Final Results

RNS Number : 7689S

Centaur Media PLC

16 September 2010

 



16 September 2010

Preliminary results for the year ended 30 June 2010

Centaur Media plc ("Centaur", "the Company" or "the Group"), the business publishing, events and information group, announces results for the year ended 30 June 2010. 

Highlights

	FY2010			FY2009
	6 months to 31 December 2009 Unaudited	6 months to 30 June 2010 Unaudited	12 months to 30 June 2010 Audited	6 months to 31 December 2008 Unaudited	6 months to 30 June 2009 Unaudited	12 months to 30 June 2009 Audited
	£m	£m	£m	£m	£m	£m
Revenue	23.9	36.0	59.9	31.5	34.8	66.3
Adjusted EBITDA 1	0.0	6.6	6.6	1.9	5.1	7.0
Adjusted EBITDA margin	0%	18%	11%	6%	15%	11%
Profit/(loss) before tax	(1.7)	4.3	2.6	(0.1)	1.8	1.7
Adjusted profit before tax 2	(1.2)	5.2	4.0	0.7	3.7	4.4
Basic EPS (pence)	(0.9)	2.3	1.4	(0.1)	0.7	0.6
Adjusted basic EPS (pence) 3	(0.6)	2.8	2.2	0.3	1.8	2.1
Cash conversion  4			112%			88%

·      Second half recovery led by advertising revenues up 11% and adjusted EBITDA up by 29%

·      Tight cost control helps produce second half EBITDA margins of 18% (FY2009 15%)

·      Adjusted EPS growth of 5%

·      112% of profit converted into cash, with year-end net cash of £1.1m after acquisition of Taxbriefs

·      10% increase in final dividend

Commenting on the preliminary results, Geoff Wilmot, Chief Executive Officer of Centaur said: 

"I am pleased to report that Centaur revenues returned to growth in the second half and that recovery is continuing into the new financial year."

Enquiries:

Centaur Media plc	Geoff Wilmot, CEO Mike Lally, Group Finance Director	Tel: [phone]
Kreab Gavin Anderson	Robert Speed Anthony Hughes	Tel: [phone]

www.centaur.co.uk

1.      One of Centaur's key measures of profit, which is used to measure the relative performance of divisional units of the Group, is earnings before interest, tax, depreciation and amortisation, excluding exceptional items and other significant non-cash items including share based payments (adjusted EBITDA) as shown in the statement of comprehensive income.

2.      Adjusted PBT (PBTA) is profit before tax, excluding the impact of amortisation of acquired intangibles and of exceptional items. See financial review.

3.      Adjusted EPS is based on the basic EPS but after making adjustments for amortisation on acquired intangibles and exceptional items. See note 4.

4.      Cash conversion rate is free cash flow expressed as a percentage of adjusted operating profit.  Free cash flow is defined as cash generated from operations, less capital expenditure on property, plant and equipment and software, and excluding the cash impact of exceptional items. Adjusted operating profit is operating profit after making adjustments for amortisation on acquired intangibles and exceptional items. See financial review.

Chairman's Statement

This is my first annual report since being appointed as Chairman of the Centaur Board. I am delighted to report that our operational and financial performance during the year to 30 June 2010 had many positive aspects that collectively provide testament to the effective management of the Group during the unprecedented global recession of the last 18 months.

During these difficult times, we have strengthened the competitive position of our brands. Furthermore, we have continued to invest in organic product development with a number of launches during the year that will contribute to the strengthening of Centaur's market position.

I was also pleased that we have continued to implement our acquisition strategy with the purchase of Taxbriefs in May 2010. This acquisition, although comparatively small, is highly complementary to our existing position within the financial intermediary community as it undergoes a period of change following completion of the FSA's Retail Distribution Review. 

Current year financial performance

Group revenues recovered progressively through the financial year. Although they show a year-on-year decrease of 10% for the full year, the Group returned to revenue growth in the second half with solid double-digit year-on-year growth of 14% reported for the final quarter of the financial year (April-June 2010).

Despite lower full year revenues we contained the decrease in full year adjusted EBITDA to just 6% of the revenue reduction. This reflects a 10% year-on-year reduction in Group expenditure (on an adjusted EBITDA basis) which is attributable to the cost saving initiatives initiated during the previous financial year together with further cost reductions affected during FY2010.

As a result of this very low level of operational gearing, together with reduced exceptional charges in the current financial year and (due to deferred tax movements on share options) an effective taxation charge below the standard rate of corporation tax, I am delighted to report a basic earnings per share more than double the previous year at 1.4p (FY2009 0.6p). Adjusted earnings per share was 2.2p (FY2009 2.1p).

Dividend

This growth in adjusted earnings per share ("EPS") for the year to 2.2p provides the context for the Board's recommendation of a final dividend of 1.1p per share, giving a full year dividend of 1.7p (FY2009: 1.5p). This 13% increase in full year dividend reflects the Board's confidence in the future prospects of the Group's current trading position.

While the level of dividend cover, at 1.3x, is below our target level of between 2.0x to 3.0x across an economic cycle, the Board's view is that it is appropriate as we recover from the recession.

Cost reduction

In anticipation of the rapidly developing downturn in trading conditions in 2008, our management took swift and decisive action with the result that average employee numbers have reduced by 20% over the last two financial years. It should be noted that these decreases in employee numbers have been achieved largely through organisational efficiencies rather than product closures. Great care has been taken to ensure the prospective recovery and growth potential of our core operating assets was not impaired by these changes.

Investment in the future

Organic growth has always been, and will remain, at the heart of Centaur's success. During this financial year we continued to invest in new product development with £1.9 million invested in software developments within our digital businesses. This included the launches of Equity Capital Market Insight ("ECMi") at Perfect Information, and Pitch Creative, an interactive agency directory launched within our Marketing and Creative division. In addition we continued the roll-out across our branded websites of the content management system, user database and job board developments started in the previous financial year.

In total, including the acquisition of Taxbriefs mentioned above, we invested £3.4 million in the future of the business.

Group fundamentals unchanged

This continued investment has resulted in a strengthening of many fundamental aspects of the Group which now presents us with an exciting opportunity for growth and development over the next 3 to 5 years.

These include:

·      Market leading brands - we have increased the market share of our major brands across our communities over the past year.

·      Lower fixed cost base - on an annualised basis, Group expenditure has reduced by around £15.6 million in the last two years, a proportion of which represents a reduction in the fixed cost base of the business that will contribute to rapid margin improvement as revenues return.

·      Strong organic growth record - we have a growing pipeline of new product initiatives including new digital products and event launches.

·      Strong balance sheet - we reported a cash conversion ratio of 112% for FY2010 with net cash of £1.1 million at 30 June 2010 leaving the Group well positioned to take advantage of future investment opportunities.

·      Cyclical recovery - as in previous cycles the recovery should drive strong revenue growth for the Group with a high level of marginal profitability enhanced by the investments we have made in our digital businesses.

·      Experienced management - the strength of our management team is clearly illustrated throughout this report and remains a key success criterion in driving organic growth and identifying relevant acquisition opportunities.

Board and staff

I assumed the Chair of the Board last year following the announcement by my predecessor, Graham Sherren, that he intended to retire from the Board at this year's AGM. Graham is, of course, much more than my predecessor. He has been the driver and architect of much that has happened at Centaur since he founded the Group 29 years ago. To many people and for many years, Graham has been Centaur and a doyen of business media in the UK and beyond. As Centaur moves into a new era without Graham Sherren at the helm, on behalf of the directors, staff, friends and supporters of Centaur, I want to thank him for everything he has contributed to this fine Group and to the lives of all those who have worked with him. We wish Graham a very happy and well-deserved retirement.

Tom Scruby became a Director of the Group in 1989. Tom's experience in corporate management has been a huge strength to the Board over these years but he too has decided that it is time for him to retire, and thus he will not be standing for re-election at the forthcoming AGM. Tom's wise counsel will also be missed.

My having taken on the role of Chairman, the Board needed someone with suitable financial experience to be Chairman of the Audit Committee. We have been exceptionally fortunate to attract Robert Boyle to this role. As a senior former partner of PricewaterhouseCoopers with responsibilities for the media and telecommunications practice, Robert is ideally suited to help us not only in the technical aspects of financial management but also through his knowledge of the fast changing media sector both in the UK and abroad.

Through the past year, I have been privileged to meet many of the Group's management and staff in the office, at award ceremonies and at other events put on by the Group. I have been impressed by the quality of our people, by their enthusiasm for the business and by their determination to grow the business as the market improves. On behalf of the Board and our shareholders, I would like to thank all of our staff for the efforts they have made through these difficult months.

Current trading and outlook

The first two months of the new financial year are traditionally a quieter period for our publishing and event businesses. We have seen evidence that the encouraging pace of growth in Group revenues that we experienced in the final quarter of FY2010 is continuing.

Given the strength of our brands in each of their communities and the work that has been done to re-position them for the digital world, the Board is confident that, with further market improvements, the Group is well positioned for the future.

 

Patrick Taylor

Chairman

Business Review

Analysis of results

	2010	2010	2009	2009
	£m	£m	£m	£m
	Revenue	Adjusted EBITDA	Revenue	Adjusted EBITDA
By Segment
Legal and Financial	17.1	2.7	17.6	1.9
Marketing and Creative	14.9	1.0	17.3	0.8
Construction and Engineering	15.0	1.2	17.3	2.4
Perfect Information	5.4	2.0	5.2	2.0
General Business Services	7.5	(0.3)	8.9	(0.1)
Total	59.9	6.6	66.3	7.0
By Source
Recruitment advertising	6.3		8.1
Other advertising	23.1		25.0
Total advertising	29.4		33.1
Events	17.3		20.1
Paid-for content1	12.5		12.2
Other	0.7		0.9
Total	59.9		66.3
By Client type
Marketers	43.2		50.3
Audiences	16.7		16.0
Total	59.9		66.3
By Product type
Print	26.5	1.3	30.2	0.6
Events	17.3	1.8	20.1	2.8
Digital products	15.6	3.5	15.5	3.6
Other	0.5	-	0.5	-
Total	59.9	6.6	66.3	7.0
Underlying
Underlying	58.0	6.3	65.3	7.1
Acquisitions2	1.9	0.3	1.0	(0.1)
Total	59.9	6.6	66.3	7.0
By Maturity
Existing and acquired	56.3	7.0	59.8	7.4
New 3	3.6	(0.4)	6.5	(0.4)
Total	59.9	6.6	66.3	7.0

Notes

1.      "Paid-for content" is a new category combining the previous categories of "Circulation revenue" and "Online subscriptions"

2.      Acquisitions are defined as those made within the current or preceding financial year

3.      New products are defined as any product launched in the current or two preceding financial years

Trading Review

The Group experienced a progressive recovery in revenues over the course of the year, culminating in 14% year-on year growth in the final quarter (April-June 2010) and although we report a further reduction in revenues and adjusted profit before tax for the full year the overall trading performance for the year was positive from a number of perspectives.

A further material reduction in Group costs for the financial year led to a substantial mitigation of the revenue reduction and this factor together with a reduced tax charge allowed the Group to report a 5% increase in adjusted earnings per share to 2.2p (FY2009: 2.1p). A steady recovery in year-on-year revenues during the second half of the financial year (FY2010 H2) together with strong cash generation represented further positive aspects of Group trading for the full year.

These factors are described in more detail below and in the financial review.

In total the Group reported a 10% reduction in revenues to £59.9 million (FY2009: £66.3 million) and adjusted profit before tax also reduced by 10% to £4.0 million (FY2009: £4.4 million).  Total Group costs (excluding deprecation, amortisation, share-based payments and exceptional charges) reduced by £6.0 million to £53.3 million (FY2009: £59.3 million) and these cost savings represented 94% of the revenue reduction for the year.

The tax charge for the year at £0.6 million represented 23% of profit before tax (FY2009: 47%) and this reflected a reduction in the amount of expenditure not deductible for tax purposes together with a deferred tax credit in relation to share based payments (see financial review).

At the time of our interim results we reported a revenue reduction for the six months to December of 24%. This was followed by a steady recovery in revenues in FY2010 H2 during which time revenues were 3% above the same period last year and this included 14% growth in revenues during the final quarter of the financial year (April-June 2010).  

The Group held net cash balances of £1.1 million at 30 June 2010 (FY2009: £0.7 million) with cash generated from operations for the year of £6.6 million (FY2009: £6.0 million) representing a cash conversion rate (adjusted operating profit into free cash flow) of 112% (FY2009: 88%). Cash flows from investing activities for the financial year included the acquisition of Taxbriefs in May 2010, the details of which are described in the financial review and in note 7.

In addition the Group continued a programme of new product development during the year to 30 June 2010. These initiatives are described in more detail below and in total around 6% of Group revenues were derived from products launched in the last three financial years (FY2009: 10%).

In view of the steady improvement in trading, highlighted above and an expectation that this recovery will continue into the new financial year, the Board has declared a 10% increase in the final dividend to 1.1p per share (FY2009: 1.0p). The final dividend will be paid on 10 December 2010 to shareholders on the share register at 12 November 2010.

Review of divisional results

Our results are grouped into five major operating business segments - Legal & Financial; Marketing & Creative, Construction & Engineering; Perfect Information and General Business Services. Trading performance for each of these separate divisions is described below.

Legal & Financial

Print 55%; Digital 23%; Events 22% (% of divisional revenues)

The Legal & Financial division reported a 3% reduction in revenues to £17.1 million for the year (FY2009: £17.6 million).

In total divisional expenditure reduced by 8% and as result, despite the revenue reduction, adjusted EBITDA increased by 42% to £2.7 million representing an adjusted EBITDA margin of 16% for the year (FY2009: 11%).

In FY2010 H2 divisional revenues were 18% above the same period a year ago and this growth was led by a 34% increase in print revenues, through the principal magazine titles of Money Marketing, Fund strategy, Mortgage Strategy and The Lawyer and including revenues from the newly acquired Taxbriefs portfolio.

In both of the sectors within this division market conditions showed some improvement from January 2010 onwards. Within Legal recruitment, which represented 11% of total divisional revenue, there was evidence of returning confidence among the top 100 corporate law practices.  Although M&A deal-flow remained fairly thinly spread, expansion into other less traditional practice areas, including a degree of internationalisation, led to an increase in both law firm branding and senior level recruitment, with expenditure deployed mainly through high yielding print campaigns.

An increase in marketing spend by financial product providers resulted in improved digital sales through our principal financial community websites - moneymarketing.co.uk, fundstrategy.co.uk and mortgagestrategy.co.uk. and although in total divisional digital revenues were flat for the year, an 11% reduction in the first half of the financial year was offset by 10% growth in FY2010 H2.

A combination of factors contributed to the FY2010 H2 growth. A sustained recovery in world stock markets resulted in a renewed focus on equity based investment product from the start of the financial year and had resulted in a record level of net retail fund sales in calendar year 2009. This continued into 2010 with ISA sales during March and April 2010 reaching their highest level since 2002. In addition the proposed changes in pension legislation planned for 2012 created a strong current and prospective market for the providers of tailored pension and retirement products and the specialist intermediaries operating in that sector. These two groups were the target for a new monthly magazine  - Retirement Strategy - launched successfully last September with eight issues published during the year.

In May 2010 we launched the Money Marketing Academy to provide training materials and support to Independent Financial Advisors ("IFAs") following the introduction of a mandatory professional qualification for advisers to be completed by all IFAs wishing to continue practising beyond 2012. The academy has been well received by the main product providers and the intermediary community with a mutual benefit to be derived from improving professional standards and technical knowledge among advisers, in advance of the material changes to product distribution recommended by the FSA following the Retail Distribution Review ("RDR").

The acquisition of Taxbriefs, for whom the intermediary community represents a key customer group for their specialist taxation materials and commentaries, is clearly highly complementary to the Academy initiative.

Revenue from events reduced by 10% which principally reflected a reduction in the number of hot-topic CPD related legal conferences compared to the prior year. Elsewhere the core events in the division - awards and sponsored meetings - were generally strong, with the principal award events reporting revenues 20% ahead year-on-year, and the summit programme, where revenues were flat year-on-year, delivering a significantly improved contribution as a result of cost reductions.

Marketing & Creative

Print 50%; Digital 22%; Events 28% (% of divisional revenues)

The division reported a year-on-year revenue decrease of 14% to £14.9 million (FY2009: £17.3 million) although this was fully mitigated by a full year reduction in divisional expenditure. In total for the year the £2.4 million reduction in revenues was offset by a £2.6 million decrease in expenditure and as a result adjusted EBITDA improved by £0.2 million to £1.0 million (FY2009: £0.8 million).

These cost savings reflect the organisational changes that took place in the previous financial year when print and web commercial and editorial publishing operations were streamlined, and a process of brand merger and rationalisation resulted in the re-establishment of the Marketing Week ("MW") brand as the commercial hub of the marketing community. In addition to the benefits of a reduced divisional cost base the Marketing Week brand gathered real momentum during FY2010 with the magazine and website gaining a growing reputation for high quality editorial news and commentary across an increasingly all embracing range of integrated marketing disciplines.  This brand now offers a very effective and tailored opportunity for advertisers and recruitment agencies to reach their target audiences and revenues built steadily in the second half of the financial year and across MW magazine and MW.co.uk were 21% above FY2009 in FY2010 H2.

Together with the improved divisional organisational structure, this growing reputation for editorial quality and customer engagement combined to facilitate growth in MW branded events during the year including the launch of the MW roundtable format sponsored meetings.

The MW Engage Awards, re-launched in May 2010, thrived on a new format and a timing change. What is now regarded as an industry flagship event benefited from enhanced promotion through both MW magazine and website and this resulted in a record number of category entrants and a 40% increase in attendees at London's Grosvenor House Hotel compared to the previous event held in October 2008. In total revenue from this event was 79% above the October 2008 event.

Our flagship marketing exhibition, Marketing Week Live, reported 20% revenue growth in its second year, attracting more than 10,000 (FY2009: 9,400) relevant senior professionals to the two day event at Olympia in June 2010. The prospects for next year's event are also encouraging with on-site rebooking strongly ahead year-on-year.

In total event revenues, which now represent 28% (FY2009:24%) of total divisional revenues were flat year-on-year although this included 31% growth in FY2010 H2 compared to the same six month period a year ago.

The Creative services community was also the focus of innovative product development in the year.

In February 2010, a new interactive content based directory ("Pitch") was launched with strong support from the target community of full service advertising agencies. The principal aim of this product is to provide a dynamic and interactive agency rating process which combines periodic proprietary research commissioned through YouGov plc with continuous user generated feedback. For the participating agencies the site provides an enhanced lead generation mechanism and allows the opportunity for a showcase of recent assignments together with the more traditional aspects of a digital searchable directory.

The initiative has progressed well and further launches extending this model into other sub-sets of the Creative community (digital, design) are scheduled for the new financial year.

Construction & Engineering

Print 49%; Digital 16%; Events 35% (% of divisional revenues)

In total divisional revenues decreased by 13% to £15.0 million while adjusted EBITDA of £1.2 million for the year (FY2009 £2.4 million) represented a margin of 8% compared to 14% in FY2009.

These year-on-year changes related primarily to events within this division where revenues fell by 23% year-on-year. This included the Homebuilding Show portfolio where a year-on-year decrease in exhibition space sales represented a late-cycle effect, inherent in this type of exhibitions, and reflecting a reduced level of rebooking from the 2009 shows rather than current sentiment among exhibitors and visitors. Generally the shows had a successful year with visitor numbers ahead of FY2009 and an increased level of on-site rebooking for next year's shows.

An important component of the exhibitors at the Homebuilding Shows are suppliers to the self-build market and prevailing conditions in this sector provided some support for increased activity levels. This included an increase in the number of finance products aimed specifically at self-builders, including the return of a number of specialist providers who exited this sector in the last two years. In addition interest rates remained comparatively low and there continued to be a good availability of building plots across the UK and excess capacity within many suppliers to the sector reflecting to some extent a continued contraction of activity in the wider general construction sector.

Beyond the self-build sector and notwithstanding the effect of reduced availability of mortgage finance on the overall housing market, the general home interest market (renovation and improvement) remained steady through the year and also benefited to some extent from lower interest rates. This was reflected in the successful launch during the year of the National Home Improvement Show with 13,000 visitors attending the three day show at Earls Court in October 2009. The show received positive exhibitor endorsement through a 76% onsite re-book for the second show scheduled for the autumn of 2010.

Elsewhere in this division the specialist home interest magazines portfolio together with the Engineer brand recovered in the second half of the financial year particularly through the respective websites within both of these areas where collectively combined digital revenues were 30% above last year in FY2010 H2.

The engineering sector represents around 28% of divisional revenues and includes around 8% of Group recruitment advertising revenue through the Engineer magazine and theengineer.co.uk.  As we reported at the time of our interim results, recruitment advertising through the Engineer brand was bolstered in the first half of the year by a strong share of high yielding direct client recruitment advertising but the higher volume of jobs within the broader manufacturing sector, predominately placed through recruitment consultants, had been much slower to recover to pre-downturn levels. This position improved during FY2010 H2 and in total recruitment advertising was 15% ahead during the second half of the financial year.

While the sluggishness of manufacturing recruitment activity was partly explained by export-led sales growth being fulfilled though utilisation of existing inventory rather than investment in new production capacity, the Subcon show offers UK manufacturers a viable alternative to capital plant investment by accessing the services offered by the providers of global subcontract services who form the core of exhibitors at this show. The show which is held at the NEC over three days in June 2010, reported flat revenues for the year but an improved contribution and increased on site rebooking for the 2011 show.

Perfect Information

Digital 98%; Events 2% (% of divisional revenues)

Revenue for the period increased by 4% to £5.4 million (FY2009: £5.2 million) while adjusted EBITDA remained unchanged for the year at £2.0 million representing a margin of 37% (FY2009: 38%).

During this financial year Perfect Information continued its programme of new product development, adapting to the changing needs of its core customer base, comprising primarily investment banks and corporate law firms. A key focus for the business is customer service and understanding the precise information needs among customers whose own business models may have undergone significant change in recent years. This has resulted in product innovation that, whilst drawing on the key legacy asset of the Perfect Filings database, has increasingly aimed to provide specific datasets for specific needs, primarily through the launch in 2009 of the Perfect Navigator front-end which utilises powerful search refinement functionality to allow smooth integration with client workflows.

The conversion of previous Perfect Filings customers to the Navigator service has been a key factor in achieving 95% customer retention in this financial year.

Two additional developments have endorsed this approach to customer service led innovation:

·      The launch in April 2010 of Equity Capital Markets Insight (ECMi) which utilises an extensive  proprietary taxonomy of index terms to provide key data drawn from a range of ECM regulatory documents grouped by section(s), sector, size, jurisdiction etc.

·      In addition the further enhancement of the private company data service has provided the opportunity for further penetration into core client workflows and increased revenue both from existing customers and new clients, often displacing other information providers who offer less tailored services.

These products have been well received and offer the opportunity for further revenue and profit growth in the new financial year.

General Business Services

Print 31%; Digital 11%; Events 52%; Other 6% (% of divisional revenues)

This segment comprises products serving a number of distinct business communities.  The main verticals in this segment are Human Resources (HR), the Recruitment sector, Supply Chain and Logistics and Business Travel.

Total General Business Services ("GBS") revenues amounted to £7.5 million for the year, a 16% reduction compared to last year (FY2009: £8.9 million). The revenue reduction was split between print and events while digital sales increased by 14% year-on-year.

The division reported an adjusted EBITDA loss for the year of £0.3 million (FY2009 £0.1 million loss).

The year-on-year revenue reduction and continued loss making performance relates primarily to the Business Travel shows where reduced on-site bookings in 2009 had an adverse effect on sold space at the main London show in February 2010. Despite this, the quality of visitors was significantly improved and included the introduction of a executive visitor programme which resulted in very positive exhibitor feedback and strongly increased rebooking for the 2011 show. Generally the sector has improved with modest growth reported by some aviation carriers and hotel groups and a resurgent rail sector reflecting the general return to growth of global economies. For the new financial year a hosted buyer programme will be introduced to the regional Düsseldorf show which moves to the Spring of 2011. In addition the Business Travel Show Dubai will return in October 2010 after a one year absence.

Excluding business travel, the rest of GBS performed more robustly and notably the Employee Benefits event portfolio reported revenues 23% ahead for the full year while both Recruiter and Logistics Manager reported revenue growth in the second half of the financial year.

Employee Benefits events, which include an exhibition, an awards event and sponsored meetings, illustrate the effectiveness of face-to face marketing to a well targeted relevant audience - in this instance primarily the Compensation and Benefits professionals working in UK corporates. This group will be a key focus for the providers of the new pension products that will accompany the proposed changes scheduled for introduction in 2012 as referred to in the commentary for the financial division.

In the recruitment sector a refocusing of the magazine circulation and editorial to target an increasingly important sector within recruitment - the in-house recruitment or human capital manager whose key focus is smart and effective recruiting - has opened additional display advertising channels and reduced dependency on the more traditional customers of the Recruiter which were drawn from recruitment consultancies ("rec-to-rec recruitment")  and the suppliers of goods and services to those consultancies.

Within Logistics Manager a key source of advertising derived from new commercial property developments remained depressed throughout the year. However other areas of the logistics and supply chain process are more dependent on the level of general economic activity and a few lucrative re-branding campaigns among distribution groups have provided some display advertising support during the year and contributed to some year-on-year growth in FY2010 H2.

Rejection of unsolicited approach

On 20 October 2009, the Group announced, in response to an announcement the same day from Critical Information Group plc ("CIG"), that it had received an unsolicited approach from CIG regarding a possible offer for the Group which was conditional on, inter alia, financing and due diligence.

The Board reviewed CIG's approach with its advisers, and given the fundamental strengths of the Group and the recovery prospects outlined above, had no hesitation in concluding that their indicative proposal materially undervalued Centaur and was not in the best interests of its shareholders.

Subsequently, on 12 November 2009, CIG announced that it did not wish to proceed with an offer for the Group.

Financial Review

Summary of Group results

As reported in the Business Review, although the Group reported a revenue reduction of 10% for the full year ended 30 June 2010, we experienced an improvement in trading conditions in most of our served market sectors as the year progressed, culminating in a 14% year-on-year increase in Group revenues in the final quarter of the year (April - June 2010).

The full year revenue reduction was substantially mitigated by cost savings with 94% of the revenue decrease offset by a 10% decrease in Group costs. Details of these cost savings, which reflected a combination of the full year effect of cost reductions achieved in the previous financial year, together with a number of new cost saving initiatives implemented during the year, are detailed below.

Adjusted EBITDA for the year amounted to £6.6 million compared to £7.0 million in FY2009.

The Group also experienced strong cash flow, generating cash from operating activities of £6.6 million, which represented a 112% conversion of adjusted operating profit into free cash flow for the year. At 30 June 2010 the Group reported net cash of £1.1m and this was comfortably within all banking covenants, the details of which are also reported below.

This strong cash flow facilitated the fully cash funded acquisition of Taxbriefs Holdings Limited ("Taxbriefs") in May 2010, details of which are described in note 7 to the financial statements.

Trading updates

The financial performance of the Group is monitored by the Board each month during the financial year and although the Group's principal revenue sources traditionally carry very low forward visibility, the profile of results, described above, was the subject of regular trading updates or interim management statements ("IMS") made during the year as follows:

19 November 2009 (IMS)

8 January 2010 (pre-close trading update)

25 February 2010 (trading update)

12 May 2010 (IMS)

Revenue

Total Group revenues for the year ended 30 June 2010 amounted to £59.9 million, a reduction of 10% (£6.4 million) compared to last year. Around 58% of this revenue reduction related to advertising, primarily due to a 16% year-on-year reduction in print advertising.

Recruitment advertising, which represented 21% (FY2009: 24%) of total advertising, reduced by 22% across the full year, although this decrease comprised a 50% year-on-year reduction in the first half of the financial year followed by 25% growth in H2. This second half growth was spread evenly between print and digital and in total 42% (FY2009: 37%) of all recruitment advertising was fulfilled online.

Excluding recruitment, digital advertising sales continued to reflect a greater degree of stability during the year and across the Group were 13% ahead for the full year. In total, at £29.4 million, advertising sales represented 49% of Group revenues for the year (FY2009: 50%).

Other publishing revenues, derived from the sale of content, were 2% ahead for the year and this growth included revenues relating to the acquisition of Taxbriefs in May 2010.

Total event revenues for the year decreased by 14% to £17.3 million which represented 29% of Group revenues (FY2009: 30%). As described in the business review this reduction primarily reflected a late-cycle effect at the two principal trade exhibitions held during the second half of the financial year where the level of rebooking at the previous years shows impacted on the total space sold for the 2010 shows.

In total revenue from acquisitions made in the current or preceding financial year together with products launched in the last three years represented 9% (FY2009: 11%) of Group revenues in the year to 30 June 2010.

Although Group revenues reduced by 10% in the year to 30 June 2010, revenue per employee of £95,000 (FY2009: £95,000) was unchanged compared to the previous year.  This full mitigation of the Group revenue reduction in terms of revenue per employee reflected the 10% decrease in average employee numbers for the year to 30 June 2010 compared to the previous year.

Profit before taxation

Profit before taxation increased by 53% to £2.6 million (FY2009: £1.7 million). After adjusting for exceptional costs and amortisation of acquired intangible assets, adjusted profit before tax reduced by 9% to £4.0 million (FY2009: £4.4 million).

The exceptional costs incurred in the year amounted to £0.3 million and these are described in more detail below and in note 2 to the financial statements.  A non-statutory alternative profit measure is provided within the statement of comprehensive income which represents the Group's earnings before interest, taxation, depreciation, amortisation, exceptional costs and other significant non-cash items including share based payments ("adjusted EBITDA"). The Board considers this to be an important measure of profitability and the adjusted EBITDA margin is one of the key performance indicators used to monitor and manage the business.

Adjusted EBITDA for the year ended 30 June 2010 was £6.6 million compared to £7.0 million in the year ended 30 June 2009.  This represented an adjusted EBITDA margin of 11% (FY2009: 11%).

An analysis of revenue and adjusted EBITDA from continuing operations by segment,  and product type and by underlying/acquired and maturity together with  an analysis of revenue by source and client type is included in the Business Review and the different measures of profit described above are summarised in the following table:

	2010	2009
	£m	£m
Revenue	59.9	66.3
Adjusted EBITDA	6.6	7.0
Depreciation of property, plant and equipment	(0.9)	(0.8)
Amortisation of software	(1.9)	(1.5)
Share based payments	0.3	(0.4)
Interest (payable)/receivable	(0.1)	0.1
Adjusted PBT	4.0	4.4
Amortisation of acquired intangibles	(1.1)	(1.0)
Exceptional costs	(0.3)	(1.7)
Profit before taxation	2.6	1.7

Group costs

In line with the definition of adjusted EBITDA above, total Group costs are stated before interest, tax, depreciation, amortisation, exceptional costs and other significant non-cash items including share based payments.

Total Group costs for the financial year amounted to £53.3 million, a reduction of £6.0 million compared to the previous year. As previously reported, during FY2009 we implemented a cost saving programme that resulted in a 12% reduction in average employee numbers for the year to 30 June 2009. As a result of this FY2009 cost saving programme additional cost savings of around £2.0 million were also achieved in the year to 30 June 2010 and this included a further 10% reduction in average employee numbers for the year to 30 June 2010.

Other cost savings arising from initiatives in the current financial year amounted to £4.0 million and these related primarily to reduced variable costs of production reflecting lower magazine advertising volumes and reduced exhibition space sales.

In total the full year cost savings of £6.0m included a reduction in print related expenditure of 15% with event related costs also reducing by 10%. This was partly offset by a 2% increase in digital expenditure for the year, reflecting increased licence and hosting charges resulting from the recent upgrade of the publishing web platform.

Adjusted EBITDA margin

The adjusted EBITDA margin is one of a range of performance indicators used by the Board to monitor progress towards the achievement of the strategic objectives of the Group.

In the current year an adjusted EBITDA margin of 11% (FY2009: 11%) is reported which is unchanged from the last financial year. While this is still some way from the higher adjusted EBITDA achieved by the Group in the year to 30 June 2008, it is notable that an unchanged adjusted EBITDA margin is reported for the year despite a further 10% revenue decline for the full year.

This reflects the degree to which the cost saving initiatives completed in the current and the last financial years have provided significant margin protection including a proportion of the cost savings that are considered to represent a permanent reduction in the fixed cost base of the business and that therefore present the opportunity for high levels of operational gearing as Group revenues recover.

In addition to a recovery in Group revenues, sustainable margin improvement will be attained through the implementation of the Group's strategic objectives, with a focus on scale and increasing critical mass in each of our key markets together with a rebalancing of the Group's revenues to reduce its dependence on display and recruitment advertising revenues which represented 49% of total Group revenue in the year to 30 June 2010 (FY2009: 50%).

These objectives also underpin the Group's acquisition strategy including the recent purchase of Taxbriefs where the acquired business has a more resilient information-based and workflow-related revenue profile and although comparatively small in the context of total Group revenues, strongly complements a strand of new product development within the financial community which has the aim of facilitating training and instruction for the intermediary community through the newly launched Money Marketing Academy (see business review).

Exceptional cost

Within administrative expenses for the year ended 30 June 2010 and in accordance with the statement of accounting policies in relation to exceptional costs, an amount of £0.3 million (FY2009: £1.7 million) has been identified as exceptional for the purpose of calculating both adjusted EBITDA and adjusted profit before tax.

The exceptional costs, which are detailed in note 2, included an onerous lease provision of £0.2 million relating to empty office space that arose following the acquisition of Taxbriefs in May 2010 and the subsequent relocation of their employees to our main West End offices.  In addition transaction costs amounting to £0.1 million are treated as exceptional in the calculation of adjusted EBITDA.

The cash effect of these exceptional costs amounted to a cash outflow of £0.1 million in the financial year (as detailed in the free cash flow and capital expenditure note below).

Taxation

Tax on profit on ordinary activities amounted to £0.6 million in the year ended 30 June 2010 (FY2009: £0.8 million).

Taking into account the tax effect of adjustments to arrive at adjusted PBT, this represents an effective tax rate of 23% (FY2009: 34%) of adjusted PBT.

This current year effective tax rate, which is 5% below the standard rate of UK corporation tax rate (28%) reflects an increase in the deferred tax asset in respect of outstanding options issued under the Group's Sharesave plan (the "SAYE Scheme"). This deferred tax asset is based on the expected deduction that will arise under Schedule 23 Finance Act 2003 when options are exercised and is calculated partly by reference to current share price. At 30 June 2010 the market price was 47.3p compared to 39.0p a year ago and the carrying value of the deferred tax asset was adjusted accordingly.

Acquisition of Taxbriefs

In May 2010 we completed the acquisition of the entire share capital of Taxbriefs Holdings Limited for a maximum consideration of £1.9 million. This included an initial cash consideration of £1.5 million with a potential further £0.4 million payable over the next twelve months. The fair value of the deferred cash consideration payable in May 2011 is estimated at £0.2 million.

The actual cash outflow in the year to 30 June 2010 amounted to £1.3 million comprising the initial cash consideration of £1.5 million less £0.2 million cash acquired with the business.

Further details of this acquisition are contained in note 7, including details of the net assets and goodwill acquired. Taxbriefs has been reported as part of the Legal & Financial segment. 

Balance sheet

The Group held net assets of £156.5 million (FY2009: £157.0 million) at 30 June 2010 which may be summarised as follows:

	2010	2009	Year-on-year movement
	£m	£m	£m
Goodwill and other intangible assets	156.9	156.4	0.5
Property, plant and equipment	3.8	3.6	0.2
Working capital	(3.0)	(2.8)	(0.2)
Provisions	(0.5)	-	(0.5)
Current and deferred taxation	(1.1)	(0.8)	(0.3)
Finance lease creditor	(0.7)	-	(0.7)
Unrestricted cash	1.1	0.6	0.5
Net assets	156.5	157.0	(0.5)

Goodwill and other intangible assets

The increase in the carrying value of goodwill and other intangible assets of £0.5 million included additional goodwill and other intangible assets acquired as part of the consideration for Taxbriefs as detailed above and in note 7.

During the year goodwill was tested for impairment in accordance with IAS 36 and no impairment was noted following this annual impairment review. The full details of this review are detailed in note 5.

Property, plant and equipment

In total, additions to property, plant and equipment for the year amounted to £1.1 million and this included office equipment purchased under a finance lease with a total net book value of £0.8 million.

Provisions

The increase in provisions of £0.5 million relates to deferred consideration (£0.2 million) in respect of the acquisition of Tax Briefs and an onerous lease provision (£0.3 million) arising from the decision to relocate the business to Centaur's West end offices.

Finance lease creditor

As described above, property plant and equipment additions in the year included the purchase of office equipment under a finance lease with a 5 year tenor. In accordance with IAS 17 these assets are capitalised and depreciated over the term of the lease, with the finance lease creditor representing the future rental obligations (net of finance charges) as at 30 June 2010.

Unrestricted cash

The unrestricted cash balance represents the amount of cash available in the day to day operations of the Group and therefore excludes any amounts held on behalf of the holders of loan notes in Centaur Media plc. At 30 June 2010 substantially all the outstanding loan notes had been redeemed and there was no loan note cash held at that date (FY2009: £0.1 million). The total Group cash and cash equivalents at 30 June 2010 was therefore unrestricted.

Banking facilities

The Group has a revolving credit facility with The Royal Bank of Scotland plc ("RBS") of up to £5.0 million maturing in May 2012. This provided adequate headroom for the Group's working capital requirements during this financial year and at 31 December 2009 and 30 June 2010 the Group reported net cash of £0.1 million and £1.1 million respectively.

The financial covenants governing this facility, which include gross leverage and interest cover ratios, are assessed on a twelve month rolling basis at each quarter end and were fully satisfied throughout this financial year.

Treasury policy

Treasury is managed centrally and is principally concerned with minimising bank borrowings through the efficient management of working capital and seeking to maximise returns on available short term cash deposits. Further details of the operation of the Group's treasury functions and a description of the role that financial instruments have had during the year in the management of the Group's funding and liquidity risks and interest and foreign exchange rate risks are contained in the full financial statements.

Free cash flow and capital expenditure 

Free cash flow ("FCF") is defined as cash generated from operations less capital expenditure required to maintain and develop the asset base of the Group, (property, plant and equipment and computer software) and after adjusting for any exceptional cash items.

Although we report a decrease in revenue and adjusted EBITDA for the year the strength of FCF generation, representing the cash available for the stakeholders of the Group, continued to be a positive feature of the Group's financial performance, with the ratio of free cash flow to adjusted operating profit reported at 112% for the financial year (FY2009: 88%).

In total cash generated from operations (before cash expenditure in respect of exceptional items) amounted to £6.7 million, with working capital reducing from net liabilities of £2.8 million at 30 June 2009 to £3.0 million at 30 June 2010. This improvement in working capital was partly attributable to a 9% year-on-year increase in deferred income at 30 June 2010 primarily reflecting improved cash collections in respect of our forward events programme.

Capital expenditure for the year amounted to £2.1 million (FY2009: £4.9 million) reflecting a combination of new product launches and in particular the development of Equity Capital Markets Insight ("ECMi") at Perfect Information and the interactive directory platform developed for Pitch Creative (see business review). In addition investment in our digital businesses included a further implementation, across the Group, of the web platform developments started in the last financial year, including a standardised web recruitment platform, an integrated magazine and web content management system and an enhanced customer database that have collectively provided the Group with a very effective means of securing incremental digital sales as revenues from our core markets continue to recover.

	2010	2009	2008	2007	2006
	Actual	Actual	Actual	Actual	Actual
	£m	£m	£m	£m	£m
Cash generated from operations	6.6	6.0	19.0	18.2	14.4
Exceptional items - cash impact	0.1	2.7	1.2	-	-
Capital expenditure	(2.1)	(4.9)	(3.1)	(2.6)	(3.0)
Free cash flow	4.6	3.8	17.1	15.6	11.4
Operating profit	2.7	1.6	14.3	15.9	14.7
Amortisation of acquired intangibles	1.1	1.0	1.1	0.7	0.3
Exceptional costs/(credit)	0.3	1.7	3.6	-	(2.2)
Adjusted operating profit	4.1	4.3	19.0	16.6	12.8
Cash conversion rate	112%	88%	90%	94%	89%

Earnings per Share ("EPS")

Basic EPS for the year was 1.4p compared to 0.6p in the previous financial year.

An alternative adjusted EPS, consistent with the calculation of adjusted PBT described above, is reported for the same reason that the Board considers this to represent a more accurate reflection of the underlying performance of the Group.  On an adjusted basis EPS was 2.2p compared to 2.1p a year ago. Full details of the EPS calculations are presented in note 4.

Dividends

A final dividend of 1.1p per share is proposed, giving a total for the year of 1.7p (FY2009: 1.5p). The final dividend is subject to shareholder approval at the annual general meeting and will be paid on 10 December 2010 to all ordinary shareholders on the register at close of business on 12 November 2010. The Company has sufficient reserves to cover the recommended dividend.

Consolidated Statement of Comprehensive Income for the year ended 30 June 2010

		2010	2009
	Note	£m	£m
Continuing operations
Revenue	1	59.9	66.3
Cost of sales		(33.4)	(37.4)
Gross profit		26.5	28.9
Distribution costs		(2.9)	(3.6)
Administrative expenses		(20.9)	(23.7)
Adjusted EBITDA	1	6.6	7.0
Depreciation of property, plant and equipment		(0.9)	(0.8)
Amortisation of software		(1.9)	(1.5)
Amortisation of acquired intangibles		(1.1)	(1.0)
Share based payments		0.3	(0.4)
Exceptional cost	2	(0.3)	(1.7)
Operating profit from continuing operations		2.7	1.6
Finance (expense)/income		(0.1)	0.1
Profit from continuing operations before taxation		2.6	1.7
Taxation		(0.6)	(0.8)
Profit for the year attributable to equity shareholders		2.0	0.9
Total comprehensive income for the period attributable to owners of the company		2.0	0.9
Earnings per share for profit attributable to the owners of the company	4
Basic		1.4p	0.6p
Fully diluted		1.4p	0.6p

 

The accompanying accounting policies and notes form an integral part of these financial statements.

Consolidated Balance Sheet at 30 June 2010

		2010	2009
	Note	£m	£m
Non-current assets
Goodwill	5	140.7	140.3
Other intangible assets		16.2	16.1
Property, plant and equipment		3.8	3.6
Deferred tax assets		0.5	0.3
		161.2	160.3
Current assets
Inventories		1.2	1.0
Trade and other receivables		11.7	11.0
Cash and cash equivalents		1.1	0.7
		14.0	12.7
Current liabilities
Financial liabilities	6	0.1	0.1
Trade and other payables		8.8	8.3
Deferred income		7.1	6.5
Current tax liabilities		0.5	-
Provisions		0.3	-
		16.8	14.9
Net current (liabilities)		(2.8)	(2.2)
Non-current liabilities
Financial liabilities	6	0.6	-
Provisions		0.2	-
Deferred tax liabilities		1.1	1.1
		1.9	1.1
Net assets		156.5	157.0
Capital and reserves attributable to owners of the parent
Share capital		15.0	15.0
Treasury shares		(9.8)	(9.8)
Share premium		0.7	0.7
Other reserves		3.2	3.5
Retained earnings		147.4	147.6
Total shareholders' equity		156.5	157.0

The financial statements were approved by the Board of Directors on 15 September 2010 and were signed on its behalf by:

MJ Lally

Group Finance Director

Consolidated Cash Flow Statement for the year ended 30 June 2010

		2010	2009
	Note	£m	£m
Cash flows from operating activities
Cash generated from operations		6.6	6.0
Tax paid		(0.3)	(2.3)
Cash flows generated from operating activities		6.3	3.7
Cash flows from investing activities
Interest received		-	0.1
Acquisition of subsidiaries (net of cash acquired)		(1.3)	-
Proceeds from the disposal of businesses		-	0.1
Purchase of property, plant and equipment		(0.2)	(2.4)
Purchase of software		(1.9)	(2.5)
Purchase of other intangible assets		-	(0.2)
Cash flows from investing activities		(3.4)	(4.9)
Cash flows from financing activities
Net proceeds from issue of ordinary share capital		-	-
Treasury shares purchased		-	(0.9)
Repayment of loan notes		(0.1)	-
Interest paid		(0.1)	(0.1)
Finance lease repayments		(0.1)	-
Dividends paid		(2.2)	(4.9)
Cash flows from financing activities		(2.5)	(5.9)
Net decrease in cash and cash equivalents		0.4	(7.1)
Cash and cash equivalents at 1 July 2009		0.7	7.8
Cash and cash equivalents 30 June 2010		1.1	0.7

Statement of Accounting Policies

The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

Basis of preparation

The consolidated and Company financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and International Financial Reporting Interpretations Committee (IFRIC) applicable at 30 June 2010 and with those parts of the Companies Act, 2006 applicable to companies reporting under IFRS. The financial statements have been prepared on the historical cost basis. 

These financial statements are presented in pounds sterling (GBP) as that is the currency of the primary economic environment in which the Group operates.

The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management's best knowledge of the amount, events or actions, the actual results may ultimately differ from those estimates.

The Company has taken advantage of the exemption available under section 408 of the Companies Act 2006 and has not presented its own statement of comprehensive income in these financial statements.

The following new standards, amendments to standards or interpretations are mandatory for the first time for the financial year ended 30 June 2010.

·     IFRS 3 (revised), 'Business combinations', and consequential amendments to IAS 27, 'Consolidated and separate financial statements', IAS 28, 'Investments in associates', and IAS 31, 'Interests in joint ventures', are effective prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 July 2009.

The revised standard continues to apply the acquisition method to business combinations but with some significant changes compared with IFRS 3. For example, all payments to purchase a business are recorded at fair value at the acquisition date, with contingent payments classified as debt subsequently re-measured through the income statement. There is a choice on an acquisition-by-acquisition basis to measure the non-controlling interest in the acquiree either at fair value or at the non-controlling interest's proportionate share of the acquiree's net assets. All acquisition-related costs are expensed. The revised standard was applied in accounting for the acquisition of Taxbriefs (note 7).

·     IAS 1 (Revised), 'Presentation of financial statements' - Comprehensive revision including a "statement of comprehensive income" (effective from 1 January 2009), which has impacted the presentational disclosure of the financial statements but has no impact on the carrying values of items.

·     IFRS 8,'Operating segments' replaces IAS 14,'Segment reporting', and requires a 'management approach' to be adopted, under which segment information is presented on the same basis as that used for internal reporting purposes. The new standard had no effect on the segmental format being presented by the Group.

Standards, amendments and interpretations to existing standards effective in 2010 but not relevant to the Group:

·     IFRIC 17, 'Distributions of non-cash assets to owners' (effective 1 July 2009).

·     IFRIC 18, 'Transfers of assets from customers', (effective1 July 2009).

·     Amendment to IAS 32, "Financial instruments: Presentation", and IAS 1, 'Presentation of financial statements' on 'Puttable financial instruments and obligations arising on liquidation' (effective 1 January 2009).

·     IAS 23 (revised), 'Borrowing costs' (effective 1 January 2009).

·     Amendment to IFRS 2, 'Share-based payments' on 'Vesting conditions and cancellations' (effective 1 January 2009).

·     IFRIC 13,'Client loyalty programmes relating to IAS 18, Revenue' (effective 1 July 2008 but EU endorsed for use 1 January 2009).

·     'IFRS 1 (revised) 'First time adoption' (effective 1 July 2009).

·     IAS 27 (revised) 'Consolidated and separate financial statements' (effective 1 July 2009).

·     Amendment to IAS 39, 'Financial instruments: Recognition and measurement', on Eligible hedged items (effective 1 July 2009).

·     Amendment to IFRS 1, 'First time adoption of IFRS' and IAS 27 'Consolidated and separate financial statements' on the Cost of an investment in a subsidiary, jointly controlled entity or associate (effective 1 July 2009).

The following new standards, new interpretations and amendments to standards and interpretations have been issued but were not effective for the financial year ended 30 June 2010 and have not been early adopted:

·     IFRS 9, 'Financial instruments', issued in December 2009. This addresses the classification and measurement of financial assets and is likely to affect the Group's accounting for its financial assets. The standard is not applicable until 1 January 2013 but is available for early adoption.

·     Revised IAS 24, 'Related party disclosures', issued in November 2009. It supersedes IAS 24, 'Related party disclosures', issued in 2003. The revised IAS 24 is required to be applied from 1 January 2011. Earlier application, in whole or in part, is permitted.

·     'Classification of rights issues' (Amendment to IAS 32), issued in October 2009. For rights issues offered for a fixed amount of foreign currency, current practice appears to require such issues to be accounted for as derivative liabilities. The amendment states that if such rights are issued pro rata to all the entity's existing shareholders in the same class for a fixed amount of currency, they should be classified as equity regardless of the currency in which the exercise price is denominated. The amendment should be applied for annual periods beginning on or after 1 July 2010. Earlier application is permitted.

·     'Prepayments of a minimum funding requirement' (Amendments to IFRIC 14), issued in November 2009. The amendments correct an unintended consequence of IFRIC 14, 'IAS 19 - The limit on a defined benefit asset, minimum funding requirements and their interaction'. Without the amendments, entities are not permitted to recognise as an asset some voluntary prepayments for minimum funding contributions. The amendments are effective for annual periods beginning 1 July 2011. Earlier application is permitted.

·     IFRIC 19, 'Extinguishing financial liabilities with equity instruments'. This clarifies the requirements of IFRSs when an entity renegotiates the terms of a financial liability with its creditor and the creditor agrees to accept the entity's shares or other equity instruments to settle the financial liability fully or partially. The interpretation is effective for annual periods beginning on or after 1 July 2010. Earlier application is permitted.

The Directors anticipate that the adoption of these standards and interpretations in future periods will have no material impact on the financial statements of the Group.

Additional presentation within the consolidated statement of comprehensive income

The Group has presented separately on the face of the consolidated statement of comprehensive income an additional profit measure of adjusted EBITDA.  Adjusted EBITDA is earnings before interest, tax, depreciation, amortisation and excluding exceptional and other significant non-cash items. This presentation has been provided as the Directors believe that this measure reflects more clearly the ongoing operations of the Group. In 2010 and 2009, share based payment costs have been treated as a significant non-cash item.

Exceptional items

The Group considers items of income and expenses as exceptional items and discloses them separately where the nature of the item, or its size, is likely to be material so as to assist the user of the financial statements to better understand the results of the operations of the Group.

Notes to the Financial Statements

1       Segmental reporting

The Group is currently organised into five main business segments. The products and services that each segment offers are described in detail in the Business Review.

 

The Board of directors has been identified as the chief operating decision-maker. The Board reviews the Group's internal monthly reporting in order to assess performance and allocate resources. Management has determined the operating segments based on these reports.

 

The Board considers the business from a divisional perspective. The basis of measurement used for allocating overheads is the headcount for each division.

Corporate costs are allocated to business segments on an appropriate basis depending on the nature of the cost.  Costs that cannot be allocated to a business segment are shown as "unallocated".

Segment assets consist primarily of property, plant and equipment, intangible assets including goodwill, inventories, trade receivables and cash and cash equivalents.

Segment liabilities comprise trade payables, accruals and deferred income. 

Corporate assets and liabilities comprise current and deferred tax balances, cash and cash equivalents and borrowings.

Capital expenditure comprises additions to property, plant and equipment, intangible assets and goodwill and includes additions resulting from acquisitions through business combinations.

Geographical segments

Substantially all of the Group's net assets are located and all revenue and profit are generated in the United Kingdom. Furthermore substantially all of the Group's customers are located in the United Kingdom.  The Directors consider that the Group operates in a single geographical segment, being the United Kingdom, and therefore geographical reporting is not required.

Year ended 30 June 2010	Legal and Financial	Marketing and Creative	Construction and Engineering	Perfect Information	General Business Services	Unallocated	Group
	£m	£m	£m	£m	£m	£m	£m
Continuing operations
Revenue	17.1	14.9	15.0	5.4	7.5	-	59.9
Adjusted EBITDA	2.7	1.0	1.2	2.0	(0.3)	-	6.6
Depreciation of property, plant and equipment	(0.2)	(0.3)	(0.2)	(0.1)	(0.1)	-	(0.9)
Amortisation of software	(0.4)	(0.4)	(0.3)	(0.7)	(0.1)	-	(1.9)
Amortisation of acquired intangibles	(0.1)	(0.1)	(0.4)	-	(0.5)	-	(1.1)
Share based payments	-	-	-	-	-	0.3	0.3
Exceptional cost	(0.3)	-	-	-	-	-	(0.3)
Segment result	1.7	0.2	0.3	1.2	(1.0)	0.3	2.7
Finance expense	-	-	-	-	-	(0.1)	(0.1)
Profit/(loss) before tax	1.7	0.2	0.3	1.2	(1.0)	0.2	2.6
Taxation	-	-	-	-	-	(0.6)	(0.6)
Profit/(loss) for the year from continuing operations	1.7	0.2	0.3	1.2	(1.0)	(0.4)	2.0
Profit/(loss) for the year attributable to equity shareholders	1.7	0.2	0.3	1.2	(1.0)	(0.4)	2.0
Segment assets	61.6	46.0	37.5	12.0	16.5	-	173.6
Corporate assets	-	-	-	-	-	1.6	1.6
Consolidated total assets	61.6	46.0	37.5	12.0	16.5	1.6	175.2
Segment liabilities	4.5	4.1	3.7	2.7	2.1	-	17.1
Corporate liabilities	-	-	-	-	-	1.6	1.6
Consolidated total liabilities	4.5	4.1	3.7	2.7	2.1	1.6	18.7
Other items:
Capital expenditure	1.5	0.7	0.5	1.1	0.2	-	4.0
Impairment of trade receivables	-	0.1	0.1	-	0.1	-	0.3

Year ended 30 June 2009	Legal and Financial	Marketing and Creative	Construction and Engineering	Perfect Information	General Business Services	Unallocated	Group
	£m	£m	£m	£m	£m	£m	£m
Continuing operations
Revenue	17.6	17.3	17.3	5.2	8.9	-	66.3
Adjusted EBITDA	1.9	0.8	2.4	2.0	(0.1)	-	7.0
Depreciation of property, plant and equipment	(0.2)	(0.2)	(0.2)	(0.1)	(0.1)	-	(0.8)
Amortisation of software	(0.2)	(0.3)	(0.3)	(0.5)	(0.2)	-	(1.5)
Amortisation of acquired intangibles	(0.1)	-	(0.4)	-	(0.5)	-	(1.0)
Share based payments	-	-	-	-	-	(0.4)	(0.4)
Exceptional cost	(0.4)	(0.7)	(0.3)	(0.1)	(0.2)	-	(1.7)
Segment result	1.0	(0.4)	1.2	1.3	(1.1)	(0.4)	1.6
Finance income	-	-	-	-	-	0.1	0.1
Profit/(loss) before tax	1.0	(0.4)	1.2	1.3	(1.1)	(0.3)	1.7
Taxation	-	-	-	-	-	(0.8)	(0.8)
Profit/(loss) for the year from continuing operations	1.0	(0.4)	1.2	1.3	(1.1)	(1.1)	0.9
Profit/(loss) for the year attributable to equity shareholders	1.0	(0.4)	1.2	1.3	(1.1)	(1.1)	0.9
Segment assets	59.3	45.7	38.3	11.8	16.9	-	172.0
Corporate assets	-	-	-	-	-	1.0	1.0
Consolidated total assets	59.3	45.7	38.3	11.8	16.9	1.0	173.0
Segment liabilities	2.9	3.8	3.8	2.5	1.8	-	14.8
Corporate liabilities	-	-	-	-	-	1.2	1.2
Consolidated total liabilities	2.9	3.8	3.8	2.5	1.8	1.2	16.0
Other items:
Capital expenditure	1.5	1.3	1.1	0.9	0.5	-	5.3
Impairment of trade receivables	0.1	0.2	0.2	-	0.1	-	0.6

2       Exceptional cost

	2010	2009
	£m	£m
Closure of Perfect Analysis
Post closure costs	-	0.1
		0.1
Reorganisation of publishing operations
Redundancies	-	1.0
Post closure costs	-	0.5
	-	1.5
Acquisition related costs	0.1	-
Onerous lease provision	0.2	0.1
Total	0.3	1.7

In May 2010, the entire share capital of Taxbriefs Holdings Limited ("Taxbriefs") was acquired by Centaur Communications Limited, and the related professional fees and stamp duty have been treated as exceptional costs and are included in acquisition related costs.

Immediately following the acquisition a decision was made to relocate the Taxbriefs business to the Centaur West End offices, resulting in an exceptional charge for the remaining costs for the lease over the empty premises.

Exceptional costs in the 12 months to 30 June 2009 included the cost of a number of restructuring initiatives that commenced in the previous financial year.  £1.0m related to redundancy costs while £0.5m related to post closure costs relating to magazine titles that were discontinued during the year.

3       Directors and employees

The average monthly number of persons employed during the year, including Directors, was:

	Group 2010	Group 2009	Company 2010	Company 2009
	Number	Number	Number	Number
Editorial	152	171	-	-
Production	39	40	-	-
Sales	126	155	-	-
Product management and support	158	165	-	-
Central services	153	164	9	9
	628	695	9	9

4       Earnings per share

 

Basic earnings per share (EPS) is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of shares in issue during the year. 725,000 (2009: 725,000) shares held in the employee benefit trust and 9,321,687 (2009: 9,326,467) shares held in treasury have been excluded in arriving at the weighted average number of shares.

For diluted earnings per share the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares.  The Company has two classes of dilutive potential ordinary shares: share options (including those granted under the Sharesave plan) granted to Directors and employees where the exercise price is less than the average market price of the Company's ordinary shares during the year; and the contingently issuable shares under the Company's long-term incentive plan to the extent that the conditions are met at the reporting date.

An alternative measure of adjusted earnings per share has been provided as the Directors believe that this measure is more reflective of the ongoing trading of the Group.

	2010			2009
Total operations	Earnings	Weighted average number of shares	Per share amount	Earnings	Weighted average number of shares	Per share amount
	£m	millions	Pence	£m	millions	Pence
Basic EPS	2.0	140.2	1.4	0.9	140.6	0.6
Effect of dilutive securities
Options	-	1.9	-	-	0.5	-
Diluted basic EPS	2.0	142.1	1.4	0.9	141.1	0.6

Adjusted EPS
Earnings attributable to ordinary shareholders from continuing operations	2.0	140.2	1.4	0.9	140.6	0.6
Amortisation of acquired intangibles	1.1	-	0.8	1.0	-	0.7
Exceptional cost (note 2)	0.3	-	0.2	1.7	-	1.3
Tax effect of above adjustments	(0.3)	-	(0.2)	(0.7)	-	(0.5)
Adjusted EPS	3.1	140.2	2.2	2.9	140.6	2.1
Effect of dilutive securities
Options	-	1.9	-	-	0.5	-
Diluted adjusted EPS	3.1	142.1	2.2	2.9	141.1	2.1

5       Goodwill

	Total
	£m
Cost
At 1 July 2009	140.3
Additions	0.4
At 30 June 2010	140.7
Net book amount
At 30 June 2010	140.7
At 30 June 2009	140.3

The majority of the Group's goodwill arose from the acquisition of the Centaur Communications Group in 2004.

Goodwill by segment

Each individual magazine and digital title is deemed to be a Cash Generating Unit (CGU). Goodwill is attributed to individual CGUs but is grouped together at segmental level for the purposes of the annual impairment review of goodwill, being the lowest level for which cash flows are separately identifiable. The following table shows the allocation of goodwill to segments at 30 June 2010:

	Legal and Financial	Marketing and Creative	Construction and Engineering	Perfect Information	General Business Services	Total
	£m	£m	£m	£m	£m	£m
At 30 June 2009	53.2	40.5	30.1	8.7	7.8	140.3
Additions	0.4	-	-	-	-	0.4
At 30 June 2010	53.6	40.5	30.1	8.7	7.8	140.7

Impairment testing of goodwill

During the year goodwill was tested for impairment in accordance with IAS 36. In assessing whether a write-down of goodwill is required in the carrying value of the related asset, the carrying value of the group of CGUs is compared with its recoverable amount.  The recoverable amount has been measured based on value-in-use.

The Group estimates the value-in-use of its CGUs using a discounted cash flow model, which adjusts the cash flows for risks associated with the assets and discounts these using a pre-tax rate of 11.5% (FY2009: 11.8%). The discount rate used is consistent with the Group's weighted average cost of capital and is used across all segments.

The key assumptions used in calculating value-in-use are revenue growth, adjusted EBITDA, discount rate and the terminal growth rate. The Group has used formally approved budgets for the first six years of the value-in-use calculation, and applied a terminal growth rate of 3%. This timescale and terminal growth rate are both considered appropriate given the cyclical nature of Group revenues.

The assumptions used in the calculations of value-in-use for each segment have been derived from past experience. 

The forecasts are most sensitive to changes in the forecast growth rates and the discount factor applied.  However, neither a reduction of 10% in revenues nor an increase of 1% in the discount factor would generate a suggested impairment in any CGU.

6       Financial liabilities

	Group 2010	Group 2009
	£m	£m
Current liabilities
Finance lease creditor	0.1	-
Bank overdraft	-	-
Loan notes	-	0.1
	0.1	0.1
Non-current liabilities
Finance lease creditor	0.6	-
	0.6	-

Finance lease creditor

Lease liabilities are effectively secured as the rights to the leased asset revert to the lessor in the event of default.

	2010	2009
	£m	£m
Gross finance lease liabilities - minimum lease payments
No later than 1 year	0.2	-
Later than 1 year and no later than 5 years	0.7	-
	0.9
Future finance charges on finance leases	(0.2)	-
Present value of finance lease liabilities	0.7	-

The present value of finance lease liabilities is as follows:

	2010	2009
	£m	£m
No later than 1 year	0.1	-
Later than 1 year and no later than 5 years	0.6	-
Present value of finance lease liabilities	0.7	-

7       Acquisitions

During the year, Centaur Communications Limited acquired the entire share capital of Taxbriefs Holdings Limited. The following table sets out, at the date of acquisition, the carrying value and the provisional fair value of the assets and liabilities acquired.   All intangible assets were recognised at their respective fair values.  The residual excess over the net assets acquired is recognised as goodwill in the financial statements.

	Carrying values pre acquisition	Fair value
	£m	£m
Intangible fixed assets (excluding goodwill)	0.1	1.2
Trade and other receivables	0.4	0.4
Trade and other payables	(0.5)	(0.5)
Cash and cash equivalents	0.2	0.2
Net assets acquired	0.2	1.3
Goodwill		0.4
Consideration		1.7
Consideration satisfied by:
Cash		1.5
Deferred contingent consideration		0.2
		1.7

Goodwill is principally attributable to the workforce and anticipated operating synergies.

The maximum deferred contingent consideration payable is £0.4m in May 2011; however this is subject to various deductions for post-acquisition costs incurred. The amount provided of £0.2m represents the Directors' best estimate of the amount to be paid.

From the dates of acquisition to 30 June 2010, the acquisition contributed £0.4 million to revenue, £0.2 million to operating profit and £0.2 million to net profit.

8       Nature of the financial information

The foregoing financial information does not amount to full accounts within the meaning of Section 434 of Companies Act 2006. The financial information has been extracted from the Group's Annual Report and Accounts for the year ended 30 June 2010 on which the auditors have expressed an unqualified opinion.

Copies of the Annual Report and Accounts will be posted to shareholders shortly and will be available from the Company's registered office at 50 Poland Street, London, W1F 7AX.

 

END

 

 

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