Future plc Preliminary Results

RNS Number : 6861T

Future PLC

22 November 2013

 



22nd November 2013

FUTURE PLC

Preliminary results for the year ended 30 September 2013

Future plc (LSE: FUTR), the international media group and leading digital publisher, today announces its preliminary results for the year ended 30 September 2013. 

Financial Highlights

	Statutory			Normalised*
	2013	2012	Change	2013	2012	Change
	£m	£m		£m	£m
Revenue	112.3	123.5	-9%	106.9	103.6	+3%
EBITDAE**	7.6	9.4	-19%	6.4	6.4	-
Operating profit pre-exceptional items (EBITE)***	4.7	6.8	-31%	3.5	4.0	-13%
Pre-tax profit/(loss)	5.8	1.1	+427%	1.9	(2.7)	+170%
Adjusted earnings per share (pence) ****	0.6	1.1	-45%	0.3	0.4	-25%
Net debt	(6.9)	(14.1)	+51%
Dividend per share (pence)	0.2	−	−

Financial highlights

·      Normalised Group revenues up 3% driven by Digital & Diversified revenue streams

·      Normalised pre-tax profit at £1.9m from loss of £2.7m in prior year

·      Digital revenues up 38% year-on-year, Digital & Diversified now 32% of total Group Revenues*****

·      Digital advertising now 59% of total advertising revenue, up from 48% a year ago

·      UK operations grow advertising and circulation revenues for the year

·      US operating profitably (at EBITDAE level) in H2

·      Net debt more than halved from £14.1m to £6.9m following the sale of non-core print activities

·      Reinstatement of dividend at 0.2 pence per share

Digital highlights

·      Unique users up 14% year-on-year to 57.7 million a month, US unique users up 18% − growth driven by TechRadar

·      Page views up 19% year-on-year to 328 million a month

·      TechRadar now reaching over 20 million unique users globally a month

·      Digital edition revenues up 44% year-on-year

·      Over 340,000 subscribers to digital editions, up 46% since September 2012

Mark Wood, Future's Chief Executive, said: "Our digital revenue growth accelerated, with a 38% increase year-on-year, and we passed an important transition point with more than half our advertising revenues now digital. We have made real progress in reshaping the Future business, diversifying our digital revenues, making our US operations profitable and building global digital brands.

"We have an on-going programme to reduce the cost base and improve margins. During the year we transformed our balance sheet, paying down term debt from the proceeds of non-core asset disposals and extending our credit facility until 2017. This leaves us well positioned to execute on our growth strategy.

"Overall, these are good results after difficult trading conditions earlier in the year, thanks to stronger trading across all areas in the fourth quarter. Looking forward, we see the encouraging Q4 trends continuing with forward advertising bookings up year-on-year, and revenue momentum across all sectors."

Notes
* Normalised results are presented to better reflect the current size and structure of the business and give a better indication of the performance of the ongoing business. The normalised results exclude revenues and costs relating to activities closed or divested between 1 October 2011 and 30 September 2013, but include any new activities launched in that period. Closed or divested activities are not such that they fell to be classified as discontinued under IFRS. The analysis in this announcement is, except where it refers to statutory results, based on normalised results.

** EBITDAE represents earnings before interest, tax, depreciation, amortisation and exceptional items.

*** EBITE represents earnings before interest, tax and exceptional items.

**** Adjusted earnings per share exclude exceptional items and related tax effects.

***** Digital & Diversified Revenues include digital activities, FutureFolio, Future Plus and events.

The most significant foreign currency affecting the Group is the US Dollar. The average exchange rate for the period was $1.5616=£1 (2012: $1.5768=£1), representing a 1% strengthening of the US Dollar against Sterling.

An analyst and investor presentation will be held today at 9am at the offices of Numis, 10 Paternoster Square, London EC4M 7LT.

For a video Q&A on the Preliminary Results with Future plc CEO Mark Wood please visit www.futureplc.com/investors/ 

Enquiries

Future plc
Mark Wood, Chief Executive                                                       Tel: [phone]
Zillah Byng-Maddick, Chief Financial Officer                                 Tel: [phone]
Chris Taylor, Director of Communications                                     Tel: [phone]

Brunswick Group
Jon Coles / Andy Rivett-Carnac                                                   Tel: [phone]

About Future:

·      Future plc is an international media group and leading digital business, listed on the London Stock Exchange (symbol: FUTR).

·      Future has been named Consumer Digital Publisher of the Year for three years in a row by the Association of Online Publishers (2011, 2012, 2013) and has been named the Professional Publishers Association Digital Publisher of the Year for two consecutive years (2012, 2013). Future is also the British Media Awards Media Company of the Year.

·      We have operations in the UK, US and Australia creating more than 200 publications, apps, websites and events.

·      We hold market-leading positions in Technology, Games, Guitar, Creative and Sport & Auto sectors.

·      We attract more than 57 million monthly global unique users to our websites, which include techradar.com, gamesradar.com, bikeradar.com and musicradar.com.

·      Future sold more than 19 million magazines last year, that's 37 magazines sold every minute. Our most well-known brands include T3, Cycling Plus, Total Film, Mollie Makes and Xbox: The Official Magazine.

·      Future has developed its own app-creation software, FutureFolio. We produce over 100 digital editions, and have sold over 5 million digital issues in the last year.

·      Future exports or syndicates 225 publications to over 89 countries, making us the UK's number one exporter and licensor of magazine content.

·      Follow Future plc on Twitter at www.twitter.com/futureplc and on LinkedIn at www.linkedin.com/company/future-publishing 

***

Chairman's Statement

We are pleased with the results, which show the business gathering momentum in the second half and ending the year with every sector performing well. We believe the advances in digital revenues mark an important turning point for the business, with advertising revenues now two thirds digital. The strategy agreed by the Board over the past two years to diversify revenues and reduce dependence on print is clearly delivering the anticipated results. Digital and Diversified revenues  − including revenues from digital activities, FutureFolio, Future Plus and events − are now one third of the business and we are on a trajectory to maintain this momentum.

It has been particularly encouraging to see an effective focus on increasing monetisation of our digital traffic and to follow the development of our digital agency activity in the US and the UK as a substantial new business.

We have placed great emphasis on managing our operating margins, and continue to re-engineer our cost base as part of that focus. We are pleased with progress in this area and the efforts undertaken to reduce costs in the UK and streamline the business organisation by removing some layers of management.

The improvement in performance and the encouraging trends as we entered the 2013-14 financial year were seen by the Board as justifying a resumption of dividend payments, which were suspended in 2011. We will therefore pay a dividend of0.2p per share for all shareholders on the register as at 14 February 2014. This decision reflects confidence in the business and the prospects for the period ahead.

We are delighted to welcome Zillah Byng-Maddick as Chief Financial Officer. She brings with her invaluable experience of managing the print-to-digital transition at Trader Media, publisher of Auto Trader. We thank her predecessor, Graham Harding, for his contribution as CFO and many years of distinguished service to Future and we wish him well.

Peter Allen

Chairman

22 November 2013

Chief Executive's Statement (Extract from Annual Report)

Overview

Future has achieved further significant progress in the transition to a diversified digital business and delivered revenue growth, despite challenging trading conditions over much of the year.

Digital revenues rose 38% − the highest rate of growth in recent years − and we passed a significant inflection point, with more than half of all advertising revenues (59% across the Group) now digital. This demonstrates how far the business has developed in its digital transformation.

Overall, Digital and Diversified revenues − including revenues from digital activities, FutureFolio, Future Plus and events − made up 32% of the business.

As a result of disposals and restructuring we have strengthened the balance sheet, net debt has been halved to £6.9m (leverage 0.99 times) and a new four year £25m maturing credit facility agreed. Second half performance was significantly better than the first half and, after an encouraging fourth quarter, we entered the 2013-14 financial year with forward advertising bookings pacing ahead of last year.

For the year as a whole, revenues grew by 3% and profit before tax came in at £1.9m against a loss in the prior year of £2.7m, with growth in digital revenues more than offsetting print declines. A cyclical decline in the Games market was a significant drag on the business in the first three quarters. But by the fourth quarter Games had substantially recovered and trading was stronger in Q4 across all other sectors.

During the second half a number of key elements of the transition programme were delivered: the US was operating profitably and restructuring activity in UK was completed which will deliver margin benefits in 2014. 

Digital growth across all key brands

We increased our digital reach by 14% to 58 million unique users (UUs) a month. Future now has 14 websites that each attract more than one million UUs a month. We achieved greater audience engagement across the portfolio, with page views rising 19% to 328 million, increased dwell times and a 32% increase in average revenue per user across all sites.

We saw sustained digital growth across all key sectors of the portfolio - Technology, Games, Photography, Sport, Crafts, Music and Digital Creative.

TechRadar, the news and reviews site which is Future's top brand, reached 20 million UUs a month and continued to grow a global audience. TechRadar US more than doubled its audience to 8.3 million UUs and was one of the fastest growing US technology sites. In the UK we launched TechRadar Pro, focused on the business technology sector and saw rapid growth in visitor traffic and advertiser interest.

TechRadar is now unchallenged as the UK's number one technology website and is increasingly competing with CNet in global markets. Future's CyclingNews and BikeRadar are global leaders in their sectors, while CVG, PCGamer and GamesRadar all had market-leading positions in the UK and US. CreativeBloq took the lead in the high-value UK Digital Design space within a year of launch and generated traffic of more than 2.2 million UUs.

Revenues from Future digital editions on tablets such as the iPad increased by 44% on the prior year and MacLife, our US title, saw subscriptions increase to 80,000. We now have more than 340,000 digital subscriptions worldwide and renewal rates have been running at close to 70%.

Innovation and diversified revenues

Content Marketing was an area of substantial digital growth and is developing into a material new business area. Future has developed expertise in managing consumer engagement and marketing campaigns for major brands in both the US and the UK. Revenues from new business in this area doubled and are now generating more than 15% of total advertising revenues. 

Future US created the blueprint, winning content production, audience engagement and experiential marketing campaigns for major brands including Hyundai, Bethesda and DTS. The UK built on that experience and secured content marketing campaigns for brands including Samsung, Carphone Warehouse, Canon, Microsoft and Tesco.

In the fast-growing Photography market, Future has three print titles in the UK's top four and our interactive Photography Week tops the sector on the Apple Newsstand. We also secured the licence to stage The Photography Show, set to be Europe's biggest annual event of its kind, at the Birmingham NEC. The Photography Show will debut in March 2014. Our Events division, launched in 2012, also launched successful B2B conferences and shows in Photography, Digital Creative and Music in the last year. This demonstrates the success of our model of creating the best brands and content in a sector and then leveraging this across other engagement vehicles.

In other areas, FutureFolio, our tablet edition software, extended its customer list. New clients include the Daily Telegraph and publishing group Redan, which has chosen FutureFolio to publish a highly interactive version of the magazine based on the hugely popular children's character Peppa Pig. In addition, we increased revenues from real-time programmatic data trading, which enables us to monetise unsold advertising inventory.

International Growth

More than 40% of the Group's revenues were generated outside the UK in the last year. In the US, revenues increased by 6% and in Australia by 23%, boosted by the acquisition of two technology brands. These have made Future a leader in the technology sector and will provide leverage to build TechRadar Australia. 

We continue to see Future's biggest opportunities internationally in the US and have an efficient model for repurposing UK-produced content for the American market. As well as significant growth in the US Technology and Games sectors, we see further potential in Photography, Crafts and Cycling.

In Europe, we launched a French-language version of MusicRadar and began producing Sport and Technology content for print and digital products in German and Italian.

Agile Management of our Magazine Portfolio

We manage our print business for cash generation and have continued to innovate in creating new revenue streams. We launch new titles into areas where we identify opportunity for revenue and profit growth. Recent new launches have included Love Patchwork & Quilting and Science Uncovered, a mainstream science title aimed at the 16-25 demographic.

We have significantly mitigated the impact of declines in mainstream title sales by substantially expanding production of high-value specials and bookazines. We print these in the UK, US and China and are targeting markets in the US, Asia, UK and Europe.

Summary & Outlook

We have halved our debt during the year as a result of selling our portfolio of Rock titles, closing loss-making titles and successfully securing sub-letting deals in the US and UK, reducing our property liabilities by £1.4m. We maintain a rigorous focus on operating margins. We have reshaped the business to support our increasingly digital revenues, reducing headcount in the UK to its lowest level for more than 10 years.

Future has developed an entrepreneurial and innovative culture and is well positioned to seize opportunities as digital markets evolve.

Future won all three top UK awards for Digital Publisher of the Year in 2013, the first company ever to take every top industry honour. This is evidence that the company is seen as undisputed digital leader by the rest of the UK media industry.

We will put that innovative flair to work as we continue to build Future's digital business at speed in the year ahead.

Looking forward, we see the encouraging Q4 trends continuing with forward advertising bookings up year-on-year, and revenue momentum across all sectors.

As we began the 2013-14 financial period, trading was in line with our expectations across all parts of the business.

Mark Wood

Chief Executive

22 November 2013

Financial review

Statutory results for the year ended 30 September 2013

Statutory results for the period	2013 £m	2012 £m
Revenue	112.3	123.5
EBITDAE	7.6	9.4
Depreciation charge	(0.9)	(1.1)
Amortisation of intangible assets	(2.0)	(1.5)
EBITE	4.7	6.8
Exceptional items	2.5	(3.6)
EBIT (Operating profit)	7.2	3.2
Net finance costs	(1.4)	(2.1)
Pre-tax profit	5.8	1.1
Earnings per share (p)	1.3	0.1
Adjusted earnings per share (p)	0.6	1.1
Dividends relating to the period (pence per share)	0.2	-

Normalised results for the year ended 30 September 2013

The normalised results for the Group, and a reconciliation to the statutory results above, are set out on pages 26 to 27.

Normalised results are presented to reflect better the current size and structure of the business and to give a better indication of the performance of the ongoing business. The normalised results exclude revenues and costs relating to activities closed or divested between 1 October 2011 and 30 September 2013, but include any new activities launched in that period.

Normalised results for the period	2013 £m	2012 £m
Revenue	106.9	103.6
EBITDAE	6.4	6.4
Depreciation charge	(0.9)	(1.1)
Amortisation of intangible assets	(2.0)	(1.3)
EBITE	3.5	4.0
Exceptional items	(0.2)	(4.6)
EBIT (Operating profit/(loss))	3.3	(0.6)
Net finance costs	(1.4)	(2.1)
Pre-tax profit/(loss)	1.9	(2.7)
Adjusted earnings per share (p)	0.3	0.4

Review of operations

The review of operations is based primarily on a comparison of normalised results for the year ended 30 September 2013 with those for the year ended 30 September 2012. Unless otherwise stated, change percentages relate to a comparison of these two periods. 

Key Performance Indicators

An update on the key performance indicators is given below:

	2013	2012
Corporate KPIs
EBITDAE (£m):	6.4	6.4
Year-on-year movement in EBITDAE	0%	+83%
EBITE (£m):	3.5	4.0
Year-on-year movement in EBITE	-13%	+208%
Digital KPIs
Year-on-year movement in digital revenues	+38%	+25%
Number of unique users logging onto our websites	57.7	51.2
Number of digital magazines sold per month (thousands)	433	239
Digital subscriber base (thousands)	342	235
Print KPIs
Number of magazines sold per month	1.7m	1.7m
Print subscriber base (thousands)	639	727
Copies sold as a percentage of copies printed (including subscriptions)	52%	54%
Year-on-year movement in print revenues	-3%	-10%

The KPI trends noted above demonstrate the further progress made during the year in digital and in the management of the overall profitability of the Group.

Analysis of revenue

	2013 £m	2012 £m	Change
Digital and Diversified	34.7	29.0	+20%
Print	72.2	74.6	-3%
Total revenue	106.9	103.6	+3%

Group revenue overall rose by 3% to £106.9m and encouragingly we saw increases in both the UK and the US. In particular Digital and Diversified revenues generated from our UK- and US-based businesses continued to show strong growth and were up 20% overall, driven by further increases in digital circulation and increases in online advertising fuelled from the continuing growth in our audience. Digital and Diversified revenues now represent 32% of the Group revenues with digital advertising now representing 59% of our total advertising revenues.

Overall print based revenues continued to decline in the UK and the US although the level of that decline has been mitigated with a significant increase in the number of Bookazines that have been published in the year - we have increased the number from 92 in FY12 to 203 in FY13.

	2013 £m	2012 £m	Change
UK	87.6	85.4	+3%
US	20.1	18.9	+6%
Intra-group	(0.8)	(0.7)
Total revenue	106.9	103.6	+3%

Analysis of EBITDAE

	2013 £m	2012 £m	Change
UK	7.5	8.3	-10%
US	(1.1)	(1.9)	+42%
Total EBITDAE	6.4	6.4	0%

Further analysis of the key drivers of the increase in EBITDAE is provided in the table below which analyses the year on year variances across Digital and Diversified activities, print activities and overheads.

	2013 £m	2012 £m	Change
Digital and Diversified	7.4	4.8	+54%
Print	18.2	21.4	-15%
Overheads	(19.2)	(19.8)	-3%
EBITDAE	6.4	6.4	0%

The table above clearly illustrates the continuing progress being made in Digital and Diversified activities whilst at the same time demonstrating the relative impact of the print declines and overhead savings achieved during the year. The 3% reduction in overheads achieved during the year does not reflect the most recent restructuring activity.

Further commentary on those movements is provided in the following sections.

UK-based performance

	2013 £m	2012 £m	Change
Circulation revenue	54.4	53.2	+2%
Advertising revenue	23.6	23.4	+1%
Customer publishing	3.8	4.0	-5%
Licensing, events and other	5.8	4.8	+21%
Total revenue	87.6	85.4	+3%
EBITDAE	7.5	8.3	-10%
EBITDAE margin	9%	10%
Depreciation	(0.7)	(0.8)	-13%
Amortisation	(1.2)	(0.7)	+71%
EBITE	5.6	6.8	-18%
EBITE margin	6%	8%

UK based activities saw revenue up by 3%.  Within this we saw Digital and Diversified revenues increase by 16%, offsetting the declines in print-related revenues.

Circulation revenues increased by 2%. Print copy sales were flat whilst digital copy sales increased from 6% of total circulation revenue to 8% of total circulation revenue in the year.

Advertising revenues overall were up 1%. Digital advertising revenues increased by 17%, more than offsetting the print decline of 11%, and now represent 50% of total advertising revenue in the UK.

Headcount in the UK at the end of September 2013 was 831, a reduction of 4% from the end of September 2012. Further restructuring was undertaken in Q4, the full-year effect of which will be seen in the current year. Following this restructuring activity there is an on-going focus on the margin, to ensure that any further declines in revenue are offset by appropriate structuring of the cost base.

US-based performance

	2013 $m	2012 $m	Change
Circulation revenue	10.5	10.9	-4%
Advertising revenue	15.0	13.0	+15%
Customer publishing	5.1	5.1	0%
Licensing, events and other	0.9	0.8	+13%
Total revenue	31.5	29.8	+6%
EBITDAE	(1.7)	(2.9)	+41%
EBITDAE margin	-5%	-10%
Depreciation	(0.3)	(0.5)	-40%
Amortisation	(1.3)	(1.0)	+30%
EBITE	(3.3)	(4.4)	+25%
EBITE margin	-10%	-15%

The US-based activities have shown revenue growth of 6% from FY12. Within this we saw Digital and Diversified revenues increase by 28%, offsetting the ongoing declines in print-related revenues.

Circulation revenue overall fell by 4% with the largest impact arising from print subscriptions which were down 20%. Advertising revenues were up 15%, with digital advertising up 49% and print advertising down 42%. Digital advertising in the US now represents 81% of total advertising revenues.

The improvement of $1.2m in EBITDAE is driven by the digital revenue increases and the full year impact of the restructuring action undertaken through FY12 which has resulted in a $0.8m saving year-on-year in overheads. In the second half the US business produced a positive EBITDAE of $0.4m.

Exceptional items

Exceptional items on a statutory basis can be split into three elements as follows:

	£m
Profit on the sale of UK assets	2.7
Vacant property provision movements	1.2
Restructuring	(1.4)
Total exceptional items	2.5

The UK Rock titles were sold in April 2013 for gross consideration of £10.2m.

The restructuring cost relates to further action taken in the UK through the year, the benefits of which will be seen in 2014.

As a result of the restructuring activities in the US in FY12 we vacated one floor of the offices in San Francisco. During the year we have sublet that floor and therefore released an element of the vacant property provision established in FY12.

Net finance costs

Net finance costs were £1.4m (2012: £2.1m) reflecting a decrease in the average net debt position over the year following the sale of the UK Rock titles in April 2013.

Taxation

The tax charge for the year amounted to £1.5m (2012: £0.9m), comprising a current tax charge of £1.2m (2012: £1.2m) and a deferred tax charge of £0.3m (2012: deferred tax credit of £0.3m). The current year charge arises in the UK where the standard rate of corporation tax is 23.5%. In the US the impact of the current year and brought forward tax losses means that there is no tax charge relating to the US.

Overall the effective rate for the Group when applied to the profit before tax was 26%.

The Group continues to focus on compliance with tax authorities in all territories in which it operates. During the year the Group reached agreement with HMRC relating to the tax treatment of certain one off transactions which took place in 2003. Part of that agreement will result in the Group paying tax of £6.2m plus interest (comprising instalments of £85,000 per month over five years from July 2013 and a final instalment of £2m). The tax payable was fully provided for in prior year accounts.

Earnings per share ("EPS")

	FY13			FY12
	Statutory	Normalised		Statutory	Normalised
Basic earnings/(loss) per share (p)	1.3	0.4		0.1	(0.9)
Adjusted earnings per share (p)	0.6	0.3		1.1	0.4

Adjusted earnings per share are based on the profit/(loss) after taxation which is then adjusted to exclude exceptional items and related tax effects. The normalised adjusted profit after tax amounted to £1.0m (2012: £1.3m) and the weighted average number of shares in issue was 332m (2012: 329m).

Dividend

The Board's policy is that dividends should be covered at least twice by adjusted earnings per share. As noted above for the year ended 30 September 2013 statutory adjusted earnings per share were 0.6p and on this basis the Board has recommended a final total dividend of 0.2p per share for the year.

If approved at the Annual General Meeting to be held on 3 February 2014, a final dividend of 0.2p per share will be paid on 14 March 2014 to all shareholders on the register on 14 February 2014. The ex dividend date will be 12 February 2014.

Cash flow and net debt

Net debt at 30 September 2012 was £14.1m. During the period there was a cash inflow from operations before cash exceptional items of £6.7m (2012: cash inflow of £6.5m).  Cash inflow from the sale of non-core titles amounted to £9.2m (2012: £2.1m).

During the year cash outflows totalled £8.9m (2012: £11.4m) in respect of the following items:

·      £2.4m (2012: £4.4m) in exceptional costs

·      £2.9m (2012: £2.5m) in respect of capital expenditure

·      £1.2m (2012: £1.4m) in net interest payments

·      £1.8m (2012: £1.0m) in net taxation payments

·      £0.6m (2012: £0.5m) in respect of bank arrangement fees

·      £nil (2012: £1.6m) in respect of dividends

Foreign exchange and other movements accounted for the balance of cash flows.

As a result of the above, net debt at 30 September 2013 was £6.9m, a decrease of 51% from September 2012.

Credit facility and covenants

The Group signed a new four year Credit Facility in February 2013. Interest payable under the facility is calculated as the cost of three month LIBOR plus an interest margin of between 2.0% and 3.25%, dependent on covenant ratio performance. The key covenants are set out in the following table where net debt is exclusive of non-current tax and other payables and Bank EBITDA is not materially different to statutory EBITDA.

Bank Covenant
Net debt/Bank EBITDA	Less than 2.25 times for December 2013 and thereafter less than 2 times
Bank EBITDA/Interest	More than 4 times
Capital expenditure	125% of agreed annual budget

The Group was in compliance with all its covenants at 30 September 2013 as set out in the following table:

Covenant	30 September 2013	Limit
Net debt: Bank EBITDA	0.99	Less than 2.25 times
Bank EBITDA: Net interest	7.74	More than 4 times

The Group also met its covenant for capital expenditure at 30 September 2013.

Based on the calculation of 2013 EBITDA for bank purposes the Group had headroom of £9.4m over and above the level of bank debt at 30 September 2013.

Consolidated income statement

for the year ended 30 September 2013

		2013	2012
	Note	£m	£m
Revenue	1,2	112.3	123.5
Operating profit before exceptional items	1	4.7	6.8
Exceptional items	3	2.5	(3.6)
Operating profit	2	7.2	3.2
Finance income	4	0.8	0.2
Finance costs	4	(2.2)	(2.3)
Net finance costs	4	(1.4)	(2.1)
Profit before tax	1	5.8	1.1
Tax on profit	5	(1.5)	(0.9)
Profit for the year attributable to owners of the parent		4.3	0.2

Earnings per 1p Ordinary share

	Note	2013	2012
	Note	pence	pence
Basic earnings per share	7	1.3	0.1
Diluted earnings per share	7	1.3	0.1

Consolidated statement of comprehensive income

for the year ended 30 September 2013

		2013	2012
		£m	£m
Profit for the year		4.3	0.2
Items that may be reclassified to the consolidated income statement
Currency translation differences		-	0.1
Cash flow hedges
- reclassified to income statement		0.2	0.1
Other comprehensive income for the year		0.2	0.2
Total comprehensive income for the year attributable to owners of the parent		4.5	0.4

Consolidated statement of changes in equity

for the year ended 30 September 2013

		Issued share capital	Share premium account	Merger reserve	Treasury reserve	Cash flow hedge reserve	Accumulated losses	Total equity
	Note	£m	£m	£m	£m	£m	£m	£m
Balance at 1 October 2011		3.3	24.5	109.0	(0.3)	(0.1)	(73.1)	63.3
Profit for the year		-	-	-	-	-	0.2	0.2
Currency translation differences		-	-	-	-	-	0.1	0.1
Cash flow hedges		-	-	-	-	0.1	-	0.1
Other comprehensive income for the year		-	-	-	-	0.1	0.1	0.2
Total comprehensive income for the year		-	-	-	-	0.1	0.3	0.4
Interim dividend relating to 2011	6	-	-	-	-	-	(1.6)	(1.6)
Share schemes
- Value of employees' services		-	-	-	-	-	0.2	0.2
New share capital subscribed		-	0.3	-	-	-	-	0.3
Balance at 30 September 2012		3.3	24.8	109.0	(0.3)	-	(74.2)	62.6
Profit for the year		-	-	-	-	-	4.3	4.3
Cash flow hedges		-	-	-	-	0.2	-	0.2
Other comprehensive income for the year		-	-	-	-	0.2	-	0.2
Total comprehensive income for the year		-	-	-	-	0.2	4.3	4.5
Share schemes
- Value of employees' services		-	-	-	-	-	0.3	0.3
Balance at 30 September 2013		3.3	24.8	109.0	(0.3)	0.2	(69.6)	67.4

Consolidated balance sheet

as at 30 September 2013

		2013	2012
	Note	£m	£m
Assets
Non-current assets
Property, plant and equipment		2.5	2.8
Intangible assets - goodwill	8	86.3	92.3
Intangible assets - other	8	3.5	3.0
Deferred tax		0.4	0.8
Total non-current assets		92.7	98.9
Current assets
Inventories		1.9	1.9
Financial assets - derivatives		0.4	-
Trade and other receivables		21.4	20.3
Cash and cash equivalents	9	4.6	8.5
Total current assets		28.3	30.7
Total assets		121.0	129.6
Equity and liabilities
Equity
Issued share capital		3.3	3.3
Share premium account		24.8	24.8
Merger reserve		109.0	109.0
Treasury reserve		(0.3)	(0.3)
Cash flow hedge reserve		0.2	-
Accumulated losses		(69.6)	(74.2)
Total equity		67.4	62.6
Non-current liabilities
Financial liabilities - interest-bearing loans and borrowings	10	-	1.7
Financial liabilities - derivatives		-	0.2
Corporation tax payable	5	5.2	-
Deferred tax		1.2	1.3
Provisions	11	1.5	4.1
Other non-current liabilities		1.5	1.3
Total non-current liabilities		9.4	8.6
Current liabilities
Financial liabilities - interest-bearing loans and borrowings	10	11.5	20.9
Financial liabilities - derivatives		0.2	0.2
Trade and other payables		31.6	31.0
Corporation tax payable	5	0.9	6.3
Total current liabilities		44.2	58.4
Total liabilities		53.6	67.0
Total equity and liabilities		121.0	129.6

 Consolidated cash flow statement

for the year ended 30 September 2013

	2013	2012
	£m	£m
Cash flows from operating activities
Cash generated from operations	4.3	2.1
Interest paid	(1.2)	(1.4)
Tax paid	(1.8)	(1.0)
Net cash generated from/(used in) operating activities	1.3	(0.3)
Cash flows from investing activities
Purchase of property, plant and equipment	(0.6)	(0.5)
Purchase of magazine titles, websites and trademarks	-	(0.1)
Purchase of computer software and website development	(2.3)	(1.9)
Disposal of magazine titles and trademarks	10.3	2.7
Costs of business disposals	(1.1)	(0.6)
Net cash generated from/(used in) investing activities	6.3	(0.4)
Cash flows from financing activities
Proceeds from issue of Ordinary share capital	-	0.3
Draw down of bank loans	26.0	17.9
Repayment of bank loans	(36.7)	(19.3)
Bank arrangement fees	(0.6)	(0.5)
Repayment of finance leases	(0.1)	(0.1)
Equity dividends paid	-	(1.6)
Net cash used in financing activities	(11.4)	(3.3)
Net decrease in cash and cash equivalents	(3.8)	(4.0)
Cash and cash equivalents at beginning of year	8.5	12.5
Exchange adjustments	(0.1)	-
Cash and cash equivalents at end of year	4.6	8.5

Notes to the Consolidated cash flow statement

for the year ended 30 September 2013

A. Cash generated from operations

The reconciliation of profit for the year to cash flows generated from operations is set out below:

	2013	2012
	£m	£m
Profit for the year	4.3	0.2
Adjustments for:
Depreciation charge	0.9	1.1
Amortisation of intangible assets	2.0	1.5
Profit on disposal of magazine titles and trademarks	(2.7)	(1.2)
Share schemes
- Value of employees' services	0.3	0.2
Net finance costs	1.4	2.1
Tax charge	1.5	0.9
Profit before changes in working capital and provisions	7.7	4.8
Movement in provisions	(2.7)	1.8
Decrease in inventories	0.1	1.6
(Increase)/decrease in trade and other receivables	(1.6)	2.3
Increase/(decrease) in trade and other payables	0.8	(8.4)
Cash generated from operations	4.3	2.1

B. Analysis of net debt

	1 October 2012	Cash flows	Other non-cash changes	Exchange movements	30 September 2013
	£m	£m	£m	£m	£m
Cash and cash equivalents	8.5	(3.8)	-	(0.1)	4.6
Debt due within one year	(20.9)	9.1	0.1	0.2	(11.5)
Debt due after more than one year	(1.7)	1.7	-	-	-
Net debt	(14.1)	7.0	0.1	0.1	(6.9)

 C. Reconciliation of movement in net debt

	2013	2012
	£m	£m
Net debt at start of year	(14.1)	(11.8)
Decrease in cash and cash equivalents	(3.8)	(4.0)
Movement in borrowings	10.8	1.5
Other non-cash changes	0.1	-
Exchange movements	0.1	0.2
Net debt at end of year	(6.9)	(14.1)

Accounting policies

Basis of preparation

This preliminary statement of annual results for the year ended 30 September 2013 is unaudited and does not constitute statutory accounts. The information contained in this statement is based on the statutory accounts for the year ended 30 September 2013. The statutory accounts have not yet been delivered to the Registrar of Companies nor have the auditors yet reported on these.

The statutory accounts are prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and the International Financial Reporting Interpretations Committee's (IFRIC) interpretations as adopted by the European Union, applicable as at 30 September 2013, and those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

The going concern basis has been adopted in preparing this preliminary statement.

The accounting policies adopted, methods of computation and presentation are consistent with those set out in the Group's statutory accounts for the year ended 30 September 2012.

Basis of consolidation

Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity.  Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.  The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group.

The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, and includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs are expensed as incurred.  Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date.  The excess of the cost of acquisition over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill.

Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated.  Unrealised losses are also eliminated but are considered an impairment indicator of the asset transferred.  Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

Notes

1.   Segmental reporting

The Group is organised and arranged primarily by reportable segment.  The executive Directors consider the performance of the business from a geographical perspective, namely the UK and the US.  The Australian business is considered to be part of the UK segment and is not separately reported due to its size. 

(a)  Reportable segment

(i)   Segment revenue

	2013	2012
	£m	£m
UK	92.2	99.1
US	20.9	25.1
Revenue between segments	(0.8)	(0.7)
Total	112.3	123.5

Transactions between segments are carried out at arm's length.

(ii)  Segment EBITE

	2013	2012
	£m	£m
UK	6.5	9.7
US	(1.8)	(2.9)
Total segment EBITE	4.7	6.8

EBITE is used by the executive Directors to assess the performance of each segment.

A reconciliation of total segment EBITE to profit before tax is provided as follows:

	2013	2012
	£m	£m
Total segment EBITE	4.7	6.8
Exceptional items	2.5	(3.6)
Net finance costs	(1.4)	(2.1)
Profit before tax	5.8	1.1

(b) Business segment

After geographical location, the Group is managed into five key business segments. Each business segment comprises groups of individual magazines, websites and events, combined according to the market sector in which they operate. The Group considers that the assets within each segment are exposed to the same risks.

(i) Revenue by business segment

	2013	2012
	£m	£m
Entertainment	29.6	36.5
Technology	27.4	26.8
Music	13.0	20.3
Creative	23.4	21.0
Sport & Auto	19.7	19.6
Revenue between segments	(0.8)	(0.7)
Total	112.3	123.5

1. Segmental reporting (continued)

(ii) Gross profit by business segment

	2013	2012
	£m	£m
Entertainment	6.3	8.2
Technology	6.7	6.4
Music	2.7	4.1
Creative	5.9	5.5
Sport & Auto	5.2	5.2
Add back: distribution expenses	7.7	9.6
Total	34.5	39.0

2.  Operating profit

	2013	2012
	£m	£m
Revenue	112.3	123.5
Cost of sales	(77.8)	(84.5)
Gross profit	34.5	39.0
Distribution expenses	(7.7)	(9.6)
Administration expenses	(22.1)	(22.6)
Exceptional items	2.5	(3.6)
Operating profit	7.2	3.2

3.  Exceptional items

	2013 £m	2012 £m
Vacant property provision movements	(1.2)	2.7
Restructuring and redundancy costs	1.4	2.1
Profit on disposal of magazine titles and trademarks	(2.7)	(1.2)
Total	(2.5)	3.6

In 2013, the vacant property provision movement relates to the release of a provision following the sublease of a vacant floor of a property in the US. The vacant property provisions made in 2012 related to surplus office space in the UK and US.

The restructuring and redundancy costs relate mainly to staff termination payments following the restructuring of the UK and US businesses in line with the Group's strategy.

The profit on disposal in 2013 relates to the sale of the UK Rock titles and in 2012 it relates to the sale of the New York Music titles and the sale of two UK based titles, Trucking and Truckstop News.

4.  Finance income and costs

	2013	2012
	£m	£m
Interest receivable	0.6	-
Fair value gain on interest rate derivative not in a hedge relationship	0.2	0.2
Total finance income	0.8	0.2
Interest payable on interest-bearing loans and borrowings	(1.0)	(1.5)
Amortisation of bank loan arrangement fees	(0.4)	(0.5)
Other finance costs	(0.7)	(0.3)
Exchange losses	(0.1)	-
Total finance costs	(2.2)	(2.3)
Net finance costs	(1.4)	(2.1)

5.  Tax on profit

The tax charged in the consolidated income statement is analysed below:

	2013	2012
	£m	£m
UK corporation tax
Current tax at 23.5% (2012: 25%) on the profit for the year	1.4	1.6
Adjustments in respect of previous years	(0.2)	(0.4)
Current tax	1.2	1.2
Deferred tax origination and reversal of temporary differences
Current year charge	-	0.2
Adjustments in respect of previous years	0.3	(0.5)
Deferred tax	0.3	(0.3)
Total tax charge	1.5	0.9

During the year the Group reached agreement with HMRC relating to the tax treatment of certain one off transactions which took place in 2003. Part of that agreement will result in the Group paying tax of £6.2m plus interest (comprising instalments of £85,000 per month over five years from July 2013 and a final instalment of £2m). The tax payable was fully provided for in prior year accounts. The liability in the balance sheet has been split based on this agreement between current liabilities and non-current liabilities.

6.  Dividends

Equity dividends	2013	2012
Number of shares in issue at end of year (million)	333.4	333.0
Dividends paid in year (pence per share)	-	0.5
Dividends paid in year (£m)	-	1.6

A final dividend in respect of the year ended 30 September 2013 of 0.2 pence per share, amounting to a total dividend of £0.7m, is to be proposed at the Annual General Meeting on 3 February 2014. This preliminary statement does not reflect this dividend.

The dividends totalling £1.6m paid during the year ended 30 September 2012 relate to the interim dividend for the six-month period to 31 March 2011 of 0.5 pence per share.

7.  Earnings per share

Basic earnings per share are calculated using the weighted average number of Ordinary shares in issue 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 awards held under employee share schemes.

Adjusted earnings per share removes the effect of exceptional items and any related tax effects from the calculation as follows:

Adjustments to profit after tax

	2013	2012
	£m	£m
Profit after tax	4.3	0.2
Exceptional items	(2.5)	3.6
Tax effect of the above adjustment	0.2	(0.3)
Adjusted profit after tax	2.0	3.5

7.  Earnings per share (continued)

	2013	2012
Weighted average number of shares in issue during the year:
- Basic	331,812,054	329,101,739
- Dilutive effect of share options	6,298,779	3,751,837
- Diluted	338,110,833	332,853,576
Basic earnings per share (in pence)	1.3	0.1
Adjusted basic earnings per share (in pence)	0.6	1.1
Diluted earnings per share (in pence)	1.3	0.1
Adjusted diluted earnings per share (in pence)	0.6	1.1

The adjustments to profit have the following effect:

	2013	2012
	pence	pence
Basic earnings per share	1.3	0.1
Exceptional items	(0.8)	1.1
Tax effect of the above adjustment	0.1	(0.1)
Adjusted basic earnings per share	0.6	1.1
Diluted earnings per share	1.3	0.1
Exceptional items	(0.8)	1.1
Tax effect of the above adjustment	0.1	(0.1)
Adjusted diluted earnings per share	0.6	1.1

8. Intangible assets

	Goodwill	Magazine  and website	Other	Total
	£m	£m	£m	£m
Cost
At 1 October 2011	313.7	15.3	10.6	339.6
Additions	-	0.1	1.9	2.0
Disposals	(1.7)	-	(0.2)	(1.9)
Exchange adjustments	(0.9)	(0.2)	(0.2)	(1.3)
At 30 September 2012	311.1	15.2	12.1	338.4
Additions	0.2	0.5	2.2	2.9
Disposals	(6.2)	-	(0.1)	(6.3)
Exchange adjustments	-	(0.1)	-	(0.1)
At 30 September 2013	305.1	15.6	14.2	334.9
Accumulated amortisation
At 1 October 2011	(219.6)	(15.2)	(8.1)	(242.9)
Charge for the year	-	(0.1)	(1.4)	(1.5)
Disposals	-	-	0.1	0.1
Exchange adjustments	0.8	0.2	0.2	1.2
At 30 September 2012	(218.8)	(15.1)	(9.2)	(243.1)
Charge for the year	-	(0.1)	(1.9)	(2.0)
At 30 September 2013	(218.8)	(15.2)	(11.1)	(245.1)
Net book value at 30 September 2013	86.3	0.4	3.1	89.8
Net book value at 30 September 2012	92.3	0.1	2.9	95.3
Net book value at 1 October 2011	94.1	0.1	2.5	96.7

8. Intangible assets (continued)

Impairment tests for goodwill

The breakdown of the goodwill balance at 30 September 2013 comprises:

	2013 £m	2012 £m
UK	82.8	88.9
US	3.5	3.4
Total	86.3	92.3

In September 2013 the group performed its annual impairment test on goodwill. These tests concluded that no impairment was required. The estimated recoverable amounts for the UK and US businesses exceeded their carrying values by £6.2m and £1.5m respectively.

Although goodwill is not considered to be impaired at 30 September 2013, a reasonably possible change could give rise to an impairment.

9. Cash and cash equivalents

	2013	2012
	£m	£m
Cash at bank and in hand	4.6	8.5
Cash and cash equivalents	4.6	8.5

10. Financial liabilities - loans, borrowings and overdrafts

Non-current liabilities

	Interest rate at 30 September 2013	Interest rate  at 30 September 2012	2013 £m	2012 £m
Sterling term loan	-	5.1%	-	1.7
Total			-	1.7

Current liabilities

	Interest rate at 30 September	Interest rate  at 30 September	2013	2012
	2013	2012	£m	£m
Sterling term loan	-	5.1%	-	3.2
Sterling revolving loan	2.9%	4.1%	6.6	15.7
US Dollar revolving loan	2.6%	3.8%	4.9	1.9
			11.5	20.8
Obligations under finance leases	-	3.0%-15.0%	-	0.1
Total			11.5	20.9

The interest-bearing loans and borrowings are repayable as follows:

	2013	2012
	£m	£m
Within one year	11.5	20.9
Between one and two years	-	1.7
Total	11.5	22.6

10. Financial liabilities - loans, borrowings and overdrafts (continued)

In February 2013, the Group negotiated a new bank facility with a syndicate of banks (comprising Barclays and Santander) to replace its existing facility which was due to expire in December 2013. The total facility available to the Group at 30 September 2013 amounts to £25m and this can be drawn in sterling, US Dollars or Euros. The Group has granted security to the banks and the availability of the facility, which expires in February 2017, is subject to certain covenants.

Fees relating to the new facility amounted to £0.6m and these are being amortised over the term of the facility. The bank borrowings and interest are guaranteed by Future plc, Future Holdings 2002 Limited, Future Publishing Limited and Future US, Inc.

Interest payable under the current credit facility is calculated as the cost of three-month LIBOR (currently approximately 0.5% plus an interest margin of between 2.0% and 3.25%, dependent on the net debt/Bank EBITDA covenant ratio.

The key covenants are set out in the following table where net debt is exclusive of non-current tax and other payables and Bank EBITDA is not materially different to statutory EBITDA.

Bank covenant
Net debt/Bank EBITDA	Periods from 31 March 2013 to 30 June 2013 - less than 2.50 times Periods from 30 September 2013 to 31 December 2013 - less than 2.25 times Periods from 31 March 2014 onwards - less than 2.00 times
Bank EBITDA/Interest	More than 4.0 times
Capital expenditure	125% of agreed annual budget

The covenants are tested quarterly on the basis of rolling figures for the preceding 12 months and the covenant position at the year-end is set out in the following table:

	30 September 2013	Covenant
Net debt/Bank EBITDA	0.99	< 2.25 times
Bank EBITDA/Interest	7.74	> 4.0 times

The Group met its covenant for capital expenditure at 30 September 2013.

Based on the above calculations the Group had headroom of £9.4m over and above the level of bank debt at 30 September 2013. 

11.  Provisions

	Property	Other	Total
	£m	£m	£m
At 1 October 2012	3.8	0.3	4.1
Charged in the year	0.1	-	0.1
Released in the year	(1.4)	-	(1.4)
Utilised in the year	(1.1)	(0.3)	(1.4)
Exchange adjustments	0.1	-	0.1
At 30 September 2013	1.5	-	1.5

The provision for property relates to dilapidations and obligations under short leasehold agreements on vacant property. The release in the provision during the year relates to an element of surplus office space in the US which was sublet during the year.  The vacant property provision is expected to be utilised over the next five years. The dilapidations provision is expected to be utilised on the expiry of property leases.

12. Related party transactions

The Group had no material transactions with related parties in 2013 or 2012 which might reasonably be expected to influence decisions made by users of this preliminary statement.

Normalised results (unaudited)

		2013	2012
	Note	£m	£m
Revenue	1,2	106.9	103.6
Operating profit before exceptional items (EBITE)	1,2	3.5	4.0

Adjusted earnings per 1p Ordinary share (normalised)

	Note	2013 pence	2012 pence
Adjusted basic earnings per share	2	0.3	0.4

Normalised results are presented to reflect better the current size and structure of the business, and give a better indication of the performance of the ongoing business.  The normalised results exclude revenues and costs of activities closed or divested between 1 October 2011 and 30 September 2013, but include any new activities launched or acquired in that period.

Adjusted earnings per share are based on normalised results but exclude exceptional items and related tax effects.

Notes to the normalised results

1.        Normalised segmental reporting

a)          Revenue by segment

	2013 £m	2012 £m
UK	87.6	85.4
US	20.1	18.9
Revenue between segments	(0.8)	(0.7)
Total normalised revenue	106.9	103.6

b)         EBITE by segment

	2013 £m	2012 £m
UK	5.6	6.8
US	(2.1)	(2.8)
Total normalised EBITE	3.5	4.0

 

2.        Reconciliation of statutory results to normalised results

a)         Reconciliation of statutory revenue to normalised revenue

	2013	2012
	£m	£m
Statutory revenue	112.3	123.5
Adjustment: UK closed and divested activities	(4.6)	(13.7)
Adjustment: US closed and divested activities	(0.8)	(6.2)
Normalised revenue	106.9	103.6

b)         Reconciliation of statutory operating profit before exceptional items (EBITE) to normalised EBITE

	2013	2012
	£m	£m
EBITE	4.7	6.8
Adjustment: UK closed and divested activities	(0.9)	(2.9)
Adjustment: US closed and divested activities	(0.3)	0.1
Normalised EBITE	3.5	4.0

c)         Reconciliation of statutory basic earnings per share to normalised adjusted basic earnings per share

	2013	2012
	pence	pence
Basic earnings per share	1.3	0.1
UK closed and divested activities	(0.8)	(1.0)
US closed and divested activities	(0.1)	-
Exceptional items	-	1.4
Tax effect of the above adjustment	(0.1)	(0.1)
Normalised adjusted basic earnings per share	0.3	0.4

 

END

 

 

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