Final Results - PART 2

Future Network PLC 10 March 2004 PART 2 Group profit and loss account for the year ended 31 December 2003 2003 2002 Note £m £m Turnover Continuing operations 1 174.9 165.3 Acquisitions 1 7.8 - 1 182.7 165.3 Operating profit/(loss) Continuing operations Operating profit before amortisation of intangible assets and other operating income 22.3 18.2 Amortisation of intangible assets 2,9 (10.4) (10.3) Other operating income 2 - 2.2 11.9 10.1 Acquisitions Operating profit before amortisation of intangible assets 0.2 - Amortisation of intangible assets 2 (2.6) - (2.4) - Operating profit 2 9.5 10.1 Profit on disposal of fixed asset investments 0.1 0.3 Profit on ordinary activities before interest 9.6 10.4 Net interest receivable and similar items 5 0.1 0.3 Profit on ordinary activities before tax 1 9.7 10.7 Tax on profit on ordinary activities 6 (7.0) (4.5) Profit on ordinary activities after tax 2.7 6.2 Profit for the financial year 20 2.7 6.2 Dividend proposed 7,20 (4.0) - Retained (loss)/profit for the financial year (1.3) 6.2 Earnings per 1 pence Ordinary share 2003 2002 pence pence Basic earnings per share 8 0.8 1.9 Adjusted basic earnings per share 8 4.9 4.4 Diluted earnings per share 8 0.8 1.9 Adjusted diluted earnings per share 8 4.8 4.4 Group statement of total recognised gains and losses for the year ended 31 December 2003 2003 2002 Note £m £m Profit for the financial year 20 2.7 6.2 Dividend proposed 7 (4.0) - Retained (loss)/profit for the financial year (1.3) 6.2 Net exchange adjustments offset in reserves 0.8 0.4 Tax on exchange adjustments offset in reserves 0.1 (0.6) Total recognised (loss)/gain relating to the year (0.4) 6.0 Group reconciliation of movements in shareholders' funds for the year ended 31 December 2003 2003 2002 Note £m £m Profit for the financial year 20 2.7 6.2 Dividend proposed 7 (4.0) - Retained (loss)/profit for the financial year (1.3) 6.2 Premium on shares issued during the year 19 0.3 - Net exchange adjustments offset in reserves 20 0.8 0.4 Tax on exchange adjustments offset in reserves 20 0.1 (0.6) Net movement in shareholders' funds (0.1) 6.0 Opening equity shareholders' funds 112.0 106.0 Equity shareholders' funds as at 31 December 111.9 112.0 Group balance sheet as at 31 December 2003 2003 2002 Note £m £m Fixed assets Intangible assets 9 117.3 108.6 Tangible assets 10 3.3 3.2 120.6 111.8 Current assets Stocks 12 3.5 3.6 Debtors 13 42.4 33.3 Investments 11 8.8 6.2 Cash at bank and in hand 11.3 12.4 66.0 55.5 Creditors: amounts falling due within one year 14 (73.0) (49.7) Net current (liabilities)/assets (7.0) 5.8 Total assets less current liabilities 113.6 117.6 Creditors: amounts falling due after more than one year 15 - (2.5) Provisions for liabilities and charges 17 (1.7) (3.1) Net assets 111.9 112.0 Capital and reserves Called-up share capital 18 3.2 3.2 Share premium account 19 0.2 169.6 Merger reserve 21 109.0 109.0 Other reserves 21 21.8 21.8 Profit and loss account 20 (22.3) (191.6) Equity shareholders' funds 111.9 112.0 Group cash flow statement for the year ended 31 December 2003 2003 2002 Note £m £m Net cash inflow from operating activities A 22.6 27.0 Returns on investments and servicing of finance Interest received 0.6 0.3 Interest paid (0.4) (1.3) Net cash inflow/(outflow) from returns on investments and servicing of finance 0.2 (1.0) Tax Tax paid (8.2) (3.2) Tax received 1.5 1.8 Net tax paid (6.7) (1.4) Capital expenditure and financial investment Purchase of tangible fixed assets (1.4) (0.7) Sale of tangible fixed assets - 0.6 Sale of fixed asset investments 0.1 0.3 Net cash (outflow)/inflow from capital expenditure and financial investment (1.3) 0.2 Acquisitions and disposals Purchase of subsidiary undertakings (7.0) - Net cash acquired with subsidiary undertakings 0.5 - Purchase of magazine titles (11.8) - Purchase of subscription lists (0.1) (0.1) Payment of deferred consideration (0.7) (0.7) Net cash (outflow) for acquisitions and disposals (19.1) (0.8) Management of liquid resources (Increase) in short term deposits with bank (2.6) (2.7) Net cash (outflow) in management of liquid resources (2.6) (2.7) Net cash (outflow)/inflow before financing (6.9) 21.3 Financing Proceeds from issue of Ordinary share capital 0.3 - Draw down of bank loans 6.3 - Movement on discounted bills - (0.2) Movement in other loan (0.1) 0.1 Repayment of bank loans (0.6) (18.9) Net cash inflow/(outflow) from financing 5.9 (19.0) (Decrease)/increase in cash in the year (1.0) 2.3 Notes to the Group cash flow statement for the year ended 31 December 2003 A. Cash flow from operating activities The reconciliation of operating profit to net cash inflow from operating activities is as follows: 2003 2002 £m £m Operating profit 9.5 10.1 Depreciation charge 1.4 1.4 Amortisation of intangible assets 13.0 10.3 Movement in provisions (1.7) (1.5) Decrease/(increase) in stocks 0.2 (0.3) (Increase)/decrease in debtors (7.5) 8.3 Increase/(decrease) in creditors 7.7 (1.3) Net cash inflow from operating activities 22.6 27.0 B. Analysis of net cash At 1 January Other 2003 non-cash Exchange £m Cash flow changes movements At 31 December 2003 £m £m £m £m Cash at bank and in 12.4 (1.0) - (0.1) 11.3 hand Debt due after one year (1.8) 0.1 1.7 - - Debt due within one - (5.7) (1.7) 0.7 (6.7) year Liquid resources 6.2 2.6 - - 8.8 Net cash 16.8 (4.0) - 0.6 13.4 C. Reconciliation of movement in net cash 2003 2002 £m £m Net cash/(debt) at 1 January 16.8 (7.8) (Decrease)/increase in cash (1.0) 2.3 Movement in deposits 2.6 2.7 Movement in borrowings (5.6) 19.0 Amortisation of bank finance costs - (0.1) Exchange movements 0.6 0.7 Net cash at 31 December 13.4 16.8 Basis of preparation of accounts The preliminary statement of annual results for the year ended 31 December 2003 is unaudited and does not comprise statutory accounts with the meaning of section 240 of the Companies Act 1985. Accounting polices The Group's accounting policies are consistent with those detailed in the Group's Annual Report for the year ended 31 December 2002. Notes to the financial statements 1. Segmental reporting The Group is involved in one class of business, the publication of magazines. The analysis of turnover by type, geographical analyses of turnover, profit/ (loss) before tax, and net assets by origin were as follows: a) Turnover by type Acquisitions Continuing Total Total 2003 2003 2003 2002 £m £m £m £m Circulation 5.6 119.9 125.5 111.9 Advertising 2.1 50.9 53.0 48.6 Other 0.1 4.1 4.2 4.8 Total 7.8 174.9 182.7 165.3 b) Turnover by origin Acquisitions Continuing Total Total 2003 2003 2003 2002 £m £m £m £m United Kingdom 0.3 100.0 100.3 97.1 United States 2.1 44.1 46.2 40.5 Mainland Europe 5.4 33.2 38.6 29.5 Turnover between segments - (2.4) (2.4) (1.8) Total 7.8 174.9 182.7 165.3 c) Turnover by destination Acquisitions Continuing Total Total 2003 2003 2003 2002 £m £m £m £m United Kingdom 0.3 83.2 83.5 82.6 United States 1.9 45.6 47.5 40.5 Mainland Europe 5.4 39.5 44.9 35.1 Rest of the world 0.2 9.0 9.2 8.9 Turnover between segments - (2.4) (2.4) (1.8) Total 7.8 174.9 182.7 165.3 d) Profit on ordinary activities before tax by origin Total Total 2003 2002 £m £m United Kingdom 12.4 14.2 United States 4.1 2.3 Mainland Europe (3.3) (3.4) Central costs (3.5) (2.4) Total 9.7 10.7 e) Net assets by origin Total Total 2003 2002 £m £m United Kingdom 86.3 91.0 United States 20.7 11.7 Mainland Europe 11.6 11.1 Interest-bearing liabilities (6.7) (1.8) Total 111.9 112.0 2. Operating (loss)/profit Continuing 2003 2002 Acquisitions operations Total Total £m £m £m £m Turnover 7.8 174.9 182.7 165.3 Cost of sales (6.4) (109.6) (116.0) (103.2) Gross profit 1.4 65.3 66.7 62.1 Distribution expenses (0.5) (11.5) (12.0) (10.4) Administration expenses (0.7) (31.5) (32.2) (33.5) Amortisation of intangible assets (2.6) (10.4) (13.0) (10.3) Other operating income - - - 2.2 Total administration expenses (3.3) (41.9) (45.2) (41.6) Operating (loss)/profit (2.4) 11.9 9.5 10.1 2003 2002 £m £m Profit on ordinary activities before tax is stated after charging/(crediting): Staff costs (note 4) 37.2 36.0 Depreciation of owned assets (note 10) 1.4 1.4 Amortisation of intangible assets (note 9) 13.0 10.3 Hire of machinery and equipment 0.3 0.2 Other operating lease rentals 3.4 2.5 Other operating income (see below) - (2.2) Net exchange gain on foreign currency borrowings less deposits (0.1) (0.9) Other operating income in 2002 represents a refund received from HM Customs and Excise in the UK in respect of VAT overpaid in years prior to 2001. 3. Fees paid to auditors 2003 2002 £m £m Audit services - statutory audit 0.2 0.2 - other audit and related regulatory reporting 0.2 - Further assurance services 0.1 - Tax services - compliance services 0.1 0.2 - advisory services 0.2 0.3 Total 0.8 0.7 4. Employees and Directors 2003 2002 Staff costs £m £m Wages and salaries 31.2 30.9 Social security costs 5.3 4.5 Other pension costs 0.7 0.6 Total 37.2 36.0 Average monthly number of people (including executive Directors) Production 682 649 Administration 326 315 Total 1,008 964 At 31 December 2003 the actual number of people employed by the Group was 1,033 (2002: 934) 5. Net interest (receivable) and similar items 2003 2002 £m £m Interest payable on bank loans and overdrafts 0.2 0.4 Amortisation of issue costs of bank loan - 0.1 Other interest payable 0.2 0.1 Amortisation of discount relating to property provisions 0.1 0.2 Amortisation of discount arising on fair valuing of deferred 0.1 0.1 consideration Total interest payable and similar charges 0.6 0.9 Interest receivable (0.6) (0.3) Exchange gains (0.1) (0.9) Total interest receivable and similar items (0.7) (1.2) Net interest (receivable) and similar items (0.1) (0.3) 6. Tax on profit on ordinary activities (a) Analysis of tax charge in the year 2003 2002 £m £m UK corporation tax at 30% (2002: 30%) on profits for the year 3.9 4.8 Adjustments in respect of previous years 0.3 - 4.2 4.8 Overseas taxes 3.3 1.1 Adjustments in respect of previous years (0.8) (0.8) Total current tax 6.7 5.1 Deferred tax origination and reversal of timing differences - Current year charge/(credit) 0.7 (0.8) - Prior year (credit)/charge (0.4) 0.2 Tax on profit on ordinary activities 7.0 4.5 (b) Factors affecting the tax charge for the year The tax assessed in each year differs from the standard rate of corporation tax in the UK for the relevant year. The differences are explained below: 2003 2002 £m £m Profit on ordinary activities before tax 9.7 10.7 Profit on ordinary activities at the standard UK tax rate of 30% 2.9 3.2 Different tax rate applicable overseas 0.6 0.7 Expenses not deductible for tax purposes 0.1 0.6 Goodwill amortisation and impairment not deductible for tax purposes 2.9 2.4 Timing differences relating to goodwill amortisation deductible 0.1 - Overseas losses generated 0.8 0.5 Capital allowances in excess of depreciation (0.2) (0.4) Other timing differences - (1.1) Impact of adjustment to prior year current tax (0.5) (0.8) Current tax charge for the year 6.7 5.1 (c) Factors that may affect future tax charges The main factors that will impact future tax charges for the Group are: i) The relative profitability and the differential in tax rates between the UK and the US, the two main territories in which the Group currently pays tax; ii) The profitability of Mainland Europe where there are significant unrecognised tax losses; and iii) The timing of any successful resolution of certain steps that the Group has taken to obtain value from historical tax losses. 7. Dividends Equity dividends 2003 2002 Number of shares in issue at 31 December 2003 (million) 322.5 321.1 Final dividend proposed (pence per share) 1.25 - Dividend proposed (£ million) 4.0 - 8. Earnings per share Basic earnings per share are calculated using the weighted average number of Ordinary shares outstanding during the year. Diluted earnings per share have been calculated by taking into account the dilutive effect of shares that would be issued on conversion into Ordinary shares of options held under employee share schemes. The adjusted earnings per share, removes the effect of the amortisation of intangible assets and other operating income from the calculation as follows: Adjustments to profit on ordinary activities after tax 2003 2002 £m £m Profit on ordinary activities after tax 2.7 6.2 Add: amortisation of intangible assets 13.0 10.3 Less: other operating income - (2.2) Adjusted profit on ordinary activities after tax 15.7 14.3 2003 2002 Weighted average number of shares outstanding during the period: - basic 321,564,888 320,674,470 - dilutive effect of share options 1,453,980 1,818,424 - diluted 323,018,868 322,492,894 Basic earnings per share (in pence) 0.8 1.9 Adjusted basic earnings per share (in pence) 4.9 4.4 Diluted earnings per share (in pence) 0.8 1.9 Adjusted diluted earnings per share (in pence) 4.8 4.4 The adjustments to profit have the following effects on EPS: 2003 2002 pence pence Basic earnings per share 0.8 1.9 Amortisation of intangible assets 4.1 3.2 Other operating income - (0.7) Adjusted basic earnings per share 4.9 4.4 Diluted earnings per share 0.8 1.9 Amortisation of intangible assets 4.0 3.2 Other operating income - (0.7) Adjusted diluted earnings per share 4.8 4.4 9. Intangible fixed assets Goodwill Group £m Cost At 1 January 2003 299.3 Additions 21.8 Exchange adjustments 0.2 At 31 December 2003 321.3 Amortisation At 1 January 2003 (190.7) Charge for the year (13.0) Exchange adjustments (0.3) At 31 December 2003 (204.0) Net book amount at 31 December 2003 117.3 Net book amount at 31 December 2002 108.6 The goodwill arising on acquisitions is being amortised on a straight-line basis over the estimated useful economic lives of the acquired businesses, being in the range one to 20 years. These periods are the periods over which the Directors estimate that the values of the underlying businesses acquired are expected to exceed the values of the underlying assets. 10. Tangible fixed assets Equipment, Plant and fixtures and Land and buildings machinery fittings Total Group £m £m £m £m Cost At 1 January 2003 1.9 5.1 2.4 9.4 Reclassification 0.4 0.9 (1.3) - Additions - 1.3 0.1 1.4 Disposals (0.1) (1.2) (0.2) (1.5) Exchange adjustments - - 0.2 0.2 At 31 December 2003 2.2 6.1 1.2 9.5 Depreciation At 1 January 2003 (0.5) (3.9) (1.8) (6.2) Reclassification (0.1) (0.3) 0.4 - Charge for the year (0.1) (1.1) (0.2) (1.4) Disposals 0.1 1.2 0.2 1.5 Exchange adjustments (0.1) (0.4) 0.4 (0.1) At 31 December 2003 (0.7) (4.5) (1.0) (6.2) Net book value at 31 1.5 1.6 0.2 3.3 December 2003 Net book value at 31 1.4 1.2 0.6 3.2 December 2002 Analysis of net book value of land and buildings Group Group 2003 2002 £m £m Leasehold: Over 50 years unexpired 1.3 1.4 Under 50 years unexpired 0.2 - Total 1.5 1.4 11. Investments Current asset investments Group Group 2003 2002 £m £m Short-term bank deposits 8.8 6.2 Total 8.8 6.2 12. Stocks Group Group 2003 2002 £m £m Raw materials 1.2 1.1 Work in progress 2.2 1.9 Finished goods 0.1 0.6 Total 3.5 3.6 13. Debtors Group Group 2003 2002 £m £m Amounts falling due within one year: Trade debtors 34.1 24.5 Amounts owed by Group undertakings - - Corporation tax recoverable 1.6 2.6 Other debtors 3.3 2.4 Prepayments and accrued income 2.5 3.0 41.5 32.5 Amounts falling due after more than one year: Other debtors (see note 17) 0.9 0.8 Total 42.4 33.3 14. Creditors: amounts falling due within one year Group Group 2003 2002 £m £m Bank and other borrowings 6.7 - Trade creditors 20.5 14.3 Amounts owed to Group undertakings - - Corporation tax 2.7 4.0 Other creditors including taxation and social security 10.5 6.0 Accruals and deferred income 27.9 24.8 Proposed dividends 4.0 - Deferred consideration for acquisitions 0.7 0.6 Total 73.0 49.7 15. Creditors: amounts falling due after more than one year Group Group 2003 2002 £m £m Bank and other borrowings - 1.8 Deferred consideration for acquisitions - 0.7 Total - 2.5 16. Bank and other borrowings i) Due within one year Group Group 2003 2002 £m £m Bank loans: secured 5.1 - Other loans: unsecured 1.6 - Total 6.7 - ii) Due after more than one year Group Group 2003 2002 £m £m Bank loans: Secured - - Other loans: Unsecured - 1.8 Total - 1.8 The bank loans are secured by a fixed charge over The Future Network plc, Future Holdings 2002 Limited, FXM International Limited, Future Media Italy SpA, Future Network USA, Inc and Future Publishing Limited's land and buildings, intellectual property and goodwill and a floating charge over the remainder of their assets. 17. Provisions for liabilities and charges Group Property and dilapidations Restructuring Total £m £m £m At 1 January 2003 2.9 0.2 3.1 Acquisitions - 0.5 0.5 (Release)/charge in the year (0.5) 0.1 (0.4) Utilised in year (1.1) (0.4) (1.5) Amortisation of discount 0.1 - 0.1 Exchange adjustments (0.1) - (0.1) At 31 December 2003 1.3 0.4 1.7 Deferred tax At 31 December 2003 a deferred tax asset has been recognised within other debtors as follows: Group Group 2003 2002 £m £m Amounts falling due within one year 0.4 0.8 Amounts falling due after more than one year 0.9 0.8 The recognised amount relates to timing differences at 31 December 2003 which are considered more likely than not to reverse in the foreseeable future and are split as follows: Group Group 2003 2002 £m £m Capital allowances 0.8 0.7 Other short term timing differences 0.5 0.9 Total 1.3 1.6 The movement on deferred taxation in the year is as follows: Group Group 2003 2002 £m £m As at 1 January 1.6 1.0 Current year (charge)/credit (0.7) 0.8 Prior year credit/(charge) 0.4 (0.2) At 31 December 1.3 1.6 The unrecognised amounts of deferred taxation assets are as follows Group Group 2003 2002 £m £m Capital allowances - 0.5 Losses 9.8 6.4 Other 2.2 2.3 Total 12.0 9.2 The other short-term timing differences are items that are considered unlikely to be utilised in the foreseeable future. Vacant property and dilapidations Following the reorganisations and significant downsizing which took place in 2001, the Group has obligations under short leasehold agreements on a number of vacant properties. The provision made represents the following: i) The best estimate of the discounted future net cash flows arising from the net shortfall on each of the leases held; and ii) The best estimate of dilapidation obligations on termination of specific leasehold agreements. At 31 December 2003 the total amount of the provision was £1.3m (2002: £2.9m). The leases against which the provisions have been made will terminate by December 2017. The provisions have been discounted at a rate in line with the Group's cost of capital. Restructuring The restructuring provisions as at 31 December 2003 relate to ongoing restructuring at the Group's European subsidiaries. 18. Called up share capital Authorised share capital 2003 2002 Ordinary shares of 1 pence each £m £m At 1 January 6.0 6.0 Increase in the year - - At 31 December 6.0 6.0 Allotted, issued and fully paid 2003 Ordinary shares of 1 pence each No. of Shares £m At 1 January 321,110,607 3.2 Share Options Exercised 1,376,978 - At 31 December 322,487,585 3.2 19. Share premium account 2003 2002 Group £m £m At 1 January 169.6 169.6 Premium on shares issued during the year 0.3 - Cancellation of share premium account (169.7) - At 31 December 0.2 169.6 On 12 June 2003 the Company cancelled its share premium account as confirmed by an Order of the High Court of Justice, Chancery Division. 20. Profit and loss account Group Company £m £m At 1 January 2003 - deficit (191.6) (58.7) Transfer on cancellation of share premium account 169.7 169.7 Profit for the financial year 2.7 2.4 Dividends proposed (4.0) (4.0) Net exchange adjustments offset in reserves 0.8 - Tax on exchange adjustments offset in reserves 0.1 - At 31 December 2003 (22.3) 109.4 21. Other reserves Group Group Group Company Merger Other Total Other reserve reserves reserves £m £m £m £m At 1 January 2003 109.0 21.8 130.8 21.8 At 31 December 2003 109.0 21.8 130.8 21.8 22. Acquisitions The results for the year include the undernoted contribution from acquisitions: HDP Guitar World Guitar One Computec UK Other Total £m £m £m £m £m £m Date acquired 28.04.03 10.09.03 31.10.03 21.11.03 - Turnover 5.4 1.9 0.2 0.3 - 7.8 Adjusted operating profit 0.2 (0.1) - 0.1 - 0.2 Amortisation of intangible assets (1.6) (0.6) (0.1) (0.1) (0.2) (2.6) Operating profit (1.4) (0.7) (0.1) - (0.2) (2.4) The most recent pre-acquisition annual results of those acquisitions showed the undernoted estimated figures: HDP Guitar World Guitar One Computec UK Other Total £m £m £m £m £m £m Year ended: 31.12.02 31.12.02 31.12.02 30.09.03 - Turnover 8.2 7.8 3.1 4.5 - 23.6 Operating profit/(loss) - 1.3 0.3 (1.4) - 0.2 The accounting polices applied by previous owners of acquired business differed from those applied by the Group and accordingly the pre-acquisition figures are not strictly comparable with those set out above for the year 2003. In addition, foreign exchange adjustments limit the comparability of the two tables. 23. Commitments and contingent liabilities a) Operating lease commitments At 31 December 2003 the Group had annual commitments under non cancellable operating leases as set out below: Land and 2003 Land and 2002 Buildings Other Total Buildings Other Total £m £m £m £m £m £m Annual commitments under non-cancellable operating leases expiring: Within one year 0.2 0.1 0.3 0.1 0.2 0.3 Within two to five years 2.2 0.2 2.4 2.6 0.3 2.9 After five years 1.8 - 1.8 1.6 - 1.6 Total 4.2 0.3 4.5 4.3 0.5 4.8 b) Contingent liabilities At 31 December 2003, the Company had contingent liabilities outstanding in respect of counter-indemnities £0.7m (2002: £1.3m) and guarantees given by it to the Group's bankers in respect of amounts outstanding from its subsidiaries under the Group bank facility arrangements. A number of trading subsidiaries are defendants in various legal actions. In the opinion of the Directors, after taking appropriate legal advice, the outcome that such actions would give rise to a significant loss is considered remote. c) Capital commitments There were no material capital commitments as at 31 December 2003. Directors: Roger Parry, Non-executive Chairman Greg Ingham, Chief Executive Officer John Bowman, Group Finance Director Michael Penington, Non-Executive Director Patrick Taylor, Non-Executive Director Lisa Gordon, Non-Executive Director John Mellon, Non-Executive Director This information is provided by RNS The company news service from the London Stock Exchange LMTTMMAMTPI

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