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
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