TIDMCAU
RNS Number : 8135A
Centaur Media PLC
29 March 2017
29 March 2017
Centaur Media Plc
Preliminary results for the year ended 31 December 2016
Further progress in re-aligning Centaur's portfolios
Centaur Media Plc (LSE: CAU), the business to business
information, insight and events group, is today publishing its
preliminary results for the year ended 31 December 2016.
Financial Highlights
-- Reported revenues +3% to GBP72.5m; underlying(1) revenues +2%
o Digital premium content revenues +19% (reported and
underlying(1) )
o Underlying live events revenues +10%; reported live events
revenues +13%
o Advertising revenues -10% (reported and underlying(1) )
-- Adjusted operating profits(2) GBP9.1m (2015: GBP10.5m);
adjusted(2) operating margin 12.6% (2015: 14.9%)
-- Reported operating loss narrowed to GBP3.9m (2015: GBP4.7m)
-- Strong cash flow performance:
o GBP12.4m positive working capital swing from a GBP6.4m outflow
in 2015 to a GBP6.0m inflow in 2016
o Adjusted operating cash flow(3) of GBP13.9m (2015: GBP3.3m)
with cash conversion(4) of 153% (2015: 31%). Operating cash flow of
GBP15.3m (2015: GBP6.1m)
o Further reduction in net debt(5) to GBP14.1m (2015:
GBP17.9m)
-- A reported loss before tax of GBP4.4m (2015: GBP5.6m) was
driven by a non-cash impairment of goodwill charge of GBP7.2m
(2015: GBP11.9m), an additional, separately reported charge for
impairment of trade receivables of GBP1.8m (2015: GBPnil) and
GBP1.2m (2015: GBP0.7m) of exceptional operating costs relating to
restructuring.
-- Adjusted(2) diluted EPS of 4.5 pence down 15% (2015: 5.3
pence). Diluted EPS of (3.8) pence (2015: (4.8) pence)
-- Final dividend of 1.5p making total for the year of 3.0p, in line with last year
Strong operational progress
-- Improving revenue mix:
o Digital revenues increase by 9% from GBP27.6m to GBP30.0m
o Digital premium content increase by 19% from GBP14.5m to
GBP17.3m
o Underlying(1) exhibition revenues increase by 13% from
GBP13.5m (excluding AMS) to GBP15.3m
-- Focusing on priority markets:
o Oystercatchers acquisition adds additional dimension to
Marketing segment offer
o Evaluating acquisition opportunities in core markets to
further reinforce B2B core offering
o Exploring disposal of Home Interest during 2017
-- Monetising content:
o Lawyer.com paywall in place, premium content growth +48%
o Marketing Week launches successful Elearning platform
-- Digital publishing migration:
o Application of WordPress platform
o Improved unique users across all publishing brand sites
-- Swag Mukerji appointed to Board as Chief Financial Officer
-- The fall in high margin advertising revenues will result in a
2017 profit reduction which is expected to reverse in 2018 as the
strategy to address the industry trend by monetising content and
expertise materialises
`(1) Underlying revenue growth rates adjust for
the acquisition of Oystercatchers and the biennial
contribution from the Advanced Manufacturing Show
('AMS') in 2015. See note 1(b).
(2) Adjusted results exclude adjusting items, as
detailed in note 1(b).
(3) See note 1(b) for explanation and reconciliation
of adjusted operating cash flow.
(4) Cash conversion is calculated as adjusted operating
cash flow / adjusted operating profit
(5) See note 1(b) for explanation of net debt and
note 15 for reconciliation to statutory measures.
(6) Refer to note 1(b) for explanation and reconciliation
of adjusted EBITDA
-----------------------------------------------------------
Commenting on the results, Andria Vidler, Chief Executive
said:
"We've delivered results for the year in line with expectations
despite continuing headwinds in the advertising market.
We achieved these results whilst managing significant change in
the business, as we reposition Centaur for the future. We have made
good progress with our revenue mix, with digital increasing to 41%
of total revenues.
Whilst the state of the advertising market continues to present
us with near term challenges in some of our portfolio, we expect
increasing digital subscription revenues to benefit performance in
future years. We are confident that our strategy of converting
non-paying readers into paying customers is building long term
value for our shareholders."
Enquiries
Centaur Media Plc Andria Vidler, Chief Executive 0207 940
4000
Swag Mukerji, Chief Financial Officer
Tulchan Communications James Macey White 0207 353 4200
Introduction
Despite a challenging marketplace, we are pleased to report a
year of progress. The investments made over the past three years in
our infrastructure have improved our operational capabilities. As a
result, we have seen further good growth in our digital offering
and a strengthening of our leading brands.
The industry-wide headwinds of falling advertising expenditure,
especially in relation to print, continued in 2016 and these
accelerated as a result of uncertainty introduced by the EU
referendum. Centaur reacted promptly by addressing our actual and
budgeted cost base to save GBP2m.
The reduction in print advertising had a negative impact on
Group profit margins due to the high 'drop through' of this revenue
stream. This has further reinforced our determination to reduce as
far as possible our reliance on advertising revenues, whilst
focusing our efforts on those sectors that offer attractive
long-term growth and profit opportunity.
We continue to seek carefully targeted acquisitions in these
priority sectors and we were pleased to acquire Oystercatchers, a
specialist marketing consultancy, in September. Oystercatchers is
already having a positive impact across the business as a whole. It
has an excellent roster of clients, as well as talented management.
Together with Econsultancy and Centaur's other marketing assets,
Oystercatchers enhances our Group-wide marketing services
capabilities, offering opportunities for us to cross-sell services
to a wider client base as well as a broader geography.
Current trading outlook
We have delivered results for 2016 in line with expectations,
despite a strong headwind in the advertising market. We achieved
these results whilst managing further significant changes in the
business.
In the first months of the current financial year, the
advertising market remains challenging. We are therefore committed
to focusing even harder on building digital subscriptions and
de-emphasising our print revenues.
The fall in high margin advertising revenues will inevitably
result in a short-term profit reduction. However our strategy is to
address this industry trend by monetising our content and
expertise. The growth of our digital premium content demonstrates
progress in this strategy and we are confident that this will
benefit our financial performance in the medium term.
As we enter the next chapter in reshaping Centaur, the
investment we are making into our digital products and improved
overall revenue mix will increasingly enhance performance going
forward. We remain confident that our strategy is building
long-term value for our shareholders.
Results and dividend
Revenues for the year ended 31 December 2016 were GBP72.5m, with
underlying(1) revenue growth of 2% (reported revenue growth of 3%),
driven principally by growth in digital premium content and live
events. Adjusted operating profits(2) for the same period were
GBP9.1m (2015: GBP10.5m), with an adjusted operating profit margin
of 12.6% (2015: 14.9%). On a reported basis the Group made an
operating loss of GBP3.9m (2015: loss of GBP4.7m), driven by a
non-cash charge in relation to an impairment of goodwill, an
additional, separately reported charge relating to an impairment of
trade receivables of GBP1.8m (2015: GBPnil) and an exceptional
restructuring charge of GBP1.2m (2015: GBP0.7m). Diluted EPS was
(3.8) pence (2015: (4.8) pence).
Net debt(5) at 31 December was GBP14.1m (2015: GBP17.9m),
reflecting a very significant improvement in cash conversion(4)
throughout 2016 at 153% (2015: 31%).
In 2016 our digital premium content revenues grew by 19% and our
total digital and live events revenues accounted for 84% of Group
revenues (2015: 78%).
We responded to the decline in advertising by initiating a
programme of restructuring and cost reduction across central
overheads as well as those parts of the business that remain
advertising dependent. These initiatives were completed in the
second half of 2016 and delivered annualised savings of GBP2m. We
continue to focus on our costs during the current year.
In light of this performance, the Board is recommending a final
dividend of 1.5 pence per share, to give an unchanged total
dividend for the year of 3.0 pence per share.
Board changes
Our Senior Independent Director, Chris Satterthwaite, stepped
down during 2016 after 9 years as a Non-Executive Director of the
Group. Chris was succeeded as Senior Independent Director by
William Eccleshare who is Chairman and CEO of Clear Channel
International. William joined the Board on 1 July 2016.
We were very pleased to appoint Swag Mukerji as Chief Financial
Officer and to the Board in October 2016. Previously Swag had a
number of senior finance and general management roles with both
blue chip FMCG companies and private equity backed businesses. Swag
replaced Mark Kerswell who resigned as Group Finance Director in
July 2016 after five years with the Group.
Group operating review
Revenues and operating results for the years ended 31 December
2016 and 31 December 2015 are set out below.
Reported Underlying
2016 2015 growth growth(1)
GBPm GBPm % %
-------------------- ------- ------- --------- -----------
Revenue 72.5 70.5 3% 2%
Operating loss (3.9) (4.7) 17%
Operating margin (5.4)% (6.7)%
Adjusted operating
profit(2) 9.1 10.5 (13)%
Adjusted operating
margin(2) 12.6% 14.9%
-------------------- ------- ------- --------- -----------
Also summarised on the same basis as above are the trends across
the Group's three core revenue categories: premium content, live
events and advertising.
Reported Underlying
2016 2015 growth growth(1)
GBPm GBPm % %
----------------- ----- ----- --------- -----------
Premium content 20.8 19.9 5% 5%
Live events 30.7 27.2 13% 10%
Advertising 20.2 22.5 (10)% (10)%
Other 0.8 0.9 (11)% (11)%
----------------- ----- ----- --------- -----------
Total revenues 72.5 70.5 3% 2%
----------------- ----- ----- --------- -----------
On an underlying(1) basis, digital premium content revenues grew
by 19% to GBP17.3m (2015: GBP14.5m) and total premium content
revenues grew by 5%, with good momentum across the Group's digital
subscription products, including Celebrity Intelligence, Fashion
& Beauty Monitor and Econsultancy.
Reported live events revenues reflect the acquisition of
Oystercatchers in 2016 and the biennial AMS event in 2016. Adjusted
for these items, underlying(1) revenues grew by 10%, reflecting
further strong performances from the larger events in the Group,
offset by weakness in smaller, more sponsorship-dependent events.
Exhibition revenues contributed GBP15.3m (2015: GBP13.5m) to
underlying(1) live events revenues in 2016.
Total advertising revenues declined by 10%, with a weakening
ahead of the UK's EU referendum. Within this, digital revenues were
down 3%, while print advertising declined by 20%. This weakness
accelerated through the year, with total advertising revenues
falling by 6% in the first half and 13% in the second half, as
compared to 2015.
Deferred revenues at 31 December 2016 of GBP16.9m were in line
with the same time last year (2015: GBP17.0m). Growth in digital
and live events deferred revenues has been offset by a decline in
print deferred revenue and timing differences around invoicing.
Adjusted operating profits(2) of GBP9.1m (2015: GBP10.5m)
declined by GBP1.4m, reflecting strong performances in Marketing
and Home Interest offset by a decline in advertising revenues and
an increase in commercial investment. The fall in adjusted
operating profit(2) margins to 12.6% (2015: 14.9%) reflects these
trends with a high level of operational gearing attached to
advertising revenues. After adjusting items, the Group made an
operating loss of GBP3.9m (2015: GBP4.7m), primarily driven by a
non-cash impairment of goodwill in the Financial Services sector
(2015: Professional sector), an additional, separately reported
charge in relation to the impairment of trade receivables of
GBP1.8m (2015: GBPnil) and exceptional restructuring costs of
GBP1.2m (2015: GBP0.7m).
Significant progress has been made on reducing receivables and
collecting cash during the year, with receivables falling to
GBP14.6m from GBP20.6m in December 2015 (and GBP22.4m in March
2016). The rate of cash conversion(4) was 153% (2015: 31%) driving
a reduction of net debt(5) to GBP14.1m at the end of December 2016
(2015: GBP17.9m). Leverage (net debt(5) to adjusted EBITDA(6) ) at
31 December 2016 was 1.1 times (2015: 1.3 times), and 1.0 times
excluding the impact of Oystercatchers.
Review of operations
Centaur has evolved from its controlled circulation advertising
legacy to a more focused, digitally aligned group. It now offers
market insight, data, advice, consultancy and events that enable
businesses to optimise their performance. By using the skills,
data, communities and unique market knowledge from our publishing
heritage we are increasingly producing and distributing thought
leadership, specialist content and effective online tools. Together
with the bespoke marketing solutions that leverage our deep
relationships, these products and services are highly valued and
are increasingly monetised by direct sale to our customers, rather
than being supported by advertising revenue.
Despite market challenges, we have benefited from good progress
with a number of our initiatives:
-- All publishing sites are now functioning on a common, fully-responsive digital platform
-- 'Desktop For Publishers' rolled out across all publishing
sites to enable better insight and use of available inventory as
well as programmatic products to ensure inventory is being sold
across all available segments
-- Re-energised legacy brands, with improved product offering
enabling our teams to begin new conversations with clients, in turn
leading to stronger partner-client relationships around content
marketing
-- Sales teams mostly operating on the same CRM system, enabling
each portfolio to identify key account managers who could
facilitate broader conversations across the Group
In respect of our four market segments, 69% of Group revenues
are weighted towards the Marketing and Professional segments, with
Financial Services and Home Interest accounting for the
remainder.
Across each of these segments we are pursuing common operational
strategies that:
-- Put our customers at the heart of what we do by evolving the
brands they trust and developing new products that significantly
enhance their performance
-- Accelerate our digital growth and reduce our exposure to print advertising
-- Improve customer experience in every contact with the Group,
ensuring high customer satisfaction and a business partnership
relationship
-- Increase agility, co-operation and efficiency across all of our operations
Portfolio Review
Marketing
This segment includes all of the Group's brands that serve
marketing and creative professions in key market sectors, including
Econsultancy, Marketing Week, Festival of Marketing, Celebrity
Intelligence, Fashion & Beauty Monitor, Design Week, Creative
Review and Oystercatchers.
Driving digital innovation has been the key focus for the
segment during 2016 with around 20% of its underlying(1) revenue
growth coming from new product development. Marketing Week, in
conjunction with Econsultancy, launched its first digital Elearning
course (the Mini MBA in Marketing) as part of developing a
Centaur-wide online classroom platform to increase both public and
corporate training revenue streams.
Marketing Week, alongside Creative Review and Design Week, has
also introduced new specialist content including career development
and leadership seminars which proved popular and has enabled them
to launch new paid-for products. Due to the success of Marketing
Week's digital offering we have been able to accelerate the shift
away from print-based revenue streams. Marketing Week reduced the
frequency of its print magazine issues in 2016 and will continue
this shift in 2017.
Focused on connecting media agencies and brands with data, news,
events and content, Fashion & Beauty Monitor and Celebrity
Intelligence both improved their performance by introducing market
insight and research reports. During 2017, the incorporation of
real-time data feeds will enable greater automation and cost
reduction, and improve the product offering and market
competitiveness.
Econsultancy performed well in 2016 with 25% growth in
subscription revenues which now represent 46% (2015: 41%) of its
total revenues. Our sales and content teams have now been realigned
on a core sector basis to build deeper customer-focused
relationships through enterprise partnerships, tailored marketing
and more sector specific content. Econsultancy also launched an
online classroom in response to market demand for customised
capability and on-demand solutions. This innovation will enable
increased yields as part of its new premium subscription
offering.
While Oystercatchers was only part of Centaur for the final
quarter, its strong performance in 2016 confirms the reasons for
its acquisition. Its expanded offering covers five disciplines of
consultancy, predominantly focused around building more effective
agency/client relationships: ways of working, agency evaluation,
marketing model recommendation, training and pitches. This
expansion has enabled it to attract a powerful client portfolio
(including Coca Cola, EY, Sainsbury's, TSB and Royal Mail). In
addition, its Marketing Excellence Training programme was named the
UK's most acclaimed by TMT News in 2016. Oystercatchers, with its
agency and consulting heritage, and Econsultancy, with its digital
performance and training heritage, naturally form a strong
combination. It is envisaged that Oystercatchers' senior client
relationships will bring wider benefits to Centaur as a whole.
The Marketing segment has made significant progress, developing
deep client relationships in order to sell multiple products across
multiple brands. Revenues from the top 20 clients grew by 60% year
on year, with three clients (2015: one client) delivering more than
GBP0.5m of revenue through a combination of advertising, premium
content and live events.
Operating Performance
Reported Underlying
2016 2015 growth growth(1)
GBPm GBPm % %
-------------------- ------ ------ --------- -----------
Revenue 29.7 27.0 10% 6%
Operating profit 0.9 2.2 (59)%
Operating margin 3.0% 8.1%
Adjusted operating
profit(2) 4.2 4.1 2%
Adjusted operating
margin(2) 14.1% 15.2%
-------------------- ------ ------ --------- -----------
There was good momentum across both digital premium content and
live events revenues offset by a 7% decline in advertising
revenues. Around 45% of this segment's revenues are derived from
premium content, with 33% from live events and 22% from
advertising. Oystercatchers contributed to reported revenue growth
of 10% in this segment, with growth on an underlying(1) basis of
6%.
Digital premium content revenues grew by 13% in 2016,
contributing GBP12.4m (42%) to reported revenues of GBP29.7m (2015:
GBP11.0m, 41%). The sector experienced volatility in advertising
revenues consistent with other parts of the Group, which finished
the year 7% down vs prior year.
Festival of Marketing ran in November 2016 and reported revenues
of GBP2.1m, in line with the 2015 edition of this event. Delegate
and table revenues grew by 21%, offsetting the 9% decline in
sponsorship income. The event featured around 250 speakers and more
than 150 hours of content. Notable speakers included Apple founder
Steve Wozniak and WPP's Sir Martin Sorrell. Customer satisfaction
scores (NPS) have increased by 26 points year on year. Festival of
Marketing is the only global event in its sector to have brand
marketers now comprise over 60% of its customer base (competitors
such as Cannes Lions and Advertising Week have 10-15%).
The decline in adjusted operating profits(2) and margin reflects
the impact of weaker advertising revenues, investment into content
and commercial teams and a higher depreciation charge reflecting
the ongoing investment into the digital platforms across the
Marketing segment. Reported operating profits were impacted by
earn-out charges relating to the Oystercatchers acquisition of
GBP0.6m (2015: GBPnil), an additional, separately reported charge
relating to the impairment of trade receivables of GBP0.8m (2015:
GBPnil) and exceptional operating expenses of GBP0.4m (2015:
GBP0.1m).
Outlook: this segment is expected to exhibit strong growth into
2017 driven by recurring digital premium content revenues and
synergies arising from the Oystercatchers integration.
Professional
The Professional segment includes four subsidiary markets:
Legal, Engineering, HR and Travel & Meetings, with around 60%
of its revenue coming from live events. The Legal portfolio
includes the print, digital and live event activities associated
with The Lawyer and Clean Energy Pipeline. The principal assets in
the segment are exhibitions, with supporting digital and print
assets. Within the Engineering portfolio are The Engineer and
Subcon, an exhibition that serves the sub-contractor industry. The
HR portfolio includes FEM, Employee Benefits and Employee Benefits
Live, and Travel & Meetings includes two exhibitions serving
the Business Travel and Meetings markets.
The development of The Lawyer's content strategy continued to
progress successfully, and in May we moved The Lawyer's premium
content behind a pay wall, leaving recruitment and a minority of
editorial content free to view. This is a significant development
for The Lawyer brand following 25 years as a controlled circulation
magazine which has now given The Lawyer a platform with reach,
international opportunity and the ability to scale new premium
content and data. The majority of top 50 UK law firms purchased a
subscription to The Lawyer's premium content within the first six
weeks of its launch. This development required investment during
H1, but since launch has had a strong uptake and premium content
revenue growth over the year was 48%.
The Lawyer Market Reports experienced impressive growth in 2016
with an increase in revenue of 65% year on year. A total of 16
reports were published in 2016 including the launch of the Global
200, a unique report containing the strategy, capability and
performance of the largest 200 law firms in the world ranked by
their global revenues.
Behind the TheLawyer.com and The Lawyer Market Reports is an
experienced content and research team which meticulously researches
its market, gathers insight and uses its experience to layer trend
analysis and comment onto data. This is a respected and
highly-skilled team which understands the key take-outs and
summaries that our customers want.
There is also a dedicated commercial team which account manages
the top law firms to ensure that they get the best out of our
reports service and data, enabling the business to sell additional
products and drive higher renewal rates.
Across the Professional segment, the remaining assets are
principally event based and performed well. Collectively,
underlying(1) growth in exhibitions revenue was 19% (13% on a
reported basis).
At The Engineer, the focus has been on the ongoing development
of its digital products and online audience. Monthly page views
have grown, with unique visitors up 8% year on year, and an
increase in digital marketing solutions revenues of 4%. Good
progress was made with developing brand-led events and the
'Collaborate to Innovate' conference was launched, a unique
awards/conference event in its marketplace.
Subcon performed well with 6% visitor growth and strong
underlying(1) revenue growth (excluding the biennial impact of AMS)
supported by the launch of three new supplier zones and a focus on
strengthening repeat business, along with a dedicated buyers
programme.
Revenues at the Business Travel Show grew for the fifth
successive year, up 32% from GBP1.7m to GBP2.3m. The year also saw
the launch of the inaugural Business Travel Summit Amsterdam and a
one-day London Business Travel Summit. Exhibitor and visitor
satisfaction ratings continued to exceed industry benchmark
standards, and visitor numbers rose by 6%, following a 24% rise in
2015.
Operating Performance
Reported Underlying
2016 2015 growth growth(1)
GBPm GBPm % %
-------------------- ------ ---------- --------- -----------
Revenue 20.2 19.7 3% 5%
Operating profit
/ (loss) 1.0 (9.9) (110)%
Operating margin 5.0% (50.3)%
Adjusted operating
profit(2) 2.1 2.2 (5)%
Adjusted operating
margin(2) 10.4% 11.2%
-------------------- ------ ---------- --------- -----------
The broad revenue split across the segment is 60% live events,
30% advertising and 10% premium content.
Legal revenues of GBP7.7m were 4% higher than last year,
reflecting good growth in premium content revenues, offset by
weaker advertising and live events revenues. Deferred revenues in
the Legal portfolio were GBP0.9m at 31 December 2015, compared to
GBP0.8m at the same time last year.
The Engineering portfolio reported revenues of GBP3.2m (2015:
GBP3.6m). Adjusted for the absence of the biennial AMS event,
underlying(1) revenues were flat. The HR portfolio reported
revenues of GBP3.9m (2015: GBP4.6m) with ongoing weakness across
all revenue streams. The Meetings Show continued to develop well in
its fourth edition, but despite good revenue growth it is not yet
achieving a satisfactory profit margin. Overall, the Travel &
Meetings portfolio reported revenues of GBP5.4m (2015:
GBP4.1m).
The decline in adjusted operating margins from 11.2% to 10.4%
reflects weaker advertising revenues across the Legal, HR and
Engineering portfolios with high drop through to profit, and the
cost of strengthening the Legal portfolio's premium content
offering. The segment saw a return to operating profitability
following a non-cash charge relating to impairment of goodwill
during 2015.
Outlook: this segment remains mixed, however it has encouraging
opportunities across both The Lawyer and the exhibition brands,
particularly Business Travel, which are all expected to add to the
Group's recurring revenue streams through growing exhibition and
digital subscription revenues.
Financial Services
Serving the retail financial services industry, this segment
includes Money Marketing, Fund Strategy, Mortgage Strategy,
Corporate Advisor, Taxbriefs, Headline Money and Platforum.
Platforum continued to build on its reputation as a key
reference point for asset managers, life companies and platforms on
retail investment distribution. Its research was referenced in
earnings reports by industry leaders including Aegon and Hargreaves
Lansdown. New research areas introduced in 2016 included the
changing market for discretionary managed portfolios on platforms,
and the rise of active and passive ETFs ('exchange-traded funds')
as well as digital benchmarking.
Importantly, Platforum completed its transition to a
subscriptions research business resulting in increased digital
revenues of 123% (down 9% overall after accounting for the
cessation of print revenues). Platforum deferred income increased
77%, demonstrating a strong pipeline of future subscription
revenues. A key driver of growth in 2016 was Platforum's series of
reports on European Fund Distribution which, due to a change in
structure, now offer more in-depth analysis to customers. On the
events front, the European Fund Distribution and DC2 events, and
the launch of the Money Marketing Interactive Conference, were
particular highlights.
Beyond Platforum, the Financial Services segment continued to
offer a full annual calendar of events for all sectors of the
financial services community including large scale multi-streamed
events, awards which celebrate the best of the industry and
exclusive invitation-only summits for industry leaders. We
successfully leveraged the power and reach of the brands to develop
sponsorship packages and used a central delegate sales team to
ensure that we had the right calibre and volume of VIPs in
attendance to give sponsors value and return on their
investment.
2016 saw a marked improvement in customer satisfaction levels
due to high quality engagement and far-reaching marketing and
social media activity which has increased brand awareness for print
and digital content platforms, as well as the transitioning of
Corporate Advisor from print to digital format.
Operating Performance
Reported Underlying
2016 2015 growth growth(1)
GBPm GBPm % %
-------------------- -------- ------ --------- -----------
Revenue 9.7 12.0 (19)% (19)%
Operating (loss)
/ profit (7.2) 1.5 (580)%
Operating margin (74.2)% 12.5%
Adjusted operating
profit(2) 0.6 2.1 (71)%
Adjusted operating
margin(2) 6.2% 17.5%
-------------------- -------- ------ --------- -----------
This segment's revenues remain reliant on advertising, at 44% of
the revenue mix, with 33% from premium content and 23% from live
events. Reflecting the wider economic environment, advertising
revenues of GBP4.2m (2015: GBP5.6m) declined by 25% year on year,
with weakness being seen across both print and digital formats. The
second half of the year was particularly volatile, with advertising
revenues 35% below the same period last year. This weakness in
advertising revenues masked strong growth in digital premium
content revenues, aided by Platforum's transition from a
report-based revenue stream to a digital subscription model.
Reflecting the weaker outlook in earnings relating to print and
advertising earnings, a non-cash impairment of goodwill of GBP7.2m
(2015: GBPnil) has been recorded in operating expenses, which is
presented as an adjusting item. Digital premium content growth was
offset by declines in print formats, leading to a fall in total
premium content revenues of 15%. This segment's live events
revenues depend on sponsorship and were impacted by the general
fall in advertising spend, and as such were disappointing, with
reported revenues of GBP2.2m, GBP0.2m lower than 2015. The decline
in adjusted operating profit margins principally reflects the
impact of high levels of operational gearing attached to weaker
advertising revenues.
Outlook: despite the weakness reported during 2016, Financial
Services has strong brands, premium content and an increasingly
agile delivery platform. Changes in the sector arising from the
UK's EU referendum result present a clear opportunity for the
segment.
Home Interest
Homebuilding & Renovating ('HB&R') is the market-leading
brand for delivering information and trusted advice for self-build
projects and renovation work. The Home Interest segment also
includes the live events and publishing assets across the
Homebuilding & Renovating, Real Homes and Period Living
brands.
This market segment has undergone a significant transformation
over the last three years, delivering revenue CAGR of 9%. It is now
the UK's leading provider of homebuilding and renovating
information and boasts unrivalled scale and reach.
Originally separated between exhibitions and magazines, it now
has a single management team that delivers a multi-channel
portfolio that provides vital information and tools to its
audience. The segment has 7 market leading exhibitions that are
supported by print and digital assets. The integration of the three
brands with a single commercial and content team has created a
virtuous circle, with each brand driving additional revenue for
portfolio products and services.
The investment priority for HB&R in 2016 was to grow its
exhibitions business by attracting additional high-value visitors
and quality exhibitors. The brand added more content stages and
advice centres at exhibitions and implemented strategic marketing
campaigns to attract more of its target audience. This marketing
strategy resulted in a 12% increase in exhibitors and 9% increase
in visitors, as well as a record 16% revenue growth and 70% re-book
rate.
Data and subscriptions were also a focus in 2016. The HB&R
brand has experienced a significant increase in digital engagement
and its combined digital and print subscription offering, with a 5%
increase in annual subscribers and 11% increase on our digital-only
services. Since 2015, online advertising revenues and data-driven
campaigns have increased by 28%, and mobile traffic has increased
by 23%. Registrations for HB&R's 'Build Cost Calculator', an
online tool that enables users to calculate the cost of building
their own home, grew by 19% year on year.
Operating Performance
Reported Underlying
2016 2015 growth growth(1)
GBPm GBPm % %
-------------------- ------ ------ --------- -----------
Revenue 12.9 11.8 9% 9%
Operating profit 1.4 1.5 (7)%
Operating margin 10.9% 12.7%
Adjusted operating
profit(2) 2.2 2.1 5%
Adjusted operating
margin(2) 17.1% 17.8%
-------------------- ------ ------ --------- -----------
This segment continues to perform strongly. The broad revenue
split across the segment is 50% live events, 30% advertising and
20% premium content. The live events portfolio has been
consolidated around the HB&R brand and continues to demonstrate
good momentum, with 2016 live events revenues 14% higher than 2015.
Forward bookings for the Homebuilding & Renovating exhibitions
are 10% ahead of the same period last year. Advertising revenues in
this sector were resilient, with an increase of 14% year on
year.
Adjusted operating profits(2) for the year were 5% higher than
the GBP2.1m reported in 2015, with adjusted operating margins(2) at
17.1% (2015: 17.8%). This slight reduction in margin reflects the
impact of higher depreciation and amortisation charges resulting
from commercial investment.
Outlook: positive, as this business is in good shape to
capitalise on strong brands and take advantage of increased demand
around renovation and self-build.
The Board of Centaur believe that the Home Interest portfolio is
no longer core to the Group's B2B focus and that as a distinct
business unit, it will accelerate its growth under more aligned
ownership. Accordingly, during 2017 we have commenced a process to
sell the business.
Business Model
The Group's activities are categorised across four market
segments: Marketing, Professional, Financial Services and Home
Interest. These activities are supported by expert teams across
digital product development, production, live events and exhibition
operations, data, research and client services.
The Group generates revenues from three primary revenue sources:
premium content, live events and advertising.
-- Premium content revenues include:
o Subscriptions: These are the fees that customers pay to
receive access to the Group's information through online access to
various databases or through regular delivery of soft copy research
or hard copy magazines. Subscription revenue is recognised over the
period of the subscription.
o Copy sales: These are generated primarily across the Group's
Home Interest print titles, Homebuilding & Renovating, Real
Homes and Period Living, and selectively across the Group's
business magazines, including Creative Review. This area also
covers the sale of market reports and other one-off sales of
products. Revenues are recognised in line with the publication
schedule for these products.
-- Live events revenues are all recognised when the event is held. These include:
o Exhibitor revenues: This represents space sold at our events
enabling our customers to raise awareness and sell their products
and services. Exhibiting at one of our events is an ideal way for
our customers to forge new relationships through face-to-face
meetings and to showcase their products.
o Sponsorship revenues: Each of our events has partners that
want to be associated with it and pay to place brand advertising
across the event. Through their sponsorship of our events, our
partners can create, develop and increase brand awareness,
furthering their credibility within a target audience and enabling
them to develop contacts and exposure for their business.
o Attendee revenues: Our consumer-focused exhibitions, Festival
of Marketing and award events all charge a fee for attendees to
access the event. The Group also generates revenues from sales of
tables to companies and individuals attending the various industry
awards evenings. Some award events also generate revenues from
paid-for award entries.
o Training revenues: The Group provides marketing training
services to customers in the UK and overseas through the
Econsultancy and Oystercatchers businesses. These services are
delivered through public training courses and through the delivery
of bespoke services to clients. The revenues are recognised when
the training is delivered.
-- Advertising revenues represent the fees that customers pay to
place an advertisement through one or more of the Group's delivery
channels, either online, in print or on mobile. There are products
where advertising is the main driver and others where advertising
is a supplemental earnings stream. This includes display,
classified, sponsored content, content marketing, native
advertising and other publication-based marketing solutions, across
the delivery platforms. Revenue is recognised on publication.
We build a deeper understanding of the commercial opportunities
across each market through an unremitting focus on our markets and
audience. We know that our customers want flexible content that
works seamlessly across multiple platforms. By leveraging this
market insight and understanding of our customer requirements we
are able to offer a higher-value customer proposition. This is
delivered in whichever format our clients want, whether that is in
print, digital or as a live event. Each market segment has clear
growth plans focused on new digital products, new revenue streams,
multi-platform content and clear competitor differentials.
Supporting each of these markets, we have centralised expert
teams across digital product development, production, live events
and exhibition operations, data, research and client services.
These teams provide the expertise and scale that allows us to
support the business efficiently. The expert teams also enable us
to manage our cost base effectively and to prioritise investment
across the business.
All areas of the business are supported by group functions
including finance, HR, building services, legal and IT.
We regularly review our cost base and seek to maintain as
flexible and scalable an operating model as possible, outsourcing
or consolidating shared activities where possible.
This structure creates the potential to scale opportunities that
alongside underlying revenue growth enables good progression in
adjusted(2) operating margins. It also creates the opportunity to
effectively bolt on acquisitions to accelerate revenue and margin
growth.
While our business remains primarily UK-focused, we aim to grow
our presence in North America and the international reach of our
products.
Financial review
Non-statutory measures
In these results we refer to 'adjusted' and 'statutory' results,
as well as other non-GAAP performance measures. Adjusted results
are prepared to provide a more comparable indication of the Group's
core business performance by removing the impact of certain items
including exceptional items (material and non-recurring), and
volatile items predominantly relating to investment activities and
other separately reported items. Adjusted results exclude adjusting
items as set out in the Consolidated Income Statement and below,
with further details given in notes 1(b) and 4. In addition, the
Group also measures and presents performance in relation to various
other non-GAAP measures, such as underlying revenue growth,
adjusted operating cash flow, adjusted EBITDA and net debt.
Adjusted results are not intended to replace statutory results.
These have been presented to provide users with additional
information and analysis of the Group's performance consistent with
how the Board also monitors results. Further rationale for each of
the adjusting items used in these measures, as well as
reconciliations to their statutory equivalents, can be found in
note 1(b).
The Group's activities are predominantly UK-based and therefore
currency movements do not have a material impact on the Group's
results.
Statutory loss before tax reconciles to adjusted operating
profit as follows:
2016 2015
Note GBPm GBPm
Statutory loss before tax (4.4) (5.6)
Adjusting items
Impairment of goodwill 7 7.2 11.9
Amortisation of acquired intangible
assets 8 2.3 2.2
Share-based payments (0.1) 0.7
Earn-out consideration 9 0.6 0.1
Additional impairment of trade
receivables 4 1.8 -
Exceptional operating costs 4 1.2 0.7
Profit on disposal of trade
and assets 4 - (0.4)
Exceptional finance costs 4 - 0.2
------------------------------------------------- ----- ------ ------
Adjusted profit before tax 8.6 9.8
Adjusted finance costs 4 0.5 0.7
Adjusted operating profit 9.1 10.5
------------------------------------------------- ----- ------ ------
Summary
Commentary on revenues and operating results is set out within
the Group Operating Review.
2016 was a challenging year, with tough trading conditions
leading to a marked decline particularly in advertising revenues,
with a high drop through to profitability, and a reduced adjusted
operating margin(2) of 13% (2015: 15%). We have rigorously reviewed
our cost base and have made significant progress in right-sizing
Group overhead expenditure.
The Group has made good progress in reducing its net debt(5) ,
which has fallen to GBP14.1m at the end of December 2016 (2015:
GBP17.9m). The rate of cash conversion(4) was 153% (2015: 31%).
Leverage (net debt(5) to adjusted EBITDA(6) ) at 31 December 2016
was 1.1 times (2015: 1.3 times), and 1.0 times excluding the impact
of Oystercatchers.
In 2016, reflecting a reduced growth outlook in the Financial
Services segment, the Group recognised a non-cash impairment charge
of GBP7.2m against goodwill. In 2015, an impairment charge of
GBP11.9m was recognised against goodwill in the Professional
segment. During 2016, an additional impairment of trade receivables
of GBP1.8m (2015: GBPnil) was separately reported as an adjusting
item, and exceptional restructuring costs of GBP1.2m (2015: 0.7m)
resulting from the re-organisation of senior management and
strategic corporate restructuring activities were incurred.
Revenues
Revenues in 2016 were GBP72.5m (2015: GBP70.5m). Underlying(1)
trends, adjusting for the biennial show, AMS, and the acquisition
of Oystercatchers, show growth of 2%. Further information on the
divisional revenue performance and the mix of revenues across
premium content, live events and advertising is included in the
Portfolio Review.
Operating profit
Adjusted operating profits(2) for the year were GBP9.1m (2015:
GBP10.5m), with an adjusted operating profit margin(2) of 12.6%
(2015: 14.9%). Further information on the divisional adjusted
operating profit performance is included in the Portfolio
Review.
Net adjusted(2) operating expenses were GBP63.4m (2015:
GBP60.0m). Adjusted(2) employee related expenses in the year were
GBP29.8m (2015: GBP29.5m), and the average number of permanent
employees was 554 (2015: 564). See below for discussion of items
impacting reported operating losses for the year of GBP3.9m (2015:
GBP4.7m).
Reported operating losses of GBP3.9m (2015: GBP4.7m) were
impacted by the adjusting items detailed below.
Adjusting items
The Directors believe that adjusted results and adjusted
earnings per share provide additional useful information on the
core operational performance of the Group to shareholders, and
review the results of the Group on an adjusted basis internally.
Details of the Group's accounting policy in relation to adjusting
items are shown in note 1(b).
Adjusting items generated a loss before tax of GBP13.0m (2015:
GBP15.4m), which includes an impairment charge of GBP7.2m relating
to goodwill in the Financial Services segment (2015: GBP11.9m in
the Professional segment).
Exceptional operating costs of GBP1.2m (2015: GBP0.7m) include
staff-related restructuring costs of GBP0.9m (2015: GBP0.6m) which
principally relate to the reorganisation of the operational and
senior management structure linked to the cost reduction programme,
and costs relating to specific corporate restructuring initiatives
of GBP0.3m (2015: GBP0.1m). Whilst similar costs have been incurred
previously, such costs linked to the Group's transformation
programme are not expected to recur once this is completed, and as
such these are deemed to be exceptional in nature.
In addition, a separately reported charge for the impairment of
trade receivables of GBP1.8m (2015: GBPnil) has been treated as an
adjusting item. Following the disappointing working capital
performance in 2015, and notwithstanding the return to strong cash
generation in 2016, there remains a legacy of debt which arose
during a period of disruption during the second half of 2015 and
into the early part of 2016 arising from the introduction of a new
accounting platform during 2015. Whilst the Group continues to make
every effort in collecting all amounts due to it, given the
extended age and magnitude of this outstanding debt by year end,
the Directors believe there is now increased uncertainty in being
able to collect these aged amounts and therefore consider these
debts to be impaired. Substantial improvements to front-end billing
and credit control processes have been made during the course of
the year and the Group continues to make good progress on
collecting current receivables and reducing the amount of days'
sales outstanding ('DSO'). These have reduced to 79 days at 31
December 2016 (2015: 88 days), which is an improvement of 17 days
since the peak in March 2016. The additional charge of GBP1.8m
(2015: GBPnil) is considered to be significant to understanding
current year performance, and has therefore been separately
reported as an adjusting item to operating profit. In addition, a
charge of GBP0.5m (2015: GBP0.6m) has been recorded in
operating profit, which is considered to be in line with
historical provisioning requirements.
Earn-out costs of GBP0.6m (2015: GBP0.1m) relate to the earn-out
arrangement on the acquisition of Oystercatchers, which are treated
as a remuneration expense through the statement of comprehensive
income. In 2015 the earn-out charges of GBP0.1m related to the
acquisition of Venture Business Research. A gain on the disposal of
the trade and assets of Aidex of GBP0.4m arose in 2015.
Other adjusting items include amortisation of acquired
intangible assets of GBP2.3m (2015: GBP2.2m) and a share-based
payment credit of GBP0.1m (2015: charge of GBP0.7m).
Further analysis on these adjusting items is included in notes
1(b) and 4.
Net finance costs
Adjusted net finance costs were GBP0.5m (2015: GBP0.7m). The
reduction in finance costs reflects lower net debt(5) during 2016
compared to 2015. Reported net finance costs were GBP0.5m (2015:
GBP0.9m), and in 2015 included exceptional unamortised facility
costs (GBP0.1m) and legal fees (GBP0.1m) associated with the
re-financing of the Group's revolving credit facility in in that
year.
Taxation
A tax charge of GBP1.0m (2015: GBP1.3m) has been recognised for
the year. The adjusted tax charge was GBP1.8m (2015: GBP1.9m)
giving an adjusted effective tax rate (compared to adjusted(2)
profit before tax) of 20.9% (2015: 19.4%). The Company's profits
were taxed in the UK at a blended rate of 20.0% (2015: 20.25%),
with the fall in the main rate of UK Corporation tax being offset
by the impact of overseas earnings taxed at different rates. On a
reported basis, the effective tax rate of (22.7)% (2015: (23.2)%)
was impacted primarily by charges relating to the impairment of
goodwill and other non-deductible expenses. See note 5 for a
reconciliation between the statutory and reported tax charge.
Share-based payments
Share-based payments in 2016 decreased to a credit of GBP0.1m
(2015: charge of GBP0.7m), as a result of lapses in the LTIP
schemes following changes in senior management and performance
under non-market performance conditions.
Earnings per share
The Group has delivered adjusted(2) diluted earnings per share
for the year of 4.5p (2015: 5.3p). Losses per share for the year
were (3.8)p (2015: (4.8)p). Full details of the earnings per share
calculations can be found in note 6 to the financial
statements.
Dividend
An interim dividend of 1.5p per share was paid in respect of the
period January to June 2016 (January to June 2015: 1.5p). A final
dividend in respect of the period July to December 2016 of 1.5p per
share (July to December 2015: 1.5p) is proposed by the Directors,
giving a total dividend for the year ended 31 December 2016 of 3.0p
(2015: 3.0p), in line with 2015.
The final dividend in respect of the year is subject to
shareholder approval at the Annual General Meeting and, if
approved, will be paid on 26 May 2017 to all ordinary shareholders
on the register at close of business on 12 May 2017.
Adjusted dividend cover in the year was 1.6 times (2015: 1.8
times) and it is intended to move above 2 times in the medium
term.
Cash flow
As set out below, net debt(5) has fallen to GBP14.1m from
GBP17.9m at the end of December 2015 and the rate of cash
conversion(4) was 153% (2015: 31%). Trade receivables are steadily
reducing and the rate of cash collection for invoices issued in
2016 is both satisfactory and steady. There was a GBP12.4m positive
swing in working capital in 2016 compared to 2015, primarily driven
by a significant improvement in the collection of trade receivables
following on from the disruption experienced during the second half
of 2015 and into the early part of 2016 as part of the accounting
system change. It is reassuring that the Group has returned to
higher levels of cash generation.
2016 2015
GBPm GBPm
--------------------------------- ------- -------
Adjusted operating profit(2) 9.1 10.5
Depreciation and amortisation 3.3 3.0
Movement in working capital 4.1 (6.9)
Capital expenditure (2.6) (3.3)
Adjusted operating cash flow(3) 13.9 3.3
Cash impact of adjusting items (1.3) (0.5)
Taxation (1.3) (1.4)
Interest and finance leases (0.5) (0.9)
Other 0.1 -
--------------------------------- ------- -------
Free cash flow 10.9 0.5
Repayment of loan notes (1.1) -
Acquisitions (1.5) (0.1)
Disposal of trade and assets - 0.4
Share repurchases (0.2) -
Dividends paid to Company's
shareholders (4.3) (4.0)
--------------------------------- ------- -------
Decrease / (increase) in net
debt 3.8 (3.2)
Opening net debt (17.9) (14.7)
--------------------------------- ------- -------
Closing net debt (14.1) (17.9)
--------------------------------- ------- -------
Adjusted operating cash flow is not a measure defined by IFRS.
It is defined as cash flow from operations excluding the impact of
adjusting items, which are defined above, and including capital
expenditure. The Directors use this measure to assess the
performance of the Group as it excludes volatile items not related
to the core trading of the Group, and includes the Group's
management of capital expenditure. A reconciliation between cash
flow from operations and adjusted operating cash flow is shown in
note 1(b) to the financial statements. The cash impact of adjusting
items primarily related to exceptional restructuring costs in both
years.
Acquisitions net of disposals generated a cash outflow of
GBP2.6m (including the repayment of loan notes in relation to the
VBR earn-out) in the year (2015: cash inflow of GBP0.3m).
Financing and bank covenants
On 8 June 2015, the Group agreed a four year GBP25m
multi-currency revolving credit facility, provided by RBS and
Lloyds. This facility runs to 31 August 2019. The principal
financial covenants under the facility are: the ratio of net debt
to adjusted EBITDA(6) shall not exceed 2.5:1, and the ratio of
EBITDA to net finance charges shall not be less than 4:1. The Group
remained within its banking covenants and has good headroom within
its GBP25m banking facilities.
Acquisition of Oystercatchers
On 30 September 2016 the Group completed the purchase of the
business and assets of The Oystercatchers LLP for a total purchase
price of GBP3.5m, including contingent consideration of up to
GBP1.2m. This is subject to the ongoing employment of specific
individuals and the business delivering sufficient earnings for the
year ended 31 March 2017, and payable in the second quarter of 2017
once the accounts have been finalised. Initial consideration of
GBP1.5m was paid on completion in cash with GBP0.5m of Centaur
Media Plc shares being issued to the vendors. The balance of
GBP0.2m will become due on 30 September 2017.
Assets acquired include working capital balances of GBP0.1m,
intangible assets comprising customer contracts, relationships and
the brand name totalling GBP1.1m, with resulting goodwill
recognised of GBP1.2m.
As the contingent consideration is dependent on the continued
employment of five key individuals of the Oystercatchers business
it is treated as a post-acquisition employment expense within the
statement of comprehensive income. An expense of GBP0.6m has been
recognised as an adjusting item during 2016.
Balance sheet
A summary of the Group's balance sheet as at 31 December 2016
and 2015 is set out below:
2016 2015
GBPm GBPm
-------------------------------------- ------- -------
Goodwill and other intangible
assets 88.8 96.4
Property, plant and equipment 2.0 2.3
Deferred income (16.9) (17.0)
Other current assets and liabilities 7.5 12.7
Deferred taxation (0.2) (0.1)
--------------------------------------
Net assets before net debt(5) 81.2 94.3
Net debt(5) (14.1) (17.9)
--------------------------------------
Net assets 67.1 76.4
-------------------------------------- ------- -------
The main movements in the Group's balance sheet are a reduction
of GBP7.6m in goodwill and other intangible assets, primarily
caused by the impairment to goodwill of GBP7.2m (2015: GBP11.9m), a
decrease in other current assets and liabilities, driven by reduced
gross trade receivables balances and increased bad debt provision,
and reduction in net debt(5) . Further details on these significant
movements can be found throughout this report.
Conclusion
The Group has made good progress towards its strategic goals
within what has been a challenging trading period. The harsh
trading conditions brought about by the falls in advertising demand
has impacted the Group's adjusted operating profit(2) margin
negatively and we have reviewed our cost base in order to
right-size this appropriately. The growth in digital platforms and
event-driven revenues has been positive and we remain vigilant but
positive against this backdrop.
Following the difficulties experienced during the second half of
2015 and into the early part of 2016 following implementation of
the new accounting platform, much hard work has been undertaken
throughout 2016 to address these issues resulting in excellent cash
flow performance in the year with a swing in working capital flow
of GBP12.4m, a resultant cash conversion(4) of 153% with a
reduction in net debt(5) to GBP14.1m. The legacy of old trade
receivables remains which have proven very difficult to collect and
an additional, separately reported, impairment provision of GBP1.8m
(2015: GBPnil) has been made to reflect the uncertainty around
these remaining amounts. We continue to make every effort to
collect all amounts due to the Group.
I am optimistic that the Group is in a strong position for
continued growth in digital and live events revenues that will
deliver margin improvement in the medium term.
Swag Mukerji
Chief Financial Officer
28 March 2017
Principal risks and uncertainties
The principal risks and uncertainties facing the Group are:
-- Trends in print advertising and sales of print products mean
that revenues from these sources continue to shrink and are not
replaced like-for-like with online or digital products. The
non-print media sector has high levels of competition from a wider
group and low barriers to entry. This leads to different pressures
on audience and customer retention as well as pricing. The Board
considers that our exposure to this risk has decreased since the
prior year due to the specific actions we have taken to reduce our
dependency on print advertising and sales of print products,
including the creation of new products which are exclusively
digital.
-- Failure to manage change effectively could exacerbate our
difficulties in retaining and recruiting staff at an appropriate
cost in parts of the business, and lead to loss of key senior
staff, resulting in increased recruitment and training costs, loss
of productivity, potential loss of clients and potential inability
to maintain content quality and deliver our specific plans. Due to
increased change taking place across the business (caused by, among
other things, initiatives aimed at reducing our reliance on print,
together with more general cost-cutting measures) the Board
considers this risk to have increased since the previous year.
-- Serious systems failure affecting our core systems and
multiple products or business functions, or breach of network
security controls (as a result of a deliberate cyber-attack or
unintentional event), results in misappropriation of financial
assets, proprietary or sensitive information or operational
disruption, such as the unavailability of our websites and of our
digital products to users or unavailability of support platforms,
thereby directly affecting our revenues or collection activities
and damaging our reputation with customers and audiences. The Board
considers this risk to be broadly the same as for the prior
year.
-- Fraudulent or accidental breach of our security, or
ineffective operation of IT and data management systems leads to
loss, theft or misuse of confidential information or personal data
or breach of data protection requirements resulting in increased
regulatory supervision, damage to our reputation and / or direct
financial impact. The Board considers this risk to be broadly the
same as for the prior year.
-- The Group runs events and exhibitions that gather large
numbers of people in single venues and locations, often in large
cities in the UK and elsewhere. This results in operational health
and safety risks including fire safety, food hygiene, crowd
control, security and failure of equipment. As the Group operates
events and exhibitions in locations hired from third parties,
including hotels and venue operators, it is generally not in
control of safety policies for the locations and depends upon the
third party venue operator to have adequate safety policies,
processes and equipment in place and to comply with health and
safety regulations. If a serious physical incident occurred at an
event, physical injury, death and other significant damage could
occur. The Board considers this risk to be broadly the same as for
the prior year.
-- A serious force majeure event, such as a flood or terrorist
attack, could affect the availability of a venue for one of our
large events or exhibitions or of our central London office. For
the Group's larger events and exhibitions, there are only a small
number of venues available for hire in the market from third
parties such as hotels, and we have a majority of our staff and
systems at a single central London location. If a venue or our
central London office becomes unavailable, it is unlikely that the
Group would be able to transfer an event to a different venue, or
our employees to a different office, at short notice. This could
result in damage to our reputation and direct financial impact from
revenues that we would be unable to collect (because, for example,
commercial teams are unable to operate effectively), costs already
incurred, refunds due to customers or legal claims from customers
and suppliers. The Board considers this risk to be broadly the same
as for the prior year.
-- The Group's products could be vulnerable to replication by
competitors in the UK or other markets including, potentially,
those offering content under a different revenue model that reduces
or eliminates costs for users. The Board considers this risk to be
broadly the same as for the prior year.
-- Changes to regulations and legal requirements, including in
relation to areas such as data protection and direct marketing,
restrict or burden the Group's activities. The Board considers this
risk to be broadly the same as for the prior year.
-- As Centaur Media's products are primarily sold to specific
sectors of the UK market, the Group's financial performance is
highly sensitive to economic and political conditions affecting the
UK market and/or the key sectors in which we operate. Uncertainty
about the future economic and political stability of the UK and its
impact on sectors including (but not limited to) the financial and
real estate sectors following the UK's vote to leave the EU in 2016
has the potential to reduce customer demand for our products and
thereby adversely affect the Group's revenues. The Board considers
this risk to have increased since the prior year due to diminished
short and medium-term expectations for the UK economy following the
referendum vote to leave the EU on 23 June 2016, meaning this risk
has been included in the annual report as a principal risk facing
the Group for the first time.
Consolidated Statement of Comprehensive Income for the year
ended 31 December 2016
Adjusted Adjusting Statutory Adjusted Adjusting Statutory
Results* Items* Results Results* Items* Results
2016 2016 2016 2015 2015 2015
Note GBPm GBPm GBPm GBPm GBPm GBPm
Revenue 2 72.5 - 72.5 70.5 - 70.5
Net operating
expenses 3 (63.4) (13.0) (76.4) (60.0) (15.2) (75.2)
Operating
profit / (loss) 9.1 (13.0) (3.9) 10.5 (15.2) (4.7)
Finance costs (0.5) - (0.5) (0.7) (0.2) (0.9)
Profit / (loss)
before tax 8.6 (13.0) (4.4) 9.8 (15.4) (5.6)
Taxation 5 (1.8) 0.8 (1.0) (1.9) 0.6 (1.3)
Profit / (loss)
for the period
attributable
to owners
of the parent 6.8 (12.2) (5.4) 7.9 (14.8) (6.9)
Total comprehensive
income / (loss)
attributable
to owners
of the parent 6.8 (12.2) (5.4) 7.9 (14.8) (6.9)
Earnings /
(loss) per
share attributable
to owners
of the parent 6
Basic 4.7p (8.5)p (3.8)p 5.5p (10.3)p (4.8)p
Diluted 4.5p (8.3)p (3.8)p 5.3p (10.1)p (4.8)p
--------------------- ----- --------- ---------- ---------- --------- ---------- ----------
* Alternative performance measure, refer to note 1(b)
Consolidated Statement of Changes in Equity for the year ended
31 December 2016
Attributable to owners of the parent company
Reserve
for
shares
Share Own Share to be Deferred Retained Total
capital shares premium issued shares earnings equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 January 2015
as previously
reported 15.0 (10.1) 0.7 4.4 0.1 76.7 86.8
Transfers relating
to prior periods* - 3.6 - (4.0) - 0.4 -
---------------------- -------- ------- -------- -------- --------- --------- -------
Restated balance
at 1 January 2015 15.0 (6.5) 0.7 0.4 0.1 77.1 86.8
Loss and total
comprehensive
loss - - - - - (6.9) (6.9)
Transactions with
owners:
Dividends (note
14) - - - - - (4.0) (4.0)
Fair value of
employee services - - - 0.5 - - 0.5
---------------------- -------- ------- -------- -------- --------- --------- -------
As at 31 December
2015 15.0 (6.5) 0.7 0.9 0.1 66.2 76.4
---------------------- -------- ------- -------- -------- --------- --------- -------
Loss and total
comprehensive
loss - - - - - (5.4) (5.4)
Transactions with
owners:
Dividends (note
14) - - - - - (4.3) (4.3)
Acquisition of
treasury shares
(note 13) - (0.2) - - - - (0.2)
Acquisition of
business and assets
(note 9) 0.1 - 0.4 - - - 0.5
Exercise of share
awards - 0.3 - (0.2) - (0.1) -
Fair value of
employee services - - - 0.1 - - 0.1
---------------------- -------- ------- -------- -------- --------- --------- -------
As at 31 December
2016 15.1 (6.4) 1.1 0.8 0.1 56.4 67.1
---------------------- -------- ------- -------- -------- --------- --------- -------
* See note 1(a)
Consolidated Statement of Financial Position as at 31 December
2016
Registered number 04948078
31 December 31 December
2016 2015
Note GBPm GBPm
Non-current assets
Goodwill 7 72.1 78.1
Other intangible assets 8 16.7 18.3
Property, plant and equipment 2.0 2.3
Deferred income tax assets 0.6 0.6
91.4 99.3
----------------------------------- ----- ------------ ------------
Current assets
Inventories 2.5 2.0
Trade and other receivables 10 15.7 25.0
Cash and cash equivalents 3.4 3.1
21.6 30.1
----------------------------------- ----- ------------ ------------
Total assets 113.0 129.4
----------------------------------- ----- ------------ ------------
Current liabilities
Trade and other payables (9.7) (12.4)
Deferred income (16.9) (17.0)
Current income tax liabilities (0.7) (0.9)
Borrowings 11 - (1.1)
Provisions 12 (0.4) -
(27.7) (31.4)
----------------------------------- ----- ------------ ------------
Net current liabilities (6.1) (1.3)
----------------------------------- ----- ------------ ------------
Non-current liabilities
Borrowings 11 (17.4) (20.9)
Deferred income tax liabilities (0.8) (0.7)
(18.2) (21.6)
----------------------------------- ----- ------------ ------------
Net assets 67.1 76.4
----------------------------------- ----- ------------ ------------
Capital and reserves attributable
to owners of the parent
Share capital 13 15.1 15.0
Own shares* (6.4) (6.5)
Share premium 1.1 0.7
Other reserves* 0.9 1.0
Retained earnings* 56.4 66.2
----------------------------------- ----- ------------ ------------
Total equity 67.1 76.4
----------------------------------- ----- ------------ ------------
* Comparative restated - see note 1(a)
The financial statements were approved by the Board of Directors
on 28 March 2017 and were signed on its behalf by:
Swag Mukerji
Chief Financial Officer
Consolidated Cash Flow Statement for the year ended 31 December
2016
2016 2015
Note GBPm GBPm
Cash flows from operating activities
Cash generated from operations 15 15.3 6.1
Tax paid (1.3) (1.4)
Net cash generated from operating
activities 14.0 4.7
-------------------------------------- ----- ------ -------
Cash flows from investing activities
Other acquisitions - settlement
of deferred consideration 12 - (0.1)
Disposal of trade and other
assets 4 - 0.4
Purchase of property, plant
and equipment (0.3) (0.5)
Purchase of intangible assets 8 (2.3) (2.8)
Acquisition of business and
assets 9 (1.5) -
Net cash flows used in investing
activities (4.1) (3.0)
-------------------------------------- ----- ------ -------
Cash flows from financing activities
Payment for shares bought back 13 (0.2) -
Interest paid (0.5) (0.9)
Dividends paid to Company's
shareholders 14 (4.3) (4.0)
Proceeds from borrowings 15 1.5 21.0
Repayment of borrowings 15 (5.0) (18.1)
Repayment of loan notes 11 (1.1) -
Net cash flows used in financing
activities (9.6) (2.0)
-------------------------------------- ----- ------ -------
Net increase / (decrease) in
cash and cash equivalents 0.3 (0.3)
-------------------------------------- ----- ------ -------
Cash and cash equivalents at
beginning of the year 3.1 3.4
-------------------------------------- ----- ------ -------
Cash and cash equivalents at
end of year 3.4 3.1
-------------------------------------- ----- ------ -------
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies adopted in the preparation of
these consolidated financial statements are set out below, to the
extent they have not already been disclosed in the other notes
below. These policies have been consistently applied to all the
periods presented, unless otherwise stated. The financial
statements are for the Group consisting of Centaur Media Plc and
its subsidiaries. Centaur Media Plc is a public company limited by
shares and incorporated in England and Wales.
(a) Basis of preparation
The consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards
('IFRS') as adopted by the European Union and IFRS Interpretations
Committee ('IFRS IC') and with those parts of the Companies Act
2006 applicable to companies reporting under IFRS. The financial
statements have been prepared on the historical cost basis.
The preparation of financial statements under IFRS requires the
use of certain key accounting assumptions and requires management
to exercise its judgement and to make estimates.
New and amended standards adopted by the Group
None of the new standards and amendments to standards (including
the Annual Improvements (2014) to existing standards) that are
mandatory for the first time for the financial year commencing 1
January 2016 affected any of the amounts recognised in the current
period or any prior period, and is not likely to affect future
periods.
New standards and interpretations not yet adopted
The following new accounting standards and interpretations have
been published that are not mandatory for 31 December 2016
reporting periods and have not been early adopted by the Group:
-- IFRS 9: Financial Instruments is a new standard which
enhances the ability of investors and other users of financial
information to understand the accounting for financial assets and
reduces complexity. The standard uses a single approach to
determine whether a financial asset is measured at amortised cost
or fair value, replacing the various rules in IAS 39, and also
introduces a new expected loss impairment model. This standard is
effective for accounting periods commencing on or after 1 January
2018, and the impact is not expected to be material.
-- IFRS 15: Revenue from Contracts with Customers is a new
standard based on a five-step model framework, which replaces all
existing revenue recognition standards. The standard requires
revenue to depict the transfer of promised goods or services to
customers in an amount that reflects the consideration to which the
entity expects to be entitled in exchange for those goods or
services. This standard is effective for accounting periods
commencing on or after 1 January 2018.
-- IFRS 16: Leases is a new standard which sets out the
principles for the recognition, measurement, presentation and
disclosure of leases for both parties to a contract. The standard
eliminates the classification of leases as either operating leases
or finance leases as required by IAS 17 and, instead, introduces a
single lessee accounting model. A lessee will be required to
recognise assets and liabilities for all leases with a term of more
than 12 months and depreciate lease assets separately from interest
on lease liabilities in the income statement. This standard is
effective for accounting periods commencing on or after 1 January
2019.
The Directors anticipate that the adoption of these standards
and interpretations in future periods, particularly IFRS 15 and
IFRS 16 will impact on the financial statements of the Group.
Management is currently undertaking an exercise to quantify the
impact of IFRS 15.
There are no other standards that are not yet effective and that
would be expected to have a material impact on the entity in the
current or future reporting periods and on foreseeable future
transactions.
Prior period adjustment
As at 1 January 2015, the value of treasury shares and shares
held in the Employee Benefit Trust in the own shares reserve
relating to the vesting of employee share plans (GBP3.6m) has been
transferred to retained earnings, reflecting shares transferred to
employees in prior periods. A transfer has also been made from the
reserve for shares to be issued of GBP4.0m to retained earnings, to
account for the vesting of these share plans up to 1 January 2015.
There is no overall impact from these adjustments on total
shareholders' equity or other reported measures as at 1 January
2015.
(b) Presentation of non-statutory measures
In addition to statutory measures, the Directors use various
non-GAAP key financial measures to evaluate the Group's
performance, and consider that presentation of these measures
provides shareholders with an additional understanding of its core
trading performance. The measures used are explained and reconciled
to their equivalent statutory headings below.
Adjusted operating profit and adjusted earnings per share
The Directors believe that adjusted results and adjusted
earnings per share provide additional useful information on the
core operational performance of the Group to shareholders, and
review the results of the Group on an adjusted basis internally.
The term 'adjusted' is not a defined term under IFRS and may not
therefore be comparable with similarly titled profit measurements
reported by other companies. It is not intended to be a substitute
for, or superior to, IFRS measurements of profit.
Adjustments are made in respect of:
-- Exceptional items - the Group considers items of income and
expense as exceptional and excludes them from the adjusted results
where the nature of the item, or its size, is material and likely
to be non-recurring in nature (in the medium term) so as to assist
the user of the financial statements to better understand the
results of the core operations of the Group. Details of exceptional
items are shown in note 4.
-- Amortisation of acquired intangible assets - the amortisation
charge for those intangible assets recognised on business
combinations is excluded from the adjusted results of the Group
since they are non-cash charges arising from non-trading investment
activities. As such, they are not considered reflective of the core
trading performance of the Group. Details of amortisation of
intangible assets are shown in note 8.
-- Share-based payments - share-based payment expenses or
credits are excluded from the adjusted results of the Group as the
Directors believe that the volatility of these charges can distort
the user's view of the core trading performance of the Group.
-- Impairment of goodwill - the Directors believe that non-cash
impairment charges in relation to goodwill are generally volatile
and material, and therefore exclude any such charges from the
adjusted results of the Group. Previous impairment charges were
presented as exceptional items. As this charge has recurred in the
current year, it is not deemed to be exceptional, but given its
materiality it has been separately reported for the reasons set out
above. Details of goodwill impairment are shown in note 7.
-- Earn-out consideration - deferred or contingent consideration
in relation to business combinations recognised in the income
statement (as a result of being classified as remuneration under
IFRS 3) is not considered reflective of the core trading of the
Group since it results from investment activities and is volatile
in nature. As such, income statement items relating to business
combinations are removed from adjusted results. See notes 9 and
12.
-- Profit or loss on disposal of assets or subsidiaries - profit
or loss on disposals of businesses are excluded from adjusted
results of the Group as they are unrelated to core trading, and can
distort a user's understanding of the performance of the Group due
to their infrequent and volatile nature. See note 4.
-- Other separately reported items - certain other items are
excluded from adjusted results where they are considered large or
unusual enough to distort the comparability of core trading results
year on year. Details of these separately disclosed items are shown
in note 4.
The tax related to adjusting items is the tax effect of the
items above that are allowable deductions for tax purposes
(primarily exceptional items), calculated using the standard rate
of corporation tax. See note 5 for a reconciliation between
reported and adjusted tax charges.
Further details of adjusting items are included in note 4. A
reconciliation between adjusted and statutory earnings per share
measures is shown in note 6.
Loss before tax reconciles to adjusted operating profit as
follows:
2016 2015
Note GBPm GBPm
Loss before tax (4.4) (5.6)
Adjusting items
Impairment of goodwill 7 7.2 11.9
Amortisation of acquired intangible
assets 8 2.3 2.2
Share-based payments (0.1) 0.7
Earn-out consideration 9 0.6 0.1
Additional impairment of trade
receivables 4 1.8 -
Exceptional operating costs 4 1.2 0.7
Profit on disposal of trade
and assets 4 - (0.4)
Exceptional finance costs 4 - 0.2
------------------------------------------------- ----- ------ ------
Adjusted profit before tax 8.6 9.8
Adjusted finance costs 4 0.5 0.7
Adjusted operating profit 9.1 10.5
------------------------------------------------- ----- ------ ------
Cash impact of adjusting items (1.3) (0.5)
------------------------------------------------- ----- ------ ------
Tax impact of adjusting items 0.8 0.6
------------------------------------------------- ----- ------ ------
Adjusted operating cash flow
Adjusted operating cash flow is not a measure defined by IFRS.
It is defined as cash flow from operations excluding the impact of
adjusting items, which are defined above, and including capital
expenditure. The Directors use this measure to assess the
performance of the Group as it excludes volatile items not related
to the core trading of the Group, and includes the Group's
management of capital expenditure. Statutory cash flow from
operations reconciles to adjusted operating cash as below:
2016 2015
GBPm GBPm
Reported cash flow from operations 15.3 6.1
Cash impact of adjusting items 1.3 0.5
Working capital impact of adjusting
items (0.1) -
Capital expenditure (2.6) (3.3)
-------------------------------------- ------ ------
Adjusted operating cash flow 13.9 3.3
-------------------------------------- ------ ------
Underlying revenue growth
The Directors review underlying revenue growth in order to allow
a like for like comparison of revenues between periods. Underlying
revenues exclude the impact of event timing differences, as well as
the revenue contribution arising from acquired or disposed
businesses.
Statutory revenue growth reconciles to underlying revenue growth
as follows:
Financial Home
Marketing Professional Services Interest Total
GBPm GBPm GBPm GBPm GBPm
Reported revenue 2015 27.0 19.7 12.0 11.8 70.5
Biennial events - AMS - (0.4) - - (0.4)
------------------------- ---------- ------------- ---------- ---------- ------
Underlying revenue
2015 27.0 19.3 12.0 11.8 70.1
------------------------- ---------- ------------- ---------- ---------- ------
Reported revenue 2016 29.7 20.2 9.7 12.9 72.5
Acquired business -
Oystercatchers (1.2) - - - (1.2)
------------------------- ---------- ------------- ---------- ---------- ------
Underlying revenue
2016 28.5 20.2 9.7 12.9 71.3
------------------------- ---------- ------------- ---------- ---------- ------
Reported revenue growth 10% 3% (19)% 9% 3%
Underlying revenue
growth 6% 5% (19)% 9% 2%
------------------------- ---------- ------------- ---------- ---------- ------
Adjusted EBITDA
Adjusted EBITDA is not a measure defined by IFRS. It is defined
as adjusted operating profit before depreciation and amortisation
of intangible assets other than those acquired through a business
combination. It is used by the Directors as a measure to review
performance of the Group, and forms the basis of some of the
Group's financial covenants under its revolving credit facility.
Adjusted EBITDA is calculated as follows:
2016 2015
GBPm GBPm
Adjusted operating profit (as
above) 9.1 10.5
Depreciation 0.6 0.9
Amortisation of computer software
(note 8) 2.7 2.1
Adjusted EBITDA 12.4 13.5
------------------------------------ ----- -----
Net debt
Net debt is not a measure defined by IFRS. Net debt is
calculated as cash less overdrafts and bank borrowings under the
Group's financing arrangements. The Directors consider the measure
useful as it gives greater clarity over the Group's liquidity as a
whole. A reconciliation between net debt and statutory measures is
shown in note 15.
2 SEGMENTAL REPORTING
The Executive Committee has been identified as the chief
operating decision-maker, reviewing the Group's internal reporting
on a monthly basis in order to assess performance and allocate
resources.
The Group is organised around four reportable market-facing
segments: Marketing, Financial Services, Professional and Home
Interest. The Professional segment aggregates the Legal, Human
Resources, Engineering and Travel & Meetings portfolios, which
are deemed to have similar profiles of risk and return. All
segments derive revenues from a combination of live events, premium
content and advertising revenues. Corporate income and costs are
allocated to these segments on an appropriate basis, depending on
the nature of the costs, including in proportion to revenues or
headcount. There is no inter-segmental revenue.
Segment assets consist primarily of property, plant and
equipment, intangible assets including goodwill, inventories and
trade receivables. 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 includes additions resulting from
acquisitions through business combinations.
Financial Home
Marketing Services Professional Interest Group
GBPm GBPm GBPm GBPm GBPm
2016
Revenue 29.7 9.7 20.2 12.9 72.5
------------------- ------------------ --------------- ------------------- ------------- --------------
Adjusted operating
profit 4.2 0.6 2.1 2.2 9.1
Amortisation of
acquired
intangibles (1.6) (0.2) (0.1) (0.4) (2.3)
Impairment of
goodwill - (7.2) - - (7.2)
Earn-out
consideration (0.6) - - - (0.6)
Additional
impairment
of trade
receivables (0.8) (0.2) (0.5) (0.3) (1.8)
Exceptional
operating
costs (0.4) (0.2) (0.5) (0.1) (1.2)
Share-based
payments 0.1 - - - 0.1
------------------- ------------------ --------------- ------------------- ------------- --------------
Operating loss 0.9 (7.2) 1.0 1.4 (3.9)
Finance costs (0.5)
------------------- ------------------ --------------- ------------------- ------------- --------------
Loss before tax (4.4)
Taxation (1.0)
------------------- ------------------ --------------- ------------------- ------------- --------------
Loss for the year
from
continuing
operations (5.4)
------------------- ------------------ --------------- ------------------- ------------- --------------
Financial Home
Marketing Services Professional Interest Group
GBPm GBPm GBPm GBPm GBPm
2015
Revenue 27.0 12.0 19.7 11.8 70.5
------------------- ------------------ --------------- ------------------- ------------- ------------
Adjusted operating
profit 4.1 2.1 2.2 2.1 10.5
Amortisation of
acquired
intangibles (1.5) (0.3) (0.1) (0.3) (2.2)
Impairment of
goodwill - - (11.9) - (11.9)
Earn-out
consideration - - (0.1) - (0.1)
Exceptional
operating
costs (0.1) (0.2) (0.2) (0.2) (0.7)
Profit on disposal
of trade and
assets - - 0.4 - 0.4
Share-based
payments (0.3) (0.1) (0.2) (0.1) (0.7)
------------------- ------------------ --------------- ------------------- ------------- ------------
Operating loss 2.2 1.5 (9.9) 1.5 (4.7)
Finance costs (0.9)
------------------- ------------------ --------------- ------------------- ------------- ------------
Loss before tax (5.6)
Taxation (1.3)
------------------- ------------------ --------------- ------------------- ------------- ------------
Loss for the year
from
continuing
operations (6.9)
------------------- ------------------ --------------- ------------------- ------------- ------------
The Group's revenue by type is as follows:
2016 2015
GBPm GBPm
Sale of goods and services
Premium content 20.8 19.9
Live events 30.7 27.2
Advertising 20.2 22.5
Other 0.8 0.9
72.5 70.5
---------------------------- ----- -----
3 NET OPERATING EXPENSES
Operating loss is stated after charging / (crediting):
Adjusted Adjusting Statutory Adjusted Adjusting Statutory
Results Items Results Results Items Results
2016 2016 2016 2015 2015 2015
Note GBPm GBPm GBPm GBPm GBPm GBPm
Net foreign exchange
gains 0.3 - 0.3 - - -
Employee benefits
expense 30.3 0.9 31.2 30.2 0.6 30.8
Depreciation of
property, plant
and
equipment 0.6 - 0.6 0.9 - 0.9
Amortisation of
intangible assets 8 2.7 2.3 5.0 2.1 2.2 4.3
Impairment of goodwill 7 - 7.2 7.2 - 11.9 11.9
Earn-out consideration 9 - 0.6 0.6 - 0.1 0.1
Other exceptional
operating costs 4 - 0.3 0.3 - 0.1 0.1
Operating lease
rentals 1.8 - 1.8 1.8 - 1.8
Repairs and maintenance
expenditure 0.3 - 0.3 0.2 - 0.2
Impairment of trade
receivables 16 0.5 1.8 2.3 0.6 - 0.6
Share-based payment
(credit) /
expense - (0.1) (0.1) - 0.7 0.7
Profit on disposal
of trade
and assets 4 - - - - (0.4) (0.4)
Other operating
expenses 26.9 - 26.9 24.2 - 24.2
-------------------------- ----- --------- ---------- ---------- --------- ---------- ----------
63.4 13.0 76.4 60.0 15.2 75.2
------------------------- ----- --------- ---------- ---------- --------- ---------- ----------
Cost of sales 34.3 - 34.3 33.2 - 33.2
Distribution costs 1.1 - 1.1 1.3 - 1.3
Administrative
expenses 28.0 13.0 41.0 25.5 15.2 40.7
63.4 13.0 76.4 60.0 15.2 75.2
------------------------- ----- --------- ---------- ---------- --------- ---------- ----------
Rental income for the sub-lease of properties under leases
totalled GBP0.7m (2015: GBP0.6m).
See note 1(b) and 4 for details of adjusting items.
4 ADJUSTING ITEMS
As discussed in note 1(b), certain items are presented as
adjusting. These are detailed below:
2016 2015
Note GBPm GBPm
Exceptional operating costs
Staff related restructuring costs 0.9 0.6
Costs relating to strategic corporate
restructuring initiatives 0.3 0.1
Exceptional operating costs 1.2 0.7
Impairment of goodwill 7 7.2 11.9
Profit on disposal of trade and
assets - (0.4)
Amortisation of acquired intangible
assets 8 2.3 2.2
Additional impairment of trade
receivables 16 1.8 -
Share-based payments (0.1) 0.7
Earn-out consideration 9 0.6 0.1
---------------------------------------- ----- ------ ------
Adjusting items to operating profit 13.0 15.2
Exceptional finance costs - 0.2
---------------------------------------- ----- ------ ------
Adjusting items to profit before
tax 13.0 15.4
Tax relating to adjusting items 5 (0.8) (0.6)
---------------------------------------- ----- ------ ------
Total adjusting items after tax 12.2 14.8
---------------------------------------- ----- ------ ------
Exceptional costs
Staff related restructuring costs
During 2016, exceptional restructuring costs of GBP0.9m were
incurred as a result of the cost reduction programme and
reorganisation of the operational management structure, including
the Executive Committee. Whilst similar costs have been incurred
previously, such costs linked to the Group's transformation
programme are not expected to recur once this is completed, and as
such these costs are deemed to be exceptional in nature.
In 2015 exceptional restructuring costs of GBP0.6m were
recognised as a result of restructuring activities and changes in
senior management.
Costs relating to strategic corporate restructuring
initiatives
These costs relate to professional fees relating to strategic
corporate restructuring initiatives GBP0.2m (2015: GBP0.1m) and
non-trading costs arising on prior disposals GBP0.1m.
Exceptional finance costs
2015 costs of GBP0.2m related to unamortised costs of GBP0.1m
relating to the previous facility and legal fees of GBP0.1m
associated with refinancing of the Group's revolving credit
facility in 2015.
Other adjusting items
Other adjusting items relate to the amortisation of acquired
intangible assets (see note 8) and share-based payment costs as
well as the items discussed below:
Impairment of trade receivables
An additional, separately reported charge has been recognised in
relation to impairment of trade receivables of GBP1.8m (2015:
GBPnil). As a result of disruption during the second half of 2015
into the early part of 2016 arising from a new accounting system
implementation in 2015 an amount of legacy and older debt remains
unpaid at 31 December 2016, which is significantly in excess of
levels historically experienced by the Group. A detailed review and
risk assessment to ascertain the recoverability of this debt has
been undertaken. This review, together with the fact there is
further extended ageing despite active pursuit of the amounts in
2016 has meant the Group considers it necessary to provide against
potentially uncollectible aged debt at levels in excess of those
which would be required under normal trading conditions. The
quantum of this additional provision arises from unique
circumstances following an accounting system implementation,
therefore the charge of GBP1.8m (2015: GBPnil) has been separately
reported in adjusting items. In addition, an ordinary GBP0.5m
(2015: GBP0.6m) charge has been recorded in adjusted operating
profit, which is not separately reported.
Impairment of goodwill
During 2016, an impairment of GBP7.2m was recognised against the
goodwill in the Financial Services segment. During 2015, the
impairment charge of GBP11.9m related to goodwill in the
Professional segment. More detail is given in note 7.
Earn-out consideration
In 2016, a charge of GBP0.6m has been recognised in relation to
the Oystercatchers acquisition earn-out, see note 9 for further
details. The charge in 2015 of GBP0.1m related to an increase in
the deferred contingent consideration associated with the
acquisition of Venture Business Research Limited ('VB
Research').
Profit on disposal of trade and assets
On 6 February 2015, the Group sold the trade and assets of the
Aidex Exhibition brand sitting within the Professional segment for
total consideration, and profit on disposal, of GBP0.4m.
5 TAXATION
2016 2015
GBPm GBPm
Analysis of charge for the year
Current tax
UK Corporation Tax 1.2 1.5
Overseas tax 0.1 0.5
Adjustments in respect of prior
years (0.2) 0.1
1.1 2.1
--------------------------------- ------ ------
Deferred tax
Current period (0.3) (0.8)
Adjustments in respect of prior
years 0.2 -
(0.1) (0.8)
--------------------------------- ------ ------
Taxation 1.0 1.3
---------------------------------- ------ ------
The tax charge for the year can be reconciled to the loss in the
statement of comprehensive income as follows:
2016 2015
GBPm GBPm
Loss before tax (4.4) (5.6)
Tax at the UK rate of corporation
tax of 20.0% (2015: 20.25%) (0.9) (1.1)
Effects of:
Expenses not deductible for
tax purposes 0.5 0.1
Goodwill impairment not deductible 1.4 2.4
Changes in tax rate on deferred
tax balances - (0.1)
Intra-group debt simplification - (0.6)
Adjustments in respect of
prior years - 0.1
Different tax rates of subsidiaries
in other jurisdictions - 0.5
1.0 1.3
------------------------------------- ------ ------
The Finance Act 2015 included legislation to reduce the main
rate of corporation tax from 20% to 19% from 1 April 2017 and to
18% from 1 April 2020. This change had been substantively enacted
at the balance sheet date and, therefore, the Group's deferred tax
balances are recorded at 19%.
During 2015, the simplification of intragroup financing
structures resulted in a waiver of certain loan and financing
arrangements between Group companies. The Group held a related
deferred tax liability connected to these balances which was
written off to the income statement upon the waiver. No current tax
arose given the transaction was non-cash in nature.
A reconciliation between the reported tax expense and the
adjusted tax expense, taking account of adjusting items as
discussed in note 1(b) and 4 is shown below:
2016 2015
GBPm GBPm
Reported tax expense 1.0 1.3
Effects of:
Amortisation of acquired
intangible assets 0.3 0.3
Additional impairment of trade
receivables 0.4 -
Share-based payments (0.1) 0.1
Exceptional expenses 0.1 0.2
Earn-out consideration 0.1 -
Adjusted tax expense 1.8 1.9
--------------------------------- ------ -----
6 EARNINGS PER SHARE
Basic earnings per share ('EPS') is calculated by dividing the
earnings attributable to ordinary shareholders by the weighted
average number of shares in issue during the year. 91,191 (2015:
473,859) shares held in the Employee Benefit Trust and 6,870,437
(2015: 6,472,990) shares held in treasury have been excluded in
arriving at the weighted average number of shares.
For diluted earnings per share the weighted average number of
ordinary shares in issue is adjusted to assume conversion of all
potentially dilutive ordinary shares. This comprises share options
and awards (including those granted under the Sharesave plan)
granted to Directors and employees where the exercise price is less
than the average market price of the Company's ordinary shares
during the year. Basic and diluted earnings per share have also
been presented on an adjusted basis, as the Directors believe that
this measure is more reflective of the core performance of the
Group.
2016 2016 2016 2015 2015 2015
Earnings Weighted Earnings Earnings Weighted Earnings
attributable average per attributable average per
to owners number share to owners number share
of the of shares of the of shares
parent parent
GBPm millions Pence GBPm millions Pence
Basic (5.4) 143.6 (3.8) (6.9) 143.2 (4.8)
Effect of dilutive
securities
Options* - - - - - -
------------------------- -------------- ----------- --------- -------------- ----------- ---------
Diluted (5.4) 143.6 (3.8) (6.9) 143.2 (4.8)
------------------------- -------------- ----------- --------- -------------- ----------- ---------
Adjusted
Basic (5.4) 143.6 (3.8) (6.9) 143.2 (4.8)
Amortisation
of acquired
intangible
assets (note
8) 2.3 1.6 2.2 1.5
Exceptional
finance costs - - 0.2 0.1
Additional
impairment
of trade receivables 1.8 1.3 - -
Earn-out consideration 0.6 0.4 0.1 -
Other exceptional
operating
costs (note
4) 1.2 0.8 0.7 0.6
Share-based
payments (0.1) (0.1) 0.7 0.5
Impairment
of goodwill 7.2 5.0 11.9 8.3
Profit on
disposal of
trade and
assets - - (0.4) (0.3)
Tax effect
of above adjustments (0.8) (0.5) (0.6) (0.4)
------------------------- -------------- ----------- --------- -------------- ----------- ---------
Adjusted basic 6.8 143.6 4.7 7.9 143.2 5.5
------------------------- -------------- ----------- --------- -------------- ----------- ---------
-
Effect of dilutive
securities
Options - 6.2 (0.2) - 4.5 (0.2)
------------------------- -------------- ----------- --------- -------------- ----------- ---------
Adjusted diluted 6.8 149.8 4.5 7.9 147.7 5.3
------------------------- -------------- ----------- --------- -------------- ----------- ---------
* Due to the reported losses during 2016 and 2015, the effect of
share options and awards was not dilutive
7 GOODWILL
GBPm
Cost
At 1 January 2015 and 31 December 2015 155.1
Additions in the year 1.2
----------------------------------------- --------------
At 31 December 2016 156.3
----------------------------------------- --------------
Accumulated impairment
At 1 January 2015 65.1
Charge for the year 11.9
----------------------------------------- --------------
At 31 December 2015 77.0
Charge for the year 7.2
----------------------------------------- --------------
At 31 December 2016 84.2
----------------------------------------- --------------
Net book value
At 31 December 2016 72.1
----------------------------------------- --------------
At 31 December 2015 78.1
----------------------------------------- --------------
Additions in the year relate to the acquisition of the business
and assets of The Oystercatchers LLP ('Oystercatchers'). See note 9
for further details.
Goodwill by segment
Each segment is deemed to be a Cash Generating Unit ('CGU'),
being the lowest level for which cash flows are separately
identifiable. See note 2 for details regarding how the Group's
segments are determined. The majority of the Group's goodwill arose
on the acquisition of the Centaur Communications group in 2004.
Goodwill is allocated to segments as follows:
Financial Home
Marketing Services Professional Interest Total
GBPm GBPm GBPm GBPm GBPm
At 31 December 2016 37.9 5.1 21.6 7.5 72.1
---------------------- ---------- ---------- ------------- ---------- ------
At 31 December 2015 36.7 12.3 21.6 7.5 78.1
---------------------- ---------- ---------- ------------- ---------- ------
Impairment testing of goodwill and acquired intangible
assets
During the year, goodwill and acquired intangible assets were
tested for impairment in accordance with IAS 36. In assessing
whether a write-down of goodwill and acquired intangible assets is
required, the carrying value of the segment is compared with its
recoverable amount. Recoverable amount is measured based on the
higher of value-in-use and fair value less costs of disposal.
The Group estimates the value-in-use of its CGUs using a
discounted cash flow model, which adjusts the cash flows for risks
associated with the assets and discounts these using a pre-tax
discount rate of 12.6% (2015: 13.2%). The discount rate used is
consistent across all segments, which are all based predominantly
in the UK and considered to have similar risks and rewards.
The key assumptions used in calculating value-in-use are revenue
growth, margin, adjusted EBITDA, discount rate and the terminal
growth rate. The Group has used formally Board approved forecasts
for the first four years of the calculation and applied a terminal
growth rate of 2.0% (2015: 2.25%). For impairment testing purposes,
these are then adjusted to reflect any historical levels of
forecasting inaccuracy. This timescale and the terminal growth rate
are both considered appropriate given the cyclical nature of the
Group's revenues and are consistent with the Group's strategic
planning horizons.
The assumptions used in the calculations of value-in-use for
each segment have been derived based on a combination of past
experience and management's expectations of future growth rates in
the business.
At 31 December 2016, before impairment testing, goodwill of
GBP37.9m, GBP12.3m, GBP21.6m and GBP7.5m was allocated to the
Marketing, Financial Services, Professional and Home Interest
segments respectively. The Financial Services segment has been
affected by weaker print and advertising trends leading to a
reduced growth outlook. The goodwill relating to the Financial
Services segment has therefore been reduced to its recoverable
amount through recognition of an impairment loss of GBP7.2m. During
2015, an impairment of GBP11.9m was recognised against the carrying
value of goodwill in the Professional segment. Impairment charges
are recognised as an adjusting item in accordance with the Group's
accounting policy (see note 1(b)).
For the remaining segments, Marketing, Professional and Home
Interest, the value-in-use calculations exceed the carrying values
in the sensitivity scenarios at 31 December 2016. However, as a
result of the impairment recognised during 2015, the headroom in
the Professional segment is significantly reduced once
sensitivities have been applied.
Sensitivity analysis has been performed on the value-in-use
calculations, holding all other variables constant, to:
(i) apply a 5% reduction to forecast adjusted EBITDA in each
year of the modelled cash flows. This would result in a further
impairment of GBP0.6m in the Financial Services segment (2015:
further impairment of GBP1.2m in the Professional segment). No
impairment would occur in any of the other segments.
(ii) apply a 0.5% increase in discount rate from 12.6% to 13.1%.
This would result in a further impairment of GBP0.4m in the
Financial Services segment (2015: increase to 13.7% would result in
a further impairment of GBP1.0m in the Professional segment). No
impairment would occur in any of the other segments.
(iii) reduce the terminal value growth rate from 2.0% to 1.75%.
This would result in a further impairment of GBP0.1m in the
Financial Services segment (2015: 0.25% reduction to 2.0% would
result in a further impairment of GBP0.4m in the Professional
segment). No impairment would occur in any of the other
segments.
8 OTHER INTANGIBLE ASSETS
Separately
Brands acquired
Computer and publishing Customer websites Non-compete
software rights* relationships* and content* arrangements* Total
GBPm GBPm GBPm GBPm GBPm GBPm
Cost
At 1 January
2015 9.5 5.6 11.6 4.7 0.5 31.9
Additions
- acquired 1.7 - - - - 1.7
Additions
- internally
generated 1.2 - - - - 1.2
Disposals
or expiry (1.5) - - - - (1.5)
At 31 December
2015 10.9 5.6 11.6 4.7 0.5 33.3
Additions
- acquired 1.3 - - - - 1.3
Additions
- internally
generated 1.0 - - - - 1.0
Additions
- business
combination
(note 9) - 0.2 0.9 - - 1.1
Disposals
or expiry - - - - (0.5) (0.5)
At 31 December
2016 13.2 5.8 12.5 4.7 - 36.2
----------------- ----------- ----------------- ----------------- --------------- ---------------- ------
Accumulated
amortisation
At 1 January
2015 3.4 1.5 4.0 2.6 0.5 12.0
Amortisation
charge for
the year 2.1 0.2 1.2 0.8 - 4.3
Disposals
or expiry (1.3) - - - - (1.3)
----------------- ----------- ----------------- ----------------- --------------- ---------------- ------
At 31 December
2015 4.2 1.7 5.2 3.4 0.5 15.0
Amortisation
charge for
the year 2.7 0.4 1.1 0.8 - 5.0
Disposals
or expiry - - - - (0.5) (0.5)
At 31 December
2016 6.9 2.1 6.3 4.2 - 19.5
----------------- ----------- ----------------- ----------------- --------------- ---------------- ------
Net book
value at
31 December
2016 6.3 3.7 6.2 0.5 - 16.7
----------------- ----------- ----------------- ----------------- --------------- ---------------- ------
Net book
value at
31 December
2015 6.7 3.9 6.4 1.3 - 18.3
----------------- ----------- ----------------- ----------------- --------------- ---------------- ------
Net book
value at
1 January
2015 6.1 4.1 7.6 2.1 - 19.9
----------------- ----------- ----------------- ----------------- --------------- ---------------- ------
* Amortisation of GBP2.3m (2015: GBP2.2m) of acquired intangible
assets from business combinations is presented as an adjusting item
(see note 1(b) for further information).
Amortisation of intangible assets is included in net operating
expenses in the Statement of Comprehensive Income.
9 BUSINESS COMBINATION
On 30 September 2016, Centaur Communications Limited, a Group
company, acquired the business and assets of The Oystercatchers LLP
('Oystercatchers'), a specialist marketing consultancy.
Oystercatchers will build on the Group's Econsultancy and other
marketing assets to provide an international leading consultancy in
the marketing sector. The results of Oystercatchers is included in
the Marketing segment. Details of the purchase consideration, the
net assets acquired and goodwill are as follows:
2016
GBPm
Purchase consideration:
Cash paid 1.5
------------------------------- -----
Ordinary shares issued 0.5
------------------------------- -----
Deferred consideration 0.2
------------------------------- -----
Working capital 0.1
------------------------------- -----
Total purchase consideration 2.3
------------------------------- -----
The fair value of the 1,202,266 Centaur Media Plc shares issued
as part of the consideration paid for Oystercatchers (GBP0.5m) was
based on the agreed issue value of 45.747p per share.
The assets and liabilities recognised as a result of the
acquisition are as follows:
2016
Fair value
GBPm
Intangible assets - brands 0.2
------------------------------------------ -----------
Intangibles assets - customer contracts
and relationships 0.9
------------------------------------------ -----------
Total intangible assets (note 8) 1.1
------------------------------------------ -----------
Property plant and equipment 0.1
------------------------------------------ -----------
Trade receivables 0.9
------------------------------------------ -----------
Prepayments and other debtors 0.1
------------------------------------------ -----------
Cash -
------------------------------------------ -----------
Trade payables (0.1)
------------------------------------------ -----------
Accruals (0.2)
------------------------------------------ -----------
Deferred Income (0.5)
------------------------------------------ -----------
Social security and other taxes (0.1)
------------------------------------------ -----------
Deferred tax liabilities (0.2)
------------------------------------------ -----------
Net identifiable assets acquired 1.1
Goodwill (note 9) 1.2
------------------------------------------ -----------
Total purchase consideration 2.3
------------------------------------------ -----------
The goodwill is attributable to the workforce of the acquired
business. It will not be deductible for tax purposes. Certain
intangible assets have been separately identified on acquisition,
including customer contracts and relationships of GBP0.9m and the
brand of GBP0.2m. The fair value of the customer contracts and
relationships was estimated using a discounted cash flow approach
based on revenue and profit forecasts over a period of five years,
and discounted using the Group's pre-tax discount rate of
12.6%.
The useful economic life of the intangible assets is as
follows:
-- Brands - 5 years
-- Customer contracts and relationships - 5 years
Contingent consideration
In the event that certain pre-determined EBITDA levels are
achieved by Oystercatchers for the year ending 31 March 2017,
additional consideration of up to GBP1.2m may be payable in cash
(75%) and shares (25%) during Q2 2017. The contingent consideration
is dependent on the continued employment of 5 key persons by
Oystercatchers and is therefore treated as remuneration. It will be
recognised in profit and loss under IAS 19 (for the cash element)
and IFRS 2 (for the share-based payment element) to the extent it
becomes payable. An expense of GBP0.6m has been recognised in the
income statement in the year as an adjusting item with a provision
of GBP0.4m and credit to equity of GBP0.2m, which assumes earn-out
performance measures will be achieved and all employees will stay
in employment. See note 12.
The potential undiscounted amount payable under the agreement is
between GBPnil for EBITDA below GBP0.7m and GBP1.2m for EBITDA
above GBP0.9m. The fair value of the contingent consideration is
undiscounted as the payment is due in less than one year.
Deferred consideration
GBP0.2m of deferred consideration is payable in cash on 1
October 2017 subject to any claims made under the purchase
agreement. GBP0.2m has been recognised in other liabilities in
respect of this deferred consideration.
Acquired receivables
The fair value of acquired trade receivables is GBP0.9m. The
gross contractual amount for trade receivables due is GBP0.9m, all
of which has since been collected.
Revenue and profit contribution
Oystercatchers contributed revenues of GBP1.2m and net profit of
GBP0.3m to the Group for the period from 1 October to 31 December
2016. If the acquisition had occurred on 1 January 2016,
consolidated pro-forma revenue and profit for the year ended 31
December 2016 would have been GBP3.9m and GBP1.0m respectively.
There were no acquisitions during the year ended 31 December
2015.
10 TRADE AND OTHER RECEIVABLES
2016 2015
GBPm GBPm
Amounts falling due within
one year
Trade receivables 15.8 20.8
Less: provision for impairment
of receivables (note 16) (2.7) (0.9)
--------------------------------- ------ ------
Trade receivables - net 13.1 19.9
Other receivables 0.8 2.3
Prepayments 1.2 1.7
Accrued income 0.6 1.1
15.7 25.0
-------------------------------- ------ ------
Receivables from subsidiaries are unsecured, have no fixed due
date and bear interest at an annual rate of 2.43% (2015:
2.71%).
11 BORROWINGS
2016 2015
GBPm GBPm
Current liabilities
Loan notes - 1.1
----------------------------- ------ ------
- 1.1
---------------------------- ------ ------
Non-current liabilities
Finance lease payables - 0.1
Arrangement fee in respect
of revolving credit
facility (0.1) (0.2)
Revolving credit facility 17.5 21.0
17.4 20.9
---------------------------- ------ ------
Loan notes totalling GBP1.1m were issued in November 2015 to
settle the deferred consideration in relation to the VB Research
earn-out. Interest was payable on these loan notes at a variable
rate of 1% above LIBOR. The loan notes were settled during
2016.
12 PROVISIONS
Deferred
consideration
GBPm
At 1 January 2015 1.1
Charged to the statement of comprehensive
income during the year 0.1
Utilised during the year (1.2)
-------------------------------------------- ---------------
At 31 December 2015 -
Charged to the statement of comprehensive
income during the year 0.4
As at 31 December 2016 0.4
-------------------------------------------- ---------------
Deferred consideration in the current year relates to the
acquisition of Oystercatchers and is payable within 1 year (see
note 9). The amount provided was dependent on continued employment
of the former owners of the business and was treated as
post-acquisition remuneration accruing over the period to the end
of the performance period. All amounts represented the Directors'
best estimate of the amount to be paid at the balance sheet
date.
Deferred consideration in the prior year related to VB Research.
The amount of deferred contingent consideration payable with
respect to the acquisition of VB Research was dependent on the
profits generated by VB Research in the period 1 July 2014 to 30
June 2015 (the performance period), subject to a maximum earn-out
payment of GBP5.0m. The deferred consideration was settled in the
prior year through the payment of GBP0.1m in cash and the issue of
loan notes for the remaining balance (see note 11 for more
details).
13 EQUITY
Nominal
value Number
Ordinary shares of 10p each GBPm of shares
Authorised share capital - Group
and Company
At 1 January 2015, 31 December
2015 and 31 December 2016 20.0 200,000,000
----------------------------------------- --------
Issued and fully paid share capital
- Group and Company
At 1 January and 31 December 2015 15.0 150,207,960
Acquisition of business 0.1 1,202,266
----------------------------------------- -------- ------------
At 31 December 2016 15.1 151,410,226
----------------------------------------- -------- ------------
Deferred shares reserve
The deferred shares reserve represents 800,000 (2015: 800,000)
deferred shares of 10p each, which carry restricted voting rights
and have no right to receive a dividend payment in respect of any
financial year.
Reserves for shares to be issued
The reserve for shares to be issued is in respect of
equity-settled share-based compensation plans. The changes to the
reserve for shares to be issued represent the total charges for the
year relating to equity-settled share-based payment transactions
with employees as accounted for under IFRS 2 and prior year
restatement relating to previous vests (see note 1(a)).
Own shares reserve
The own shares reserve represents the value of shares held as
treasury shares and in an employee benefit trust. At 31 December
2016, 6,870,437 (2015: 6,472,990) 10p ordinary shares are held in
treasury and 91,191 (2015: 473,859) 10p ordinary shares are held in
the Employee Benefit Trust.
During 2016, the Company purchased 397,447 ordinary shares to be
held in treasury in order to meet future obligations arising from
share-based rewards to employees. The buyback programme was
approved by shareholders at the Annual General Meeting held on 11
May 2016 up to a value of GBP1.0m. The shares were acquired at an
average price of 42.75p per share, with prices ranging from 39p to
46p. The total cost of GBP0.2m (2015: GBPnil) has been recognised
in other reserves in the own shares reserve in equity.
See note 1(a) for details of the prior year restatement of this
reserve.
14 DIVIDS
2016 2015
GBPm GBPm
Equity dividends
Final dividend for 2014: 1.3p
per 10p ordinary share - 1.9
Interim dividend for 2015: 1.5p
per 10p ordinary share - 2.1
Final dividend for 2015: 1.5p
per 10p ordinary share 2.2 -
Interim dividend for 2016: 1.5p
per 10p ordinary share 2.1 -
4.3 4.0
--------------------------------- ----- -----
A final dividend for the year ended 31 December 2016 of GBP2.2m
(1.5p per share) is proposed by the Directors and, subject to
shareholder approval at the Annual General Meeting, will be paid on
26 May 2017.
15 NOTES TO THE CASH FLOW STATEMENT
Reconciliation of loss for the period to net cash inflow from
operating activities:
2016 2015
GBPm GBPm
Loss for the period (5.4) (6.9)
Adjustments for:
Tax 1.0 1.3
Interest expense 0.5 0.9
Depreciation 0.6 0.9
Amortisation of intangible
assets 5.0 4.3
Impairment of goodwill 7.2 11.9
Earn-out costs 0.6 0.1
Share-based payment (credit)
/ charge (0.1) 0.7
Profit on disposal of trade
and assets - (0.4)
Other (0.1) (0.3)
Changes in working capital
(excluding effects of
acquisitions and disposals
of subsidiaries):
Increase in inventories (0.5) (0.2)
Decrease / (increase) in
trade and other receivables 9.2 (9.3)
(Decrease) / increase in
trade and other payables (2.6) 1.4
(Decrease) / increase in
deferred income (0.1) 1.7
--------------------------------- ------ ------
Cash generated from operating
activities 15.3 6.1
--------------------------------- ------ ------
Analysis of changes in net debt
Net
At 31 December cash At 31 December
2015 flow 2016
Note GBPm GBPm GBPm
Cash and cash equivalents 3.1 0.3 3.4
Revolving credit facility 11 (21.0) 3.5 (17.5)
------
Net debt (17.9) 3.8 (14.1)
---------------------------- ----- --------------- ------ ---------------
16 FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT
Financial risk management
The Board has overall responsibility for the determination of
the Group's risk management policies. The Board receives monthly
reports from the Chief Financial Officer through which it reviews
the effectiveness of policies and processes put in place to manage
risk. The Board sets policies that reduce risk as far as possible
without unduly affecting the operating effectiveness of the
Group.
The Group's activities expose it to a variety of financial
risks, including interest rate risk, credit risk, liquidity risk,
capital risk and currency risk. Of these, credit risk and liquidity
risk are considered the most significant. This note presents
information about the Group's exposure to each of the above
risks.
Credit risk
The Group's principal financial assets are trade and other
receivables (note 10) and cash and cash equivalents. Credit risk
refers to the risk that a counterparty will default on its
contractual obligations resulting in financial loss to the Group.
The carrying amount of financial assets recorded in the financial
statements, which is net of impairment losses, represents the
Group's maximum exposure to credit risk in relation to financial
assets. Credit risk is managed on a Group basis. The Group does not
consider that it is subject to any significant concentrations of
credit risk.
Trade receivables
Trade receivables consist of a large number of customers, of
varying sizes and spread across diverse industries and geographies.
The Group does not have significant exposure to credit risk in
relation to any single counterparty or group of counterparties
having similar characteristics. The Group's exposure to credit risk
is influenced predominantly by the circumstances of individual
customers as opposed to industry or geographic trends.
The business assesses the credit quality of customers based on
their financial position, past experience and other qualitative and
quantitative factors. The Group's policy requires customers to pay
in accordance with agreed payment terms, which are generally 30
days from the date of invoice. Under normal trading conditions, the
Group is exposed to relatively low levels of risk, and potential
losses are mitigated as a result of a diversified customer base and
the requirement for events and certain premium content subscription
invoices to be paid in advance of service delivery.
The credit control function within the Group's finance
department monitors the outstanding debts of the Group, and trade
receivables balances are analysed by the age and value of
outstanding balances.
Any trade receivable balance which is objectively determined to
be uncollectible is written off the ledger, with a charge taken
through the Statement of Comprehensive Income. The Group also
records a provision for estimated impairment losses on its trade
receivables balances. All balances past due are reviewed, with
those greater than 90 days past due considered to carry a higher
level of credit risk. Specific provision is made against customer
balances with known credit issues or where debt has been referred
to a collection agency. The remaining past due balances are then
analysed, with balances relating to revenue recognised in advance,
customers on payment plans and non-payment resulting from
administrative queries considered to be of lower risk. A judgement
is applied to the net balance based on historic experience on a
percentage basis taking into account both the age and the reason
items remain unpaid.
Impairment losses are taken through administrative expenses in
the Statement of Comprehensive Income.
An additional, separately reported, charge for impairment of
trade receivables of GBP1.8m has been made during 2016 in excess of
the charge which would arise under normal trading conditions and
recorded in adjusted operating profit of GBP0.5m (2015: GBP0.6m).
Following the disappointing working capital performance in 2015,
and notwithstanding the return to strong cash generation in 2016,
there remains a legacy of old debt which arose during a period of
disruption during the second half of 2015 and into the early part
of 2016 arising from the implementation of a new accounting system.
The gross trade receivables balance at 31 December 2016 of GBP15.8m
remains in excess of historical levels albeit, reduced from the
level at 31 December 2015 of GBP20.8m. Whilst the Group continues
to make every effort in collecting all amounts due to it, given the
age and magnitude of this outstanding debt, the Directors believe
there remains significant uncertainty in being able to collect
these amounts and therefore consider the value of this debt to be
impaired. The underlying risk profile of the Group's debtors has
not fundamentally worsened, however the ageing has made the debt
balances harder to collect.
The ageing of trade receivables according to their original due
date is detailed below:
2016 2016 2015 2015
Gross Provision Gross Provision
GBPm GBPm GBPm GBPm
Not due 6.4 - 9.0 -
0-30 days past due 3.2 - 3.7 -
31-60 days past due 1.2 (0.1) 1.7 -
61-90 days past due 0.9 (0.1) 1.4 -
Over 90 days past due 4.1 (2.5) 5.0 (0.9)
------------------------ ------ ---------- ------ ----------
15.8 (2.7) 20.8 (0.9)
----------------------- ------ ---------- ------ ----------
Trade receivables that are less than 3 months past due are
generally not considered to be impaired, except where specific
credit issues or delinquency in payments have been identified. At
31 December 2016, there are debtors greater than 90 days past due
with a carrying value of GBP1.6m (2015: GBP4.1m) which have not
been provided against. In making the assessment that these amounts
are not impaired, the Directors have considered the quantum of
amounts included in gross trade receivables which relate to amounts
not yet included in income, including pre-event debt included in
deferred income and amounts relating to VAT. The credit quality of
trade receivables not yet due nor impaired has been assessed as
acceptable. A sensitivity analysis has been performed based on the
Group's exposure to unimpaired trade receivables at 31 December
2016. If the provision methodology was expanded to increase the age
of all receivables by an additional 30 days, without receiving any
further payments in relation to those receivables, the provision
requirement would increase by GBP0.2m.
The movement in the provision for impairment of receivables is
detailed below:
2016 2015
GBPm GBPm
Balance at start of year 0.9 0.5
Utilised (0.5) (0.2)
Additional provision charged to
the statement of comprehensive income:
Recorded in adjusted operating profit 0.5 0.6
Adjusting item in operating loss 1.8 -
------------------------------------------------ ------ ------
Balance at end of year 2.7 0.9
----------------------------------------------- ------ ------
The Directors consider the carrying value of trade and other
receivables approximates to their fair value.
17 POST BALANCE SHEET EVENTS
The Board believes that the Home Interest portfolio is no longer
core to Centaur's B2B focus, and that as a distinct business unit,
it will accelerate its growth under more aligned ownership.
Accordingly, following the year end, the Group has commenced a
process to sell this portfolio.
18 NATURE OF FINANCIAL INFORMATION
The foregoing financial information does not amount to full
accounts within the meaning of Section 434 of the Companies Act
2006. The financial information has been extracted from the Group's
annual report and financial statements for the year ended 31
December 2016 on which the auditors have expressed an unqualified
opinion.
Copies of the annual report and financial statements will be
posted to shareholders shortly and will be available from the
Company's registered office at Wells Point, 79 Wells Street,
London, W1T 3QN.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR JPMRTMBATBJR
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