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 £80.6m (2002: £74.0m) Up 9%
Circulation revenue Up 10%
Advertising revenue Up 7%
Adjusted operating profit £6.5m (2002: £4.7m) Up 38%
Goodwill amortisation £5.6m (2002: £4.5m)
Pre-tax profit £1.1m (2002: £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 £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 £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 £80.6m, an increase of 9% on the
corresponding figure for the previous half-year.
Adjusted operating profit was £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
£0.9m (2002: £0.2m). After net interest receivable and similar items, the
Group's pre-tax profit for the half-year was £1.1m (2002: £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 £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
% £m £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
% £m £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
% £m £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 £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
£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
£m £m £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 %
£m £m
Turnover 46.0 44.2 4%
Adjusted operating profit 6.0 6.1 (2%)
Turnover for the half-year was £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 £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 £1.3m in
respect of licensing revenue external to the Group (2002: £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
£m £m %
Turnover 18.1 16.7 8%
Adjusted operating profit 1.9 (0.2) -
Turnover for the period was £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 £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 £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 %
£m £m £m £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 £17.4m, which included £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 £0.1m for the first half is stated after intra-group
licence fees paid by Mainland Europe for the period of £0.8m (2002: £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 £3.6m. Including net liabilities acquired on acquisition
(mostly termination costs of a number of staff) the goodwill arising on
acquisition was £4.6m. The results for the half-year include HDP turnover of
£1.4m and an operating loss of £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 £0.3m operating loss from HDP, mainland
European operations showed a small operating profit of £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 £6.0m and that achieved by overseas subsidiaries
was £1.8m, giving a combined total of £7.8m. After deducting Group central
costs of £1.3m (2002: £1.5m), adjusted operating profit for the period was £6.5m
(2002: £4.7m) representing an adjusted operating profit margin of 8% (2002: 6%).
Net interest receivable and similar items
The total figure of £0.2m represents net interest receivable of £0.1m arising on
net cash balances, and foreign exchange gains for the half-year totalling £0.1m.
Tax
The tax charge for the period amounted to £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 £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 £16.8m and the Group's
operations for the half-year were significantly cash generative, with net cash
inflow from operating activities of £9.4m. The largest cash outflows were for
tax paid (£4.3m); for the HDP acquisition (net £3.1m); and in respect of capital
expenditure (£0.8m). The Group ended the half-year with net cash of £17.3m.
Leasehold property
The consolidated balance sheet contains provisions totalling £2.0m (December
2002: £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 £0.4m
During the half-year the Group paid a total of £1.8m in relation to leasehold
property, of which £1.3m was in respect of occupied property and £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 £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 £m £m £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
£m
Note £m £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 £m £m £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 £m £m £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 £m £m £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
£m £m £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 £m
£m £m £m
£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
£m £m £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
£m £m £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
£m £m £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
£m £m £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
£m £m £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
£m £m £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
£m £m £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
£m £m £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
£m £m £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 £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
£m Total
£m £m
Group £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
£m £m £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
£m £m £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
£m £m £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
£m £m £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
£m £m £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
£m £m £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
£m £m
£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) £m
At 1 January and 30 June 2003 6.0
Allotted, issued and fully paid (Ordinary shares of 1p each) No. of Shares £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 £m £m Total
£m £m
£m £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
£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 £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.
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