Ingenta Regulatory News (ING)

27 Mar 2006 07:01

Ingenta PLC27 March 2006 Date: Embargoed until 07.00am, Monday 27 March 2006 Contacts: Ingenta Martyn Rose, Non-Executive Chairman Simon Dessain, Chief Executive Tel: 020 7796 4133 (27/3/2006) Tel: 01865 799000 (thereafter) Website: www.ingenta.com/corporate Hudson Sandler Alistair Mackinnon-Musson Philip Dennis Tel: 020 7796 4133 Email: ingenta@hspr.com Ingenta plc PRELIMINARY RESULTS Ingenta plc is a provider of technology and marketing services to the publishingand information industries, undertaking online delivery of professional,scholarly and research content and associated services to maximize its use incorporate, academic, and governmental institutions and their libraries. Highlights • Close to break even in the second half • New products and services launched in all operations • IngentaConnect hosted titles approaches 10,000 - up by 14% • Sales in the year of £6.6m (15 month period to 31 December 2004: £8.8m) • Overheads before exceptional items reduced by 26% to £5.5m (15 month period to 31 December 2004: £9.5m) 1 • Gross profit £4.9m - margin increased to 75% (15 month period to 31 December 2004: 74%) • Loss of £0.3m (15 month period to 31 December 2004: loss £3.3m) • Operating loss reduced by 79% 1 • Trading showed further improvements 1 For comparative purposes 'annualised pro rata' assumes revenue and overheadsaccruing evenly over the 15 month period throughout. Commenting, Simon Dessain, Chief Executive of Ingenta, said: "In 2005 we significantly reduced our costs and implemented a new structuretargeting the headline goal of achieving profitability on a sustainable basis.I am delighted the progress made enabled us to achieve the best ever financialresult in our history, finishing the year close to break even in the second half". "The budget adopted by the Board for the coming year plans for ongoing tradingimprovements and thereafter delivery of further growth in revenues andprofitability in future years". Ingenta: Business Overview Ingenta provides technology and associated marketing services to publishers fromwhom it receives fees. The provision of Ingenta's software and services enablepublishers to make their content available online under a variety of businessmodels including subscription and pay per view. Ingenta also provides marketingservices to help publishers maximise distribution of their content. Ingenta charges recurring fees, in many cases under multi year agreements, foruse of its market-leading technology and services. These are in the areas ofcontent preparation, content enhancement, website creation, marketing services,online distribution and access management of subscription controlled content. The services provided by Ingenta not only enable publishers to securelydisseminate their content online but also to make incremental revenues fromtheir content. In 2005 the Group worked with over 40 new publishers in additionto over 270 with whom it has existing relationships. Ingenta's technical skills, its market leadership and its broad understanding ofthe issues faced by publishers attempting to distribute content and gain newonline revenues are key business advantages for the Group. Ingenta's three principal activities are as follows: 1) IngentaConnect (www.ingentaconnect.com) 2005 saw IngentaConnect add another 25 new publishers to its customer base.IngentaConnect provides online access to over 9,500 titles to those wishing toconduct academic or scientific research and during the year achieved a new peakof nearly 20 million user sessions a month. IngentaConnect enables publishersto reach an audience beyond their traditional subscriber bases, for instance itallows free access to paid-up subscribers of a publication, with othernon-subscribers able to purchase individual articles on a pay per view basis. Institutions also engage Ingenta to create online student course packs throughthe Group's Heron service, which is used by over 45% of UK Higher Educationinstitutions and which generates a further royalty stream for publishers.Ingenta also operates a small number of premium services of direct benefit toinstitutions and users of IngentaConnect, for which there is an annual charge. 2) Information Commerce and Publication Websites (ICS) Publishers have a range of complex needs to maximise the value of the contentthey create in online environments. This may include increasing awareness andreadership, capturing data about customers, revenue goals or cost targets foronline delivery. All these aims require publishers to have flexible tools torebundle, rebrand and market their content online and also to create brandedwebsites through which users can purchase and access this content. Ingenta provides software and services to meet these needs, the core of which isa software package called Information Commerce Services (ICS), which is offeredto publishers for use by them or as part of publication websites created,maintained and run on behalf of publishers, by Ingenta. 3) Publishers Communication Group (PCG) Ingenta's PCG provides a range of specialised marketing and business developmentservices to meet the needs of professional and scholarly publishers. Theseinclude services in the areas of: market intelligence for planning and marketingnew products; promotions to expand awareness; and local market representationservices. In addition PCG has recently introduced market segmentation andpublisher consulting services. PCG provides services to over 50 North American and European publishers withprograms delivered in over 40 countries in 8 languages on their behalf. Chairman's Statement The year to 31 December 2005 saw Ingenta significantly reduce its operatingcosts and implement a new organisational structure in order to target theheadline goal of profitable trading and also to support future revenue growth.The trading progress made during the year enabled the best ever financial resultin the company's history to be achieved being close to break even for the secondhalf. Finance and Operations Turnover in the year was £6.6m (15 month period to 31 December 2004: £8.8m). Thegross margin improved to 75% (15 month period to 31 December 2004: 74%). As a result of actions taken to reduce costs, the loss before tax in the yeardecreased by 79% on a pro rata basis to £0.6m (15 month period to 31 December2004: loss £3.7m), inclusive of £1.2m (15 month period to 31 December 2004:£1.8m) invested in Research and Development, all of which was expensed throughthe profit and loss account as incurred. A Research and Development tax creditof £0.3m for the year (2004: credit of £0.4m) has resulted in a net loss for thefinancial year of £0.3m (15 month period to 31 December 2004: loss £3.3m). Theyear showed an improving trading trend overall. The Group's net cash balances at 31 December 2005 were £0.3m (2004: £0.9m) The Group's leading academic and research publications hosting platform,IngentaConnect (www.ingentaconnect.com) continued to perform strongly and 2005saw the release of new services for both publisher clients and end users. Inaddition, Ingenta's Information Commerce (ICS) unit completed further importantcontracted software deliveries and gained new website agreements from threeclients. Finally the Group's Publisher Communication Group (PCG) worked with 18new publishers, further demonstrating the value of the high quality servicesoffered. Ingenta's activities with Google, including Google Scholar, continue to provideboth parties with benefits. This work allows us to assist publishers inmaximising their online presence, not only with Google, but also with a largerange of other information discovery and search resources. Further increases in operational efficiency have enabled Ingenta to increase itsgross margin. The central importance Ingenta places on software engineering, inorder to drive down the cost of delivering services to clients throughautomation and improved reliability, continues. This aspect is underlined bythe ongoing level of research and development expenditure incurred by the Group. Ingenta's acute understanding of the issues faced by publishers trying to reachglobal audiences for their content and to derive new revenues from onlinedelivery of content, remain key business advantages for the Group. Staff During the first quarter of 2005 the number of people employed by Ingentadeclined further, from 114 to 94 at the end of the first quarter and then to 86full time equivalent employees at the year end. The changes completed in the year succeeded as a result of the contributionsmade by staff across the whole Group. The resulting financial progress was onlypossible with their support and the Board wishes to thank them for theirenthusiasm, hard work and commitment. The Board would also like to thank David Embleton, who stepped down asNon-Executive Director at our 2005 Annual General Meeting, for his six years ofcontribution to the Group during Ingenta's early and formative stages ofdevelopment. Current Trading and Prospects 2005 saw the Group deliver major improvements in its financial performance, withsubstantial reductions in losses and the beginning of returns from the newproducts and services introduced over the last 18 months. Having achieved a sustainable lower cost base the task for the Board ahead, isto focus on generation of an improved sales pipeline and increased revenues. Martyn RoseChairman Chief Executive's Review Ingenta provides services for publishers of high value content, including marketleading services in the areas of content preparation and enhancement, websitecreation, marketing services, online distribution and access management forsubscriber controlled content. Access management in particular requiressophisticated and complex technical solutions for which Ingenta is a marketleader. The use of such technology is a pre-requisite for publishers wishing toexploit new and evolving e-commerce opportunities and thus derive incrementalrevenues from their digital content. Ingenta continues to generate over 90% of its revenues from providing technologyand marketing services to publishers, with the remaining revenues coming frominstitutions and end users of the Group's services. In 2005 Ingenta againexpanded the number of publishers it works with by adding an additional 40clients. The majority of the Group's publisher revenues consist of recurringannual fees and long term contracts derived through the following threeprincipal activities: IngentaConnect (www.ingentaconnect.com) 2005 saw IngentaConnect cement further its position as a leader in its sector,with over 8,000 research and professional publication titles. Title growth of14% in the year was achieved, though publisher consolidation has reduced ournumber of imprints. During the year, the site saw a peak of over 20 millionmonthly user sessions from around 20,000 institutions spread across 160countries and at an availability level in excess of 99.99%. In addition over20,000 further titles are available for searching and delivery through fax payper view. IngentaConnect provides online access to over 245 academic imprints for thoseconducting academic or scientific research worldwide. During the yearworld-leading specialist publishing group, Springer, revised a long-termcontract with Ingenta and increased the number of titles available through ourservice to over 1,000. With over 60 linking partners and a large number ofsearch and discovery services pointing users towards IngentaConnect, publishersgain access to a far wider audience for their content, beyond their traditionalindividual subscriber bases. Following the establishment of IngentaConnect's new technology platform,launched in 2004, a rolling program of new services for publishers continuedthrough 2005 including Connect Collections. This service provides the abilityto create subsets of content, discipline or topic based, which can be offered asa collection, enabling specialist libraries to easily expand their holdings inspecific subject areas. 2005 also saw the launch of byDesign, a service through which publishers can addthe extensive functionality of IngentaConnect to their own websites. Thisservice allows paid-up subscribers of a publication to download articles forfree, or non-subscribers to purchase individual articles online on a pay perview basis from the byDesign element of the publisher's website. In addition, Ingenta's Heron service creates online student course packs and isin use by over 45% of all UK Higher Education institutions. Through the Heronwebsite, institutions can request digitisation, copyright clearance and coursepack distribution services. Article pay per view through IngentaConnect andHeron together generate royalty revenues of over £1m per annum for Ingenta'spublishers. Ingenta also now provides a small number of chargeable premium services, whichare of direct benefit to users of IngentaConnect. There are three new productsin this area, including IngentaConnect Premium, an enhanced package of userservices available for a small additional fee and IngentaConnect Complete andIngentaConnect InTouch, new services designed for libraries. Revenues from theIngentaConnect operation comprise set up and annual fees, as well as revenuesharing, and they contributed 58% of Group turnover during the year. Information Commerce and Publication Websites Print publications face financial pressure as access to information isundertaken in an increasing range of ways. These pressures require publishers toincrease their revenues from digital content. Through Ingenta's InformationCommerce Services (ICS) we provide business and professional publishers, as wellas our current research oriented publishers, with a solution to this problem. As with our IngentaConnect operation, the core of our proposition is a set offeatures enabling publishers to define which kinds of user can access whatcontent and under what licence terms. When combined with Ingenta's ability totailor and deliver branded web pages containing the client's content, orfacilities enabling the client to upload and update content within a website,these features are a key part of Ingenta's competitive advantage and are part ofa product family generally referred to as ICS. ICS also delivers both a fastertime to market and an improved return on investment for publishers. Ingenta's ICS group designs, builds, maintains and operates websites andprovides a standalone software product. In 2005 the unit undertook further work for Oxford University Press, McGraw Hilland the World Bank and initiated work with UNESCO and the IMF. Important furtherdeliveries were made to our first ICS software client, the Institute of PhysicsPublishing. Ingenta's revenues from ICS are generated from initial and ongoing fees from thesale of software and also from the integration into, and management of,publication websites. Revenues from the ICS unit contributed 28% of Groupturnover for the period. Publishers Communication Group (PCG) PCG provides specialised marketing and business development services to meet theneeds of professional and scholarly publishers. In 2005 the PCG unit continued to expand its reach into the European publishermarket, adding sales representation and consortia licensing services and as aresult 50% of PCG revenues in 2005 came from providing European services. During the period, PCG also launched a new service called the MarketSegmentation Study. This analyses a publisher's penetration into the U.S.library market, in comparison with other competing journals. Customisedconsulting services provided by PCG also help publishers to developinstitutional site licenses, analyse their operations, and to study tieredpricing. In 2005, PCG grew its client base substantially by adding 18 new publishersincluding American Society of Clinical Oncology, Taylor and Francis - an Informabusiness, Society for Endocrinology, Water Environment Federation and Elsevier.Ingenta's revenues in this area are largely fee based and represented 14% ofGroup turnover during the period. Operations The Group improved productivity substantially during the period, with strongreductions in operating costs which were down 26% on an annualised pro ratabasis. This improved productivity was largely down to increased automation oftasks and improved technical reliability. In the year to 31 December 2005, the Group maintained a high level of investmentin software engineering activities consistent with our determination to continueto be a leading provider of technology and services to publishers. The Groupdoes not expect to reduce the number of people employed in 2006 and currentlyhas a number of vacancies to support business growth as a result of the steadyrelease of new products and services. Automation of tasks through use of software technologies remains the key tocontinuing to improve services and margins. Outlook The strength of our products and the encouraging financial progress in 2005place Ingenta in a strong position to grow the business organically in 2006 andto explore new opportunities. These may include expansion of our establishedservices into additional publisher markets and acquisitions of similarbusinesses to increase the Group's scale. The budget adopted by the Board for the coming year plans for ongoing tradingimprovements and thereafter delivery of further growth in revenues andprofitability in future years. Simon DessainChief Executive Officer Consolidated profit and loss account for the year ended 31 December 2005 Year ended 15 months ended 31/12/2005 31/12/2004 Audited Audited £m £mTurnover 6.6 8.8Cost of sales (1.7) (2.3)Gross profit 4.9 6.5 Administrative expenses (5.5) (10.2) Operating loss (0.6) (3.7) Interest payable and similar charges - - Loss on ordinary activities before taxation (0.6) (3.7)Tax on loss on ordinary activities 0.3 0.4Loss for the financial period (0.3) (3.3) Loss per 1p share- basic and diluted (0.2)p (2.5)p All activities are classified as continuing Consolidated balance sheet as at 31 December 2005 31/12/2005 31/12/2004 Audited Audited £m £mFixed assets Tangible assets 0.2 0.4 Investments 0.2 0.2 0.4 0.6 Current assets Debtors 2.3 2.7 Cash at bank 0.6 0.9 2.9 3.6 Creditors: amounts falling due within one year Deferred income (1.6) (2.0) Other (3.2) (2.9) (4.8) (4.9)Net current liabilities (1.9) (1.3) Total assets less current liabilities (1.5) (0.7) Provisions for liabilities and charges (0.1) (0.5) Net liabilities (1.6) (1.2) Capital and reserves Called up share capital 7.5 7.5 Share premium account 21.0 21.0 Merger reserve 11.0 11.0 Reverse acquisition reserve 12.7 12.7 Profit and loss account deficit (53.8) (53.4) Equity shareholders' deficit (1.6) (1.2) Consolidated cash flow statement for the year ended 31 December 2005 Year ended 15 months ended 31/12/2005 31/12/2004 Audited Audited £m £m Cash flow from operating activities Operating loss (0.6) (3.7) Depreciation charge 0.2 0.7 Increase/(decrease) in debtors 0.2 (0.3) Decrease in creditors and provisions (0.8) (0.6) Net cash outflow from operating activities (1.0) (3.9) Taxation received 0.5 0.3 Capital expenditure and financial investments Purchase of tangible fixed assets (0.1) (0.1)Management of liquid resources Sale/(purchase) of short term deposits 0.7 (0.7) Net cash inflow/(outflow) from management of 0.7 (0.7)liquid resources Net cash inflow/(outflow) before financing 0.1 (4.4) Financing Issues of shares at a premium - 5.0 Repayment of principle under finance - (0.1) leases Cash inflow from financing - 4.9 Increase in cash in the period 0.1 0.5 Statement of consolidated total recognised gains and losses for the year ended31 December 2005 Year ended 15 months ended 31/12/2005 31/12/2004 Audited Audited £m £m Loss for the financial period (0.3) (3.3) Currency translation differences onforeign currency net investments (0.1) 0.2 Total recognised losses for the period (0.4) (3.1) Notes to the preliminary announcement of audited results for the year ended31 December 2005 1 Basis of preparation The preliminary announcement has been prepared in accordance with applicableaccounting standards and under the historical cost convention. The principal accounting policies of the Group have remained unchanged from theprevious year. 2 Reconciliation of movements in equity shareholders' funds Group 31/12/2005 31/12/04 Audited Audited £m £m Loss for the period (0.3) (3.3)Net exchange adjustments (0.1) 0.2New share capital issued - 5.4Expenses of share issue - (0.4)Net (reduction to)/increase in shareholders' funds (0.4) 1.9Opening shareholders' funds (1.2) (3.1)Closing shareholders' funds (1.6) (1.2) Reconciliation of net cash flow to movement in net funds/(debt) Group 2005 2004 £'000 £'000Increase/(decrease) in cash in the period 110 550Cash used to (decrease)/increase liquid resources (680) 680Finance lease repayments 1 84Change in net debt resulting from cash flows (569) 1,314New finance leases (6) -Movement in net funds in the period (575) 1,314Net funds/(debt) at beginning of the period 883 (431)Net funds at end of the period 308 883 3 Publication of non-statutory accounts The financial information set out in this preliminary announcement does notconstitute statutory accounts as defined in Section 240 of the Companies Act1985. The Group balance sheet as at 31 December 2005 and the Group profit and lossaccount, statements of total recognised gains and losses, consolidated cash flowstatement and associated notes for the year then ended have been extracted fromthe Group's 2005 statutory financial statements upon which the auditor's opinionis unqualified and does not include any statement under Section 237 of theCompanies Act 1985. The auditors have included an emphasis of matter statement with regard to goingconcern. They have drawn attention to the Directors statement that theyregularly review forecasts of trading and cash flows and examine these againstavailable funding. The Group has suffered a loss for the year of £0.3m and has anet balance sheet deficit of £1.6m. The forecasts anticipate increases inrevenues and maintenance of the Group's current banking facilities. Some of theforecast increases in revenue are supported by new contracts already won. TheGroup has examined its ability to achieve cost saving measures in the event thatfurther new business does not meet the forecast in order to make its assessment.The directors have a reasonable expectation that the Group has sufficientresources to continue in operational existence for the foreseeable future andthus continues to adopt the going concern basis in preparation of thesefinancial statements. The Group's statutory accounts have not yet been delivered to the Registrar ofCompanies. 4 Copies of announcement Copies of this announcement will be available from the company's registeredoffice at 23-38 Hythe Bridge Street, Oxford OX1 2ET. This document is confidential and is only for distribution in the United Kingdomto persons to whom such a communication is permitted by the Financial Servicesand Markets Act 2000 (Financial Promotion) Order 2001 or by any other Order madepursuant to section 21(5) of the Financial Services and Markets Act 2000 and, ifpermitted by applicable law, for distribution outside the United Kingdom toprofessionals or institutions whose ordinary business involves them in engagingin investment activities. It is not intended to be distributed or passed on,directly or indirectly, to any other class of persons. This document is beingsupplied to you solely for your information and may not be copied, reproduced,further distributed to any other person or published, in whole or in part, forany purpose. The information in this document does not constitute, or form part of, any offerto sell or issue, or any solicitation of an offer to purchase or subscribe for,any shares in the Company nor shall this document, or any part of it, or thefact of its distribution, form the basis of, or be relied on, in connection withany contract. - ENDS - This information is provided by RNS The company news service from the London Stock Exchange