Final Results

Informa PLC 14 March 2006 14 March 2006 Informa plc STRONG PERFORMANCE DRIVEN BY GOOD ORGANIC GROWTH AND ACQUISITION OF IIR Highlights of 2005 2005 2004 Reported Organic Â£m Â£m Growth Growth(1) Turnover 729.3 449.8 62% 6% Adjusted operating profit(2) 147.3 95.4 54% 13% Operating profit 91.4 62.3 47% Adjusted profit before tax(3) 115.4 79.6 45% Profit before tax 61.0 43.0 42% Adjusted diluted earnings per share 22.2p 21.0p 6% Diluted earnings per share 2.8p 25.3p (89)% â€¢ Good organic growth demonstrates strength of portfolio â€¢ Excellent cash conversion at 113% of adjusted operating profit â€¢ Strong performance and encouraging prospects support recommended total annual dividend increase of 20% to 8.7p â€¢ 2004 merger delivers revenue and cost savings â€¢ Acquisition of IIR extends product and geographic reach â€¢ Focus on exploiting organic growth opportunities within enlarged business â€¢ Confident of prospects for 2006 Commenting on the Group's performance, Peter Rigby, CEO of Informa said: 'These results reflect the successful integration of Informa and Taylor & Francis and in the last year the acquisition of IIR, all under-pinned by solid organic growth. Our information provision activities are well focused on publishing, events and performance improvement and we have been able to capitalise on a range of new opportunities in our specialist sectors. Reflecting the performance and encouraging prospects of the Group we are recommending a 20% increase in the total annual dividend. 'In 2006, we expect to continue to develop the new revenue and profit opportunities that the enlarged Group brings. The current year has started well, with trading across the Group in line with our expectations and as a result we are confident of meeting our targets and delivering another good financial performance in 2006.' (1) Excluding currency impacts and acquisitions made in 2005 (which contributed Â£196.2m to turnover and Â£32.3m to adjusted operating profit) while including the results of Taylor & Francis from 1 January 2004 - 10 May 2004 (turnover Â£54.4m and adjusted operating profit Â£9.2m, after eliminating restructuring costs of Â£0.7m and goodwill and intangible asset amortisation of Â£5.0m). (2) Excluding restructuring costs of Â£8.3m (2004: Â£9.3m), intangible asset amortisation of Â£47.6m (2004: Â£8.8m) and goodwill impairment of Â£nil (2004: Â£15.0m). See Note 4 to the preliminary financial statements. (3) Excluding restructuring costs of Â£8.3m (2004: Â£9.3m), intangible asset amortisation of Â£47.6m (2004: Â£8.8m), goodwill impairment of Â£nil (2004: Â£15.0m), non-operating income and expense of Â£nil (2004: Â£1.1m) and finance (income)/costs of Â£(1.6m) (2004: Â£2.4m). See Note 4 to the preliminary financial statements. Enquiries: Informa plc Tel: 020 7017 5000 Peter Rigby, Chief Executive David Gilbertson, Managing Director Tony Foye, Finance Director Financial Dynamics Tel: 020 7831 3113 Tim Spratt / Charles Palmer Chief Executive's Review Introduction The Group traded strongly in 2005 benefiting from good organic growth and an encouraging first six months contribution from IIR which was acquired on 6 July 2005. Turnover for the year ended 31 December 2005 increased by 62% to Â£729.3m and operating profit by 47% to Â£91.4m, largely as a result of the six months' contribution from IIR and a full year's contribution from Taylor & Francis. Adjusted operating profit increased by 54% to Â£147.3m. Turnover, excluding acquisitions made in 2005 and currency impacts, increased organically by 6% on a fully comparable basis. Adjusted operating profit growth on the same organic basis was 13%. In recognition of the Group's performance and its encouraging prospects, the Board is pleased to recommend a significant increase in the dividend. The total 2005 dividend will grow from 7.26p per share paid in respect of 2004 (after adjusting for the July 2005 Rights Issue) to 8.70p payable in respect of 2005, an increase of 20%. Informa plc was formed from the merger between Taylor & Francis Group plc (Taylor & Francis) and Informa Group plc on 10 May 2004. Under International Financial Reporting Standards (IFRS) this transaction is accounted for as an acquisition and accordingly the comparative 2004 results shown in these preliminary financial statements only include the Taylor & Francis contribution from 10 May 2004, making comparison between 2005 and 2004 difficult. To assist comparability, reference is made in this statement to 'organic' results, which include the Taylor & Francis results from 1 January 2004 in the comparative 2004 figures. The reported 2005 results include IIR from 6 July 2005, the date of its acquisition. Since it was acquired IIR contributed Â£192.5m to turnover and Â£31.7m to adjusted operating profit. 'Organic' results exclude the contribution from IIR to both turnover and adjusted operating profit. Acquisitions IIR produced excellent results in its first period with the Group, reporting turnover of Â£192.5m and adjusted operating profit of Â£31.7m. A number of smaller acquisitions of products and businesses contributed a further Â£3.7m to turnover and Â£0.6m to adjusted operating profit. IIR's Performance Improvement business, which is a new area for the Group, contributed turnover of Â£106.2m and adjusted operating profit of Â£17.6m. Another significant area of contribution was in Regional Events, where IIR contributed Â£60.1m to turnover and Â£8.9m to adjusted operating profit. The addition of IIR significantly extends the Group's events presence and fully complements our pre-existing business, with little or no duplication. Through the combination with IIR we have significantly strengthened our geographic reach and vertical market positions. Illustratively we now have critical mass in international financial events and geographically, in the Middle East, through our market leading position in the United Arab Emirates. The IIR Performance Improvement (PI) businesses, with their respected brands, strong market positions, and good cash generation, give the Group a substantial position in an attractive new market which offers strong recurring revenue streams and exciting growth prospects. The PI businesses, which are built around specialist proprietary intellectual property, follow a similar model to the other Informa businesses. This has facilitated their integration into the Group and we are encouraged by the opportunities this new business brings. We are pursuing a number of initiatives to drive synergies between our PI businesses and publishing operations. We have successfully executed a detailed 90 day integration plan for the IIR businesses. All the key IIR senior management have been retained and we are pleased with their high calibre, the cultural fit between the organisations, the progress to date and the prospects for the combined business. Merger Update The merger of Informa with Taylor & Francis was completed on 10 May 2004. New product development resulting from the merger continues to proceed to plan and we estimate that we have achieved Â£9m of incremental revenue in 2005 through a combination of new products and the increased sale of existing products driven by improved marketing access. This revenue benefited not only the Academic & Scientific division in terms of additional events and advertising revenue but also businesses such as Finance, Insurance, Law & Tax and Telecoms, through the launch of new publications. Â£9m of cost savings were also achieved in 2005 from the merger. Outlook The Group's strategy of combining organic growth with selective acquisitions has led to considerable growth over the last 18 months, initially through the merger of Taylor & Francis and Informa and now through the acquisition of IIR. The enlarged Group has a strong, well branded portfolio with leading positions in its selected market sectors. The focus for 2006 is to continue to exploit the opportunities arising from these transactions - developing new product revenue streams and capitalising on the Group's broader geographic presence. 2006 has started well across the three divisions and in line with our expectations, with our academic books unit, Middle East based events and Performance Improvement businesses reporting particularly strong trading. As a result, we are confident of meeting our targets and delivering another good financial performance in 2006. Divisional Performance Academic & Scientific Division The Academic & Scientific division comprises two segments: â€¢ Scientific, Technical and Medical (STM) and â€¢ Humanities & Social Sciences (HSS). 2005 2004 Reported Organic increase increase Â£'m Â£'m % % Turnover STM 161.8 121.7 33 2 HSS 98.7 67.8 46 7 260.5 189.5 37 4 Adjusted operating profit Adjusted Organic increase increase % % STM 43.0 36.0 19 10 HSS 22.5 16.5 36 9 65.5 52.5 25 10 Adjusted operating margin % 25.1 27.7 Under IFRS the business combination between Taylor & Francis and Informa is treated for accounting purposes as an acquisition of Taylor & Francis by Informa from the transaction date of 10 May 2004. As a consequence, the financial results of Taylor & Francis prior to this date are excluded from the 2004 comparative figures shown above. Turnover for this excluded period was Â£54.4m, and adjusted operating profit was Â£9.2m. For comparative purposes we have shown in the 'Organic' column the growth adjusting for acquisitions, discontinued businesses and currency effects, while treating Taylor & Francis as if it were part of the Group from 1 January 2004. Acquisitions contributed Â£9.6m to the STM business' reported turnover and Â£1m to its adjusted operating profit in 2005. IIR contributed Â£5.9m to the division's revenue and Â£0.4m to its adjusted operating profit since acquisition. A solid STM journal performance was offset by a marginal reduction in book sales to academic bookshops. Within STM, the Pharmaceutical Information business achieved an encouraging growth in profitability as a result of investments in new products, including written courses, awards and directories. The business saw an increase in overall revenue and improved margins, with the flagship products Scrip and Pharmaprojects at the centre of this growth. The inaugural Scrip Awards, held in December 2005, were a sell-out. The HSS business saw good organic growth, with journal subscription renewals at or above the levels of recent years and good content growth in a number of our leading journals. Routledge academic books, the main imprint of Taylor & Francis in the HSS subject areas, encountered the same challenges seen in the STM books business. The division's academic journals subscription business remained resilient, showing an overall increase in organic revenue of 7.5%. During the year a number of new journal sales models were introduced to supplement the existing successful single subscription model, aimed at building sustainable on-line revenues. We also launched Informa World, our own platform, which we developed to store, process, sell and distribute on-line the Group's digital content. Initially Informa World will contain academic on-line information only, but this will be expanded to include more of the Group's content during 2006 and beyond. We had a successful year for new journal titles and have acquired or are launching an additional 64 titles for 2006 and a further 12 titles are already in hand for 2007. Technological developments in automated manuscript processing and print-on-demand are helping us to drive efficiencies in the books production process and reduce levels of physical inventory. We now have nearly 6,000 titles available in print-on-demand format, out of a total catalogue of more than 40,000 titles. As part of a continued focus on the growth potential offered by developing countries, the Academic & Scientific division has opened a new office in Beijing to drive sales of its products in China and a new company has been established in India to develop local publishing initiatives. Professional Division The Professional division includes our US-led Financial Data Analysis businesses together with our specialist publishing and event products for finance, insurance, legal and tax professionals. The Performance Improvement businesses acquired with IIR are also included here. 2005 2004 Reported Organic increase increase Â£'m Â£'m % % Turnover Financial Data Analysis 60.8 60.2 1 1 Finance, Insurance Law & Tax 50.8 33.1 53 6 Performance Improvement 106.2 - 100 - 217.8 93.3 133 3 Adjusted Organic Adjusted operating profit increase increase % % Financial Data Analysis 17.9 15.9 13 13 Finance, Insurance Law & Tax 9.9 5.3 86 23 Performance Improvement 17.6 - 100 - 45.4 21.2 114 14 Adjusted operating margin % 20.8 22.7 The Professional division's reported turnover was up 133% and adjusted operating profit up 114%. The acquisition of the Performance Improvement businesses materially enhanced the overall growth, although underlying performance was also good, with 3% and 14% organic growth achieved in turnover and adjusted operating profit, respectively. IIR contributed Â£122.0m to the division's revenue and Â£21.2m to its adjusted operating profit since acquisition. The Informa Financial Data Analysis businesses continued to leverage their strong positions in the fixed income, credit and currency analysis markets. Both businesses in this area, Informa Global Markets and International Insider, performed strongly in 2005 and we are well positioned to take advantage of investments we have made in IT infrastructure and new products. Market conditions improved within the money fund industry in the second half of the year and the iMoneyNet business continued to grow. Its new product, Analyzer, launched early in 2005, was well received by the industry and provides improved, flexible analysis. The Finance, Insurance, Law & Tax business had an excellent year supported by good growth in advertising and sponsorship revenue. Subscription revenues grew as a result of on-line product developments throughout 2005, with electronic revenues up 35% on the prior year, and the launch of www.i-law.com, a new integrated on-line service aimed at practitioners in the niche sectors of maritime, insurance, construction and intellectual property law. In 2005 we established a new distance learning business which already has 20 courses in the Finance, Insurance, Law & Tax areas and which moved into profit in its first year. IIR, with its strong portfolio of events, particularly in investment banking, contributed Â£15.8m to the Finance, Insurance, Law & Tax business' turnover and Â£3.4m to its operating profit. The Performance Improvement business traded at the high end of our expectations throughout the post-acquisition period. Comparing the 12 months ended 31 December 2005 to the twelve months ended 31 December 2004 and excluding the contribution of Robbins Gioia, acquired in July 2004, from both periods, the PI business' revenue grew by 9% and adjusted operating profit by 13%. All seven of the individual PI business units grew over the prior year, with particularly encouraging results from Robbins Gioia, the largest of the PI businesses, with some 90% of its revenues generated from US government contracts, and from ESI, the project management specialists, which had a record year. Commercial Division The Commercial division comprises our Regional Events and the multi-format, market-facing businesses, Telecoms & Media and Maritime & Commodities. 2005 2004 Reported Organic increase Increase Â£'m Â£'m % % Turnover Regional Events 143.1 71.7 99 15 Telecoms & Media 48.4 37.7 28 17 Maritime & Commodities 59.5 57.6 3 3 251.0 167.0 50 12 Adjusted operating profit Adjusted Organic increase increase % % Regional Events 18.6 8.4 121 15 Telecoms & Media 12.0 8.6 40 26 Maritime & Commodities 5.8 4.7 23 23 36.4 21.7 68 21 Adjusted operating margin % 14.5 13.0 The Commercial division's turnover was up 50% and adjusted operating profit up 68%. Overall margins improved across the division and were helped by the addition of higher margin, predominantly large scale events from IIR. IIR contributed Â£64.6m to the division's revenue and Â£10.1m to its adjusted operating profit since acquisition. Our Regional Events, comprising domestic language conferences, exhibitions and courses, had an outstanding year benefiting from general improvements in economic conditions. The acquired IIR business also contributed strongly to the businesses' performance. Regional Events' organic revenue and adjusted operating profit both grew by 15%. The key drivers were a 17% increase in delegate numbers and a 10% rise in the number of events staged. Germany, the largest of the Regional Events business units, saw 19% growth in organic revenue, while The Netherlands, the second largest events business in this group, showed an increase of 28%. Scandinavia, Brazil and Australia also achieved encouraging growth. However, our French business sustained continued losses and with no prospect of a turnaround we closed this operation. The markets served by our Telecoms & Media business continued to rebound strongly and the unit reported a 17% increase in organic turnover and a 26% improvement in organic adjusted operating profit. New mobile technologies are providing the business with significant opportunities for new product development from events to a range of publications, including textbooks, with 30 new titles set for publication in 2006. Telecoms event output more than doubled over 2004 and sector coverage was enhanced still further by the complementary IIR telecoms events. We have developed the premier mobile telecoms events in some of the fastest growing territories across the world, including Africa, Asia, the Middle East, Central and Eastern Europe, Russia, India and the Americas. The annual 3GSM World Congress which has been held in Cannes for the last 10 years was successfully transferred to Barcelona in February 2006. The Maritime & Commodities businesses, which encompass the leading daily newspaper Lloyd's List, and Agra, our commodities business, grew turnover and adjusted operating profit organically by 3% and 23%, respectively. The Maritime business enjoyed sustained growth in training programmes including distance learning, classroom courses and bespoke training development, while the Commodities business performed particularly well in events, especially in the growing renewable fuels sector. Financial Review The Group's annual results are reported under IFRS for the first time in these preliminary financial statements. Under IFRS accounting the Group reported an increase in turnover of 62%, to Â£729.3m from Â£449.8m. The reported 2005 results include Â£196.2m in turnover from acquisitions made during the year. Currency had little impact on turnover in 2005 compared to 2004. Reported operating profit increased by 47% to Â£91.4m from Â£62.3m, with acquisitions contributing Â£3m (inclusive of Â£29.3m amortisation of intangible assets). Adjusted operating profit, which is presented after removing non-recurring and non-trading items and amortisation, increased by 54% to Â£147.3m from Â£95.4m. Within operating costs amortisation increased from Â£9.6m to Â£49.8m, reflecting the impact of increases in intangible assets resulting from acquisitions in 2005. Finance Costs Finance costs increased to Â£36.2m from Â£20.5m, driven by increased debt associated with acquisitions and increased pension scheme interest costs. In connection with the acquisition of IIR, the Group's debt facilities have been increased to Â£965m. Taxation Following a detailed review of the impact of the introduction of IFRS, the Board has resolved to write-off deferred tax assets of Â£35.2m, resulting in a distorted effective tax rate of 82%. However, the underlying tax rate, was 25% (2004: 27%), benefiting from a combination of the utilisation of operating losses generated in the US and from profits generated by IIR in relatively low tax jurisdictions. Earnings Per Share Adjusted diluted earnings per share, which is stated after removing non-recurring and non-trading items and amortisation, increased by 6% to 22.18p from 20.97p. The increase in adjusted diluted EPS has been adversely affected by the requirement under IFRS to use acquisition accounting for the combination of Informa with Taylor & Francis, whereby the financial results of Taylor & Francis from 1 January to 10 May 2004 have been excluded from the 2004 comparative figures. The result of this was to unevenly distribute reported profits to the post-acquisition period in 2004. Adjusted diluted EPS in 2005 was also affected by the issue of 120m ordinary shares in July 2005 in support of the acquisition of IIR. Mainly as a result of the write-off of the deferred tax asset referred to above, basic EPS from continuing operations decreased to 2.76p (2004: 25.47p) and diluted EPS from continuing operations decreased to 2.75p (2004: 25.30p). Dividend In recognition of the Group's performance and its encouraging prospects, the Directors have recommended a significant increase to the total annual dividend. The Directors have declared a final dividend of 6.00p per ordinary share (2004: 4.76p after adjusting for the Rights Issue in July 2005). This dividend is payable on 30 May 2006 to ordinary shareholders registered as of the close of business on 28 April 2006. Total dividends declared in respect of 2005 are 8.70p which represents an increase of 20% on 2004 of 7.26p (after adjusting for the July 2005 Rights Issue). Balance Sheet Goodwill increased by Â£520.4m to Â£1,123.4m and other intangible assets by Â£454.7m to Â£935.7m, mainly as a result of the acquisition of IIR. The Group has net pension scheme liabilities of Â£17.7m in respect of defined benefit retirement schemes. The pension scheme liabilities mainly relate to UK-based entities. Net debt increased by Â£433.5m to Â£735.4m, mainly due to Â£812.8m spent on acquisitions, offset by Â£311m raised in the Rights Issue. Share capital and the share premium account increased as a result of the Rights Issue. The deferred tax liability at 31 December 2005 increased by Â£138.5m to Â£240.4m, largely due to the provision of Â£146.5m arising on acquired intangible assets in the year. Trade debtors, trade and other payables and deferred income increased largely due to acquisitions made in the year, reflecting the greater scale of the Group's operations. Cash flow The Group again demonstrated excellent cash generation from operations, with a conversion ratio of 113% of adjusted operating profit into cash (2004: 112%). Overall the Group has negative working capital requirements and relatively low capital expenditure. P Rigby Chief Executive 13 March 2006 Consolidated Income Statement For the Year Ended 31 December 2005 Year ended Year ended 2004 2005 Note Â£'000 Â£'000 Continuing operations Revenue 2 729,280 449,845 Change in inventories of finished goods and work in progress 3,091 4,447 Raw materials and consumables used (239,360) (150,028) Employee benefit expense (210,710) (139,954) Depreciation expense (8,175) (7,059) Amortisation of intangible fixed assets (49,755) (9,620) Goodwill impairment - (15,000) Other expenses (132,953) (70,292) Operating profit 4 91,418 62,339 Non-operating income and expense (28) (1,118) Finance costs 5 (36,247) (20,534) Investment income 5 5,902 2,308 Profit before tax 61,045 42,995 Deferred tax adjustment (released) / recognised on UK (35,224) 35,386 restructuring Other tax (15,054) (8,545) Tax 6 (50,278) 26,841 Profit for the year from continuing operations 10,767 69,836 Discontinued operations Loss for the year from discontinued operations (1,885) - Profit for the year 8,882 69,836 Attributable to: - Equity holders of the parent 8,825 69,862 - Minority interests 57 (26) Earnings per share 8 From continuing operations - Basic (p) 2.76 25.47 - Diluted (p) 2.75 25.30 From continuing and discontinued operations - Basic (p) 2.27 25.47 - Diluted (p) 2.26 25.30 Consolidated Statement of Recognised Income and Expense For the Year Ended 31 December 2005 Year ended Year ended 2004 2005 Â£'000 Â£'000 Actuarial losses on defined benefit pension schemes (3,766) (2,935) Exchange differences on translation of foreign operations 4,367 (6,800) Cash flow hedges: gains taken to equity 3,789 - Tax on items taken directly to equity (3,752) 881 Profit for the year 8,882 69,836 Total recognised income and expense for the year 9,520 60,982 9,463 61,008 Attributable to: - Equity holders of the parent - Minority interests 57 (26) Change in accounting policy to adopt IAS 32 and IAS 39 Attributable to: - Equity holders of the parent (5,948) - - Minority interests - - Consolidated Balance Sheet At 31 December 2005 2005 2004 Note Â£'000 Â£'000 ASSETS Non-current assets Goodwill 1,123,418 603,023 Other intangible assets 935,687 481,024 Property and equipment 22,868 21,479 Available for sale investments 10,279 10,605 Deferred tax assets 13,106 40,098 2,105,358 1,156,229 Current assets Trade and other receivables 187,699 98,213 Inventory 31,138 27,535 Cash and cash equivalents 20,654 19,126 239,491 144,874 Non-current assets classified as held for sale 4,574 5,924 Total assets 2,349,423 1,307,027 EQUITY AND LIABILITIES Capital and reserves Called up share capital 9 42,152 29,946 Share premium account 9 496,826 192,097 Reserve for shares to be issued 9 1,124 1,647 Merger reserve 9 496,400 496,400 Other reserve 9 37,398 37,398 ESOP trust shares 9 (3,334) (4,731) Hedging and translation reserve 9 408 (6,800) Retained losses 9 (145,096) (114,132) Equity attributable to equity holders of parent 925,878 631,825 Minority interests 110 53 Total equity 925,988 631,878 Non-current liabilities Long-term borrowings 692,500 305,721 Deferred tax liabilities 240,431 101,901 Retirement benefit obligation 17,729 22,535 Provisions 1,847 53 Trade and other payables 4,852 465 957,359 430,675 Current liabilities Short-term borrowings 63,521 15,346 Current tax liabilities 58,620 23,141 Provisions 2,014 607 Trade and other payables 154,476 81,019 Deferred income 187,445 124,361 466,076 244,474 Total liabilities 1,423,435 675,149 Total equity and liabilities 2,349,423 1,307,027 Consolidated Cash Flow Statement For the Year Ended 31 December 2005 Year ended Year ended 2005 2004 Note Â£'000 Â£'000 Operating activities Cash generated by operations 11 160,929 91,942 Income taxes paid (12,231) (9,419) Interest element of finance lease payments (1) (2) Interest paid (32,921) (15,029) Net cash from operating activities 115,776 67,492 Investing activities Investment income 4,708 2,308 Proceeds on disposal of trading investments - 11 Proceeds on disposal of property and equipment 200 3,220 Purchases of intangible software assets (5,605) - Purchases of property and equipment (9,511) (8,484) Purchases of available for sale investments (89) (1,427) Acquisition of subsidiaries and businesses (812,787) (22,063) Net cash used in investing activities (823,084) (26,435) Financing activities Dividends paid (27,271) (15,822) Repayments of borrowings (617,287) (285,981) New bank loans raised 1,035,914 263,316 Repayments of obligations under finance leases (23) (40) Proceeds from the issue of share capital 316,935 3,412 Net cash from / (used in) financing activities 708,268 (35,115) Net increase in cash and cash equivalents 960 5,942 Cash and cash equivalents at beginning of year 15,125 9,183 Cash and cash equivalents at end of year 16,085 15,125 Notes to the Consolidated Financial Statements For the Year Ended 31 December 2005 1 Basis of Preparation The financial information set out in the preliminary announcement does not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985, but is derived from those accounts. While the financial information in this preliminary announcement has been prepared in accordance with International Financial Reporting (IFRS), this announcement does not itself contain sufficient information to comply with IFRS. The IFRS accounting policies applied in respect of the current and prior years have previously been disclosed in the Group's Interim Report for the six months ended 30 June 2005. Statutory accounts for the year ended 31 December 2004 have been delivered to the Registrar of Companies and those for the year ended 31 December 2005 will be delivered following the Company's Annual General Meeting. The statutory accounts for the year ended 31 December 2005 will be despatched to shareholders by 13 April for approval at the Annual General Meeting on 16 May 2006. The auditors have reported on those accounts - their reports were unqualified and did not contain statements under Section 237(2) or (3) of the Companies Act 1985. 2 Business and Geographical Segments Analysis by market sector Revenue Operating profit / (loss) 2005 2004 2005 2004 Â£'000 Â£'000 Â£'000 Â£'000 Academic & Scientific Division Scientific, Technical & Medical 161,747 121,737 28,059 24,881 Humanities & Social Sciences 98,790 67,754 14,889 9,546 260,537 189,491 42,948 34,427 Professional Division Financial Data Analysis 60,767 60,212 17,074 15,908 Finance, Insurance, Law & Tax 50,813 33,136 5,085 1,099 Performance Improvement 106,179 - 5,508 - 217,759 93,348 27,667 17,007 Commercial Division Regional Events 143,066 71,732 12,845 8,406 Telecoms & Media 48,441 37,695 2,352 8,010 Maritime & Commodities 59,477 57,579 5,606 (5,511) 250,984 167,006 20,803 10,905 Total from continuing operations 729,280 449,845 91,418 62,339 Adjusted operating profit (Note 4) 2005 2004 Â£'000 Â£'000 Academic & Scientific Division Scientific, Technical & Medical 42,997 35,985 Humanities & Social Sciences 22,466 16,508 65,463 52,493 Professional Division Financial Data Analysis 17,938 15,908 Finance, Insurance, Law & Tax 9,860 5,311 Performance Improvement 17,613 - 45,411 21,219 Commercial Division Regional Events 18,622 8,406 Telecoms & Media 12,011 8,648 Maritime & Commodities 5,822 4,639 36,455 21,693 Adjusted operating profit 147,329 95,405 Geographical segments The following table provides an analysis of the Group's sales by geographical market, irrespective of the origin of the goods/services: Sales revenue by geographical market 2005 2004 Â£'000 Â£'000 United Kingdom 116,225 86,558 North America 277,180 142,364 Continental Europe 211,869 147,612 Rest of World 124,006 73,311 729,280 449,845 3 Restructuring Costs The acquisitions of IIR Holdings Limited in July 2005 and Taylor & Francis Group plc in May 2004 led to the re-organisation of the Group, particularly in relation to the merging of back office functions. To the extent that employees could not be redeployed, termination terms were agreed. In 2005, there were also costs associated with Board level changes and Â£1,008,000 of vacant property costs which relate to a dormant overseas subsidiary and additional provisions in respect of the 2004 US books reorganisation. 2005 2004 Â£'000 Â£'000 Board level changes 1,200 - Acquisition and integration 6,069 9,285 Vacant property 1,008 - 8,277 9,285 In the year ended 31 December 2005, acquisition and integration costs comprise reorganisation costs of Â£3,436,000, redundancies of Â£2,126,000 and vacant property provisions of Â£507,000. These items are included in the other expenses line on the Income Statement, except for the Board level changes and other redundancies which are included in employee benefit expense. Restructuring and re-organisation costs of Â£9,285,000 in the year ended 31 December 2004 consist of costs of re-organising book publications operations in the UK and US of Â£4,200,000, redundancy costs of Â£3,657,000, property move costs of Â£763,000 and other re-organisation costs of Â£665,000. 4 Adjusted Figures - Continuing Operations 2005 2004 Â£'000 Â£'000 Reconciliation of operating profit to adjusted operating profit: Operating profit 91,418 62,339 Adjusting operating profit items Restructuring costs (Note 3) 8,277 9,285 Intangible asset amortisation(1) 47,634 8,781 Goodwill impairment - 15,000 Adjusting operating profit items 55,911 33,066 Adjusted operating profit 147,329 95,405 Reconciliation of profit before tax to adjusted profit before tax: Profit before tax 61,045 42,995 Adjusting operating profit items 55,911 33,066 Non-operating income and expense(2) Loss on disposal of fixed assets - 921 Loss on sale of businesses - (3) Impairment of other investment - 200 - 1,118 Finance costs and investment income Gain on exchange contract (3,426) - Bank facility fees written off on acquisition of business 1,827 2,415 (1,599) 2,415 Adjusting profit before tax items 54,312 36,599 Adjusted profit before tax 115,357 79,594 Reconciliation of profit for the year to adjusted profit for the year - from continuing operations: Profit for the period from continuing operations 10,767 69,836 Adjusted profit before tax items 54,312 36,599 Deferred tax adjustment released / (recognised) on UK restructuring 35,224 (35,386) Prior year tax adjustments - (6,964) Attributable tax expense on adjusting items (13,802) (6,188) 21,422 (48,538) Adjusting profit items for the year 75,734 (11,939) Adjusted profit for the year from continuing operations 86,501 57,897 (1)Excludes software amortisation (2)An amount of Â£28,000 is shown on the Income Statement in 2005 under non-operating income and expenses, which relates to the retranslation of certain short-term balances within an acquisition, but has been excluded from the above adjusted analysis. 5 Finance Costs and Investment Income 2005 2004 Â£'000 Â£'000 Interest on bank overdrafts and loans 31,728 15,979 Bank loan facility fees expensed on business combination* 1,827 2,415 Finance lease charges 1 3 Interest on pension scheme liabilities 2,691 2,137 Finance Costs 36,247 20,534 *On 6 July 2005, further facilities expired on the acquisition of IIR Holdings Limited and the unamortised element of the related fees was written off at that date. On 10 May 2004, certain bank facilities available to Taylor & Francis Group plc and Informa Group plc expired on the business combination. The unamortised element of the related fees was written off at that date. 2005 2004 Â£'000 Â£'000 Interest on bank deposits 269 1,117 Gain on exchange contract 3,426 - Return on pension scheme assets 1,999 1,191 Profit on disposal of non-current assets classified as held for sale 208 - Investment Income 5,902 2,308 6 Tax The tax charge comprises: Continuing operations Discontinued operations Total 2005 2004 2005 2004 2005 2004 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Current tax: UK corporation tax 18,912 8,116 - - 18,912 8,116 Foreign tax 4,863 8,325 8 - 3,457 8,325 Adjustments in respect of prior years - (6,964) - - 1,414 (6,964) 23,775 9,477 8 - 23,783 9,477 Deferred tax: Current year (8,729) (932) - - (8,729) (932) Recognition of deferred tax asset 35,224 (35,386) - - 35,224 (35,386) Total tax on profit on ordinary 50,270 (26,841) 8 - 50,278 (26,841) activities Corporation tax is calculated at 30 per cent (2004: 30 per cent) of the estimated assessable profit for the year. Taxation for other jurisdictions is calculated at the rates prevailing in the relevant jurisdictions. The total charge for the year can be reconciled to the accounting profit as follows: 2005 2004 Â£'000 % Â£'000 % Profit before taxation: Continuing operations 61,045 42,995 Discontinuing operations (1,885) - 59,160 42,995 Tax at the UK corporation tax rate of 30% (2004: 30%) 17,748 30 12,899 30 Prior year adjustments - - (6,964) (16) Tax effect of expenses that are not deductible in determining 7,418 12 2,595 6 taxable profit Foreign exchange not previously recognised - - (130) - Effect of different tax rates of subsidiaries operating in other (3,716) (6) 1,422 3 jurisdictions Deferred tax not previously recognised (6,396) (11) (1,343) (3) Deferred tax asset 35,224 60 (35,386) (82) Other - - 66 - Tax expense and effective rate for the year 50,278 85 (26,841) (62) On the transfer of the trade and assets of PJB Publications Limited to T&F Informa UK Limited on 1 September 2004, a deferred tax asset of Â£35,386,000 was recognised, with a resultant credit to the Income Statement. While management still believes this to be recoverable this cannot be said to be certain. The balance of Â£35,224,000 has therefore been charged to the Income Statement during the year. Of the charge to current tax, approximately Â£8,000 (2004: Â£nil) related to discontinued operations arising in the Regional Events business, which was disposed of during the year. No tax charge or credit arose on the disposal of the relevant subsidiary. In addition to the income tax expense charged to the income statement, a deferred tax credit of Â£3,752,000, of which Â£3,808,000 relates to current tax and Â£(55,000) relates to deferred tax (2004: Â£nil), has been recognised in equity during the year. 7 Dividends 2005 2004 Â£'000 Â£'000 Amounts recognised as distributions to equity holders in the year: Final dividend for the year ended 31 December 2003 of 4.94p - 7,480 per share (ex-rights issue 4.41p) Interim dividend for the year ended 31 December 2004 of 2.80p - 8,342 per share (ex-rights issue 2.50p) Final dividend for the year ended 31 December 2004 of 5.33p 15,926 - per share (ex-rights issue 4.76p) Interim dividend for the year ended 31 December 2005 of 2.70p 11,345 - per share (ex-rights issue 2.41p) 27,271 15,822 Proposed final dividend for the year ended 31 December 2005 25,292 15,926 of 6.00p (2004: 5.33p ex-rights issue 4.76p) per share Holders of 635,617 ordinary shares of 10p each have waived their rights to receive dividends. The proposed final dividend is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these financial statements. 8 Earnings per Share Basic The basic earnings per share calculation is based on a profit attributable to equity shareholders of the parent of Â£8,825,000 (2004 profit: Â£69,862,000). This profit on ordinary activities after taxation is divided by the weighted average number of shares in issue (less those non-vested shares held by employee share ownership trusts) which is 388,230,732 (2004: 274,319,229*). Diluted The diluted earnings per share calculation is based on the basic earnings per share calculation above except that the weighted average number of shares includes all potentially dilutive options granted by the Balance Sheet date as if those options had been exercised on the first day of the accounting period or the date of the grant, if later, giving a weighted average of 390,003,685 (2004: 276,104,452). In 2004, in accordance with IAS 33 the weighted average number of shares includes the estimated maximum number of shares payable to the vendors of Routledge Publishing Holdings Limited. This liability was settled in cash during 2005. The table below sets out the adjustment in respect of diluted potential ordinary shares: 2005 2004* Weighted average number of shares used in basic earnings per share 388,230,732 274,319,229 calculation Effect of dilutive share options 1,772,953 1,449,594 Shares potentially to be issued or allotted - 335,629 Weighted average number of shares used in diluted earnings per share 390,003,685 276,104,452 calculation *The weighted average number of shares at 31 December 2004 has been adjusted for the effects of the rights issue at 25 July 2005 Adjusted earnings per share The basic and diluted adjusted earnings per share calculations have been made to allow shareholders to gain a further understanding of the trading performance of the Group. It is based on the basic and diluted earnings per share calculations above except that profits are based on continuing operations only, before minority interests, and are adjusted for items that are not perceived by management to be part of the underlying trends in the business and the tax effect of those adjusting items as follows: 2005 2004 Â£'000 Â£'000 Profit for the year from continuing operations 10,767 69,836 Adjusting items net of attributable taxation (Note 4) 75,734 (11,939) Adjusted profit for the period after taxation from 86,501 57,897 continuing operations Earnings per share: From continuing operations - Adjusted basic (p) 22.28 21.11 - Adjusted diluted (p) 22.18 20.97 9 Reserves Reserve for Shares to be Issued ESOP Hedging and Trust Translation Share Share Â£'000 Merger Other Shares Reserve Retained Capital Premium Reserve Reserve Losses Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 At 1 January 2004 15,195 184,494 - - 37,399 (3,641) - (166,118) Recognised income and expense - - - - - - - 67,808 Exchange differences on translation of foreign operations - - - - - - (6,800) - Acquisition of subsidiary - 4,342 1,267 496,400 - - - - Dividends to shareholders - - - - - - - (15,822) Share award issue - - - - - (3,269) - - Share award expense - - 380 - - 2,179 - - Issue of share capital 14,634 - - - - - - - Premium arising on options exercised during year 117 3,261 - - (1) - - - At 31 December 2004 29,946 192,097 1,647 496,400 37,398 (4,731) (6,800) (114,132) Implementation of IAS 39 - - - - - - (948) (5,000) At 1 January 2005 29,946 192,097 1,647 496,400 37,398 (4,731) (7,748) (119,132) Recognised income and expense in the year - - - - - - - 1,307 Exchange differences on translation of foreign operations - - - - - - 4,367 - Increase in fair value hedging of derivatives - - - - - - 3,373 - Transfer to income - - - - - - 416 - Issue of share capital (net of Â£7,095,000 transaction costs) 12,030 299,657 - - - - - - Dividends to shareholders - - - - - - - (27,271) Share award expense - - 744 - - 1,397 - - Options exercised 176 - - - - - - - Premium arising on options exercised during year - 5,072 - - - - - - Settlement of deferred consideration - - (1,267) - - - - - At 31 December 2005 42,152 496,826 1,124 496,400 37,398 (3,334) 408 (145,096) The Reserve for Shares to be Issued at 31 December 2004 includes Â£1,267,000 of deferred consideration payable to the vendors of Routledge Publishing Holdings Limited if no claims are made against warranties given on the sale of that company. The balance was settled in cash during 2005. As at 31 December 2005 the Informa Employee Share Trust held 632,775 (2004: 632,775) ordinary shares in the Company at a cost of Â£3,641,000 (2004: Â£3,641,000) (market value Â£2,744,000). Informa Quest Ltd held 2,842 (2004: 171,285) ordinary shares at a book cost of Â£nil (2004: Â£nil) (market value Â£12,000). The Taylor & Francis Group Employee Benefit Trust held nil (2004: 935,279) ordinary shares at a book cost of Â£nil (2004: Â£1,090,000). These shares have not yet been allocated to individuals and accordingly, dividends on these shares have been waived. At 31 December 2005 the Group held 0.2% (2004: 0.6%) of its own called up share capital. 10 Acquisition of IIR Holdings Ltd On 6 July 2005, the Group acquired 100% of the issued share capital of IIR Holdings Ltd for a cash consideration of Â£793,731,000. Net assets acquired Book value Accounting policy Fair value Fair value adjustments adjustments* Â£'000 Â£'000 Â£'000 Â£'000 Property and equipment 3,086 - - 3,086 Trade and other receivables 78,547 - (4,068) 74,479 Inventory 1,232 - - 1,232 Cash and cash equivalents 15,780 - - 15,780 Deferred tax assets 7,103 - 202 7,305 Trade and other payables (48,627) - (3,761) (52,388) Deferred income (48,192) - - (48,192) Deferred tax liability - (143,370) - (143,370) Current tax liabilities (14,674) - (8,081) (22,755) (5,745) (143,370) (15,708) (164,823) Intangible assets - - 474,345 474,345 Net assets 309,522 Provisional goodwill 484,209 Total consideration 793,731 Satisfied by: Cash 789,056 Directly attributable costs 4,675 793,731 Net cash outflow arising on acquisition: Cash consideration 793,731 Cash and cash equivalents acquired (15,780) 777,951 Provisional goodwill of Â£484,209,000 represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired, and is partially deductible for tax purposes. The goodwill arising on the acquisition is attributable to the anticipated profitability of IIR Holdings Limited's products and services in existing and new markets as they added to the Group's existing range. *The book value of the assets and liabilities of IIR Holdings Limited have been adjusted to fair value in accordance with IFRS 3. These fair value adjustments include the expensing of deferred promotional expenditure of Â£4,068,000, provision for vacant properties and other onerous contracts Â£3,085,000, provision for a defined pension deficit of Â£675,000 and provision for taxes at source of Â£8,081,000. IIR generated revenues of Â£192,470,000 and net income (based on assumed tax rate of 30%) of Â£23,923,000 in the post acquisition period from 6 July 2005 to 31 December 2005. The results of IIR Holdings Limited are spread across all sectors except Humanities & Social Sciences. If the acquisition of IIR had taken place on the first day of the financial year, Group revenues for the period would have been Â£192,830,000 higher and the Group profit after tax attributable to Equity shareholders would have been Â£23,523,000 higher. In total, including IIR for the whole year would have contributed revenue of Â£385,300,000 and adjusted operating profit of Â£64,100,000. 11 Notes to the Cash Flow Statement 2005 2004 Â£'000 Â£'000 Operating profit - continuing operations 91,418 62,339 Discontinued operations (1,885) - Profit from operations 89,533 62,339 Adjustments for: Depreciation of property and equipment 8,175 7,059 Amortisation of intangible assets 49,755 9,620 Impairment of goodwill - 15,000 Loss / (gain) on disposal of property and 100 (92) equipment Operating cash flows before movements in working capital 147,563 93,926 (Increase)/decrease in inventories (2,421) 500 Increase in receivables (5,637) (7,381) Increase in payables 19,451 3,347 Movement in other operating items 1,973 1,550 Cash generated by operations 160,929 91,942 Cash and cash equivalents (which are presented as a single class of assets on the face of the balance sheet) comprise cash at bank and other short-term highly liquid investments with a maturity of three months or less. Adjusted Cash Generated by Operations 2005 2004 Â£'000 Â£'000 Adjusted operating profit (Note 4) 147,329 95,405 Cash generated by operations 160,929 91,942 Restructuring costs 8,277 9,285 Adjusting items on a cash flow basis 169,206 101,227 Accrued in prior year 2,500 8,000 Accrued at year end (4,426) (2,500) Adjusted cash generated by operations 167,280 106,727 2005 2004 % % Percentage of adjusted operating profit converted to adjusted cash 113 112 generated by operations Analysis of Net Debt At 1 Non-cash Cash Exchange At 31 January items flow movement December 2005 2005 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Cash at bank and in hand 19,126 - 1,528 - 20,654 Overdrafts (4,001) - (568) - (4,569) Net cash 15,125 - 960 - 16,085 Bank loans due in less than one year (5,156) (5,192) (48,313) 2 (58,659) Loan notes due in less than one year (6,189) - 5,896 - (293) Bank loans due in more than one year (305,721) 2,594 (376,211) (13,162) (692,500) Finance leases due in less than one year (29) (17) 23 - (23) Finance leases due in more than one year (17) (3) - - (20) (301,987) (2,618) (417,645) (13,160) (735,410) Pro Forma Information The following section contains the pro forma results of Informa including Taylor & Francis and IIR from 1 January 2004 as if these businesses were part of the Group from that date. These results are un-audited and provided for information only. Reconciliation Informa IIR Group Informa IIR Group 2005 2005 2005 2004 2004 2004 Â£'m Â£'m Â£'m Â£'m Â£'m Â£'m Turnover Turnover reported 536.8 192.5 729.3 449.8 - 449.8 Turnover pre acquisition IIR - 192.8 192.8 - 312.9 312.9 Turnover pre acquisition T&F - - - 54.4 - 54.4 Pro forma Group 536.8 385.3 922.1 504.2 312.9 817.1 Adjusted Operating Profit (OP) Adjusted OP as reported 115.6 31.7 147.3 95.4 - 95.4 Adjusted OP acquisition IIR - 32.4 32.4 - 47.6 47.6 Adjusted OP acquisition T&F - - - 9.2 - 9.2 Pro forma Group 115.6 64.1 179.7 104.6 47.6 152.2 2005 vs 2004 2005 2004 Total Total Increase Increase Â£'m Â£'m Â£'m % Turnover 922.1 817.1 105.0 13 PI 202.6 157.3 45.3 29 Subscriptions 225.2 217.1 8.1 4 Copy sales 120.6 120.9 (0.3) - Advertising 32.8 30.4 2.4 8 Delegates & Conferences 340.9 291.4 49.5 17 922.1 817.1 2005 2004 Total Total Increase Â£'m Â£'m % UK 152.4 148.5 3 US 380.0 331.6 15 CE 240.8 216.8 11 RoW 148.9 120.2 24 922.1 817.1 Turnover by Division 2005 2004 Total Total Increase Â£'m Â£'m % Academic & Scientific 268.8 257.2 5 Professional 333.5 278.2 20 Commercial 319.8 281.7 14 922.1 817.1 Turnover by Business 2005 2004 Total Total Increase Â£'m Â£'m % Academic & Scientific STM 170.1 164.8 3 HSS 98.7 92.3 7 268.8 257.1 Professional Financial Data Analysis 60.8 60.2 1 FIL & T 68.4 59.7 15 Performance Improvement 204.3 158.3 29 333.5 278.2 Commercial Regional Events 208.3 180.6 15 Telecoms & Media 52.0 44.6 17 Maritime & Commodities 59.5 56.6 5 319.8 281.8 Total 922.1 817.1 13 Adjusted Operating Profit 2005 2004 Increase Total Total Â£'m Increase Â£'m Â£'m % 179.7 152.2 27.5 18 Adjusted Operating Profit by 2005 2004 Division Total Total Increase Â£'m Â£'m % Academic & Scientific 67.5 62.4 8 Professional 64.7 53.7 20 Commercial 47.5 36.1 32 179.7 152.2 2005 2004 Total Total Increase Â£'m Â£'m % Academic & Scientific STM 47.0 42.1 12 HSS 20.5 20.3 1 67.5 62.4 Professional Financial Data Analysis 17.7 15.9 11 FIL & T 15.9 14.0 14 Performance Improvement 31.1 23.8 31 64.7 53.7 Commercial Regional Events 28.8 21 37 Telecoms & Media 12.9 10.4 24 Maritime & Commodities 5.8 4.7 23 47.5 36.1 Total 179.7 152.2 18 This information is provided by RNS The company news service from the London Stock Exchange

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