Ingenta Regulatory News (ING)

28 Sep 2007 07:05

Publishing Technology PLC28 September 2007 September 28th 2007FOR IMMEDIATE RELEASE Publishing Technology plc reports interim results Improved revenues demonstrate value of the Vista International Ltd and Ingenta plc merger Publishing Technology plc (LSE: PTO), which provides online systems, softwareand services to academic, journal and book publishers, has today announced itsinterim results for the six months to June 30, 2007. Publishing Technology plc was formed from the merger of Vista International Ltdand Ingenta plc earlier this year. Highlights include: • Group revenue for the period up 22% to £6.6m (2006: £5.4m) • EBITDA of £0.2m • Profit of £0.1m before merger costs of £0.1m and goodwill amortisation of £0.3m due to IFRS accounting for goodwill on the acquisition of Ingenta plc • All business units making a positive contribution to group expenses since the merger • Substantial business wins and a strong pipeline of new business • Cross-selling of services by Vista and Ingenta business units to each other's clients testifies to the benefits of the merger • Anticipated stronger second half of the year due to increased high-margin revenue streams and continued cost savings George Lossius, Chief Executive, commented: "I am delighted to able to report an EBITDA profit for the six months to June30, 2007, thanks to improved performances across the group and positivecontributions from each business unit. "We won several important contracts in our first half year. We signed up over 15new publishers, including the third largest UK university press and two large USuniversity presses, and have signed both UNICEF and the BBC as clients, thelatter for a combination of our online products and sales representation. "These new business wins demonstrate our ability to deliver the promisedbenefits of the merger of the Vista, Ingenta and PCG businesses, namely tocross-sell services across our print and online and sales representationbusiness units. Integration is virtually complete, the anticipated synergies arebeginning to yield gains, and we expect the merger to continue to deliverfurther cost savings, interest charge reductions and revenue enhancements in thesecond half of the year." Martyn Rose, Chairman, commented: "In its first six months, Publishing Technology has already begun todemonstrate the logic of combining Vista and Ingenta. We now have the skills tohelp publishers develop their online content and integrate it with their printedproducts in a single company with the scale to compete across the publishingindustry. These results demonstrate that Publishing Technology has built a solidplatform from which it can achieve further growth, and has the right servicesand management team to deliver for shareholders." Notes to Editors: Publishing Technology plc (www.publishingtechnology.com) provides on-linesystems, software and services, and marketing and sales representation servicesto the publishing industry. It supplies software, consultancy and services tomanage the supply chain of printed and digital products, and tools that helppublishers digitise their content and earn revenues from posting it online.Clients include leading book publishers such as, Hachette, Random House, Penguinand Reed Elsevier and top corporate and academic research library clients, suchas Columbia University Library, and Glaxo SmithKline's research library, and anumber of multilateral institutions, such as the World Bank, the IMF, OECD andUNICEF. The company was formed in February 2007, following the merger of VistaInternational Ltd and Ingenta plc. For further information please contact: Richard Evans / Sara BrigdenThe Communication Group plc Tel: 020 7630 1411 / 07751 087 291 Chief Executive's half-year statement The group had a turnover of £6.6m for the period, a 22% improvement on the sameperiod in 2006 (£5.4m). All business units have made a positive financialcontribution to the group since the merger, and I am pleased to be able toreport an EBITDA profit of £0.2m for the first half of the year. Before mergercosts and IFRS write-down provisions, the profit for the period was £0.1m. The revenue increase was largely due to the reverse acquisition of Ingenta byVista, which was completed in February 2007 to form Publishing Technology plc. As a result of IFRS accounting for the reverse takeover of Ingenta plc, therewill be a non-cash, goodwill on intangibles write-down of £2.4m over 36 months.The results to June 2007 reflect four months of this charge (£0.3m). The group had cash resources of £(0.6m) at 30 June 2007, and facilities with theCompany's bankers continued to be used as needed. Trading during the first half of the year has delivered solid results, and thesuccesses achieved since the merger have been encouraging. We have met our costreduction plans, have developed new revenue streams and are pleased to see theanticipated cross-selling benefits of the merger beginning to bear fruit. The recent success in acquiring the BBC Monitoring contract is a testimony tothe success of the business integration. The sales process was run by theIngenta sales team, for new online systems to be provided by Vista, with salesrepresentation acting on behalf of BBC Monitoring provided by PCG, using Vista'sback office publishing systems to manage subscriptions and billing. Highlights for each of Publishing Technology's principal business units are asfollows: VISTA Vista, which operates mainly in Europe and North America, provides managementand administration systems that help publishers manage the supply chain fortheir printed and digital products. In the UK, it is estimated that over 80% ofall books sold on the High Street are processed through a Vista system. Compared to the same period last year, there has been a 6% reduction in revenuesto £5.1m, a change that can be materially attributed to the US Dollar exchangerate fall which has had a negative impact on revenues whilst having less effecton profits. In 2007, Vista entered the market for providing online publishing platforms forpublishers and now looks after systems for five publishers. Vista uses Ingentasystems but also has an exclusive partnership agreement with Impelsys to supportthe delivery of publishing platforms for content rich publications. Additional business developments within Vista during the period include: Signed UNICEF as a client for Vista's publishing platform Signed a revenue share deal with BBC Monitoring to provide digital platform fortheir collation of materials from 3,000 global news sources Systems successfully supported the distribution of the seventh and final editionof the Harry Potter series Ingenta Ingenta provides online publishing platforms that enable publishers to reach anaudience for their digital content. It provides electronic access to some 11,000individual publications on behalf of nearly 300 publishers. The market for online publishing delivery platforms is high growth andincreasingly competitive. However, Ingenta continues to demonstrate itstechnology leadership and commitment to customer service, and additional revenueopportunities continue to materialise, such as new high-margin advertisingrevenue streams. Since the merger, IngentaConnect has added 12 new publishers to its platform,one of which, Manchester University Press is the third largest university pressin the UK. Publishing Technology now provides systems and services to all threeof the largest University Presses. Ingenta is greatly increasing the volume of content managed on its systems, a10% increase to date is due in part to the uploading of 50,000 articles datingback to 1890, on behalf of Brill, the academic publisher. During the remainder of 2007, Ingenta's IT infrastructure will be substantiallyupgraded to improve performance in line with growing usage and to benefit fromsavings associated with a smaller and more efficient infrastructure. Since the merger, compared to the same period last year revenues have remainedstatic, but cost savings and operational efficiencies associated with the mergerhave allowed Ingenta to report positive EBITDA for the period. Publishers Communication Group (PCG) Publishers Communication Group (PCG), which represents 17% of group revenue(2005: 14%) continues to enhance its reputation as a high quality provider ofmarketing, sales, customer service and research services to academic publishers.During the period the unit worked with six new publishers and further expandedits European presence as a result of increased demand. PCG will also besupporting BBC Monitoring, having been contracted to provide the salesrepresentation to promote the online products. PCG's business has grown significantly in this period, and reported a 100%increase in telemarketing calls from Q1 of 2007 to Q2 2007 as well as aconsiderable increase in activities in Europe. George LossiusSeptember 26, 2007 UNAUDITED INTERIM RESULTS FOR THE 6 MONTHS ENDED 30 JUNE 2007 Condensed Consolidates Income Statement Six months endedfor the period ended 30 June 2007. 30 June 2007 30 June 2006 Note £'m £'m Revenue 6.6 5.4Cost of sales (1.6) (3.6)Gross profit 5.0 1.8 Sales and marketing expenses (0.4) (0.4)Administrative expenses (4.8) (1.4)Operating profit/(loss) (0.2) - Interest income 0.1 -Finance costs (0.3) (0.3)Profit/(loss) on ordinary activities before taxation (0.4) (0.3) Tax on (profit)/loss on ordinary activities 0.1 0.2 Profit/(loss) on ordinary activities after taxation (0.3) (0.1) Dividends paid - - (0.3) (0.1)Retained profit/(loss) for the period Earnings per share 1 Basic 0.0 0.0 Diluted 0.0 0.0 Consolidated Statement of Recognised Income & ExpenseFor the period ended 30 June 2007 Six months ended 30 June 30 June 2007 2006 £'m £'m Exchange differences on translation of foreign operations 0.2 - Tax on items taken directly to equity - - Net income recognised directly in equity 0.2 - Profit/(loss) for the period (0.3) (0.1) Total recognised income and expense for the period (0.1) (0.1) Condensed Consolidated Balance SheetAt 30 June 2007 30 June 2007 31 December 2006 Note £'m £'m Intangible assets 6.5 1.9Property, plant & equipment 0.4 0.2Investments 0.1 -Deferred tax assets - -Total non-current assets 7.0 2.1 Inventories - -Trade & other receivables 3.1 3.2Non-current assets held for sale - -Cash & cash equivalents (0.6) (0.1)Total current assets 2.5 3.1 Total assets 9.5 5.2 Current liabilities 7.7 6.1 Non-current liabilities 3.4 2.5Deferred tax liabilities - -Provisions for liabilities and charges - - Total liabilities 11.1 8.6 Net assets (1.6) (3.4) 30 June 2007 31 December 2006 £'m £'m Called up share capital 2 1.9 -Share premium account 3 - -Own shares held - -Capital redemption reserve 3 0.8 0.8Share option reserve - -Merger Difference - -Reverse Acquisition Reserve - -Translation reserve - -Retained earnings 3 (4.3) (4.2) Total equity (1.6) (3.4) Condensed Consolidated Cash Flow StatementFor the period ended 30 June 2007 Six months ended 30 June 30 June 2007 2006 £'m £'m Cash generated from operations (1.1) 0.3Other operating cash flows (net) - -Net cash from operating activities (1.1) 0.3 Purchases of property, plant & equipment (0.2) -Proceeds on disposal of property, plant & equipment - -Other investing cash flows (net) 1.2 -Net cash used in investing activities 1.0 - Repayments of borrowings (0.4) (0.3)Other financing cash flows (net) - -Net cash used in financing activities (0.4) (0.3)Net (decrease) / increase in cash & cash equivalents (0.5) - Cash & cash equivalents at 1 January (0.1) (0.1) Effect of foreign exchange rate changes - - Cash & cash equivalents at 30 June (0.6) (0.1) Notes to the Unaudited Interim Reportfor the 6 months ended 30 June 2007 Accounting policies The accounting policies set out in the appendix have, unless otherwise stated,been applied consistently to all periods presented in these group financialstatements and in preparing an opening IFRS Balance sheet at 1 July 2005 for thepurposes of the transition to EU Adopted IFRS. Details of the effect of transition to IFRS and details of the accountingpolicies applied are set out in the appendix to this report. Transition to EU Adopted IFRS The Group is preparing its financial statements in accordance with EU AdoptedInternational Financial Reporting Standards (IFRS) for the first time andconsequently has applied IFRS 1. IFRS 1 grants certain exemptions from the full requirements of IFRS in thetransition period. The following exemptions have been taken in these financialstatements: • Business combinations - Business combinations that took place prior to 1 July 2005 have not been restated. • Fair value or revaluation as deemed cost - At the date of transition, fair value has been used as deemed cost for property, plant and equipment assets previously measured at fair value. • Cumulative translation differences - Cumulative translation differences for all foreign operations have been set to zero at 1 July 2005. • Share-base payment - the Group has applied the requirements of IFRS 2 Share-based payments to all grants of equity instruments after 7 November 2002 that were unvested as of 1 January 2005. Basis of preparation The consolidated financial statements have been prepared on the going concernbasis, under the historical cost convention except for the revaluation ofcertain financial assets and liabilities. The measurement bases are more fullydescribed in the accounting policies in the appendix. Ingenta Plc acquired VISTA International Limited (VISTA) on 27 February 2007.At the Extraordinary General Meeting on 27 February 2007 the enlarged Companychanged its name to Publishing Technology Plc (ticker: PTO) on the AIM market ofthe London Stock Exchange. This is more fully described in the Circular toshareholders in respect of the above dated 2 February 2007, a copy of which isavailable on request from the Company's registered office. As a result of the issuance of the Ordinary shares, the shareholders of VISTAInternational Limited obtained control of Ingenta Plc. Accordingly thetransaction was accounted for as a reverse acquisition in accordance with IFRS 3"Business Combinations". The consolidated financial statements prepared following the reverse acquisitionare issued under the name of the Publishing Technology plc, but they are acontinuance of the financial statements of VISTA. Because such consolidatedfinancial statements represent a continuation of the financial statements ofVISTA: • the assets and liabilities of VISTA have been recognised and measured in these consolidated financial statements at their pre-combination carrying amounts. • the retained earnings and other equity balances recognised in those consolidated financial statements are the retained earnings and other equity balances of VISTA immediately before the business combination. • the amount recognised as issued equity instruments in these consolidated financial statements has been determined by adding to the issued equity of VISTA immediately before the business combination the cost of the combination determined as described in the following paragraphs. However, the equity structure appearing in those consolidated financial statements (the number and type of equity instruments issued) reflects the equity structure of the Company, including the equity instruments issued by the Company to effect the combination. These consolidated financial statements prepared following the reverseacquisition reflect the fair values of the assets and liabilities of the Company(the acquiree for accounting purposes). Since as of the date of the acquisition, the fair value of the Company'sidentifiable assets approximates their carrying value, the excess of thepurchase price over the carrying value of the net assets acquired together withthe direct transaction costs incurred has been recorded as reduction ofadditional paid-in capital. 1. Earnings per share From continuing and discontinued operations The calculation of the basic and diluted earnings per share is based on thefollowing data: Earnings Six months ended 30 June 2007 30 June 2006 £'m £'m Earnings for the purposes of basic earnings per share (0.3) (0.1)being net profit attributable to equity holders of theparent Earnings for the purposes of diluted earnings per share (0.3) (0.1) Number of Shares 30 June 2007 30 June 2006 Number Number millions millionsWeighted average number of ordinary shares for the 462.0 260.0purposes of basic earnings per share Effect of dilutive potential ordinary shares: Share options 0.0 0.0Weighted average number of ordinary shares for the 462.0 260.0purposes of diluted earnings per share 2. Share Capital & Reserves Share capital Capital redemption Account reserve £'m £'m Balance at 1 January 2006 0.0 0.7Shares issued in the period - -Share redeemed in the period - - Balance at 30 June 2006 0.0 0.7 Balance at 1 January 2007 0.0 0.7Shares issued in the period 2.4 -Reverse acquisition movement (0.5) - Balance at 30 June 2007 1.9 0.7 3. Retained earnings £Balance at 1 January 2006 (4.1)Net (loss)/profit for the period (0.1)Loss on sale of own shares - Balance at 30 June 2006 (4.2) Balance at 1 January 2007 (4.2)Net (loss)/profit for the period (0.1)Loss on sale of own shares - Balance at 30 June 2007 (4.3) 4. Segment information Below an analysis of the revenue and results for the period, analysed bybusiness segment, the Group's primary basis of segmentation. The Group comprises the following business segments: VistaIngentaPublisher Communications Group Segmental revenue Segment result Six months ended Six months ended 30 June 2007 30 June 2006 30 June 2007 30 June 2006 £'m £'m £'m £'m Vista 4.9 5.4 0.1 0.0Ingenta 1.3 - 0.1 -Publisher Communications 0.4 - 0.0 -Group 6.6 5.4 0.2 0.0 Unallocated corporate 0.0 0.0expenses Operating profit 0.2 0.0 5. Related party transactions There were no significant related party transactions for this or the comparativeperiod 6. Contingencies and commitments There were no contingencies and commitments at the end of this or thecomparative period 7. Post balance sheet events There were no material events subsequent to the end of the interim reportingperiod that have not been reflected in the financial statements for the interimperiod. Appendix to the Unaudited Interim ReportFor the 6 months ended 30 June 2007 Explanation of transition to IFRS This is the first year that the company will present its financial statementsunder IFRS. The following disclosures are required in the year of transition. The last financial statements under UK GAAP were for the period ended 30 June2006 and the date of transition to IFRS was 1 July 2005. Reconciliation of equity at 1 July 2005 (date of transition to IFRS) Effect of Note transition to UK GAAP IFRS IFRS £'m £'m £'m Intangible assets 4.3 (2.4) 1.9 Property, plant & equipment 0.1 - 0.1 Investments - - - Deferred tax assets - - - Total non-current assets 4.4 (2.4) 2.0 Inventories - - - Trade & other receivables 2.2 - 2.2 Non-current assets held for sale - - - Cash & cash equivalents 1.6 - 1.6 Total current assets 3.8 - 3.8 Total assets 8.2 (2.4) 5.8 Current liabilities 5.5 - 5.5 Non-current liabilities 4.3 - 4.3 Deferred tax liabilities - - - Provisions for liabilities and charges - - - Total liabilities 9.8 - 9.8 Net assets (1.6) (2.4) (4.0) Called up share capital - - - Share premium account - - - Own shares held - - - Capital redemption reserve - - - Share options reserve - - - Translation reserve - - - Retained earnings (1.6) (2.4) (4.0) Total equity (1.6) (2.4) (4.0) Notes to the reconciliation of equity at 1 July 2005 The Group has utilised the IFRS1 first-time exemption whereby the cumulative translation differences for all foreign operations are deemed to be zero at the date of transition to IFRS. These have been included in retained earnings under UK GAAP, and therefore no further adjustment is required at the date of transition. Subsequently, such translation differences will be recognised in a separate translation reserve. The adjustments to retained earnings are as follows: £'m Impairment of goodwill 2.4 Reconciliation of equity at 30 June 2006 (date of last UK GAAP financialstatements) Effect of transition to UK GAAP IFRS IFRS Note £'m £'m £'m Intangible assets 4.0 (2.1) 1.9 Property, plant & equipment 0.1 - 0.1 Investments - - - Deferred tax assets - - - Total non-current assets 4.1 (2.1) 2.0 Inventories - - - Trade & other receivables 2.5 - 2.5 Non-current assets held for sale - - - Cash & cash equivalents 0.5 - 0.5 Total current assets 3.0 - 3.0 Total assets 7.1 (2.1) 5.0 Current liabilities 5.5 - 5.5 Non-current liabilities 2.9 - 2.9 Deferred tax liabilities - - - Provisions for liabilities and charges - - - Total non-current liabilities 2.9 - 2.9 Total liabilities 8.4 - 8.4 Net assets (1.3) (2.1) (3.4) Called up share capital - - - Share premium account - - - Own shares held - - - Capital redemption reserve 0.8 - 0.8 Share options reserve - - - Translation reserve - - - Retained earnings (2.1) (2.1) (4.2) Total equity (1.3) (2.1) (3.4) Notes to the reconciliation of equity at 30 June 2006 Design and development internally-generated intangible assets recognised under IFRS and amortised over their estimated useful lives. The Group has utilised the IFRS1 first-time exemption whereby the cumulative translation differences for all foreign operations are deemed to be zero at the date of transition to IFRS. These have been included in retained earnings under UK GAAP, and therefore no further adjustment is required at the date of transition. Subsequently, such translation differences have been recognised in a separate translation reserve. The adjustments to retained earnings are as follows: £ Impairment of goodwill 2.4Write back of goodwill amortisation (0.3) 2.1 Reconciliation of profit or loss for six months ended 30 June 2006 (interimcomparative period) Effect of transition to UK GAAP IFRS IFRS Note £'m £'m £'m Revenue 5.4 - 5.4 Cost of sales (3.6) - (3.6) Gross profit 1.8 - 1.8 Sales and marketing expenses (0.4) - (0.4) Administrative expenses (1.6) 0.2 (1.4) Operating (loss)/profit (0.2) 0.2 - Interest income - - - Finance costs (0.3) - (0.3) Profit on ordinary activities before taxation (0.5) 0.2 (0.3) Tax on loss on ordinary activities 0.2 - 0.2 Profit on ordinary activities after taxation (0.3) 0.2 (0.1) Dividends paid - - - Retained profit for the period (0.3) 0.2 (0.1) Items recognised directly in equity during the period - - - Retained earnings movement in the period (0.3) 0.2 (0.1) Notes to the reconciliation of profit or loss for six months ended 30 June 2006 Design and development internally generated intangible assets that are expensedunder UK GAAP are recognised under IFRS and amortised over their useful lives. Appendix to the Unaudited Interim Reportfor the 6 months ended 30 June 2007 Details of significant accounting policies Basis of preparation These financial statements are presented in pounds sterling because that is thecurrency of the primary economic environment in which the group operates.Foreign operations are included in accordance with the policies set out below. Basis of consolidation The consolidated financial statements incorporate the financial statements ofthe Company and entities controlled by the Company (its subsidiaries) made up to31 December each year. Control is achieved where Publishing Technology plc has the power to govern thefinancial and operating policies of an investee entity so as to obtain benefitsfrom its activities. The financial statements of subsidiaries are included in the consolidatedfinancial statements from the date that control commences until the date thatcontrol ceases. Intra-Group balances are eliminated fully on consolidation. On acquisition of a subsidiary, all of the subsidiary's assets and liabilitiesand contingent liabilities that exist at the date of acquisition are recorded attheir fair values reflecting their condition at that date. Any deficiency of the cost of acquisition below the fair values of theidentifiable net assets acquired (i.e. discount on acquisition) is credited toprofit or loss in the period of acquisition. The results of subsidiaries acquired or disposed of during the period areincluded in the consolidated Income Statement from the effective date ofacquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements ofsubsidiaries to bring the accounting policies used into line with those used bythe Group. Property, Plant and Equipment Property, plant and equipment are stated at cost less accumulated depreciationand any recognised impairment loss. Depreciation is provided on the cost of assets less any residual value overtheir estimated useful lives, using the straight-line method, as follows: Leasehold improvements over lease term Computer equipment 33% Fixtures, fittings and equipment 20% Motor vehicles 20-25% Office equipment 33% The residual value and the useful life of each asset are reviewed at least ateach financial year-end and, if expectations differ from previous estimates, thechange(s) are accounted for as a change in an accounting estimate. The gain or loss arising on the disposal or retirement of an asset is determinedas the difference between the sales proceeds and the carrying amount of theasset and is recognised in income. Goodwill Goodwill arising on consolidation represents the excess of the cost ofacquisition over the Company's interest in the fair value of the identifiableasset and liabilities of a subsidiary at the date of acquisition. Goodwill isrecognised as an asset and reviewed for impairment at least annually. Anyimpairment is recognised immediately in the income statement and is notsubsequently reversed. Goodwill arising on acquisitions before the date of transition to IFRS has beenretained at the previous UK GAAP amounts subject to being tested for impairmentat that date and at least annually thereafter. On disposal of a subsidiary, the attributable net book value of goodwill isincluded in the determination of the profit or loss on disposal. Internally generated intangible assets - Research & Development Expenditure on research activities is recognised as an expense in the period inwhich it is incurred. An internally generated intangible asset arising from the group's development isrecognised only if all of the following conditions are met: • An asset is created that can be identified; • It is probable that the asset created will generate future economic benefits; and • The development cost of the asset can be measured reliably. Internally generated intangible assets are amortised on a straight-line basisover their respective useful lives, from the date at which they are availablefor use, using the straight-line method. Where no internally generated intangible assets can be recognised, developmentexpenditure is recognised as an expense in the period in which it is incurred. Impairment At each Balance sheet date, the Group reviews the carrying amounts of its assetsto determine whether there is any indication that those assets have suffered animpairment loss. If any such indication exists, the recoverable amount of the asset is estimatedin order to determine the extent of the impairment loss (if any). Recoverable amount is the higher of fair value less costs to sell and value inuse. In assessing value in use, the estimated future cash flows are discountedto their present value using a pre-tax discount rate that reflects currentmarket assessments of the time value of money and the risks specific to theasset for which the estimates of future cash flows have not been adjusted. Where the asset does not generate cash flows that are independent from otherassets, the Group estimates the recoverable amount of the cash-generating unitto which the asset belongs. If the recoverable amount of an asset (or cash-generating unit) is estimated tobe less than its carrying amount, the carrying amount of the asset(cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately, unless the relevantasset is carried at a revalued amount, in which case the impairment loss istreated as a revaluation decrease. Where an impairment loss subsequently reverses, the carrying amount of the asset(cash-generating unit) is increased to the revised estimate of its recoverableamount, but so that the increased carrying amount does not exceed the carryingamount that would have been determined had no impairment loss been recognisedfor the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised as income immediately, unless therelevant asset is carried at a revalued amount, in which case the reversal ofthe impairment loss is treated as a revaluation increase. Inventory Inventory is stated at the lower of cost and net realisable value. Cost comprises of the direct material costs of purchase, and where applicable,the direct labour costs and those overheads that have been incurred in bringingthe inventories to their present location and condition. Net realisable value is based on estimated selling price less all further coststo completion and all relevant marketing, selling and distribution costs. Leases Leases are classified as finance leases whenever the terms of the leasetransfers substantially all the risks and rewards of ownership to the lessee.All other leases are classified as operating leases. Assets held under finance leases are included in the balance sheet at fairvalue, or, if lower, at the present value of the minimum lease payments, eachdetermined at inception of the lease less depreciation and impairment losses. These assets are depreciated over the shorter of the asset's useful life and thelease term. The interest element of the finance cost is charged to the income statement overthe lease period so as to produce a constant periodic rate of interest on theremaining balance of the liability for each period. Leases where the third party lessor retains substantially all the risks andrewards of ownership are classified as operating leases. Rentals payable under operating leases are charged to the income statement on astraight-line basis over the period of the lease. Lease incentives received arerecognised in the income statement as an integral part of the total leaseexpense. Foreign currencies Transactions in foreign currencies are translated into sterling (the functionalcurrency of the Group) at the rates of exchange ruling at the date of thetransaction. Monetary assets and liabilities in foreign currencies are translated intosterling at the rates of exchange ruling at the end of the financial year. All such foreign exchange differences are taken to the profit and loss accountin the year in which they arise. Non-monetary assets and liabilities that are measured in terms of the historicalcost in a foreign currency are translated using the exchange rate at the date ofthe transaction. On consolidation, the assets and liabilities of subsidiaries in foreigncurrencies are translated at rates of exchange ruling at the balance sheet date. Income and expense items are translated at the average exchange rates for theperiod unless exchange rates fluctuate significantly. Exchange differencesarising, if any, are classified as equity and transferred to the Group'stranslation reserve. Such translation differences are recognised as income or as expenses in theperiod in which the operation is disposed of. Goodwill and fair value adjustments arising on the acquisition of a foreignentity are treated as assets and liabilities of the foreign entity andtranslated at the closing rate. The Group has elected to treat goodwill and fair value adjustment arising onacquisitions before the date of transition to IFRS as sterling denominatedassets and liabilities. Revenue Recognition Revenue, which excludes value added tax, sales between Group companies, tradediscounts and other sales related taxes, is recognised as follows: Revenue on the sale of hardware Hardware revenue is recognised when delivery of the hardware takes place, whenthe risks and rewards of ownership are transferred. Licences and software sales Licences and sales of standard software packages and sales of bespoke softwareare recognised as revenue in accordance with the percentage completed. Support and maintenance of software Revenue from contracts for the support and maintenance of software is recognisedon a straight-line basis over the term of the contract. Website and software design, development and implementation services Revenues received from these activities are recognised when performance of thecontract gives rise to the right to consideration. Revenue relating to either royalty agreements or revenue sharing arrangements isrecognised over the term of the contract and in line with performance of thecontractual obligation. Content processing, hosting and marketing services Revenues from the processing of e-journal content are recognised in accordancewith the period to which they relate. Revenue from other services is recognised upon the work being completed inaccordance with the provisions of the contract. Ongoing service fees are recognised in revenue on a straight-line basis over thelife of the relevant agreements. Revenue collected or billed in advance of such services being performed isrecorded as deferred income and recognised on a straight-line basis over thecontract period. User services revenue (including deposit account charges) is recognised on astraight-line basis over the period to which the services relate with revenuecollected or billed in advance of such services being performed, recorded asdeferred income. Document sales Revenues from documents delivered under pay-per-view access and clearance anddigitisation services are recognised on despatch/delivery of the documents. Multi-element arrangements The Group has certain products that are sold as multi-element arrangements.Revenue is recognised when each element is delivered to the customer based uponthe fair value of each product element. Long-term contracts Revenue on long term contracts is recognised according to the stage reached inthe contract by reference to the value of work done. A prudent estimate of theprofit attributable to work completed is recognised once the outcome of thecontract can be assessed with reasonable certainty. The amount by which revenue exceeds payments on account is recognised withinreceivables. The costs on long-term contracts not yet recognised in the incomestatement less related foreseeable losses and payments on account are recognisedin work in progress as long term contract balances. Financial instruments Income and expenditure arising on financial instruments is recognised on theaccruals basis, and credited or charged to the income statement in the financialperiod to which it relates. Trade receivables Trade receivables do not carry any interest and are stated at their nominalvalue as reduced by appropriate allowances for estimated irrecoverable amounts. Financial liabilities and equity Financial liabilities and equity instruments are classified according to thesubstance of the contractual arrangements entered into. An equity instrument isany contract that evidences a residual interest in the assets of the group afterdeducting all of its liabilities. Borrowings Bank and other loans are raised for support of long term funding of the Group'soperations. They are recognised at proceeds received, net of direct issue costs. Finance charges, including premiums payable on settlement or redemption, anddirect issue costs are charged to the income statement on an accruals basisusing the effective interest method and are added to the carrying amount of theinstrument to the extent that they are not settled in the period in which theyarise. Convertible loan notes Convertible loan notes are regarded as compound instruments, consisting of aliability component and an equity component. At the date of issue, the fairvalue of the liability component is estimated using the prevailing marketinterest rate for similar non-convertible debt. The difference between theproceeds of issue of the convertible loan notes and the fair value assigned tothe liability component, representing the embedded option to convert theliability into equity of the group, is included in equity. Issue costs are apportioned between the liability and equity components of theconvertible loan notes based on their relative carrying amounts at the date ofissue. The portion relating to the equity component is charged directly againstequity. The interest expense on the liability component is calculated by applying theprevailing market interest rate for similar non-convertible debt to theliability component of the instrument. The difference between this amount andthe interest paid is added to the carrying amount of the convertible loan note. Trade Payables Trade payables are not interest bearing and are stated at their nominal value. Equity Instruments Equity instruments issued by the company are recorded at the proceeds received,net of direct issue costs. Risk management The Group does not enter into derivative or hedging transactions. It has been,throughout the period under review, the Group's policy that no trading infinancial instruments shall be undertaken. When applicable, the Group places themajority of its cash on short-term deposit. The Group's objective is to minimisethe risk of loss by limiting the Group's credit exposure to quality institutionsmaintaining a very high credit rating. The main risks arising from the Group'sfinancial instruments are interest rate risk and foreign currency risk. The Group's policy in relation to interest rate risk is to monitor short andmedium term interest rates and to place cash on deposit for periods thatoptimise the amount of interest earned while maintaining access to sufficientfunds to meet day to day cash requirements. Cash and cash equivalents Cash and cash equivalents comprise cash balances at the bank, cash in hand andcash on short-term deposits. Cash for the purpose of the cash flow statement,comprises cash in hand, bank overdrafts and short term deposits repayable ondemand. Retirement benefit costs The Group makes contributions into individual employees' personal pension planson a defined contribution basis. The pension charge in the period represents thecontributions payable into these plans. The Group has no further paymentobligations once the contributions have been paid. Prepaid contributions are recognised as an asset to the extent that a cashrefund or a reduction in the future payments is appropriate. Short-term employee benefit costs The undiscounted amount of short-term benefits attributable to services thathave been rendered in the period are recognised as an expense, unlessspecifically required or permitted within the scope of IFRS reporting to beincluded in the cost of an asset. Any difference between the amount of cost recognised and cash payments made istreated as a liability or prepayment as appropriate. Employee share option trust The company is deemed to have control of the assets, liabilities, income andcosts of the Vista International Limited 1998 Employee Share Ownership Trust(ESOT). The borrowings of the ESOT, which have been guaranteed by the company, areincluded borrowings with the net financing costs of the ESOT being shown asfinance charges in the income statement. All dividends in respect of these shareholdings have been waived. Taxation The charge for current tax is based on the results for the period as adjustedfor items that are non-assessable or disallowed. It is calculated using taxrates that have been enacted or substantively enacted by the balance sheet date. Deferred tax is the tax expected to be payable or recoverable on differencesbetween the carrying amounts of assets and liabilities in the financialstatements and the corresponding tax bases used in the computation of taxableprofit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are recognised for taxable temporary differences, anddeferred tax assets are recognised to the extent that it is probable thattaxable profits will be available against which deductible temporary differencescan be utilised. Such assets and liabilities are not recognised if the temporary differencearises from goodwill (or any discount on acquisition) or from the initialrecognition (other than in a business combination) of other assets andliabilities in a transaction that affects neither the tax profit nor theaccounting profit. Deferred tax liabilities are recognised for taxable temporary differencesarising on investments in subsidiaries and associates, and interests in jointventures, except where the Group is able to control the reversal of thetemporary difference and it is probable that the temporary difference will notreverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at each balance sheetdate and reduced to the extent that it is no longer probable that sufficienttaxable profits will be available to allow all or part of the asset to berecovered. Deferred tax is calculated at the tax rates that are expected to apply in theperiod when the liability is settled or the asset is realised. Deferred tax ischarged or credited in the Income statement, except when it relates to itemscharged or credited directly to equity, in which case the deferred tax is alsodealt with in equity. Deferred tax assets and liabilities are offset when they relate to income taxeslevied by the same taxation authority and the Group intends to settle itscurrent tax assets and liabilities on a net basis. Share based payments The Group issues share options to its employees. The group has applied therequirements of IFRS 2 Share-based Payments. In accordance with the transitionalprovisions, IFRS 2 has been applied to all grants of equity instruments after 7November 2002 that were unvested as of 1 January 2005. The Group issues equity-settled share-based payments to employees.Equity-settled share-based payments are measured at fair value at the date ofgrant. The fair value determined at the grant date of the equity-settled, share-basedpayments is expensed on a straight-line basis over the vesting period, based onthe Group's estimate of shares that will eventually vest, updated at eachBalance sheet date. Dividends Dividends are recognised as a liability in the period in which they aredeclared. Borrowing costs Borrowing costs directly attributable to the acquisition, construction orproduction of qualifying assets, which are assets that necessarily take asubstantial period of time to get ready for their intended use or sale, areadded to the cost of those assets, until such time as the assets aresubstantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowingspending their expenditure on qualifying assets is deducted from the borrowingcosts eligible for capitalisation. All other borrowing costs are recognised in the profit or loss in the period inwhich they are incurred. Provisions A provision is recognised in the balance sheet when the Group has a presentlegal or constructive obligation as a result of a past event, and it is probablethat an outflow of economic benefits will be required to settle the obligation.If the effect is material, provisions are determined by discounting the futurecash flows at a pre-tax rate that reflects current market assessments of thetime value of money and, where appropriate, the risks specific to the liability. Restructuring provisions are recognised only if a detailed formal plan for therestructuring has been developed and implemented, or management has at leastannounced the plan's main features to those affected by it. Provisions are notrecognised for future operating losses. Non-current assets held for sale On initial classification as held for sale, non current assets and disposalgroups are recognised at the lower of carrying amount and fair value less coststo sell. Impairment losses on initial classification as held for sale are included inprofit or loss, even when there is a revaluation. Gains and losses on subsequent re-measurement are also included in profit orloss during the relevant period. This information is provided by RNS The company news service from the London Stock Exchange