Final Results
Huveaux PLC
06 March 2006
6 March 2006
Huveaux PLC
2005 PRELIMINARY RESULTS
Highlights
• Group turnover up 92%
• Organic sales from existing operations up 12.5%
• Profit before tax and exceptionals up 74%
• EPS before exceptionals up 24%
• Three strong divisions each with market leadership
• Digital media now 28% of annualised Group turnover
• Successful integration (including significant cost savings) and good performances from recent acquisitions
Summary of Results
£'000 2005 2004
Turnover 27,736 14,433
Profit before tax and exceptional items* 4,270 2,450
Profit before tax 2,136 2,128
Earnings per share before exceptional items (basic)* 2.72p 2.19p
Earnings per share (basic) 1.45p 1.94p
Dividend per share 1.10p 1.00p
*Exceptional items amounted to £2,134,000 (2004: £322,000) relating to the cost
of planned restructuring following acquisitions made during the year.
Commenting on the results, John van Kuffeler, Executive Chairman, said:
'Huveaux continued to deliver significant increases in both revenues and profits
through a combination of strong organic growth and the two strategic
acquisitions of Epic and JBB Sante. We now have an excellent platform for the
next phase of growth and remain on track to achieve our stated objective of
building a substantial, high quality B2B publishing and media group.'
A presentation for analysts will be held at 9.30am today at Finsbury, Tenter
House, 45 Moorfields, London EC2Y 9AE.
For further information, please contact:
Huveaux PLC
John van Kuffeler, Executive Chairman 0207 245 0270
Finsbury
James Leviton
Don Hunter 0207 251 3801
About Huveaux
Huveaux was formed in 2001 with the objective of building a substantial, high
quality publishing and media group through organic and acquisition-led growth.
Huveaux provides essential and intelligent information to both the public and
private sectors.
Since being admitted to the Alternative Investment Market in December 2001, the
Company has successfully completed the acquisition of nine complementary
businesses which have been organized into three Divisions: Political, Learning
and Healthcare. It is the market leader in political publishing and e-learning
in the UK and the leading Continuing Medical Education magazine publisher in
France.
Products comprise magazines, websites, electronic databases, reference books,
e-learning content and delivery, revision guides, manuals, videos, conferences,
seminars and events. Huveaux has offices in London, Paris and Brussels as well
as five regional UK offices.
Further information about Huveaux can be found at www.huveauxplc.com
The name Huveaux is a trademark of Huveaux PLC. All other trademarks mentioned
herein are the property of Huveaux's respective subsidiary companies. All rights
reserved.
CHAIRMAN'S STATEMENT
2005 OVERVIEW
The year 2005 saw a further major transformation of Huveaux in line with our
stated objective of building a substantial, high quality publishing and media
group through organic and acquisition-led growth. For the third consecutive
year, we again doubled our size after completing the two major acquisitions of
Epic and JBB Sante, thereby creating a more balanced business with a broader
spread of revenues and profits.
We are also pleased to announce another set of record results. Sales grew 92% to
£ 27.7 million; pre-tax profits (before exceptional items) grew 74% to £ 4.3
million and earnings per share (before exceptional items) grew 24% to 2.71
pence. Excluding acquisitions, organic sales growth was 12.5%. Profit before tax
(but after exceptional items) was £2.1 million, the same as in last year.
In line with our progressive dividend policy, the Board is recommending a final
dividend of 1.1 pence per share for 2005, an increase of 10 % on the prior year.
Our growth and broader range of operations have been achieved while maintaining
a strong balance sheet, including the introduction of a modest level of debt to
optimise shareholder returns. At the year-end, we had net debt of £7.6 million
and shareholders' funds of £44.0 million.
STRATEGIC PROGRESS
The strength of our performance and achievements in 2005 clearly demonstrate
that we are delivering on our stated objective. We now have three business
divisions, each of which is a market leader in a growing sector:
Political Division
We are the market leader in the UK and EU political B2B sector and have achieved
organic revenue growth in excess of 15% in each of the past two years. We see
continued growth opportunities as we further develop our services and offerings
in the political sector.
Learning Division
We are the UK market leader in e-learning and there are indications that this
market will see good growth reflecting the significant government support for
e-learning and the increasing trend for training and learning to include an
e-learning element. Overall, our Learning Division achieved like-for-like sales
growth of 6 % in 2005 which we intend to build upon in 2006.
Healthcare Division
We are the market leader in magazines for Continuing Medical Education (CME) in
France which is becoming mandatory in 2006. In addition, we have a
market-leading medical website in France. In 2005, we achieved 23% like-for-like
organic sales growth but we expect our much larger business to settle down to
more modest growth in 2006.
DIGITAL MEDIA
A very important aspect to our business is the growing demand in all our markets
for high quality information and services to be available and delivered through
online digital media. Currently, digital media represents some 28% of the
Group's annualised revenues. We will continue to invest more resources into this
important area in 2006 as well as exploit the necessary skills and experience
available to us through the acquisition of Epic. We expect online digital
revenues to grow in the future as more and more of our customers recognise its
benefits.
PROGRESS ON ACQUISITIONS
Epic Group plc ('Epic')
Our recommended offer for the strategic acquisition of Epic, the UK's market
leader in bespoke e-learning solutions, was declared unconditional on 22 August
2005.
The planned integration and restructuring programme, which included a complete
change in the Board of Epic, has now been successfully completed, achieving a
cost saving of £0.3 million per annum. The new management team has bedded in
well, and the year finished with a good performance in the final quarter of
2005, including an outstanding month for orders in November.
The move into e-learning products and the establishment of joint initiatives
within the Group is already underway. Most notable are the ventures involving
Lonsdale's revision guides and JBB Sante's medical publications.
Les Editions Jean-Baptiste Bailliere Sante ('JBB Sante')
On 5 October 2005, Huveaux completed the acquisition of JBB Sante, the
market-leader in magazine publications for CME in France.
The integration of JBB Sante with our existing French healthcare publishing
business, ATP-Egora, has been successfully completed along with the planned cost
reduction and restructuring programmes. The result has been a cost saving of
€1.0 million (£0.7 million) per annum; the targeted relaunch of certain key
titles and a strong performance in the final quarter of 2005.
The outlook in 2006 for the Healthcare Division in France is positive
particularly given the more competitive cost base and the more dynamic
management team now in place. The anticipated increase in revenues arising from
the introduction of compulsory CME, which will require doctors to subscribe to
professional magazines such as those published by JBB Sante, will begin once the
detailed requirements have been finalised by the French Government. These are
expected in the second half of 2006.
BOARD, MANAGEMENT AND PEOPLE
During the course of last year, we continued the strengthening of our Board and
senior management to reflect the enlarged and broader operations of the Group.
Gerry Murray, who has made a significant contribution to Huveaux since joining
in May 2004, was promoted to the newly-created post of Group Chief Executive in
November 2005. This appointment will also enable the Executive Chairman, John
van Kuffeler, to dedicate more time to the overall strategy and direction of the
Group's future activities.
Dan O'Brien was appointed to the Board as Finance Director and Michael Arnaouti
appointed as Company Secretary and Director of Corporate Services on 1 January
2006. Both have a wealth of international experience in acquisitions, large PLC
management and good corporate governance practice.
We have also continued to strengthen the operational management of all three of
our operating divisions.
David Horne and Jean-Marie Simon stepped down from the Board effective from 31
December 2005 and 6 March 2006 respectively. The Board would like to thank each
of them for their hard work and dedication to the business during the past three
years. We wish them both well in their future careers.
The Board would also like to thank our management and staff for their hard work
and dedication in 2005 and for their achievements in contributing to the
continuing success of Huveaux.
2006 OUTLOOK
It is still early in the year, but the results for January and February are
encouraging.
We have a sound, well-balanced platform of businesses with market-leading
positions. This, together with the planned development and introduction of a
number of key products and initiatives in each of our three divisions, gives us
confidence that we can continue to build on our strong performance and deliver
sound organic growth in 2006 and beyond.
We have a powerful management team and a strong balance sheet and these will
assist us in pursuing our strategy of making further targeted acquisitions.
CHIEF EXECUTIVE'S REVIEW
MARKET AND OPERATION OVERVIEW
2005 was a year for delivering on our promises and we have done so. We doubled
our overall revenue base and increased like-for-like revenues and profits in
each of our three operating divisions. In parallel, we also successfully
integrated two major strategic acquisitions and created a strengthened,
market-focused management structure designed to facilitate our future expansion.
POLITICAL DIVISION
The Political Division contributed operating profit, before exceptionals, of
£1.6 million (2004: £1.3 million) on revenues of £9.7 million (2004: £6.3
million) with organic revenue growth of 18% in 2005.
The political markets were dominated by the UK general election in May 2005,
which was a double-edged sword as the political markets are usually soft before
and buoyant after an election. With careful attention to the new information
needs of our customers following the election, we delivered an overall 19.6%
improvement in like-for-like operating profits from our UK political business.
This included substantial profit improvement from our Data and Reference
business, including Dod's Parliamentary Companion, and our executive search
business, Electus.
Particularly satisfying were the establishment of the fortnightly publication
Whitehall and Westminster World as the leading journal for senior civil servants
and the continued advance of ePolitixPlus, our political monitoring business.
Both of these are relatively new areas for us and offer a good opportunity for
future growth.
The continued drive to improve and develop our Brussels-based EU political
business, resulted in a strong performance in 2005. Parliament Magazine, which
is dedicated to political affairs in the European Parliament and Commission, has
now firmly established itself as essential reading within the Brussels political
community. We have recently launched an EU political monitoring service in
Brussels, modelled on our successful UK ePolitixPlus service. We believe that
the increasingly sophisticated Brussels political market offers further
significant opportunity for growth in the medium-term.
LEARNING DIVISION
The Learning Division contributed operating profit, before exceptionals, of £2.5
million (2004: £1.8 million) on revenues of £11.2 million (2004: £7.0 million)
with organic revenue growth of 6%.
Our Political Knowledge business - providing seminars, conferences and training
in the political and government sector - was, as expected, hindered by the UK
election but still delivered a 12% improvement in like-for-like operating
profits. We also continued to see excellent progress in enrolment for our
Certificate for Public Service Delivery for which we expect to see record intake
numbers in 2006.
In spite of reported static school budgets in 2005, our Lonsdale school revision
guides business grew substantially, delivering a 23% improvement in operating
profit with another year of new title launches and revenue growth. Due to the
significant curriculum changes being introduced in 2006 in Sciences at Key Stage
4, there are both challenges and potential increased market share opportunities
available to us. Our development programme for the new curricula is well
advanced and we are confident in our ability to deliver the new revision guides
in line with our high quality market reputation.
As indicated last year, Training Journal is now being produced in London
alongside our other magazines and was relaunched during the year. The remaining
Fenman business has been downsized, with new management adopting a business
model aligned to market conditions and e-commerce opportunities. Although it is
only a small part of our business, its progress will continue to be carefully
monitored.
Epic, which became part of Huveaux in late August 2005, has already become a
crucial part of the Learning Division. It had an outstanding month for orders in
November and it exceeded our expectations for both revenues and profits in 2005.
The business and strategic objectives for Epic are discussed further under
'Acquisitions and Integration Strategy' below.
HEALTHCARE DIVISION
Our newly established Healthcare Division comprises JBB Sante, which became part
of Huveaux in early October 2005 (see below), and ATP-Egora, both based in
Paris. It also includes, for the time being, our small French-based political
business. The combined revenues of these businesses in 2005 (for the periods
owned) were £6.8 million (2004: £1.1 million) and operating profits, before
exceptionals, were £1.4 million (2004: £0.2 million). Like-for-like revenue
growth in 2005 was 37% for the smaller business ATP-Egora.
While the Healthcare advertising market in France remained flat during 2005,
more innovative web-based offerings from ATP-Egora together with completion of
the planned €1.0 million (£0.7 million) cost saving programme at JBB Sante
before the year-end, helped to produce a significant profit contribution. Our
strategy in this business is to establish a number of new revenue sources in
addition to advertising, particularly in the area of Continuing Medical
Education (CME).
Healthcare is the second largest media market in France. The acquisition of JBB
Sante has given us a substantial presence in that market and its merger with
ATP-Egora gives us the opportunity to modernise, reinvigorate and further
enhance the profitability of the Division. That programme is well underway (see
below).
ACQUISITIONS AND INTEGRATION STRATEGY
During the year, Huveaux made two strategic acquisitions:
Epic
Epic is the leading e-learning provider in the UK. It has a blue chip client
base both in the public and private sectors and is renowned for its innovative
learning solutions. However, it has historically restricted itself to sourcing
revenue solely from the bespoke market with no recurring revenue stream and very
little retained intellectual property value. From the outset, it has been our
intention to extend Epic's skill set and experience and expand its revenue base
by altering the business model and building a portfolio of owned IP which can
deliver an additional and recurring revenue stream over the longer term.
Consequently, our strategy for Epic is to:
•Create a Huveaux-owned product portfolio combining Epic's innovative
e-learning techniques with our existing learning content. These products
will be sold based on an annual user licence model. Our first chosen areas
are Leadership, Compliance and Human Resources Legislation;
•Further develop the existing bespoke business model to increase the
element of learning consulting and to combine, where opportunities exist,
with our other learning offerings to give customers new and improved blended
learning solutions;
•Develop further Epic's powerful learning consultancy capability;
•Invest in the high quality web development capability at Epic which has
been underexploited to date; and
•Develop, through internal joint ventures, electronic versions of our
existing product where they offer customers an extra benefit.
In Epic we have acquired a high quality, highly-skilled business and workforce
and we will leverage that strength to add value across a wider range of online
services. The skill base there will also be crucial to us beyond e-learning in
the development of all our online digital media products in the future. Epic has
given us a new digital capability, confidence and ambition which we now intend
to exploit across the entire Huveaux Group.
JBB Sante
With the acquisition of JBB Sante, we have established a substantial foothold in
the second largest B2B media market in France. It publishes the leading weekly
magazine for GPs as well as several other magazines focusing on clinical
knowledge and the operation of a medical practice.
Our planned strategy from the outset has been very clear:
•Replace the existing senior management with our own management team;
•Achieve €1.0 million (£0.7 million) annualised cost savings through a
targeted restructuring programme;
•Integrate the business with our existing healthcare operation, ATP-Egora;
•Improve and relaunch all the major titles; and
•Develop new sources of revenue, principally through new initiatives in
CME and including a joint venture with Epic.
All of these measures have already been completed with the joint venture now
underway. We are intent on reducing the proportion of total revenue that comes
from advertising. New revenue streams from subscription sales and medical
learning initiatives will become more important going forward.
DIGITAL MEDIA
Since the initial acquisition of Vacher Dod in 2002, with its dodonline
subscription website, Huveaux has continued to identify and grow its digital
capacity. The importance of online business offerings and the capability to
design, build and supply digital services has been a key driver in Huveaux's
historic and future growth plans. Digital revenues already account for 28% of
the Group's total annualised turnover.
Our objective is to provide customers in all our markets with the high-quality
content and services they require at the time and in the formats they require,
whether through print, digital, seminars, classroom activity, events or a
combination of any of these delivery formats. We have seen increasing demand for
online digital offerings and we expect this to continue.
The acquisition of Parliamentary Communications in mid-2004 brought the prime UK
political news and information website ePolitix into the Huveaux portfolio. This
site is highly regarded for its political news and information and houses almost
400 MPs' websites with the number increasing monthly since the May 2005
election. The political monitoring service ePolitixPlus offers online bulletins
tailored to specific industries and client needs. ePolitixPlus delivered revenue
growth in excess of 29% in 2005.
At ATP-Egora, we also have in place a market-leading website for healthcare
professionals in France and which provides e-bulletins for customers on profiled
topics of interest. This business grew 37% in 2005.
The acquisition of Epic, which has increased Huveaux's digital revenues from
£2.2 million to more than £11.0 million on an annualised basis, represents a
further important step in cementing our online digital capabilities and
ambitions. Within the Huveaux Group, the opportunity now exists to build on this
invaluable experience and develop a wider range of digital offerings to the
business communities we serve. It also provides the platform to further develop
our existing content and knowledge resource through new methods of internet and
electronic delivery. From this, we expect to create new profitable and
customer-led revenue streams for the Group.
This year will see a further strengthening of Huveaux's digital capability and
offerings as the Company grows its capacity and all divisions develop their own
market-facing initiatives in this important strategic area. Huveaux will embrace
a programme of internal development designed to offer our customers an online
digital facility when and where they require it and across all markets and
geographies.
MANAGEMENT FOCUS
With the increased size and breadth of the Group's operations, we have
established a management structure which supports both current and future
growth. Increased responsibility has been passed down the management chain,
overseen by the experienced Huveaux Board. We have been enthusiastic to
undertake this as we have been fortunate enough to inherit local management
talent with the recently acquired businesses who are committed to our growth
strategy. We have also successfully attracted additional sector management with
relevant expertise to help strengthen our relatively young teams and deepen our
resources.
The Executive Management Committee has recently been introduced and is chaired
by the CEO. It also comprises the Finance Director, each Divisional Managing
Director, the central Heads of Finance, Marketing and Development and the
Company Secretary. Its primary objective is to review and monitor the actual
operational and financial performance of the Group against Board agreed business
plans and budgets.
FINANCIAL REVIEW
The Group's results for the year to 31 December 2005 showed continued
substantial growth and improvement from the existing businesses and from each of
the two major acquisitions completed during the year, namely, Epic and JBB
Sante. Turnover for the year was up 92% to £27.7 million (2004: £14.4 million)
and pre-profits before exceptionals were up 79% to £4.3 million (2004: £2.5
million). The Group's balance sheet remains strong with net debt of £7.6 million
at the year-end including, for the first time, bank debt of £10.3 million.
TURNOVER AND OPERATING RESULTS
Turnover for the year increased by 92% to £27.7 million of which
acquisitions made during the year contributed £7.6 million. The turnover from
the ongoing businesses grew by 12.5% in 2005 on a like-for-like basis, with
acquisitions in the prior year contributing a further £3.8 million to the
overall revenue increase.
Profit before tax was £2.1 million (2004: £2.1 million) and before exceptional
items was £4.3 million (2004: £2.5 million).
EXCEPTIONAL ITEMS
The exceptional items totalling £2.1 million relate primarily to the planned
restructuring of the operations at both Epic and JBB Sante, which commenced
immediately following completion of their respective acquisitions. Costs
associated with the restructuring of the Board composition also form part of the
exceptional items.
An exceptional interest charge of £0.2 million was incurred during the year.
This related to the £8.5 million bridging loan facility with Bank of Scotland
which was established to part finance the acquisition consideration for Epic.
The loan was repaid, and the facility cancelled, immediately following
completion.
TAXATION
The utilisation of tax losses, together with the increase in the proportion of
the Group's profits which are generated in France, has led to an increase in the
overall rate of effective tax to 20.3% (2004: 16.3%). While the Group continues
to seek to optimise its tax position going forward, it is expected that the
blended tax rate will increase further.
EARNINGS PER SHARE
The adjusted EPS (pre-exceptional items) was 2.72 pence (2004: 2.19 pence),
representing a 24% increase. Basic EPS was 1.62 pence (2004: 1.45 pence).
DIVIDENDS
Based on the Group's continuing strong financial performance and in line with
the Company's stated progressive dividend policy, the Board is proposing a final
dividend for the year of 1.1 pence per share, up 10% on last year's final
dividend. Subject to shareholders approval at the forthcoming Annual General
Meeting, this dividend will be paid on 31 May 2006 to shareholders registered on
28 April 2006.
LIQUIDITY AND CAPITAL RESOURCES
During the year, Huveaux entered into a €15.0 million (£10.3 million) seven-year
term loan with Bank of Scotland. This loan was used to finance the acquisition
consideration of JBB Sante together with the associated integration costs,
initial working capital requirements and transaction fees.
Interest payable during the year on the term loan was £0.1 million. Interest
receivable was £0.1 million, which is consistent with the prior year.
During the period, the business generated cash equal to 100% of its operating
profit. This, less certain acquisition and restructuring costs, resulted in
Group cash generated of £1.2 million (2004: £0.7 million). At the year-end, the
Group had £2.7 million (2004: £3.1 million) of cash balances and net debt of
£7.6 million.
DERIVATIVES AND OTHER INSTRUMENTS
In 2005, Huveaux's financial instruments comprised bank loans, cash deposits and
other items such as normal trade debtors and creditors. The main purpose of
these financial instruments is to finance the Group's day-to-day operations. The
Company held no derivative instruments during the year.
In February 2006, the Company entered into certain derivative transactions in
order to manage the financial risk exposures arising from the Group's activities
such as interest rate, liquidity and foreign currency risks. The Group's policy
is that no speculative trading in derivatives is permitted. The Board regularly
reviews and agrees policies for managing these risks and the current situation
is as follows:
Liquidity Risk
The Group has in place a £1.0 million working capital facility with Bank of
Scotland for the purpose of providing contingency funds in the event of any
significant delay in converting working capital into cash.
Foreign Currency Risk
The Group now derives a significant proportion of revenue from its operations in
France. The investment in these operations is naturally hedged by the €15.0
million seven-year term loan. In February 2006, the Group entered into a forward
exchange contract to partially hedge the exposure on translating the resulting
profits and cash flows from its French operations into sterling.
Interest Rate Risk
The outstanding €15.0 million seven-year term loan attracts interest payable in
Euros and is calculated with reference to the prevailing Euribor interest rate.
In order to limit any forward exposure to changes in the Euribor rate, the Group
has entered into an interest rate cap for the term of the loan.
Adoption of International Financial Reporting Standards
Huveaux is required to comply with International Financial Reporting Standards
('IFRS') with effect from 1 January 2007. We are currently undertaking a review
programme in relation to the requirement of IFRS and their likely impact on the
Group's financial position. It is expected that this review will be completed
during the first half of 2006. Consequently, we propose to update shareholders
further as part of the Company's 2006 interim results announcement.
CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the year ended 31 December 2005
Note
2005 2004
£ 000s £ 000s
Turnover
Continuing operations 2 20,065 14,433
Acquisitions 2 7,671 -
27,736 14,433
Cost of sales (15,646) (6,872)
Gross profit 12,090 7,561
Administrative expenses (7,826) (5,217)
Exceptional items 3 (1,903) (322)
Total administrative expenses (9,729) (5,539)
Continuing operations 2 1,882 2,022
Acquisitions 2 479 -
Total operating profit 2,361 2,022
Other interest receivable and similar income 111 116
Interest payable and similar charges (105) (10)
Exceptional items 3 (231) -
Interest payable and similar charges (336) (10)
Profit on ordinary activities before taxation 2,136 2,128
Tax on profit on ordinary activities 4 (433) (345)
Profit for the financial year 1,703 1,783
Earnings per share - basic 6 1.45 p 1.94 p
Earnings per share - diluted 6 1.44 p 1.92 p
Adjusted basic earnings per share before 6 2.72 p 2.19 p
exceptional items
The accompanying notes form an integral part of this consolidated profit and
loss account.
CONSOLIDATED BALANCE SHEET
at 31 December 2005
Note 2005 2004
As restated
(see note 1)
£ 000s £ 000s
Fixed assets
Intangible assets 8 51,083 38,046
Tangible assets 1,000 800
52,083 38,846
Current assets
Stocks 2,150 1,329
Debtors 12,666 4,638
Cash at bank and in hand 2,678 3,120
17,494 9,087
Creditors: Amounts falling due within one year (13,919) (7,671)
Net current assets 3,575 1,416
Total assets less current liabilities 55,658 40,262
Creditors: Amounts falling due after more than one (10,065) (77)
year
Provision for liabilities and charges (1,552) -
Net assets 44,041 40,185
Capital and reserves
Called-up equity share capital issued 9 14,017 10,646
Called-up equity share capital not issued 9 - 400
Share premium account 26,795 26,444
Merger reserve 409 409
Profit and loss account 2,820 2,286
Equity shareholders' funds 44,041 40,185
The accompanying notes form an integral part of this consolidated balance sheet.
These financial statements were approved by the Board of Directors and were
signed on its behalf by:
John P de Blocq van Kuffeler Dan O'Brien
Executive Chairman Finance Director
6 March 2006
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 December 2005
Note 2005 2004
£ 000s £ 000s
Reconciliation of operating profit to net cash
flow from operating activities 2005 2004
£ 000s £ 000s
Operating profit 2,361 2,022
Depreciation charges 400 238
Amortisation charges 56 -
Cash flow relating to restructuring provisions (1,349) -
Decrease/(increase) in stocks 409 (483)
Increase in debtors (2,977) (773)
Increase/(decrease) in creditors 2,273 (348)
Net cash inflow from operating activities 1,173 656
Cash flow statement
Cash flow from operating activities 1,173 656
Returns on investments and servicing of 10 (225) 106
finance Taxation (385) (49)
Capital expenditure and financial investment 10 (359) (309)
Acquisitions and disposals 10 (9,849) (17,122)
Dividends paid on shares classified in
shareholders' funds (1,076) (629)
Cash outflow before management of liquid resources
and financing (10,721) (17,347)
Management of liquid resources - (47)
Financing 10 10,389 16,787
Decrease in cash in the year 11 (332) (607)
Reconciliation of net cash flow to movement in net debt
Decrease in cash in the year (332) (607)
Cash (inflow)/outflow from (increase)/decrease in debt (10,323) 240
Change in net funds resulting from cash flows (10,655) (367)
Translation differences (110) 17
Movement in net debt in the year (10,765) (350)
Net funds at the start of the year 3,120 3,470
Net (debt)/funds at the end of the year (7,645) 3,120
31 December 2005
Note
1 Accounting policies
The financial statements have been prepared on the basis of the accounting
policies set out on pages 23 and 24 of the Huveaux PLC Annual Report & Accounts
for 2004, which have been consistently applied, except that the Group has
adopted Financial Reporting Standard 21: 'Events after the balance sheet date'.
As a result, when the Group declares dividends after the balance sheet date to
shareholders, such dividends are not considered to represent a liability of the
Group as at the balance sheet date. Previously, under the Statement of Standard
Accounting Practice 17: 'Post Balance Sheet Events', the final dividend had been
declared, authorised and was no longer at the Group's discretion as at the date
of approval of the financial statements, the dividends were treated as an
adjusting post balance sheet event and accrued in the accounts for the year to
which it related.
The final dividend for the year ended 31 December 2004 of £1,065,000 has been
included as a deduction from the profit and loss account for the year ended 31
December 2005, in addition to £11,000 dividend paid on shares issued after 31
December 2004, but prior to 15 April 2005. The recommended final dividend for
the year ended 31 December 2005, of £1,542,000, has not been accrued as a
liability in the accounts for the year ended 31 December 2005, but has been
disclosed as a post balance sheet event in the notes to the accounts.
The accounts for the year ended 31 December 2004 have been restated to increase
the retained profit for the year and reduce the accrual for dividends by
£1,065,000 respectively. The effect on earlier periods was to increase net
assets at 1 January 2004 by £629,000.
In addition to the above, the following accounting policies are also applicable
as a result of the acquisitions made during the year.
Turnover and revenue recognition
Turnover relating to contracts for e-learning is recognised on the basis of the
accounting policies on long term contracts. Turnover in all other respects is
recognised when the goods or services are delivered to the customer.
Intangible assets
Purchased goodwill (representing the excess of the fair value of the
consideration paid over the fair value of the separable net assets acquired)
arising on consolidation in respect of non-publishing acquisitions is
capitalised. Positive goodwill is amortised to nil by equal annual installments
over its estimated useful life of 20 years.
Stocks, work in progress and long term contracts
The amount of profit attributable to the stage of completion of a long term
contract is recognised when the outcome of the contract can be foreseen with
reasonable certainty. Turnover for such contracts is stated at cost appropriate
to their stage of completion plus attributable profits, less amounts recognised
in previous years. Provision is made for any losses as soon as they are
foreseen.
Contract work in progress is stated at costs incurred, less those transferred to
the profit and loss account, after deducting foreseeable losses and payments on
account not matched with turnover.Amounts recoverable on contracts are included
in debtors and represent turnover recognised in excess of payments on account.
2. Segmental information
The tables below set out information on each of the Group's industry segments
and geographic areas of operation.
Continuing
Operations Acquisitions Total
2005 2005 2005 2004
Group turnover £ 000s £ 000s £ 000s £ 000s
Political
United Kingdom 8,214 - 8,214 5,447
Continental Europe & rest of 1,507 - 1,507 882
the world
9,721 - 9,721 6,329
Learning
United Kingdom 7,952 2,928 10,880 6,778
Continental Europe & rest of 223 121 344 199
the world
8,175 3,049 11,224 6,977
Healthcare
United Kingdom - - - -
Continental Europe & rest of 2,169 4,622 6,791 1,127
the world
2,169 4,622 6,791 1,127
20,065 7,671 27,736 14,433
2. Segmental information (continued)
Continuing
Operations Acquisitions Total
2005 2005 2005 2004
Operating profit / (loss) £ 000s £ 000s £ 000s £ 000s
Political
United Kingdom 724 - 724 533
Continental Europe & rest of the 165 - 165 93
world
889 - 889 626
Learning
United Kingdom 1,417 49 1,466 1,264
Continental Europe & rest of the 18 2 20 22
world
1,435 51 1,486 1,286
Healthcare
United Kingdom - - - -
Continental Europe & rest of the (442) 428 (14) 110
world
(442) 428 (14) 110
1,882 479 2,361 2,022
Continuing
Operations Acquisitions Total
2005 2005 2005 2004
As restated
(see note 1)
£ 000s £ 000s £ 000s £ 000s
Net assets/(liabilities)
Political
United Kingdom 23,337 - 23,337 23,776
Continental Europe - - - -
23,337 - 23,337 23,776
Learning
United Kingdom 13,651 4,113 17,764 13,498
Continental Europe - - - -
13,651 4,113 17,764 13,498
Healthcare
United Kingdom - - - -
Continental Europe (6,822) 8,767 1,945 2,609
(6,822) 8,767 1,945 2,609
Head Office
United Kingdom 995 - 995 302
Continental Europe - - - -
995 - 995 302
31,161 12,880 44,041 40,185
Head Office operating costs of £1,482,000 (2004: £917,000) have been allocated
to segmental operating profit on a pro rata basis. Exceptional items of
£1,903,000 (2004: £322,000) were incurred in respect of the United Kingdom
(£675,000) and Continental Europe & rest of the world (£1,228,000). The results
and net assets of our French political business are shown as part of the
Healthcare Division to reflect the local management structure currently in
operation. Turnover for this business was £799,000 (2004: £722,000).
3. Exceptional items
2005 2004
£ 000s £ 000s
Redundancy and people related costs 1,653 287
Relocation provisions 135 35
Other exceptional items 115 -
1,903 322
Interest on financing 231 -
The exceptional items relate primarily to the restructuring of the operations at
Epic and COPEF following the acquisition of those businesses in 2005. The
increase in scale and activities across the Group has also led to a review of
our existing structures to ensure that they are appropriate to meet the
requirements of the Group going forward.
An exceptional interest charge was incurred in relation to the £8.5 million
bridge financing facility which was put in place as part of the acquisition of
Epic. This facility was repaid once the acquisition of Epic was completed.
4. Taxation
2005 2004
£ 000s £ 000s
UK corporation tax
Current tax on income for the period 166 272
Adjustments in respect of prior periods 15 (4)
181 268
Double taxation relief (2) (5)
Foreign tax
Current tax on income for 2 5
the period
Total current tax 181 268
Deferred tax - note 18
Origination and reversal of timing differences 517 371
Deferred tax asset on French losses (166) (278)
Impact of discounting (99) (16)
Total deferred tax 252 77
Tax on profit on ordinary activities 433 345
The charge to the profit and loss account in respect of deferred tax of £252,000
(2004: £77,000) is stated after recording a deferred tax asset of £150,000
(before discounting) (2004: £278,000) in respect of tax losses, the recovery of
which has been enabled by the merger of our French operations in 2004 and 2005.
There are other potential deferred tax assets in respect of tax losses totaling
£293,000 (2004: £443,000) that have not been recognised on the basis that their
future economic benefit is uncertain.
5. Dividends
2005 2004
As restated
£ 000s £ 000s
The aggregate amount of dividends comprises:
Final dividends paid in respect of prior year but
not recognised as,liabilities in that year 1,076 629
Following implementation of Financial Reporting Standard 21: 'Events after the
balance sheet date', proposed dividends are no longer recognised at the year end
balance sheet date.
A final dividend of 1.1 pence per 10p Ordinary share has been recommended and,
subject to approval by shareholders at the Annual General Meeting on 27 April,
will be paid on 31 May to shareholders on the register at 18 April 2006.
6. Earnings per share
2005 2004
£ 000s £ 000s
Profit attributable to shareholders 1,703 1,783
Add: exceptional items 2,134 322
Less: tax in respect of exceptional items (640) (97)
Adjusted profit attributable to shareholders 3,197 2,008
2005 2004
Ordinary shares Ordinary shares
Weighted average number of shares
In issue during the year - basic 117,677,253 91,737,954
Dilutive potential ordinary shares 421,610 1,179,162
Diluted 118,098,863 92,917,116
Earnings per share - basic (pence) 1.45 1.94
Earnings per share - diluted (pence) 1.44 1.92
Adjusted earnings per share before exceptional 2.72 2.19
items (pence)
7. Acquisitions
Each of the following acquisitions has been accounted for by the acquisition
method. An analysis of the book value and provisional fair value of the net
assets acquired on each is set out below. Publishing rights have been valued to
reflect their estimated fair values, and each publication can be separately
identified and valued. All fair values are provisional.
a) Epic Group plc
On 22 August 2005 the Company's recommended cash and share offer for Epic Group
plc ('Epic') was declared wholly unconditional and from which date the Company
acquired effective control of Epic and its business. The following table sets
out the book values of the identifiable assets and liabilities acquired and
their provisional fair value to the Huveaux Group:
Fair value
Book value Adjustments Fair value
£ 000s £ 000s £ 000s
Tangible fixed assets 159 - 159
Fixed asset investments 100 (100) -
Stock 934 - 934
Debtors 1,104 - 1,104
Cash 9,505 - 9,505
Deferred tax 70 - 70
Creditors (2,304) - (2,304)
Net assets acquired 9,568 (100) 9,468
Goodwill 3,367
Total consideration 12,835
Satisfied by:
Cash paid 8,327
Shares issued 3,256
Acquisition costs 1,252
12,835
The adjustment to fixed asset investments was made to write down the carrying
value of investments in shares in unlisted companies, the realisation of which
is uncertain.
As a result of the compulsory acquisition procedure following the public
offering for Epic, share options exercised in Epic after the acquisition date
gave rise to the simultaneous creation and repurchase of a minority interest in
that subsidiary. Subsequent to 22 August 2005, options over 301,500 Ordinary
Shares in Epic were exercised and £242,000 was paid into that company. Huveaux
PLC controlled 100% of the share capital throughout the post-acquisition period.
As part funding for the acquisition, a bridge loan of £8,500,000 was taken out
with the Bank of Scotland and repaid in October 2005.
7. Acquisitions (continued)
The summarised profit and loss account for Epic for the year ended 31 May 2005
and for the period from
1 June 2005 to 25 August 2005 is given below:
Period ended Year ended
25 August 2005 31 May 2005
Unaudited Audited
£ 000s £ 000s
Turnover 1,603 8,104
Operating (loss)/profit (93) 1,569
Profit before taxation and exceptional items 11 2,085
Exceptional items (508) -
Taxation 120 (550)
(Loss)/profit after tax (377) 1,535
The exceptional items relate to costs incurred or associated with the sale of
the company.
b) COPEF SA, trading as Les Editions Jean- Baptiste Bailliere Sante ('COPEF' or
'JBB Sante')
On 1 October 2005, the Group took effective control of COPEF and certain of its
subsidiary undertakings, which businesses collectively trade as JBB Sante. The
following table sets out the book values of the identifiable assets and
liabilities acquired and their provisional fair value to the Huveaux Group:
Fair value
Book value Adjustments Fair value
£ 000s £ 000s £ 000s
Publishing - 9,697 9,697
rights
Goodwill 10,618 (10,618) -
Tangible fixed assets 84 - 84
Stock 303 - 303
Debtors 3,420 - 3,420
Cash 441 - 441
Deferred tax - 686 686
Creditors due within one year (4,988) (998) (5,986)
year
Net assets acquired 9,878 (1,233) 8,645
Goodwill -
Total consideration 8,645
Satisfied by:
Cash paid 171
Debt acquired 7,685
Acquisition costs 789
8,645
The adjustment to deferred tax was made to ensure consistency of accounting
policies. The fair value adjustment to the creditors was made for certain
contingent liabilities that crystalised as a result of the acquisition in
accordance with Financial Reporting Standard 7: 'Fair values and acquisition
accounting'.
Debt was acquired during acquisition and repaid by way of a loan - see note 21.
Legal completion of the acquisition took place on 5 October 2005.
7. Acquisitions (continued)
The summarised consolidated profit and loss account for COPEF for the year ended
31 December 2004 and for the period from 1 January 2005 to 30 September 2005 is
given below:
Period ended Year ended
30 September 31 December
2005 2004
Unaudited Unaudited
£ 000s £ 000s
Turnover 8,926 12,986
Operating profit before goodwill amortisation 5 1,263
Goodwill amortisation (764) (1,012)
Operating (loss)/profit (759) 251
Loss before taxation (759) (468)
Taxation - (35)
Loss after taxation (759) (503)
8. Intangible fixed assets
Group Goodwill Publishing rights Total
£ 000s £ 000s £ 000s
Cost
At 1 January 2005 - 38,046 38,046
Additions - 29 29
Additions through acquisition 3,367 9,697 13,064
At 31 December 2005 3,367 47,772 51,139
Amortisation
At 1 January 2005 - - -
Charged in year 56 - 56
At 31 December 2005 56 - 56
Net book value
At 1 January 2005 - 38,046 38,046
At 31 December 2005 3,311 47,772 51,083
9. Called-up share capital in the company
2005 2004
£ 000s £ 000s
Authorised:
200,000,000 Ordinary shares of 10p each 20,000 17,500
(2004:175,000,000)
Allotted, called-up and fully paid:
140,170,496 Ordinary shares of 10p each 14,017 10,646
(2004:106,464,730)
New Ordinary share value to be issued as deferred - 400
acquisition consideration
During the year, the Company issued:
1,142,855 new Ordinary shares, credited as fully paid, in settlement of £397,000
(net of expenses) part deferred consideration arising from the acquisition of
Lonsdale SRG in 2003; and
32,562,911 new Ordinary shares, credited as fully paid, in settlement of the
non-cash consideration element, totaling £3,256,000, in respect of the
acquisition of Epic.
The total nominal value of new shares issued was £3,371,000.
10. Analysis of cash flows
2005 2004
£ 000s £ 000s
Returns on investment and servicing of finance
Interest and similar income 111 116
received
Interest paid (336) (10)
(225) 106
Capital expenditure and financial investment
Purchase of tangible fixed assets (358) (304)
Purchase of intangible fixed assets (1) (5)
(359) (309)
Acquisitions and disposals
Purchase of subsidiary undertakings and (18,224) (17,060)
assets
Lonsdale deferred consideration paid (1,100) (300)
Dods Parliamentary Communications deferred (471) -
consideration paid
Cash acquired on acquisition of subsidiary - see 9,946 238
note 7
(9,849) (17,122)
Financing
Debt due within one year:
- Increase in short-term borrowing 9,016 -
- Repayment of secured loan (8,500) -
Debt due after more than one year: - -
- New secured loan repayable from 2007 to 2012 9,807 -
Issue of ordinary share capital - 17,500
Expenses recouped/(paid) in connection with share 66 (713)
issue
10,389 16,787
11. Analysis of net debt
At beginning Exchange At end
of year Cash flow movement of year
£ 000s £ 000s £ 000s £ 000s
Cash at bank and in 3,120 (332) (110) 2,678
hand
Debt due within one year - (516) - (516)
Debt due after one year - (9,807) - (9,807)
3,120 (10,655) (110) (7,645)
12. Post balance sheet events
On 9 February, the Company sold the trade of the mailing business of JBB Sante
for a cash consideration of £147,000.
13. Basis of presentation
The financial information set out above does not constitute the Group and
Company's statutory accounts for the years ended 31 December 2005 or 2004 but is
derived from those accounts. Statutory accounts for 2004 have been delivered to
the Registrar of Companies and those for 2005 will be delivered in due course.
The auditors have reported on those accounts; their report was (i) unqualified,
(ii) did not include a reference to any matters to which the auditors drew
attention by way of emphasis without qualifying their report and (iii) did not
contain a statement under section 237(2) or (3)
of the Companies Act 1985.
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