annum reducing balanceComputer equipment & software 25% per annum on costsPlant & equipment Straight line over 3-10 yearsOperating leases Over remaining useful life Impairment Assets that have an indefinite useful life are not subject to amortisation andare tested annually for impairment. Assets that are subject to amortisation ordepreciation are reviewed for impairment whenever events or changes incircumstances indicate that the carrying amount may not be recoverable. If anysuch condition exists, the recoverable amount of the asset is estimated in orderto determine the extent, if any, of the impairment loss. Where the asset doesnot generate cash flows that are independent from other assets, estimates aremade of the cashflows of the cash generating unit to which the asset belongs. Recoverable amount is the higher of fair value, less costs to sell, and value inuse. In assessing value in use, estimated future cashflows are discounted totheir present value using a discount rate appropriate to the specific asset orcash generating unit. If the recoverable amount of an asset or cash generating unit is estimated to beless than its carrying amount, the carrying value of the asset or cashgenerating unit is reduced to its recoverable amount. Impairment losses arerecognised immediately in the income statement. In respect of assets other than goodwill, an impairment loss is reversed ifthere has been a change in the estimates used to determine the recoverableamount. An impairment loss is reversed only to the extent that the asset'scarrying amount does not exceed the carrying amount that would have beendetermined, net of depreciation or amortisation, if not impairment loss had beenrecognised. Impairment losses in respect of goodwill are not reversed. Financial instruments Financial assets The group classifies its financial assets into one of the following categories,depending on the purpose for which the asset was acquired. The group'saccounting policy for each category is as follows: • Loans and receivables: These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise principally through the provision of goods and services to customers (trade debtors), but also incorporate other types of contractual monetary asset. They are carried at cost less any provision for impairment. • Held-to-maturity investments: These assets are non-derivative financial assets with fixed or determinable payments and fixed maturities that the group's management has the positive intention and ability to hold to maturity. These assets are measured at amortised cost, with changes through the income statement. Financial liabilities The group classifies its financial liabilities as 'Other financial liabilities',which includes the following items: • Trade payables and other short-term monetary liabilities, which are recognised at amortised cost. • Bank borrowings, and loan notes issued by the group are initially recognised at the amount advanced net of any transaction costs directly attributable to the issue of the instrument. Such interest bearing liabilities are subsequently measured at amortised cost using the effective interest rate method, which ensures that any interest expense over the period to repayment is at a constant rate on the balance of the liability carried in the balance sheet. "Interest expense" in this context includes initial transaction costs as well as any interest or coupon payable while the liability is outstanding. Provisions Provisions are recognised when the Group has a present obligation as a result ofa past event, and it is probable that the Group will be required to settle thatobligation. Provisions are measured at the directors' best estimate of theexpenditure required to settle the obligation at the balance sheet date, and arediscounted to present value where the effect is material. Share-based payments The Group has applied the requirements of IFRS 2 'Share-based Payment'. Inaccordance with the transitional provisions, IFRS 2 has been applied to allgrants of options after 7 November 2002 that were unvested at 1 January 2005. The Group issues equity-settled share-based payments only. These are measuredat fair value (excluding the effect of non market-based vesting conditions) atthe date of grant. The fair value determined at the grant date of theequity-settled share-based payments is expensed on a straight-line basis overthe vesting period, with a corresponding credit to equity, based on the Group'sestimate of shares that will eventually vest and adjusted for the effect of nonmarket-based vesting conditions. Fair value is measured by use of a binomial model, Black-Scholes. The expectedlife used in the model has been adjusted, based on management's best estimated,for the effects of non-transferability, exercise restrictions, and behaviouralconsiderations. Retirement benefits Defined contribution schemes: Contributions to defined contribution pensionschemes are charged to the income statement in the year to which they relate. Leased assets Where substantially all of the risks and rewards incidental to ownership of aleased asset have been transferred to the group (a "finance lease"), the assetis treated as if it had been purchased outright. The amount initially recognisedas an asset is the present value of the minimum lease payments payable over theterm of the lease. The corresponding lease commitment is shown as a liability.Lease payments are analysed between capital and interest. The interest elementis charged to the income statement over the period of the lease and iscalculated so that it represents a constant proportion of the lease liability.The capital element reduces the balance owed to the lessor. Where substantiallyall of the risks and rewards incidental to ownership are retained by the lessor(an "operating lease"), the total rentals payable under the lease are charged tothe income statement on a straight-line basis over the lease term. The land andbuildings elements of property leases are considered separately for the purposesof lease classification. 2. Taxation on profit During the period the deferred tax asset has been increased by £153,000 toprovide for the extent that trade losses will be recoverable against futureprofits in the foreseeable future. The tax charge for the period is estimated to be £190,000 on profits notallowable to be offset against losses carried forward. 3. Dividends No interim dividend is being proposed. 4. Earnings per share The calculation of the basic and diluted earnings per share based on thefollowing data: 31 July 2006 31 July 2005 IFRS IFRS £'000s £'000sEarning for the purpose of basic 1,062 800earnings per share being netprofit attributable to equityholders of the parent Adjustments for deferred tax (153) (231)Adjustments for goodwillamortisationAdjustments for 'purchased 194 -intangibles' amortisationAdjustments for share incentives 124 125Adjustments for performance bonus 176 -Adjustments for restructuring 101 -costs Earnings for the purpose of 1,504 694adjusted earnings per share Number of sharesWeighted average number of 31,296,925 28,744,247ordinary shares for the purpose ofbasic earnings per share Effect of dilutive potentialordinary sharesShare options 1,324,373 1,437,212Convertible loan notes Weighted average number of 32,621,298 30,181,459ordinary shares for the purpose ofdiluted earnings per share Basic earnings per share 3.39p 2.78pDiluted earnings per share 3.26p 2.65pAdjusted basic earnings per share 4.81p 2.41pAdjusted diluted earnings per 4.61p 2.30pshare 5. Other intangible assets Internally generated Purchased intangible Total intangible intangible assets assets assets £'000s £'000s £'000sCostAt 1 February 2006 3,304 3,395 6,699Additions 360 - 360 At 31 July 2006 3,664 3,395 7,059 Amortisation At 1 February 2006 (1,441) (162) (1,603)Provision for the period (304) (194) (498) At 31 July 2006 (1,745) (356) (2,101) Net book value At 31 July 2006 1,919 3,039 4,958At 31 January 2006 1,863 3,233 5,096 On 23 August 2005 the Company acquired the entire share capital of BCMG Limited(billetts) for a maximum total consideration of £13.1m. In line with IAS 38intangible assets owned by billetts have been independently valued by anexternal consultant and shown within 'other intangible assets' on the balancesheet. Amortisation is charged so as to write off the cost of the purchased intangibleassets over their estimated useful lives, the assets, initial values and periodsused are as follows: Purchased intangibles Asset value Useful economic life £'000s Years Media Consulting Customer relationships 2,859 10Marketing Sciences Customer relationships 271 5MPMA Customer relationships 43 2Trade name 215 10Non-compete 7 1.5 3,395 6. Debtors Unaudited Unaudited Audited* 6 months ended 6 months ended Year ended 31 July 06 31 July 05 31 January 06 £'000s £'000s £'000sTrade and other receivables duewithin one yearTrade receivables 4,672 1,383 3,875Other receivables 277 (30) 427Prepayments & accrued income 3,706 1,677 1,624 8,655 3,030 5,926Trade and other receivables due afterone yearPrepayments & accrued income 1,448 447 1,235 7. Post balance sheet event On 23 August 2005 the company purchased the entire issued share capital of 'billetts' (BCMG Ltd). The initial consideration was £7.5 million. Maximumpotential deferred consideration at the time of acquisition was £3.85 million,dependant upon performance up to 30 April 2006 and a further £1.75 million onperformance up to 30 April 2007. At 30 April 2006 billetts achieved the maximumearnout amount and the deferred consideration was financed through loan notesissued on 8 August 2006 with a total value of £3.71 million, net of shareholderbonuses. 8. Amendment to transition to International Financial Reporting Standards Subsequent to publication of our IFRS transition statement on 13 October 2006,clarification of the deferred tax impact of capitalisation of DevelopmentExpenditure has resulted in a further IFRS transitional adjustment beingrequired which has the effect of reducing the deferred tax asset at each balancesheet date. A reconciliation of the impact of this is shown below: Balance Sheet As at 31 Jan 2005 £,000 Deferred Tax asset, as previously stated 480Deferred Tax adjustment (525)Deferred Tax Liability as restated (45) Balance Sheet As at 31 Jan 2006 £,000 Deferred Tax Liability - opening balance as restated (45)Movement as previously reported 430Deferred Tax Adjustment (34)Deferred Tax asset - as restated 351 Income Statement - Six months ended 31 July 2005 - Effect of transition toIFRS UK GAAP Goodwill Research & development Prelinimary Preliminary Share based Deferred IFRS IFRS renumeration Tax Adjustments Development Amortisation expenditure expensed £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Revenue 3,457 - 3,457 Cost of sales (976) (976) Gross Profit 2,481 2,481 Share based expenses (115) (10) (10) (125) Administrative (1,865) 322 322 (1,543)expensesAmortisation of (6) 6 (266) (260) (266)intangible assets Total administrative (1,986) 6 322 (266) (10) 52 (1,934)expenses Operating profit 495 6 322 (266) (10) 52 547 Financial income 22 22 Financial expenses - - Net financing income 22 22 Profit before 517 6 322 (266) (10) 52 569taxation Deferred tax 248 (17) (17) 231 Profit after 765 6 322 (266) (10) (17) 35 800taxation Minority interest - - Retained profit for 765 6 322 (266) (10) (17) 35 800the year Attributable to: Equity holders of 765 800the parentMinority interests - - The restatement adjustments to the comparative interim period are similar innature to those restatement adjustments for the year ended 31 January 2006 whichare set out in the IFRS Restatement Statement available from our registeredoffice, 1 Westmoreland Road, Bromley, Kent BR2 0TB. Balance Sheet as at 31 July 2005 - Effect of transition to IFRS UK GAAP Goodwill Research Deferred Preliminary IFRS Preliminary & development Tax Adjustments IFRS Development Amortisation expenditure capitalisedNon-current assetsGoodwill 25 6 6 31Other intangible 2,982 (1,175) 1,807 1,807assetsProperty plant and 616 616equipmentInvestments 36 36Deferred tax asset 728 (542) (542) 186 1,405 6 2,982 (1,175) (542) 1,271 2,676 Current assetsTrade & other 3,030 3,030receivables: Duewithin one yearTrade & other 447 447receivables: Dueafter one yearCash & cash 1,455 1,455equivalents 4,932 4,932 Current liabilitiesTrade & other (657) (657)payablesAccruals & deferred (3,872) (3,872)income (4,529) (4,529) Net current assets 1,131 1,131 Non-currentliabilitiesAccruals & deferred (507) (507)income (507) (507) Total liabilities (5,036) (5,036) Net assets 1,301 6 2,982 (1,175) (542) 1,271 2,572 Capital & reserves Share capital 7,186 7,186Share premium 5,064 5,064Merger reserve (5,250) (5,250)Retained earnings (5,699) 6 2,982 (1,175) (542) 1,271 (4,428) 1,301 6 2,982 (1,175) (542) 1,271 2,572 The restatement adjustments to the comparative interim period are similar innature to those restatement adjustments for the year ended 31 January 2006 whichare set out in the IFRS Restatement Statement available from our registeredoffice, 1 Westmoreland Road, Bromley, Kent BR2 0TB. Independent Review Report to Thomson Intermedia plc Introduction We have been instructed by the company to review the financial information forthe six months ended 31 July 2006 which comprises the Consolidated IncomeStatement, the Consolidated Balance Sheet, the Consolidated Cashflow Statementand related notes. We have read the other information contained in the interimreport and considered whether it contains any apparent misstatements or materialinconsistencies with the financial information. Our report has been prepared in accordance with the terms of our engagement toassist the company in meeting the requirements of the Listing Rules of theFinancial Services Authority and for no other purpose. No person is entitled torely on this report unless such a person is a person entitled to rely upon thisreport by virtue of and for the purpose of our terms of engagement or has beenexpressly authorised to do so by our prior written consent. Save as above, we donot accept responsibility for this report to any other person or for any otherpurpose and we hereby expressly disclaim any and all such liability. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by the directors. The directors areresponsible for preparing the interim report in accordance with Listing Rules ofthe Financial Services Authority. As disclosed in the basis of preparation section, the next annual financialstatements of the company will be prepared in accordance with accountingstandards adopted for use in the European Union. This interim report has beenprepared in accordance with the basis set out in note 1. The accounting policies are consistent with those that the directors intend touse in the next annual financial statements. As explained in the basis ofpreparation section, there is however, a possibility that the directors maydetermine that some changes are necessary when preparing the full annualfinancial statements for the first time in accordance with accounting standardsadopted for use in the European Union. The IFRS standards and IFRICinterpretations that will be applicable and adopted for use in the EuropeanUnion at 30 April 2007 are not known with certainty at the time of preparingthis interim financial information. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4issued by the Auditing Practices Board for use in the United Kingdom. A reviewconsists principally of making enquiries of group management and applyinganalytical procedures to the financial information and underlying financial dataand based thereon, assessing whether the accounting policies and presentationhave been consistently applied unless otherwise disclosed. A review excludesaudit procedures such as tests of controls and verification of assets,liabilities and transactions. It is substantially less in scope than an auditperformed in accordance with United Kingdom Auditing Standards and thereforeprovides a lower level of assurance than an audit. Accordingly we do not expressan 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 31 July 2006. BDO Stoy Hayward LLPChartered Accountants8 Baker StreetLondonW1U 3LL Date: 18 October 2006 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Ebiquity