Interim Results

Future Network PLC 16 September 2003 16 September 2003 THE FUTURE NETWORK PLC Interim results for half-year end The Future Network plc (LSE: FNET), the international magazine group, today announces its interim results for the half-year ended 30 June 2003. Financial highlights Turnover Â£80.6m (2002: Â£74.0m) Up 9% Circulation revenue Up 10% Advertising revenue Up 7% Adjusted operating profit Â£6.5m (2002: Â£4.7m) Up 38% Goodwill amortisation Â£5.6m (2002: Â£4.5m) Pre-tax profit Â£1.1m (2002: Â£0.9m) Up 22% Adjusted earnings per share 1.4p (2002: 1.1p) Up 27% Operational highlights Games magazines Good growth Computing magazines Difficult market Entertainment magazines Growing portfolio UK business Solid performance US business Strong out-perform Mainland Europe Moving forward Ten magazines launched in first half Expansion continues Business remains heavily reliant on second-half Q4-loaded Definitions: Adjusted operating profit: operating profit before amortisation of intangible assets and other operating income Adjusted earnings: earnings before amortisation of intangible assets and other operating income ABC: Audit Bureau of Circulations Commenting on the results, Greg Ingham, Future's Chief Executive said: 'Overall, the performance of the Group has shown progress, with both revenues and profits ahead of last year. UK profits have been held back by increased launch spend, which has been more than offset by strong performance in the US. Across the Group, games magazines have provided the strongest revenue growth, with UK entertainment magazines also performing well, and computing magazines generally doing well to show any growth in testing market conditions. Circulation revenues account for 70% of Group revenues and have grown by 10%. Advertising revenue has grown by 7%. Second-half trading has started satisfactorily overall. Shareholders are reminded of the importance of the second half of the year, particularly the fourth quarter, which historically has generated a significant proportion of Group profits. Although we remain cautious about market conditions overall, we continue to seek expansion both by acquisition, including Guitar World in the US for Â£10m, and by magazine launches across the Group.' A presentation to analysts will take place at 10am today on the 23rd Floor of The City Media Centre, London Stock Exchange, Old Broad Street, London EC2N 1HP. A copy of this presentation will be posted to the Group's website, www.thefuturenetwork.plc.uk, alongside a recording of the presentation itself. Enquiries: The Future Network plc Greg Ingham, Chief Executive Tel: 01225 442244 John Bowman, Group Finance Director Hogarth Partnership James Longfield/Georgina Briscoe Tel: 020 7357 9477 Interim Report Summary The Group's magazine portfolio has shown progress, with revenues up by 9% and adjusted operating profit up by 38% driven by a very strong performance in the US. As at 30 June 2003, the Group had net cash of Â£17.3m. The Group continues to expand both by magazine launch activity and by acquisition. Financial results for half-year Group turnover for the half-year was Â£80.6m, an increase of 9% on the corresponding figure for the previous half-year. Adjusted operating profit was Â£6.5m, an increase of 38% on the corresponding figure for the previous half-year; and represented an adjusted operating margin of 8% (2002: 6%). After increased goodwill amortisation, operating profits were Â£0.9m (2002: Â£0.2m). After net interest receivable and similar items, the Group's pre-tax profit for the half-year was Â£1.1m (2002: Â£0.9m). Adjusted earnings per share for the half-year were 1.4p (2002: 1.1p), an increase of 27%. Group turnover Group turnover for the half-year was Â£80.6m, an increase of 9% on the corresponding figure for the previous half-year. All of the turnover was derived from the Group's principal activity of publishing specialist magazines serving the games, computing and entertainment sectors. A comparison of turnover by territory is shown below: 2003 2002 Change % Â£m Â£m % UK 57% 46.0 44.2 Up 4% US 22% 18.1 16.7 Up 8% Mainland Europe 21% 17.4 14.0 Up 24% Intra-group - (0.9) (0.9) - Group turnover 100% 80.6 74.0 Up 9% Definitions: Adjusted operating profit: operating profit before amortisation of intangible assets and other operating income Adjusted earnings: earnings before amortisation of intangible assets and other operating income ABC: Audit Bureau of Circulations Gross contribution: magazine revenue less directly related costs Turnover analysed by type is shown below: 2003 2002 Change % Â£m Â£m % Circulation 70% 56.8 51.5 Up 10% Advertising 27% 21.4 20.0 Up 7% Other 3% 2.4 2.5 Down 4% Group turnover 100% 80.6 74.0 Up 9% Turnover analysed by sector is shown below: 2003 2002 Change % Â£m Â£m % Games 45% 37.0 31.6 Up 17% Computing 33% 26.8 26.3 Up 2% Entertainment 22% 17.7 17.0 Up 4% Intra-group - (0.9) (0.9) - Group turnover 100% 80.6 74.0 Up 9% Portfolio The Group expanded its portfolio during the period by launching eight new magazines in the UK and two in Italy; and by acquiring four magazines in France. By the end of the period under review, the Group published 93 specialist magazines in four countries, as shown in the table below. In addition, the Group licensed local editions of its magazines in a further 30 countries. Number of titles At 1 January Launches/acquisitions Disposals/closures At 30 June published UK 54 8 (2) 60 US 5 - - 5 France 13 4 (1) 16 Italy 10 2 - 12 Total 82 14 (3) 93 Magazine launches During the half-year ten monthly magazines were launched and the Group expects to continue its programme of seeking growth through launches. The Group now expects to commit no more than Â£2.5m in respect of 2003 net losses (measured at the gross contribution level) to launches. Analysis of Group pre-tax profit for half-year Â£m Adjusted operating profit 6.5 Net interest receivable and similar items 0.2 Sub-total of taxable profit 6.7 Goodwill amortisation (non-taxable) (5.6) Pre-tax profit 1.1 Analysis of Group adjusted operating profit by territory 2003 2002 Change Â£m Â£m Â£m UK 6.0 6.1 (0.1) US 1.9 (0.2) 2.1 Mainland Europe (0.1) 0.3 (0.4) Central costs (1.3) (1.5) 0.2 Group adjusted operating profit 6.5 4.7 1.8 Group gross contribution by sector 2003 2002 Games 39% 32% Computing 37% 42% Entertainment 24% 26% UK performance in first half-year 2003 2002 Change Total Total % Â£m Â£m Turnover 46.0 44.2 4% Adjusted operating profit 6.0 6.1 (2%) Turnover for the half-year was Â£46.0m, an increase of 4% on the corresponding figure for 2002. Circulation revenue increased by 6% and advertising revenue grew by 2%. The proportion of turnover derived from circulation revenues rose to 74% (2002: 72%) and the proportion derived from advertising was 22% (2002: 22%). During the half-year the UK launched eight monthly magazines including Bang, an alternative music magazine; What Guitar has been added to the UK's already successful portfolio of guitar magazines; Digital Camera Shopper, supplementing Digital Camera which was launched in 2002, and Windows XP Answers. Circulation revenue for the first half-year grew by 6%, despite some weakness in UK circulation volumes. Future's first-half market share of the games segment remained level with the same period last year at 65% by volume and 70% by retail sales value. Copy sales of Future's UK games titles were down 3.8% year on year, reflecting a relatively quiet period for new game launches. Official PlayStation 2 Magazine was in line with the overall trend, with sales of 188,079, down 3.7% year on year. Official Xbox Magazine at 80,179 was confirmed as the fastest growing consumer magazine in the UK, with a 108% increase in circulation year on year. Strong performances from the magazines in Computing and Entertainment that reported six-monthly ABCs included first six-monthly figures from Digital Camera magazine of 33,085, making it the UK's second biggest-selling digital camera title; as well as strong performances from Microsoft Windows XP: The Official Magazine, Redline, Classic Rock and Total Film. In terms of UK sales, the split of turnover by sector was: 2003 2002 Games 34% 32% Computing 28% 29% Entertainment 38% 39% Gross contribution by sector in the UK was: 2003 2002 Games 32% 32% Computing 32% 32% Entertainment 36% 36% UK adjusted operating profit was Â£6.0m, representing an adjusted operating profit margin of 13% from continuing activities, compared with 14% for the six months to June 2002. The margin was held back by increased launch spend during the first half of 2003. Licensing International licensing of Future's magazine portfolio has been further developed during the period. The results for the half-year include Â£1.3m in respect of licensing revenue external to the Group (2002: Â£1.0m). The Group licenses local editions of its magazines in 30 countries, in addition to those published in the UK, US, France and Italy. The number of local editions published in those countries has risen from 78 to 88. Digital Camera, launched in November 2002, is now licensed in six non-Group countries. The Group has experienced good growth in licensing its entertainment titles, resulting in a broader spread of licensed titles. US performance in first half-year 2003 2002 Change Â£m Â£m % Turnover 18.1 16.7 8% Adjusted operating profit 1.9 (0.2) - Turnover for the period was Â£18.1m, an increase of 8% (in sterling terms) compared with the previous half-year. The average value of the dollar against the pound declined by 11% compared with the previous half-year, so that revenue growth in dollar terms was 20%. For the half-year, 56% of turnover came from circulation and 40% from advertising. Subscription revenue in the half-year accounted for 47% of US circulation turnover. Circulation revenue grew by 11% and advertising revenue by 7% compared with the previous first half-year. Each of the magazines published in the US is performing better than last year. The total number of copies sold during the half-year exceeded the corresponding number for 2002 by 33% for titles audited by ABC. The number of computing magazines sold held firm, with the three games magazines accounting for the increase. Future continues to have the largest-selling PlayStation, Xbox and PC games magazines in the US. In January 2004 Future will launch a new magazine in the US, Mobile PC, which will focus on mobile technology and which is Future's first American magazine launch since Official Xbox Magazine in 2001. Mobile PC launch costs expensed in 2003 are estimated not to exceed Â£1m and in 2004 the magazine is assumed to be loss-making in its early phase. On 4 September 2003 we announced the acquisition of the US market-leading guitar magazine Guitar World and related titles for Â£10.0m ($16.25m) in cash. For the year ended 31 December 2002 the estimated profit attributable to these titles was $1.9m on turnover of $11.8m. Mainland Europe performance in first half-year 2003 2002 Change Existing Acquisition Total Total % Â£m Â£m Â£m Â£m Turnover 16.0 1.4 17.4 14.0 24% Adjusted operating profit 0.2 (0.3) (0.1) 0.3 - Combined turnover from France and Italy was Â£17.4m, which included Â£1.4m from the Hachette titles acquired on 28 April 2003. Excluding these, the increase in turnover was 14%. The average value of the euro against the pound strengthened by 9% compared with the previous half-year, so that this revenue growth in euro terms was 5%. For the half-year, 74% of turnover came from circulation and 25% from advertising. Circulation revenue (excluding HDP) grew by 14% and advertising revenue by 18% compared with the previous half-year. The operating loss of Â£0.1m for the first half is stated after intra-group licence fees paid by Mainland Europe for the period of Â£0.8m (2002: Â£0.7m). During the period, Future acquired four magazines in France previously published by HDP, a subsidiary company of Hachette Filipacchi Presse S.A. As already announced, the acquisition of HDP was completed on 28 April 2003 for a cash consideration of Â£3.6m. Including net liabilities acquired on acquisition (mostly termination costs of a number of staff) the goodwill arising on acquisition was Â£4.6m. The results for the half-year include HDP turnover of Â£1.4m and an operating loss of Â£0.3m. During the period two magazines were launched in Italy: Digital Camera and Linux Pro. Market conditions in Italy have been challenging. Nonetheless, excluding the initial Â£0.3m operating loss from HDP, mainland European operations showed a small operating profit of Â£0.2m for the first half. Operating profitability as measured by adjusted operating profit Aside from launches, virtually all of the Group's magazines recorded a positive gross contribution in the half-year. Overheads in each country remained under careful control throughout the period. Adjusted operating profit achieved by the UK for the half-year was Â£6.0m and that achieved by overseas subsidiaries was Â£1.8m, giving a combined total of Â£7.8m. After deducting Group central costs of Â£1.3m (2002: Â£1.5m), adjusted operating profit for the period was Â£6.5m (2002: Â£4.7m) representing an adjusted operating profit margin of 8% (2002: 6%). Net interest receivable and similar items The total figure of Â£0.2m represents net interest receivable of Â£0.1m arising on net cash balances, and foreign exchange gains for the half-year totalling Â£0.1m. Tax The tax charge for the period amounted to Â£2.1m. Ignoring goodwill amortisation, which has no impact on taxation, the total effective tax rate for the half-year was 31% (2002: 32%). This is the Group's estimate of the effective tax rate likely to apply to taxable profits for the financial year 2003 as a whole. Share premium account At the Annual General Meeting on 15 May 2003, shareholders approved the proposed cancellation of share premium account and this was subsequently effected on 12 June 2003, following court approval. As a result, the Company as at 30 June 2003 had distributable profits in excess of Â£100m. As announced in March 2003, this step paves the way to enable the payment of dividends in due course. Net cash and capital expenditure The Group started the half-year with net cash of Â£16.8m and the Group's operations for the half-year were significantly cash generative, with net cash inflow from operating activities of Â£9.4m. The largest cash outflows were for tax paid (Â£4.3m); for the HDP acquisition (net Â£3.1m); and in respect of capital expenditure (Â£0.8m). The Group ended the half-year with net cash of Â£17.3m. Leasehold property The consolidated balance sheet contains provisions totalling Â£2.0m (December 2002: Â£2.9m) representing provisions against onerous lease commitments in respect of property in the US and UK and certain UK dilapidation obligations. The property provision reduced during the half-year mainly as a result of rental payments in respect of vacant properties and the net release of other provisions amounting to Â£0.4m During the half-year the Group paid a total of Â£1.8m in relation to leasehold property, of which Â£1.3m was in respect of occupied property and Â£0.5m in respect of unoccupied property. Board On 12 March this year John Mellon and Lisa Gordon joined the Board as independent non-executive Directors, bringing the number of independent non-executive Directors to five. The Board announced today that Colin Morrison, its Chief Operating Officer, will leave the Group on 31 December 2003. He resigns as a Director of the Company with effect from 16 September 2003. Colin joined the Company in January 2001 as Chief Operating Officer and also filled the position of UK Managing Director from July 2001. The Group will recruit a new Managing Director for its UK business in due course. The role of Chief Operating Officer will cease. The Board is grateful to Colin, who joined Future at a very difficult time when the Company was undergoing major changes. He played a crucial role in our restructuring and re-organisation. The business is now in much better shape and the Board understands his decision to move on after three years. The Board thanks him for a job very well done and wishes him the very best for his next challenge. Outlook Overall, the performance of the Group has shown progress, with both revenues and profits ahead of last year. UK profits have been held back by increased launch spend, which has been more than offset by strong performance in the US. Across the Group, games magazines have provided the strongest revenue growth, with UK entertainment magazines also performing well, and computing magazines generally doing well to show any growth in testing market conditions. Circulation revenues account for 70% of Group revenues and have grown by 10%. Advertising revenue has grown by 7%. Second-half trading has started satisfactorily overall. Shareholders are reminded of the importance of the second half of the year, particularly the fourth quarter, which historically has generated a significant proportion of Group profits. Although we remain cautious about market conditions overall, we continue to seek expansion both by acquisition, including Guitar World in the US for Â£10m, and by magazine launches across the Group. Roger Parry, non-executive Chairman Greg Ingham, Chief Executive John Bowman, Group Finance Director Michael Penington, senior independent non-executive Director Patrick Taylor, independent non-executive Director John Mellon, independent non-executive Director Lisa Gordon, independent non-executive Director 16 September 2003 The Future Network plc Interim report 2003 Group profit and loss account for the six months ended 30 June 2003 Note 6 months to 6 months to 12 months to 30 June 2003 30 June 2002 31 December 2002 Continuing operations Â£m Â£m Â£m Turnover 2 80.6 74.0 165.3 Operating profit Operating profit before amortisation of intangible 6.5 4.7 18.2 assets and other operating income Amortisation of intangible assets 3,8 (5.6) (4.5) (10.3) Other operating income - - 2.2 0.9 0.2 10.1 Operating profit 3 0.9 0.2 10.1 Profit on disposal of fixed asset investments - 0.3 0.3 Profit on ordinary activities before interest 0.9 0.5 10.4 Net interest receivable and similar items 5 0.2 0.4 0.3 Profit on ordinary activities before tax 2 1.1 0.9 10.7 Tax on profit on ordinary activities 6 (2.1) (1.7) (4.5) (Loss)/profit on ordinary activities after tax (1.0) (0.8) 6.2 Retained (loss)/profit for the period 17 (1.0) (0.8) 6.2 Earnings per 1 pence Ordinary share 6 months to 6 months to 12 months to 30 June 2003 30 June 2002 31 December 2002 Note pence pence pence Basic (loss)/earnings per share 7 (0.3) (0.3) 1.9 Adjusted basic earnings per share 7 1.4 1.1 4.4 Diluted (loss)/earnings per share 7 (0.3) (0.3) 1.9 Adjusted diluted earnings per share 7 1.4 1.1 4.4 Statement of total recognised gains and losses for the six months ended 30 June 2003 6 months to 6 months to 12 months to 30 June 30 June 31 December 2003 2002 2002 Â£m Note Â£m Â£m Retained (loss)/profit for the period (1.0) (0.8) 6.2 Net exchange adjustments offset in reserves 17 0.6 0.3 0.4 Tax on exchange adjustments offset in reserves 17 0.1 (0.3) (0.6) Total recognised (loss)/gain relating to the period (0.3) (0.8) 6.0 Reconciliation of movements in shareholders' funds for the six months ended 30 June 2003 6 months to 6 months to 12 months to 30 June 30 June 31 December 2003 2002 2002 Note Â£m Â£m Â£m Retained (loss)/profit for the period (1.0) (0.8) 6.2 Premium on shares issued during the period 17 0.1 - - Net exchange adjustments offset in reserves 17 0.6 0.3 0.4 Tax on exchange adjustments offset in reserves 17 0.1 (0.3) (0.6) Net movement in shareholders' funds (0.2) (0.8) 6.0 Opening equity shareholders' funds 112.0 106.0 106.0 Equity shareholders' funds at end of period 111.8 105.2 112.0 Group balance sheet As at 30 June 2003 30 June 30 June 31 December 2003 2002 2002 Note Â£m Â£m Â£m Fixed assets Intangible assets 8 108.6 114.3 108.6 Tangible assets 9 3.6 3.5 3.2 112.2 117.8 111.8 Current assets Stocks 10 4.0 3.8 3.6 Debtors 11 32.8 30.7 33.3 Investments 12 14.0 3.8 6.2 Cash at bank and in hand 5.1 3.5 12.4 55.9 41.8 55.5 Creditors: amounts falling due within one year 13 (53.9) (47.9) (49.7) Net current assets/(liabilities) 2.0 (6.1) 5.8 Total assets less current liabilities 114.2 111.7 117.6 Creditors: amounts falling due after more than one year 14 - (2.4) (2.5) Provisions for liabilities and charges 15 (2.4) (4.1) (3.1) Net assets 111.8 105.2 112.0 Capital and Reserves Called-up share capital 16 3.2 3.2 3.2 Share premium account 17 - 169.6 169.6 Merger reserve 17 109.0 109.0 109.0 Other reserves 17 21.8 21.8 21.8 Profit and loss account 17 (22.2) (198.4) (191.6) Equity shareholders' funds 111.8 105.2 112.0 Group cash flow statement for the six months ended 30 June 2003 6 months 6 months 12 months to to 30 June to 30 June 31 December 2003 2002 2002 Note Â£m Â£m Â£m Net cash inflow from operating activities A 9.4 12.8 27.0 Returns on investment and servicing of finance Interest received 0.7 0.1 0.3 Interest paid - (0.9) (1.3) Net cash inflow/(outflow) from returns on investment and servicing of finance 0.7 (0.8) (1.0) Tax Tax paid (4.3) (0.1) (3.2) Tax received - 1.1 1.8 Net tax (paid)/received (4.3) 1.0 (1.4) Capital expenditure and financial investment Purchase of tangible fixed assets (0.8) (0.2) (0.7) Sale of tangible fixed assets - 0.5 0.6 Sale of current asset investments - 0.3 0.3 Net cash (outflow)/inflow for capital expenditure and financial investment (0.8) 0.6 0.2 Acquisitions and disposals Purchase of subsidiary undertakings (3.6) - - Net cash acquired with subsidiary undertakings 0.5 - - Purchase of subscription lists (0.1) - (0.1) Payment of deferred consideration (0.7) (0.6) (0.7) Net cash outflow for acquisitions and disposals (3.9) (0.6) (0.8) Management of liquid resources Increase in short-term deposits with bank (7.9) (0.3) (2.7) Net cash outflow in management of liquid resources (7.9) (0.3) (2.7) Net cash (outflow)/inflow before financing (6.8) 12.7 21.3 Financing Proceeds from issue of Ordinary share capital 0.1 - - Movement on discounted bills - 0.3 (0.2) Movement on shareholder loan - 0.1 0.1 Repayment of bank loans - (18.9) (18.9) Net cash inflow/(outflow) from financing 0.1 (18.5) (19.0) (Decrease)/increase in cash in the period (6.7) (5.8) 2.3 Notes to the Group cash flow statement For the six months ended 30 June 2003 A. Net cash inflow from operating activities The reconciliation of operating profit to net cash inflow from operating activities is as follows: 6 months to 6 months to 12 months to 31 30 June 2003 30 June 2002 December 2002 Â£m Â£m Â£m Group operating profit 0.9 0.2 10.1 Depreciation charge 0.6 0.8 1.4 Intangible amortisation 5.6 4.5 10.3 Movement in provisions (1.3) (0.5) (1.5) (Increase)/decrease in stocks (0.2) (0.3) (0.3) Decrease in debtors 3.2 10.8 8.3 Increase/(decrease) in creditors 0.6 (2.7) (1.3) Net cash inflow from operating activities 9.4 12.8 27.0 B. Analysis of net cash At 1 January Other non-cash Exchange At 30 June 2003 2003 changes movements Cash inflow Â£m Â£m Â£m Â£m Â£m Cash at bank and in hand 12.4 (6.7) (0.6) 5.1 Debt due within one year - - (1.8) - (1.8) Debt due after more than one year (1.8) - 1.8 - Liquid resources 6.2 7.8 - - 14.0 Net cash 16.8 1.1 - (0.6) 17.3 C. Reconciliation of movement in net cash/(debt) 6 months to 6 months to 12 months to 30 June 2003 30 June 2002 31 December 2002 Â£m Â£m Â£m Net cash/(debt) at start of period 16.8 (7.8) (7.8) (Decrease)/increase in cash (6.7) (5.8) 2.3 Movement in deposits 7.8 0.3 2.7 Movement in borrowings - 18.5 19.0 Amortisation of bank finance costs - (0.1) (0.1) Exchange movements (0.6) (0.1) 0.7 Net cash at end of period 17.3 5.0 16.8 Notes to the Interim report 1. Basis of preparation of accounts The results for the six months ended 30 June 2003 and 2002 are unaudited. The figures for the year ended 31 December 2002 are taken from the statutory accounts of The Future Network plc that have been delivered to the Registrar of Companies and upon which an unqualified audit report was given. This Interim report does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. The accounting policies are as stated on pages 44 and 45 of the 2002 Annual Report. 2. Segmental reporting The Group is involved in one class of business, the publication of magazines. The geographical analyses of turnover by category, origin and destination and profit before tax by origin, were as follows: (a) Turnover by category 6 months to 6 months to 12 months to 30 June 30 June 31 December 2003 2002 2002 Â£m Â£m Â£m Circulation 56.8 51.5 111.9 Advertising 21.4 20.0 48.6 Other 2.4 2.5 4.8 Total 80.6 74.0 165.3 (b) Turnover by origin 6 months to 6 months to 12 months to 30 June 30 June 31 December 2003 2002 2002 Â£m Â£m Â£m United Kingdom 46.0 44.2 97.1 United States 18.1 16.7 40.5 Mainland Europe 17.4 14.0 29.5 Turnover between segments (0.9) (0.9) (1.8) Total 80.6 74.0 165.3 (c) Turnover by destination 6 months to 6 months to 12 months to 30 June 30 June 31 December 2003 2002 2002 Â£m Â£m Â£m United Kingdom 39.4 38.7 82.6 United States 18.6 16.7 40.5 Mainland Europe 19.8 15.7 35.1 Rest of the world 3.7 3.8 8.9 Turnover between segments (0.9) (0.9) (1.8) Total 80.6 74.0 165.3 (d) Profit before tax by origin 6 months to 6 months to 12 months to 30 June 30 June 31 December 2003 2002 2002 Â£m Â£m Â£m United Kingdom 3.5 3.6 14.2 United States 0.5 (1.1) 2.3 Mainland Europe (1.6) (0.3) (3.4) Central costs (1.3) (1.3) (2.4) Total 1.1 0.9 10.7 3. Operating profit 6 months to 6 months to 12 months to 30 June 2003 30 June 2002 31 December 2002 Â£m Â£m Â£m Turnover 80.6 74.0 165.3 Cost of sales (55.3) (49.6) (103.2) Gross profit 25.3 24.4 62.1 Distribution expenses (5.1) (4.6) (10.4) Administration expenses (13.7) (15.1) (33.5) Amortisation of intangible assets (5.6) (4.5) (10.3) Other operating income - - 2.2 Total administration expenses (19.3) (19.6) (41.6) Operating profit 0.9 0.2 10.1 4. Staff costs 6 months to 6 months to 12 months to 30 June 2003 30 June 2002 31 December 2002 Â£m Â£m Â£m Wages and salaries 14.4 15.3 30.9 Social security costs 2.6 2.3 4.5 Other pension costs 0.4 0.3 0.6 Total 17.4 17.9 36.0 5. Net interest receivable and similar items 6 months to 30 6 months to 12 months to June 2003 30 June 2002 31 December 2002 Â£m Â£m Â£m Interest payable on bank loans and overdrafts 0.1 0.3 0.4 Amortisation of issue costs of bank loan - 0.1 0.1 Interest payable on other loans - - 0.1 Amortisation of discount relating to vacant property provisions 0.1 0.1 0.2 Amortisation of discount arising on fair valuing of deferred consideration - 0.1 0.1 Total interest payable and similar charges 0.2 0.6 0.9 Interest receivable (0.3) (0.2) (0.3) Exchange gains (0.1) (0.8) (0.9) Total interest receivable and similar items (0.4) (1.0) (1.2) Net interest receivable and similar items (0.2) (0.4) (0.3) 6. Tax The tax charge for the six months ended 30 June 2003 is based on the estimated effective rate of tax for the full year. The effective rate is assessed on a country by country basis and is applied to the profit before tax and amortisation. 7. Earnings per share Basic earnings per share are calculated using the weighted average number of Ordinary shares outstanding during the period. 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 effects of the amortisation of intangible assets and other operating income from the calculation as follows: Adjustments to (loss)/profit on ordinary activities 6 months to 6 months to 30 12 months to after tax 30 June 2003 June 2002 31 December 2002 Â£m Â£m Â£m (Loss)/profit on ordinary activities after tax (1.0) (0.8) 6.2 Add: Amortisation and impairment of intangible assets 5.6 4.5 10.3 Less: other operating income - - (2.2) Adjusted profit on ordinary activities after tax 4.6 3.7 14.3 6 months to 6 months to 12 months to 30 June 2003 30 June 2002 31 December 2002 Weighted average number of Ordinary shares outstanding during the period - Basic 321,257,747 320,295,573 320,674,470 - Dilutive effect of share options 1,590,681 1,518,892 1,818,424 - Diluted 322,848,428 321,814,465 322,492,894 Basic (loss)/earnings per share (in pence) (0.3) (0.3) 1.9 Adjusted basic earnings per share (in pence) 1.4 1.1 4.4 Diluted (loss)/earnings per share (in pence)* (0.3) (0.3) 1.9 Adjusted diluted earnings per share (in pence) 1.4 1.1 4.4 6 months to 6 months to 12 months to The adjustments to profit have the following effects 30 June 2003 30 June 2002 31 December 2002 on earnings per share: pence pence pence Basic (loss)/earnings per share (0.3) (0.3) 1.9 Amortisation of intangible assets 1.7 1.4 3.2 Other operating income - - (0.7) Adjusted basic earnings per share 1.4 1.1 4.4 Diluted (loss)/earnings per share (0.3) (0.3) 1.9 Amortisation of intangible assets 1.7 1.3 3.2 Other operating income - - (0.7) Adjusted diluted earnings per share 1.4 1.1 4.4 * The share options do not have a dilutive effect where there is a loss. 8. Intangible fixed assets Goodwill Group Â£m Cost At 1 January 2003 299.3 Exchange adjustments 1.5 Additions 4.7 At 30 June 2003 305.5 Amortisation At 1 January 2003 (190.7) Exchange adjustments (0.6) Charge for the period (5.6) At 30 June 2003 (196.9) Net book amount at 31 December 2002 108.6 Net book amount at 30 June 2003 108.6 9. Tangible fixed assets Equipment, fixtures and Land and Plant and fittings buildings machinery Â£m Total Â£m Â£m Group Â£m Cost At 1 January 2003 1.9 5.1 2.4 9.4 Exchange adjustments - - 0.1 0.1 Acquisitions - - 0.1 0.1 Additions - 0.6 0.2 0.8 Disposals - (0.1) - (0.1) At 30 June 2003 1.9 5.6 2.8 10.3 Depreciation At 1 January 2003 (0.5) (3.9) (1.8) (6.2) Exchange adjustments - 0.1 (0.1) - Charge for the period - (0.5) (0.1) (0.6) Disposals - 0.1 - 0.1 At 30 June 2003 (0.5) (4.2) (2.0) (6.7) Net book value at 30 June 2003 1.4 1.4 0.8 3.6 Net book value at 31 December 2002 1.4 1.2 0.6 3.2 10. Stocks 30 June 2003 30 June 2002 31 December 2002 Â£m Â£m Â£m Raw materials 1.6 1.3 1.1 Work in progress 2.2 2.0 1.9 Finished goods 0.2 0.5 0.6 Total 4.0 3.8 3.6 11. Debtors 30 June 2003 30 June 2002 31 December 2002 Â£m Â£m Â£m Amounts falling due within one year: Trade debtors 22.9 19.5 24.5 Corporation tax recoverable 2.5 2.3 2.6 Other debtors 3.6 4.1 2.4 Prepayments and accrued income 3.1 3.8 3.0 32.1 29.7 32.5 Amounts falling due after one year: Other debtors 0.7 1.0 0.8 Total 32.8 30.7 33.3 At 30 June 2003 a deferred tax asset has been recognised within other debtors as follows: 30 June 2003 30 June 2002 31 December 2002 Â£m Â£m Â£m Amounts falling due within one year 0.9 - 0.8 Amounts falling due after more than one year 0.7 1.0 0.8 Total 1.6 1.0 1.6 12. Current asset investments 30 June 2003 30 June 2002 31 December 2002 Â£m Â£m Â£m Short-term bank deposits 14.0 3.8 6.2 Total 14.0 3.8 6.2 13. Creditors: amounts falling due within one year 30 June 2003 30 June 2002 31 December 2002 Â£m Â£m Â£m Bank and other borrowings - 0.5 - Shareholder loan 1.8 - - Trade creditors 15.7 14.2 14.3 Corporation tax 1.5 2.7 4.0 Other creditors including taxation and social security 7.5 6.5 6.0 Accruals and deferred income 26.7 23.4 24.8 Deferred consideration for acquisitions 0.7 0.6 0.6 Total 53.9 47.9 49.7 14. Creditors: amounts falling due after more than one year 30 June 2003 30 June 2002 31 December 2002 Â£m Â£m Â£m Shareholder loan - 1.8 1.8 Deferred consideration for acquisitions - 0.6 0.7 Total - 2.4 2.5 15. Provisions for liabilities and charges Property and Restructuring Total dilapidations Â£m Â£m Â£m At 1 January 2003 2.9 0.2 3.1 Acquisitions - 0.5 0.5 Credit in the period (0.6) - (0.6) Utilised in the period (0.4) (0.3) (0.7) Amortisation of discount 0.1 - 0.1 At 30 June 2003 2.0 0.4 2.4 16. Called up share capital Authorised share capital (Ordinary shares of 1p each) Â£m At 1 January and 30 June 2003 6.0 Allotted, issued and fully paid (Ordinary shares of 1p each) No. of Shares Â£m At 1 January 2003 321,110,607 3.2 Share options exercised 596,884 - At 30 June 2003 321,707,491 3.2 17. Capital and reserves Called up Share Profit & premium loss share account Merger Other account reserve reserves capital Â£m Â£m Total Â£m Â£m Â£m Â£m At 1 January 2003 3.2 169.6 109.0 21.8 (191.6) 112.0 Net exchange adjustments offset in reserves - - - - 0.6 0.6 Tax on exchange adjustments offset in reserves - - - - 0.1 0.1 Premium on exercise of share options - 0.1 - - - 0.1 Cancellation of share premium account - (169.7) - - 169.7 - Retained loss for the financial period - - - - (1.0) (1.0) At 30 June 2003 3.2 - 109.0 21.8 (22.2) 111.8 On 12 June 2003 the Company cancelled its share premium account as confirmed by an Order of the High Court of Justice, Chancery Division. 18. Acquisition On 28 April 2003 an intermediate holding company within the Group acquired 100% of the share capital of a subsidiary of Hachette Filipacchi Presse SA, Hachette Digital Presse SA (HDP), a company domiciled in France for a cash consideration Â£3.6m. 19. Post balance sheet events On 10 September 2003 the Groups subsidiary Future Network USA acquired the US market-leading guitar magazine Guitar World and related titles for Â£10.0m ($16.25m) in cash. For the year ended 31 December 2002 the estimated profit attributable to these titles was $1.9m on turnover of $11.8m. Independent review report to The Future Network plc Introduction We have been instructed by the company to review the financial information which comprises the consolidated profit and loss account, consolidated balance sheet, statement of total recognised gains and losses, reconciliation of movements in shareholders' funds, consolidated cash flow statement, notes to the consolidated cash flow statement and notes to the interim statement. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. Directors' responsibilities The interim report, including the financial information contained therein, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim report in accordance with the Listing Rules of the Financial Services Authority which require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A review consists principally of making enquiries of group management and applying analytical procedures to the financial information and underlying financial data and, based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with United Kingdom Auditing Standards and therefore provides a lower level of assurance than an audit. Accordingly we do not express an audit opinion on the financial information. This report, including the conclusion, has been prepared for and only for the Company for the purpose of the Listing Rules of the Financial Services Authority and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. Review conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 30 June 2003. PricewaterhouseCoopers LLP Chartered Accountants Bristol 16 September 2003 Notes: (a) The maintenance and integrity of The Future Network plc website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the interim report since it was initially presented on the website. (b) Legislation in the United Kingdom governing the preparation and dissemination of financial information may differ from legislation in other jurisdictions. This information is provided by RNS The company news service from the London Stock Exchange

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