Ingenta Regulatory News (ING)

22 Mar 2005 07:02

Ingenta PLC22 March 2005 Date: Embargoed until 07.00am, Tuesday 22 March 2005 Contacts: Ingenta Martyn Rose, Non-Executive Chairman Simon Dessain, Chief Executive Tel: 01865 799000 Website: www.ingenta.com Hudson Sandler Alistair Mackinnon-Musson Philip Dennis Tel: 020 7796 4133 Email: ingenta@hspr.co.uk Ingenta plc Unaudited Preliminary Results for the 15 months to 31 December 2004 Ingenta plc, the technology and services provider to the publishing andinformation industries, is pleased to announce its preliminary results for the15 months to 31 December 2004. Highlights • Sales in the 15 month period of £8.8m (2003: £8.5m) • Sales achieved in adjacent markets • New products and services launched • Annualised overheads before exceptional items of £7.6m reduced by 18% on a pro rata basis • Gross profit £6.5m - stable margin of 74% • 15 month loss of £3.3m (2003: £2.0m) • Operating loss (before exceptionals and depreciation) reduced by 17% on pro rata annualised basis • Current trading showing further improvements Martyn Rose, Non-Executive Chairman of Ingenta, said: "During the 15 month period to the end of December 2004 we laid the foundationsfor profitable trading through management change, lower operating costs andenhanced products and services. The effect of these measures should flow throughinto further improvements in the financial performance of the group during 2005." Simon Dessain, Chief Executive Officer, added: "Ingenta has a pre-eminent understanding of the online needs of publishers ofhigh value content. We have spent much of 2004 improving the delivery of ourservices to our existing clients at reduced costs and in expanding into newmarkets through introducing additional products and services." Notes to Editors: Over 90% of Ingenta's revenues come from providing technology and associatedmarketing services to publishers, in the form of fees and under long termcontracts. Ingenta provides a suite of software and services that enablepublishers of high value, subscription-based publications to make their contentavailable via the Internet. Ingenta charges recurring fees for use of its market-leading technology andservices in the areas of content preparation, content enhancement, websitecreation, marketing services, online distribution and subscriber accessmanagement of subscription controlled content. The services provided by Ingenta not only enable publishers to securelydisseminate their content online but they also create the opportunity forpublishers to make incremental revenues from their content. In 2004 the groupexpanded the number of publishers with which it works by adding an additional 25bringing the total to nearly 300. The depth of Ingenta's technical skills, its market leadership and its profoundunderstanding of the issues faced by publishers attempting to derive newrevenues from online delivery of high value content remain key businessadvantages for the group. Ingenta's three principal activities are as follows: 1) IngentaConnect (www.ingentaconnect.com) 2004 saw the launch of IngentaConnect, a service that is used by nearly 300academic publishers to provide online worldwide access to those conductingacademic or scientific research. The service, already delivering more than 12million user sessions a month, allows free downloads to paid-up subscribers of apublication, with other users able to purchase individual articles. IngentaConnect therefore enables publishers to access a far wider audience fortheir content, beyond their traditional subscriber bases. Institutions alsoengage Ingenta to create online student course packs, which generate a furtherroyalty stream for publishers. Ingenta has also created a small number ofpremium services of direct benefit to users of IngentaConnect, for which thereis a yearly charge. 2) Information Commerce and Publication Websites Publishers have a range of complex needs to maximise the value of the contentthey create, which may include increasing awareness and readership, capturingdata about customers, revenue goals or cost targets for online delivery. Allthese aims require publishers to have flexible tools to rebundle, rebrand andmarket their content online and also to create branded websites through whichusers can purchase and access this content. Ingenta provides a range of software and services to meet these needs, the coreof which is a set of software and services called Information Commerce Services(ICS). 3) Publishers Communications Group (PCG) PCG offers a range of specialised marketing services to meet the needs ofscholarly and professional publishers. They include a Market IntelligenceService designed to assist publishers in planning and marketing new products,Promotion Services to expand the awareness of their publications or products tonew audiences and Representation Services which offers publishers a European orNorth American sales, marketing and customer service presence to minimise costsand provide customers with locally-based contacts. Ingenta plc Unaudited Preliminary Results for the 15 months to 31 December 2004 Chairman's Statement The 15 month period to 31 December 2004 was one in which Ingenta continued toreduce its operating costs and built the foundations for a return to growth inits core markets, for the development of new revenue opportunities, and forachieving profitability. Finance and Operations Turnover in the 15 month period was £8.8m (year to 30 September 2003: £8.5m).The gross margin was stable at 74% (year to 30 September 2003: 76%). As thegroup generates a substantial proportion of its sales in US dollars, thedepreciation in the US dollar exchange rate during the 15 month financial periodhad an adverse effect on reported revenues. Our reported turnover at constantcurrencies would have been higher by some £0.5m. This currency effect also contributed to reductions in the group's US overheadswhen translated into sterling. Overall, group overheads (excluding exceptionalitems) were £9.5m in the period (2003: £9.3m), representing a 18% reduction on apro rata annualised basis. As a result of cost reduction actions taken, the loss before tax and exceptionalitems in the 15 month period was £3.0m (12 months to 30 September 2003: loss£2.8m), inclusive of £1.8m invested in Research and Development, which wasexpensed through the profit and loss account as incurred. The period showed animproving trading trend overall. Following the management changes during the year described below, a thoroughreview of the group's activities was carried out and implementation of aprogramme of change is underway. As a result, an exceptional charge of £0.7m hasbeen included in the accounts for the 15 months to 31 December 2004 to cover thecosts of reorganisation, onerous leases and aborted acquisitions. This, togetherwith a Research & Development tax credit of £0.4m for the period (2003: creditof £0.9m) has resulted in a net loss for the financial period of £3.3m (2003:loss £2.0m). The group benefited from the raising of additional finance during the period of£5.0m and had cash balances at 31 December 2004 of £0.9m (2003: overdraft of£0.3m). As noted above, the group is claiming a substantial further Research &Development tax credit in respect of 2004, prudent provision for which has beenincluded in the 2004 accounts. Our previous experience supports our confidencethat the claim will be paid in full and consequently it has been included in ourcash flow forecasts. The focus for 2004 was on rolling out enhanced products and services whichimprove reliability, lower the cost of delivery and enhance growth prospects.The group's new Information Commerce Services (ICS) software product waslaunched in 2004 and has already secured its first customer, Institute ofPhysics Publishing. In late 2004, the group's new journal hosting platform, IngentaConnect(www.ingentaconnect.com) was also launched, to industry acclaim. The earlysuccess our new online platform has achieved within the information industry isdemonstrated by the increasing usage it is experiencing - now already well inexcess of 12 million user sessions a month. IngentaConnect replaces our twolarge previous sites, www.ingenta.com and www.ingentaselect.com, which will beretired producing further cost savings. In addition, Ingenta's activities with Google, including Google Scholar, provideboth parties with benefits and traffic which should continue to reinforceIngenta's value proposition to its customers and assist in keeping clientretention rates at their current high level. The increased operational efficiency of the above new services has enabledIngenta to maintain its gross margins, despite competitive pressures. Keyoperating metrics, such as website usage, error rates and costs per employee,have shown healthy improvements during the year, largely made possible by thecentral importance Ingenta places on software engineering in order to automatetasks, improve reliability and so drive down the cost of delivering services toclients. The depth of Ingenta's technical skills, its market leadership and its deepunderstanding of the issues faced by publishers attempting to derive newrevenues from online delivery of high value content remain key businessadvantages for the group. Staff During the period the number of people employed by Ingenta declined further,from 128 to 114 at year end, as a result of further process automation andcontinued cost control. Ingenta saw low staff turnover during the period in itsoperating units which undoubtedly contributed to its ability to increasethroughput and productivity in the face of declining staff numbers. The Board wishes to recognise the substantial contribution made by all ofIngenta's staff and to thank them for their continuing dedication andcommitment. The significant change the business has made and is undertakingcould only have been achieved with their support. As already announced, the Board appointed Simon Dessain as Chief ExecutiveOfficer during the last quarter of the year. Simon spent over 20 years incommercial and management roles in international software and technologybusinesses before joining Ingenta. Simon succeeded Mark Rowse, whom the Board would like to thank for his six yearsof contribution to the executive team, especially during Ingenta's early andformative stages of development. As shareholders are aware, Mark will maintainan involvement with Ingenta via his ongoing role as a non-executive director. Current Trading and Prospects Following the management changes, fundraising and group reorganisationundertaken in 2004, together with new product and service launches, Ingenta haslaid the foundations for achieving the critical goal of profitability for 2005. The improvements in trading performance, combined with a lower cost base andongoing sales successes, provide the Board with confidence this can be achieved. Martyn Rose Chairman 22 March 2005 Consolidated profit and loss account for the 15 months ended 31 December 2004 15 months ended 15 months ended 15 months ended Year Ended 31 December 2004 31 December 2004 31 December 2004 30 September 2003 Pre exceptional Exceptional items items Unaudited Unaudited Unaudited Audited £m £m £m £mTurnover 8.8 8.8 8.5 Cost of sales (2.3) (2.3) (2.0) Gross Profit 6.5 6.5 6.5 Administrative expensesOther operating expenses (9.5) (9.5) (9.3) Exceptional items: - onerous lease provisions - (0.5) (0.5) - - aborted acquisition costs - (0.1) (0.1) - - reorganisation costs - (0.1) (0.1) - (9.5) (0.7) (10.2) (9.3) Operating loss (3.0) (0.7) (3.7) (2.8) Interest payable - (0.1) Loss on ordinary activities before taxation (3.7) (2.9)Tax on loss on ordinary activities 0.4 0.9 Loss for the financial period (3.3) (2.0) Loss per share (basic and diluted) 2.5p 2.4p Consolidated balance sheet 31 December 2004 30 September 2003 Unaudited Audited £m £mFixed assets Tangible assets 0.4 1.0 Investments 0.2 0.3 0.6 1.3 Current assets Debtors and work in progress 2.7 2.4 Cash & bank 0.9 - 3.6 2.4 Creditors: amounts falling due within one year Deferred income (2.0) (1.4) Other (2.9) (4.3) (4.9) (5.7)Net current liabilities (1.3) (3.3) Total assets less current liabilities (0.7) (2.0) Creditors: amounts falling due after more than one year Deferred income - (0.5) Other - (0.1) - (0.6)Provisions for liabilities and charges (0.5) (0.5) Net liabilities (1.2) (3.1) Capital and reserves Called up share capital 7.5 5.4 Share premium account 21.0 18.0 Merger reserve 11.1 11.1 Reverse acquisition reserve 12.7 12.7 Profit and loss account (53.5) (50.3) Equity shareholders' deficit (1.2) (3.1) Consolidated cash flow statement for the 15 months ended 31 December 2004 15 months ended Year Ended 31 December 2004 30 September 2003 Unaudited Audited £m £m Cash flow from operating activities Operating loss (3.7) (2.8) Depreciation charge 0.7 0.6 Impairment of leasehold improvements - 0.1 (Increase)/Decrease in debtors (0.3) 0.5 Increase/(Decrease) in creditors and provisions (0.6) (2.4) Net cash outflow from operating activities (3.9) (4.0) Taxation received 0.3 0.5 Capital expenditure & financial investments Purchase of fixed assets (0.1) (0.1)Management of liquid resources Purchase of short term deposits (0.7) - Net cash outflow from management of liquid resources (0.7) - Net cash outflow before financing (4.4) (3.6) Financing Issues of shares at a premium 5.0 2.3 Repayment of principal under finance leases (0.1) (0.3) Net cash inflow from financing 4.9 2.0 Increase/(Decrease) in cash in the year 0.5 (1.6) Statement of consolidated total recognised gains and losses for the 15 monthsended 31 December 2004 15 months ended Year ended 31 December 2004 30 September 2003 Unaudited Audited £m £m Loss for the financial period (3.3) (2.0) Currency translation differences on 0.2 0.1foreign currency net investments Total recognised losses for the period (3.1) (1.9) Notes to the announcement of unaudited results for the period ended 31 December2004 1 Basis of preparation The preliminary announcement has been prepared in accordance with applicableaccounting standards and under the historical cost convention. Ingenta's Directors regularly review forecasts of trading and cash flows andexamine these against available funding. As noted in the circular toshareholders of 29 October 2004 they have undertaken a review of sales andexpense forecasts and funding needs including the expected receipt of a £0.4mResearch and Development tax credit in respect of 2004 (2003: £0.3m). Because ofthe nature of such claims there is uncertainty as to the value and timing ofreceipt of the amount claimed. On the basis that the sum claimed is received asforecast, the Directors have a reasonable expectation that the group hassufficient resources to continue in operational existence for the foreseeablefuture and thus continue to adopt the going concern basis in the preparation ofthese financial statements. The principal accounting policies of the group have remained unchanged fromthose set out in the 2003 annual accounts. 2 Basis of consolidation The consolidated accounts comprise the accounts of Ingenta plc, the company, andits subsidiary undertakings made up to 31 December 2004. The results ofsubsidiaries acquired are included in the consolidated profit and loss accountfrom the date control passes. Intra-group balances are eliminated fully onconsolidation. 3 Segmental reporting The group's turnover and loss on ordinary activities before taxation are derivedentirely from its principal activity. The analysis by geographical area of turnover is set out below: Sales by Destination Sales by Origin Sales by Destination Sales by Origin 15 months ended 15 months ended Year ended Year ended 31 December 31 December 30 September 30 September 2004 2004 2003 2003 Unaudited Unaudited Audited AuditedTurnover £'m £'m £'m £'mUnited Kingdom 4.3 5.6 3.2 4.7USA 3.6 3.2 4.7 3.8Rest of World 0.9 - 0.6 -Total 8.8 8.8 8.5 8.5 4 Loss per share The basic loss per share has been calculated by dividing the loss for thefinancial period by the weighted average number of ordinary shares of130,244,269 (2003: 84,906,207) in issue during the period. The company had nodilutive ordinary shares in either period which would serve to increase the lossper ordinary share and there is therefore no difference between the loss perordinary share and the diluted loss per ordinary share. 5 Reconciliation of movements in equity shareholders' funds Group 15 months ended Year ended 31/12/2004 30/09/2003 Unaudited Audited £m £mLoss for the year (3.3) (2.0)Net exchange adjustments 0.2 0.1New share capital issued 5.4 2.6Expenses of share issue (0.4) (0.3)Net increase/(reduction) in shareholders' funds 1.9 0.4Opening shareholders' (deficit) / funds (3.1) (3.5)Closing shareholders' deficit (1.2) (3.1) 6 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 balance sheet as at 31 December 2004 and the group profit and loss account,statements of total recognised gains and losses, consolidated cash flowstatement and associated notes for the period then ended have been extractedfrom the group's unaudited draft 2004 statutory financial statements upon whichno audit opinion has been provided. It is expected that the audited accountswill include an audit report which will contain a modification concerning anuncertainty over going concern relating to the amount and timing of receipt ofthe Research & Development tax credit referred to above. 7 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