Final Results
Ingenta PLC
22 March 2005
Date: Embargoed until 07.00am, Tuesday 22 March 2005
Contacts: Ingenta
Martyn Rose, Non-Executive Chairman
Simon Dessain, Chief Executive
Tel: 01865 799000
Website: www.ingenta.com
Hudson Sandler
Alistair Mackinnon-Musson
Philip Dennis
Tel: 020 7796 4133
Email: ingenta@hspr.co.uk
Ingenta plc
Unaudited Preliminary Results for the 15 months to 31 December 2004
Ingenta plc, the technology and services provider to the publishing and
information industries, is pleased to announce its preliminary results for the
15 months to 31 December 2004.
Highlights
• Sales in the 15 month period of £8.8m (2003: £8.5m)
• Sales achieved in adjacent markets
• New products and services launched
• Annualised overheads before exceptional items of £7.6m reduced by 18% on a
pro rata basis
• Gross profit £6.5m - stable margin of 74%
• 15 month loss of £3.3m (2003: £2.0m)
• Operating loss (before exceptionals and depreciation) reduced by 17% on
pro rata annualised basis
• Current trading showing further improvements
Martyn Rose, Non-Executive Chairman of Ingenta, said:
'During the 15 month period to the end of December 2004 we laid the foundations
for profitable trading through management change, lower operating costs and
enhanced products and services. The effect of these measures should flow through
into further improvements in the financial performance of the group during 2005.
'
Simon Dessain, Chief Executive Officer, added:
'Ingenta has a pre-eminent understanding of the online needs of publishers of
high value content. We have spent much of 2004 improving the delivery of our
services to our existing clients at reduced costs and in expanding into new
markets through introducing additional products and services.'
Notes to Editors:
Over 90% of Ingenta's revenues come from providing technology and associated
marketing services to publishers, in the form of fees and under long term
contracts. Ingenta provides a suite of software and services that enable
publishers of high value, subscription-based publications to make their content
available via the Internet.
Ingenta charges recurring fees for use of its market-leading technology and
services in the areas of content preparation, content enhancement, website
creation, marketing services, online distribution and subscriber access
management of subscription controlled content.
The services provided by Ingenta not only enable publishers to securely
disseminate their content online but they also create the opportunity for
publishers to make incremental revenues from their content. In 2004 the group
expanded the number of publishers with which it works by adding an additional 25
bringing the total to nearly 300.
The depth of Ingenta's technical skills, its market leadership and its profound
understanding of the issues faced by publishers attempting to derive new
revenues from online delivery of high value content remain key business
advantages for the group.
Ingenta's three principal activities are as follows:
1) IngentaConnect (www.ingentaconnect.com)
2004 saw the launch of IngentaConnect, a service that is used by nearly 300
academic publishers to provide online worldwide access to those conducting
academic or scientific research. The service, already delivering more than 12
million user sessions a month, allows free downloads to paid-up subscribers of a
publication, with other users able to purchase individual articles.
IngentaConnect therefore enables publishers to access a far wider audience for
their content, beyond their traditional subscriber bases. Institutions also
engage Ingenta to create online student course packs, which generate a further
royalty stream for publishers. Ingenta has also created a small number of
premium services of direct benefit to users of IngentaConnect, for which there
is a yearly charge.
2) Information Commerce and Publication Websites
Publishers have a range of complex needs to maximise the value of the content
they create, which may include increasing awareness and readership, capturing
data about customers, revenue goals or cost targets for online delivery. All
these aims require publishers to have flexible tools to rebundle, rebrand and
market their content online and also to create branded websites through which
users can purchase and access this content.
Ingenta provides a range of software and services to meet these needs, the core
of which is a set of software and services called Information Commerce Services
(ICS).
3) Publishers Communications Group (PCG)
PCG offers a range of specialised marketing services to meet the needs of
scholarly and professional publishers. They include a Market Intelligence
Service designed to assist publishers in planning and marketing new products,
Promotion Services to expand the awareness of their publications or products to
new audiences and Representation Services which offers publishers a European or
North American sales, marketing and customer service presence to minimise costs
and provide customers with locally-based contacts.
Ingenta plc
Unaudited Preliminary Results for the 15 months to 31 December 2004
Chairman's Statement
The 15 month period to 31 December 2004 was one in which Ingenta continued to
reduce its operating costs and built the foundations for a return to growth in
its core markets, for the development of new revenue opportunities, and for
achieving profitability.
Finance and Operations
Turnover in the 15 month period was £8.8m (year to 30 September 2003: £8.5m).
The gross margin was stable at 74% (year to 30 September 2003: 76%). As the
group generates a substantial proportion of its sales in US dollars, the
depreciation in the US dollar exchange rate during the 15 month financial period
had an adverse effect on reported revenues. Our reported turnover at constant
currencies would have been higher by some £0.5m.
This currency effect also contributed to reductions in the group's US overheads
when translated into sterling. Overall, group overheads (excluding exceptional
items) were £9.5m in the period (2003: £9.3m), representing a 18% reduction on a
pro rata annualised basis.
As a result of cost reduction actions taken, the loss before tax and exceptional
items in the 15 month period was £3.0m (12 months to 30 September 2003: loss
£2.8m), inclusive of £1.8m invested in Research and Development, which was
expensed through the profit and loss account as incurred. The period showed an
improving trading trend overall.
Following the management changes during the year described below, a thorough
review of the group's activities was carried out and implementation of a
programme of change is underway. As a result, an exceptional charge of £0.7m has
been included in the accounts for the 15 months to 31 December 2004 to cover the
costs of reorganisation, onerous leases and aborted acquisitions. This, together
with a Research & Development tax credit of £0.4m for the period (2003: credit
of £0.9m) has resulted in a net loss for the financial period of £3.3m (2003:
loss £2.0m).
The group benefited from the raising of additional finance during the period of
£5.0m and had cash balances at 31 December 2004 of £0.9m (2003: overdraft of
£0.3m). As noted above, the group is claiming a substantial further Research &
Development tax credit in respect of 2004, prudent provision for which has been
included in the 2004 accounts. Our previous experience supports our confidence
that the claim will be paid in full and consequently it has been included in our
cash flow forecasts.
The focus for 2004 was on rolling out enhanced products and services which
improve reliability, lower the cost of delivery and enhance growth prospects.
The group's new Information Commerce Services (ICS) software product was
launched in 2004 and has already secured its first customer, Institute of
Physics Publishing.
In late 2004, the group's new journal hosting platform, IngentaConnect
(www.ingentaconnect.com) was also launched, to industry acclaim. The early
success our new online platform has achieved within the information industry is
demonstrated by the increasing usage it is experiencing - now already well in
excess of 12 million user sessions a month. IngentaConnect replaces our two
large previous sites, www.ingenta.com and www.ingentaselect.com, which will be
retired producing further cost savings.
In addition, Ingenta's activities with Google, including Google Scholar, provide
both parties with benefits and traffic which should continue to reinforce
Ingenta's value proposition to its customers and assist in keeping client
retention rates at their current high level.
The increased operational efficiency of the above new services has enabled
Ingenta to maintain its gross margins, despite competitive pressures. Key
operating metrics, such as website usage, error rates and costs per employee,
have shown healthy improvements during the year, largely made possible by the
central importance Ingenta places on software engineering in order to automate
tasks, improve reliability and so drive down the cost of delivering services to
clients.
The depth of Ingenta's technical skills, its market leadership and its deep
understanding of the issues faced by publishers attempting to derive new
revenues from online delivery of high value content remain key business
advantages for the group.
Staff
During the period the number of people employed by Ingenta declined further,
from 128 to 114 at year end, as a result of further process automation and
continued cost control. Ingenta saw low staff turnover during the period in its
operating units which undoubtedly contributed to its ability to increase
throughput and productivity in the face of declining staff numbers.
The Board wishes to recognise the substantial contribution made by all of
Ingenta's staff and to thank them for their continuing dedication and
commitment. The significant change the business has made and is undertaking
could only have been achieved with their support.
As already announced, the Board appointed Simon Dessain as Chief Executive
Officer during the last quarter of the year. Simon spent over 20 years in
commercial and management roles in international software and technology
businesses before joining Ingenta.
Simon succeeded Mark Rowse, whom the Board would like to thank for his six years
of contribution to the executive team, especially during Ingenta's early and
formative stages of development. As shareholders are aware, Mark will maintain
an involvement with Ingenta via his ongoing role as a non-executive director.
Current Trading and Prospects
Following the management changes, fundraising and group reorganisation
undertaken in 2004, together with new product and service launches, Ingenta has
laid the foundations for achieving the critical goal of profitability for 2005.
The improvements in trading performance, combined with a lower cost base and
ongoing sales successes, provide the Board with confidence this can be achieved.
Martyn Rose
Chairman
22 March 2005
Consolidated profit and loss account for the 15 months ended 31 December 2004
15 months ended 15 months ended 15 months ended Year Ended
31 December 2004 31 December 2004 31 December 2004 30 September 2003
Pre exceptional Exceptional
items items
Unaudited Unaudited Unaudited Audited
£m £m £m £m
Turnover 8.8 8.8 8.5
Cost of sales (2.3) (2.3) (2.0)
Gross Profit 6.5 6.5 6.5
Administrative expenses
Other operating expenses (9.5) (9.5) (9.3)
Exceptional items:
- onerous lease provisions - (0.5) (0.5) -
- aborted acquisition costs - (0.1) (0.1) -
- reorganisation costs - (0.1) (0.1) -
(9.5) (0.7) (10.2) (9.3)
Operating loss (3.0) (0.7) (3.7) (2.8)
Interest payable - (0.1)
Loss on ordinary activities before
taxation (3.7) (2.9)
Tax on loss on ordinary activities 0.4 0.9
Loss for the financial period (3.3) (2.0)
Loss per share (basic and diluted) 2.5p 2.4p
Consolidated balance sheet
31 December 2004 30 September 2003
Unaudited Audited
£m £m
Fixed assets
Tangible assets 0.4 1.0
Investments 0.2 0.3
0.6 1.3
Current assets
Debtors and work in progress 2.7 2.4
Cash & bank 0.9 -
3.6 2.4
Creditors: amounts falling due within one year
Deferred income (2.0) (1.4)
Other (2.9) (4.3)
(4.9) (5.7)
Net current liabilities (1.3) (3.3)
Total assets less current liabilities (0.7) (2.0)
Creditors: amounts falling due after more than one
year
Deferred income - (0.5)
Other - (0.1)
- (0.6)
Provisions for liabilities and charges (0.5) (0.5)
Net liabilities (1.2) (3.1)
Capital and reserves
Called up share capital 7.5 5.4
Share premium account 21.0 18.0
Merger reserve 11.1 11.1
Reverse acquisition reserve 12.7 12.7
Profit and loss account (53.5) (50.3)
Equity shareholders' deficit (1.2) (3.1)
Consolidated cash flow statement for the 15 months ended 31 December 2004
15 months ended Year Ended
31 December 2004 30 September 2003
Unaudited Audited
£m £m
Cash flow from operating activities
Operating loss (3.7) (2.8)
Depreciation charge 0.7 0.6
Impairment of leasehold improvements - 0.1
(Increase)/Decrease in debtors (0.3) 0.5
Increase/(Decrease) in creditors and provisions (0.6) (2.4)
Net cash outflow from operating activities (3.9) (4.0)
Taxation received 0.3 0.5
Capital expenditure & financial investments
Purchase of fixed assets (0.1) (0.1)
Management of liquid resources
Purchase of short term deposits (0.7) -
Net cash outflow from management of liquid resources (0.7) -
Net cash outflow before financing (4.4) (3.6)
Financing
Issues of shares at a premium 5.0 2.3
Repayment of principal under finance leases (0.1) (0.3)
Net cash inflow from financing 4.9 2.0
Increase/(Decrease) in cash in the year 0.5 (1.6)
Statement of consolidated total recognised gains and losses for the 15 months
ended 31 December 2004
15 months ended Year ended
31 December 2004 30 September 2003
Unaudited Audited
£m £m
Loss for the financial period (3.3) (2.0)
Currency translation differences on 0.2 0.1
foreign currency net investments
Total recognised losses for the period (3.1) (1.9)
Notes to the announcement of unaudited results for the period ended 31 December
2004
1 Basis of preparation
The preliminary announcement has been prepared in accordance with applicable
accounting standards and under the historical cost convention.
Ingenta's Directors regularly review forecasts of trading and cash flows and
examine these against available funding. As noted in the circular to
shareholders of 29 October 2004 they have undertaken a review of sales and
expense forecasts and funding needs including the expected receipt of a £0.4m
Research and Development tax credit in respect of 2004 (2003: £0.3m). Because of
the nature of such claims there is uncertainty as to the value and timing of
receipt of the amount claimed. On the basis that the sum claimed is received as
forecast, the Directors have a reasonable expectation that the group has
sufficient resources to continue in operational existence for the foreseeable
future and thus continue to adopt the going concern basis in the preparation of
these financial statements.
The principal accounting policies of the group have remained unchanged from
those set out in the 2003 annual accounts.
2 Basis of consolidation
The consolidated accounts comprise the accounts of Ingenta plc, the company, and
its subsidiary undertakings made up to 31 December 2004. The results of
subsidiaries acquired are included in the consolidated profit and loss account
from the date control passes. Intra-group balances are eliminated fully on
consolidation.
3 Segmental reporting
The group's turnover and loss on ordinary activities before taxation are derived
entirely from its principal activity.
The analysis by geographical area of turnover is set out below:
Sales by Destination Sales by Origin Sales by Destination Sales by Origin
15 months ended 15 months ended Year ended Year ended
31 December 31 December 30 September 30 September
2004 2004 2003 2003
Unaudited Unaudited Audited Audited
Turnover £'m £'m £'m £'m
United Kingdom 4.3 5.6 3.2 4.7
USA 3.6 3.2 4.7 3.8
Rest of World 0.9 - 0.6 -
Total 8.8 8.8 8.5 8.5
4 Loss per share
The basic loss per share has been calculated by dividing the loss for the
financial period by the weighted average number of ordinary shares of
130,244,269 (2003: 84,906,207) in issue during the period. The company had no
dilutive ordinary shares in either period which would serve to increase the loss
per ordinary share and there is therefore no difference between the loss per
ordinary share and the diluted loss per ordinary share.
5 Reconciliation of movements in equity shareholders' funds
Group 15 months ended Year ended
31/12/2004 30/09/2003
Unaudited Audited
£m £m
Loss for the year (3.3) (2.0)
Net exchange adjustments 0.2 0.1
New share capital issued 5.4 2.6
Expenses of share issue (0.4) (0.3)
Net increase/(reduction) in shareholders' funds 1.9 0.4
Opening shareholders' (deficit) / funds (3.1) (3.5)
Closing shareholders' deficit (1.2) (3.1)
6 Publication of non-statutory accounts
The financial information set out in this preliminary announcement does not
constitute statutory accounts as defined in Section 240 of the Companies Act
1985.
The balance sheet as at 31 December 2004 and the group profit and loss account,
statements of total recognised gains and losses, consolidated cash flow
statement and associated notes for the period then ended have been extracted
from the group's unaudited draft 2004 statutory financial statements upon which
no audit opinion has been provided. It is expected that the audited accounts
will include an audit report which will contain a modification concerning an
uncertainty over going concern relating to the amount and timing of receipt of
the Research & Development tax credit referred to above.
7 Copies of announcement
Copies of this announcement will be available from the company's registered
office at 23-38 Hythe Bridge Street, Oxford OX1 2ET.
This document is confidential and is only for distribution in the United Kingdom
to persons to whom such a communication is permitted by the Financial Services
and Markets Act 2000 (Financial Promotion) Order 2001 or by any other Order made
pursuant to section 21(5) of the Financial Services and Markets Act 2000 and, if
permitted by applicable law, for distribution outside the United Kingdom to
professionals or institutions whose ordinary business involves them in engaging
in investment activities. It is not intended to be distributed or passed on,
directly or indirectly, to any other class of persons. This document is being
supplied to you solely for your information and may not be copied, reproduced,
further distributed to any other person or published, in whole or in part, for
any purpose.
The information in this document does not constitute, or form part of, any offer
to sell or issue, or any solicitation of an offer to purchase or subscribe for,
any shares in the Company nor shall this document, or any part of it, or the
fact of its distribution, form the basis of, or be relied on, in connection with
any contract.
- ENDS -
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