DODS.L Regulatory News (DODS)

5 Mar 2007 07:03

Huveaux PLC05 March 2007 5 MARCH 2007 Huveaux PLC 2006 PRELIMINARY RESULTS FIFTH CONSECUTIVE YEAR OF SIGNIFICANT GROWTH Financial Highlights •Turnover up 62% to £45.0 million •Normalised profit before tax up 43% to £6.0 million •Profit before tax up 146% to £4.8 million •Normalised EPS up 17% to 3.06 pence per share •Dividend up 10% to 1.21 pence per share •EBITDA organic growth of 14% •Continued strong revenue from digital and events at 26% and 12% respectively •Underlying margin improved through synergies and cost control Operating Highlights •Leading position in the UK study aid and revision guide market achieved through acquisition of Letts Educational and Leckie & Leckie •Education Division established in 2007 to exploit further opportunities •Political monitoring business enhanced through acquisition of Political Wizard and launch of new EU monitoring services •Market leadership established in Continuing Medical Education market in France •Diversification of revenue streams delivered through expansion of events business Summary of Results£'000 2006 2005 Restated*Turnover 45,028 27,736Profit before tax 4,827 1,963 Normalised profit before tax** 5,952 4,153 EBITDA*** 7,174 4,547Normalised earnings per share (basic)** 3.06p 2.62pEarnings per share (basic) 2.41p 1.31pDividend per share 1.21p 1.10p * Restated for change in accounting policy in accordance with the introductionof FRS 20: 'Share-based Payment.' The charge for 2006 was £153,000 (2005:£173,000). ** Normalised profit before tax and normalised earnings per share are statedbefore amortisation of goodwill and exceptional items. *** EBITDA is calculated as operating profit before amortisation of goodwill,depreciation and exceptional items. An analyst presentation will be held at 11.00am today at Dresdner Kleinwort, 30Gresham Street, London EC2P 2XY, with coffee available from 10.30am. John van Kuffeler, Executive Chairman of Huveaux, commented: "In 2006, we have made great progress towards our strategic objective ofcreating a substantial B2B media group, while continuing to deliver double-digitprofit and EPS growth. We have achieved this while also improving our products and services across theGroup, by pursuing the opportunities offered by digital technologies and bycontinuing to broaden our revenue streams. Although it is still early in the year, we have made an encouraging start to2007. Our four divisions all have good market positions, leaving us well placedto exploit market opportunities, supplemented by targeted acquisitions. TheBoard looks forward to another year of strong financial performance and furtherstrategic progress." For further information, please contact: HuveauxJohn van Kuffeler, Executive Chairman 020 7245 0270Gerry Murray, Chief Executive OfficerDan O'Brien, Group Finance Director FinsburyJames Leviton 020 7251 3801Don Hunter About Huveaux: 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 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. 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. 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 and seminarsbusiness. 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. CHAIRMAN'S STATEMENT For the fifth consecutive year since Huveaux's foundation, we have achievedsignificant strategic and financial progress in 2006. Sales grew 62% from £27.7million to £45.0 million, while profit before tax, amortisation of goodwill andexceptional items grew 43% from £4.2 million to £6.0 million. Profits weredriven by the full year impact of acquisitions made in 2005, the addition of thenew education businesses acquired during the year and an impressive underlyingmargin growth in the divisions. Normalised earnings per share grew 17% to 3.1pence. In line with our progressive dividend policy, your Board is recommending a finaldividend of 1.21 pence per share (2005: 1.1 pence), an increase of 10% on theprevious year. "Acquire, improve, build and add" With the emergence of internet technologies, the media landscape has beentransformed during the period since Huveaux's foundation. Nevertheless, theCompany has been able to deliver consistent and improving financial performanceover that period while keeping pace with the fundamental changes in its marketsand investing for the future. Our four-part strategy has been clear from the outset: •Acquire a market position •Improve the existing business •Build innovative new revenue opportunities in line with market changes, principally in events and online •Add acquisitions to secure our market position By pursuing and successfully executing on this strategy, we have created amodern B2B media group from scratch over the past five years and considerableprogress has also been made in 2006 in advancing this strategy still further. Huveaux has developed strong brands in market leading positions, typically thenumber one or number two in our selected markets. Our customers experience thesebrands across print and digital media as well as events. Our major brands havebeen strengthened with acquisitions and new launches, consolidating our marketleadership in the Political, Education, Healthcare and , Learning fields andproducing new revenue sources for the future. Digital revenues grew 75% in 2006 and now account for 26% of Group sales,reflecting the importance we place on delivering information and servicesonline.. Our events business, largely developed organically, is also expandingfast and now comprises 12% of Group revenue. Strategic Progress Political Division The acquisition of Political Wizard in July 2006 for £4.9 million helpedstrengthen our political monitoring business, which is the fastest growingsector in our Political Division. The performance of Political Wizardpost-acquisition has been in line with our positive expectations. New productlaunches, such as Dods Polling and The Civil Service Network portal, haveexpanded our product range to both government and the public affairs industry. Education Division Another major strategic step during the year was the acquisition in September2006 of Letts Educational and Leckie & Leckie for £12.0 million and itsintegration with our existing Lonsdale revision guide business to form a newEducation Division from the beginning of 2007. This is a key strategic move forHuveaux. We are fully aware of the changing landscape in educational publishingand that some of today's suppliers do not relish the digital challenge itbrings. We do not share this view and are confident that our current position inrevision and testing and the expertise at Epic, our leading UK bespokee-learning company, provide us with an excellent platform for digital expansionin this sector. Learning Division The Learning Division has achieved higher margin sales through Epic, the leadingUK bespoke e-learning company. Particularly significant were new private sectorcustomers and contracts won in conjunction with other parts of the HuveauxGroup. The Political Knowledge seminar and events business had a further year ofexcellent growth and our new TJ Awards for Human Resources was a considerablesuccess. Healthcare Division Our Healthcare Division achieved all its principal objectives in 2006. The threeleading magazines all achieved the accreditation of providing Continuing MedicalEducation (CME) for doctors in France and the introduction of two CME programmesensured we are the market leading CME publisher by revenue in France. Our Vision Huveaux is now a sizable business, running some 500 seminars and conferences,delivering over 25% of its sales through digital media, publishing 16 magazinesand newsletters and selling in excess of 5.0 million books a year. We have delivered consistent and improving financial results from our marketleading brands. We have developed those brands to produce new revenue sourcesfor the future in line with customer demand for new digitally deliveredservices. Our strategy remains the same, our ambition strengthened. We are in astrong position going forward. The Board, Management and People Timothy Benn and Christina Benn stepped down from the Board in April 2006. Iwould like to thank them for their invaluable contribution to the first fouryears of Huveaux's existence. Richard Flaye was appointed a non-executive director in September and hisconsiderable experience in B2B publishing is already proving to be a valuableasset to the Board. We continue to build our senior management teams in each of the operatingdivisions and have recently recruited an experienced Managing Director tohead-up our newly formed Education Division. The Board would like to thank the management and staff of Huveaux for their hardwork and dedication in achieving a series of challenging targets in 2006. Outlook In 2006, we have made great progress towards our strategic objective of creatinga substantial B2B media group, while continuing to deliver double-digit profitand EPS growth. We have achieved this while also improving our products and services across theGroup, by pursuing the opportunities offered by digital technologies and bycontinuing to broaden our revenue streams. Although it is still early in the year, we have made an encouraging start to2007. Our four divisions all have good market positions, leaving us well placedto exploit market opportunities, supplemented by targeted acquisitions. TheBoard looks forward to another year of strong financial performance and furtherstrategic progress. CHIEF EXECUTIVE'S REVIEW At a time when all media groups face fundamental challenges to their businessmodels, we have once again delivered substantial double-digit growth in bothprofits and earnings per share. We have achieved this while also improving ourproducts and services across the board, pursuing the opportunities offered bydigital technologies and continuing to broaden our revenue streams. Our abilityto deliver results today, while laying the foundations for sustainable revenueand profit growth in the future, means we are well placed to take advantage ofthe communications revolution taking place across our industry. Huveaux's core objective is to help its customers drive and improve their ownindividual and organisational performance. We do this by amplifying andexpanding the traditional B2B model to include e-learning, numerous web-basedinformation and communication services and a substantial events business. Webelieve firmly that the expansion of digital services and events in our marketsrepresents a significant opportunity. Diversifying Revenue In 2006, we made further good progress towards our strategic objective ofbecoming a substantial B2B media group, with diversified revenue streams aroundeach of our main brands and existing content. We have expanded our digitalportfolio through both acquisition and new product launches. In July 2006, weadded a web-based service to our political monitoring business with theacquisition of Political Wizard. This has now been fully integrated into theDods business, enabling us to offer a much wider range of services and pricepoints to customers as part of a recently restructured EU monitoring operation. Elsewhere, we have developed a web portal for the civil service, The CivilService Network, and an online assessment tool for secondary schools. In France,we have significantly enhanced our Egora.fr website by incorporating anextensive searchable medical archive. We will shortly be enhancing it stillfurther with the introduction of a management system that will enable GPs tosource, monitor and control their Continuing Medical Education (CME) activities.Our ability to innovate, by applying a healthy mix of proven and cutting-edgedigital technologies, is greatly assisted by our e-learning and web developmentcapabilities at Epic. The expansion of our events business has also helped us to diversify our revenuestreams away from print subscriptions and advertising in 2006. We now run anumber of prestigious awards events, particularly in the political andgovernment sector, and we were delighted to launch the inaugural Civil ServiceAwards for Excellence. Elsewhere, we ran over 500 training courses andconferences in the year (compared to 330 in 2005) and our government trainingunit, Political Knowledge, was again one of our best-performing businesses in2006. Learning events also form a crucial part of our development as a providerof CME in France. We are the first CME supplier to have been approved by theFrench government and we are determined to leverage this position and reinforceour lead in this field. These diversification and brand extension initiatives are underpinned by thecontinued dominance of our traditional print products in their respectivemarkets. Our two major UK publications, The House Magazine and ParliamentaryMonitor, both showed healthy organic growth in 2006. In France, we relaunchedour weekly publication for GPs, Panorama du Medecin, which ended the year withan increased market share in the highly competitive pharmaceutical advertisingmarket. Our newspaper for UK government, Whitehall and Westminster World,continued to grow and is now established reading amongst UK civil servants. One of the highlights of last year was the acquisition of Letts Educational andLeckie & Leckie, two companies with substantial positions in revision guidepublishing for schools. Combined with our existing Lonsdale business, thisacquisition makes us the clear market leader in the UK. In 2007, we willdistribute over five million study aids and revision guide products. Huveaux hassubstantial ambitions in UK education outside of revision guide publishing. Tothis end, we have recently formed a dedicated Education Division to help focusand realise these ambitions. Our revision guides business will form the nucleusof this new division. Operational Review 2006 has been a full and eventful year. At Group level, we have achievedsubstantial EPS growth, despite challenging market conditions. With theexception of our schools education business, we have improved margins across theGroup and are well placed to expand in 2007 and beyond. Political Division +---------------------------------------+----------------+----------------+|£ million | 2006| 2005|+---------------------------------------+----------------+----------------+|Turnover | 10,578| 9,721|+---------------------------------------+----------------+----------------+|EBITDA* | 2,483| 1,800|| | | ||* A reconciliation between EBITDA and | | ||operating profit is | | ||provided in Schedule A | | |+---------------------------------------+----------------+----------------+ Our political business enjoyed a strong 12 months performance with underlyingorganic sales growth for the year of 10 % although, influenced particularly by arecord number of new product launches, 18 % in the second half. 2006 also sawthe 30th anniversary of our flagship publication, The House Magazine, and we aregrateful to the Prime Minister for agreeing to host its birthday recognitionevent at 10 Downing Street. In 2006, the strength and resilience of our political publishing businessenabled us nevertheless to grow our revenue across the board despite trading forthe first time in a post-election environment in the UK. We also managed toproduce marked profit and margin improvements as digital and events-relatedrevenue became a more significant proportion of our overall income. Political advertising rose by 3% due to better than expected sales during theparty conference season and a generally strong performance in the final quarterof 2006. During the year, we launched several new awards events, including thehighly successful Civil Service Awards for Excellence, alongside which we alsolaunched The Civil Service Network, a portal for civil servants which is alreadygenerating revenues. Our Political Monitoring business was boosted by the acquisition of PoliticalWizard in July but also saw substantial organic growth from its existingoperations. There is no doubt that the combination of the automated Wizardbusiness with our existing bespoke offering has substantially improved ourmonitoring proposition and market position, leading to several significant newclient wins. In addition, we launched an EU version of Political Wizard, makingus the only supplier of such a political monitoring service. In Europe, we forged a strong relationship with the Committee of the Regions andlaunched The Regional Review, a publication dealing exclusively with the fundingof regional projects within the EU. Our French political business had a quietyear but showed improved profits and margins year on year. 2007 is a doubleelection year in France and we look forward to increased activity in thisbusiness in the next 12 months. Our Political Division in the UK and Europe continues to grow from strength tostrength. Learning Division +---------------------------------------+----------------+----------------+|£ million | 2006| 2005|+---------------------------------------+----------------+----------------+|Turnover | 19,516| 11,224|+---------------------------------------+----------------+----------------+|EBITDA* | 4,068| 2,615|| | | ||* A reconciliation between EBITDA and | | ||operating profit is | | ||provided in Schedule A | | |+---------------------------------------+----------------+----------------+ The Learning Division included the best performing business unit in the groupwith our Political Knowledge business showing organic sales growth in excess of20% year on year. This was largely driven by expansion in our briefings andconference business, a highly competitive area in which we have builtsubstantial expertise. In 2007 we will be producing a number of new blendedlearning programmes for the Civil Service combining our e-learning expertisewith established classroom courses. At Epic, as expected, sales were marginally lower than in 2005 as weconcentrated on margin improvement and transition to higher quality earnings (aswell as supporting many digital initiatives elsewhere in the Group). Thisplanned focus has largely been achieved by using new software tools developedin-house and concentrating on higher value contracts. We have won several newclients in retail and financial services as well as in the public sector. Epicmaintains its position as the foremost bespoke e-learning supplier in the UK anda vital ingredient in Huveaux's digital future. Our established Fenman business, now known as Epic Professional, responded wellto last year's restructuring and showed a substantial increase in profits drivenby further cost reductions and margin improvements. The future of this businesswill be based on a number of online and e-learning offerings; although we nolonger produce training videos, previous content is being converted for usethrough digital delivery. Included within our Learning Division for 2006 was our education business, whichat the beginning of the year consisted solely of our Lonsdale schools revisionguide business. However, with the complementary acquisition of Letts Educationaland Leckie & Leckie in early September, we finished the year as the leadingsupplier of study aids and revision guides in the UK, with full product coverageacross all subjects and stages of the school curriculum. The acquired businesseshave now been successfully integrated with our existing Lonsdale product range.Together, they will form the nucleus of our newly created Education Division,enabling us to focus on our planned expansion in this sector. The Division willbe led by Andy Ware, who joins us in March 2007. Andy is an extremelyexperienced educational publisher having held senior positions at Pearson, thelearning arm of the BBC and McGraw Hill. Compared to the record performance in 2005, sales at Lonsdale fell by 9% in2006. This disruption, which was caused by curriculum changes in Key Stage 4Science, had an adverse profit impact on the business. While we successfullyproduced all planned books to schedule, they did not sell in the numbersexpected. We believe that this is mainly due to a delayed decision-making issuewithin school departments as they absorb the extent of the new curriculumchanges. The Letts and Leckie & Leckie businesses were not affected in the sameway as they are not so dependent on Key Stage 4 Science or on direct sales toschools. Both Letts and Leckie & Leckie delivered good performances ahead of ourexpectations during our period of ownership in 2006. UK schools education is now a very important sector for Huveaux and we will makeit a targeted area for expansion in the future. We believe the sector isevolving rapidly and that the balance of power amongst suppliers will be subjectto fundamental change in the near future; several of the major players arealready planning to exit the market to avoid the challenges posed by digitalcontent and delivery. However, we believe that the move to digital will work inour favour due to the strength of our digital training capabilities at Epic andbecause our valuable revision and testing content is easily converted intodigital delivery. Our ambition is to become a major player in education and webelieve the quality of our existing revision guides business provides anexcellent platform for that expansion. Healthcare Division +-------------------------------------+---------------+-------------------+|£ million | 2006| 2005|+-------------------------------------+---------------+-------------------+|Turnover | 14,934| 6,791|+-------------------------------------+---------------+-------------------+|EBITDA* | 2,379| 1,481|| | | ||* A reconciliation between EBITDA and| | ||operating profit is provided in | | ||Schedule A | | |+-------------------------------------+---------------+-------------------+ In France, our Healthcare publishing business faced challenging marketconditions in 2006. The market for pharmaceutical advertising to GPs was down 6%year on year but our income from advertising held steady due to increased marketshare at our leading title, Panorama du Medecin, which was relaunched early inthe year. We also managed to substantially increase our profits from thisbusiness in 2006 by delivering significant improvements in our margin, largelyas a result of the successful restructuring programme undertaken in the secondhalf of 2005. The growth opportunity in healthcare in France was based upon our becoming asuccessful supplier of Continuing Medical Education (CME). We achieved this goalduring 2006 when we became the first government-approved CME supplier shortlyafter legislation was introduced. We have already launched our first sponsoredCME programme and we expect to produce two further substantial programmes in2007. Our digital healthcare operations produced an excellent performance in the yearand we will be expanding these significantly in 2007. Egora.fr is the mostvisited medical website in France. It will be relaunched this year with theaddition of a large, searchable medical archive which will operate on apay-per-view pricing model and contain every article published by us in the pastfive years. Egora.fr will also have a substantial part to play in our CMEstrategy. Using technology developed by our e-learning company Epic, we will belaunching a digital platform where GPs can select, monitor and record their nowcompulsory CME learning activities. This will enhance the opportunity forEgora.fr to increase sponsorship revenue going forward. We are confident of ourstrong position in the French Healthcare market and believe that in the longerterm we will remain the leading CME supplier to the French healthcare community. Our People, Our Future The passion of our people, together with their knowledge, motivation andcollaboration, is what gives them an insight into our customers' behaviour. Itis also what inspires them to develop, innovate and deliver new and betterproduct solutions, something we have seen in abundance this year. Through the acquisitions we have made in 2006, we have welcomed many newcolleagues into the Group and we are delighted by the positive energy, ideas andperformance they have generated. To them, and to all my colleagues in the Group,I extend my thanks for their contribution throughout the year. I believe we are very well placed now in four major markets. We have a depth ofmanagement talent and strong market positions. Our ambition for expansionremains undimmed. FINANCIAL REVIEW The Group's results for the year to 31 December 2006 demonstrated continuedgrowth and achievement of our strategic objectives. Turnover for the year rose62% to £45.0 million (2005: £27.7 million) and pre-tax profits beforeexceptional items and goodwill amortisation were up 43% to £6.0 million (2005:£4.2 million). The Group's balance sheet remains strong with net debt of £18.7million at the year-end representing gearing of 31% (2005:19%), providing asound financial platform for further growth. Turnover and Operating Results Turnover for the year increased by 62% to £45.0 million, of which acquisitionsmade during the year contributed £3.9 million. The turnover growth wasprincipally the result of acquisitions made in the current and prior year. Organic revenue growth for the Group as a whole was constrained in 2006. Goodgrowth performances in several areas of the business was largely offset byreductions arising in three key areas: in Healthcare, where the overall marketdecreased marginally as anticipated; in Lonsdale, due to the market turbulencecaused by the introduction of a new Key Stage 4 Science syllabus; and in Epic,where the planned focus during the year had been on the transition to higherprofit, higher margin business and intra-Group projects. Profit before tax was £4.8 million (2005: £2.0 million) and EBITDA was £7.2million (2005: £4.5 million). This represents a 2.2% improvement on profitmargins on a like-for-like annualised basis. Exceptional Items Exceptional items for the year totalled £0.6 million, of which £0.4 millionrelated primarily to the planned restructuring of operations immediatelyfollowing the acquisitions of Political Wizard in July and Letts Educational andLeckie & Leckie in September 2006. The remaining exceptional items related toresidual restructuring costs incurred in France on the post-acquisitionintegration programme at JBB Sante acquired in October 2005. Taxation The increase in the proportion of the Group's profits generated in France,together with the lower utilisation of tax losses, has led to an increase in theoverall rate of effective tax to 28.1% (2005: 21.8%). Whilst the Group continuesto seek to optimise its tax position going forward, it is expected that theblended tax rate will increase further. Earnings per Share (EPS) Normalised EPS (pre-exceptional items and goodwill amortisation) was 3.1 pence(2005: 2.6 pence), representing a 17% increase. Basic EPS was 2.4 pence (2005:1.3 pence). Dividends Based on the Group's continuing strong financial performance and in line withthe Company's stated progressive dividend policy, the Board is proposing a finaldividend for the year of 1.21 pence per share, up 10% on last year's finaldividend. Subject to shareholders' approval at the forthcoming Annual GeneralMeeting, this dividend will be paid on 31 May 2007 to shareholders registered on27 April 2007. Liquidity and Capital Resources During the year, Huveaux entered into a £5.4 million six-year secured term loanand a £8.0 million seven-year secured term loan with Bank of Scotland. Huveauxalso raised £5.5 million through the placement of shares in the Company withinstitutional investors. These total funds of £18.9 million were used to financethe acquisitions of Political Wizard, Letts Educational and Leckie & Leckietogether with the associated integration costs, initial working capitalrequirements and transaction fees. Interest payable during the year amounted to £0.9 million (2005: £0.1 million).This increase reflects the first full year of interest charges on the €15.0million seven-year term loan entered into in 2005 together with pro-ratainterest paid on the £13.4 million aggregated term loans entered into during2006. Interest receivable was £0.2 million (2005: £0.1 million). During the year, underlying cash conversion was again strong with the Groupgenerating £4.6 million (2005: £1.2 million) of cash from its operatingactivities. At the year-end, the Group had cash balances of £4.3 million (2005:£2.7 million) and net debt of £18.7 million, representing a net debt to EBITDAratio of 2.6 times (2005: 1.7 times). Derivatives and Other Instruments In 2006, Huveaux's financial instruments comprised bank loans, cash deposits andother items such as normal trade debtors and creditors. The main purpose ofthese financial instruments is to finance the Group's day-to-day operations. During 2006, 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 for the purpose of providing contingency funds in the event of anysignificant delay in converting working capital into cash. Foreign Currency Risk The Group now 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 in2005, of which €14.3 million remainedoutstanding as at the 31 December 2006. In February 2007, the Group entered intoa forward exchange contract to partially hedge the exposure on translating theresulting profits and cash flows from its French operations into sterling. Interest Rate Risk The outstanding €14.3 million seven-year term loan attracts interest payable inEuros, calculated with reference to prevailing EURIBOR. In order to limit ourforward exposure to changes in EURIBOR, the Group has entered into an interestrate cap for the term of the loan. The aforementioned £5.4 million and £8.0 million term loans attract interestpayable in sterling, calculated with reference to prevailing LIBOR. In order tolimit our forward exposure to changes in LIBOR, the Group has entered into aninterest rate cap for the term of the loan. Changes to the Financial Reporting Framework The Group is reporting for the first time under FRS 20: "Share-based Payment",which requires the fair value of share options to be calculated and chargedagainst profits. The charge for 2006 was £153,000 (2005: £173,000 as restated),and while the variables affecting the calculation cannot be accurately forecast,the annual impact of this charge is expected to increase. In line with AIM market guidelines, Huveaux is intending to comply withInternational Financial Reporting Standards ("IFRS") for the current financialyear ending 31 December 2007. We are currently undertaking a review programme inrelation to the requirements of IFRS and their likely impact on the Group'sfinancial position. It is expected that this review will be completed during thefirst half of 2007 and we therefore plan to provide a further update toshareholders ahead of the Company's 2007 interim results announcement. CONSOLIDATED PROFIT AND LOSS ACCOUNTfor the year ended 31 December 2006 Note 2006 2005 as restated* £ 000s £ 000s TurnoverContinuing operations 2 41,084 27,736Acquisitions 2 3,944 - 45,028 27,736Cost of sales (26,408) (15,646) Gross profit 18,620 12,090 Administrative expenses (12,442) (7,999)Exceptional items 3 (640) (1,903)Total administrative expenses (13,082) (9,902) Continuing operations 2 4,727 2,188Acquisitions 2 811 -Total operating profit 5,538 2,188 Other interest receivable and similar 161 111incomeInterest payable and similar charges (872) (105)Exceptional items 3 - (231)Interest payable and similar charges (872) (336) Profit on ordinary activities before 4,827 1,963taxation Tax on profit on ordinary activities 4 (1,354) (428) Profit for the financial year 3,473 1,535 Earnings per share - basic 6 2.41 p 1.31 pEarnings per share - diluted 6 2.40 p 1.30 pAdjusted basic earnings per sharebefore exceptionalitems and amortisation of goodwill 6 3.06 p 2.62 p *as restated for the adoption of FRS 20 "Share-based Payment" (see note 1) CONSOLIDATED BALANCE SHEETat 31 December 2006 Note 2006 2005 as restated* £ 000s £ 000s Fixed assetsIntangible assets 8 66,006 51,083Tangible assets 1,589 1,000 67,595 52,083 Current assetsStocks 3,806 2,150Debtors 16,525 12,671Cash at bank and in hand 4,307 2,678 24,638 17,499 Creditors: Amounts falling due within (20,392) (13,919)one year Net current assets 4,246 3,580 Total assets less current liabilities 71,841 55,663 Creditors: Amounts falling due after (19,951) (10,065)more than one year Provision for liabilities and charges (368) (1,552) Net assets 51,522 44,046 Capital and reservesCalled-up share capital 9 15,200 14,017Share premium account 30,816 26,795Merger reserve 409 409Profit and loss account 5,097 2,825 Equity shareholders' funds 51,522 44,046 *as restated for the adoption of FRS 20 "Share-based Payment" (see note 1) CONSOLIDATED CASH FLOW STATEMENTfor the year ended 31 December 2006 Note 2006 2005 £ 000s £ 000s Cash flow statement Cash flow from operating activities 4,612 1,173Returns on investments and servicing of 10 (913) (225)financeTaxation (745) (385)Capital expenditure and financial 10 (1,166) (359)investmentAcquisitions and disposals 10 (16,711) (9,849)Dividends paid on shares classified in 5shareholders'funds (1,542) (1,076) Cash outflow before management of liquidresourcesand financing (16,465) (10,721) Management of liquid resources 10 55 -Financing 10 18,088 10,389 Increase/(decrease) in cash in the year 11 1,678 (332) Reconciliation of net cash flow tomovement in net debt Increase/(decrease) in cash in the year 1,678 (332) Cash inflow from increase in debt 11 (12,884) (10,323)Change in net funds resulting from cash (11,206) (10,655)flows Translation differences 11 163 (110)Movement in net debt in the year (11,043) (10,765)Net (debt)/funds at the start of the (7,645) 3,120year Net debt at the end of the year 11 (18,688) (7,645) Notes to the preliminary announcement31 December 2006 Note 1 Accounting policies The financial statements have been prepared on the basis of the accountingpolicies set out on pages 29 to 31 of the Huveaux PLC Annual Report for 2005,which have been consistently applied, except that the Group has adoptedFinancial Reporting Standard 20: "Share-based Payment". FRS 20 requires that the fair value of share awards granted to employees isassessed at grant date and is charged to the profit and loss account over thevesting period based on the number of shares which the Directors consider likelyto vest, with a corresponding increase in equity. The fair value of the optionsgranted is measured using an option pricing model, taking into account the termsand conditions upon which the options were granted. Deferred tax is recognisedwhere it is likely that share relief will be available on the difference betweenexercise price and market price at the balance sheet date. The profit and loss account for the year ended 31 December 2005 has beenrestated to include a charge of £173,000, with a corresponding deferred taxcredit of £5,000. The net effect has been to increase equity shareholders' fundsby £5,000. The profit and loss account for the year ended 31 December 2006includes a charge of £153,000 and a discounted deferred tax credit of £28,000. In addition to the above the following accounting policies are also applicableas a result of the acquisitions made during the year. Stock and work in progress The costs of the design and development of CD ROM titles ("plate costs") arecapitalised on individual projects where the future recoverability of the costscan be foreseen with reasonable certainty. Plate costs are stated at theirdirect cost less accumulated amortisation. Full provision is made for any platecosts where the CD ROM titles are excess to requirements or where they will nolonger be used in the business. Amortisation is provided to write off the platecosts over one to three years at varying rates to match the anticipated futureincome streams. Post retirement benefits The Group operates a pension scheme in France providing benefits on finalpensionable pay. The assets of the scheme are held separately from those of theGroup. Pension scheme assets are measured using market values. Pension schemeliabilities are measured using a projected unit method and discounted at thecurrent rate of return on a high quality corporate bond of equivalent term andcurrency to the liability. The pension scheme deficit is recognised in full. Themovement in the scheme deficit is split between operating charges, finance itemsand, in the statement of total recognised gains and losses, actuarial gains andlosses. 2 Segmental information The tables below set out information on each of the Group's industry segmentsand geographic areas of operation. Continuing Operations Acquisitions Total 2006 2006 2006 2005 £ 000s £ 000s £ 000s £ 000sGroup turnoverPoliticalUnited Kingdom 8,905 139 9,044 8,214Continental Europe & rest of 1,534 - 1,534 1,507the world 10,439 139 10,578 9,721LearningUnited Kingdom 15,355 3,522 18,877 10,880Continental Europe & rest of 356 283 639 344the world 15,711 3,805 19,516 11,224HealthcareContinental Europe & rest of 14,934 - 14,934 6,791the world 14,934 - 14,934 6,791 41,084 3,944 45,028 27,736 Total operating profit/(loss)PoliticalUnited Kingdom 1,718 20 1,738 1,137Continental Europe & rest of 364 - 364 237the world 2,082 20 2,102 1,374LearningUnited Kingdom 2,726 725 3,451 2,103Continental Europe & rest of 51 66 117 29the world 2,777 791 3,568 2,132HealthcareContinental Europe & rest of 2,048 - 2,048 274the world 2,048 - 2,048 274Head OfficeUnited Kingdom (2,180) - (2,180) (1,592) (2,180) - (2,180) (1,592) 4,727 811 5,538 2,188 Head office costs include amortisation of goodwill totalling £485,000 (2005:£56,000). In the prior year, Head office costs were allocated across theoperating divisions on a pro rata basis. The directors believe that thedisclosure of the Head office costs as a separate division presents a fairerdisclosure of the Group's operations. Exceptional items of £640,000 (2005:£2,134,000) were incurred in respect of the United Kingdom (£399,000) andContinental Europe & rest of the world (£241,000). Exceptional items have beenincurred in the Political Division (£102,000 of which £62,000 relates toacquisitions during the year), Learning Division (£297,000 of which £124,000relates to acquisitions) and Healthcare Division (£241,000). 2 Segmental information (continued) Continuing Operations Acquisitions Total 2006 2006 2006 2005 £ 000s £ 000s £ 000s £ 000sNet assetsPoliticalUnited Kingdom 25,145 14 25,159 23,337 25,145 14 25,159 23,337LearningUnited Kingdom 19,998 552 20,550 17,764 19,998 552 20,550 17,764HealthcareContinental Europe 3,331 - 3,331 1,945 3,331 - 3,331 1,945Head OfficeUnited Kingdom 2,482 - 2,482 1,000 2,482 - 2,482 1,000 50,956 566 51,522 44,046 As in the prior year the results and net assets of our French political businessare shown as part of the Healthcare Division to reflect the local managementstructure currently in operation. The turnover of this division for the year was£670,000 (2005: £799,000). 3 Exceptional items 2006 2005 £ 000s £ 000s Redundancy and people related costs 452 1,653Relocation and integration 188 135Other exceptional items - 115 640 1,903 Interest on financing - 231 The exceptional items relate primarily to the restructuring of the operations atLetts Educational Limited, Leckie and Leckie Limited, Political Wizard Limitedand Political Monitoring Services Limited following their acquisition in 2006,and additional restructuring of the operations at COPEF SA following theacquisition of that business in 2005. Further exceptional items were incurred inthe restructuring of the Group's operations following these acquisitions. An exceptional interest charge was incurred in 2005 in relation to the £8.5million bridge financing facility which was put in place to part finance theacquisition of Epic Group Plc and which was repaid immediately following theacquisition.4 Taxation 2006 2005 as restated* £ 000s £ 000sUK corporation taxCurrent tax on income for the period 878 166Adjustments in respect of prior periods 24 15 902 181 Double taxation relief (1) (2) Foreign taxCurrent tax on income for the period 1 2Total current tax 902 181 Deferred taxOrigination and reversal of timing differences 736 512Deferred tax asset on French losses (93) (166)Impact of discounting (191) (99)Total deferred tax 452 247 Tax on profit on ordinary activities 1,354 428 The effect of exceptional items charged during the year is to increase the taxcharge by £192,000 (2005: £640,000). The charge to the profit and loss account in respect of deferred tax of £452,000(2005: £247,000) is stated after recording a deferred tax asset of £93,000(before discounting) (2005: £150,000) in respect of tax losses, the recovery ofwhich has been enabled by the merger of our French operations in 2006. There areother potential deferred tax assets in respect of tax losses totalling £200,000(2005: £293,000) that have not been recognised on the basis that their futureeconomic benefit is uncertain. 4 Taxation (continued) The tax charge for the period differs from the standard rate of corporation taxin the UK of 30% (2005: 30%). The differences are explained below: 2006 2005 as restated* £ 000s £ 000sCurrent tax reconciliationProfit on ordinary activities before tax 4,827 1,963 Current tax at 30% (2005: 30%) 1,448 589 Effects of:Permanent differences between expenditures chargedin arriving at income and expenditures allowed fortax purposes 216 11Share based payment charge not allowable 46 52Capital allowances in excess of depreciation (109) (52)Adjustments to tax charge in respect of prior 24 15periodsUtilisation of tax losses (723) (434)Total current tax 902 181 *as restated for the adoption of FRS 20 "Share-based Payment" (see note 1) 5 Dividends 2006 2005 £ 000s £ 000sThe aggregate amount of dividends comprises: Final dividends paid in respect of prior yearbut not recognised asliabilities in that year 1,542 1,076 A final dividend of 1.21 pence per 10p Ordinary share has been recommended and,subject to approval by shareholders at the Annual General Meeting on 26 April2007, will be paid on 31 May 2007 to shareholders on the register at 27 April2007. 6 Earnings per share 2006 2005 £ 000s £ 000s Profit attributable to shareholders 3,473 1,535Add: exceptional items 640 2,134Add: amortisation of goodwill 485 56Less: tax in respect of exceptional items (192) (640)Adjusted profit attributable to shareholders 4,406 3,085 2006 2005 Ordinary Ordinary shares sharesWeighted average number of sharesIn issue during the year - basic 143,994,329 117,677,253Dilutive potential ordinary shares 698,200 421,610In issue during the year - diluted 144,692,529 118,098,863 Earnings per share - basic 2.41 p 1.31 pEarnings per share - diluted 2.40 p 1.30 pAdjusted earnings per share before exceptionalitemsand amortisation of goodwill 3.06 p 2.62 p 7 Acquisitions Each of the following acquisitions has been accounted for by the acquisitionmethod. An analysis of the book value and provisional fair value of the netassets acquired on each is set out below. All fair values are provisional. a) Political Monitoring Services Limited and Political Wizard Limited On 27 July 2006 the Group acquired 100% of the issued share capital of PoliticalMonitoring Services Limited ("PMS") and 50% of the issued share capital ofPolitical Wizard Limited ("Wizard"), the remaining 50% of which is owned by PMS,in one transaction. The following table sets out the book values of the identifiable assets andliabilities acquired and their provisional fair value to the Huveaux Group: PMS Wizard Accounting Book Book Policy Fair value Fair value value Alignments Adjustments value £ 000s £ 000s £ 000s £ 000s £ 000s Tangible fixed assets 21 - - (17) 4Debtors 205 232 - (54) 383Cash 8 (10) - - (2)Creditors (174) (193) (274) (81) (722)Net assets/ 60 29 (274) (152) (337)(liabilities)acquired Goodwill 5,576Total consideration 5,239 Satisfied by:Cash paid 4,904Acquisition costs 335 5,239 The accounting policy alignment comprises £274,000 of revenue which has beendeferred in accordance with the group accounting policies. Fair valueadjustments include provisions against the book value of certain debtors and therecognition of certain accruals. Cash paid includes £580,000 of deferred consideration which is held within othercreditors. This will be paid subject to certain operational performance targetsbeing met through to 30 June 2008. 7 Acquisitions (continued) The summarised profit and loss account for PMS for the year ended 31 December2005 and for the period from 1 January 2006 to 26 July 2006 is given below: Period ended Year ended 26 July 31 December 2006 2005 Unaudited Unaudited £ 000s £ 000s Turnover 349 650Operating profit/(loss) 21 (5) The summarised profit and loss account for Wizard for the year ended 31 December2005 and for the period from 1 January 2006 to 26 July 2006 is given below: Period ended Year ended 26 July 31 December 2006 2005 Unaudited Unaudited £ 000s £ 000s Turnover 442 627Operating profit/(loss) 54 (31) 7 Acquisitions (continued) b) Letts Educational Limited and Leckie & Leckie Limited On 4 September 2006 the Group acquired 100% of the issued share capital in bothLetts Educational Limited ("Letts") and Leckie & Leckie Limited ("Leckie") inone transaction. The following table sets out the book values of theidentifiable assets and liabilities acquired and their provisional fair value tothe Huveaux Group: Letts Leckie Accounting Book Book value Policy Fair value Fair value Alignments Adjustments value £ 000s £ 000s £ 000s £ 000s £ 000s Stock 2,553 289 - (987) 1,855Debtors 2,335 417 (946) (149) 1,657Deferred tax (199) (63) - 787 525Creditors (401) (708) - (327) (1,436)Net assets/ 4,288 (65) (946) (676) 2,601(liabilities)acquired Goodwill 9,620Total consideration 12,221 Satisfied by:Cash paid 6,316Shares issued 5,500Acquisition costs 405 12,221 Provisions were made against debtors for the return of stock issued prior toacquisition in order to align accounting policies. The fair value adjustments tostock were made to write down items including plate costs which were consideredto have no net realisable value at the date of acquisition. The adjustment todeferred tax was made to account for losses brought forward at the date ofacquisition. 7 Acquisitions (continued) The summarised consolidated profit and loss account for Letts for the year ended 31 December 2005 and for the period from 1 January 2006 to 3 September 2006 isgiven below: Period ended Year ended 3 September 2006 31 December 2005 Unaudited Audited £ 000s £ 000s Turnover 4,456 7,811Operating (loss)/profit (610) 86 The summarised consolidated profit and loss account for Leckie for the yearended 31 December 2005 and for the period from 1 January 2006 to 3 September 2006 isgiven below: Period ended Year ended 3 September 2006 31 December 2005 Unaudited Audited £ 000s £ 000s Turnover 913 2,194Operating loss (319) (239) 8 Intangible assets Goodwill Publishing rights Total £ 000s £ 000s £ 000sCostAt 1 January 2006 3,367 47,772 51,139Additions 65 278 343Additions through 15,196 - 15,196acquisitionDisposals - (131) (131)At 31 December 2006 18,628 47,919 66,547 AmortisationAt 1 January 2006 56 - 56Charged in year 485 - 485At 31 December 2006 541 - 541 Net book valueAt 1 January 2006 3,311 47,772 51,083 At 31 December 2006 18,087 47,919 66,006 Additions to existing goodwill and publishing rights represent adjustments tothe goodwill relating to the acquisition of Epic Group Plc and COPEF SA in 2005.The disposal of publishing rights represents the sale of the business mailingoperation of COPEF SA in 2006 which was sold at its book value. 9 Called-up share capital 2006 2005 £ 000s £ 000sAuthorised:200,000,000 Ordinary shares of 10p each (2005: 20,000 20,000200,000,000) Allotted, called-up and fully paid:151,998,453 Ordinary shares of 10p each (2005: 15,200 14,017140,170,496) During the year, the Company issued 11,827,957 new Ordinary shares in respect ofthe acquisition of Letts Educational Limited and Leckie & Leckie Limited. The total nominal value of new shares issued was £1,183,000. 10 Analysis of cash flows 2006 2005 £ 000s £ 000s Returns on investment and servicing of financeInterest and similar income received 153 111Interest paid (1,066) (336) (913) (225) Capital expenditure and financial investmentPurchase of tangible fixed assets (1,166) (358)Purchase of intangible fixed assets - (1) (1,166) (359) Acquisitions and disposalsPurchase of subsidiary undertakings and assets (16,840) (18,224)Proceeds on sale of investment 131 -Lonsdale deferred consideration paid - (1,100)Dods Parliamentary Communications deferred - (471)consideration paid(Overdraft)/cash acquired on acquisition of (2) 9,946subsidiary (see note 7) (16,711) (9,849) Management of liquid resourcesProceeds on sale of current asset investments 55 - 55 - FinancingDebt due within one year:- Reclassification of loans repayable within 3,160 9,016one year- Repayment of loan (516) (8,500)Debt due after more than one year:- New loans acquired 13,400 9,807- Reclassification of loans repayable within (3,160) -one yearIssue of ordinary share capital 5,500 -Expenses (paid)/recouped in connection with (296) 66share issue 18,088 10,389 11 Analysis of net debt At beginning Exchange At end of year Cash flow movement of year £ 000s £ 000s £ 000s £ 000s Cash at bank and in 2,678 1,678 (49) 4,307hand Debt due within one (516) (2,644) 20 (3,140)yearDebt due after one year (9,807) (10,240) 192 (19,855) (7,645) (11,206) 163 (18,688) 12 Basis of presentation The financial information set out above does not constitute the Group andCompany's statutory accounts for the years ended 31 December 2006 or 2005 but isderived from those accounts. Statutory accounts for 2005 have been delivered tothe Registrar of Companies, and those for 2006 will be delivered in due course.The auditors have reported on those accounts; their report was (i) unqualified,(ii) did not include a reference to any matters to which the auditors drewattention by way of emphasis without qualifying their report and (iii) did notcontain a statement under section 237(2) or (3) of the Companies Act 1985. 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 and uncertainty because they relate to events and depend on circumstances that will occur in the future; and • not a guarantee of future performance and are subject to factors that could cause the actual results to differ materially from those expressed or implied. 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 2006 Annual Report and Financial Statements are being posted toshareholders on 26 March 2007 and will be available to the public upon requestat 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 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 and exceptional items. Operating Depreciation Allocation Exceptional and of shareYear ended 31 basedDecember 2006 profit Amortisation payment items EBITDA £ 000s £ 000s £ 000s £ 000s £ 000s Political 2,102 224 55 102 2,483Learning 3,568 182 21 297 4,068Healthcare 2,048 77 13 241 2,379Head Office (2,180) 513 64 - (1,603)Share based - - (153) - (153)paymentsallocation 5,538 996 - 640 7,174 Operating Depreciation Allocation Exceptional and of share based Year ended 31December 2005 profit Amortisation payment items EBITDA £ 000s £ 000s £ 000s £ 000s £ 000s Political 1,374 218 53 155 1,800Learning 2,132 104 6 373 2,615Healthcare 274 52 3 1,152 1,481Head Office (1,592) 82 111 223 (1,176)Share based - - (173) - (173)paymentsallocation 2,188 456 - 1,903 4,547 This information is provided by RNS The company news service from the London Stock Exchange