Interim Results
CSS Stellar PLC
26 September 2005
Immediate Release 26 September 2005
CSS Stellar plc
('CSS' or 'the Group')
Interim Results for the six months ended 30 June 2005
CHAIRMAN'S STATEMENT
The first half of 2005 and the period running up to this announcement has seen
the Group focus on becoming a holding company specialising in the investment in
sports and entertainment businesses. Therefore the Board has considered the
valuation of the assets as well as the operating results.
The results for the period to 30 June 2005 are an adjusted operating profit of
£490,000 prior to goodwill amortisation compared with a loss of £552,000 in
2004.
The Board has carried out a review of the goodwill held on the balance sheet and
has concluded that an impairment provision of £13.7 million should be made. This
gives a net asset value for the group of 76p per share. The Board of CSS intend
to apply to restructure the share capital in the Company balance sheet to allow
the possibility to pay dividends more quickly in the future.
A considerable amount of management time has been spent over the last year on
working to improve the operating performance of Group companies. In Europe this
has been successful; the operating profits in Europe have improved to £1.2
million (2004: £0.9 million). Our European businesses, which are all ranked as
number one or two in their sectors, will also be beneficiaries of the successful
London bid for the 2012 Olympics, with Europe becoming an increased centre of
focus over the next five years.
In North America the market is more competitive and GEM and Echo have found
trading more difficult with a first half loss of £124,000 (2004: profit of
£569,000). In an effort to streamline the business and reduce the cost base, the
Group is in the process of re-structuring its businesses so there are four
businesses in Europe and three in North America. Our European businesses are
performing well - Icon (events), PFD (talent agency) and CSS Sports (sports
talent) and CSS Presenters (TV management) are all performing in line with or
above expectation.
We have made changes in North America. The global aspirations of GEM have been
curtailed and we closed the Atlanta office. This, combined with the sale of GEM
Europe, has resulted in a reduction of GEM North America overhead and
infrastructure cost. Since 30th June 2005 GEM Chief Executive, Keith McCracken
has resigned. Keith has been a significant part of the development of the GEM
Group in recent years and we wish him well for the future.
In September 2005 we agreed to sell GEM's European operations for £2m, as
previously announced. As part of our regular reviews of our businesses, it was
felt that GEM Europe had reached a stage of maturity which indicated it was a
good time and price to sell the business.
DIVISIONAL REVIEW OF CONTINUING OPERATIONS
EUROPE
Talent Management
In the six months to 30th June 2005, turnover was £5.9m (2004: £5.0m) and profit
was £645,000 (2004: £473,000), an increase of 18% in turnover and 36% in profit.
Sport
In motor racing we continue to manage Formula 1 star Juan Pablo Montoya who has
won two Grands Prix so far this season, confirming his potential as a future F1
World Champion. Dan Wheldon is the 2005 winner of the Indy Racing League
Championship during which he won the world famous Indy 500 - the first Briton to
do so since Graham Hill. Sebastien Loeb, 2004 World Rally Champion, is on the
point of retaining his title in 2005.
In football, Sir Bobby Robson's book has become a best seller and number one in
the hardback sales list. In golf the growing list of talent managed by CSS was
confirmed by the appearance of no fewer than 5 clients in the The 2005 Open
Championship at St. Andrews.
Entertainment
At PFD, Keira Knightley is securing unprecedented media exposure on the back of
her starring role in the Hollywood blockbuster, Pride and Prejudice. The new
series by Ricky Gervais, Extras, has had rave reviews on both sides of the
Atlantic. Novelist Julian Barnes has just been short listed for the 2005 Booker
Prize for his new novel 'Arthur and George'. Nick Hornby's book 'A Long Way
Down' also recently became a best seller.
CSS Presenters' television stars continue to be prominent on our screens.
Michael Parkinson's chat show on ITV is continuing to get excellent ratings.
Anne Robinson continues to present a number of highly popular programmes and
former Daily Mirror editor, Piers Morgan, is becoming a regular presenter on
television.
Events and Marketing
In the six months to 30th June 2005 Events turnover was £4.3m (2004: £2.8m) and
profit was £554,000 (2004: £347,000), an increase of 53.6% on turnover and 59.7%
on profit.
Icon Display have had an outstanding period and continue to grow and establish
themselves as one of the leading event and signage companies in the sports
sector, as well as branching out into other areas.
Icon were responsible for the signage for the successful London 2012 Olympic
bid. The company also continues its outstanding work branding all the UEFA
Champions' League matches throughout Europe. Chelsea FC have also become a major
client with the installation of their new perimeter advertising board system.
The company successfully created and installed all the branded signage at the
BMW Golf Championship at Wentworth in May.
Icon are continuing to expand into other non-sports markets, notably in the
creation of branded signage and sets at major conferences and exhibitions for
clients such as Neff.
Prior to its sale GEM Europe had secured additional work on behalf of Powergen
through their rugby league and rugby union sponsorships. The company also looked
after Vodafone's sponsorship of the successful England cricket team. Profits in
GEM Europe for the six months to 30th June 2005 were £40,000 (2004: profit of
£38,000).
NORTH AMERICA
Marketing
In the Marketing Division which dominates North American operations, in the six
months to 30th June 2005, turnover was £19.2m (2004: £25.5m) with an operating
loss of £136,000 (2004: profit of £576,000).
In North America, trading conditions have been extremely hard, with our Canadian
operations finding trading particularly challenging. There have been several
client losses and the company overall has not sustained the profitability of
2004.
Despite the client losses, GEM has begun to recover and has made business gains.
In the USA GEM's New York office has had a fine start to the year and is
increasing its work on behalf of major client GE Lighting. GEM NY has just
launched the largest GE North American lighting promotion in association with
GE's Olympic programme.
It is intended that the GEM US sports and promotional marketing operations will
be more focused around our New York office.
GEM Minneapolis continues to be profitable, and Dave Kuettel has now been
appointed Chief Executive of GEM Minneapolis. The company secured a major 3 year
contract with its biggest client, the catalogue specialists, Fingerhut. This
will secure long term revenues and profits but has resulted in some short term
reductions in profitability due to a reduction in margin. Our Minneapolis
business operates in an area of marketing which is very different to any other
in the Group and it is therefore now being managed separately.
Canadian operations have had a very difficult six months and our Toronto office
is only just beginning to recover from a poor start to the period.
Echo Media, like the Minneapolis office, will also be separated out from the
rest of the North American companies to operate as a stand-alone company because
it again operates in an area which is unique within the Group. A major partner
will be secured to strengthen the business and help to realise shareholder
value.
Finally, we have continued to streamline the central overhead to £573,000 (2004:
£601,000) and are looking to make further reductions in these costs going
forward.
Looking forward, CSS will now concentrate entirely on being an investor in high
quality businesses that operate in the sports and entertainment sector. The
strategic development of the Group will see us focusing on the strengths of the
business and on expanding the valuable businesses that we own. This will include
an increased focus on the ownership of proprietary content rather than on the
servicing of rights holders.
The Board remain extremely confident about the future of the Group as a platform
for growth. There has been considerable activity in both the sports and
entertainment investment markets in recent months. The Group also continues to
attract interest from investors and other groups within our areas of
specialisation which reaffirms our confidence in this growing sector for the
future.
John Webber
Chairman
26 September 2005
INDEPENDENT REVIEW REPORT TO CSS STELLAR PLC
Introduction
We have been instructed by the company to review the financial information for
the six months ended 30 June 2005 which comprise the consolidated profit and
loss account, the consolidated balance sheet, the consolidated cash flow
statement, the statement of total recognised gains and losses and the related
notes. We have read the other information contained in the interim report which
comprises only the Chairman's Statement and the Divisional review of continuing
operations and considered whether it contains any apparent misstatements or
material inconsistencies with the financial information. Our responsibilities do
not extend to any other information.
This report is made solely to the company's members, as a body, in accordance
with guidance contained in APB Bulletin 1999/4 'Review of Interim Financial
Information'. Our review work has been undertaken so that we might state to the
company's members those matters we are required to state to them in a review
report and for no other purpose. To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone other than the company and the
company's members as a body, for our review work, for this report, or for the
conclusion we have formed.
Directors' Responsibilities
The interim report including the financial information contained therein is the
responsibility of, and has been approved by, the directors. The directors are
responsible for preparing the interim report in accordance with the AIM Rules
which require that the accounting policies and presentation applied to the
interim figures should be consistent with those applied in preparing the
preceding annual accounts except where any changes, and the reasons for them,
are disclosed.
Review Work Performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
'Review of Interim Financial Information' issued by the Auditing Practices Board
for use in the United Kingdom. A review consists primarily of making enquiries
of group management and applying analytical procedures to the financial
information and underlying financial data and based thereon, assessing whether
the accounting policies and presentation have been consistently applied unless
otherwise disclosed. A review excludes audit procedures such as tests of
controls and verification of assets, liabilities and transactions. It is
substantially less in scope than an audit performed in accordance with United
Kingdom auditing standards and therefore provides a lower level of assurance
than an audit. Accordingly, we do not express an audit opinion on the financial
information.
Review Conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2005.
GRANT THORNTON UK LLP
CHARTERED ACCOUNTANTS
London
26 September 2005
CSS STELLAR PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the period ended 30 JUNE 2005
Unaudited Unaudited Audited
6 months to 6 months to Year to
30 June 30 June 31 December
Note 2005 2004 2004
£'000 £'000 £'000
Turnover
- Continuing operations 29,430 33,354 67,812
- Discontinued operations - 4,227 10,032
Total Turnover 29,430 37,581 77,844
Cost of Sales (15,809) (22,050) (46,215)
Gross Profit 13,621 15,531 31,629
Impairment of goodwill (13,731) - -
Amortisation of goodwill (1,193) (1,213) (2,438)
Other administrative expenses (13,131) (16,083) (31,902)
Total administrative expenses (28,055) (17,296) (34,340)
Operating loss
- Continuing operations (14,434) (418) (786)
- Discontinued operations - (1,347) (1,925)
Total operating loss (14,434) (1,765) (2,711)
Exceptional items 3 (725) (321) -
(15,159) (2,086)
Interest receivable 65 47 112
Interest payable (209) (175) (404)
Loss on ordinary activities before
taxation (15,303) (2,214) (3,003)
Tax on loss on ordinary activities (72) (143) (267)
Loss on ordinary activities
after
taxation (15,375) (2,357) (3,270)
Equity minority interest - 241 331
Transferred from reserves (15,375) (2,116) (2,939)
Loss per ordinary share 4
Basic (53.19) (7.96) (10.61)
Diluted (53.19) (7.96) (10.61)
Adjusted earnings/(loss) per
ordinary share 4
Basic 0.20 (0.53) 3.06
Diluted 0.20 (0.53) 2.84
Statement of total recognised
gains
and losses £'000 £'000 £'000
Loss for the financial year (15,375) (2,116) (2,939)
Unrealised surplus on revaluation
of
investment properties - - 500
Translation adjustment on
opening
reserves (6) (58) 5
Total losses recognised since
last
annual report (15,381) (2,174) (2,434)
CSS STELLAR PLC
CONSOLIDATED BALANCE SHEET AT 30 JUNE 2005
Unaudited Unaudited Audited
30 June 30 June 31 December
2005 2004 2004
£'000 £'000 £'000
Fixed assets
Intangible assets 21,784 38,970 36,690
Tangible assets 3,050 2,974 3,201
Investments - other 1,074 1,056 1,056
25,908 43,000 40,947
Current assets
Stocks and work in progress 650 405 173
Debtors 13,009 16,594 12,470
Cash at bank and in hand 516 4,554 1,220
14,175 21,553 13,863
Creditors: amounts falling due
within one year (16,614) (26,668) (15,689)
Net current liabilities (2,439) (5,115) (1,826)
Total assets less current liabilities 23,469 37,885 39,121
Creditors: amounts falling due
after more than one year (1,452) (828) (1,723)
Minority interests - 417 -
22,017 37,474 37,398
Capital and reserves
Called up share capital 14,452 13,621 14,452
Share premium account 28,025 25,866 28,025
Shares to be issued 489 3,295 489
Revaluation reserve 646 171 654
Profit and loss account (21,595) (5,479) (6,222)
Equity shareholders' funds 22,017 37,474 37,398
CSS STELLAR PLC
CONSOLIDATED CASHFLOW STATEMENT
For the period ended 30 JUNE 2005
Unaudited Unaudited Audited
6 months to 6 months to Year to
30 June 30 June 31 December
Note 2005 2004 2004
£'000 £'000 £'000
Net cash (outflow)/inflow from
operating activities 1 (364) (233) 148
Returns on investments and
servicing of finance
Interest paid (209) (162) (392)
Interest received 65 47 112
Interest element of finance lease
payments - (13) (12)
Net cash outflow from returns on
investments and servicing of (144) (128) (292)
finance
Taxation - (208) (35)
Capital expenditure and
financial
investment
Purchase of tangible fixed assets (267) (495) (848)
Purchase of intangible fixed - (292) (440)
assets
Sale of tangible fixed assets - 86 170
Net cash outflow from capital
expenditure and financial (267) (701) (1,118)
investment
Acquisitions and disposals
Purchase of subsidiaries - (982) (970)
Sale of subsidiaries 655 - (151)
Purchase of investments (37) - -
Net cash inflow/(outflow) from
acquisitions and disposals 618 (982) (1,121)
Equity dividends paid - - -
Net cash outflow before financing (157) (2,252) (2,418)
Financing
Receipts from borrowings - - 3,900
Repayment of borrowings (847) (1,057) (3,048)
Capital element of finance lease
rentals (3) (52) (75)
Net cash (outflow)/inflow from
financing (850) (1,109) 777
Decrease in cash (1,007) (3,361) (1,641)
CSS STELLAR PLC
NOTES TO THE ACCOUNTS
For the period ended 30 JUNE 2005
1. RECONCILIATION OF OPERATING LOSS TO NET CASH (OUTFLOW)/INFLOW FROM OPERATING
ACTIVITIES
6 months to 6 months to Year to
30 June 30 June 31 December
2005 2004 2004
£'000 £'000 £'000
Operating loss (14,434) (1,765) (2,711)
Depreciation charge 419 476 820
Impairment of goodwill 13,731 - -
Amortisation of goodwill 1,193 1,213 2,478
Increase in stocks (477) (153) 79
(Increase)/decrease in debtors (1,213) (809) 1,326
Increase/(decrease) in creditors 417 805 (1,844)
Net cash (outflow)/inflow from
operating activities (364) (233) 148
2. ANALYSIS OF TRADING BY CLASS OF BUSINESS
Divisions Turnover Profit/(loss) before taxation
6 months 6 months Year 6 months 6 months Year
to 30 to 30 to 31 to 30 to 30 to 31
June June December June June December
2005 2004 2004 2005 2004 2004
£'000 £'000 £'000 £'000 £'000 £'000
Continuing
operations
Talent
Management 5,896 5,024 10,924 645 473 1,236
Marketing 19,237 25,516 50,321 (136) 576 920
Television - - - - - -
Events 4,297 2,814 6,567 554 347 687
Central costs(1) - - - (573) (601) (1,191)
29,430 33,354 67,812 490 795 1,652
Discontinued
operations
Talent
Management - 304 229 - (512) (976)
Marketing - 79 93 - (254) (369)
Television - 3,844 9,710 - (581) (580)
Events - - - - - -
- 4,227 10,032 - (1,347) (1,925)
Impairment of
goodwill (13,731) - -
Amortisation
of goodwill (1,193) (1,213) (2,438)
Operating loss (14,434) (1,765) (2,711)
Net interest (144) (128) (292)
Exceptional
items (725) (321) -
Group loss
before
taxation (15,303) (2,214) (3,003)
CSS STELLAR PLC
NOTES TO THE ACCOUNTS
For the period ended 30 JUNE 2005
2. ANALYSIS OF TRADING BY CLASS OF BUSINESS (cont...)
Geographical Turnover Profit/(loss) before taxation
analysis
6 months 6 months Year 6 months 6 months Year
to 30 to 30 to 31 to 30 to 30 to 31
June June December June June December
2005 2004 2004 2005 2004 2004
£'000 £'000 £'000 £'000 £'000 £'000
Continuing
operations
Europe 11,950 10,352 21,807 1,187 895 1,912
North America 17,480 22,990 45,993 (124) 569 1,028
Rest of the
World - 12 12 - (68) (97)
Central costs(1) - - - (573) (601) (1,191)
29,430 33,354 67,812 490 795 1,652
Discontinued
operations
Europe - 4,148 9,938 - (1,093) (1,658)
North America - 48 48 - (129) (128)
Rest of the
World - 31 46 - (125) (139)
- 4,227 10,032 - (1,347) (1,925)
(1) Central costs have been separately analysed to enable a direct comparison of
the operating performance of each division in accordance with IFRS guidelines.
3. EXCEPTIONAL ITEMS
6 months to 6 months to Year to
30 June 30 June 31 December
2005 2004 2004
£'000 £'000 £'000
Exceptional items
Costs of restructuring (725) - -
Loss on disposal of subsidiary
undertakings - (321) -
(725) (321) -
CSS STELLAR PLC
NOTES TO THE ACCOUNTS
For the period ended 30 JUNE 2005
4. (LOSS)/EARNINGS PER SHARE
Basic Adjusted
per per
Weighted share share
average no amount amount
£'000 of shares pence pence
6 months ended 30 June 2005
Loss (15,375)
Amortisation of goodwill 1,193
Amounts written off goodwill 13,731
Costs of restructuring 725
Less: tax at 30% (217)
Adjusted earnings 57
Basic earnings per share
Earnings attributable to ordinary
shareholders 28,906,428 (53.19) 0.20
Dilutive effect of securities
- options and warrants -
Diluted earnings per share 28,906,428 (53.19) 0.20
6 months ended 30 June 2004
Loss (2,116)
Amortisation of goodwill 1,213
Exceptional loss on disposal 321
Operating loss on discontinued 766
activities
Less: tax at 30% (325)
Adjusted earnings (141)
Basic earnings per share
Earnings attributable to ordinary
shareholders 26,574,359 (7.96) (0.53)
Dilutive effect of securities
- options and warrants 2,305,256
Diluted earnings per share 28,879,615 (7.96) (0.53)
Year ended 31 December 2004
Loss (2,939)
Amortisation of goodwill 2,438
Operating loss on discontinued 1,925
activities
Less: tax at 30% (577)
Adjusted earnings 847
Basic earnings per share
Earnings attributable to ordinary
shareholders 27,692,271 (10.61) 3.06
Dilutive effect of
securities - options and warrants 2,155,116
Diluted earnings per share 29,847,387 (10.61) 2.84
The adjusted earnings per share is based on the retained profits adjusted by the
amortisation of goodwill and the exceptional administrative expenses and
exceptional items net of taxation at 30%.
5. PUBLICATIONS OF NON-STATUTORY ACCOUNTS
The financial information set out in this interim report does not constitute
statutory accounts as defined in Section 240 of the Companies Act 1985. The
figures from the year ended 31 December 2004 have been extracted from the
statutory financial statements which have been filed with the Registrar of
Companies. The auditors' report was unqualified and did not contain a statement
under Section 237(2) of the Companies Act 1985.
6. BASIS OF PREPARATION
The interim financial statements have been prepared in accordance with
applicable accounting standards under the historical cost convention as modified
by the revaluation of land and buildings. The principal accounting policies of
the Group have remained unchanged from those set out in the Group's annual
report and accounts.
END
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