Final Results - Part One

Future PLC 29 November 2005 29 November 2005 FUTURE PLC Preliminary results for the year ended 30 September 2005 Future plc (LSE: FUTR), the international special-interest media group, today announces its preliminary results for the year ended 30 September 2005. These preliminary results are accompanied by unaudited pro forma results for the twelve months ended 30 September 2004, as published last year. An analyst presentation will be held today at 10.00am at the offices of UBS, 1 Finsbury Avenue, London EC2M 2PP. Financial highlights Adjusted* results for year ended 30 September 2005 compared with pro Change forma results for 12 months to 30 September 2004 Turnover Â£212.3m (2004: Â£190.4m) Up 12% EBITAE profit Â£20.7m (2004: Â£23.6m) Down 12% Adjusted pre-tax profit Â£19.7m (2004: Â£23.6m) Down 17% Exceptional costs of Â£7.2m (2004: Nil) - Adjusted earnings per share 5.1p (2004: 5.8p) Down 12% Final proposed dividend of 1.3p making a total dividend Up 20% of 1.8p per share (2004: 1.5p) * Adjusted results are presented to provide a better indication of overall financial performance and to reflect how the business is run on a day to day basis. In running the business, Future management focuses on earnings before interest, tax, goodwill amortisation and impairment, and exceptional items. Profit on disposal of subsidiaries is also excluded. For convenience we refer to this as EBITAE. Similarly, adjusted earnings per share are stated before these items, and after the tax charge for the year. Other highlights: - Significant expansion of business through acquired titles, including 38 from Highbury - Integration progressing well, following exceptional costs and recent consolidation of London offices - Increased spend on new product development, including online properties and new titles - Profit margin reduced by weakness in Mainland European computing titles - Games profits held steady in 2005 - Entertainment titles growing in revenues and profits - Circulation revenue up 7% (excluding acquisitions, up 1%) - Advertising revenue up 21% (excluding acquisitions, up 5%) Statutory results: Year ended 30 September 2005 9 months to 30 September 2004 Turnover Â£212.3m Â£133.0m Operating (loss)/profit Â£(10.0)m Â£0.4m Pre-tax (loss)/profit Â£(8.9)m Â£0.6m Basic loss per share (3.4)p (0.2)p Total dividend per share 1.8p 1.5p Commenting on the results, Greg Ingham, Future's Chief Executive said: 'The year to 30 September 2005 has been an important one for Future. Although the economic backdrop has been unhelpful, the Group has significantly grown the scale of its operations during the year. This provides the platform for the Group to develop its profits further over time. 'In the meantime, Future's strong cash generation and modest level of bank debt enables the Group readily to withstand any adverse economic conditions; and may also enable the Group to take advantage of further attractive business opportunities should they arise. 'We are committed to building on our progress and to ensuring Future's continued growth through acquisitions and increased new product development spend on launches and internet expansion. 'Whilst we continue to take a cautious view on the near term outlook, trading in the first month of the new financial year is on track.' Enquiries: Future plc Greg Ingham, Chief Executive Tel: 01225 442244 John Bowman, Finance Director Tel: 01225 732281 Hogarth Partnership James Longfield/Georgina Briscoe Tel: 020 7357 9477 Summary The past year has been one of intense activity for Future, during which we have invested significantly in launches and acquisitions of new magazines and websites. This has inevitably incurred significant exceptional costs in relation to our acquisition programme. Financial performance Whilst annual turnover has grown by 12% to Â£212.3m, operating profits at the EBITAE level were Â£20.7m, down 12% on last year. We also incurred exceptional costs totalling Â£7.2m, as we pursued our expansion strategy. Adjusted earnings per share were 5.1p (2004: 5.8p). Business expansion During the past year we have launched 11 magazines and made eight acquisitions, representing 57 magazines including the purchase of 38 magazines from Highbury House Communications plc. We were originally planning to acquire the whole of Highbury House but our recommended Offer was unexpectedly referred in April by the Office of Fair Trading to the Competition Commission and thus our Offer lapsed. Although we welcomed the subsequent purchase of certain Highbury assets, Future incurred exceptional bid costs of Â£2.2m on the aborted transaction. We were also involved in investigating a major potential acquisition in the US and we incurred modest costs. During the year, we realised Â£2.1m of profit on disposal of certain non-trading subsidiaries. Strategy Future has built a focused business, now serving a significant number of special-interest consumer audiences. By focusing on communities of interest, we are less exposed to the intense competition that is all too visible in more mass market media areas. This targeted approach also presents a good business opportunity as new communities of interest are always emerging and evolving. In addition, we are able to achieve a much better balance between circulation and advertising income, as our customers are generally prepared to pay a premium for products relevant to their own special interests. There continue to be three key elements to Future's growth plan. These are: - development of existing titles - new product development - selected acquisitions Development of existing titles It is important to re-invigorate existing titles frequently. Most titles in Future's portfolio are magazines which have been in existence for more than five years, and 58% of them were originally launched, rather than acquired. Key creative effort is applied to every title to ensure that it continues to address the special-interests of readers. There have been many development successes in recent years, across a variety of sectors. The group's best selling title is a US games magazine, Official Xbox Magazine, launched in the US in 2001, and now selling more than 400,000 copies a month. Our Xbox magazine business is the Group's largest business area. Microsoft's decision last year to extend the Official Xbox Magazine contract until 2011 is testament to the magazine's success and to the good working relationship between Future and Microsoft. New product development The second element of Future's strategy is the development of new products, an area where Future has a strong track record. Future defines New Product Development spend as the losses from launched titles and websites until they are profitable. Most product launches are profitable within one year (except in the US) and once profitable, the products are excluded from the definition. The definition also embraces any loss-making acquired products, again until profitable. The Internet is becoming increasingly important to Future, both as a means of augmenting print activity, and for creating profitable business units in their own right. Future's understanding of areas of special-interest helps to enhance Internet opportunities. Of the 17 magazines launched during the last two years, four had been closed by the year end as the Group had decided they were not successful. Building on this successful record, Future has been consciously increasing its spending on New Product Development. Notable launches this year include Micro Actuel, Simply Knitting, Future Snowboarding Magazine, Total Su Doku and scrapbooking magazines in both the UK and US. Notable among our websites are www.gamesradar.com, www.oxm.co.uk, www.totalfilm.com, www.t3.co.ukand www.myfavouritemagazines.co.uk. Selected acquisitions The third element of Future's strategy is to grow by acquisition, provided that the price paid for the acquisition is not excessive; the acquisition has the clear potential to be earnings-enhancing; and that the post-tax return on investment should exceed Future's weighted average cost of capital within a reasonable period. Last year, the Board reported that it was investigating a number of possible new magazine acquisitions. During the year Future made eight acquisitions, acquiring more than 50 titles. During the three years to September 2005 Future has invested Â£69.2m on 14 acquisitions, acquiring 71 magazines and six websites. The Board is satisfied that, with the exception of two small acquisitions, the performance of acquired titles to date has been good. It is also clear that these acquisitions have helped to increase the scale of Future's business in each country and increase the diversity of the Company's magazine portfolio. Growth plan Last year Future stated its aim to double the size of the business by September 2008. Good progress has been made during this last year in terms of increasing the Group's turnover. This has led to a significantly larger business, which in turn provides a greater platform from which to generate increased profits in due course. Profits have been held back in the short term by increased New Product Development spend, weakness in computing titles, the acquisition of lower margin titles that require additional investment and also by the current challenging trading environment. The games sector continued to perform well for Future and growth is expected after 2006 following the launch of the next generation games consoles. More generally, Future is focused on exploiting growth opportunities provided that they meet the Group's strategic and financial criteria. Group financial overview The following review is based primarily on a comparison of results for the financial year ended 30 September 2005 with the unaudited pro forma results for the 12 months to 30 September 2004 published in our Annual Report 2004. These accompanied the audited results for the nine months to 30 September, which in turn resulted from the change in the Group's financial year to 30 September. A brief commentary on the statutory results is set out overleaf. In running the business, Future management focuses on earnings before interest, tax, goodwill amortisation and impairment, and exceptional items. Profit on disposal of subsidiaries is also excluded. For convenience we refer to this as EBITAE. Unless otherwise stated, growth percentages relate to a comparison of twelve months to September 2005 with twelve months to September 2004. Financial headlines Turnover for the year was Â£212.3m (2004: Â£190.4m) including Â£17.7m from acquisitions. EBITAE for the year was Â£20.7m (2004: Â£23.6m) including Â£1.6m from acquisitions. Exceptional items totalling Â£7.2 (2004: Nil) arose during the year, the majority of which related to our acquisition programme. The largest elements relate to property (Â£2.4m costs, following our decision to relocate certain offices in the interests of greater efficiency); Â£2.2m of aborted bid costs; Â£1.8m of restructuring and redundancy costs related to integrating acquisitions; and Â£0.8m relating to restructuring costs within the existing business. Among other financial items, the results were enhanced by Â£2.1m of profit on the disposal of certain non-trading subsidiaries (2004: Â£0.2m). The charge for amortisation and impairment totalled Â£23.5m (2004: Â£16.6m) including Â£6.2m relating to acquisitions during the year. Net interest payable for the year was Â£1.0m (2004: Â£Nil). Adjusted earnings per share, which exclude the impact of exceptional items, amortisation charge and profit on disposal, were 5.1p (2004: 5.8p). Following the introduction of the Board's dividend policy last year and the introduction of an interim dividend of 0.5p in 2005, the Board is recommending a final dividend of 1.3p per share, bringing total dividends for the year up 20% to 1.8p (2004: 1.5p). If approved at the Annual General Meeting to be held on 25 January 2006, the final dividend of 1.3p per share will be paid on 27 January 2006 to shareholders on the register on 30 December 2005. The ex-dividend date will be 28 December 2005. Statutory results for year ended 30 September 2005 These show that Future generated Â£212.3m of turnover, operating loss of Â£10.0m after exceptional items of Â£7.2m, pre-tax loss of Â£8.9m, and a basic loss per share of 3.4 pence. Statutory results for nine months ended 30 September 2004 (the Group changed its financial year end to 30 September in 2004) These show that Future generated Â£133.0m of turnover, operating profit of Â£0.4m, pre-tax profit of Â£0.6m and a basic loss per share of 0.2 pence. Adjusted operating profit (EBITAE) was Â£13.1m and adjusted earnings per share were 3.6 pence. Reconciliation of statutory loss for year with EBITAE --------------------------- -------------- ------------ Period ended 30 September Year ended 30 9 months to 30 Sept 2005 Sept 2004 Â£m Â£m --------------------------- -------------- ------------ Adjusted operating profit (EBITAE) 20.7 13.1 --------------------------- -------------- ------------ Exceptional items (7.2) - Profit on disposal of subsidiaries 2.1 0.2 Net interest payable (1.0) - Amortisation and impairment of intangible fixed (23.5) (12.7) assets --------------------------- -------------- ------------ Pre-tax loss for period (8.9) 0.6 Tax (2.1) (1.3) --------------------------- -------------- ------------ Loss for period (11.0) (0.7) --------------------------- -------------- ------------ The table below analyses the Group's operating profit. ------------------------------ ----------- ------------ Period ended 30 September Year ended 30 9 months to 30 Sept 2005 Sept 2004 Â£m Â£m ------------------------------ ----------- ------------ Adjusted operating profit (EBITAE) 20.7 13.1 ------------------------------ ----------- ------------ Exceptional items (7.2) - Goodwill amortisation and impairment (23.5) (12.7) ------------------------------ ----------- ------------ Operating (loss)/profit (10.0) 0.4 ------------------------------ ----------- ------------ Group revenues The tables below analyse Group revenues which grew 2% from continuing operations and by 12% including the impact of acquisitions made during the year. ---------------- ---------- ----------- ----------- -------- Summary % of 2005 2004 Change Group Â£m Â£m % ---------------- ---------- ----------- ----------- -------- Continuing operations 92% 194.6 190.4 Up 2% Acquisitions 8% 17.7 - - ---------------- ---------- ----------- ----------- -------- Group turnover 100% 212.3 190.4 Up 12% ---------------- ---------- ----------- ----------- -------- ---------------- ---------- ----------- ----------- -------- Turnover by type % of 2005 2004 Change Group Â£m Â£m % ---------------- ---------- ----------- ----------- -------- Circulation 66% 139.0 129.8 Up 7% Advertising 32% 68.1 56.2 Up 21% Other 2% 5.2 4.4 Up 18% ---------------- ---------- ----------- ----------- -------- Group turnover 100% 212.3 190.4 Up 12% ---------------- ---------- ----------- ----------- -------- ---------------- ---------- ----------- ----------- -------- Turnover by country % of 2005 2004 Change Group Â£m Â£m % ---------------- ---------- ----------- ----------- -------- UK 55% 118.4 100.4 Up 18% US 26% 55.5 52.0 Up 7% Mainland Europe 19% 39.7 39.9 Down 1% Intra-group - (1.3) (1.9) ---------------- ---------- ----------- ----------- -------- Group turnover 100% 212.3 190.4 Up 12% ---------------- ---------- ----------- ----------- -------- Proportion of Mainland Group revenue UK US Europe Group ------------------- -------- ----------- --------- ---------- Games 16% 13% 10% 39% Computing 13% 6% 8% 27% Entertainment 26% 7% 1% 34% ------------------- -------- ----------- --------- ---------- Total 55% 26% 19% 100% ------------------- -------- ----------- --------- ---------- Group profit The table below summarises the Group's EBITAE which was 12% below that for last year; and also shows the other key elements in the Group profit and loss account in summary form. ----------------------- ----------- ------------ ----------- Year ended 30 September 2005 2004 Change Â£m Â£m Â£m ----------------------- ----------- ------------ ----------- UK 17.6 17.3 0.3 US 3.8 5.6 (1.8) Mainland Europe 2.1 3.1 (1.0) Central costs (2.8) (2.4) (0.4) ----------------------- ----------- ------------ ----------- Adjusted operating profit (EBITAE) 20.7 23.6 (2.9) ----------------------- ----------- ------------ ----------- Profit on disposal of subsidiaries 2.1 0.2 1.9 Exceptional items (7.2) - (7.2) Net interest payable (1.0) - (1.0) ----------------------- ----------- ------------ ----------- Sub-total 14.6 23.8 (9.2) Goodwill amortisation (23.5) (16.6) (6.9) ----------------------- ----------- ------------ ----------- Pre-tax (loss/profit) (8.9) 7.2 (16.1) ----------------------- ----------- ------------ ----------- Adjusted operating profit (EBITAE) Profits have been held back as a result of a Â£1.5m increase in New Product Development spend, and a reduction of Â£1.2m in profits from computing titles. Profits from games titles were Â£0.3m above those for last year. UK EBITAE profit improved to Â£17.6m, representing a margin of 15% (2004: 17%) on turnover which increased 18% to Â£118.4m. This reduction in margin reflects a low initial margin from certain acquisitions, together with lower margin business from certain computing and games titles during the year. US EBITAE profits reduced to Â£3.8m, representing a margin of 7% (2004: 11%) on turnover which increased by 7% to Â£55.5m. This reduction in margin reflects reducing margin from games titles during the year, partially offset by improved performance from guitar titles, and significant New Product Development spend. Mainland Europe profits reduced to Â£2.1m, representing a margin of 5% (2004: 8%) on turnover down 1% at Â£39.7m. This result reflects more challenging newsstand conditions in both France and Italy, particularly in computing, together with the cost of launching Micro Actuel in France. Games titles performed well. Central costs increased to Â£2.8m (2004: Â£2.4m) reflecting increased activity in relation to the Group's growth plans. With the changing magazine portfolio, and the phasing of New Product Development spend, the bias of profits towards the first half will not apply in 2006. New product development (NPD) During the year, a total of Â£4.6.m (2004: Â£3.1m) was spent on New Product Development. The overall purpose of continued spending in New Product Development is to create media properties which will deliver future profit growth. Indeed, many of the Group's titles were originally launches, not acquisitions. Acquisitions The result for the year includes turnover of Â£17.7m and EBITAE of Â£1.6m from acquisitions made during the year. The largest of these was the acquisition of 38 titles from Highbury on 21 June 2005. Excluding the cost of exceptional items and goodwill amortisation, in aggregate these acquisitions have enhanced earnings per share. Exceptional items These amounted to Â£7.2m (2004: Â£Nil) representing Â£2.2m of aborted bid costs, Â£1.8m of restructuring costs associated with acquisition activity, and Â£0.8m of restructuring costs within the existing business. Property costs of Â£2.4m have been incurred including additional property provisions of Â£1.6m following the Board's decision to relocate certain acquired and existing offices. In the UK, following acquisition activity, we had four rented offices in London and we are currently moving all our London employees to one office in Marylebone. In the US, we are moving our San Francisco employees to new offices and there is a small property provision for the unoccupied portion of rent paid in the new financial year. Taxation The Group's tax strategy is to minimise its liabilities to taxation, having regard to commercial circumstances, tax history, the risk of changing legislation, and delays in agreeing matters in certain territories. The tax charge for the year amounted to Â£2.1m (2004: 4.7m), comprising a current tax charge of Â£2.0m and a deferred tax charge of Â£0.1m. In computing taxable profits, a significant portion of purchased goodwill is allowed to be set against taxable profits in some territories. If this goodwill were not deductible the effective tax rate, based on the current tax charge, would be 17%. The Group's effective current tax rate is therefore below standard rates of corporation tax of 30% (UK), 42% (US), 35% (France) and 35% (Italy). In France and Italy, the Group has accumulated tax losses, so that profits generated there should continue to be effectively tax-free for at least the next two years. The Group also benefits from the structuring of certain acquisitions and other planning steps. Earnings per share After adjusting so as to exclude the impact of goodwill amortisation and impairment and exceptional items (including any related tax effects) profit after tax amounted to Â£16.6m. With a weighted average of 325.5m shares in issue, adjusted earnings per share were down 12% on last year at 5.1p per share (2004: 5.8p). Balance sheet The main change in the shape of the Group balance sheet this year end compared with 2004 is that the Group has moved into modest net debt, following a period of acquisitions, and for the same reason there have been increases in the level of tangible assets, debtors, stocks and creditors. Net assets at 30 September 2005 amounted to Â£91.7m (2004: Â£107.7m) of which Â£135.8m (2004: Â£108.4m) related to intangible fixed assets - acquired publishing rights and goodwill arising on acquisition. As is common in media companies, Future has a low capital base and its value is better measured from its strong cash flows rather than by returns on capital employed. Cash flow and net debt Future is strongly cash-generative. Over the three years to 30 September 2005 more than 84% of EBITA profit was converted into cash. For the year ended 30 September 2005, the cash conversion ratio (excluding the impact of exceptional costs) was 67%. Net cash inflow from operating activities (after the cost of exceptional items) for the year was Â£9.8m (2004: 17.7m). The Group paid out a net Â£46.1m in respect of acquisitions and disposals, Â£6.5m in respect of dividends, Â£4.1m in tax, and Â£1.8m in capital expenditure. Net debt at the end of the year was Â£39.5m (2004: net cash of Â£9.8m). International financial reporting standards Future is required to publish its accounts in accordance with IFRS for accounting periods from 1 October 2005. Accordingly, IFRS will apply to Future's interim results for the six months to 31 March 2006 and full year results to 30 September 2006. As Future explained in its 2003 and 2004 Annual Reports, the areas of IFRS which will have the most significant impact on Future's reported financial results relate to: (a) purchased goodwill, which will cease to be amortised over its estimated useful life: instead Future will perform annual impairment reviews of goodwill; and (b) share-based payments. The transition to IFRS has no effect on the cash flows of the business, nor on the Company's ability to pay dividends for the foreseeable future. The Group will update shareholders on the impact of the transition to IFRS early in 2006, and will provide restated results for the year ended 30 September 2005 in advance of publishing its first IFRS results for the six months to 31 March 2006. Post balance sheet event On 20 October 2005, the Group announced that Microsoft had awarded Future international rights to publish a consumer title called Windows Vista The Official Magazine. The publishing licence is initially for five years with worldwide licensing and distribution opportunities. Future will launch the first issue of the magazine in autumn 2006, in the UK, US, France and Italy. Other editions of the magazine will be produced under licence by Future's international publishing partners. UK performance for year ended September 2005 ------------- -------- -------- ------- ------- ------- -------- ------ 2005 2005 2005 2005 2004 2004 2004 Turnover Contribution Margin % of Turnover Contribution Margin Â£m Â£m % turnover Â£m Â£m % ------------- -------- -------- ------- ------- ------- -------- ------ Games 34.1 11.9 35% 29% 33.8 11.1 33% Computing 28.0 8.3 30% 24% 27.3 7.9 29% Entertainment 56.3 13.4 24% 47% 39.3 10.5 27% ------------- -------- -------- ------- ------- ------- -------- ------ Overheads and other 118.4 33.6 28% 100% 100.4 29.5 29% costs (16.0) (12.2) ------------- -------- -------- ------- ------- ------- -------- ------ EBITAE 17.6 15% 17.3 17% Exceptional items (4.5) - Amortisation and (4.7) (0.6) impairment ------------- -------- -------- ------- ------- ------- -------- ------ Operating profit 8.4 7% 16.7 17% ------------- -------- -------- ------- ------- ------- -------- ------ UK EBITAE was Â£17.6m, representing an EBITAE margin of 15% (2004: 17%). UK turnover for the year rose by 18% reflecting organic growth of 3% and a significantly increased level of acquisition activity. We have broadened our UK portfolio, including the acquisition in the first half of the following: 11 motoring, two parenting, one wedding and one computing magazine. In June we acquired for Â£30.5m 38 titles (of which 33 are in the UK) and associated assets from Highbury House Communications plc, strengthening our positions in some magazine sectors and also taking us into new areas. Integration of these acquired titles is progressing well. During the first half-year, we completed the relocation of most of our 750 Bath-based employees to new offices. In London, we acquired three offices, through acquisitions, in addition to our existing office in Baker Street. We have now secured one larger office in Marylebone, which we have contracted to lease for 10 years. We are relocating all our London employees in the early part of the new financial year. UK circulation revenue increased by 10% and advertising revenue by 45% for the year. Excluding the effect of acquisitions, the growth rates were 0% and 15% respectively. Our UK online business generated turnover of Â£1.7m (up 89%) and an EBITAE loss of Â£0.1m. US performance for year ended 30 September 2005 ------------- -------- -------- ------- ------- ------- -------- ------ 2005 2005 2005 2005 2004 2004 2004 Turnover Contribution Margin % of Turnover Contribution Margin Â£m Â£m % turnover Â£m Â£m % ------------- -------- -------- ------- ------- ------- -------- ------ Games 50.1 12.8 26% 49% 52.1 15.3 29% Computing 22.5 4.0 18% 22% 22.8 2.2 10% Entertainment 29.8 3.6 12% 29% 18.0 3.7 21% ------------- -------- -------- ------- ------- ------- -------- ------ Overheads 102.4 20.4 20% 100% 92.9 21.2 23% (13.3) (11.3) ------------- -------- -------- ------- ------- ------- -------- ------ EBITAE 7.1 7% 9.9 11% Exceptional items (1.1) - Amortisation (6.6) (4.8) ------------- -------- -------- ------- ------- ------- -------- ------ Operating (loss)/ (0.6) - 5.1 5% profit ------------- -------- -------- ------- ------- ------- -------- ------ US EBITAE was $7.1m, representing an EBITAE profit margin of 7% (2004: 11%) after NPD of $4.6m. The Group's NPD spend was most marked in the US, with a higher than usual amount spent. US turnover rose by 10% as Future continued to diversify its US portfolio, which now serves five special-interest areas: games, computing, music, action sports and craft. During the first half, we established our action sports division in San Diego and acquired Snowboard Journal; in the second half, we launched Future Snowboarding, Scrapbook Answers and Future Music. The result for the year reflects the losses from investment in new launches, developing our internet activities, and losses of $0.9m from Mobile, which we launched last year but which had not made enough progress and was closed in September. We acquired the profitable Cheatplanet.com website for $8.7m in May and it has performed well ahead of our expectations. This acquisition was the first step in our plan to increase our Internet presence and develop our games website activities in the US. Mainland Europe performance for year ended 30 September 2005 2005 2005 2005 2005 2004 2004 2004 Turnover Contribution Margin % % of Turnover Contribution Margin â‚¬m â‚¬m turnover â‚¬m â‚¬m % --------------- --------- ----------- -------- --------- --------- ----------- -------- Games 32.9 8.5 26% 57% 32.6 7.0 21% Computing 24.3 3.6 15% 42% 25.1 7.5 30% Entertainment 0.6 0.2 33% 1% 0.8 (0.4) - --------------- --------- ----------- -------- --------- --------- ----------- -------- 57.8 12.3 21% 100% 58.5 14.1 24% Overheads (9.2) (9.5) --------------- --------- ----------- -------- --------- --------- ----------- -------- EBITAE 3.1 5% 4.6 8% Amortisation (3.1) (3.4) --------------- --------- ----------- -------- --------- --------- ----------- -------- Operating profit - - 1.2 2% --------------- --------- ----------- -------- --------- --------- ----------- -------- Although good progress was made in Mainland Europe during the first half, second half trading was unexpectedly tough. For the year as a whole, the EBITAE profit was â‚¬3.1m representing an EBITAE profit margin of 5% (2004: 8%). This result is also stated after the cost of intra-group licence fees of â‚¬1.4m (2004: â‚¬1.8m). Both businesses are profitable. We increased revenues in Italy whilst experiencing a decline in France, reflecting tougher newsstand trading conditions during the second half-year. In both countries, games magazine performance exceeded our expectations whereas the performance of the existing computing titles was below expectation. In France, we launched a new computing title, Micro Actuel, in March, which incurred losses of â‚¬0.6m during the period and has achieved good levels of both circulation and advertising revenue. Our Italian business trialled two new titles during the summer, Wrestling Power and 1,2,3...Su Doku, both of which were quickly profitable. In September Future Italy acquired Italy's longest-running games title The Games Machine and associated titles and website, for â‚¬3.5m. In France, Future acquired Console Plus for â‚¬0.2m, including integration costs. These titles usefully build on our existing position in the games sector in Italy and France. Group performance 2005 2005 2005 2004 2004 2004 Turnover Contribution Margin Turnover Contribution Margin Â£m Â£m % Â£m Â£m % ----------- -------- --------- ------- -------- --------- ------- Games 83.8 24.8 30% 85.3 24.5 29% Computing 56.9 13.0 23% 57.1 14.2 25% Entertainment 72.9 15.4 21% 49.9 12.3 25% ----------- -------- --------- ------- -------- --------- ------- 213.6 53.2 25% 192.3 51.0 27% ----------- -------- --------- ------- -------- --------- ------- Less intra-group (1.3) - (1.9) - ----------- -------- --------- ------- -------- --------- ------- 212.3 - 190.4 - Overheads and other costs (32.5) (27.4) ----------- -------- --------- ------- -------- --------- ------- EBITAE 20.7 10% 23.6 12% Exceptional items (7.2) - Amortisation and impairment (23.5) (16.6) ----------- -------- --------- ------- -------- --------- ------- Operating (loss) /profit (10.0) 7.0 ------------ -------- --------- ------- -------- --------- ------- Current trading outlook The year to 30 September 2005 has been an important one for Future. Although the economic backdrop has been unhelpful, the Group has significantly grown the scale of its operations during the year. This provides the platform for the Group to develop its profits further over time. In the meantime, Future's strong cash generation and modest level of bank debt enables the Group readily to withstand any adverse economic conditions; and may also enable the Group to take advantage of further attractive business opportunities should they arise. We are committed to building on our progress and to ensuring Future's continued growth through acquisitions and increased new product development spend on launches and internet expansion. Whilst we continue to take a cautious view on the near term outlook, trading in the first month of the new financial year is on track. Section 1 - Financial information for the 12 months to 30 September 2005 and pro forma 12 months to 30 September 2004 Group profit and loss account for the 12 months to 30 September 2005 ------------------ ------ ------------- --------- --------- --------- Pro forma 12 months 12 months to 30 to 30 September September Continuing Acqui- 2005 2004 Note operations sitions Total Total ------------------ ------ ------------- --------- --------- --------- Â£m Â£m Â£m Â£m ------------------ ------ ------------- --------- --------- --------- Turnover 2,18 194.6 17.7 212.3 190.4 ------------------ ------ ------------- --------- --------- --------- ------------------ ------ ------------- --------- --------- --------- Operating profit/(loss) ------------- --------- --------- --------- Operating profit before exceptional items and amortisation and impairment of intangible assets 19.1 1.6 20.7 23.6 Exceptional items 3 (4.8) (2.4) (7.2) - Amortisation and impairment of intangible assets 9 (17.3) (6.2) (23.5) (16.6) ------------- --------- --------- --------- ------------------ ------ ------------- --------- --------- --------- Operating (loss)/profit 3 (3.0) (7.0) (10.0) 7.0 Profit on disposal of subsidiaries 3 2.1 0.2 ------------------ ------ ------------- --------- --------- --------- (Loss)/profit on ordinary activities before interest (7.9) 7.2 Net interest payable and similar charges 5 (1.0) - ------------------ ------ ------------- --------- --------- --------- (Loss)/profit on ordinary activities before tax 2 (8.9) 7.2 Tax on (loss)/profit on ordinary activities 6 (2.1) (4.7) ------------------ ------ ------------- --------- --------- --------- (Loss)/profit for the year (11.0) 2.5 ------------------ ------ ------------- --------- --------- --------- ------------------ ------ ------------- --------- --------- --------- Dividends: - September 2005 proposed 7 (4.2) - - March 2005 paid 7 (1.6) - - September 2004 paid - (4.9) - December 2003 paid - (4.0) ------------------ ------ ------------- --------- --------- --------- Retained loss for the year (16.8) (6.4) ------------------ ------ ------------- --------- --------- --------- Earnings per 1p Ordinary share ------------------------------- --------- --------- --------- Note 12 months to 30 Pro forma September 2005 12 months to 30 pence September 2004 pence ------------------------------- --------- --------- --------- Basic (loss)/earnings per share 8 (3.4) 0.8 Adjusted basic earnings per share 8 5.1 5.8 Diluted (loss)/earnings per share 8 (3.4) 0.8 Adjusted diluted earnings per share 8 5.1 5.8 ------------------------------- --------- --------- --------- Group statement of total recognised gains and losses for the 12 months to 30 September 2005 ------------------------------ ------ ---------- ------------ Note 12 months to Pro forma 30 September 12 months to 2005 30 September 2004 Â£m Â£m ------------------------------ ------ ---------- ------------ (Loss)/profit for the year 17 (11.0) 2.5 Dividend - September 2005 proposed 7 (4.2) - Dividend - March 2005 paid 7 (1.6) - Dividend - September 2004 paid - (4.9) Dividend - December 2003 paid - (4.0) ------------------------------ ------ ---------- ------------ Retained loss for the year (16.8) (6.4) Release of pre-acquisition loan - 1.0 Tax on release of pre-acquisition loan - (0.4) Unwinding of licensing obligation - 0.1 ------------------------------ ------ ---------- ------------ Total recognised loss relating to the year (16.8) (5.7) ------------------------------ ------ ---------- ------------ Group reconciliation of movements in shareholders' funds for the 12 months to 30 September 2005 ------------------------------ ------ ----------- ---------- Note 12 months to Pro forma 30 September 12 months to 2005 30 September 2004 Â£m Â£m ------------------------------ ------ ----------- ---------- (Loss)/profit for the year 17 (11.0) 2.5 Dividend - September 2005 proposed 7 (4.2) - Dividend - March 2005 paid 7 (1.6) - Dividend - September 2004 paid - (4.9) Dividend - December 2003 paid - (4.0) ------------------------------ ------ ----------- ---------- Retained loss for the year (16.8) (6.4) Issue of share capital during the year 17 0.1 - Premium on shares issued during the year 17 0.7 0.9 Release of pre-acquisition loan - 1.0 Tax on release of pre-acquisition loan - (0.4) Unwinding of licensing obligation - 0.1 ------------------------------ ------ ----------- ---------- Net movement in shareholders' funds (16.0) (4.8) Opening equity shareholders' funds 107.7 112.5 ------------------------------ ------ ----------- ---------- Equity shareholders' funds 91.7 107.7 ------------------------------ ------ ----------- ---------- Group balance sheet as at 30 September 2005 -------------------------- ------------ --------- --------- Note 30 Sep- 30 Sep- tember tember 2005 2004 Â£m Â£m -------------------------- ------------ --------- --------- Fixed assets Intangible assets 9 135.8 108.4 Tangible assets 10 3.9 3.5 -------------------------- ------------ --------- --------- 139.7 111.9 Current assets Stocks 11 6.2 5.0 Debtors 12 50.2 39.5 Investments 13 - 2.5 Cash at bank and in hand 10.7 12.0 -------------------------- ------------ --------- --------- 67.1 59.0 Creditors: amounts falling due within one year 14 (80.9) (62.3) -------------------------- ------------ --------- --------- Net current liabilities (13.8) (3.3) -------------------------- ------------ --------- --------- -------------------------- ------------ --------- --------- Total assets less current liabilities 125.9 108.6 -------------------------- ------------ --------- --------- Creditors: amounts falling due after more than 15 (32.0) - one year Provisions for liabilities and charges 16 (2.2) (0.9) -------------------------- ------------ --------- --------- Net assets 91.7 107.7 -------------------------- ------------ --------- --------- Capital and reserves Called-up share capital 17 3.3 3.2 Share premium account 17 24.4 23.7 Merger reserve 17 109.0 109.0 Profit and loss account 17 (45.0) (28.2) -------------------------- ------------ --------- --------- Equity shareholders' funds 91.7 107.7 -------------------------- ------------ --------- --------- Group cash flow statement for the 12 months to 30 September 2005 ------------------------------ --------- --------- 12 months Pro forma to 30 12 months September to 30 2005 September 2004 Â£m Â£m ------------------------------ --------- --------- Net cash inflow from operating activities 9.8 17.7 ------------------------------ --------- --------- Returns on investments and servicing of finance Interest received 0.5 0.6 Issue costs of new bank loan (0.4) - Interest paid (0.8) (0.4) ------------------------------ --------- --------- Net cash (outflow)/inflow from returns on investments and servicing of finance (0.7) 0.2 ------------------------------ --------- --------- Tax Tax paid (5.5) (6.6) Tax received 1.4 0.8 ------------------------------ --------- --------- Net tax paid (4.1) (5.8) ------------------------------ --------- --------- Capital expenditure and financial investment Purchase of tangible fixed assets (1.8) (1.4) ------------------------------ --------- --------- Net cash outflow from capital expenditure and financial investment (1.8) (1.4) ------------------------------ --------- --------- Acquisitions and disposals Purchase of subsidiary undertakings (33.6) (3.3) Net cash acquired with subsidiary undertakings 0.8 - Disposal of subsidiary undertakings 2.1 0.2 Purchase of magazine titles (15.3) (5.6) Payment of deferred consideration (0.1) (0.7) ------------------------------ --------- --------- Net cash outflow for acquisitions and disposals (46.1) (9.4) ------------------------------ --------- --------- Dividends Equity dividends paid (6.5) (4.0) ------------------------------ --------- --------- Net cash outflow from payment of dividends (6.5) (4.0) ------------------------------ --------- --------- Management of liquid resources Decrease in short-term deposits with bank 2.5 6.5 ------------------------------ --------- --------- Net cash inflow in management of liquid resources 2.5 6.5 ------------------------------ --------- --------- Net cash (outflow)/inflow before financing (46.9) 3.8 ------------------------------ --------- --------- Financing Proceeds from issue of Ordinary share capital 0.8 0.9 Draw down of bank loans 53.6 - Movement in other loan - (0.5) Repayment of bank loans (8.7) (0.3) ------------------------------ --------- --------- Net cash inflow from financing 45.7 0.1 ------------------------------ --------- --------- (Decrease)/increase in cash in the year (1.2) 3.9 ------------------------------ --------- --------- Notes to the Group cash flow statement for the 12 months to 30 September 2005 A. Cash flow from operating activities The reconciliation of operating (loss)/profit to net cash inflow from operating activities is as follows: ---------------------------------- ----------- ---------- 12 months to Pro forma 30 September 12 months 2005 to 30 September 2004 Â£m Â£m ---------------------------------- ----------- ---------- Operating (loss)/profit (10.0) 7.0 Depreciation charge 1.5 1.5 Amortisation and impairment of intangible assets 23.5 16.6 Movement in provisions 1.0 (1.2) Increase in stocks (1.0) (1.4) Increase in debtors (7.9) (1.6) Increase/(decrease) in creditors 2.7 (3.2) ---------------------------------- ----------- ---------- Net cash inflow from operating activities 9.8 17.7 ---------------------------------- ----------- ---------- B. Analysis of net cash/(debt) ------------- -------- ----------- --------- -------- ------------- At 1 October Cash flow Acquis- Exchange At 30 2004 itions movements September 2005 Â£m Â£m Â£m Â£m Â£m ------------- -------- ----------- --------- -------- ------------- Cash at bank and in hand 12.0 (2.4) 1.2 (0.1) 10.7 Debt due within one year (4.7) (15.1) (0.4) (0.2) (20.4) Debt due after more than - (29.8) - - (29.8) one year Liquid resources 2.5 (2.5) - - - ------------- -------- ----------- --------- -------- ------------- Net cash/(debt) 9.8 (49.8) 0.8 (0.3) (39.5) ------------- -------- ----------- --------- -------- ------------- C. Reconciliation of movement in net cash/(debt) ------------------------------------ --------- --------- 12 months to 30 Pro forma September 2005 12 months Â£m to 30 September 2004 Â£m ------------------------------------ --------- --------- Net cash at 1 October 9.8 10.4 (Decrease)/increase in cash (1.2) 3.9 Movement in deposits (2.5) (6.5) Movement in borrowings (44.9) 0.8 Overdraft acquired with subsidiary (0.4) - Non-cash movements - 1.0 Exchange movements (0.3) 0.2 ------------------------------------ --------- --------- Net (debt)/cash at 30 September (39.5) 9.8 ------------------------------------ --------- --------- Notes to the pro forma financial information 1. Basis of preparation of pro forma financial information This preliminary statement of annual results for the 12 months ended 30 September 2005 is unaudited and does not comprise statutory accounts within the meaning of section 240 of the Companies 1985 In order to assist readers following the change of financial year end, pro forma financial information was prepared for the 12 months to 30 September 2004. These results are unaudited and do not constitute statutory accounts as defined in section 240 of the Companies Act 1985. 2. Segmental reporting The Group is involved in one class of business, the publication of magazines and related websites. The analysis of turnover by type, geographical analyses of turnover and (loss)/profit before tax were as follows: a) Turnover by type --------------------- --------- ---- ----------- ------------ 12 months to Pro forma 30 September 12 months to 2005 30 September Â£m 2004 Â£m --------------------- --------- ---- ----------- ------------ Circulation1 139.0 129.8 Advertising1 68.1 56.2 Other 5.2 4.4 --------------------- ----------- ------------ Total 212.3 190.4 --------------------- --------- ---- ----------- ------------ 1Included in the total circulation revenue for the 12 months ended 30 September 2005 is Â£7.8m relating to acquisitions. Acquisitions provided Â£9.1m of advertising revenue in the same period. b) Turnover by origin --------------------- --------- ---- ----------- ------------ 12 months to Pro forma 30 September 12 months to 2005 30 September Â£m 2004 Â£m --------------------- --------- ---- ----------- ------------ United Kingdom2 118.4 100.4 United States2 55.5 52.0 Mainland Europe 39.7 39.9 Turnover between segments (1.3) (1.9) --------------------- ----------- ------------ Total 212.3 190.4 --------------------- ----------- ------------ 2Included in the UK turnover by origin for the 12 months ended 30 September 2005 is Â£14.9m relating to acquisitions. Acquisitions provided Â£2.4m of revenue in the US. Further information on the acquisitions during the year can be found in note 18. c) Turnover by destination --------------------- --------- ---- ----------- ----------- 12 months to Pro forma 30 September 12 months to 2005 30 September Â£m 2004 Â£m --------------------- --------- ---- ----------- ----------- United Kingdom 99.4 83.5 United States 57.0 53.6 Mainland Europe 47.1 46.0 Rest of the world 10.1 9.2 Turnover between segments (1.3) (1.9) --------------------- ----------- ----------- Total 212.3 190.4 --------------------- ----------- ----------- d) (Loss)/profit on ordinary activities before tax by origin ------------------------------ ----------- ------------ 12 months to Pro forma 30 September 12 months to 2005 30 September Â£m 2004 Â£m ------------------------------ ----------- ------------ United Kingdom (1.1) 11.4 United States (2.8) 0.4 Mainland Europe (1.4) (1.7) Central costs (3.6) (2.9) ------------------------------ ----------- ------------ Total (8.9) 7.2 ------------------------------ ----------- ------------ 3. Operating (loss)/profit ----------------- ------------- --------- ---------- --------- 12 months Pro forma to 30 12 months September to 30 2005 September 2004 Continuing Acquisi- Total Total operations tions Â£m Â£m Â£m Â£m ----------------- ------------- --------- ---------- --------- Turnover 194.6 17.7 212.3 190.4 Cost of sales (130.5) (14.2) (144.7) (126.3) ----------------- ------------- --------- ---------- --------- Gross profit 64.1 3.5 67.6 64.1 Distribution costs (14.0) (0.4) (14.4) (13.1) ------------- --------- ---------- --------- Administration expenses (31.0) (1.5) (32.5) (27.4) Exceptional items (4.8) (2.4) (7.2) - Amortisation and impairment of intangible assets (17.3) (6.2) (23.5) (16.6) ------------- --------- ---------- --------- Total administration expenses (53.1) (10.1) (63.2) (44.0) ----------------- ------------- --------- ---------- --------- Operating (loss)/profit (3.0) (7.0) (10.0) 7.0 ----------------- ------------- --------- ---------- --------- Included in administration expenses are the following exceptional items: ----------------- ------------- --------- ---------- --------- 12 months Pro forma to 30 12 months September to 30 2005 September 2004 Continuing Acquisi Total Total operations tions Â£m Â£m Â£m Â£m ----------------- ------------- --------- ---------- --------- Aborted bid costs 2.2 - 2.2 - Restructuring costs 0.8 1.8 2.6 - Property costs 1.8 0.6 2.4 - ----------------- ------------- --------- ---------- --------- Total exceptional items 4.8 2.4 7.2 - ----------------- ------------- --------- ---------- --------- The aborted bid costs relate to the external professional fees and other costs of the aborted bid for the entire issued share capital of Highbury House Communications plc during the first half of 2005. The restructuring costs relate to the costs incurred whilst integrating the acquisitions of Beach Magazines and Publishing Limited, A&S Publishing Company Limited and the various Highbury assets into the main Future businesses in the UK and the US. In addition there are some costs relating to subsequent restructuring within Future's ongoing businesses. The property costs relate to the integration of the acquisitions and in particular the move of Future UK's business in London to a larger single office following the substantial increase in London-based employees as a result of the Highbury acquisition which is set to be completed by the end of 2005. Profit on disposal of subsidiaries During the year the Group sold four wholly-owned subsidiary companies for a total consideration of Â£2.1m. After accounting for associated costs of disposal the profit on disposal of subsidiaries was Â£2.1m. The companies disposed of contained capital tax losses which were surplus to Future's requirements. 4. Employees and Directors -------------------------------- ----------- ----------- Staff costs 12 months to Pro forma 30 September 12 months to 2005 30 September Â£m 2004 Â£m -------------------------------- ----------- ----------- Wages and salaries 42.5 32.8 Social security costs 6.9 5.6 Other pension costs 0.8 0.7 -------------------------------- ----------- ----------- Total 50.2 39.1 -------------------------------- ----------- ----------- 5. Net interest payable and similar charges ------------------------------- ---------- ---------- 12 months to Pro forma 30 September 12 months to 2005 30 September Â£m 2004 Â£m ------------------------------- ---------- ---------- Interest receivable 0.5 0.6 Exchange losses - (0.2) ------------------------------- ---------- ---------- Total interest receivable and similar items 0.5 0.4 ------------------------------- ---------- ---------- Interest payable on bank loans and overdrafts (1.1) (0.3) Other interest payable - (0.1) Write-off of debt issue costs (0.4) - ------------------------------- ---------- ---------- Total interest payable and similar charges (1.5) (0.4) ------------------------------- ---------- ---------- Net interest payable and similar charges (1.0) - ------------------------------- ---------- ---------- 6. Tax on (loss)/profit on ordinary activities The tax charge for 12 months to 30 September 2004 has been calculated using the weighted average effective rates for the 12 month period, derived from the Group's financial statements for the year ended 31 December 2003, and the 9 months to 30 September 2004. 7. Dividends Equity dividends September March September 2005 2005 2004 ------------------------ ------------ --------- ----------- Number of shares in issue at end of period 326.3 325.8 324.5 (million) Dividend proposed/paid (pence per share) 1.3 0.5 1.5 ------------------------ ------------ --------- ----------- Dividend proposed/paid (Â£million) 4.2 1.6 4.9 ------------------------ ------------ --------- ----------- 8. Earnings per share Basic earnings per share are calculated using the weighted average number of Ordinary shares outstanding during the year. Diluted earnings per share have been calculated by taking into account the dilutive effect of Ordinary shares that would be issued on conversion into Ordinary shares of options held under employee share schemes. The adjusted earnings per share removes the effect of the amortisation and impairment of intangible assets, exceptional items (including profit on disposal of subsidiaries) and any tax effects of the exceptional items from the calculation as follows: Adjustments to (loss)/profit on ordinary activities after tax ------------------------------- ----------- ---------- 12 months to Pro forma 30 September 12 months to 2005 30 September Â£m 2004 Â£m ------------------------------- ----------- ---------- (Loss)/profit on ordinary activities after tax (11.0) 2.5 Add: exceptional items 7.2 - Add: amortisation and impairment of intangible assets 23.5 16.6 Less: profit on disposal of subsidiaries (2.1) (0.2) Less: tax effect of exceptional items (1.0) - ------------------------------- ----------- ---------- Adjusted profit on ordinary activities after tax 16.6 18.9 ------------------------------- ----------- ---------- In some territories the Group gains a tax deduction for the amortisation of intangible assets. The calculation of adjusted earnings as above does not take this into account. If a further adjustment is made for this effect the adjusted profit after tax is Â£14.9m. On this basis, basic and diluted adjusted earnings per share are 4.6 pence (2004: 5.7 pence). 2005 2004 --------------------------------- --------- --------- Weighted average number of shares outstanding during the period: - basic 325,468,072 323,215,690 - dilutive effect of share options 937,654 886,179 - diluted 326,405,726 324,101,869 Basic (loss)/earnings per share (in pence) (3.4) 0.8 Adjusted basic earnings per share (in pence) 5.1 5.8 Diluted (loss)/earnings per share (in pence) (3.4) 0.8 Adjusted diluted earnings per share (in pence) 5.1 5.8 --------------------------------- --------- --------- The adjustments to profit have the following effect: --------------------------------- --------- --------- 2005 2004 pence pence --------------------------------- --------- --------- Basic (loss)/earnings per share (3.4) 0.8 Exceptional items 2.2 - Amortisation and impairment of intangible assets 7.2 5.0 Profit on disposal of subsidiaries (0.6) - Tax effect of exceptional items (0.3) - --------- --------- Adjusted basic earnings per share 5.1 5.8 --------- --------- Diluted (loss)/earnings per share (3.4) 0.8 Exceptional items 2.2 - Amortisation and impairment of intangible assets 7.2 5.0 Profit on disposal of subsidiaries (0.6) - Tax effect of exceptional items (0.3) - --------- --------- Adjusted diluted earnings per share 5.1 5.8 --------------------------------- --------- --------- 9. Intangible fixed assets --------------------------------------- ----------- Goodwill Â£m --------------------------------------- ----------- Cost At 1 October 2004 324.8 Additions 50.3 Adjustments to fair value on prior year acquisitions 0.2 Exchange adjustments 0.7 --------------------------------------- ----------- At 30 September 2005 376.0 --------------------------------------- ----------- --------------------------------------- ----------- Amortisation At 1 October 2004 (216.4) Charge for the year (23.5) Exchange adjustments (0.3) --------------------------------------- ----------- At 30 September 2005 (240.2) --------------------------------------- ----------- Net book value at 30 September 2005 135.8 --------------------------------------- ----------- Net book value at 30 September 2004 108.4 --------------------------------------- ----------- During the year the Directors performed impairment reviews on certain intangible assets within the Group. These reviews resulted in a provision being made against the remaining carrying value of the goodwill (Â£0.7m) relating to Spanish Homes Magazine acquired in 2004. This was due to the poor trading experienced by this magazine since acquisition. 10. Tangible fixed assets -------------- ---------- ---------- ---------- ---------- Group Land and Plant and Equipment, Total buildings machinery fixtures and fittings Â£m Â£m Â£m Â£m -------------- ---------- ---------- ---------- ---------- Cost At 1 October 2004 2.4 6.8 1.3 10.5 Additions - 1.5 0.3 1.8 Exchange adjustments - 0.1 - 0.1 -------------- ---------- ---------- ---------- ---------- At 30 September 2005 2.4 8.4 1.6 12.4 -------------- ---------- ---------- ---------- ---------- -------------- ---------- ---------- ---------- ---------- Depreciation At 1 October 2004 (0.8) (5.2) (1.0) (7.0) Charge for the year (0.1) (1.2) (0.2) (1.5) Exchange adjustments - (0.1) 0.1 - -------------- ---------- ---------- ---------- ---------- At 30 September 2005 (0.9) (6.5) (1.1) (8.5) -------------- ---------- ---------- ---------- ---------- -------------- ---------- ---------- ---------- ---------- Net book value at 30 September 2005 1.5 1.9 0.5 3.9 -------------- ---------- ---------- ---------- ---------- Net book value at 30 September 2004 1.6 1.6 0.3 3.5 -------------- ---------- ---------- ---------- ---------- 11. Stocks 30 September 30 September 2005 2004 Â£m Â£m ------------------------------ ----------- ----------- Raw materials 2.4 1.6 Work in progress 2.6 2.8 Finished goods 1.2 0.6 ------------------------------ ----------- ----------- Total 6.2 5.0 ------------------------------ ----------- ----------- 12. Debtors 30 September 30 September 2005 2004 Â£m Â£m ----------------------------- ----------- ----------- Amounts falling due within one year: Trade debtors 37.9 31.0 Corporation tax recoverable 2.3 2.0 Other debtors 3.0 2.9 Prepayments and accrued income 6.1 2.7 ----------------------------- ----------- ----------- 49.3 38.6 Amounts falling due after more than one year: Other debtors 0.9 0.9 ----------------------------- ----------- ----------- Total 50.2 39.5 ----------------------------- ----------- ----------- Deferred tax At 30 September 2005 a deferred tax asset has been recognised within other debtors as follows: ----------------------------- ----------- ----------- 30 September 30 September 2005 2004 Â£m Â£m ----------------------------- ----------- ----------- Amounts falling due within one year 0.9 0.9 Amounts falling due after more than one year 0.8 0.9 ----------------------------- ----------- ----------- 13. Current asset investments ----------------------------- ----------- ----------- 30 September 30 September 2005 2004 Â£m Â£m ----------------------------- ----------- ----------- Short-term bank deposits - 2.5 ----------------------------- ----------- ----------- Total - 2.5 ----------------------------- ----------- ----------- 14. Creditors: amounts falling due within one year ------------------------- ----------- ----------- 30 September 30 September 2005 2004 Â£m Â£m ------------------------- ----------- ----------- Bank and other borrowings 20.4 4.7 Trade creditors 20.2 16.5 Corporation tax 0.3 2.1 Taxation and social security 3.3 3.0 Other creditors 7.1 6.3 Accruals and deferred income 25.4 24.7 Proposed dividend 4.2 4.9 Deferred consideration for acquisitions - 0.1 ------------------------- ----------- ----------- Total 80.9 62.3 ------------------------- ----------- ----------- The deferred consideration of Â£0.1m in the prior year related to the acquisition of Spanish Homes Magazine in 2004 and was paid during 2005. 15. Creditors: amounts falling due after more than one year --------------------- ----------- ----------- 30 September 30 September 2005 2004 Â£m Â£m --------------------- ----------- ----------- Bank and other borrowings 29.8 - Other creditors 2.2 - --------------------- ----------- ----------- Total 32.0 - --------------------- ----------- ----------- Within creditors, the bank and other borrowings are repayable as follows: --------------------- ----------- ----------- 30 September 30 September 2005 2004 Â£m Â£m --------------------- ----------- ----------- Within one year 20.4 - Between 1 and 2 years 4.0 - Between 2 and 5 years 25.8 - --------------------- ----------- ----------- Total 50.2 - --------------------- ----------- ----------- 16. Provisions for liabilities and charges ------------- ---------------- ------------- ------------- Property and Redundancy Total dilapidations provisions Â£m Â£m Â£m ------------- ---------------- ------------- ------------- At 1 October 2004 0.9 - 0.9 On acquisitions 0.1 0.2 0.3 Charge in the year 1.6 - 1.6 Utilised in year (0.4) (0.2) (0.6) ------------- ---------------- ------------- ------------- At 30 September 2005 2.2 - 2.2 ------------- ---------------- ------------- ------------- 17. Capital and reserves ---------------- -------- --------- ------ --------- -------- Called up Share Merger Profit Total share premium reserve & loss capital account account Â£m Â£m Â£m Â£m Â£m ---------------- -------- --------- ------ --------- -------- At 1 October 2004 3.2 23.7 109.0 (28.2) 107.7 Issue of share capital during the 0.1 - - - 0.1 year Premium on exercise of share - 0.7 - - 0.7 options Loss for the year - - - (11.0) (11.0) Dividends - - - (5.8) (5.8) ---------------- -------- --------- ------ --------- -------- At 30 September 2005 3.3 24.4 109.0 (45.0) 91.7 ---------------- -------- --------- ------ --------- -------- 18. Acquisitions The results for the 12 months to 30 September 2005 include the undernoted contribution from acquisitions made in the year: -------------- ------- --------- -------- -------- -------- What Beach A&S Snowboard Cheat Laptop Magazines Publishing Journal Planet & Company Publishing Limited Limited Â£m Â£m Â£m Â£m Â£m -------------- ------- --------- -------- -------- -------- Date acquired 30.11.04 03.12.04 24.01.05 26.01.05 12.05.05 Turnover 0.7 2.9 4.8 0.1 0.3 -------------- ------- --------- -------- -------- -------- Operating profit/(loss) before exceptional items and amortisation of intangible assets 0.3 (0.6) 1.0 (0.3) 0.3 Amortisation of intangible assets (0.7) (0.6) (1.4) (0.3) (0.7) Exceptional items - (0.1) (0.8) - - -------------- ------- --------- -------- -------- -------- Operating loss (0.4) (1.3) (1.2) (0.6) (0.4) -------------- ------- --------- -------- -------- -------- -------------- -------- -------- -------- -------- -------- Highbury Consoles The Games Other Total titles Plus Machine Â£m Â£m Â£m Â£m Â£m -------------- -------- -------- -------- -------- -------- Date acquired 21.06.05 16.08.05 13.09.05 Turnover 8.5 0.1 0.3 - 17.7 -------------- -------- -------- -------- -------- -------- Operating profit before exceptional items and amortisation of intangible assets 0.8 - 0.1 - 1.6 Amortisation of intangible assets (2.4) - - (0.1) (6.2) Exceptional items (1.5) - - - (2.4) -------------- -------- -------- -------- -------- -------- Operating (loss)/profit (3.1) - 0.1 (0.1) (7.0) -------------- -------- -------- -------- -------- -------- i) Acquisition of Highbury titles On 21 June 2005 the Group's wholly owned UK subsidiary Future Publishing Limited acquired certain assets and liabilities relating to 38 magazine titles and related businesses from Highbury House Communications plc, Highbury Lifestyle Limited and Highbury Entertainment Limited for a cash consideration of Â£30.5m. The consideration was funded by a combination of cash resources and bank debt. The purchase is being accounted for as an acquisition. The provisional fair values of the net liabilities acquired are set out below: ------------------ -------- --------- ----------- --------- Assets and liabilities Book value Revaluations Accounting Fair value acquired policy alignment Â£m Â£m Â£m Â£m ------------------ -------- --------- ----------- --------- Intangible fixed assets 0.7 - (0.7)1 - Tangible fixed assets 0.5 (0.4)2 (0.1)3 - Debtors 1.4 - (0.2)4 1.2 Cash at bank and in hand 0.1 - - 0.1 Other creditors (2.0) (0.2)5 - (2.2) ------------------ -------- --------- ----------- --------- Net assets/(liabilities) acquired 0.7 (0.6) (1.0) (0.9) ------------------ -------- --------- ----------- --------- Goodwill 33.2 ------------------ -------- --------- ----------- --------- Consideration ------------------ -------- --------- ----------- --------- Consideration satisfied by: Cash 30.5 Associated costs 1.8 ------------------ -------- --------- ----------- --------- Total consideration 32.3 ------------------ -------- --------- ----------- --------- Notes: The fair value adjustments comprise: 1. The write off of the capitalised value of publishing rights in line with the Group's accounting policies 2. The revaluation of fixed assets to reflect the market value at the date of acquisition 3. The revaluation of fixed assets to reflect the Group's accounting policies on depreciation 4. An additional provision for advertising debtors in line with the Group's accounting policies 5. An accrual relating to unrecorded liabilities at the date of acquisition in respect of software licences. Prior to the acquisition of these titles, they were owned by Highbury House Communications plc, Highbury Lifestyle Limited and Highbury Entertainment Limited. In the year ended 31 December 2004 turnover for these titles was Â£34.1m and estimated trading profit attributable to these titles was Â£5.3m. This profit is presented before corporate charges, interest and taxation and any financing items which were dealt with on a group basis by Highbury House Communications plc as a whole. As only certain assets and liabilities of the group were acquired, it is not practical to provide any details of post-tax profits or recognised gains or losses for the financial periods pre-acquisition. ii) Other acquisitions During the year, the following business combinations, which were all accounted for as acquisitions, also occurred: a) On 30 November 2004, the acquisition of the title What Laptop in the UK for a consideration of Â£0.7m. b) On 3 December 2004, the acquisition of 100% of the shares of Beach Magazines & Publishing Limited for a consideration of Â£1.5m. c) On 24 January 2005, the acquisition of 100% of the shares of A&S Publishing Company Limited for a consideration of Â£6.0m, plus an additional payment of Â£0.7m in respect of net assets acquired. d) On 26 January 2005, the acquisition of the title Snowboard Journal in the US for a consideration of Â£0.2m. e) On 12 May 2005, the acquisition of the computer games website Cheat Planet for a consideration of Â£4.6m. f) On 16 August 2005, the acquisition of the title Consoles Plus in France for a consideration of Â£0.0m g) On 13 September 2005, the acquisition of the titles The Games Machine and PC Action in Italy for a consideration of Â£2.3m h) In October 2004, the purchase in the UK of a trademark for a consideration of Â£0.2m. In addition, in relation to the acquisition of Beach Magazines and Publishing Limited, there is a deferred element of consideration, up to a maximum of Â£1.5m payable 12 months after the date of purchase, subject to the achievement of certain performance criteria. At 30 September 2005 it is considered unlikely that these criteria will be met and therefore no provision has been made for any payment of deferred consideration. The aggregate provisional fair values of the net assets acquired at the dates of these other acquisitions are shown below: ------------------ -------- --------- --------- ------ -------- Assets and Book value Revalu- Accounting Other Fair liabilities ations policy value acquired alignment Â£m Â£m Â£m Â£m Â£m ------------------ -------- --------- --------- ------ -------- Intangible fixed assets 0.2 - (0.2)1 - - Tangible fixed assets 0.3 (0.2)2 - - 0.1 Stocks 0.4 - (0.2)3 - 0.2 Debtors 1.6 (0.2)5 (0.2)4 - 1.2 Cash at bank and in hand 1.1 - - - 1.1 Bank overdraft (0.3) - - - (0.3) Other creditors (2.6) - - - (2.6) Provisions - - - (0.2)6 (0.2) ------------------ -------- --------- --------- ------ -------- Net assets/(liabilities) acquired 0.7 (0.4) (0.6) (0.2) (0.5) ------------------ -------- --------- --------- ------ -------- Goodwill 17.1 ------------------ -------- --------- --------- ------ -------- Consideration ------------------ -------- --------- --------- ------ -------- Consideration satisfied by: Cash 16.2 Associated costs 0.4 ------------------ -------- --------- --------- ------ -------- Total consideration 16.6 ------------------ -------- --------- --------- ------ -------- Notes: The fair value adjustments comprise: 1. The write off of the capitalised value of publishing rights in line with the Group's accounting policies 2. The revaluation of fixed assets to reflect the market value at the date of acquisition 3. The revaluation of stock in line with the Group's accounting policies 4. An additional provision for advertising debtors in line with the Group's accounting policies 5. The write off of irrecoverable other debtor balances at the date of acquisition 6. A provision of Â£0.2m to reflect onerous employee contracts on the acquisition of Consoles Plus in France. Under French law certain classes of journalists have the right on the change of control of a company to demand favourable redundancy packages for an unlimited period after the change of control. The provision reflects the potential cost of those eligible to claim redundancy and as at 30 September 2005 less than Â£0.1m of the provision remained, with the remainder having been fully utilised. During the last three years, the Group has spent Â£69.2m on acquisitions. In the 12 months to 30 September 2003 the results for these acquired businesses were as follows: ------------- ------ ------- ------- -------- ------ ------- HDP Guitar Guitar Computec Spanish PC Zone World One Homes / CVG Â£m Â£m Â£m Â£m Â£m Â£m ------------- ------ ------- ------- -------- ------ ------- Turnover 2.8 - - - - - ------------- ------ ------- ------- -------- ------ ------- Operating loss before exceptional items and (0.2) - - - - - amortisation of intangible assets ------ ------- ------- -------- ------ ------- ------------- Amortisation of intangible assets (1.0) (0.1) - - - - ------------- ------ ------- ------- -------- ------ ------- Operating loss (1.2) (0.1) - - - - ------------- ------ ------- ------- -------- ------ ------- -------------- ------- --------- -------- -------- -------- What Beach A&S Snowboard Cheat Laptop Magazines Publishing Journal Planet & Company Publishing Limited Limited Â£m Â£m Â£m Â£m Â£m -------------- ------- --------- -------- -------- -------- Turnover - - - - - -------------- ------- --------- -------- -------- -------- Operating profit before and - - - - - amortisation of intangible assets -------------- ------- --------- -------- -------- -------- Amortisation of intangible assets - - - - - -------------- ------- --------- -------- -------- -------- Operating profit - - - - - -------------- ------- --------- -------- -------- -------- -------------- -------- -------- -------- -------- -------- Highbury Consoles The Games Other Total titles Plus Machine Â£m Â£m Â£m Â£m Â£m -------------- -------- -------- -------- -------- -------- Turnover - - - - 2.8 -------------- -------- -------- -------- -------- -------- Operating profit before and amortisation of intangible - - - - (0.2) assets -------- -------- -------- -------- -------- -------------- Amortisation of intangible assets - - - - (1.1) -------------- -------- -------- -------- -------- -------- Operating loss - - - - (1.3) -------------- -------- -------- -------- -------- -------- In the 12 months to 30 September 2004 these acquisitions contributed as follows: ------------- ------- ------ ------- -------- ------ ------- HDP Guitar Guitar Computec Spanish PC Zone World One Homes / CVG Â£m Â£m Â£m Â£m Â£m ------------- ------- ------ ------- -------- ------ ------- Turnover 7.8 7.7 2.3 2.8 0.1 0.1 ------------- ------- ------ ------- -------- ------ ------- Operating profit before and amortisation of intangible assets 0.9 0.6 0.1 0.7 0.1 - ------------- ------- ------ ------- -------- ------ ------- Amortisation of intangible assets (2.4) (2.0) (0.5) (1.0) (0.1) (0.1) ------------- ------- ------ ------- -------- ------ ------- Operating loss (1.5) (1.4) (0.4) (0.3) - (0.1) ------------- ------- ------ ------- -------- ------ ------- -------------- ------- --------- -------- -------- -------- What Beach A&S Snow Cheat Laptop Magazines Publishing board Planet & Company Journal Publishing Limited Limited Â£m Â£m Â£m Â£m Â£m -------------- ------- --------- -------- -------- -------- Turnover - - - - - -------------- ------- --------- -------- -------- -------- Operating profit before and - - - - - amortisation of intangible assets -------------- ------- --------- -------- -------- -------- Amortisation of intangible assets - - - - - -------------- ------- --------- -------- -------- -------- Operating profit - - - - - -------------- ------- --------- -------- -------- -------- -------------- -------- -------- -------- -------- -------- Highbury Consoles The Games Other Total Plus Machine Â£m Â£m Â£m Â£m Â£m -------------- -------- -------- -------- -------- -------- Turnover - - - - 20.8 -------------- -------- -------- -------- -------- -------- Operating profit before and amortisation of - - - - 2.4 intangible assets -------------- -------- -------- -------- -------- -------- Amortisation of intangible assets - - - (0.2) (6.3) -------------- -------- -------- -------- -------- -------- Operating loss - - - (0.2) (3.9) -------------- -------- -------- -------- -------- -------- In the 12 months to 30 September 2005 these acquisitions contributed as follows: ------------- ------- ------ ------- -------- ------ ------- HDP Guitar Guitar Computec Spanish PC Zone World One Homes / CVG Â£m Â£m Â£m Â£m Â£m ------------- ------- ------ ------- -------- ------ ------- Turnover 7.0 9.5 3.8 3.1 0.6 2.1 ------------- ------- ------ ------- -------- ------ ------- Operating profit before exceptional items and amortisation of intangible assets 1.3 1.5 0.2 0.6 - 0.7 ------------- ------- ------ ------- -------- ------ ------- Amortisation and impairment of intangible assets (1.4) (2.1) (0.4) (1.3) (1.5) (0.9) Exceptional items - - - - - - ------------- ------- ------ ------- -------- ------ ------- Operating loss (0.1) (0.6) (0.2) (0.7) (1.5) (0.2) ------------- ------- ------ ------- -------- ------ ------- -------------- ------- --------- -------- -------- -------- What Beach A&S Snow Cheat Laptop Magazines Publishing board Planet & Company Journal Publishing Limited Limited Â£m Â£m Â£m Â£m Â£m -------------- ------- --------- -------- -------- -------- Turnover 0.7 2.9 4.8 0.1 0.3 -------------- ------- --------- -------- -------- -------- Operating profit/(loss) before exceptional items and amortisation of intangible assets 0.3 (0.6) 1.0 (0.3) 0.3 -------------- ------- --------- -------- -------- -------- Amortisation and impairment of intangible assets (0.7) (0.6) (1.4) (0.3) (0.7) Exceptional items - (0.1) (0.8) - - -------------- ------- --------- -------- -------- -------- Operating loss (0.4) (1.3) (1.2) (0.6) (0.4) -------------- ------- --------- -------- -------- -------- -------------- -------- -------- -------- -------- -------- Highbury Consoles The Games Other Total titles Plus Machine Â£m Â£m Â£m Â£m Â£m -------------- -------- -------- -------- -------- -------- Turnover 8.5 0.1 0.3 - 43.8 -------------- -------- -------- -------- -------- -------- Operating profit before exceptional items and amortisation of intangible assets 0.8 - 0.1 - 5.9 -------------- -------- -------- -------- -------- -------- Amortisation and impairment of intangible assets (2.4) - - (0.1) (13.8) Exceptional items (1.5) - - - (2.4) -------------- -------- -------- -------- -------- -------- Operating (loss)/profit (3.1) - 0.1 (0.1) (10.3) -------------- -------- -------- -------- -------- -------- In total, over the three years, the results include the undernoted contribution from acquisitions: ------------- ------- ------- ------- -------- ------- ------- HDP Guitar Guitar One Computec Spanish PC Zone World Homes / CVG Â£m Â£m Â£m Â£m Â£m ------------- ------- ------- ------- -------- ------- ------- Country France US US UK UK UK ------------- ------- ------- ------- -------- ------- ------- Date 28.04.03 10.09.03 31.10.03 21.11.03 02.08.04 23.08.04 acquired ------------- ------- ------- ------- -------- ------- ------- Turnover 17.6 17.2 6.1 5.9 0.7 2.2 ------------- ------- ------- ------- -------- ------- ------- Operating profit before exceptional items and amortisation of intangible assets 2.0 2.1 0.3 1.3 0.1 0.7 ------------- ------- ------- ------- -------- ------- ------- Amortisation and impairment of intangible assets (4.8) (4.2) (0.9) (2.3) (1.6) (1.0) Exceptional items - - - - - - ------------- ------- ------- ------- -------- ------- ------- Operating loss (2.8) (2.1) (0.6) (1.0) (1.5) (0.3) ------------- ------- ------- ------- -------- ------- ------- -------------- ------- --------- -------- -------- -------- What Beach A&S Snow Cheat Laptop Magazines Publishing board Planet & Company Journal Publishing Limited Limited Â£m Â£m Â£m Â£m Â£m -------------- ------- --------- -------- -------- -------- Country UK UK UK US US -------------- ------- --------- -------- -------- -------- Date acquired 31.11.04 03.12.04 24.01.05 26.01.05 12.05.05 -------------- ------- --------- -------- -------- -------- Turnover 0.7 2.9 4.8 0.1 0.3 -------------- ------- --------- -------- -------- -------- Operating profit/(loss) before exceptional items and amortisation of intangible assets 0.3 (0.6) 1.0 (0.3) 0.3 -------------- ------- --------- -------- -------- -------- Amortisation and impairment of intangible assets (0.7) (0.6) (1.4) (0.3) (0.7) Exceptional items - (0.1) (0.8) - - -------------- ------- --------- -------- -------- -------- Operating profit (0.4) (1.3) (1.2) (0.6) (0.4) -------------- ------- --------- -------- -------- -------- -------------- -------- -------- -------- -------- -------- Highbury Consoles The Games Other Total Plus Machine Â£m Â£m Â£m Â£m Â£m -------------- -------- -------- -------- -------- -------- Country UK France Italy - -------------- -------- -------- -------- -------- -------- Date acquired 21.06.05 16.08.05 13.09.05 - -------------- -------- -------- -------- -------- -------- Turnover 8.5 0.1 0.3 - 67.4 -------------- -------- -------- -------- -------- -------- Operating profit before exceptional items and amortisation of intangible assets 0.8 - 0.1 - 8.1 -------------- -------- -------- -------- -------- -------- Amortisation and impairment of intangible assets (2.4) - - (0.3) (21.2) Exceptional items (1.5) - - - (2.4) -------------- -------- -------- -------- -------- -------- Operating (loss)/profit (3.1) - 0.1 (0.3) (15.5) -------------- -------- -------- -------- -------- -------- This information is provided by RNS The company news service from the London Stock Exchange MORE TO FOLLOW FR IFFFFLFLTFIE

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