Final Results
Ingenta PLC
19 December 2003
Date: Embargoed until 07.00, 19 December 2003
Contacts: Ingenta Website: www.ingenta.com
Martyn Rose, Non-Executive Chairman (On 19 December) 020 7796 4133
Mark Rowse, Chief Executive Thereafter: 01865 799010
Hudson Sandler
Alistair Mackinnon-Musson Tel: 020 7796 4133
Philip Dennis email: ingenta@hspr.co.uk
Ingenta plc
Preliminary audited results for the 12 months ended 30 September 2003
Ingenta plc, market leader in creating and operating specialist publication
websites for academic and professional publishers, is pleased to announce its
preliminary audited results for the 12 months to 30 September 2003.
Highlights
• Goal of monthly profitability achieved
• Reorganisation has removed £4.9m of annualised costs
• 97% customer renewal rate
• Number of publisher customers up by 10% to 254
• Number of publications handled up by 10% to over 6,100
• Number of Specialist Websites increased by 17% to over 250
Martyn Rose, Non-Executive Chairman, said:
'The group has produced rapidly improving results, moving from a £1.8m first
half loss to near break-even after tax in the second half. Having achieved our
goal of monthly pretax profitability for the last two months of the financial
year, we have considerable confidence that the group will make continuing
progress in 2004.'
Commenting on the results, Mark Rowse, Chief Executive, said:
'For most of 2003 our top priority was reducing costs. With management now
firmly focused on sales growth, and a newly strengthened sales team in place, we
are looking forward to 2004 with confidence.'
Notes to Editors
Ingenta is the market leader in providing academic and professional publishers,
and self-publishing societies, with technology and services enabling them to
create online versions of their books and periodicals. It also acts as a
powerful distribution channel for publishers by providing an online access
service to some 15,000 libraries worldwide.
Ingenta's revenue streams derive from the following three main areas:-
Specialist Websites
Fees received under long term outsourcing contracts with publishers and
libraries for the creation, hosting, maintenance and enhancement of publication
websites. Ingenta provides access to high value, subscription-based journal and
reference content, and now operates over 250 such sites for major publishers
such as McGraw-Hill and Oxford University Press.
Publisher Services
Fees received from publishers under long term contracts for the creation of
Internet-deliverable versions of academic journals, reports and books.
Ingenta's cutting edge technology adds value to published material through data
conversion, addition of sophisticated reference linking, enhancing
searchability, secure hosting and systems to ensure that only the publisher's
existing customers can access the publication. Ingenta now handles every new
issue of some 6,100 publications, adding around 100,000 documents every month.
Pay-Per-View
Ingenta also provides information commerce services to its publisher customers,
enabling libraries and researchers to buy content on a pay-per-view basis where
they do not have subscription access rights. Ingenta shares this revenue with
the owner of the publication.
Ingenta PLC
Preliminary audited results for the 12 months to 30 September 2003
Chairman's statement
I am pleased to announce that Ingenta has made further substantial progress
towards profitability during the financial year to 30 September 2003.
The progress made during the year is highlighted by the fact that the overall
loss before tax was reduced from £1.8m in the first 6 months to £1.0m in the
second half of the year. Including the benefit of a tax credit of £0.9m, the
group produced post tax results near breakeven for the 6 months to 30 September
2003.
The principal focus of management during the year was the continuing reduction
in the group's overhead costs, which (excluding depreciation) were reduced by
36% to £8.7m (2002: £13.6m). Sales in the year of £8.5m (2002: £9.3m), together
with slightly reduced average margins (76% as against 80% in 2002) and greatly
reduced costs, produced a 59% reduction in losses before tax and goodwill
amortisation for the year to 30 September 2003 to £2.9m (2002: £7.0m).
Even during this period of focus on cost reduction, the group continued to
attract substantial amounts of new customers, with the number of publisher
customers increasing over the year by a net 30 to 254, the number of journal
titles being processed increasing by over 10% to 6,100 and the number of
Specialist Websites being operated increasing by 17% to over 250.
Further work on new contracts won, but not yet recognised as turnover, has
continued to be generated during the period and as a result the group carried
deferred revenue and customer deposit account balances at 30 September 2003 of
£3.4m (30 September 2002: £4.2m). An estimated £2.0m of this will be recognised
as turnover over the next 12 months, and in addition the group will benefit from
recurring contracts and repeat business not yet invoiced.
Staff
Overall staff numbers reduced from 166 at 30 September 2002 to 127 at 30
September 2003, in line with the cost reduction plans outlined above. The
delivery of increasing volumes of business from a smaller staff indicates not
only the benefit of the reorganisation undertaken, and the effects of continuing
investment in R&D, but also the dedication of our staff, whom the Board would
like to thank for their continuing hard work in delivering high levels of
service to our customers in a period of substantial change.
Prospects
2003 has been a year of consolidation and progress for Ingenta. The year has
shown remarkable achievement in reducing our costs and reported losses, largely
achieved through reduction in operating overheads.
In particular we have achieved our goal of profitability during the second half
of the financial year with the last two months being profitable at the pre-tax
level on the basis of unaudited management accounts. This performance has
continued into October, 2003.
The group enters the 2004 fiscal year with the benefits of a stable business,
substantial pre-contracted revenues from its existing customers and a
significantly reduced cost base. Together with a strengthened sales organisation
and significant market opportunity, this gives the Board considerable confidence
that it will make continuing progress in the current year.
Martyn Rose
Chairman
19 December 2003
Chief Executive's Review
Ingenta continues to be the market leader in the creation of websites for the
world's scholarly and professional publishers, enabling the online delivery of
their journal and reference publications. We work with over 6,000 publications,
and deliver content into some 15,000 of the world's academic and corporate
libraries through over 250 separate websites.
This represents around 75% of all the publications that are available online in
this sector, substantially more than any of our competitors. With around
two-thirds of all scholarly and professional publications not yet having an
Internet edition, the scope for growth remains considerable.
Ingenta's revenue is derived from three core areas, namely:
• building and operating websites for professional and academic publishers
which enable those customers to deliver their journals, and other research
publications, over the Internet to their subscribers; as well as creating
websites allowing specialist libraries to provide access to these
publications for their readers - Specialist Websites;
• converting articles and other types of research content for publishers into
a format that can be readily delivered via the Internet, adding features
such as active reference linking; and securely hosting these articles and
other research content so as to ensure that only the publisher's existing
customers can access and download them for free via the www.ingenta.com
website - Publisher Services; and
• charging libraries and end-users on a per-article basis for downloading
material to which they do not currently have free access under subscription
arrangements with the publisher - Pay-Per-View.
Divisional review
Specialist Websites
The number of Specialist Websites being operated on behalf of publishers,
self-publishing societies and libraries grew by 17% during the period from 220
to 258.
The group generates revenues both from fees recognised when a website is
accepted by a customer and from ongoing annual maintenance revenue, which tends
to increase over time as sites are enhanced and attract greater usage. Overall,
the proportion of group turnover generated from this area of the business
declined to 38% of total group sales (2002: 44%), due to a reduction in total
fees generated from new site launches, as indicated in the interim results to 31
March 2003. However, the quality of earnings in this area again improved through
an increase in annual recurring income from ongoing service provision for the
220 sites already live at the start of the year.
In accordance with the group's revenue recognition policies, work undertaken on
a number of new contract wins during the period has not yet been recognised as
turnover in these results but will contribute to the substantial amount of
pre-contracted sales and revenue to be recognised in the 2004 financial year and
beyond.
Highlights of the period included major new websites providing worldwide
internet access to the reports and other publications produced by the World Bank
and World Tourism Organisation, and the creation of Oxford Scholarship Online,
which provides online access to the scholarly book publishing programme of
Oxford University Press.
Publisher Services
Revenues are principally generated in this division from the ongoing conversion,
loading and hosting of each new issue of a publication during the year, and also
from fees for the initial configuration of software tools to enable this process
to take place as efficiently as possible. In addition, the group provides
fee-based marketing services to publishers through its Boston-based PCG
operation.
Although a total of seven customers chose not to renew contracts with the group,
Ingenta extended its contractual arrangements with 97% of its client base during
the year. In addition, the group benefited from concluding arrangements with 31
new customers, taking the total number of customers working with Ingenta at 30
September 2003 to 254.
Whilst renewal rates were encouraging, in some cases renewals were achieved for
a lower level of ongoing service, and hence lower revenues, which together with
the effect of cancellations resulted in the contribution from this division
remaining static at 41% of total sales (2002: 42%).
New customers in the period included substantial and prestigious national bodies
such as the American Sociological Association, the Statistical Society of Canada
and the Yale Journal of Biology and Medicine.
Pay-Per-View
Whilst the majority of the documents viewed by users of Ingenta's services are
delivered to them for free under their subscription arrangements with
publishers, in some cases Ingenta charges libraries or end users for access to
documents to which they are not subscribers. This includes both documents used
for research purposes via Ingenta's online systems and those used by students
within course packs through its HERON service.
Demand for these services continued to rise, with turnover from this activity
representing some 21% of turnover in the year ended 30 September 2003 (2002:
14%).
Average cost of sales is reducing as users choose to switch from low margin fax
delivery of articles to higher margin online delivery, thereby increasing the
average gross margin contribution to the group.
Operations
Significant progress was made during the year in consolidating and streamlining
operations at the group's UK (Oxford and Bath) and US (Providence, Rhode Island
and Cambridge, Massachusetts) locations following the reorganisation announced
in September 2002. This resulted in overheads being reduced by £4.9m in the year
to 30 September 2003 compared with the previous year. The reorganisation was
focused on improving the efficiency of the group's operations and through this
delivering higher levels of service at a lower overall cost.
Following some 12 months of firm focus on reduction of the group's operating
costs, towards the end of the year management attention turned back to renewing
growth in sales. The teams dealing with Client Management for our substantial
existing customer base have been separated from those dealing with new customer
acquisition. Key appointments were made during the last quarter of the year in
the form of three new leaders of the sales and Client Management teams in the UK
and US operations. These new appointees, all recognised leaders within the
industry, are now building the sales teams on both sides of the Atlantic to
ensure we grow sales from new customers in the current year, as well as
continuing to generate more revenue from our substantial existing base of
customers.
In the year to 30 September 2003, we have continued to invest substantially in
research and development, incurring costs of some £1.5m during the year in
software engineering of cutting edge new services. This included continuing
innovation in the technology underpinning our online journal access platform. In
particular, we undertook a complete renewal of our systems for managing
subscription access, which will allow us to service the needs of a wider range
of publishers with this important part of their information commerce strategy.
This core part of our systems now supports access and entitlement for some 20
million subscription records.
We have also continued to develop new software tools to improve the efficiency
of processing and loading content received from publishers, now amounting to
some 100,000 new documents per month. A number of customers are now using our
new web-based software tools to process, load and check their online
publications themselves, thereby improving efficiency and turnround times. New
services also allow publishers to check the progress of their content through
our systems using online viewing facilities.
We have also implemented new technology to enable us to deal with a full range
of content types, including XML and SGML, within our standard service offering,
and have added a number of additional features to our menu of services,
including archive processing, automated reference extraction, automated metadata
creation and remote content editing for customers.
Outlook
Our strategy is to continue to invest in technology which reduces our costs of
operation and keeps us ahead of competition, while also moving control of
content and websites back into the hands of our publisher customers.
We are leaders in a market which still provides substantial growth
opportunities. I am confident that the investment we have already made, and the
sales infrastructure we are now putting in place, will enable us to generate
additional volume in our core business, whilst maintaining margins as well as
developing new revenue streams in the year ahead.
Mark Rowse
Chief Executive
19 December 2003
Operating and Financial Review
Operating results
Although turnover was £0.8m lower than last year at £8.5m (2002: £9.3m), the
effect of a continuing programme of cost reduction during the year has meant
that losses, before goodwill amortisation and write-off and tax, were reduced by
£4.1m.
Gross profit for the period was £6.5m (2002: £7.4m) and gross margins were
reduced slightly to 76% (2002: 80%) as a result of changed business mix.
Overheads were reduced by £4.9m over the year, a 36% reduction, to £8.7m (2002:
£13.6m). Together with depreciation of £0.6m (2002: £1.1m) this resulted in a
59% reduction in losses before goodwill amortisation and write-off and tax to
£2.9m (2002: £7.0m).
The progress made during the year is highlighted by the fact that this overall
loss before tax was reduced from £1.8m in the 6 months to 31 March 2003 to £1.0m
in the second half of the year to 30 September 2003. Including the benefit of a
tax credit of £0.9m, the group produced post tax results near breakeven for the
6 months to 30 September 2003. In particular we have achieved our goal of
profitability during the second half of the financial year with the last two
months being profitable at the pre-tax level on the basis of unaudited
management accounts. This performance has continued into October, 2003.
The reduction in goodwill amortisation and write-off assisted in creating a
marked improvement in losses after tax for the year to 30 September 2003 which
were reduced by £23.8m, or 92%, to £2.0m (2002: £25.8m).
Exchange rates
As the group generates a substantial proportion of its sales in US dollars, the
movement in the sterling-dollar exchange rate during the year reduced reported
sales by some £0.5m when compared with rates at the start of the year. This
effect was offset to some extent by reductions in the group's US overheads when
translated into sterling. The Board is reviewing its hedging policy with a view
to ensuring that appropriate exchange rate risk management policies are in place
for 2004.
Taxation
A tax credit of £0.9m (2002: £0.6m) was included in the results for the year
relating to amounts received and receivable under the Research and Development
Tax Credit Scheme introduced in the Finance Act 2000. This includes the credit
received during the year in respect of the year ended 30 September 2002 as well
as an accrual for the expected credit in respect of the year ended 30 September
2003.
Dividends
The Directors do not recommend the payment of a dividend (2002: £nil).
Balance sheet and cash
Shareholders' deficit totalled £3.1m (2002: deficit £3.5m) at the year-end.
Cash outflow from operating activities was reduced over the year to £4.0m (2002:
£4.5m). This included a number of non-recurring items including payment of
reorganisation costs of £1.2m provided for in the 2002 accounts, together with a
substantial reduction in trade creditors, as reflected in the change in average
creditor days to 47 (2002: 55). At the year end bank borrowings were £0.3m
(2001: cash of £1.2m).
During the year £4.0m (2002: £4.5m) of cash was absorbed by operations or used
for capital expenditure. This was partially offset by the issue of 41,314,981
new ordinary shares in March 2003 which raised £1.8m net of expenses and
5,000,000 new ordinary shares in July 2003 which raised £0.5m net of expenses,
and a Research and Development Tax Credit of £0.5m.
The Board has reviewed its fixed asset depreciation policy and concluded that
the estimated life of computer hardware assets should be extended to four years.
Prospects
The group continues to make good progress towards annual profitability. Action
has already been taken to reduce overheads and costs continue to be tightly
controlled. The group's substantial base of recurring income and a strong
forward order pipeline, together with its high gross margin and the reduced
overhead base going forward, provide confidence that significant further
improvements in performance can be achieved by the group in the current year.
Mark Rowse
Chief Executive
19 December 2003
Consolidated profit and loss account for the year ended 30 September 2003
Year Ended Year Ended
30/09/2003 30/09/2002
Audited Audited
£m £m
Turnover 8.5 9.3
Cost of sales (2.0) (1.9)
Gross Profit 6.5 7.4
Operating costs (9.3) (14.7)
Goodwill amortisation and write-off - (19.4)
Total operating costs (9.3) (34.1)
Other operating income - 0.3
Operating loss (2.8) (26.4)
Interest payable (0.1) -
Loss on ordinary activities before taxation (2.9) (26.4)
Tax on loss on ordinary activities 0.9 0.6
Loss for the financial year (2.0) (25.8)
Loss per share (basic and diluted) 2p 45p
Consolidated balance sheet as at 30 September 2003
Year Ended Year Ended
30/09/2003 30/09/2002
Audited Audited
£m £m
Fixed assets
Tangible assets 1.0 1.7
Investments 0.3 0.3
1.3 2.0
Current assets
Debtors and work in progress 2.4 2.6
Cash & bank - 1.2
2.4 3.8
Creditors: amounts falling due within one year
Deferred income (1.4) (1.5)
Other (4.3) (6.0)
(5.7) (7.5)
Net current liabilities (3.3) (3.7)
Total assets less current liabilities (2.0) (1.7)
Creditors: amounts falling due after more than
one year
Deferred income (0.5) (0.9)
Other (0.1) (0.2)
(0.6) (1.1)
Provisions for liabilities and charges (0.5) (0.7)
Net liabilities (3.1) (3.5)
Capital and reserves
Called up share capital 5.4 3.1
Share premium account 18.0 18.1
Merger reserve 11.1 11.1
Reverse acquisition reserve 12.7 12.7
Profit and loss account (50.3) (48.5)
Equity shareholders' deficit (3.1) (3.5)
Consolidated cash flow statement for the year ended 30 September 2003
Year Ended Year Ended
30/09/2003 30/09/2002
Audited Audited
£m £m
Cash flow from operating activities
Operating loss (2.8) (26.4)
Depreciation charge 0.6 1.1
Impairment of leasehold improvements 0.1 -
Profit on disposal of assets - (0.2)
Amortisation/write-off of goodwill - 19.4
Foreign exchange adjustment 0.2 (0.3)
Decrease in stocks and work in progress - 0.2
(Increase)/Decrease in debtors 0.5 (0.5)
Increase/(Decrease) in creditors and provisions (2.6) 2.2
Net cash outflow from operating activities (4.0) (4.5)
Taxation received 0.5 0.7
Capital expenditure & financial investments
Purchase of fixed assets (0.1) (0.2)
Net cash inflow from acquisitions - 0.1
Net cash outflow before financing (3.6) (3.9)
Financing
Issues of shares at a premium 2.3 3.2
Repayment of principal under finance leases (0.3) (0.3)
Net cash inflow from financing 2.0 2.9
Decrease in cash in the year (1.6) (1.0)
Statement of consolidated total recognised gains and losses for the year ended
30 September 2003
Year Ended Year Ended
30/09/2003 30/09/2002
Audited Audited
£m £m
Loss for the financial period (2.0) (25.8)
Currency translation differences on 0.1 (0.4)
foreign currency net investments
Total recognised losses for the period (1.9) (26.2)
Notes to the preliminary announcement of audited results for the year ended 30
September 2003
1 Basis of preparation
The preliminary announcement has been prepared in accordance with applicable
accounting standards and under the historical cost convention.
The principal accounting policies of the group have remained unchanged from the
previous year.
2 Basis of consolidation
The consolidated accounts comprise the accounts of Ingenta plc, the company, and
its subsidiary undertakings made up to 30 September 2003. The results of
subsidiaries acquired are included in the consolidated profit and loss account
from the date control passes. Intra-group balances are eliminated fully on
consolidation.
3 Reconciliation of movements in equity shareholders' funds
Year ended Year ended
30/09/2003 30/09/2002
Group Audited Audited
£m £m
Loss for the year (2.0) (25.8)
Net exchange adjustments 0.1 (0.3)
New share capital issued 2.6 8.3
Expenses of share issue (0.3) (0.1)
Shares to be issued - (5.5)
Net increase/(reduction) in shareholders' funds 0.4 (23.4)
Opening shareholders' (deficit) / funds (3.5) 20.0
Closing shareholders' deficit (3.1) (3.4)
4 Publication of non-statutory accounts
The financial information set out in this preliminary announcement does not
constitute statutory accounts as defined in Section 240 of the Companies Act
1985.
The balance sheet as at 30 September 2003 and the group profit and loss account,
statements of total recognised gains and losses, consolidated cashflow statement
and associated notes for the year then ended have been extracted from the
group's 2003 statutory financial statements upon which the auditor's opinion is
unqualified and does not include any statement under Section 237 of the
Companies Act 1985.
5 Copies of announcement
Copies of this announcement will be available from the company's registered
office at 23-38 Hythe Bridge Street, Oxford OX1 2ET.
This document is confidential and is only for distribution in the United Kingdom
to persons to whom such a communication is permitted by the Financial Services
and Markets Act 2000 (Financial Promotion) Order 2001 or by any other Order made
pursuant to section 21(5) of the Financial Services and Markets Act 2000 and, if
permitted by applicable law, for distribution outside the United Kingdom to
professionals or institutions whose ordinary business involves them in engaging
in investment activities. It is not intended to be distributed or passed on,
directly or indirectly, to any other class of persons. This document is being
supplied to you solely for your information and may not be copied, reproduced,
further distributed to any other person or published, in whole or in part, for
any purpose.
The information in this document does not constitute, or form part of, any offer
to sell or issue, or any solicitation of an offer to purchase or subscribe for,
any shares in the Company nor shall this document, or any part of it, or the
fact of its distribution, form the basis of, or be relied on, in connection with
any contract.
- Ends -
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