News

Centaur Media plc Preliminary results for the year ended 30 June 2006

CHAIRMAN'S STATEMENT

Introduction

I am pleased to announce that Centaur is reporting record profits in the 12 months to 30 June 2006, with adjusted PBT ahead of expectations up 36% to 13.2m, and adjusted basic earnings per share 32% up at 6.2p (2005: 4.7p).  Revenues, which grew 14% in the year, benefited from strong growth in advertising in most of our served markets, particularly in online media, continued growth in our events business and from the results of new and recently launched products.  Revenue growth was underpinned by the bolt-on acquisitions we made during the year, but underlying revenues excluding acquisitions still grew 9% in the year.

Adjusted EBITDA increased by 29% to 15.7m, representing a further strong improvement in margin to 19% from 17% in the previous year, despite another year of significant further investment in the major new product, Finance Week.   

Profit before tax amounted to 15.1m compared with 9.2m in the year ended 30 June 2005.  The 2006 result is stated after an exceptional credit of 2.2m relating principally to the release of a provision for deferred purchase consideration in respect of Synergy Group and after charging, within administrative expenses, 0.3m of amortisation of acquired brands and publishing rights (2005 0.0m).  Finally, cash balances at 30 June 2006, net of loan note creditors, stood at 6.2m (2005: 10.0m).

In light of this performance, the Board is recommending a final dividend of 2.4p per share, giving a full year dividend of 3.0p, representing an increase of 76% over prior year.The final dividend will be paid to shareholders on the register as at 3 November 2006.  It is proposed that the dividend will be paid on 1 December 2006.  The Company will not be proposing any Scrip Dividends or Dividend Reinvestment Plan Options.

These excellent results reflect the success of our strategy of seeking to build market-leading positions across a number of vertical markets through continuous customer-focussed innovation.The recovery in the advertising cycle that started towards the end of 2003 has continued through the year to June 2006 in most of our served markets, although the marketing and creative sectors experienced well-publicised difficulties, reflecting weakness in the retail and consumer goods sectors in particular.   

Nevertheless, total advertising turnover during the year increased by 15% over the equivalent prior year period. Acquisitions made during the year contributed to this growth, but underlying advertising revenues also grew strongly, thanks in particular to buoyant underlying trading conditions in the legal and financial markets.     

The fastest pace of revenue growth was derived from online products (up 20%) and events (up 15%), reflecting the success of the principal focus of our strategy in the past few years, which has been to extend our major print publishing brands across multiple media. Centaur has developed most of its business organically and in FY2006, 12% of revenues were generated by products launched within the previous three years.  We continued to maintain an active pace of new product development during the year, with the launch of 4 new magazines, 5 new websites and half a dozen new events.

In the past year we have also supplemented our growth through a number of small bolt-on acquisitions.  These were in line with our established acquisition strategy, making selective purchases of businesses that fit with our overall growth strategy, which is to expand existing market positions and to establish market-leading positions in new markets.  The key developments and initiatives in the period are outlined in the Business Review.

The new financial year has started well and our growth prospects continue to be supported by our pipeline of new and recently launched or acquired products.  Revenues in the first quarter are comfortably ahead of the same period last year.The outlook is encouraging and we expect FY 2007 results to demonstrate further good progress.

As previously reported, I am also pleased to confirm that Geoff Wilmot will become Chief Executive Officer with effect from 1^st November 2006.  I am confident that he and his team will continue to take Centaur from strength to strength.Finally, my thanks to all my colleagues who as always have performed with great energy and enthusiasm.

Business Review

Trading Review

Revenues grew 14% in the year to 30 June 2006, led by 15% growth in revenues from both advertising and events.Advertising growth was particularly strong in our online media, which grew total revenues by 20%.Overall productivity improved, with total revenues per employee increasing 11% to 112k.  This revenue and productivity growth, combined with other initiatives, resulted in adjusted EBITDA margins improving to 19% (2005:17%) and in adjusted basic earnings per share rising by 32% to 6.2p.

Centaur's rapid growth in the year continued to be supported by its pipeline of new and recently launched products and the record results were achieved despite a continuing high level of investment in future growth.  Overall, approximately 12% of revenues generated in the last financial year were from products or events launched within the past three years. The bulk of the new product launches have been in existing communities, enhancing and extending established leading brands.  Our major new product development, Finance Week, incurred further significant operating losses during the year, which have decreased significantly following its conversion to an online-only format in March 2006.

We also completed a number of small bolt-on acquisitions during the past year.  In addition to the acquisition of Logistics Manager part way through the previous year, these acquisitions contributed 5% of revenues in FY2006 and an adjusted EBITDA margin of 10%.     

Legal & Financial

This was our most successful market segment in the year, reflecting the strength of the underlying communities served.Revenue grew 18% year on year and we increased the EBITDA margin to 29% (2005:26%).

This division's three leading titles, Money Marketing, Mortgage Strategy and The Lawyer, each ended the year strongly.Money Marketing and its sister title, Fund Strategy, both benefited from a surge in demand for retail investment products in the second half, whilst Mortgage Strategy's consistent growth throughout the year reflected the continuing high levels of activity in that sector.The Lawyer, meanwhile, again recorded its best performance ever, benefiting in particular from the impact of the healthy levels of underlying M&A activity on the legal profession.

Events in this Division also recorded strong growth, led by the launch of two new summit events during the year. The Mortgage Summit, launched in September 2005, was successfully repeated in June 2006.  The Investment Summit, launched in March 2006, was also a great success.  The Lawyer's European Summit continued to grow as did our major exhibitions in the financial sector, Money Marketing Live.

The fastest pace of growth in this Division was derived from online products.  Revenues and profits from the three major internet businesses, Money Marketing Online (principally banner advertising), TheLawyer.com (recruitment and directory advertising) and Headlinemoney (subscriptions income) each grew strongly and each of these business units is now delivering above average EBITDA margins.  

Marketing, Creative & New Media

Revenues in what was previously our largest market segment declined 2% in the year, and, despite tight cost control, adjusted EBITDA margins deteriorated to 14% (2005: 20%).

The advertising recovery in this sector has been severely affected by the consumer and retail slowdown experienced in the last year and by the well-publicised challenges faced by traditional media owners.As a result, recruitment advertising in particular suffered and our leading magazines in this sector, Marketing Week, Design Week and Creative Review, all recorded a decline in overall revenues during the year.  This was offset to an extent by continuing recovery in revenues from New Media Age, our leading weekly magazine for the interactive marketing community.

The direct marketing segment, for which we publish the weekly magazine Precision Marketing (PM), also remained weak.In response to changing conditions in this market, we decided to reduce PM's frequency to fortnightly, with effect from July 2006.   We are supplementing the magazine with a new stand-alone website, launched in September 2006, and we are increasing the magazine's revenue potential by expanding its circulation.     

The Insight and InStore shows both delivered modest revenue and profits growth. The DM Show, run in September 2005, did not improve its results year on year, reflecting the weakness of the underlying sector of the market.  The Total Motivation Show also achieved only modest revenue growth in its second year. The only event which recorded significant growth was The Online Marketing Show, also in its second year.

Our internet portal, mad.co.uk, which serves the marketing, advertising and design communities, delivered strong revenue growth, principally from recruitment and banner advertising, but profits growth was held back by the increased costs of its new technology platform, implemented during the year, which we invested in to support future growth.

Construction & Engineering

Led by the acquisitions of Period Living and Pro-Talk, revenues in this division grew 24% in the year and EBITDA margins improved 5 points to 21% having doubled in the previous year to 16%.

The leading title in the engineering portfolio is The Engineer, which is celebrating its 150^th anniversary in 2006.We have been successfully repositioning the title as the news magazine for technology and innovation, published principally for those involved in the development of new applications and transferable technology.  As a result of this repositioning, the magazine delivered its second successive year of double digit revenue growth. Our largest magazine in the construction portfolio is the leading monthly self-build publication Homebuilding & Renovating, which experienced a levelling out of revenues, following several years of strong growth, reflecting some softness in the housing market during the year. 

We continued to experience challenging market conditions for our two major engineering monthlies, Process Engineering and Metalworking Production.  We have reduced the frequency of both magazines to bi-monthly and enhanced their online publication activity.  The respective online services will deliver news and jobs, leaving the magazines more capacity for in-depth analysis and case studies. 

Despite the slowdown in the housing market each of the six established Homebuilding exhibitions generated further strong growth in revenues, delivering nearly 100,000 visitors in aggregate.In the engineering sector, Subcon, the show for international buyers of sub-contracted manufacturing, delivered significant revenue growth and a useful profit contribution.

Online revenues in this Division are driven principally by The Engineer Online (mainly recruitment advertising), homebuilding.co.uk (mainly banner advertising), plotfinder.co.uk (revenues from subscriptions) and the newly acquired Pro-Talk (online response driven search-advertising model).  In aggregate, online products delivered strong revenue growth and satisfactory improvement in margins.

Perfect Information

Perfect Information (PI) achieved record results in the year, with revenue growth of 8% combined with cost savings leading to a 1m increase in EBITDA to 1.4m, giving an improved adjusted EBITDA margin of 22%. 

High levels of M&A activity led to improved trading conditions in PI's core investment banking and legal markets.As a result, PI secured significant growth in new subscriptions to its core Perfect Filings service.The year also saw good progress on the development of PI's new equity research service, Perfect Analysis (PA).PA Web, which delivers most of PA's powerful functionality within a pure web environment, was launched in February 2006.  A new Excel add-in service, allowing users to exploit the full functionality of PA from within their own desktop version of Excel, was substantially completed by the year-end and was released to the market in the first quarter of the new financial year.We secured a number of new subscribers to PA during the year under review and net operating losses relating to this service were substantially reduced.  PA is expected to generate a net profit contribution in the current year. 

Other

This division comprises products serving a number of distinct business communities.  These include HR (Employee Benefits), logistics (Logistics Manager), the recruitment sector (The Recruiter), corporate accounting and finance managers (Finance Week), business travel (Business Travel Shows), carpets and textiles (Hali) and TV and film production (Televisual).  In aggregate, revenues grew 37%, with most of the growth arising in the newly acquired sectors, logistics and recruitment.EBITDA grew 1.1m to 0.5m, despite continuing losses on Finance Week amounting to 1.3m (2005: 1.4m).

Revenue and profits growth in this division were driven principally by Logistics Manager and The Recruiter.In both cases, the underlying served markets are enjoying buoyant trading conditions and our investment in redeveloping these recently acquired titles is delivering promising results.In addition, the Employee Benefits portfolio and the Business Travel shows also delivered growth in revenues and profit contribution.

As previously reported, we converted Finance Week (FW) into an online-only format in the third quarter of last year.This was done in order to enable us to expand the readership base of the title so as to provide the market with a more effective recruitment medium.  It also enabled us to make a substantial reduction in FW's operating costs.FW's online circulation has been building steadily over the past few months and revenue growth is on target.

Since the year-end we have sold Televisual (TV) to its former publisher.  TV is a strong brand that enjoys an exceptional position in its market.However, the market it serves has been in decline for a number of years, as a result of technology innovations, TV has recently begun to incur losses and we do not believe that it offers the potential to justify Centaur's continued investment. 

New Business Development Initiatives

During the year we continued to focus on new product development opportunities and we became more proactive in searching for suitable bolt-on acquisitions.  The key development initiatives in the period are outlined below.

New Magazines

In the first half we launched two new magazines within existing product portfolios.  The monthly magazine Move or Improve is an extension of the market-leading publication, Homebuilding and Renovating, which will in particular enable us to address the metropolitan market more successfully.  It published 6 issues during the year and delivered a small profit contribution before overheads.  Modern Carpets & Textiles is a quarterly magazine published by the Hali team for the major buyers of these products in this growing international market.  We published 3 issues in the year and traded at a small loss. 

In January 2006, in response to recent regulatory and technology changes in the UK lending industry, we launched the monthly magazine Lending Strategy, published alongside its successful sister publication, Mortgage Strategy.  We published 5 issues in the year which generated a small loss.           

In May 2006 we launched Corporate Adviser, a monthly publication targeted at financial intermediaries selling pensions and employee benefits products into the corporate market.  The magazine bridges the gap between Employee Benefits and Money Marketing and builds on our extensive knowledge of these two sectors.We published two issues in the year and generated a small loss.

Each of these new products is expected to make a profit contribution in the new financial year.

New Online Products

The Internet is becoming established as an increasingly important advertising and information medium, which offers significant business opportunities to Centaur. We have continued to invest steadily in enhancing the performance, functionality and reach of our established internet operations and as reported above they are now delivering high rates of revenue growth and increasingly attractive profit margins.Our success in this area was reflected in the TheLawyer.com's great achievement in winning the Association of Online Publishers' award of Business Website of the Year in autumn 2005.  

Apart from the ongoing development of financeweek.co.uk and Perfect Analysis, as reported above, most of our new online product activity during the year was linked to our bolt-on acquisitions, which are addressed below.      

New Events

We organised three new trade exhibitions during the year.  Two of these were regional logistics shows acquired with Logistics Manager magazine.The third show was a new launch of a third regional logistics show combined with a section for materials handling suppliers.  These shows all made a useful profit contribution and served to enhance our strengthening position in this important new market.  In June 2006 we also announced a major repositioning of the Smart Homes show in conjunction with Future Publishing's market-leading consumer title T3.The first of the new-look shows will be run alongside the National Homebuilding show at the NEC in March 2007.    

In FY2006, Centaur established a new extension to its events business with the formation of Centaur Summits. Summits typically comprise meetings/workshop-based events, bringing together relatively small numbers of senior decision-makers within particular vertical markets.We give these events a strong independent "editorial" base, but revenues are normally derived from sponsorship.  

As noted above, we organised three new summits during the year, two Mortgage Summits and one Investment Summit, which made an important profit contribution in their first year and have resulted in increased levels of bookings for repeat events in FY2007.We also announced the launch of the first Employee Benefits summit which ran successfully in July 2006.

The Conferences division, most of whose events have traditionally been in the marketing sector, suffered from the underlying weakness of that market.  This was offset to a certain extent by the launch of a number of new conferences in other Centaur communities, notably, legal, financial and engineering and we will seek to consolidate our position as a conference producer in these markets in the future.         

Acquisitions

Our acquisition strategy is typically to identify targets that meet the following criteria:

a.     The business is operating in a market with high growth potential and high value.

b.     There is an identifiable high value information need on which to base a range of products

c.     The business is a market-leader in its respective sector or capable of achieving market leadership quickly

d.     Its key people fit comfortably into Centaur's culture

In the past year we have completed six bolt-on acquisitions which we believe meet these criteria.  In October 2005 we strengthened our position in the increasingly important logistics market with the acquisition of two small magazines and an established awards event from UKTP for 0.3m.     

In December 2005 we acquired the fortnightly magazine The Recruiter for 4m.  We are pleased with the progress we have made in investing in the quality of the magazine, which has performed ahead of our expectations at the time of purchase.  In the second half we organised a successful awards event for the community and relaunched The Recruiter's website.   

In January 2006, we acquired the monthly magazine Period Living for 1.5m.  We have made improvements to the editorial and visual quality of this strong brand, which is fitting in well with our growing portfolio of special interest consumer brands, focussed currently on the property sector.  

In March 2006 we announced the acquisition, for a maximum of 1.2m, of the remaining 50% of the website Headlinemoney (HM), the highly successful information service for financial journalists.Total ownership of this business will enable us more readily to apply the Headlinemoney model in other markets.Since acquisition, we have successfully integrated HM's operations within Centaur and we expect to launch the first new extension of this business in the next few months.

In May 2006 we announced the purchase of the online sales lead service Pro-Talk for an initial consideration of 4m.We believe that this acquisition will provide us with a model which can be applied across a number of vertical markets to take advantage of the ongoing significant growth in search engine marketing expenditure.  Since acquisition, we have identified and launched three new sites within Pro-Talk and invested further in sales resources to drive future growth.

We have also recently announced the acquisition for 0.1m of Air and Business Travel News (ABTN), an online publication for the business travel community which complements our successful trade shows serving this community.  ABTN currently comprises a website and an online newsletter reaching 23,000 readers.We intend to develop ABTN to unlock its true commercial potential and to enhance our position in this market.

Overall, our recently acquired companies have contributed revenues in FY2006 of 3.9m on which they earned an EBITDA margin of 10%.

Current Development Activity

Innovation is central to Centaur's culture and is an almost constant activity across the whole portfolio. In the new financial year, we are continuing to develop new products at a steady pace.Our current development effort is focussed on extending our established brands into new areas and enhancing our recent acquisitions. 

In addition to the ongoing development of initiatives mentioned above, we have recently launched a new specialist consumer exhibition, The Good Parent Show and three new summits in the financial and legal sectors.  We have also launched two new stand-alone marketing websites, marketingweek.co.uk and precisionmarketing.co.uk, to complement our leading magazines in this sector and will shortly launch a dedicated website to complement Design Week.    We have also recently launched eCR, a digital version of Creative Review, with which we plan to extend the title's circulation and which is allowing us to offer advertisers improved marketing solutions.   

 Editors' Notes

Business Review (continued)

Analysis of results

Consolidated Income Statement for the year ended 30 June 2006

All operations in the current and prior year relate to continuing activities

The accompanying accounting policies and notes form an integral part of these financial statements

Consolidated Balance Sheet at 30 June 2006

The financial statements were approved by the Board of Directors on 28 September 2006 and were signed on its behalf by:

GTD Wilmot
Director

Consolidated Cash Flow Statement for the year ended 30 June 2006

Statement of accounting policies

The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

Basis of preparation

The consolidated and Company financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and International Financial Reporting Interpretations Committee (IFRIC) applicable at 30 June 2006 and with those parts of the Companies Act, 1985 applicable to companies reporting under IFRS. The financial statements have been prepared on the historical cost basis. 

The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management's best knowledge of the amount, events or actions, the actual results may ultimately differ from those estimates.

Alternative presentation within the consolidated income statement

The Group has presented separately on the face of the consolidated income statement an alternative profit measure of adjusted EBITDA.  Adjusted EBITDA is earnings before interest, tax, depreciation, amortisation and excluding exceptionals and other material non-cash items. This presentation has been provided as the Directors believe that this measure reflects more clearly the ongoing operations of the Group.

First time adoption of IFRS

On first time adoption of IFRS, Centaur followed the guidelines outlined in IFRS 1, First Time Adoption of International Financial Reporting Standards, in which a number of optional exemptions to the general principle of full retrospective application are permitted.Centaur has adopted the following approach in respect of the following key exemptions:

• Business combinations: Centaur has not reclassified business combinations prior to the transition date.
• Share based payment: Centaur has adopted the exemption from full retrospective application of all share based payment awards and in accordance with the guidance in IFRS 2, Share-based payments has only applied the standard to equity instruments that were granted after 7 November 2002, and which had not vested before 1 July 2005.
• Financial instruments: Centaur has taken the exemption not to restate comparatives for IAS 32 Financial Instruments: Disclosure and Presentation and IAS 39 Financial Instruments: Recognition and Measurement for the year ended 30 June 2005.

Reconciliations to assist in understanding the nature and value of the differences between UK GAAP and IFRS are given in note 4.

Notes to the financial statements

1. Segmental reporting

Primary reporting format business segments

The group is currently organised into five main business segments:

Corporate costs are allocated to business segments on an appropriate basis depending on the nature of the cost.  Inter-segment pricing is determined on an arm's length basis.

Segment assets consist primarily of property, plant and equipment, intangible assets including goodwill, inventories, trade receivables and cash and cash equivalents. Segment liabilities comprise trade payables, accruals and deferred income.

Corporate assets and liabilities comprise current and deferred tax balances, cash and cash equivalents and borrowings. Capital expenditure comprises additions to property, plant and equipment, intangible assets and goodwill and includes additions resulting from acquisitions through business combinations.

Notes to the financial statements (continued)

1. Segmental reporting (continued)