RNS Number:0905Z
Datamonitor PLC
25 July 2002
25 July 2002
DATAMONITOR plc
The Premium Business Information Company
Interim Results for the 6 months ended 30 June 2002
SUMMARY
• Revenue decreased by 18% to £15.4m (2001: £18.7m)
• Premium Services revenue decreased by 3% to £11.8m (2001:
£12.2m) now representing 77% of total revenues (2001: 65%)
• EBITDA loss increased to £2.3m (2001: £0.4m loss)
• Loss before tax of £3.4m (2001: £0.5m loss)
• Strong cash balance of £13.3m
• Cost reduction programmes delivering anticipated savings
Commenting on the results, Mike Danson, Chief Executive Officer, said:
"We have continued to experience challenging trading conditions during the first
half of the year particularly in the Technology sector. We have acted rapidly to
deal with the reduction in revenues by managing our costs and making management
changes. Visibility in our markets in the short term remains limited and we
expect our revenue in the second half to be broadly in line with the first half.
Over the longer term, the company remains confident that its focus on
subscription products and its spread across sectors will allow it to grow by
attracting new clients and increasing its Premium Services revenue."
ENQUIRIES
Datamonitor Plc Tel: 020 7796 4133 on the morning of 25 July
Mike Danson, Chief Executive Officer Tel: 020 7675 7000 thereafter
Ian Pratt, Chief Financial Officer
Hudson Sandler Tel: 020 7796 4133
Nick Lyon
Noemie de Andia
Note to Editors:
Datamonitor is a premium business information company specialising in industry
analysis. We help our clients, the world's leading companies, to address complex
strategic issues. Through our proprietary databases and wealth of expertise, we
provide clients with unbiased expert analysis and in depth forecasts for six
industry sectors: Automotive, Consumer Markets, Energy, Financial Services,
Healthcare and Technology.
Datamonitor's objective is to be the premier global research and analysis
company in each of these six industry sectors. The key elements of our strategy
are:
• To increase sales to our existing customers and to expand our
customer base. Each industry sector has growth potential that will
generate economies of scale as revenues increase against a
relatively fixed cost base.
• To extend our international scope. Although our analysts, our
research base and our products are all international, our customer
base is concentrated in Europe and North America. We have plans to
extend our geographic spread through a number of initiatives.
• To exploit our intellectual property. Our primary aim is to reap the
rewards from the significant investment our existing products
represent by adding revenue while keeping our cost base relatively
fixed. We will, however, continue to evaluate new opportunities to
expand our business through targeted new product development.
• To enhance our Internet distribution. Our publishing platform was
designed to provide an ideal platform from which to expand our
Internet distribution. Although the site has only been on line for
a short time at this point, the initial indications are good
Datamonitor's key product and services include:
1. Premium services products:
• Strategic Planning Programmes (or SPPs) and other subscription
products. Products that combine a variety of market reports,
periodic written analysis and briefings on industry trends and
events, forecasting models, supporting data and access to its
analysts. Customers subscribe to these products as an annual
prepaid package.
• Custom solutions. Discrete assignments that Datamonitor undertakes
on request from its customers as extensions of its customer
relationships.
2. Other information products:
• Market reports and Dashboard. Standardised reports and a business
information service covering essential data on companies, industries
and countries on a global basis.
Please visit our website for further information at www.datamonitor.com
CHIEF EXECUTIVE'S REVIEW
Market conditions have remained challenging over the first six months of the
year and discretionary budgets continue to be restricted. This impact has been
most pronounced in the Technology sector, but it has also affected our Financial
Services business. We are pleased that our Healthcare and Energy businesses have
continued to generate strong revenue growth. We have taken prompt action to
respond to current market challenges by reducing our cost base and recently
announced senior management changes.
FINANCIAL REVIEW
Revenue in the first half of the year decreased by 18% to £15.4m (2001: £18.7m),
principally reflecting the continued decline in the Technology sector and the
withdrawal of product last year in the Consumer and Automotive sectors.
Gross profit in the first half of the year decreased by 23% to £9.2m (2001:
£12.0m). Gross margin decreased to 60% (2001: 65%) reflecting the fixed elements
in cost of sales. Sales and marketing costs decreased in absolute terms to £6.0m
(2001: £7.0m) as a result of savings made through an efficiency review.
Excluding £0.6m of one off costs connected with the recent management changes
and the cost reduction programme, general and administrative costs decreased in
absolute terms to £5.0m (2001: £5.5m).
EBITDA loss increased to £2.3m (2001: £0.4m) as a result of our high operational
gearing. Our operating loss also increased to £3.6m (2001: £1.1m), also impacted
by a higher depreciation charge as a result of higher levels of capital
expenditure in 2001. The loss before and after tax was £3.4m (2001: £0.5m). This
represented a loss per share of 4.9p (2001: 0.7p).
We still have a strong cash balance at the half year with net cash of £13.3m at
30 June 2002 (31 December 2001: £18.8m). The reduction in net cash was primarily
due to the funding of operating losses and the increased working capital
requirement as a result of falling deferred revenues, which have decreased by
approximately £1.2m since 31 December 2001 to £8.1m (30 June 2001: £9.3m). Cash
was also impacted by the acquisition of shares by the employee share trust
(£0.8m) and one off costs relating to management changes and the cost reduction
programme (£0.6m). Capital expenditure in the first half of the year was £1.6m,
but is expected to be significantly lower in the future.
OPERATIONAL REVIEW
We have recently put in place a number of initiatives to protect revenues in the
short term; these include strengthening our customer databases, improving the
capability of our sales teams and deepening customer relationships through
selling additional content to our existing customers.
Our electronic publishing platform, soft launched in November 2001 and actively
marketed over this first half, has started to realise some direct revenue gains
by improving reach (measured by traffic and customer registrations) and customer
satisfaction (through both the improved functionality and the new range of
content). In addition we have achieved a number of cost benefits such as our
increased ability to carry out on line, rather than paper based, surveys.
Premium Services
Revenue from our Premium Services (Strategic Planning Programmes (SPPs), Other
Subscription Products and Custom Solutions) decreased by 3% to £11.8m (2001:
£12.2m). Premium Services now represent 77% of our revenue, above the long-term
target that we set at the time of the IPO.
Strategic Planning Programmes and Other Subscription Products
Our subscription products benefit from high renewal rates and deeply embedded
customer relationships. Our aim is to continue to build this high-quality
revenue stream by exploiting the research and analysis base within our existing
broad range of SPPs and Other Subscription Products to add revenue to the
relatively fixed cost base. The development of our Other Subscription Products
means that the distinction between these products and our SPP's is becoming less
clear and therefore we are taking this opportunity to provide greater
information on both SPP's and Other Subscription Products.
Revenue from the sale of SPP's and Other Subscription Products increased by 7%
to £9.1m (2001: £8.5m). However, sales of these products declined in the period.
At 30 June 2002 we had 1,110 SPP and subscription contracts (2001: 1,092).
Average contract value fell marginally, by 3% to £15,400 (2001: £15,900).
Average contracts per customer fell by 3% to 1.21 (2001:1.25).
Some of our Other Subscription Products are made available to academic
institutions and other organisations at discounted rates. Excluding these
contracts (which have a contract value of less than £10,000) we had, at 30 June
2002, 617 SPP and subscription contracts (2001: 698). Average contract value of
these contracts increased by 11% to £25,200 (2001: £22,800). Average contracts
per customer increased by 6% to 1.37 (2001: 1.29). Within this, SPPs (our
branded continuous advisory services) continue to be our largest selling product
area with revenue increasing to £6.7m (2001: £6.6m). Average contract value
increased by 13% to £25,900 (2001: £23,000). Average contracts per customer
increased by 6% to 1.43 (2001:1.35). The total number of SPP contracts was 469
at 30 June 2002 (2001: 580), reflecting the sharp decline in our Technology and
consolidation in both the Financial Services and Healthcare sectors. Our renewal
rate fell to 56% at 30 June 2002 (65% at 30 June 2001). This reduction was
caused by lower renewals in the Technology and Professional Services sectors,
excluding these sectors the renewal rate was 66% (2001: 66%).
Custom Solutions
Demand for Custom Solutions, discrete assignments undertaken on behalf of
clients, improved from the second half of last year, but has not recovered to
the levels experienced in the comparable period. First half revenue decreased
to £2.7m (2001: £3.7m) reflecting the budget pressures that affected many of our
customers.
Other Information products
Revenue from the sale of reports and distribution agreements declined during the
first half to £3.5m (2001: £6.5m) and now represents 23% of revenue. This
reduction in revenue has been more pronounced than anticipated as discretionary
budgets continue to be restricted, particularly in the Technology and Financial
Services sectors. A number of customers from whom we received up front
distribution fees in 2001 have now gone out of business. However, we have
continued to develop the relationships with the blue chip distributors that were
signed in the second half of 2001 and we are confident that these distribution
agreements will provide a sound basis for future revenue growth.
Cost Savings
In response to continued challenging market conditions, we have taken prompt
action to reduce our cost base. The company has already started to benefit from
the cost reduction measures announced in the last quarter of 2001, which have
now delivered the expected annualised costs savings of £2.2m. In addition to
these actions, we announced in June that we had taken additional measures in the
first half of 2002 to reduce total annual costs by a further £2.0m in a full
year. These cost savings were achieved through a targeted redundancy programme
and a series of measures to reduce our non-headcount costs in the general and
administrative areas.
Board Changes
As announced in the trading update on 12 June 2002, the Company has made changes
in its senior management. On 1 July 2002 I was re-appointed Chief Executive
Officer, following the resignation of Tom Gardner. In addition, Ian Pratt has
resigned as a Director of the Company with effect from 23 July 2002, but will
continue as a Chief Financial Officer until after the recruitment of a successor
and an appropriate transition period. A search is underway to find a successor.
Effective July 23, Bradley Hanson, a non-executive Director appointed by Reuters
in 1998 has also resigned from the Board and will be replaced by Graham Albutt.
Graham is President of the Business Technology Group at Reuters, which consists
of 4,000 staff worldwide. Prior to this appointment Graham was Chief Information
Officer at Reuters. Graham's broad experience of the business information
industry, gained over 15 years at Reuters, will be of considerable benefit to
us. Graham will join the audit and remuneration committees. Geoffrey Dunn, one
of the Company's three non-executive directors, has resigned with effect from 1
September 2002 in order to concentrate on his other activities.
We have initiated a search for a non-executive Chairman.
Prospects
Visibility on the second half is limited and revenues will be dependent on some
major contract renewals being achieved; on this basis, the Company expects that
revenue in the second half of the year will be broadly in line with that of the
first half.
In light of sustained challenging market conditions, we have acted rapidly to
deal with the reduction in revenues by continuing to manage costs tightly across
the business. The actions taken on costs, which will start to be felt
immediately in the second half of the year, will allow us to return to our path
to profitability. Although visibility in our markets is still limited, the
Company remains confident that its focus on subscription products and its spread
across sectors will allow it to grow, over the longer term, by attracting new
clients and increasing premium services revenue.
Mike Danson
Chief Executive Officer
24 July 2002
FINANCIAL REVIEW
6 months to % 6 months to % Year to %
June 30 2002 June 30 2001 December 31,
2001
£000 £000 £000
Premium services 11,843 77.0 12,185 65.3 24,578 69.5
Non-subscription 3,547 23.0 6,479 34.7 10,784 30.5
information
products
Total revenue 15,390 100.0 18,664 100.0 35,362 100.0
Cost of Services (6,151) (40.0) (6,625) (35.5) (13,075) (37.0)
Gross profit 9,239 60.0 12,039 64.5 22,287 63.0
Sales and marketing costs (5,952) (38.7) (6,967) (37.3) (12,931) (36.5)
General and administrative (5,555) (36.1) (5,478) (29.4) (10,891) (30.8)
expenses
EBITDA (2,268) (14.7) (406) (2.2) (1,535) (4.3)
Depreciation & (1,374) (9.0) (698) (3.7) (1,752) (5.0)
amortization
Operating loss before (3,642) (23.7) (1,104) (5.9) (3,287) (9.3)
exceptional items
Exceptional items
Redundancy costs - - (402) (1.1)
Net interest received/ 282 1.8 589 3.1 999 2.8
(paid)
Loss before taxation (3,360) (21.9) (515) (2.8) (2,690) (7.6)
Consolidated profit and loss account
for the six months ended 30 June 2002
Six months ended Year ended
30 June 31 December
Note 2002 2001 2001
Unaudited Unaudited Audited
Restated* Restated*
£000 £000 £000
Turnover 15,390 18,664 35,362
Cost of sales
Ongoing costs (6,151) (6,625) (13,075)
Exceptional item - Redundancy Costs - - (183)
Total cost of sales (6,151) (6,625) (13,258)
Gross profit 9,239 12,039 22,104
Sales and marketing costs
Ongoing costs (5,952) (6,967) (12,931)
Administrative expenses
Ongoing costs (6,929) (6,176) (12,643)
Exceptional item - Redundancy Costs - - (219)
Operating loss (3,642) (1,104) (3,689)
Interest receivable and similar income 282 589 1,000
Interest payable and similar charges - - (1)
Loss on ordinary activities before taxation (3,360) (515) (2,690)
Tax on loss on ordinary activities 3 - (2) -
Retained loss for the period (3,360) (517) (2,690)
Basic loss per ordinary share 4 (4.89p) (0.73p) (3.82p)
All results during current and previous periods relate to continuing operations.
* see note 1
Consolidated statement of total recognised gains and losses
for the six months ended 30 June 2002
Six months ended Year ended
30 June 31 December
2002 2001 2001
Unaudited Unaudited Audited
£000 £000 £000
Loss on ordinary activities after taxation (3,360) (517) (2,690)
Exchange difference on retranslation of net 97 (80) (39)
liabilities of subsidiary undertaking
Total recognised gains and losses relating to (3,263) (597) (2,729)
the period
All results during current and previous periods relate to continuing operations.
Consolidated balance sheet
at 30 June 2002
As at As at As at
30 June 30 June 31 December
2002 2001 2001
Unaudited Unaudited Audited
£000 £000 £000
Fixed assets
Tangible assets 5,939 5,152 5,667
Investments 839 - 843
6,778 5,152 6,510
Current assets
Stocks 99 194 112
Debtors 9,781 9,702 8,929
Cash at bank and in hand 13,295 21,156 18,817
23,175 31,052 27,858
Creditors: amounts falling due within one (13,771) (14,871) (14,912)
year
Net current assets 9,404 16,181 12,946
Total assets less current liabilities 16,182 21,333 19,456
Provisions for liabilities and charges (243) - (254)
Net assets 15,939 21,333 19,202
Capital and reserves
Called up share capital 7,040 7,040 7,040
Share premium account 28,287 28,286 28,287
Profit and loss account (19,388) (13,993) (16,125)
15,939 21,333 19,202
Equity shareholders' funds
The financial statements were approved by the Board of Directors on 23 July 2002
and were signed on its behalf by
M. Danson, Director
Consolidated cash flow statement
for the six months ended 30 June 2002
Six months ended Year ended
30 June 31 December
Note 2002 2001 2001
Unaudited Unaudited Audited
£000 £000 £000
Cash outflow from operating activities 5 (4,258) (1,347) (1,732)
Returns on investments and servicing of finance 6 282 589 999
Taxation - 54 59
Capital expenditure and financial investment 6 (1,643) (3,157) (5,568)
Cash outflow before financing (5,619) (3,861) (6,242)
Financing 6 - 366 367
Decrease in cash in the period (5,619) (3,495) (5,875)
Reconciliation of net cash flow 7
to movement in net funds
Decrease in cash in the period (5,619) (3,495) (5,875)
Exchange difference 97 (80) (39)
Movement in net funds in the period (5,522) (3,575) (5,914)
Net funds at the start of the period 18,817 24,731 24,731
Net funds at the end of the period 13,295 21,156 18,817
Reconciliations of movements in equity shareholders' funds
for the six months ended 30 June 2002
Six months ended Year ended
30 June 31 December
2002 2001 2001
Unaudited Unaudited Audited
£000 £000 £000
Loss on ordinary activities after taxation (3,360) (517) (2,690)
Exchange difference on retranslation of net liabilities 97 (80) (39)
of subsidiary undertaking
New share capital subscribed (net of issue costs) - 366 367
Net reduction in shareholders' funds (3,263) (231) (2,362)
Opening shareholders' funds 19,202 21,564 21,564
Closing shareholders' funds 15,939 21,333 19,202
Notes
1 Basis of preparation
The financial statements have been prepared using the Group's accounting
policies set out in the Annual Report for the year ended 31 December 2001.
The comparative figures for the financial year ended 31 December 2001 are not
the Group's statutory accounts for that financial year. Those accounts have been
reported on by the Group's auditors and delivered to the registrar of companies.
The report of the auditors was unqualified and did not contain a statement under
section 237 (2) or (3) of the Companies Act 1985.
The comparative profit and loss accounts for the financial year ended 31
December 2001 and the six months ended 30 June 2001 have been restated to report
gross profit before sales and marketing costs and to disclose sales and
marketing costs separately from cost of sales. This additional disclosure is
intended to improve comprehension of the profit and loss account.
The following new accounting standard has become effective for the first time
this period and has been adopted by the Group:
FRS 19 Deferred tax: FRS 19 requires deferred tax to be recognised in respect of
all timing differences that result in an obligation to pay more tax, or a right
to pay less tax, in the future as a result of past events. There is no effect
from the adoption of FRS 19, as the Group's deferred tax assets are not deemed
recoverable in the foreseeable future.
2 Segmental information
The Group views its operations and manages its business as principally one
segment, research and analysis. As a result, the financial information
disclosed herein materially represents all of the financial information related
to the Group's principal operating segment.
Six months ended Year ended
30 June 31 December
2002 2001 2001
Unaudited Unaudited Audited
£000 £000 £000
Turnover
USA 4,471 4,465 8,744
Europe 10,919 14,199 26,618
15,390 18,664 35,362
Operating (loss)/profit
USA (322) 201 (279)
Europe (3,320) (1,305) (3,410)
(3,642) (1,104) (3,689)
Net interest 282 589 999
Loss on ordinary activities before taxation (3,360) (515) (2,690)
Net assets/(liabilities)
USA (2,138) (1,480) (1,916)
Europe 18,077 22,813 21,118
Total net assets 15,939 21,333 19,202
Group turnover is allocated to geographic segments based on the location from
which services are delivered and orders fulfilled. Group operating loss and net
assets/(liabilities) are allocated to the locations which give rise to the
result for the period and net asset/(liability) position.
Net interest arose substantially in Europe.
3 Taxation
Six months ended Year ended
30 June 31 December
2002 2001 2001
Unaudited Unaudited Audited
£000 £000 £000
UK Corporation Tax at 30 % (2001 : 30%) - - -
Adjustments to prior years' UK Corporation Tax - - -
Foreign tax at 35% (2001: 35%) - - -
Adjustments to prior years' foreign tax - 2 -
Tax on loss on ordinary activities - 2 -
There is no UK Corporation tax charge for the period due to the trading losses
incurred. The Group has losses of approximately £16,700,000 available for carry
forward against future trading profits at 30 June 2002.
In addition, at 30 June 2002 the Company has an unrecognised deferred tax asset
of approximately £40,000 arising on the cumulative excess of depreciation over
capital allowances.
4 Loss per share
Six months ended Year ended
30 June 31 December
2002 2001 2001
Unaudited Unaudited Audited
£000 £000 £000
Loss for the period attributable to shareholders (3,360) (517) (2,690)
Weighted average number of shares in issue 70,376,440 70,373,733 70,373,755
Weighted average non-vested shares held by employee (1,680,904) - (4,618)
share ownership trust
Basic loss per share denominator 68,686,344 70,373,733 70,369,137
Basic loss per ordinary share (4.89p) (0.73p) (3.82p)
Diluted earnings per share is not disclosed as its computation results in an
anti-dilutive effect.
5 Reconciliation of operating loss to operating cash flows
Six months ended Year ended
30 June 31 December
2002 2001 2001
Unaudited Unaudited Audited
£000 £000 £000
Operating loss (3,642) (1,104) (3,689)
Exceptional item within operating loss - - 402
Operating loss before exceptional item (3,642) (1,104) (3,287)
Depreciation, amortisation and impairment charges 1,375 699 1,765
Profit on disposal of tangible fixed assets - - (13)
Decrease/(increase) in stocks 13 (35) 47
(Increase) in debtors (852) (1,132) (362)
(Decrease)/increase in creditors (1,141) 225 266
(Decrease)/increase in provisions for liabilities and (11) - 254
charges
(4,258) (1,347) (1,330)
Outflow related to exceptional item - - (402)
Net cash outflow from operating activities (4,258) (1,347) (1,732)
6 Analysis of cash flows
Six months ended Year ended
30 June 31 December
2002 2001 2001
Unaudited Unaudited Audited
£000 £000 £000
Returns on investment and servicing of finance
Interest received 282 589 1,000
Interest paid - - (1)
Net cash inflow from returns on investment and servicing 282 589 999
of finance
Capital expenditure and financial investment
Purchase of tangible fixed assets (1,647) (3,157) (4,725)
Purchase of own shares - - (843)
Sale of own shares 4 - -
Net cash outflow from capital expenditure and financial (1,643) (3,157) (5,568)
investment
Financing
Issue of ordinary share capital - 366 367
Net cash inflow from financing - 366 367
7 Analysis of net funds
At 1 January Cash flow Exchange At 30 June
2002 Difference 2002
£000 £000 £000 £000
Cash in hand, at bank 18,817 (5,619) 97 13,295
Interim statement
Copies of the interim report will be posted in due course to all shareholders on
the register at 6 August 2002 and will be available from the company at Charles
House, 108 - 110 Finchley Road, London NW3 5JJ or via our web site
www.datamonitor.com.
This information is provided by RNS
The company news service from the London Stock Exchange
