DODS.L Regulatory News (DODS)

26 Jul 2007 07:01

Huveaux PLC26 July 2007 Huveaux PLC Interim Results for the six months ended 30 June 2007 Financial Highlights • Revenue up 8% to £21.7 million• EBITDA at £1.0 million (2006: £1.8 million)*• Profit before tax of £0.1 million (2006: £1.4 million)**• EPS of 0.02 pence (2006: 0.68 pence)** Operational Highlights • Significant sales and profits growth in Education Division• Strong outlook for Political Division following change of Prime Minister• Healthcare Division impacted by very weak French pharmaceutical advertising• Learning Division impacted by lower public sector training spend• Strategy in place to drive near-term financial and operational performance Summary of Results Six months to Six months to 30 June 2007 30 June 2006£'000 Unaudited Unaudited and Restated*** Turnover 21,663 20,075EBITDA* 963 1,780Normalised (loss)/profit before tax** 58 1,380(Loss)/profit before tax (1,525) 497Normalised earnings per share (basic)** 0.02p 0.68p(Loss)/earnings per share (basic) (0.75)p 0.24p * EBITDA is calculated as operating profit before amortisation, depreciation and restructuring costs** Normalised profit is stated before amortisation of intangible assets*** Restated for conversion to IFRS John van Kuffeler, Executive Chairman of Huveaux, commented: "Our first half performance has been impacted by the very weak Frenchpharmaceutical advertising market, which has affected our Healthcare Divisionand UK government cutbacks in training budgets, which have affected our LearningDivision. However, the outlook for the second half is encouraging across much of theGroup. Although the French pharmaceutical advertising market continues to bedifficult, the political environment across Europe remains buoyant and theEducation Division is trading well, with many new products in the pipeline.Recent weeks have seen some recovery in public sector training spending and theLearning Division therefore looks set to achieve a satisfactory performance inthe second half. The Board has initiated an operational and profit improvement programme which itis confident will return us to growth in 2008." For further information, please contact: HuveauxJohn van Kuffeler, Executive Chairman 020 7245 0270Gerry Murray, Chief Executive OfficerDan O'Brien, Group Finance Director FinsburyDon Hunter 020 7251 3801Peter Russell An analyst presentation will be held at 9.30am at Dresdner Kleinwort, 30 GreshamStreet, London EC2P 2XY, with coffee available from 9am. Note to Editors: Huveaux PLC is a public limited company listed on the Alternative InvestmentMarket (ticker HVX.L). The Company was formed in 2001 with the objective of building a substantial,high-quality media group. Huveaux has completed and successfully integrated 13acquisitions over the past six years and employs more than 500 staff in London,Paris, Brussels, Edinburgh and four other UK regional offices. The Group consists of four Divisions, each of which has strong brands and marketleading positions: Political DivisionThe market leader in political business-to-business publishing in the UK and EU,serving both the political and public affairs communities. The Divisioncomprises Dods Parliamentary Companion, The House Magazine, Epolitix.com andnumerous other political magazines, reference books, monitoring products andrevenue-generating websites as well as events, awards and recruitment services. Learning DivisionA leading provider of resources to learning communities in the UK, includinge-learning solutions for the public and private sector and blended learningsolutions, seminars and events for the political, public affairs and trainingmarkets. The Division comprises Epic, the UK market leader in e-learning; The TJmagazine; and the highly acclaimed Westminster Explained conferences andseminars business. Education Division (established 1 January 2007)The leading supplier of study aids and revision guides in the UK, with fullproduct coverage across all subjects and stages of the entire curriculum in UKschools. The Division comprises Lonsdale, Letts Educational and Leckie & Leckie. Healthcare DivisionOne of the leading providers of specialist B2B publications and online educationfor the medical sector in France. The Division comprises Panorama du Medecin, aleading weekly magazine for French doctors, Le Concours Medical and La Revue duPraticien, market-leading Continuing Medical Education magazines, Egora.fr; theleading medical information website; a medical conference business; and a numberof other magazines and reference materials. OPERATING AND FINANCIAL REVIEW Group Performance The first half of 2007 saw an 8% growth in revenue to £21.7 million (2006: £20.1million), driven by the acquisition of Letts and Leckie & Leckie in September2006. Organic revenue growth in the Political and Education divisions has beenoffset by decreases in revenue in the Learning and Healthcare divisions. EBITDA decreased from £1.8 million to £1.0 million, reflecting the marketconditions in France and lower public sector training spend in the UK. Earningsper share decreased from 0.68 pence to 0.02 pence. Operating Review • Political Division The Political Division had first half revenues of £4.6 million (2006: £4.1m). With the appointment of Gordon Brown as Prime Minister, the second half of 2007will prove to be an even busier period than usual for our Political Division.The timing of his appointment has meant that a number of our regularpublications, which would normally be produced in the first half of the year,have been moved into the third quarter of 2007. This, together with the newlaunch activity detailed below, will increase the usual second half weighting ofthe profits in the division. The first half has seen us release two new books following the recent devolvedelections: the Scottish Parliament Companion and the National Assembly for WalesCompanion. Our European business is showing excellent growth in both online and print. TheRegional Review will expand to publish six times a year and this incorporatesthe launch of two further titles in Brussels, the Research Review and theEmployment and Learning Review. Our portfolio in Brussels has been enhanced by the acquisition of the EuropeanPublic Affairs Directory (EPAD) for £0.2 million cash in April. The acquisitionof EPAD is expected to be earnings neutral in 2007. In France, following the recent presidential and parliamentary elections, ourprint and online sales are good and will be ahead of last year. Our awards and events businesses in London, Paris and Brussels go from strengthto strength and forward sales into the busy party conference season are strong.With our expanded portfolio, an increasing number of awards and events and abuoyant political market across Europe, we expect the Political Division todeliver good revenue and profit growth across the board in 2007. • Learning Division The Learning Division had revenues of £5.2 million in the first half of 2007compared to £6.6 million last year. The division experienced a slowdown inpublic sector training spend in the first half ahead of the appointment of thenew Prime Minister and Cabinet. This adversely affected both our WestminsterExplained and Epic businesses. At Fenman, we have substantially increased our profit levels while continuing toreduce our reliance on the sale of training resources for trainers. The TJEvents business continues to grow and TJ Online has been successfully launched. This year we have established a conference business within the LearningDivision, with a total of 18 conferences planned for 2007, 15 of which will takeplace in the second half of the year. Our Westminster Briefing businesscontinues to expand at a healthy rate. Epic continues to win significant public sector contracts and its current winrate is one in three for new competitive tenders. We have reorganised the senior and local management teams within the LearningDivision and have reduced the cost base as a result. In recent weeks we haveseen an increase in public sector training bookings and the outlook for thesecond half of the year is more positive, with growth in revenue expected fromthe increased number of events and awards. • Education Division Following the successful integration of Letts and Leckie & Leckie, which wereacquired in September 2006, we created a separate Education Division from thestart of this year, comprising both these companies together with our existingLonsdale business. The division's sales in the first half of 2007 amounted to£5.5 million, compared to £1.2 million in the first half of 2006, with theincrease largely driven by the two acquisitions made last September. Lonsdale has seen 10% organic growth in the first half of the year driven mainlyby increased sales volumes of its Science curriculum products at Key Stage 4.Organic sales at Leckie & Leckie have also been strong and the historic salesdecline at Letts has been halted. Encouragingly, sales to schools have risenover 20% across the division. Additionally, the division has also delivered an impressive increase in profitswith Lonsdale's EBITDA increasing 34%. Profits across the division havebenefited from synergies including reduced distribution costs, print savings andmore efficient use of the publishing cost base. There has also been substantial investment in new publishing with 51 new titlesreleased in the first half of the year and a further 164 new titles scheduled tobe published in the second half. This includes the launch of a new range ofrevision guides, Essentials GCSE Science, which has 26 titles in book format,together with a corresponding digital e-learning product developed jointly withEpic. This investment reinforces Huveaux's position as the leading publisher in the UKrevision market. As we approach the key trading period ahead of the new academicyear, the overall outlook for the Education Division is for further good growthin revenue and profitability in 2007. • Healthcare Division The Healthcare Division's sales in the first half were £6.3 million, compared to£8.2 million in the corresponding period last year. This year's first halfperformance has been significantly impacted by the 19% year-on-year decrease inthe French pharmaceutical advertising market. This has arisen due topharmaceutical companies reducing their advertising budgets to the primary caresector in response to the sharp rise in generic drugs and the lack of newblockbuster drug launches. In June 2007 we disposed of our non-core contract publishing business for £0.6million in cash. This divestment is expected to have a neutral impact on theGroup's earnings in 2007 and beyond. The revenues from our Continuing Medical Education and Evaluation of MedicalPractice accredited product offerings have started to flow through, with £0.3million recognised in the first half. These are anticipated to provide a growingrevenue stream in the second half of 2007. Overall, the outlook for the Healthcare Division in 2007 is for sales and EBITDAto be significantly lower than in 2006. Nevertheless, this expected performancewill still generate at least a 15% pre-tax return on the original cost ofacquisition - well in excess of our cost of capital. Longer term the focus forthe division remains on controlling the costs of our print publications andgrowing CME revenue streams. Financial Review Net debt at 30 June 2007 amounted to £18.5 million. During the first half wegenerated £2.7 million of operating cash flows, particularly from positiveworking capital movements. In addition, the Group repaid £1.6 million of itsoutstanding loans and paid £1.8 million in satisfaction of the 2006 finaldividend. The level of gearing for the Group, with net debt to EBITDA of 3.1times, provides a robust financial position going forward. On 11 May 2007, the Company announced its adoption of International FinancialReporting Standards (IFRS) for the year ended 31 December 2007. The comparativefinancial information for the six months to 30 June 2006 and the year ended 31December 2006 has been restated accordingly. Profit Improvement Programme The Board remain committed to increasing shareholder value and have initiated anoperational and profit improvement programme. This consists of revenue growth,driven principally from new conferences and exhibitions and by new publicationsacross the four divisions as summarised above. In addition, we have completed aprint and paper review which will yield significant savings in 2008. We havereduced the cost base of the management team in the Learning Division andcompleted plans to reduce our central overhead by more than 20%. Outlook The second half of the financial year is always seasonally more important forHuveaux, as it coincides with the start of the academic and parliamentary yearsin September and October respectively. The second-half weighting is heightenedthis year by the appointment of a new Prime Minister and the impact of this onthe timing of our political publications and the expected increase in publicsector training spend. The outlook for Huveaux in the second half of 2007 is encouraging across much ofthe Group. The political market remains buoyant and the Education Division isperforming well. There has been some recovery in public sector training spend inrecent weeks and the Learning Division therefore looks set to achieve asatisfactory performance in the second half. The pharmaceutical advertisingmarket in France remains difficult, with revenues in France expected to continueat levels well below those of previous years. Our focus in the HealthcareDivision is on controlling costs and accelerating our CME revenue streams. HUVEAUX PLCCONSOLIDATED INCOME STATEMENT For the six For the six For the year months ended months ended ended 30 June 30 June 31 December 2007 2006 2006 Unaudited Unaudited Unaudited Note £ 000s £ 000s £ 000s Revenue 3 21,663 20,075 45,028Cost of sales (14,231) (12,443) (26,408) ---------------------------------------- Gross profit 7,432 7,632 18,620--------------------------------------------------------------------------------Administrative expensesbefore amortisation and impairment (6,734) (6,100) (12,597)Amortisation of intangibleassets (1,583) (883) (2,132)--------------------------------------------------------------------------------Total administrative expenses (8,317) (6,983) (14,729) (Loss)/profit from operations (885) 649 3,891 Financing income 112 46 161Financing costs (752) (198) (872) ---------------------------------------- (Loss)/profit before taxation (1,525) 497 3,180 Income tax credit/(expense) 4 378 (162) (892) ----------------------------------------(Loss)/profit for the period (1,147) 335 2,288 ======================================== Earnings per share - basic 5 (0.75 p) 0.24 p 1.59 pEarnings per share - diluted 5 (0.75 p) 0.24 p 1.58 p HUVEAUX PLCCONSOLIDATED BALANCE SHEET As at As at As at 30 June 30 June 31 December 2007 2006 2006 Unaudited Unaudited Unaudited Note £ 000s £ 000s £ 000s ----------------------------------------Goodwill 6 28,046 19,869 28,165Intangible assets 7 43,083 35,222 44,778Property, plant and equipment 1,125 886 991 Non-current assets 72,254 55,977 73,934 ---------------------------------------- Inventories 3,657 1,941 3,268Trade and other receivables 10,571 10,889 15,158Derivative financial instruments 140 87 140Cash and cash equivalents 2,925 1,033 4,307Assets held for sale - 189 188 ---------------------------------------- Current assets 17,293 14,139 23,061 Income tax payable (163) (252) (412)Provisions for liabilities and charges (86) (615) (368)Trade and other payables (18,226) (13,559) (19,871) ---------------------------------------- Current liabilities (18,475) (14,426) (20,651) Net current (liabilities)/assets (1,182) (287) 2,410 ---------------------------------------- Total assets less current liabilities 71,072 55,690 76,344 Interest bearing loans and borrowings (18,022) (9,328) (19,855)Employee benefits (156) (137) (156)Deferred tax liability (7,768) (5,645) (8,248)Other non-current liabilities - - (96) ---------------------------------------- Non current liabilities (25,946) (15,110) (28,355) ---------------------------------------- Net assets 45,126 40,580 47,989 ======================================== Capital and reservesIssued capital 15,200 14,017 15,200Share premium 30,816 26,795 30,816Other reserves 409 409 409Retained (loss)/earnings (1,299) (641) 1,564 ---------------------------------------- Equity shareholders' funds 8 45,126 40,580 47,989 ======================================== HUVEAUX PLCCONSOLIDATED STATEMENT OF CASH FLOWS For the six For the six For the year months ended months ended ended 30 June 30 June 31 December 2007 2006 2006 Unaudited Unaudited Unaudited Note £ 000s £ 000s £ 000s Cash flows from operatingactivities(Loss)/profit for the period (1,147) 335 2,288 Depreciation of property, plantand equipment 265 248 511Amortisation of intangibleassets 1,583 883 2,132Profit on disposal of property,plant and equipment (67) - -Profit on disposal ofdiscontinued operation 5 - -Credits on defined benefitscheme - - (1)Share based payments charges 125 117 153Net finance costs 640 152 711Income tax expense (378) 162 892Cash flow relating torestructuring provisions (282) (937) (1,824) ----------------------------------------Operating cash flows beforemovements in working capital 744 960 4,862 Change in inventories (389) 209 199Change in receivables 4,375 647 (1,449)Change in payables (2,023) (1,127) 1,000 ----------------------------------------Cash generated by operations 2,707 689 4,612 Interest and similar expensespaid (296) (198) (1,066)Income tax paid (280) - (745) ----------------------------------------Net cash from operatingactivities 2,131 491 2,801 ---------------------------------------- Cash flows from investingactivitiesInterest and similar incomereceived 112 46 153Proceeds from sale of property,plant and equipment 275 - -Proceeds from sale ofinvestments - - 55Escrow received on acquisitionof Letts and Leckie 400 - -Disposal of discontinuedoperation 370 - 131Acquisition of subsidiary, netof overdraft acquired - - (16,842)Deferred consideration paid onPolitical Wizard (500) - -Acquisition of property, plantand equipment (325) (548) (854)Acquisition of publishing rights (164) - -Acquisition of other intangibleassets (277) (75) (312) ----------------------------------------Net cash used in investingactivities (109) (577) (17,669) ---------------------------------------- Cash flows from financingactivitiesProceeds from issue of sharecapital - - 5,500New loans acquired - - 13,400Payment of transaction costs - - (296)Repayment of borrowings (1,569) - (516)Dividends paid (1,839) (1,542) (1,542) ----------------------------------------Net cash used in financingactivities (3,408) (1,542) 16,546 ---------------------------------------- Net decrease in cash and cashequivalents 9 (1,386) (1,628) 1,678Opening cash and cashequivalents 4,307 2,678 2,678Effect of exchange ratefluctuations on cash held 4 (17) (49) ----------------------------------------Closing cash and cashequivalents 9 2,925 1,033 4,307 ======================================== HUVEAUX PLCNotes to the Accounts30 June 2007 1 Statement of Accounting Policies The accounting policies set out below, have, unless otherwise stated, beenapplied consistently to all periods presented in these Group financialstatements and in preparing an opening IFRS balance sheet at 1 January 2006. Basis of preparation The consolidated financial statements of Huveaux PLC have been prepared inaccordance with International Financial Reporting Standards as adopted by the EU("adopted IFRS"). The unaudited financial information presented in this document has been preparedon the basis of the expected accounting policies which the Group will complywith in the accounts to 31 December 2007 and on the basis of all InternationalFinancial Reporting Standards ("IFRS"), including International AccountingStandards ("IAS") and interpretations issued by the International AccountingStandards Board ("IASB") and its committees, as adopted by the EU. These aresubject to ongoing amendment by the IASB and subsequent endorsement by theEuropean Commission and are therefore subject to possible change. As a result,information contained within this release will require updating for anysubsequent amendment to IFRS required for first time adoption or those newstandards that the Group may elect to adopt early. The financial statements have been prepared in accordance with applicableaccounting standards, and under the historical cost accounting rules, except forderivative financial instruments which are stated at their fair value, andnon-current assets and disposal groups held for sale which are stated at thelower of previous carrying value and fair value less costs to sell. IFRS 1 exemptions IFRS 1 "First time adoption of International Financial Reporting Standards" setsout procedures that the Group must follow when IFRS is adopted for the firsttime as the basis for preparing Group consolidated financial statements. Itprovides a number of exemptions that are available on first time adoption toassist companies in the transition to reporting under adopted IFRS. Thefollowing exemptions have been taken: The Group has taken advantage of the exemption from restating all previousacquisitions under IFRS 3"Business Combinations" and has chosen to restate all business combinations from1 October 2003 onwards; and The Group has set its cumulative translation differences to zero at the date oftransition to adopted IFRS. Basis of consolidation The consolidated financial statements incorporate the financial statements ofthe Group controlled by the Company and its subsidiaries (the "Group"). Controlis achieved where the Group has the power to govern the financial and operatingpolicies of an investee entity so as to obtain benefits from its activities. Theresults of subsidiaries acquired or sold are included in the consolidatedfinancial statements from the date control commences to the date control ceases.Where necessary, adjustments are made to the results of the acquiredsubsidiaries to align their accounting policies with those of the Group. Allintra-group transactions, balances, income and expenditure are eliminated onconsolidation. Business combinations The acquisition of subsidiaries is accounted for using the purchase method. Thecost of acquisition is measured at the aggregate of the fair values, at the dateof exchange, of assets given, liabilities incurred or assumed, and equityinstruments issued by the Group in exchange for control of the acquiree, plusany costs attributable to the business combination. The acquiree's identifiableassets, liabilities and contingent liabilities that meet the conditions forrecognition under IFRS 3 "Business Combinations" are recognised at fair value atthe acquisition date, except for non-current assets (or disposal groups) thatare classified as held for sale in accordance with IFRS 5 "Non-Current AssetsHeld for Sale and Discontinued Operations", which are recognised and measured atfair value less costs to sell. Revenue recognition - sale of goods Revenue is measured at the fair value of consideration received or receivableand represents amounts receivable for goods and services provided in the normalcourse of business, net of discounts, VAT and other sales-related taxes, andprovisions for returns and cancellations. Revenue in respect of advertising services is recognised on publication. Wherepublications are printed and distributed in more than one volume, the fair valueof the revenue attributable to each volume is recognised as it is distributed.Revenue on books or magazines provided for clients is recognised when thesignificant risks and rewards of ownership of the goods have passed to the buyerand the amount of revenue can be measured reliably. When books are sold on a sale or return basis, revenue is recognised ondistribution less a provision for expected returns. Revenue recognition - sale of services Revenue in respect of subscription-based services, including online services, isrecognised on a straight line basis over the period of subscription. Theunrecognised element is carried within creditors as deferred revenue. Where the outcome of an e-learning contract can be estimated reliably, revenueis recognised on a stage of completion basis based on the percentage of costsincurred at the balance sheet date. Where the outcome of an e-learning contractcannot be estimated reliably, contract revenue is recognised to the extent ofcontract costs incurred that it is probable will be recoverable. Contract costsare recognised as expenses in the period in which they are incurred and work inprogress amounts are recorded in the balance sheet at cost. Costs consist ofsalaries of staff allocated to specific contracts on the basis of time spent onthe contract, and any materials directly incurred on that contract. Costs do notinclude an apportionment of overheads. When it is probable that total contractcosts will exceed total contract revenue, the expected loss is recognised as anexpense immediately. Where long term training is provided together with training materials, the fairvalue of the materials provided to delegates is recognised as revenue upondistribution. The remaining revenue is recognised in stages as courses occur.When long term training programmes are designed on a client's behalf, revenuerelating to the conception, set-up and design of the programme is recognisedwhen the first event occurs. Revenue in relation to the organisation andadministration of the programme is recognised over the programme's life. Revenueon all one-off events and conferences is recognised as they occur. Leases Operating lease rentals are charged to the income statement on a straight linebasis over the period of the lease. Lease incentives are recognised in theincome statement as an integrated part of the total lease expense. Post retirement benefits - defined contribution The Group contributes to independent defined contribution pension schemes. Theassets of the schemes are held separately from those of the Group inindependently administered funds. The amount charged to the profit and lossaccount represents the contributions payable to the schemes in respect of theaccounting period. Post retirement benefits - defined benefit The Group operates a defined benefit pension scheme in France providing benefitson final pensionable pay. The assets of the scheme are held separately fromthose of the Group. Pension scheme assets are measured using market values.Pension scheme liabilities are measured using a projected unit method anddiscounted at the current rate of return on a high quality corporate bond ofequivalent term and currency to the liability. The pension scheme deficit isrecognised in full. The movement in the scheme deficit is split betweenoperating charges, finance items and, in the statement of total recognisedincome and expense, actuarial gains and losses. The Group recognises allactuarial gains and losses in the period in which they are valued. The value of the defined benefit obligations at 30 June 2007 was £156,000. Share based payment The Group operates a number of equity-settled, share-based compensation plans.The fair value of the employee services received in exchange for the grant ofthe options is recognised as an expense with a corresponding increase in equity.The total amount to be expensed over the vesting period is determined byreference to the fair value of the options granted, excluding the impact of anynon-market vesting conditions. Non-market vesting conditions are included inassumptions about the number of options that are expected to vest. At eachbalance sheet date, the Group revises its estimates of the number of optionsthat are expected to vest. It recognises the impact of the revision to originalestimates, if any, in the income statement, with a corresponding adjustment toequity. Deferred tax is recognised where it is likely that share relief will beavailable on the difference between exercise price and market price at thebalance sheet date. Taxation The tax expense represents the sum of the tax currently payable and deferredtax. Current tax is based on taxable profit for the year and any adjustment to taxpayable in respect of previous years. Taxable profit differs from net profit asreported in the income statement because it excludes items of income or expensethat are taxable or deductible in other years and it further excludes items thatare never taxable or deductible. The Group's liability for current tax iscalculated using tax rates that have been enacted or substantively enacted bythe balance sheet date. Deferred tax is expected to be payable or recoverable on differences between thecarrying amounts of assets and liabilities in the financial statements and thecorresponding tax bases used in the computation of taxable profit, and isaccounted for using the balance sheet liability method. Deferred tax liabilitiesare generally recognised for all taxable temporary differences and deferred taxassets are recognised to the extent that it is probable that taxable profit willbe available against which temporary differences can be utilised. Such assetsand liabilities are not recognised if the temporary difference arises from theinitial recognition of goodwill or from the initial recognition of other assetsand liabilities in a transaction that affects neither the tax nor the accountingprofit. Deferred tax liabilities are recognised for taxable temporary differencesarising on investments in subsidiaries except where the Group is able to controlthe reversal of the temporary difference and it is probable that the temporarydifference will not reverse in the foreseeable future. The carrying amount of the deferred tax asset is reviewed at each balance sheetdate and reduced to the extent that it is no longer probable that sufficienttaxable profits will be available to allow all or part of the asset to berecovered. Deferred tax is calculated at the tax rates that are expected to apply in theperiod when the liability is settled or the asset is realised. Deferred tax ischarged or credited to the income statement, except when it relates to itemscharged or credited directly to equity, in which case the deferred tax is alsodealt with in equity. Deferred tax assets and liabilities are offset when there is a legallyenforceable right to set off current tax assets against current tax liabilitiesand when they relate to income taxes levied by the same taxation authority andthe Group intends to settle its current tax assets and liabilities on a netbasis. Intangible assets Intangible assets acquired by the Group are stated at cost less accumulatedamortisation and impairment losses. Intangible assets are amortised on astraight-line basis over their useful lives in accordance with IAS 38"Intangible Assets". Assets are not revalued. The amortisation period and methodare reviewed at each financial year end and are changed in accordance with IAS 8"Accounting Policies, Changes in Accounting Estimates and Errors" if this isconsidered necessary. The estimated useful lives are as follows: Publishing rights 10-75 years Brand name 15-20 years Customer relationships 1-8 years Customer lists 4 years Order books 1 year Other assets 1 year Software which is not integral to a related item of hardware is included inintangible assets and amortised over its estimated useful life of 3 years. For new publications and other new products, development costs are deferred andamortised over periods of between one and five years following the first releaseof the new product for sale. The costs of the design and development of revisionmaterial ("plate costs") are capitalised on individual projects where the futurerecoverability of the costs can be foreseen with reasonable certainty. Platecosts are stated at their direct cost less accumulated amortisation. Fullprovision is made for any plate costs where the revision material titles areexcess to requirements or where they will no longer be used in the business.Amortisation is provided to write off the plate costs over one to three years atvarying rates to match the anticipated future income streams. In respect of acquisitions prior to 1 October 2003, publishing rights are heldat deemed cost, which represents the amount recorded under UK GAAP. Under UKGAAP these assets were not amortised. Management have reviewed this accountingpolicy and consider it more appropriate to assign useful lives to these assetsin accordance with the policy adopted for other publishing rights as detailedabove. The effect of amortising these assets over their useful lives has been toincrease the loss for the period by £216,000 and to reduce intangible assets bythe same amount. Goodwill Goodwill represents the difference between the cost of acquisition of a businessand the fair value of identifiable assets, liabilities and contingentliabilities acquired. Identifiable intangibles are those which can be soldseparately or which arise from legal rights regardless of whether those rightsare separable. Goodwill is stated at cost less any accumulated impairmentlosses. Goodwill is allocated to cash generating units and is tested annuallyfor impairment. Any impairment is recognised immediately in profit or loss andis not subsequently reversed. Property, plant and equipment Depreciation is provided to write off the cost less estimated residual value oftangible fixed assets by equal instalments over their estimated useful economiclives as follows: Leasehold improvements Over the remaining life of the lease Equipment, fixtures and fittings 5 years Database development costs 5 years Motor vehicles 4 years IT systems 3 years Non-current assets held for sale Non-current assets (and disposal groups) classified as held for sale aremeasured at the lower of carrying amount and fair value less costs to sell. Non-current assets and disposal groups are classified as held for sale if theircarrying amount will be recovered through a sale transaction rather than throughcontinuing use. This condition is regarded as met only when the sale is highlyprobable and the asset (or disposal group) is available for immediate sale inits present condition. Management must be committed to the sale which should beexpected to qualify for recognition as a completed sale within one year from thedate of classification. Inventories, work in progress and long term contracts Inventories are stated at the lower of cost and net realisable value. Work inprogress consists of internal and third party editorial and production costsprior to print, which are capitalised for new publications and substantialupdates of continuing publications. Work in progress is valued at the lower ofcost and net realisable value being the recoverable amount based on anticipatedforward sales from the first print run. The amount of profit attributable to the stage of completion of a long termcontract is recognised when the outcome of the contract can be foreseen withreasonable certainty. Contract work in progress is stated at costs incurred,less those transferred to the income statement, after deducting foreseeablelosses and payments on account not matched with turnover. Amounts recoverable oncontracts are included in debtors and represent turnover recognised in excess ofpayments on account. Cash and cash equivalents Cash and cash equivalents comprise cash on hand and demand deposits, and othershort-term highly liquid investments that are readily convertible (with amaturity of three months or less) to a known amount of cash and are subject toan insignificant risk of changes in value. Provisions A provision is recognised in the balance sheet when the Group has a presentlegal or constructive obligation as a result of a past event, and it is probablethat an outflow of economic benefits will be required to settle the obligation.If the effect is material, provisions are determined by discounting the expectedfuture cash flows at a pre tax rate that reflects current market assessments ofthe time value of money and, where appropriate, the risks specific to theliability. Derivative financial instruments The Group's activities expose it primarily to the financial risks of changes inforeign currency exchange rates and interest rates. The group uses foreignexchange forward contracts and interest rate caps to hedge these exposures. Thegroup does not use derivative financial instruments for speculative purposes.Derivative financial instruments are recognised at fair value. The gain or losson remeasurement to fair value is recognised immediately in the incomestatement. The fair value of interest rate caps is the estimated amount that theGroup would receive or pay to terminate the cap at the balance sheet date. Financial liabilities and equity instruments Financial assets and financial transaction are recognised on the Group's balancesheet when the Group becomes a party to the contractual provisions of theinstrument. Financial liabilities and equity instruments are classified according to thesubstance of the contractual arrangements entered into. An equity instrument isany contract that evidences a residual interest in the assets of the Group afterdeducting all of its liabilities, and includes no contractual obligations uponthe Group to deliver cash or other financial assets or to exchange financialassets or financial liabilities with another party under conditions that arepotentially unfavourable to the Group, or, where the instrument will or may besettled in the Company's own equity instruments, it is either a non-derivativethat includes no obligation to deliver a variable number of the Company's ownequity instruments or is a derivative that will be settled by the Company'sexchanging a fixed amount of cash or other financial assets for a fixed numberof its own equity instruments. Interest bearing bank loans and overdrafts are recorded at the proceedsreceived, net of direct issue costs. Finance charges, including premiums payableon settlement or redemption and incremental costs directly attributable to theissue, are accounted for on an accruals basis as part of finance expenses in theincome statement using the effective interest rate method and are added to thecarrying amount of the instrument to the extent that they are not settled in theperiod that they arise. Equity instruments issued by the Company are recorded at the proceeds received,net of direct issue costs. Foreign currencies The individual financial statements of each group company are presented in thecurrency of the primary economic environment in which it operates (itsfunctional currency). For the purpose of the consolidated financial statements,the results and financial position of each Group company are expressed in poundssterling, which is the functional currency of the Group, and the presentationcurrency for the consolidated financial statements. In preparing the financial statements of the individual companies, transactionsin currencies other than the entity's functional currency (foreign currencies)are recorded at the rates of exchange prevailing on the dates of thetransactions. At each balance sheet date, monetary assets and liabilities thatare denominated in foreign currencies are retranslated at the rates prevailingon the balance sheet date. Non-monetary items carried at fair value that aredenominated in foreign currencies are translated at the rates prevailing at thedate when the fair value was determined. Non-monetary items that are measured interms of historical cost in a foreign currency are not retranslated but remainat the exchange rate at the date of the transaction. Exchange differences arising on the settlement of monetary items, and on theretranslation of monetary items, are included in profit or loss for the period.Exchange differences arising on the retranslation of non-monetary items carriedat fair value are included in the income statement for the period except fordifferences arising on the retranslation of non-monetary items in respect ofwhich gains and losses are recognised directly in equity. For such non-monetaryitems, any exchange component of that gain or loss is also recognised directlyin equity. For the purpose of presenting consolidated financial statements, the assets andliabilities of the Group's foreign operations are translated at exchange ratesprevailing on the balance sheet date. Income and expense items are translated atthe average exchange rates for the period ended on the balance sheet date.Income and expense items are translated at the average exchange rates for theperiod, unless exchange rates fluctuate significantly during that period, inwhich case the exchange rates at the date of transactions are used. Exchange rate differences arising, if any, are recognised directly in equity inthe Group's translation reserve. Such translation differences are recognised asincome or as expense in the period in which the operation is disposed of. 2 Nature of information The interim accounts for the six months ended 30 June 2007 and the comparativefigures for the six months ended 30 June 2006 are not audited by the Company'sauditors. The comparative figures for the twelve months ended 31 December 2006are not the Company's statutory accounts within the meaning of Section 240 ofthe Companies Act 1985 but are abridged from such accounts and then restatedunder IFRS. The financial statements for the twelve months ended 31 December 2006 aspreviously stated (under UK GAAP) have been reported on by the Company'sauditors and delivered to the Registrar of Companies. The report of the auditorson such accounts was unqualified and did not contain any statement underSections 237(2) or 237(3) of the Companies Act 1985. 3 Segmental information Segment information is presented in respect of the Group's business andgeographical segments. The primary format, business segments, is based on theGroup's management and internal reporting structure. The secondary segmentrepresents geographical destination of turnover. Six months Six months Year ended ended ended 30 June 30 Jun 31 December 2007 2006 2006 Unaudited Unaudited UnauditedTurnover (primary segment) £ 000s £ 000s £ 000s Political 4,624 4,112 10,578Learning 5,232 6,567 12,718Education 5,528 1,233 6,798Healthcare 6,279 8,163 14,934 ---------------------------------------- 21,663 20,075 45,028 ---------------------------------------- Turnover (secondary segment) United Kingdom 14,243 11,020 27,921Continental Europe and restof the world 7,420 9,055 17,107 ---------------------------------------- 21,663 20,075 45,028 ---------------------------------------- Six months Six months Year ended ended ended 30 June 30 June 31 December 2007 2006 2006 Unaudited Unaudited UnauditedEBITDA from operations (primary segment)* £ 000s £ 000s £ 000s Political 195 393 2,428Learning 209 926 1,888Education 904 383 2,159Healthcare 448 1,048 2,366Head Office (793) (970) (1,667) ---------------------------------------- 963 1,780 7,174 ---------------------------------------- EBITDA from operations (secondarysegment)* United Kingdom 449 612 4,327Continental Europe and restof the world 514 1,168 2,847 ---------------------------------------- 963 1,780 7,174 ---------------------------------------- *EBITDA is defined by the Directors as being earnings before interest, tax,depreciation, amortisation and fundamental restructuring costs (previouslyclassified as exceptional items under UK GAAP). A reconciliation between EBITDA and profit from operations is shown in ScheduleA. 4 Taxation The taxation charge for the six months ended 30 June 2007 is based on theexpected annual tax rate. 5 Earnings per Share Six months Six months Year ended ended ended 30 June 30 June 31 December 2007 2006 2006 Unaudited Unaudited Unaudited £ 000s £ 000s £ 000s Profit attributable toshareholders (1,147) 335 2,288Add: costs relating tofundamental restructuring* - - 640Add: amortisation ofintangibles 1,583 883 2,132Less: tax thereon (403) (272) (845) ----------------------------------------Adjusted profitattributable toshareholders 33 946 4,215 ======================================== Shares Shares SharesWeighted average number of sharesIn issue during the year -basic 151,998,453 140,170,496 143,994,329Dilutive potential ordinary shares 950,981 513,854 698,200 ---------------------------------------- Diluted 152,949,434 140,684,350 144,692,529 ======================================== Earnings per share - basic(pence) (0.75) 0.24 1.59Earnings per share -diluted (pence) (0.75) 0.24 1.58Adjusted earnings per share beforefundamentalrestructuring costs andamortisation of intangibles(pence) 0.02 0.68 2.93 *previously disclosed as exceptional items under UK GAAP 6 Goodwill Six months Six months Year ended ended ended 30 June 30 June 31 December 2007 2006 2006 Unaudited Unaudited Unaudited £ 000s £ 000s £ 000sCost & Net book valueOpening balance 28,165 19,869 19,869Additions 98 - 343Acquisitions throughbusiness combinations - - 5,031Disposals (133) - -Movements in deferred taxasset (84) - 2,922 ------------------------------------------------Closing balance 28,046 19,869 28,165 ================================================ 7 Intangible fixed assets Six months Six months Year ended ended ended 30 June 30 June 31 December 2007 2006 2006 Unaudited Unaudited UnauditedAssets acquired on acquisition £ 000s £ 000s £ 000s CostOpening balance 47,927 37,843 37,843Acquisitions throughbusiness combinations 164 - 10,084Disposals (477) - - ---------------------------------------------Closing balance 47,614 37,843 47,927 ============================================= AmortisationOpening balance 4,097 1,965 1,965Charge for the period 1,583 883 2,132Disposals (23) - - ---------------------------------------------Closing balance 5,657 2,848 4,097 ============================================= Net book value ------------ ----------- ---------Opening balance 43,830 35,878 35,878 ============ =========== ========= ------------ ----------- ---------Closing balance 41,957 34,995 43,830 ============ =========== ========= Other intangible assets Net book value ---------------------------------------------Opening balance 948 210 210 ============================================= ---------------------------------------------Closing balance 1,126 227 948 ============================================= Net intangible assets ---------------------------------------------Opening balance 44,778 36,088 36,088 ============================================= ---------------------------------------------Closing balance 43,083 35,222 44,778 ============================================= During the period the Group acquired the European Public Affairs Directory for aconsideration of £164,000. The Group also disposed of its French cardiologypublications for £572,000, of which £202,000 represents deferred considerationand is held within receivables. All acquisition entries have been recorded on a provisional basis. Experiencemay result in revisions to fair values during the year to 31 December 2007 andthe subsequent accounting period. 8 Reconciliation of movements in equity shareholders' funds Total equity shareholders' funds Unaudited £ 000s Profit for the period (1,147)Payment of 2006 dividend (1,839)Share-based payments charges 125Currency translation differences on foreign currency netinvestments (2) ----------Net decrease in equity shareholders' funds (2,863)Equity shareholders' funds at 31 December 2006 47,989 ----------Equity shareholders' funds at 30 June 2007 45,126 ==========9 Analysis of net debt At beginning Non-cash Exchange At end of period Cash flow movements movement of period £ 000s £ 000s £ 000s £ 000s £ 000sCash at bank andin hand 4,307 (1,386) - 4 2,925Debt due withinone year (3,140) 1,569 (1,821) 1 (3,391)Debt due after oneyear (19,855) - 1,821 12 (18,022) ---------------------------------------------------------- (18,688) 183 - 17 (18,488) ========================================================== 10 Reconciliation of comparative information to previously reported information A reconciliation between results previously published under UK GAAP and theresults presented above under IFRS was provided in the IFRS Conversion Statementreleased by the Group on 11 May 2007. Please refer to that document for a fullreconciliation. A copy of the document can be found on the Group's website,www.huveauxplc.com. Schedule A Reconciliation between profit from operations and non-statutory measure The following tables reconcile profit from operations as stated above to EBITDA,a non-statutory measure which the Directors believe is the most appropriatemeasure in assessing the performance of the Group. EBITDA is defined by the Directors as being earnings before interest, tax,depreciation, amortisation and fundamental restructuring costs*. Six months ended 30 June 2007 Political Learning Education Healthcare Head Office Total £ 000s £ 000s £ 000s £ 000s £ 000s £ 000s(Loss)/profitfrom operations (496) (163) 367 209 (802) (885)Amortisation 585 307 502 189 - 1,583Depreciation 106 65 35 50 9 265 --------------------------------------------------------------------------------EBITDA 195 209 904 448 (793) 963 -------------------------------------------------------------------------------- Year ended 31 December 2006 Political Learning Education Healthcare Head Office Total £ 000s £ 000s £ 000s £ 000s £ 000s £ 000sProfit/(loss)from operations 1,187 984 1,711 1,704 (1,695) 3,891Amortisation 915 646 227 344 - 2,132Depreciation 224 152 30 77 28 511Restructuringcosts* 102 106 191 241 - 640 --------------------------------------------------------------------------------EBITDA 2,428 1,888 2,159 2,366 (1,667) 7,174 -------------------------------------------------------------------------------- Six months ended 30 June 2006 Political Learning Education Healthcare Head Office Total £ 000s £ 000s £ 000s £ 000s £ 000s £ 000s(Loss)/profitfrom operations (106) 529 368 842 (984) 649Amortisation 388 323 - 172 - 883Depreciation 111 74 15 34 14 248 --------------------------------------------------------------------------------EBITDA 393 926 383 1,048 (970) 1,780 -------------------------------------------------------------------------------- *previously disclosed as exceptional items under UK GAAP This information is provided by RNS The company news service from the London Stock Exchange