Interim Results
Future Network PLC
14 September 2004
14 September 2004
THE FUTURE NETWORK PLC
Interim Report 2004
Six months to 30 June 2004
Financial highlights for half-year
Adjusted results *
Turnover £87.1m (2003: £80.6m) Up 8%
Circulation revenue Up 7%
Advertising revenue Up 14%
Adjusted operating profit £7.1m (2003: £6.5m) Up 9%
Adjusted pre-tax profit £7.2m (2003: £6.7m) Up 7%
Adjusted earnings per share 1.7p (2003: 1.4p) Up 21%
Statutory results
Turnover £87.1m (2003: £80.6m) Up 8%
Circulation revenue Up 7%
Advertising revenue Up 14%
Goodwill amortisation £8.4m (2003: £5.6m) Up 50%
Operating loss £1.3m (2003 profit: £0.9m) -
Pre-tax loss £1.2m (2003 profit: £1.1m) -
Loss per share 0.9p (2003: 0.3p) -
Other highlights
> Magazines acquired in 2003 made good progress in the first half of 2004
and have delivered financial returns ahead of plan
> Strengthened position in Games magazine sector. Official Xbox magazine
partnership with Microsoft extended until 2011
> Diversification continues, with entertainment magazines now accounting for
27% (2003: 22%) of Group revenues. Computing titles continue to
face challenging conditions
> Solid first half UK performance. Robert Price appointed as new UK MD in
March 2004
> US business continues strong sales growth and has been confirmed as the
fastest growing publisher at newsstand in 2003.
> Excellent progress achieved in Mainland Europe as the business returns to
profitability
Definitions:
* 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. The only adjustments made are to remove goodwill amortisation.
Greg Ingham, Chief Executive of The Future Network commented:
'The Group has made good progress in the first half of 2004, with solid UK
profits, further strengthening of our position in the US and excellent progress
achieved in Mainland Europe, where the business has returned to profitability.
All the 2003 acquisitions performed well in the period and have delivered
financial returns ahead of plan.
'We were also pleased to report in July 2004 that our partnership with Microsoft
for the worldwide (ex Japan) publication of the Official Xbox Magazine was
extended to 2011. We believe this is one of the longest magazine publishing
contracts ever awarded.
'The continued weakness of the US Dollar and ongoing launch costs for Mobile PC
are holding back profit growth in the US this year. Since the period end we
continue to make progress, with two more bolt-on acquisitions completed, Spanish
Homes Magazine, PC Zone and Computer & Video Games, and plans in place for at
least seven launches in the next twelve months. Future has a strong balance
sheet to support further growth plans.
For further information:
The Future Network plc
Greg Ingham, Chief Executive 01225 442244
John Bowman, Group Finance Director 01225 732281
Hogarth Partnership 020 7357 9477
James Longfield/Georgina Briscoe
Interim Report
Summary
The Group has made good progress in the first half of 2004, with solid UK
profits, further strengthening of our position in the US and excellent progress
achieved in Mainland Europe, where the business has returned to profitability.
All the 2003 acquisitions performed well in the period and have delivered
financial returns ahead of plan.
We were also pleased to report in July 2004 that our partnership with Microsoft
for the worldwide (ex Japan) publication of the Official Xbox Magazine was
extended to 2011. We believe this is one of the longest magazine publishing
contracts ever awarded.
Our business is underpinned by a strong, debt-free balance sheet and the Board
today re-confirms its intention (in the absence of exceptional circumstances) to
declare in December a final-only dividend of 1.25 pence per share.
Financial results for half-year to 30 June 2004
Group turnover was £87.1m, 8% up on 2003 and 13% up in constant currency.
Adjusted operating profit was £7.1m, up 9% on 2003 and represents an adjusted
operating profit margin of 8% (2003: 8%). The impact of adverse currency
movements held back profits by £0.3m. The results also show a goodwill
amortisation charge of £8.4m (2003: £5.6m): the increase arises from 2003
acquisitions. After this non-cash charge, the Group's pre-tax loss was £1.2m
(2003 profit: £1.1m). Adjusted earnings per share were 1.7p (2003: 1.4p), an
increase of 21%.
Dividends
On 24 May 2004 the Group paid its first dividend of 1.25 pence per share. The
Board today re-confirms its intention to recommend a final-only dividend of 1.25
pence per share for the nine months to 30 September 2004, in the absence of
exceptional circumstances.
Magazine portfolio and launch activity
As at 30 June 2004 the Group published 96 monthly special-interest magazines.
The Board expects to commit no more than £2.0m on launches in respect of 2004
net losses (measured at the gross contribution level), of which up to £1.5m is
on Mobile PC in the US, which was launched in January. The top 10 titles in the
period accounted for 33% of Group turnover, and the top 20 for 49%; the
corresponding figures in the year 2001 were 41% and 58% respectively. The
smaller percentages reflect the more broadly-based portfolio now published by
Future.
Performance of 2003 acquisitions
In 2003 we spent £18.2m on four acquisitions in the UK, US and France. In the
six months to June 2004 the acquired titles generated turnover of £10.8m and
adjusted operating profit of £1.2m. This performance is a little ahead of the
Group's expectation and the acquisitions have enhanced earnings.
Analysis of Group pre-tax profit for half-year
----------------------- ----------- ------------ -----------
2004 2003 Change
£m £m £m
----------------------- ----------- ------------ -----------
UK 5.8 6.0 (0.2)
US 1.2 1.9 (0.7)
Mainland Europe 1.4 (0.1) 1.5
Central costs (1.3) (1.3) -
----------------------- ----------- ------------ -----------
Adjusted operating profit 7.1 6.5 0.6
----------------------- ----------- ------------ -----------
Net interest receivable and similar items 0.1 0.2 (0.1)
Sub-total of taxable profit 7.2 6.7 0.5
Goodwill amortisation (non-taxable) (8.4) (5.6) (2.8)
----------------------- ----------- ------------ -----------
Pre-tax (loss) / profit (1.2) 1.1 (2.3)
----------------------- ----------- ------------ -----------
Currency effect on half-year profits
The average value of the Dollar against Sterling weakened by 13%, impacting the
reported results of our US business and also UK exports to the US. The average
value of the Euro against the pound also weakened by 2%. The Group impact of
adverse currency movements held back operating profits by £0.3m.
UK performance in half-year
------------------------------ --------- -------- --------
2004 2003 Change
£m £m %
------------------------------ --------- -------- --------
Circulation revenue 33.2 34.0 (2%)
Advertising revenue 10.1 10.0 1%
Other revenue 2.1 2.0 5%
------------------------------ --------- -------- --------
Turnover 45.4 46.0 (1%)
Adjusted operating profit 5.8 6.0 (3%)
------------------------------ --------- -------- --------
UK adjusted operating profit was £5.8m, representing an adjusted operating
profit margin of 13% (2003: 13%).
In March we appointed Robert Price as UK Managing Director. He has implemented a
number of initiatives to drive growth, with three new Publishing Directors and a
number of other senior staff promoted; a prioritising of title development; and
greater impetus behind launch and acquisition activity. The impact of these
initiatives will start to become apparent during our new financial year.
As previously reported, newsstand sales were slightly soft during January to
March, recovering during the second quarter. Future's UK games titles continued
to out-perform the sector as a whole, with share increasing from 65% to 70% year
on year by volume and from 68% to 73% by value (as measured by retail sales
value).
Strong competitive activity in the first half-year saw both EMAP and IPC
spending heavily to launch weekly men's titles. These are reported to have
almost doubled the volume of men's lifestyle magazines in the UK. Against this
background, our titles held up well, with circulation revenue in the half-year
down by only 2%.
The two titles, PSW and Xbox World, acquired from Computec in November 2003 have
performed well, generating turnover of £1.5m and adjusted operating profit of
£0.3m.
We changed our magazine distributor with effect from 1 May 2004 to Marketforce,
the UK's largest magazine distributor. The new arrangement is working well.
In August, we acquired PC Zone and CVG from Dennis Publishing at a cost of
£2.5m. We also entered two new special-interest sectors with the launch of Hair
Style and Beauty Magazine and the acquisition of Spanish Homes Magazine, for
£1.5m.
Export and licensing activity
UK exports totalled £5.4m (2003: £4.7m). The weakening of the US dollar held
back UK revenues by £0.2m, primarily in computing. International licensing
revenue for the Group was £1.4m, up 8% on 2003.
US performance in half-year
---------------------------- --------- -------- ----------
2004 2003 Change
$m $m %
---------------------------- --------- -------- ----------
Circulation revenue 23.2 16.3 42%
Advertising revenue 18.2 11.7 56%
Other revenue 0.9 1.1 (18%)
---------------------------- --------- -------- ----------
Turnover 42.3 29.1 45%
Adjusted operating profit 2.2 3.1 (29%)
---------------------------- --------- -------- ----------
US adjusted operating profit was $2.2m, representing an adjusted operating
profit margin of 5% (2003: 11%). Average monthly magazine sales of Future's US
portfolio rose 23% to 1,899,898 building on our position as the fastest growing
publisher at newsstand in 2003 (source: Circulation Management magazine).
Revenue growth was led by the acquisition of the US guitar magazines and these
titles generated $9.7m of turnover and $0.8m of adjusted operating profit in the
first half. We have recently added cover-mounted discs to our larger guitar
titles, an innovation new to the US guitar magazine sector but one successfully
pioneered by Future in the UK during the 1990s.
At the gross contribution level the US is stated after losses of $1.4m from
Mobile PC, launched in January.
We were delighted to announce in early July the significant extension to the
Official Xbox Magazine contract with Microsoft. This means that Future has the
exclusive, worldwide rights (excluding Japan) to publish official magazines for
all Microsoft Xbox products until 31 December 2011. For the half-year, copy
sales of Official Xbox Magazine in the US increased 18% on 2003.
Mainland Europe performance in half-year
------------------------------- ---------- ------ ----------
2004 2003 Change
€m €m %
------------------------------- ---------- ------ ----------
Circulation revenue 22.1 18.7 18%
Advertising revenue 6.2 6.1 2%
Other revenue 0.2 0.5 (60%)
------------------------------- ---------- ------ ----------
Turnover 28.5 25.3 13%
Adjusted operating profit 2.1 (0.2) -
------------------------------- ---------- ------ ----------
Substantial progress has been made in Mainland Europe, with an adjusted
operating profit of €2.1m representing an adjusted operating profit margin of 7%
(2003: nil). This result is also stated after intra-group licence fees of €0.7m
(2003: €1.1m).
This excellent progress has been driven by a strong performance in France,
reflecting both improvement in the existing portfolio and the success of the
titles acquired from Hachette in 2003. These titles generated €6.0m of turnover
and €0.5m of adjusted operating profit in the first half, with cost savings in
line with our forecasts.
Our expanded business in France has experienced a good first-half, with the
enlarged business better able to exploit economies of scale. Although our
Italian business is facing a tough competitive market, our operations in
Mainland Europe have achieved significant progress in adjusted operating
profitability.
Group operating profitability as measured by adjusted operating profit
Adjusted operating profit for the period was £7.1m (2003: £6.5m) representing an
adjusted operating profit margin of 8% (2003: 8%). For the calendar year 2003,
the margin achieved was 12%. The business continues to target an adjusted
operating profit margin of 15% in the mid-term.
Tax
The tax charge for the period amounted to £1.6m which represents an effective
tax rate for the half-year of 22% (2003: 31%), ignoring goodwill amortisation,
which has little impact on taxation. During the period, Mainland Europe profits
were effectively tax-free, reflecting the benefit of accumulated tax losses:
this benefit should continue for some years. This rate is similar to the Group's
estimate of the effective tax rate likely to apply to taxable profits for the
financial period ending on 30 September 2004.
Net cash and capital expenditure
The Group started the half-year with net cash of £13.4m and, during the period,
the Group paid out £4.0m in respect of its first dividend, £2.2m in tax, and
£0.8m for capital expenditure. The Group's operations for the half-year resulted
in a net cash outflow from operating activities of £0.6m, reflecting certain
movements in working capital during the period. The Group ended the half-year
with net cash of £6.7m.
Leasehold property
The Group balance sheet contains property provisions totalling £1.0m (December
2003: £1.3m). The Group's only remaining unoccupied property is in the US.
Quarterly performance
The table below provides a quarterly analysis of the pro forma results for the
12 months to September 2003, together with the corresponding quarterly figures
to June 2004.
------------------- --------- ---------- --------- --------- ------
Quarter to Quarter to Quarter to June Quarter to Total
December March September
£m £m £m £m £m
------------------- --------- ---------- --------- --------- ------
Turnover
Year ending 30
September 2003 52.9 38.9 41.7 44.2 177.7
Year ending 30
September 2004 54.7 41.5 45.6 < > < >
Adjusted operating
profit
Year ending 30
September 2003 11.1 3.2 3.3 5.7 23.3
Year ending 30
September 2004 10.3 2.4 4.7 < > < >
------------------ --------- ---------- --------- --------- ------
Change of financial year-end and trading outlook
As previously announced, the Group has changed its financial year-end to
September. Results for the period ending 30 September 2004 will be announced on
7 December. To assist analysis of this change, a quarterly analysis of the
results for the twelve months to 30 September 2003 is set out above. This shows
pro-forma adjusted operating profit of £23.3m on turnover of £177.7m.
Pro-forma figures for the twelve months to 30 September 2004 are expected to
show increased turnover on 2003, with adjusted operating profit slightly lower.
In comparison with the previous year, the quarter to September 2004 will show
the effect of a weaker US dollar; continuing launch costs in the US; and certain
UK re-organisation costs.
Over the last two years Future Network has made significant progress.
Acquisitions made in 2003 in particular are performing well, and a number of
magazine launches have been announced. The Group has a strong balance sheet to
support further growth plans.
Roger Parry, non-executive Chairman
Greg Ingham, Chief Executive
John Bowman, Group Finance Director
Michael Penington, senior independent non-executive Director
Patrick Taylor, independent non-executive Director
Lisa Gordon, independent non-executive Director
John Mellon, independent non-executive Director
14 September 2004
Analysis of turnover for half-year to 30 June
------------- ------- ----------- ------------- -----------
% of 2004 2003 Change
Group £m £m %
------------- ------- ----------- ------------- -----------
UK 52% 45.4 46.0 Down 1%
US 26% 23.2 18.1 Up 28%
Mainland Europe 22% 19.2 17.4 Up 10%
Intra-group - (0.7) (0.9) -
------------- ------- ----------- ------------- -----------
Group turnover 100% 87.1 80.6 Up 8%
------------- ------- ----------- ------------- -----------
In constant currencies the half year turnover is shown below:
------------- ------- ----------- ------------- -----------
% of 2004 2003 Change
Group £m £m %
------------- ------- ----------- ------------- -----------
UK 50% 45.6 46.0 Down 1%
US 29% 26.3 18.1 Up 45%
Mainland Europe 21% 19.5 17.4 Up 12%
Intra-group - (0.7) (0.9) -
------------- ------- ----------- ------------- -----------
Group turnover 100% 90.7 80.6 Up 13%
------------- ------- ----------- ------------- -----------
Analysis of results by segment
The table below analyses the Group's turnover for the six months to 30 June 2004
by segment.
Proportion of Group UK US Mainland Europe Group
------------------- -------- ----------- --------- ----------
Games 17% 13% 12% 42%
Computing 14% 7% 10% 31%
Entertainment 21% 6% - 27%
------------------- -------- ----------- --------- ----------
Total 52% 26% 22% 100%
------------------- -------- ----------- --------- ----------
The table below shows the profitability of each business segment, in terms of
their profitability (measured at the gross contribution level) as a proportion
of turnover.
Profitability (gross UK US Mainland Europe Profitability
contribution as a proportion of segment
of turnover)
------------------- -------- ----------- --------- ----------
Games 28% 21% 21% 23%
Computing 26% 10% 28% 24%
Entertainment 25% 22% - 24%
------------------- -------- ----------- --------- ----------
Profitability by
territory 26% 18% 24% 24%
------------------- -------- ----------- --------- ----------
Group profit and loss account
for the six months ended 30 June 2004
-------------- -------------- --------- -------- -------- --------
6 months to 30 6 months to 30 12 months to 31
June 2004 June 2003 December
2003
Note £m £m £m
------------- ------------- --------- --------- --------- ----------
Turnover 1 87.1 80.6 182.7
Operating
profit --------- --------- ----------
Operating 7.1 6.5 22.5
profit before
amortisation
of intangible
assets
Amortisation
of intangible
assets 2,7 (8.4) (5.6) (13.0)
--------- --------- ----------
------------- ------------- -------- --------- --------- ----------
Operating
(loss)/ profit 2 (1.3) 0.9 9.5
Profit on
disposal of
fixed asset
investments - - 0.1
------------- ------------- -------- --------- --------- ----------
(Loss)/profit
on ordinary
activities
before
interest (1.3) 0.9 9.6
Net interest
receivable and
similar items 4 0.1 0.2 0.1
------------- ------------- -------- --------- --------- ----------
(Loss)/profit
on ordinary
activities
before tax 1 (1.2) 1.1 9.7
Tax on profit
on ordinary
activities 5 (1.6) (2.1) (7.0)
------------- ------------- -------- --------- --------- ----------
(Loss)/profit
for the
financial
period 15 (2.8) (1.0) 2.7
------------- ------------- -------- --------- --------- ----------
Dividend
proposed - - (4.0)
------------- ------------- -------- --------- --------- ----------
Retained
(loss)/profit
for the
financial
period (2.8) (1.0) (1.3)
------------- ------------- -------- --------- --------- ----------
Earnings per 1 pence Ordinary share
-------------------------- --------- -------- -------- --------
6 months to 30 6 months to 30 12 months to 31
June 2004 June 2003 December 2003
pence pence pence
-------------------------- --------- -------- -------- --------
Basic
(loss)/earning
s per share 6 (0.9) (0.3) 0.8
Adjusted basic
earnings per
share 6 1.7 1.4 4.9
Diluted
(loss)/earning
s per share 6 (0.9) (0.3) 0.8
Adjusted
diluted
earnings per
share 6 1.7 1.4 4.8
-------------------------- --------- -------- -------- --------
Group statement of total recognised gains and losses
for the six months ended 30 June 2004
------------------------------- ------- --------- --------- ----------
6 months to 30 6 months to 30 12 months to 31
June 2004 June 2003 December 2003
Note £m £m £m
------------------------------- ------- --------- --------- ----------
(Loss)/profit
for the period 15 (2.8) (1.0) 2.7
Dividend
proposed - - (4.0)
------------------------- ------- --------- --------- ----------
Retained loss
for the period 15 (2.8) (1.0) (1.3)
Net exchange
adjustments
offset in
reserves 15 (0.4) 0.6 0.8
Tax on
exchange
adjustments
offset in
reserves 15 - 0.1 0.1
------------------------- ------- --------- --------- ----------
Total
recognised
loss relating
to the period (3.2) (0.3) (0.4)
------------------------- ------- --------- --------- ----------
Group reconciliation of movements in shareholders' funds
for the six months ended 30 June 2004
------------------------------ ------- ------- ------- -------
6 months to 30 6 months to 30 12 months to 31
June 2004 June 2003 December2003
Note £m £m £m
------------------------------ ------- ------- ------- -------
(Loss)/profit
for the period 15 (2.8) (1.0) 2.7
Dividend
proposed - - (4.0)
------------------------------ ------- ------- ------- -------
Retained
(loss) for the
period (2.8) (1.0) (1.3)
Premium on
shares issued
during the
period 15 0.5 0.1 0.3
Net exchange
adjustments
offset in
reserves 15 (0.4) 0.6 0.8
Tax on
exchange
adjustments
offset in
reserves 15 - 0.1 0.1
Write-off of
pre
acquisition
loan 15 1.0 - -
------------------------------ ------- ------- ------- -------
Net movement in
shareholders'
funds (1.7) (0.2) (0.1)
Opening equity
shareholders'
funds 111.9 112.0 112.0
------------------------------ ------- ------- ------- -------
Equity
shareholders'
funds as at
end of period 110.2 111.8 111.9
------------------------------ ------- ------- ------- -------
Group balance sheet
as at 30 June 2004
------------------------- --------- --------- --------- ---------
30 June 2004 30 June 2003 31 December
2003
Note £m £m £m
------------------------- --------- --------- --------- ---------
Fixed assets
Intangible assets 7 108.3 108.6 117.3
Tangible assets 8 3.5 3.6 3.3
------------------------ --------- --------- --------- ---------
111.8 112.2 120.6
Current assets
Stocks 9 4.4 4.0 3.5
Debtors 10 37.5 32.8 42.4
Investments 11 - 14.0 8.8
Cash at bank and in hand 11.9 5.1 11.3
------------------------ --------- --------- --------- ---------
53.8 55.9 66.0
Creditors: amounts falling
due within one year 12 (54.2) (53.9) (73.0)
------------------------ --------- --------- --------- ---------
Net current
(liabilities)/assets (0.4) 2.0 (7.0)
------------------------ --------- --------- --------- ---------
------------------------ --------- --------- --------- ---------
Total assets less current
liabilities 111.4 114.2 113.6
------------------------ --------- --------- --------- ---------
Provisions for liabilities
and charges 13 (1.2) (2.4) (1.7)
------------------------ --------- --------- --------- ---------
Net assets 110.2 111.8 111.9
------------------------ --------- --------- --------- ---------
Capital and reserves
Called-up share capital 14 3.2 3.2 3.2
Share premium account 15 23.5 - 0.2
Merger reserve 15 109.0 109.0 109.0
Other reserves 15 - 21.8 21.8
Profit and loss account 15 (25.5) (22.2) (22.3)
------------------------ --------- --------- --------- ---------
Equity shareholders' funds 110.2 111.8 111.9
------------------------ --------- --------- --------- ---------
Group cash flow statement
for the six months ended 30 June 2004
--------------------------- ------ --------- --------- ---------
6 months to 30 6 months to 30 12 months to 31
June 2004 June 2003 December 2003
Note £m £m £m
--------------------------- ------ --------- --------- ---------
Net cash
(outflow)
/inflow from
operating
activities A (0.6) 9.4 22.6
--------------------------- ------ --------- --------- ---------
Returns on investments and
servicing of finance
Interest
received 0.4 0.7 0.6
Interest paid (0.1) - (0.4)
--------------------------- ------ --------- --------- ---------
Net cash
inflow from
returns on
investments
and servicing
of finance 0.3 0.7 0.2
--------------------------- ------ --------- --------- ---------
Tax
Tax paid (2.9) (4.3) (8.2)
Tax received 0.7 - 1.5
--------------------------- ------ --------- --------- ---------
Net tax paid (2.2) (4.3) (6.7)
--------------------------- ------ --------- --------- ---------
Capital expenditure and
financial investment
Purchase of
tangible fixed
assets (0.8) (0.8) (1.4)
Sale of fixed
asset
investments - - 0.1
--------------------------- ------ --------- --------- ---------
Net cash
(outflow) from
capital
expenditure
and financial
investment (0.8) (0.8) (1.3)
--------------------------- ------ --------- --------- ---------
Acquisitions and
disposals
Purchase of
subsidiary
undertakings - (3.6) (7.0)
Net cash
acquired with
subsidiary
undertakings - 0.5 0.5
Purchase of
magazine
titles - - (11.8)
Purchase of
subscription
lists - (0.1) (0.1)
Payment of
deferred
consideration (0.7) (0.7) (0.7)
--------------------------- ------ --------- --------- ---------
Net cash
(outflow) for
acquisitions
and disposals (0.7) (3.9) (19.1)
--------------------------- ------ --------- --------- ---------
Management of liquid
resources
Decrease/(Incr
ease) in short
term deposits
with bank 8.8 (7.9) (2.6)
--------------------------- ------ --------- --------- ---------
Net cash
inflow/(outflo
w) in
management of
liquid
resources 8.8 (7.9) (2.6)
--------------------------- ------ --------- --------- ---------
Dividends
--------------------------- ------ --------- --------- ---------
Equity
dividends paid (4.0) - -
--------------------------- ------ --------- --------- ---------
Net cash
inflow/
(outflow)
before
financing 0.8 (6.8) (6.9)
--------------------------- ------ --------- --------- ---------
Financing
Proceeds from
issue of
Ordinary share
capital 0.5 0.1 0.3
Draw down of
bank loans - - 6.3
Movement in
other loan (0.2) - (0.1)
Repayment of
bank loans (0.3) - (0.6)
--------------------------- ------ --------- --------- ---------
Net cash
inflow from
financing - 0.1 5.9
--------------------------- ------ --------- --------- ---------
Increase/(Decr
ease) in cash
in the period 0.8 (6.7) (1.0)
--------------------------- ------ --------- --------- ---------
Notes to the Group cash flow statement
for the six months ended 30 June 2004
A. Cash flow from operating activities
The reconciliation of operating profit to net cash (outflow)/inflow from
operating activities is as follows:
------------------------------ --------- --------- ---------
6 months to 30 6 months to 30 12 months to 31
June 2004 June 2003 December 2003
£m £m £m
------------------------------ --------- --------- ---------
Operating
(loss)/ profit (1.3) 0.9 9.5
Depreciation
charge 0.6 0.6 1.4
Amortisation
of intangible
assets 8.4 5.6 13.0
Movement in
provisions (0.6) (1.3) (1.7)
(Increase)/dec
rease in
stocks (1.4) (0.2) 0.2
Decrease/(incr
ease) in
debtors 5.7 3.2 (7.5)
(Decrease)/inc
rease in
creditors (12.0) 0.6 7.7
------------------------------ --------- --------- ---------
Net cash
(outflow)/infl
ow from
operating
activities (0.6) 9.4 22.6
------------------------------ --------- --------- ---------
B. Analysis of net cash
------------- -------- ----------- ------- -------- -------------
At 1 January Cash flow Other non-cash Exchange At 30 June 2004
changes movements
2004 £m £m £m £m
£m
------------ --------- ---------- --------- -------- -------------
Cash at bank
and in hand 11.3 0.8 - (0.2) 11.9
Debt due
within one
year (6.7) 0.5 1.0 - (5.2)
Liquid
resources 8.8 (8.8) - - -
------------ --------- ---------- --------- -------- -------------
Net cash 13.4 (7.5) 1.0 (0.2) 6.7
------------ --------- ---------- --------- -------- -------------
C. Reconciliation of movement in net cash
--------------------------------- -------- -------- --------
6 months to 30 6 months to 30 12 months to 31
June 2004 June 2003 December 2003
£m £m £m
--------------------------------- -------- -------- --------
Net cash at
start of
period 13.4 16.8 16.8
Increase/(decr
ease) in cash 0.8 (6.7) (1.0)
Movement in
deposits (8.8) 7.8 2.6
Movement in
borrowings 0.5 - (5.6)
Non-cash
movements 1.0 - -
Exchange
movements (0.2) (0.6) 0.6
--------------------------------- -------- -------- --------
Net cash at
end of period 6.7 17.3 13.4
--------------------------------- -------- -------- --------
Accounting policies
Basis of preparation of accounts
The results for the six months ended 30 June 2004 and 2003 are unaudited. The
figures for the year ended 31 December 2003 are taken from the statutory
accounts of The Future Network plc that have been delivered to the Registrar of
Companies and upon which an unqualified audit report was given. The Interim
report does not constitute statutory accounts as defined in section 240 of the
Companies Act 1985. The accounting policies are as stated on pages 52 and 53 of
the 2003 Annual Report.
International Financial Reporting Standards (IFRS) will apply for the first time
to the Group's financial statements for the year ending 30 September 2006. As
discussed in the 2003 Annual Report on page 26, the Group is planning carefully
for the introduction of IFRS and will continue to monitor applicable
developments in this area.
Notes to the financial statements
1. Segmental reporting
The Group is involved in one class of business, the publication of magazines.
The analysis of turnover by category, geographical analyses of turnover and
profit/(loss) before tax by origin were as follows:
a) Turnover by type
--------------------- --------- ---------- -----------
6 months to 30 6 months to 12 months to
June 2004
£m 30 June 2003 31 December
2003
£m £m
--------------------- --------- ---------- -----------
Circulation 60.8 56.8 125.5
Advertising 24.3 21.4 53.0
Other 2.0 2.4 4.2
--------------------- --------- ---------- -----------
Total 87.1 80.6 182.7
--------------------- --------- ---------- -----------
b) Turnover by origin
--------------------- --------- ---------- -----------
6 months to 6 months to 12 months to
31December 2003
30 June 2004 30 June 2003 £m
£m £m
--------------------- --------- ---------- -----------
United Kingdom 45.4 46.0 100.3
United States 23.2 18.1 46.2
Mainland Europe 19.2 17.4 38.6
Turnover between
segments (0.7) (0.9) (2.4)
--------------------- --------- ---------- -----------
Total 87.1 80.6 182.7
--------------------- --------- ---------- -----------
c) Turnover by destination
--------------------- --------- ---------- -----------
6 months to 6 months to 12 months to
30 June 2004 30 June 2003 31 December 2003
£m £m £m
--------------------- --------- ---------- -----------
United Kingdom 37.4 39.4 83.5
United States 24.0 18.6 47.5
Mainland Europe 22.1 19.8 44.9
Rest of the world 4.3 3.7 9.2
Turnover between
segments (0.7) (0.9) (2.4)
--------------------- --------- ---------- -----------
Total 87.1 80.6 182.7
--------------------- --------- ---------- -----------
d) (Loss)/profit before tax by origin
--------------------- --------- ---------- -----------
6 months to 6 months to 12 months to
30 June 2004 30 June 2003 31December 2003
£m £m £m
--------------------- --------- ---------- -----------
United Kingdom 2.5 3.5 12.4
United States (1.5) 0.5 4.1
Mainland Europe (1.0) (1.6) (3.3)
Central costs (1.2) (1.3) (3.5)
--------------------- --------- ---------- -----------
Total (1.2) 1.1 9.7
--------------------- --------- ---------- -----------
2. Operating profit
--------------------- --------- ---------- -----------
6 months to 6 months to 12 months to
30 June 2004 30 June 2003 31December 2003
£m £m £m
--------------------- --------- ---------- -----------
Turnover 87.1 80.6 182.7
Cost of sales (60.2) (55.3) (116.0)
--------------------- --------- ---------- -----------
Gross profit 26.9 25.3 66.7
Distribution expenses (6.6) (5.1) (12.0)
--------- ---------- -----------
Administration expenses (13.2) (13.7) (32.2)
Amortisation of intangible
assets (8.4) (5.6) (13.0)
--------- ---------- -----------
Total administration expenses (21.6) (19.3) (45.2)
--------------------- --------- ---------- -----------
Operating (loss)/profit (1.3) 0.9 9.5
--------------------- --------- ---------- -----------
3. Staff Costs
--------------------- --------- ---------- -----------
6 months to 6 months to 12 months to
30 June 2004 30 June 2003 31December 2003
£m £m £m
--------------------- --------- ---------- -----------
Wages and salaries 16.5 14.4 31.2
Social security costs 2.8 2.6 5.3
Other pension costs 0.4 0.4 0.7
--------------------- --------- ---------- -----------
Total 19.7 17.4 37.2
--------------------- --------- ---------- -----------
4. Net interest receivable and similar items
----------------------- -------- --------- ----------
6 months to 6 months to 12 months to
30 June 2004 30 June 2003 31December 2003
£m £m £m
----------------------- -------- --------- ----------
Interest payable on bank loans
and overdrafts (0.2) (0.1) (0.2)
Other interest payable - - (0.2)
Amortisation of discount
relating to property
provisions - (0.1) (0.1)
Amortisation of discount
arising on fair valuing of
deferred consideration - - (0.1)
----------------------- -------- --------- ----------
Total interest payable and
similar charges (0.2) (0.2) (0.6)
Interest receivable 0.4 0.3 0.6
Exchange (losses)/gains (0.1) 0.1 0.1
----------------------- -------- --------- ----------
Total interest receivable and
similar items 0.3 0.4 0.7
----------------------- -------- --------- ----------
Net interest receivable and
similar items 0.1 0.2 0.1
----------------------- -------- --------- ----------
5. Tax on profit on ordinary activities
The tax charge for the six months ended 30 June 2004 is based on the estimated
effective rate of tax for the full year. The effective rate is assessed on a
country by country basis and is applied to the profit before tax and
amortisation.
6. Earnings per share
Basic earnings per share are calculated using the weighted average number of
Ordinary shares outstanding during the period. Diluted earnings per share have
been calculated by taking into account the dilutive effect of 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 of
intangible assets from the calculation as follows:
Adjustments to profit on ordinary activities after tax
---------------------- --------- --------- -----------
6 months to 6 months to 12 months to
30 June 2004 30 June 2003 31December2003
£m £m £m
---------------------- --------- --------- -----------
(Loss)/profit on ordinary
activities after tax (2.8) (1.0) 2.7
Add: amortisation of intangible
assets 8.4 5.6 13.0
---------------------- --------- --------- -----------
Adjusted profit on ordinary
activities after tax 5.6 4.6 15.7
---------------------- --------- --------- -----------
6 months to 30 6 months to 30 12 months to 31
June 2004 June 2003 December 2003
---------------------- --------- --------- -----------
Weighted average number of shares
outstanding during the period:
- basic 323,332,909 321,257,747 321,564,888
- dilutive
effect of
share options 803,481 1,590,681 1,453,980
- diluted 324,136,390 322,848,428 323,018,868
Basic
(loss)/earning
s per share
(in pence) (0.9) (0.3) 0.8
Adjusted basic
earnings per
share (in
pence) 1.7 1.4 4.9
Diluted
(loss)/earning
s per share
(in pence) (0.9) (0.3) 0.8
Adjusted
diluted
earnings per
share (in
pence) 1.7 1.4 4.8
---------------------- --------- --------- -----------
The share options do not have a dilutive effect where there is a loss.
The adjustments to profit have the following effects on EPS:
---------------------- --------- --------- -----------
6 months to 6 months to 12 months to
30 June 2004 30 June 2003 31December 2003
pence pence pence
---------------------- --------- --------- -----------
Basic (loss)/earnings per
share (0.9) (0.3) 0.8
Amortisation of intangible
assets 2.6 1.7 4.1
---------------------- --------- --------- -----------
Adjusted basic earnings per
share 1.7 1.4 4.9
---------------------- --------- --------- -----------
Diluted (loss)/earnings per
share (0.9) (0.3) 0.8
Amortisation of intangible
assets 2.6 1.7 4.0
---------------------- --------- --------- -----------
Adjusted diluted earnings per
share 1.7 1.4 4.8
---------------------- --------- --------- -----------
7. Intangible fixed assets
--------------------------------------- -----------
Group Goodwill
£m
--------------------------------------- -----------
Cost
At 1 January 2004 321.3
Additions -
Adjustments to fair value 0.1
Exchange adjustments (1.3)
--------------------------------------- -----------
At 30 June 2004 320.1
--------------------------------------- -----------
--------------------------------------- -----------
Amortisation
At 1 January 2004 (204.0)
Charge for the year (8.4)
Exchange adjustments 0.6
--------------------------------------- -----------
At 30 June 2004 (211.8)
--------------------------------------- -----------
Net book amount at 30 June 2004 108.3
--------------------------------------- -----------
Net book amount at 31 December 2003 117.3
--------------------------------------- -----------
8. Tangible fixed assets
-------------- ------------ ----------- ------------- -------
Land and Plant and Equipment, Total
buildings machinery fixtures and
fittings
£m £m £m £m
-------------- ------------ ----------- ------------- -------
Cost
At 1 January
2004 2.2 6.1 1.2 9.5
Reclassificati
on 0.1 0.5 (0.6) -
Additions 0.1 0.5 0.1 0.7
Disposals (0.1) (0.6) 0.6 (0.1)
Exchange adjustments - - - -
-------------- ------------ ----------- ------------- -------
At 30 June
2004 2.3 6.5 1.3 10.1
-------------- ------------ ----------- ------------- -------
-------------- ------------ ----------- ------------- -------
Depreciation
At 1 January 2004 (0.7) (4.5) (1.0) (6.2)
Reclassification - (0.5) 0.5 -
Charge for the year (0.1) (0.5) - (0.6)
Disposals 0.1 0.5 - 0.6
Exchange adjustments - 0.1 (0.5) (0.4)
-------------- ------------ ----------- ------------- -------
At 30 June 2004 (0.7) (4.9) (1.0) (6.6)
-------------- ------------ ----------- ------------- -------
-------------- ------------ ----------- ------------- -------
Net book value at 30 June 2004 1.6 1.6 0.3 3.5
-------------- ------------ ----------- ------------- -------
Net book value at 31 December
2003 1.5 1.6 0.2 3.3
-------------- ------------ ----------- ------------- -------
9. Stock
----------------------- --------- ---------- -----------
30 June 2004 30 June 2003 31 December
2003
£m £m £m
----------------------- --------- ---------- -----------
Raw materials 1.5 1.6 1.2
Work in progress 2.5 2.2 2.2
Finished goods 0.4 0.2 0.1
----------------------- --------- ---------- -----------
Total 4.4 4.0 3.5
----------------------- --------- ---------- -----------
10. Debtors
----------------------- --------- ---------- -----------
30 June 2004 30 June 2003 31 December
2003
£m £m £m
----------------------- --------- ---------- -----------
Amounts falling due within one year:
Trade debtors 30.0 22.9 34.1
Corporation tax recoverable 0.9 2.5 1.6
Other debtors 3.2 3.6 3.3
Prepayments and accrued
income 3.2 3.1 2.5
----------------------- --------- ---------- -----------
37.3 32.1 41.5
Amounts falling due after more than
one year:
Other debtors 0.2 0.7 0.9
----------------------- --------- ---------- -----------
Total 37.5 32.8 42.4
----------------------- --------- ---------- -----------
At 30 June 2004 a deferred tax asset has been recognised within other debtors as
follows:
----------------------- --------- ---------- -----------
30 June 2004 30 June 2003 31 December
2003
£m £m £m
----------------------- --------- ---------- -----------
Amounts falling due within
one year 0.6 0.9 0.4
Amounts falling due after
more than one year 0.7 0.7 0.9
----------------------- --------- ---------- -----------
Total 1.3 1.6 1.3
----------------------- --------- ---------- -----------
11. Current asset investments
----------------------- --------- ---------- ------------
30 June 2004 30 June 2003 31 December
2003
£m £m £m
----------------------- --------- ---------- ------------
Short-term bank deposits - 14.0 8.8
----------------------- --------- ---------- ------------
Total - 14.0 8.8
----------------------- --------- ---------- ------------
12. Creditors: amounts falling due within one year
----------------------- --------- ---------- -----------
30 June 2004 30 June 2003 31 December
2003
£m £m £m
----------------------- --------- ---------- -----------
Bank and other borrowings 5.2 1.8 6.7
Trade creditors 15.2 15.7 20.5
Corporation tax 1.4 1.5 2.7
Other creditors including
taxation and social security 9.2 7.5 10.5
Accruals and deferred income 23.2 26.7 27.9
Proposed dividends - - 4.0
Deferred consideration for
acquisitions - 0.7 0.7
----------------------- --------- ---------- -----------
Total 54.2 53.9 73.0
----------------------- --------- ---------- -----------
13. Provisions for liabilities and charges
------------------ ----------- ------------- -----------
Property and Restructuring Total
dilapidations
£m £m £m
------------------ ----------- ------------- -----------
At 1 January 2004 1.3 0.4 1.7
Adjustments to fair value - 0.1 0.1
Utilised in period (0.3) (0.3) (0.6)
------------------ ----------- ------------- -----------
At 30 June 2004 1.0 0.2 1.2
------------------ ----------- ------------- -----------
14. Called up share capital
----------------------------------------- ---------
Authorised share capital £m
Ordinary shares of 1 pence each
----------------------------------------- ---------
At 1 January and 30 June 2004 6.0
----------------------------------------- ---------
---------------------------------- --------- ---------
Allotted, issued and fully paid
Ordinary shares of 1 pence each No. of Shares £m
---------------------------------- --------- ---------
At 1 January 2004 322,487,585 3.2
Share options exercised 1,457,255 -
---------------------------------- --------- ---------
At 30 June 2004 323,944,840 3.2
---------------------------------- --------- ---------
15. Capital and reserves
------------- --------- -------- -------- ------- ---------- -----
Called up share Share premium Merger reserve Other reserves Profit and loss Total
capital account account
£m £m £m £m £m £m
------------- --------- -------- -------- ------- ---------- ------
At 1 January
2004 3.2 0.2 109.0 21.8 (22.3) 111.9
Net exchange
adjustments
offset in
reserves - - - - (0.4) (0.4)
Premium on
exercise of
share options - 0.5 - - - 0.5
Write off
pre-acquisitio
n loan - 1.0 - - - 1.0
Transfer of
premium on
share options
exercised 21.8 - (21.8) - -
Retained
profit for the
period - - - - (2.8) (2.8)
------------- --------- -------- -------- ------- ---------- ------
At 30 June
2004 3.2 23.5 109.0 - (25.5) 110.2
------------- --------- -------- -------- ------- ---------- ------
During the period there has been a transfer of £21.8m from other reserves to the
share premium account. This amount represents the premium on shares issued
pursuant to the exercise of share options granted as part of the consideration
for the 1999 acquisition of the US business. All such options have now been
fully exercised and accordingly the total premium has been transferred to the
share premium account.
In addition, a related pre-acquisition loan has been released to the share
premium account in accordance with the US acquisition agreement.
This information is provided by RNS
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