6th Jun 2006 07:03
Future PLC06 June 2006 6 June 2006 FUTURE PLC Interim results for the six months ended 31 March 2006 Future plc (LSE: FUTR), the international special-interest media group, todayannounces its interim results for the six months ended 31 March 2006. An analystpresentation will be held today at 10.00am at the offices of UBS, 1 FinsburyAvenue, London EC2M 2PP. Financial highlights for half-year to 31 March: 2006 2005 Turnover £114.7m £104.3mEBITAE profit * £6.3m £12.8mExceptional items £(3.5)m £(1.5)mImpairment of intangible assets £(11.0)m -Amortisation of intangible assets £(2.6)m £(0.3)mReported (loss) / profit before tax £(12.1)m £11.1mBasic (loss) / earnings per share (3.6)p 2.7pAdjusted earnings per share * 1.0p 3.1pProposed interim dividend 0.5p 0.5p * Adjusted results are presented to provide a better indication of overallfinancial performance and to reflect how the business is run on a day-to-daybasis. In running the business, Future management focuses on earnings beforeinterest, tax, amortisation and impairment of intangible assets, and exceptionalitems. Profit on disposal of subsidiaries is also excluded. For convenience werefer to this as EBITAE. Similarly, adjusted earnings per share are stated before these items, and afterthe tax charge for the period. Commenting on the results, Roger Parry, Future's Chairman said: "The first six months of Future's financial year have produced EBITAE profits athalf the level of the same period last year, despite growth in group turnover.Against last year, the major profit shortfall was in games titles. The reportedloss before tax is £12.1m against a profit before tax of £11.1m in the sameperiod last year. The Board has conducted an extensive review of the Group's strategy andoperations and has decided to scale back the ambitious policy of rapidexpansion. We continue to seek growth but the focus going forward will be onorganic growth and operational effectiveness. The continued tight management of our business is our number one priority. Ourefforts are focused on maximising the potential from our existing portfolio andfurther strengthening our online presence. Greg Ingham has stepped down as Chief Executive. We have appointed StevieSpring, who has a long experience in running media and advertising companies,and who will take up the post of Chief Executive on 3 July 2006. Because of timing issues, there will be a bias in EBITAE profits towards thesecond half of the financial year which the Board believes will be higher thanthose in the first half of this year. However, EBITAE for the current financialyear is considered likely to be approximately £2m below current marketexpectations. Over the coming 18 months we plan to focus on organic investment in our existingbusiness to strengthen our publishing offerings in specific sectors. Togetherwith lower expectations for 2006 this organic investment will depress reportedprofits in 2007 to a level below existing expectations." Enquiries: Future plcRoger Parry, Chairman Tel: 020 7042 4032John Bowman, Group Finance Director Tel: 01225 732281 Hogarth PartnershipJames Longfield/Georgina Briscoe Tel: 020 7357 9477 Chairman's Statement The first six months of Future's financial year have produced EBITAE profits athalf the level of the same period last year, despite growth in group turnover. This was caused by a number of factors but the main one is lower sales revenuesfrom magazines in the games sector, compared with last year. In addition,anticipated profits from more recently acquired titles, including ex-Highburytitles, have been reduced by weakness in consumer spending and haveunderperformed against our expectations. These acquired profits have not beenlarge enough to make up for the reduction in profit from existing titles. Thesefactors were accompanied by a higher level of investment in new productdevelopment than in the first half last year. Future's strength as the clear world leader in games magazines can also be aweakness as the business is exposed to the cycle of growth and decline inreadership that is closely linked to both the development and sale of new,improved games console technology and games software. For some years the strategy of Future has been to strengthen our profitablegames business but, at the same time, to launch and acquire titles and internetproperties in other areas of consumer interest, to diversify our portfolio. Over the past two years the management of Future has been engaged in the pursuitof rapid expansion. This was attempted at a time when special-interest monthlyconsumer magazines have come under considerable pressure from reduced consumerspending, the growth of weekly titles in the UK, and delay in production of newgames consoles. The Board has conducted an extensive review of the Group's strategy andoperations and has decided to scale back the ambitious policy of rapidexpansion. Accordingly we are today announcing the revision of our previouslystated target to double the size of the business by 2008. We continue to seekgrowth but the focus going forward will be on organic growth and operationaleffectiveness. New product development will be focused on existing areas ofexpertise and on further developing the Group's internet activities. We continue to manage our portfolio tightly. We have closed a number ofunsuccessful titles, rationalised our office accommodation, reduced ourproduction costs and cut headcount in certain areas. Our UK management has beenstreamlined to re-emphasise the role of the publisher and we have re-organisedour advertising sales teams to focus on customers, rather than products. Future has strong market positions in the games, technology, auto, music makingand sports magazine sectors and these will be the Group's main focus in future. We will continue to diversify away from our games magazine business, bylaunching new titles and by strategic and tactical acquisitions if they supportthe diversification strategy. However, our primary plan is to invest in a number of organic developmentprojects. This will reduce operating profits in the coming 18 months as theinvestment will be reflected in the income statement but we believe it is thebest long-term value-creating strategy in the current market conditions. Such investment is readily affordable as the Group is strongly cash generativeand has adequate headroom within its bank borrowing facility. The Board is actively considering the purchase of shares in the Company in orderto permit fulfilment of senior employee incentives. Board Greg Ingham has stepped down as Chief Executive. We have appointed StevieSpring, who has a long experience in running media and advertising companies,and who will take up the post of Chief Executive on 3 July 2006. Prospects Because of timing issues, there will be a bias in EBITAE profits towards thesecond half of the financial year which the Board believes will be significantlyhigher than those in the first half of this year. However, EBITAE for thecurrent financial year is considered likely to be approximately £2m belowcurrent market expectations. Over the coming 18 months we plan to focus on organic investment in our existingbusiness to strengthen our publishing offerings in specific sectors. Togetherwith lower expectations for 2006, this organic investment will depress reportedprofits in 2007 to a level below existing expectations. I would like to thank shareholders for their patience and hope that they will berewarded by seeing the Company grow in value as a result of the new approach wehave adopted. Roger ParryChairman6 June 2006 Interim Report Financial results for half-year to 31 March 2006 Group turnover was £114.7m (2005: £104.3m). EBITAE profit was £6.3m (2005:£12.8m) before exceptional costs (£3.5m), amortisation (£2.6m) and impairment(£11.0m) of intangible assets. After these and net financing costs of £1.3m, theGroup recorded a pre-tax loss of £12.1m for the first half-year (2005: £11.1mpre-tax profit). Adjusted earnings per share were 1.0p (2005: 3.1p). Interim dividend An interim dividend of 0.5p per share (2005: 0.5p) will be paid on 5 July 2006to all shareholders on the register on 16 June 2006. The ex-dividend date is 14June 2006. Turnover Turnover rose by 10% (8% in constant currencies) to £114.7m. Of this, £20.9m wasgenerated from acquisitions made during the previous financial year. Excludingthese, turnover fell by 8%. This reduction is largely due to reduced sales of,and advertising in, our games magazines. The Group's top 10 titles in thehalf-year accounted for 27% of Group turnover (2005: 34%). Analysis of turnover for half-year to 31 March % of 2006 2005 Change Group £m £m %------------- ------- ----------- ----------- ----------UK 56% 64.2 55.8 + 15%US 26% 29.9 27.1 + 10%Mainland Europe 18% 21.3 22.0 - 3%Intra-group (0.7) (0.6)------------- ------- ----------- ----------- ----------Group turnover 100% 114.7 104.3 + 10%------------- ------- ----------- ----------- ---------- Performance of recent acquisitions During the year to 30 September 2005 Future spent £48.2m on eight acquisitions.In the half-year to 31 March 2006 these acquired titles generated turnover of£20.9m and EBITAE profit of £1.2m, including £0.8m from former Highbury titles. The integration of the acquired titles has progressed well, but overall theyhave under-performed against our expectations, with weakness particularly in themarket for performance cars magazines and Future's women's interest titles. New product development (NPD) Net spend on NPD in the first half-year was £2.8m (2005: £1.6m), the largestelements being on the launch of www.gamesradar.com and developing other websitesand the continuing development of action sports magazines in the US. Analysis of profits for half-year to 31 March --------------------- ----------- ------------ ----------- 2006 2005 Change £m £m £m--------------------- ----------- ------------ -----------UK 6.4 9.9 (3.5)US (0.3) 2.7 (3.0)Mainland Europe 1.7 1.8 (0.1)Central costs (1.5) (1.6) 0.1--------------------- ----------- ------------ -----------EBITAE profits 6.3 12.8 (6.5)--------------------- ----------- ------------ -----------Exceptional items (3.5) (1.5) (2.0)Amortisation of intangibles (2.6) (0.3) (2.3)Impairment of intangible assets (11.0) - (11.0)Net financing (costs)/income (1.3) 0.1 (1.4)--------------------- ----------- ------------ -----------Pre-tax (loss) / profit (12.1) 11.1 (23.2)--------------------- ----------- ------------ ----------- Explanation of reduction in profit EBITAE profits were less than half those of the previous year at £6.3m (2005:£12.8m). The Group's existing business experienced a decline in profits, partlydue to phasing, and this decline was only partly offset by the profits fromtitles acquired during the financial year 2005. Against last year's interim results, the major profit shortfall was in gamestitles. Against our budget expectations, the major profit shortfalls were inperformance cars, women's interest and games titles. By territory, the decline in profitability has come from our UK and USbusinesses with Mainland Europe maintaining the level of last year. The reasonsfor the decline in UK and US profits are set out below. UK performance in half-year ------------------------------ --------- -------- -------- 2006 2005 Change £m £m %------------------------------ --------- -------- --------Circulation revenue 41.6 39.0 + 7%Advertising revenue 20.2 14.7 + 37%Other revenue 2.4 2.1 + 14%------------------------------ --------- -------- --------Turnover 64.2 55.8 + 15%EBITAE profit 6.4 9.9 - 35%------------------------------ --------- -------- --------EBITAE profit margin 10% 18%------------------------------ --------- -------- -------- UK turnover for the half year rose by £8.4m or 15% driven by the full half-yearimpact of titles acquired during the prior financial year. This full half-yearimpact amounted to £12.4m but was partly offset by a fall in turnover of theexisting portfolio of titles which amounted to £4.0m, predominantly in thecomputer games sector. At the EBITAE profit level, titles acquired in the prior financial yearcontributed an additional £0.5m year on year but this has been more than offsetby a £4.0m fall in profits from the existing portfolio of titles. We have soldour Spanish Homes Magazine title for nominal consideration. The reduction in EBITAE for the half-year reflects the increase in the overheadbase resulting from taking on new rented premises in Bath and London in arationalisation of our property portfolio. US performance in half-year ---------------------------- --------- -------- ---------- 2006 2005 Change $m $m %---------------------------- --------- -------- ----------Circulation revenue 23.3 27.6 - 16%Advertising revenue 28.3 22.3 + 27%Other revenue 0.7 0.9 - 22%---------------------------- --------- -------- ----------Turnover 52.3 50.8 + 3%EBITAE profit (0.6) 5.1 ----------------------------- --------- -------- ----------EBITAE profit margin - 10%---------------------------- --------- -------- ---------- US turnover for the half year rose by $1.5m or 3% driven by the full half-yearimpact of titles acquired during the prior financial year. This full half-yearimpact amounted to $7.8m but was partly offset by a fall in turnover fromexisting games titles which amounted to $5.5m, partly due to phasing. At the EBITAE profit level titles acquired in the prior financial yearcontributed an additional $0.9m. However, this has been more than offset by theimpact of NPD investment in magazine launches in action sports, scrapbooking,music and in a website launch in games (Games Radar), together with a reductionin profits from the existing games portfolio. Mainland Europe performance in half-year ------------------------------- ---------- ------ ---------- 2006 2005 Change •m •m %------------------------------- ---------- ------ ----------Circulation revenue 23.9 24.8 - 4%Advertising revenue 7.2 6.8 + 6%Other revenue 0.1 0.1 -------------------------------- ---------- ------ ----------Turnover 31.2 31.7 - 2%EBITAE profit 2.5 2.6 - 4%------------------------------- ---------- ------ ----------EBITAE profit margin 8% 8%------------------------------- ---------- ------ ---------- Mainland Europe turnover was slightly below that for last year. Despite this,EBITAE profit held steady, reflecting the tight management control of thesebusinesses. Both face tough newsstand trading. EBITAE profit for Mainland Europeis stated after intra-group licence fees of €0.7m (2005: €0.6m). Exceptional items These amounted to £3.5m (2005: £1.5m). During the period, we completed therelocation of our employees in London to a single office in Marylebone, NW1. Acharge of £2.8m relating mainly to the remaining lease commitments on previousoffices has been made in the period. The Group also incurred £0.6m of redundancycosts and £0.1m of other restructuring, as part of the integration of acquiredtitles and the continued tight management of the business. Taxation The tax credit for the half-year was £0.3m (2005: tax charge of £2.2m) which hasbeen calculated using an estimated tax rate of 31% (2005: 19%) applied totaxable profits. Taxable profits exclude the group charge for impairment ofintangible assets. This is the rate estimated to apply to taxable profits forthe full financial year. Cash flow and net debt Net debt at 30 September 2005 was £39.5m. Net cash inflow from operatingactivities for the half-year was £12.7m (2005: £11.4m) representing a veryhealthy conversion ratio of profits to cash supported by tight management ofworking capital. Major cash outflows were for capital expenditure (£3.3m), theacquisition of Revolver magazine in the US (£2.4m) and payment of last year'sfinal dividend (£4.2m). Net debt at 31 March 2006 was £38.3m. International Financial Reporting Standards (IFRS) The interim results and comparative figures reflect the application of IFRS. Aspreviously communicated the most significant impacts arising from IFRS relate toaccounting for intangible assets, and share-based payments. On 6 April 2006 theGroup published a restatement of its audited results for the year ended 30September 2005 from UK GAAP to IFRS. A copy of that restatement is available onthe Company's website www.futureplc.com/future/investors. Intangible assets We have taken an impairment charge of £11.0m against the carrying value of theintangible assets relating to Future Italy, to reflect more accurately thetrading levels of this business. This is a non-cash charge. Current trading and prospects Because of timing issues there will be a bias in EBITAE profits towards thesecond half of the financial year which the Board believes will be higher thanthose in the first half of this year. However, EBITAE for the current financialyear is considered likely to be approximately £2m below current marketexpectations. The second half bias will be driven by: • Full period impact of titles acquired during the prior financial year.• Phasing of NPD spend, in particular in the US.• Timing of the publication of issues, in particular in the UK. Over the coming 18 months we plan to focus on organic investment in our existingbusiness to strengthen our publishing offerings in specific sectors. Togetherwith lower expectations for 2006, this organic investment will depress reportedprofits in 2007 to a level below existing expectations. The continued tight management of our business is our number one priority, andthis, together with our strong cash generation and level of bank debt, providesthe reassurance that we can withstand the current external pressures facing thebusiness. Our efforts are focused on maximising the potential from our existingportfolio and further strengthening our online presence. Roger Parry, ChairmanJohn Bowman, Group Finance DirectorMichael Penington, senior independent non-executive DirectorPatrick Taylor, independent non-executive DirectorJohn Mellon, independent non-executive Director 6 June 2006 Consolidated Income Statementfor the six months ended 31 March 2006 ------------------------- ------ -------- -------- --------- 6 months to 6 months to 12 months to 31 March 31 March 30 September 2006 2005 2005 Note £m £m £m------------------------- ------ -------- -------- ---------Turnover 1 114.7 104.3 212.3------------------------- ------ -------- -------- ---------------------------------- ------ -------- -------- ---------Operatingprofit beforeexceptionalitems andamortisationof intangibleassets 6.3 12.8 20.4Exceptionalitems 3 (3.5) (1.5) (5.1)Exceptionalimpairment ofintangibleassets 2,9 (11.0) - -Amortisationof intangibleassets 2,9 (2.6) (0.3) (1.8)------------------------- ------ -------- -------- --------- Operating(loss)/profit 2 (10.8) 11.0 13.5 Financialincome 5 0.2 0.3 0.5Financial costs 5 (1.5) (0.2) (1.5)------------------------- ------ -------- -------- ---------Net financing(costs)/income 5 (1.3) 0.1 (1.0)------------------------- ------ -------- -------- ---------(Loss)/profiton ordinaryactivitiesbefore tax 1 (12.1) 11.1 12.5Tax on(loss)/profiton ordinaryactivities 6 0.3 (2.2) (2.2)------------------------- ------ -------- -------- ---------(Loss)/profitfor thefinancialperiod (11.8) 8.9 10.3------------------------- ------ -------- -------- --------- Earnings per 1p Ordinary share ------------------------- -------- -------- -------- --------- Note 6 months to 6 months to 12 months to 31 March 31 March 30 September 2006 2005 2005 pence pence pence------------------------- -------- -------- -------- ---------Basic (loss)/earningsper share 8 (3.6) 2.7 3.2Diluted (loss)/earningsper share 8 (3.6) 2.7 3.2------------------------- -------- -------- -------- --------- Consolidated statement of changes in equityfor the six months ended 31 March 2006 Note Share Share Merger Retained Total capital premium reserve earnings equity £m £m £m £m £m-------------------- ----- ------- ------- -------- -------- -------Balance at 1 October 2005 3.3 24.4 109.0 (19.2) 117.5-------------------- ----- ------- ------- -------- -------- -------Loss for the period - - - (11.8) (11.8)Currency translation differences - - - 0.2 0.2Dividend relating to 2005 7 - - - (4.2) (4.2)-------------------- ----- ------- ------- -------- -------- -------Total recognised loss for the period - - - (15.8) (15.8)Share option schemes - value of employees' services - - - 0.3 0.3New share capital subscribed - 0.1 - - 0.1-------------------- ----- ------- ------- -------- -------- -------Balance at 31 March 2006 3.3 24.5 109.0 (34.7) 102.1-------------------- ----- ------- ------- -------- -------- ------- -------------------- ----- ------- ------- -------- -------- -------Balance at 1 October 2004 3.2 23.7 109.0 (23.6) 112.3-------------------- ----- ------- ------- -------- -------- -------Profit for the period - - - 8.9 8.9Dividend relating to 2004 7 - - - (4.9) (4.9)-------------------- ----- ------- ------- -------- -------- -------Total recognised income for the period - - - 4.0 4.0 Share option schemes - value of employees' services - - - 0.1 0.1New share capital subscribed 0.1 0.5 - - 0.6-------------------- ----- ------- ------- -------- -------- -------Balance at 31 March 2005 3.3 24.2 109.0 (19.5) 117.0-------------------- ----- ------- ------- -------- -------- ------- -------------------- ----- ------- ------- -------- -------- -------Balance at 1 October 2004 3.2 23.7 109.0 (23.6) 112.3-------------------- ----- ------- ------- -------- -------- -------Profit for the year - - - 10.3 10.3Currency translation differences - - - 0.2 0.2Dividend relating to 2004 7 - - - (4.9) (4.9)Dividend relating to 2005 7 - - - (1.6) (1.6)-------------------- ----- ------- ------- -------- -------- -------Total recognised income for the year - - - 4.0 4.0 Share option schemes - value of employees' services - - - 0.4 0.4New share capital subscribed 0.1 0.7 - - 0.8-------------------- ----- ------- ------- -------- -------- -------Balance at 30 September 2005 3.3 24.4 109.0 (19.2) 117.5-------------------- ----- ------- ------- -------- -------- ------- Consolidated balance sheetas at 31 March 2006----------------------------- ----- --------- --------- --------- 31 March 31 March 30 September 2006 2005 2005 Note £m £m £m----------------------------- ----- --------- --------- ---------AssetsNon-current assetsProperty, plant and equipment 6.4 3.4 3.7Intangible assets - goodwill 9 138.5 116.8 147.3Intangible assets - other 9 10.8 2.1 12.9Deferred tax 2.2 2.3 1.9----------------------------- ----- --------- --------- ---------Total non-current assets 157.9 124.6 165.8----------------------------- ----- --------- --------- --------- Current assetsInventories 7.1 5.6 6.2Corporation tax recoverable 2.9 0.6 2.3Trade and other receivables 42.2 38.0 46.2Cash and cash equivalents 19.4 10.4 10.7----------------------------- ----- --------- --------- ---------Total current assets 71.6 54.6 65.4----------------------------- ----- --------- --------- ---------Total assets 229.5 179.2 231.2----------------------------- ----- --------- --------- --------- Equity and liabilitiesEquityIssued share capital 3.3 3.3 3.3Share premium account 24.5 24.2 24.4Merger reserve 109.0 109.0 109.0Retained earnings (34.7) (19.5) (19.2)----------------------------- ----- --------- --------- ---------Total equity 102.1 117.0 117.5----------------------------- ----- --------- --------- --------- Non-current liabilitiesInterest-bearing loansand borrowings 27.8 - 29.8Deferred tax 2.3 0.8 2.3Provisions 3.7 1.1 2.2Other 2.2 - 2.2----------------------------- ----- --------- --------- ---------Total non-current liabilities 36.0 1.9 36.5----------------------------- ----- --------- --------- --------- Current liabilitiesInterest-bearing loansand borrowings 29.9 3.7 20.4Trade and other payables 61.3 55.5 56.5Corporation tax payable 0.2 1.1 0.3----------------------------- ----- --------- --------- ---------Total current liabilities 91.4 60.3 77.2----------------------------- ----- --------- --------- ---------Total liabilities 127.4 62.2 113.7----------------------------- ----- --------- --------- ---------Total equity and liabilities 229.5 179.2 231.2----------------------------- ----- --------- --------- --------- Consolidated cash flow statement for the six months ended 31 March 2006 --------------------------- --------- --------- --------- 6 months to 6 months to 12 months to 31 March 31 March 30 September 2006 2005 2005 £m £m £m--------------------------- --------- --------- ---------Cash flows from operatingactivitiesCash generated from operations 12.7 11.4 9.8Interest received 0.2 0.3 0.5Tax received 0.2 1.4 1.4Interest paid (1.1) (0.2) (0.8)Tax paid (0.8) (3.6) (5.5)--------------------------- --------- --------- ---------Net cash generated fromoperating activities 11.2 9.3 5.4--------------------------- --------- --------- --------- Cash flows from investingactivitiesPurchase of property, plant andequipment (3.3) (0.6) (1.8)Purchase of magazine titles (2.4) (1.1) (15.3)Purchase of subsidiary undertakings - (8.6) (33.6)Net cash acquired with subsidiaryundertakings - 0.8 0.8Disposal of subsidiary undertakings - 1.6 2.1Payment of deferred consideration - (0.1) (0.1)--------------------------- --------- --------- ---------Net cash used in investingactivities (5.7) (8.0) (47.9)--------------------------- --------- --------- --------- Cash flows from financingactivitiesProceeds from issue ofOrdinary share capital 0.1 0.6 0.8Draw down of bank loans 7.4 4.0 53.6Issue costs of new bank loan - - (0.4)Repayment of bank loans - (4.8) (8.7)Equity dividends paid (4.2) (4.9) (6.5)--------------------------- --------- --------- ---------Net cash generated from/(used in)financing activities 3.3 (5.1) 38.8--------------------------- --------- --------- --------- Net increase/(decrease) in cashand cash equivalents 8.8 (3.8) (3.7)Cash and cash equivalents atbeginning of period 10.7 14.5 14.5Exchange adjustments (0.1) (0.3) (0.1)--------------------------- --------- --------- ---------Cash and cash equivalents atend of period 19.4 10.4 10.7--------------------------- --------- --------- --------- Notes to the consolidated cash flow statementfor the six months ended 31 March 2006 A. Cash flows from operating activities The reconciliation of operating (loss)/profit to cash flows from operatingactivities is as follows: --------------------------------------- --------- --------- --------- 6 months to 6 months to 12 months to 31 March 31 March 30 September 2006 2005 2005 £m £m £m--------------------------------------- --------- --------- ---------Operating (loss)/profit for the period (10.8) 11.0 13.5Adjustments for:Depreciation charge 0.9 0.5 1.2Profit on disposal of subsidiaries - (1.6) (2.1)Amortisation of intangible assets 2.6 0.3 1.8Impairment of intangible assets 11.0 - ---------------------------------------- --------- --------- ---------Share option schemes - value of employees' services 0.3 0.1 0.4--------------------------------------- --------- --------- ---------Operating profit before changes in working capital andprovisions 4.0 10.3 14.8Movement in provisions 1.5 (0.4) 1.0Increase in inventories (0.9) (0.5) (1.0)Decrease/(increase) in trade and other receivables 4.0 (1.3) (7.9)Increase in trade and other payables 4.1 3.3 2.9--------------------------------------- --------- --------- ---------Cash generated from operations 12.7 11.4 9.8--------------------------------------- --------- --------- --------- B. Analysis of net debt ----------------- --------- -------- --------- -------- --------- At 1 October Cash Non-cash Exchange At 31 March 2005 flows changes movements 2006 £m £m £m £m £m----------------- --------- -------- --------- -------- ---------Cash and cashequivalents 10.7 8.8 - (0.1) 19.4Debt due within oneyear (20.4) (7.4) (2.0) (0.1) (29.9)Debt due aftermore than one year (29.8) - 2.0 - (27.8)----------------- --------- -------- --------- -------- ---------Net debt (39.5) 1.4 - (0.2) (38.3)----------------- --------- -------- --------- -------- --------- C. Reconciliation of movement in net (debt)/cash ------------------------------- --------- -------- --------- 6 months to 6 months to 12 months to 31 March 31 March 30 September 2006 2005 2005 £m £m £m------------------------------- --------- -------- ---------Net (debt)/cash at start of period (39.5) 9.8 9.8Increase/(decrease) in cash and cashequivalents 8.8 (3.8) (3.7)Overdraft acquired with subsidiaries - (0.3) (0.4)Movement in overdraft - 0.3 -Movement in borrowings (7.4) 0.8 (44.9)Exchange movements (0.2) (0.1) (0.3)------------------------------- --------- -------- ---------Net (debt)/cash at end of period (38.3) 6.7 (39.5)------------------------------- --------- -------- --------- Accounting policies Basis of accounting These interim results do not constitute statutory accounts as defined in section240 of the Companies Act 1985 and have not been audited. The auditors havecarried out a review of the interim results and their report will be set out inthe printed Interim Report. These interim results are the first interim financial statements following theadoption of International Financial Reporting Standards (IFRS) and are preparedin accordance with the Listing Rules of the Financial Services Authority. In accordance with EU legislation the Group's first annual financial statementsto be prepared in accordance with IFRS will be for the year ending 30 September2006. The financial information contained in these results in respect of the yearended 30 September 2005 has been produced using extracts from the auditedstatutory accounts as prepared under UK GAAP, amended by adjustments requiredunder IFRS. The audited statutory accounts for the year ended 30 September 2005,upon which an unqualified audit opinion was given, have been delivered to theRegistrar of Companies. In anticipation of changes required under IFRS the Group has published adocument - Restatement from UK GAAP to International Financial ReportingStandards for the year ended 30 September 2005 (the Restatement document). TheRestatement document sets out the effect of adopting IFRS for the Group, thebasis of preparation and details of significant adjustments in respect of theopening balance sheet at 1 October 2004, the results for the year ended 30September 2005 and the balance sheet at 30 September 2005. The most significantimpacts arising as a result of adopting IFRS relate to accounting for intangibleassets (note 9), share-based payments (note 4) and dividends (note 7). TheRestatement document was published on 6 April 2006 and is available on ourwebsite (www.futureplc.com/future/investors), along with full details of theGroup's accounting policies. IFRS are subject to ongoing amendment and additional interpretations andtherefore the accounting policies for the year ending 30 September 2006 will befinally determined only when the financial statements for that year areprepared. The financial information contained in this interim results announcement inrespect of the 6 month periods ended 31 March 2006 and 31 March 2005 has beenprepared on a basis consistent with that used in the Restatement document and inaccordance with all IFRS and IFRIC interpretations that had been published by 31March 2006. The standards used are those endorsed by the EU together with thosestandards that have been issued by the IASB but which had not been endorsed by31 March 2006. Notes to the financial statements 1. Segmental reporting The Group is organised and managed primarily on a geographical basis. Ananalysis of turnover and results by primary reporting segment is set out below: a) Turnover by origin ---------------------- --------- --------- ----------- 6 months to 6 months to 12 months to 31 March 31 March 30 September 2006 2005 2005 £m £m £m---------------------- --------- --------- -----------United Kingdom 64.2 55.8 118.4United States 29.9 27.1 55.5Mainland Europe 21.3 22.0 39.7Turnover between segments (0.7) (0.6) (1.3)---------------------- --------- --------- -----------Total 114.7 104.3 212.3---------------------- --------- --------- ----------- b) (Loss)/profit before tax by origin ---------------------- --------- --------- ----------- 6 months to 6 months to 12 months to 31 March 31 March 30 September 2006 2005 2005 £m £m £m---------------------- --------- --------- -----------United Kingdom 0.9 8.9 10.8United States (0.6) 3.0 3.6Mainland Europe (9.4) 1.8 2.1Central costs (3.0) (2.6) (4.0)---------------------- --------- --------- -----------Total (12.1) 11.1 12.5---------------------- --------- --------- ----------- Additional analysis of the Group's turnover by type and destination is set outbelow: i) Turnover by type ---------------------- --------- --------- ----------- 6 months to 6 months to 12 months to 31 March 31 March 30 September 2006 2005 2005 £m £m £m---------------------- --------- --------- -----------Circulation 71.3 70.9 139.0Advertising 41.2 31.3 68.1Other 2.2 2.1 5.2---------------------- --------- --------- -----------Total 114.7 104.3 212.3---------------------- --------- --------- ----------- ii) Turnover by destination ---------------------- --------- --------- ----------- 6 months to 6 months to 12 months to 31 March 31 March 30 September 2006 2005 2005 £m £m £m---------------------- --------- --------- -----------United Kingdom 53.5 47.5 99.4United States 31.5 27.3 57.0Mainland Europe 26.1 24.8 47.1Rest of the world 4.3 5.3 10.1Turnover between segments (0.7) (0.6) (1.3)---------------------- --------- --------- -----------Total 114.7 104.3 212.3---------------------- --------- --------- ----------- 2. Operating (loss)/profit ---------------------- --------- --------- ----------- 6 months to 6 months to 12 months to 31 March 31 March 30 September 2006 2005 2005 £m £m £m---------------------- --------- --------- -----------Turnover 114.7 104.3 212.3Cost of sales (83.7) (69.3) (144.7)---------------------- --------- --------- -----------Gross profit 31.0 35.0 67.6Distribution expenses (7.5) (6.9) (14.4)Administration expenses(including exceptional items) (20.7) (16.8) (37.9)Exceptional impairment ofintangible assets (11.0) - -Amortisation of intangibleassets (2.6) (0.3) (1.8)---------------------- --------- --------- -----------Operating (loss)/profit (10.8) 11.0 13.5---------------------- --------- --------- ----------- 3. Exceptional items ---------------------- --------- --------- ----------- 6 months to 6 months to 12 months to 31 March 31 March 30 September 2006 2005 2005 £m £m £m---------------------- --------- --------- -----------Property costs 2.8 0.2 2.4Restructuring costs 0.7 0.7 2.6Aborted bid costs - 2.2 2.2Profit on disposal ofsubsidiaries - (1.6) (2.1)---------------------- --------- --------- -----------Total 3.5 1.5 5.1---------------------- --------- --------- ----------- The property costs consist mainly of a vacant property provision made againstoffice space in Baker Street, London which was vacated in January 2006. The restructuring costs relate to the costs incurred as a result of integratingbusinesses and titles acquired during the year ended 30 September 2005. The aborted bid costs relate to the external professional fees and other costsof the aborted bid for the entire issued share capital of Highbury HouseCommunications plc during the first half of 2005. 4. Employees ---------------------- --------- --------- ----------- 6 months to 6 months to 12 months to 31 March 31 March 30 September 2006 2005 2005 £m £m £m---------------------- --------- --------- -----------Wages and salaries 24.8 19.6 42.5Social security costs 4.0 3.3 6.9Other pension costs 0.6 0.3 0.8---------------------- --------- --------- -----------Share option schemes - value of employees' services 0.3 0.1 0.4---------------------- --------- --------- -----------Total 29.7 23.3 50.6---------------------- --------- --------- ----------- IFRS 2 (Share-based payments) requires an expense for equity instruments grantedto be recognised over the appropriate vesting period, measured at their fairvalue at the date of grant. The Group has used the Black Scholes model to value instruments with nonmarket-based performance criteria such as earnings per share. For instrumentswith market-based performance criteria, notably total shareholder return, theGroup has used a Monte Carlo model to determine the fair value. The expense for the 6 months ended 31 March 2006 of £0.3m has been credited toreserves. 5. Financial income and costs ------------------------ -------- -------- ---------- 6 months to 6 months to 12 months to 31 March 31 March 30 September 2006 2005 2005 £m £m £m------------------------ -------- -------- ----------Interest receivable 0.2 0.3 0.5------------------------ -------- -------- ----------Total financial income 0.2 0.3 0.5------------------------ -------- -------- ---------------------------------- -------- -------- ----------Interest payable oninterest-bearing loans andborrowings (1.4) (0.1) (1.1)Net foreign exchange losses (0.1) (0.1) -Write-off of debt issue costs - - (0.4)------------------------ -------- -------- ----------Total financial costs (1.5) (0.2) (1.5)------------------------ -------- -------- ----------Net financial (costs)/income (1.3) 0.1 (1.0)------------------------ -------- -------- ---------- 6. Tax on (loss)/profit on ordinary activities The tax credit for the six months ended 31 March 2006 is based on the estimatedeffective rate of tax for the full year to 30 September 2006. The effective rateis applied to the profit before tax and impairment but after exceptional items. 7. Dividends ------------------------- -------- -------- ----------Equity dividends 6 months to 6 months to 12 months to 31 March 31 March 30 September 2006 2005 2005------------------------- -------- -------- ----------Number of shares in issueat end of period (million) 326.5 325.8 326.3Dividends paid in period(pence per share) 1.3 1.5 2.0------------------------- -------- -------- ----------Dividends paid in period (£m) 4.2 4.9 6.5------------------------- -------- -------- ---------- In accordance with IFRS dividends declared are recognised in the period in whichthey are approved and paid. The dividend of £4.2m paid during the period ended 31 March 2006 relates to thefinal dividend of 1.3 pence per share declared for the year ended 30 September2005. The dividend of £4.9m paid during the six month period ended 31 March 2005relates to the final dividend of 1.5 pence per share declared for the ninemonths ended 30 September 2004. The dividends totalling £6.5m paid during the year ended 30 September 2005relate to the interim dividend for the six month period to 31 March 2005 of 0.5pence per share (£1.6m) and the final dividend declared for the nine monthsended 30 September 2004 of 1.5 pence per share (£4.9m). 8. Earnings per share Basic earnings per share are calculated using the weighted average number ofOrdinary shares outstanding during the period. Diluted earnings per share havebeen calculated by taking into account the dilutive effect of shares that wouldbe issued on conversion into Ordinary shares of options held under employeeshare schemes. The adjusted earnings per share removes the effect of the amortisation andimpairment of intangible assets, exceptional items (including profit on disposalof subsidiaries) and any related tax effects from the calculation as follows: Adjustments to (loss)/profit on ordinary activities after tax ---------------------------- --------- --------- ----------- 6 months to 6 months to 12 months to 31 March 31 March 30 September 2006 2005 2005 £m £m £m---------------------------- --------- --------- -----------(Loss)/profit on ordinaryactivities after tax (11.8) 8.9 10.3Add: amortisation of intangibleassets 2.6 0.3 1.8Add: impairment of intangibleassets 11.0 - -Add: exceptional items 3.5 1.5 5.1Tax effect of the aboveadjustments (2.0) (0.5) (2.8)---------------------------- --------- --------- -----------Adjusted profit on ordinaryactivities after tax 3.3 10.2 14.4---------------------------- --------- --------- ----------- ----------------------------------- --------- --------- ----------- 6 months to 6 months to 12 months to 31 March 31 March 30 September 2006 2005 2005 ----------------------------------- --------- --------- -----------Weighted average number of sharesoutstanding during the period: - basic 326,404,239 324,850,523 325,468,072 - dilutive effect of share options 181,529 1,125,610 937,654 - diluted 326,585,768 325,976,133 326,405,726Basic (loss)/earnings per share (in pence) (3.6) 2.7 3.2Adjusted basic earnings per share(in pence) 1.0 3.1 4.4Diluted (loss)/earnings pershare (in pence) (3.6) 2.7 3.2Adjusted diluted earnings per share(in pence) 1.0 3.1 4.4----------------------------------- --------- --------- ----------- The share options do not have a dilutive effect where there is a loss. The adjustments have the following effect: ---------------------- --------- --------- ----------- 6 months to 6 months to 12 months to 31 March 31 March 30 September 2006 2005 2005 pence pence pence---------------------- --------- --------- -----------Basic (loss)/earnings per share (3.6) 2.7 3.2Amortisation of intangibleassets 0.8 0.1 0.5Impairment of intangible assets 3.4 - -Exceptional items 1.1 0.5 1.6Tax effect of the aboveadjustments (0.7) (0.2) (0.9)---------------------- --------- --------- -----------Adjusted basic earnings pershare 1.0 3.1 4.4---------------------- --------- --------- ----------- Diluted (loss)/earnings pershare (3.6) 2.7 3.2Amortisation of intangibleassets 0.8 0.1 0.5Impairment of intangible assets 3.4 - -Exceptional items 1.1 0.5 1.6Tax effect of the aboveadjustments (0.7) (0.2) (0.9)---------------------- --------- --------- -----------Adjusted diluted earnings per share 1.0 3.1 4.4---------------------- --------- --------- ----------- 9. Intangible assets ------------------------ -------- -------- -------- -------- Goodwill Magazine Other Total related £m £m £m £m------------------------ -------- -------- -------- --------CostAt 1 October 2005 363.7 14.2 1.8 379.7Additions 1.4 1.0 - 2.4Adjustments to fair value onprior year acquisitions 0.1 - - 0.1Exchange adjustments 0.6 - - 0.6------------------------ -------- -------- -------- --------At 31 March 2006 365.8 15.2 1.8 382.8------------------------ -------- -------- -------- -------- ------------------------ -------- -------- -------- --------AmortisationAt 1 October 2005 (216.4) (1.5) (1.6) (219.5)Charge for the period - (2.5) (0.1) (2.6)Impairment charges (10.5) (0.5) - (11.0)Exchange adjustments (0.4) - - (0.4)------------------------ -------- -------- -------- --------At 31 March 2006 (227.3) (4.5) (1.7) (233.5)------------------------ -------- -------- -------- -------- Net book amount at 31 March 2006 138.5 10.7 0.1 149.3------------------------ -------- -------- -------- --------Net book amount at 30 September 2005 147.3 12.7 0.2 160.2------------------------ -------- -------- -------- -------- The group elected to apply IFRS 3 (Business Combinations) from the transitiondate of 1 October 2004. Acquisitions undertaken subsequent to that date havebeen restated in accordance with this standard. Magazine related assets have been recognised and relate mainly to trademarks,advertising relationships and customer lists. These assets are amortised overtheir estimated economic lives, typically ranging between one and five years. Any residual amount arising as a result of the purchase consideration being inexcess of the value of identified magazine related assets is recorded asgoodwill. Goodwill is not amortised under IFRS, but is subject to impairmenttesting either annually or on the occurrence of some triggering event. Goodwillis recorded and tested for impairment on a territory by territory basis. Impairment testing has been undertaken as at 31 March 2006. As a result animpairment charge of £11.0m has been made in respect of intangible assetsrelating to the Italian business. Other intangibles relate to capitalised software costs. 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