Final Results 2007
Publishing Technology PLC
01 April 2008
1 April 2008
"Not for release, distribution or publication, in whole or in part, in or into
the United States of America, Canada, Ireland, Japan, South Africa or
Australia."
Publishing Technology plc announces preliminary results for 2007
Publishing Technology plc is pleased to announce its preliminary results for
2007. Publishing Technology delivers information technology tools and services
to publishers, undertaking a broad range of activities to cater for the
wide-ranging requirements of publishers and information providers. The group
enjoys a strong position for its widely-employed print and online publishing
platforms.
On 27 February 2007, Vista International Limited reversed into Ingenta plc and
Ingenta plc changed its name to Publishing Technology plc. Publishing Technology
plc is listed on the Alternative Investment Market of the London Stock Exchange
(ticker: PTO).
As a result of the reverse acquisition, this reporting period reflects the
continuing operations of Vista International Limited, and therefore, as the
Vista group year end was 30 June, this report covers 18 months to 31 December
2007 with 10 months trading of the former Ingenta group businesses incorporated
from the date of the reverse acquisition. As a result, this announcement does
not show comparative figures as comparative figures would only be for 12 months
of the Vista business.
Highlights:
• Revenue in the period of £18.4m
• Gross profit of £6.2m
• EBITDA profit (earnings before interest, tax, depreciation and
amortisation) of £0.2m
• Pre-Tax loss of £1.7m after adjusting, inter alia, for the
amortisation of intangibles of £0.8m
• Ingenta, Publishers Communication Group and Vista Europe operations
performed strongly with growth post-acquisition
• Annualised synergy cost reductions of over £1.5m
• Positive sales synergy with Vista operations successfully implementing
and selling Ingenta products
Outlook:
The merger of the businesses in early 2007 presented a number of integration and
consolidation challenges throughout the period. However, the combined objectives
of increasing revenue through cross-selling and cost savings from synergies and
duplicated functions began to come to fruition in the last quarter. The group
has ended the period on a stable revenue footing with considerably lower costs,
Vista businesses successfully entering online publishing markets, and several
new customers being acquired across all divisions. The value of the merger is
becoming apparent.
In 2008, we will be focussing on:
• Increasing high-margin revenue streams
• Continuing to rationalise infrastructure costs
• Extending the cross-selling of products across the group's 400
publisher clients.
George Lossius, chief executive, said:
"These maiden results are very encouraging. The merger in early 2007 presented
numerous integration and consolidation challenges, but the benefits of the
transaction have clearly begun to emerge. We have seen significant cross-selling
between operating divisions, as we successfully exploit the growing need within
the publishing industry to integrate print and online platforms."
Martyn Rose, chairman, said:
"We have developed strong market position for both our online publishing
products and services and our publisher's administration platforms, and are
enjoying increasing synergy between these two parts of the business. This
company is well positioned for future growth."
For further information please contact:
FinnCap, nominated adviser
Geoff Nash/Rose Herbert : 020 7600 1658
The Communication Group plc
Richard Evans Tel: 020 7630 1411 / 0775 108 7291
Kit Bingham Tel: 020 7630 1411 / 0788 074 8672
Chairman's statement
Finance and Operations
The most significant event of the period was the reverse acquisition of Ingenta
by Vista to create Publishing Technology in February 2007. As with many such
mergers, integration is complex and considerable time is required to bring
together the combined operations into an efficient group; the inception of
Publishing Technology was no exception, but by the end of 2007 the benefits of
revenues from cross-selling products and savings from synergies were apparent.
Revenues of the combined group rose consistently post acquisition and
considerable overheads were driven out of the operations, resulting in the
business finishing the period trading cash positive, and with positive EBITDA
(earnings before interest, tax, depreciation and amortisation) and pre-tax
profits, before adjustment for IFRS amortisation of intangible assets.
During the 2007 calendar year, each area of the business demonstrated positive
and satisfying advances. IngentaConnect continued to add new publishers to its
research platform, and also added sales of online advertising inventory to its
range of e-content optimisation services. Vista has embraced the digital market,
evolving from a business that dealt only with systems for print products to
working with six publishers on digital publication solutions. Publishers
Communication Group continued the trend of its 2006 growth, maintaining a high
retention rate and working with 22 new publishers and considerably extending its
activities in Europe.
The financial reporting for this period is complicated by the reverse
acquisition in February 2007. The results show an initial eight months of Vista
activity and then ten months of the combined entity. During this period, revenue
was £18.4m and the gross margin was 34%.
The EBITDA profit in this period was £0.2m. The loss before tax in the period
was £1.7m which is inclusive of £3.1m invested in Research and Development all
of which was expensed through the income statement as incurred, £0.3m of foreign
exchange losses due to the fall in the US Dollar and a £0.8m amortisation of
intangible assets arising on the reverse acquisition of Ingenta. With the
benefit of a Research and Development tax credit of £0.3m for the period, this
has resulted in a net loss for the financial period of £1.6m. The group's net
cash balance at 31 December 2007 was a deficit of £1.7m.
Staff
The contribution made by staff across the group enables us to enhance even
further our reputation for delivering high quality products and services. The
increasing volume of work delivered by a leaner staff validates the rationale
behind the creation of Publishing Technology, and the Board wishes to thank all
employees for their work, enthusiasm and commitment.
During the period to 31 December 2007, thanks to synergies in a number of areas
of the group and the closure of one office, the number of people employed
declined from a pre-merger level of 188 to 158.
Current Trading and Prospects
2007 saw the group focus on integration synergies and consolidation to provide
the group with a stable and growing revenue base and reduced overheads geared to
maximise profits. We are particularly pleased that the expertise and
relationships of the combined Publishing Technology sales team have successfully
enabled realisation of new business that the separate organisations had
previously lacked the authority to complete.
The results of this greater market confidence in the Publishing Technology
organisation is evident in the improvement in trading post merger, and the Board
has no doubt that this can be carried forward into the new year by:
• continuing to focus on increasing high-margin revenue streams
• providing innovative products to the expanding publishing and
information industries
• using the breadth of the Publishing Technology tools and services to
differentiate the group from its competition.
Having completed vital integration and consolidation activities during 2007, the
potential for our business in the coming years is considerable.
M C Rose
Chairman
1 April 2008
Publishing Technology plc
Chief executive's review
We estimate that the publishing and information service sector Publishing
Technology targets is a $200billion global industry. It continues to grow
whether that is in the traditional print publishing sector, or in alternative
channels created by new geographic markets coming on stream and emerging
technologies. Many publishers have not yet scratched the surface of the digital
potential of their content, while those who have made some progress are
nonetheless challenged by the speed of technological evolution, which threatens
to force them away from their core competences. Their future success lies in
joining with a trusted partner, to whom they can outsource those technical
requirements that distract them from their core business.
In this changing environment, Publishing Technology is uniquely able to support
publishers with a consistent, end-to-end service across the breadth of the
publishing supply chain. Our 400+ publisher clients benefit from our
comprehensive capabilities and experience, allowing then to concentrate on the
things they do best.
"The Publishing Technology package is a compelling prospect for an organisation
seeking to enter new publishing sectors. We needed an organisation that could
provide not only top-rate technology, but also the skills to ensure our
investment in it is optimised by well-timed and targeted sales campaigns. We're
looking forward to enabling new audiences to benefit from the valuable
information we provide."
Rosy Wolfe, Head of Business Development and Customer Relations, BBC Monitoring
Our comprehensive suite of technologies includes website development; content
digitisation, conversion and enhancement; online content distribution and
discoverability; access management and information commerce; content sales and
marketing; production management; business intelligence; product information
management; rights and royalties; customer care; distribution and fulfilment;
and editorial management. Our online services are complemented by collection
management, document delivery and content awareness services for libraries and
end users. The majority of revenues consist of recurring annual fees and
long-term contracts derived through the following three principal activities:
Ingenta
Ingenta's well-established scholarly service IngentaConnect provides researchers
with immediate access to over 11,000 electronic publications. The robust
technology that delivers the site regularly supports over 20 million user
sessions a month. IngentaConnect enables publishers to deploy a variety of
business models to reach audiences beyond their traditional target markets.
Publishers can generate leads by implementing short-term free trials, and
monetise the high-level of traffic resulting from Ingenta's relationship with
Google by selling individual articles or issues to non-subscription users.
Ingenta also operates a small number of premium services of direct benefit to
academic, corporate, government and other institutional users of IngentaConnect,
for which there is an annual charge.
During 2007, Ingenta added another 21 new publishers to its customer base,
including prestigious US journal The Charleston Advisor, which will help to
develop Ingenta's brand awareness and identity in North America. Clients were
given the opportunity to carry advertisements alongside electronic publications
on a revenue-share basis, and the subscription tools used by publishers to
control user access benefitted from considerable re-engineering. Document
delivery transactions were streamlined to drive higher conversion rates of new
customers entering the site from its search engine partners. Recent appointments
to Ingenta's business development teams can be expected to deliver renewed
business growth in both its publisher and library markets.
Vista
For three decades, Vista has provided management systems for print-based
publishers in Europe and North America. Its comprehensive suite of software
applications is custom-built to meet publishing needs and can be deployed
throughout a publisher's workflow to undertake complex business operations and
promote products in the market. Vista serves major global publishing operations
as well as small independent players, helping them to realise cost-savings by
introducing efficiencies and ensuring interoperability with other key services
and providers. A full 85% of books in UK high street book stores have been
processed by a Vista system at some point in their production or distribution,
and Vista works directly with eight of the top ten publishers.
During the period, Vista introduced new services for digital publications and
won six new publishers in this area, including major new projects with British
Medical Journal and Netherlands' government publisher, Sdu for Publishing
Technology's market-leading Information Commerce Services (ICS). Vista's core
author2reader service remains embedded in the publishing supply chain, and the
business's sustainable growth to date points to substantial repeat business in
2008.
Publishers Communication Group (PCG)
PCG provides a range of specialised marketing and business development services
to meet the needs of professional and scholarly publishers. These include
services in the areas of: market intelligence for planning and marketing new
products; promotions to expand awareness; and local sales representation and
customer service. The company delivers regular research reports which are
well-respected by the scholarly information community. Its market is growing as
publishers recognise the value of outsourcing sales and marketing activities to
locally-based experts. As a consequence, PCG has invested in developing its
European business and now provides services to 85 North American and European
publishers with programmes delivered in over 40 countries in eight languages on
their behalf.
During 2007, PCG performed strongly with 22 new publisher customers, including
North America's largest University Press, selecting its services despite an
increase in competition. Enhancements to its web presence, including new
customer-specific micro-sites to augment its research and representation
services, have helped to differentiate PCG's proposition further and will
support continued growth.
Outlook
2007's solid performance reflects the group's considerable investment in
integration and in new product development, both of which can be expected to
contribute to strong financial progress in 2008. We anticipate continued growth
based on the potential for considerably expanded systems and services of the
group, backed by our integrated and strengthened sales force, and the favourable
prospects for our new 'Pub2web' publications platform, which has already been
selected by the OECD and World Bank amongst others. Additionally, we look
forward to our combined operations allowing us to offer a suite of services to
both trade and academic publisher customer bases. The group continues to explore
potential markets for development and acquisition opportunities that would
complement its capabilities and increase its competitive strength. We are
looking forward to delivering solid growth in 2008 and beyond.
G M Lossius
Chief Executive Officer
1 April 2008
Publishing Technology plc
Financial review
for the 18 months ended 31 December 2007
Reverse acquisition accounting
As a result of the business combination on 27 February 2007, the shareholders of
Vista obtained control of the group. Accordingly the transaction was accounted
for as a reverse acquisition.
The financial statements are issued under the name of the legal parent
'Publishing Technology plc', but are a continuance of the financial statements
of Vista International Limited.
On combination the balance sheets of both entities are combined with the
exception that:
• retained earnings and other reserve balances are those of Vista
• shareholding is that of the acquired company (formerly Ingenta plc)
plus shares issued as part of the combination.
Vista year end was 30 June, therefore these financial statements are for an 18
month period from 1 July 2006 to 31 December 2007. The income statement
represents 18 months trading of the Vista group and 10 months trading of the
former Ingenta group businesses incorporated from 27 February 2007 (the date of
the reverse acquisition) to 31 December 2007.
Operating results
Revenue for the 18 months ended 31 December 2007 was £18.4m.
Gross profit for the period was £6.2m and the gross margin was 34%.
Total operating costs in the period were £7.2m. This resulted in a loss before
tax of £1.7m. With the benefit of a tax credit of £0.3m the net loss for the
financial period was £1.6m.
Taxation
A tax credit of £0.3m is included in the results for 2007 relating to amounts
received and receivable under the Research and Development tax credit scheme.
The claim has been prepared on the same basis as in prior years but is subject
to HM Revenue and Customs approval.
The group has unutilised tax losses at 31 December 2007 in the UK and the USA of
£13.3m and $15.5m respectively, which are yet to be agreed with the US tax
authorities.
Shareholders' returns and dividends
The Directors do not recommend the payment of a dividend.
Balance sheet and cash
Shareholders' deficit totalled £2.4m at the period end.
Cash outflow from operating activities was £2.5m. At the period end, net bank
overdraft was £1.7m inclusive of a revolving credit facility of £1.5m.
Cash absorbed by operations or for capital expenditure during the period
amounted to £0.2m. A tax credit of £0.3m in respect of Research and Development
expenditure was received in the period which related to the calendar year 2006
claimed by Ingenta plc pre acquisition.
Going concern and future funding
The accounts are prepared on a going concern basis. In assessing whether the
going concern assumption is appropriate, management have taken into account all
available information about the future.
As part of its assessment, management have taken into account the profit and
cash forecasts, the continued support of the shareholders and directors, a
placing of shares to raise £1.1m, banking facilities and management ability to
affect costs and revenues.
Treasury
The group's policy with regard to cash balances is to monitor short and medium
term interest rates and to place cash on deposit for periods that optimise
interest earned while maintaining sufficient funds to meet day-to-day
requirements.
The group operates in a business which has marked seasonality in cash flows.
This is expected to continue and has been taken into account in assessing the
working capital requirements.
Publishing Technology plc has reported under IFRS for the financial period
ending 31 December 2007. The main impacts of this are that the intangible assets
recognised on the reverse acquisition of Ingenta will be amortised over three
years at £0.8m per annum. Goodwill on transition in Vista was impaired in 2005
reducing the goodwill brought forward to 2006 by £4.3m.
A B Moug C.A.
Chief Financial Officer
1 April 2008
Publishing Technology plc
Consolidated Income Statement
For the 18 months ended 31 December 2007
18 months ended 31
Dec 07
Note £000's
Continuing operations
Revenue 18,360
Cost of sales (12,207)
Gross profit 6,153
Sales and marketing expenses (1,925)
Administrative expenses (4,596)
Other expenses 2 (748)
Other Income - rental income 92
Loss from operations 2 (1,024)
Analysis of loss from operations
Profit before net finance costs, tax, depreciation, 236
amortisation and foreign exchange losses (EBITDA)
Depreciation (244)
Amortisation of intangibles (748)
Foreign exchange loss (268)
Loss from operations (1,024)
Finance income 187
Finance costs (879)
Loss before tax (1,716)
Tax 3 128
Loss for the period (1,588)
Attributable to:
Equity holders of the parent (1,588)
Retained loss for the period (1,588)
Loss per share
From total and continuing operations
Basic and diluted (pence) 4 (0.35)
All activities are classified as continuing
Consolidated statement of recognised income and expense
For the 18 months ended 31 December 2007
18 months ended 31
Dec 07
£'000s
Exchange differences on translation of foreign (15)
operations
Net loss recognised directly in equity (15)
Loss for the period (1,588)
Total recognised income and expense for the (1,603)
period
Consolidated Balance Sheet
As at 31 December 2007
Note 31 December 2007
£000's
Non-current assets
Goodwill and other Intangible assets 5,231
Property, plant and equipment 307
Available for Sale Investments 102
5,640
Current assets
Trade and other receivables 2,539
R & D tax credit receivable 3 315
Cash and cash equivalents 581
3,435
Total assets 9,075
Equity
Share capital 11,610
Share premium 6 20,685
Merger Reserve 6 11,055
Reverse Acquisition reserve 6 (38,048)
Translation reserves 6 (37)
Retained earnings 6 (7,703)
Investment in own shares (7)
Total equity (2,445)
Non-current liabilities
Borrowings 1,000
1,000
Current liabilities
Trade and other payables 7,020
Borrowings 3,323
Provisions 177
10,520
Total liabilities 11,520
Total equity and liabilities 9,075
Consolidated Cash Flow Statement
For the 18 months ended 31 December 2007
18 months
ended 31 Dec
07
£'000
Loss after taxation (1,588)
Adjustments for
Amortisation of intangibles 748
Depreciation 244
Investment income (187)
Interest expense 879
Taxation (189)
Unrealised foreign exchange differences 115
Decrease in stock 7
Decrease in trade and other receivables (1,010)
Decrease in trade and other payables (1,488)
Increase in provisions 17
Cash used in operations (2,452)
Interest paid (879)
Net cash used in operating activities (3,331)
Cash flows from investing activities
Purchase of property, plant and equipment (231)
Costs of reverse acquisition (228)
Interest received 187
Net cash used in investing activities (272)
Cash flows from financing activities
Net proceeds from issue of share capital 1,967
Proceeds from short term borrowings (revolving credit 1,500
facility)
Payment of finance long term borrowings (50)
Net cash from financing activities 3,417
Net decrease in cash and cash equivalents (186)
Cash and cash equivalents at beginning of period (56)
Cash and cash equivalents at end of period (242)
Notes to the preliminary announcement
For the 18 months ended 31 December 2007
1. Basis of preparation
The principal accounting policies of the group are set out in the group's 2007
annual report and financial statements.
2. Loss from Operations
Loss from operations has been arrived at after charging/crediting):
18 months
ended 31 Dec
07
£'000
Research and development costs 3,073
Net foreign exchange losses/(gains) 268
Depreciation of property, plant and equipment
- owned assets 244
Operating lease rentals:
- land and buildings 633
- other 312
Amortisation of internally-generated intangible assets included in 748
other operating expenses
Auditor's remuneration 115
3. Tax
18 months
ended 31 Dec
07
£'000
Analysis of charge in period (continuing operations)
Current tax:
- Current Research and Development tax credit - UK (317)
- Overseas 2
(315)
Deferred tax 187
Taxation (128)
The tax for the period is lower (2006: lower) than the standard rate of the
corporation tax in the UK (30%; 2006: 30%).
The differences are explained below:
18 months
ended 31 Dec
07
Reconciliation of tax expense £'000
Loss on ordinary activities before tax (1,716)
Tax at the UK corporation tax rate of 30% (2006: 30%) (515)
Effect of:
Expenses not deductible for tax purposes 240
Adjustment to goodwill not deductible to taxation 217
UK Losses in current year utilised (58)
Difference in timing of allowances (199)
Total taxation (continuing operations) (315)
United Kingdom Corporation tax is calculated at 30 per cent of the estimated
assessable profit for the 18 month period.
Taxation for other jurisdictions is calculated at the rates prevailing in the
respective jurisdictions.
A deferred tax asset has not been recognised in relation to tax losses due to
uncertainty over their recoverability.
4. Loss Per Share
Basic loss per share is calculated by dividing the earnings attributable to
ordinary shareholders by the weighted average number of ordinary shares
outstanding during the period.
For diluted loss per share, the weighted average number of ordinary shares in
issue is adjusted to assume conversion of all dilutive potential ordinary
shares. Since the group is loss making there is no dilutive impact
18 months ended 31
Dec 07
£'000
Attributable loss (1,588)
Weighted average number of ordinary shares 452,480
Loss Per Share (basic and dilutive) arising from (0.35) p
both total and continuing operations
All potential ordinary shares including options and conditional shares are
anti-dilutive.
5. Business Combinations
On 27 February 2007, Vista International Limited acquired Publishing Technology
plc (formerly known as 'Ingenta plc').
The acquisition has been accounted for as a 'reverse acquisition' in accordance
with IFRS 3 'business combinations'.
Publishing Technology provides technology and associated marketing services to
publishers. The revenue and profit contribution from the acquired business is
indistinguishable from that of the group as the Vista businesses were hived up
into the Ingenta trading businesses from the date of acquisition.
Details of net assets acquired and goodwill are as follows:
The acquisition had the following effects on the group's assets and liabilities
on the acquisition date.
Pre-Acquisition Fair Value Recognised value
carrying amount on acquisition
£'000 £'000 £'000
Cash and cash equivalents (176) - (176)
Property, plant and equipment 308 - 308
Intangibles
- Trade mark - 290 290
- Licences - 1,824 1,824
- Customer relationships - 128 128
Inventories & WIP 7 - 7
Trade and other receivables 1,319 - 1,319
Trade and other payables (4,663) (684) (5,347)
Net liabilities acquired (3,205) 1,558 (1,647)
Cash and cash equivalents in subsidiary acquired (176)
Cash outflow on acquisition (176)
£'000
Purchase Consideration
- Direct costs relating to the acquisition 228
- Fair value of consideration 1,862
Total purchase consideration 2,090
Fair value of net liabilities acquired (1,647)
Goodwill 3,737
The pre-acquisition carrying amounts were determined, based on applicable IFRS's
immediately before the acquisition. The values of assets and liabilities are the
estimated fair values. In determining the fair values of trade marks, licenses
and customer relationships the group has applied a discount rate of 8.13%.
The fair value adjustment on intangibles was calculated by an independent valuer
who under IFRS 3 identified the value of the intangible assets acquired by Vista
as part of the reverse takeover of Ingenta. Intangible assets were measured at
the reverse acquisition date. Only those assets which met the IAS 38 definition
of intangible assets and on which the fair value could be reliably measured were
included.
Trade and other payables have been adjusted to reflect provisions which meet the
criteria within IFRS 3 for recognition.
The fair value of consideration is equal to the value of the market capital of
Ingenta plc at the date of the reverse acquisition as required by IFRS 3, being
186,207,420 shares of 1p each. The combination was effected by the plc issuing
260 million shares of 1p each.
6. Share Capital and Reserves
Ordinary Deferred Share Capital Translation Reverse Merger Investment Retained Total
shares Shares Premium Redemption Reserve Acquisition Reserve in own Earnings
Reserves Reserve shares
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 30 June 2005 37 - 6 - - - - (6) (5,868) (5,831)
Own shares acquired - - - - - - - (1) - (1)
Shares redeemed in the - - - 756 - - - - - 756
year
Total recognised income - - - - (22) - - - (190) (212)
and expenses
Net loss on buy back of - - - - - - - - (35) (35)
own shares
Balance at 30 June 2006 37 - 6 756 (22) - - (7) (6,093) (5,323)
Share movements pre deal 17 803 591 - - - - - (22) 1,389
Acquisition Adjustments 11,556 (803) 20,088 (756) - (38,048) 11,055 - - 3,092
under IFRS3
Total recognised loss - - - - (15) - - - (1,588) (1,603)
Balance as at 31 11,610 - 20,685 - (37) (38,048) 11,055 (7) (7,703) (2,445)
December 2007
The IFRS 3 adjustment reflects the entries required under reverse acquisition
accounting, whereby consolidated shareholders funds comprise the capital
structure of the legal parent combined with the reserves of the legal subsidiary
and post acquisition reserves of the legal parent.
7. 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 consolidated income statement, consolidated statement of recognised income
and expense, consolidated balance sheet at 31 December 2007, consolidated cash
flow statement and associated notes have been extracted from the group's 2007
statutory financial statements upon which the auditors opinion is unqualified
and which do not include any statement under section 237 of the Companies Act
1985.
Those financial statements have not been delivered to the registrar of
companies.
The results for the financial period ended 31 December 2007 are available on the
Company's website www.publishingtechnology.com. Report and accounts for the
financial period ended 31 December 2007 will be sent to Shareholders with
details of the annual general meeting.
This information is provided by RNS
The company news service from the London Stock Exchange
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