Final Results

Next Fifteen Communications Grp PLC 08 November 2005 8 November 2005 Next Fifteen Communications Group plc Financial results for the year ended 31 July 2005 Next Fifteen Communications Group plc ("Next Fifteen" or "the Group"), the international public relations consultancy group, today reports record profitability and revenues for its financial results for the year ended 31 July 2005. Financial highlights: • Revenue up by 15% to £43.2m (2004: £37.7m) • Pre-tax profit increased by 58% to £3.05m (2004: £1.93m) • Adjusted profit before tax, reorganisation costs and goodwill amortisation improved by 28% to £3.29m (2004: £2.57m) • Basic earnings per share rose by 45% to 3.87p (2004: 2.67p) • Adjusted earnings per share up by 12% to 4.45p (2004: 3.98p) • Final dividend of 0.9p (2004: 0.8p), making a total dividend for the year of 1.23p (2004: 1.1p), up 12% Corporate progress: • Acquisition of OutCast Communications towards the end of the period creating the market leading provider of technology PR in the US • Minority interest in Bite Communications, previously not controlled by the Group, acquired in August 2005; expected to be earnings enhancing in current financial year • 25% stake acquired in Lexis Public Relations, a leading UK consumer PR firm, post year-end; strengthens Group's presence beyond technology sector with remaining equity to be purchased over next five years • Vendor placing of £2.5m in June 2005 to provide additional funding for the acquisition of Outcast • Transfer of the listing of the Group's Ordinary Shares to AIM from the Official List in March 2005 Commenting on the results, Will Whitehorn, Chairman of Next Fifteen, said: "The Group's strategy is still focused on driving organic growth from its existing PR brands, but it will still seek to supplement this with targeted acquisitions that offer growth potential and complement the existing PR businesses in the Group. Looking forward, the Group has made an encouraging start to the new financial year, adding some impressive clients during the first quarter including Philips and Sprint Nextel Corporation. These wins, combined with Bite's Sun Microsystems success in the second half of last year, create an excellent platform for further organic growth in the current financial year. "The addition of OutCast and Lexis to the Group and the acquisition of the Bite minority interest will add yet further earnings growth. Against this background and a steadily improving general economic outlook for the Group's major markets, we believe we have good cause to remain confident about our prospects for the current year." - Ends - For further information: Next Fifteen Communications Group Tim Dyson, Chief Executive 001 415 350 2801 David Dewhurst, Finance Director 07974 161183 Merlin 020 7653 6620 Vanessa Maydon Mob. 07802 961 902 Rebecca Penney Mob. 07795 108 178 Attached: Chairman and Chief Executive Statement Consolidated Profit & Loss Account Consolidated Statement of Total Recognised Gains & Losses Company Balance Sheet Consolidated Cash Flow Statement Reconciliation of Movements in Shareholders' Funds Notes to the Preliminary Statement Chairman and CEO's statement Next Fifteen Communications Group plc, which owns some of the world's most respected public relations consultancies is pleased to announce record full-year results for the year to 31 July 2005. Revenue for the last year rose by 15% to £43.2m (2004: £37.7m). Pre-tax profit also increased during the year by 58% to £3.05m (2004: £1.93m). Adjusted profit before tax and goodwill amortisation improved 28% to £3.29m (2004: £2.57m). Basic earnings per share were 3.87p, up 45% from 2.67p last year. The adjusted earnings per share were 4.45p, up 12% from the previous year's 3.98p. As a result, the Board is proposing a final dividend of 0.9p, which will bring the total for the year to 1.23p (2004: 1.1p), a rise of 12%. Selective acquisitions Towards the end of the financial year the Group made the acquisition of OutCast Communications, a leading technology PR firm based in San Francisco and New York. With the addition of OutCast, Next Fifteen becomes a market leading provider of technology PR in the world's largest PR market, the United States of America. The acquisition further strengthens the Group's client base with the addition of such brands as Yahoo!, Dell and salesforce.com. These add to an existing client list which includes IBM, Microsoft, Apple, Sun Microsystems and Xerox. At the start of the current financial year the Group made two further important investments. These were the purchase of the minority interest previously not controlled by the Group in Bite Communications, which should enhance earnings in the current financial year. Also there was the acquisition of a 25% stake in Lexis Public Relations, a leading UK consumer PR firm. Lexis, named PR agency of the year by Marketing Magazine in 2004, has a client list which includes Unilever, Coca-Cola, Diageo and Barclays, thus strengthening the Group's presence beyond the technology sector. Under the terms of the deal, Next Fifteen will acquire the remaining equity in Lexis over the next five years. Lexis sits alongside August One which the Group restructured this year so that it could focus solely on clients outside the technology market. Following the restructuring of August One, Next Fifteen elevated its third technology PR brand in the UK, Inferno PR, to become a direct subsidiary of Next Fifteen and its clients now include Microsoft and Computer Associates. The acquisition of OutCast was funded through a combination of new equity and existing bank facilities. The payments made after the year-end for the acquisition of the Bite minority interest and the purchase of the initial stake in Lexis were made from the existing bank facilities. This leaves the Group with only modest levels of debt. During the year to 31 July 2005, the Group generated cash of £0.4m before acquisition payments and financing, despite the exceptionally high £1.9m capital expenditure resulting mainly from office moves in the US and the UK. Continued expansion in APAC and North America Much of the Group's growth has come from the expansion of our North American and Asian businesses. In the US, we have continued to see substantial organic growth. In this market, which currently accounts for over 50% of the Group's revenues and profits, Text 100 and Bite generated revenue of £19.3m compared with £16.1m last year, an increase of 20%, despite a further 5% weakening of the dollar. The growth in the US has come largely from a strong flow of new business from companies such as Sun Microsystems, Yahoo!, eBay and AMD but also through the expansion of relationships with existing clients such as Fuji and ARM. In Asia, Text 100 is fast becoming the leading provider of technology PR. In the last year Text 100 expanded its business in China with the opening of its fourth office in the region this time in Guangzhou. Text 100 has also added AAPT and Nokia to its client list in the region. Group strategy in action The Group's strategy is still focused on driving organic growth from its existing PR brands, but it will still seek to supplement this with targeted acquisitions that offer growth potential and complement the existing PR businesses in the Group. Looking forward, the Group has made an encouraging start to the new financial year, adding some impressive clients during the first quarter including Philips and Sprint Nextel Corporation. These wins, combined with Bite's Sun Microsystems success in the second half of last year, create an excellent platform for further organic growth in the current financial year. The addition of OutCast and Lexis to the Group and the acquisition of the Bite minority interest will add yet further earnings growth. Against this background and a steadily improving general economic outlook for the Group's major markets, we believe we have good cause to remain confident about our prospects for the current year. Will Whitehorn Tim Dyson Chairman Chief Executive Officer 8 November 2005 FINANCIAL REVIEW Overview The year to 31 July 2005 was a year where a number of milestones were passed. Revenue exceeded £43m, pre-tax profit was over £3m and the adjusted EPS rose to almost 4.5p. The US was our strongest performing market and despite a further decline in the dollar of over 5%, the US accounted for 44% of the Group's turnover and 58% of profits, before head office costs. The US is set to grow even stronger in the current year following the acquisition of OutCast in June 2005, which will help to push US turnover over 50% of the Group's total. The acquisition was preceded by a move of the Group's listing to the Alternative Investment Market (AIM), a market which is more attractive for smaller, growing companies. Geographic and client analysis During the last year the proportion of Group turnover generated outside the UK rose to almost 75%, from 70% the previous year. The strongest region was North America (up 23% in sterling terms) and accounting for 44% of total turnover. With the UK market accounting for 25% of turnover (down from 30% last year), in the current year the Group is expecting to generate in excess of 70% of its turnover in the two strongest markets for public relations services. In Europe and Africa the businesses continued to experience mixed fortunes but overall turnover increased 12% to £9.6m. The Asia Pacific region grew strongly to £5.4m from £4.5m last year. The region posted strong results particularly in India and added a third Mainland China office, in Guangzhou. The spread of the Group's key clients has broadened following the Bite win of Sun Microsystems in the US. The top ten clients now represent approximately 54% of the business and no single client has more than 15% of the total. Cash flow The underlying cash conversion from operating profit was strong once again but a number of significant investments caused the business to move from a net funds position of £2.9m in July 2004 to £2.4m a year later. Firstly, the Group paid £1.9m in capital expenditure largely related to office moves to accommodate the expanding US business and in the UK following office moves to house the enlarged Inferno business and to utilise previously surplus space. Secondly the initial $6m payment for OutCast was partly funded from a successful share placing and partly from the existing net cash balance. The share placing raised £2.5m before costs of £0.1m and represents the largest equity injection ever for the company, surpassing the £1.7m raised on flotation in 1999. Without the acquisition-related cashflows the Group would have generated £0.3m from its trading and investing activities. Balance sheet The biggest change in the Group balance sheet is the goodwill and other intangible assets arising from the acquisition of OutCast and the additional share capital raised to partially fund it. Net assets at 31 July 2005 were £12.4m, (2004: £7.7m), of which £2.4m is net cash. In August 2005, these funds were invested in a 25% stake in Lexis PR and the purchase of the remaining minority interest in Bite Communications. The Lexis investment is the first part of a phased purchase which will see the Group own a minimum of 51% in 2006, 75% by 2008 and the whole business in 2010. The purchase of the remaining Bite shares will be earnings enhancing for the Group and gives key members of the Bite management team shares in Next Fifteen, putting them on a similar equity incentive to other senior management within the Group. During the year the Group received £169k from employees exercising their share options and becoming shareholders in the Group. Treasury, funding and exchange risk The Group has established treasury policies and procedures which ensure that foreign currency exposure is continually monitored. The Group has a £3m revolving 3-year term loan facility, which it began to use with the OutCast acquisition. The facility is available in a combination of Sterling, US dollar, and euro at an interest rate of 1.65% over Barclays Bank's call-loan rate. Also available is an overdraft facility of £1m at a rate of 1.2 % over base rate, available in Sterling, US dollar and euro. All UK businesses are part of a composite accounting system which allows the offset of UK overdrawn and credit bank balances. The Group aims to concentrate any surplus cash in the UK subject to any local transfer restrictions, and as far as possible to hold only moderate non-deposit cash balances in overseas subsidiaries. The majority of trade is denominated in the functional currencies of the jurisdiction in which trade is conducted. Where this is not the case the directors monitor the exposure to ensure that the foreign currency risk is not material to the Group. To protect profit translation exposure from businesses denominated in US dollar and euro the Group purchases treasury products designed to give some protection against a weakening of the US dollar and euro. Taxation The total tax charge for the year is £1.3m on consolidated profits of £3.05m, an effective rate of 43.6%; one percent higher than a year ago. After adjusting for goodwill amortisation costs the underlying effective rate is 40.9%. The main reason for this increase has been the increasing proportion of profits generated in the higher tax regimes of US and India. We anticipate that the reorganization of our US businesses following the acquisition of OutCast and the Bite minority interests will begin to see a reduction in the effective tax rate to just below 40%. Earnings Basic earnings per share (EPS), adjusted for goodwill amortisation charges, rose 11.8% to 4.45p (see Note 6). The purchase of the Bite minority will have a positive impact on future earnings as this minority interest was growing as employees became eligible to exercise their options and the business became more profitable. Dividends The proposed final ordinary dividend per share is 0.9p, which takes the total for the year to 1.23p, compared with a total dividend of 1.1p last year. It will be paid on 27 January 2006, assuming it is passed at the AGM on 24 January 2006. The dividend is covered almost three times by the profit attributable to the members during the year. The Board continues to view its dividend policy over the medium-term and aims to strike a balance between the relevance placed on dividends by some shareholders and the needs of the Company to invest for future growth. David Dewhurst Finance Director NEXT FIFTEEN COMMUNICATIONS GROUP PLC CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 JULY 2005 2005 2004 (Unaudited) (Audited) Note £'000 £'000 Turnover Existing operations 2 47,939 43,111 Acquisitions 2 577 - -------- --------- Continuing operations 48,516 43,111 Other external charges (5,290) (5,423) -------- -------- Net Revenue 43,226 37,688 Staff costs 30,100 26,014 Depreciation 1,115 1,277 Amortisation and amounts written off intangible 232 197 assets Reorganisation costs - 447 Other operating charges 8,746 7,848 -------- --------- (40,193) (35,783) Operating profit Existing operations 2,923 1,905 Acquisitions 110 - -------- --------- Continuing operations 3,033 1,905 Interest receivable and similar 46 76 income Interest payable and similar (25) (54) charges -------- -------- Profit on ordinary activities 2 3,054 1,927 before taxation Taxation on profit on ordinary 4 (1,332) (821) activities -------- -------- Profit on ordinary activities 1,722 1,106 after taxation Minority interest (183) (63) -------- -------- Profit attributable to members 1,539 1,043 Equity dividends paid and proposed 5 (532) (434) -------- -------- Retained profit for the period 1,007 609 ======== ======== Earnings per share Basic 6 3.87p 2.67p Diluted 6 3.73p 2.51p Adjusted 6 4.45p 3.98p NEXT FIFTEEN COMMUNICATIONS GROUP PLC CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES FOR THE YEAR ENDED 31 JULY 2005 2005 2004 (Unaudited) (Audited) £'000 £'000 Profit attributable to members 1,539 1,043 Translation differences on foreign currency net investments 124 (169) Translation differences on long term foreign currency loans used to finance overseas subsidiaries 146 (121) -------- -------- Total recognised gains and losses related to the year 1,809 753 ======== ======== NEXT FIFTEEN COMMUNICATIONS GROUP PLC CONSOLIDATED BALANCE SHEET AS AT 31 JULY 2005 2005 2004 (Unaudited) (Audited) Note £'000 £'000 Fixed assets Intangible assets 6,917 826 Tangible assets 2,961 2,043 --------- --------- 9,878 2,869 Current assets Debtors -due within one year 11,602 8,561 -due after more than 418 278 one year --------- --------- 12,020 8,839 Cash at bank and in hand 2,960 2,942 --------- --------- 14,980 11,781 Creditors: amounts falling due within one year 9,222 6,598 Net current assets 5,758 5,183 --------- --------- Total assets less current liabilities 15,636 8,052 Creditors: amounts falling due after more than one year 3,259 200 Provision for liabilities and charges 5 196 --------- --------- Net assets 2 12,372 7,656 ========= ========= Capital and reserves Called up share capital 1,244 1,121 Shares to be issued 7 568 - Share premium account 5,112 2,714 ESOP reserve (1,667) (1,851) Profit and loss account 6,667 5,402 --------- --------- Equity shareholders' funds 11,924 7,386 Minority interests 448 270 --------- --------- 12,372 7,656 ========= ========= NEXT FIFTEEN COMMUNICATIONS GROUP PLC CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 JULY 2005 2005 2004 (Unaudited) (Audited) Note £'000 £'000 Net cash inflow from operating activities 9 3,818 2,213 Returns on investments and servicing of finance Interest received 46 76 Interest paid (12) (29) Minority interest dividend paid (26) (14) ------- ------- Net cash inflow from returns on investments and servicing of finance 8 33 Taxation (996) (1,131) Capital expenditure and financial investment Payments for long-term deposits (40) (73) Payments to acquire tangible fixed (1,932) (837) assets Proceeds from sale of tangible fixed 17 39 assets ------- ------- Net cash outflow from capital expenditure and (1,955) (871) financial investment Acquisitions and disposals Purchase of subsidiary undertaking (3,408) - Cash at bank and in hand acquired with 85 - subsidiary Payments to acquire trade and assets (311) (486) ------- ------- Net cash outflow from acquisitions and (3,634) (486) disposals Equity dividends paid (444) (391) -------- -------- Net cash outflow before financing (3,203) (633) Financing Issue of new share capital 2,431 3 Issue of shares to minorities 68 62 Payments to acquire own shares - (66) Proceeds from sale of own shares 169 186 Long term loan 511 - Capital element of finance lease (69) (226) rental repayments Redemption of minorities (4) (12) ------- ------- Cash inflow/ (outflow) from financing 3,106 (53) -------- -------- Decrease in cash in the year 9 (97) (686) ======== ======== NEXT FIFTEEN COMMUNICATIONS GROUP PLC RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS FOR THE YEAR ENDED 31 JULY 2005 2005 2004 (Unaudited) (Audited) Note £'000 £'000 Profit attributable to members 1,539 1,043 Dividends (532) (434) --------- -------- 1,007 609 Translation differences on foreign currency net investments 124 (169) Translation differences on long term foreign currency loans used to finance overseas subsidiaries 146 (121) Issue of shares 2,521 3 Shares to be issued 7 568 - Disposal of own equity shares held in ESOP 169 120 Revaluation of ESOP reserve* 3 - --------- -------- Net addition to shareholders' funds 4,538 442 ========= ======== Opening shareholders' funds 7,386 6,944 --------- -------- Closing shareholders' funds 11,924 7,386 ========= ======== *Downward revaluation due to write-off of historical balance payable by ESOP for shares. 1) FINANCIAL INFORMATION The financial information is for the year ended 31 July 2005 and is not audited as defined by APB Bulletin 1993/1 and 1998/6. The financial information in this report does not constitute statutory financial statements within the meaning of section 240 of the Companies Act 1985 (as amended). The results for the year ended 31 July 2004 have been extracted from the financial statements of the Group on which an unqualified audit report has been received which did not contain a statement under section 237 of the Companies Act 1985 and which have been filed with the Registrar of Companies. The preliminary statement is prepared on the basis of the accounting policies as set out in the last annual report. 2) SEGMENTAL INFORMATION Analysis of turnover, profit before taxation and net assets by geographic origin and destination are stated below. The turnover relates to one class of business, being the provision of public relations services. Turnover Profit before Net assets Turnover taxation Net assets £'000 £'000 £'000 Year ended 31 July 2005 Continuing activities: UK 12,269 551 3,673 EMEA* 9,581 584 1,310 North America 20,637 2,332 4,095 Asia Pacific 5,452 644 1,537 Head office - (1,167) 869 --------- --------- --------- 47,939 2,944 11,484 Acquisitions: North America 577 110 888 --------- --------- --------- 48,516 3,054 12,372 ========= ========= ========= Year ended 31 July 2004 Continuing activities: UK 12,891 1,059 2,157 EMEA* 8,531 364 1,120 North America 17,189 1,412 2,611 Asia Pacific 4,500 263 1,272 Head office - (1,171) 496 --------- --------- --------- 43,111 1,927 7,656 ========= ========= ========= *EMEA means Europe (excluding the UK), Middle East and Africa. The directors consider these regions to be separate geographic markets and the markets within which the Group operates. The 2004 segmental analysis has been restated to show UK turnover, profit before taxation and net assets separately from the rest of EMEA. The directors believe that the new allocation appropriately recognises the UK market as being distinct from the remainder of Europe, the Middle East and Africa. 3) RECONCILIATION OF PRO FORMA FINANCIAL MEASURES 2005 2004 (Unaudited) (Audited) £'000 £'000 Profit on ordinary activities before taxation 3,054 1,927 Reorganisation costs - 447 Amortisation and amounts written off intangible assets 232 197 ------- ------- Adjusted profit on ordinary activities before taxation 3,286 2,571 ======= ======= Adjusted profit on ordinary activities before taxation has been presented to provide additional information which may be useful to the readers of the statement. 4) TAX ON PROFIT ON ORDINARY ACTIVITIES 2005 2004 (Unaudited) (Audited) £'000 £'000 UK Corporation tax at the standard rate of 30% (2004: 30%) on the results for the year 650 192 Overseas Taxation 956 756 --------- -------- Total current charge for the year 1,606 948 Prior year under/ (over) provision UK 19 (329) Prior year (over)/ under provision (overseas) (10) 41 Deferred taxation (283) 161 --------- -------- Total tax charge on profit on ordinary activities 1,332 821 ========= ======== 5) DIVIDENDS A final dividend of 0.9p (2004 - 0.8p) per share has been proposed. The interim dividend was 0.33p (2004 - 0.3p) per share, making a total for the year of 1.23p per share (2004 - 1.1p). The final dividend, if approved at the AGM on 24 January 2006 will be paid on 27 January 2006 to all shareholders on the Register of Members on 23 December 2005. The ex-dividend date for the shares is 21 December 2005. 6) EARNINGS PER SHARE Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares during the year, determined in accordance with the provisions of FRS 14, "Earnings per share". Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares in issue on the assumption of conversion of all the potentially dilutive ordinary shares. The Group has only one category of dilutive potential shares, being share options granted where the exercise price is less than the average price of the Company's ordinary shares during the year. Adjusted earnings per share is calculated by dividing the earnings attributed to ordinary shareholders before reorganisation costs and amortisation of goodwill, after tax, by the weighted average number of ordinary shares during the year. 2005 2004 (Unaudited) (Audited) £'000 £'000 Basic and diluted earnings attributable to ordinary shareholders 1,539 1,043 Reorganisation costs after taxation - 313 Amortisation of goodwill after taxation 232 197 --------- --------- Adjusted earnings attributable to ordinary shareholders 1,771 1,553 --------- --------- Number Number Weighted average number of ordinary shares 39,806,952 39,021,121 Dilutive share options 1,477,007 2,381,296 Diluted weighted average number of ordinary shares 41,283,959 41,402,417 --------- --------- Basic earnings per share 3.87p 2.67p Diluted earnings per share 3.73p 2.51p Adjusted earnings per share 4.45p 3.98p Adjusted earnings per share has been presented to provide additional information which may be useful to the readers of the statement. 7) ACQUISITIONS AND INTANGIBLE ASSETS On 20 June 2005, the Group purchased the entire share capital of OutCast Communications ("OutCast") which is based in San Francisco. The maximum consideration for OutCast is £7,384,000 ($13,000,000) payable over five years in both shares and cash. An initial cash payment of £3,408,000 ($6,000,000) was made on completion, with the remaining consideration based upon both the revenue and profit performance of OutCast post acquisition. The deferred consideration will be paid in five annual instalments, with £568,000 ($1,000,000) of the first £1,136,000 ($2,000,000) being satisfied in shares and the balance in cash. Included within the maximum amount of £7,384,000 ($13,000,000) payable under the purchase agreement is £245,000 ($431,000) of retention bonuses for key OutCast staff. The bonus liability is recognised on an accruals basis over the retention period, rather than as a cost of acquisition, and should any of these staff leave during the retention period, the bonus amount will instead be paid as deferred consideration to the previous shareholders of OutCast. The provisional fair value of the net assets acquired was £822,000 ($1,447,000). In calculating the total cost of the acquisition of £7,131,000 ($12,555,000), the maximum deferred cash consideration recognisable at this stage of £3,163,000 ($5,569,000 - being $7,000,000 less both the $431,000 retention bonus and the $1,000,000 deferred share consideration) is reduced by a discount of £432,000 ($760,000) which arises when the deferred consideration is discounted to its net present value as required by FRS 12, "Provisions, Contingent Liabilities and Assets". The deferred share consideration has not been discounted. In addition, legal and professional fees of £190,000 ($335,000) being the incremental fees incurred as a result of the transaction have been treated as an acquisition cost, as has a tax charge of £234,000 ($411,000) arising on the conversion of OutCast from an S-Corp partnership to a C-Corp. The goodwill of £6,309,000 ($11,108,000), has been capitalised and is being amortised over its useful economic life of twenty years. 8) POST BALANCE SHEET EVENTS On 19 July 2005, the Company made an offer to buy the minority interest in its subsidiary Bite Communications Group Limited ("Bite") that was not already under its control. Under the terms of the offer, the price paid by Next Fifteen was calculated as a multiple of the profits generated by Bite for the year ending 31 July 2005. An interim payment was paid to shareholders who accepted the offer on 10 August 2005 with a further balancing payment being due on 29 November 2005. Key employee shareholders of Bite received 50% of their total consideration in Next Fifteen shares which may only be sold in one-third proportions over each of the first three anniversaries from 10th August 2005. The Company now owns or has under its control 100% of the issued share capital of Bite. The total consideration payable under the offer will be £2.2 million, implying a value of approximately £11.1 million for the entire issued share capital of Bite. On 4 August 2005, the Company acquired a 25% stake in the UK public relations company Lexis Public Relations Limited ("Lexis") by the acquisition of a 25% stake in Panther Communications Group Limited ("Panther"), the parent company of Lexis. It is the intention of the Company to acquire the whole of Panther by 2010 and Panther's existing management has agreed to sell further stakes in the company over the next 5 years. Under the terms of the acquisition, the Company paid initial consideration of £1.27 million for 25% of Panther. Further purchases will be made over the next five years based on the performance of the company, with total consideration capped at £10 million. During 2006 the Company will increase its shareholding to at least 51% and the consideration for this and subsequent purchases will be satisfied through a combination of cash and Next Fifteen shares, with a minimum of 25% to be in the form of shares. Until the Company's shareholding in Panther exceeds 50%, Lexis will be accounted for as an associate undertaking in the Group's accounts, and after this stage will be fully consolidated. 9) NOTES TO THE CASH FLOW STATEMENT (1) Reconciliation of operating profit to net cash inflow from operating activities 2005 2004 (Unaudited) (Audited) £'000 £'000 Operating profit 3,033 1,905 Depreciation, amortisation and amounts written off intangible assets 1,347 1,474 Loss/ (profit) on sale of tangible fixed assets 15 (2) Loss on sale of minority interest 15 59 Increase in debtors (2,425) (1,537) Increase in creditors 2,024 616 Decrease in provisions (191) (302) ---------- -------- Net cash inflow from operating activities 3,818 2,213 ========== ======== (2) Reconciliation of net cash flow to movement in net funds 2005 2004 (Unaudited) (Audited) £'000 £'000 Decrease in cash in the year (97) (686) Cash outflow from decrease in lease financing 69 226 Cash inflow from increase in debt (511) - --------- --------- Change in net funds resulting from cashflows (539) (460) Translation differences 115 (179) --------- --------- Movement in net funds in the year (424) (639) Net funds at 1 August 2,873 3,512 --------- --------- Net funds at 31 July 2,449 2,873 ========= ========= (3) Analysis of net funds At 31 July Cash flow Exchange At 31 July 2004 movement 2005 £'000 £'000 £'000 £'000 Cash at bank and in hand 2,942 (97) 115 2,960 Obligations under finance leases (69) 69 - - Debt due after one year - (511) - (511) -------- -------- --------- -------- Net funds 2,873 (539) 115 2,449 ======== ======== ========= ======== This information is provided by RNS The company news service from the London Stock Exchange
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