RNS No 2086e
HODDER HEADLINE PLC
23rd September 1997
INTERIM RESULTS
Hodder Headline announces more than doubled pre-tax profits and
earnings per share in its interim results for the six months to
30th June 1997.
The key points are:
* Pre-tax profits up 154% to #1.3 million (1996, #0.5
million)
* Sales #38.0 million (1996, #40.3 million)
* Operating profits up 67% to #1.6 million (1996, #0.9
million)
* Earnings per share up 127% to 2.5 pence (1996, 1.1 pence)
* Net borrowing reduced by 21% to #7.3 million (1996, #9.2
million)
* Gearing reduced to 22% (1996, 30%)
* Interim dividend raised by 10% to 2.2 pence net per share
(1996, 2.0 pence net per
share)
* Trading in July and August 1997 shows continued progress
Tim Hely Hutchinson, Group Chief Executive, commented on the
results and prospects:
"I am delighted that Hodder Headline continued to perform
strongly in the first half of the year.
The second half has also started well and publishing sales to
the end of August were 5% ahead of sales in the same eight
month period of 1996 on a like-for-like basis. We look forward
to a successful full year in 1997.
The retail book market in the UK has stabilised and shows some
promise of renewed growth, however the Australian market has
been weak this year. Overall, improved results are being
achieved in market conditions that remain challenging.
Our central strategy of investment in premium long-term
copyrights, for both consumer and educational titles, is
proving very effective in enabling us to improve profitability
despite this background, and has established the foundation for
a bright future.
Margin improvement continues to be a significant factor in the
Group's 1997 performance. For the future, we are continuing to
strive for quality sales growth, margin enhancement and the
highest standards of excellence in every area of the business."
Attached is a copy of the Group's 1997 Interim Report.
For further information, please contact:
Tim Hely Hutchinson, 0171 404 5959 on 23rd September
Group Chief Executive Otherwise, 0171 873 6000
Mark Opzoomer As above
Deputy Chief Executive
Richard Adam As above
Group Finance Director
John Sunnucks 0171 404 5959
Brunswick Public Relations
23rd September 1997
Chairman's Interim Statement
We are pleased to report continuing progress in the first half
of 1997. Pre-tax profits and earnings per share were more than
doubled compared to the same period in 1996, and net debt at
the period end was reduced compared to 30th June 1996.
The retail book market in the UK has stabilised and is showing
some promise of renewed growth. However, the Group's second
largest market, Australia, has been weak this year. Overall,
improved results are being achieved in market conditions that
remain challenging.
Our central strategy of investment in premium long-term
copyrights, for both consumer and educational titles, is
proving very effective in enabling us to improve profitability
despite this background and has established the foundation for
a bright future.
Results and Dividends
Pre-tax profits for the six months ended 30th June rose to
#1.3m (1996, #0.5m).
Total sales in the first half of 1997 were #38.0m (1996,
#40.3m). As we stated in our 1996 Annual Report, this year's
reported sales figures will be affected by our having
discontinued low margin agency and door-to-door business
overseas. The continuing strength of sterling also limited
reported sales growth in the period, although it has not had
any material impact on earnings.
Our policy of concentrating on higher margin business at home
and overseas is succeeding. Gross margins increased from 46%
to 49%. Other operating income grew by 55% to #1.6m due to the
contribution of the New Zealand-originated Anne Geddes
publishing joint venture. Net interest charges were lower at
#0.3m (1996, #0.4m) because of lower borrowing levels
throughout the period.
Taxation has been provided for at 33% (1996, 30%) as we fully
utilised the tax losses available for reinstatement by Hodder &
Stoughton during 1996. The estimated 1997 rate includes
recognition of the reduction in UK corporation tax rates from
33% to 31% announced in July.
Earnings per share for the period rose to 2.5 pence (1996, 1.1
pence). The Board has decided to increase the interim dividend
to 2.2 pence net per share (1996, 2.0 pence net per share).
This will be paid on 12th November 1997 to shareholders on the
register at 17th October 1997.
Balance Sheet
The Group's balance sheet continues to strengthen compared to
the same period in 1996 and key ratios in the business have
been improved. Net debt at 30th June was reduced by 21% to
#7.3m (1996, #9.2m). Shareholders' funds grew to #33.1m (1996,
#30.7m). Gearing was reduced to 22% (1996, 30%). Stock as a
percentage of annual sales reduced to 21.5% (1996, 22.5%) as
stock levels decreased to #19.5m (1996, #20.4m).
At the same time we have continued to invest substantially in
our forward publishing programme, and this is reflected in an
increase in the authors' royalty advances component of debtors.
Current Trading and Prospects
Publishing sales to the end of August were 5% ahead of sales in
the same eight month period of 1996 on a like-for-like basis.
Margin improvement continues to be a significant factor in the
Group's 1997 performance.
UK Consumer Publishing highlights for the second half include
bestselling crime writer Elizabeth George's first novel for
Hodder & Stoughton, Deception on His Mind, bestselling thriller
writer James Patterson's first novel for Headline, Cat and
Mouse, Dean Koontz's new novel, Fear Nothing, legendary cricket
umpire Dickie Bird's autobiography and the fourth instalment in
Stephen King's Dark Tower series, Wizard and Glass. These are
in addition to strong children's, religious and audiobook
lists. We are publishing slightly fewer new consumer titles in
the UK, particularly within Headline, but we are on average
selling more copies of each title. This policy is underpinning
the continued margin improvement.
Hodder & Stoughton Educational has just published its
innovative thirteen-volume Teach Yourself Revision Guides
series with plans to extend the series in 1998. Arnold will
publish its ground-breaking new edition of Topley & Wilson's
Microbiology and Microbial Infections in six-volume book form
and as a CD Rom in November.
Overseas, we continue to build our locally-originated
publishing programmes, including the highly successful Anne
Geddes range of photographic gift books.
Bookpoint has successfully introduced its next day service for
UK retailers and its financial performance also continues to
improve.
The Group's progress so far this year is encouraging and we
look forward to a successful full year in 1997. For the
future, we are continuing to strive for good quality sales
growth, margin enhancement and the highest standards of
excellence in every area of the business.
Management and Staff
Lord Donoughmore retired as Chairman at the Annual General
Meeting in May. All of us have very much appreciated his great
qualities as Chairman, which have contributed so much to the
Company's successful development. We extend our best wishes
for his retirement. I would also like to take this opportunity
to thank all the Group's staff for their dedication to building
today's Hodder Headline, a business where many individual
contributions are adding up to a strong performance.
Christopher Weston
23rd September 1997
Unaudited Consolidated Profit and Loss Account
For the six months ended 30th June
Year
ended
31st
December
Note 1997 1996 1996
#000 #000 #000
--------------------------------- --- ------ ------ ------
Turnover - continuing operations 2 38,011 40,250 92,830
Cost of sales (19,339) (21,731) (50,568)
--------------------------------- --- ------ ------ ------
Gross profit 18,672 18,519 42,262
Distribution costs (4,426) (4,396) (9,582)
Administrative expenses (14,308) (14,229)(27,854)
Other operating income 1,619 1,042 2,598
--------------------------------- --- ------ ------ ------
Operating profit - before 1,557 936 7,424
interests in associated
undertakings
Income from interests in 19 9 53
associated undertakings
--------------------------------- --- ------ ------ ------
Operating profit - continuing 2 1,576 945 7,477
operations
Interest receivable and similar 58 151 207
income
Profit on ordinary activities 1,317 519 6,605
before taxation
Tax on profit on ordinary 3 (435) (156) (1,948)
activities
--------------------------------- --- ------ ------ ------
Profit on ordinary activities 882 363 4,657
after taxation
Equity minority interests (14) 9 15
--------------------------------- --- ------ ------ ------
Profit for the financial period 868 372 4,672
Dividends 4 (776) (705) (2,292)
--------------------------------- --- ------ ------ ------
Retained profit / (loss) for the
financial period transferred to 92 (333) 2,380
reserves
--------------------------------- --- ------ ------ ------
Earnings per share 5 2.5p 1.1p 13.3p
--------------------------------- --- ------ ------ ------
Unaudited Consolidated Balance Sheet
At 30th June
At
31st
December
Note 1997 1996 1996
#000 #000 #000
----------- --------------------- ----- ------ ------ ------
Fixed assets
Intangible assets 514 527 536
Tangible assets 3,670 4,443 3,900
Investments 192 149 178
--------------------------------- --- ------ ------ ------
4,376 5,119 4,614
--------------------------------- --- ------ ------ ------
Current assets
Stocks 19,488 20,423 18,144
Debtors 41,552 37,130 43,171
Cash at bank and in hand 2,059 646 1,341
--------------------------------- --- ------ ------ ------
63,099 58,199 62,656
Creditors: amounts falling due
(24,469)(29,934)(32,029)
within one year
--------------------------------- --- ------ ------ ------
Net current assets 38,630 28,265 30,627
--------------------------------- --- ------ ------ ------
Total assets less current 43,006 33,384 35,241
liabilities
Creditors: amounts falling due (8,945) (1,340) (921)
after more than one year
Provisions for liabilities and (999) (1,352) (1,271)
charges
--------------------------------- --- ------ ------ ------
Net assets 2 33,062 30,692 33,049
--------------------------------- --- ------ ------ ------
Capital and reserves
Called up share capital 3,527 3,525 3,527
Share premium account 17,253 17,234 17,248
Merger reserve 3,171 3,171 3,171
Profit and loss account 9,068 6,723 9,075
--------------------------------- --- ------ ------ ------
Equity shareholders' funds 6 33,019 30,653 33,021
Equity minority interests 43 39 28
--------------------------------- --- ------ ------ ------
Shareholders' funds 33,062 30,692 33,049
--------------------------------- --- ------ ------ ------
Unaudited Consolidated Cash Flow Statement
For the six months ended 30th June
Year
ended
31st
December
Note 1997 1996 1996
#000 #000 #000
----------------------------------- --- ------ ------ ------
Net cash (outflow) / inflow from
operating activities
Net cash (outflow) / inflow from (704) 1,713 9,202
continuing operating activities
Cash outflow in respect of prior
year acquisition and (380) (348) (757)
reorganisation provisions
----------------------------------- --- ------ ------ ------
7 (1,084) 1,365 8,445
----------------------------------- --- ------ ------ ------
Returns on investment and servicing
of finance
Interest paid (268) (572) (1,077)
Interest received 62 149 207
Net cash outflow from returns on
investment and servicing of finance (206) (423) (870)
Taxation
UK corporation tax paid (105) (146) (519)
Overseas tax paid (41) (11) (129)
Tax paid (146) (157) (648)
----------------------------------- --- ------ ------ ------
Capital expenditure and financial
investment
Purchase of tangible fixed assets (451) (432) (769)
Purchase of intangible fixed assets - - (30)
Proceeds from sale of tangible 30 48 94
fixed assets
----------------------------------- --- ------ ------ ------
Net cash outflow from capital
expenditure and financial (421) (384) (705)
investment
----------------------------------- --- ------ ------ ------
Net cash outflow from the
acquisition of subsidiary - (220) (206)
undertakings
----------------------------------- --- ------ ------ ------
Equity dividends paid (1,587) (1,586) (2,291)
----------------------------------- --- ------ ------ ------
Net cash (outflow) / inflow before (3,444) (1,405) 3,725
financing
----------------------------------- --- ------ ------ ------
Financing
Issue of ordinary share capital 5 7 23
Proceeds from new borrowings 8,125 - -
Repayment of loans (142) (3,458) (3,858)
Capital element of finance lease (245) (258) (461)
payments
Receipts from new finance leases - - 25
----------------------------------- --- ------ ------ ------
Net cash inflow / (outflow) from 7,743 (3,709) (4,271)
financing
----------------------------------- --- ------ ------ ------
Increase / (decrease) in cash 4,299 (5,1140) (546)
----------------------------------- --- ------ ------ ------
Unaudited Reconciliation of Net Cash Flow to Movement in Net
Debt
For the six months ended 30th June
Year
ended
31st
December
Note 1997 1996 1996
#000 #000 #000
---------------------------------- --- ------ ------ ------
Increase / (decrease) in cash in 4,299 (5,114) (546)
the period
Cash (inflow) / outflow from
(increase) / decrease in debt and (7,738) 3,716 4,294
leasing finance
---------------------------------- --- ------ ------ ------
Change in debt resulting from cash (3,439) (1,398) 3,748
flows
Other finance lease movements (38) - 11
Currency translation differences 49 (249) (4)
---------------------------------- --- ------ ------ ------
Movement in net debt in the period (3,428 (1,647) 3,755
Net debt at start of period (3,837) (7,592) (7,592)
---------------------------------- --- ------ ------ ------
Net debt at end of period 8 (7,265) (9,239) (3,837)
---------------------------------- --- ------ ------ ------
Notes to the Interim Financial Statements
1 Basis of Preparation
The Interim Financial Statements have been prepared on the
basis of the accounting policies set out in Hodder
Headline PLC's financial statements for the year ended
31st December 1996. The Interim Financial Statements are
unaudited but have been reviewed by the Auditors and their
report to the Company is set out on the inside back cover
of this Interim Report.
The Interim Financial Statements do not comprise statutory
accounts within the meaning of Section 240 of the
companies Act 1985.
The comparative figures for the year ended 31st December
1996 are taken from the statutory accounts filed with the
Registrar of Companies. The Auditors' report on the
statutory accounts was unqualified and did not contain a
statement under Section 237 of the Companies Act 1985.
2 Segmental Analysis
For the six months ended 30th June
Year
ended
31st
December
1997 1996 1996
#000 #000 #000
----------------------------------- ------ ----- -------
Turnover - continuing operations
UK Consumer Publishing 22,206 21,605 48,959
UK Educational, Academic & 7,600 7,105 18,930
Professional Publishing
Overseas Operations 7,212 10,253 22,320
UK Distribution 993 1,287 2,621
----------------------------------- ------ ----- -------
38,011 40,250 92,830
----------------------------------- ------ ----- -------
Profits
UK Consumer Publishing 1,902 1,558 3,946
UK Educational, Academic & 168 371 2,452
Professional Publishing
Overseas Operations (72) (378) 1,625
UK Distribution (422) (606) (546)
----------------------------------- ------ ----- -------
Operating profit - continuing 1,576 945 7,477
operations
Net interest payable (259) (426) (872)
----------------------------------- ------ ----- -------
Profit before taxation 1,317 519 6,605
----------------------------------- ------ ----- -------
Net assets
UK Consumer Publishing 28,264 26,051 24,124
UK Educational, Academic & 4,973 4,600 4,762
Professional Publishing
Overseas Operations 5,779 7,631 6,646
UK Distribution 1,311 1,649 1,354
----------------------------------- ------ ----- -------
Net operating assets 40,327 39,931 36,886
Net borrowings (7,265)(9,239) (3,837)
----------------------------------- ------ ----- -------
33,062 30,692 33,049
----------------------------------- ------ ----- -------
3 Taxation
The taxation charge for the period is based on the
estimated effective rate of 33% for the year ending 31st
December 1997.
4 Dividends
An interim dividend of 2.2 pence net per share will be
paid on 12th November 1997 to shareholders on the register
at the close of business on 17th October 1997. The
ordinary shares will be marked ex dividend on 13th October
1997.
5 Earnings per Share
Earnings per share have been calculated using the weighted
average number of shares in issue during the period, which
for the six months to 30th June 1997 was 35,265,566
and for the six months to 30th June 1996 was 35,247,069.
6 Reconciliation of Movement in Equity Shareholders' Funds
For the six months ended 30th June
Year
ended
31st
December
1997 1996 1996
#000 #000 #000
Profit attributable to members of 868 372 4,672
the Company
Dividends (776) (705) (2,292)
92 (333) 2,380
Capital Subscribed 5 7 23
Exchange rate differences (99) 144 (217)
Net movement in equity (2) (182) 2,186
shareholders' funds
Opening equity shareholders' funds 33,021 30,835 30,835
Closing equity shareholders' funds 33,019 30,653 33,021
7 Reconciliation of Operating Profit to Net Cash Flow from
Operating Activities
For the six months ended 30th June
Year
ended
31st
December
1997 1996 1996
#000 #000 #000
Operating profit - before interests 1,557 936 7,424
in associated undertakings
Adjustments to operating profit:
Depreciation and amortisation 688 686 1,393
charges
Loss on sale of tangible fixed 7 1 32
assets
(Increase) / decrease in working
capital:
Proceeds from sale of property 182 3,458 3,458
held for sale
Stocks (1,432) (1,737) 117
Debtors 1,341 (543) (6,771)
Creditors (3,155) (1,088) 3,455
Increase in reorganisation 108 - 94
provisions
Net cash (outflow) / inflow from (704) 1,713 9,202
continuing operations
Cash outflow in respect of prior
year acquisition and reorganisation (380) (348) (757)
provisions
Net cash (outflow) / inflow from (1,084) 1,365 8,445
operating activities
8 Analysis of Changes in Net Debt during the Period
For the six months ended 30th June
At Net Other Effect At At
1st cash changes of 30th 30th
January flow foreign June June
1997 exchange 1997 1996
rates
#000 #000 #000 #000 #000 #000
Cash at bank and 1,341 681 - 37 2,059 646
in hand
Bank overdrafts (3,620) 3,618 - 2 - (7,665)
(2,279) 4,299 - 39 2,059 (7,019)
Borrowings due (142) 142 - - - (542)
within one year
Borrowings due - (8,125) - - (8,125) -
after one year
Finance Leases (1,416) 245 (38) 10 (1,199)(1,678)
(1,558) (7,738) (38) 10 (9,324)(2,220)
Net debt (3,837) (3,439) (38) 49 (7,265)(9,239)
9 Company Information
Copies of this statement are being sent to all
shareholders and are also available from the Company's
Registered Office : 338 Euston Road, London, NW1 3BH; telephone
0171 873 6000, fax 0171 873 6024.
10 Financial Calendar
Dates Events
13th October 1997 1997 Interim Dividend Ex Dividend
Date
17th October 1997 1997 Interim Dividend Record Date
12th November 1997 1997 Interim Dividend Payment
March 1998 1997 Preliminary Results Announcement
April 1998 1997 Annual Report & Accounts
May 1998 Annual General Meeting
May 1998 1997 Final Dividend Payment
Review Report by the Auditors to Hodder Headline PLC
We have reviewed the interim financial information for the six
months ended 30th June 1997 set out on pages 3 to 9 which is
the responsibility of, and has been approved by, the Directors.
Our responsibility is to report on the results of our review.
Our review was not performed for any purpose connected with any
specific transaction and should not be relied upon for any such
purpose.
Our review was carried out having regard to the Bulletin
"Review of Interim Financial Information" issued by the
Auditing Practices Board. This review consisted principally of
applying analytical procedures to the underlying financial
data, assessing whether accounting policies have been
consistently applied, and making enquiries of Group management
responsible for financial and accounting matters. The review
excluded any audit procedures such as tests of controls and
verification of assets and liabilities, and was therefore
substantially less in scope than an audit performed in
accordance with Auditing Standards. Accordingly we do not
express an audit opinion on the interim financial information.
On the basis of our review:
* in our opinion the interim financial information has been
prepared using accounting policies consistent with those
adopted by Hodder Headline PLC in its financial statements for
the year ended 31st December 1996 and
* we are not aware of any material modifications that should
be made to the interim financial information as presented.
Deloitte & Touche
Chartered Accountants and Registered Auditors
Hill House
1 Little New Street
London
EC4A 3TR
END
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