Final Results

Moneysupermarket.com Group PLC 26 February 2008 26th February 2008 Moneysupermarket.com Group PLC Preliminary Results for the period ended 31 December 2007 Moneysupermarket.com Group PLC ('Company'), the UK's leading price comparison website, is pleased to announce a strong set of results for the period ending 31 December 2007. The Company was formed as a new holding company on 14 March 2007 and it acquired Moneysupermarket.com Financial Group Limited and its subsidiaries (together the 'Group') on 22 June 2007. Accordingly, the Group is presenting consolidated results for the period from 22 June 2007 to 31 December 2007. Revenues in the period were £88.3m generating a profit before tax of £7.6m. Following a tax credit for the period of £1.8m, total profit for the period was £9.4m. The Company is also presenting a pro forma Income Statement below for the years ended 31 December 2006 and 31 December 2007 to show what the results would have been had the Company acquired Moneysupermarket.com Financial Group Limited on 1 January 2006 (1). The Directors believe this will allow the users of the financial information to gain a better understanding of the underlying performance of the business and is consistent with the presentation made in the prospectus issued in connection with the listing of the Company. Unless otherwise stated, commentary on the results relate to the pro forma Income Statement and adjusted EBITDA (2) figures. 2007 2006 % £'000 £'000 Revenue 162,882 104,459 55.9% Gross Profit 108,614 63,798 70.2% Gross Margin 66.70% 61.10% 560bpts Adjusted EBITDA 52,949 33,683 57.2% Pro forma financial highlights • Revenues increased by 55.9% from £104.5m to £162.9m with internet revenues increasing by 63.7% from £93.0m to £152.2m • Gross margins increased from 61.1% to 66.7% driven by an increase in direct to site revenues and a change in sales mix in favour of the internet business • Adjusted EBITDA increased by 57.2% from £33.7m to £52.9m • Final dividend of 1.63p per ordinary share Operational highlights • Visitors to the Group's websites increased by 54.0% to 91.0m • Transactions on the Group's websites increased by 52.4% to 58.2m • Improved revenue per transaction (RPT) and revenue per visitor (RPV) in each vertical • Online brand recognition increased to 73% in November 2007 • Continued diversification across the internet business as the Travel and Home Services verticals continue to expand rapidly The Board is proposing a final dividend of 1.63p per ordinary share. The final dividend will be paid on 30 April 2008 to ordinary shareholders on the register on 25 March 2008. Notes: (1) Assuming a debt free acquisition of Moneysupermarket.com Financial Group Limited by the Company on 1 January 2006, from which date intangible amortisation commenced, and a share option charge which reflects the average charge over the vesting period of currently unexercised options. The Directors anticipate presenting financial information on a similar basis until the final results for the year ended 31 December 2008. Thereafter the need to present a pro forma Income Statement will not be required because the relevant comparator period will be consistent with the current period. (2) Adjusted EBITDA is calculated by the Directors by making certain adjustments relating to the historical compensation levels of the Directors and senior managers. These adjustments reflect the Directors' and senior managers' profit share, discretionary bonus, and employer's national insurance contributions from these historical compensation levels. Following the listing of the Company on 31 July 2007, these elements of compensation no longer apply at these levels to these individuals each of whom entered into a new service agreement with effect from 31 July 2007. The charge for share based compensation relating to options issued prior to the listing of the Company has also been added back. Simon Nixon, CEO said 'I am delighted to be announcing a strong set of results for the Group in a year when we have floated the business and grown revenues by more than 55%. Importantly, our investment in the Moneysupermarket.com brand has continued, as has investment in our consumer offering and marketing engine. I believe we have a very strong platform from which to grow the business in the future. We have made a strong start to the current financial year. The Money vertical has enjoyed double digit growth year to date, with broadly flat performance in loans and mortgages offset by very strong growth in credit cards and savings products. The other verticals, Insurance, Travel and Home Services, have maintained the momentum experienced in the second half of 2007. In line with our business plan, we anticipate a step up in costs in the first half of 2008 associated with our continued investment in the business and development of our German subsidiary. We remain very confident in our diverse business model and the benefit it brings to consumers and providers. Given current trading and the ongoing investment programme, we are confident that we can have another successful year.' Analysts Presentation There will be a presentation for investors and analysts at 1 Finsbury Avenue, London, EC2M 2PP at 9.30am this morning. Contact details: Moneysupermarket.com Group PLC Paul Doughty Chief Financial Officer - 020 7353 4200 Alexander Cowen-Wright Public Relations Manager - 01244 665700 Tulchan Communications David Trenchard - 020 7353 4200 Celia Gordon Shute - 020 7353 4200 Chief Executive's Report I am pleased to present my first Chief Executive's Report for what has been a very successful year for the Group. We have continued to grow the business substantially whilst investing significantly for the future. This has all taken place in a year when we floated the Group on the London Stock Exchange in the very challenging and volatile markets of July 2007. The Group entered the FTSE 250 in September 2007. Group revenues grew by 55.9% in 2007 to £162.9m. Internet revenues increased by 63.7% to £152.2m and adjusted EBITDA by 57.2% to £52.9m. All areas of the internet business performed well whilst the intermediary business was broadly stable in 2007. Despite the well documented turbulence in credit markets in 2007, the Money vertical traded successfully throughout the year. Revenues grew by 48.7% and we believe this demonstrates the value that our business delivers to both consumers and providers. We believe providers reduced advertising spend on other media whilst maintaining their commercial relationships with the Group because it offers targeted and focused advertising spend and generates a greater return on investment than many other forms of media. In the Insurance vertical, revenues grew by 74.7% to £54.4m in 2007. We maintained a strong market position in a sector which continues to show rapid growth through greater consumer awareness and increasing use of on-line aggregators. We have the most complete insurance comparison engine in the UK offering the consumer the widest choice of providers. We have a very strong brand with 73% of online consumers recognising the Moneysupermarket.com brand. This gives the Group a strong competitive advantage and a powerful base from which to defend and grow its position as the UK's leading price comparison website. The Travel vertical increased its revenues by 100.9% to £15.0m. The Travelsupermarket.com brand is recognised in its own right and is the clear market leader in its field. We have made the product more comprehensive, adding additional channels which enable the business to cater for more of our consumers' requirements. Inventory has been increased allowing the consumer to compare more providers. This improves the consumer experience and engenders trust in the Group. Ultimately we believe these factors will make Travelsupermarket.com the preferred and most trusted travel website in the UK. Home Services revenues have increased by 280.2% to £4.5m. The focus this year has been on growing market share in a vertical where there were already established competitor businesses. We have been successful in the application of this strategy. We have leveraged our already substantial user base, the strength of our brand and our sales and marketing expertise to take market share from the incumbents. Home Services continues to show rapid growth, albeit from a small base, but also benefits the business by widening the Group's offering to the consumer. This gives the consumer even more reasons to return to our website. We launched our business in Germany (www.icero.de) in October 2007, initially offering Home and Motor insurance partnering with a third party who provided the technology. We have had some success in 2007 but are working hard to improve the consumer interface and conversion rates over the course of the first half of 2008. We will not commit significant investment to promoting the service until we are satisfied with progress in this area. I believe the Group has achieved a great deal in 2007 and its success is largely down to the dedication of our employees. I would like to thank them for their continuing efforts. Strategic Context As the UK's leading price comparison website, the Group is very well placed to respond to a continuing structural shift in consumers' and advertisers' behaviour. Increasing broadband penetration in the UK has dramatically improved the online experience. It is 'always on' and gives much faster access than a dial up connection. As a result, consumers are spending ever increasing amounts of time online. The consumption of internet media now accounts for more than one quarter of all media consumption in the UK. As consumers' online time increases so their confidence and familiarity with transacting over the internet improves. Advertisers are increasingly recognising this in their consumer acquisition strategies and are allocating ever increasing amounts of their advertising budgets from traditional offline media to the internet. We believe the Group provides the largest and most effective price comparison marketplace in the UK, matching relevant and ready to transact consumers with providers. Our strategy, which aims to capitalise on this structural shift, is built upon two primary objectives: •To continue to innovate with a constant focus on improving our existing products and improving the consumer/provider experience; and •To improve the volumes and mix of traffic to the Group's website by increasing brand awareness of Moneysupermarket.com. Innovation and Product Development It is imperative we maintain our leading edge in product development. The internet is unique in that it offers consumers the ability to move between different 'retailers' at the click of a mouse. It is not good enough to be the best and most trusted in 70% of the things you do because ultimately the remaining 30% of the business will suffer. Product is therefore key to our success. This is encapsulated through two of our key operating values: •To build services that we would feel proud to recommend to close family and friends; and •To endeavour to offer our consumers the widest selection of products enabling them to compare and buy online in all of the major sectors of the market. Content is therefore paramount. These values sit at the heart of all of the products and services we develop. Product development introduces more relevant consumers to more relevant product providers and improves both consumer satisfaction and provider conversion. By constantly improving our service to both of these key stakeholders, the Group will continue to prosper and maintain its position as the UK's leading price comparison website. In 2007 we introduced a number of key developments in this area. For example: • We extended the question set within our motor insurance offering to enable consumers to obtain a more tailored quote for their particular circumstances. The response has been good and we have seen an increase in conversion rates recorded by providers. This has generated increased revenues per visitor in the motor insurance channel since the new question set was introduced; • In July 2007 we introduced MyMoneysupermarket. This enables consumers to enter their details once within our safe and secure systems; these details can then be used to prepopulate application forms which can save the consumer time and effort at the time of renewal. It also, through the log in feature, enables us to get a better understanding of our consumers and tailor our products and services to their individual needs; and • We have added more user and professional reviews and significantly grown the content in our forums features. We now have more than 24,000 registered users and many times more viewers of our forums who interact with each other to discuss topics of interest and concern to them which increases consumers' affinity with the website. We believe that these developments in particular contributed significantly to increasing the revenue per visitor across our business during 2007. Brand Awareness Marketing and PR drive new consumers to our website. We began offline initiatives a number of years ago with the supply of best buy tables to the personal finance sections of the daily newspapers. This continues and today we supply the best buy tables for seven newspapers including the Telegraph, Times and Independent. More recently in 2006 we extended our offline initiatives into TV and radio advertising which have stepped up considerably in 2007. The success of this is reflected in two key areas: • Our online brand recognition increased from 40% in July 2006 to 73% in November 2007 according to a YouGov survey commissioned for the Group; and • Our gross margins increased from 61.1% to 66.7% as the Group earned a greater proportion of its revenues from consumers who came directly to the website rather than from search engine marketing or portal partners where there is a direct cost of consumer acquisition. We need to retain our position in the front of consumers' minds as a trusted consumer champion and to become their de facto choice when considering their financial, insurance, travel and home services requirements. Current trading and outlook We have made a strong start to the current financial year. The Money vertical has enjoyed double digit growth year to date, with broadly flat performance in loans and mortgages offset by very strong growth in credit cards and savings products. The other verticals, Insurance, Travel and Home Services, have maintained the momentum experienced in the second half of 2007. In line with our business plan, we anticipate a step up in costs in the first half of 2008 associated with our continued investment in the business and development of our German subsidiary. We remain very confident in our diverse business model and the benefit it brings to consumers and providers. Given current trading and the ongoing investment programme, we are confident that we can have another successful year. Business Review The Group is presenting a pro forma Income Statement below for the years ended 31 December 2006 and 31 December 2007 to show what the financial results would have been had the Company acquired Moneysupermarket.com Financial Group Limited on 1 January 2006 (1). The Directors believe that this will allow users of the financial information to gain a better understanding of the underlying performance of the business. This is consistent with the presentation in both the interim statements for 2007 and in the prospectus issued in connection with listing of the Group in July 2007. The pro forma Income Statement forms the basis of the commentary contained in the Business Review presented below unless otherwise stated. Unaudited pro forma Income Statement for the year ended 31 December 2007 2007 2006 £000 £000 Continuing operations Revenue 162,882 104,459 -------------------------------------------------------------------------------- Internet 152,220 92,985 Intermediary 10,662 11,474 -------------------------------------------------------------------------------- Cost of sales (54,268) (40,661) --- --- Gross profit 108,614 63,798 Other operating income - 193 Distribution expenses (19,640) (7,406) -------------------------------------------------------------------------------- Administrative expenses - excluding directors' and senior managers' profit share and discretionary bonuses, and share based compensation (62,837) (49,141) Administrative expenses - directors' and senior managers' profit share and discretionary bonuses (4,967) (17,572) Administrative expenses - share based compensation (4,433) (4,192) -------------------------------------------------------------------------------- Administrative expenses (72,237) (70,905) --- --- Profit/(loss) from operating activities 16,737 (14,320) === === Adjusted EBITDA Profit/(loss) from operating activities 16,737 (14,320) Directors' and senior managers' profit share and discretionary bonuses 4,967 17,572 Share based compensation 4,433 4,192 Amortisation of intangibles 25,200 25,200 Depreciation 1,612 1,039 --- --- Adjusted EBITDA 52,949 33,683 === === Pro forma earnings per ordinary share: === === - basic 7.5p 4.7p - diluted 7.3p 4.6p Notes Basis of Preparation The pro forma results show the trading results of the Group for the years ended 31 December 2006 and 31 December 2007 adjusted for the following assumptions: • The acquisition of Moneysupermarket.com Financial Group Limited by the Company occurred debt free on 1 January 2006. • The charge included within the pro forma for share options is the average expected charge over the vesting period of options still to be exercised following the listing of the Company on 31 July 2007. In the pro forma Income Statement, basic and diluted earnings per ordinary share figures have been included which are based on an adjusted net profit figure assuming that the number of ordinary shares and options in issue at 31 December 2007 had been in issue since 1 January 2006. The diluted earnings per ordinary share calculation for the year ended 31 December 2007 does however include a weighting for Long Term Incentive Plan awards made on 28 December 2007. The Directors regard an adjusted EBITDA figure as being the most meaningful profit measure for this period. The following adjustments have been made to the pro forma Income Statement: • The acquisition of Moneysupermarket.com Financial Group Limited by the Company gave rise to £207.2m of intangibles. These are to be written off over a period of 3-10 years with a charge of £25.2m per annum to be recorded in each of the first three years. This has been shown within administrative expenses as a charge of £25.2m in the 2006 and 2007 pro forma Income Statements. • With effect from the listing of the Company on 31 July 2007, Directors and senior management compensation was revised and the individuals entered into new service agreements. Directors' and certain senior management's profit share, discretionary bonus and employer's national insurance contributions have been added back to reflect the fact that following listing on 31 July 2007 these elements of compensation no longer apply to these individuals. • Share option charges relating to Directors, senior management and other employees of the Group have been added back to calculate adjusted EBITDA. Prior to the acquisition of Moneysupermarket.com Financial Group Limited by the Company, Moneysupermarket.com Financial Group Limited issued share options to employees on terms that will not be offered moving forwards. On listing, the Company also issued 'free' shares to the value of £3,000 as a 'bonus' to each employee as part of its Share Incentive Plan scheme. On listing, the Company also entered into an agreement with Gerald Corbett under which Gerald Corbett purchased 117,647 ordinary shares in the Company and provided he completes three years service as Chairman of the Company from listing and he retains those ordinary shares he purchased, he will be entitled to subscribe at nominal value for 235,294 ordinary shares in the Company. The Company does not currently intend to make similar awards in the future. It does however anticipate making conditional share awards under the terms of the Company's Long Term Incentive Plan in the future to key staff on commercial terms. Conditional awards were made under the Company's Long Term Incentive Plan on 28 December 2007. No charge is included in the pro forma results in either 2006 or 2007. The pro forma earnings per share figures assume a 30% tax rate. Overview of financial performance Revenues grew strongly by 55.9% to £162.9m (2006: £104.5m) and adjusted EBITDA by 57.2% to £52.9m (2006: £33.7m). The internet business generated £152.2m of revenues representing 93.5% of turnover in the year to 31 December 2007 compared to £93.0m in the corresponding period which represented 89.0% of turnover. Group gross margins increased over the period from 61.1% to 66.7%, partly as a result of a more favourable mix, as the lower margin intermediary business contributed 6.5% of Group revenues in 2007 compared to 11.0% in 2006. We also saw direct to site revenues increase as a proportion of total revenues over the period. We believe that the improvement in direct to site revenues has been driven by increased brand awareness supported by continued investment in brand building including TV advertising which commenced in March 2006, and a focus on Search Engine Optimisation (SEO) which has helped to maintain and improve the Group's rankings in the free listings in the major search engines for key search terms. The adjusted cost base before depreciation increased from £30.3m to £55.7m. The majority of the increase is attributable to an increase in distribution expenses which consist primarily of television advertising, marketing and PR expenses. These have grown significantly from £7.4m in 2006 to £19.6m in 2007. Television advertising did not commence until March 2006 and the 2007 results therefore include a full year's activity compared to ten months in 2006. However throughout 2007 we increased the level of advertising activity. The success of this has been demonstrated by a significant improvement in online brand recognition from 40% in July 2006 to 73% in November 2007 as measured by a YouGov survey regularly commissioned by the Group. Administration costs have also increased substantially. Headcount increased from 523 to 647 over the period, primarily in IT and operations, as work continues on improving our consumer offering and the development of new products and services. Adjusted staff costs increased by £6.6m to £22.8m in 2007. Other costs including irrecoverable VAT increased by £7.1m driven by a change in sales mix towards sales which were exempt from VAT together with an increase in outsourced call centre costs associated with the growth in the sale of insurance leads. Included in the adjusted cost base is £1.0m of costs that relate to the launch of our German business, www.icero.de, in October 2007. Adjusted EBITDA margins improved from 32.2% in 2006 to 32.5% in 2007. The Group operates two different business segments in the UK (internet and intermediary). The internet business operates across four vertical markets. These are discussed below: 31 December 2007 31 December 2006 £000 % £000 % Money 78,030 48 52,468 50 Insurance 54,402 33 31,144 30 Travel 15,004 9 7,469 7 Home Services 4,540 3 1,194 1 Other - UK 87 0 710 1 Total Internet UK 152,063 93 92,985 89 Germany 157 0 - - --- --- --- --- Total internet 152,220 93 92,985 89 Intermediary 10,662 7 11,474 11 --- --- --- --- Total 162,882 100 104,459 100 === === === === Internet Business The UK internet business accounted for 93% of Group revenues. The Directors use key performance indicators (KPIs) to assess the performance of the internet business against our strategy. These are reviewed on a regular basis. The principle KPIs for the internet business are as follows: Visitors The Group measures the number of its visitors to its websites as the number of unique visitors per day per channel, measured on a cumulative basis using cookie -based tracking methodologies. Number of Transactions The Group measures transactions at the point in time that the consumer leaves its websites having clicked through to a third party website, or in some cases having completed an application form hosted on one of the Group's websites. Revenue Per Transaction ('RPT') The Group measures the click based revenue divided by the total number of transactions. Revenue Per Visitor ('RPV') The Group measures the total revenue (including click and other internet revenue) divided by the number of visitors defined above. The relative performance of each of the internet verticals is discussed below: Money The Money vertical currently offers the consumer the ability to search for and compare finance products for business finance, credit cards, current accounts, mortgages, loans, debt solutions and savings accounts. It also includes elements of the Group's lead business (PAA) and advisory business (MCAT) together with advertising revenues that derive from money products. The KPIs for the Money vertical are shown below: 31 December 31 December Change 2007 2006 Visitors ('000) 27,676 23,152 20% Transactions ('000) 12,557 11,006 14% Revenue (£'000) - click based revenue 60,779 37,714 61% Revenue (£'000) - other 17,251 14,754 17% Revenue (£'000) - total 78,030 52,468 49% RPV £2.82 £2.27 RPT £4.84 £3.43 Revenues in the Money vertical in total have increased by 49% from £52.5m to £78.0m and transaction revenue by 61% from £37.7m to £60.8m. Growth has been driven by both an increase in visitors of 20% and a shift in sales mix away from unsecured lending towards secured lending products. These generate higher revenues for the Group and this has significantly improved average RPT and RPV in the Money vertical which have increased by 41% and 24% respectively. The Group saw little impact on the reported results from the volatility of the credit markets in 2007. Other revenues grew 17% in the period broadly in line with visitor growth. This includes revenues from the sale of leads through PAA, commission based sales through MCAT for mortgages and loans, and advertising revenues. Insurance The Insurance vertical currently offers the ability for the consumer to search and compare insurance quotations for breakdown, dental, home, life, medical, mortgage payment protection, motor, payment protection, pet and travel insurance. It also includes elements of the Group's lead business (PAA) and advisory business (MCAT) together with advertising revenues that derive from insurance products. The KPIs for the Insurance vertical are shown below: (3) 31 December 31 December Change 2007 2006 Visitors (000) 20,677 13,365 55% Transactions (000) 13,291 8,918 49% Revenue (£000) - click based revenue 46,674 27,480 70% Revenue (£000) - other 7,728 3,664 111% Revenue (£000) - total 54,402 31,144 75% RPV £2.63 £2.33 RPT £3.51 £3.08 Revenue in the Insurance vertical increased by 75% from £31.1m to £54.4m and transaction revenue grew by 70% from £27.5m to £46.7m. RPT increased 14% to £3.51 as consumer sales conversion improved on provider websites in respect of home and motor insurance driven by upgrades in the search functionality on the website. For example an enhanced question set was added to motor insurance in July 2007 which enabled consumers to obtain a more tailored quote for their particular circumstances, further increasing conversion on the providers' websites. This improved RPT in the motor insurance channel. Other revenues increased by 111% with the launch of the leads bidding system which enabled motor and home leads to be retailed on the Group's online bidding platform. Note: (3) As noted in the prospectus issued in connection with the listing of the Company, the Group's visitor numbers during the period between June 2006 and May 2007 were understated due to certain visitors not being assigned a unique global user ID. The issue was resolved in May 2007 and has not impacted visitor numbers in the Insurance vertical after May 2007. The Group has not been able to quantify the exact extent of the understatement. Travel The Travel vertical currently offers the consumer the ability to search for and compare airport parking, car hire, flights, hotels and package holidays. The KPIs for the Travel vertical are shown below: 31 December 31 December Change 2007 2006 Visitors (000) 36,964 19,749 87% Transactions (000) 30,636 17,205 78% Revenue (£000) - click based revenue 13,080 6,796 92% Revenue (£000) - other 1,924 673 186% Revenue (£000) - total 15,004 7,469 101% RPV £0.41 £0.38 RPT £0.43 £0.40 Revenues in the Travel vertical have grown by 101% from £7.5m to £15.0m and transaction revenue by 92% from £6.8m to £13.1m. Visitors have grown by 87% over the period and each of RPT and RPV has increased by 8%. Car hire and hotels now account for a greater proportion of revenues in 2007 than 2006. There has also been some benefit with the widening of the product portfolio late in 2006 which saw the launch of airport parking and a Top Deals promotion where consumers are periodically sent details of some of the best deals found on the website. The existing product set has been further developed in 2007 to include flight sectors with B&B's being added to the hotels offering. The increased product set and content has increased page impressions and has enabled the Group to generate greater advertising revenues which are shown within other revenues. Home Services The Home Services vertical was launched in 2006. It offers consumers the opportunity to search for and compare products for broadband, mobile telephone, shopping and utilities. The KPIs for the Home Services vertical are shown below: (4) 31 December 31 December Change 2007 2006 Visitors (000) 5,721 2,819 103% Transactions (000) 1,699 1,107 53% Revenue (£000) - click based revenue 4,345 1,194 264% Revenue (£000) - other 195 N/A Revenue (£000) - total 4,540 1,194 280% RPV £0.79 £0.42 RPT £2.56 £1.08 Revenues in the Home Services vertical have grown by 280% from £1.2m to £4.5m. Revenues in 2006 were predominantly generated from utilities which was a white labelled offering with content provided by a third party and the Group was remunerated on a cost per click basis. Late in 2006 the Group developed its own utilities offering, introduced a number of other channels and the majority of commercial deals migrated towards cost per action based arrangements. This increased RPV in 2007 over 2006. Note: (4) The KPIs in respect of 2006 do not include the new car channel which was discontinued in the second half of 2006. Germany The German business launched in October 2007. It provides a range of products including home and motor insurance. Revenues were £0.2m and the Group incurred £1m in associated costs. The Group will focus in the coming months on how it can improve its product offering in Germany. Intermediary Business Intermediary revenues declined from £11.5m to £10.7m over the period. In June 2006 the Group disposed of its 50% shareholding in HL Partnership Limited, a network business. This contributed £0.8m of revenues in 2006 and nil profit. Trading in the underlying business remained stable in 2007. Acquisition of Moneysupermarket.com Financial Group Limited and Listing As noted above, on 22 June 2007 the Company, at that time controlled by Simon Nixon, purchased the entire issued share capital of Moneysupermarket.com Financial Group Limited. This was funded partially by a cash payment of £162m to one of the founder shareholders, Duncan Cameron, and a share for share exchange. This transaction has had a number of impacts on the accounts of the Company in the current period and will also impact on subsequent periods. Goodwill and Intangibles The acquisition of Moneysupermarket.com Financial Group Limited gave rise to £125.0m of goodwill and the recognition of £207.2m of intangible assets. Individual intangible assets will be amortised over their useful lives (which are in the range of 3-10 years) with a charge of £25.2m per annum in the first 3 years in the full year accounts. A charge of £13.3m has been included in the accounts covering the period from 22 June 2007 to 31 December 2007. A full year's charge of £25.2m has been included in the pro forma Income Statement for the years ended 31 December 2006 and 31 December 2007. Costs of Transaction The Company incurred total transaction costs relating to the acquisition of Moneysupermarket.com Financial Group Limited, the raising and draw down of the required financing and the flotation on the London Stock Exchange of £15.8m. The Company incurred costs and stamp duty of £2.8m relating to the acquisition of Duncan Cameron's shares in Moneysupermarket.com Financial Group Limited. These costs have been capitalised and recorded as a cost of investment on the Company's balance sheet. The acquisition of Duncan Cameron's shares in Moneysupermarket.com Financial Group Limited was funded by an all senior debt facility of £150m. The Company incurred costs of £3.7m directly associated with the raising and draw down of the loan facility. The debt was repaid from the proceeds of the listing on 31 July 2007. The costs have therefore been expensed in the current period and shown as a finance charge in the statutory accounts. The pro forma Income Statement has been prepared on a debt free basis and consequently there have been no costs recognised in respect of the debt raised in them. The remaining balance of £9.3m relates to costs incurred in relation to the listing of the Company. These costs have been written off against the share premium account. Treasury and Funding The Company raised £180m from the proceeds of the listing on 31 July 2007. Approximately £178m of the proceeds raised were used to fund the costs of the acquisition by the Company of Duncan Cameron's shares in Moneysupermarket.com Financial Group Limited including all related costs and expenses of the acquisition, the raising and draw down of debt finance and the costs of the listing. The Company acquired £14m of cash at the acquisition and has continued to generate cash from operations. It has no debt. The Company had cash balances of £54.0m at 31 December 2007. The Company has invested its cash over the period predominantly in instant access cash deposits and short term deposits (less than six months). As such the interest earned has closely followed movements in the Bank of England Base Rate. Dividend The Directors currently intend to adopt a progressive dividend policy, initially targeting a dividend payout of approximately one third of net income each year, payable by way of an interim and final dividend each year. The Board is declaring a final dividend, subject to shareholder approval, consistent with the policy above in respect of the year ended 31 December 2007 of two thirds of the annual targeted payout ratio representing one third of adjusted net income. This equates to £8.1m and represents 1.63p per ordinary share. The ex-dividend date is 19 March 2008, with a record date of 25 March 2008 and a payment date of 30 April 2008. Tax The Group tax credit of £1.8m in the statutory income statement represents an effective tax rate of -25.2%. This is significantly below the prevailing rate for the period of 30%. The current year rate has been impacted by a number of items. The deferred tax liability relating to the intangible assets has been revalued to reflect the change in corporation tax rates from 30% to 28%. This has generated a credit in the current period to tax of £3.7m. The Group has also recognised a deferred tax credit of £1.7m relating to share based payments arising from shares and options issued prior to the listing. In future, the Group expects the underlying effective rate of tax to revert to close to the standard UK corporation tax rate of 28%. Earnings per Ordinary Share Basic statutory earnings per ordinary share for the period to 31 December 2007 were 3.0p. Details can be found in Note 1. Pro forma basic earnings per ordinary share increased from 4.7p to 7.5p per share. The pro forma earnings per ordinary share is based on adjusted EBITDA after deducting depreciation and adding back estimated interest income for each period to calculate pro forma profit before tax. A tax rate of 30% has been applied to calculate pro forma profit after tax. Consolidated income statement for the period ended 31 December 2007 December 2007 £'000 Continuing operations Revenue 88,314 Cost of sales (29,057) Gross profit 59,257 Distribution expenses (10,332) Administrative expenses (37,817) Results from operating activities 11,108 Financial income 1,336 Financial expense (4,894) Net finance costs (3,558) Profit before income tax 7,550 Income tax credit 1,874 Profit for the period 9,424 Attributable to: Equity holders of the Company 9,472 Minority interest (48) Profit for the period 9,424 Earnings per share Basic earnings per ordinary share (pence) 3.0 Diluted earnings per ordinary share (pence) 2.9 Consolidated balance sheet at 31 December 2007 December 2007 £'000 Assets Non-current assets Property, plant and equipment 12,585 Intangible assets 318,853 Deferred tax asset 3,124 Total non-current assets 334,562 Trade and other receivables 19,906 Prepayments 1,194 Cash and cash equivalents 54,015 Total current assets 75,115 Total assets 409,677 Liabilities Non-current liabilities Deferred tax liability 54,243 Current liabilities Trade and other payables 25,681 Current tax liabilities 2,758 Total current liabilities 28,439 Total liabilities 82,682 Equity Share capital 118 Share premium 170,565 Retained earnings 13,285 Other reserves 143,027 Total equity attributable to equity holders of the 326,995 Company Minority interest - Total equity 326,995 Total equity and liabilities 409,677 Consolidated statement of changes in equity for the period ended 31 December 2007 Foreign Issued Reserve currency share Share Other Retained for own translation capital premium reserves earnings shares reserve Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 Foreign currency translation - - - - - 9 9 ------------------------------------------------------------------- Total income and expense for the period recognised directly in equity - - - - - 9 9 Deferred tax recognised on share-based payments 262 - 262 Profit for the period - - - 9,424 - - 9,424 ------------------------------------------------------------------- Total income and expense for the period - - - 9,686 - 9 9,695 Arising on acquisition of subsidiary - - 143,018 - - 143,018 Issue of share capital 118 179,927 - - - - 180,045 Conversion of shares to deferred shares - - - - - - - Transaction costs - (9,362) - - - - (9,362) Share- based payment - - - 3,599 - - 3,599 -------------------------------------------------------------------- At 31 December 2007 118 170,565 143,018 13,285 - 9 326,995 ==================================================================== Other reserves The other reserves balance represents the merger and revaluation reserves generated upon the acquisition of Moneysupermarket.com Financial Group Limited by Moneysupermarket.com Group PLC. Foreign currency translation reserve The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations. Reserve for own shares The reserve for the Company's own ordinary shares comprises the cost of the Company ordinary shares held by the Group. At 31 December 2007, the Group held 948,184 shares at a cost of 0.02 pence per share through a trust for the benefit of the Group's employees. Consolidated Cash Flow Statement for the period ended 31 December 2007 December 2007 £000 Operating activities Profit for the period 9,424 Adjustments to reconcile Group operating profit to net cash flows: Depreciation 908 Amortisation of intangible assets 13,325 Net finance costs 3,558 Equity-settled share-based payment transactions 3,599 Income tax credit (1,874) Change in trade and other receivables 2,541 Change in trade and other payables (1,730) Income tax paid (6,254) Net cash flow from operating activities 23,497 Investing activities Interest received 1,336 Acquisition of subsidiary (164,560) Cash acquired with subsidiary 14,295 Acquisition of property, plant and equipment (6,260) Net cash flow from investing activities (155,189) Financing activities Proceeds from share issue 179,951 Costs from issue of shares (9,362) Proceeds from borrowings 150,000 Loan from a related party 20,000 Repayment of borrowings (150,000) Interest paid (4,882) Net cash flow from financing activities 185,707 Net increase in cash and cash equivalents 54,015 Cash and cash equivalents at start of period - Cash and cash equivalents at end of period 54,015 Notes: 1 Earnings per share Basic earnings per share Basic earnings per share amounts are calculated by dividing profit for the year attributable to ordinary equity holders of the parent, by the weighted average number of ordinary shares outstanding during the period. Diluted earnings per share Diluted earnings per share amounts are calculated by dividing profit attributable to ordinary equity holders of the parent, by the weighted average number of ordinary shares outstanding during the period plus the weighted average number of ordinary shares that would be issued on the conversion of all dilutive potential ordinary shares into ordinary shares. The following reflects the share data used in the basic and diluted earnings per share computations: Earnings Weighted average Per share number of shares amount £'000 millions pence Basic earnings per share 9,424 313.6 3.0 Dilutive effect of share based instruments - 12.1 (0.1) Diluted earnings per share 9,424 325.8 2.9 2 Dividends No dividends have been declared nor paid during the period. £'000 Proposed for approval at Annual General Meeting (not recognised as a liability as at 31 December): Equity dividends on ordinary shares: Final dividend for 2007: 1.63 pence per share 8,098 Statutory Information The financial information set out above does not constitute the Company's statutory accounts for the period ended 31 December 2007 but is derived from those accounts. The accounts for the period ended 31 December 2007 will be delivered to the Registrar of Companies following the Annual General Meeting. The Company's auditors, KPMG Audit Plc, have reported on the accounts for the period ended 31 December 2007 under section 235(1) of the Companies Act 1985 ('Act'). These reports were not qualified within the meaning of section 235(2) of the Act and did not contain statements made under section 237(2) and section 237(3) of the Act. The annual report and accounts for the period ended 31 December 2007 will be posted to shareholders in March 2007. The results for the period ended 31 December 2007 were approved by the board of Directors on 25 February and are audited. The Annual General Meeting will take place on 22 April 2008. The final dividend will be payable on 30 April 2008 to shareholders on the register at the close of business on 25 March 2008. Interim and preliminary announcements notified to the London Stock Exchange are available on the internet at www.moneysupermarket.com. Cautionary note regarding forward looking statements This announcement includes statements that are forward looking in nature. Forward looking statements involve known and unknown risks, assumptions, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward looking statements. Except as required by the Listing Rules and applicable law, the Company undertakes no obligation to update or change any forward looking statements to reflect events occurring after the date such statements are published. This information is provided by RNS The company news service from the London Stock Exchange

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Moneysupermarket.com Group (MONY)
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