Final Results
T&F Informa PLC
10 March 2005
10 March 2005
T&F Informa plc
GOOD ORGANIC GROWTH
MERGER BENEFITS COMING THROUGH AS EXPECTED
Highlights of 2004
Constant
2004 2003 Reported Currency
£'000 £'000 Growth Growth
---------------------------------------------
Turnover 504,225 441,676 14% 19%
Adjusted operating profit1 108,343 79,309 37% 50%
Total operating profit 48,639 46,170 5%
Adjusted pre tax profit2 91,324 69,937 31%
Pre tax profit 12,384 32,976 (62%)
Adjusted diluted earnings per share3 24.50p 18.28p 34%
Diluted earnings per share 0.04p 5.89p (99%)
---------------------------------------------
• Adjusted pre tax profit2 up 31% to £91.3m on turnover up 14% to
£504.2m.
• Turnover and adjusted operating profit1 grew organically4 5.3% and
23.5% respectively at 2003 exchange rates.
• Merger of Informa and Taylor & Francis completed - benefits coming
through.
• Good contribution from recent acquisitions - including CRC Press, PJB
Publications, MMS and Dekker.
• Solid platform to drive further profitable growth.
• Confident of prospects for 2005.
Commenting on the Group's performance, Peter Rigby, CEO of T&F Informa said:
'2004 was a transforming year for the business. The Group's excellent results
combine organic growth with a good contribution from the businesses acquired in
2003. Our three operating divisions produced good organic growth reflecting the
strength of the portfolio as well as our ability to respond to improving market
conditions.
'The momentum seen in 2004 has been maintained into the current year and the
revenue and cost synergies from the merger are coming through as expected. With
the company performing in line with our expectations, the Board is confident of
delivering another good financial performance in 2005.'
1 Excludes exceptional operating costs of £10.0m (2003: £11.8m) and goodwill
amortisation and impairment of £49.7m (2003: £21.3m).
2 Excludes exceptional operating and non-operating items of £44.2m (2003:
£15.7m) and goodwill amortisation of £34.7m (2003: £21.3m).
3 Excludes exceptional items after tax of £38.3m (2003: £13.1m) and goodwill
amortisation of £34.7m (2003: £21.3m).
4 Excludes acquisitions made since 1 January 2003.
Enquiries:
T&F Informa plc Tel: 020 7017 5000
Peter Rigby, Chief Executive
David Gilbertson, Managing Director
Tony Foye, Finance Director
Financial Dynamics Tel: 020 7831 3113
Tim Spratt / Charles Palmer
Operating and Financial Review 2004
Introduction
T&F Informa traded strongly during the year ended 31 December 2004, with
turnover up 14% to £504.2m from £441.7m and adjusted operating profit1 up 37% to
£108.3m from £79.3m. Adjusted pre tax profit2 increased 31% to £91.3m from
£69.9m. Adjusted diluted earnings per share3 increased 34%, to 24.50p from
18.28p.
These are the first full year results of the enlarged Group, which was formed
from the merger of Informa Group plc and Taylor & Francis Group plc on 10 May
2004. The results have been prepared under merger accounting principles, under
which the financial statements are presented as if the two groups had been
merged from 1 January 2003.
The 2004 results have been achieved during a period of considerable change,
including the integration of three major acquisitions, a number of office
relocations and the merger of two highly successful groups.
The Group's performance for the year was impacted by the adverse effects of
exchange rate movements and, in particular, the relative weakness of the US
dollar. In 2004 the Group received approximately 50% of its revenues and
incurred approximately 35% of its costs in US dollars and hence exchange rate
movements had an adverse effect on translated turnover and profit. Had exchange
rates remained constant at their 2003 levels, reported consolidated turnover
would have been £20.8m higher and operating profit £10.6m higher. In constant
currency terms therefore reported turnover would have grown by 19% and adjusted
operating profit by 50%.
The Group is highly cash generative, converting 110% of its 2004 adjusted
operating profit into cash (2003: 112%). Strong cash flow, particularly in the
second half of the year, enabled net debt to be reduced at the year end to £302m
from £356m at 30 June 2004.
The Group's three operating divisions - Academic & Scientific, Professional and
Commercial - all performed well, combining organic growth with good
contributions from recent acquisitions, including CRC Press, PJB Publications,
MMS and Dekker. The Group saw improved trading conditions in most of its
operating sectors, with particularly good growth in the Scientific, Technical
and Medical (STM), Telecoms and Financial Information market segments.
The integration of the two groups is now largely complete and the enlarged Group
has started to benefit from the revenue and cost benefits which the merger
brings. The £9m of revenue synergies announced in September 2004 will be
realised in 2005 alongside the £9m of cost savings.
In recognition of the encouraging performance in 2004 and the Group's future
prospects, the Board has decided to recommend an increased final dividend of
5.33p per ordinary share, making a total dividend for the year of 8.13p.
Adjusted figures, which exclude exceptional items and goodwill amortisation are
presented as additional performance measures:
2004 2003
£'000 £'000
---- ----
Adjusted operating profit1 108,343 79,309
Adjusted pre-tax profit2 91,324 69,937
Adjusted diluted earnings per share3 24.50p 18.28p
Adjusted operating cash flow4 119,587 88,803
Adjusted operating cash flow conversion5 110% 112%
1 Excludes exceptional operating costs of £10.0m (2003: £11.8m) and goodwill
amortisation and impairment of £49.7m (2003: £21.3m).
2 Excludes exceptional operating and non-operating items of £44.2m (2003:
£15.7m) and goodwill amortisation of £34.7m (2003: £21.3m).
3 Excludes exceptional items after tax of £38.3m (2003: £13.1m) and goodwill
amortisation of £34.7m (2003: £21.3m).
4 Adjusted operating cash flow is measured after adjusting for exceptional items
on a cash flow basis.
5 Adjusted operating cash flow conversion expresses adjusted operating cash flow
as a percentage of adjusted operating profit.
Financial Performance
As noted above, the results covered by this review have been produced under
merger accounting principles, which combine the results of the Taylor & Francis
Group with those of the Informa Group as if the two groups had been merged since
1 January 2003.
During 2004 turnover grew by 14% (£62.5m) to £504.2m (2003: £441.7m), despite
adverse exchange rate movements which reduced reported revenue by £20.8m (5%)
compared to 2003. Dekker, acquired on 2 January 2004, contributed £24.4m in
turnover. At constant exchange rates and after adjusting for acquisitions made
since 1 January 2003, the organic turnover growth was 5%.
Adjusted operating profit was £108.3m in the period, up 37%, or £29.0m, over
2003 (£79.3m). Excluding the £10.6m adverse effect of exchange rate movements,
this operating profit growth was 50%. Dekker contributed £7.6m to this result in
its first period of ownership.
Trading was stronger across all three operating divisions compared to 2003, with
acquisitions, organic growth, good subscription renewal rates and higher average
delegate numbers combining to increase revenue and profitability. This growth in
revenue, together with good cost control and the successful integration of
acquisitions, was reflected in increased adjusted operating margins of 21.5% in
2004 compared with 18.0% in 2003. At constant exchange rates the organic growth
in adjusted operating profit was 23.5%.
Total operating profit after exceptional items and goodwill amortisation
increased by 5% to £48.6m from £46.2m.
The combined Group will be required to adopt International Financial Reporting
Standards (IFRS) in producing its results for 2005 and beyond. The adoption of
IFRS will necessitate material changes to both the bases and format of financial
reports sent to shareholders. To help shareholders better understand the impact
of adopting IFRS, prior to the Annual General Meeting in May 2005 the Board
intends to issue a separate report showing the 2004 results prepared under IFRS.
Exceptional Operating Items
Over the last 12 months the Group has completed significant integration of
acquisitions resulting in exceptional operating costs of £10.0 million (2003:
£11.8m). Of this total £4.5m represented integration costs relating to the
acquisitions of Cass (July 2003), SZP (October 2003), MMS (September 2003), PJB
(December 2003) and Dekker (January 2004). £4.2m was incurred in respect of the
relocation of the UK academic books businesses from London to Oxford, the
setting up and transferring of the US books warehousing and distribution
operations to Kentucky and the move of PJB from its former Richmond offices to
existing Group premises in central London. £1.3m was provided in relation to the
merger integration.
Goodwill Amortisation and Impairment
As a result of acquisitions made over the last two years, goodwill amortisation
increased by £13.4m in 2004 to £34.7m from £21.3m.
Following the merger we have also undertaken a review of goodwill and as a
result have reduced the carrying value related to certain pre-2001 acquisitions
by £15m.
Merger Costs
As previously reported in September 2004, merger costs were £15.7m (2003: £nil),
consisting of professional and other fees incurred in connection with the merger
between Taylor & Francis Group plc and Informa Group plc on 10 May 2004.
On the merger the previous bank loan facilities of both groups were terminated
and replaced by new enlarged Group facilities and unamortised loan arrangement
fees of £2.4m were written off to the profit and loss account.
Net Interest
Net interest payable for 2004 increased by £7.6m to £17.0m as a result of
increased bank debt used to fund recent acquisitions. Over 2003 and 2004 we have
spent £311m on acquisitions, funded mainly by bank debt.
Net interest cover (based on adjusted operating profit) was a comfortable 6.4
times in 2004 (2003: 8.5 times).
Profit Before Taxation
Adjusted profit before taxation increased by 31% to £91.3m (2003: £69.9m).
Profit before taxation and after exceptional items and goodwill amortisation was
£12.4m (2003: £33.0m).
Taxation
Tax has been provided at an underlying rate of 26.6% (2003: 28.0%). The
effective tax rate is influenced by goodwill amortisation, which in the main
does not attract tax relief, and the partial deductibility of certain
exceptional items and merger costs. The Group also benefited from the release of
prior year tax provisions no longer required.
Earnings Per Share
Adjusted diluted earnings per share increased 34% to 24.50p per ordinary share
compared to 18.28p in 2003. Basic earnings per share were 0.04p (2003: 5.89p).
Dividend
The Board has recommended a final dividend of 5.33p per ordinary share, making
a total dividend for the year of 8.13p. The final dividend will be payable on 31
May 2005 to shareholders registered as at the close of business on 29 April
2005.
Balance Sheet
Intangible assets increased by £21.1m to £504.2m. Of this increase, £88.2m was
in respect of the provisional goodwill arising on the acquisition of Dekker,
offset by ongoing amortisation, impairment and the effect of exchange rate
movements.
Net debt increased by £42.8m, to £302.0m compared with £259.2m at 31 December
2003, reflecting £86.2m spent on acquisitions in 2004, offset by positive cash
generation. Cash conversion was strong with adjusted operating cash inflow as a
percentage of adjusted operating profit at 110% (2003: 112%).
On the merger the Group entered into a new five year, £440m multi-currency
syndicated bank loan facility.
Accruals and deferred income increased by £18.9m (11%) compared with 2003.
Within this increase, deferred income was up 12% compared with 31 December 2003.
Divisional Performance
2004 was a transforming year for the Group. The successful merger of two
complementary groups and the integration of recent acquisitions have created a
business which has entered 2005 with confidence and in good financial health.
Academic & Scientific Division
2004 2003
£'m £'m
---- ----
Turnover
STM 152.0 109.5
Humanities & Social Sciences (HSS) 92.3 87.8
---- ----
244.3 197.3
======= =======
Adjusted operating profit
STM 43.0 27.0
Humanities & Social Sciences 21.3 18.8
---- ----
64.3 45.8
======= =======
Adjusted operating margin % 26.3 23.2
======= =======
Highlights
• Turnover up 24%, adjusted operating profit up 40%. Organic growth at
constant exchange rates 5% and 17%, respectively.
• 74 new journals launched, including 38 new academic society publishing
contracts.
• Good performance from PJB, acquired December 2003, and Dekker,
acquired January 2004.
• STM adjusted operating margin increased to 28.3% (2003: 24.7%) and HSS
to 23.1% (2003: 21.3%).
The Academic & Scientific division had a strong year. Turnover increased by 24%
to £244.3m and adjusted operating profit by 40% to £64.3m. The division
benefited from STM acquisitions including PJB (acquired December 2003) and
Dekker (acquired January 2004) but was adversely affected by exchange rate
movements, which reduced reported turnover by £10.8m and adjusted operating
profit by £7.6m. At constant exchange rates organic turnover growth was 5% and
adjusted organic operating profit growth was 17%.
The STM business saw robust turnover and profit growth both organically and from
acquisitions, offset slightly by some weakness in US Life Science advertising
and events and exchange rate movements. Turnover grew 39% to £152.0m from
£109.5m. At 2003 exchange rates excluding acquisitions turnover was up by 4% and
adjusted operating profit up by 16%
We also saw good underlying turnover growth from our Humanities and Social
Science lists which did not benefit from any major acquisitions, although this
growth was masked by adverse exchange rate movements. Overall turnover increased
by 5% and adjusted operating profit by 14%, helped by efficiencies from
integrating prior acquisitions. At 2003 exchange rates turnover was up 5% and
adjusted operating profit up 17%.
We have rationalised our academic publishing brands and will now use the Taylor
& Francis imprint for STM publishing and the Routledge imprint for Humanities
and Social Sciences publishing.
Since the merger the Academic & Scientific division has accelerated its efforts
to acquire more academic society and other third party publishing business.
2004 was a most successful year in this respect, with 38 new third party
publishing contracts signed. The division also launched or acquired 36 journal
titles and discontinued 26. As a result of this activity, in 2005 the division
will be publishing 1,075 journal titles.
There has been much discussion around 'open access' and academic journal
publishing models. Recently the Department of Trade and Industry (DTI) on behalf
of the UK government has issued its response to the House of Commons Select
Committee's report on scientific publishing. The DTI appears to us to have taken
a pragmatic line, broadly accepting the maintenance of the current publishing
system. The Group will continue to monitor the situation carefully and position
itself to respond appropriately to any changes in the academic market's
information requirements.
PJB had a good year despite having been adversely affected by £0.7m at the
adjusted operating profit line by the relative weakness of the US dollar. PJB's
core products, Scrip, Pharmaprojects, Clinica and Agrow, which between them
represent some 90% of its operating profit, all performed strongly in 2004, with
solid subscription volumes and high renewal rates. Almost 55% of PJB's revenues
are generated by electronic products and this proportion is growing quickly as
customers migrate from traditional hard copy products.
In the Life Sciences events area, the flagship annual Drug Discovery Technology
event was held in Boston in August. While it was again successful, there was
some decline in attendance in 2004 compared with 2003, reflecting a general
reduction in investment in drug discovery. However the establishment of
spin-off events in Singapore, India and Europe is encouraging and provides a
partial offset. While the drug discovery sector has become more challenging,
the area of bio-processing has grown and our Bio-Process International magazine
has moved more quickly into profit than we had expected. Taking advantage of
this market strength, we have launched a Bio-Process International trade show
and conference, which in 2004 became the largest event worldwide in the
bio-manufacturing area. This event format has also been rolled out into Europe
and Asia.
Following the acquisition of PJB, we have diversified our Life Sciences
conference business through the launch of a pharmaceutical development series,
both in the US and Europe. This series concentrates on clinical development
technologies, regulatory issues and business strategies and complements the
published products of PJB, particularly Scrip and Pharmaprojects.
Professional Division
2004 2003
£'m £'m
---- ----
Turnover
Financial Information 60.2 49.1
Insurance, Law and Tax 33.1 39.6
---- ----
93.3 88.7
======= =======
Adjusted operating profit
Financial Information 16.3 10.3
Insurance, Law and Tax 5.5 4.5
---- ----
21.8 14.8
======= =======
Adjusted operating margin % 23.3 16.7
======= =======
Highlights
• Turnover up 5%, adjusted operating profit up 47%. Organic growth at
constant exchange rates 5% and 43%, respectively.
• Good performance from combination of MCM/MMS, with MMS subscriber
retention rate over 65%.
• Both Financial Information and legal conference businesses performed
strongly.
• Advertising recovery in key insurance publications.
The Professional division, which consists of our US-based Financial Information
businesses and our UK-led professional information business, covering Insurance,
Law and Tax, performed well in 2004.
Turnover and adjusted operating profit in the Financial Information business
were up 23% and 59% respectively compared with 2003. The 2004 results include
the acquisitions made in 2003 of MMS and two smaller businesses - Barry Leeds
and Net Decide. The reported results of the US-based business were adversely
affected by exchange rate movements. At constant exchange rates the Financial
Information business produced organic growth in turnover of 24% and adjusted
operating profit growth of 55%. The adjusted operating margin of the Financial
Information business increased to 27.1%, from 20.9%, aided by good overhead
control.
The growth of our Financial Information business was led by the acquisition of
MMS and its successful integration with MCM, to create a market-leading service
for the international corporate bond, sovereign fixed income and foreign
exchange markets, under the new brand Informa Global Markets (IGM). In combining
the two businesses and creating a single consolidated offering we successfully
retained more than 65% of the MMS subscribers, exceeding our pre-acquisition
expectations.
As part of this integration exercise we established a single sales team across
both businesses as well as a single content authoring and contribution system.
This system, known as Market Work Station, allows content to be seamlessly
published across the multiple channels we utilise, including Reuters and
Bloomberg, our own website and where we co-brand with other clients.
iMoneyNet, the leading provider of information for the US money market fund
sector, also had a good year in 2004, despite some weaknesses in the money fund
market sector. As the sector improves our new analytical products for money fund
families, including browser-based applications, look to have exciting
possibilities.
During 2004 the Insurance, Law and Tax business saw good performances throughout
its portfolio. The largely subscription-based legal publishing business remained
resilient and we saw particularly strong underlying improvement in the events
based business, which covers both legal and financial topics. This improvement,
coupled with the elimination of events which had proved unprofitable or marginal
in 2003, helped drive a 20% increase in adjusted operating profit, despite a
reduction in revenue of 16%. The adjusted operating margin rose to 16.5% from
11.5%.
Within the Insurance, Law and Tax business, the financial services area
experienced a marked rebound reflecting the return to positive trading
conditions in the underlying markets after two years of cutbacks and
consolidation. The recovery fed through into improved advertising income led by
a 10% improvement in the flagship title Insurance Day.
Commercial Division
2004 2003
£'m £'m
---- ----
Turnover
Telecoms & Media 37.7 35.0
Maritime, Trade & Transport 39.4 37.7
Commodities 17.2 13.0
International Conferences 72.3 70.0
---- ----
166.6 155.7
======= =======
Adjusted operating profit
Telecoms & Media 8.9 7.9
Maritime, Trade & Transport 4.0 1.6
Commodities 2.2 1.4
International Conferences 7.2 7.8
---- ----
22.3 18.7
======= =======
Adjusted operating margin % 13.4 12.0
======= =======
Highlights
• Turnover up 7% and adjusted operating profit up 19%. Organic growth at
constant exchange rates 6% and 25%, respectively.
• Continuing recovery in mobile Telecoms sector enabling new event
launches.
• Strong trading in Maritime with adjusted operating profit up by 154%.
• Commodities boosted by 2003 acquisition of Sparks.
The Telecoms business saw strongly improving underlying trends, with confidence
returning to the mobile sector as a result of the expansion of 3G services and
applications. The 2004 3GSM World Congress in Cannes produced profit ahead of
the previous year, although increased royalty payments under a revised agreement
with our event partners largely offset the underlying gain. The increase in
market activity continued into the 2005 3GSM event, which attracted a record
43,000 pre-registered attendants. The growth of this flagship event has meant
that the conference has outgrown the Cannes venue and in 2006 we are relocating
it to Barcelona.
There are positive signs that 2005 may prove to be another strong year for the
mobile telecoms sector. As the leading international provider of information to
this market sector we began to see the results of increased confidence in 2004
and this has continued into 2005. As the sector improves we are aiming to double
our event output and especially concentrate in areas where 3G services are being
launched or expanding quickly. Our new partnership with the leading industry
trade association GSMA saw us establish a new 3G event for the Asian market
which was held in Singapore last September. Alongside other 3G events for 2005
covering India, Africa, the Americas, Russia, China and the Middle East, we are
well placed to benefit from improvement in the mobile telecoms market.
The Maritime & Transport business, which encompasses the leading daily newspaper
Lloyd's List, maritime and logistics information and conferences in the
transport and energy sectors, traded strongly in the year, exceeding the 2003
full year adjusted operating profit by 154%.
Prosperity in shipping is being boosted by strong trade demand from China which
has helped push up freight rates and, with oil prices also strong, this has
helped to increase demand for advertising space and boosted delegate attendances
at our maritime and energy events. Maritime & Transport's leading publications
Lloyd's List and its associated maritime magazines (most of which are also
delivered electronically) performed well and saw subscription revenues and
renewal rates improve and advertising yields rise. Data and consultancy
services are also growing in importance.
We are also developing and expanding our corporate training and distance
learning programmes in the Maritime and Transport sector. As Asia becomes
increasingly important as a world maritime trade centre we are expanding our
regional publishing programme there and emphasising Asia-focused exhibitions and
awards events, especially in the logistics area, which has proved a major
success in Hong Kong. We ran an inaugural Greek shipping awards event in Athens
in 2004 which sold out, with more than 700 delegates attending. This event will
be repeated in 2005 and a similar new event run for the Turkish market.
Commodities, the smallest of our sectors within the Commercial Division, had a
good 2004 boosted by the 2003 acquisition of Sparks, a Memphis based information
business, now renamed Informa Economics. Commodities turnover was up 32%, or
£4.2m. Adjusted operating profit was up 54% (£0.8m), again due mainly to the
Sparks acquisition. The Commodities business delivered a record number of events
in 2004, with the average number of delegates attending reaching 67.
Our International Conferences business comprises domestic language conferences
and courses in Germany, the Netherlands, Asia, Australia, Brazil, France, Sweden
and Denmark. In addition, through a partnership with Expomedia Group plc, we
have established joint venture conference arrangements in Russia, Hungary,
Poland and India. The Asian events operation has recently opened a satellite
office in Shanghai. The International Conferences business typically has a
strong second half performance and full year turnover ended up 3%, with an
underlying increase in overall profits offset, as expected, by costs of £1.6m
(2003: £0.3m) in relation to the new products and territories including China,
India, Russia, Poland and Hungary.
In 2004 the International Conferences business ran more than 2,000 events across
a broad variety of subject areas. Our existing International Conference
operations performed better in 2004 than in 2003, demonstrating a better climate
for our conference product.
Business Integration
2004 saw significant premises rationalisation. In the UK, the academic book
publishing business was relocated from London and consolidated with our existing
journal publishing operations in Didcot, Oxfordshire. The move brings STM and
Humanities and Social Science (HSS) publishing operations into one site, leading
to significant management and operational efficiency. PJB was moved from its
previous five offices in Richmond into one of the Group's existing offices in
central London. A single Group head office was also established in central
London immediately following the merger.
In the US, the acquired Dekker business was integrated into existing offices in
Philadelphia and Boca Raton and two New York offices were consolidated into one.
We also combined two sites in Boca Raton into one office and began consolidating
three separate US book warehouse and distribution operations into a single
facility in Kentucky, which we expect will yield considerable efficiencies in
book order fulfilment.
In the area of operating systems, we are well advanced in our integration
strategy, having completed the installation of a single Group-wide accounting
system and we will shortly move to a single sales order fulfilment platform for
the UK-based business, centred on our existing SAP system.
We have also combined our two marketing databases, giving our divisions greater
access to customers and the ability to target them more precisely. In addition
we consolidated our UK mailing house operations into our facility in Weybridge,
Surrey, thus saving on the use of third party providers.
Merger Highlights
The merger integration process has gone smoothly and to plan. We are on track
to deliver the previously reported cost savings of £9m per year and revenue
synergies of £9m in 2005.
The revenue synergies are in four principal areas:
Publishing
The market previously addressed by Informa, from Maritime to Telecoms to Life
Sciences, has proved to be fertile ground for extending the former Taylor &
Francis (T&F) publishing portfolio. Many initiatives have resulted in the
creation of new titles in areas such as drug discovery, drug technology,
wireless security, IT technical texts, broadband implementation and port
management. In 2005 these new publications are scheduled to deliver £2m of
sales.
Events
The leveraging of T&F's subject expertise and academic connections has allowed
the events teams to explore opportunities through a new range of conferences and
events. We have established dedicated teams in both the UK and the US to exploit
these connections. The 80 new events planned for 2005 are expected to generate
£2.5m of additional revenues. Initial events will cover topics such as Stress in
the Workplace, Sustainable Development, Nanotechnology and Eating Disorders.
In addition, we can now approach academic and professional societies with whom
we already have established contacts to launch new journal publications or to
offer event management capabilities where we had not previously offered those
services. An example is in Sweden, where the newly combined T&F and Informa
office has signed a four year agreement with the Swedish Association of
Graduates in Social Science, Personnel and Public Administration, Economics and
Social Work (an organisation of some 45,000 members) to organise all of the
associations major meetings and education programmes and also for us to publish
a new journal in the field of management and leadership.
Distance Learning
All of our market sectors share the need for high quality education and
professional development. Much of this can be met through distance learning,
either in the form of e-learning or written courses. Prior to the merger we
generated some £7m of turnover from this source and the enlarged Group's content
pool facilitates expansion into topics such as self-study courses on project
management and employment law and MBA programmes delivered in partnership with
leading universities. The combined marketing reach of the merged Group, coupled
with its wealth of published material and author access, allows us to construct
brand new and powerful course offerings. We have established a dedicated
e-learning team whose job it is to grow this part of the business, which we
believe will be a significant element of future turnover in the medium term.
Areas where distance learning initiatives are proving particularly promising
include: System Biology, Nanotechnology, Nanotoxicology, Electrical Engineering,
IT Security, Forensic Science, Remote Sensing, Occupational Health and
Industrial Hygiene.
Cross Marketing and Cross Selling
We have also been working to identify business intersects between publishing and
events. Where these exist such as in pharmaceuticals, health sciences,
chemistry, engineering, maritime security, counter terrorism and telecoms,
marketing teams have come together to cross-promote each of their products at
little or no extra cost. Publications are displayed at conferences and
seminars, web services carry banners for related products, advertisements are
placed in sister publications, internet links have been established,
complementary products are mailed jointly and free samples are offered to
delegates and subscribers. The result is a growing network of new sales
opportunities and a healthy increase in the reach of many of our products. We
expect to generate £4.5m of additional revenue from these efforts in 2005.
The revenue plans outlined above will develop and grow as we begin to drive the
opportunities which the merger has created. Informa itself resulted from a
merger in 1998 and some six years later we are still finding new opportunities.
We expect the same to happen as T&F Informa grows.
Cost Savings
At the time of the merger we had identified potential annual cost savings of
£4.6m resulting from the merger. As a result of more detailed analysis and the
completion of integration steps we have identified a total of £9m of recurring
annual savings. This £9m of identified savings is expected to come from the
areas of IT (£2.5m), premises (£2.1m), print and distribution (£1.5m), finance
and related areas (£1.3m) and corporate overheads (£1.6m).
Strategy
T&F Informa is a global information provider across a broad portfolio of
academic, professional and commercial market sectors. We aim, wherever possible,
to be the leading provider in the niche sectors we select and to provide high
value information in the many media formats our customers demand.
The subscription model is a cornerstone of our business however we seek to
maintain a well balanced product portfolio combining a number of revenue streams
with differing dynamics, including copy sales, events and the more cyclical
revenue streams of advertising and sponsorship. We also look to develop new
revenue streams through a combination of product development and geographical
expansion.
Following the merger we will continue to look for ways to develop new products
around our leading brands. We will continue to exploit the interplay between
publications and events that gives our business a distinctive strength. Strong
publishing brands provide our events with added market leverage, yielding
greater access to important speakers and market segments.
T&F Informa has strong positions within the US market, which accounts for some
50% of revenue. These activities are currently focused on relatively few of our
market sectors and intend to develop our US presence through a combination of
organic growth and well planned acquisitions.
We have conference businesses in Eastern Europe, China and India and in South
America, (through our Brazilian operation) - markets which have higher medium to
long term growth prospects. It is our intention to build associated publishing
activities in these regions, and we are already establishing a publishing
presence in Beijing and in New Delhi.
The Group is well placed in electronic product delivery, with some 25% of our
publishing revenues and 17% of our total revenues coming from standalone
electronic publishing activities in 2004. Generally these revenues, which are
subscription based, enjoy renewal rates slightly higher than for hard copy
products. Looking forward it is clear that our customers will increasingly
demand information to be delivered electronically in succinct and fully
searchable forms.
Current Trading and Prospects
Although it is still relatively early in the year, 2005 has started well. We are
beginning to crystallise the opportunities provided by the merger and T&F
Informa is well placed to grow organically and through selective acquisitions at
a time where there is evidence that many of our markets are in recovery. The
momentum seen in 2004 has been maintained into the current year and the revenue
and cost synergies from the merger are coming through as expected. With the
Group performing in line with our expectations, the Board is confident of
meeting our demanding targets and delivering another good financial performance
in 2005.
We are delighted with the way the two groups have come together and thank our
staff for their professionalism and enthusiasm in embracing the many new
opportunities the enlarged Group now enjoys.
Peter Rigby
Chief Executive
9 March 2005
Consolidated Profit and Loss Account
For the Year Ended 31 December 2004
2004
Before 2004
exceptional items Exceptional items 2003
and goodwill and goodwill 2004 Total
amortisation amortisation Total Restated*
Note £'000 £'000 £'000 £'000
Turnover:
Total turnover including Joint 504,666 - 504,666 441,676
Ventures
Less: Share of Joint Ventures' (441) - (441) -
turnover
Group turnover 2 504,225 - 504,225 441,676
Continuing operations 478,993 - 478,993 441,676
Acquisitions 25,232 - 25,232 -
Net operating costs
Operating costs before goodwill
amortisation and impairment (395,882) (9,963) (405,845) (374,196)
Goodwill amortisation - (34,741) (34,741) (21,310)
Goodwill impairment - (15,000) (15,000) -
Total net operating costs 3 (395,882) (59,704) (455,586) (395,506)
Operating profit
Continuing operations 101,123 (53,929) 47,194 46,170
Acquisitions 7,491 (5,775) 1,716 -
Operating profit 108,614 (59,704) 48,910 46,170
Share of Joint Ventures' operating (271) - (271) -
result
Total operating profit 2,3 108,343 (59,704) 48,639 46,170
Merger costs - (15,703) (15,703) -
Loss on disposal of tangible fixed - (921) (921) -
assets
Profit / (loss) on sale or
termination of a business - 3 3 (3,822)
Amounts written off investments - (200) (200) -
Net interest payable and similar (17,019) - (17,019) (9,372)
charges
Bank loan facility fees expensed on
merger - (2,415) (2,415) -
Total net interest cost (17,019) (2,415) (19,434) (9,372)
Profit on ordinary activities before
taxation 91,324 (78,940) 12,384 32,976
Tax on profit on ordinary activities 5 (18,149) 5,865 (12,284) (16,543)
Profit on ordinary activities after
taxation 73,175 (73,075) 100 16,433
Minority interest - equity 26 - 26 (84)
Profit for the financial period
attributable to shareholders 73,201 (73,075) 126 16,349
Dividends 6 (24,211) (15,203)
(Loss) / profit for the financial
year transferred to reserves (24,085) 1,146
Earnings per ordinary share
Basic (p) 7 0.04 5.91
Diluted (p) 7 0.04 5.89
Diluted (adjusted) (p) 4,7 24.50 18.28
*Comparative figures have been restated in accordance with merger accounting
principles.
Note: Operating profit for the year ended 31 December 2003 includes charges for
exceptional items of £11,829,000 as detailed in Note 4.
Consolidated Balance Sheet
At 31 December 2004
Group
----
2003
2004 Restated*
Note £'000 £'000
Fixed assets
Intangible assets 504,244 483,185
Tangible assets 33,400 33,456
Investments 10,605 9,957
548,249 526,598
Current assets
Stocks 42,638 42,414
Debtors due within one year 92,102 91,017
Debtors due after more than one year - 784
Cash at bank and in hand 19,126 23,586
153,866 157,801
Creditors: amounts falling due within
one year (74,047) (70,312)
Net current assets 79,819 87,489
Total assets less current liabilities 628,068 614,087
Creditors: amounts falling due after more (306,186) (276,276)
than one year
Provisions for liabilities and charges (6,561) (10,903)
Accruals and deferred income (184,081) (165,156)
Minority interests - equity (53) (79)
131,187 161,673
Capital and reserves
Called up share capital 29,946 29,790
Share premium account 187,755 184,494
Reserve for own shares 1,267 1,267
Other reserve 37,398 37,399
Merger reserve 34,540 34,540
ESOP trust shares (3,641) (3,641)
Profit and loss account (156,078) (122,176)
Equity shareholders' funds 8 131,187 161,673
*Comparative figures have been restated in accordance with merger accounting
principles.
Consolidated Cash flow Statement
For the Year Ended 31 December 2004
2004 2003
Note £'000 £'000
Net cash inflow from operating activities 9 88,184 79,065
Returns on investments and servicing of finance
Interest received 1,117 1,490
Interest paid (15,994) (10,773)
Net cash outflow from returns on investments and servicing of finance (14,877) (9,283)
Taxation
Corporation tax paid (9,752) (6,965)
Overseas taxes paid (4,235) (6,220)
Net cash outflow from taxation (13,987) (13,185)
Capital expenditure and financial investment
Purchase of publishing goodwill (1,665) (3,469)
Tangible fixed assets acquired (10,828) (5,689)
Tangible fixed assets sold 3,220 267
Purchase of unlisted investments (joint ventures) (1,427) (8,810)
Disposal of unlisted investments 1,151 -
Net cash outflow from capital expenditure and financial investment (9,549) (17,701)
Acquisitions and disposals
Purchase of businesses/subsidiary undertakings (net of cash and (86,250) (225,854)
overdrafts acquired)
Disposal of business/subsidiary undertakings - 1,045
Net cash outflow from acquisitions and disposals (86,250) (224,809)
Equity dividends paid (18,575) (13,787)
Net cash outflow before use of liquid resources and financing (55,054) (199,700)
Management of liquid resources - 11,988
Financing
Repayment of loans (120,156) (66,248)
New loans 165,218 214,784
Repayment of capital element of finance leases (40) (54)
Issue of ordinary share capital - 53,124
Issue costs - (1,553)
Proceeds from share options 3,416 1,009
Net cash inflow from financing 48,438 201,062
(Decrease) / increase in cash 10 (6,616) 13,350
Notes to the Financial Statements
1 Basis of Preparation
The financial information set out in the preliminary announcement does not
constitute statutory accounts within the meaning of Section 240 of the Companies
Act 1985, but is derived from those accounts. Statutory accounts for the year
ended 31 December 2003 have been delivered to the Registrar of Companies and
those for the year ended 31 December 2004 will be delivered following the
Company's Annual General Meeting. The statutory accounts for the year ended 31
December 2004 will be despatched to shareholders by 1 April 2005 for approval at
the Annual General Meeting on 18 May 2005. The auditors have reported on those
accounts, their reports were unqualified and did not contain statements under
Section 237(2) or (3) of the Companies Act 1985.
The preliminary announcement has been prepared in accordance with accounting
policies consistent with the financial statements for the year ended 31 December
2004 and in accordance with applicable United Kingdom accounting standards.
2 Segmental Analysis
Analysis by market sector
Operating profit before
exceptional items and
goodwill amortisation
Turnover
2004 2003 2004 2003
£'000 £'000 £'000 £'000
Academic & Scientific Division
Scientific, Technical & Medical 151,978 109,445 42,966 27,017
Humanities & Social Sciences 92,334 87,822 21,302 18,754
244,312 197,267 64,268 45,771
Professional Division
Financial Information 60,212 49,130 16,339 10,251
Insurance, Law & Tax 33,136 39,570 5,455 4,555
93,348 88,700 21,794 14,806
Commercial Division
Telecoms & Media 37,695 34,982 8,882 7,943
Maritime, Trade & Transport 39,395 37,737 3,964 1,558
Commodities 17,181 13,020 2,208 1,437
International Conferences 72,294 69,970 7,227 7,794
166,565 155,709 22,281 18,732
504,225 441,676 108,343 79,309
Amounts written off goodwill (49,741) (21,310)
Exceptional items (26,784) (15,651)
Total net interest cost (19,434) (9,372)
Profit before tax 12,384 32,976
Geographical analysis by location of business
Operating profit before
exceptional items and
goodwill amortisation
Turnover
2004 2003 2004 2003
£'000 £'000 £'000 £'000
United Kingdom 268,241 230,900 65,761 52,191
North America 136,294 121,747 28,957 14,171
Continental Europe 75,214 71,147 9,327 9,330
Rest of World 24,476 17,882 4,298 3,617
504,225 441,676 108,343 79,309
Amounts written off goodwill (49,741) (21,310)
Exceptional items (26,784) (15,651)
Total net interest cost (19,434) (9,372)
Profit before tax 12,384 32,976
Geographical analysis of turnover by location of customer
2004 2003
£'000 £'000
United Kingdom 93,851 89,235
North America 167,460 134,565
Continental Europe 157,439 146,694
Rest of the World 85,475 71,182
504,225 441,676
3 Operating Profit
Continuing Total Total
operations Acquisitions 2004 2003
3 (a) Net operating costs
£'000 £'000 £'000 £'000
Increase in stock of finished goods and work in progress (977) (65) (1,042) (2,635)
Raw materials and consumables 154,225 4,421 158,646 162,745
Depreciation and other amounts written off tangible and
intangible fixed assets 53,943 4,616 58,559 29,996
Staff costs in total 146,969 3,676 150,645 133,307
Other operating charges
(including exceptional items (note 4)) 77,910 10,868 88,778 72,093
432,070 23,516 455,586 395,506
The acquisition of Dekker represents the only material acquisition in the year.
The impact on operating costs is shown above.
4 Exceptional Items
2004 2003
£'000 £'000
Exceptional operating costs 9,963 11,829
Goodwill impairment 15,000 -
Exceptional items charged to operating profit 24,963 11,829
Merger costs 15,703 -
Loss on disposal of tangible fixed assets 921 -
(Profit) / loss on sale or termination of a business (3) 3,822
Amounts written off investments 200 -
Bank loan facility fees expensed on merger 2,415 -
44,199 15,651
Tax on operating exceptional items (2,486) (2,576)
Tax on non-operating exceptional items (3,379) -
38,334 13,075
Operating costs for the year ended 31 December 2004 are stated after charging
exceptional items of £24,963,000, (2003: £11,829,000) consisting of impairment
of £15,000,000 to goodwill, costs of re-organising book publishing operations in
the UK and US of £4,200,000, redundancy costs of £3,657,000, property move costs
of £762,000 and other costs of reorganisation of £1,344,000.
The 2003 charge of £11,829,000 consists of costs of re-organising academic
publishing operations in the US of £1,705,000, costs associated with the
attempted acquisition of Bertelsmann Springer of £1,581,000, the write-off of
bank loan facility fees of £874,000 and business restructuring costs of
£7,669,000.
5 Tax on Profit on Ordinary Activities
The tax charge comprises:
2004 2003
Current tax £'000 £'000
UK corporation tax at 30% (2003: 30%) 6,990 10,551
Foreign Tax 8,979 4,661
Adjustments in respect of prior years (6,964) (856)
Total current tax 9,005 14,356
Deferred tax 3,279 2,187
Total tax on profit on ordinary activities 12,284 16,543
6 Dividends
2004 2003
£'000 £'000
Ordinary equity shares
Interim
Taylor & Francis (0.9 per share)* - 1,359
Informa (2.66p per share) - 3,651
T&F Informa (2.8p per share) 8,342 -
Final**
Taylor & Francis (1.9p per share)* - 2,755
Informa (4.94p per share) - 7,438
T&F Informa (5.33p per share) 15,869 -
24,211 15,203
* As adjusted to take account of the transfer of shares in Taylor & Francis
Group plc to T&F Informa plc on the merger of Taylor & Francis Group plc and
Informa Group plc, (dividend per share adjusted by a factor of 1.7).
** This dividend was paid under a scheme of arrangement instead of as a final
dividend.
Holders of 1,739,339 ordinary shares of 10p each have waived their rights to
receive dividends.
7 Earnings per Share
Basic
The basic earnings per share calculations are based on a profit on ordinary
activities after taxation of £126,000 (2003: profit of £16,349,000). This profit
on ordinary activities after taxation is then divided by the weighted average
number of shares in issue less those non-vested shares held by the employee
share ownership trusts, which is 296,971,000 (2003: 276,493,000).
Diluted
The diluted earnings per share calculation is based on the basic earnings per
share calculation above except that the weighted average number of shares
includes all dilutive options granted by the balance sheet date as if those
options had been exercised on the first day of the accounting period or the date
of the grant, if later, giving a weighted average of 298,757,000 (2003:
277,604,000). In accordance with FRS 14 the weighted average number of shares
includes the estimated maximum number of shares payable to the vendors of
Routledge Publishing Holdings Limited assuming that there are no claims for
compensation by the Group that will reduce this deferred consideration and
assuming that the Company does not exercise its option to pay the balance of
deferred consideration in cash. The deferred consideration shares are also
assumed for the purposes of this calculation to have been issued on 1 January
2004 at the closing mid-market share price on 31 December 2004 of 377.5p, making
336,000 (2003: 423,000) ordinary shares that could potentially be issued.
Diluted (adjusted)
The diluted adjusted earnings per share calculation has been made to allow
shareholders to gain a better understanding of the trading performance of the
Group. It is based on the diluted earnings per share calculation above except
that profits are adjusted for goodwill amortisation and the after tax effect of
exceptional items as follows:
2004 2003
£'000 £'000
Profit on ordinary activities after taxation attributable to shareholders 126 16,349
Goodwill amortisation 34,741 21,310
Operating exceptional items after tax (note 4) 22,477 9,253
Non operating exceptional items after tax (note 4) 15,857 3,822
Adjusted profit on ordinary activities after taxation 73,201 50,734
The table below sets out the adjustments in respect of diluted potential
ordinary shares:
2004 2003
No. '000 No. '000
Weighted average number of shares used in basic earnings per share calculation 296,971 276,493
Share options 1,450 688
Shares potentially to be issued or allotted 336 423
Weighted average number of shares used in diluted earnings per share calculation 298,757 277,604
8 Reconciliation of Movements in Consolidated Equity
Shareholders' Funds
2003
2004 Restated
£'000 £'000
Profit for the year 126 16,349
Dividends (24,211) (15,203)
Retained (loss) / profit for the year (24,085) 1,146
Currency translation difference on foreign currency net investments (9,817) (3,802)
Proceeds of new share issues (net) 3,416 64,330
(30,486) 61,674
Opening equity shareholders' funds 161,673 103,640
Prior year adjustment; reclassification of investment in ESOP shares - (3,641)
Closing equity shareholders' funds 131,187 161,673
9 Reconciliation of Operating Profit to Net Cash Inflow from
Operating Activities
2004 2003
£'000 £'000
Operating profit 48,639 46,170
Merger costs (15,703) -
Depreciation and amortisation 58,559 29,966
Profit on sale of tangible fixed assets (92) (25)
Decrease / (increase) in stocks 2,377 (670)
Decrease in debtors 1,474 4,641
Decrease in creditors (7,070) (1,017)
Net cash inflow from operating activities 88,184 79,065
10 Reconciliation of Net Cash Flow to Movement in Net Debt
2004 2003
£'000 £'000
(Decrease) / increase in cash net of overdrafts in the year (6,616) 13,350
Increase in bank loans and loan notes (45,022) (148,482)
Cash flow from decrease in deposit accounts - (11,988)
Change in net debt resulting from cash flows (51,638) (147,120)
Foreign exchange translation difference 11,297 6,515
Non-cash movements (2,441) (114)
Increase in net debt during the year (42,782) (140,719)
Opening net debt (259,205) (118,486)
Closing net debt (301,987) (259,205)
11 Analysis of Net Debt
At At 31
1 January Exchange December
2004 Non-cash Cash flow movement 2004
items
£'000 £'000 £'000 £'000 £'000
Cash at bank and in hand 23,586 - (4,460) - 19,126
Overdrafts (1,845) - (2,156) - (4,001)
Net cash 21,741 - (6,616) - 15,125
Bank loans due in less than one year (4,201) (5,156) 4,201 - (5,156)
Loan notes due in less than one year (455) (5,877) 143 - (6,189)
Bank loans due in more than one year (270,353) 2,741 (49,406) 11,297 (305,721)
Loan notes due in more than one year (5,877) 5,877 - - -
Finance leases due in less than one year (40) (29) 40 - (29)
Finance leases due in more than one year (20) 3 - - (17)
Total (259,205) (2,441) (51,638) 11,297 (301,987)
Non-cash items represent an addition of £26,000 to tangible fixed assets held
under finance leases and a write off of bank loan facility fees £2,415,000.
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