15th Nov 2007 07:03
Euromoney Institutional InvestorPLC15 November 2007 15 November 2007 EUROMONEY INSTITUTIONAL INVESTOR PLC PRELIMINARY ANNOUNCEMENT RESULTS FOR YEAR TO SEPTEMBER 30 2007 Record Profits and Dividend in 2007 Highlights 2007 2006 Change Revenue £305.2 m £220.5 m +38%Operating profit £54.1 m £39.7 m +36%Adjusted operating profit* £78.6 m £43.8 m +79% Profit before tax £41.1 m £35.2 m +17%Adjusted profit before tax* £55.5 m £37.0 m +50%Diluted earnings a share 29.9 p 41.9 p -29%Adjusted diluted earnings a share* 32.7 p 28.6 p +14%Dividend 19.0 p 17.0 p +12% *see glossary Results reflect strong organic growth and successful integration of acquisitions • Revenues up 38% to £305.2 million, a record • Adjusted profit before tax up 50% to £55.5 million, the highest yet • City profit before tax* £65.7 million, exceeding CAP target a year earlier than expected • Strong growth across all divisions and revenue streams • Subscription revenues up 88%, now a third of turnover • Adjusted operating margin improved from 20% to 26% • Net debt reduced by £35.0 million since half year - operating cash conversion 115% • Metal Bulletin integration successfully completed and synergies ahead of expectations • Final dividend increased by 12% to 13p making total for the year of 19p • Limited impact to date from global credit market crisis Commenting on the results, chairman Padraic Fallon, said: "The new financial year has begun reasonably well, although growth is slower.The full year may be testing if financial markets deteriorate further, butthe 2007 results provide a strong platform to launch new products and to makemore acquisitions on the back of strong cash flows. We beat every target we setourselves, integrated Metal Bulletin and successfully increased the emphasis onsubscription revenues and profits from electronic publishing. The future is moreopaque than usual, but the company is stronger than ever". Highlights Euromoney Institutional Investor PLC, the international publishing, events and electronic information group, achieved adjusted operating profit for the year to September 30 2007 of £78.6 million, against £43.8 million in 2006. Adjusted profit before tax increased by 50% to £55.5 million and adjusted diluted earnings a share increased from 28.6p to 32.7p. The directors recommend a 12% increase in the final dividend to 13p, making a total for the year of 19p. These record results reflect the continued success of the group's strategy to drive profit growth and build a more robust subscription-driven business. Revenue and profit growth were achieved across all divisions; subscription revenues increased sharply and now account for more than a third of group revenues; the adjusted operating margin improved from 20% to 26%; the integration of Metal Bulletin, acquired in October 2006, was completed ahead of time and its performance has surpassed that projected at the time of acquisition; and record net operating cash flows helped reduce net debt at year end to £204.6 million compared with £239.6 million at the half year. The group operating margin improved sharply and all divisions achieved strong organic growth, based on:- subscription revenues for both print and electronic products continuing to show double digit growth;- advertising revenues increasing at the highest rate for some time;- a successful strategy for growing existing events complemented by the launch of new events; - continuing strong volume growth in the training businesses; and- the benefit of earlier investment in marketing and new products. The problems in global credit markets, which began in early August, did not affect the group's profits in the final quarter of the year. However, the continued volatility in financial markets which has triggered significant asset write-downs and job cuts among the global investment banks clearly casts uncertainty over the outlook for 2008. Current trading is in line with the board's expectations. October profits from continuing operations were ahead of last year, helped by strong performances from two of the group's flagship events: the annual Coaltrans coal conference and Institutional Investor's MARHedge Global Hedge Fund Summit in Bermuda. Forward revenues for the first quarter are ahead of the same time last year. While there is evidence of some slowing in advertising and sponsorship bookings, sales for the last three months are also ahead of the same period last year. The first quarter is traditionally the least significant of the financial year and, as usual at the time of the preliminary results, visibility into the second quarter is limited. Trading Background These results have been achieved on the back of the positive conditions in the markets experienced throughout 2007, fuelled by record levels of liquidity, low interest rates and easy credit. Growth has been achieved across all geographies and sectors, and emerging markets, which account for more than a third of group revenues, remained strong even during the credit market troubles. The group's strategy of investing in premium subscription products, particularly those delivered electronically, has delivered strong organic growth over the past two years. The investment in subscription marketing and new products has been stepped up. Subscription revenue, which includes Metal Bulletin's BCA research business, nearly doubled to £104 million and is now the largest revenue stream in the group. Global financial institutions continue to invest in new products and markets, driving increased demand for quality business information through a variety of media. Technology has opened up opportunities for new electronic information services and nearly £2 million was invested in new products during the period. Business Review Financial Publishing: Revenues, which comprise both advertising and subscriptions, increased by 16% to £75.2 million. Advertising continued the positive trend seen in the first half and titles such as Euromoney and the international edition of Institutional Investor, which derive a significant proportion of their advertising from emerging markets, achieved advertising growth rates in excess of 15%, their best performance for many years. The profit flow through on advertising revenues helped improve the adjusted operating margin from 20% to 26% and adjusted operating profits increased by 44% to £19.0 million. Subscriptions, which account for one third of Financial Publishing revenues, increased by 21%. This reflects both volume increases in print subscriptions as well as the gradual migration of print products to electronic platforms. The group's investment in new products is targeted at niche financial information services with real-time news, unique data and sophisticated search engine technology, as well as upgrading individual print subscriptions to enhanced electronic products sold as site licences. New products launched in the year have included Total Securitisation, The Cover (news and data for the covered bond market), FiX (Euromoney's weekly commentary on the foreign exchange markets) and the Euromoney Business Library, with more planned for 2008. The initial market response to these new products has been very positive and we expect to launch more in 2008. Business Publishing: Following the acquisition of Metal Bulletin, and the disposal of Engel Publishing, the pharmaceutical marketing business, this division is now focussed on three sectors - metals, energy and legal - and derives nearly half its revenues from subscription products. All three sectors benefited from buoyant markets, in particular high energy and commodity prices. The Metals, Minerals and Mining (MMM) business of Metal Bulletin is the largest component of this division and its performance improved in the second half as the benefits of the post-acquisition restructuring and investment in marketing started to come through. The inclusion of the MMM business helped adjusted operating profits from Business Publishing more than double to £14.0 million on the back of a 91% increase in revenues to £40.7 million. Conferences and Seminars: The strong growth achieved over the past few years continued with revenues up 28% to £98.2 million. The strategy of building large, must-attend annual events in key sectors, as well as launching new events to exploit market trends and hot topics, helped the margin improve from 26% to 30% and adjusted operating profits increased by 47% to £29.8 million. Institutional Investor's subscription-based membership business continues to achieve excellent growth with member numbers increasing by 15%, helped by new launches for the research, legal and tax markets, and a renewal rate of 90% which emphasises the quality of this business. Training: The Training division extended the excellent results achieved over the previous 12 months, with revenues increasing by 21% to £35.2 million. The growth has been driven by a combination of more targeted marketing to improve the delegate attendance rate, and new courses offered, particularly in emerging markets. Adjusted operating profits from the Training division increased by 41% to £9.8 million. Databases and Information Services: This division largely comprises three businesses which share similar characteristics: subscription-only products delivering high quality data and information in electronic-only format and with renewal rates in excess of 90%. The inclusion of BCA in this division means that revenues more than doubled to £52 million and adjusted operating profits increased from £5.1 million to £18.7million. BCA subscription sales improved significantly during the second half with average monthly new sales more than 40% ahead of 2006. This performance was helped by the launch of a new Commodities and Energy research product and the benefits of being part of the Euromoney group which accelerated the addition of sales resource in the group's offices in New York, Hong Kong, Sydney and Buenos Aires. ISI, the emerging markets information business, also achieved strong growth. Net new subscription sales over the second half were the highest ever, and the business has invested heavily in new products including the roll out of the CEIC economic data business to new markets in 2008. Acquisition of Metal Bulletin The acquisition of Metal Bulletin plc, the company's largest transaction, was completed at the start of the financial year and the integration of its businesses within the Euromoney Institutional Investor group was concluded ahead of time. Annualised cost savings from the elimination of duplicate functions and the restructuring of under performing businesses are expected to exceed £5 million, of which £3.5 million were realised in 2007. Exceptional costs of £5.9 million were charged against profits in 2007 to cover the costs of restructuring and onerous property leases. The process of disposing of non-core Metal Bulletin businesses, including EIC, Atalink and Systematics was completed soon after the half year. The two key parts of Metal Bulletin, the MMM division, including the eponymous title, and BCA, the independent economic research house, are strong subscription businesses. Both have responded well to Euromoney initiatives to drive revenue synergies. The events business has been restructured and positioned for a sharp increase in the number of new events in 2008, the first Metal Bulletin training courses were run in the last quarter, and the investment in technology has been stepped up with a view to launching publishing products. The acquisition of these Metal Bulletin businesses provides a counter balance to the group's other activities. Financial Review The company's Capital Appreciation Plan (CAP) is a five year equity incentive put in place to help drive City PBT from a base of £21 million in 2003 to a target of at least £57 million by 2008. City PBT for the year was £65.7 million meaning the CAP profit target was passed a year earlier than expected. As a result an accelerated share option expense of £3.2 million was charged in the year, and 2.5 million new shares will be issued in February 2008 to satisfy the first vesting under the CAP. The second and third tranches of up to 2.5 million new shares each will be issued in February 2009 and 2010, subject to the performance condition that City PBT remains above the £57 million level. The acquisition of Metal Bulletin was completed on October 6 2006 for a cash consideration of £240 million, plus assumed debt of £15 million, funded by the issue of 13.8 million new shares for £65 million and borrowings of £175 million. Further investments totalling £26 million were made in a number of the group's associates and subsidiaries during the year, while disposals of non-core businesses generated proceeds of £15 million. The company generates approximately 60% of its revenues in US dollars. The average US dollar exchange rate fell by 9% over the year. The company hedges its US dollar exposure a year forward so the impact on the results of currency fluctuations is delayed accordingly. Net debt at year end was £204.6 million compared to £239.6 million at the half year. The strong operating cash flows of Metal Bulletin helped increase group cash generated by operations for the year to £90.2 million and generated an adjusted operating profit to cash conversion rate of 115%. The net cost of funding the group's debt increased from £3.6 million to £13.4 million. The net debt:EBITDA covenant was a comfortable 2.9 times at year end, leaving plenty of headroom for further acquisitions. Adjusted diluted earnings a share increased by 14% to 32.7p, after taking account of the equity dilution from for the new shares issued to fund the acquisition of Metal Bulletin and to be issued under the CAP. A final dividend of 13p has been proposed, an increase of 12%, after a 11% increase in the interim dividend. The final dividend will be paid on February 6 2008. Strategy Since the last downturn in our markets, the group has successfully executed a strategy of developing new revenue streams to reduce its dependence on advertising, traditionally a volatile but high margin revenue stream, by building up its events businesses and, more recently, its subscription-based products. The revenue mix is now better balanced: subscriptions account for more than a third of the total, compared to 21% in 2001; the share of advertising has fallen from 37% to 22%; and revenues from training and events have increased from 30% to 39% of the total. Profitability is also higher as the group has eliminated low margin products and maintained tight cost controls, while increasing the investment in marketing and developing successful new products. Seven of the group's 10 largest businesses are subscription-based and in many cases, such as BCA, ISI and II Memberships, these are fast growing businesses, with high renewal rates and significant scope for launching new products and increasing market penetration, even in more challenging conditions. In 2008, the group will continue to invest in marketing and new businesses, in particular electronic information services, to drive revenue growth, and the successful integration of Metal Bulletin and strong operating cash flows leave the group well positioned for further acquisitions. Outlook The group remains strong despite the uncertainty over the economic outlook in general and global credit markets in particular. The strength and positioning of the group's brands combined with a commitment to investment in marketing and new products provides opportunities for further revenue growth in 2008. The successful integration of Metal Bulletin will generate additional cost savings in 2008 and leaves the group well placed to deliver more revenue synergies. Excellent operating cash flows will continue to reduce debt levels and associated funding costs. In addition, the increased proportion of revenues now derived from high margin subscription products, particularly those delivered electronically, and the reduced exposure to traditionally more volatile advertising revenues, means the group's earnings should be more robust than before. The board of Euromoney remains confident in its clear long-term strategy to deliver consistent organic growth from new and existing products; to invest in increasing revenues from high quality subscription products, particularly electronic data and information services; to maintain the operating margin; and to make selective acquisitions to strengthen the group's market positions. Overall, the group is well positioned to meet the challenges of a more difficult trading environment. Padraic Fallon ChairmanNovember 14 2007 *GlossaryAdjusted operating profit = Operating profit before acquired intangibleamortisation, share option expense, exceptional items and share of results inassociates and joint ventures as set out in the income statement. Adjusted profit before tax = Profit before tax from continuing operations beforeacquired intangible amortisation, exceptional items, net movements inacquisition option commitment values, imputed interest on acquisition optioncommitments and foreign exchange loss interest charge on tax equalisation swapsas set out in the income statement and note 4. City profit before tax (City PBT) = Adjusted profit before tax before shareoption expense. Adjusted earnings a share = Diluted earnings a share before acquired intangibleamortisation, exceptional items, net movements in acquisition option commitmentvalues, imputed interest on acquisition option commitments, related tax, taxcredit on non-recurring intergroup transactions and deferred tax assetsrecognised as set out in note 7.END NOTE TO EDITORS About Euromoney Institutional Investor PLC Euromoney Institutional Investor PLC is listed on the London Stock Exchange anda member of the FTSE-250 share index. It is a leading internationalbusiness-to-business media group focused primarily on the international finance,metals and commodities sectors. It publishes more than 70 magazines, newslettersand journals, including Euromoney, Institutional Investor, and Metal Bulletin.It also runs an extensive portfolio of conferences, seminars and trainingcourses and is a leading provider of electronic information and data coveringinternational finance, metals and emerging markets. Its main offices are inLondon, New York and Hong Kong and approximately half its revenues and profitsare managed from the United States. For further information, please contact: Euromoney Institutional Investor PLC Padraic Fallon, Chairman: +44 20 7779 8556; [email protected] Colin Jones, Finance Director: +44 20 7779 8845; [email protected] Richard Ensor Managing Director 020 7779 8845 [email protected] Financial Dynamics Charles Palmer: +44 20 7269 7180; [email protected] Tim Spratt: +44 20 7269 7131; [email protected] Or visit our website at www.euromoneyplc.com Group Income Statement for the year ended September 30 2007 2007 2006 Notes £000's £000's Revenue Continuing operations 2 305,594 222,276 Less: share of revenue of joint ventures (441) (1,800) Total revenue 2 305,153 220,476 Operating profit before acquired intangible 2 78,606 43,812 amortisation, share option expense and exceptional items Acquired intangible amortisation (15,716) (144) Share option expense (6,993) (4,428) Accelerated share option expense (3,183) - Exceptional items 3 855 (716) Operating profit before associates and joint 2 53,569 38,524 ventures Share of results in associates and joint 490 1,208 ventures Operating profit 54,059 39,732 Finance income 4 5,496 772 Finance expense 4 (18,427) (5,270) Net finance costs 4 (12,931) (4,498) Profit before tax 41,128 35,234 Tax on profit (11,401) (10,137) Deferred tax asset recognition 3,178 13,649 Tax (charge)/credit on profit on ordinary 5 (8,223) 3,512 activities Profit after tax from continuing operations 32,905 38,746 Discontinued operations Profit for the year from discontinued operations 9 500 - Profit for the year 33,405 38,746 Attributable to: Equity holders of the parent 31,822 37,430 Equity minority interests 1,583 1,316 33,405 38,746 Basic earnings per share - continuing operations 7 30.66p 42.11p Basic earnings per share - continuing and 7 31.16p 42.11p discontinued operations Diluted earnings per share - continuing 7 29.86p 41.90p operations Diluted earnings per share - continuing and 7 30.34p 41.90p discontinued operations Adjusted diluted earnings per share 7 32.70p 28.61p Dividend per share (including proposed 6 19.00p 17.00p dividends) Group Balance Sheet as at September 30 2007 2007 2006 £000's £000's Non-current assets Intangible assets Goodwill 248,137 68,452 Other intangible assets 131,885 3,146 Property, plant and equipment 20,917 14,643 Investments 252 25,846 Deferred tax assets 11,508 22,917 Net pension surplus 364 - 413,063 135,004 Current assets Trade and other receivables 67,458 73,512 Cash and cash equivalents 26,711 27,503 Derivative financial instruments 8,093 3,069 102,262 104,084 Current liabilities Acquisition option commitments (14,899) - Trade and other payables (42,827) (95,515) Accruals (43,424) (29,478) Deferred income (73,382) (45,324) Provisions (1,469) (329) Loan notes (11,796) - Bank overdrafts (5,935) (1,235) (193,732) (171,881) Net current liabilities (91,470) (67,797) Total assets less current 321,593 67,207 liabilities Non-current liabilities Acquisition option commitments (18,436) (24,332) Other non-current liabilities (1,189) (597) Committed loan facility (213,559) (65,530) Deferred tax liabilities (31,650) (3,074) Derivative financial instruments (596) - Provisions (383) (448) (265,813) (93,981) Net assets/(liabilities) 55,780 (26,774) Shareholders' equity Called up share capital 258 223 Share premium account 38,509 38,081 Other reserve 64,981 - Capital redemption reserve 8 8 Own shares (74) (74) Liability for share based payments 15,737 5,907 Fair value reserve 18,176 6,618 Translation reserve (15,335) (244) Retained earnings (69,975) (78,642) Equity shareholders' surplus/ 52,285 (28,123) (deficit) Equity minority interests 3,495 1,349 Total equity 55,780 (26,774) Group Cash Flow Statement for the year ended September 30 2007 2007 2006 £000's £000's Cash flow from operating activities Operating profit 54,059 39,732 Share of results (490) (1,208) in associates and joint ventures Operating profit 885 - from discontinued operations (Profit)/loss on (6,780) 1,483 disposal of business Acquired 15,716 144 intangible amortisation Licences and 289 237 software amortisation Goodwill - 519 impairment Share option 10,176 4,428 expense Depreciation of 2,585 2,925 property, plant and equipment Movement in 1,119 (348) property rental provision Loss/(gain) on 297 (1,286) disposal of property, plant and equipment Operating cash 77,856 46,626 flows before movements in working capital Increase in (11,570) (9,822) receivables Increase in 23,895 22,753 payables Cash generated by 90,181 59,557 operations Income taxes paid (9,773) (6,884) Net cash from 80,408 52,673 operating activities Investing activities Dividends paid to (1,511) (1,724) minorities Dividends received 646 756 from associate Interest received 2,162 662 Purchases of (8,001) (7,694) property, plant and equipment Proceeds on 1,106 1,975 disposal of property, plant and equipment Purchase of - (19,740) available for sale investments Purchase of (18,594) (14,507) additional interest in subsidiary undertakings Acquisition of (6) (3,424) associates and joint ventures Acquisition of (151,317) - subsidiary undertakings Proceeds from 14,778 150 disposal of businesses Net cash used in (160,737) (43,546) investing activities Financing activities Dividends paid (18,110) (14,563) Interest paid (17,855) (696) Issue of new share 428 730 capital (Repayment)/ (78,136) 3,336 increase in borrowings Redemption of loan (915) - notes Loan repaid to (61,350) (71,991) DMGT group company Loan received from 251,297 76,399 DMGT group company Net cash from/ 75,359 (6,785) (used in) financing activities Net (decrease)/ (4,970) 2,342 increase in cash and cash equivalents Cash and cash 26,268 24,932 equivalents at beginning of year Effect of foreign (522) (1,006) exchange rate movements Cash and cash 20,776 26,268 equivalents at end of year Note to the Group Cash Flow Statement Net Debt 2007 2006 £000's £000's Net debt at (73,438) (66,430) beginning of period (Decrease)/increase (4,970) 2,342 in cash and cash equivalents Decrease/(increase) 78,136 (15,716) in loans (Increase)/decrease (189,948) 7,972 in amounts owed to DMGT group company Debt acquired on (12,606) - acquisition of Metal Bulletin Non cash changes: (11,796) - issue of loan notes Other non cash (1,422) (4,973) changes Effect of foreign 11,465 3,367 exchange rate movements Net debt at end of (204,579) (73,438) period Net debt comprises cash at bank and in hand, bank overdrafts, bank loans and other borrowings. Cash and cash equivalents in the cash flow statement includes banks overdrafts. Group Statement of Recognised Income and Expense for the year ended September 30 2007 2007 2006 £000's £000's Gains on sale of available-for-sale investments (405) 405 taken to equity Gains on cash flow hedges 6,392 3,629 Gains on revaluation of intangible assets 2,384 - Net exchange differences on translation of foreign (15,001) 1,056 operations Net exchange differences on foreign currency loans 5,886 3,183 Actuarial gains on defined benefit pension schemes 4,158 - Tax on items taken directly to equity 2,082 (265) Other movements - (23) Net income recognised directly in equity 5,496 7,985 Translation reserves recycled to the income (90) - statement on disposals Transfer of gain on cash flow hedges from fair value (2,699) - reserves to income statement Profit for the year 33,405 38,746 Total recognised income and expense for the year 36,112 46,731 Attributable to: Equity holders of the parent 34,529 45,415 Equity minority interests 1,583 1,316 36,112 46,731 Notes to the Preliminary Announcement 1 Basis of preparation The financial information set out in this announcement does not constitute thecompany's statutory accounts for the year ended September 30 2007 or 2006 but isderived from those accounts. Statutory accounts for 2006 have been delivered tothe Registrar of Companies, and those for 2007 will be delivered following thecompany's annual general meeting. The auditors have reported on those accounts;their report was unqualified and did not contain statements under section 237(2) or (3) of the Companies Act 1985. Whilst the financial information included in this preliminary announcement hasbeen computed in accordance with International Financial Reporting Standards(IFRSs), this announcement does not itself contain sufficient information tocomply with IFRSs. The company expects to publish full financial statements thatcomply with IFRSs in January 2008. The financial information has been preparedon the basis of the accounting policies as stated in the previous year'sfinancial statements. 2 Segmental analysis Primary reporting format Segmental information is presented in respect of the group's business divisionsand represent the group's management and internal reporting structure. The groupis currently organised into five business divisions: Financial publishing;Business publishing; Training; Conferences and seminars; and Databases andinformation services. This is considered to be the primary reporting format.Financial publishing and Business publishing consist primarily of advertisingand subscription revenue. The Training division consists primarily of delegaterevenue. Conferences and seminars consists of both sponsorship income anddelegate revenue. Databases and information services consists of subscriptionrevenue. A breakdown of the group's revenue by type is set out below. Secondary reporting format The group divides the operation of its businesses across three main geographicalareas: United Kingdom; North America; and Rest of World (which primarilyincludes Asia). These geographical areas are considered as the secondaryreporting format. Inter segment sales are charged at prevailing market rates and shown in theeliminations columns below. United Kingdom North America Rest of Eliminations Total World 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 £000's £000's £000's £000's £000's £000's £000's £000's £000's £000'sRevenue By division and source: Financial 41,469 32,803 33,180 31,608 1,669 1,605 (1,109) (932) 75,209 65,084publishing Business 29,062 14,570 10,678 5,772 1,399 1,291 (481) (312) 40,658 21,321publishing Training 25,466 20,214 7,660 7,143 2,662 2,243 (616) (585) 35,172 29,015Conferences 41,138 27,827 47,540 40,575 14,090 11,960 (4,540) (3,696) 98,228 76,666and seminars Databases 6,835 5,303 31,141 3,904 13,794 10,689 (141) (52) 51,629 19,844and information services Sold/ 1,321 3,773 2,951 4,688 - 146 (15) (61) 4,257 8,546closed businesses Group 145,291 104,490 133,150 93,690 33,614 27,934 (6,902) (5,638) 305,153 220,476revenue Joint - 915 - - 441 885 - - 441 1,800ventures 145,291 105,405 133,150 93,690 34,055 28,819 (6,902) (5,638) 305,594 222,276 The joint venture revenues of £441,000 (2006: £1,800,000) can be allocated asfollows: Business publishing £nil (2006: £915,000); Conferences and seminars£353,000 (2006: £nil); Training £88,000 (2006: £nil); Databases and informationservices £nil (2006: £885,000). Revenues of £54,507,000 from Metal Bulletin are included within the figuresabove as follows: Financial publishing £3,610,000; Business publishing£21,683,000; Conferences and seminars £2,555,000; Databases and informationservices £26,479,000 2007 2006 £000's £000'sRevenue by type: Advertising 65,356 54,177Subscriptions 104,046 55,373Sponsorship 46,314 36,744Delegates 74,376 57,001Other 10,804 8,635Sold/closed businesses 4,257 8,546Total revenue 305,153 220,476Investment income (note 653 7334) Total revenue and investment income 305,806 221,209 Notes to the Preliminary Announcement continued United Kingdom North America Rest of World Eliminations Total 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 £000's £000's £000's £000's £000's £000's £000's £000's £000's £000's Revenue By destination: Sale of goods 31,633 21,845 91,888 53,189 58,659 37,413 (1,759) (1,270) 180,421 111,177Sale of services 17,422 14,654 52,170 43,999 56,012 46,399 (5,129) (4,299) 120,475 100,753Closed businesses 497 887 3,081 5,437 694 2,292 (15) (70) 4,257 8,546(sale of goods Group revenue 49,552 37,386 147,139 102,625 115,365 86,104 (6,903) (5,639) 305,153 220,476Joint ventures - 60 - 152 441 1,588 - - 441 1,800(sale of goods) Total revenue 49,552 37,446 147,139 102,777 115,806 87,692 (6,903) (5,639) 305,594 222,276Investment income 267 284 386 366 - 83 - - 653 733Total revenue 49,819 37,730 147,525 103,143 115,806 87,775 (6,903) (5,639) 306,247 223,009(including share of joint venture revenue) and investment income United Kingdom North America Rest of World Total 2007 2006 2007 2006 2007 2006 2007 2006 £000's £000's £000's £000's £000's £000's £000's £000's Operating profit 1 by division and source: Financial 12,938 8,526 5,974 4,721 114 (13) 19,026 13,234publishing Business 10,716 4,934 3,409 1,561 (175) 204 13,950 6,699publishing Training 7,348 5,069 1,833 1,460 635 456 9,816 6,985Conferences and 13,990 7,502 13,840 11,091 2,015 1,694 29,845 20,287seminars Databases and 5,211 3,792 11,144 (121) 2,329 1,380 18,684 5,051information services Closed businesses 544 (9) (1) - (3) 8 540 (1)Unallocated (11,993) (7,577) (950) (1,182) (312) 316 (13,255) (8,443)corporate costs 38,754 22,237 35,249 17,530 4,603 4,045 78,606 43,812 Acquired (5,703) - (9,216) - (797) (144) (15,716) (144)intangible amortisation 2 Share option (6,503) (2,241) (3,317) (1,944) (356) (243) (10,176) (4,428)expense Exceptional items (727) (716) 1,582 - - - 855 (716)(note 3) Operating profit 25,821 19,280 24,298 15,586 3,450 3,658 53,569 38,524before associates and joint ventures Share of results 490 1,208in associates and joint ventures Net finance costs (12,931) (4,498)(note 4) Profit before tax 41,128 35,234Tax (note 5) (8,223) 3,512Profit after tax 32,905 38,746 The exceptional gain of £855,000 (2006: loss of £716,000) can be allocated asfollows: Business publishing £3,628,000 (2006: £2,002,000), Databases andinformation services loss £303,000 (2006: £nil); Unallocated corporate costs,loss £2,470,000 (2006: £1,286,000). Share option expense of £10,176,000 (2006: £4,428,000) can be allocated asfollows: Financial publishing £2,543,000 (2006: £1,198,000); Business publishing£1,337,000 (2006: £464,000), Training £2,160,000 (2006: £577,000); Conferencesand seminars £1,333,000 (2006: £1,253,000); Databases and information services£1,147,000 (2006: £302,000); Unallocated corporate costs £1,656,000 (2006:£634,000). Acquired intangible amortisation of £15,716,000 (2006: £144,000) can beallocated as follows: Financial publishing £1,760,000 (2006: £nil); Businesspublishing £4,418,000 (2006: £nil); Conferences and seminars £248,000 (2006:£nil); Databases and information services £9,133,000 (2006: £144,000);Unallocated corporate costs £157,000 (2006: £nil); Operating profit of £21,142,000 from Metal Bulletin is included within thefigures above. This can been allocated as follows: Financial publishing £88,000;Business publishing £6,149,000; Conferences and seminars £3,415,000; Databasesand information services £11,490,000. 1. Operating profit before acquired intangible amortisation, share optionexpense and exceptional items. 2. Intangible amortisation represents amortisation on acquisition relatednon-goodwill assets such as brands, database content and trademarks. 3 Exceptional items Exceptional items are items of income or expense considered by the directors,either individually or if of a similar type in aggregate, as being eithermaterial or significant and which require disclosure in order to provide a viewof the group's results excluding these items. 2007 2006 £000's £000's Profit on sale of property - 1,286Profit/(loss) on disposal 6,780 (1,483)of businesses Goodwill impairment - (519)Reorganisation and restructuring costs (5,925) - 855 (716) In March 2007 the group sold the net assets of Raven Fox, a leading duty-freeand luxury goods publishing and events business, resulting in a profit of £1.8million (note 9) and a corresponding tax charge of £0.2 million, afterutilisation of capital losses brought forward. In August 2007 the group sold its equity interest in Med Ad Inc, a leadingprovider of marketing and clinical research information to the pharmaceuticalindustry, resulting in a profit of £5.0 million (note 9) and a corresponding taxcharge of £1.9 million. Subsequent to the acquisition of Metal Bulletin plc in October 2006 (note 8) thegroup has restructured and reorganised of the acquired group's operations andincurred associated costs of £5.9 million. This primarily includes restructuringcosts and provisions for onerous property leases. This results in a related taxcredit of £1.3 million 4 Finance income and expense 2007 2006 £000's £000's Finance income Interest receivable from short-term 653 623 investments Dividends receivable from assets held for sale - 110 Ineffectiveness of interest rate swaps - 39 Net movements in acquisition option commitment 3,885 - values Expected return on pension scheme assets 958 - 5,496 772 Finance expense Committed borrowings (14,915) (4,020) Imputed interest on acquisition option (1,603) (916) commitments Net tax equalisation swap expense (190) - Notional interest on deferred consideration - (334) Ineffectiveness of interest rate swaps (27) - Interest payable on loan stock (578) - Interest on pension scheme liabilities (1,114) - (18,427) (5,270) Net finance costs (12,931) (4,498) The tax equalisation swap expense relates to tax hedges on intra-groupfinancing, of which £1.8 million is in relation to foreign exchange losses. Thisforeign exchange element is equal to tax payable on the gains on the intra-groupfinancing (note 5). 5 Tax on profit on ordinary activities 2007 2006 £000's £000's Current tax expense UK corporation tax 4,946 6,119 Foreign tax 6,343 1,533 Adjustments in respect of prior 494 107 years 11,783 7,759 Deferred tax (credit)/expense Current year (4,031) (11,361) Adjustments in respect of prior 471 90 years (3,560) (11,271) Total tax charge/(credit) in income 8,223 (3,512) statement The effective rate of tax for the year is 20% (2006: credit (10%)). Theunderlying tax rate for 2007 is 25% based on adjusted profit before tax (seeglossary page 6), prior year items and foreign exchange on Yen deal butincreases to 34% after stripping out the effect of other non-recurring items.The actual total tax charge for the year is different from 30% of profit beforetax for the reasons set out in the following reconciliation: 2007 2006 £000's £000's Profit 41,128 35,234before tax Tax at 30% 12,338 10,570Factors affecting tax change: Rates of tax on overseas 463 (338)profits Joint venture and associate income reported net of tax (147) (362)US State 615 756taxes US goodwill (1,201) (13,120)UK goodwill - 161Disallowable 689 136expenditure Tax effects of intra group transactions eliminated on consolidation (3,901) -Recognition of previously unrecognised tax losses (1,890) (1,957)Non deductible loss on sale of business - 445Deferred tax charge arising from changes in tax laws 292 -Prior year 965 197adjustments Total tax charge/(credit) for 8,223 (3,512)the year Of the charge to current tax £384,000 (2006: £nil) related to profits arising inbusinesses disposed of during the year (note 9). No tax charge arose on the saleof Atalink and EIC. The tax charge on the disposal of Raven Fox was £223,000.Following the sale of Med Ad Inc in the year, the US group's tax losses(excluding Metal Bulletin US), have been fully utilised. The tax charge on thedisposal was £1.9 million. A tax credit of £1,300,000 arises in relation to theexceptional costs on the acquisition of Metal Bulletin. Following a reassessmentof the recoverability of the potential US deferred tax asset, an additionalasset of £3,178,000 (2006: £13,649,000) was recognised during the year. The actual tax credited directly to equity was £2,082,000 (2006: charge of£265,000). A credit of £1,826,000 (2006: £nil) relating to tax on foreignexchange losses has been treated as exceptional as it is hedged by foreignexchange losses of £1,826,000 (2006: £nil) on tax equalisation swaps withinfinance costs (see note 4). 6 Dividends 2007 2006 £000's £000's Amounts recognisable as distributable to equity holders in period Final dividend for the year ended September 30 2006 of 11.6p 11,943 9,767 (2005: 11.0p) Interim dividend for year ended September 30 2007 of 6.0p (2006: 6,177 4,806 5.4p) 18,120 14,573 Employees' Share Ownership Trust dividend (10) (10) 18,110 14,563 Proposed final dividend for the period ended September 30 13,386 11,943 Employees' Share Ownership Trust dividend (8) (7) 13,378 11,936 The final dividend of 13.0 pence per ordinary share (2006: 11.6 pence) will,subject to shareholder approval at the Annual General Meeting, be paid onFebruary 6 2008 to shareholders on the register on November 23 2007. It isexpected that the shares will be marked ex-dividend on November 21 2007. Holdersof International Depositary Receipts can receive their dividend on February 62008 by presentation of coupon number 41 to Dexia Banque a Luxembourg or to oneof their agents. The final dividend is subject to approval at the Annual General Meeting onJanuary 30 2008 and has not been included as a liability in these financialstatements in accordance with IAS 10 "Events after the balance sheet date". 7 Earnings per share 2007 2006 £000's £000's Earnings attributable to equity holders of the parent 31,822 37,430 Less earnings from discontinued operations (500) - Basic earnings - continuing operations 31,322 37,430 Intangible amortisation 15,716 144 Exceptional items (855) 716 Deferred tax assets recognition (3,178) (13,649) Imputed interest on acquisition option commitments 1,603 916 Net movements in acquisition option commitment values (3,885) - Tax on above adjustments (3,831) - Tax credit on non-recurring intergroup transactions (2,588) - Adjusted earnings 34,304 25,557 Basic earnings - continuing and discontinued operations 31,822 37,430 Number Number 000's 000's Weighted average number of shares 102,196 88,943 Shares held by the Employees' Share Ownership Trust (59) (59) 102,137 88,884 Effect of dilutive share options 2,752 456 Diluted weighted average number of shares 104,889 89,340 Pence per Pence share per share Basic earnings per share - continuing operations 30.66 42.11 Effect of dilutive share options (0.80) (0.21) Diluted earnings per share - continuing operations 29.86 41.90 Effect of intangible amortisation 14.98 0.16 Effect of exceptional items (0.82) 0.80 Effect of deferred tax assets recognition (3.03) (15.28) Effect of imputed interest on acquisition option commitments 1.53 1.03 Effect of net movements in acquisition option commitment values (3.70) - Effect of tax on the above adjustments (3.65) - Effect of tax credit on non-recurring intergroup transactions (2.47) - Adjusted diluted earnings per share 32.70 28.61 Basic earnings per share - continuing and discontinued operations 31.16 42.11 Effect of dilutive share options (0.82) (0.21) Diluted earnings per share - continuing and discontinued operations 30.34 41.90 The adjusted diluted earnings per share figure has been disclosed since thedirectors consider it to give a more meaningful indication of the underlyingtrading performance. 8 Acquisitions Metal Bulletin On October 6 2006, the group acquired 100% of the issued share capital of MetalBulletin plc for cash consideration of £239.6 million. Metal Bulletin plc is theparent company of a group of companies operating as a leading global informationprovider of "must have" market sensitive data in niche, business-to-businessmarkets. Its revenues are derived from a range of publications, electronicproducts and services, conferences and research. This transaction has beenaccounted for using the purchase method of accounting. The directors have adjusted the consolidated balance sheet of Metal Bulletin plcat October 6 2006 for the following adjustments that they believe represent thefair value of the assets at acquisition. The fair values in the interim reportwere provisional and have been finalised during the second half of the year. Book value Accounting Fair value Fair policy adjustments value alignment £000's £000's £000's £000'sNet assets acquired: Goodwill 32,438 (32,438) - -Intangible 5,456 - 133,043 138,499assets Software 1,092 - - 1,092Other non-current assets 3,226 446 6,292 9,964Cash and cash equivalents 2,821 - - 2,821Other current 9,234 (47) (4,106) 5,081assets Trade creditors and other (24,016) (133) (1,065) (25,214)payables Bank (5,914) - - (5,914)overdrafts Other current liabilities (6,033) - (81) (6,114)Non-current (15,364) (1,593) (43,296) (60,253)liabilities 2,940 (33,765) 90,787 59,962Goodwill 179,629Total 239,591consideration Consideration satisfied by: Cash 156,410Shares (13,833,249 shares issued at market value of 65,016£4.70) Loan notes 12,711Directly attributable costs 5,454 239,591 Intangible assets represent trade marks, subscriber relationships, advertiserrelationships, and databases for which amortisation of £12.9 million has beencharged in the year. Goodwill is attributable to the value of the workforce andanticipated future operating synergies. Non-current liabilities includesprimarily a deferred tax liability arising on the intangible assets. The Metal Bulletin group contributed £54.5 million to the group's revenue, £21.0million to the group's operating profit and £10.1 million to the group's profitbefore tax for the period between the date of acquisition and September 30 2007. Since acquisition, three non-core businesses owned by Metal Bulletin plc havebeen sold (note 9). 9 Disposals and discontinued operations Disposals On March 12 2007, the group disposed of Raven Fox, a leading duty-free andluxury goods publishing and events business for cash consideration of £1.8million. Raven Fox's net liabilities on disposal were £0.2 million resulting inprofit on sale, after related sale costs of £1.8 million. This results in a taxcharge of £0.2 million. The results of Raven Fox are included in theconsolidated accounts up to the date of their disposal as part of closedbusinesses. On August 31 2007, the group sold Med Ad Inc, a provider of marketing andclinical research information to managers and executives in the pharmaceuticalindustry, for £6.3 million on completion with a further payment anticipated tobe £0.5 million, to be received for the net current assets of the company onagreement of the completion accounts. Profit on sale, after related sale costs,was £5.0 million resulting in a tax charge of £1.9 million. The results of MedAd Inc are included in the consolidated accounts up to the date of theirdisposal as part of closed businesses. Discontinued operations The first of the non-core Metal Bulletin operations, Atalink Limited, aspecialist and direct response publication company was sold on March 30 2007 for£1.8 million. A further payment, anticipated to be £0.7 million, will bereceived for the net current assets of the company on agreement of thecompletion accounts. An additional final payment of £0.5 million is payable onMarch 30 2008. No profit or loss was made on disposal. The results of AtalinkLimited are included in the consolidated accounts up to the date of theirdisposal as part of discontinued operations. On April 12 2007 the group sold Energy Information Centre Limited, a leadingcompany in the provision of wholesale and retail market intelligence, outsourcedprocurement and energy risk management strategy. The group received £4.7 millionon completion with a further payment, anticipated to be £0.3 million, to bereceived for the net current assets of the company on agreement of thecompletion accounts. No profit or loss was made on disposal. The results ofEnergy Information Centre Limited are included in the consolidated accounts upto the date of their disposal as part of discontinued operations. On May 15 2007 the group sold the business and net assets of SystematicsInternational Limited, a database business principally in the farm machinery andconstruction sector, for £100,000 on completion plus £25,000 deferred for oneyear. No profit or loss was made on disposal. The results of Systematics Limitedare included in the consolidated accounts up to the date of their disposal aspart of discontinued operations. The group's income statement includes the following results from discontinued operations: £'000Revenue 5,000Expenses (4,116)Profit before tax 884Tax (384)Profit after tax 500 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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