Final Results
World Sport Group PLC
26 November 2001
Embargoed until: 0700hrs
Date: 263 November 2001
On behalf of: World Sport Group plc
('WSG' or the 'Company' formerly Orchard Furniture plc)
WORLD SPORT GROUP PLC
Current Trading Update and Preliminary Results
Chairman's Statement
This is my first report to shareholders as Chairman of World Sport Group and
follows the acquisition of World Sport Group (Jersey) by Orchard Furniture
('Orchard') on 15th August this year. This transaction transformed the old
Orchard from a cash shell into an international sports marketing, media and
management business which controls the commercial and media rights to a number
of major sporting properties, with a particularly strong position in Asia.
The results for the year to 30th June 2001 relate to a period prior to the
above transaction, when the Company's sole source of income was represented by
interest receivable on its cash balances. Pre-tax profits of £441,000 were
achieved after taking account of exceptional costs of £181,000 which related
almost entirely to professional costs incurred in conducting due diligence on
abortive acquisitions.
Current Trading
Since the end of the financial year, the Company has undergone a fundamental
transformation with the acquisition of the World Sport Group Limited and
Parallel Media Group International Limited. The Company has been re-branded
World Sport Group plc and is a leading sports marketing, media and management
company. In particular, World Sport controls the commercial and media rights
to a number of major sporting properties with a major preserve in Asia. I am
delighted to report that the integration of the businesses has proceeded
swiftly and I would like to take this opportunity to thank all the staff and
my fellow Board members for all their efforts in making the integration so
successful.
Since the completion of the acquisition, the Board has undertaken a strategic
review of the business in order to achieve the objectives of maximising its
leading position in the Asian market place, leveraging strategic relationships
with sports bodies and developing a fully integrated media sales platform. In
addition, the Board has been looking at ways of increasing operational
efficiencies by reducing the cost base across the entire Group. The Board has
also identified a number of non-core activities that it will be discontinuing.
This review has not been completed but it is expected that the Group will
incur certain one-off costs in this financial year as a result of the
restructuring and the expenses associated with the reverse takeover.
While market conditions in the aftermath of the events of 11 September have
not adversely affected the overall prospects of the business, they have caused
timetables for negotiations with sponsorship partners to be extended.
Furthermore, a number of events organised by the Group have been postponed or
cancelled. Notwithstanding this, financial performance for the year to 31
December 2001, the new accounting reference date for the Group, is expected to
be broadly in line with market expectations. The eventual level of operating
profitability achieved in the period remains dependent on the successful
conclusion of certain major sponsorship contracts that management had
originally hoped to finalise in the autumn. The Board is confident that they
will be signed before the year-end.
Given the sponsorship and broadcast deals that have been signed post 11
September 2001, and the high visibility of revenue going forward, the Board is
confident that the revenues from continuing businesses should show an
improvement next year. In our experience, that business in Asia has been less
adversely affected than it has in Europe and North America. More than 80 per
cent of our revenues are from Asia and we are experiencing a heightened
interest by multi-nationals in sports events in this region ahead of the World
Cup in Japan and South Korea in 2002 and the Asian Cup in China in 2004.
This, combined with the anticipated reduction in our cost base as referred to
above, leaves us confident that we will show good organic growth next year. In
addition, the Group will continue to look at a number of add-on acquisitions
to accelerate our growth.
A further statement regarding the outcome of the Board's restructuring plans,
strategic review and trading for the period to 31 December will be made in the
new year.
J D N Ciclitira
Chairman
23 November 2001
Enquiries to:
Emma Kane, Chief Executive Tel: 020 7955 1410
Redleaf Communications Ltd Mob: 07876 338339
Notes to Editors:
* World Sport Group plc (WSG) listed on AIM on 15 August 2001, following
the reverse takeover of Orchard Furniture plc by the combined businesses
of World Sport Group Limited and Parallel Media Group International
Limited.
* Current shareholders include News Corporation and Nomura.
* The Company is currently capitalised at £53m.
* The Company offers a full one-stop shop for advertisers and sponsors:
television programming, airtime sales, outdoor marketing opportunities,
Internet services, exposure in print publications and bespoke event
management plus sponsorship in football, cricket, rugby and golf.
* WSG owns the media and marketing rights to the Asian Professional
Golfers' Association (Asian PGA) for 90 years and rights to Asian
Professional Football until 2009 (with matching rights to 2013). In
partnership with News Corporation, it also has the rights to ICC
International Cricket, including the World Cups in 2003 (South Africa) and
2007 (West Indies).end
Consolidated profit and loss account for the year ended 30 June 2001
2001 2000
Notes £'000 £'000
Turnover - -
Administration expenses - exceptional 3 (181) 15
Administration expenses - other (198) (112)
(379) (97)
Other operating income - 92
Operating loss (379) (5)
Interest receivable 820 84
Profit on ordinary activities before tax 441 79
Tax on profit on ordinary activities 2 -
Profit for the financial year 439 79
Earnings per share - basic and diluted 4 4.14p 3.51p
There were no recognised gains or losses other than disclosed above and there
have been no discontinued activities or acquisitions in the current or
preceding period.
Consolidated Balance sheet at 30 June 2001
2001 2000
Note £'000 £'000
Fixed assets
Investments - -
- -
Current assets
Debtors 487 63
Cash 15,147 13,108
15,634 13,171
Creditors: amounts falling due within one year (235) (337)
Net current assets 15,399 12,834
Capital and reserves
Called up share capital 5 7,182 6,965
Share premium account 20,247 18,338
Other reserve 557 557
Profit and loss account (12,587) (13,026)
Shareholders' funds - equity 15,399 12,834
Consolidated cash flow statement for the year ended 30 June 2001
2001 2000
Notes £'000 £'000
Net cash (outflow) from operating activities 6 (585) (24)
Returns on investments and servicing of finance
Interest paid - -
Interest received 703 84
703 84
Capital expenditure and financial investment
Receipts from sales of tangible fixed assets - -
Net cash inflow before management of liquid resources 118 60
and financing
Management of liquid resources
Increase in short term deposits (2,182) (12,831)
Financing
Proceeds from new share issues 2,000 13,420
Expenses of share issues (79) (377)
1,921 13,043
(Decrease)/increase in cash 7 (143) 272
Reconciliation of movements in consolidated shareholders' funds for the year
ended 30 June 2001
2001 2000
£'000 £'000
Profit for the financial year 439 79
Proceeds from issue of shares 2,126 13,043
Net increase in shareholders' funds 2,565 13,122
Opening shareholders' funds 12,834 (288)
Closing shareholders' funds 15,399 12,834
Notes
The preliminary announcement has been prepared on the basis of the accounting
policies set out below, which are substantially the same as in the Group's
annual financial statements for the year ended 30 June 2001.
The financial information in this statement does not constitute statutory
accounts within the meaning of S.240 Companies Act 1985. The figures for the
year ended 30 June 2001 are extracted from the Group's audited financial
statements to that date which were approved on 23 September 2001 and on which
the auditors issued an unqualified opinion.
The financial information for the year ended 30 June 2000 is extracted from
the Group's financial statements to that date which have been filed with the
Registrar of Companies and were unqualified and did not contain a statement
under S.237 of the Companies Act 1985.
1 Accounting policies
The financial statements have been prepared under the historical cost
convention and in accordance with applicable accounting standards.
The following principal accounting policies have been applied:
Basis of consolidation
The consolidated financial statements incorporate the results of the
Company and all of its subsidiary undertakings as at 30 June 2001
using the acquisition method of accounting. Under the acquisition
method the results of subsidiary undertakings are included from the
date of acquisition. On disposal, the results are included up to the
date of disposal.
Deferred taxation
Provision is made for timing differences between the treatment of
certain items for taxation and accounting purposes to the extent that
it is probable that a liability or asset will crystallise.
Leases
Annual rentals for operating leases losses are charged to the profit
and loss account on a straight line basis over the term of the lease.
Pension costs
Contributions to the Company's employee personal pension schemes are
charged to the profit and loss account in the year in which they fall
due.
Liquid resources
For the purposes of the cash flow statement, liquid resources are
defined as short term deposits.
Financial instruments
It is, and has been throughout the period under review, the Group's
policy that no trading in financial instruments shall be undertaken.
2 Exceptional items
The exceptional item for the year to 30 June 2001 of £
181,000 comprises primarily legal costs in respect of abortive
take-overs.
The exceptional items for the year to 30 June 2000 of £
15,263 comprise a write-back of £122,113 in respect of creditors as a
result of approval of the company voluntary arrangement that took
place on 10 January 2000 and a charge of £106,850 in respect of
pension and compensation payments made to former directors and
employees for loss of office.
3 Exceptional operating expenses
The actuarial assessment of the pension fund as at 30 September 1999
identified a funding deficit of £1,200,000. The actuary recommended total
contributions payable by the company in the years ending 30 September 2001
to April 2007 amounting in aggregate to £1,590,000.
Full provision for the funding deficit has been made in the year as
the group no longer has any employees who are members of the scheme which
was closed following the disposal of the motor dealerships in 2000.
Further details of the scheme are given in note 22.
Tax
The tax charge represents corporation tax on the element of
interest received, not covered by excess management charges brought
forward.
4 Earnings per share
2001 2000
Profit for the financial year £439,000 £79,000
Number of shares in issue (weighted average as adjusted 10,590,232 2,229,528
for the 1 : 200 consolidation in August 2001)
Earnings per share 4.14p 3.51p
Diluted earnings per share 4.14p 3.51p
5. Called up share capital
2001 2000
£'000 £'000
Authorised
6,253,679,353 ordinary shares of 0.1p each 6,254 6,254
25,295,753 deferred shares of 19.9p each 5,034 5,034
11,288 11,288
Issued and fully paid
2,147,544,645 (2000 - 1,931,093,829 ) ordinary shares of 0.1p 2,148 1,931
each
25,295,753 deferred shares of 19.9p each 5,034 5,034
7,182 6,965
On 16 August 2000 200,000,000 shares of 0.1p each were placed at
a price of 1p.
On 7 September 2000 9,146,058 shares of 0.1p were issued to
creditors at a price of 1.25p
On 22 March 2001 the company issued 7,304,758 shares of 0.1p in
respect of outstanding amounts owed to creditors at a price of 1.25p.
Deferred shares
The deferred shares have no rights to receive dividends,
have no voting rights and entitle their holders on a return of assets
on a winding up of the Company or otherwise only to the repayment of
the amount paid up on the deferred shares which they hold and only
after repayment of the capital paid up on the ordinary shares and the
payment of a further £100,000 on each ordinary share. The deferred
shares may at any time be cancelled for no consideration by means of a
reduction of capital effected in accordance with Companies Act 1985
without the sanction or consent of the holders of the deferred shares.
Share options
Under the Company's Executive Share Option Scheme, the
following share options have been granted and were outstanding at 30
June 2001:
Exercise price Number
Exercisable between:
March 2002 and March 2009 1.25p 650,000
Share warrants
On 10 August 2000, the Company issued warrants to subscribe
for 25,000,000 shares at a price of 4p per share. These warrants are
exercisable by 4 February 2002.
On the same date, the company also issued the warrant holder
with warrants to subscribe for up to an additional 75,000,000 ordinary
shares of 0.1p each at a price of 4p per share, exercisable by 30 June
2002. These warrants are only exercisable if the company utilises a
facility of up to £10 million made available by the warrant holder by
way of a loan or subscription for shares in the company. The precise
number of shares issued under this warrant will be determined by a pro
rata basis by the amount of the facility utilised.
Capital re-organisation
Subsequent to the year end, a capital re-organisation of the company's
capital was approved on 10 August 2001 whereby the existing ordinary
shares were consolidated into Ordinary Shares of 20p each on a 1 for
200 basis. The deferred shares were redeemed by the company for an
aggregate price of 1p on 20 August 2001. The terms of the warrants
have been amended in accordance with the share consolidation,
resulting in warrants over 125,000 and 375,000 shares respectively at
£8.00 per share. The terms of the share options have similarly been
amended to be options over 3,250 Ordinary Shares of 20p each
exercisable at £2.50 each.
The authorised share capital was increased by £9,746,322 by the
creation of 48,731,609 new Ordinary Shares of 20p each.
6 Reconciliation of operating loss to net cash outflow from operating
activities
2001 2000
£'000 £'000
Operating loss (379) (5)
(Increase) in debtors (309) (63)
Increase in creditors 103 44
(585) (24)
Included above is £92,000 cash outflow and £89,000 increase in creditors in
respect of exceptional operating costs.
7. Reconciliation of net cash flow to movements in net funds
2000 Cash flow 2001
£'000 £'000 £'000
Analysis of net funds
Cash at bank and in hand 277 (143) 134
Investment in short term deposits 12,831 2,182 15,013
Net funds 13,108 2,039 15,147
Decrease in cash during the year (143)
Increase in liquid resources 2,182
Change in net funds resulting
from cash flows 2,039
Net funds at 1 July 2000 13,108
Net funds at 30 June 2001 15,147
8. Contingent liability
During September and October 2000 the Company was in negotiations
to acquire, by way of a reversal, a target company (the 'Target
Company') to which Arthur Andersen were auditors and financial
advisers. The directors of the Company have been advised by the
Company's solicitors, Bircham Dyson Bell, that it was agreed between
the Company and the Target Company, subject to contract, that Arthur
Andersen were, on completion of the transaction, also to be nominated
advisers to the enlarged group comprising the Company and the Target
Company. The proposed transaction did not proceed. On 6 November 2000
Arthur Andersen wrote to the Company to say that it had allocated and
proposed to bill the Company £598,650 (excluding VAT) for its share of
Arthur Andersen's costs and expenses in the aborted matter. Included
in the £598,650 was a sum of £11,375 plus VAT which the Company
acknowledged was due for advice given by Arthur Andersen to the
Company in relation to the preparation of the Company's audited
accounts. The sum of £11,375 plus VAT has been duly paid to Arthur
Andersen, although to date no invoice has been rendered to the Company
and no acknowledgement of receipt has been received.
The Company, after seeking advice from Bircham Dyson Bell, has
denied that it agreed, except as above, to be responsible for any of
Arthur Andersen's costs and expenses and, in particular, denies that
it has any further liability to Arthur Andersen in respect of the
balance of the sum which they have proposed should be billed by them,
namely £587,275. To date Arthur Andersen has not commenced any legal
proceedings against the Company.
9 Post balance sheet events
On 16 July 2001 the Company announced it had concluded
negotiations to acquire The World Sport Group Limited and Parallel
Media Group International Limited and World Sport Group (Jersey)
Limited for a consideration of some £65.7m, to be satisfied by the
issue of 42,950,892 Ordinary Shares of 20p each. This was approved at
an Extraordinary General meeting on 10 August 2001. At the same time
the Company made a Placing and Open Offer of 8,847,772 Ordinary Shares
of 20p each, of which 5,268,531 were in respect of a vendor placing of
the consideration shares, resulting in a net £3.58m being raised.
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