15th Mar 2006 07:01
Incisive Media PLC15 March 2006 Embargoed until 07.00 15 March 2006 INCISIVE MEDIA PLC PRELIMINARY ANNOUNCEMENT OF THE RESULTS FOR THE YEAR ENDED 31 DECEMBER 2005 Incisive Media plc announces full year results for the year ended 31 December2005. Incisive Media is a fast growing specialist business informationprovider, delivering key information to defined target audiences across avariety of platforms in print, in person and online, including magazines,newsletters and books, conferences, exhibitions and training, websites anddatabases in Europe, North America and Asia. Incisive Media is focused on highvalue, growth markets, and providing targeted and integrated marketing solutionswhich bring buyers and sellers together. Incisive Media's market leading brandsinclude Risk, Investment Week, Post Magazine, Your Mortgage, Unquote, Legal Weekand Search Engine Strategies. FINANCIAL AND OPERATING HIGHLIGHTS 12 months to 12 months to 31/12/05 31/12/04 Change £'000 £'000 % Revenue 57,456 46,492 +24% PROFIT AS REPORTED ON A STATUTORY BASIS Operating profit 12,811 11,872 +8% Operating margin 22.3% 25.5% Profit before tax 10,053 9,517 +6% Profit for the financial year 7,378 6,707 +10% Basic earnings per share 7.72 7.57 +2%Diluted earnings per share 7.61 7.41 +3% PROFIT AS REPORTED ON AN ADJUSTED* BASIS(see note 3) Adjusted operating profit 14,609 11,872 +23% Adjusted operating margin 25.4% 25.5% Adjusted profit before tax 11,851 9,517 +25% Adjusted profit for the financial year 8,756 6,707 +31% Adjusted basic earnings per share (p) 9.16 7.57 +21%Adjusted diluted earnings per share (p) 9.03 7.41 +22% Final dividend (p) 1.60 1.25 +28%Total dividend (p) 2.50 2.00 +25% • Revenues up 24%, existing** revenues up 11%• Profit before tax up by 6%, adjusted profit before tax up 25%• Growth in EPS - basic up 2%, diluted up 3%;• Growth in adjusted EPS - basic up 21%, diluted up 22%• 28% increase in the final dividend• Strong cash conversion rate - 112% of operating profit and 99% of adjusted operating profit Adjusted* = before amortisation of intangible assets arising on acquisitions andassociated notional tax charge Existing** = excluding revenue from acquisitions made in the year Mike Masters, Chairman of Incisive Media plc, commented "I am absolutely delighted to be able to report yet another year of stronggrowth. In 2005 we delivered our eleventh consecutive year of revenue andprofit growth, achieved through a combination of innovation across the existingportfolio and strategic acquisitions which have taken us into two new growthmarkets." Tim Weller, Chief Executive of Incisive Media plc, commented: "2005 has been yet another exciting and successful year in which our flair andinnovation helped generate significant underlying growth in revenue, and despitethe required investment in new and existing products, we also maintained thehigh operating margin of the Group through strong management of the cost base.This innovation has enabled us to grow existing revenues by 11%. The strong element of organic growth in these results illustrates our continuedability to develop our brands to accommodate the ever changing needs of ourclients, whether it is in print, in person or online. This strong internal growth has been supplemented by three strategic andaccretive acquisitions, Search Engine Strategies combined with the ClickZnetwork, the remaining 80% of Global Professional Media Limited and the Senateevent, which together have further broadened our portfolio and have given usaccess to two new growth markets, Interactive Marketing and Legal." END For further information, please contact: Tim Weller Chief Executive +44 (0) 20 7484 9700 Incisive Media plc Tim.Weller@incisivemedia.com www.incisivemedia.com Jamie Campbell-Harris Group Finance Director +44 (0) 20 7484 9700 Incisive Media plc Jamie.Campbell-Harris@incisivemedia.com www.incisivemedia.com Anthony Payne Peregrine Communications Dir: +44 (0) 20 7978 6052 Mob: +44 (0) 7930 643 983 Gen: +44 (0) 870 800 5275 Anthony.Payne@peregrinecommunications.co.uk Notes: • There will be an analyst briefing at 9.30 am on Wednesday 15 March, 2006 at the offices of Incisive Media, Haymarket House, 28-29 Haymarket, London SW1Y 4RX. • Photographs of Tim Weller and Jamie Campbell-Harris are available at www.incisivemedia.com INCISIVE MEDIA PLC CHAIRMAN'S STATEMENT I am absolutely delighted to be able to report yet another year of stronggrowth. In 2005 we delivered our eleventh consecutive year of revenue andprofit growth, achieved through a combination of innovation across the existingportfolio and strategic acquisitions which have taken us into two new growthmarkets. While profit before tax grew by 6% to £10.1m (2004: £9.5m) and dilutedearnings per share increased by 3% to 7.6p (2004: 7.4p), profit before tax anddiluted earnings per share, adjusted for the amortisation of intangible assetsarising on acquisitions, increased by 25% to £11.9m (2004: £9.5m) and 22% to9.0p (2004: 7.4p) respectively, and our adjusted operating margin has remainedvery strong at 25.4% (2004: 25.5%). Total revenue increased by 24% to £57.5m (2004: £46.5m), with revenue from theexisting portfolio increasing by 11%, excluding revenue of £5.9m from theacquisitions made in the year. Encouragingly we saw growth in all divisions forthe full year, and after reporting in September difficult trading conditions inour Insurance and Risk divisions during the first half, I can report that ourInsurance portfolio delivered 6% growth in the second half and 3% for the fullyear, while our Risk Management division achieved 23% second half growth and 11%year on year growth. We have been able to achieve this growth in our existing business throughinnovation in new products, combined with an ability to adapt to the needs ofour clients and deliver information via a greater variety of media. While printadvertising increased by just 4%, other publication revenue (which includessubscriptions, book sales and contract publishing) increased by 8% and eventsand online revenues increased by 18% and 30% respectively, albeit from lowerbases. There has been considerable new product development over the past eighteenmonths. We launched the magazine brands Structured Products, Real Adviser andLife and Pensions, re-launched Credit and OpRisk & Compliance and developedapproximately 30 new events and several new web sites. Our online debatingplatform, Conjecture, which was launched in the Financial Services divisioneighteen months ago, has been extended across other divisions, and we haverecently launched our first virtual conference, the "Investment Week e-symposium". Although these launches contribute to the revenue growth, they do not allmake a contribution to profit in the year of launch. The operating margin of22.3% (2004: 25.5%), which includes the amortisation of intangible assetsarising on acquisition, remains high, but we have also been able to maintain ouralready very strong adjusted operating margin at over 25%, despite havingexpensed start up losses associated with these new investments. These strong operating margins result in a very high free cash to sales ratio,which coupled with our strong conversion rate of adjusted operating profit tocash of 99% (2004: 101%) over each of the last two years, enables us to leverageour balance sheet efficiently for the benefit of shareholders. Acquisitionscan, therefore, be funded by a mix of bank debt and equity as appropriate and atthe year end net debt was £45.4m (2004: £32.8m) with interest coveredcomfortably in the year by 5.3 times (2004: 5.0). We made three acquisitions in the year. Our first acquisition in January wasthe "Senate" event, which runs in June each year and serves the retailinvestment market. This event complements our other events in the FinancialServices division and is a "bolt-on" that has been swiftly integrated into thatdivision. The other two acquisitions, however, have taken us into two newgrowth markets. In August we completed the acquisition for $43m of Search Engine Strategies ("SES") and the ClickZ Network, which together form our interactive marketingportfolio. SES is a series of international conferences and exhibitions whichdeliver, in person, key information and education to interactive marketers andother professionals involved in the search engine industry. These are supportedby the ClickZ network, a range of market leading websites, including ClickZ.comand searchenginewatch.com. This is a growing arena for marketing and offersvery exciting opportunities in this new fast growing, global, vertical market.In the five months since acquisition, we have held two of the portfoliosflagship events, SES San Jose and SES Chicago, both of which showed strongyear-on-year growth. We also ran SES Stockholm in October and launched SESParis in November, both of which generated losses this year but show promise forthe future. We were also highly encouraged when the ClickZ network posted itsrecord quarter for advertising sales in the fourth quarter. Our third acquisition in the year was Global Professional Media Limited ("GPM"),publishers of Legal Week, a leading weekly magazine serving the legal market,predominantly in the UK but increasingly on a global basis. GPM is a businessthat we invested in at its launch in 1998 and this transaction represented theacquisition, for £5.8m, of the remaining 80% not already owned by the Group.Legal Week is supported by a range of events, complementary publications andwebsites, which together form our Legal portfolio. This portfolio sitsalongside our Insurance portfolio, within the re-named Professional Servicesdivision. In the four months since acquisition this portfolio has performed inline with our expectations and was marginally earnings enhancing during theperiod. On the back of these very strong results, the Board are pleased to propose a 28%increase in the final dividend to 1.60p (2004: 1.25p), which if approved at theAnnual General Meeting will be paid on 24 May 2006 to shareholders on theregister as at 07 April 2006. This will bring the full year dividend to 2.50p(2004: 2.00p), an overall increase of 25%. Finally, and as ever, it is the entrepreneurial quality and vitality of all thestaff across the whole business that makes Incisive Media such an innovativecompany and its brands so successful and I would like to thank them all fortheir continued hard work and dedication. Mike MastersChairman INCISIVE MEDIA PLC CHIEF EXECUTIVE'S REPORT 2005 has been yet another exciting and successful year, in which our flair andinnovation helped to generate significant underlying growth in revenue, and,despite the required investment, we also maintained the high operating margin ofthe Group through strong management of the cost base. This has beensupplemented by three strategic and accretive acquisitions, as detailed in theChairman's statement, which have taken us into two new markets, and given usfurther opportunity to accelerate additional organic growth in the future. I tried to encapsulate that spirit of innovation in a recent speech I made toall our staff at the annual employee awards dinner: "2005 has been another momentous year in Incisive Media's development and a busyone at that! First we celebrated our 10th anniversary of being in business. We have come along way in those 10 years from when we started Investment Week back in January1995 with just 13 people. The company now employs over 500 people and hasundoubtedly some of the leading brands in b2b publishing that must be the envyof our peers. We also have an excellent track record of delivering growth yearafter year, and we achieve this through your ability to innovate and provide newsolutions for your clients. This entrepreneurial spirit is the bedrock on whichthis business was founded and is why we continue to prosper. So what of 2005? It has been a really busy year. In fact it has been one of our busiest in terms of new product development and Iam pleased to report we had a cracking 2nd half when like for like revenuegrowth was in excess of 10%. 2005 saw the launch of: • Life & Pensions• Real Adviser• Journal of Credit Risk• Insurancejobs.com, and• a new series of Executive Reports as well as: • the re-launch of Credit• the successful establishment of Structured Products• and a substantial roll out of over 30 new events and conferences which included: - the American Financial Technology Awards - FX Week's Asia conference - Inside Market Data's Asia conference - Risk's Asia conference - Structured Products' European conference - Structured Products' Asian conference - Hedge Funds Review's Dubai conference - Compliance USA - The Equity Release Roadshow - The First Time Buyer Initiative - Mortgage Solutions' golf day - The Limited Partner Congress - Europe - The Limited Partner Congress - Stockholm - The Unquote Private Equity Awards - Search Engine Strategies - Paris - Insurance Age Expo - Investment Week's Tokyo Congress - Square Up in the City - Senate Investment Conference - International Investment's Spanish Forum - IFAonline's Technology day - The Middle East insurance briefing - Operational Risk's webinar - Waters' breakfast briefings - 11 new training courses launched by the Risk training team - the launch of Incisive In-House Training Solutions, and - the roll out of Conjecture into the Insurance, Investment, Mortgage and Private Equity portfolios Furthermore, it is worth mentioning that the Company, its people and its brands,have again been recognised this year by winning a large number of externalawards: • At the annual PPA Awards, Risk was voted the International Magazine of the Year, while IFAonline was voted Best Interactive Website of the Year;• The Private Client Legal Forum won the ITMA's award for the best International event, and;• Investment Week was voted trade magazine of the year in the Bradford and Bingley awards;• Across the business, many of our journalists were again voted the best in their given sectors, picking up over 20 of awards between them, and;• I was honoured to receive the Marcus Morris Award in recognition of our company's achievements since formation. What a fantastic year, and as I said, it just goes to show that quality,creativity, flair and innovation are truly the cornerstones on which IncisiveMedia is built. None of which could have been achieved without having the verybest people in the business. I thank you all." This innovation is the reason why we have been able to grow existing revenues(which exclude revenues from acquisitions made in the year) by 11%, whichincludes publication revenue growth of 6% and events revenue growth of 18%. TheGroup now publishes 8 weekly magazines and newsletters, approximately 30 monthlytitles, 4 quarterly journals, a range of annual directories and more than 100books. These are supplemented by more than 50 websites and around 240 events,held in 40 cities, in 17 countries and across 4 continents. One third of the Group's reported revenue in 2005 has been generated from the 16magazine or online brands that have been launched from scratch under IncisiveMedia's ownership. This does not include many of the new events or websiteslisted above which have been incorporated within acquired brands or their shareof revenue from group wide launches such as Incisive Research or Conjecture. All of the launches I have referred to both illustrate our flexibility indeveloping our brands to accommodate the ever changing needs of our clients,whether they be readers, delegates, advertisers or sponsors, and emphasise ourfocus on organic growth. This approach is also the key driver behind our acquisitions strategy. Theprincipal criteria for our major acquisitions are that they sit withinattractive growth sectors, with robust market leading brands which are yet tofulfil their full potential. However, generally speaking, each acquiredbusiness also delivers fresh opportunities to our existing business by bringingnew skill sets and different approaches to revenue generation, while itselfbenefiting from the skills and innovation already prevalent within IncisiveMedia. This enables us to generate significant growth from both existing andacquired assets. We co-ordinate this approach to growth with tight control on costs and a focuson the operating margins of the business. Cost savings are never the principaldriver of an acquisition, although where potential efficiencies are identifiedthey are delivered as swiftly as possible. Through the year we applied our strategy of growing the business throughinnovation and measured acquisitions, and while we strongly manage the costbase, we also made significant investments in new products and in developing theinfrastructure of the business and we will continue to do so in 2006. Thisinvestment includes a number of new high level appointments to supplementinternal promotions as the business grows. Most notably following theacquisition of Search Engine Strategies and the ClickZ network, we recruitedGiles Grant to deliver a coordinated web strategy across the business which willrequire further investment through 2006 and Graham Harman to lead ourProfessional Services division and to integrate and grow the Insurance and Legalportfolios. I would like to thank all of our staff for their fantastic effort and dedicationthrough the year. They are the most important part of the business, and inorder to continue to attract and retain the best quality of staff and ensurethat the highest standards of editorial, production, sales and marketingexcellence are maintained throughout the business, we have continued to investin them through increased support, training and other initiatives. One of the most pleasing aspects of the year is that we can report underlyinggrowth across all of the divisions, and in particular a very strong second halfto the year following a slightly disappointing performance in the secondquarter. The review below sets out the performances by division. Divisional review As stated in the interim results, to simplify both the internal and externalreporting of the Group as it grows, we have re-organised the business into fourdivisions: Financial Services, Risk Management, Professional Services andMarketing and Other Specialist Services. This better reflects the way in whichthe Group is managed, as well as the communities the brands serve. Financial Services division This division, which comprises the Retail Financial Services, Mortgage andAlternative Asset portfolios, accounted for 41% of the revenues of the Group in2005 (2004: 43%). While we are reporting revenue growth of 17% in this division, this has beenpositively affected by the acquisition of the "Senate" event. However,adjusting for this, existing revenue increased by 14%, with a 23% increase inevent revenues thanks to the launch of several new events. These included threeevents for the Private Equity community, as well as new overseas Investmentevents in Tokyo, Spain and Switzerland and new events too for the Mortgageindustry, such as the Equity Release Roadshow. Overall, publication revenue in the division grew by 5%, including a goodperformance from the flagship Investment Week (up 5%) and Mortgage Solutions (up31%) which offset a disappointing revenue performance from some of the smallerniche titles. 2005 also saw the launch of Real Adviser, which replaced anexisting title serving the multi-managed funds sector. Risk Management division This division accounted for 28% of the revenue for the year (2004: 31%). It is pleasing to be able to say that an exceptionally strong second half of theyear, with revenue growth of 24%, has boosted overall annual revenue growth to11%, despite having reported a 1% decline in year-on-year revenues in the firsthalf of the year Like for like event revenues were also up 11% overall, but 52% up in the secondhalf, with many of the new events listed earlier being part of the growth wehave demonstrated. During the year we launched Life and Pensions magazine and benefited from thestrong performance of Structured Products in its first full year, which alongwith significant growth from Asia Risk and Operational Risk, helped boostadvertising revenue for the division by 8% year on year. Subscriptions grew by17% and Risk's book sales by 11%. Professional Services division This division, which is composed of the Insurance and Legal portfolios,accounted for 18% of the reported revenues of the Group in 2005 (2004: 18%). The Insurance portfolio recovered well in the second half of the year, on theback of some strong events. Overall revenue for the portfolio was up 3% for theyear, but was up 6% in the second half. The flagship Post Magazine was up 3%for the year and, despite some pressure on advertising revenues, subscriptionswere strong and its delegate-led events performed well. There was aparticularly strong performance in the year from Insurance Age which grew by21%, thanks largely to the new Insurance Age Expo. The Legal portfolio comprising Legal Week, Legal IT and Legal Director wasacquired in September and in the final quarter performed in line with ourexpectation, and ahead of last year on a like for like revenue basis. Marketing and Other Specialist Services This division, which includes the Interactive Marketing, Financial IT, MarketData and Photographic portfolios accounted for 13% of the reported revenues ofthe Group in 2005 (2004: 8%). The interactive marketing portfolio comprises the Search Engine Strategiesevents and the ClickZ Network and websites. These were acquired in August 2005and in that period showed strong revenue growth year on year. SES San Josedelivered 66% growth in delegate revenue and 52% growth in exhibitor and sponsorsales, while SES Chicago was up 18% and 21% respectively. Since acquisition welaunched SES Paris, which although loss making, was a successful event that haslaid a solid foundation for the future. The ClickZ Network had its recordquarter for advertising sales in the three months to December 2005. The Financial IT portfolio benefited from a very strong performance from Waterswhich grew by 62% in the year on the back of a 35% growth in publication revenueand some very strong events. This helped the portfolio grow by 29% overall. Outlook The second half performance of the business in 2005 was very encouraging andthis has continued into the first quarter of 2006. During this period we haveseen improved advertising markets across core brands and continued momentumbehind all of our online properties. This, coupled to the benefit of improvedvisibility from further growth on subscriptions and substantial forward bookingson events, gives us confidence for another year of strong growth in 2006. Tim WellerChief Executive INCISIVE MEDIA PLC Preliminary announcement of the results for the twelve months to 31 December2005 Consolidated profit and loss account 12 months to 12 months to 31/12/05 31/12/04Continuing operations Note £'000 £'000 Revenue 2 57,456 46,492 Cost of sales (33,720) (27,081) Gross profit 23,736 19,411 - administrative expenses before amortisation (9,086) (7,514)- amortisation of intangible assets (1,839) (25)Administrative expenses (10,925) (7,539) Operating profit 2 12,811 11,872 Interest receivable and similar income 201 130Interest payable and similar charges (2,959) (2,485) Profit before taxation 10,053 9,517 Taxation 5 (2,675) (2,810) Profit for the year 3 7,378 6,707 Attributable to:Equity shareholders 7,368 6,713Minority interest 10 (6) 8 7,378 6,707 pence pence Earnings per share - basic 4 7.72 7.57Earnings per share - diluted 4 7.61 7.41 Dividend paid per share 2.15 1.75 Consolidated statement of recognised income and expense 12 months to 12 months to 31/12/05 31/12/04 £'000 £'000 Fair value loss on financial instruments (362) -Deferred tax on share based payments 58 84Net exchange adjustment offset in reserves net of tax of £35,000 (2004: 325 12nil) Net gains not recognised in income statement 21 96 Profit for the year 7,378 6,707 Total recognised income and expense for the year 7,399 6,803 Attributable to:Equity shareholders 7,389 6,809Minority interest 10 (6) 7,399 6,803 Transitional adjustment on adoption of IAS 39 154 - Consolidated balance sheet 31/12/05 31/12/04 Note £'000 £'000AssetsNon-current assetsIntangible assets 128,307 96,339Property, plant and equipment 1,416 797Deferred tax asset 369 - 130,092 97,136 Current assetsFinancial assets - derivative financial instruments 99 -Inventories 360 467Trade and other receivables 14,953 10,235Cash and cash equivalents 5,918 5,334 21,330 16,036LiabilitiesCurrent liabilitiesFinancial liabilities - borrowings (9,765) (7,385)Financial liabilities - derivative financial (319) -instrumentsTrade and other payables (18,480) (16,706)Current tax liabilities (2,833) (1,972) (31,397) (26,063) Net current liabilities (10,067) (10,027) Non-current liabilitiesFinancial liabilities - borrowings (41,503) (26,500)Deferred tax liabilities (4,957) (5,082) (46,460) (31,582) Net assets 73,565 55,527 Shareholders' equityOrdinary shares 1,006 914Share premium 48,180 35,903Other reserves 9,082 8,965Retained earnings 15,293 9,751 Total shareholders' equity 73,561 55,533 Minority interest in equity 4 (6) Total equity 8 73,565 55,527 Consolidated cash flow statement 12 months to 12 months to Note 31/12/05 31/12/04 £'000 £'000 Cash flows from operating activitiesCash generated from operations 7 14,395 11,932Interest received 200 124Interest paid (2,682) (2,435)Tax paid (2,128) (1,843)Net cash from operating activities 9,785 7,778 Cash flows from investing activitiesAcquisition of subsidiaries (net of cash acquired) (5,926) (16,851)Acquisition of trading businesses (25,470) -Payment of deferred consideration (2,000) -Purchase of plant and equipment (952) (430)Payments to purchase intangible assets (141) -Proceeds from sale of plant and equipment - 8Net cash flows used in investing activities (34,489) (17,273) Cash flows from financing activitiesNet proceeds from the issue of ordinary share capital 12,369 10,987Net proceeds from the issue of new bank loans 22,744 8,904Repayment of bank loans (3,753) (3,057)Repayment of loan notes (3,686) (2,124)Dividends paid to shareholders (2,061) (1,514)Net cash from financing activities 25,613 13,196 Effect of exchange rate changes (325) - Net increase in cash and cash equivalents 584 3,701 Cash and cash equivalents at the beginning of the year 5,334 1,633 Cash and cash equivalents at the end of the year 5,918 5,334 Notes to the preliminary statements 1. Basis of preparation These financial statements have been prepared in accordance with InternationalFinancial Reporting Standards (IFRS) and IFRIC interpretations endorsed by theEuropean Union and with those parts of the Companies Act 1985 applicable tocompanies reporting under IFRS. The financial statements have been prepared under the historical cost conventionas modified by the revaluation of financial assets and derivative instruments. 2. Segmental review Segment information is presented in respect of the Group's business segments.The primary format, business segments is based on the Group's management andinternal reporting structure. The Group comprises the following main businesssegments: Financial Services, Risk Management, Professional Services andMarketing and Other Specialist Services. Segment results include items directly attributable to a segment as well asthose that can be allocated on a reasonable basis. Unallocated items comprisemainly of corporate and head office expenses. 12 months to 12 months to 31/12/05 31/12/04 £'000 £'000RevenueFinancial Services 23,281 19,923Risk Management 16,105 14,493Professional Services 10,418 8,180Marketing and Other Specialist Services 7,652 3,896 57,456 46,492 12 months to 12 months to 31/12/05 31/12/04 £'000 £'000 Operating profitFinancial Services 6,469 6,152Risk Management 4,937 4,053Professional Services 2,512 2,310Marketing and Other Specialist Services (199) 154Central departments* (908) (797) 12,811 11,872 12 months to 12 months to 31/12/05 31/12/04 £'000 £'000 Adjusted operating profit (see note 3 below)Financial Services 6,649 6,152Risk Management 4,937 4,053Professional Services 2,529 2,310Marketing and Other Specialist Services 1,402 154Central departments* (908) (797) 14,609 11,872 * = IAS 14, "Segment Reporting", requires the allocation back to each segment ofall attributable costs. The full year comparative for central costs has beenrestated since the Group's interim results to reflect more accurately thisallocation. The remaining unallocated costs represent the actual costsattributable to corporate and other wholly central resource. 3. Profit for the year 12 months to 12 months to 31/12/05 31/12/04 £'000 £'000 Profit for the year is stated after charging:Amortisation of intangible assets - contracted business at the date of acquisition 1,120 - - other intangible assets arising on acquisition 678 - - software 35 19 - other intangible assets 6 6Depreciation 365 341Fair value of share based payments 177 131 When, at the date of acquisition, there exists an acquired contractualrelationship with a customer with contracted revenues, the fair value of thoserelationships are capitalised and amortised in line with the profits as they aredelivered. In order to assist the understanding of the underlying performance of thebusiness, the following adjustments have been made to arrive at an adjustedprofit before taxation. This basis is referred to in the Chairman's statement,Chief Executive's report and financial highlights and review. 12 months to 12 months to 31/12/05 31/12/04 £'000 £'000 Operating profit - statutory basis 12,811 11,872 Add back: Amortisation of intangible assets that arise on acquisition 1,798 - Adjusted operating profit 14,609 11,872 Interest receivable and similar income 201 130Interest payable and similar charges (2,959) (2,485) Adjusted profit before taxation 11,851 9,517 Taxation (2,675) (2,810)Deduct: Notional taxation charge on contracted business at date of (420) -acquisition Adjusted profit for the period 8,756 6,707 Attributable to:Equity shareholders 8,746 6,713Minority interest 10 (6) 8,756 6,707 4. Earnings per share 2005 2004 Weighted Weighted average 2005 average 2004 number Amount number Amount 2005 of per 2004 of per Earnings shares share Earnings shares share £'000 '000 pence £'000 '000 pence On profit attributable to ordinary shareholders Basic earnings per share 7,378 95,442 7.72 6,713 88,660 7.57 Effect of dilutive securities - options to staff 1,433 1,889 Diluted earnings per share 7,368 96,875 7.61 6,713 90,549 7.41 On adjusted profit attributable to ordinaryshareholders Amortisation of intangible assets that arise on 1,798 1.86 - -acquisitionNotional taxation charge on contracted business at (420) (0.43) - -date of acquisition Adjusted basic earnings per share 8,746 95,442 9.16 6,713 88,660 7.57 Effect of dilutive securities - options to staff 1,433 1,889 Adjusted diluted earnings per share 8,746 96,875 9.03 6,713 90,549 7.41 5. Taxation The tax charge for the year to 31 December 2005 is based on the profit beforetax for that period, and results in an effective tax rate of 26.6% (2004:29.5%). 6. Dividends The Company will pay a final dividend of 1.60 pence per share (2004: 1.25pence). The dividend will be paid on 24 May 2006 to shareholders on the shareregister at 07 April 2006. The shares will go ex-dividend on 05 April 2006. 7. Reconciliation of profit for the period to cash generated fromoperations 12 months to 12 months to 31/12/05 31/12/04 £'000 £'000 Profit for the year 7,378 6,707 Adjusted for:Tax 2,675 2,810Depreciation 365 341Profit on disposal of plant and equipment - (3)Amortisation of intangible assets 1,839 25Fair value of share based payments 177 131Interest income (201) (130)Interest expense 2,959 2,485Fair value loss on revaluation of financial instruments 12 - Changes in working capital (excluding effects of acquisitions)Decrease/(increase) in inventories 107 (162)(Increase)/decrease in trade and other receivables (2,746) 556Increase/(decrease) in payables 1,830 (828) Cash generated from operations 14,395 11,932 8. Statement of changes in shareholders' equity Share Share Other Retained Minority Total capital premium reserves earnings interest equity £'000 £'000 £'000 £'000 £'000 £'000 Balance at 1 January 2004 829 25,001 8,953 4,337 - 39,120 Exchange differences on translation of foreignoperations - - 12 - - 12Profit for the period - - - 6,713 (6) 6,707Dividends - - - (1,514) - (1,514)Shares issued including issue costs 85 10,902 - - - 10,987Fair value of share based payments - - - 131 - 131Deferred tax on share based payments - - - 84 - 84Balance at 31 December 2004 914 35,903 8,965 9,751 (6) 55,527 Transitional adjustment on adoption of IAS 39 - - 154 - - 154 914 35,903 9,119 9,751 (6) 55,681 Exchange differences on translation of foreignoperations - - 325 - - 325Profit for the period - - - 7,368 10 7,378Dividends - - - (2,061) - (2,061)Shares issued including issue costs 92 12,277 - - - 12,369Fair value of share based payments - - - 177 - 177Deferred tax on share based payments - - - 58 - 58Fair value loss on financial instruments - - (362) - - (362)Balance at 31 December 2005 1,006 48,180 9,082 15,293 4 73,565 9. Annual Report and Accounts This preliminary announcement is extracted from the audited accounts which willbe posted to shareholders in April. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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