Half Yearly Report

RNS Number : 0128S

WEARE 2020 PLC

27 November 2012

 



On behalf of:   WEARE 2020 plc ("2020", "the Company" or "the Group")

WEARE 2020 plc

Interim Results 2012/2013

WEARE 2020 plc (AIM: 2020) today announced its interim results for the six months ended 30 September 2012.

Performance Highlights

·      Gross profit £14.65m; (2011: £15.25m)

·      EBITDA before other income £1.16m; (2011: £2.06m)

·      Profit before tax ("PBT") £0.56m; (2011: £1.01m)

·      Profit after tax £0.46m; (2011: £0.79m)

·      Net debt £1.4m; (2011: £4.3m); undrawn banking facilities of £4.3million

·      Basic earnings per share 0.61 pence; (2011: 1.06 pence)

·      Diluted earnings per share 0.58 pence (2011: 1.02 pence)

Commenting on the results, Andrew Wilson, Chairman of WEARE 2020 plc, said: "In the toughest economic environment that the UK has seen for many years, I am pleased to report that WEARE 2020 plc has made an operating profit of £695k in the first half of the year (2011: (£1,267k).  With improvements in the new business pipeline, together with the acquisition of Iris, the Sheffield based marketing agency, and the steps being taken to contain costs across the Group, we remain cautiously optimistic for the second half."

Enquiries:

WEARE 2020 plc

Kate McIntyre, Group Finance Director    0114 281 1200

Cenkos

Nick Wells            020 7397 8900                                    

Ivonne Cantu

INTERIM RESULTS

The economic climate remains extremely challenging and the Group's performance for the first half of the financial year has unquestionably been impacted by this. Overall, Group profit before tax is down by £442k on last year. 

During the period the business has refocused its activities to face the market in two ways: 2020 and 2020 Consulting. Within 2020 are the Brand Communications and Digital Marketing propositions (formerly Agency) and the Contact centre business (formerly part of Dialogue). Within 2020 Consulting are the Marketing and Risk Consulting propositions, along with 2020 Technology. The analysis showing the performance of these two segments can be seen in note 4.

Alongside these changes, the Group is strengthening its expertise and infrastructure, as we bring together company-wide support services, such as Marketing, IT and Finance.

In the first six months of the year the 2020 segment has returned an operating profit of £606k (2011: £753k). Existing clients have been reducing spend and new business has been slower to come to fruition but there are now signs of increased tender activity. The acquisition of the Sheffield based Iris agency on 4 October brings new client contracts and new talent into the business. The integration is underway and early signs are positive.

2020 Consulting has been negatively impacted by the implementation issue in the Technology business reported in the 2012 annual results, but that is now substantially resolved and the business is enjoying a healthier pipeline. This is partially compensated for by a strong performance in the rest of the Consulting business. 

As stated in previous announcements, we continue to receive settlement of a contractual obligation from a client who has gone into liquidation. In the six months to 30 September 2012, we received £567k (2011: £285k). An additional amount of £157k was received in October. 

The Group continues to reduce its debt. Net debt at 30 September 2012 was £1.4m (2011: £4.3m).

Trading conditions are difficult, but we remain confident that the actions we are taking to win new business and develop existing client relationships, as well as manage costs tightly, are starting to deliver results. 

Andrew Wilson

Chairman

26 November 2012

Consolidated Interim Statement of Comprehensive Income (unaudited)

		Six months ended 30 Sept 2012	Six months ended 30 Sept 2011	Year ended 31 March 2012
	Note	£'000	£'000	£'000
Revenue	4	17,199	18,589	37,265
Direct costs		(2,542)	(3,342)	(7,520)
Gross profit		14,657	15,247	29,745
Other operating income		567	285	567
Amortisation		(852)	(900)	(1,801)
Operating expenses		(13,677)	(13,365)	(26,768)
Operating profit		695	1,267	1,743
Finance income		1	1	2
Finance costs		(131)	(261)	(479)
Net financing costs		(130)	(260)	(477)
Profit before tax		565	1,007	1,266
Tax expense	5	(108)	(214)	(144)
Profit for the period attributable to equity holders of the parent		457	793	1,122
Other comprehensive income:
Cash flow hedging
Current year gains		51	88	197
Total comprehensive income		508	881	1,319
Earnings per ordinary share	6
- basic		0.61p	1.06p	1.50p
- diluted		0.58p	1.02p	1.43p

Consolidated interim balance sheet (unaudited)

		30 Sept 2012	30 Sept 2011	31 March 2012
	Note	£'000	£'000	£'000
Assets
Non-current assets
Property, plant and equipment		726	1,533	1,172
Goodwill		29,753	29,752	29,753
Other intangible assets		8,621	10,374	9,473
		39,100	41,659	40,398
Current assets
Inventories		20	248	81
Trade and other receivables		9,844	9,788	9,505
Cash and cash equivalents		294	3,877	61
		10,158	13,913	9,647
Total assets		49,258	55,572	50,045
Liabilities
Current liabilities
Bank overdraft	7	-	(3,014)	(233)
Other interest bearing loans and borrowings	7	(1,700)	(5,192)	(3,000)
Financial derivatives	8	-	(156)	(52)
Trade and other payables		(6,006)	(6,299)	(5,845)
Tax payable		(1,071)	(893)	(729)
Provisions		(40)	(10)	(116)
		(8,817)	(15,564)	(9,975)
Non-current liabilities
Deferred tax liabilities		(2,060)	(2,831)	(2,326)
		(2,060)	(2,831)	(2,326)
Total liabilities		(10,877)	(18,395)	(12,301)
Net assets		38,381	37,177	37,744
Equity
Capital and reserves attributable to equity holders of the company
Share capital		34,051	34,051	34,051
Share premium account		6,608	6,608	6,608
Hedging reserve		-	(156)	(52)
Capital redemption reserve		125	125	125
Shares purchased for treasury		(25)	(42)	(25)
Share option reserve		207	329	207
Retained earnings		(2,585)	(3,738)	(3,170)
Total equity		38,381	37,177	37,744

Consolidated interim cash flow statement (unaudited)

		Six months ended 30 Sept 2012	Six months ended 30 Sept 2011	Year  ended 31 March 2012
	Note	£'000	£'000	£'000
Cash flow from operating activities
Profit for the period		457	793	1,122
Adjustment for:
Depreciation, amortisation and impairment		1,031	1,079	2,368
Profit on disposal of property, plant and equipment		(9)	-	-
Movement in provisions		(76)	(113)	41
Deferred consideration now not payable		-	(125)	-
Finance income		(1)	(1)	(2)
Finance costs		131	261	479
Share based payment expense		146	207	11
Taxation		108	214	144
Operating cash flow before changes in working capital		1,787	2,315	4,163
(Increase)/decrease in trade and other receivables		(386)	545	860
Decrease/(increase) in inventories		61	(105)	62
Increase/(decrease) in trade and other payables		149	(610)	(482)
Cash generated from operations		1,611	2,145	4,603
Interest received		1	1	2
Interest paid		(122)	(291)	(469)
Tax paid		-	109	(425)
Net cash flow from operating activities		1,490	1,964	3,711
Cash flows from investing activities
Payment of contingent consideration for prior year acquisitions		-	(2,000)	(2,375)
Addition of intangible assets		-	-	(1)
Acquisition of property, plant and equipment		(411)	(126)	(278)
Proceeds from disposal of property, plant and equipment		687	-	-
Net cash inflow/(outflow) from investing activities		276	(2,126)	(2,654)
Cash flows from financing activities
Proceeds from draw down of bank facilities		-	797	-
Repayment of borrowings		(1,300)	(888)	(2,311)
Cash settlement of equity share options		-	(32)	(66)
Net cash outflow from financing activities		(1,300)	(123)	(2,377)
Net increase/(decrease) in cash, cash equivalents and bank overdrafts		466	(285)	(1,320)
Cash and cash equivalents at beginning of period		(172)	1,148	1,148
Cash and cash equivalents at end of period		294	863	(172)
Cash and cash equivalents comprise:
Cash at bank and in hand		294	3,877	61
Bank overdrafts	7	-	(3,014)	(233)
Cash and cash equivalents at end of period		294	863	(172)

 Consolidated interim statement of changes in equity (unaudited)

	Share capital	Share premium account	Hedging reserve	Capital redemption reserve	Treasury Shares	Share option reserve	Retained earnings	Total  equity
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 31 March 2011	34,051	6,608	(244)	125	(42)	329	(4,706)	36,121
Credit in respect of share based payments	-	-	-	-	-	-	207	207
Cash settled share options	-	-	-	-	-	-	(32)	(32)
Transactions with owners	-	-	-	-	-	-	175	175
Profit for the period	-	-	-	-	-	-	793	793
Other comprehensive income:
Cash flow hedges	-	-	88	-	-	-	-	88
Total comprehensive income for the period	-	-	88	-	-	-	793	881
Balance at 30 September 2011	34,051	6,608	(156)	125	(42)	329	(3,738)	37,177

Allotment of shares from Treasury on the exercise of options	-	-	-	-	17	-	(17)	-
Credit in respect of share based payments	-	-	-	-	-	-	163	163
Transfer from share option reserve	-	-	-	-	-	(122)	122	-
Cash settled share options	-	-	-	-	-	-	(34)	(34)
Transactions with owners	-	-	-	-	17	(122)	234	129
Profit for the period	-	-	-	-	-	-	329	329
Other comprehensive income:
Cash flow hedges	-	-	109	-	-	-	-	109
Transfer from Hedging reserve	-	-	(5)	-	-	-	5	-
Total comprehensive income for the period	-	-	104	-	-	-	334	438
Balance at 31 March 2012	34,051	6,608	(52)	125	(25)	207	(3,170)	37,744

Credit in respect of share based payments	-	-	-	-	-	-	128	128
Transactions with owners	-	-	-	-	-	-	128	128
Profit for the period	-	-	-	-	-	-	457	457
Other comprehensive income:
Cash flow hedges	-	-	52	-	-	-	-	52
Total comprehensive income for the period	-	-	52				457	509
Balance at 30 September 2012	34,051	6,608	-	125	(25)	207	(2,585)	38,381

1.     General Information

WEARE 2020 plc (the "Company") is incorporated and domiciled in the United Kingdom. The Company is listed on the AIM market of the London Stock Exchange. The registered address is 101 Finsbury Pavement, London, EC2A 1RS.

The interim financial information was approved for issue on 26 November 2012. 

2.     Basis of preparation

The consolidated interim financial statements for the six months ended 30 September 2012 have been prepared in accordance with applicable accounting standards and under the historical cost convention except for certain financial instruments that are carried at fair value.

The financial information for the year ended 31 March 2012 set out in this interim report does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006.  The Group's statutory financial statements for the year ended 31 March 2012 have been filed with the Registrar of Companies.  The auditor's report on those financial statements was unqualified and did not contain statements under Section 498 (2) or Section 498 (3) of the Companies Act 2006.

The consolidated interim financial information should be read in conjunction with the annual financial statements for the year ended 31 March 2012, which have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union.

3.     Accounting policies

Except as described below, the principal accounting policies of WEARE 2020 plc and its subsidiaries ("the Group") are consistent with those set out in the Group's 2012 annual report and financial statements.

Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.

There are no standards and interpretations in issue at 30 September 2012 that have been adopted by the EU but are not yet effective.

4.     Segment information (unaudited)

The Group now reports its business activities in two areas: 2020 and 2020 Consulting, its two primary business activities. In previous years this has been reported in the three areas of Agency, Dialogue and Technology. The comparative information has been amended to reflect this change of management reporting. Unallocated represents the Group's head office function, along with intragroup transactions.

All the Group's activities are carried out within the UK. During the period one customer included within the Consulting segment accounted for greater than 10% of the Group's revenue. This customer accounted for 19.1% (2011: 9.2%) of Group revenue.

4.     Segment information (unaudited) (continued)

Six months ended 30 September 2012
			2020		2020 Consulting			Unallocated		Total
			£'000		£'000			£'000		£'000
Revenue			7,963		9,304			(68)		17,199
Direct costs			(1,590)		(1,058)			106		(2,542)
Gross profit			6,373		8,246			38		14,657
Other operating income			512		55			-		567
Operating expenses excluding depreciation, amortisation and charges for share based payments			(5,769)		(6,659)			(924)		(13,352)
Operating profit before depreciation, amortisation and charges for share based payments			1,116		1,642			(886)		1,872
Depreciation			(110)		(69)			-		(179)
Amortisation			(400)		(452)			-		(852)
Charges for share based payments			-		-			(146)		(146)
Operating profit			606		1,121			(1,032)		695
Finance income										1
Finance costs										(131)
Profit before tax										565
Tax expense										(108)
Profit for the period										457
Six months ended 30 September 2011
				2020		2020 Consulting	Unallocated		Total
				£'000		£'000	£'000		£'000
Revenue				9,707		9,081	(199)		18,589
Direct costs				(2,754)		(813)	225		(3,342)
Gross profit				6,953		8,268	26		15,247
Other operating income				257		28	-		285
Operating expenses excluding depreciation, amortisation and charges for share based payments				(5,924)		(6,459)	(596)		(12,979)
Operating profit before depreciation, amortisation and charges for share based payments				1,286		1,837	(570)		2,553
Depreciation				(113)		(65)	(1)		(179)
Amortisation				(400)		(500)	-		(900)
Charges for share based payments				(20)		(10)	(177)		(207)
Operating profit				753		1,262	(748)		1,267
Finance income									1
Finance costs									(261)
Profit before tax									1,007
Tax expense									(214)
Profit for the period									793

4.   Segment information (unaudited) (continued)

Year ended 31 March 2012
		2020	2020 Consulting	Unallocated	Total
		£'000	£'000	£'000	£'000
Revenue		19,764	18,203	(702)	37,265
Direct costs		(5,978)	(2,244)	702	(7,520)
Gross profit		13,786	15,959	-	29,745
Other operating income		512	55	-	567
Operating expenses excluding depreciation, amortisation, impairment and exceptional charges and charges for share based payments		(12,172)	(13,178)	(799)	(26,149)
Operating profit before depreciation, amortisation, impairment and charges for share based payments		2,126	2,836	(799)	4,163
Depreciation		(231)	(128)	(1)	(360)
Amortisation		(799)	(1,002)	-	(1,801)
Impairment		(248)	-	-	(248)
Charges for share based payments		(6)	(10)	5	(11)
Operating profit		842	1,696	(795)	1,743
Finance income					2
Finance costs					(479)
Profit before tax					1,266
Tax expense					(144)
Profit for the period					1,122

Total assets		2020	2020 Consulting	Unallocated	Total
		£'000	£'000	£'000	£'000
30 September 2012		25,547	28,716	(5,005)	49,258
31 March 2012		26,632	27,001	(3,588)	50,045
30 September 2011		29,737	27,796	(1,961)	55,572

5.     Tax expense (unaudited)

A reconciliation of the charge that would result from applying the standard UK corporation tax rate to profit before tax to the tax charge is given below.

		Six months ended 30 Sept 2012	Six months ended 30 Sept 2011	Year  ended 31 March 2012
		£'000	£'000	£'000
Recognised in the consolidated statement of comprehensive income:
Current year tax		343	506	868
Origination and reversal of temporary differences		(235)	(292)	(724)
Total tax charge		108	214	144
Profit before tax		565	1,007	1,266
Tax charge thereon at UK corporation tax rate of 24% (2011: 26%)		136	262	329
Effects of:
Non-deductible expenses		2	-	10
Impairment of goodwill		-	-	-
Share based payment charges		31	54	96
Capital allowances in excess of depreciation		(60)	-	33
Schedule 23 deductions		-	-	(3)
Other		(1)	(32)	(16)
Prior year adjustment		-	(70)	(305)
Total tax charge		108	214	144

6.     Earnings per share (unaudited)

		Six months ended 30 Sept 2012	Six months ended 30 Sept 2011	Year  ended 31 March 2012
		Pence per share	Pence per share	Pence per share
Basic		0.61p	1.06p	1.50p
Diluted		0.58p	1.02p	1.43p

Earnings per share have been calculated by dividing the profit attributable to shareholders by the weighted average number of ordinary shares in issue during the period. The calculations of basic and diluted earnings per share are:

		Six months ended 30 Sept 2012	Six months ended 30 Sept 2011	Year  ended 31 March 2012
		£'000	£'000	£'000
Profit for the period attributable to shareholders		457	793	1,122
Weighted average number of ordinary shares in issue:		Number '000	Number '000	Number '000
Basic		74,505	74,605	74,505
Adjustment for share options, warrants and contingent shares		4,137	3,105	4,137
Diluted		78,642	77,710	78,642
Adjusted earnings per share
		Six months ended 30 Sept 2012	Six months ended 30 Sept 2011	Year  ended 31 March 2012
		Pence per share	Pence per share	Pence per share
Basic adjusted earnings per share		0.87p	1.77	2.54p
Diluted adjusted earnings per share		0.82p	1.70	2.41p

Adjusted earnings per share have been calculated by dividing the profit attributable to shareholders before other income, amortisation, impairment and charges for share based payments by the weighted average number of ordinary shares in issue during the period. The numbers used in calculating the basic and diluted adjusted earnings per share are reconciled below:

		Six months ended 30 Sept 2012	Six months ended 30 Sept 2011	Year  ended 31 March 2012
		£'000	£'000	£'000
Profit before tax		565	1,007	1,266
Other income		(567)	(285)	(567)
Amortisation		846	900	1,801
Impairment of non-current assets and exceptional costs		-	-	248
Charges for share based payments		146	207	11
Adjusted profit attributable to shareholders		990	1,829	2,759
Current period tax charge		(343)	(506)	(868)
		647	1,323	1,891

7.     Bank overdraft, borrowings and loans (unaudited)

		30 Sept 2012	30 Sept 2011	31 March 2012
Summary		£'000	£'000	£'000
Bank overdraft		-	3,014	233
Borrowings, undiscounted cash flows		1,700	5,192	3,000
		1,700	8,206	3,233
Borrowings are repayable as follows:
Within 1 year
Bank overdraft		-	3,014	233
Borrowings		1,700	5,228	3,000
Total due within 1 year		1,700	8,242	3,233
Less future interest		-	(36)	-
Total due within 1 year		1,700	8,206	3,233
In more than 1 year but not more than 2 years		-	-	-
In more than 2 years but not more than 3 years		-	-	-
Total due in more than 1 year		-	-	-
Less future interest		-	-	-
Total due in more than 1 year		-	-	-
Average interest rates at the balance sheet date were:		%	%	%
Overdraft		3.35	2.75	3.35
Term loan		-	3.52	-
Revolving credit facility		3.35	3.40	3.35

As the loans are at variable market rates their carrying amount is equivalent to their fair value.

The borrowing facilities available to the Group at 30 September 2012 were £5.7 million (2011: £7.6 million) and, taking into account cash balances within the Group, there was £4.3 million (2011: £3.2 million) of available borrowing facilities.

A composite accounting system is set up with the Group's bankers, which allows debit balances on overdraft to be offset across the Group with credit balances.

Reconciliation of net debt	Cash at bank and in hand	Overdraft	Borrowings	Net debt
	£'000	£'000	£'000	£'000
30 September 2012	294	-	(1,700)	(1,406)
31 March 2012	61	(233)	(3,000)	(3,172)
30 September 2011	3,877	(3,014)	(5,192)	(4,329)

8.     Financial derivatives (unaudited)

		30 Sept 2012	30 Sept 2011	31 March 2012
		£'000	£'000	£'000
Interest rate swap		-	156	52

In 2007 the Group purchased an interest rate swap of 6.19% for the period 2007 to 2012 for £4.0 million of its borrowings. This swap is designated a hedge of the interest expense relating to the Group loans. The contract came to an end in June 2012. Last year the contract was marked to market at 30 September 2011 and was a net liability of £156,000.

9.     Provisions (unaudited)

		30 Sept 2012	30 Sept 2011	31 March 2012
		£'000	£'000	£'000
At the beginning of the period		116	123	123
Additional provisions for closure of site		-	-	116
Released		-	(65)	-
Utilised during the year		(76)	(48)	(123)
At the end of the period		40	10	116

Provisions relate to leases in the Group where the commercial benefit has either ceased or will cease before the normal expiry period.

10.   Share capital (unaudited)

Authorised:

	45p deferred shares		5p ordinary shares
	£'000		£'000
Authorised share capital at 31 March 2012 and 30 September 2012	45,000		10,000

Allotted, issued and fully paid

	45p deferred shares	5p ordinary shares
	Number	Number		£'000
Issued share capital at 31 March 2012 and at 30 September 2012	67,378,520	74,604,999		34,051

No shares were issued in the period.

11.   Post Balance Sheet event

On 4 October Scope Creative Marketing Limited, a 100% subsidiary of WEARE 2020 plc, acquired 100% of the share capital of Iris Associates Limited, a Sheffield based creative agency, for an initial consideration of £1.1m in cash. Based on certain performance criteria, additional consideration of up to £1.3m may become payable over the next three years.

12.   Related party transactions (unaudited)

There were no significant changes in the nature and size of related party transactions for the period from those disclosed in the Annual Report for the year ended 31 March 2012.

INDEPENDENT REVIEW REPORT TO WEARE 2020 PLC

Introduction

We have been engaged by the company to review the interim financial information in the interim report for the six months ended 30 September 2012 which comprises the consolidated interim statement of comprehensive income, the consolidated interim balance sheet, the consolidated interim cash flow statement and the consolidated interim statement of changes in equity and the related notes 1 to 12.  We have read the other information contained in the interim financial report and considered whether it contains any apparent misstatements or material inconsistencies with the interim financial information.

This report is made solely to the company in accordance with guidance contained in ISRE (UK and Ireland) 2410, "Review of Interim Financial Information performed by the Independent Auditor of the Entity". Our review work has been undertaken so that we might state to the company 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, for our review work, for this report, or for the conclusion we have formed.

Directors' responsibilities

The interim report is the responsibility of, and has been approved by, the directors. The AIM rules of the London Stock Exchange require that the accounting policies and presentation applied to the interim financial information are consistent with those which will be adopted in the annual accounts having regard to the accounting standards applicable for such accounts.

As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The interim financial information in the interim report has been prepared in accordance with the basis of preparation in note 2. 

Our responsibility

Our responsibility is to express to the company a conclusion on the interim financial information in the interim report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Based on our review, nothing has come to our attention that causes us to believe that the interim financial information in the interim report for the six months ended 30 September 2012 is not prepared, in all material respects, in accordance with the basis of preparation described in note 2.

Grant Thornton UK LLP

Chartered Accountants

Sheffield

26 November 2012

 

END

 

 

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