Final Results
Ingenta PLC
27 March 2006
Date: Embargoed until 07.00am, Monday 27 March 2006
Contacts: Ingenta
Martyn Rose, Non-Executive Chairman
Simon Dessain, Chief Executive
Tel: 020 7796 4133 (27/3/2006)
Tel: 01865 799000 (thereafter)
Website: www.ingenta.com/corporate
Hudson Sandler
Alistair Mackinnon-Musson
Philip Dennis
Tel: 020 7796 4133
Email: ingenta@hspr.com
Ingenta plc
PRELIMINARY RESULTS
Ingenta plc is a provider of technology and marketing services to the publishing
and information industries, undertaking online delivery of professional,
scholarly and research content and associated services to maximize its use in
corporate, academic, and governmental institutions and their libraries.
Highlights
• Close to break even in the second half
• New products and services launched in all operations
• IngentaConnect hosted titles approaches 10,000 - up by 14%
• Sales in the year of £6.6m (15 month period to 31 December 2004: £8.8m)
• Overheads before exceptional items reduced by 26% to £5.5m (15 month
period to 31 December 2004: £9.5m) 1
• Gross profit £4.9m - margin increased to 75% (15 month period to 31
December 2004: 74%)
• Loss of £0.3m (15 month period to 31 December 2004: loss £3.3m)
• Operating loss reduced by 79% 1
• Trading showed further improvements
1 For comparative purposes 'annualised pro rata' assumes revenue and overheads
accruing evenly over the 15 month period throughout.
Commenting, Simon Dessain, Chief Executive of Ingenta, said:
'In 2005 we significantly reduced our costs and implemented a new structure
targeting the headline goal of achieving profitability on a sustainable basis.
I am delighted the progress made enabled us to achieve the best ever financial
result in our history, finishing the year close to break even in the second
half'.
'The budget adopted by the Board for the coming year plans for ongoing trading
improvements and thereafter delivery of further growth in revenues and
profitability in future years'.
Ingenta: Business Overview
Ingenta provides technology and associated marketing services to publishers from
whom it receives fees. The provision of Ingenta's software and services enable
publishers to make their content available online under a variety of business
models including subscription and pay per view. Ingenta also provides marketing
services to help publishers maximise distribution of their content.
Ingenta charges recurring fees, in many cases under multi year agreements, for
use of its market-leading technology and services. These are in the areas of
content preparation, content enhancement, website creation, marketing services,
online distribution and access management of subscription controlled content.
The services provided by Ingenta not only enable publishers to securely
disseminate their content online but also to make incremental revenues from
their content. In 2005 the Group worked with over 40 new publishers in addition
to over 270 with whom it has existing relationships.
Ingenta's technical skills, its market leadership and its broad understanding of
the issues faced by publishers attempting to distribute content and gain new
online revenues are key business advantages for the Group.
Ingenta's three principal activities are as follows:
1) IngentaConnect (www.ingentaconnect.com)
2005 saw IngentaConnect add another 25 new publishers to its customer base.
IngentaConnect provides online access to over 9,500 titles to those wishing to
conduct academic or scientific research and during the year achieved a new peak
of nearly 20 million user sessions a month. IngentaConnect enables publishers
to reach an audience beyond their traditional subscriber bases, for instance it
allows free access to paid-up subscribers of a publication, with other
non-subscribers able to purchase individual articles on a pay per view basis.
Institutions also engage Ingenta to create online student course packs through
the Group's Heron service, which is used by over 45% of UK Higher Education
institutions and which generates a further royalty stream for publishers.
Ingenta also operates a small number of premium services of direct benefit to
institutions and users of IngentaConnect, for which there is an annual charge.
2) Information Commerce and Publication Websites (ICS)
Publishers have a range of complex needs to maximise the value of the content
they create in online environments. This may include increasing awareness and
readership, capturing data about customers, revenue goals or cost targets for
online delivery. All these aims require publishers to have flexible tools to
rebundle, rebrand and market their content online and also to create branded
websites through which users can purchase and access this content.
Ingenta provides software and services to meet these needs, the core of which is
a software package called Information Commerce Services (ICS), which is offered
to publishers for use by them or as part of publication websites created,
maintained and run on behalf of publishers, by Ingenta.
3) Publishers Communication Group (PCG)
Ingenta's 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 market representation
services. In addition PCG has recently introduced market segmentation and
publisher consulting services.
PCG provides services to over 50 North American and European publishers with
programs delivered in over 40 countries in 8 languages on their behalf.
Chairman's Statement
The year to 31 December 2005 saw Ingenta significantly reduce its operating
costs and implement a new organisational structure in order to target the
headline goal of profitable trading and also to support future revenue growth.
The trading progress made during the year enabled the best ever financial result
in the company's history to be achieved being close to break even for the second
half.
Finance and Operations
Turnover in the year was £6.6m (15 month period to 31 December 2004: £8.8m). The
gross margin improved to 75% (15 month period to 31 December 2004: 74%).
As a result of actions taken to reduce costs, the loss before tax in the year
decreased by 79% on a pro rata basis to £0.6m (15 month period to 31 December
2004: loss £3.7m), inclusive of £1.2m (15 month period to 31 December 2004:
£1.8m) invested in Research and Development, all of which was expensed through
the profit and loss account as incurred. A Research and Development tax credit
of £0.3m for the year (2004: credit of £0.4m) has resulted in a net loss for the
financial year of £0.3m (15 month period to 31 December 2004: loss £3.3m). The
year showed an improving trading trend overall.
The Group's net cash balances at 31 December 2005 were £0.3m (2004: £0.9m)
The Group's leading academic and research publications hosting platform,
IngentaConnect (www.ingentaconnect.com) continued to perform strongly and 2005
saw the release of new services for both publisher clients and end users. In
addition, Ingenta's Information Commerce (ICS) unit completed further important
contracted software deliveries and gained new website agreements from three
clients. Finally the Group's Publisher Communication Group (PCG) worked with 18
new publishers, further demonstrating the value of the high quality services
offered.
Ingenta's activities with Google, including Google Scholar, continue to provide
both parties with benefits. This work allows us to assist publishers in
maximising their online presence, not only with Google, but also with a large
range of other information discovery and search resources.
Further increases in operational efficiency have enabled Ingenta to increase its
gross margin. The central importance Ingenta places on software engineering, in
order to drive down the cost of delivering services to clients through
automation and improved reliability, continues. This aspect is underlined by
the ongoing level of research and development expenditure incurred by the Group.
Ingenta's acute understanding of the issues faced by publishers trying to reach
global audiences for their content and to derive new revenues from online
delivery of content, remain key business advantages for the Group.
Staff
During the first quarter of 2005 the number of people employed by Ingenta
declined further, from 114 to 94 at the end of the first quarter and then to 86
full time equivalent employees at the year end.
The changes completed in the year succeeded as a result of the contributions
made by staff across the whole Group. The resulting financial progress was only
possible with their support and the Board wishes to thank them for their
enthusiasm, hard work and commitment.
The Board would also like to thank David Embleton, who stepped down as
Non-Executive Director at our 2005 Annual General Meeting, for his six years of
contribution to the Group during Ingenta's early and formative stages of
development.
Current Trading and Prospects
2005 saw the Group deliver major improvements in its financial performance, with
substantial reductions in losses and the beginning of returns from the new
products and services introduced over the last 18 months.
Having achieved a sustainable lower cost base the task for the Board ahead, is
to focus on generation of an improved sales pipeline and increased revenues.
Martyn Rose
Chairman
Chief Executive's Review
Ingenta provides services for publishers of high value content, including market
leading services in the areas of content preparation and enhancement, website
creation, marketing services, online distribution and access management for
subscriber controlled content. Access management in particular requires
sophisticated and complex technical solutions for which Ingenta is a market
leader. The use of such technology is a pre-requisite for publishers wishing to
exploit new and evolving e-commerce opportunities and thus derive incremental
revenues from their digital content.
Ingenta continues to generate over 90% of its revenues from providing technology
and marketing services to publishers, with the remaining revenues coming from
institutions and end users of the Group's services. In 2005 Ingenta again
expanded the number of publishers it works with by adding an additional 40
clients. The majority of the Group's publisher revenues consist of recurring
annual fees and long term contracts derived through the following three
principal activities:
IngentaConnect (www.ingentaconnect.com)
2005 saw IngentaConnect cement further its position as a leader in its sector,
with over 8,000 research and professional publication titles. Title growth of
14% in the year was achieved, though publisher consolidation has reduced our
number of imprints. During the year, the site saw a peak of over 20 million
monthly user sessions from around 20,000 institutions spread across 160
countries and at an availability level in excess of 99.99%. In addition over
20,000 further titles are available for searching and delivery through fax pay
per view.
IngentaConnect provides online access to over 245 academic imprints for those
conducting academic or scientific research worldwide. During the year
world-leading specialist publishing group, Springer, revised a long-term
contract with Ingenta and increased the number of titles available through our
service to over 1,000. With over 60 linking partners and a large number of
search and discovery services pointing users towards IngentaConnect, publishers
gain access to a far wider audience for their content, beyond their traditional
individual subscriber bases.
Following the establishment of IngentaConnect's new technology platform,
launched in 2004, a rolling program of new services for publishers continued
through 2005 including Connect Collections. This service provides the ability
to create subsets of content, discipline or topic based, which can be offered as
a collection, enabling specialist libraries to easily expand their holdings in
specific subject areas.
2005 also saw the launch of byDesign, a service through which publishers can add
the extensive functionality of IngentaConnect to their own websites. This
service allows paid-up subscribers of a publication to download articles for
free, or non-subscribers to purchase individual articles online on a pay per
view basis from the byDesign element of the publisher's website.
In addition, Ingenta's Heron service creates online student course packs and is
in use by over 45% of all UK Higher Education institutions. Through the Heron
website, institutions can request digitisation, copyright clearance and course
pack distribution services. Article pay per view through IngentaConnect and
Heron together generate royalty revenues of over £1m per annum for Ingenta's
publishers.
Ingenta also now provides a small number of chargeable premium services, which
are of direct benefit to users of IngentaConnect. There are three new products
in this area, including IngentaConnect Premium, an enhanced package of user
services available for a small additional fee and IngentaConnect Complete and
IngentaConnect InTouch, new services designed for libraries. Revenues from the
IngentaConnect operation comprise set up and annual fees, as well as revenue
sharing, and they contributed 58% of Group turnover during the year.
Information Commerce and Publication Websites
Print publications face financial pressure as access to information is
undertaken in an increasing range of ways. These pressures require publishers to
increase their revenues from digital content. Through Ingenta's Information
Commerce Services (ICS) we provide business and professional publishers, as well
as our current research oriented publishers, with a solution to this problem.
As with our IngentaConnect operation, the core of our proposition is a set of
features enabling publishers to define which kinds of user can access what
content and under what licence terms. When combined with Ingenta's ability to
tailor and deliver branded web pages containing the client's content, or
facilities enabling the client to upload and update content within a website,
these features are a key part of Ingenta's competitive advantage and are part of
a product family generally referred to as ICS. ICS also delivers both a faster
time to market and an improved return on investment for publishers.
Ingenta's ICS group designs, builds, maintains and operates websites and
provides a standalone software product.
In 2005 the unit undertook further work for Oxford University Press, McGraw Hill
and the World Bank and initiated work with UNESCO and the IMF. Important further
deliveries were made to our first ICS software client, the Institute of Physics
Publishing.
Ingenta's revenues from ICS are generated from initial and ongoing fees from the
sale of software and also from the integration into, and management of,
publication websites. Revenues from the ICS unit contributed 28% of Group
turnover for the period.
Publishers Communication Group (PCG)
PCG provides specialised marketing and business development services to meet the
needs of professional and scholarly publishers.
In 2005 the PCG unit continued to expand its reach into the European publisher
market, adding sales representation and consortia licensing services and as a
result 50% of PCG revenues in 2005 came from providing European services.
During the period, PCG also launched a new service called the Market
Segmentation Study. This analyses a publisher's penetration into the U.S.
library market, in comparison with other competing journals. Customised
consulting services provided by PCG also help publishers to develop
institutional site licenses, analyse their operations, and to study tiered
pricing.
In 2005, PCG grew its client base substantially by adding 18 new publishers
including American Society of Clinical Oncology, Taylor and Francis - an Informa
business, Society for Endocrinology, Water Environment Federation and Elsevier.
Ingenta's revenues in this area are largely fee based and represented 14% of
Group turnover during the period.
Operations
The Group improved productivity substantially during the period, with strong
reductions in operating costs which were down 26% on an annualised pro rata
basis. This improved productivity was largely down to increased automation of
tasks and improved technical reliability.
In the year to 31 December 2005, the Group maintained a high level of investment
in software engineering activities consistent with our determination to continue
to be a leading provider of technology and services to publishers. The Group
does not expect to reduce the number of people employed in 2006 and currently
has a number of vacancies to support business growth as a result of the steady
release of new products and services.
Automation of tasks through use of software technologies remains the key to
continuing to improve services and margins.
Outlook
The strength of our products and the encouraging financial progress in 2005
place Ingenta in a strong position to grow the business organically in 2006 and
to explore new opportunities. These may include expansion of our established
services into additional publisher markets and acquisitions of similar
businesses to increase the Group's scale.
The budget adopted by the Board for the coming year plans for ongoing trading
improvements and thereafter delivery of further growth in revenues and
profitability in future years.
Simon Dessain
Chief Executive Officer
Consolidated profit and loss account for the year ended 31 December 2005
Year ended 15 months ended
31/12/2005 31/12/2004
Audited Audited
£m £m
Turnover 6.6 8.8
Cost of sales (1.7) (2.3)
Gross profit 4.9 6.5
Administrative expenses (5.5) (10.2)
Operating loss (0.6) (3.7)
Interest payable and similar charges - -
Loss on ordinary activities before taxation (0.6) (3.7)
Tax on loss on ordinary activities 0.3 0.4
Loss for the financial period (0.3) (3.3)
Loss per 1p share
- basic and diluted (0.2)p (2.5)p
All activities are classified as continuing
Consolidated balance sheet as at 31 December 2005
31/12/2005 31/12/2004
Audited Audited
£m £m
Fixed assets
Tangible assets 0.2 0.4
Investments 0.2 0.2
0.4 0.6
Current assets
Debtors 2.3 2.7
Cash at bank 0.6 0.9
2.9 3.6
Creditors: amounts falling due within one year
Deferred income (1.6) (2.0)
Other (3.2) (2.9)
(4.8) (4.9)
Net current liabilities (1.9) (1.3)
Total assets less current liabilities (1.5) (0.7)
Provisions for liabilities and charges (0.1) (0.5)
Net liabilities (1.6) (1.2)
Capital and reserves
Called up share capital 7.5 7.5
Share premium account 21.0 21.0
Merger reserve 11.0 11.0
Reverse acquisition reserve 12.7 12.7
Profit and loss account deficit (53.8) (53.4)
Equity shareholders' deficit (1.6) (1.2)
Consolidated cash flow statement for the year ended 31 December 2005
Year ended 15 months ended
31/12/2005 31/12/2004
Audited Audited
£m £m
Cash flow from operating activities
Operating loss (0.6) (3.7)
Depreciation charge 0.2 0.7
Increase/(decrease) in debtors 0.2 (0.3)
Decrease in creditors and provisions (0.8) (0.6)
Net cash outflow from operating activities (1.0) (3.9)
Taxation received 0.5 0.3
Capital expenditure and financial investments
Purchase of tangible fixed assets (0.1) (0.1)
Management of liquid resources
Sale/(purchase) of short term deposits 0.7 (0.7)
Net cash inflow/(outflow) from management of 0.7 (0.7)
liquid resources
Net cash inflow/(outflow) before financing 0.1 (4.4)
Financing
Issues of shares at a premium - 5.0
Repayment of principle under finance - (0.1)
leases
Cash inflow from financing - 4.9
Increase in cash in the period 0.1 0.5
Statement of consolidated total recognised gains and losses for the year ended
31 December 2005
Year ended 15 months ended
31/12/2005 31/12/2004
Audited Audited
£m £m
Loss for the financial period (0.3) (3.3)
Currency translation differences on
foreign currency net investments (0.1) 0.2
Total recognised losses for the period (0.4) (3.1)
Notes to the preliminary announcement of audited results for the year ended
31 December 2005
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 Reconciliation of movements in equity shareholders' funds
Group
31/12/2005 31/12/04
Audited Audited
£m £m
Loss for the period (0.3) (3.3)
Net exchange adjustments (0.1) 0.2
New share capital issued - 5.4
Expenses of share issue - (0.4)
Net (reduction to)/increase in shareholders' funds (0.4) 1.9
Opening shareholders' funds (1.2) (3.1)
Closing shareholders' funds (1.6) (1.2)
Reconciliation of net cash flow to movement in net funds/(debt)
Group 2005 2004
£'000 £'000
Increase/(decrease) in cash in the period 110 550
Cash used to (decrease)/increase liquid resources (680) 680
Finance lease repayments 1 84
Change in net debt resulting from cash flows (569) 1,314
New finance leases (6) -
Movement in net funds in the period (575) 1,314
Net funds/(debt) at beginning of the period 883 (431)
Net funds at end of the period 308 883
3 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 Group balance sheet as at 31 December 2005 and the Group profit and loss
account, statements of total recognised gains and losses, consolidated cash flow
statement and associated notes for the year then ended have been extracted from
the Group's 2005 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.
The auditors have included an emphasis of matter statement with regard to going
concern. They have drawn attention to the Directors statement that they
regularly review forecasts of trading and cash flows and examine these against
available funding. The Group has suffered a loss for the year of £0.3m and has a
net balance sheet deficit of £1.6m. The forecasts anticipate increases in
revenues and maintenance of the Group's current banking facilities. Some of the
forecast increases in revenue are supported by new contracts already won. The
Group has examined its ability to achieve cost saving measures in the event that
further new business does not meet the forecast in order to make its assessment.
The directors have a reasonable expectation that the Group has sufficient
resources to continue in operational existence for the foreseeable future and
thus continues to adopt the going concern basis in preparation of these
financial statements.
The Group's statutory accounts have not yet been delivered to the Registrar of
Companies.
4 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
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The information in this document does not constitute, or form part of, any offer
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