RNS No 5322h
HODDER HEADLINE PLC
7th September 1998
INTERIM RESULTS
Hodder Headline announces record results for the six months to 30th
June 1998, with earnings per share up by 72% compared to the
same period in 1997.
The key points are :
Earnings per share up by 72% to 4.3 pence (1997, 2.5 pence)
Sales up by 19% to #45.1 million (1997, #38.0 million)
Operating profits up by 60% to #2.5 million
(1997, #1.6 million)
Pre-tax profits up by 70% to #2.2 million (1997, #1.3 million)
Net debt reduced by 45% to #4.0 million (1997, #7.3
million)
Gearing halved to 11% (1997, 22%)
Interim dividend raised by 11% to 2.45 pence net per share
(1997, 2.20 pence net per share)
The second half has started well and the Board is confident that
the Group will show good progress in the full year
Tim Hely Hutchinson, Group Chief Executive, commented on the
results and prospects:
"We are delighted with these record results. They have been
achieved through the successful implementation of our long-
term strategy of vigorous investment in copyrights from the
best authors and in strong marketing campaigns to build
those authors' sales. Our bestsellers in the period
included paperbacks of Josephine Cox's Miss You Forever;
Charles Frazier's Cold Mountain; Elizabeth George's
Deception on his Mind; Cathy Kelly's Woman to Woman and Dean
Koontz's Fear Nothing. Bestselling hardback titles included
Sophie Grigson and William Black's Fish and Thrones,
Dominations by Dorothy L Sayers and Jill Paton Walsh. Lucy
Daniels' Animal Ark books are now one of the fastest selling
children's young fiction series in Britain.
Russell & Rubinstein's Pathology of Tumours of the Central
Nervous System (6th edition) made a significant contribution
to sales in our Educational, Academic & Professional
publishing segment.
The UK retail market for books continued to be reasonably firm.
We are encouraged by the continued opening of attractive new
bookshops, including superstores, that promise to usher in
an expansive new era in British bookselling. However, Hodder
Headline's growth rate of 29% in UK Consumer Publishing in
the period largely reflected growth in market share. Around
70% of the Group's sales in the period were made in the UK.
In the meantime, Australian and New Zealand markets were
weak and are likely to remain so while their currencies and
economies continue to be affected by problems in Asia.
New Zealand's recent abandonment of territorial copyright
protections is having a negative effect on margins in this
small market. We are reducing our overheads in Australia by
establishing a joint venture with another publisher for
warehousing and distribution from the beginning of 1999.
The reorganisation costs of #0.2m were provided for in the
first six months of the year.
We have strong publishing lists for the second half of the year
and, although our high sales and profit growth rates in the
first and less important half of the year were favourably
influenced by the weighting of this year's publishing
programme, we are confident of another year of good
progress."
Attached is a copy of the Group's 1998 Interim Report.
For further information, please contact :
Tim Hely Hutchinson 0171 404 5959 on
7th September
Group Chief Executive Otherwise, 0171 873 6000
Mark Opzoomer As above
Deputy Chief Executive
Richard Adam As above
Group Finance Director
Jane Hardman / Jessica Shepherd-Smith 0171 404 5959
Brunswick Public Relations
7th September, 1998
Editors' Note
Hodder Headline PLC is one of the largest book publishers in
Britain and is listed on The London Stock Exchange. The
Group currently has annual sales of about #100 million and
employs 750 staff.
Consumer publishing comprises 80% of Group sales, principally
under the imprints of Headline, Hodder & Stoughton, Sceptre,
Coronet, New English Library, Hodder Children's Books and
Teach Yourself.
Leading fiction authors include John le Carr?, Tom Clancy,
Josephine Cox, Elizabeth George, Stephen King, Dean Koontz
and James Patterson. Important non-fiction works include
The Bible (New International Version), Superplonk, Rothmans
Football Yearbook and Playfair Cricket Annual. Children's
authors include Enid Blyton, Mick Inkpen, Paula Danziger
with Anne Martin, and Lucy Daniels (the Animal Ark series).
Hodder Headline also publishes a wide range of Educational,
Academic and Professional books.
Just over 70% of the Group's sales are destined for the UK
domestic market. The Group also has overseas operations in
Australia, South Africa and New Zealand, from where Hodder
Headline also jointly publishes the bestselling works of the
internationally renowned photographer, Anne Geddes.
Chairman's Interim Statement
We are delighted to announce record interim results for the
first half of 1998. They have been achieved through the
successful implementation of our long-term strategy of
vigorous investment in copyrights from the best authors and
in strong marketing campaigns to build those authors'
sales. The Group had a good showing on bestseller lists
throughout the period.
Results and Dividends
Sales in the first half of 1998 grew by 19% to #45.1 million
(1997, #38.0 million). The sales increase of 19% compared
to the same period in 1997 would have been 2% higher but
for currency adjustments.
The UK retail market continued to be reasonably firm. We are
encouraged by the continued opening of attractive new
bookshops, including superstores, that promise to usher in
an expansive new era in British bookselling. However,
Hodder Headline's growth rate of 29% in UK Consumer
Publishing sales in the period largely reflected growth in
market share. Around 70% of the Group's sales in the
period were made in the UK. In the meantime, the
Australian and New Zealand markets were weak and are likely
to remain so while their currencies and economies continue
to be affected by problems in Asia. New Zealand's recent
abandonment of territorial copyright protections is having
a negative effect on margins in this small market. We are
reducing our overheads in Australia by establishing a joint
venture with another publisher for warehousing and
distribution from the beginning of 1999. The
reorganisation costs of #0.2 million were provided for in
the first six months of the year.
Operating profit rose by 60% to #2.5 million (1997, #1.6
million). Profit before taxation rose by 70% to #2.2
million (1997, #1.3 million). The Overseas operating loss
was #0.9 million in the period (1997, #0.1 million),
increased mostly because of lower income as anticipated
from the Anne Geddes gift book programme and the Australian
reorganisation provisions. However, strong results from
the UK publishing divisions more than offset these factors.
Net interest costs were #0.3 million (1997, #0.3 million),
with the benefits of lower average borrowings being offset
by higher average base rates. Interest cover was 8.9 times
(1997, 6.2 times). Taxation has been provided for at 32.5%
(1997, 33.0%).
Earnings per share increased by 72% to 4.3 pence (1997, 2.5
pence). The Board has decided to increase the interim
dividend by 11% to 2.45 pence net per share (1997, 2.20
pence net per share). The interim dividend is covered 1.7
times by interim earnings (1997, 1.1 times). This dividend
will be paid on 11th November 1998 to shareholders on the
register at 16th October 1998.
The quoted share price was 266 pence at 30th June 1998,
increased from 207 pence at 31st December 1997 and 196
pence at 30th June 1997. The highest and lowest quoted
prices in the first half of 1998 were 278 and 207 pence
respectively.
Balance Sheet and Cash Flow
Gearing fell to 11% (1997, 22%), with net debt at 30th June
1998 down by 45% to #4.0 million (1997, #7.3 million).
Stock levels at the period end were reduced by 5% compared
with the same date in 1997. The ratio of stock to moving
annual sales reduced from 21.5% to 18.5% and the trade
debtor ratio on the same basis improved from 21.6% to
18.2%.
Year 2000
The Year 2000 issue is one that affects all companies. In
1997 we initiated a Year 2000 programme and progress is
regularly monitored by the Board of Directors.
We aim to ensure that we will be Year 2000 compliant by 31st
December 1998, although total compliance by this date is
dependent upon organisations with whom we trade meeting
their targets. The Group incurred costs of #0.1m in the
first six months of the year in relation to Year 2000
compliance and we are satisfied that the total future costs
will not be material to the profitability of the Group.
Current Trading and Prospects
Sales in July and August were fully in line with our
expectations, and customers continue to give positive
indications about the Group's all-important Autumn
programme.
Major new adult consumer titles for the second half include
Stephen King's new novel Bag of Bones and the paperback of
his Wizard and Glass; Sir Edward Heath's and Will
Carling's autobiographies; James Patterson's new novel When
the Wind Blows and the paperback of his Cat and Mouse;
Josephine Cox's new novel Tomorrow the World and the
paperback of her Love Me or Leave Me; Pete Goss's Close to
the Wind; Dean Koontz's new novel Seize the Night and the
first novel in Tom Clancy's new series Net Force.
Highlights of the Autumn Children's book publishing programme
include Mick Inkpen's The Great Pet Sale and six new titles
in the bestselling Animal Ark series. We have introduced
several major new secondary school textbook projects,
principally in the subject areas of English, Maths and
Science and we are hopeful of strong sales from these in
the second half of the year.
Although our high sales and profit growth rates in the first
and less important half of the year were favourably
influenced by the weighting of this year's publishing
programme, we are confident of further good progress in the
full year.
Forward commissioning for 1999 and future years is well
advanced and we are especially pleased that John le Carr?
has brought us his superb new novel of financial intrigue,
Single and Single, for publication in early 1999.
Management and Staff
I would like to take this opportunity to thank all the staff
at Hodder Headline for their hard work and achievements not
only during this successful start to 1998, but also more
generally as they prepare for a busy Autumn season and
develop strong publishing lists for the future.
Christopher Weston
7th September 1998
Unaudited Consolidated Profit and Loss Account
For the six months ended 30th June
Year ended
31st December
Note 1998 1997 1997
#000 #000 #000
_____________________________________________________________
Turnover - continuing
operations 245,133 38,011 93,162
Cost of sales (23,508) (19,339) (49,314)
_____________________________________________________________
Gross profit 21,625 18,672 43,848
Distribution costs (5,177) (4,426) (10,004)
Administrative expenses (15,003) (14,308) (28,687)
Other operating income 1,054 1,619 3,541
_____________________________________________________________
Operating profit - before
interests in associated
undertakings and joint ventures 2,499 1,557 8,698
Income from interests in
associated undertakings
and joint ventures 17 13 200
_____________________________________________________________
Operating profit -
continuing operations 2 2,516 1,570 8,898
Net interest payable and
similar charges (282) (253) (724)
_____________________________________________________________
Profit on ordinary activities
before taxation 2,234 1,317 8,174
Tax on profit on
ordinary activities 3 (726) (435) (2,616)
______________________________________________________________
Profit on ordinary activities
after taxation 1,508 882 5,558
Equity minority interests (2) (14) (1)
______________________________________________________________
Profit for the financial period 1,506 868 5,557
______________________________________________________________
Dividends 4 (864) (776) (2,540)
______________________________________________________________
Retained profit for the financial
Period transferred to reserves 642 92 3,017
______________________________________________________________
Earnings per share 5 4.3p 2.5p 15.8p
____________________________________________________________
Unaudited Consolidated Balance Sheet
At 30th June
At
31st December
Note 1998 1997 1997
#000 #000 #000
________________________________________________________________
Fixed assets
Intangible assets 475 514 495
Tangible assets 3,469 3,670 3,695
Investments 299 344 358
________________________________________________________________
4,243 4,528 4,548
________________________________________________________________
Current assets
Stock 18,594 19,488 17,880
Debtors 43,134 41,400 45,123
Cash at bank and in hand 1,909 2,059 3,492
________________________________________________________________
63,637 62,947 66,495
Creditors: amounts falling due
within one year (25,586) (24,469) (29,110)
________________________________________________________________
Net current assets 38,051 38,478 37,385
________________________________________________________________
Total assets less current
liabilities 42,294 43,006 41,933
Creditors: amounts falling
due after more than one year (5,590) (8,945) (5,582)
Provisions for liabilities
and charges (831) (999) (901)
_______________________________________________________________
Net assets 2 35,873 33,062 35,450
_______________________________________________________________
Capital and reserves
Called up share capital 3,528 3,527 3,527
Share premium account 17,274 17,253 17,256
Merger reserve 3,171 3,171 3,171
Profit and loss account 11,873 9,068 11,468
_________________________________________________________________
Equity shareholders' funds 6 35,846 33,019 35,422
Equity minority interests 27 43 28
________________________________________________________________
Shareholders' funds 35,873 33,062 35,450
________________________________________________________________
Unaudited Consolidated Cash Flow Statement
For the six months ended 30th June
Year ended
31st December
Note 1998 1997 1997
#000 #000 #000
__________________________________________________________________
Net cash inflow/(outflow)
from operating activities
Net cash inflow/(outflow)
from continuing operating
activities 1,596 (745) 7,038
Cash outflow in respect of prior
year acquisition
and reorganisation provisions (100) (380) (442)
________________________________________________________________
7 1,496 (1,125) 6,596
________________________________________________________________
Dividends from associated
undertakings andjoint ventures 52 41 186
________________________________________________________________
Returns on investment and servicing
of finance
Interest paid (323) (268) (781)
Interest received 43 62 111
________________________________________________________________
Net cash outflow from returns
on investment and servicing
of finance (280) (206) (670)
________________________________________________________________
Taxation
UK corporation tax paid (655) (105) (981)
Overseas tax paid (3) (41) (302)
________________________________________________________________
Tax paid (658) (146) (1,283)
________________________________________________________________
Capital expenditure and financial
investment
Purchase of tangible fixed assets (537) (451) (1,272)
Proceeds from sale of tangible
fixed assets 2 30 73
________________________________________________________________
Net cash outflow from capital
expenditure and financial
investment (535) (421) (1,199)
_________________________________________________________________
Equity dividends paid (1,764) (1,587) (2,363)
_________________________________________________________________
Net cash (outflow)/inflow
before financing (1,689) (3,444) 1,267
_______________________________________________________________________
________
Financing
Issue of ordinary share capital 19 5 8
Proceeds from new borrowings 121 8,125 5,000
Repayment of loans - (142) (142)
Capital element of finance
lease payments (193) (245) (504)
_________________________________________________________________
Net cash (outflow)/inflow
from financing (53) 7,743 4,362
_________________________________________________________________
(Decrease)/increase in cash (1,742) 4,299 5,629
__________________________________________________________________
Unaudited Reconciliation of Net Cash Flow to Movement in Net Debt
For the six months ended 30th June
Year ended
31st December
Note 1998 1997 1997
#000 #000 #000
______________________________________________________________
(Decrease) /increase in cash
in the period (1,742) 4,299 5,629
Cash outflow/(inflow) from
decrease/(increase)
in debt and leasing finance 72 (7,738) (4,354)
_______________________________________________________________
Change in debt resulting
from cash flows (1,670) (3,439) 1,275
Other finance lease movements 6 (38) (73)
Currency translation differences 129 49 186
_______________________________________________________________
Movement in net debt in the period (1,535) (3,428) 1,388
Net debt at start of period (2,449) (3,837) (3,837)
_______________________________________________________________
Net debt at end of period 8 (3,984) (7,265) (2,449)
_______________________________________________________________
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
1997. 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 1997
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
1998 1997 1997
#000 #000 #000
_________________________________________________________________
Turnover - continuing operations
UK Consumer Publishing 28,678 22,206 53,688
UK Educational, Academic
& Professional Publishing 9,224 7,600 19,989
Overseas Operations 6,168 7,212 17,377
UK Distribution 1,063 993 2,108
_________________________________________________________________
45,133 38,011 93,162
_________________________________________________________________
Segmental Analysis continued
For the six months ended 30th June
Year ended
31st December
1998 1997 1997
#000 #000 #000
_________________________________________________________________
Profits
UK Consumer Publishing
- Group 3,272 1,883 5,283
- associated undertakings 17 13 40
_________________________________________________________________
3,289 1,896 5,323
_________________________________________________________________
UK Educational, Academic &
Professional Publishing 232 168 2,628
Overseas Operations
- Group (939) (72) 783
- joint ventures - - 160
_________________________________________________________________
(939) (72) 943
_________________________________________________________________
UK Distribution (66) (422) 4
_________________________________________________________________
Operating profit - continuing
operations 2,516 1,570 8,898
Net interest payable and similar
charges (282) (253) (724)
________________________________________________________________
Profit before taxation 2,234 1,317 8,174
________________________________________________________________
Net assets
UK Consumer Publishing
- Group 28,688 28,072 25,980
- associated undertakings 146 192 134
_________________________________________________________________
28,834 28,264 26,114
_________________________________________________________________
UK Educational, Academic &
Professional Publishing 5,209 4,973 5,527
________________________________________________________________
Overseas Operations
- Group 4,470 5,627 4,602
- joint ventures 153 152 229
_________________________________________________________________
4,623 5,779 4,831
_________________________________________________________________
UK Distribution 1,191 1,311 1,427
_________________________________________________________________
Net operating assets 39,857 40,327 37,899
Unallocated net assets:
Net debt (3,984) (7,265) (2,449)
_________________________________________________________________
35,873 33,062 35,450
_________________________________________________________________
3 Taxation
The taxation charge for the period is based on the estimated
effective rate of 32.5% for the year ending 31st December
1998 (33.0% for the year ending 31st December 1997).
4 Dividends
An interim dividend of 2.45 pence net per share (1997, 2.20
pence net per share) will be paid on 11th November 1998 to
shareholders on the register at the close of business on
16th October 1998.
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 1998 was 35,273,911 and for
the six months to 30th June 1997 was 35,265,566.
6 Reconciliation of Movement in Equity Shareholders' Funds
For the six months ended 30th June
Year ended
31st December
1998 1997 1997
#000 #000 #000
______________________________________________________________
Profit attributable to members
of the Company 1,506 868 5,557
Dividends (864) (776) (2,540)
______________________________________________________________
642 92 3,017
Capital subscribed 19 5 8
Exchange rate differences (237) (99) (624)
______________________________________________________________
Net movement in equity
shareholders' funds 424 (2) 2,401
Opening equity shareholders'
funds 35,422 33,021 33,021
______________________________________________________________
Closing equity shareholders'
funds 35,846 33,019 35,422
______________________________________________________________
7 Reconciliation of Operating Profit to Net Cash Flow from
Operating Activities
For the six months ended 30th June
Year ended
31st December
1998 1997 1997
#000 #000 #000
_________________________________________________________________
Operating profit - before
interests in associated
undertakings and joint
ventures 2,499 1,557 8,698
Adjustments to operating profit:
Depreciation and amortisation
charges 721 688 1,391
Loss on sale of tangible
fixed assets 6 7 39
(Increase)/decrease in working capital:
Proceeds from sale of
property held for sale - 182 182
Stocks (1,083) (1,432) (300)
Debtors 1,787 1,300 (4,168)
Creditors (2,364) (3,155) 1,105
Increase in acquisition and
reorganisation provisions 30 108 91
_____________________________________________________________
Net cash inflow/(outflow) from
continuing operations 1,596 (745) 7,038
Cash outflow in respect of prior
year acquisition and
reorganisation provisions (100) (380) (442)
______________________________________________________________
Net cash inflow/(outflow)
from operating activities 1,496 (1,125) 6,596
______________________________________________________________
8 Analysis of Changes in Net Debt during the Period
For the six months ended 30th June
Effect of
At foreign At At
1st January Net cash Other exchange 30th June 30th June
1998 flow changes rates 1998 1997
#000 #000 #000 #000 #000 #000
_________________________________________________________________
Cash at bank and
in hand 3,492 (1,688) - 105 1,909 2,059
Bank overdrafts - (54) - 9 (45) -
_________________________________________________________________
3,492 (1,742) - 114 1,864 2,059
Borrowings due
after one year (5,000) (121) - - (5,121)(8,125)
Finance leases (941) 193 6 15 (727)(1,199)
_________________________________________________________________
(5,941) 72 6 15 (5,848)(9,324)
_________________________________________________________________
Net debt (2,449) (1,670) 6 129 (3,984)(7,265)
_________________________________________________________________
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 Dates Events
-----------------------------------------------------------
12th October 1998 1998 Interim Dividend March 1999 1998
Ex Dividend Date Preliminary Results
Announcement
16th October 1998 1998 Interim Dividend April 1999 1998 Annual Report &
Record Date Accounts
11th November 1998 1998 Interim Dividend May 1999 Annual General Meeting
Payment May 1999 19998 Finan 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 1998 set out on pages 4 to 11
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 Bulletins
1993/1 'Review of Interim Financial Information' and 1998/6
Review of Interim Financial Information - Supplementary
Guidance for Auditors', 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 1997 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
7th September 1998
END
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