Final Results
Infoserve Group PLC
04 June 2007
Press Release 4 June 2007
Infoserve Group plc
('Infoserve' or 'the Company')
Final Results
Infoserve Group plc (AIM: INFS), a leading online local search marketing
specialist, today announces its final results for the year ended 31 March 2007.
Highlights
• Turnover more than doubled to £4.01 million (2006: £1.71 million on a
pro forma basis).
• Performance reflects growth in market share and high levels of customer
renewals.
• Operating losses before amortisation were £2.68 million (2006: £2.14
million on a pro forma basis). The increased loss is due to significant
investment in the sales teams and essential support functions as
well as the relocation of the main call centre to Darlington.
• Visitors to sites displaying Infoserve local search data increased from
24 to 32 million visitors per month and this growth is expected to
continue.
• Enhanced contract signed with the Football League, announced on 29
March 2007.
• New contract signed with Yahoo! Local to become the official advertising
sales partner for the UK. Early indicators show sales ahead of
expectations.
• Seeking to raise approximately £1.5 million, net of expenses, by way of
a Placing, primarily to maximise the Yahoo! Local opportunity.
Chairman James Newman said 'Substantial progress has been made during the year
in building the Company's marketing, sales and technology infrastructure and
establishing a customer base for the future. The new contracts provide the
Company with significant opportunities to grow its activities and should allow
substantial progress to be made in the year ahead towards its goal of being the
leading provider of local search services and data in the UK.'
Commenting on the fund raising, Steve Barnes, Chief Executive Officer, said:
'The Company has made substantial progress since listing on AIM in June 2006.
Our growth has exceeded the industry average, demonstrating that we are
capturing further market share of the local search market. All our product
groups have performed well and the new contracts with the Football League and
Yahoo! Local present us with significant opportunities for further rapid growth.
As a result, we are looking to raise £1.5 million by way of a Placing in order
to maximise the Yahoo! Local opportunity and provide some working capital.
Meanwhile, we have been building the Company's marketing, sales and technology
infrastructure and establishing a customer base for the future. We are in a
strong position to achieve our goal of becoming the leading provider of local
search services and data in the UK.'
For further information please contact:
Infoserve Group plc
Steve Barnes, Chief Executive Officer Tel: +44 (0)113 238 6200
Steve.barnes@infoserve.com www.infoserve.com
David Balbi, Finance Director Tel: +44 (0)113 238 6200
David.balbi@infoserve.com www.infoserve.com
Nominated Adviser
WH Ireland
Richard Lindley Tel: +44 (0) 113 394 6628
richard.lindley@wh-ireland.co.uk
Media enquiries:
Abchurch Communications
Ariane Comstive/ Helen Waggott/ Emma Johnson Tel: +44 (0) 20 7398 7784
emma.johnson@abchurch-group.com www.abchurch-group.com
Chairman's Statement
I am delighted to report a period of progress for the Company, in this, its
first year as a public company and my first year as Chairman.
AIM Flotation
The Company floated on the AIM market on 23 June 2006, raising £2 million by
placing 4,860,267 new shares at 41.15p. Due to the efforts of my colleagues on
the Board, this was achieved without too much disruption to the day-to-day
business operations.
The primary reason for joining AIM was to give the Company a stronger financial
base from which to significantly expand its sales activities and technology base
and to raise its profile in the local search market.
Results
Turnover for the year reached £4.01 million, which compared to £1.71 million on
a pro forma basis for the twelve months ended 31 March 2006. This growth in
turnover was restricted by the cautious approach to sales staff recruitment as a
result of the limited funds raised at flotation, due to the difficult stock
market conditions at the time.
However, it is pleasing to note that productivity per person increased
substantially throughout the year, although second half gross margins were
affected by the decision to write off certain direct costs relating to the
collection of data, which had previously been capitalised. Overheads have been
well managed but do include the costs of relocating the main call centre to a
new building in Darlington.
Operating losses before amortisation were £2.68 million, which increased to
£3.11 million after charging amortisation of £277,000 and net interest of
£155,000. The deficit for the year was £2.41 million after crediting deferred
tax of £703,000. The basic loss per share was 19.27p.
Dividend
In line with the statement made at the time of the flotation, the Board is not
recommending a dividend, as all funds are needed to be invested in the
development of the business.
Business Developments
In March 2007, we announced the signing of two major contracts, one with Yahoo!
and the other with Football League Interactive. These contracts represent a step
change for the Company and are a clear endorsement by the industry of the
business model, which the Board has developed over the last few years.
Board
I am pleased to welcome David Balbi to the Board as Group Finance Director,
having joined us in January this year. David has considerable experience, both
in the call centre environment and in the telecommunications industry, which he
gained during seven years at Kingston Communications between 1999 and 2006.
Share Placing
At the beginning of May 2007, the Board announced that it was planning to raise
approximately £1.5 million, net of expenses, by way of a placing of Ordinary
Shares. The Placing was approved by shareholders at an Extraordinary General
Meeting held on 1 June 2007.
The Board is currently in the process of marketing to potential investors in
order to raise funds to expand the Company's sales and marketing activities by
recruiting and training additional sales executives in light of the recently
announced contracts with Yahoo! and the Football League mentioned above.
Outlook
The market in which the Company operates is growing substantially every month as
more businesses and consumers are increasingly using the internet and local
search in particular, to buy, sell or search for products or services. The
services that the Company provides are at the heart of this growth.
Substantial progress has been made during the year in building the Company's
marketing, sales and technology infrastructure and establishing a customer base
for the future. The new contracts provide the Company with significant
opportunities to grow its activities and should allow substantial progress to be
made in the year ahead towards its goal of being the leading provider of local
search services and data in the UK.
James H Newman
Chairman
4 June 2007
Chief Executive's Review
Over the past twelve months our Company more than doubled sales revenue, from
£1.7 million (pro forma) in the year ended March 2006 to over £4.0 million in
the year ended March 2007.
Against a market backdrop of overall local search market revenues growing at a
compound rate of circa 22% per annum, our performance reflects growth in market
share, growth in retained customer numbers, the near doubling of our customer
base, and a further broadening of our appeal to local businesses through our
expanding network of sites.
Monthly visitors to sites displaying our local search data increased from 24 to
32 million visitors per month. As local search increases in significance, our
profile as a supplier of accurate, comprehensive and relevant data to our online
Partner network, allied to the consumer's growing desire to source this data
online, has been raised.
68% of consumers who perform an online local search make a phone call to a local
business, 47% of those people visit those local businesses soon after calling,
and more than 90% of those who phone eventually convert into sales. Our Company
mantra, 'bringing business to you', reflects the growing nature of the
importance of online local search for businesses and consumers alike.
Our database contains 3.4 million business records (2006: 2.4 million), of which
over 2.7 million have the full address, phone number and comprehensive business
category details. Through daily contact with approximately 10,000 SMEs , and
the support of our data suppliers, we cleanse records constantly, with over
100,000 updates per month.
Our keyword collection programme has enabled us to build into our database the
additional keywords (goods, services, brands, models) of over 500,000
businesses, and this advanced keyword collection is being driven to reach 1
million businesses by the end of 2007. The use of keywords will allow even more
specific search and thus increased sales opportunities for businesses, greater
accuracy and relevancy in results for consumers, and therefore improved
advertising sales opportunities for the Company.
The business has five distinct product groups; each has grown and developed this
year.
Our Owned Business Directory group has driven much of the growth in our
revenues. We have achieved customer renewal rates over 70%, putting us in the
industry's top echelon. These sites, mainly found on major search engines
through natural positions and purchased sponsored links, cover both general
directories (e.g. www.cityvistor.co.uk) and over 100 single industry vertical
directories (e.g. www.accountantlocal.co.uk). In January 2007, we launched the
new www.infoserve.com site, a hybrid of a search engine and a business
directory. This site will grow in importance and prominence as our keyword
database expands.
The Online Income group performed well, with a 69% increase in revenues. This
reflects growth in visitor numbers to our sites, and I am delighted that we
continue to develop the quality and relevancy of our advertising proposition.
Our Partner Network Product group continued to offer a broad spread of high
profile, widely visited sites, including www.telegraph.co.uk and
www.thisislondon.co.uk. Turnover in this product group grew by 26%. We also
continued to offer local businesses opportunities to feature on Sky TV's
interactive platform, with over 10 million monthly consumer users.
Our Web Product group, which includes SMS products, website building and
hosting, domain name purchase and registration, and peripheral products, has
grown revenues by 21% this year. We have recently completely reviewed and
revitalised our template driven website product, and in March 2007 re-launched
our offering. 50% of businesses still do not have a website and many of those
that do, have not updated or amended theirs for years. These statistics support
our view of a strong commercial opportunity.
Our fifth product group, Strategic Partnerships, centred this year on a third
party arrangement to act on behalf of a number of Football League clubs. A new,
more wide-ranging and extensive contract direct with the Football League, was
announced on 29 March 2007, which will build upon the platform created this
year. By linking their local business with a Football Club business finder
service, SMEs align their brand with their local team and demonstrate their
support in a simple, visible way. In return, they tap into football fans'
loyalty and their highly specific market profile.
Over 2.2 million visitors per month visit the sites of the original 40 clubs,
and once the network is expanded with the addition of the majority of the
remaining 38 clubs during 2007, we expect our potential audience to more than
double. Sales on these town specific sites now account for some 6% of our
business, and it is anticipated this will grow as we increasingly package these
in media 'bundles' with relevant complementary products in our Owned Business
Directory product group.
In March 2007 we announced a new contract with Yahoo! that will substantially
aid Company growth in revenues for the financial year beginning April 2007. The
contract allows Infoserve to become the seller of local featured listings on
Yahoo! Local's UK web pages. Under the agreement, Infoserve becomes the
official Yahoo! Local advertising sales partner for the UK. The product
offering, mirroring the product launched on Yahoo! Local in the USA, which has
received much critical acclaim and early commercial success, has been available
in the UK since 15 May 2007.
Local businesses can easily see the appeal of purchasing a featured listing,
which appears as a link on Yahoo! Local results pages that relate to the product
or service and location of their business. The advertising gives a guaranteed
position for a guaranteed period at a fixed price. Our link with Yahoo!
provides a further step change opportunity for our business and gives our
advertisers exposure to the 19.5 million UK web users that access Yahoo! sites
each month.
In order to aid the rapid expansion of the sales team to maximise the benefit
from the new contract win with Yahoo! Local, the Company is undertaking a
Placing to raise £1.5 million net of expenses.
Recent market statistics show that 60% of online searches are now local in
nature, compared to 41% a year ago, and that 76% of all local searches are
online, reflecting not only the change in consumer behaviour towards increased
internet usage, but the rapid move away from paper-based local searches to
online. With spending on local online advertising expected to double to £7
billion in 2010, I expect continued rapid growth in our customer numbers.
I am confident our strategy to develop both our branded business, as well as our
long-term strategic relationships with global media companies, will drive future
growth. We must continue to offer our customers great value advertising
opportunities to enable them to present themselves to potential customers as
they search online for local suppliers of goods and services.
Steve Barnes
Chief Executive
4 June 2007
Financial Review
To demonstrate the Company's progress I have summarised the pro forma results
for the 12 months ended 31 March 2006 and compared them to the audited results
for the year ended 31 March 2007.
Audited Pro Forma
31 March 31 March
2007 2006
£000 £000
Turnover 4,015 1,707
Cost of sales (3,607) (1,613)
Gross profit 408 94
Administrative expenses (2,962) (2,071)
EBITDA (2,554) (1,977)
Depreciation (128) (165)
Amortisation (277) -
Operating loss (2,959) (2,142)
Interest received 47 4
Interest payable (202) (42)
Loss before tax (3,114) (2,180)
Turnover has increased by 135% to £4.015 million. Average sales per head within
telesales has risen 100% from £16,000 (pro forma) to £32,000 for year ended 31
March 2007.
During the year ended 31 March 2007 the Company decided that the capitalisation
of costs incurred in developing keywords was inappropriate. The impact of this
change in accounting policy was to increase the loss reported in the interim
accounts for the 6 months to September 2006 by £319,000 increasing the reported
operating loss before amortisation to £1.461 million.
EBITDA for the year showed a loss of £2.554 million, an increase of £0.577
million. This increase was as a direct result of the expansion in the product
development, operational and head office functions capable of supporting an
enlarged contact centre operation.
The Company has recognised a deferred tax asset of £0.703 million based only on
post acquisition tax losses, discounted to the expected point of realisation.
The Company has recently secured a new bank facility of £500,000 as additional
working capital funding.
International Financial Reporting Standards (IFRS) came into effect for AIM
listed companies on 1 January 2007. The Company is committed to achieving a
smooth transition to IFRS and a review of the effect of the conversion from UK
GAAP to IFRS is currently being planned and will be complete by September 2007.
The Company's first set of audited financial statements under IFRS will be for
the year ended 31 March 2008. The Company will prepare its interim statement as
at 30 September 2007 under IFRS, which will include a reconciliation of the
adjustments between UK GAAP and IFRS.
David Balbi
Finance Director
4 June 2007
Consolidated Profit and Loss Account
Period ended
31 March 2007
£'000 £'000
Turnover
Continuing operations -
Acquisitions 4,015
_____ 4,015
Cost of sales (3,607)
_____
Gross profit 408
Administrative expenses (3,090)
_____
Operating loss before amortisation (2,682)
Amortisation - Goodwill (156)
- Other intangibles (121)
_____ (277)
_____
Operating loss
Continuing operations (484)
Acquisitions (2,475)
_____ _____
(2,959)
Interest receivable 47
Interest payable (202)
_____
(155)
_____
Loss on ordinary activities before taxation (3,114)
Taxation 703
_____
Retained deficit for the year (2,411)
_____
Loss per share
Basic (19.27p)
Diluted (19.21p)
_____
Loss per share before amortisation
(17.05p)
_____
Consolidated Balance Sheet
Group
2007
£'000
Fixed assets
Intangible assets 3,480
Tangible assets 480
Investments -
_____
3,960
Current assets
Debtors due within one year 405
Debtors due after more than one year 703
Cash at bank and in hand 330
_____
1,438
Creditors: amounts falling due within one year (2,606)
_____
Net current (liabilities)/assets (1,168)
_____
Total assets less current liabilities 2,792
Creditors: amounts falling due after more than one year (2,254)
_____
Net assets 538
_____
Capital reserves
Called up share capital 731
Share premium account 2,210
Profit and loss account (2,403)
_____
Equity shareholders' funds 538
_____
Consolidated Cashflow Statement
Year to
31 March 2007
£'000 £'000
Net cash outflow from operating activities (1,867)
Returns on investments and servicing of finance
Interest paid (1)
Interest received 47
_____
Net cash inflow from servicing of finance 46
Capital expenditure and financial investment
Purchase of tangible fixed assets (394)
Purchase of intangible fixed assets (341)
_____
Net cash outflow from capital expenditure and financial (735)
investment
Acquisitions and disposals
Net cash acquired with subsidiary undertaking 211
_____
Net cash inflow from acquisitions and disposals 211
_____
Net cash outflow before use of liquid resources and (2,345)
financing
Financing
Issue of new shares 445
Share premium on issue of new shares 2,567
AIM flotation costs (357)
Repayment of term loans (50)
Advance of loans 70
_____
Net cash inflow from financing 2,675
_____
Increase in cash in the year 330
_____
Notes to the Final Financial Statements
1. Accounting Policy
The financial information in this preliminary announcement has been prepared in
accordance with the accounting policies set out in the financial statements of
Infoserve Group plc for the financial year ended 31 March 2007. The financial
information in this document does not constitute the company's statutory
accounts for the financial year but is derived from those accounts. Statutory
accounts for the period will be delivered following the company's Annual General
Meeting. The auditors have reported on these accounts; their reports were
unqualified and did not contain statements under sections 237 (2) or (3) of the
Companies Act 1985.
2. Comparatives
Infoserve Group plc acquired Infoserve Limited on 11 April 2006 and therefore no
comparative figures exist for the corresponding year in the preceding financial
year.
3. Taxation
There is no corporation tax charge as the group has made trading losses
throughout the year. The group has estimated tax losses of £5,240,000 as at 31
March 2007, available to carry forward against future trading profits. The asset
that would arise in respect of the post acquisition losses amounts to £703,000
(calculated at 30%, net of a discount of £191,000) has been recognised as the
directors have assessed there will be sufficient taxable profit in the period
after the balance sheet date.
4. Earnings per share
The calculation of earnings per share is based upon the loss after taxation of
£2,411,377 divided by 12,516,101, being the weighted average number of ordinary
shares in issue during the period of 11 April 2006 to 31 March 2007.
The diluted earnings per share takes the weighted average number of ordinary
shares in issue during the year to 31 March 2007, and adjusts this for dilutive
share options existing at the year end. This results in a diluted weighted
average number of shares of 12,554,507. In accordance with FRS 22 'Earnings per
share' the effects of anti-dilutive potential ordinary shares are ignored when
calculating diluted earnings per share.
5. Investment
On 11 April 2006 the group acquired the entire issued share capital of Infoserve
Limited by way of a share for share exchange.
The acquisition of Infoserve Limited can be summarised as follows:
Fair
Value
£'000
Intangible assets 295
Tangible assets 214
Debtors 348
Bank balance 211
Creditors (3,802)
_____
Net liabilities acquired (2,734)
Goodwill 3,120
_____
Consideration 386
_____
Comprising:
Share for share exchange 386
_____
The summarised profit and loss accounts of Infoserve Limited for the year ended
31 March 2006 and the year to 31 December 2005 are set out below:
Year to Year to
31 March 31 December
2006 2005
£'000 £'000
Turnover 617 1,471
_____ _____
Operating loss (670) (1,378)
_____ _____
Loss before interest and taxation (670) (1,378)
Net interest receivable 1 4
Net interest payable (57) (38)
_____ _____
Loss on ordinary activities before taxation (726) (1,412)
Taxation - -
_____ _____
Loss after taxation (726) (1,412)
_____ _____
There were no material recognised gains and losses in the year to 31 March 2006
or the year to 31 December 2005 other than the loss on ordinary activities after
taxation.
6. Reconciliation of Movement in Equity Shareholders Funds
2007
£'000
Loss for the financial year (2,411)
Adjustment in respect of employee share scheme 8
Equity shares issued in the year 731
Share premium on equity shares issued 2,567
Costs (357)
_____
538
_____
7. Reconciliation of Operating Loss to Net Cashflow From Operating Activities
2007
£'000
Operating loss (2,959)
Depreciation 128
Amortisation 277
Adjustment in respect of employee share scheme 8
Increase in debtors (57)
Increase in creditors 736
_____
Net cash outflow from operating activities (1,867)
_____
8. Analysis of Changes in Net Debt
At 21 March Non - cash At 31 March
2006 Cashflows Movement 2007
£'000 £'000 £'000 £'000
Cash in hand and at bank - 330 - 330
_____ _____ _____ _____
Debt due within one year - 50 (608) (558)
Debt due after one year - - (2,154) (2,154)
_____ ____ _____ _____
- 50 (2,762) (2,712)
_____ _____ _____ _____
Movement in net debt - 380 (2,762) (2,382)
_____ _____ _____ _____
9. Post Balance Sheet Events
The Company has recently secured a new short-term bank facility of £500,000 as
additional working capital funding.
10. Notice of the Annual General Meeting
A copy of the Annual Report and Accounts will be sent to shareholders and copies
will be available from the Company's Registered Office at Infoserve Group plc,
South Side Aviation, Leeds Bradford Airport, Leeds, West Yorkshire, LS19 7UG.
Notice is hereby given that the Annual General Meeting of the company will be
held at South Side Aviation, Leeds Bradford International Airport, Leeds, LS19
7UG on 27 July 2007 at 11.00 a.m.
- Ends -
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