Interim Results

Future PLC 06 June 2006 6 June 2006 FUTURE PLC Interim results for the six months ended 31 March 2006 Future plc (LSE: FUTR), the international special-interest media group, today announces its interim results for the six months ended 31 March 2006. An analyst presentation will be held today at 10.00am at the offices of UBS, 1 Finsbury Avenue, London EC2M 2PP. Financial highlights for half-year to 31 March: 2006 2005 Turnover £114.7m £104.3m EBITAE profit * £6.3m £12.8m Exceptional items £(3.5)m £(1.5)m Impairment of intangible assets £(11.0)m - Amortisation of intangible assets £(2.6)m £(0.3)m Reported (loss) / profit before tax £(12.1)m £11.1m Basic (loss) / earnings per share (3.6)p 2.7p Adjusted earnings per share * 1.0p 3.1p Proposed interim dividend 0.5p 0.5p * Adjusted results are presented to provide a better indication of overall financial performance and to reflect how the business is run on a day-to-day basis. In running the business, Future management focuses on earnings before interest, tax, amortisation and impairment of intangible assets, and exceptional items. Profit on disposal of subsidiaries is also excluded. For convenience we refer to this as EBITAE. Similarly, adjusted earnings per share are stated before these items, and after the tax charge for the period. Commenting on the results, Roger Parry, Future's Chairman said: 'The first six months of Future's financial year have produced EBITAE profits at half the level of the same period last year, despite growth in group turnover. Against last year, the major profit shortfall was in games titles. The reported loss before tax is £12.1m against a profit before tax of £11.1m in the same period last year. The Board has conducted an extensive review of the Group's strategy and operations and has decided to scale back the ambitious policy of rapid expansion. We continue to seek growth but the focus going forward will be on organic growth and operational effectiveness. The continued tight management of our business is our number one priority. Our efforts are focused on maximising the potential from our existing portfolio and further strengthening our online presence. Greg Ingham has stepped down as Chief Executive. We have appointed Stevie Spring, who has a long experience in running media and advertising companies, and who will take up the post of Chief Executive on 3 July 2006. Because of timing issues, there will be a bias in EBITAE profits towards the second half of the financial year which the Board believes will be higher than those in the first half of this year. However, EBITAE for the current financial year is considered likely to be approximately £2m below current market expectations. Over the coming 18 months we plan to focus on organic investment in our existing business to strengthen our publishing offerings in specific sectors. Together with lower expectations for 2006 this organic investment will depress reported profits in 2007 to a level below existing expectations.' Enquiries: Future plc Roger Parry, Chairman Tel: 020 7042 4032 John Bowman, Group Finance Director Tel: 01225 732281 Hogarth Partnership James Longfield/Georgina Briscoe Tel: 020 7357 9477 Chairman's Statement The first six months of Future's financial year have produced EBITAE profits at half the level of the same period last year, despite growth in group turnover. This was caused by a number of factors but the main one is lower sales revenues from magazines in the games sector, compared with last year. In addition, anticipated profits from more recently acquired titles, including ex-Highbury titles, have been reduced by weakness in consumer spending and have underperformed against our expectations. These acquired profits have not been large enough to make up for the reduction in profit from existing titles. These factors were accompanied by a higher level of investment in new product development than in the first half last year. Future's strength as the clear world leader in games magazines can also be a weakness as the business is exposed to the cycle of growth and decline in readership that is closely linked to both the development and sale of new, improved games console technology and games software. For some years the strategy of Future has been to strengthen our profitable games business but, at the same time, to launch and acquire titles and internet properties in other areas of consumer interest, to diversify our portfolio. Over the past two years the management of Future has been engaged in the pursuit of rapid expansion. This was attempted at a time when special-interest monthly consumer magazines have come under considerable pressure from reduced consumer spending, the growth of weekly titles in the UK, and delay in production of new games consoles. The Board has conducted an extensive review of the Group's strategy and operations and has decided to scale back the ambitious policy of rapid expansion. Accordingly we are today announcing the revision of our previously stated target to double the size of the business by 2008. We continue to seek growth but the focus going forward will be on organic growth and operational effectiveness. New product development will be focused on existing areas of expertise and on further developing the Group's internet activities. We continue to manage our portfolio tightly. We have closed a number of unsuccessful titles, rationalised our office accommodation, reduced our production costs and cut headcount in certain areas. Our UK management has been streamlined to re-emphasise the role of the publisher and we have re-organised our advertising sales teams to focus on customers, rather than products. Future has strong market positions in the games, technology, auto, music making and sports magazine sectors and these will be the Group's main focus in future. We will continue to diversify away from our games magazine business, by launching new titles and by strategic and tactical acquisitions if they support the diversification strategy. However, our primary plan is to invest in a number of organic development projects. This will reduce operating profits in the coming 18 months as the investment will be reflected in the income statement but we believe it is the best long-term value-creating strategy in the current market conditions. Such investment is readily affordable as the Group is strongly cash generative and has adequate headroom within its bank borrowing facility. The Board is actively considering the purchase of shares in the Company in order to permit fulfilment of senior employee incentives. Board Greg Ingham has stepped down as Chief Executive. We have appointed Stevie Spring, who has a long experience in running media and advertising companies, and who will take up the post of Chief Executive on 3 July 2006. Prospects Because of timing issues, there will be a bias in EBITAE profits towards the second half of the financial year which the Board believes will be significantly higher than those in the first half of this year. However, EBITAE for the current financial year is considered likely to be approximately £2m below current market expectations. Over the coming 18 months we plan to focus on organic investment in our existing business to strengthen our publishing offerings in specific sectors. Together with lower expectations for 2006, this organic investment will depress reported profits in 2007 to a level below existing expectations. I would like to thank shareholders for their patience and hope that they will be rewarded by seeing the Company grow in value as a result of the new approach we have adopted. Roger Parry Chairman 6 June 2006 Interim Report Financial results for half-year to 31 March 2006 Group turnover was £114.7m (2005: £104.3m). EBITAE profit was £6.3m (2005: £12.8m) before exceptional costs (£3.5m), amortisation (£2.6m) and impairment (£11.0m) of intangible assets. After these and net financing costs of £1.3m, the Group recorded a pre-tax loss of £12.1m for the first half-year (2005: £11.1m pre-tax profit). Adjusted earnings per share were 1.0p (2005: 3.1p). Interim dividend An interim dividend of 0.5p per share (2005: 0.5p) will be paid on 5 July 2006 to all shareholders on the register on 16 June 2006. The ex-dividend date is 14 June 2006. Turnover Turnover rose by 10% (8% in constant currencies) to £114.7m. Of this, £20.9m was generated from acquisitions made during the previous financial year. Excluding these, turnover fell by 8%. This reduction is largely due to reduced sales of, and advertising in, our games magazines. The Group's top 10 titles in the half-year accounted for 27% of Group turnover (2005: 34%). Analysis of turnover for half-year to 31 March % of 2006 2005 Change Group £m £m % ------------- ------- ----------- ----------- ---------- UK 56% 64.2 55.8 + 15% US 26% 29.9 27.1 + 10% Mainland Europe 18% 21.3 22.0 - 3% Intra-group (0.7) (0.6) ------------- ------- ----------- ----------- ---------- Group turnover 100% 114.7 104.3 + 10% ------------- ------- ----------- ----------- ---------- Performance of recent acquisitions During the year to 30 September 2005 Future spent £48.2m on eight acquisitions. In the half-year to 31 March 2006 these acquired titles generated turnover of £20.9m and EBITAE profit of £1.2m, including £0.8m from former Highbury titles. The integration of the acquired titles has progressed well, but overall they have under-performed against our expectations, with weakness particularly in the market for performance cars magazines and Future's women's interest titles. New product development (NPD) Net spend on NPD in the first half-year was £2.8m (2005: £1.6m), the largest elements being on the launch of www.gamesradar.com and developing other websites and the continuing development of action sports magazines in the US. Analysis of profits for half-year to 31 March --------------------- ----------- ------------ ----------- 2006 2005 Change £m £m £m --------------------- ----------- ------------ ----------- UK 6.4 9.9 (3.5) US (0.3) 2.7 (3.0) Mainland Europe 1.7 1.8 (0.1) Central costs (1.5) (1.6) 0.1 --------------------- ----------- ------------ ----------- EBITAE profits 6.3 12.8 (6.5) --------------------- ----------- ------------ ----------- Exceptional items (3.5) (1.5) (2.0) Amortisation of intangibles (2.6) (0.3) (2.3) Impairment of intangible assets (11.0) - (11.0) Net financing (costs)/income (1.3) 0.1 (1.4) --------------------- ----------- ------------ ----------- Pre-tax (loss) / profit (12.1) 11.1 (23.2) --------------------- ----------- ------------ ----------- Explanation of reduction in profit EBITAE profits were less than half those of the previous year at £6.3m (2005: £12.8m). The Group's existing business experienced a decline in profits, partly due to phasing, and this decline was only partly offset by the profits from titles acquired during the financial year 2005. Against last year's interim results, the major profit shortfall was in games titles. Against our budget expectations, the major profit shortfalls were in performance cars, women's interest and games titles. By territory, the decline in profitability has come from our UK and US businesses with Mainland Europe maintaining the level of last year. The reasons for the decline in UK and US profits are set out below. UK performance in half-year ------------------------------ --------- -------- -------- 2006 2005 Change £m £m % ------------------------------ --------- -------- -------- Circulation revenue 41.6 39.0 + 7% Advertising revenue 20.2 14.7 + 37% Other revenue 2.4 2.1 + 14% ------------------------------ --------- -------- -------- Turnover 64.2 55.8 + 15% EBITAE profit 6.4 9.9 - 35% ------------------------------ --------- -------- -------- EBITAE profit margin 10% 18% ------------------------------ --------- -------- -------- UK turnover for the half year rose by £8.4m or 15% driven by the full half-year impact of titles acquired during the prior financial year. This full half-year impact amounted to £12.4m but was partly offset by a fall in turnover of the existing portfolio of titles which amounted to £4.0m, predominantly in the computer games sector. At the EBITAE profit level, titles acquired in the prior financial year contributed an additional £0.5m year on year but this has been more than offset by a £4.0m fall in profits from the existing portfolio of titles. We have sold our Spanish Homes Magazine title for nominal consideration. The reduction in EBITAE for the half-year reflects the increase in the overhead base resulting from taking on new rented premises in Bath and London in a rationalisation of our property portfolio. US performance in half-year ---------------------------- --------- -------- ---------- 2006 2005 Change $m $m % ---------------------------- --------- -------- ---------- Circulation revenue 23.3 27.6 - 16% Advertising revenue 28.3 22.3 + 27% Other revenue 0.7 0.9 - 22% ---------------------------- --------- -------- ---------- Turnover 52.3 50.8 + 3% EBITAE profit (0.6) 5.1 - ---------------------------- --------- -------- ---------- EBITAE profit margin - 10% ---------------------------- --------- -------- ---------- US turnover for the half year rose by $1.5m or 3% driven by the full half-year impact of titles acquired during the prior financial year. This full half-year impact amounted to $7.8m but was partly offset by a fall in turnover from existing games titles which amounted to $5.5m, partly due to phasing. At the EBITAE profit level titles acquired in the prior financial year contributed an additional $0.9m. However, this has been more than offset by the impact of NPD investment in magazine launches in action sports, scrapbooking, music and in a website launch in games (Games Radar), together with a reduction in profits from the existing games portfolio. Mainland Europe performance in half-year ------------------------------- ---------- ------ ---------- 2006 2005 Change €m €m % ------------------------------- ---------- ------ ---------- Circulation revenue 23.9 24.8 - 4% Advertising revenue 7.2 6.8 + 6% Other revenue 0.1 0.1 - ------------------------------- ---------- ------ ---------- Turnover 31.2 31.7 - 2% EBITAE profit 2.5 2.6 - 4% ------------------------------- ---------- ------ ---------- EBITAE profit margin 8% 8% ------------------------------- ---------- ------ ---------- Mainland Europe turnover was slightly below that for last year. Despite this, EBITAE profit held steady, reflecting the tight management control of these businesses. Both face tough newsstand trading. EBITAE profit for Mainland Europe is stated after intra-group licence fees of €0.7m (2005: €0.6m). Exceptional items These amounted to £3.5m (2005: £1.5m). During the period, we completed the relocation of our employees in London to a single office in Marylebone, NW1. A charge of £2.8m relating mainly to the remaining lease commitments on previous offices has been made in the period. The Group also incurred £0.6m of redundancy costs and £0.1m of other restructuring, as part of the integration of acquired titles and the continued tight management of the business. Taxation The tax credit for the half-year was £0.3m (2005: tax charge of £2.2m) which has been calculated using an estimated tax rate of 31% (2005: 19%) applied to taxable profits. Taxable profits exclude the group charge for impairment of intangible assets. This is the rate estimated to apply to taxable profits for the full financial year. Cash flow and net debt Net debt at 30 September 2005 was £39.5m. Net cash inflow from operating activities for the half-year was £12.7m (2005: £11.4m) representing a very healthy conversion ratio of profits to cash supported by tight management of working capital. Major cash outflows were for capital expenditure (£3.3m), the acquisition of Revolver magazine in the US (£2.4m) and payment of last year's final dividend (£4.2m). Net debt at 31 March 2006 was £38.3m. International Financial Reporting Standards (IFRS) The interim results and comparative figures reflect the application of IFRS. As previously communicated the most significant impacts arising from IFRS relate to accounting for intangible assets, and share-based payments. On 6 April 2006 the Group published a restatement of its audited results for the year ended 30 September 2005 from UK GAAP to IFRS. A copy of that restatement is available on the Company's website www.futureplc.com/future/investors. Intangible assets We have taken an impairment charge of £11.0m against the carrying value of the intangible assets relating to Future Italy, to reflect more accurately the trading levels of this business. This is a non-cash charge. Current trading and prospects Because of timing issues there will be a bias in EBITAE profits towards the second half of the financial year which the Board believes will be higher than those in the first half of this year. However, EBITAE for the current financial year is considered likely to be approximately £2m below current market expectations. The second half bias will be driven by: • Full period impact of titles acquired during the prior financial year. • Phasing of NPD spend, in particular in the US. • Timing of the publication of issues, in particular in the UK. Over the coming 18 months we plan to focus on organic investment in our existing business to strengthen our publishing offerings in specific sectors. Together with lower expectations for 2006, this organic investment will depress reported profits in 2007 to a level below existing expectations. The continued tight management of our business is our number one priority, and this, together with our strong cash generation and level of bank debt, provides the reassurance that we can withstand the current external pressures facing the business. Our efforts are focused on maximising the potential from our existing portfolio and further strengthening our online presence. Roger Parry, Chairman John Bowman, Group Finance Director Michael Penington, senior independent non-executive Director Patrick Taylor, independent non-executive Director John Mellon, independent non-executive Director 6 June 2006 Consolidated Income Statement for the six months ended 31 March 2006 ------------------------- ------ -------- -------- --------- 6 months to 6 months to 12 months to 31 March 31 March 30 September 2006 2005 2005 Note £m £m £m ------------------------- ------ -------- -------- --------- Turnover 1 114.7 104.3 212.3 ------------------------- ------ -------- -------- --------- ------------------------- ------ -------- -------- --------- Operating profit before exceptional items and amortisation of intangible assets 6.3 12.8 20.4 Exceptional items 3 (3.5) (1.5) (5.1) Exceptional impairment of intangible assets 2,9 (11.0) - - Amortisation of intangible assets 2,9 (2.6) (0.3) (1.8) ------------------------- ------ -------- -------- --------- Operating (loss)/profit 2 (10.8) 11.0 13.5 Financial income 5 0.2 0.3 0.5 Financial costs 5 (1.5) (0.2) (1.5) ------------------------- ------ -------- -------- --------- Net financing (costs)/income 5 (1.3) 0.1 (1.0) ------------------------- ------ -------- -------- --------- (Loss)/profit on ordinary activities before tax 1 (12.1) 11.1 12.5 Tax on (loss)/profit on ordinary activities 6 0.3 (2.2) (2.2) ------------------------- ------ -------- -------- --------- (Loss)/profit for the financial period (11.8) 8.9 10.3 ------------------------- ------ -------- -------- --------- Earnings per 1p Ordinary share ------------------------- -------- -------- -------- --------- Note 6 months to 6 months to 12 months to 31 March 31 March 30 September 2006 2005 2005 pence pence pence ------------------------- -------- -------- -------- --------- Basic (loss)/earnings per share 8 (3.6) 2.7 3.2 Diluted (loss)/earnings per share 8 (3.6) 2.7 3.2 ------------------------- -------- -------- -------- --------- Consolidated statement of changes in equity for the six months ended 31 March 2006 Note Share Share Merger Retained Total capital premium reserve earnings equity £m £m £m £m £m -------------------- ----- ------- ------- -------- -------- ------- Balance at 1 October 2005 3.3 24.4 109.0 (19.2) 117.5 -------------------- ----- ------- ------- -------- -------- ------- Loss for the period - - - (11.8) (11.8) Currency translation differences - - - 0.2 0.2 Dividend relating to 2005 7 - - - (4.2) (4.2) -------------------- ----- ------- ------- -------- -------- ------- Total recognised loss for the period - - - (15.8) (15.8) Share option schemes - value of employees' services - - - 0.3 0.3 New share capital subscribed - 0.1 - - 0.1 -------------------- ----- ------- ------- -------- -------- ------- Balance at 31 March 2006 3.3 24.5 109.0 (34.7) 102.1 -------------------- ----- ------- ------- -------- -------- ------- -------------------- ----- ------- ------- -------- -------- ------- Balance at 1 October 2004 3.2 23.7 109.0 (23.6) 112.3 -------------------- ----- ------- ------- -------- -------- ------- Profit for the period - - - 8.9 8.9 Dividend relating to 2004 7 - - - (4.9) (4.9) -------------------- ----- ------- ------- -------- -------- ------- Total recognised income for the period - - - 4.0 4.0 Share option schemes - value of employees' services - - - 0.1 0.1 New share capital subscribed 0.1 0.5 - - 0.6 -------------------- ----- ------- ------- -------- -------- ------- Balance at 31 March 2005 3.3 24.2 109.0 (19.5) 117.0 -------------------- ----- ------- ------- -------- -------- ------- -------------------- ----- ------- ------- -------- -------- ------- Balance at 1 October 2004 3.2 23.7 109.0 (23.6) 112.3 -------------------- ----- ------- ------- -------- -------- ------- Profit for the year - - - 10.3 10.3 Currency translation differences - - - 0.2 0.2 Dividend relating to 2004 7 - - - (4.9) (4.9) Dividend relating to 2005 7 - - - (1.6) (1.6) -------------------- ----- ------- ------- -------- -------- ------- Total recognised income for the year - - - 4.0 4.0 Share option schemes - value of employees' services - - - 0.4 0.4 New share capital subscribed 0.1 0.7 - - 0.8 -------------------- ----- ------- ------- -------- -------- ------- Balance at 30 September 2005 3.3 24.4 109.0 (19.2) 117.5 -------------------- ----- ------- ------- -------- -------- ------- Consolidated balance sheet as at 31 March 2006 ----------------------------- ----- --------- --------- --------- 31 March 31 March 30 September 2006 2005 2005 Note £m £m £m ----------------------------- ----- --------- --------- --------- Assets Non-current assets Property, plant and equipment 6.4 3.4 3.7 Intangible assets - goodwill 9 138.5 116.8 147.3 Intangible assets - other 9 10.8 2.1 12.9 Deferred tax 2.2 2.3 1.9 ----------------------------- ----- --------- --------- --------- Total non-current assets 157.9 124.6 165.8 ----------------------------- ----- --------- --------- --------- Current assets Inventories 7.1 5.6 6.2 Corporation tax recoverable 2.9 0.6 2.3 Trade and other receivables 42.2 38.0 46.2 Cash and cash equivalents 19.4 10.4 10.7 ----------------------------- ----- --------- --------- --------- Total current assets 71.6 54.6 65.4 ----------------------------- ----- --------- --------- --------- Total assets 229.5 179.2 231.2 ----------------------------- ----- --------- --------- --------- Equity and liabilities Equity Issued share capital 3.3 3.3 3.3 Share premium account 24.5 24.2 24.4 Merger reserve 109.0 109.0 109.0 Retained earnings (34.7) (19.5) (19.2) ----------------------------- ----- --------- --------- --------- Total equity 102.1 117.0 117.5 ----------------------------- ----- --------- --------- --------- Non-current liabilities Interest-bearing loans and borrowings 27.8 - 29.8 Deferred tax 2.3 0.8 2.3 Provisions 3.7 1.1 2.2 Other 2.2 - 2.2 ----------------------------- ----- --------- --------- --------- Total non-current liabilities 36.0 1.9 36.5 ----------------------------- ----- --------- --------- --------- Current liabilities Interest-bearing loans and borrowings 29.9 3.7 20.4 Trade and other payables 61.3 55.5 56.5 Corporation tax payable 0.2 1.1 0.3 ----------------------------- ----- --------- --------- --------- Total current liabilities 91.4 60.3 77.2 ----------------------------- ----- --------- --------- --------- Total liabilities 127.4 62.2 113.7 ----------------------------- ----- --------- --------- --------- Total equity and liabilities 229.5 179.2 231.2 ----------------------------- ----- --------- --------- --------- Consolidated cash flow statement for the six months ended 31 March 2006 --------------------------- --------- --------- --------- 6 months to 6 months to 12 months to 31 March 31 March 30 September 2006 2005 2005 £m £m £m --------------------------- --------- --------- --------- Cash flows from operating activities Cash generated from operations 12.7 11.4 9.8 Interest received 0.2 0.3 0.5 Tax received 0.2 1.4 1.4 Interest paid (1.1) (0.2) (0.8) Tax paid (0.8) (3.6) (5.5) --------------------------- --------- --------- --------- Net cash generated from operating activities 11.2 9.3 5.4 --------------------------- --------- --------- --------- Cash flows from investing activities Purchase of property, plant and equipment (3.3) (0.6) (1.8) Purchase of magazine titles (2.4) (1.1) (15.3) Purchase of subsidiary undertakings - (8.6) (33.6) Net cash acquired with subsidiary undertakings - 0.8 0.8 Disposal of subsidiary undertakings - 1.6 2.1 Payment of deferred consideration - (0.1) (0.1) --------------------------- --------- --------- --------- Net cash used in investing activities (5.7) (8.0) (47.9) --------------------------- --------- --------- --------- Cash flows from financing activities Proceeds from issue of Ordinary share capital 0.1 0.6 0.8 Draw down of bank loans 7.4 4.0 53.6 Issue costs of new bank loan - - (0.4) Repayment of bank loans - (4.8) (8.7) Equity dividends paid (4.2) (4.9) (6.5) --------------------------- --------- --------- --------- Net cash generated from/(used in) financing activities 3.3 (5.1) 38.8 --------------------------- --------- --------- --------- Net increase/(decrease) in cash and cash equivalents 8.8 (3.8) (3.7) Cash and cash equivalents at beginning of period 10.7 14.5 14.5 Exchange adjustments (0.1) (0.3) (0.1) --------------------------- --------- --------- --------- Cash and cash equivalents at end of period 19.4 10.4 10.7 --------------------------- --------- --------- --------- Notes to the consolidated cash flow statement for the six months ended 31 March 2006 A. Cash flows from operating activities The reconciliation of operating (loss)/profit to cash flows from operating activities is as follows: --------------------------------------- --------- --------- --------- 6 months to 6 months to 12 months to 31 March 31 March 30 September 2006 2005 2005 £m £m £m --------------------------------------- --------- --------- --------- Operating (loss)/profit for the period (10.8) 11.0 13.5 Adjustments for: Depreciation charge 0.9 0.5 1.2 Profit on disposal of subsidiaries - (1.6) (2.1) Amortisation of intangible assets 2.6 0.3 1.8 Impairment of intangible assets 11.0 - - --------------------------------------- --------- --------- --------- Share option schemes - value of employees' services 0.3 0.1 0.4 --------------------------------------- --------- --------- --------- Operating profit before changes in working capital and provisions 4.0 10.3 14.8 Movement in provisions 1.5 (0.4) 1.0 Increase in inventories (0.9) (0.5) (1.0) Decrease/(increase) in trade and other receivables 4.0 (1.3) (7.9) Increase in trade and other payables 4.1 3.3 2.9 --------------------------------------- --------- --------- --------- Cash generated from operations 12.7 11.4 9.8 --------------------------------------- --------- --------- --------- B. Analysis of net debt ----------------- --------- -------- --------- -------- --------- At 1 October Cash Non-cash Exchange At 31 March 2005 flows changes movements 2006 £m £m £m £m £m ----------------- --------- -------- --------- -------- --------- Cash and cash equivalents 10.7 8.8 - (0.1) 19.4 Debt due within one year (20.4) (7.4) (2.0) (0.1) (29.9) Debt due after more than one year (29.8) - 2.0 - (27.8) ----------------- --------- -------- --------- -------- --------- Net debt (39.5) 1.4 - (0.2) (38.3) ----------------- --------- -------- --------- -------- --------- C. Reconciliation of movement in net (debt)/cash ------------------------------- --------- -------- --------- 6 months to 6 months to 12 months to 31 March 31 March 30 September 2006 2005 2005 £m £m £m ------------------------------- --------- -------- --------- Net (debt)/cash at start of period (39.5) 9.8 9.8 Increase/(decrease) in cash and cash equivalents 8.8 (3.8) (3.7) Overdraft acquired with subsidiaries - (0.3) (0.4) Movement in overdraft - 0.3 - Movement in borrowings (7.4) 0.8 (44.9) Exchange movements (0.2) (0.1) (0.3) ------------------------------- --------- -------- --------- Net (debt)/cash at end of period (38.3) 6.7 (39.5) ------------------------------- --------- -------- --------- Accounting policies Basis of accounting These interim results do not constitute statutory accounts as defined in section 240 of the Companies Act 1985 and have not been audited. The auditors have carried out a review of the interim results and their report will be set out in the printed Interim Report. These interim results are the first interim financial statements following the adoption of International Financial Reporting Standards (IFRS) and are prepared in accordance with the Listing Rules of the Financial Services Authority. In accordance with EU legislation the Group's first annual financial statements to be prepared in accordance with IFRS will be for the year ending 30 September 2006. The financial information contained in these results in respect of the year ended 30 September 2005 has been produced using extracts from the audited statutory accounts as prepared under UK GAAP, amended by adjustments required under IFRS. The audited statutory accounts for the year ended 30 September 2005, upon which an unqualified audit opinion was given, have been delivered to the Registrar of Companies. In anticipation of changes required under IFRS the Group has published a document - Restatement from UK GAAP to International Financial Reporting Standards for the year ended 30 September 2005 (the Restatement document). The Restatement document sets out the effect of adopting IFRS for the Group, the basis of preparation and details of significant adjustments in respect of the opening balance sheet at 1 October 2004, the results for the year ended 30 September 2005 and the balance sheet at 30 September 2005. The most significant impacts arising as a result of adopting IFRS relate to accounting for intangible assets (note 9), share-based payments (note 4) and dividends (note 7). The Restatement document was published on 6 April 2006 and is available on our website (www.futureplc.com/future/investors), along with full details of the Group's accounting policies. IFRS are subject to ongoing amendment and additional interpretations and therefore the accounting policies for the year ending 30 September 2006 will be finally determined only when the financial statements for that year are prepared. The financial information contained in this interim results announcement in respect of the 6 month periods ended 31 March 2006 and 31 March 2005 has been prepared on a basis consistent with that used in the Restatement document and in accordance with all IFRS and IFRIC interpretations that had been published by 31 March 2006. The standards used are those endorsed by the EU together with those standards that have been issued by the IASB but which had not been endorsed by 31 March 2006. Notes to the financial statements 1. Segmental reporting The Group is organised and managed primarily on a geographical basis. An analysis of turnover and results by primary reporting segment is set out below: a) Turnover by origin ---------------------- --------- --------- ----------- 6 months to 6 months to 12 months to 31 March 31 March 30 September 2006 2005 2005 £m £m £m ---------------------- --------- --------- ----------- United Kingdom 64.2 55.8 118.4 United States 29.9 27.1 55.5 Mainland Europe 21.3 22.0 39.7 Turnover between segments (0.7) (0.6) (1.3) ---------------------- --------- --------- ----------- Total 114.7 104.3 212.3 ---------------------- --------- --------- ----------- b) (Loss)/profit before tax by origin ---------------------- --------- --------- ----------- 6 months to 6 months to 12 months to 31 March 31 March 30 September 2006 2005 2005 £m £m £m ---------------------- --------- --------- ----------- United Kingdom 0.9 8.9 10.8 United States (0.6) 3.0 3.6 Mainland Europe (9.4) 1.8 2.1 Central costs (3.0) (2.6) (4.0) ---------------------- --------- --------- ----------- Total (12.1) 11.1 12.5 ---------------------- --------- --------- ----------- Additional analysis of the Group's turnover by type and destination is set out below: i) Turnover by type ---------------------- --------- --------- ----------- 6 months to 6 months to 12 months to 31 March 31 March 30 September 2006 2005 2005 £m £m £m ---------------------- --------- --------- ----------- Circulation 71.3 70.9 139.0 Advertising 41.2 31.3 68.1 Other 2.2 2.1 5.2 ---------------------- --------- --------- ----------- Total 114.7 104.3 212.3 ---------------------- --------- --------- ----------- ii) Turnover by destination ---------------------- --------- --------- ----------- 6 months to 6 months to 12 months to 31 March 31 March 30 September 2006 2005 2005 £m £m £m ---------------------- --------- --------- ----------- United Kingdom 53.5 47.5 99.4 United States 31.5 27.3 57.0 Mainland Europe 26.1 24.8 47.1 Rest of the world 4.3 5.3 10.1 Turnover between segments (0.7) (0.6) (1.3) ---------------------- --------- --------- ----------- Total 114.7 104.3 212.3 ---------------------- --------- --------- ----------- 2. Operating (loss)/profit ---------------------- --------- --------- ----------- 6 months to 6 months to 12 months to 31 March 31 March 30 September 2006 2005 2005 £m £m £m ---------------------- --------- --------- ----------- Turnover 114.7 104.3 212.3 Cost of sales (83.7) (69.3) (144.7) ---------------------- --------- --------- ----------- Gross profit 31.0 35.0 67.6 Distribution expenses (7.5) (6.9) (14.4) Administration expenses (including exceptional items) (20.7) (16.8) (37.9) Exceptional impairment of intangible assets (11.0) - - Amortisation of intangible assets (2.6) (0.3) (1.8) ---------------------- --------- --------- ----------- Operating (loss)/profit (10.8) 11.0 13.5 ---------------------- --------- --------- ----------- 3. Exceptional items ---------------------- --------- --------- ----------- 6 months to 6 months to 12 months to 31 March 31 March 30 September 2006 2005 2005 £m £m £m ---------------------- --------- --------- ----------- Property costs 2.8 0.2 2.4 Restructuring costs 0.7 0.7 2.6 Aborted bid costs - 2.2 2.2 Profit on disposal of subsidiaries - (1.6) (2.1) ---------------------- --------- --------- ----------- Total 3.5 1.5 5.1 ---------------------- --------- --------- ----------- The property costs consist mainly of a vacant property provision made against office space in Baker Street, London which was vacated in January 2006. The restructuring costs relate to the costs incurred as a result of integrating businesses and titles acquired during the year ended 30 September 2005. The aborted bid costs relate to the external professional fees and other costs of the aborted bid for the entire issued share capital of Highbury House Communications plc during the first half of 2005. 4. Employees ---------------------- --------- --------- ----------- 6 months to 6 months to 12 months to 31 March 31 March 30 September 2006 2005 2005 £m £m £m ---------------------- --------- --------- ----------- Wages and salaries 24.8 19.6 42.5 Social security costs 4.0 3.3 6.9 Other pension costs 0.6 0.3 0.8 ---------------------- --------- --------- ----------- Share option schemes - value of employees' services 0.3 0.1 0.4 ---------------------- --------- --------- ----------- Total 29.7 23.3 50.6 ---------------------- --------- --------- ----------- IFRS 2 (Share-based payments) requires an expense for equity instruments granted to be recognised over the appropriate vesting period, measured at their fair value at the date of grant. The Group has used the Black Scholes model to value instruments with non market-based performance criteria such as earnings per share. For instruments with market-based performance criteria, notably total shareholder return, the Group has used a Monte Carlo model to determine the fair value. The expense for the 6 months ended 31 March 2006 of £0.3m has been credited to reserves. 5. Financial income and costs ------------------------ -------- -------- ---------- 6 months to 6 months to 12 months to 31 March 31 March 30 September 2006 2005 2005 £m £m £m ------------------------ -------- -------- ---------- Interest receivable 0.2 0.3 0.5 ------------------------ -------- -------- ---------- Total financial income 0.2 0.3 0.5 ------------------------ -------- -------- ---------- ------------------------ -------- -------- ---------- Interest payable on interest-bearing loans and borrowings (1.4) (0.1) (1.1) Net foreign exchange losses (0.1) (0.1) - Write-off of debt issue costs - - (0.4) ------------------------ -------- -------- ---------- Total financial costs (1.5) (0.2) (1.5) ------------------------ -------- -------- ---------- Net financial (costs)/income (1.3) 0.1 (1.0) ------------------------ -------- -------- ---------- 6. Tax on (loss)/profit on ordinary activities The tax credit for the six months ended 31 March 2006 is based on the estimated effective rate of tax for the full year to 30 September 2006. The effective rate is applied to the profit before tax and impairment but after exceptional items. 7. Dividends ------------------------- -------- -------- ---------- Equity dividends 6 months to 6 months to 12 months to 31 March 31 March 30 September 2006 2005 2005 ------------------------- -------- -------- ---------- Number of shares in issue at end of period (million) 326.5 325.8 326.3 Dividends paid in period (pence per share) 1.3 1.5 2.0 ------------------------- -------- -------- ---------- Dividends paid in period (£m) 4.2 4.9 6.5 ------------------------- -------- -------- ---------- In accordance with IFRS dividends declared are recognised in the period in which they are approved and paid. The dividend of £4.2m paid during the period ended 31 March 2006 relates to the final dividend of 1.3 pence per share declared for the year ended 30 September 2005. The dividend of £4.9m paid during the six month period ended 31 March 2005 relates to the final dividend of 1.5 pence per share declared for the nine months ended 30 September 2004. The dividends totalling £6.5m paid during the year ended 30 September 2005 relate to the interim dividend for the six month period to 31 March 2005 of 0.5 pence per share (£1.6m) and the final dividend declared for the nine months ended 30 September 2004 of 1.5 pence per share (£4.9m). 8. 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 effect of the amortisation and impairment of intangible assets, exceptional items (including profit on disposal of subsidiaries) and any related tax effects from the calculation as follows: Adjustments to (loss)/profit on ordinary activities after tax ---------------------------- --------- --------- ----------- 6 months to 6 months to 12 months to 31 March 31 March 30 September 2006 2005 2005 £m £m £m ---------------------------- --------- --------- ----------- (Loss)/profit on ordinary activities after tax (11.8) 8.9 10.3 Add: amortisation of intangible assets 2.6 0.3 1.8 Add: impairment of intangible assets 11.0 - - Add: exceptional items 3.5 1.5 5.1 Tax effect of the above adjustments (2.0) (0.5) (2.8) ---------------------------- --------- --------- ----------- Adjusted profit on ordinary activities after tax 3.3 10.2 14.4 ---------------------------- --------- --------- ----------- ----------------------------------- --------- --------- ----------- 6 months to 6 months to 12 months to 31 March 31 March 30 September 2006 2005 2005 ----------------------------------- --------- --------- ----------- Weighted average number of shares outstanding during the period: - basic 326,404,239 324,850,523 325,468,072 - dilutive effect of share options 181,529 1,125,610 937,654 - diluted 326,585,768 325,976,133 326,405,726 Basic (loss)/earnings per share (in pence) (3.6) 2.7 3.2 Adjusted basic earnings per share (in pence) 1.0 3.1 4.4 Diluted (loss)/earnings per share (in pence) (3.6) 2.7 3.2 Adjusted diluted earnings per share (in pence) 1.0 3.1 4.4 ----------------------------------- --------- --------- ----------- The share options do not have a dilutive effect where there is a loss. The adjustments have the following effect: ---------------------- --------- --------- ----------- 6 months to 6 months to 12 months to 31 March 31 March 30 September 2006 2005 2005 pence pence pence ---------------------- --------- --------- ----------- Basic (loss)/earnings per share (3.6) 2.7 3.2 Amortisation of intangible assets 0.8 0.1 0.5 Impairment of intangible assets 3.4 - - Exceptional items 1.1 0.5 1.6 Tax effect of the above adjustments (0.7) (0.2) (0.9) ---------------------- --------- --------- ----------- Adjusted basic earnings per share 1.0 3.1 4.4 ---------------------- --------- --------- ----------- Diluted (loss)/earnings per share (3.6) 2.7 3.2 Amortisation of intangible assets 0.8 0.1 0.5 Impairment of intangible assets 3.4 - - Exceptional items 1.1 0.5 1.6 Tax effect of the above adjustments (0.7) (0.2) (0.9) ---------------------- --------- --------- ----------- Adjusted diluted earnings per share 1.0 3.1 4.4 ---------------------- --------- --------- ----------- 9. Intangible assets ------------------------ -------- -------- -------- -------- Goodwill Magazine Other Total related £m £m £m £m ------------------------ -------- -------- -------- -------- Cost At 1 October 2005 363.7 14.2 1.8 379.7 Additions 1.4 1.0 - 2.4 Adjustments to fair value on prior year acquisitions 0.1 - - 0.1 Exchange adjustments 0.6 - - 0.6 ------------------------ -------- -------- -------- -------- At 31 March 2006 365.8 15.2 1.8 382.8 ------------------------ -------- -------- -------- -------- ------------------------ -------- -------- -------- -------- Amortisation At 1 October 2005 (216.4) (1.5) (1.6) (219.5) Charge for the period - (2.5) (0.1) (2.6) Impairment charges (10.5) (0.5) - (11.0) Exchange adjustments (0.4) - - (0.4) ------------------------ -------- -------- -------- -------- At 31 March 2006 (227.3) (4.5) (1.7) (233.5) ------------------------ -------- -------- -------- -------- Net book amount at 31 March 2006 138.5 10.7 0.1 149.3 ------------------------ -------- -------- -------- -------- Net book amount at 30 September 2005 147.3 12.7 0.2 160.2 ------------------------ -------- -------- -------- -------- The group elected to apply IFRS 3 (Business Combinations) from the transition date of 1 October 2004. Acquisitions undertaken subsequent to that date have been restated in accordance with this standard. Magazine related assets have been recognised and relate mainly to trademarks, advertising relationships and customer lists. These assets are amortised over their estimated economic lives, typically ranging between one and five years. Any residual amount arising as a result of the purchase consideration being in excess of the value of identified magazine related assets is recorded as goodwill. Goodwill is not amortised under IFRS, but is subject to impairment testing either annually or on the occurrence of some triggering event. Goodwill is recorded and tested for impairment on a territory by territory basis. Impairment testing has been undertaken as at 31 March 2006. As a result an impairment charge of £11.0m has been made in respect of intangible assets relating to the Italian business. Other intangibles relate to capitalised software costs. This information is provided by RNS The company news service from the London Stock Exchange

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