Preliminary Results
Huveaux PLC
03 March 2008
3 March 2008
Huveaux PLC
2007 PRELIMINARY RESULTS
Financial Highlights
• Revenue up 2% to £46.1 million (2006: £45.0 million)
• EBITDA down 19% to £5.8 million (2006: £7.2 million)*
• Profit for the year of £0.4 million (2006: £2.3 million)
• Basic EPS of 0.24 pence per share (2006: 1.59 pence)
• Normalised EPS down 38% to 1.82 pence per share (2006: 2.93 pence)**
• Dividend recommended in line with results at 0.75 pence per share
(2006: 1.21 pence)
Operating Highlights
• Results for the year were impacted by a fall in the market for
pharmaceutical advertising in France and a reduction in UK public
sector learning spend
• We reacted to these changed market conditions by adapting our
business models and creating new sources of revenue
• Actions taken as part of a Group wide cost reduction programme will
realise £2.5 million of annualised cost savings
• EBITDA in our Education Division increased by 25% on a like for like
basis
• Our European political business showed encouraging growth, enhanced
by the acquisition of the European Public Affairs Directory
• Conferences and exhibitions performed strongly
• Our Learning Division now has new management teams in place
Summary of Results
£'000 2007 2006
Revenue 46,069 45,028
Profit for the year 362 2,288
EBITDA* 5,801 7,174
Normalised earnings per share (basic)** 1.82p 2.93p
Earnings per share (basic) 0.24p 1.59p
Dividend per share 0.75p 1.21p
* EBITDA is calculated as earnings before interest, tax, depreciation,
amortisation of intangible assets acquired through business combinations, and
non-trading items.
** Normalised earnings per share is stated before amortisation of intangible
assets acquired through business combinations, non-trading items and related
tax.
Non-trading items are items which in management's judgement need to be disclosed
by virtue of their size, incidence or nature. Such items are included within
the income statement caption to which they relate and are separately disclosed
either in the notes to the consolidated financial statements or on the face of
the consolidated income statement.
These results are the Group's first to be prepared under International Financial
Reporting Standards as endorsed by the International Accounting Standards Board
and as adopted by the EU ('Adopted IFRS'). The December 2006 comparative
figures have been restated accordingly.
An analyst presentation will be held at 09.30am today at Dresdner Kleinwort, 30
Gresham Street, London EC2P 2XY, with coffee available from 09.00am.
John van Kuffeler, Non-Executive Chairman of Huveaux, commented:
'2007 was a disappointing year for Huveaux with a 19 per cent fall in normalised
EBITDA.
We responded to the changing market conditions by adapting parts of our business
model. This included a series of successful new business initiatives and the
lowering of our cost base.
As a result, we won good levels of new business in December and this has ensured
a good start to 2008.'
For further information, please contact:
Huveaux
John van Kuffeler, Non-Executive Chairman 020 7245 0270
Gerry Murray, Chief Executive Officer
Brewin Dolphin Limited (NOMAD) 0131 225 2566
Sandy Fraser
Note to Editors:
Huveaux PLC is a public limited company listed on the Alternative Investment
Market (ticker HVX.L).
The Company was formed in 2001 with the objective of building a substantial,
high-quality media group. Huveaux has completed and successfully integrated 13
acquisitions over the past six years and employs 500 staff in London, Paris,
Brussels, Edinburgh and four other UK regional offices.
The Group now consists of four Divisions, each of which has strong brands and
market leading positions:
Political Division
The market leader in political business-to-business publishing in the UK and EU,
serving both the political and public affairs communities. The Division
comprises Dods Parliamentary Companion, The House Magazine, Epolitix.com and
numerous other political magazines, reference books, monitoring products and
revenue-generating websites as well as events, awards and recruitment services.
Learning Division
A leading provider of resources to learning communities in the UK, including
e-learning solutions for the public and private sector and blended learning
solutions, seminars and events for the political, public affairs and training
markets. The Division comprises Epic, the UK market leader in e-learning; The TJ
magazine; and the highly acclaimed Westminster Explained conferences and
seminars business.
Education Division
The leading supplier of study aids and revision guides in the UK, with full
product coverage across all subjects and stages of the entire curriculum in UK
schools. The Division comprises Lonsdale, Letts Educational and Leckie & Leckie.
Healthcare Division
One of the leading providers of specialist B2B publications and online education
for the medical sector in France. The Division comprises Panorama du Medecin, a
leading weekly magazine for French doctors, Le Concours Medical and La Revue du
Praticien, market-leading Continuing Medical Education magazines; Egora.fr, the
leading medical information website; a medical conference business; and a number
of other magazines and reference materials.
CHAIRMAN'S STATEMENT
2007 Overview
2007 was a disappointing year for your Company. Revenue grew by £1.1 million to
£46.1 million despite two sizable acquisitions in the previous year, and
earnings before interest, tax, amortisation and non-trading items (EBITDA)
declined from £7.2 million to £5.8 million, a 19 per cent per cent fall.
Normalised earnings per share decreased by 38 per cent to 1.82 pence and basic
earnings per share fell to 0.24 pence (2006: 1.59 pence).
Non-trading items amounted to a total of £0.9 million, including the costs of
the abortive deal process for the Company (£0.4 million) and the impact of the
Group initiative to reduce costs (£0.7 million), less profit on disposal of
assets (£0.2 million).
Your Board is recommending a dividend in line with our financial performance of
0.75 pence per share (2006 - 1.21 pence), a reduction of 38 per cent compared to
last year.
The Board explored the possibility of an offer for the Company from a private
equity house in the last quarter of 2007 but conditions, particularly in the
financial markets, were not conducive to effecting a successful transaction, and
the talks were terminated on 12 December 2007.
Strategy
Our first priority is to deliver a good set of results in 2008 to restore
investor confidence in our business. We are well placed to do this as we have
successfully restructured both Epic and our Political Knowledge businesses,
leading to major contract wins which will flow through to profit in the first
quarter of this year. This, combined with the impact of the cost reduction
measures undertaken throughout the Group, should allow us to deliver on this
priority.
At the same time we are concentrating our resources on driving new development
in the businesses which are showing good organic growth, principally in the
Political and Education Divisions. This is reflected in our new exhibition and
conference business and the further developments in expanding our digital
portfolio within the Political Division. It is equally apparent in the Education
Division where digital developments are now gathering pace while our revision
guide portfolio continues to expand.
We are also adapting the business model of our French Healthcare business by
containing the effects of the structural decline in pharmaceutical advertising
revenues while growing our Continuing Medical Education business. We are
examining any opportunities to optimise shareholder value from this Division.
Achieving these strategic priorities will migrate Huveaux's business and
financial profile towards one of strong organic revenue and EBITDA growth with
good margins in attractive B2B sectors with significant digital and events
revenue.
The Board, Management and People
I would like to thank our management and staff for their considerable efforts
during such a difficult year. Much has been achieved in reducing costs and
winning new business which is a direct result of their hard work.
There have also been three changes at Board level. Dan O'Brien, our Finance
Director for the last two years, is leaving to take up a high profile
appointment with another media company and intends to step down from the Board
on 4 March. I am pleased to announce that we are today announcing the
appointment of his successor Rupert Levy, Finance Director within the Haymarket
Group, who will join us on 22 April this year. Mike Arnaouti, our Company
Secretary and Director of Corporate Services, has also stepped down after two
and a half active and eventful years. He is succeeded by Sue De Cesare. Finally,
I am moving from Executive Chairman to Non-Executive Chairman, which gives
Huveaux the benefit of a conventional Board structure with a Non-Executive
Chairman and a Chief Executive. The net result of these three changes is a
significant cost saving for the Group.
Outlook
The Board is mindful that the external economic environment in 2008 is likely to
be difficult, implying that both corporate profits and Government tax revenues
are likely to be under pressure. This background has conditioned our strategy
for 2008, namely to focus on organic growth, cost control and margin
improvement, guided by the new management teams that have been put in place in
2007. In addition, 2008 will benefit from the full impact of the cost saving
measures introduced in 2007. As a result, your Board is confident that the group
can deliver a satisfactory performance in the year ahead, notwithstanding the
overall market environment.
The Board is not planning any material acquisitions and continues to review the
optimum structure for the group to ensure that shareholder value is maximized.
CHIEF EXECUTIVE'S BUSINESS AND FINANCIAL REVIEW
Introduction
In a year when some of our markets have seen considerable turmoil and presented
major challenges, we have worked hard to reorganise our company, reduce our
costs and move forward in a business climate which remains difficult for all
media owners. However, we are confident that the changes we have made will drive
substantial improvement in the year ahead.
Business Overview
Our performance this year has been impacted by fundamental changes in the global
pharmaceutical market, public sector cutbacks in the UK and a flat public
affairs market. We have changed our business model in response to each of these
and the efforts of management throughout the group have been directed at
developing new initiatives to grow future revenues while eliminating costs where
we can, without damaging the prospects for the businesses going forward. In
addition we have very substantially reduced our central costs in line with the
strategic needs of our company.
In our French Healthcare Division advertising volumes fell throughout the year.
We have continued to grow our online and Continuing Medical Education (CME)
revenues but not at sufficient pace to make up for lost advertising income in
our three major healthcare magazines. The final divisional result of £1.8
million EBITDA for the year was disappointing but still represented more than a
15 per cent return on the acquisition cost. The fall in the pharmaceutical
advertising market is driven by the inexorable rise in the use of generic drugs,
as governments around the world attempt to cut healthcare costs. It is our view
that this will persist for the foreseeable future. We continue to examine the
options for the future of this business.
Cost efficiencies in the UK civil service have led to reduced spending on public
sector training. Whilst this adversely impacted our e-learning and civil service
training business during the year, we have recently seen a return to growth in
this sector and are confident of better market conditions going forward. We have
refined our business model for face-to-face training and implemented an
efficiency programme at Epic. Both these changes have already had a positive
effect on our recent performance, and December was a record month for new
business orders, which will be realised as profit in 2008. Our training business
at Fenman had a very good year with the cost reduction exercise we implemented
during 2006 helping us achieve more than 80 per cent growth in EBITDA.
In our Education Division we have continued to expand our portfolio and have
seen year on year underlying EBITDA growth in excess of 25 per cent as a result.
Revenue growth was substantial in our Scottish business, Leckie & Leckie, and
indeed all our education companies showed double digit EBITDA growth. The
integration of Letts was completed during the year and it showed very pleasing
growth in its sales direct to schools where historically it has not been strong.
We will continue our portfolio expansion throughout 2008 both in print and
online, and are very confident of the future for this business.
Our Political Division had a mixed year with good growth in our European and
Government business but with a disappointing performance from our parliamentary
magazines. We had a flat party conference season and the subsequent uncertainty
around a possible general election caused confusion in our markets. This gave us
a poor final quarter for the division though for the whole year revenue was
slightly up on 2006, driven principally by a strong performance of the EU unit
in Brussels. EBITDA for the Political Division fell to £1.8 million as we
absorbed the costs of several new developments which will benefit the Group from
2008 onwards.
2008 Priorities
Huveaux was established with the intention of creating a substantial B2B media
group. Throughout 2005 and 2006 we made good progress with this objective
showing double digit earnings per share growth in both years.
There is no doubt that the difficult trading conditions we have faced during
2007, particularly in France, have interrupted that progress. However, we enter
2008 a much leaner and fitter organisation. Management overhead and central
costs have been substantially reduced in line with more conservative growth
ambitions. Divisional management costs have also been reduced and cost control
and margin improvement are central to our business improvement strategy for
2008. During the second half of 2007 a cost reduction programme was put in
place, as a result of which £2.5 million of costs will be saved on an annualised
basis. The full benefit of these will be seen in 2008.
The trading environment for all media companies in 2008 is predicted to be
challenging. Whilst much of our advertising is 'defensive' in nature, we will
not be entirely immune to an economic downturn .We can expect very little in the
way of growth in advertising. Progress during a period such as this is driven by
concentration on new events and digital content, and on costs and margin
management. That is the task we are determined to complete in the next 12
months and we feel confident that this will deliver a good result to
shareholders.
Political Division
£'000 2007 2006
Revenue 10,825 10,578
EBITDA* 1,791 2,428
*A reconciliation between EBITDA and operating profit is provided in Schedule A
on page 22.
As the country awaited the long transition from Tony Blair to Gordon Brown, and
in the autumn the new Prime Minister decided against a general election, the
public affairs market in Westminster in 2007 was flat.
For us it was a year of investment for our Political Division. It was a year
where we invested in our people, technology and products to secure expansion
into growing markets and new services.
Highlights:
• Our government business grew its revenues by 29 per cent and expanded
its online and events income.
• Revenues in our European political publishing business increased by
18 per cent with our Regional Review magazine growing by more than 50
per cent.
• We became the clear leader in EU political monitoring and this
business more than doubled in size.
• We now run over 100 political events across the Group.
• We have launched Civil Service Live, the first ever exhibition for
the civil service showcasing best practice and innovation in public
sector delivery.
We have now successfully expanded into the civil service market. Our government
business, which operates under the brand of Whitehall and Westminster World,
grew by 29 per cent in 2007. In just three years it has developed into a
thriving newspaper, online and events business, and has established itself as an
indispensable resource to senior civil servants. This was highlighted when the
Prime Minister Gordon Brown and the Cabinet Secretary Sir Gus O'Donnell gave
presentations at our Whitehall and Westminster World Civil Service Awards
ceremony in November.
In 2008 our government business will take a major leap forward through the
launch of Civil Service Live. This is the first ever exhibition dedicated to
the UK civil service. It will bring together more than 5,000 senior civil
servants over three days to inspire innovation amongst the people running
today's and tomorrow's civil service. It will showcase best practice and
innovation in the civil service and will be the must-attend event for senior
civil servants.
Civil Service Live is a significant brand extension for Whitehall and
Westminster World and it moves our successful events business into major
exhibitions. In 2004 Dods held just one event; in 2008 it will hold over 50.
We have successfully expanded in the Brussels market through the solid growth of
our European political magazine business. In 2007 revenue for this business
grew by 18 per cent. The Parliament Magazine, our magazine for the European
Parliament has become an increasingly influential channel for EU Commissioners
to communicate to MEPs.
The Regional Review, our magazine focussing on the regions of the EU, saw
revenue grow by 58 per cent last year. Michel Delaberre, the President of the
Committee of the Regions, gave the closing address at the inaugural Regional
Review Awards.
In 2007 Dods acquired the European Public Affairs Directory (EPAD), the
definitive guide to who's who in public affairs in Brussels. This is an
excellent addition to our market leading portfolio of books and we plan to
launch the inaugural EPAD Awards in 2008.
In 2008 we expect further growth in our Europe business, especially through the
growing demand for policy forums and networking events in Brussels.
In 2007 our online information business showed solid growth, especially our EU
monitoring information service which grew by an exceptional 150 per cent. We
expect our EU monitoring service to continue this significant growth in 2008.
We have invested heavily in our digital information products as we see this as a
key growth area in future years.
In 2008 we will be launching a new version of ePolitix.com, our website for
parliamentarians and policymakers. We will also be launching an improved
version of Dodonline which will offer much greater functionality reflecting our
clients' changing needs.
Our recruitment business Electus showed good profit growth in 2007. Although
the recruitment market is increasingly competitive, the demand for public
affairs recruitment services remains strong.
Last year Public Affairs News, our magazine for the public affairs industry
showed strong profit growth. In July, four hundred public affairs practitioners
gathered at the Cafe Royal for our annual Public Affairs News Awards dinner.
In the summer of 2008 Dods will hold a major exhibition in Westminster Hall in
the Palace of Westminster, lasting three months. The 'Your Parliament'
Exhibition will celebrate 175 years of Dods serving Parliament and will also
reveal how Parliament has made dramatic changes to our society over this time.
We are proud to be working with Parliament through this exhibition to encourage
people, and especially young people, to engage more in the democratic process.
In 2007 we invested in our future growth by expanding into new markets,
particularly government and the EU. We invested in technology to drive our
digital products forward and by further developing the expertise to grow our
highly successful events business. In 2008 we will deliver on these ambitious
and exciting expansion plans.
Learning Division
£'000 2007 2006
Revenue 10,544 12,718
EBITDA* 798 1,888
*A reconciliation between EBITDA and operating profit is provided in Schedule A
on page 22.
Our Learning Division had a very mixed and ultimately disappointing year. Severe
public sector training cuts across all government departments seriously impacted
our Political Knowledge and Epic businesses in the first half of the year. This
slowly turned around in the second half of the year, but too late for what is
clearly a very disappointing result. Throughout all this our Fenman training
business, which also saw revenue downturn, was able to increase its profits by
over 80 per cent to record levels. This was due entirely to the cost reduction
programme undertaken in the final quarter of 2006.
We ended the year on a high at both Political Knowledge and Epic where newly
installed management and record levels of sales have given us much increased
visibility on future revenues, and renewed confidence for a very different
financial picture in 2008.
Highlights:
• Fenman increased its profits year on year by 87 per cent and launched
two web based interactive training services: TrainerActive and Good
Practice.
• The Political Knowledge business won its largest ever contract in
December 2007 with the Equality and Human Rights Commission to deliver
training to its staff in the first quarter of 2008.
• Westminster Explained and Westminster Briefing launched new websites
in July 2007 enabling clients to book courses on-line. This has proved
popular and approximately 25 per cent of places are now reserved
through the website. This proportion is expected to grow in 2008.
• Epic had its largest ever sales month in December with well over £1
million of orders. This business now has a new management team and has
completed an efficiency programme resulting in a 15 per cent headcount
reduction.
Market conditions in 2007 were very tough in the public sector. Training budgets
were under pressure and many organizations opted to save money by delivering
training internally or ensuring value for money through competitively procured
solutions.
In our classroom training business, Westminster Explained, we have traditionally
relied on an 'open courses' model with off the shelf content. This model has
worked well when budgets are available; however in leaner times it simply does
not offer sufficient value to the customer. In light of this we have developed a
much more customized option for government departments. This complementary model
has the added advantage of creating a much closer relationship with the customer
and giving a much greater degree of visibility of revenue going forward. As a
result we started winning significant new business in the final months of 2007.
Our Westminster Briefing business continued to prosper throughout the year
putting on a record number of briefings and conferences, and we plan to expand
this substantially in 2008. This part of our business is very strong and we
continue to attract top flight speakers.
We have launched several new civil service programmes in the year including new
courses for fast-track entrants and an international civil service programme
based on best practice in the UK. We look forward to these new products bringing
brand new customers on board in 2008. Our Political Knowledge business finished
the year on a high winning the largest single training contract in our history
from The Human Rights and Equalities Commission.
In the final quarter of 2006 we implemented a comprehensive cost reduction
initiative at Fenman. This exercise produced significant savings in 2007
enabling Fenman not only to withstand the downturn but to increase profits by
over 80 per cent. Through a policy of co-production we have been able to develop
new training materials for relatively low investment, and this is now paying
off.
Training Journal had a satisfactory year, the highlight being its annual TJ
conference which is now a premier industry event after only two years.
TrainerActive, our online training resources service, made good progress and we
have now established a joint arrangement with Good Practice to extend the range
of training materials we can offer online.
Epic had a very difficult first half year and struggled to find sufficient high
margin work in the poor public sector climate. This situation improved as the
year went on and in the last quarter we contracted a record amount of work with
a significant proportion coming from the public sector. This work will mostly
be completed in the first half of 2008. In the last quarter of the year we
carried out an efficiency drive. This has resulted in a significant headcount
reduction and these savings are expected to come through in increased margins as
we go through 2008.
Education Division
£'000 2007 2006
Revenue 12,060 6,798
EBITDA* 2,933 2,159
*A reconciliation between EBITDA and operating profit is provided in Schedule A
on page 22.
Overall our Education Division had an excellent year in 2007.
The UK schools market for educational publishing showed modest growth in 2007,
although it was boosted in Scotland by additional money made available from the
Scottish Executive. However, school spend on digital product is expected to have
declined slightly, as government e-learning credit funds reduced significantly
year on year.
The traditional retail market for educational publishing (high street
bookstores) also increased in value modestly in 2007 by 2.3 per cent, slightly
behind overall book sales growth.
Highlights:
• Sales direct to schools were well above the overall market
performance and contributed to our strategy of increased schools presence to
reinforce retail/consumer sales.
• A year-on-year revenue increase strengthened Leckie & Leckie's
position as the leading Scottish educational publisher, and Bookscan figures
confirmed that both school and retail/consumer performance outstripped the
overall market.
• The new Lonsdale Essentials revision range launched in Science had an
immediate impact, both contributing to year-on-year revenue growth and adding
choice to the range of revision materials available to learners.
• Online revenue growth over prior year was encouraging, and the
increase in the number of registered users, driven by various marketing
campaigns, was also impressive.
• The expanded internal editorial and design capability allowed 21 per
cent more new titles to be published in the year than planned, including the new
Essentials range, which contributed to the sales growth of the Lonsdale imprint.
Our Education Division revenue for the full year was in line with the market,
whilst EBITDA was well in advance of 2006 levels with an encouraging like for
like 25 per cent increase.
Leckie & Leckie enhanced its reputation as the leading Scottish educational
publisher with a 13 per cent revenue increase over 2006, with full year revenue
of £2.6 million. Sales to retail were up 7 per cent, driven by Leckie's own
titles, whilst the past paper titles published with the SQA maintained their
sales levels. School sales were 21 per cent up on 2006, and again Leckie titles
generated most of the increase. Bookscan figures for the full year showed
Leckie's sales out of bookstores up 7 per cent year-on-year, with both SQA and
Leckie titles improving their performance.
Lonsdale revenue finished at £3.1 million, 5 per cent up on 2006. Trade sales
and new publishing were responsible for the increase, with Lonsdale titles
distributed through high street bookstores for the first time in 2007. New
publishing contributed over 12 per cent of sales, lead by the new Essentials
series for GCSE Science, which had immediate sales impact. Overall GCSE Science
sales, a key barometer of the Lonsdale imprint, grew by 15 per cent and
re-established this offering as a market-leading list. E-commerce revenue was
also encouraging, finishing 60 per cent ahead of prior year.
Letts revenue finished at £6.4 million, with school sales performing
particularly well, up 21 per cent on 2006. Sales to high street retail customers
were also very strong, up nearly 5 per cent on prior year, a significant
achievement at a time of decreasing consumer confidence. However sales to
independents and supermarkets fell in 2007. This has been a lucrative sales
channel for Letts and, coupled to a smaller presence in the supermarket channel
than in previous years, meant that Letts retail sales outside the high street
bookstores declined year on year. However, signs are that this was a cyclical
effect, and 2008 should see a return to previous sales levels through these
outlets.
Letts e-commerce sales also showed dramatic growth, up 112 per cent, and a
marketing collaboration with St Ivel (promoting Letts books on Omega 3 milk)
brought 20,000 new registered users to the Letts website.
Overall Divisional sales through the schools channel significantly outperformed
the market, being 9 per cent up on 2006, compared to a 5 per cent market
increase.
Most impressively, overall EBITDA at £2.9 million was up £0.8 million on 2006
due to a combination of significant cost savings in print and distribution (the
former due to improved buying capability across the Division) added to tight
overhead control.
Essentials Online was launched in November 2007 as this Division's first venture
into online test practice and revision product. Co-developed by sister company
Epic, the product currently covers GCSE Science but has the potential to roll
out to other subjects and levels in future years. Initial response to the
product has been favourable, and distribution deals with key school re-sellers
have been signed.
A licensing deal with Autology, an online intelligent search service for
secondary schools, was signed during the first half of the year. A growing
number of schools across the UK are benefiting from this service, which includes
content from most of the Letts and Lonsdale secondary catalogue. In addition, a
groundbreaking deal with TutorVista, an online tutoring service, was signed in
the second half of the year, which combined Letts Science and Maths GCSE content
with live, real-time tuition delivered via webex, Skype and messaging.
Future curriculum change in schools secondary markets in England and Wales, at
GCSE, KS3 and A-level, will create opportunity for new business as schools begin
to switch to updated materials, an opportunity that our Education Division is
well placed to realise. Increased use of digital product by schools and the need
for a wider range of curriculum software content will also be a key driver of
growth for Huveaux, as the Education Division migrates more of its publishing
into digital formats and develops more digital pure play product.
Retail markets may be exposed to a downturn in consumer confidence, but the
education book sector has usually been immune to this trend as revision books
and study guides are a relatively small outlay and are viewed as an investment
for a child's future, even more so in times of economic uncertainty. The
education book sector is therefore expected to continue to show modest growth
and we feel well placed to take advantage.
Healthcare Division
£'000 2007 2006
Revenue 12,800 14,934
EBITDA* 1,752 2,366
*A reconciliation between EBITDA and operating profit is provided in Schedule A
on page 22.
The pharmaceutical advertising market is enduring the worst trading conditions
in recent memory. The rise in use of generic drugs and lack of new blockbuster
drug launches which has traditionally fuelled this market has meant an 8 per
cent reduction in advertising spend.
Highlights:
• The Healthcare Division remains the leading supplier of Continuing
Medical Education (CME) products in France.
• Medical monitoring business launched at the end of 2007.
• New e-learning programmes established in conjunction with Epic.
Our magazines have held their market share at 24 per cent but revenue was down
by 14 per cent and EBITDA by 24 per cent. These difficult conditions have
continued into 2008. Maintaining a 15 per cent profit margin in these very
difficult circumstances is one of the few positives in this disappointing
situation.
Our CME revenue grew substantially in the period but not enough to close the gap
created by the advertising shortfall. It is clear that the growth of CME revenue
will be much slower than we originally thought. During the period we signed an
exclusive agreement with the Federal organization of French medical
associations, Federations des Specialites Medicales, to produce CME programs
which carry official CME credits. By the beginning of 2008, three national CME
programs were taking place under this agreement.
In addition we have begun production of two new e-learning programmes with the
assistance of Epic. This is a completely new type of revenue for us in this
division. These programmes will be available to GPs from the Egora.fr website in
the spring of 2008.
A further new revenue source was developed with the introduction of a monitoring
business for the pharmaceutical industry based on the principles of our well
established political monitoring business in the UK. It will deliver customised
technical and marketing information on demand and will show a profit in its
first year.
We are realistic about the prospects for our healthcare publishing business and
do not expect the return of sizeable advertising revenues in the foreseeable
future. In the short term we continue our efforts to maintain our market share
and develop new sources of non advertising revenue. In the longer term we remain
open minded about the strategic alternatives for this business.
Financial Review
On 11 May 2007, the Company announced its adoption of International Financial
Reporting Standards (IFRS) for the year ended 31 December 2007. The comparative
financial information for the year ended 31 December 2006 has been restated
accordingly. A reconciliation between operating profit under IFRS and EBITDA is
provided in Schedule A as an appendix. Distributable reserves are not affected
by the adoption of IFRS.
Revenue and Operating Results
Operating performance was disappointing across the business. Revenue for the
year was £46.1 million (2006: £45.0 million). The growth was the result of
acquisitions made in the prior year.
Profit for the year was £0.4 million (2006: £2.3 million) and EBITDA was £5.8
million (2006: £7.2 million). The profit for the year is also lower in 2007 due
to the first full year of interest charges on the £13.4 million aggregated term
loans entered into in 2006 to fund acquisitions.
Non-trading Items
Non-trading items for the year totalled £0.9 million, of which £0.4 million
related to the potential acquisition of the company by a private equity house.
The Company also incurred redundancy costs of £0.7m in realising the significant
cost savings achieved during 2007. Also included within non-trading items is a
profit of £0.2 million on disposal of assets.
Taxation
The utilisation of tax losses in the year has led to a decrease in the overall
rate of effective tax (adjusted for non-trading items and amortisation of
intangible assets acquired through business combinations) to 24.7 per cent
(2006: 29.2 per cent). Whilst the Group continues to seek to optimise its tax
position going forward, it is expected that the blended tax rate will increase.
Earnings per Share (EPS)
Normalised EPS (before non-trading items and amortisation of intangible assets
acquired through business combinations) was 1.82 pence (2006: 2.93 pence). Basic
EPS was 0.24 pence (2006: 1.59 pence).
Dividends
The Board is proposing a final dividend for the year of 0.75 pence per share.
Subject to shareholders' approval at the forthcoming Annual General Meeting,
this dividend will be paid on 29 August 2008 to shareholders registered on 4
June 2008.
Liquidity and Capital Resources
During the year, Huveaux repaid £3.2 million of debt and ended the year with
gross bank debt of £20.7 million (2006: £23.0m).
Interest payable during the year amounted to £1.7 million (2006: £0.9 million).
This increase reflects the first full year of interest charges on the £13.4
million aggregated term loans entered into in 2006. Interest receivable was £0.1
million (2006: £0.2 million).
During the year, underlying cash conversion was again strong with the Group
generating £6.0 million (2006: £4.6 million) of cash from its operating
activities. At the year-end, the Group had cash balances of £2.0 million (2005:
£4.3 million) and net debt of £18.7 million, representing a net debt to EBITDA
ratio of 3.2 times (2006: 2.6 times).
Derivatives and Other Instruments
In 2007, Huveaux's financial instruments comprised bank loans, cash deposits and
other items such as normal receivables and payables. The main purpose of these
financial instruments is to finance the Group's day-to-day operations.
During 2007, 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 £2.0 million working capital facility with Bank of
Scotland which expires in July 2008, 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 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 taken out in 2005, of which €12.8 million remained
outstanding as at 31 December 2007.
Interest Rate Risk
The outstanding €12.8 million seven-year term loan attracts interest payable in
Euros, calculated with reference to prevailing EURIBOR. The £13.4 million term
loans attract interest payable in sterling, calculated with reference to
prevailing LIBOR. In order to limit our forward exposure to changes in EURIBOR
and LIBOR, the Group has entered into interest rate caps for the terms of the
loans.
CONSOLIDATED INCOME STATEMENT
for the year ended 31 December 2007
Note Audited Audited
2007 2006
£'000 £'000
Revenue 46,069 45,028
Cost of sales (27,918) (26,408)
Gross profit 18,151 18,620
Administrative expenses:
Non-trading items 2 (931) (640)
Amortisation of intangible assets acquired through business
combinations
7 (3,304) (2,132)
Other administrative expenses (12,945) (11,957)
(17,180) (14,729)
Operating profit 971 3,891
Finance income 148 161
Financing costs (1,689) (872)
(Loss)/profit before tax (570) 3,180
Income tax credit/(expense) 932 (892)
Profit for the year attributable to equity holders of parent 362 2,288
Earnings per share
Basic 5 0.24 p 1.59 p
Diluted 5 0.24 p 1.58 p
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
for the year ended 31 December 2007
Note Audited Audited
2007 2006
£'000 £'000
Actuarial gains/(losses) on defined benefit scheme 28 25
Exchange differences on translation of foreign operations (723) 158
Net (expense)/income recognised directly in equity (695) 183
Profit for the year 362 2,288
Total recognised income and expense for the year attributable to (333) 2,471
equity holders of parent
CONSOLIDATED BALANCE SHEET
at 31 December 2007
Note Audited Audited
2007 2006
£'000 £'000
Goodwill 6 28,651 28,165
Intangible assets 7 42,325 44,888
Property, plant and equipment 887 991
Non-current assets 71,863 74,044
Inventories 3,181 3,158
Trade and other receivables 12,175 15,102
Derivative financial instruments 117 140
Cash and cash equivalents 1,994 4,307
Income tax receivable 163 -
Assets held for sale - 188
Current assets 17,630 22,895
Interest bearing loans and borrowings 8 (3,788) (3,140)
Income tax payable - (412)
Provisions (709) (368)
Trade and other payables (14,703) (16,731)
Current liabilities (19,200) (20,651)
Net current assets (1,570) 2,244
Total assets less current liabilities 70,293 76,288
Interest bearing loans and borrowings 8 (16,877) (19,855)
Employee benefits (141) (156)
Deferred tax liability (7,390) (8,248)
Other non-current liabilities - (96)
Non-current liabilities (24,408) (28,355)
Net assets 45,885 47,933
Equity attributable to equity holders of parent
Issued capital 15,200 15,200
Share premium 30,816 30,816
Other reserves 409 409
Retained earnings 25 1,350
Translation reserve (565) 158
Total equity 9 45,885 47,933
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 December 2007
Note Audited Audited
2007 2006
£'000 £'000
Profit from operations 362 2,288
Depreciation of property, plant and equipment 366 300
Amortisation of intangible assets acquired through business 3,304 2,132
combinations
Amortisation of other intangible assets 881 329
Profit on disposal of assets held for sale (64) -
Profit on disposal of magazine titles (101) -
Movements on defined benefit scheme 18 (1)
Share based payments charges 124 153
Net finance costs 1,541 711
Income tax (credit)/expense (932) 892
Cash flow relating to restructuring provisions (755) (1,824)
Operating cash flows before movements in working capital 4,744 4,980
Change in inventories (23) 81
Change in receivables 2,601 (1,449)
Change in payables (1,325) 1,000
Cash generated by operations 5,997 4,612
Income tax paid (423) (745)
Net cash from operating activities 5,574 3,867
Cash flows from investing activities
Interest and similar expenses paid (1,478) (1,066)
Interest and similar income received 148 153
Proceeds from sale of property, plant and equipment 19 -
Proceeds from sale of investments - 55
Proceeds from sale of magazine titles 575 131
Proceeds from sale of assets held for sale 252 -
Acquisition of subsidiary, net of overdraft acquired - (16,842)
Net deferred consideration paid (140) -
Acquisition of property, plant and equipment (271) (854)
Acquisition of publishing rights (183) -
Acquisition of other intangible assets (1,859) (312)
Net cash used in investing activities (2,937) (18,735)
Cash flows from financing activities
Proceeds from issue of share capital - 5,500
New loans acquired - 13,400
Payment of transaction costs - (296)
Repayment of borrowings (3,186) (516)
Dividends paid (1,839) (1,542)
Net cash used in financing activities (5,025) 16,546
Net (decrease)/increase in cash and cash equivalents (2,388) 1,678
Opening cash and cash equivalents 4,307 2,678
Effect of exchange rate fluctuations on cash held 75 (49)
Closing cash and cash equivalents 10 1,994 4,307
Notes to the preliminary announcement
31 December 2007
1 Basis of Preparation
The Group financial statements consolidate those of Huveaux PLC and its
subsidiaries (together referred to as the 'Group'). The financial statements
have been prepared on the basis of the accounting policies set out on pages 8 to
13 of the Huveaux PLC Interim Report for 2007, which have been consistently
applied.
The financial information set out above does not constitute the company's
statutory accounts for the years ended 31 December 2007 or 2006. Statutory
accounts for 2006, which were prepared under UK GAAP, have been delivered to the
registrar of companies, and those for 2007, prepared under accounting standards
adopted by the EU, will be delivered in due course. The auditors have reported
on those accounts; their reports were (i) unqualified, (ii) did not include
references to any matters to which the auditors drew attention by way of
emphasis without qualifying their reports and (iii) did not contain statements
under section 237(2) or (3) of the Companies Act 1985.
As required by EU law (IAS regulation EC 1606/2002) the Group's accounts have
been prepared in accordance with International Financial Reporting Standards
endorsed by the International accounting Standards Board (IASB) as adopted by
the EU ('Adopted IFRS').
2 Non-trading items
Audited Audited
2007 2006
£'000 £'000
Redundancy and people related costs 648 452
Relocation and integration - 188
Abortive deal costs 448 -
Profit on sale of assets held for sale (64) -
Profit on disposal of magazine titles (101) -
931 640
Non-trading items are items which in management's judgement need to be disclosed
by virtue of their size, incidence or nature. Such items are included within
the income statement caption to which they relate and are separately disclosed
either in the notes to the consolidated financial statements or of the face of
the consolidated income statement.
Non-trading redundancy and people related costs in 2007 represent the effect of
a Group initiative to reduce costs. Abortive deal costs represent advisory
fees relating to the aborted transaction with a private equity firm.
Non-trading items in 2006 represent the restructuring of the Group following the
acquisitions of Letts Educational Limited, Leckie & Leckie Limited, Political
Wizard Limited and Parliamentary Monitoring Services Limited, and additional
restructuring of the operations at COPEF SA following the acquisition of that
business in 2005.
3 Taxation
Audited Audited
2007 2006
£'000 £'000
Current tax
Current tax on income for the year at 30% (2006: 30%) 3 878
Adjustments in respect of prior periods (247) 24
(244) 902
Double taxation relief (1) (1)
Overseas tax
Current tax expense on income for the year at 30% (2006: 30%) 1 1
Total current tax expense (244) 902
Deferred tax
Origination and reversal of temporary differences 268 83
Effect of change in tax rate (592) -
Benefit from previously unrecognised tax losses (364) (93)
Total deferred tax income (688) (10)
Total income tax (credit)/expense (932) 892
The effect of non-trading items charged during the year is to reduce the tax
charge by £279,000 (2006: £192,000).
The credit to the income statement in respect of deferred tax of £688,000 (2006:
£10,000) is stated after recording a deferred tax asset of £364,000 (2006:
£93,000) in respect of tax losses, the recovery of which has been enabled by the
merger of our French operations in 2006. There are other potential deferred tax
assets in respect of tax losses totalling £238,000 (2006: £200,000) that have
not been recognised on the basis that their future economic benefit is
uncertain.
Included within the tax credit to the income statement is £133,000 of
tax-related goodwill written off on the sale of magazine titles (2006: £nil).
The tax charge for the period differs from the standard rate of corporation tax
in the UK of 30% (2006: 30%). The differences are explained below:
Income tax reconciliation 2007 2006
£'000 £'000
(Loss)/profit before tax (570) 3,180
National tax charge at standard rate of 30% (2006: 30%) (171) 954
Effects of:
Expenses not deductible for tax purposes 1,183 756
Accelerated capital allowances and temporary differences 158 (26)
Adjustments to tax charge in respect of prior periods (247) 24
Utilisation of tax losses (899) (723)
Effect on deferred tax of change in tax rate (592) -
Recognition of previously unrecognised tax losses (364) (93)
Total income tax (credit)/expense (932) 892
4 Dividends
Audited Audited
2007 2006
£'000 £'000
The aggregate amount of dividends comprises:
Final dividends paid in respect of the previous year but not
recognised as liabilities in that year
1,839 1,542
A final dividend of 0.75 pence per 10p Ordinary share has been recommended and,
subject to approval by shareholders at the Annual General Meeting on 3 June
2008, will be paid on 29 August 2008 to shareholders on the register at 4 June
2008.
5 Earnings per share
Audited Audited
2007 2006
£'000 £'000
Profit attributable to shareholders 362 2,288
Add: non-trading items (see note 2) 931 640
Add: amortisation of intangible assets acquired through
business combinations
3,304 2,132
Less: tax in relation to the above items (1,838) (845)
Adjusted profit attributable to shareholders 2,759 4,215
Audited Audited
2007 2006
Weighted average number of shares Ordinary Ordinary
shares shares
In issue during the year - basic 151,998,453 143,994,329
Dilutive potential ordinary shares 634,341 698,200
In issue during the year - diluted 152,632,794 144,692,529
Earnings per share - basic 0.24 p 1.59 p
Earnings per share - diluted 0.24 p 1.58 p
Normalised earnings per share (before non-trading items and 1.82 p 2.93 p
amortisation of intangible assets acquired through business
combinations)
6 Goodwill
Audited Audited
2007 2006
Cost & Net book value £'000 £'000
Opening balance 28,165 19,869
Revisions to fair values of assets and liabilities on 584 343
acquisitions made in the prior year
Acquisitions through business combinations - 7,953
Disposals (98) -
Closing balance 28,651 28,165
Additions to goodwill in the year represent amendments to the fair value of
goodwill acquired in 2006 on the acquisitions of Letts Educational Limited and
Political Wizard Limited.
Goodwill acquired in a business combination is allocated at acquisition to the
cash-generating units (CGUs) that are expected to benefit from that business
combination. The carrying amount of goodwill has been allocated as follows:
Audited Audited
2007 2006
£'000 £'000
Political Division 15,112 15,016
Learning Division 5,071 5,071
Education Division 4,411 3,868
Healthcare Division 4,057 4,210
28,651 28,165
The Group tests annually for impairment, or more frequently if there are
indications that goodwill might be impaired. The recoverable amounts of the
CGUs are determined from value in use calculations. Value in use was determined
by discounting future cash flows generated from the continuing use of the titles
and was based on the following most sensitive assumptions:
- cash flows were projected based on operating results and the 5 year
business plan.
- cash flows were extrapolated using conservative growth rates of
between 0% and 2.5%.
- cash flows were discounted using the Company's pre-tax weighted
average cost of capital of 7.8% (2006: 8.2%).
7 Intangible assets
Audited Audited Audited Audited
Assets acquired Software Plate costs Total
through business
combinations
£'000 £'000 £'000 £'000
Cost
At 1 January 2006 37,843 2,413 - 40,256
Additions - externally purchased - 411 175 586
Additions through acquisition 10,084 - 591 10,675
Disposals - (77) - (77)
Exchange adjustment - (44) - (44)
At 1 January 2007 47,927 2,703 766 51,396
Additions - externally purchased - 588 713 1,301
Additions - internally generated - 184 374 558
Additions through acquisition 183 - - 183
Disposals (477) (1,370) - (1,847)
Reclassifications - (312) - (312)
Exchange adjustment - 72 - 72
At 31 December 2007 47,633 1,865 1,853 51,351
Amortisation
At 1 January 2006 1,965 2,202 - 4,167
Charged in year 2,132 211 118 2,461
Disposals - (77) - (77)
Exchange adjustment - (43) - (43)
At 1 January 2007 4,097 2,293 118 6,508
Charged in year 3,304 231 650 4,185
Disposals (23) (1,407) - (1,430)
Reclassifications - (294) - (294)
Exchange adjustment - 57 - 57
At 31 December 2007 7,378 880 768 9,026
Net book value
At 1 January 2006 35,878 211 - 36,089
At 31 December 2006 43,830 410 648 44,888
At 31 December 2007 40,255 985 1,085 42,325
Audited Audited
2007 2006
£'000 £'000
Assets acquired through business combinations comprise:
Publishing rights 33,679 35,648
Brand names 2,610 2,765
Customer relationships 3,701 4,942
Customer lists 198 358
Other assets 67 117
40,255 43,830
Amortisation of plate costs is recognised within cost of sales; all other
amortisation is recognised within administrative expenses. No intangibles have
an indefinite useful economic life.
Included within intangibles are internally generated assets with a net book
value of £182,000 (2006: £16,000).
8 Interest bearing loans and borrowings
Audited Audited
2007 2006
£'000 £'000
Borrowings are repayable as follows:
On demand or within one year 3,788 3,140
Between one and two years 3,788 3,645
Between two and five years 12,469 11,440
After five years 620 4,770
20,665 22,995
Less: Amounts due for settlement within 12 months (shown (3,788) (3,140)
within trade and other payables)
Amount due for settlement after 12 months 16,877 19,855
Audited Audited
2007 2006
£'000 £'000 £'000
Borrowings are taken out in
the following currencies:
Interest Principal
Sterling Floating linked to LIBOR £13,400 11,270 13,400
Euros Floating linked to EURIBOR €15,000 9,395 9,595
Total 20,665 22,995
The weighted average interest rate paid on the bank loans was 6.8% (2006: 5.7%).
The floating rates of interest expose the Group to cash flow interest rate
risk, which is mitigated by the interest rate caps into which the Group has
entered.
The euro loan represents the outstanding element of a €15,000,000 loan to
finance the acquisition of COPEF SA in 2005, on which the last repayment is due
in December 2012. The sterling loans represent a £5,400,000 loan taken out in
2006 to finance the acquisition of Parliamentary Monitoring Services Limited and
Political Wizard Limited, on which the last repayment is due in December 2012;
and an £8,000,000 loan taken out in 2006 to finance the acquisition of Letts
Educational Limited and Leckie & Leckie Limited, on which the last repayment is
due in June 2013. All loans are taken out with Bank of Scotland.
In connection with the Group's banking and borrowing facilities with the Bank of
Scotland, the Company and its UK subsidiary undertakings have entered into a
cross guarantee, which gives a fixed and floating charge over the assets of the
UK trading companies of the Group.
The Group estimates the fair value of its loans to be the same as their carrying
amount.
At 31 December 2007, the Group had available £2,000,000 (2006: £2,000,000) of
undrawn facilities under its working capital facility. Interest on amounts
drawn down under this facility is paid at 2% over base rate. This facility is
due to expire in July 2008.
9 Reconciliation of movements in equity
Audited Audited
2007 2006
£'000 £'000
Opening shareholders' funds 47,933 41,647
Profit for the year 362 2,288
Dividends paid (1,839) (1,542)
Actuarial gains and losses 28 25
Currency translation differences (723) 158
New share capital subscribed (net of issue costs) -
5,204
Share based payment charges credited to equity 124 153
Closing shareholders' funds 45,885 47,933
10 Analysis of net debt
At beginning Exchange At end
of year Cash flow Reclassification movement of year
Cash at bank and in hand 4,307 (2,388) - 75 1,994
Debt due within one year (3,140) 3,186 (3,645) (189) (3,788)
Debt due after one year (19,855) - 3,645 (667) (16,877)
(18,688) 798 - (781) (18,671)
11 Transition to IFRS
This is the first year that he Group has presented its financial statements
under IFRS. A full reconciliation between IFRS and UK GAAP was released on 11
May 2007 and can be found on the Group's website www.huveauxplc.com.
Cautionary statement
This press release may contain forward-looking statements based on current
expectations or beliefs, as well as assumptions about future events. In that
regard, such statements are:
• inherently predictive and speculative and involve risk and
uncertainty because they relate to events and depend on circumstances that will
occur in the future; and
• not a guarantee of future performance and are subject to factors that
could cause the actual results to differ materially from those expressed or
implied.
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.
The Huveaux PLC 2007 Annual Report and Financial Statements are being posted to
shareholders on 27 March 2008 and will be available to the public
upon request at the Company's registered office: 4 Grosvenor Place,
London, SW1X 7DL.
Copies of recent announcements, including this Preliminary Results announcement,
and additional information on Huveaux, can be found at www.huveauxplc.com.
Schedule A
Reconciliation between operating profit and non-statutory performance measure
The following tables reconcile operating profit as stated above to EBITDA, a
non-statutory measure which the Directors believe is the most appropriate
measure in assessing the performance of the Group.
EBITDA is defined by the Directors as being earnings before interest, tax,
depreciation, amortisation of assets acquired through business combinations, and
non-trading items.
Year ended Amortisation of
31 December 2007 Operating intangible Non-trading
Profit Depreciation* assets items EBITDA
Political 264 235 1,213 79 1,791
Learning (251) 137 708 204 798
Education 1,910 84 1,003 (64) 2,933
Healthcare 1,354 119 380 (101) 1,752
Head Office (2,306) 20 - 813 (1,473)
971 595 3,304 931 5,801
Year ended Amortisation of
31 December 2006 Operating intangible Non-trading
Profit Depreciation* assets items EBITDA
Political 1,187 224 915 102 2,428
Learning 984 152 646 106 1,888
Education 1,711 30 227 191 2,159
Healthcare 1,704 77 344 241 2,366
Head Office (1,695) 28 - - (1,667)
3,891 511 2,132 640 7,174
*including amortisation of software shown within intangibles.
This information is provided by RNS
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