RNS Number : 6808S
Future PLC
24 November 2011
 



24th November 2011

 

FUTURE PLC

Preliminary results for the year ended 30 September 2011

Future plc (LSE: FUTR), the international special-interest media group and leading digital publisher, today announces its preliminary results for the year ended 30 September 2011. An analyst presentation will be held today at 10.00am at the offices of Numis, 10 Paternoster Square, London EC4M 7LT.

 

Financial Summary:

2011

2010

Change

 

 

 

 

Revenue

£141.7m

£151.5m

-6%

EBITAE*

£6.6m

£10.1m

-35%

EBITAE margin

4.7%

6.7%

 

Reported Pre-tax (loss)/profit 

£(18.0)m

£5.6m

Loss from profit

Adjusted ** Pre-tax profit

£5.1m

£8.3m

-39%

Reported (loss)/earnings per share (p)

(5.9)p

1.7p

Loss from profit

Adjusted** earnings per share (p)

0.7p

2.4p

-71%

Net debt

£11.8m

£7.4m

Increased 59%

Impairment (US business)

£17.1m

Exceptional costs

£4.8m


Financial and operating headlines:
 

·       UK delivers resilient performance: strong digital revenue growth (up 36%) offsets managed decline in print revenues

·       US: significant loss driven by print - measures are in place to reduce scale of exposure and return US to profitability by 2013

·       Net debt increased by £4.4m to £11.8m

·       Extension of bank facility by 12 months to November 2013, to provide flexibility for ongoing restructuring programme in FY12

·       Dividend holiday to conserve cash/strengthen balance sheet - expected to resume payment in 2013

·       Operating costs reducing by an estimated annualised £4.5m by end of FY12

·       Changes in top-level management and focus - and removal of corporate costs

·       Restructuring in UK complete, but ongoing in US - further exceptionals in FY12

·       Merger of two businesses to create integrated product line

·       Launched over 100 digital titles for tablet devices - encouraging trends, six million Apple Newsstand app downloads in first month

 

Peter Allen, Future's Chairman, said:

"Given the decline in Group performance and profitability, the Board took action to remove corporate level cost and change the way the company is managed. We have installed as new Group CEO and Finance Director, two individuals with a proven track record of running an efficient business for Future in the UK and achieving rapid and profitable digital transformation."

Mark Wood, Future's Chief Executive, said:

"Building on the digital success in the UK, we have taken steps to reorganise the company, merge UK and US operations and create a single global product line. These changes will enable us to operate more efficiently and return the US business to profitability. The changes will also mean that we can accelerate our transition to a digital business model and start to sell our entire range of digital content to high-value audiences in the US and other key markets.

 

"Digital channels such as the Apple iPad are rapidly opening up new routes to markets in which our niche products can quickly build a loyal following. Future's success on the Apple Newsstand, with more than six million downloads of our apps in a month, has demonstrated our ability to develop and deliver digital products at high speed, and underlines the global appeal of content ranging from Cycling, Games and Technology to Music, Film and Crafts. So, as a result, we look forward to the year ahead with confidence."

- ends -

Enquiries:

Future plc
Mark Wood, Chief Executive                                                   Tel: 020 7042 4007
Graham Harding, Group Finance Director                                 Tel:
01225 788203
Chris Taylor, Head of Communications                                     Tel: 020 7042 4033/07980 221942

FTI Consulting:
Charles Palmer/Jon Snowball                                                    Tel: 020 7831 3113

Notes
* EBITAE represents operating profit before amortisation and impairment of intangible assets, and exceptional items.

** Adjusted profit before tax and earnings per share are based on statutory results, but exclude amortisation and impairment of intangible assets and exceptional items, and related tax effects. 

The most significant foreign currency affecting the Group is the US Dollar. The average exchange rate for the year was $1.61=£1 (2010: $1.56=£1), representing a 3% weakening of the US Dollar against Sterling.

About Future:
Future plc is an international special-interest media group and leading digital publisher, listed on the London Stock Exchange (symbol: FUTR).  Founded in 1985 with one magazine, today we have operations in the UK, US and Australia creating 200 special-interest publications, apps, websites and events.  We hold market-leading positions in Games, Film, Music, Technology, Cycling, Automotive and Crafts. Our biggest-selling products include T3, Total Film, Classic Rock, Guitar World and Official Xbox Magazine. Our websites include gamesradar.com, bikeradar.com, musicradar.com and techradar.com (the UK's number one consumer technology website). Future sells 2.9 million magazines each month; we attract more than 34 million monthly unique visitors to our websites; and we deliver over 100 digital editions and bespoke apps on tablet. Future exports or syndicates publications to 89 countries, making us the UK's number one exporter and licensor of magazine content. Future was named Consumer Digital Publisher of the Year at the Association of Online Publishers Awards 2011.

Chairman's Statement

Future has delivered disappointing results in the past financial year, in line with previous announcements. As a result, the Board took decisive action to address the key problems, and to carry out a restructuring of the Group. It also appointed a new Chief Executive and Finance Director to eliminate significant cost and to take the business in a new direction.

 

The reorganisation saw the departure of Stevie Spring as Chief Executive and John Bowman as Group Finance Director, both of whom had made a valuable contribution to the refocusing and stabilisation of the business in recent years. They leave with our thanks.

 

The Board recognised the strong performance of Future's UK operation and in particular the digital innovation there, which has built on both the strength of its market positions and quality of its content to deliver new products and generate impressive digital revenue growth. We therefore asked the UK CEO, Mark Wood, and his Finance Director, Graham Harding, to step up to lead the business.

 

This change enabled us to eliminate an expensive layer of central corporate cost. The new management, supported by the Board, is subsequently taking out further costs in the US as it integrates a previously separate, sub-scale subsidiary into a business which will be focussed on selling the full range of its content into the US and other major world markets.

 

Given their experience and success in the UK operation, we have great confidence in the new leadership and their ability to manage the transition to new business models at speed and within a tightly managed cost base.

 

We expect to see the Group return to profit growth in the year ahead. 

 

Financial Performance

 

2011 results show Group revenue of £141.7m (2010: £151.5m) and EBITAE of £6.6m (2010: £10.1m). This disappointing performance was caused mainly by sharply reduced print copy and advertising sales in the US. Exceptional items in the year totalled £4.8m (2010: Nil) and relate to restructuring costs, property provisions and other one-off costs, reflecting lower headcount. The ongoing restructuring will lead to further exceptional cash costs estimated at £1.9m in the current year.

 

The Group has taken a non-cash impairment charge of £17.1m (2010: Nil) against the carrying value of the intangible assets relating to the Group's US subsidiary to reflect more accurately the value of that business.

 

After this charge, amortisation of intangibles of £1.2m (2010: £2.7m) and net financing costs of £1.5m (2010: £1.8m), the Group recorded a pre-tax loss of £18.0m (2010: pre-tax profit of £5.6m).

 

Basic earnings per share were a loss of 5.9p (2010: earnings of 1.7p) and adjusted earnings per share were 0.7p (2010: 2.4p)

 

Financing & Dividend

 

We are pleased to have secured the continuing support of our banks with the extension of our loan facility until November 2013.

 

Borrowings have increased from £7.4m to £11.8m this year and will increase further in the first half of 2012 as we finalise the reorganisation. Thereafter we should be cash generative again.

 

In this context, the Board recommends a dividend holiday until Group borrowings have reverted to less than two times Bank EBITDA, which we anticipate happening at the beginning of the 2013 financial year. 

 

The interim dividend of 0.5p (2010: 0.5p), which was paid on 3 October 2011, was therefore the only dividend payment relating to the year.

 

Board

 

I am delighted to have been appointed Chairman of Future in August. During the past year, the Board has been significantly refreshed with the arrival of Mark Whiteling in November 2010, who chairs the Audit Committee, and Manjit Wolstenholme in February 2011, who is our Senior Independent Director. Seb Bishop, who has been a Board member since 2007, provides a valuable digital and entrepreneurial perspective to the business. Mark Wood and Graham Harding complete the current Board membership.

 

I would like to thank the previous Chairman, Roger Parry, for more than a decade of service to Future, during which he steered the company through some turbulent and difficult periods. I would also like to thank Patrick Taylor and Michael Penington, who retired from the Board in February, for their invaluable contributions as directors of the company.

 

Summary

 

The current Board is satisfied that it has taken appropriate steps to put Future in a better position to continue to achieve exciting growth in digital markets and that it has put a management team in place which is capable of reversing the company's recent decline and transforming its growth prospects. We look forward to the year ahead with growing confidence and anticipation following a very difficult period.

 

Peter Allen

Chairman

24 November 2011

 

Chief Executive's Statement (Extract from Annual Report)

Overview

 

Future delivered disappointing results for the past year, in line with previous announcements. While the UK business showed resilience in challenging conditions, the US operations tipped back into loss, pulling down the Group's overall final results. 

 

However, over the same period, Future has become a leader among publishers in driving digital transformation. It is now well positioned for rapid expansion of its online and mobile businesses, which will be the drivers of the company's profit growth. 

 

We have taken swift action to reorganise the company, merging our UK and US operations, and creating a single global product line. These changes enable us to operate more efficiently and will get our US business back to profitability by FY13.

 

These actions also mean that we can accelerate our transition to a digital business model. Instead of seeing our business constrained by geography and defined by separately focussed UK and US operations, we will now sell our entire range of high-quality content into the borderless digital markets opening up worldwide.

 

Our aim is to see the US operation transformed from loss-maker, and the US market become one of the key drivers of profit growth from Future's current product line.

 

The key to the change is that new digital channels, such as the Apple iPad, are rapidly opening up new routes to international markets in which our niche products can quickly build a loyal following. Future's success on the Apple Newsstand − with more than six million downloads of our apps in the month of launch alone − has demonstrated our ability to develop and deliver digital products at high speed. It also underlines the global appeal of our content, ranging from Cycling, Games and Technology to Music, Film and Digital Design.

 

Meanwhile, digital advertising revenues from websites and mobile devices are showing strong and sustainable growth.

 

A new Future business is taking shape and we have the content, products and skills to make it a success.

 

Results

 

The results for 2011 show a decline in full year revenue of 6% and a reduction in Group EBITAE from £10.1m to £6.6m. Exceptional costs of £4.8m have been incurred, mainly as a result of the restructuring actions taken in the period, predominantly in the UK. Further exceptional costs will be incurred in respect of central costs and the US business in the current financial year.

 

The UK operation, representing 73% of revenues, was resilient in challenging market conditions, delivering revenues of £103.4m - down just 2% from 2010, and EBITAE of £12.5m - down 3%. This is a good result in a period when most publishers saw print sales decline. Future also saw sales of its magazines in retail outlets fall, but this was largely offset by strong growth in UK digital revenues, which were 36% up year-on-year.

 

In contrast, US revenues were down 13% at $62.4m (2010: $72.0m) and the operation delivered an EBITAE loss of $5.6m. Newsstand print sales fell 32% and print advertising fell 21%. These were partially offset by growth in digital revenues - up 25%, and our customer publishing operation, Future Plus, saw growth of 30%.

 

Reorganisation

 

We have carried out reorganisations and restructuring in both the UK and US. The departures of several senior executives have contributed to cost savings, as have other headcount reductions. The changes in the UK enabled us to reduce resources dedicated to print and create headroom to bring in digital expertise. Overall we are reducing operating costs across the Group by an estimated annualised £4.5m by the end of FY12. 

 

We have also introduced a new hub and spoke production model which means more agility and efficiency in the way we produce content. This model enables us to stretch resources across titles more efficiently and manage an integrated UK-US production process. This is key to more cost efficient content management and flexible use of outsourced production.

 

We are migrating the US business to a predominantly digital model and have taken steps to de-risk remaining print properties. We will improve the margins of residual print titles by merging production with the appropriate teams in the UK.

 

A year of fast progress towards a digital world

 

Future operates market-leading websites in the Games, Technology, Cycling and Music sectors, and traffic has grown significantly over the past year: we are now generating over 34 million unique visits each month. Digital revenues grew by 31% in the period.

 

TechRadar.com - the UK's leading consumer technology news and reviews website - has shown particularly impressive growth, nearly doubling revenues and generating a margin close to 50%. 

 

We have launched or upgraded more than 25 websites in the year, and recently launched new e-commerce platforms in the crafts sector: www.themakingspot.com and www.weheartcraft.co.uk

 

In the past year, Future has launched over 100 digital titles on the iPad and other tablets. T3, our mainstream gadget magazine, is one of the UK's most successful iPad magazines, selling over 18,000 digital editions each month. And Future has developed its own app creation software, FutureFolio, which we are already licensing to other publishers.

 

We have developed our own in-house video production capability, making short-form video a core part of our Technology, Games, Cycling and Film products. Video generates higher advertising rates and has become an essential component of interactive tablet editions.

 

We have continued to demonstrate efficient management of our print portfolio, selling or closing a number of titles in the audio-visual and automotive areas, and launching three new magazines in the UK. One of them, Practical Photoshop, immediately became market leader in its sector.

 

Another, Mollie Makes - a new craft and lifestyle magazine for women aged 18-35 - was one of Future's most successful launches ever, with early editions sold out and trading on e-Bay at six times the cover price. Mollie Makes was designed and pre-launched via blogging on relevant specialist websites and has set a template for ways we can use blogs and social media - including Facebook - to plan and pre-publicise new digital and print products. 

 

Building our business around high-value audiences

 

The spread of broadband connections and proliferation of tablet devices are opening up entirely new digital markets for fast-moving content producers. For Future, this is a golden opportunity. Niche content businesses can flourish in this environment. Suddenly we can deliver content to enthusiasts in places we could never reach when restricted by the need to print, ship and deliver physical magazines. Those audiences may be cyclists in the US, Linux programmers in Korea or rock music fans in Japan.

 

Future's previous silo structure meant we never realised the full potential of our high-value digital content outside the UK market. Yet we have clear evidence of how great that potential can be. Nearly a third of TechRadar's monthly seven million unique visitors are already in the US. We now plan to roll out a US-customised version of TechRadar as a high priority so that we can monetise that interest.

 

Following that, we have immediate plans to expand our Games and Cycling digital businesses in the US and then look at Photography, Film, Music and Digital Design. Our new business model enables us to utilise our high-quality US commercial and editorial teams to manage a succession of product roll-outs in the coming months.

 

Apple Newsstand statistics reveal Total Film, Fast Car, T3 and many of our Games and Music titles all have large global audiences. Some of our specialist B2B products, such as those aimed at the animation and web design industries, have far bigger audiences in the US and Asia than in the UK. Overall, more than 75% of our sales through Newsstand have come from outside the UK. These figures point the way for our business growth.

 

We are an information and entertainment source in fast-growing markets. Future's products typically reach affluent enthusiasts who become loyal members of the communities around our magazines or digital offerings. We also provide valuable news and trusted advice to people seeking information to guide decision-making, whether that's about which film to go and see or what new smart-phone to buy.

 

The common theme among all our audiences is that they are highly attractive to advertisers.

 

As well as selling advertising around our content, we are also increasingly able to develop valuable commercial partnerships with retailers, generating transaction royalties or producing interactive advertising for our partners. Meanwhile, the in-house skills which have powered our digital growth are now driving our customer publishing business, Future Plus. Its UK and US operations are increasingly based around providing pioneering multi-platform content, products and services. Customers range from Best Buy and Coats & Clark in the US to Tesco, O2, Canon and Page & Moy in the UK.

 

Current Trading Outlook

 

Given the recessionary trends in the broader economy and the pace of change in the publishing industry we remain cautious about overall prospects for print and digital content businesses. But we believe Future is well positioned to seize opportunities as they emerge, above all in the fast-changing digital markets.

 

The Board has supported steps taken by management to reduce headcount and overall cost levels in the UK, and subsequently in the US as well. The result will be an integrated, more efficient and more focussed business.

 

Trading in the first month of FY12 has been in line with our expectations.

 

Summary

 

The new management team has taken fast and decisive action to restructure the business, manage costs down and accelerate transition into digital growth areas.

 

·     UK + US - we are creating a unified business, delivering significant efficiencies and revenue opportunities

·     Digital  − we are creating a unified digital product line to leverage global audiences and exposure to online advertising

·     Print - we  are managing circulation declines where they occur proactively, efficiently and effectively

·     Content - in our chosen markets we are leveraging our content to generate new and incremental revenue streams, including through our customer publishing operation, Future Plus

 

Future has a dynamic culture which is enabling us to reinvent the company at speed.

 

We have assembled a strong management team on both sides of the Atlantic. We are eager to exploit new technologies and apply Future's creativity, design flair, intellectual property and commercial skills to growing entirely new digital opportunities.

 

Importantly, we have a company which is full of talent and ambition to succeed. Despite a challenging year, our people have the energy, focus and commitment to help us build a bigger multi-platform business and make Future a global leader in the digital world.  As the Chairman has said, we look forward to the year ahead with growing confidence.

 

I am confident we have the skills, the content and the determination to make Future a global leader in the digital content world. 

 

Mark Wood

Chief Executive

24 November 2011

 

Financial Review

Introduction

 

This financial review is based on a comparison of the Group's results for the year ended 30 September 2011 with those for the year ended 30 September 2010. In running the business operationally, management use a number of Key Performance Indicators (KPIs) which are set out in some detail at the end of this document. One of the most important of those indicators is earnings before interest, tax, impairment, amortisation and exceptional items which is referred to as EBITAE.

 

An overview of the financial results for the year is set out below:

 

Year ended 30 September

2011

£m

2010

£m

Revenue

141.7 

151.5 

EBITAE

6.6 

10.1 

Exceptional items

(4.8)

Impairment of intangible assets

(17.1)

Amortisation of intangible assets

(1.2)

(2.7)

Operating (loss)/profit

(16.5)

7.4 

Net finance costs

(1.5)

(1.8)

(Loss)/profit before taxation

(18.0)

5.6 

Taxation

(1.3)

(0.1)

(Loss)/profit after taxation

(19.3)

5.5 




Basic (loss)/earnings per share (p)

(5.9)

1.7

Adjusted earnings per share (p)

0.7

2.4

Dividends relating to the year (p)

0.5

1.1




 

Revenues

 

Total Group revenues were down £9.8m or 6% (£8.9m or 6% in constant currency) to £141.7m in the year.

 

The tables below analyse Group revenues in sterling:

 

By country

% of
Group

2011
£m

2010
£m

Change
%

UK

73%

103.4

105.9

-2%

US

27%

38.8

46.2

-16%

Intra-group

-

(0.5)

(0.6)


Group revenue

100%

141.7

151.5

-6%

 

By type

% of
Group

2011
£m

2010
£m

Change
%

Circulation

57%

80.7

88.7

-9%

Advertising

30%

43.4

45.4

-4%

Customer Publishing

9%

12.1

11.6

+4%

Licensing, events & other

4%

5.5

5.8

-5%

Group revenue

100%

141.7

151.5

-6%

 

 

By media

% of
Group

2011
£m

2010
£m

Change
%

Digital

11%

16.2

12.4

+31%

Print

80%

113.4

127.5

-11%

Customer Publishing

9%

12.1

11.6

+4%

Group revenue

100%

141.7

151.5

-6%

 

 

EBITAE

 

The reduction in revenues, which was largely driven by the US performance, gave rise to a corresponding reduction in EBITAE which was down £3.5m or 35% to £6.6m. A breakdown of EBITAE by territory is shown below:

 


2011
£m

2010
£m

Change
%

UK

12.5 

12.9 

-3%

US

(3.5)

0.2 

 Loss from profit

Central costs

(2.4)

(3.0)

-20%

Total EBITAE

6.6 

10.1 

-35%

 

Further analysis of the key drivers behind the reduced level of EBITAE is provided in the table below which analyses the year-on-year variance across digital activities, print activities, customer publishing activities and overheads.

 


UK

£m

US
£m

Central

£m

Group
£m

Digital

+2.1

+0.8

-

+2.9

Print

-2.6

-4.7

-

-7.3

Customer Publishing

-

+0.1

-

+0.1

Overheads

+0.1

+0.1

+0.6

+0.8

Change in EBITAE

-0.4

-3.7

+0.6

-3.5

 

This table illustrates the impact of the transitional effect from print to digital and the success that the UK business has had to date in managing that transition. The restructuring actions taken in the UK towards the end of the financial year should ensure that the business continues to be able to manage that transition. For the US the transition has been much more pronounced and therefore more difficult to manage resulting in some of the restructuring actions undertaken in the year and the further actions planned in the current year.

 

Exceptional items

 

The exceptional items incurred in the year relate mainly to the restructuring actions in the UK and the US and amount to £4.8m in total, split mainly between restructuring and redundancy costs, and vacant property provisions as set out in the table below:

 


Provision for unoccupied property

£m

Restructuring

and redundancy

costs
£m

Other

costs

£m

Total
£m

UK

1.5

1.9

0.1

3.5 

US

-

0.4

-

0.4 

Central

-

0.1

0.8

0.9 

Total

1.5

2.4

0.9

4.8 

 

In the UK this has been focused on repositioning resources in the business to enable it to pursue digital opportunities more quickly and efficiently and this restructuring is substantially complete.

 

In the US as noted above the different print business model has been more significantly impacted by the challenging economic and operating environment and whilst some restructuring actions were taken in the year ended 30 September 2011 the new management team are working to restructure the operations further in the new financial year.

 

This ongoing restructuring plan combined with the departure of the former Chief Executive and Group Finance Director will give rise to further exceptional cash costs, which are estimated in the region of £1.9m, in the year ending 30 September 2012.

 

Impairment of intangible assets

 

As a result of the performance in the year of the US business, the Group has taken an impairment charge of £17.1m in the year against the carrying value of the intangible assets relating to the US business. This is a non-cash charge which restates the carrying value to a level which is representative of the current estimated fair value of that business based on current trading levels.

 

Group performance for year ended 30 September

 


2011
Revenue
£m

2011
Contribution
£m

2011
Margin
%

2011
% of
revenue

2010
Revenue
£m

2010 
Contribution 
£m 

2010
Margin
%

Games

39.2 

7.7 

20%

27%

43.0

9.0 

21%

Music & Movies

            32.4 

                    5.7 

      18%

         23%

         34.9

                7.9 

        23%

Technology

37.8 

9.0 

24%

27%

41.5

10.9 

26%

Active

32.8 

8.2 

25%

23%

32.7

7.1 

22%


142.2 

30.6 

22%

100%

152.1

34.9 

23%

Less: intra-group

            (0.5)




           (0.6)

                   -



141.7 

30.6 



151.5

34.9 


Overheads


(24.0)




(24.8)


EBITAE


6.6 

4.7%



10.1 

6.7%

Exceptional items


                  (4.8)




                       -


Impairment


(17.1)




-


Amortisation


(1.2)




(2.7)


Operating (loss)/profit


 

(16.5)




 

7.4 


 

 

UK performance for year ended 30 September

 


2011
£m

2010
£m

Change
%

Circulation revenue

64.6

66.5

-3%

Advertising revenue

28.1

27.9

+1%

Customer publishing

5.9

6.7

-12%

Licensing, events & other

4.8

4.8

0%

Total revenue

103.4

105.9

-2%

EBITAE

12.5

12.9

-3%

EBITAE margin

12.1%

12.2%


 

Future's UK business (comprising 73% of Group revenue) remained resilient. Following a decline in first-half revenues of 3%, revenues in the second half declined by only 2% so that revenue for the year was down 2% compared with 2010.

 

EBITAE for the year was £12.5m, representing a margin of 12.1% of revenue. This is a similar operating margin as in 2010 (12.2%). 

 

This performance is encouraging in a media sector that continues to experience very significant advertising and newsstand challenges and reflects the underlying strength of our special-interest business, our continuing focus on operating performance in each sector and our ability to mitigate revenue disappointments swiftly.

 

Circulation revenue fell by 3% and within this, subscription revenue remained flat. Domestic newsstand revenue declined 6% and export revenue was flat.

 

Advertising revenue grew by 1% for the year largely due to growth in digital advertising exceeding the decline in print advertising. 

 

The following table shows the UK performance by sector. The strongest year-on-year performance came from Active, driven by the websites cyclingnews.com and bikeradar.com and growth in print titles lead by Cycling Plus.

 


2011
Revenue
£m

2011
Contribution
£m

2011
Margin
%

2011
% of
revenue

2010
Revenue
£m

2010
Contribution
£m

2010
Margin
%

Games

19.9

5.1

26%

19%

21.5

5.9

27%

Music & Movies

            24.0

                   5.7

       24%

        23%

          24.5

                6.3

      26%

Technology

29.8

8.9

30%

29%

31.0

9.0

29%

Active

29.7

8.3

28%

29%

28.9

7.3

25%


103.4

28.0

27%

100%

105.9

28.5

27%

Overheads


(15.5)




(15.6)


EBITAE


12.5

12.1%



12.9

12.2%

Exceptional items


                 (3.5)




                     -


Impairment


-




-


Amortisation


(0.4)




(1.3)


Operating profit


8.6




11.6


 

 

US performance for year ended 30 September

 


2011
$m

2010
$m

Change
%

Circulation revenue

25.8

34.6 

-25%

Advertising revenue

24.8

27.3 

-9%

Customer publishing

9.9

7.6 

+30%

Licensing, events & other

1.9

2.5 

-24%

Total revenue

62.4

72.0 

-13%

EBITAE

(5.6)

0.3 

Loss from profit

EBITAE margin

(9.0)%

0.4%


 

US revenue fell 13% in dollar terms, reflecting the closure of our Pregnancy group, a 12% further decline in print advertising, and a 31% reduction in sales at newsstand.

 

Total advertising revenue fell by 9%, as the growth in digital advertising of 21% was less than the reduction in print advertising.

 

Customer publishing recorded strong revenue growth through contracts with Best Buy and Coats & Clark.

 

The following table shows the US performance by sector.

 


2011
Revenue
$m

2011
Contribution
$m

2011
Margin
%

2011
% of
revenue

2010
Revenue
$m

2010
Contribution
$m

2010
Margin
%

Games

31.1

4.1

13%

50%

33.5

4.9

15%

Music & Movies

                    13.4

                               -

                 -

          21%

            16.2

                      2.5

          15%

Technology

12.9

0.1

1%

21%

16.3

3.0

18%

Active

5.0

(0.1)

(2)%

8%

6.0

(0.3)

(5)%


62.4

4.1

7%

100%

72.0

10.1

14%

Overheads


(9.7)




(9.8)


EBITAE


(5.6)

(9.0)%



0.3

0.4%

Exceptional items


                         (0.6)




                           -       


Impairment


(26.7)




-


Amortisation


(1.2)




(2.1)


Operating loss


(34.1)




(1.8)


 

 

Taxation

 

The Group continues to focus on compliance with all tax authorities in the territories in which it operates.

 

The taxation charge for the year amounted to £1.3m (2010: £0.1m), comprising a current taxation charge of £1.6m (2010: £1.0m credit) and a deferred taxation credit of £0.3m (2010: £1.1m charge). The 2011 charge arises in the UK where the standard rate of corporation tax is 27%. In the US the impact of current year and brought forward tax losses means that there is no material taxation charge relating to the US. Overall the effective rate for the Group when applied to the loss before taxation was -7%.

 

Earnings per share

 

Basic earnings per share for the Group were a loss of 5.9p (2010: earnings of 1.7p) whilst adjusted earnings per share were 0.7p (2010: 2.4p). The adjusted calculations are based on the (loss)/profit after taxation which is then adjusted to exclude exceptional items, impairment and amortisation of intangibles, and related tax effects. The adjusted profit after tax amounted to £2.2m (2010: £7.9m) and the weighted average number of shares in issue was 327.5m (2010: 327.3m).

 

Dividend

 

In light of the results for the year and the ongoing restructuring actions referred to in this report the Board does not recommend the payment of a final dividend for the year ended 30 September 2011. This means that the dividend for the year is 0.5p being the interim dividend which was paid on 3 October 2011.

 

Cash flow and net debt

 

Net debt at 30 September 2011 was £11.8m (2010: £7.4m), of which 77% was denominated in US dollars.

 

Cash generated from operations during the year ended 30 September 2011 amounted to £3.8m, a sharp fall from the £12.0m generated in the previous year driven by the weaker trading of the Group during the year. The other main cash inflow during the period related to taxation and amounted to £1.3m (2010: £1.2m). We expect to recommence tax payments during the current year.

 

Cash outflows exceeded the inflows in the year with the main outflows being in respect of:

 

·     Dividends paid in respect of FY10 of £3.6m (2010: £1.6m)

·    Capital expenditure of £3.6m (2010: £1.8m) of which £1.2m related to tangible fixed assets and £2.4m  related to intangible fixed assets, the largest element of which was web development;

·     Net interest payments of £1.2m (2010: £1.4m).

 

As noted in the Chairman's report, the net debt position will increase further in the first half of the current year due to the payment of the interim dividend on 3 October and cash outflow relating to the restructuring costs. We have therefore put in place an extension to our banking facility to 30 November 2013 and renegotiated covenants and other terms for the next 12 months as set out in the notes.

 

Net Finance Costs

 

Net finance costs amounted to £1.5m (2010: £1.8m). The reduction in costs reflected the greater balance of net debt denominated in US dollars during the year.

 

 

Credit facility

 

During the year to 30 September 2011 bank debt was provided under the terms of the banking facility signed in May 2009 and due to mature in November 2012.  Arrangement and other fees related to this facility totalled £1.0m and these are being amortised over the term of the facility. Interest payable is calculated as the cost of three-month LIBOR (currently approximately 0.7%) plus an interest margin of between 2.5% and 3.25%, dependent on the covenant ratio.

 

Based on the calculation of 2011 EBITDA for bank purposes, the Group had headroom of £4.1m over and above the level of bank debt at 30 September 2011.

 

As noted above, on 21 November 2011 we agreed an extension of the current banking facility for 12 months to 30 November 2013. This extension provides the Group with flexibility in the short term to carry out the restructuring plans as set out in the Chief Executive's statement. Fees relating to the extension amounted to £0.4m and these will be amortised over the remaining term of the facility.

 

Interest payable under the new banking facility is calculated as the cost of three-month LIBOR (as noted above) plus an interest margin of between 2.5% and 3.75%, dependent on covenant ratios.

 

The Board are confident that they have sufficient headroom and flexibility under the revised covenants to execute its plans as set out in this report.

 

 

Key Performance Indicators

An updated set of key performance indicators is presented at the end of this document.

 

 

Consolidated income statement

for the year ended 30 September 2011

 

 

2011

2010

 

Note

£m

£m

 

 


 

Revenue

1

141.7 

151.5 

 

 


 

Operating profit before exceptional items,

impairment and amortisation of intangible assets

 

 

6.6 

 

10.1 

Exceptional items

2

(4.8)

-

Impairment of intangible assets

7

(17.1)

-

Amortisation of intangible assets

7

(1.2)

(2.7)

 

 


 

Operating (loss)/profit

 

(16.5)

7.4 

Finance income

3

Finance costs

3

(1.5)

(1.8)

Net finance costs

3

(1.5)

(1.8)

(Loss)/profit before tax

 

(18.0)

5.6 

Tax on (loss)/profit

4

(1.3)

(0.1)

(Loss)/profit for the year

 

(19.3)

5.5 

 

 

 

Earnings per 1p Ordinary share

 

 

 

 

 

Note

2011

2010

 

Note

pence

pence

Basic (loss)/earnings per share

6

(5.9)

1.7 

Diluted (loss)/earnings per share

6

(5.9)

 1.6 

 

 

Consolidated statement of comprehensive income

for the year ended 30 September 2011

 

 

2011

2010

 

 

£m

£m

(Loss)/profit for the year

 

(19.3)

5.5 

 

 

 

 

Currency translation differences

 

0.1 

Cash flow hedges

 

0.1 

Other comprehensive income for the year

 

0.2 

 

 

 

 



Total comprehensive (loss)/income for the year

 

(19.3)

5.7 

 

 

Consolidated statement of changes in equity

for the year ended 30 September 2011

 

 

 

 

Share capital

 

Share premium

 

 

Merger reserve

 

Treasury reserve

Cash flow hedge reserve 

 

Retained earnings

 

Total equity

 

Note

£m

£m

£m

£m

£m

£m

£m

 

 

 

 

 

 

 

 

 

Balance at 1 October 2009

 

3.3 

24.5 

109.0 

(0.1)

(0.2)  

(55.0)

81.5 

 

 

 

 

 

 

 

 

 

Profit for the year

 

-  

-  

-  

-  

-  

5.5 

5.5 

 

 

 

 

 

 

 

 

 

Currency translation differences

 

-  

-  

-  

-  

-  

0.1 

0.1 

Cash flow hedges

 

-  

-  

-  

-  

0.1

-   

0.1 

Other comprehensive income for the year

 

 

-  

 

-  

 

-  

 

-  

 

0.1

 

0.1

 

0.2 

 

 

 

 

 

 

 

 

 

Total comprehensive income for the year

 

 

-  

 

-  

 

-  

 

-  

 

0.1

 

5.6 

 

5.7 

 

 

 

 

 

 

 

 

 

Final dividend relating to 2009

5

-  

-  

-  

-  

-  

(1.6)

(1.6)

Share schemes

 

 

 

 

 

 

 

 

- Value of employees' services

 

-  

-  

-  

-  

-  

0.5 

0.5 

- Deferred tax on share schemes

 

-  

-  

-  

-  

-  

0.1 

0.1 

Transfer between reserves

 

-  

-  

-  

0.1 

-  

(0.1)

-  

Balance at 30 September 2010

 

3.3 

24.5 

109.0 

-  

(0.1)

(50.5)

86.2 

 

 

 

 

 

 

 

 

 

Loss for the year

 

-  

-  

(19.3)

(19.3)

 

 

 

 

 

 

 

 

 

Currency translation differences

 

-  

-  

-  

-  

Cash flow hedges

 

-  

-  

-  

-  

Other comprehensive loss for the year

 

 

 

 

 

-  

 

-  

 

-  

 

-  

 

 

 

 

 

 

 

 

 

Total comprehensive loss for the year

 

 

 

 

 

-  

 

-  

 

(19.3)

 

(19.3)

 

 

 

 

 

 

 

 

 

Interim dividend relating to 2010

5

 

 

 

-  

-  

(1.6)

(1.6)

Final dividend relating to 2010

5

-  

-  

(2.0)

(2.0)

Share schemes

 

 

 

 

 

 

 

 

- Value of employees' services

 

-  

-  

0.4 

0.4 

- Deferred tax on share schemes

 

-  

-  

(0.1)

(0.1)

Treasury shares acquired

 

(0.3)

-  

-  

(0.3)

Balance at 30 September 2011

 

3.3

24.5

109.0

(0.3)

(0.1)

(73.1)

63.3 

 

 

Consolidated balance sheet

as at 30 September 2011

 

2011

2010

 

Note

£m

£m

Assets

 

 

 

Non-current assets

 

 

 

Property, plant and equipment

 

3.4 

3.2 

Intangible assets - goodwill

7

94.1 

110.9 

Intangible assets - other

7

2.6 

1.2 

Deferred tax

 

1.0 

0.9 

Total non-current assets

 

101.1 

116.2 

Current assets

 

 

 

Inventories

 

3.5 

3.4 

Corporation tax recoverable

 

-  

0.3 

Trade and other receivables

 

22.7 

23.8 

Cash and cash equivalents

8

12.5 

13.3 

Total current assets

 

38.7 

40.8 

Total assets

 

139.8 

157.0 

Equity and liabilities

 

 

 

Equity

 

 

 

Issued share capital

 

             3.3 

3.3 

Share premium account

 

           24.5 

24.5 

Merger reserve

 

         109.0 

109.0 

Treasury reserve

 

(0.3)

Cash flow hedge reserve

 

(0.1)

(0.1)

Retained earnings

 

(73.1)

(50.5)

Total equity

 

           63.3 

86.2 

Non-current liabilities

 

 

 

Financial liabilities - interest-bearing loans and borrowings

 

5.1 

7.8 

Financial liabilities - derivatives

 

0.4 

0.4 

Deferred tax

 

1.8 

2.0 

Provisions

10

2.1 

0.8 

Other non-current liabilities

 

1.9 

2.4 

Total non-current liabilities

 

11.3 

13.4 

Current liabilities

 

 

 

Financial liabilities - interest-bearing loans and borrowings

 

19.2 

12.9 

Financial liabilities - derivatives

 

0.3 

0.3 

Trade and other payables

 

39.6 

40.8 

Corporation tax payable

 

6.1 

3.4 

Total current liabilities

 

65.2 

57.4 

Total liabilities

 

76.5 

70.8 

Total equity and liabilities

 

139.8 

157.0 

 

 

 

 

 

 

Consolidated cash flow statement

for the year ended 30 September 2011

 

 

 

 

2011

2010

 

 

 

 

£m

£m

Cash flows from operating activities

 

 

 

 

 

Cash generated from operations

 

 

 

3.8 

12.0 

Tax received

 

 

 

1.4 

1.4 

Interest paid

 

 

 

(1.2)

(1.4)

Tax paid

 

 

 

(0.1)

(0.2)

Net cash generated from operating activities

 

 

 

3.9 

11.8 

Cash flows from investing activities

 

 

 

 

 

Purchase of property, plant and equipment

 

 

 

(1.2)

(0.8)

Purchase of magazine titles, websites and trademarks

 

 

 

(0.2)

Purchase of computer software and website development

 

 

 

(2.4)

(0.8)

Net cash used in investing activities

 

 

 

(3.6)

(1.8)

Cash flows from financing activities

 

 

 

 

 

Purchase of own shares by Employee Benefit Trust

 

 

 

(0.3)

Draw down of bank loans

 

 

 

10.0 

Repayment of bank loans

 

 

 

(7.2)

(9.9)

Equity dividends paid

 

 

 

(3.6)

(1.6)

Net cash used in financing activities

 

 

 

(1.1)

(11.5)

 

 

 

 

 

 

Net decrease in cash and cash equivalents

 

 

 

(0.8)

(1.5)

Cash and cash equivalents at beginning of year

 

 

 

13.3 

14.6 

Exchange adjustments

 

 

 

0.2 

Cash and cash equivalents at end of year

 

 

 

12.5 

13.3 

 

 

Notes to the consolidated cash flow statement

for the year ended 30 September 2011

 

A. Cash generated from operations

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

 

 

 

 

2011

2010

 

 

 

£m

£m

(Loss)/profit for the year

 

 

(19.3)

5.5 

Adjustments for:

 

 

 

 

Depreciation charge

 

 

1.2 

1.6 

Amortisation of intangible assets

 

 

1.2 

2.7 

Impairment of intangible assets

 

 

17.1 

Share schemes

 

 

 

 

- Value of employees' services

 

 

0.4 

 0.5 

Finance costs

 

 

1.5 

1.8 

Tax charge

 

 

1.3 

0.1 

Profit before changes in working capital and provisions

 

 

3.4 

12.2 

Movement in provisions

 

 

1.3 

(0.3)

Increase in inventories

 

 

(0.1)

(0.1)

Decrease/(increase) in trade and other receivables

 

 

1.2 

(0.7)

(Decrease)/increase in trade and other payables

 

 

(2.0)

0.9 

Cash generated from operations

 

 

3.8 

 12.0 

 

B. Analysis of net debt

 

 

1 October 2010

Cash flows

Finance leases entered into

Other non-cash changes

Exchange movements

30 September 2011

 

£m

£m

£m

£m

£m

£m

Cash and cash equivalents

13.3 

(0.8)

 

12.5 

Debt due within one year

(12.9)

(2.8)

 

(0.1)

(3.2)

(0.2)

(19.2)

Debt due after more than one year

(7.8)

 

(0.2)

2.9 

(5.1)

Net debt

(7.4)

(3.6)

(0.3)

(0.3)

(0.2)

(11.8)

 

 C. Reconciliation of movement in net debt

 

 

 

 

2011

2010

 

 

 

£m

£m

Net debt at start of year

 

 

(7.4)

(15.6)

Decrease in cash and cash equivalents

 

 

(0.8)

(1.5)

Movement in borrowings

 

 

(2.8)

9.9 

Finance leases entered into

 

 

(0.3)

Other non-cash changes

 

 

(0.3)

(0.3)

Exchange movements

 

 

(0.2)

0.1 

Net debt at end of year

 

 

(11.8)

(7.4)

 

 

Accounting Policies

 

Basis of preparation

This preliminary statement of annual results for the year ended 30 September 2011 is unaudited and does not constitute statutory accounts. The information contained in this statement is based on the statutory accounts for the year ended 30 September 2011. The statutory accounts have not yet been delivered to the Registrar of Companies nor have the auditors yet reported on these.

 

The statutory accounts are prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and International Financial Reporting Interpretations Committee's (IFRIC) interpretations as adopted by the European Union (EU) applicable at 30 September 2011, and those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

 

The accounting policies adopted are consistent with those set out in the Group's statutory accounts for the year ended 30 September 2010.

 

Basis of consolidation

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

 

The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition.  Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest.  The excess of the cost of acquisition over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill.

 

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

 

 

Notes

 

1.   Segmental reporting

 

 (a) Geographical segment

 

(i)  Segment revenue

 

2011

2010

 

£m

£m

UK

103.4 

105.9 

US

38.8 

46.2 

Revenue between segments

(0.5)

(0.6)

Total

141.7 

151.5 

 

 

(ii) Segment EBITAE

 

2011

2010

 

£m

£m

UK

12.5 

12.9 

US

(3.5)

0.2 

Central costs

(2.4)

(3.0)

Total segment EBITAE

6.6 

10.1 

 

EBITAE is used by the Board to assess the performance of each segment. Segment EBITAE represents the EBITAE earned by each segment without the allocation of central administration costs.

 

 

(b) Business segment

 

(i) Revenue by segment

 

 

2011

2010

 

£m

£m

Games

39.2 

43.0 

Music & Movies

32.4 

34.9 

Technology

37.8 

41.5 

Active

32.8 

32.7 

Revenue between segments

(0.5)

(0.6)

Total

141.7 

151.5 

 

(ii) Gross profit by segment

 

 

2011

2010

 

£m

£m

Games

7.7 

9.0 

Music & Movies

5.7 

7.9 

Technology

9.0 

10.9 

Active

8.2 

7.1 

Add back: distribution expenses

11.2 

12.0 

Total

41.8 

46.9 

 

 

 

2.    Exceptional items

 

 

2011

£m

2010

£m

Property costs

1.5 

Restructuring and redundancy costs

2.4 

Other costs

0.9 

Total

4.8 

 

The property costs relate to a vacant property provision made against surplus office space.

 

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

 

Other costs relate mainly to ongoing commercial dispute resolution.

 

3.    Finance income and costs

 

2011

2010

 

£m

£m

Interest receivable

Total finance income

Interest payable on interest-bearing loans and borrowings

(1.1)

(1.4)

Fair value loss on interest rate derivatives

(0.1)

Exchange gains

0.1 

Amortisation of bank loan arrangement fees

(0.3)

(0.3)

Other finance costs

(0.1)

(0.1)

Total finance costs

(1.5)

(1.8)

Net finance costs

(1.5)

(1.8)

 

4.    Tax on (loss)/profit

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

 

2011

2010

 

£m

£m

UK corporation tax

 

 

Current tax at 27% (2010: 28%) on the profit for the year

0.9 

1.9 

Adjustments in respect of previous years

0.7 

(1.3)

 

1.6 

0.6 

Foreign tax

 

 

Current tax on the loss for the year

Adjustments in respect of previous years

(1.6)

Current tax

1.6 

(1.0)

Deferred tax origination and reversal of timing differences

 

 

Current year charge/(credit)

0.4 

(0.1)

Adjustments in respect of previous years

(0.7)

1.2 

Deferred tax

(0.3)

1.1 

Total tax charge

1.3 

0.1 

 

 

 

 

5.    Dividends

 

Equity dividends

2011

2010

Number of shares in issue at end of year (million)

328.8

328.0

Dividends paid in year (pence per share)

1.1

0.5

Dividends paid in year (£m)

3.6

1.6

 

As outlined in the Chairman's statement, the Board recommends a dividend holiday until Group borrowings have reverted to comfortably less than two times Bank EBITDA.

 

The dividends totalling £3.6m paid during the year ended 30 September 2011 relate to the interim dividend for the six-month period to 31 March 2010 of 0.5 pence per share (£1.6m) and the final dividend declared for the year ended 30 September 2010 of 0.6 pence per share (£2.0m).

 

Whilst the Board recognises that, based on the full year adjusted EPS, the interim dividend of 0.5p per share paid on 3 October 2011 does not comply with its policy on dividend cover, it retains that policy for future dividends, namely that any such dividend should be covered at least two times by adjusted earnings per share.

 

The dividend totalling £1.6m paid during the year ended 30 September 2010 relates to the final dividend declared for the year ended 30 September 2009 of 0.5 pence per share.

 

 

6.    Earnings per share

 

Basic earnings per share are calculated using the weighted average number of Ordinary shares in issue during the year.  Diluted earnings per share have been calculated by taking into account the dilutive effect of shares that would be issued on conversion into Ordinary shares of awards held under employee share schemes.

 

Adjusted earnings per share removes the effect of the amortisation of intangible assets and any related tax effects from the calculation as follows:

 

Adjustments to profit after tax

 

 

2011

2010

 

£m

£m

(Loss)/profit after tax

(19.3)

5.5 

Add: Exceptional items

4.8 

Add: Impairment of intangible assets

17.1 

Add: amortisation of intangible assets

1.2 

2.7 

Tax effect of the above adjustments

(1.6)

(0.3)

Adjusted profit after tax

2.2 

7.9 

 

 

 

2011

2010

Weighted average number of shares in issue during the year:

 


- Basic

327,526,863

327,314,532

- Dilutive effect of share options

6,070,662

8,442,387

- Diluted

333,597,525

335,756,919

Basic (loss)/earnings per share (in pence)

(5.9)

1.7

Adjusted basic earnings per share (in pence)

0.7 

2.4

Diluted (loss)/earnings per share (in pence)

(5.9)

1.6

Adjusted diluted earnings per share (in pence)

0.7 

 2.3

 

The adjustments to (loss)/profit have the following effect:

 

2011

2010

 

pence

pence

Basic (loss)/earnings per share

(5.9)

1.7 

Exceptional items

1.5 

Impairment of intangible assets

5.2 

Amortisation of intangible assets

0.4 

0.8 

Tax effect of the above adjustment

(0.5)

(0.1)

Adjusted basic earnings per share

0.7 

2.4 

 

 

 

Diluted (loss)/earnings per share

(5.9)

1.6 

Exceptional items

1.5 

Impairment of intangible assets

5.2 

Amortisation of intangible assets

0.4 

0.8 

Tax effect of the above adjustment

(0.5)

(0.1)

Adjusted diluted earnings per share

0.7 

2.3 

 

 

7.    Intangible assets

 

 

Goodwill

Magazine  and website

Other

Total

 

£m

£m

£m

£m

Cost

 

 

 

 

At 1 October 2009

313.2 

15.0 

7.1 

335.3 

Additions

-  

0.1 

0.9 

1.0 

Exchange adjustments

0.2 

0.1 

0.3 

At 30 September 2010

313.4 

15.2 

8.0 

336.6 

Additions

-  

0.1 

2.6 

2.7 

Disposals

-  

-  

(0.1)

(0.1)

Exchange adjustments

0.3 

-  

0.1 

0.4 

At 30 September 2011

313.7 

15.3 

10.6 

339.6 

 





Amortisation

 

 

 

 

At 1 October 2009

(202.4)

(13.7)

(5.6)

(221.7)

Charge for the year

-  

(1.2)

(1.5)

(2.7)

Exchange adjustments

(0.1)

-

-

(0.1)

At 30 September 2010

(202.5)

(14.9)

(7.1)

(224.5)

Charge for the year

(0.2)

(1.0)

(1.2)

Impairment charge

(17.1)

-  

(17.1)

Disposals

0.1 

0.1 

Exchange adjustments

(0.1)

(0.1)

(0.2)

At 30 September 2011

(219.6)

(15.2)

(8.1)

(242.9)

 

 

 

 

 

Net book value at 30 September 2011

94.1 

0.1 

2.5 

96.7 

Net book value at 30 September 2010

110.9 

0.3 

0.9 

112.1 

Net book value at 1 October 2009

      110.8 

        1.3 

1.5 

      113.6 

 

Impairment tests for goodwill and other intangibles

 

In September 2011 the Group performed its annual impairment test on goodwill. As a result of the performance in the year of the US business an impairment charge of £17.1m (2010: nil) has been recognised in our US segment. No impairment was required in respect of our UK segment (2010: nil). The recoverable amount for the UK business exceeded its carrying value by £33.6m.

 

 

2011

2010

Goodwill

£m

£m

UK

89.1

89.1

US

5.0

21.8

Total

94.1

110.9

 

 

8.    Cash and cash equivalents 

 

 

 

 

2011

2010

 

 

 

£m

£m

Cash at bank and in hand

 

 

12.5

13.3

Cash and cash equivalents

 

 

12.5

13.3

 

9.    Financial liabilities - interest-bearing loans and borrowings

 

Non-current liabilities

 

 

Interest rate at

 

 

 

 

 

30 September

 

 

2011

2010

 

2011

 

 

£m

£m

Sterling term loan - unsecured

3.7%

 

 

4.9

7.8

Obligations under finance leases

3.0%-15.0%

 

 

0.2

-

Total

 

 

 

5.1

7.8

 

Current liabilities

 

 

Interest rate at

 

 

 

 

 

30 September

 

 

2011

2010

 

2011

 

 

£m

£m

Sterling term loan - unsecured

3.7%

 

 

2.9

 3.0

Sterling revolving loan - unsecured

3.7%

 

 

4.0

2.9

US Dollar revolving loan - unsecured

3.2%

 

 

12.2

7.0

 

 

 

19.1

12.9

Obligations under finance leases

3.0% - 15.0%

 

 

0.1

-

Total

 

 

 

19.2

12.9

 

During the year to 30 September 2011 bank debt was provided under the terms of the banking facility signed in May 2009 and due to mature in November 2012.  The bank borrowings and interest were guaranteed by Future plc, Future Holdings 2002 Limited, Future Publishing Limited and Future US, Inc. The total facility available to the Group amounted to £33.6m and this could be drawn in Sterling, US Dollars or Euros. Interest payable was calculated as the cost of three-month LIBOR (currently approximately 0.7%) plus an interest margin of between 2.5% and 3.25%, dependent on covenant ratio.

 

 

The availability of the facility was subject to certain covenants; the key bank covenants applicable at the end of the year were that: (i) net debt was not to exceed 2.0 times Bank EBITDA; (ii) net interest payable was to be covered at least four times by Bank EBITDA.  These covenants were tested quarterly on the basis of rolling figures for the preceding 12 months. The covenant position at the year-end is as set out in the following table.

 

 

30 September 2011

Covenant

Net debt/EBITDA

1.5

< 2.0 times

EBITDA/Interest

6.8

> 4.0 times

 

Based on the above calculations the Group had headroom of £4.1m at 30 September 2011.

 

As noted above on 21 November 2011 we agreed an extension of the current banking facility for 12 months to 30 November 2013 together with new covenant levels to give the Group flexibility above the two times Net debt/EBITDA covenant level until the quarter ended 30 September 2012 to carry out its restructuring plans. As part of the extension the Group granted security to its Banks, gave additional covenants and undertakings including an undertaking by the Board, consistent with the Chairman's statement on dividends, not to declare any dividends whilst Net debt/EDITDA ratio is more than two times. Fees relating to the extension amounted to £0.4m and these will be amortised over the remaining term of the facility.

 

Interest payable under the new banking facility is calculated as the cost of three month LIBOR (as noted above) plus an interest margin of between 2.5% and 3.75%, dependent on covenant ratio. The key covenants are as set out in the following table.

 


Bank covenant

Net debt/EBITDA

Periods from 31 December 2011 to 30 June 2012 -
between less than 2.55 and 2.8 times

30 September 2012 and following - less than 2.0 times

EBITDA/interest

More than 4.0 times

Cash flow Cover

Ratios to be met on a quarterly basis measured against an agreed budget

Capex

115% of agreed annual budget

 

In addition to the above there is a limit on exceptional cash costs which can be excluded from the calculation of Bank EBITDA in the year ended 30 September 2012 of £1.9m. The Board are confident that they have sufficient headroom and flexibility under these revised covenants to execute its plans as set out in this report.

 

 

10.  Provisions

 

 

Property and dilapidations

Other

Total

 

£m

£m

£m

At 1 October 2010

0.1 

0.7 

0.8 

Charged in the year

1.4 

0.7 

2.1 

Utilised in the year

(0.8)

(0.8)

At 30 September 2011

1.5 

0.6 

2.1 

 

The provision for property and dilapidations relates to obligations under a short leasehold agreement on vacant property. The provision has been discounted at a rate in line with the Group's post tax cost of capital which is 8.5%.

 

Other provisions as shown above relate to disposals made during 2007 and ongoing commercial dispute resolution.

 

All of the above provisions will potentially be utilised or will reverse during the next five years.

 

 

11.  Related party transactions

The Group has no material transactions with related parties which might reasonably be expected to influence decisions made by users of these financial statements.

 

            Key Performance Indicators


2011

2010

Corporate KPIs

 



Absolute EBITAE

 

£6.6m

£10.1m

Year on year movement in EBITAE

 

-35%

0%

Digital KPIs

 



Number of Unique Users logging onto our websites

30m(see note)

23m(see note)

Year on year movement in digital revenues

 

+31%

+16%

Number of digital magazines sold per month (thousands) 

 

35

2

Digital subscriber base (thousands)

 

50

4

Print KPIs 



Number of magazines sold per month

2.9m

3.4m

Print subscriber base (thousands)

1,126

1,319

Copies sold as a percentage of copies printed (including subscriptions)   

55%

59%

Year on year movement in print advertising revenues

-16%

-9%

 

Note

For each of our websites we know the number of page impressions and the number of unique visitors to that website. We do not know how many unique visitors visit more than one of our websites. The number presented here is the simple total of each website's number of unique visitors at the end of the financial year.

 


This information is provided by RNS
The company news service from the London Stock Exchange