Interim Results
Thomson Intermedia PLC
18 October 2006
18 October 2006
Thomson Intermedia plc
Adjusted pretax profits up 143%
Thomson Intermedia plc ('Thomson Intermedia' or the 'Group', AIM: THN), a
leading provider of media intelligence, today announces its interim results for
the six months ended 31 July 2006, under international financial reporting
standards.
Highlights
- Revenue increased by 144% to £8.4m (2005: £3.5m)
- Adjusted pretax profit* increased by 143% to £1.7m (2005: £0.7m)
- Pretax profit £1.1m (2005: £0.6m)
- Adjusted earnings per share** doubled to 4.81p (2005: 2.41p); Basic
earnings per share 3.39 pence
- Gross sales contracts significantly increased to £9.0m from £3.8m
- The Group's forward visibility remains strong with future contracted
revenue of £5.7m.
- Contracts renewal rate of 90%
- Successful integration of the billetts business
- Two new on line products developed and launched: Auditlive and Newslive
- Exclusive long-term deals secured with over 90% of regional publications
*pre amortisation of purchased intangibles, exceptional items and share based
expenses
** pre amortisation of purchased intangibles, exceptional items, share based
expenses and deferred tax
Sarah Jane Thomson, Joint Chief Executive Officer of Thomson Intermedia plc,
said:
'This has been a very important period for us. We have not only developed all
our businesses but seen a good operating performance across the Group. In
addition we have seen our presence in the market considerably increased due to
our acquisition and integration of the billetts business.
'The scale and offerings of the enlarged Group have enabled us to develop some
very exciting new products during this period and we look forward to reaping the
benefits of these. Thomson Intermedia is now a significant force in the UK
media landscape and I am confident we are now well positioned to maintain our
considerable momentum.'
Enquiries:
Thomson Intermedia
Sarah Jane Thomson, Joint Chief Executive Today 020 7457 2020
David Trendle, Finance Director Thereafter 020 8466 2906
College Hill
Adrian Duffield/Ben Way 020 7457 2815/2055
Financial Performance
Following the IFRS restatement of the Group's financial results, the Group
presents its interim results for the period ended 31 July 2006, under IFRS for
the first time.
Group revenue in the six months to 31 July 2006 increased by 144% to £8.4m
(2005: £3.5m) with gross sales more than doubling to £9.0m (2005: £3.8m). New
sales contracts continued at a strong pace amounting to £2.4m, with consultancy
and project work securing a further £1.2m of revenue. Renewals of online
advertising monitoring products and billetts media audit products maintained at
a satisfying level of 90%.
Gross profit increased by 97% to £4.9m (2005: £2.5m), providing a gross margin
across the Group of 58.1% (2005 Thomson Intermedia only: 71.8%).
Adjusted operating profit increased by 171% to £1.8m (2005: £0.7m), before share
based expenses (£124,000), amortisation of purchased intangibles (£194,000), and
one off restructuring costs (£101,000). Adjusted operating margins improved to
21.6% (2005: 19.4%).
Adjusted Group pretax profit increased by 143% to £1.7m (2005: £0.7m). Group
pretax profit was £1.1m (2005: £0.6m), after net financing costs of £133,000.
The Group has a nil net tax charge with tax on profits offset by deferred tax
assets.
Adjusted earnings per share improved by 100% to 4.81p from 2.41p. Basic
earnings per share improved from 2.78p to 3.39p.
The Board is not recommending the payment of a dividend, reflecting the high
growth nature of the Group and the numerous opportunities available for further
development. However, given the cash generative nature of the Group's business
model this policy will be reviewed on an ongoing basis.
The Group has moved to a net debt position of £1.0m as at 31 July 2006. The
Board expects cash flow in the second half to improve sharply as the net cash
from operating activities is expected to be significantly stronger as a result
of increased profitability and an improvement in working capital. The first half
had an unusually high negative working capital movement during the integration
process.
Thomson Intermedia is pleased to announce that billetts achieved the maximum
earn out for its results for the year ended 30 April 2006. As a result, on 8
August, the Group issued loan notes to the value of £3.7m, net of shareholder
bonuses paid, with a maturity date of April 2008.
Following the integration of the businesses, one small office was closed
resulting in a one off restructuring costs of £101,000 in the first half, but
will result in annualised cost savings of approximately £230,000.
Operational Highlights
Thomson Intermedia has completed very successfully a notable period of change.
Integrating the billetts business has significantly strengthened the management
team, enabled us to develop new and revolutionary online media performance
products and considerably enhanced the position of the Group in the market
place.
The enlarged and fully integrated Group had not only a good sales performance
for the first half but notably benefited from the combination of the two
complementary businesses. The fully integrated Group now operates via four
divisions, benefiting from the expertise within each area as well as cross
selling within the Group's customer base. These are:
o Online systems
o Media Owner platforms
o Consultancy
o International
UK Business
The Group is recognised as a leading provider of products and services to the
media industry, providing information to enhance the impact and performance of
companies' media expenditure. The Group's strength is based on the
comprehensiveness and accuracy of its media data, technical expertise and
considerable knowledge of the media industry which provide the springboard for
the opportunities. This is set against an industry valued at £14 billion whose
demands for this data are ever increasing.
Online Systems
Thomson Intermedia's online systems in the UK represent 39% of Group revenue
(£3.3m). This area of the business is characterised by high operational
gearing, significant barriers to entry and is internationally scaleable. The
core data captured for these products is substantial with more than 40,000
adverts being added per day and a history of more than eight years of data. The
market opportunity for these products is considerable with a largely fixed cost
base to produce them.
The three products, Advertising Monitoring and the newly developed AuditLive and
Newslive, are based on the same set of core data feeds.
Advertising Monitoring: The flagship online product, represents 88% of current
turnover in this division and has a renewal rate of 83%. Its strong momentum
has been considerably enhanced by the inclusion of 'accuracy of expenditure
modules', the billetts team's knowledge, and by increasing the capture of
regional media data, Thomson Intermedia has secured exclusively more than 90% of
regional media data.
This product enables the division's 235 clients to have a real time view of
their competitors advertising and understand the impact of their own media spend
and propositions on the target market.
As expected the focus for vouching has moved from retrospective to ongoing and
therefore the vouching product has been amalgamated within the billetts media
audits product suite as part of an enhanced offering to clients. The Group also
continues to have success in securing media owners to sign up for the e-vouching
product (see Media Owner Platforms below).
AuditLive: This new product has been developed to provide media audit services
to companies who have not before been able to afford the services of an audit
consultancy. In today's environment of increased management accountability,
marketers need more than ever to be able to demonstrate the effectiveness of
their media budgets and to be confident that they are spending the budget as
efficiently as possible. Auditlive enables them to do this in real time as
their campaign runs.
It provides clear and actionable results and provides the following crucial
facts to Marketing and Finance Directors: Have all your ads run as expected,
have you paid a fair price for your media and have you received good quality
placement of your media?
The Group's statistics demonstrate to clients that access to our audit products
can save them up to 20% year on year.
Newslive: This product has been developed to benefit from the editorial data
which is captured in the process of monitoring advertising and the exclusive pdf
editorial data which has been secured via our Media Owner platform. This
product is the first in the UK to monitor real time mentions of any entity,
company or person, across TV, Radio, Print and the Internet. In addition to all
of this print capturing, we utilise speech to text technology in conjunction
with close caption technology to provide links to the broadcast clip within TV
or Radio and to automate a transcript and monitor the full spectrum of the
Internet including sites, blogs and Webcasts.
The clippings market in the UK is estimated to be worth £80m and is dominated by
largely print based serviced solutions. This new service will provide the
market with the first comprehensive and real time view of the stories which
impact their business and will be delivered within Thomson Intermedia's easy to
use interface.
In addition the Group is currently developing Resultslive - the first of a suite
of return on investment products. Resultslive is a powerful test and control
system, allowing companies to test a strategy in a controlled environment and to
evaluate the impact the strategy would have on a wider role out.
Media Owner Platform
The business impact in securing the tender for Press vouching is felt over the
entire Group, having secured exclusive contracts with all significant regional
media owners, which account for more than 90% of regional publications.
Clients, and the media owners, use the technical system which has been developed
to provide instant proof to agencies and direct advertisers of their advert
appearing. The system provides significant cost efficiencies to media owners as
it negates the need for them to send out a voucher copy to every advertiser
within the publication.
This Thomson Intermedia system is now operational in 108 agencies and used daily
to ensure the placement of their spend. The completion of the rollout will then
enable further services to be implemented providing media owners with improved
systems and further cost reductions and efficiency gains.
In addition to the revenue that the Group receives from this division, Thomson
Intermedia also benefits considerably from the exclusive access to the data for
use in its systems.
Consultancy
This division, made up of billetts media audits and billetts marketing sciences,
contributes 40% of Group turnover (£3.4m). These two strong areas of the
business work for 165 large blue chip clients providing products and services to
demonstrate the value of their media spend.
billetts media audits has further consolidated its position as the UK market
leader in this field. Growth has come from increased activity in interactive
media as well as winning new clients and ad hoc projects Improvements have
also been made with better data provision and technology introduced by the
original Thomson Intermedia business. Its data pool of cost and quality metrics
is by far the most extensive and comprehensive in the UK, enabling the most
robust and impartial viewpoint on the media performance of its clients. In
addition to the contracted income which is recurring for the 157 clients,
consultancy income is also received through ad hoc projects.
billetts marketing sciences provides consulting to assist the advertiser in
achieving their maximum ROI by optimising payback and allocation of marketing
spend across geographies, brands and marketing methods. This unit draws on
advanced analytical techniques, marketing experience, benchmarks and tools to
deliver improved and fact based marketing strategies. With increasing importance
on return on investment and additional technological tools further growth is
expected in this area.
International
International revenue now represents 21% of Group revenue (£1.8m). The Group
has a number of significant international contracts for media auditing where it
utilises international partners to secure required local data and to help in
some elements of the service. Over the last three years the Group has seen
revenue treble from this area with contracts extending to all key markets
including Europe, North America and Asia.
MPMA, the US Auditing division, has made steady progress with an additional four
new clients, increasing the client base to 14 with average values in excess of
$100k. MPMA contributed £0.5m of revenue in the first half, with a small
positive contribution to operating profit.
The joint venture in Germany with Media Control which provides the advertising
monitoring products to the German market, continues to move towards a breakeven
position with further wins and maintaining a average contract value of €49k.
Whilst the Group has excellent relations with its various international
partners, it is looking to invest further in key markets to establish operations
which will provide the international content, and therefore improved margins, as
well as growth in the local market. The Group continues to review its
international strategy and are currently investigating a number of markets.
Integration
During the second half of the period the restructure of the business took effect
with a number of senior personnel moving to new roles. One of the significant
benefits of the acquisition was the high calibre additional management resource
which existed in the billetts business. The restructure maximises the potential
of this resource within the Group to drive the integrated business forward.
The development team have been working extremely hard applying technology to the
billetts business which provides integrated databases across the Group business.
They have developed powerful and impressive new systems.
The Group's streamlining of some operations resulted in a one off restructuring
cost of £101,000, but ongoing cost savings in office and personnel costs.
Current trading and outlook
The Group has had a successful first half both in overall performance,
integration of the businesses and the significant new product developments and
launches.
The Board is confident that the integrated business is with its new management
structure is in a very strong position to continue its UK penetration, with both
existing and new products.
The Group has had a good start to the third quarter in line with Board
expectations and have a strong pipeline of business across the entire product
suite. The Group's forward visibility remains strong with future contracted
revenue, secured as at 31 July 2006, of £5.7m. This, coupled with the new and
powerful products, provides a very good platform for continued growth.
Consolidated Income Statement
for the six months ended 31 July 2006
Unaudited Unaudited *Audited
6 months ended 6 months ended Year ended
31 July 06 31 July 05 31 January 06
£'000s £'000s £'000s
Revenue 8,428 3,457 11,136
Cost of Sales (3,532) (976) (4,129)
Gross Profit 4,896 2,481 7,007
Overheads (2,773) (1,543) (4,131)
Share based expenses (124) (125) (249)
Amortisation of intangible assets (498) (266) (694)
Performance bonus (176) - -
Restructuring costs (101) - -
Total administrative expenses (3,672) (1,934) (5,074)
Operating profit 1,224 547 1,933
Finance income 30 22 49
Finance expenses (163) - (55)
Net financing income (133) 22 (6)
Profit before taxation 1,091 569 1,927
Income tax (190) - (126)
Deferred tax 153 231 396
Tax (expense)/income (37) 231 270
Profit for the period 1,054 800 2,197
Attributable to:
Equity holders of the parent 1,062 800 2,207
Minority interests (8) - (10)
1,054 800 2,197
Earnings per share
Basic 3.39p 2.78p 7.48p
Diluted 3.26p 2.65p 7.13p
*UK GAAP Figures were audited/extracted from the audited financial statement for
31 January 2006 prepared under UK GAAP, and converted to IFRS as disclosed in
our statement of transition to IFRS, with a subsequent amendment to deferred tax
as described in note 8 below.
Consolidated Balance Sheet
as at 31 July 2006
Unaudited Unaudited *Audited
as at as at as at
31 July 06 31 July 05 31 January 06
£'000s £'000s £'000s
Non current assets
Goodwill 7,905 31 7,905
Other intangible assets 4,958 1,807 5,096
Property, plant & equipment 644 616 706
Investments 115 36 122
Deferred tax asset 504 186 351
14,126 2,676 14,180
Current assets
Trade & other receivables: Due
within one year 8,655 3,030 5,926
Trade & other receivables: Due
after one year 1,448 447 1,235
Cash & cash equivalents 1,821 1,455 2,774
11,924 4,932 9,935
Current liabilities
Trade & other payables (1,390) (657) (2,041)
Current tax liabilities (175) - (126)
Bank overdrafts & loans (250) - (312)
Provisions (3,850) - (3,850)
Accruals & deferred income (5,230) (3,872) (3,979)
(10,895) (4,529) (10,308)
Net current assets/(liabilities) 1,029 1,131 (373)
Non current liabilities
Bank loans (2,562) - (2,687)
Provisions (325) - (269)
Accruals & deferred income (1,628) (507) (1,374)
(4,515) (507) (4,330)
Total liabilities (15,410) (5,036) (14,638)
Net assets 10,640 2,572 9,477
Capital & Reserves
Share capital 7,828 7,186 7,823
Share premium 8,896 5,064 8,869
Merger reserve (4,504) (5,250) (4,504)
Retained earnings (1,464) (4,428) (2,603)
Minority interest (116) - (108)
Shareholders' funds 10,640 2,572 9,477
*UK GAAP Figures were audited/extracted from the audited financial statement for
31 January 2006 prepared under UK GAAP, and converted to IFRS as disclosed in
our statement of transition to IFRS, with a subsequent amendment to deferred tax
as disclosed in note 8 below.
Consolidated Cashflow Statement for the six months ended 31 July 2006
Unaudited Unaudited *Audited
6 months ended 6 months ended Year ended
31 July 06 31 July 05 31 January 06
£'000s £'000s £'000s £'000s £'000s £'000s
Cashflows from operating activities
Profit before taxation 1,091 569 1,927
Adjustments for:
Depreciation 166 119 276
Amortisation 498 266 694
Investment - (36) -
Share option charges 124 125 249
Investment income (30) (22) (49)
Interest expense 163 55
2,012 1,021 3,152
Increase in trade receivables (2,909) (1,185) (2,654)
Increase in trade payables 801 538 1,385
Cash generated from operations (96) 374 1,883
Interest expense (107) - (71)
Income taxes paid (126) - (6)
Net cash from operating activities (329) 374 1,806
Cashflows from investing activities
Purchase of subsidiary, net of cash acquired - - (7,012)
Purchase of property, plant & equipment (97) (217) (264)
Purchase of intangible assets (361) (322) (644)
Purchase of investments - - (87)
Investment income 30 22 43
Net cash used in investing activities (428) (517) (7,964)
Cashflows from financing activities
Proceeds from issue of share capital - - 4,343
Proceeds from longterm borrowings - - 3,000
Repayment of bank loans (124) - (63)
Net cashflow used in financing activities (124) - 7,280
Net (decrease)/increase in cash & cash
equivalents (881) (143) 1,122
Effect of foreign exchange rate changes (9) - (8)
Cash & cash equivalents at beginning of period 2,712 1,598 1,598
Cash & cash equivalents at end of period 1,822 1,455 2,712
*UK GAAP Figures were audited/extracted from the audited financial statement for
31 January 2006 prepared under UK GAAP, and converted to IFRS as disclosed in
our statement of transition to IFRS, with a subsequent amendment to deferred tax
as disclosed in note 8 below.
Basis of preparation
The financial information presented in this documentation has been prepared in
accordance with International Financial Reporting Standards (IFRS) and
International Financial Reporting Interpretations Committee (IFRIC)
interpretations that are expected to be applicable for the period ended 30 April
2007 (the Group's new period end). These are subject to ongoing review and
endorsement by the European Commission, or possible amendment by the
International Accounting Standards Board (IASB), and are therefore subject to
possible change. Further standards or interpretations may also be issued that
could be applicable for the period ended 30 April 2007. These potential changes
could result in the need to change the basis of accounting or presentation of
certain financial information from that presented in this document.
The Group may need to review some accounting treatments used for the purpose of
this document as a result of emerging industry consensus on practical
application of IFRS and further technical opinions. This could mean that the
financial information in this document may require modification until the Group
prepares its first complete set of IFRS financial statement for the period ended
30 April 2007.
The comparative figures for the year ended 31 January 2006 do not amount to full
statutory accounts within the meaning of S240 of the Companies Act 1985. Those
accounts which were prepared under UK GAAP have been reported on by the Group's
auditors and delivered to the registrar of companies. Those accounts received
an unqualified audit report which did not contain statements under sections 237
(2) or (3) (accounting record or returns inadequate, accounts not agreeing with
records and returns or failure to obtain necessary information and explanations)
of the Companies Act 1985.
As permitted, the group has not applied IAS 34' Interim Reporting' in preparing
this interim report.
Basis of accounting
The financial statements have been prepared in accordance with all adopted
International Financial Reporting Standards (IFRSs) for the first time. The
disclosures required by IFRS 1 concerning the transition from UK GAAP to IFRSs
are given above. The financial statements have also been prepared in accordance
with IFRSs adopted for use in the European Union and therefore comply with
Article 4 of the EU IAS Regulation.
IFRS1: First time adoption of International Financial Reporting Standards
The rules for first-time adoption of IFRS are set out in IFRS 1, which requires
that the Group establishes its IFRS accounting policies at its date of
transition, 1 February 2005, and apply these prospectively. The standard allows
a number of optional exemptions on transition to help companies simplify the
move to IFRS. The exemptions selected by Thomson Intermedia Plc are set out
below:
Business Combinations (IFRS3)
The Group has elected to apply IFRS 3 prospectively from the date of transition
to IFRS rather than to restate previous business combinations.
Share based payments
The Group has adopted the exemption to apply IFRS 2 'Share based payments' only
to awards made after 7 November 2002 that had not vested by 1 January 2005.
Financial instruments
The Group has adopted the exemption not to restate comparatives for IAS 32 and
IAS 39 and therefore the comparative information in the 2007 financial
statements will be presented on the existing UK GAAP basis and will not be
restated in line with IAS 32 and IAS 39.
Cumulative translation differences
Cumulative translation differences in respect of foreign operations have been
deemed to be nil at the date of the transition.
Presentation of financial information
The layout of the primary financial information has been amended in accordance
with IAS1 'Presentation of financial information' from that presented under UK
GAAP. This format and presentation may require modification as practice and
industry consensus develops.
1 Significant Accounting Policies
The principal accounting policies adopted are set out below.
Basis of consolidation
The consolidated interim financial statements incorporate the financial
statements of the Company and entities controlled by the Company (its
subsidiaries) made up to 31 July 2006. Control is achieved where the Company
has the power to govern the financial and operating policies of an investee
entity so as to obtain benefits from its activities.
Where necessary, adjustments are made to the financial statements of
subsidiaries to bring the accounting policies used into line with those used by
the Group. All intra-group transactions, balances, income and expenses are
eliminated on consolidation.
Business combinations
• Acquisition method of accounting
The cost of the acquisition is measured at the aggregate of the fair values, at
the date of exchange, of assets given, liabilities incurred or assumed, and
equity instruments issued by the Group in exchange for control of the acquiree,
plus any costs directly attributable to the business combination. The
acquiree's identifiable assets, liabilities and contingent liabilities that meet
the conditions for recognition under IFRS 3 are recognised at their fair value
at the acquisition date.
The interest of minority shareholders in the acquiree is initially measured at
the minority's proportion of the net fair value of the assets, liabilities and
contingent liabilities recognised.
• Merger method of accounting
Although IFRS 3 outlawed merger accounting, under IFRS 1, the Group is not
required to re-state acquisitions or business combinations prior to the date of
transition. Therefore the Group is permitted to retain their historical merger
accounting position in the consolidated accounts.
Goodwill
Goodwill arising on consolidation represents the excess of the cost of
acquisition over the Group's interest in the fair value of the identifiable
assets and liabilities of a subsidiary. Goodwill is initially recognised as an
asset at cost and is subsequently measured at cost less any accumulated
impairment losses. Goodwill which is recognised as an asset is reviewed for
impairment at least annually. Any impairment is recognised immediately in
profit and loss and is not subsequently reversed.
For the purpose of impairment testing, goodwill is allocated to each of the
Group's cash-generating units expected to benefit from the synergies of the
combination. Cash-generating units to which goodwill has been allocated are
tested for impairment annually, or more frequently when there is an indication
that the unit may be impaired. If the recoverable amount of the cash-generating
unit is less than the carrying amount of the unit, the impairment loss is
allocated first to reduce the carrying amount of any goodwill allocated to the
unit and then to the other assets of the unit pro-rata on the basis of the
carrying amount of each asset in the unit. An impairment loss recognised for
goodwill is not reversed in a subsequent period.
Goodwill arising on other acquisitions before the date of transition to IFRS has
been retained at the previous UK GAAP amounts subject to being tested for
impairment at that date.
Revenue recognition
Revenue is measured at the fair value of the consideration received or
receivable and represents amounts receivable for services provided in the normal
course of business, net of discounts, VAT and other sales related taxes. Income
is recognised evenly over the period of the contract for subscription to systems
and in accordance with the stage of completion of the contract activity for
consultancy income.
If the outcome of a contract could not be estimated reliably, the contract
revenue would be recognised to the extent of contract costs incurred that it is
probable would be recoverable. Costs are recognised as an expense in the period
in which they are incurred.
Foreign currencies
For the purposes of the consolidated financial statements, the results and
financial position of each Group company are expressed in pounds sterling, which
is the functional currency of the Company, and the presentation currency for the
consolidated financial statements.
In preparing the financial statements of the individual companies, transactions
in currencies other than the entity's functional currency (foreign currencies)
are recorded at the rates of exchange prevailing on the dates of transactions.
At each balance sheet date, monetary assets and liabilities that are denominated
in foreign currencies are retranslated at the rates prevailing on the balance
sheet date.
For the purpose of presenting consolidated financial statements, the assets and
liabilities of the Group's foreign operations are translated at exchange rates
prevailing on the balance sheet date. Income and expense items are translated
at the average exchange rates for the period, approximating to rates applicable
at the dates of the transactions.
The exchange differences arising from the retranslation of the opening balance
sheet amounts of subsidiaries and the difference on translation of the results
of subsidiaries are dealt with through equity. All other exchange differences
are dealt with through the income statement.
Operating profit
Operating profit is stated after charging restructuring costs, but before
investment income and finance costs.
Taxation
The tax expense included in the Consolidated Income Statement comprises current
and deferred tax. Current tax is the expected tax payable on the taxable income
for the period, using tax rates enacted or substantively enacted by the balance
sheet date.
Tax is recognised in the Consolidated Income Statement except to the extent that
it relates to items recognised directly in equity, in which case it is
recognised in equity.
Deferred tax is provided using the balance sheet liability method, providing for
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation purposes.
Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset is realised. Deferred tax is
charged or credited in the Consolidated Income Statement, except when it relates
to items charged or credited directly to equity, in which case deferred tax is
also dealt with in equity.
Deferred tax liabilities are recognised for all taxable temporary differences
and deferred tax assets are recognised to the extent that it is probable that
taxable profits will be available against which deductible temporary differences
can be utilised.
The carrying amount of deferred tax assets is reviewed at each balance sheet
date and reduced to the extent that it is no longer probable that sufficient
taxable profits will be available to allow all or part of the asset to be
recovered.
Deferred tax assets and liabilities are offset against each other when they
relate to income taxes levied by the same tax jurisdiction and when the group
intends to settle its current tax assets and liabilities on a net basis.
Internally-generated intangible assets - research and development expenditure
An internally-generated intangible asset arising from the Group's development
expenditure is recognised only if all of the following conditions are met:
• An asset is created that can be identified (such as software);
• It is probable that the asset created will generated future economic
benefits; and
• The development cost of the asset can be measured reliably.
Internally-generated intangible assets are amortised on a straight-line basis
over their useful lives. Where internally-generated intangible asset can not be
recognised, development expenditure is recognised as an expense in the period in
which it is incurred.
Purchased intangible assets
Externally acquired intangible assets are initially recognised at cost and
subsequently amortised on a straight-line basis over their useful economic
lives. The amortisation expense is included within the administrative expenses
line in the income statement. Intangible assets are recognised on business
combinations if they are separable from the acquired entity or give rise to
other contractual/legal rights. The amounts ascribed to such intangibles are
arrived at by using appropriate valuation techniques. In-process research and
development programmes acquired in such combinations are recognised as an asset
even if subsequent expenditure is written off because the criteria specified in
the policy for research and development costs above are not met. The significant
intangibles recognised by the group, their useful economic lives and the methods
used to determine the cost of intangibles acquired in a business combination are
as follows:
billetts Media Consulting - customer Straight line over 10 years Estimated discounted cash flow
relationships
billetts Marketing Sciences - Straight line over 5 years Estimated discounted cash flow
customer relationships
MPMA Customer relationships Straight line over 2 years Estimated discounted cash flow
Trade name Straight line over 10 years Estimated royalty stream if
rights were to be licensed
Non-compete agreement Straight line over 1.5 years Estimated discounted cash flow
of potentially lost revenue
Plant and equipment
Fixtures and equipment are stated at cost less accumulated depreciation and any
recognised impairment loss.
Depreciation is charged so as to write off the cost or valuation of assets over
their estimated useful lives, the rates generally applicable are:
Motor vehicles 25% per annum reducing balance
Furniture & fittings 25% per annum reducing balance
Computer equipment & software 25% per annum on costs
Plant & equipment Straight line over 3-10 years
Operating leases Over remaining useful life
Impairment
Assets that have an indefinite useful life are not subject to amortisation and
are tested annually for impairment. Assets that are subject to amortisation or
depreciation are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. If any
such condition exists, the recoverable amount of the asset is estimated in order
to determine the extent, if any, of the impairment loss. Where the asset does
not generate cash flows that are independent from other assets, estimates are
made of the cashflows of the cash generating unit to which the asset belongs.
Recoverable amount is the higher of fair value, less costs to sell, and value in
use. In assessing value in use, estimated future cashflows are discounted to
their present value using a discount rate appropriate to the specific asset or
cash generating unit.
If the recoverable amount of an asset or cash generating unit is estimated to be
less than its carrying amount, the carrying value of the asset or cash
generating unit is reduced to its recoverable amount. Impairment losses are
recognised immediately in the income statement.
In respect of assets other than goodwill, an impairment loss is reversed if
there has been a change in the estimates used to determine the recoverable
amount. An impairment loss is reversed only to the extent that the asset's
carrying amount does not exceed the carrying amount that would have been
determined, net of depreciation or amortisation, if not impairment loss had been
recognised. Impairment losses in respect of goodwill are not reversed.
Financial instruments
Financial assets
The group classifies its financial assets into one of the following categories,
depending on the purpose for which the asset was acquired. The group's
accounting policy for each category is as follows:
• Loans and receivables: These assets are non-derivative financial assets
with fixed or determinable payments that are not quoted in an active market.
They arise principally through the provision of goods and services to
customers (trade debtors), but also incorporate other types of contractual
monetary asset. They are carried at cost less any provision for impairment.
• Held-to-maturity investments: These assets are non-derivative financial
assets with fixed or determinable payments and fixed maturities that the
group's management has the positive intention and ability to hold to
maturity. These assets are measured at amortised cost, with changes through
the income statement.
Financial liabilities
The group classifies its financial liabilities as 'Other financial liabilities',
which includes the following items:
• Trade payables and other short-term monetary liabilities, which are
recognised at amortised cost.
• Bank borrowings, and loan notes issued by the group are initially
recognised at the amount advanced net of any transaction costs directly
attributable to the issue of the instrument. Such interest bearing
liabilities are subsequently measured at amortised cost using the effective
interest rate method, which ensures that any interest expense over the
period to repayment is at a constant rate on the balance of the liability
carried in the balance sheet. 'Interest expense' in this context includes
initial transaction costs as well as any interest or coupon payable while
the liability is outstanding.
Provisions
Provisions are recognised when the Group has a present obligation as a result of
a past event, and it is probable that the Group will be required to settle that
obligation. Provisions are measured at the directors' best estimate of the
expenditure required to settle the obligation at the balance sheet date, and are
discounted to present value where the effect is material.
Share-based payments
The Group has applied the requirements of IFRS 2 'Share-based Payment'. In
accordance with the transitional provisions, IFRS 2 has been applied to all
grants of options after 7 November 2002 that were unvested at 1 January 2005.
The Group issues equity-settled share-based payments only. These are measured
at fair value (excluding the effect of non market-based vesting conditions) at
the date of grant. The fair value determined at the grant date of the
equity-settled share-based payments is expensed on a straight-line basis over
the vesting period, with a corresponding credit to equity, based on the Group's
estimate of shares that will eventually vest and adjusted for the effect of non
market-based vesting conditions.
Fair value is measured by use of a binomial model, Black-Scholes. The expected
life used in the model has been adjusted, based on management's best estimated,
for the effects of non-transferability, exercise restrictions, and behavioural
considerations.
Retirement benefits
Defined contribution schemes: Contributions to defined contribution pension
schemes are charged to the income statement in the year to which they relate.
Leased assets
Where substantially all of the risks and rewards incidental to ownership of a
leased asset have been transferred to the group (a 'finance lease'), the asset
is treated as if it had been purchased outright. The amount initially recognised
as an asset is the present value of the minimum lease payments payable over the
term of the lease. The corresponding lease commitment is shown as a liability.
Lease payments are analysed between capital and interest. The interest element
is charged to the income statement over the period of the lease and is
calculated so that it represents a constant proportion of the lease liability.
The capital element reduces the balance owed to the lessor. Where substantially
all of the risks and rewards incidental to ownership are retained by the lessor
(an 'operating lease'), the total rentals payable under the lease are charged to
the income statement on a straight-line basis over the lease term. The land and
buildings elements of property leases are considered separately for the purposes
of lease classification.
2. Taxation on profit
During the period the deferred tax asset has been increased by £153,000 to
provide for the extent that trade losses will be recoverable against future
profits in the foreseeable future.
The tax charge for the period is estimated to be £190,000 on profits not
allowable to be offset against losses carried forward.
3. Dividends
No interim dividend is being proposed.
4. Earnings per share
The calculation of the basic and diluted earnings per share based on the
following data:
31 July 2006 31 July 2005
IFRS IFRS
£'000s £'000s
Earning for the purpose of basic 1,062 800
earnings per share being net
profit attributable to equity
holders of the parent
Adjustments for deferred tax (153) (231)
Adjustments for goodwill
amortisation
Adjustments for 'purchased 194 -
intangibles' amortisation
Adjustments for share incentives 124 125
Adjustments for performance bonus 176 -
Adjustments for restructuring 101 -
costs
Earnings for the purpose of 1,504 694
adjusted earnings per share
Number of shares
Weighted average number of 31,296,925 28,744,247
ordinary shares for the purpose of
basic earnings per share
Effect of dilutive potential
ordinary shares
Share options 1,324,373 1,437,212
Convertible loan notes
Weighted average number of 32,621,298 30,181,459
ordinary shares for the purpose of
diluted earnings per share
Basic earnings per share 3.39p 2.78p
Diluted earnings per share 3.26p 2.65p
Adjusted basic earnings per share 4.81p 2.41p
Adjusted diluted earnings per 4.61p 2.30p
share
5. Other intangible assets
Internally generated Purchased intangible Total intangible
intangible assets assets assets
£'000s £'000s £'000s
Cost
At 1 February 2006 3,304 3,395 6,699
Additions 360 - 360
At 31 July 2006 3,664 3,395 7,059
Amortisation
At 1 February 2006 (1,441) (162) (1,603)
Provision for the period (304) (194) (498)
At 31 July 2006 (1,745) (356) (2,101)
Net book value
At 31 July 2006 1,919 3,039 4,958
At 31 January 2006 1,863 3,233 5,096
On 23 August 2005 the Company acquired the entire share capital of BCMG Limited
(billetts) for a maximum total consideration of £13.1m. In line with IAS 38
intangible assets owned by billetts have been independently valued by an
external consultant and shown within 'other intangible assets' on the balance
sheet.
Amortisation is charged so as to write off the cost of the purchased intangible
assets over their estimated useful lives, the assets, initial values and periods
used are as follows:
Purchased intangibles Asset value Useful economic life
£'000s Years
Media Consulting Customer relationships 2,859 10
Marketing Sciences Customer relationships 271 5
MPMA Customer relationships 43 2
Trade name 215 10
Non-compete 7 1.5
3,395
6. Debtors
Unaudited Unaudited Audited*
6 months ended 6 months ended Year ended
31 July 06 31 July 05 31 January 06
£'000s £'000s £'000s
Trade and other receivables due
within one year
Trade receivables 4,672 1,383 3,875
Other receivables 277 (30) 427
Prepayments & accrued income 3,706 1,677 1,624
8,655 3,030 5,926
Trade and other receivables due after
one year
Prepayments & accrued income 1,448 447 1,235
7. Post balance sheet event
On 23 August 2005 the company purchased the entire issued share capital of '
billetts' (BCMG Ltd). The initial consideration was £7.5 million. Maximum
potential deferred consideration at the time of acquisition was £3.85 million,
dependant upon performance up to 30 April 2006 and a further £1.75 million on
performance up to 30 April 2007. At 30 April 2006 billetts achieved the maximum
earnout amount and the deferred consideration was financed through loan notes
issued on 8 August 2006 with a total value of £3.71 million, net of shareholder
bonuses.
8. Amendment to transition to International Financial Reporting Standards
Subsequent to publication of our IFRS transition statement on 13 October 2006,
clarification of the deferred tax impact of capitalisation of Development
Expenditure has resulted in a further IFRS transitional adjustment being
required which has the effect of reducing the deferred tax asset at each balance
sheet date. A reconciliation of the impact of this is shown below:
Balance Sheet As at 31 Jan 2005 £,000
Deferred Tax asset, as previously stated 480
Deferred Tax adjustment (525)
Deferred Tax Liability as restated (45)
Balance Sheet As at 31 Jan 2006 £,000
Deferred Tax Liability - opening balance as restated (45)
Movement as previously reported 430
Deferred Tax Adjustment (34)
Deferred Tax asset - as restated 351
Income Statement - Six months ended 31 July 2005 - Effect of transition to
IFRS
UK GAAP Goodwill Research & development Prelinimary Preliminary
Share based Deferred IFRS IFRS
renumeration Tax Adjustments
Development Amortisation
expenditure
expensed
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Revenue 3,457 - 3,457
Cost of sales (976) (976)
Gross Profit 2,481 2,481
Share based expenses (115) (10) (10) (125)
Administrative (1,865) 322 322 (1,543)
expenses
Amortisation of (6) 6 (266) (260) (266)
intangible assets
Total administrative (1,986) 6 322 (266) (10) 52 (1,934)
expenses
Operating profit 495 6 322 (266) (10) 52 547
Financial income 22 22
Financial expenses - -
Net financing income 22 22
Profit before 517 6 322 (266) (10) 52 569
taxation
Deferred tax 248 (17) (17) 231
Profit after 765 6 322 (266) (10) (17) 35 800
taxation
Minority interest - -
Retained profit for 765 6 322 (266) (10) (17) 35 800
the year
Attributable to:
Equity holders of 765 800
the parent
Minority interests - -
The restatement adjustments to the comparative interim period are similar in
nature to those restatement adjustments for the year ended 31 January 2006 which
are set out in the IFRS Restatement Statement available from our registered
office, 1 Westmoreland Road, Bromley, Kent BR2 0TB.
Balance Sheet as at 31 July 2005 - Effect of transition to IFRS
UK GAAP Goodwill Research Deferred Preliminary IFRS Preliminary
& development Tax Adjustments IFRS
Development Amortisation
expenditure
capitalised
Non-current assets
Goodwill 25 6 6 31
Other intangible 2,982 (1,175) 1,807 1,807
assets
Property plant and 616 616
equipment
Investments 36 36
Deferred tax asset 728 (542) (542) 186
1,405 6 2,982 (1,175) (542) 1,271 2,676
Current assets
Trade & other 3,030 3,030
receivables: Due
within one year
Trade & other 447 447
receivables: Due
after one year
Cash & cash 1,455 1,455
equivalents
4,932 4,932
Current liabilities
Trade & other (657) (657)
payables
Accruals & deferred (3,872) (3,872)
income
(4,529) (4,529)
Net current assets 1,131 1,131
Non-current
liabilities
Accruals & deferred (507) (507)
income
(507) (507)
Total liabilities (5,036) (5,036)
Net assets 1,301 6 2,982 (1,175) (542) 1,271 2,572
Capital & reserves
Share capital 7,186 7,186
Share premium 5,064 5,064
Merger reserve (5,250) (5,250)
Retained earnings (5,699) 6 2,982 (1,175) (542) 1,271 (4,428)
1,301 6 2,982 (1,175) (542) 1,271 2,572
The restatement adjustments to the comparative interim period are similar in
nature to those restatement adjustments for the year ended 31 January 2006 which
are set out in the IFRS Restatement Statement available from our registered
office, 1 Westmoreland Road, Bromley, Kent BR2 0TB.
Independent Review Report to Thomson Intermedia plc
Introduction
We have been instructed by the company to review the financial information for
the six months ended 31 July 2006 which comprises the Consolidated Income
Statement, the Consolidated Balance Sheet, the Consolidated Cashflow Statement
and related notes. We have read the other information contained in the interim
report and considered whether it contains any apparent misstatements or material
inconsistencies with the financial information.
Our report has been prepared in accordance with the terms of our engagement to
assist the company in meeting the requirements of the Listing Rules of the
Financial Services Authority and for no other purpose. No person is entitled to
rely on this report unless such a person is a person entitled to rely upon this
report by virtue of and for the purpose of our terms of engagement or has been
expressly authorised to do so by our prior written consent. Save as above, we do
not accept responsibility for this report to any other person or for any other
purpose and we hereby expressly disclaim any and all such liability.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by the directors. The directors are
responsible for preparing the interim report in accordance with Listing Rules of
the Financial Services Authority.
As disclosed in the basis of preparation section, the next annual financial
statements of the company will be prepared in accordance with accounting
standards adopted for use in the European Union. This interim report has been
prepared in accordance with the basis set out in note 1.
The accounting policies are consistent with those that the directors intend to
use in the next annual financial statements. As explained in the basis of
preparation section, there is however, a possibility that the directors may
determine that some changes are necessary when preparing the full annual
financial statements for the first time in accordance with accounting standards
adopted for use in the European Union. The IFRS standards and IFRIC
interpretations that will be applicable and adopted for use in the European
Union at 30 April 2007 are not known with certainty at the time of preparing
this interim financial information.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board for use in the United Kingdom. A review
consists principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying financial data
and based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review excludes
audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with United Kingdom Auditing Standards and therefore
provides a lower level of assurance than an audit. Accordingly we do not express
an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 31 July 2006.
BDO Stoy Hayward LLP
Chartered Accountants
8 Baker Street
London
W1U 3LL
Date: 18 October 2006
This information is provided by RNS
The company news service from the London Stock Exchange
Latest directors dealings
- 1 day ago The Renewables Infrastructure Group Limited
- 1 day ago The Renewables Infrastructure Group Limited
- 1 day ago Smurfit Westrock (DI)
- 1 day ago Menhaden Resource Efficiency
- 1 day ago BP