CENTAUR MEDIA PLC ANNUAL REPORT 2008 CONTENTS 3 Highlights 5 Trends 7 Centaur’s Vision 8 Centaur’s Strategy 9 Centaur’s Key Media Models 11 Chairman’s Statement 12-23 Business Review 24-25 Corporate Social Responsibility 26-31 Financial Review 32-33 Board of Directors 34-35 Report of the Directors 36-39 Corporate Governance Statement 40-45 Directors’ Report on Remuneration 46-47 Independent Auditors’ Report 48 Consolidated Income Statement 49 Statement of Recognised Income and Expense 50 Consolidated Balance Sheet 51 Company Balance Sheet 52 Consolidated Cash Flow Statement 53 Company Cash Flow Statement 54-57 Statement of Accounting Policies 58-88 Notes to the Financial Statements 89 Centaur’s Vision and Values 90 Directors, Advisers and Other Corporate Information HIGHLIGHTS Revenue £90.4m (2007:£90.3m); 4 year CAGR 8% Adjusted EBITDA1 margin up 2 percentage points to 24% Adjusted PBT2 up 14% to £19.2m (2007:£16.9m) PBT after exceptional cost £14.5m (2007:£16.9m) Adjusted basic EPS3 up 12% to 9.2p (basic EPS 6.7p (2007:8.2p)) Net cash of £7.7m after share repurchase of £7.9m (Net cash at 30 June 2007:£9.0m) Full year dividend per share up 20% to 4.2p (2007:3.5p) Notes (1) One of Centaur’s key measures of profit, which is used to measure the (4) All comparatives have been restated to exclude discontinued operations relative performance of divisional units of the Group, is earnings before interest, tax, depreciation and amortisation, excluding exceptional items and other (5) Cash conversion rate is free cash flow expressed as a percentage of significant non-cash items including share based payments (Adjusted EBITDA). adjusted operating profit. Free cash flow is defined as cash generated from Refer to page 27. operations (note 25 to the financial statements), less capital expenditure on property, plant and equipment and software, and excluding the cash impact of (2) Adjusted PBT (PBTA) is profit before tax, excluding the impact of exceptional items. Adjusted operating profit is operating profit after making amortisation of acquired intangibles and of exceptional items and excluding adjustments for amortisation on acquired intangibles and exceptional items. the profit on disposal of associated undertakings. Refer to page 27. Refer to page 28. (3) Adjusted EPS is based on the basic EPS but after making adjustments for amortisation on acquired intangibles and exceptional items and excluding the profit on disposal of associated undertakings, as detailed in note 7 to the financial statements. Centaur Media plc – Annual Report Year ended 30 June 2008 03 TRENDS Over the last five years, Centaur has delivered significant growth in revenues, profits, and cash flows as illustrated below Revenue (£m) Adjusted EBITDA (£m) 21.5 90.3 90.4 19.7 80.5 70.4 15.7 66.3 12.1 8.4 2004 2005 2006 2007 2008 2004 2005 2006 2007 2008 Adjusted PBT (£m) Adjusted EPS (pence) 19.2 9.2 16.9 8.2 13.2 6.2 9.6 4.6 5.9 2.8 2004 2005 2006 2007 2008 2004 2005 2006 2007 2008 4 year compound Year ended Year ended Year ended Year ended Year ended annual growth 30 June 2008 30 June 2007 30 June 2006 30 June 2005 30 June 2004 Actual Actual Actual (4) Actual (4) Proforma IFRS IFRS IFRS IFRS UK GAAP % £m £m £m £m £m Revenue 8% 90.4 90.3 80.5 70.4 66.3 Adjusted EBITDA (1) 26% 21.5 19.7 15.7 12.1 8.4 Adjusted EBITDA (1) margin 24% 22% 20% 17% 13% Adjusted profit before tax (2) 34% 19.2 16.9 13.2 9.6 5.9 Profit before tax 14.5 16.9 15.1 9.1 3.0 Adjusted basic EPS (pence) (3) 35% 9.2 8.2 6.2 4.6 2.8 Basic EPS 6.7 8.2 7.6 4.3 2.9 Average staffing (number of heads) 786 748 710 695 724 continuing operations Revenue per head (£000) 115 121 113 101 92 Cash conversion rate % (5) 90% 94% 89% 81% 91% Net cash 7.7 9.0 6.2 10.0 5.7 Full year dividend per share (pence) 4.2 3.5 3.0 1.7 1.0 Centaur Media plc – Annual Report Year ended 30 June 2008 05 CENTAUR’S VISION Centaur serves the information highly entrepreneurial and innovative and marketing needs of a number with a strong sense of local ownership. of high value markets and professional communities. Centaur's vision is to be the leading provider of information, marketing Our understanding of the changing and lead-generation media solutions needs of our customers has led to us to our chosen business and special owning many market-leading brands. interest communities. We seek to These brands are increasingly offer the best integrated product and deployed over a broad range of media, service portfolio in each of the vertical and our brand strength and closeness markets we serve. We aim to achieve to our markets provides a rich source and maintain market leadership of organic growth opportunities. through continuous customer- responsive innovation and a We operate as a federation of small consistently high level of content businesses, with a culture that is quality and integrity. Centaur Media plc – Annual Report Year ended 30 June 2008 07 CENTAUR’S STRATEGY Centaur’s strategy, since the formation of the Group in 1982, has been based firstly on identifying and serving the information needs of distinct business communities and secondly on facilitating contact between buyers and sellers in those communities. We do not seek to enter a new market unless we believe that it offers substantial value and that we can achieve market leadership within an acceptable timescale. Centaur’s organisation reflects our community In pursuit of market leadership, Centaur's strategy from advertising, exhibitions and sponsored focus, operating as it does as a federation of is generally first to establish a high frequency events, we are positioned primarily as being in the small businesses serving individual vertical publication (in print or online) that becomes a relevant readership business and our primary goal communities, supported by a strong central trusted source of information, whose identity is to establish and maintain market-leading infrastructure of common services such as Finance, becomes closely linked with that of the information brands. This permits us to build a Circulation, Web and IT Operations and HR. community it serves. Typically we have launched database of loyal communities of readers with new products within markets that are undergoing significant purchasing power, which we can use to Our culture is entrepreneurial, innovative and change (which is invariably the catalyst which provide effective marketing and lead generation highly customer-focused, with each community permits market entry) and where we perceive high solutions to our advertising clients. served by discrete profit centres. We strongly value, long-term growth potential. encourage innovation in pursuit of customer The second element of Centaur's strategy is satisfaction. As a result, most of our portfolio has In creating products that meet the needs of our therefore to extend its core publication brands been created and launched within the business, markets, we seek both to define and analyse the into complementary product offerings. as opposed to being acquired, and we seek to buyer audience that suppliers wish to reach and sustain market leadership by continually refreshing to identify the essential information needs of that and expanding that portfolio. Around 11% of audience. In doing so, we also seek to maintain Centaur's revenues in the past year derived from the highest standards of content quality and products created within the last three years. editorial integrity. This strategy reflects the fact that, whilst Centaur generates significant revenues Centaur Media plc – Annual Report 08 Year ended 30 June 2008 CENTAUR’S KEY MEDIA MODELS Magazines Online services Events Magazines have traditionally been at the core of The internet offers many new ways to serve our As a natural extension of our core mission to Centaur's strategy. Their ability to engage with core markets and also dramatically extends our create a market identity for a community and their readers can allow them to become an reach and therefore the size and potential of our diminish the sense of isolation between its integral part of the community they serve. markets. We expect online products to become members, the development of meetings-based This is particularly true of weekly magazines, an increasingly important medium over the next events is a core part of Centaur's strategy. whose frequency reinforces their importance few years. These take a number of forms, the most to their market. The key editorial functions of important of which are exhibitions, conferences, magazines are as follows: Editorially, the magazine provides an ideal medium summits and awards. for news analysis and special emphasis features, (a) They provide a forum for news and analysis whilst the internet is better suited to breaking The strategy for exhibitions is primarily to build about the market, where topicality and depth of news highlights, multimedia content, user- small to medium-sized shows that seek to serve understanding are essential. generated content, data analysis and database clearly defined vertical markets. These vertical searching. From an advertiser's perspective, the markets may be subsets of a broader market (b) They serve to diminish the sense of isolation business magazine is an excellent medium for served by the relevant weekly or monthly periodical. experienced by people working within one part of brand building and achieving in-depth Revenues are derived principally from stand sales.