Second Interim Results
Thomson Intermedia PLC
30 April 2007
30 April 2007
Thomson Intermedia plc
Core business gaining momentum with revenues up 22%
Thomson Intermedia plc ('Thomson Intermedia' or the 'Group', AIM: THN), a
leading provider of media intelligence, today announces its second interim
results for the six months ended 31 January 2007.
Highlights
• Core business revenue increased by 22% to £7.7m (2006: £6.3m)
• International revenue up 50% to £1.7m (2006: £1.1m)
• Development revenue lower, in line with expectations
• Core underlying operating profit* up 75% to £1.4m (2006: £0.8m)
• Group underlying profit before tax* was £1.1m (2006: £1.7m)
• Sales pipeline remains strong - several projects expected to close this
calendar year
• Group is on track to meet the Board's expectations for 15 months to 30 April
2007
* before Highlighted Items
Sarah Jane Thomson, Joint Chief Executive Officer of Thomson Intermedia plc,
said:
'Our Core business continued to perform strongly particularly as the benefits of
the enlarged integrated group begin to materialise. We are confident that this
part of business will continue to strengthen as our new combined offering gains
momentum and we strengthen our routes to market.
'The Group is still working on a significant pipeline of projects and remains
confident that a high proportion will be closed during the current calendar year
and should therefore benefit the next financial year.'
Enquiries:
Thomson Intermedia
Sarah Jane Thomson, Joint Chief Executive Today 020 7457 2020
Michael Uzielli, Finance Director Thereafter 020 7321 4000
Bridgewell
Shaun Dobson/Fred Ward 020 7003 3000
College Hill
Adrian Duffield/Ben Way 020 7457 2815/2055
Overview
Thomson Intermedia had a good underlying performance during the second six
months of the financial year. On a headline basis, revenue from the Core
business increased 22% to £7.7m and the pipeline of development projects remains
strong. The Group is on track to deliver against the revised expectations
issued in the trading update in January 2007.
The Board remains confident about the Group's opportunities and prospects as it
starts to realise the benefits of having two integrated and complementary
businesses, combining the UK's premier online data capture and analysis
operation with media consultancy expertise.
The Group has two types of business, Core and Development:
Core business, which encompasses Subscriptions, Consultancy and International,
has continued to grow strongly as it benefited from the combination of the two
businesses, the launch of new and enhanced products and strong international
revenues. The Core business will be strengthened further with the planned roll-
out of the new combined offering and the imminent new agency/client product
which will enable the Group to benefit from the GroupM partnership.
Development business, as highlighted in the trading update in January 2007, had
lower revenues than originally anticipated. The majority of this revenue relates
to projects which directly or indirectly lead to longer term core revenue
streams. The Group is still working on a significant pipeline of projects and
remains confident that a high proportion will be closed during the current
calendar year and should therefore benefit the next financial year.
Financial Performance
Following the extension of the Group's accounting reference date to 30 April
2007, Thomson Intermedia is publishing its second interim results for the six
month period ended 31 January 2007 and reporting the twelve month period ended
on the same date. All figures are unaudited.
Revenue
6 months ended 6 months ended 12 months ended 12 months ended
31 January 2007 31 January 2006 31 January 2007 31 January 2006
£'000s £'000s £'000s £'000s
Core 7,672 6,306 15,582 8,918
Development 343 1,373 861 2,218
Total Revenue 8,015 7,679 16,443 11,136
Total Group revenue increased by 5% to £8.0m (2006: £7.7m) for the second six
months with Core revenue up 22% to £7.7m (2006: £6.3m). Total future contracted
revenue as at 31 January 2007 was £6.7m. Development revenue was £0.3m (2006:
£1.4m) reflecting the previously announced delays in project income and the high
level of income in 2006 from retrospective vouching and developing the Publisher
Platform.
Gross Profit
Gross profit was flat at £4.5m, yielding a gross margin of 56.6% (2006: 58.9%),
as the Group continued to invest in new products and recruited additional
consultancy, sales and commercial expertise to support the growth of the
business.
In total, cost of sales and administrative expenses before highlighted items
increased by 3% on a pro forma basis (adjusting 2006 to include billetts for six
rather than five months). The Group is currently reviewing its property
portfolio with a view to consolidating from two London offices into one which
will reduce cost over the medium term.
Operating Profit
6 months ended 6 months ended 12 months ended 12 months ended
31 January 2007 31 January 2006 31 January 2007 31 January 2006
£'000s £'000s £'000s £'000s
Core 1,404 802 3,196 1,076
Development (124) 902 (90) 1,300
Underlying Operating Profit 1,280 1,704 3,106 2,376
Highlighted Items (862) (318) (1,464) (443)
Reported Operating Profit 418 1,386 1,642 1,933
Underlying operating profit for the second six months was £1.3m (2006: £1.7m).
The Core business increased operating profit by 75% to £1.4m (2006: £0.8m). The
Development business recorded a loss of £0.1m (2006: £0.9m profit). Reported
operating profit was £0.4m (2006: £1.4m).
For the 12 months to 31 January 2007, underlying operating profit increased by
30% to £3.1m (2006: £2.4m) whilst operating profit from the Core business
increased by £2.1m to £3.2m (2006: £1.1m). Reported operating profit was £1.6m
(2006: £1.9m).
Adjusting 2006 to include billetts on a like for like basis, underlying
operating profit from Core business for the last twelve months more than doubled
from £1.5m to £3.2m.
Highlighted Items
Highlighted items comprise recurring and non-recurring items and have been
highlighted to help the understanding of the underlying performance of the
business.
6 months 6 months 12 months Year
ended ended ended ended
31 January 31 January 31 January 31 January
2007 2006 2007 2006
£'000s £'000s £'000s £'000s
Share based expenses (151) (124) (275) (249)
Amortisation of purchased intangible assets (194) (162) (388) (162)
Acquisition related expenses (83) - (360) -
Provision for specific doubtful debts relating
to a line of business which is no longer pursued (301) - (301) -
Other (133) (32) (140) (32)
(862) (318) (1,464) (443)
Note 2 to this statement sets out more detail on the Highlighted Items.
Profit Before Tax and EPS
Underlying profit before tax for the second six months was £1.1m (2005: £1.7m)
reflecting higher interest charges due to vendor loan notes which were issued in
August 2006. Reported profit before tax was £0.2m (2006: £1.4m).
Underlying earnings per share for the second six months was 2.72p (2005: 5.06p).
Reported earnings per share was 1.18p (2006: 4.57p).
The Board are 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.
Cash and Debt
Cash balances increased during the second six months by £0.9m to £2.7m as a
result of an improvement in working capital. The Group's net debt position
increased from £0.9m to £3.7m due to the issuance, on 8 August 2006, of vendor
loan notes to the value of £3.7m related to the billetts acquisition.
Operational Highlights
Subscriptions
This area of the business is characterised by high operational gearing, high
renewal rates, significant barriers to entry and international scalability. It
comprises advertiser monitoring, news monitoring, e-vouching and audit services,
although these products are aligned in new interfaces going forward and can be
sold as a package.
This business currently has 360 clients, including 74 of the top 100 UK
advertisers. Strong performance in this period has led to over 30 new contracts
including Renault, Standard Life and Bird's Eye.
The recently announced partnership with GroupM removes a major sales barrier for
Thomson Intermedia's monitoring products by facilitating access to a customer
base of more than 650 of the UK's top advertisers. It also highlights the
growing importance of the Group's systems in the media landscape. The Group is
nearing completion of dedicated and tailored online systems and is dedicating
additional sales resource to this partnership.
The dedicated online unit has seen revenues more than double since last year and
now advises 13 of the top 25 online display advertisers in the UK.
Consultancy
This area of the business focuses on bespoke consultancy projects assisting
advertisers in achieving their maximum return on investment by optimising
payback and allocation of marketing spend across geographies, brands and
marketing methods. The unit draws on advanced analytical techniques, marketing
experience, benchmarks and proprietary tools to deliver improved and fact based
marketing strategies. Given the growing interest in marketing ROI, further
growth is expected in this area.
International
The Group's products and services have international appeal and are scaleable.
International revenues now comprise 21% of Group revenue having increased by 50%
over the same period last year. The Group currently has businesses in the USA
and Germany and generates growing revenues from working with key partners in
other territories.
USA: The Group owns 80% of MPMA, the US Auditing division which was established
in 2003. It has continued to make excellent progress with an additional nine
new clients, increasing the client base to 25. Its earn-out from the billetts
acquisition ends today and, looking forward, the Group intends to extend its
range of products and services beyond audit.
Germany: The Group owns 50% of Thomson Media Control which currently offers
media monitoring services in Germany. It has grown well with a current client
base of over 35 of which 15 were signed in the past year. The Group is
currently exploring opportunities to extend products and services in Germany.
Partners: The Group has partnerships with 16 companies in 25 countries to secure
local data, benchmarks and media training insight in order to provide an
international audit service. Whilst the Group has excellent relations with
these international partners, the Group believes there is an opportunity to
establish or acquire wholly-owned operations in certain larger key markets.
This will improve margins but also put the Group in a stronger position to drive
future growth and additional products and services in these local markets.
Development Income
Development income is characterised by one-off income which often leads to
additional ongoing revenue sources. In the past, development income has been
derived from areas such as retrospective vouching, licence fee income from
Germany and the Publisher Platform.
The Publisher Platform has secured exclusive long term contracts with 10
regional media owners which account for more than 90% of regional publications.
The platform provides the media owner with significant cost savings by removing
the need to send out voucher copies. Discussions are ongoing with a number of
other regional and national owners to sell more voucher technology and to expand
the platform further. The Group has been developing new services, using the
same data, which will enable media owners to save costs and improve efficiencies
in other areas.
The Publisher Platform as well as opportunities which stem from the technology
are currently in the pipeline for additional development income. The Group is
confident that during the calendar year it will secure a number of these
contracts.
Current Trading and Outlook
On 25 January 2007, the Group issued a trading update in which it indicated that
it expected - for the 15 months to 30 April 2007 - revenue to be in the region
of £20.6m and underlying operating profit of £3.3m. The Group confirms that it
is on track to meet these expectations.
The Group acquired billetts in August 2005. The final earn-out period from the
transaction ends today and John Billett is leaving the Group at this juncture.
billetts has proved to have been a very successful acquisition for the Group and
it is now a key part of the portfolio of services that the Group makes available
to all participants in the marketing industry. The Board is grateful to John
for all he has done in creating the billetts brand and for entrusting it to the
Group.
Over the past twelve months, the Group has built a much stronger position in the
marketplace as a result of the integration of billetts, the enhancement of data
sets and products and the investment in relationships.
As a result, there is a significant pipeline of development projects which when
concluded will deliver both immediate revenues and new recurring revenues for
the future of the core business. At the same time, underlying growth in the
existing Core business continues to be robust supported by market-leading
products, increased presence in interactive media and more international
contracts.
The Board remains confident that the progress made and platforms being built
will continue to drive and exploit the Group's significant opportunities.
Consolidated Income Statement
for the six months ended 31 January 2007
Unaudited Unaudited Proforma *Year ended
6 months ended 6 months ended unaudited 31 January
31 January 31 January 2006 12 months 2006
2007 ended
31 January
2007
Note £'000s £'000s £'000s £'000s
Revenue 8,015 7,679 16,443 11,136
Cost of Sales (3,475) (3,153) (7,007) (4,129)
Gross Profit 4,540 4,526 9,436 7,007
Administrative expenses
- excluding highlighted items (3,260) (2,822) (6,330) (4,631)
Administrative expenses
- highlighted items 2 (862) (318) (1,464) (443)
Total administrative expenses (4,122) (3,140) (7,794) (5,074)
Operating profit 418 1,386 1,642 1,933
Finance income 28 27 58 49
Finance expenses (216) (55) (379) (55)
Net finance costs (188) (28) (321) (6)
Profit before taxation 230 1,358 1,321 1,927
Corporation tax 3 (176) (126) (366) (126)
Deferred tax 3 361 165 514 396
Tax income 185 39 148 270
Profit for the period 415 1,397 1,469 2,197
Attributable to:
Equity holders of the parent 386 1,407 1,432 2,207
Minority interests 29 (10) 37 (10)
415 1,397 1,469 2,197
Earnings per share
Basic 5 1.23p 4.79p 4.58p 7.51p
Diluted 5 1.18p 4.57p 4.40p 7.16p
*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 the Interim report for the six months ended 31 July 2006.
Consolidated Balance Sheet
as at 31 January 2007
Unaudited *As at
as at 31 January
31 January 2006
2007
Note £'000s £'000s
Non current assets
Goodwill** 8,924 8,924
Other intangible assets 6 4,869 5,096
Property, plant & equipment 670 706
Investment in joint ventures 115 122
Deferred tax asset 683 351
15,261 15,199
Current assets
Trade & other receivables: Due within one year 7 6,619 5,452
Trade & other receivables: Due after one year 7 93 -
Cash & cash equivalents 2,702 2,774
9,414 8,226
Total Assets 24,675 23,425
Current liabilities
Bank overdrafts - (62)
Other financial liabilities (3,962) (250)
Trade & other payables (1,753) (2,041)
Current tax liabilities (130) (126)
Provisions (299) (3,850)
Accruals & deferred income (3,936) (3,644)
(10,080) (9,973)
Non current liabilities
Other financial liabilities (2,438) (2,687)
Provisions - (269)
Deferred tax liability (854) (1,019)
(3,292) (3,975)
Total liabilities (13,372) (13,948)
Net assets 11,303 9,477
Capital & Reserves
Share capital 7,828 7,823
Share premium 8,896 8,869
Merger reserve (4,504) (4,504)
Retained earnings (846) (2,603)
Capital and reserves attributable to the equity
holder of the parent
11,374 9,585
Minority interest (71) (108)
Total Equity 11,303 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 the Interim report for the six months ended 31 July 2006 and to
the presentation of accrued and deferred income
**Adjusted to reflect revised accounting for deferred tax as part of the
billetts acquisition as set out in note 1.
Consolidated Cashflow Statement
for the six months ended 31 January 2007
Proforma
unaudited 12
Unaudited Unaudited months ended
6 months 6 months 31 January 2007
ended ended *Year ended
31 January 31 January 31 January
2007 2006 2006
£'000s £'000s £'000s £'000s
Cashflows from operating activities
Profit before taxation 230 1,358 1,321 1,927
Adjustments for:
Depreciation 156 157 322 276
Amortisation 498 428 996 694
Foreign exchange differences on operating 86 32 93 32
activities
Investment - 36 - -
Share option charges 151 124 275 249
Finance income (28) (27) (58) (49)
Finance expense 216 55 379 55
1,309 2,163 3,328 3,184
Decrease/(Increase) in trade receivables 1,682 240 (1,251) (945)
(Decrease)/Increase in trade payables (1,076) (862) (182) (324)
Cash generated from operations 1,915 1,541 1,895 1,915
Finance expense (196) (71) (379) (71)
Income taxes paid (217) (6) (343) (6)
Net cash from operating activities 1,502 1,464 1,173 1,838
Cashflows from investing activities
Purchase of subsidiary, net of cash acquired - (7,012) - (7,012)
Purchase of property, plant & equipment (188) (47) (286) (264)
Purchase of intangible assets (409) (322) (769) (644)
Purchase of investments - (87) - (87)
Finance income 28 21 58 43
Net cash used in investing activities (569) (7,447) (997) (7,964)
Cashflows from financing activities
Proceeds from issue of share capital - 4,343 - 4,343
Proceeds from long term borrowings - 3,000 - 3,000
Repayment of bank loans (125) (63) (249) (63)
Net cashflow used in financing activities (125) 7,280 (249) 7,280
Net increase in cash, cash equivalents and bank 808 1,297 (73) 1,154
overdrafts
Effect of foreign exchange rate changes 73 (40) 63 (40)
Cash, cash equivalents and bank overdrafts at
beginning of period 1,821 1,455 2,712 1,598
Cash, cash equivalents and bank overdrafts at end
of period 2,702 2,712 2,702 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 the Interim report for the six months ended 31 July 2006.
1. Accounting policies
Basis of preparation
Following the extension of the Group's accounting reference date to 30 April
2007, the Group presents its second interim results for the 6 month period ended
31 January 2007, as required by the AiM rules. Proforma results for the 12
months ended 31 January 2007 have also been presented in order to show
shareholders the current position for the period since the last audited annual
report and accounts.
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.
We have reviewed the deferred tax accounting in relation to certain intangible
assets recognised on the acquisition of billetts, and in light of IFRS 3 and
developing accounting practice we have increased Goodwill by £1,019,000 and
created a deferred tax liability for a corresponding amount. The deferred tax
liability is subsequently utilised in line with the amortisation of the
purchased intangible fixed assets resulting in a tax credit in the income
statement for the six months ended 31 January of £165,000, with the deferred tax
liability reducing by the same amount.
The Group may need to further 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.
The Group has revised how it presents accrued and deferred income in the balance
sheet in respect of future unearned contracted income. As a result, the balance
sheet at 31 January 2006 has been restated to bring accounting treatments in
line with this revised presentation. The effect of the adjustment on the 31
January 2006 balance sheet is to adjust both accrued and deferred revenue by the
same amounts. This adjustment has no impact on the income statement or net
assets of the Group.
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.
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
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.
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 January 2007. 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.
Using the liability method, deferred tax is provided on all temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and their tax bases, except for differences arising on:
• the initial recognition of goodwill;
• goodwill for which amortisation is not tax deductible;
• the initial recognition of an asset or liability in a transaction
which is not a business combination and at the time of the transaction
affects neither accounting or taxable profit; and
• investments in subsidiaries and jointly controlled entities where the
group is able to control the timing of the reversal of the difference
and it is probable that the difference will not reverse in the
foreseeable future.
Recognition of deferred tax assets is restricted to those instances where it is
probable that taxable profit will be available against which the difference can
be utilised. The carrying amount of deferred tax assets is reviewed at each
balance sheet.
The amount of the asset or liability is determined using tax rates that have
been enacted or substantially enacted by the balance sheet date and are expected
to apply when the deferred tax liabilities/(assets) are settled/(recovered).
Deferred tax balances are not discounted.
Deferred tax assets and liabilities are offset when the group has a legally
enforceable right to offset current tax assets and liabilities and the deferred
tax assets and liabilities relate to taxes levied by the same tax authority on
either:
• the same taxable group company; or
• different group entities which intend either to settle current tax
assets and liabilities on a net basis, or to realise the assets and
settle the liabilities simultaneously, in each future period in which
significant amounts of deferred tax assets or liabilities are expected
to be settled or recovered.
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 an internally-generated intangible asset cannot
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:
Media Consulting - customer Straight line over 10 years Estimated discounted cash flow
relationships
Marketing Sciences - customer Straight line over 5 years Estimated discounted cash flow
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 the Black-Scholes Model. 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. Highlighted items
Highlighted items comprise significant non-cash charges and non-recurring items
which are highlighted in the income statement because separate disclosure is
considered helpful in understanding the underlying performance of the business.
6 months 6 months 12 months Year ended
ended ended ended 31 January
31 January 31 January 31 January 2006
2007 2006 2007
£'000s £'000s £'000s £'000s
Recurring:
Share based expenses (151) (124) (275) (249)
Amortisation of purchased intangible assets (194) (162) (388) (162)
Foreign exchange gains/(losses) (86) (32) (93) (32)
Non recurring:
Acquisition related - performance bonus (30) - (206) -
- restructuring costs (53) - (154) -
Provision for doubtful debts (301) - (301) -
Professional fees (47) - (47) -
(862) (318) (1,464) (443)
The performance bonus relates to the acquisition of billetts in August 2005.
The restructuring costs relate to the closure of the acquired entity's previous
head office.
The provision for doubtful debts relates to specific contracts from a line of
business which the Group no longer pursues. All other provisions for doubtful
debts are included within Administrative expenses.
Professional fees relate to legal and accounting advice in relation to the share
premium reduction (see Note 8) and IFRS transition. All other professional fees
are included within Administrative expenses.
3. Taxation on profit
During the period the deferred tax asset has been increased by £103,000 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 £176,000 on profits not
allowable to be offset against losses carried forward.
4. Dividends
No interim dividend is being proposed.
5. Earnings per share
The calculation of the basic and diluted earnings per share is based on the
following data:
6 months 6 months 12 months Year
ended ended ended ended
31 January 31 January 31 January 31 January
2007 2006 2007 2006
£'000s £'000s £'000s £'000s
Earning for the purpose of basic earnings 386 1,407 1,432 2,207
per share being net profit attributable to
equity holders of the parent
Adjustments:
Deferred tax (361) (165) (514) (396)
Share incentives 151 124 275 249
Purchased intangibles amortisation 194 162 388 162
Foreign exchange (gain)/loss 86 32 93 32
Performance bonus* 30 - 206 -
Restructuring costs* 53 - 154 -
Provision for doubtful debts* 301 - 301 -
Professional fees* 47 - 47 -
Earnings for the purpose of underlying 887 1,560 2,382 2,254
earnings per share
Number of shares
Weighted average number of ordinary shares 31,310,258 29,380,750 31,296,925 29,380,750
for the purpose of basic earnings per share
Effect of dilutive potential ordinary shares
Share options** 1,272,453 1,432,829 1,272,453 1,432,829
Weighted average number of ordinary shares 32,582,711 30,813,579 32,569,378 30,813,579
for the purpose of diluted earnings per
share
Basic earnings per share 1.23p 4.79p 4.58p 7.51p
Diluted earnings per share** 1.18p 4.57p 4.40p 7.16p
Underlying basic earnings per share 2.83p 5.31p 7.61p 7.67p
Underlying diluted earnings per share 2.72p 5.06p 7.31p 7.31p
*Non recurring items (see note 2).
**Note that certain share options have been excluded from the calculation of
diluted EPS as their exercise price is greater than the weighted average share
price during the year (i.e. they are out-of-the-money) and therefore it would
not be advantageous for the holders to exercise those options.
6. Other intangible assets
Internally generated Purchased intangible Total intangible
intangible assets assets assets
£'000s £'000s £'000s
Cost
At 1 August 2006 3,664 3,395 7,059
Additions 409 - 409
At 31 January 2007 4,073 3,395 7,468
Amortisation
At 1 August 2006 (1,745) (356) (2,101)
Provision for the period (304) (194) (498)
At 31 January 2007 (2,049) (550) (2,599)
Net book value
At 31 January 2007 2,024 2,845 4,869
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
7. Debtors
31 January 31 January
2007 2006
£'000s £'000s
Trade and other receivables due within one year
Trade receivables 4,111 3,875
Other receivables 56 427
Prepayments & accrued income 2,452 1,150
6,619 5,452
Trade and other receivables due after one year
Prepayments & accrued income 93 -
8. Post balance sheet events
During the period the parent company, by way of a special resolution, reduced
its share premium account. This was approved by an Order of the High Court of
Justice, Chancery Division on 31 January 2007. The Order was registered
pursuant to section 138 of the Companies Act, 1985 on 10 February 2007 and so no
adjustment has been made in this interim report. The impact on the results for
the 15 month period to 30 April 2007 will be to reduce the share premium and
reduce the accumulated deficit on retained earnings in the parent company by
£7,056,000.
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 January 2007 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 rules of the London Stock
Exchange for companies trading securities on the Alternative Investment Market
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 the rules of the
London Stock Exchange for companies trading securities on the Alternative
Investment Market which require that the half-yearly report be presented and
prepared in a form consistent with that which will be adopted in the company's
annual accounts having regard to the accounting standards applicable to such
annual accounts.
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 January 2007.
BDO Stoy Hayward LLP
Chartered Accountants
8 Baker Street
London
W1U 3LL
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