RNS Number:2831S
Euromoney Institutional InvestorPLC
20 November 2003
Euromoney
Institutional
Investor PLC
Preliminary Announcement
September 30 2003
Contents
Chairman's Statement
Group Profit & Loss Account
Group Balance Sheet
Group Cash Flow Statement
Group Statement of Total Recognized Gains & Losses
Reconciliation of Movements in Shareholders' Funds
Notes to the Preliminary Announcement
Chairman's statement
Highlights 2003 2002 change
Turnover #158.9 m #179.7 m -12%
Operating profit* #23.8 m #29.1 m -18%
Profit before tax, goodwill and exceptional items #21.3 m #25.2 m -15%
Profit before tax #7.4 m #20.6 m -64%
Adjusted diluted earnings per share* 20.5 p 24.3 p -16%
Dividend 14.75 p 14.75 p =
Net debt #67.1 m #62.8 m +7%
*(Before goodwill amortization, goodwill impairment and exceptional items as set
out in the attached profit and loss account)
References to profits in the narrative below are to operating profit before
goodwill amortization and impairment.
Euromoney Institutional Investor PLC, the international publishing, events and
electronic information group reports a profit before tax, goodwill amortization
and exceptional items of #21.3 million in the year to September 30, against
#25.2 million for the previous 12 months. The directors recommend a final
dividend of 9.75p, making a total of 14.75p, the same as the previous year.
Adjusted diluted earnings a share were 20.5p, against 24.3p in 2002.
The company operated in a most difficult business environment during 2003. The
war in Iraq, a significant fall in the numbers of people travelling on business,
a declining US dollar, and the scare over SARS contributed to an already
unfavourable business climate as financial institutions cut advertising,
subscriptions, sponsorship and training. Throughout, the group maintained its
commitment to position itself for growth, to remain as profitable as possible,
and to continue to seek acquisitions. In August, the group completed its first
significant acquisition for two years, paying up to #16.5 million for HedgeFund
Intelligence Limited.
Turnover fell from #180 million to #159 million, largely as a result of the fall
in financial advertising, particularly in the US. The weakness of the US dollar
accounted for nearly half the decline, but the group's currency hedging policy
minimised the effect on profits. The results demonstrate the group's continued
resilience in tough markets.
The fall in turnover was the same in the second half as the first. However,
turnover in the month of September was marginally higher than in September 2002,
and profits in the month were the highest since September 2000, thanks to an
excellent performance from Euromoney in particular, while advertising revenues
at Institutional Investor improved for the first time in many months. In total,
September accounted for 16% of the group's turnover, and 40% of profits.
The results of the financial publishing businesses depend heavily on the
advertising of global financial institutions, and Wall Street investment banks
in particular. Both have suffered significant cuts over the past couple of
years. As a result, financial advertising revenues fell #4.1 million to #32.8
million and profits fell #3.4 million to #10.4 million. The Institutional
Investor titles, with their focus on the pensions and asset management world,
suffered most, with advertising revenues down 24%. Asiamoney and Latin Finance
also suffered falls in advertising revenues but were able to compensate for this
through the launch of new products.
In contrast, Euromoney, with its debt and emerging markets focus, proved more
robust. The September issue of Euromoney, published to coincide with the annual
IMF/World Bank meeting, achieved revenues close to their highest for five years.
This excellent performance helped the magazine achieve advertising revenues for
the year close to 2002's level.
Business publishing experienced contrasting performances across its different
sectors. Profits fell #2.5 million to #3.8 million after a 12% fall in
advertising revenues. The travel titles, which cover the aviation, shipping,
business travel and duty-free sectors, accounted for most of this fall and there
is little sign of any recovery in this sector. In pharmaceuticals, advertising
revenues weakened after a strong first half although the profit impact was
mitigated by continued growth in subscription revenues. Both the energy and
legal publishing businesses had excellent years, increasing profits and
continuing to grow through the launch of new products. Gulf Publishing,
acquired in August 2001 when it was loss-making, made a good contribution. The
strategy of growing the business through the roll-out of new products such as
events and handbooks under the World Oil and Hydrocarbon Processing brands is
proving very successful.
In contrast to publishing, both the events and training sides of the business
have held up well. Sponsored conferences and the Institutional Investor
memberships were the best performers, emphasizing the value of the group's high
quality face-to-face meeting businesses. Events profits fell #1.7 million to
#6.7 million in 2003, although half of this was due to the absence of Vinisud,
the biennial wine exhibition run by our French business meeting subsidiary. Of
the other four key annual conferences run by the group, three managed to
increase revenues despite the difficult markets.
The training businesses performed well after a difficult 2002. Profits fell 10%
to #4 million despite suffering from the continued constraints of cuts in
company training budgets, and travel fears following the unrest in the Middle
East and the SARS outbreak in Asia. Business in Asia has picked up post-SARS
and there are also signs of a recovery at MIS, our Boston-based audit and
information security subsidiary.
Profits from the database and information services businesses increased 55% to
#2.7 million. After heavy investment in building ISI's emerging market database
in 2000 and 2001, the business reached breakeven in September 2002. It has
remained profitable and continued to grow throughout 2003, adding new revenues
of $1.2 million - nearly twice the pace it achieved in 2002 - improving its
retention rate and significantly reducing its dependence on the financial
sector. ISI revenues have more than doubled to $16.2 million since its
acquisition in 1999. The Dealogic capital markets database joint ventures
experienced a slight fall in subscription revenues, but continue to make a
significant contribution despite the cuts in customer headcount.
Net debt at September 30 was #67.1 million against #62.8 million 12 months
earlier. The group continues to generate strong cash flows with nearly half its
revenues generated from subscriptions and training. The acquisition in August
of HedgeFund Intelligence, a leading hedge fund publisher and event organizer,
was financed from the group's existing multi-currency revolving credit facility.
The initial consideration was #11 million in cash, with a further payment of up
to #5.5 million payable in February 2005 depending on HFI's profits for the year
to November 30 2004. HFI is performing well and the group has accrued for the
full deferred payment at year end.
In the first half, two small businesses were sold for a cash consideration of
#700,000 generating an exceptional gain of the same amount. In the second half,
the group completed a review of its past acquisitions with a view to better
positioning the business for growth. As a result, certain businesses have been
merged and others restructured, and the associated goodwill is no longer
separately identifiable. This has led to an exceptional non-cash goodwill
impairment charge of #7.8 million. The charge relates to acquisitions made
before 1997, since acquisitions after this date are being amortized through the
profit and loss account in accordance with FRS 10.
In spite of the strong September performance, first quarter advertising revenues
may be flat or slightly lower, although there are more cheerful signs in the
company's training and event businesses. Two thirds of the group's revenues are
in dollars, and continued weakness of the US currency would affect first half
revenues. In general, the financial atmosphere has improved and the directors
believe that the strength of the group's titles, its operational gearing and
strong cash flows, and its investment in new products will drive profits as the
business climate improves.
END
Background note: Euromoney Institutional Investor PLC is listed on the London
and Luxembourg stock exchanges. It is a constituent of the FTSE 250 Index. Daily
Mail and General Trust plc owns 71% of the company.
Padraic Fallon
Chairman
November 20 2003
For further information please contact:
Padraic Fallon Chairman 020 7779 8556
Richard Ensor Managing 020 7779 8844
Director
Colin Jones Finance Director 020 7779 8666
or visit our website at: www.euromoneyplc.com
Back to contents
Group Profit & Loss Account
for the year ended 30 September 2003
2003 2002
Note #000's #000's
Turnover 2
Acquisition 293 -
Closed businesses 173 862
Other continuing operations 158,476 178,872
Total turnover 158,942 179,734
Operating profit before goodwill amortization 2
and impairment
Acquisition (49) -
Closed businesses 46 428
Other continuing operations 23,815 28,636
23,812 29,064
Goodwill amortization (6,787) (6,125)
Exceptional goodwill impairment 3 (7,830) -
Operating profit/(loss) 2
Acquisition (314) -
Closed businesses 46 428
Other continuing operations 9,463 22,511
Total operating profit 9,195 22,939
Share of operating profit in associates 418 413
Exceptional profit on disposal/closure of 3 701 1,533
businesses
Profit on ordinary activities before interest 10,314 24,885
and tax
Interest receivable and similar income 1,600 589
Interest payable and similar charges (4,518) (4,828)
Net interest (2,918) (4,239)
Profit on ordinary activities before tax 7,396 20,646
Tax on profit on ordinary activities (3,101) (3,961)
Release of prior years' tax provisions - 6,754
Total tax (charge)/credit on profit on ordinary 4 (3,101) 2,793
activities
Profit on ordinary activities after tax 4,295 23,439
Equity minority interests (226) 38
Profit for the financial year 4,069 23,477
Dividends paid and proposed 8 (12,941) (12,941)
Retained (loss)/profit for the financial year (8,872) 10,536
Basic earnings per share 9 4.64p 26.76p
Diluted earnings per share 9 4.64p 26.76p
Adjusted diluted earnings per share before 9 20.50p 24.29p
goodwill amortization and exceptional items
Dividend per share 14.75p 14.75p
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Group Balance Sheet
as at 30 September 2003
2003 2002
#000's #000's
Fixed assets
Intangible assets 33,757 24,685
Tangible assets 8,666 9,893
Investments 505 195
42,928 34,773
Current assets
Debtors 47,017 40,007
Cash at bank and in hand 10,772 35,633
57,789 75,640
Creditors: amounts falling due within (59,907) (38,354)
one year
Net current (liabilities)/assets (2,118) 37,286
Total assets less current liabilities 40,810 72,059
Creditors: amounts falling due after more (64,680) (98,350)
than one year
Provisions for liabilities and charges - (127)
Accruals (17,032) (17,258)
Deferred income (32,330) (31,946)
Accruals and deferred income falling (49,362) (49,204)
due within one year
Net liabilities (73,232) (75,622)
Capital and reserves
Called up share capital 219 219
Share premium account 33,749 33,743
Capital redemption reserve 8 8
Profit and loss account (107,391) (109,775)
Equity shareholders' deficit (73,415) (75,805)
Equity minority interests 183 183
(73,232) (75,622)
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Group Cash Flow Statement
for the year ended 30 September 2003
2003 2002
Note #000's #000's
Net cash inflow from continuing 5 24,435 30,033
operating activities
Returns on investments and servicing
of finance
Interest received 1,600 589
Interest paid (3,116) (4,769)
Dividends paid to minorities (192) (126)
(1,708) (4,306)
Taxation
UK tax paid (4,265) (3,288)
Overseas tax paid (1,484) (1,090)
UK tax received 477 57
Overseas tax received 361 647
(4,911) (3,674)
Capital expenditure and financial
investment
Purchase of tangible fixed assets (1,258) (6,251)
Sale of tangible fixed assets 28 162
(1,230) (6,089)
Acquisitions and disposals
Purchase of unincorporated businesses - (379)
Purchase of subsidiary undertakings (11,218) -
Purchase of additional interests in (166) (43)
subsidiary undertakings
Cash acquired with subsidiary 480 -
undertakings
Proceeds on sale of businesses 701 1,772
(10,203) 1,350
Equity dividends paid (12,941) (12,941)
Cash (outflow)/inflow before financing (6,558) 4,373
Financing
Issue of new ordinary share capital 6 4
Redemption of secured loan stock (16) (35)
Repayment of loan by associate - 398
Revolving credit facilities:
Increase in borrowings 21,303 34,236
Repayment of borrowings (52,138) (31,759)
Loan repaid to DMGT group company (4,774) (12,163)
Loan received from DMGT group company 17,640 12,163
Receipts on forward hedges - 533
(17,979) 3,377
(Decrease)/increase in cash during the 6 (24,537) 7,750
year
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Group Statement of Total Recognized Gains and Losses
for the year ended 30 September 2003
2003 2002
#000's #000's
Profit for the financial year 4,069 23,477
Foreign exchange translation differences 4,477 6,801
Tax on foreign exchange translation - (740)
differences
Total recognized gains and losses for the 8,546 29,538
year
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Reconciliation of Movements in Shareholders' Funds
for the year ended 30 September 2003
2003 2002
#000's #000's
Profit for the financial year 4,069 23,477
Dividends paid and proposed (12,941) (12,941)
(8,872) 10,536
Proceeds from exercise of share options 6 4
Reinstatement of goodwill 6,779 512
Other recognized gains and losses relating to 4,477 6,061
the year
Net decrease in shareholders' deficit 2,390 17,113
Opening shareholders' deficit (75,805) (92,918)
Closing shareholders' deficit (73,415) (75,805)
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Notes to the Preliminary Announcement 2003
1 Basis of Preparation
The financial information set out in this announcement does not constitute the
company's statutory accounts for the years ended September 30 2003 but is
derived from those accounts. Statutory accounts for 2002 have been delivered to
the Registrar of Companies, and those for 2003 will be delivered following the
company's annual general meeting. The auditors have reported on those accounts;
their report was unqualified and did not contain statements under section 237
(2) or (3) of the Companies Act 1985.
The financial information for the year ending September 30 2003 has been
prepared in accordance with the accounting policies set out in the group's 2002
annual report, except for the reclassification of accruals which were included
in creditors due within one year and are now included in accruals and deferred
income on the face of the balance sheet.
2 Segmental analysis
United Kingdom North America Rest of World Total
2003 2002 2003 2002 2003 2002 2003 2002
#000's #000's #000's #000's #000's #000's #000's #000's
Turnover
By
destination:
Other
continuing 29,283 32,406 62,877 71,558 66,316 74,908 158,476 178,872
businesses
Closed
businesses - 59 - 272 173 531 173 862
Acquisitions 156 - 93 - 44 - 293 -
29,439 32,465 62,970 71,830 66,533 75,439 158,942 179,734
United Kingdom North America Rest of World Total
2003 2002 2003 2002 2003 2002 2003 2002
#000's #000's #000's #000's #000's #000's #000's #000's
Turnover
By activity
and source:
Financial 24,456 26,118 32,412 40,492 1,408 1,502 58,276 68,112
publishing
Business 18,828 22,606 9,607 11,193 2,636 2,935 31,071 36,734
publishing
Training 13,207 13,982 5,187 6,236 1,702 2,194 20,096 22,412
Conferences and 14,162 14,786 14,722 15,199 6,352 7,793 35,236 37,778
seminars
Databases and 4,371 4,312 3,052 3,156 6,374 6,368 13,797 13,836
information services
Closed - 105 - 267 173 490 173 862
businesses
Acquisitons* 293 - - - - - 293 -
75,317 81,909 64,980 76,543 18,645 21,282 158,942 179,734
United Kingdom North America Rest of World Total
2003 2002 2003 2002 2003 2002 2003 2002
#000's #000's #000's #000's #000's #000's #000's #000's
Operating
profit
By activity
and source:
Financial 6,839 7,866 3,521 5,831 87 173 10,447 13,870
publishing
Business 2,761 4,650 1,277 1,379 (286) 250 3,752 6,279
publishing
Training 2,900 2,923 758 1,137 325 389 3,983 4,449
Conferences
and seminars 2,424 3,584 3,388 3,087 866 1,712 6,678 8,383
Databases and 2,364 3,347 361 (983) 12 (606) 2,737 1,758
information
services
Closed (8) (11) 3 384 51 55 46 428
businesses
Acquisitions* (49) - - - - - (49) -
Unallocated
corporate (3,650) (6,026) (132) (77) - - (3,782) (6,103)
costs
13,581 16,333 9,176 10,758 1,055 1,973 23,812 29,064
Goodwill (7,053) (328) (7,543) (5,776) (21) (21) (14,617) (6,125)
amortization
Operating
profit
after goodwill
amortization 6,528 16,005 1,633 4,982 1,034 1,952 9,195 22,939
* Acquisition revenue and profit stem entirely from the financial publishing
sector.
The goodwill amortization of #14,617,000 (2002: #6,125,000) can be allocated as
follows; Business publishing, #6,889,000 (2002: #754,000); Conferences and
seminars, #1,559,000 (2002: #190,000); and Databases and information services,
#5,904,000 (2002: #5,181,000); Acquisitions, #265,000 (2002: #nil).
3 Exceptional items
Exceptional goodwill impairment
The group regularly performs a review of its portfolio and this year the review
has resulted in additional goodwill write offs in the profit and loss account.
The group has accelerated the amortization of goodwill on its recent Gulf
acquisition from 20 years to 10 years and has written down other portfolio
assets where goodwill was held on the balance sheet by #1,051,000. In
addition, the group has taken a writedown of #6,779,000 through the profit and
loss account for goodwill that was previously written off against reserves under
SSAP 22 on several investments either where the goodwill is now no longer
separately identifiable as a result of business merger or where the immediate
prospects for the business are uncertain.
Exceptional profit on disposal/closure of businesses
2003
In January 2003, the group sold two titles owned by Asia Law and Practice for a
profit of #701,000 after related sale costs. There was no goodwill associated
with the sale.
2002
In March 1999, the group sold its investment in 100% Design Limited for a cash
consideration of #743,000 and a performance based deferred consideration.
During 2002, the group received the final element of the deferred consideration
amounting to #1,772,000.
In the first half of 2002, the group closed its Technology + Media Limited
business, which resulted in a goodwill write off of #239,000.
4 Tax on profit on ordinary activities
2003 2002
#000's #000's
United Kingdom
Corporation tax at 30% (2002: 30%) 2,958 4,320
Associates 108 125
Release of prior years' provisions - (6,754)
Over provision in respect of prior years (523) (403)
2,543 (2,712)
Foreign tax
Overseas taxation 686 766
Under provision of overseas taxation in respect of prior 69 335
periods
Total current tax 3,298 (1,611)
Deferred tax
Origination and reversal of asset timing differences 83 (720)
Origination and reversal of liability timing 2,773 2,989
differences
Increase in discount (2,694) (2,923)
Over provision of deferred taxation in respect of prior (359) (528)
periods
Total deferred tax (197) (1,182)
Tax on profit on ordinary activities 3,101 (2,793)
The standard rate of current tax for the year, based on the UK standard rate of
corporation tax is 30% (2002: 30%). The current tax charge for the year is
different from 30% of profit before tax for the reasons set out in the following
reconciliation:
2003 2002
#000's #000's
Profit on ordinary 7,396 20,646
activities before tax
Tax at 30% 2,219 6,194
Factors affecting tax charge
/(credit):
UK goodwill 4,385 1,838
amortization
Non-taxable items and additional deductible UK items (1,629) (1,836)
US goodwill (1,590) (3,184)
amortization
US state 219 270
taxes
Disallowable 124 2,590
expenditure
Depreciation in excess of 11 20
capital allowances
Lower rates of tax on 13 (149)
overseas profits
Utilization of losses - (532)
brought forward
Release of prior years' - (6,754)
tax provisions
Over provisions in prior (454) (68)
years
Current tax charge/(credit) 3,298 (1,611)
for the year
The exceptional item in 2003 gives rise to a nominal tax charge as the element
relating to capital gains is not taxable in Hong Kong. The exceptional items in
2002 did not give rise to any tax charge or credit due to the availability of
brought forward capital losses and the non-deductible nature of UK goodwill
amortization on share acquisitions.
The release in 2002 of prior years' tax provisions of #6,754,000 relates to tax
provisions no longer required following agreement of certain open issues with
the UK Inland Revenue in relation to the group's US acquisition structure.
5 Reconciliation of operating profit to net cash inflow from operating activities
2003 2002
#000's #000's
Group operating 9,195 22,939
profit
Amortization of 6,787 6,125
goodwill
Impairment of 1,051 -
capitalized
goodwill
Goodwill 6,779 512
previously written
off to reserves,
reinstated and
written off (note 3)
Depreciation of 2,220 2,827
tangible fixed
assets
Loss on sale of 21 32
tangible fixed
assets
(Increase)/ (6,386) 9,091
decrease in
debtors
Increase/ 4,893 (10,646)
(decrease) in
creditors
Utilization of (125) (847)
property rental
provision
Net cash inflow 24,435 30,033
from continuing
operating
activities before
exceptional items
6 Reconciliation of net cash flow to movement in net debt
2003 2002
#000's #000's
(Decrease)/increase in cash during (24,537) 7,750
the year
Cash outflow/(inflow) from change 13,211 (2,442)
in debt finance
Decrease in net amounts due from 4,774 -
DMGT group undertakings
(6,552) 5,308
Other non-cash
items:
Currency 3,677 5,075
translation
differences
Other non-cash (1,382) -
changes
Movement in net (4,257) 10,383
debt in the year
Net debt at (62,846) (73,229)
October 1
Net debt at (67,103) (62,846)
September 30
7 Analysis of changes in net debt
Other At
At October 1 Exchange non-cash September 30
2002 Cash flow movements changes 2003
#000's #000's #000's #000's #000's
Cash at bank and 35,633 (24,318) (543) - 10,772
in hand
Bank overdrafts (76) (219) 3 - (292)
35,557 (24,537) (540) - 10,480
Debt due within (11,499) (17,624) 801 (839) (29,161)
one year
Debt due in more (98,350) 30,835 4,217 (1,382) (64,680)
than one year
(109,849) 13,211 5,018 (2,221) (93,841)
Amounts owed by 11,446 4,774 (801) 839 16,258
DMGT group
undertakings
Total (62,846) (6,552) 3,677 (1,382) (67,103)
8 Dividends
2003 2002
#000's #000's
Interim paid 5p per share (2002: 5p) 4,390 4,390
Final proposed 9.75p per share (2002: 9.75p) 8,560 8,560
12,950 12,950
Employees' Share Ownership Trust dividend (9) (9)
12,941 12,941
9 Earnings per share
2003 2002
#000's #000's
Basic earnings 4,069 23,477
Goodwill amortization 6,787 6,125
Exceptional goodwill impairment (note 3) 7,830 -
Exceptional profit on disposal/closure of businesses (701) (1,533)
(note 3)
Provision release in respect of prior period tax (note 4) - (6,754)
Adjusted earnings before goodwill amortization and 17,985 21,315
exceptional items
Number Number
000's 000's
Weighted average number of shares 87,796 87,793
Shares held by the Employees' Share Ownership Trust (59) (59)
87,737 87,734
Effect of dilutive share options - 1
Diluted weighted average number of shares 87,737 87,735
Pence per share Pence per share
Basic earnings per share 4.64 26.76
Effect of dilutive share options - -
Diluted earnings per share 4.64 26.76
Effect of goodwill amortization 7.74 6.98
Effect of exceptional goodwill impairment 8.92 -
Effect of profit on disposal/closure of businesses (0.80) (1.75)
Effect of prior years' provision release - (7.70)
Adjusted diluted earnings per share before goodwill 20.50 24.29
amortization and exceptional items
The adjusted diluted earnings per share figure has been disclosed since the
directors consider it to give a more meaningful indication of the underlying
trading performance.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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