DODS.L Regulatory News (DODS)

3 Mar 2008 07:01

Huveaux PLC03 March 2008 3 March 2008 Huveaux PLC 2007 PRELIMINARY RESULTS Financial Highlights • Revenue up 2% to £46.1 million (2006: £45.0 million) • EBITDA down 19% to £5.8 million (2006: £7.2 million)* • Profit for the year of £0.4 million (2006: £2.3 million) • Basic EPS of 0.24 pence per share (2006: 1.59 pence) • Normalised EPS down 38% to 1.82 pence per share (2006: 2.93 pence)** • Dividend recommended in line with results at 0.75 pence per share (2006: 1.21 pence) Operating Highlights • Results for the year were impacted by a fall in the market for pharmaceutical advertising in France and a reduction in UK public sector learning spend • We reacted to these changed market conditions by adapting our business models and creating new sources of revenue • Actions taken as part of a Group wide cost reduction programme will realise £2.5 million of annualised cost savings • EBITDA in our Education Division increased by 25% on a like for like basis • Our European political business showed encouraging growth, enhanced by the acquisition of the European Public Affairs Directory • Conferences and exhibitions performed strongly • Our Learning Division now has new management teams in place Summary of Results£'000 2007 2006Revenue 46,069 45,028Profit for the year 362 2,288EBITDA* 5,801 7,174Normalised earnings per share (basic)** 1.82p 2.93pEarnings per share (basic) 0.24p 1.59pDividend per share 0.75p 1.21p * EBITDA is calculated as earnings before interest, tax, depreciation,amortisation of intangible assets acquired through business combinations, andnon-trading items. ** Normalised earnings per share is stated before amortisation of intangibleassets acquired through business combinations, non-trading items and relatedtax. Non-trading items are items which in management's judgement need to be disclosedby virtue of their size, incidence or nature. Such items are included withinthe income statement caption to which they relate and are separately disclosedeither in the notes to the consolidated financial statements or on the face ofthe consolidated income statement. These results are the Group's first to be prepared under International FinancialReporting Standards as endorsed by the International Accounting Standards Boardand as adopted by the EU ("Adopted IFRS"). The December 2006 comparativefigures have been restated accordingly. An analyst presentation will be held at 09.30am today at Dresdner Kleinwort, 30Gresham Street, London EC2P 2XY, with coffee available from 09.00am. John van Kuffeler, Non-Executive Chairman of Huveaux, commented: "2007 was a disappointing year for Huveaux with a 19 per cent fall in normalisedEBITDA. We responded to the changing market conditions by adapting parts of our businessmodel. This included a series of successful new business initiatives and thelowering of our cost base. As a result, we won good levels of new business in December and this has ensureda good start to 2008." For further information, please contact: Huveaux John van Kuffeler, Non-Executive Chairman 020 7245 0270Gerry Murray, Chief Executive Officer Brewin Dolphin Limited (NOMAD) 0131 225 2566Sandy Fraser 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 500 staff in London, Paris,Brussels, Edinburgh and four other UK regional offices. The Group now consists of four Divisions, each of which has strong brands andmarket leading positions: Political Division The 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 Division A 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 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 Division One 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. CHAIRMAN'S STATEMENT 2007 Overview 2007 was a disappointing year for your Company. Revenue grew by £1.1 million to£46.1 million despite two sizable acquisitions in the previous year, andearnings before interest, tax, amortisation and non-trading items (EBITDA)declined from £7.2 million to £5.8 million, a 19 per cent per cent fall.Normalised earnings per share decreased by 38 per cent to 1.82 pence and basicearnings per share fell to 0.24 pence (2006: 1.59 pence). Non-trading items amounted to a total of £0.9 million, including the costs ofthe abortive deal process for the Company (£0.4 million) and the impact of theGroup initiative to reduce costs (£0.7 million), less profit on disposal ofassets (£0.2 million). Your Board is recommending a dividend in line with our financial performance of0.75 pence per share (2006 - 1.21 pence), a reduction of 38 per cent compared tolast year. The Board explored the possibility of an offer for the Company from a privateequity house in the last quarter of 2007 but conditions, particularly in thefinancial markets, were not conducive to effecting a successful transaction, andthe talks were terminated on 12 December 2007. Strategy Our first priority is to deliver a good set of results in 2008 to restoreinvestor confidence in our business. We are well placed to do this as we havesuccessfully restructured both Epic and our Political Knowledge businesses,leading to major contract wins which will flow through to profit in the firstquarter of this year. This, combined with the impact of the cost reductionmeasures undertaken throughout the Group, should allow us to deliver on thispriority. At the same time we are concentrating our resources on driving new developmentin the businesses which are showing good organic growth, principally in thePolitical and Education Divisions. This is reflected in our new exhibition andconference business and the further developments in expanding our digitalportfolio within the Political Division. It is equally apparent in the EducationDivision where digital developments are now gathering pace while our revisionguide portfolio continues to expand. We are also adapting the business model of our French Healthcare business bycontaining the effects of the structural decline in pharmaceutical advertisingrevenues while growing our Continuing Medical Education business. We areexamining any opportunities to optimise shareholder value from this Division. Achieving these strategic priorities will migrate Huveaux's business andfinancial profile towards one of strong organic revenue and EBITDA growth withgood margins in attractive B2B sectors with significant digital and eventsrevenue. The Board, Management and People I would like to thank our management and staff for their considerable effortsduring such a difficult year. Much has been achieved in reducing costs andwinning new business which is a direct result of their hard work. There have also been three changes at Board level. Dan O'Brien, our FinanceDirector for the last two years, is leaving to take up a high profileappointment with another media company and intends to step down from the Boardon 4 March. I am pleased to announce that we are today announcing theappointment of his successor Rupert Levy, Finance Director within the HaymarketGroup, who will join us on 22 April this year. Mike Arnaouti, our CompanySecretary and Director of Corporate Services, has also stepped down after twoand a half active and eventful years. He is succeeded by Sue De Cesare. Finally,I am moving from Executive Chairman to Non-Executive Chairman, which givesHuveaux the benefit of a conventional Board structure with a Non-ExecutiveChairman and a Chief Executive. The net result of these three changes is asignificant cost saving for the Group. Outlook The Board is mindful that the external economic environment in 2008 is likely tobe difficult, implying that both corporate profits and Government tax revenuesare likely to be under pressure. This background has conditioned our strategyfor 2008, namely to focus on organic growth, cost control and marginimprovement, guided by the new management teams that have been put in place in2007. In addition, 2008 will benefit from the full impact of the cost savingmeasures introduced in 2007. As a result, your Board is confident that the groupcan deliver a satisfactory performance in the year ahead, notwithstanding theoverall market environment. The Board is not planning any material acquisitions and continues to review theoptimum structure for the group to ensure that shareholder value is maximized. CHIEF EXECUTIVE'S BUSINESS AND FINANCIAL REVIEW Introduction In a year when some of our markets have seen considerable turmoil and presentedmajor challenges, we have worked hard to reorganise our company, reduce ourcosts and move forward in a business climate which remains difficult for allmedia owners. However, we are confident that the changes we have made will drivesubstantial improvement in the year ahead. Business Overview Our performance this year has been impacted by fundamental changes in the globalpharmaceutical market, public sector cutbacks in the UK and a flat publicaffairs market. We have changed our business model in response to each of theseand the efforts of management throughout the group have been directed atdeveloping new initiatives to grow future revenues while eliminating costs wherewe can, without damaging the prospects for the businesses going forward. Inaddition we have very substantially reduced our central costs in line with thestrategic needs of our company. In our French Healthcare Division advertising volumes fell throughout the year.We have continued to grow our online and Continuing Medical Education (CME)revenues but not at sufficient pace to make up for lost advertising income inour three major healthcare magazines. The final divisional result of £1.8million EBITDA for the year was disappointing but still represented more than a15 per cent return on the acquisition cost. The fall in the pharmaceuticaladvertising market is driven by the inexorable rise in the use of generic drugs,as governments around the world attempt to cut healthcare costs. It is our viewthat this will persist for the foreseeable future. We continue to examine theoptions for the future of this business. Cost efficiencies in the UK civil service have led to reduced spending on publicsector training. Whilst this adversely impacted our e-learning and civil servicetraining business during the year, we have recently seen a return to growth inthis sector and are confident of better market conditions going forward. We haverefined our business model for face-to-face training and implemented anefficiency programme at Epic. Both these changes have already had a positiveeffect on our recent performance, and December was a record month for newbusiness orders, which will be realised as profit in 2008. Our training businessat Fenman had a very good year with the cost reduction exercise we implementedduring 2006 helping us achieve more than 80 per cent growth in EBITDA. In our Education Division we have continued to expand our portfolio and haveseen year on year underlying EBITDA growth in excess of 25 per cent as a result.Revenue growth was substantial in our Scottish business, Leckie & Leckie, andindeed all our education companies showed double digit EBITDA growth. Theintegration of Letts was completed during the year and it showed very pleasinggrowth in its sales direct to schools where historically it has not been strong. We will continue our portfolio expansion throughout 2008 both in print andonline, and are very confident of the future for this business. Our Political Division had a mixed year with good growth in our European andGovernment business but with a disappointing performance from our parliamentarymagazines. We had a flat party conference season and the subsequent uncertaintyaround a possible general election caused confusion in our markets. This gave usa poor final quarter for the division though for the whole year revenue wasslightly up on 2006, driven principally by a strong performance of the EU unitin Brussels. EBITDA for the Political Division fell to £1.8 million as weabsorbed the costs of several new developments which will benefit the Group from2008 onwards. 2008 Priorities Huveaux was established with the intention of creating a substantial B2B mediagroup. Throughout 2005 and 2006 we made good progress with this objectiveshowing double digit earnings per share growth in both years. There is no doubt that the difficult trading conditions we have faced during2007, particularly in France, have interrupted that progress. However, we enter2008 a much leaner and fitter organisation. Management overhead and centralcosts have been substantially reduced in line with more conservative growthambitions. Divisional management costs have also been reduced and cost controland margin improvement are central to our business improvement strategy for2008. During the second half of 2007 a cost reduction programme was put inplace, as a result of which £2.5 million of costs will be saved on an annualisedbasis. The full benefit of these will be seen in 2008. The trading environment for all media companies in 2008 is predicted to bechallenging. Whilst much of our advertising is 'defensive' in nature, we willnot be entirely immune to an economic downturn .We can expect very little in theway of growth in advertising. Progress during a period such as this is driven byconcentration on new events and digital content, and on costs and marginmanagement. That is the task we are determined to complete in the next 12months and we feel confident that this will deliver a good result toshareholders. Political Division £'000 2007 2006Revenue 10,825 10,578EBITDA* 1,791 2,428 *A reconciliation between EBITDA and operating profit is provided in Schedule Aon page 22. As the country awaited the long transition from Tony Blair to Gordon Brown, andin the autumn the new Prime Minister decided against a general election, thepublic affairs market in Westminster in 2007 was flat. For us it was a year of investment for our Political Division. It was a yearwhere we invested in our people, technology and products to secure expansioninto growing markets and new services. Highlights: • Our government business grew its revenues by 29 per cent and expanded its online and events income. • Revenues in our European political publishing business increased by 18 per cent with our Regional Review magazine growing by more than 50 per cent. • We became the clear leader in EU political monitoring and this business more than doubled in size. • We now run over 100 political events across the Group. • We have launched Civil Service Live, the first ever exhibition for the civil service showcasing best practice and innovation in public sector delivery. We have now successfully expanded into the civil service market. Our governmentbusiness, which operates under the brand of Whitehall and Westminster World,grew by 29 per cent in 2007. In just three years it has developed into athriving newspaper, online and events business, and has established itself as anindispensable resource to senior civil servants. This was highlighted when thePrime Minister Gordon Brown and the Cabinet Secretary Sir Gus O'Donnell gavepresentations at our Whitehall and Westminster World Civil Service Awardsceremony in November. In 2008 our government business will take a major leap forward through thelaunch of Civil Service Live. This is the first ever exhibition dedicated tothe UK civil service. It will bring together more than 5,000 senior civilservants over three days to inspire innovation amongst the people runningtoday's and tomorrow's civil service. It will showcase best practice andinnovation in the civil service and will be the must-attend event for seniorcivil servants. Civil Service Live is a significant brand extension for Whitehall andWestminster World and it moves our successful events business into majorexhibitions. In 2004 Dods held just one event; in 2008 it will hold over 50. We have successfully expanded in the Brussels market through the solid growth ofour European political magazine business. In 2007 revenue for this businessgrew by 18 per cent. The Parliament Magazine, our magazine for the EuropeanParliament has become an increasingly influential channel for EU Commissionersto communicate to MEPs. The Regional Review, our magazine focussing on the regions of the EU, sawrevenue grow by 58 per cent last year. Michel Delaberre, the President of theCommittee of the Regions, gave the closing address at the inaugural RegionalReview Awards. In 2007 Dods acquired the European Public Affairs Directory (EPAD), thedefinitive guide to who's who in public affairs in Brussels. This is anexcellent addition to our market leading portfolio of books and we plan tolaunch the inaugural EPAD Awards in 2008. In 2008 we expect further growth in our Europe business, especially through thegrowing demand for policy forums and networking events in Brussels. In 2007 our online information business showed solid growth, especially our EUmonitoring information service which grew by an exceptional 150 per cent. Weexpect our EU monitoring service to continue this significant growth in 2008.We have invested heavily in our digital information products as we see this as akey growth area in future years. In 2008 we will be launching a new version of ePolitix.com, our website forparliamentarians and policymakers. We will also be launching an improvedversion of Dodonline which will offer much greater functionality reflecting ourclients' changing needs. Our recruitment business Electus showed good profit growth in 2007. Althoughthe recruitment market is increasingly competitive, the demand for publicaffairs recruitment services remains strong. Last year Public Affairs News, our magazine for the public affairs industryshowed strong profit growth. In July, four hundred public affairs practitionersgathered at the Cafe Royal for our annual Public Affairs News Awards dinner. In the summer of 2008 Dods will hold a major exhibition in Westminster Hall inthe Palace of Westminster, lasting three months. The 'Your Parliament'Exhibition will celebrate 175 years of Dods serving Parliament and will alsoreveal how Parliament has made dramatic changes to our society over this time.We are proud to be working with Parliament through this exhibition to encouragepeople, and especially young people, to engage more in the democratic process. In 2007 we invested in our future growth by expanding into new markets,particularly government and the EU. We invested in technology to drive ourdigital products forward and by further developing the expertise to grow ourhighly successful events business. In 2008 we will deliver on these ambitiousand exciting expansion plans. Learning Division £'000 2007 2006Revenue 10,544 12,718EBITDA* 798 1,888 *A reconciliation between EBITDA and operating profit is provided in Schedule Aon page 22. Our Learning Division had a very mixed and ultimately disappointing year. Severepublic sector training cuts across all government departments seriously impactedour Political Knowledge and Epic businesses in the first half of the year. Thisslowly turned around in the second half of the year, but too late for what isclearly a very disappointing result. Throughout all this our Fenman trainingbusiness, which also saw revenue downturn, was able to increase its profits byover 80 per cent to record levels. This was due entirely to the cost reductionprogramme undertaken in the final quarter of 2006. We ended the year on a high at both Political Knowledge and Epic where newlyinstalled management and record levels of sales have given us much increasedvisibility on future revenues, and renewed confidence for a very differentfinancial picture in 2008. Highlights: • Fenman increased its profits year on year by 87 per cent and launched two web based interactive training services: TrainerActive and Good Practice. • The Political Knowledge business won its largest ever contract in December 2007 with the Equality and Human Rights Commission to deliver training to its staff in the first quarter of 2008. • Westminster Explained and Westminster Briefing launched new websites in July 2007 enabling clients to book courses on-line. This has proved popular and approximately 25 per cent of places are now reserved through the website. This proportion is expected to grow in 2008. • Epic had its largest ever sales month in December with well over £1 million of orders. This business now has a new management team and has completed an efficiency programme resulting in a 15 per cent headcount reduction. Market conditions in 2007 were very tough in the public sector. Training budgetswere under pressure and many organizations opted to save money by deliveringtraining internally or ensuring value for money through competitively procuredsolutions. In our classroom training business, Westminster Explained, we have traditionallyrelied on an "open courses" model with off the shelf content. This model hasworked well when budgets are available; however in leaner times it simply doesnot offer sufficient value to the customer. In light of this we have developed amuch more customized option for government departments. This complementary modelhas the added advantage of creating a much closer relationship with the customerand giving a much greater degree of visibility of revenue going forward. As aresult we started winning significant new business in the final months of 2007. Our Westminster Briefing business continued to prosper throughout the yearputting on a record number of briefings and conferences, and we plan to expandthis substantially in 2008. This part of our business is very strong and wecontinue to attract top flight speakers. We have launched several new civil service programmes in the year including newcourses for fast-track entrants and an international civil service programmebased on best practice in the UK. We look forward to these new products bringingbrand new customers on board in 2008. Our Political Knowledge business finishedthe year on a high winning the largest single training contract in our historyfrom The Human Rights and Equalities Commission. In the final quarter of 2006 we implemented a comprehensive cost reductioninitiative at Fenman. This exercise produced significant savings in 2007enabling Fenman not only to withstand the downturn but to increase profits byover 80 per cent. Through a policy of co-production we have been able to developnew training materials for relatively low investment, and this is now payingoff. Training Journal had a satisfactory year, the highlight being its annual TJconference which is now a premier industry event after only two years.TrainerActive, our online training resources service, made good progress and wehave now established a joint arrangement with Good Practice to extend the rangeof training materials we can offer online. Epic had a very difficult first half year and struggled to find sufficient highmargin work in the poor public sector climate. This situation improved as theyear went on and in the last quarter we contracted a record amount of work witha significant proportion coming from the public sector. This work will mostlybe completed in the first half of 2008. In the last quarter of the year wecarried out an efficiency drive. This has resulted in a significant headcountreduction and these savings are expected to come through in increased margins aswe go through 2008. Education Division £'000 2007 2006Revenue 12,060 6,798EBITDA* 2,933 2,159 *A reconciliation between EBITDA and operating profit is provided in Schedule Aon page 22. Overall our Education Division had an excellent year in 2007. The UK schools market for educational publishing showed modest growth in 2007,although it was boosted in Scotland by additional money made available from theScottish Executive. However, school spend on digital product is expected to havedeclined slightly, as government e-learning credit funds reduced significantlyyear on year. The traditional retail market for educational publishing (high streetbookstores) also increased in value modestly in 2007 by 2.3 per cent, slightlybehind overall book sales growth. Highlights: • Sales direct to schools were well above the overall marketperformance and contributed to our strategy of increased schools presence toreinforce retail/consumer sales. • A year-on-year revenue increase strengthened Leckie & Leckie'sposition as the leading Scottish educational publisher, and Bookscan figuresconfirmed that both school and retail/consumer performance outstripped theoverall market. • The new Lonsdale Essentials revision range launched in Science had animmediate impact, both contributing to year-on-year revenue growth and addingchoice to the range of revision materials available to learners. • Online revenue growth over prior year was encouraging, and theincrease in the number of registered users, driven by various marketingcampaigns, was also impressive. • The expanded internal editorial and design capability allowed 21 percent more new titles to be published in the year than planned, including the newEssentials range, which contributed to the sales growth of the Lonsdale imprint. Our Education Division revenue for the full year was in line with the market,whilst EBITDA was well in advance of 2006 levels with an encouraging like forlike 25 per cent increase. Leckie & Leckie enhanced its reputation as the leading Scottish educationalpublisher with a 13 per cent revenue increase over 2006, with full year revenueof £2.6 million. Sales to retail were up 7 per cent, driven by Leckie's owntitles, whilst the past paper titles published with the SQA maintained theirsales levels. School sales were 21 per cent up on 2006, and again Leckie titlesgenerated most of the increase. Bookscan figures for the full year showedLeckie's sales out of bookstores up 7 per cent year-on-year, with both SQA andLeckie titles improving their performance. Lonsdale revenue finished at £3.1 million, 5 per cent up on 2006. Trade salesand new publishing were responsible for the increase, with Lonsdale titlesdistributed through high street bookstores for the first time in 2007. Newpublishing contributed over 12 per cent of sales, lead by the new Essentialsseries for GCSE Science, which had immediate sales impact. Overall GCSE Sciencesales, a key barometer of the Lonsdale imprint, grew by 15 per cent andre-established this offering as a market-leading list. E-commerce revenue wasalso encouraging, finishing 60 per cent ahead of prior year. Letts revenue finished at £6.4 million, with school sales performingparticularly well, up 21 per cent on 2006. Sales to high street retail customerswere also very strong, up nearly 5 per cent on prior year, a significantachievement at a time of decreasing consumer confidence. However sales toindependents and supermarkets fell in 2007. This has been a lucrative saleschannel for Letts and, coupled to a smaller presence in the supermarket channelthan in previous years, meant that Letts retail sales outside the high streetbookstores declined year on year. However, signs are that this was a cyclicaleffect, and 2008 should see a return to previous sales levels through theseoutlets. Letts e-commerce sales also showed dramatic growth, up 112 per cent, and amarketing collaboration with St Ivel (promoting Letts books on Omega 3 milk)brought 20,000 new registered users to the Letts website. Overall Divisional sales through the schools channel significantly outperformedthe market, being 9 per cent up on 2006, compared to a 5 per cent marketincrease. Most impressively, overall EBITDA at £2.9 million was up £0.8 million on 2006due to a combination of significant cost savings in print and distribution (theformer due to improved buying capability across the Division) added to tightoverhead control. Essentials Online was launched in November 2007 as this Division's first ventureinto online test practice and revision product. Co-developed by sister companyEpic, the product currently covers GCSE Science but has the potential to rollout to other subjects and levels in future years. Initial response to theproduct has been favourable, and distribution deals with key school re-sellershave been signed. A licensing deal with Autology, an online intelligent search service forsecondary schools, was signed during the first half of the year. A growingnumber of schools across the UK are benefiting from this service, which includescontent from most of the Letts and Lonsdale secondary catalogue. In addition, agroundbreaking deal with TutorVista, an online tutoring service, was signed inthe second half of the year, which combined Letts Science and Maths GCSE contentwith live, real-time tuition delivered via webex, Skype and messaging. Future curriculum change in schools secondary markets in England and Wales, atGCSE, KS3 and A-level, will create opportunity for new business as schools beginto switch to updated materials, an opportunity that our Education Division iswell placed to realise. Increased use of digital product by schools and the needfor a wider range of curriculum software content will also be a key driver ofgrowth for Huveaux, as the Education Division migrates more of its publishinginto digital formats and develops more digital pure play product. Retail markets may be exposed to a downturn in consumer confidence, but theeducation book sector has usually been immune to this trend as revision booksand study guides are a relatively small outlay and are viewed as an investmentfor a child's future, even more so in times of economic uncertainty. Theeducation book sector is therefore expected to continue to show modest growthand we feel well placed to take advantage. Healthcare Division £'000 2007 2006Revenue 12,800 14,934EBITDA* 1,752 2,366 *A reconciliation between EBITDA and operating profit is provided in Schedule Aon page 22. The pharmaceutical advertising market is enduring the worst trading conditionsin recent memory. The rise in use of generic drugs and lack of new blockbusterdrug launches which has traditionally fuelled this market has meant an 8 percent reduction in advertising spend. Highlights: • The Healthcare Division remains the leading supplier of Continuing Medical Education (CME) products in France. • Medical monitoring business launched at the end of 2007. • New e-learning programmes established in conjunction with Epic. Our magazines have held their market share at 24 per cent but revenue was downby 14 per cent and EBITDA by 24 per cent. These difficult conditions havecontinued into 2008. Maintaining a 15 per cent profit margin in these verydifficult circumstances is one of the few positives in this disappointingsituation. Our CME revenue grew substantially in the period but not enough to close the gapcreated by the advertising shortfall. It is clear that the growth of CME revenuewill be much slower than we originally thought. During the period we signed anexclusive agreement with the Federal organization of French medicalassociations, Federations des Specialites Medicales, to produce CME programswhich carry official CME credits. By the beginning of 2008, three national CMEprograms were taking place under this agreement. In addition we have begun production of two new e-learning programmes with theassistance of Epic. This is a completely new type of revenue for us in thisdivision. These programmes will be available to GPs from the Egora.fr website inthe spring of 2008. A further new revenue source was developed with the introduction of a monitoringbusiness for the pharmaceutical industry based on the principles of our wellestablished political monitoring business in the UK. It will deliver customisedtechnical and marketing information on demand and will show a profit in itsfirst year. We are realistic about the prospects for our healthcare publishing business anddo not expect the return of sizeable advertising revenues in the foreseeablefuture. In the short term we continue our efforts to maintain our market shareand develop new sources of non advertising revenue. In the longer term we remainopen minded about the strategic alternatives for this business. Financial Review 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 year ended 31 December 2006 has been restatedaccordingly. A reconciliation between operating profit under IFRS and EBITDA isprovided in Schedule A as an appendix. Distributable reserves are not affectedby the adoption of IFRS. Revenue and Operating Results Operating performance was disappointing across the business. Revenue for theyear was £46.1 million (2006: £45.0 million). The growth was the result ofacquisitions made in the prior year. Profit for the year was £0.4 million (2006: £2.3 million) and EBITDA was £5.8million (2006: £7.2 million). The profit for the year is also lower in 2007 dueto the first full year of interest charges on the £13.4 million aggregated termloans entered into in 2006 to fund acquisitions. Non-trading Items Non-trading items for the year totalled £0.9 million, of which £0.4 millionrelated to the potential acquisition of the company by a private equity house.The Company also incurred redundancy costs of £0.7m in realising the significantcost savings achieved during 2007. Also included within non-trading items is aprofit of £0.2 million on disposal of assets. Taxation The utilisation of tax losses in the year has led to a decrease in the overallrate of effective tax (adjusted for non-trading items and amortisation ofintangible assets acquired through business combinations) to 24.7 per cent(2006: 29.2 per cent). Whilst the Group continues to seek to optimise its taxposition going forward, it is expected that the blended tax rate will increase. Earnings per Share (EPS) Normalised EPS (before non-trading items and amortisation of intangible assetsacquired through business combinations) was 1.82 pence (2006: 2.93 pence). BasicEPS was 0.24 pence (2006: 1.59 pence). Dividends The Board is proposing a final dividend for the year of 0.75 pence per share.Subject to shareholders' approval at the forthcoming Annual General Meeting,this dividend will be paid on 29 August 2008 to shareholders registered on 4June 2008. Liquidity and Capital Resources During the year, Huveaux repaid £3.2 million of debt and ended the year withgross bank debt of £20.7 million (2006: £23.0m). Interest payable during the year amounted to £1.7 million (2006: £0.9 million).This increase reflects the first full year of interest charges on the £13.4million aggregated term loans entered into in 2006. Interest receivable was £0.1million (2006: £0.2 million). During the year, underlying cash conversion was again strong with the Groupgenerating £6.0 million (2006: £4.6 million) of cash from its operatingactivities. At the year-end, the Group had cash balances of £2.0 million (2005:£4.3 million) and net debt of £18.7 million, representing a net debt to EBITDAratio of 3.2 times (2006: 2.6 times). Derivatives and Other Instruments In 2007, Huveaux's financial instruments comprised bank loans, cash deposits andother items such as normal receivables and payables. The main purpose of thesefinancial instruments is to finance the Group's day-to-day operations. During 2007, the Company entered into certain derivative transactions in orderto manage the financial risk exposures arising from the Group's activities suchas interest rate, liquidity and foreign currency risks. The Group's policy isthat no speculative trading in derivatives is permitted. The Board regularlyreviews and agrees policies for managing these risks and the current situationis as follows: Liquidity Risk The Group has in place a £2.0 million working capital facility with Bank ofScotland which expires in July 2008, for the purpose of providing contingencyfunds in the event of any significant delay in converting working capital intocash. Foreign Currency Risk The Group derives a significant proportion of revenue from its operations inFrance. The investment in these operations is naturally hedged by the €15.0million seven-year term loan taken out in 2005, of which €12.8 million remainedoutstanding as at 31 December 2007. Interest Rate Risk The outstanding €12.8 million seven-year term loan attracts interest payable inEuros, calculated with reference to prevailing EURIBOR. The £13.4 million termloans attract interest payable in sterling, calculated with reference toprevailing LIBOR. In order to limit our forward exposure to changes in EURIBORand LIBOR, the Group has entered into interest rate caps for the terms of theloans. CONSOLIDATED INCOME STATEMENT for the year ended 31 December 2007 Note Audited Audited 2007 2006 £'000 £'000Revenue 46,069 45,028Cost of sales (27,918) (26,408)Gross profit 18,151 18,620 Administrative expenses:Non-trading items 2 (931) (640)Amortisation of intangible assets acquired through businesscombinations 7 (3,304) (2,132)Other administrative expenses (12,945) (11,957) (17,180) (14,729) Operating profit 971 3,891Finance income 148 161Financing costs (1,689) (872)(Loss)/profit before tax (570) 3,180Income tax credit/(expense) 932 (892)Profit for the year attributable to equity holders of parent 362 2,288 Earnings per shareBasic 5 0.24 p 1.59 pDiluted 5 0.24 p 1.58 p CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE for the year ended 31 December 2007 Note Audited Audited 2007 2006 £'000 £'000Actuarial gains/(losses) on defined benefit scheme 28 25Exchange differences on translation of foreign operations (723) 158Net (expense)/income recognised directly in equity (695) 183Profit for the year 362 2,288Total recognised income and expense for the year attributable to (333) 2,471equity holders of parent CONSOLIDATED BALANCE SHEET at 31 December 2007 Note Audited Audited 2007 2006 £'000 £'000Goodwill 6 28,651 28,165Intangible assets 7 42,325 44,888Property, plant and equipment 887 991Non-current assets 71,863 74,044 Inventories 3,181 3,158Trade and other receivables 12,175 15,102Derivative financial instruments 117 140Cash and cash equivalents 1,994 4,307Income tax receivable 163 -Assets held for sale - 188Current assets 17,630 22,895 Interest bearing loans and borrowings 8 (3,788) (3,140)Income tax payable - (412)Provisions (709) (368)Trade and other payables (14,703) (16,731)Current liabilities (19,200) (20,651)Net current assets (1,570) 2,244Total assets less current liabilities 70,293 76,288 Interest bearing loans and borrowings 8 (16,877) (19,855)Employee benefits (141) (156)Deferred tax liability (7,390) (8,248)Other non-current liabilities - (96)Non-current liabilities (24,408) (28,355) Net assets 45,885 47,933 Equity attributable to equity holders of parentIssued capital 15,200 15,200Share premium 30,816 30,816Other reserves 409 409Retained earnings 25 1,350Translation reserve (565) 158Total equity 9 45,885 47,933 CONSOLIDATED CASH FLOW STATEMENT for the year ended 31 December 2007 Note Audited Audited 2007 2006 £'000 £'000Profit from operations 362 2,288Depreciation of property, plant and equipment 366 300Amortisation of intangible assets acquired through business 3,304 2,132combinationsAmortisation of other intangible assets 881 329Profit on disposal of assets held for sale (64) -Profit on disposal of magazine titles (101) -Movements on defined benefit scheme 18 (1)Share based payments charges 124 153Net finance costs 1,541 711Income tax (credit)/expense (932) 892Cash flow relating to restructuring provisions (755) (1,824)Operating cash flows before movements in working capital 4,744 4,980Change in inventories (23) 81Change in receivables 2,601 (1,449)Change in payables (1,325) 1,000Cash generated by operations 5,997 4,612Income tax paid (423) (745)Net cash from operating activities 5,574 3,867 Cash flows from investing activitiesInterest and similar expenses paid (1,478) (1,066)Interest and similar income received 148 153Proceeds from sale of property, plant and equipment 19 -Proceeds from sale of investments - 55Proceeds from sale of magazine titles 575 131Proceeds from sale of assets held for sale 252 -Acquisition of subsidiary, net of overdraft acquired - (16,842)Net deferred consideration paid (140) -Acquisition of property, plant and equipment (271) (854)Acquisition of publishing rights (183) -Acquisition of other intangible assets (1,859) (312)Net cash used in investing activities (2,937) (18,735) Cash flows from financing activitiesProceeds from issue of share capital - 5,500New loans acquired - 13,400Payment of transaction costs - (296)Repayment of borrowings (3,186) (516)Dividends paid (1,839) (1,542)Net cash used in financing activities (5,025) 16,546 Net (decrease)/increase in cash and cash equivalents (2,388) 1,678Opening cash and cash equivalents 4,307 2,678Effect of exchange rate fluctuations on cash held 75 (49)Closing cash and cash equivalents 10 1,994 4,307 Notes to the preliminary announcement 31 December 2007 1 Basis of Preparation The Group financial statements consolidate those of Huveaux PLC and itssubsidiaries (together referred to as the "Group"). The financial statementshave been prepared on the basis of the accounting policies set out on pages 8 to13 of the Huveaux PLC Interim Report for 2007, which have been consistentlyapplied. The financial information set out above does not constitute the company'sstatutory accounts for the years ended 31 December 2007 or 2006. Statutoryaccounts for 2006, which were prepared under UK GAAP, have been delivered to theregistrar of companies, and those for 2007, prepared under accounting standardsadopted by the EU, will be delivered in due course. The auditors have reportedon those accounts; their reports were (i) unqualified, (ii) did not includereferences to any matters to which the auditors drew attention by way ofemphasis without qualifying their reports and (iii) did not contain statementsunder section 237(2) or (3) of the Companies Act 1985. As required by EU law (IAS regulation EC 1606/2002) the Group's accounts havebeen prepared in accordance with International Financial Reporting Standardsendorsed by the International accounting Standards Board (IASB) as adopted bythe EU ("Adopted IFRS"). 2 Non-trading items Audited Audited 2007 2006 £'000 £'000Redundancy and people related costs 648 452Relocation and integration - 188Abortive deal costs 448 -Profit on sale of assets held for sale (64) -Profit on disposal of magazine titles (101) - 931 640 Non-trading items are items which in management's judgement need to be disclosedby virtue of their size, incidence or nature. Such items are included withinthe income statement caption to which they relate and are separately disclosedeither in the notes to the consolidated financial statements or of the face ofthe consolidated income statement. Non-trading redundancy and people related costs in 2007 represent the effect ofa Group initiative to reduce costs. Abortive deal costs represent advisoryfees relating to the aborted transaction with a private equity firm. Non-trading items in 2006 represent the restructuring of the Group following theacquisitions of Letts Educational Limited, Leckie & Leckie Limited, PoliticalWizard Limited and Parliamentary Monitoring Services Limited, and additionalrestructuring of the operations at COPEF SA following the acquisition of thatbusiness in 2005. 3 Taxation Audited Audited 2007 2006 £'000 £'000Current taxCurrent tax on income for the year at 30% (2006: 30%) 3 878Adjustments in respect of prior periods (247) 24 (244) 902Double taxation relief (1) (1) Overseas taxCurrent tax expense on income for the year at 30% (2006: 30%) 1 1Total current tax expense (244) 902 Deferred taxOrigination and reversal of temporary differences 268 83Effect of change in tax rate (592) -Benefit from previously unrecognised tax losses (364) (93)Total deferred tax income (688) (10) Total income tax (credit)/expense (932) 892 The effect of non-trading items charged during the year is to reduce the taxcharge by £279,000 (2006: £192,000). The credit to the income statement in respect of deferred tax of £688,000 (2006:£10,000) is stated after recording a deferred tax asset of £364,000 (2006:£93,000) in respect of tax losses, the recovery of which has been enabled by themerger of our French operations in 2006. There are other potential deferred taxassets in respect of tax losses totalling £238,000 (2006: £200,000) that havenot been recognised on the basis that their future economic benefit isuncertain. Included within the tax credit to the income statement is £133,000 oftax-related goodwill written off on the sale of magazine titles (2006: £nil). The tax charge for the period differs from the standard rate of corporation taxin the UK of 30% (2006: 30%). The differences are explained below: Income tax reconciliation 2007 2006 £'000 £'000(Loss)/profit before tax (570) 3,180National tax charge at standard rate of 30% (2006: 30%) (171) 954 Effects of:Expenses not deductible for tax purposes 1,183 756Accelerated capital allowances and temporary differences 158 (26)Adjustments to tax charge in respect of prior periods (247) 24Utilisation of tax losses (899) (723)Effect on deferred tax of change in tax rate (592) -Recognition of previously unrecognised tax losses (364) (93)Total income tax (credit)/expense (932) 892 4 Dividends Audited Audited 2007 2006 £'000 £'000The aggregate amount of dividends comprises:Final dividends paid in respect of the previous year but notrecognised as liabilities in that year 1,839 1,542 A final dividend of 0.75 pence per 10p Ordinary share has been recommended and,subject to approval by shareholders at the Annual General Meeting on 3 June2008, will be paid on 29 August 2008 to shareholders on the register at 4 June2008. 5 Earnings per share Audited Audited 2007 2006 £'000 £'000Profit attributable to shareholders 362 2,288Add: non-trading items (see note 2) 931 640Add: amortisation of intangible assets acquired throughbusiness combinations 3,304 2,132Less: tax in relation to the above items (1,838) (845)Adjusted profit attributable to shareholders 2,759 4,215 Audited Audited 2007 2006Weighted average number of shares Ordinary Ordinary shares sharesIn issue during the year - basic 151,998,453 143,994,329Dilutive potential ordinary shares 634,341 698,200In issue during the year - diluted 152,632,794 144,692,529 Earnings per share - basic 0.24 p 1.59 pEarnings per share - diluted 0.24 p 1.58 pNormalised earnings per share (before non-trading items and 1.82 p 2.93 pamortisation of intangible assets acquired through businesscombinations) 6 Goodwill Audited Audited 2007 2006Cost & Net book value £'000 £'000 Opening balance 28,165 19,869Revisions to fair values of assets and liabilities on 584 343acquisitions made in the prior yearAcquisitions through business combinations - 7,953Disposals (98) -Closing balance 28,651 28,165 Additions to goodwill in the year represent amendments to the fair value ofgoodwill acquired in 2006 on the acquisitions of Letts Educational Limited andPolitical Wizard Limited. Goodwill acquired in a business combination is allocated at acquisition to thecash-generating units (CGUs) that are expected to benefit from that businesscombination. The carrying amount of goodwill has been allocated as follows: Audited Audited 2007 2006 £'000 £'000Political Division 15,112 15,016Learning Division 5,071 5,071Education Division 4,411 3,868Healthcare Division 4,057 4,210 28,651 28,165 The Group tests annually for impairment, or more frequently if there areindications that goodwill might be impaired. The recoverable amounts of theCGUs are determined from value in use calculations. Value in use was determinedby discounting future cash flows generated from the continuing use of the titlesand was based on the following most sensitive assumptions: - cash flows were projected based on operating results and the 5 year business plan. - cash flows were extrapolated using conservative growth rates of between 0% and 2.5%. - cash flows were discounted using the Company's pre-tax weighted average cost of capital of 7.8% (2006: 8.2%). 7 Intangible assets Audited Audited Audited Audited Assets acquired Software Plate costs Total through business combinations £'000 £'000 £'000 £'000CostAt 1 January 2006 37,843 2,413 - 40,256Additions - externally purchased - 411 175 586Additions through acquisition 10,084 - 591 10,675Disposals - (77) - (77)Exchange adjustment - (44) - (44)At 1 January 2007 47,927 2,703 766 51,396Additions - externally purchased - 588 713 1,301Additions - internally generated - 184 374 558Additions through acquisition 183 - - 183Disposals (477) (1,370) - (1,847)Reclassifications - (312) - (312)Exchange adjustment - 72 - 72At 31 December 2007 47,633 1,865 1,853 51,351 AmortisationAt 1 January 2006 1,965 2,202 - 4,167Charged in year 2,132 211 118 2,461Disposals - (77) - (77)Exchange adjustment - (43) - (43)At 1 January 2007 4,097 2,293 118 6,508Charged in year 3,304 231 650 4,185Disposals (23) (1,407) - (1,430)Reclassifications - (294) - (294)Exchange adjustment - 57 - 57At 31 December 2007 7,378 880 768 9,026 Net book valueAt 1 January 2006 35,878 211 - 36,089At 31 December 2006 43,830 410 648 44,888At 31 December 2007 40,255 985 1,085 42,325 Audited Audited 2007 2006 £'000 £'000Assets acquired through business combinations comprise:Publishing rights 33,679 35,648Brand names 2,610 2,765Customer relationships 3,701 4,942Customer lists 198 358Other assets 67 117 40,255 43,830 Amortisation of plate costs is recognised within cost of sales; all otheramortisation is recognised within administrative expenses. No intangibles havean indefinite useful economic life. Included within intangibles are internally generated assets with a net bookvalue of £182,000 (2006: £16,000). 8 Interest bearing loans and borrowings Audited Audited 2007 2006 £'000 £'000Borrowings are repayable as follows:On demand or within one year 3,788 3,140Between one and two years 3,788 3,645Between two and five years 12,469 11,440After five years 620 4,770 20,665 22,995Less: Amounts due for settlement within 12 months (shown (3,788) (3,140)within trade and other payables)Amount due for settlement after 12 months 16,877 19,855 Audited Audited 2007 2006 £'000 £'000 £'000Borrowings are taken out in the following currencies: Interest PrincipalSterling Floating linked to LIBOR £13,400 11,270 13,400Euros Floating linked to EURIBOR €15,000 9,395 9,595Total 20,665 22,995 The weighted average interest rate paid on the bank loans was 6.8% (2006: 5.7%). The floating rates of interest expose the Group to cash flow interest raterisk, which is mitigated by the interest rate caps into which the Group hasentered. The euro loan represents the outstanding element of a €15,000,000 loan tofinance the acquisition of COPEF SA in 2005, on which the last repayment is duein December 2012. The sterling loans represent a £5,400,000 loan taken out in2006 to finance the acquisition of Parliamentary Monitoring Services Limited andPolitical Wizard Limited, on which the last repayment is due in December 2012;and an £8,000,000 loan taken out in 2006 to finance the acquisition of LettsEducational Limited and Leckie & Leckie Limited, on which the last repayment isdue in June 2013. All loans are taken out with Bank of Scotland. In connection with the Group's banking and borrowing facilities with the Bank ofScotland, the Company and its UK subsidiary undertakings have entered into across guarantee, which gives a fixed and floating charge over the assets of theUK trading companies of the Group. The Group estimates the fair value of its loans to be the same as their carryingamount. At 31 December 2007, the Group had available £2,000,000 (2006: £2,000,000) ofundrawn facilities under its working capital facility. Interest on amountsdrawn down under this facility is paid at 2% over base rate. This facility isdue to expire in July 2008. 9 Reconciliation of movements in equity Audited Audited 2007 2006 £'000 £'000Opening shareholders' funds 47,933 41,647Profit for the year 362 2,288Dividends paid (1,839) (1,542)Actuarial gains and losses 28 25Currency translation differences (723) 158New share capital subscribed (net of issue costs) - 5,204Share based payment charges credited to equity 124 153Closing shareholders' funds 45,885 47,933 10 Analysis of net debt At beginning Exchange At end of year Cash flow Reclassification movement of yearCash at bank and in hand 4,307 (2,388) - 75 1,994 Debt due within one year (3,140) 3,186 (3,645) (189) (3,788)Debt due after one year (19,855) - 3,645 (667) (16,877) (18,688) 798 - (781) (18,671) 11 Transition to IFRS This is the first year that he Group has presented its financial statementsunder IFRS. A full reconciliation between IFRS and UK GAAP was released on 11May 2007 and can be found on the Group's website www.huveauxplc.com. Cautionary statement This press release may contain forward-looking statements based on currentexpectations or beliefs, as well as assumptions about future events. In thatregard, such statements are: • inherently predictive and speculative and involve risk anduncertainty because they relate to events and depend on circumstances that willoccur in the future; and • not a guarantee of future performance and are subject to factors thatcould cause the actual results to differ materially from those expressed orimplied. The name Huveaux is a trademark of Huveaux PLC. All other trademarks mentionedherein are the property of Huveaux's respective subsidiary companies. All rightsreserved. The Huveaux PLC 2007 Annual Report and Financial Statements are being posted toshareholders on 27 March 2008 and will be available to the publicupon request at the Company's registered office: 4 Grosvenor Place,London, SW1X 7DL. Copies of recent announcements, including this Preliminary Results announcement,and additional information on Huveaux, can be found at www.huveauxplc.com. Schedule A Reconciliation between operating profit and non-statutory performance measure The following tables reconcile operating profit as stated above to EBITDA, anon-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 of assets acquired through business combinations, andnon-trading items. Year ended Amortisation of31 December 2007 Operating intangible Non-trading Profit Depreciation* assets items EBITDAPolitical 264 235 1,213 79 1,791Learning (251) 137 708 204 798Education 1,910 84 1,003 (64) 2,933Healthcare 1,354 119 380 (101) 1,752Head Office (2,306) 20 - 813 (1,473) 971 595 3,304 931 5,801 Year ended Amortisation of31 December 2006 Operating intangible Non-trading Profit Depreciation* assets items EBITDAPolitical 1,187 224 915 102 2,428Learning 984 152 646 106 1,888Education 1,711 30 227 191 2,159Healthcare 1,704 77 344 241 2,366Head Office (1,695) 28 - - (1,667) 3,891 511 2,132 640 7,174 *including amortisation of software shown within intangibles. This information is provided by RNS The company news service from the London Stock Exchange