Preliminary Results
Huveaux PLC
05 March 2007
5 MARCH 2007
Huveaux PLC
2006 PRELIMINARY RESULTS
FIFTH CONSECUTIVE YEAR OF SIGNIFICANT GROWTH
Financial Highlights
•Turnover up 62% to £45.0 million
•Normalised profit before tax up 43% to £6.0 million
•Profit before tax up 146% to £4.8 million
•Normalised EPS up 17% to 3.06 pence per share
•Dividend up 10% to 1.21 pence per share
•EBITDA organic growth of 14%
•Continued strong revenue from digital and events at 26% and 12%
respectively
•Underlying margin improved through synergies and cost control
Operating Highlights
•Leading position in the UK study aid and revision guide market achieved
through acquisition of Letts Educational and Leckie & Leckie
•Education Division established in 2007 to exploit further opportunities
•Political monitoring business enhanced through acquisition of Political
Wizard and launch of new EU monitoring services
•Market leadership established in Continuing Medical Education market in
France
•Diversification of revenue streams delivered through expansion of events
business
Summary of Results
£'000 2006 2005
Restated*
Turnover 45,028 27,736
Profit before tax 4,827 1,963
Normalised profit before tax** 5,952 4,153
EBITDA*** 7,174 4,547
Normalised earnings per share (basic)** 3.06p 2.62p
Earnings per share (basic) 2.41p 1.31p
Dividend per share 1.21p 1.10p
* Restated for change in accounting policy in accordance with the introduction
of FRS 20: 'Share-based Payment.' The charge for 2006 was £153,000 (2005:
£173,000).
** Normalised profit before tax and normalised earnings per share are stated
before amortisation of goodwill and exceptional items.
*** EBITDA is calculated as operating profit before amortisation of goodwill,
depreciation and exceptional items.
An analyst presentation will be held at 11.00am today at Dresdner Kleinwort, 30
Gresham Street, London EC2P 2XY, with coffee available from 10.30am.
John van Kuffeler, Executive Chairman of Huveaux, commented:
'In 2006, we have made great progress towards our strategic objective of
creating a substantial B2B media group, while continuing to deliver double-digit
profit and EPS growth.
We have achieved this while also improving our products and services across the
Group, by pursuing the opportunities offered by digital technologies and by
continuing to broaden our revenue streams.
Although it is still early in the year, we have made an encouraging start to
2007. Our four divisions all have good market positions, leaving us well placed
to exploit market opportunities, supplemented by targeted acquisitions. The
Board looks forward to another year of strong financial performance and further
strategic progress.'
For further information, please contact:
Huveaux
John van Kuffeler, Executive Chairman 020 7245 0270
Gerry Murray, Chief Executive Officer
Dan O'Brien, Group Finance Director
Finsbury
James Leviton 020 7251 3801
Don Hunter
About Huveaux:
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 more than 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.
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.
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 (established 1 January 2007)
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.
CHAIRMAN'S STATEMENT
For the fifth consecutive year since Huveaux's foundation, we have achieved
significant strategic and financial progress in 2006. Sales grew 62% from £27.7
million to £45.0 million, while profit before tax, amortisation of goodwill and
exceptional items grew 43% from £4.2 million to £6.0 million. Profits were
driven by the full year impact of acquisitions made in 2005, the addition of the
new education businesses acquired during the year and an impressive underlying
margin growth in the divisions. Normalised earnings per share grew 17% to 3.1
pence.
In line with our progressive dividend policy, your Board is recommending a final
dividend of 1.21 pence per share (2005: 1.1 pence), an increase of 10% on the
previous year.
'Acquire, improve, build and add'
With the emergence of internet technologies, the media landscape has been
transformed during the period since Huveaux's foundation. Nevertheless, the
Company has been able to deliver consistent and improving financial performance
over that period while keeping pace with the fundamental changes in its markets
and investing for the future.
Our four-part strategy has been clear from the outset:
•Acquire a market position
•Improve the existing business
•Build innovative new revenue opportunities in line with market changes,
principally in events and online
•Add acquisitions to secure our market position
By pursuing and successfully executing on this strategy, we have created a
modern B2B media group from scratch over the past five years and considerable
progress has also been made in 2006 in advancing this strategy still further.
Huveaux has developed strong brands in market leading positions, typically the
number one or number two in our selected markets. Our customers experience these
brands across print and digital media as well as events. Our major brands have
been strengthened with acquisitions and new launches, consolidating our market
leadership in the Political, Education, Healthcare and , Learning fields and
producing new revenue sources for the future.
Digital revenues grew 75% in 2006 and now account for 26% of Group sales,
reflecting the importance we place on delivering information and services
online.. Our events business, largely developed organically, is also expanding
fast and now comprises 12% of Group revenue.
Strategic Progress
Political Division
The acquisition of Political Wizard in July 2006 for £4.9 million helped
strengthen our political monitoring business, which is the fastest growing
sector in our Political Division. The performance of Political Wizard
post-acquisition has been in line with our positive expectations. New product
launches, such as Dods Polling and The Civil Service Network portal, have
expanded our product range to both government and the public affairs industry.
Education Division
Another major strategic step during the year was the acquisition in September
2006 of Letts Educational and Leckie & Leckie for £12.0 million and its
integration with our existing Lonsdale revision guide business to form a new
Education Division from the beginning of 2007. This is a key strategic move for
Huveaux. We are fully aware of the changing landscape in educational publishing
and that some of today's suppliers do not relish the digital challenge it
brings. We do not share this view and are confident that our current position in
revision and testing and the expertise at Epic, our leading UK bespoke
e-learning company, provide us with an excellent platform for digital expansion
in this sector.
Learning Division
The Learning Division has achieved higher margin sales through Epic, the leading
UK bespoke e-learning company. Particularly significant were new private sector
customers and contracts won in conjunction with other parts of the Huveaux
Group. The Political Knowledge seminar and events business had a further year of
excellent growth and our new TJ Awards for Human Resources was a considerable
success.
Healthcare Division
Our Healthcare Division achieved all its principal objectives in 2006. The three
leading magazines all achieved the accreditation of providing Continuing Medical
Education (CME) for doctors in France and the introduction of two CME programmes
ensured we are the market leading CME publisher by revenue in France.
Our Vision
Huveaux is now a sizable business, running some 500 seminars and conferences,
delivering over 25% of its sales through digital media, publishing 16 magazines
and newsletters and selling in excess of 5.0 million books a year.
We have delivered consistent and improving financial results from our market
leading brands. We have developed those brands to produce new revenue sources
for the future in line with customer demand for new digitally delivered
services. Our strategy remains the same, our ambition strengthened. We are in a
strong position going forward.
The Board, Management and People
Timothy Benn and Christina Benn stepped down from the Board in April 2006. I
would like to thank them for their invaluable contribution to the first four
years of Huveaux's existence.
Richard Flaye was appointed a non-executive director in September and his
considerable experience in B2B publishing is already proving to be a valuable
asset to the Board.
We continue to build our senior management teams in each of the operating
divisions and have recently recruited an experienced Managing Director to
head-up our newly formed Education Division.
The Board would like to thank the management and staff of Huveaux for their hard
work and dedication in achieving a series of challenging targets in 2006.
Outlook
In 2006, we have made great progress towards our strategic objective of creating
a substantial B2B media group, while continuing to deliver double-digit profit
and EPS growth.
We have achieved this while also improving our products and services across the
Group, by pursuing the opportunities offered by digital technologies and by
continuing to broaden our revenue streams.
Although it is still early in the year, we have made an encouraging start to
2007. Our four divisions all have good market positions, leaving us well placed
to exploit market opportunities, supplemented by targeted acquisitions. The
Board looks forward to another year of strong financial performance and further
strategic progress.
CHIEF EXECUTIVE'S REVIEW
At a time when all media groups face fundamental challenges to their business
models, we have once again delivered substantial double-digit growth in both
profits and earnings per share. We have achieved this while also improving our
products and services across the board, pursuing the opportunities offered by
digital technologies and continuing to broaden our revenue streams. Our ability
to deliver results today, while laying the foundations for sustainable revenue
and profit growth in the future, means we are well placed to take advantage of
the communications revolution taking place across our industry.
Huveaux's core objective is to help its customers drive and improve their own
individual and organisational performance. We do this by amplifying and
expanding the traditional B2B model to include e-learning, numerous web-based
information and communication services and a substantial events business. We
believe firmly that the expansion of digital services and events in our markets
represents a significant opportunity.
Diversifying Revenue
In 2006, we made further good progress towards our strategic objective of
becoming a substantial B2B media group, with diversified revenue streams around
each of our main brands and existing content. We have expanded our digital
portfolio through both acquisition and new product launches. In July 2006, we
added a web-based service to our political monitoring business with the
acquisition of Political Wizard. This has now been fully integrated into the
Dods business, enabling us to offer a much wider range of services and price
points to customers as part of a recently restructured EU monitoring operation.
Elsewhere, we have developed a web portal for the civil service, The Civil
Service Network, and an online assessment tool for secondary schools. In France,
we have significantly enhanced our Egora.fr website by incorporating an
extensive searchable medical archive. We will shortly be enhancing it still
further with the introduction of a management system that will enable GPs to
source, monitor and control their Continuing Medical Education (CME) activities.
Our ability to innovate, by applying a healthy mix of proven and cutting-edge
digital technologies, is greatly assisted by our e-learning and web development
capabilities at Epic.
The expansion of our events business has also helped us to diversify our revenue
streams away from print subscriptions and advertising in 2006. We now run a
number of prestigious awards events, particularly in the political and
government sector, and we were delighted to launch the inaugural Civil Service
Awards for Excellence. Elsewhere, we ran over 500 training courses and
conferences in the year (compared to 330 in 2005) and our government training
unit, Political Knowledge, was again one of our best-performing businesses in
2006. Learning events also form a crucial part of our development as a provider
of CME in France. We are the first CME supplier to have been approved by the
French government and we are determined to leverage this position and reinforce
our lead in this field.
These diversification and brand extension initiatives are underpinned by the
continued dominance of our traditional print products in their respective
markets. Our two major UK publications, The House Magazine and Parliamentary
Monitor, both showed healthy organic growth in 2006. In France, we relaunched
our weekly publication for GPs, Panorama du Medecin, which ended the year with
an increased market share in the highly competitive pharmaceutical advertising
market. Our newspaper for UK government, Whitehall and Westminster World,
continued to grow and is now established reading amongst UK civil servants.
One of the highlights of last year was the acquisition of Letts Educational and
Leckie & Leckie, two companies with substantial positions in revision guide
publishing for schools. Combined with our existing Lonsdale business, this
acquisition makes us the clear market leader in the UK. In 2007, we will
distribute over five million study aids and revision guide products. Huveaux has
substantial ambitions in UK education outside of revision guide publishing. To
this end, we have recently formed a dedicated Education Division to help focus
and realise these ambitions. Our revision guides business will form the nucleus
of this new division.
Operational Review
2006 has been a full and eventful year. At Group level, we have achieved
substantial EPS growth, despite challenging market conditions. With the
exception of our schools education business, we have improved margins across the
Group and are well placed to expand in 2007 and beyond.
Political Division
+---------------------------------------+----------------+----------------+
|£ million | 2006| 2005|
+---------------------------------------+----------------+----------------+
|Turnover | 10,578| 9,721|
+---------------------------------------+----------------+----------------+
|EBITDA* | 2,483| 1,800|
| | | |
|* A reconciliation between EBITDA and | | |
|operating profit is | | |
|provided in Schedule A | | |
+---------------------------------------+----------------+----------------+
Our political business enjoyed a strong 12 months performance with underlying
organic sales growth for the year of 10 % although, influenced particularly by a
record number of new product launches, 18 % in the second half. 2006 also saw
the 30th anniversary of our flagship publication, The House Magazine, and we are
grateful to the Prime Minister for agreeing to host its birthday recognition
event at 10 Downing Street.
In 2006, the strength and resilience of our political publishing business
enabled us nevertheless to grow our revenue across the board despite trading for
the first time in a post-election environment in the UK. We also managed to
produce marked profit and margin improvements as digital and events-related
revenue became a more significant proportion of our overall income.
Political advertising rose by 3% due to better than expected sales during the
party conference season and a generally strong performance in the final quarter
of 2006. During the year, we launched several new awards events, including the
highly successful Civil Service Awards for Excellence, alongside which we also
launched The Civil Service Network, a portal for civil servants which is already
generating revenues.
Our Political Monitoring business was boosted by the acquisition of Political
Wizard in July but also saw substantial organic growth from its existing
operations. There is no doubt that the combination of the automated Wizard
business with our existing bespoke offering has substantially improved our
monitoring proposition and market position, leading to several significant new
client wins. In addition, we launched an EU version of Political Wizard, making
us the only supplier of such a political monitoring service.
In Europe, we forged a strong relationship with the Committee of the Regions and
launched The Regional Review, a publication dealing exclusively with the funding
of regional projects within the EU. Our French political business had a quiet
year but showed improved profits and margins year on year. 2007 is a double
election year in France and we look forward to increased activity in this
business in the next 12 months.
Our Political Division in the UK and Europe continues to grow from strength to
strength.
Learning Division
+---------------------------------------+----------------+----------------+
|£ million | 2006| 2005|
+---------------------------------------+----------------+----------------+
|Turnover | 19,516| 11,224|
+---------------------------------------+----------------+----------------+
|EBITDA* | 4,068| 2,615|
| | | |
|* A reconciliation between EBITDA and | | |
|operating profit is | | |
|provided in Schedule A | | |
+---------------------------------------+----------------+----------------+
The Learning Division included the best performing business unit in the group
with our Political Knowledge business showing organic sales growth in excess of
20% year on year. This was largely driven by expansion in our briefings and
conference business, a highly competitive area in which we have built
substantial expertise. In 2007 we will be producing a number of new blended
learning programmes for the Civil Service combining our e-learning expertise
with established classroom courses.
At Epic, as expected, sales were marginally lower than in 2005 as we
concentrated on margin improvement and transition to higher quality earnings (as
well as supporting many digital initiatives elsewhere in the Group). This
planned focus has largely been achieved by using new software tools developed
in-house and concentrating on higher value contracts. We have won several new
clients in retail and financial services as well as in the public sector. Epic
maintains its position as the foremost bespoke e-learning supplier in the UK and
a vital ingredient in Huveaux's digital future.
Our established Fenman business, now known as Epic Professional, responded well
to last year's restructuring and showed a substantial increase in profits driven
by further cost reductions and margin improvements. The future of this business
will be based on a number of online and e-learning offerings; although we no
longer produce training videos, previous content is being converted for use
through digital delivery.
Included within our Learning Division for 2006 was our education business, which
at the beginning of the year consisted solely of our Lonsdale schools revision
guide business. However, with the complementary acquisition of Letts Educational
and Leckie & Leckie in early September, we finished the year as the leading
supplier of study aids and revision guides in the UK, with full product coverage
across all subjects and stages of the school curriculum. The acquired businesses
have now been successfully integrated with our existing Lonsdale product range.
Together, they will form the nucleus of our newly created Education Division,
enabling us to focus on our planned expansion in this sector. The Division will
be led by Andy Ware, who joins us in March 2007. Andy is an extremely
experienced educational publisher having held senior positions at Pearson, the
learning arm of the BBC and McGraw Hill.
Compared to the record performance in 2005, sales at Lonsdale fell by 9% in
2006. This disruption, which was caused by curriculum changes in Key Stage 4
Science, had an adverse profit impact on the business. While we successfully
produced all planned books to schedule, they did not sell in the numbers
expected. We believe that this is mainly due to a delayed decision-making issue
within school departments as they absorb the extent of the new curriculum
changes. The Letts and Leckie & Leckie businesses were not affected in the same
way as they are not so dependent on Key Stage 4 Science or on direct sales to
schools. Both Letts and Leckie & Leckie delivered good performances ahead of our
expectations during our period of ownership in 2006.
UK schools education is now a very important sector for Huveaux and we will make
it a targeted area for expansion in the future. We believe the sector is
evolving rapidly and that the balance of power amongst suppliers will be subject
to fundamental change in the near future; several of the major players are
already planning to exit the market to avoid the challenges posed by digital
content and delivery. However, we believe that the move to digital will work in
our favour due to the strength of our digital training capabilities at Epic and
because our valuable revision and testing content is easily converted into
digital delivery. Our ambition is to become a major player in education and we
believe the quality of our existing revision guides business provides an
excellent platform for that expansion.
Healthcare Division
+-------------------------------------+---------------+-------------------+
|£ million | 2006| 2005|
+-------------------------------------+---------------+-------------------+
|Turnover | 14,934| 6,791|
+-------------------------------------+---------------+-------------------+
|EBITDA* | 2,379| 1,481|
| | | |
|* A reconciliation between EBITDA and| | |
|operating profit is provided in | | |
|Schedule A | | |
+-------------------------------------+---------------+-------------------+
In France, our Healthcare publishing business faced challenging market
conditions in 2006. The market for pharmaceutical advertising to GPs was down 6%
year on year but our income from advertising held steady due to increased market
share at our leading title, Panorama du Medecin, which was relaunched early in
the year. We also managed to substantially increase our profits from this
business in 2006 by delivering significant improvements in our margin, largely
as a result of the successful restructuring programme undertaken in the second
half of 2005.
The growth opportunity in healthcare in France was based upon our becoming a
successful supplier of Continuing Medical Education (CME). We achieved this goal
during 2006 when we became the first government-approved CME supplier shortly
after legislation was introduced. We have already launched our first sponsored
CME programme and we expect to produce two further substantial programmes in
2007.
Our digital healthcare operations produced an excellent performance in the year
and we will be expanding these significantly in 2007. Egora.fr is the most
visited medical website in France. It will be relaunched this year with the
addition of a large, searchable medical archive which will operate on a
pay-per-view pricing model and contain every article published by us in the past
five years. Egora.fr will also have a substantial part to play in our CME
strategy. Using technology developed by our e-learning company Epic, we will be
launching a digital platform where GPs can select, monitor and record their now
compulsory CME learning activities. This will enhance the opportunity for
Egora.fr to increase sponsorship revenue going forward. We are confident of our
strong position in the French Healthcare market and believe that in the longer
term we will remain the leading CME supplier to the French healthcare community.
Our People, Our Future
The passion of our people, together with their knowledge, motivation and
collaboration, is what gives them an insight into our customers' behaviour. It
is also what inspires them to develop, innovate and deliver new and better
product solutions, something we have seen in abundance this year.
Through the acquisitions we have made in 2006, we have welcomed many new
colleagues into the Group and we are delighted by the positive energy, ideas and
performance they have generated. To them, and to all my colleagues in the Group,
I extend my thanks for their contribution throughout the year.
I believe we are very well placed now in four major markets. We have a depth of
management talent and strong market positions. Our ambition for expansion
remains undimmed.
FINANCIAL REVIEW
The Group's results for the year to 31 December 2006 demonstrated continued
growth and achievement of our strategic objectives. Turnover for the year rose
62% to £45.0 million (2005: £27.7 million) and pre-tax profits before
exceptional items and goodwill amortisation were up 43% to £6.0 million (2005:
£4.2 million). The Group's balance sheet remains strong with net debt of £18.7
million at the year-end representing gearing of 31% (2005:19%), providing a
sound financial platform for further growth.
Turnover and Operating Results
Turnover for the year increased by 62% to £45.0 million, of which acquisitions
made during the year contributed £3.9 million. The turnover growth was
principally the result of acquisitions made in the current and prior year.
Organic revenue growth for the Group as a whole was constrained in 2006. Good
growth performances in several areas of the business was largely offset by
reductions arising in three key areas: in Healthcare, where the overall market
decreased marginally as anticipated; in Lonsdale, due to the market turbulence
caused by the introduction of a new Key Stage 4 Science syllabus; and in Epic,
where the planned focus during the year had been on the transition to higher
profit, higher margin business and intra-Group projects.
Profit before tax was £4.8 million (2005: £2.0 million) and EBITDA was £7.2
million (2005: £4.5 million). This represents a 2.2% improvement on profit
margins on a like-for-like annualised basis.
Exceptional Items
Exceptional items for the year totalled £0.6 million, of which £0.4 million
related primarily to the planned restructuring of operations immediately
following the acquisitions of Political Wizard in July and Letts Educational and
Leckie & Leckie in September 2006. The remaining exceptional items related to
residual restructuring costs incurred in France on the post-acquisition
integration programme at JBB Sante acquired in October 2005.
Taxation
The increase in the proportion of the Group's profits generated in France,
together with the lower utilisation of tax losses, has led to an increase in the
overall rate of effective tax to 28.1% (2005: 21.8%). Whilst 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 (EPS)
Normalised EPS (pre-exceptional items and goodwill amortisation) was 3.1 pence
(2005: 2.6 pence), representing a 17% increase. Basic EPS was 2.4 pence (2005:
1.3 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 1.21 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 2007 to shareholders registered on
27 April 2007.
Liquidity and Capital Resources
During the year, Huveaux entered into a £5.4 million six-year secured term loan
and a £8.0 million seven-year secured term loan with Bank of Scotland. Huveaux
also raised £5.5 million through the placement of shares in the Company with
institutional investors. These total funds of £18.9 million were used to finance
the acquisitions of Political Wizard, Letts Educational and Leckie & Leckie
together with the associated integration costs, initial working capital
requirements and transaction fees.
Interest payable during the year amounted to £0.9 million (2005: £0.1 million).
This increase reflects the first full year of interest charges on the €15.0
million seven-year term loan entered into in 2005 together with pro-rata
interest paid on the £13.4 million aggregated term loans entered into during
2006. Interest receivable was £0.2 million (2005: £0.1 million).
During the year, underlying cash conversion was again strong with the Group
generating £4.6 million (2005: £1.2 million) of cash from its operating
activities. At the year-end, the Group had cash balances of £4.3 million (2005:
£2.7 million) and net debt of £18.7 million, representing a net debt to EBITDA
ratio of 2.6 times (2005: 1.7 times).
Derivatives and Other Instruments
In 2006, 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.
During 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 £2.0 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 taken out in2005, of which €14.3 million remained
outstanding as at the 31 December 2006. In February 2007, 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 €14.3 million seven-year term loan attracts interest payable in
Euros, calculated with reference to prevailing EURIBOR. In order to limit our
forward exposure to changes in EURIBOR, the Group has entered into an interest
rate cap for the term of the loan.
The aforementioned £5.4 million and £8.0 million term loans attract interest
payable in sterling, calculated with reference to prevailing LIBOR. In order to
limit our forward exposure to changes in LIBOR, the Group has entered into an
interest rate cap for the term of the loan.
Changes to the Financial Reporting Framework
The Group is reporting for the first time under FRS 20: 'Share-based Payment',
which requires the fair value of share options to be calculated and charged
against profits. The charge for 2006 was £153,000 (2005: £173,000 as restated),
and while the variables affecting the calculation cannot be accurately forecast,
the annual impact of this charge is expected to increase.
In line with AIM market guidelines, Huveaux is intending to comply with
International Financial Reporting Standards ('IFRS') for the current financial
year ending 31 December 2007. We are currently undertaking a review programme in
relation to the requirements 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 2007 and we therefore plan to provide a further update to
shareholders ahead of the Company's 2007 interim results announcement.
CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the year ended 31 December 2006
Note
2006 2005
as restated*
£ 000s £ 000s
Turnover
Continuing operations 2 41,084 27,736
Acquisitions 2 3,944 -
45,028 27,736
Cost of sales (26,408) (15,646)
Gross profit 18,620 12,090
Administrative expenses (12,442) (7,999)
Exceptional items 3 (640) (1,903)
Total administrative expenses (13,082) (9,902)
Continuing operations 2 4,727 2,188
Acquisitions 2 811 -
Total operating profit 5,538 2,188
Other interest receivable and similar 161 111
income
Interest payable and similar charges (872) (105)
Exceptional items 3 - (231)
Interest payable and similar charges (872) (336)
Profit on ordinary activities before 4,827 1,963
taxation
Tax on profit on ordinary activities 4 (1,354) (428)
Profit for the financial year 3,473 1,535
Earnings per share - basic 6 2.41 p 1.31 p
Earnings per share - diluted 6 2.40 p 1.30 p
Adjusted basic earnings per share
before exceptional
items and amortisation of goodwill 6 3.06 p 2.62 p
*as restated for the adoption of FRS 20 'Share-based Payment' (see note 1)
CONSOLIDATED BALANCE SHEET
at 31 December 2006
Note 2006 2005
as
restated*
£ 000s £ 000s
Fixed assets
Intangible assets 8 66,006 51,083
Tangible assets 1,589 1,000
67,595 52,083
Current assets
Stocks 3,806 2,150
Debtors 16,525 12,671
Cash at bank and in hand 4,307 2,678
24,638 17,499
Creditors: Amounts falling due within (20,392) (13,919)
one year
Net current assets 4,246 3,580
Total assets less current liabilities 71,841 55,663
Creditors: Amounts falling due after (19,951) (10,065)
more than one year
Provision for liabilities and charges (368) (1,552)
Net assets 51,522 44,046
Capital and reserves
Called-up share capital 9 15,200 14,017
Share premium account 30,816 26,795
Merger reserve 409 409
Profit and loss account 5,097 2,825
Equity shareholders' funds 51,522 44,046
*as restated for the adoption of FRS 20 'Share-based Payment' (see note 1)
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 December 2006
Note 2006 2005
£ 000s £ 000s
Cash flow statement
Cash flow from operating activities 4,612 1,173
Returns on investments and servicing of 10 (913) (225)
finance
Taxation (745) (385)
Capital expenditure and financial 10 (1,166) (359)
investment
Acquisitions and disposals 10 (16,711) (9,849)
Dividends paid on shares classified in 5
shareholders'
funds (1,542) (1,076)
Cash outflow before management of liquid
resources
and financing (16,465) (10,721)
Management of liquid resources 10 55 -
Financing 10 18,088 10,389
Increase/(decrease) in cash in the year 11 1,678 (332)
Reconciliation of net cash flow to
movement in net debt
Increase/(decrease) in cash in the year 1,678 (332)
Cash inflow from increase in debt 11 (12,884) (10,323)
Change in net funds resulting from cash (11,206) (10,655)
flows
Translation differences 11 163 (110)
Movement in net debt in the year (11,043) (10,765)
Net (debt)/funds at the start of the (7,645) 3,120
year
Net debt at the end of the year 11 (18,688) (7,645)
Notes to the preliminary announcement
31 December 2006
Note
1 Accounting policies
The financial statements have been prepared on the basis of the accounting
policies set out on pages 29 to 31 of the Huveaux PLC Annual Report for 2005,
which have been consistently applied, except that the Group has adopted
Financial Reporting Standard 20: 'Share-based Payment'.
FRS 20 requires that the fair value of share awards granted to employees is
assessed at grant date and is charged to the profit and loss account over the
vesting period based on the number of shares which the Directors consider likely
to vest, with a corresponding increase in equity. The fair value of the options
granted is measured using an option pricing model, taking into account the terms
and conditions upon which the options were granted. Deferred tax is recognised
where it is likely that share relief will be available on the difference between
exercise price and market price at the balance sheet date.
The profit and loss account for the year ended 31 December 2005 has been
restated to include a charge of £173,000, with a corresponding deferred tax
credit of £5,000. The net effect has been to increase equity shareholders' funds
by £5,000. The profit and loss account for the year ended 31 December 2006
includes a charge of £153,000 and a discounted deferred tax credit of £28,000.
In addition to the above the following accounting policies are also applicable
as a result of the acquisitions made during the year.
Stock and work in progress
The costs of the design and development of CD ROM titles ('plate costs') are
capitalised on individual projects where the future recoverability of the costs
can be foreseen with reasonable certainty. Plate costs are stated at their
direct cost less accumulated amortisation. Full provision is made for any plate
costs where the CD ROM titles are excess to requirements or where they will no
longer be used in the business. Amortisation is provided to write off the plate
costs over one to three years at varying rates to match the anticipated future
income streams.
Post retirement benefits
The Group operates a pension scheme in France providing benefits on final
pensionable pay. The assets of the scheme are held separately from those of the
Group. Pension scheme assets are measured using market values. Pension scheme
liabilities are measured using a projected unit method and discounted at the
current rate of return on a high quality corporate bond of equivalent term and
currency to the liability. The pension scheme deficit is recognised in full. The
movement in the scheme deficit is split between operating charges, finance items
and, in the statement of total recognised gains and losses, actuarial gains and
losses.
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
2006 2006 2006 2005
£ 000s £ 000s £ 000s £ 000s
Group turnover
Political
United Kingdom 8,905 139 9,044 8,214
Continental Europe & rest of 1,534 - 1,534 1,507
the world
10,439 139 10,578 9,721
Learning
United Kingdom 15,355 3,522 18,877 10,880
Continental Europe & rest of 356 283 639 344
the world
15,711 3,805 19,516 11,224
Healthcare
Continental Europe & rest of 14,934 - 14,934 6,791
the world
14,934 - 14,934 6,791
41,084 3,944 45,028 27,736
Total operating profit/(loss)
Political
United Kingdom 1,718 20 1,738 1,137
Continental Europe & rest of 364 - 364 237
the world
2,082 20 2,102 1,374
Learning
United Kingdom 2,726 725 3,451 2,103
Continental Europe & rest of 51 66 117 29
the world
2,777 791 3,568 2,132
Healthcare
Continental Europe & rest of 2,048 - 2,048 274
the world
2,048 - 2,048 274
Head Office
United Kingdom (2,180) - (2,180) (1,592)
(2,180) - (2,180) (1,592)
4,727 811 5,538 2,188
Head office costs include amortisation of goodwill totalling £485,000 (2005:
£56,000). In the prior year, Head office costs were allocated across the
operating divisions on a pro rata basis. The directors believe that the
disclosure of the Head office costs as a separate division presents a fairer
disclosure of the Group's operations. Exceptional items of £640,000 (2005:
£2,134,000) were incurred in respect of the United Kingdom (£399,000) and
Continental Europe & rest of the world (£241,000). Exceptional items have been
incurred in the Political Division (£102,000 of which £62,000 relates to
acquisitions during the year), Learning Division (£297,000 of which £124,000
relates to acquisitions) and Healthcare Division (£241,000).
2 Segmental information (continued)
Continuing
Operations Acquisitions Total
2006 2006 2006 2005
£ 000s £ 000s £ 000s £ 000s
Net assets
Political
United Kingdom 25,145 14 25,159 23,337
25,145 14 25,159 23,337
Learning
United Kingdom 19,998 552 20,550 17,764
19,998 552 20,550 17,764
Healthcare
Continental Europe 3,331 - 3,331 1,945
3,331 - 3,331 1,945
Head Office
United Kingdom 2,482 - 2,482 1,000
2,482 - 2,482 1,000
50,956 566 51,522 44,046
As in the prior year 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. The turnover of this division for the year was
£670,000 (2005: £799,000).
3 Exceptional items
2006 2005
£ 000s £ 000s
Redundancy and people related costs 452 1,653
Relocation and integration 188 135
Other exceptional items - 115
640 1,903
Interest on financing - 231
The exceptional items relate primarily to the restructuring of the operations at
Letts Educational Limited, Leckie and Leckie Limited, Political Wizard Limited
and Political Monitoring Services Limited following their acquisition in 2006,
and additional restructuring of the operations at COPEF SA following the
acquisition of that business in 2005. Further exceptional items were incurred in
the restructuring of the Group's operations following these acquisitions.
An exceptional interest charge was incurred in 2005 in relation to the £8.5
million bridge financing facility which was put in place to part finance the
acquisition of Epic Group Plc and which was repaid immediately following the
acquisition.
4 Taxation
2006 2005
as restated*
£ 000s £ 000s
UK corporation tax
Current tax on income for the period 878 166
Adjustments in respect of prior periods 24 15
902 181
Double taxation relief (1) (2)
Foreign tax
Current tax on income for the period 1 2
Total current tax 902 181
Deferred tax
Origination and reversal of timing differences 736 512
Deferred tax asset on French losses (93) (166)
Impact of discounting (191) (99)
Total deferred tax 452 247
Tax on profit on ordinary activities 1,354 428
The effect of exceptional items charged during the year is to increase the tax
charge by £192,000 (2005: £640,000).
The charge to the profit and loss account in respect of deferred tax of £452,000
(2005: £247,000) is stated after recording a deferred tax asset of £93,000
(before discounting) (2005: £150,000) 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 £200,000
(2005: £293,000) that have not been recognised on the basis that their future
economic benefit is uncertain.
4 Taxation (continued)
The tax charge for the period differs from the standard rate of corporation tax
in the UK of 30% (2005: 30%). The differences are explained below:
2006 2005
as restated*
£ 000s £ 000s
Current tax reconciliation
Profit on ordinary activities before tax 4,827 1,963
Current tax at 30% (2005: 30%) 1,448 589
Effects of:
Permanent differences between expenditures charged
in arriving at income and expenditures allowed for
tax purposes 216 11
Share based payment charge not allowable 46 52
Capital allowances in excess of depreciation (109) (52)
Adjustments to tax charge in respect of prior 24 15
periods
Utilisation of tax losses (723) (434)
Total current tax 902 181
*as restated for the adoption of FRS 20 'Share-based Payment' (see note 1)
5 Dividends
2006 2005
£ 000s £ 000s
The aggregate amount of dividends comprises:
Final dividends paid in respect of prior year
but not recognised as
liabilities in that year 1,542 1,076
A final dividend of 1.21 pence per 10p Ordinary share has been recommended and,
subject to approval by shareholders at the Annual General Meeting on 26 April
2007, will be paid on 31 May 2007 to shareholders on the register at 27 April
2007.
6 Earnings per share
2006 2005
£ 000s £ 000s
Profit attributable to shareholders 3,473 1,535
Add: exceptional items 640 2,134
Add: amortisation of goodwill 485 56
Less: tax in respect of exceptional items (192) (640)
Adjusted profit attributable to shareholders 4,406 3,085
2006 2005
Ordinary Ordinary
shares shares
Weighted average number of shares
In issue during the year - basic 143,994,329 117,677,253
Dilutive potential ordinary shares 698,200 421,610
In issue during the year - diluted 144,692,529 118,098,863
Earnings per share - basic 2.41 p 1.31 p
Earnings per share - diluted 2.40 p 1.30 p
Adjusted earnings per share before exceptional
items
and amortisation of goodwill 3.06 p 2.62 p
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. All fair values are provisional.
a) Political Monitoring Services Limited and Political Wizard Limited
On 27 July 2006 the Group acquired 100% of the issued share capital of Political
Monitoring Services Limited ('PMS') and 50% of the issued share capital of
Political Wizard Limited ('Wizard'), the remaining 50% of which is owned by PMS,
in one transaction.
The following table sets out the book values of the identifiable assets and
liabilities acquired and their provisional fair value to the Huveaux Group:
PMS Wizard Accounting
Book Book Policy Fair value Fair
value value Alignments Adjustments value
£ 000s £ 000s £ 000s £ 000s £ 000s
Tangible fixed assets 21 - - (17) 4
Debtors 205 232 - (54) 383
Cash 8 (10) - - (2)
Creditors (174) (193) (274) (81) (722)
Net assets/ 60 29 (274) (152) (337)
(liabilities)
acquired
Goodwill 5,576
Total consideration 5,239
Satisfied by:
Cash paid 4,904
Acquisition costs 335
5,239
The accounting policy alignment comprises £274,000 of revenue which has been
deferred in accordance with the group accounting policies. Fair value
adjustments include provisions against the book value of certain debtors and the
recognition of certain accruals.
Cash paid includes £580,000 of deferred consideration which is held within other
creditors. This will be paid subject to certain operational performance targets
being met through to 30 June 2008.
7 Acquisitions (continued)
The summarised profit and loss account for PMS for the year ended 31 December
2005 and for the period from 1 January 2006 to 26 July 2006 is given below:
Period ended Year ended
26 July 31 December
2006 2005
Unaudited Unaudited
£ 000s £ 000s
Turnover 349 650
Operating profit/(loss) 21 (5)
The summarised profit and loss account for Wizard for the year ended 31 December
2005 and for the period from 1 January 2006 to 26 July 2006 is given below:
Period ended Year ended
26 July 31 December
2006 2005
Unaudited Unaudited
£ 000s £ 000s
Turnover 442 627
Operating profit/(loss) 54 (31)
7 Acquisitions (continued)
b) Letts Educational Limited and Leckie & Leckie Limited
On 4 September 2006 the Group acquired 100% of the issued share capital in both
Letts Educational Limited ('Letts') and Leckie & Leckie Limited ('Leckie') in
one transaction. The following table sets out the book values of the
identifiable assets and liabilities acquired and their provisional fair value to
the Huveaux Group:
Letts Leckie Accounting
Book Book value Policy Fair value Fair
value Alignments Adjustments value
£ 000s £ 000s £ 000s £ 000s £ 000s
Stock 2,553 289 - (987) 1,855
Debtors 2,335 417 (946) (149) 1,657
Deferred tax (199) (63) - 787 525
Creditors (401) (708) - (327) (1,436)
Net assets/ 4,288 (65) (946) (676) 2,601
(liabilities)
acquired
Goodwill 9,620
Total consideration 12,221
Satisfied by:
Cash paid 6,316
Shares issued 5,500
Acquisition costs 405
12,221
Provisions were made against debtors for the return of stock issued prior to
acquisition in order to align accounting policies. The fair value adjustments to
stock were made to write down items including plate costs which were considered
to have no net realisable value at the date of acquisition. The adjustment to
deferred tax was made to account for losses brought forward at the date of
acquisition.
7 Acquisitions (continued)
The summarised consolidated profit and loss account for Letts for the year ended
31 December 2005 and for the period from 1 January 2006 to 3 September 2006 is
given below:
Period ended Year ended
3 September 2006 31 December 2005
Unaudited Audited
£ 000s £ 000s
Turnover 4,456 7,811
Operating (loss)/profit (610) 86
The summarised consolidated profit and loss account for Leckie for the year
ended
31 December 2005 and for the period from 1 January 2006 to 3 September 2006 is
given below:
Period ended Year ended
3 September 2006 31 December 2005
Unaudited Audited
£ 000s £ 000s
Turnover 913 2,194
Operating loss (319) (239)
8 Intangible assets
Goodwill Publishing rights Total
£ 000s £ 000s £ 000s
Cost
At 1 January 2006 3,367 47,772 51,139
Additions 65 278 343
Additions through 15,196 - 15,196
acquisition
Disposals - (131) (131)
At 31 December 2006 18,628 47,919 66,547
Amortisation
At 1 January 2006 56 - 56
Charged in year 485 - 485
At 31 December 2006 541 - 541
Net book value
At 1 January 2006 3,311 47,772 51,083
At 31 December 2006 18,087 47,919 66,006
Additions to existing goodwill and publishing rights represent adjustments to
the goodwill relating to the acquisition of Epic Group Plc and COPEF SA in 2005.
The disposal of publishing rights represents the sale of the business mailing
operation of COPEF SA in 2006 which was sold at its book value.
9 Called-up share capital
2006 2005
£ 000s £ 000s
Authorised:
200,000,000 Ordinary shares of 10p each (2005: 20,000 20,000
200,000,000)
Allotted, called-up and fully paid:
151,998,453 Ordinary shares of 10p each (2005: 15,200 14,017
140,170,496)
During the year, the Company issued 11,827,957 new Ordinary shares in respect of
the acquisition of Letts Educational Limited and Leckie & Leckie Limited.
The total nominal value of new shares issued was £1,183,000.
10 Analysis of cash flows
2006 2005
£ 000s £ 000s
Returns on investment and servicing of finance
Interest and similar income received 153 111
Interest paid (1,066) (336)
(913) (225)
Capital expenditure and financial investment
Purchase of tangible fixed assets (1,166) (358)
Purchase of intangible fixed assets - (1)
(1,166) (359)
Acquisitions and disposals
Purchase of subsidiary undertakings and assets (16,840) (18,224)
Proceeds on sale of investment 131 -
Lonsdale deferred consideration paid - (1,100)
Dods Parliamentary Communications deferred - (471)
consideration paid
(Overdraft)/cash acquired on acquisition of (2) 9,946
subsidiary (see note 7)
(16,711) (9,849)
Management of liquid resources
Proceeds on sale of current asset investments 55 -
55 -
Financing
Debt due within one year:
- Reclassification of loans repayable within 3,160 9,016
one year
- Repayment of loan (516) (8,500)
Debt due after more than one year:
- New loans acquired 13,400 9,807
- Reclassification of loans repayable within (3,160) -
one year
Issue of ordinary share capital 5,500 -
Expenses (paid)/recouped in connection with (296) 66
share issue
18,088 10,389
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 2,678 1,678 (49) 4,307
hand
Debt due within one (516) (2,644) 20 (3,140)
year
Debt due after one year (9,807) (10,240) 192 (19,855)
(7,645) (11,206) 163 (18,688)
12 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 2006 or 2005 but is
derived from those accounts. Statutory accounts for 2005 have been delivered to
the Registrar of Companies, and those for 2006 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.
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 2006 Annual Report and Financial Statements are being posted to
shareholders on 26 March 2007 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 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 and exceptional items.
Operating Depreciation Allocation Exceptional
and of share
Year ended 31 based
December 2006
profit Amortisation payment items EBITDA
£ 000s £ 000s £ 000s £ 000s £ 000s
Political 2,102 224 55 102 2,483
Learning 3,568 182 21 297 4,068
Healthcare 2,048 77 13 241 2,379
Head Office (2,180) 513 64 - (1,603)
Share based - - (153) - (153)
payments
allocation
5,538 996 - 640 7,174
Operating Depreciation Allocation Exceptional
and of share
based
Year ended 31
December 2005
profit Amortisation payment items EBITDA
£ 000s £ 000s £ 000s £ 000s £ 000s
Political 1,374 218 53 155 1,800
Learning 2,132 104 6 373 2,615
Healthcare 274 52 3 1,152 1,481
Head Office (1,592) 82 111 223 (1,176)
Share based - - (173) - (173)
payments
allocation
2,188 456 - 1,903 4,547
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