Interim Results
Digital Marketing Group PLC
10 December 2007
Date: 10 December 2007
On behalf of: Digital Marketing Group plc ('the Company')
Embargoed until: 0700hrs
Digital Marketing Group plc
Interim Results for the six months ended 30 September 2007
Digital Marketing Group plc (AIM: DIGI), the digital direct marketing
specialists, today announced its interim results for the six months ended 30
September 2007.
Financial Highlights
• Revenues: £22.14m
• Gross Profit: £14.77m
• EBITDA: £3.06m (before charges for share options of £1.01m)
• Profit before tax: £2.49m (before charges for share options and
amortisation)
• Basic EBITDA per share: 5.44p (before charges for share options)
Operational Highlights
• Completion of the acquisitions of Graphico New Media and Hyperlaunch New
Media in June 2007 following the £10m equity raise in May 2007
• Awarded 'Digital Direct Marketing Services Supplier of the Year'
Pro forma Highlights
• Gross Profit up 20% to £16.70m (2006: £13.96m)
• EBITDA up 39% to £3.86m (2006: £2.78m) before central costs and charges
for share options of £1.01m
• EBITDA after central costs before charges for share options up 47% to
£3.48m (2006: £2.36m)
• Profit before tax (before charges for share options and amortisation up
52% to £2.89m (2006: £1.90m)
Commenting on these results, Stephen Davidson, Chairman of Digital Marketing
Group plc, said:
'It is a pleasure to report an excellent set of interim results which re-confirm
the competitiveness of Digital Marketing Group's strategy. Importantly, these
results fulfil our financial goals for the period and we remain highly confident
of delivering the levels of profitability for the full year which meet market
expectations. We also remain confident that we will sustain high levels of
growth into the future.'
Ben Langdon, Chief Executive, added:
'Our single minded focus on digital direct marketing has helped us to attract
new blue-chip clients and to generate incremental business from our existing
client base. We continue to benefit from growth in expenditure through digital
channels and are already recognised as leaders in this specialist sector. We
have achieved a lot in a short space of time, and we will continue to achieve a
lot in the future.'
Enquiries:
Digital Marketing Group plc www.digitalmarketinggroup.co.uk
Ben Langdon, Chief Executive Officer 01491 615 306
Sarah Guest, Chief Financial Officer 01491 615 306
Cenkos Securities
Adrian Hargrave 0207 397 8900
Redleaf Communications
Emma Kane/ Sanna Lehtinen/Tom Newman 0207 822 0200
CHAIRMAN'S STATEMENT
It is a pleasure to report an excellent set of interim results which re-confirm
the competitiveness of Digital Marketing Group's strategy.
These results represent the performance of the business in the six months to 30
September 2007, a period during which the Company was awarded 'Direct Digital
Marketing Services Supplier of the Year'. The results include a full six months
for HSM Limited (incorporating both HSM Telemarketing and Inbox Digital), Scope
Creative Marketing (trading as Dig for Fire), Cheeze Limited (Cheeze) and
Alphanumeric Group (trading as Jaywing). The results include only three months
for Graphico New Media (Graphico) and Hyperlaunch New Media (Hyperlaunch) as
these companies were acquired at the end of June 2007.
The recent acquisitions of Graphico and Hyperlaunch add important digital skills
to our group. Graphico has strong credentials in web design & build and mobile
marketing. Hyperlaunch has significant online PR and 'buzz marketing' expertise
gained through their specialisation in the music and entertainment industry.
These two businesses are being successfully integrated into our group and are
exceeding expectations in terms of their financial performance.
Financials
We posted revenue of £22.14m, and gross profit (revenue less direct cost of
sales) of £14.77m. EBITDA was £3.06m before charges for share options of £1.01m.
Profit before tax was £2.49m before charges for share options of £1.01m and
amortisation of £0.65m. Basic EBITDA per share (before charges for share
options) was 5.44p.
When looked at on a pro forma basis (an explanation of which is given in the
chief executive's review) for the six months ended 30 September 2007, the
results for Digital Marketing Group plc would have been:
• Gross Profit up 20% to £16.70m (2006: £13.96m)
• EBITDA up 39% to £3.86m before central costs and before charges for
share options (2006: £2.78m)
• EBITDA of £3.48m after central costs up 47% (2006: £2.36m).
• Profit before tax (before charges for share options and amortisation)
up 52% to £2.89m (2006: £1.90m)
We are in a strong position financially. In May 2007, we completed a £10m equity
raise. Our net debt at £4.33m is 45% below our net debt at year end and gearing
(gross debt as % of total equity) decreased to 25% at 30 September 2007 from 47%
at the year end. At present the Group has £6.74m of undrawn borrowing
facilities.
People
On 4th September, we were delighted to welcome Sarah Guest as the Group's new
Finance Director and Company Secretary succeeding Robert Millington. The Board
is grateful for the valued contribution Bob made through the AIM flotation
process and the first phase of the Group's development and wish him every
success with his future endeavours.
Current trading & Outlook
Current trading is strong and our companies have secured significant new
business wins and organic growth. Expenditure on digital marketing remains
buoyant and these results fulfil our financial goals for the period. We remain
highly confident of delivering the levels of profitability for the full year
which meet market expectations. We also remain confident that we will sustain
high levels of growth into the future.
Stephen Davidson
Chairman
10 December 2007
CHIEF EXECUTIVE'S REVIEW
Digital Marketing Group was formed in October 2006. Our business is in very good
shape and performing strongly. We have a clear and competitive proposition with
an integrated platform that generates incremental success over and above the
good levels of organic growth delivered by our businesses.
Our Product and Philosophy
Digital Marketing Group believes that the boundaries between digital and direct
marketing are now blurred.
Good digital marketing is good direct marketing.
We are a digital communications group that uses the principles of direct
marketing to inform everything that we do.
What makes us different?
We are not a marketing services group. We don't make investments in traditional
marketing services businesses.
We specialise in digital communications through the online marketing and online
media skills of four of our businesses: - Inbox Digital, Graphico, Hyperlaunch
and Cheeze. We call this our 'online marketing and media' segment.
We underpin our digital communications expertise with some of the best direct
marketing and data professionals in the UK. HSM and Dig for Fire are our direct
marketing businesses. Jaywing is our data business.
Integration
At the heart of our company is 'Digital Brain', a process which enables the real
time integration of digital, direct marketing and data. This helps us create
unique contact strategies for each individual consumer based on their historical
data and real-time interactions regardless of channel.
We call this 'real-time marketing using real-time channels'.
Processes such as Digital Brain bring the integrated proposition of Digital
Marketing Group to life as clients can easily realise the benefits to be derived
from the real-time coordination of digital, direct marketing and data.
Digital Brain also allows us to market the Group aggressively and we have
recently appointed a Group Marketing Director to focus on maximising
opportunities from marketing to clients who do not currently work with any of
the companies in our group.
Our recent success in winning the prestigious 'Digital Direct Marketing Services
Supplier of the Year' award not only confirms the quality of our product but it
will inevitably benefit the Group's marketing efforts.
Financial Review
The Group was formed in October 2006 with the acquisitions of HSM and Dig for
Fire. In January 2007 we acquired Cheeze and Jaywing and, in June 2007, we
acquired Graphico and Hyperlaunch.
In June 2007 we posted our maiden set of results.
We have now delivered our interim results for the six months to 30 September
2007. The results represent a full six months for HSM, Dig for Fire, Cheeze and
Jaywing and three months' post acquisition results for Graphico and Hyperlaunch.
On this basis the Group achieved:
• £14.77m Gross Profit (revenue less direct cost of sales)
• £3.06m EBITDA before charges for share options
• £2.49m Profit before tax (before charges for share options of £1.01m and
amortisation of £0.65m)
• 5.44p basic EBITDA per share (before charges for share options)
• 0.95p basic earnings per share
Pro forma Basis
As the group was only formed after 30 September 2006 there is no published
comparative financial information available. Therefore throughout the remainder
of this report certain information is provided on a pro forma basis for
illustrative purposes only. This basis attempts to illustrate the group as it
would have been if it had existed previously. The information is based on the
unaudited management accounts of the individual entities prepared under UK GAAP,
time apportioned where appropriate. The information has been adjusted for items
which, in the judgement of the directors, are non recurring, for example excess
management remuneration, and excludes charges in respect of share options. The
information is not necessarily fully consistent in all respects with the
respective statutory accounts and its reliability is accordingly limited
thereby.
When looked at on a pro forma basis the Group's results for the six months
ending 30 September 2007 would have been:
• Gross Profit up 20% to £16.70m (2006: £13.96m)
• EBITDA up 39% to £3.86m before central costs of £0.38m and before
charges for share options of £1.01m (2006: £2.78m)
• EBITDA after central costs but before charges for share options up 47%
to £3.48m (2006: £2.36m)
• Profit before tax (before charges for share options and amortisation) up
52% to £2.89m (2006: £1.90m)
The following table shows an analysis of the results for the six months together
with comparative pro forma information for illustrative purposes on the basis
set out in the segmental performance section.
6mths Sep 6mths Sep 6mths Sep Yr/Yr
07 07 Pro 06 Pro Growth
forma forma
£m £m £m
Revenue 22.14 24.30 20.94 16%
Direct Costs 7.37 7.60 6.98 9%
Gross Profit 14.77 16.70 13.96 20%
Operating expenses, 11.33 12.83 11.18 15%
excluding central costs,
charges for share options,
depreciation, and
amortisation.
EBITDA before central 3.44 3.87 2.78 39%
costs and charges for
share options
Central costs 0.38 0.38 0.42 (9)%
EBITDA before charges for 3.06 3.49 2.36 48%
share options
Depreciation 0.25 0.28 0.24 16%
EBITA before charges for 2.81 3.21 2.12 51%
share options
Net interest expense 0.32 0.32 0.22 45%
Profit before tax before 2.49 2.89 1.90 52%
charges for share options
and amortisation
Net debt at 30 September 2007 stood at £4.33m, a 45% reduction compared to the
year end net debt of £7.91m. Net cash flow from operating activities in six
months was £1.69m with cash and cash equivalents increasing to £5.77m as at 30
September 2007.
These interim results for the Group are consistent with expectations for the
period and we are also highly confident that we will deliver against market
expectations for the full year.
Acquisitions of Graphico and Hyperlaunch
GRAPHICO
History
Graphico was founded in 1990 and had its origins in digital production work for
the music industry.
Using its understanding of digital technology Graphico evolved into web design
and build work for clients. It then broadened its service offer even further and
now offers clients a wide range of strategic and creative services all focused
in the digital space.
Graphico is now best described as a full service creative digital marketing
agency.
The company employs over 70 people in its offices in Newbury, Berkshire.
Over the past 5 years the company has enjoyed rapid growth and achieved industry
recognition for the quality of its product. This year they were voted the UKs
sixth most respected digital agency in New Media Age (NMA) magazine's 'Top
100 Interactive Agencies 2007' report.
Graphico has an enviable reputation for achieving international award
nominations for the work that it produces for its clients. In 2007 to date alone
the Company has won six accolades.
Product
Graphico's core product remains large scale web design and build work for its
clients.
Graphico's range of products and services is of course much broader than this
and encompasses the creation of digital advertising campaigns, strategic
planning and consultancy in the area of digital strategy and the creation of
digital businesses for clients like slicethepie.com.
In addition Graphico have developed a particular expertise in mobile marketing
through its 'Momentum' product which enables clients to create and run
SMS campaigns as well as manage and develop WAP campaigns through one interface.
It has a range of international and blue-chip clients including Pepsi, The
London Eye, Walkers, Universal, Bacardi-Martini, BBC, Chivas Regal and First
Great Western.
Financial Performance
The following table shows the financial contribution of Graphico to the Group's
results, representing 3 months post acquisition trading, together with an
indicative summary of what the contribution would have been on a pro forma basis
to September 2007 and previous year.
GRAPHICO
3mths 6mths Sep 6mths Sep 06 Yr/Yr
07 Growth
Sept 07 Pro forma
Pro forma
Post
Acquisition
£m £m £m
Revenue 1.42 3.12 2.09 49%
Direct Costs 0.20 0.41 0.24 71%
Gross Profit 1.22 2.71 1.85 46%
Operating expenses, 1.00 2.21 1.68 32%
excluding charges for
share options,
depreciation and
amortisation.
EBITDA 0.22 0.50 0.17 194%
Depreciation 0.02 0.04 0.03 33%
Operating profit before 0.20 0.46 0.14 229%
charges for share
options and
amortisation
Note 1 2 2
1. The post acquisition column shows the financial contribution of Graphico to
the Group's results to 30 September 2007 before amortisation of intangible
assets which, in this period amounted to £0.08m.
2. The pro forma Sep 07 and Sep 06 columns are shown for illustrative purposes
only. The information is based on the unaudited management accounts of Graphico
and has been adjusted for items which, in the judgement of the directors, are
considered to be non recurring, for example, excess management remuneration and
excludes charges in respect of group share options.
HYPERLAUNCH
History
Hyperlaunch, began trading in August 2001. The Company's first client was
Columbia Tristar Home Entertainment, a division of Sony.
Since its launch Hyperlaunch has focused on entertainment orientated clients
developing an industry specialism and has won a number of awards particularly
for its work in the music industry.
The Company has serviced most of the top three companies in each of the film,
music, games and publishing sectors resulting in a very high quality client
portfolio.
Recently Hyperlaunch has successfully developed re-usable software libraries and
content management tools, which, when coupled with contracted hosting services,
enables a prompt response to client needs.
Product
The aim of the Company is to generate online product awareness and create a
'buzz'. Clients are presented with a marketing and creative implementation
strategy to ensure that products receive extensive online PR coverage and a
return on investment, above and beyond that which could be achieved through
traditional media.
Hyperlaunch has extensive entertainment product release experience and has an
enviable reputation, particularly within the music industry where it currently
handles around 35% of music chart product releases at any given time.
Opportunities have arisen to build close relationships with clients in these
sectors and the company is therefore often viewed as a trusted partner.
Consequently client retention has been excellent.
Hyperlaunch's reputation as an entertainment specialist has led to brand related
projects for companies including Sony, Philips and Samsung. Often this is
because of experience with 'cutting edge' digital campaigns or because of
capabilities to reach the youth demographic.
With its reputation and the fact that digital marketing is being viewed as an
integral part of the marketing mix, Hyperlaunch is well positioned in the market
place to exploit future opportunities and achieve its ambitions for growth.
Its client base includes blue-chip brands such as Universal Music, Atlantic
Records, Samsung and Warner Bros.
Financial performance
The following table shows the financial contribution of Hyperlaunch to the
Group's results, representing 3 months post acquisition trading, together with
an indicative summary of what the contribution would have been on a pro forma
basis to September 2007 and previous year.
HYPERLAUNCH
3mths 6mths Sep 6mths Sep Yr/Yr Growth
07 Pro 06 Pro
Sept 07 forma forma
Post
Acquisition
£m £m £m
Revenue 0.44 0.90 0.77 17%
Direct Costs 0.01 0.03 0.05 (60)%
Gross Profit 0.43 0.87 0.72 21%
Operating expenses, 0.35 0.65 0.59 10%
excluding charges for
share options,
depreciation and
amortisation.
EBITDA 0.08 0.22 0.13 69%
Depreciation 0.01 0.01 0.00 0%
Operating profit before 0.07 0.21 0.13 62%
charges for share
options and
amortisation
Note 1 2 2
1. •The post acquisition column shows the financial contribution of Hyperlaunch
to the Group's results to 30 September 2007 before amortisation of
intangible assets which, in this period amounted to £0.03m.
2. •The pro forma Sep 07 and Sep 06 columns are shown for illustrative purposes
only. The information is based on the unaudited management accounts of
Hyperlaunch and has been adjusted for items which, in the judgement of the
directors, are considered to be non recurring, for example, excess
management remuneration and excludes charges in respect of group share
options.
Segmental performance
In order to aid shareholders in reviewing our business, we intend to use the
following three segments on an ongoing basis:
1. •'Online marketing and media' (Inbox Digital, Graphico, Hyperlaunch, Cheeze)
2. •'Direct Marketing' (HSM, Dig for Fire)
3. •'Data Services & Consultancy' (Jaywing)
6mths Sep 07 6mths Sep 07 6mths Sep 06 % Growth
Pro forma Pro forma
Gross Profit EBITDA Gross EBITDA Gross EBITDA Gross EBITDA
* Profit * Profit * Profit yr/yr%
yr/yr%
£m £m £m £m £m £m
Online Marketing & Media 4.02 1.14 5.95 1.56 4.66 0.95 28% 65%
Direct Marketing 5.52 1.19 5.52 1.19 4.50 0.95 23% 25%
Data Services & 5.23 1.11 5.23 1.11 4.80 0.88 9% 27%
Consultancy
14.77 3.44 16.70 3.86 13.96 2.78 20% 39%
Central costs - (0.38) - (0.38) - (0.42) - 9%
14.77 3.06 16.70 3.48 13.96 2.36 20% 47%
* EBITDA before charges for share options
The pro forma Sep 07 and Sep 06 columns are shown for illustrative purposes
only. The information in the Sep 07 column represents the information included
in the interim financial information for the group adjusted to include the full
six months activity of Graphico and Hyperlaunch extracted from unaudited
management accounts. The information in the Sep 06 column is based on the
unaudited management accounts of:
•HSM
•Dig For Fire
•Cheeze
•Jaywing
•Graphico
•Hyperlaunch
Both columns have been adjusted for items which, in the judgement of the
directors, are considered to be non-recurring, for example, excess management
remuneration, and exclude charges in respect of group share options.
Online marketing and media
In the six months to 30 September 2007 this segment achieved on a pro forma
basis Gross Profits of £5.95m and EBITDA (before charges for share options) of
£1.56m.
This represents growth in Gross Profits of 28% year on year, and growth in
EBITDA of 65% year on year.
ONLINE MARKETING AND MEDIA
6mths Sep 6mths Sep 07 6mths Sep 06 % Growth
07 Pro forma Pro forma
£m £m £m
Revenue 8.80 10.97 9.25 19%
Direct Costs 4.78 5.02 4.59 9%
Gross Profit 4.02 5.95 4.66 28%
Operating expenses, excluding 2.88 4.39 3.71 18%
charges for share options,
depreciation and amortisation.
EBITDA before charges for 1.14 1.56 0.95 65%
share options
Depreciation 0.08 0.11 0.07 57%
Operating profit before 1.06 1.45 0.88 65%
charges for share options and
amortisation
Direct marketing
In the six months to 30 September 2007 this segment achieved on a pro forma
basis Gross Profits of £5.52m and EBITDA (before charges for share options) of
£1.19m
This represents growth in Gross Profits of 23% year on year, and growth in
EBITDA of 25% year on year.
DIRECT MARKETING
6mths Sep 6mths Sep 06 % Growth
07 Pro forma
£m £m
Revenue 7.28 5.39 35%
Direct Costs 1.76 0.89 98%
Gross Profit 5.52 4.50 23%
Operating expenses, excluding 4.33 3.55 22%
charges for share options,
depreciation and
amortisation.
EBITDA before charges for 1.19 0.95 25%
share options
Depreciation 0.10 0.09 11%
Operating profit before 1.09 0.86 27%
charges for share options and
amortisation
Data services and consultancy
In the six months to September this segment achieved on a pro forma basis Gross
Profits of £5.23m and EBITDA (before charges for share options) of £1.11m.
This represents growth in Gross Profits of 9% year on year, and growth in EBITDA
of 27% year on year.
DATA SERVICES AND CONSULTANCY
6mths Sep 07 6mths Sep 06 Growth
Pro forma Pro forma
£m £m
Revenue 6.98 6.31 11%
Direct Costs 1.75 1.51 16%
Gross Profit 5.23 4.80 9%
Operating expenses, excluding 4.12 3.92 5%
charges for share options,
depreciation and
amortisation.
EBITDA before charges for 1.11 0.88 27%
share options
Depreciation 0.07 0.07 0%
Operating profit before 1.04 0.81 29%
charges for share options and
amortisation
Summary & Outlook
Our strategy remains focused on integrating product and process in order to
achieve continuing new business success. We also have identified some areas
where the group could achieve some rationalisation of its cost base.
We have already achieved significant success in generating new business from
existing clients using the integrated proposition of the group. We are also on
track to meet market expectations in terms of the level of gross profits
achieved through cross-referrals from existing Group clients.
Our single minded focus on digital direct marketing has helped us to attract new
blue-chip clients to the Group, and to generate incremental business from our
existing client base. We continue to benefit from growth in expenditure through
digital channels and are already recognised as leaders in this specialist
sector. We have achieved a lot in a short space of time, and we will continue to
achieve a lot in the future.
In summary, we are pleased that we are comprehensively delivering against our
objectives. We have:
• Acquired six market leading businesses in digital direct marketing
• Met the financial promises and commitments we have made
• Built an integrated platform to deliver digital direct marketing to our
clients
• Gained industry wide recognition for the quality of our product and
services
• Secured new accounts and generated incremental revenue for the Group
• Given ourselves sufficient financial flexibility to exploit suitable
acquisition opportunities that may arise in the digital market space
As I stated in our maiden set of accounts, 'much achieved, much opportunity'.
Ben Langdon
Chief Executive
10 December 2007
Consolidated Income Statement
Unaudited Unaudited Audited
Note Six Six Year
months months
ended
ended 30 ended 30 31
September September March
2006 2007
2007
Total Total Total
£000 £000 £000
Continuing operations
Revenue 2 22,138 - 13,057
Direct costs (7,370) - (4,668)
Gross profit 14,768 - 8,389
Other operating income 16 - 16
Amortisation (648) - (321)
Operating expenses (12,982) - (6,904)
Operating profit 2 1,154 - 1,180
Financial income 64 - 99
Financial expenses (380) - (205)
Net financing costs (316) - (106)
Profit before tax 838 - 1,074
Taxation 3 (301) - (537)
Profit for year from continuing 537 - 537
operations
Discontinued operations
Profit/(loss) for period on - (640) (640)
discontinued operations
Profit/(loss) for the year 537 (640) (103)
attributable to shareholders
Earnings per share 4
From continuing and discontinued
operations
- basic 0.95p (9.95)p (0.55)p
- diluted 0.78p (9.95)p (0.51)p
From continuing operations
- basic 0.95p - 2.87p
- diluted 0.78p - 2.62p
Consolidated Balance Sheet
Unaudited Unaudited Audited
Note 30 30 31 March
September September 2007
2007 2006
£000 £000 £000
Non-current assets
Property, plant and equipment 2,128 3 714
Goodwill 38,712 - 30,734
Other intangible assets 14,083 - 10,215
54,923 3 41,663
Current assets
Inventories 562 - 165
Trade and other receivables 8,539 11 6,102
Cash and cash equivalents 5,765 2,867 5,569
14,866 2,878 11,836
Total assets 69,789 2,881 53,499
Current liabilities
Bank overdraft 6 4,603 - 2,664
Other interest-bearing loans and 6 1,130 - 1,474
borrowings
Trade and other payables 10,277 181 6,980
Contingent consideration 3,100 - -
Tax payable 1,021 - 611
20,131 181 11,729
Non-current liabilities
Other interest-bearing loans and 6 4,362 - 9,339
borrowings
Provisions 450 - 518
Deferred tax liabilities 3,938 - 3,073
8,750 - 12,930
Total liabilities 28,881 181 24,659
Net assets 40,908 2,700 28,840
Equity attributable to
shareholders
Share capital 32,206 3,217 25,063
Share premium account 5,306 - 2,986
Shares to be issued 1,562 - 500
Retained earnings 1,834 (517) 291
Total equity 40,908 2,700 28,840
Consolidated Cash Flow Statement
Unaudited Unaudited Audited
Six months Six months Year ended
ended 30 ended 30 31 March
September September 2007
2007 2006
£000 £000 £000
Cash flows from operating activities
Profit/(Loss) for the period 537 (640) (103)
Adjustments for:
Depreciation, amortisation and 902 3 487
impairment
Financial income (64) - (99)
Financial expense 380 222 205
Share-based payment expense 1,006 - 271
Taxation 301 - 537
Operating profit/(loss) before changes 3,062 (415) 1,298
in working capital and provisions
(Increase)/decrease in trade and other (629) 1 1
receivables
Increase in inventories (106) - (11)
Increase/(decrease) in trade and other 121 (9) (349)
payables
Cash generated from the operations 2,448 (423) 939
Interest paid (380) - (205)
Interest received 64 65 99
Tax paid (438) - (288)
Net cash inflow/(outflow) from 1,694 (358) 545
operating activities
Cash flows from investing activities
Proceeds from sale of property, plant - - 1,306
and equipment
Acquisitions of subsidiaries, net of (6,378) - (20,662)
cash acquired
Acquisition of property, plant and (333) - (143)
equipment
Net cash outflow from investing (6,711) - (19,499)
activities
Cash flows from financing activities
Proceeds from new loan - - 10,813
Proceeds from the issue of share 9,463 (50) 7,532
capital
Repayment of borrowings (6,189) - -
Payments to redeem share capital - - (50)
Net cash inflow/(outflow) from 3,274 (50) 18,295
financing activities
Net decrease in cash and cash (1,743) (408) (659)
equivalents
Cash and cash equivalents at beginning 2,905 3,564 3,564
of period
Effect of exchange rate fluctuations on - (289) -
cash held
Cash and cash equivalents at end of 1,162 2,867 2,905
period
Cash and cash equivalents comprise:
Cash at bank and in hand 5,765 2,867 5,569
Bank overdrafts (4,603) - (2,664)
Cash and cash equivalents at end of 1,162 2,867 2,905
period
Consolidated Statement of Changes in Equity
Share Share Shares to Retained Total
capital premium be issued earnings £000
£000 account £000 £000
£000
At 31 March 2006 3,267 - - 123 3,390
Redemption of Convertible A (50) - - - (50)
shares
Retained earnings - - - (640) (640)
At 30 September 2006 3,217 - - (517) 2,700
Allotment of 50p Ordinary 21,846 2,986 - - 24,832
shares
Retained earnings - - - 537 537
Credit in respect of share - - - 271 271
based payments
Shares to be issued - - 500 - 500
At 31 March 2007 25,063 2,986 500 291 28,840
Allotment of 50p Ordinary 7,143 2,320 - - 9,463
shares
Retained earnings - - - 537 537
Credit in respect of share - - - 1,006 1,006
based payments
Shares to be issued - - 1,062 - 1,062
At 30 September 2007 32,206 5,306 1,562 1,834 40,908
1 Basis of Preparation
The interim financial statements have been prepared in accordance with
applicable accounting standards and under the historical cost convention. The
interim financial statements do not constitute statutory financial statements in
accordance with section 435 of the Companies Act 2006. The full year figures in
this report are derived from the statutory accounts on which the auditors gave
an unmodified report. The group's statutory financial statements prepared under
International Financial Reporting Standards (IFRS) have been filed with the
Registrar of Companies.
The principal accounting policies of the group have remained unchanged from
those set out in the group's 2007 annual report and financial statements.
The interim financial statements have been reviewed by the company's auditor. A
copy of the auditor's review report is attached to this interim report.
The interim financials statements were approved by the board of directors on 10
December 2007.
2 Segmental reporting
The Group's primary reporting segments are the following business segments:
Continuing operations
Six Months Ended 30 September 2007
Online Direct Data Unallocated Group
Marketing Marketing Services total
and Media Services and
Consultancy
£000 £000 £000 £000 £000
Revenue 8,799 7,286 6,978 (925) 22,138
Direct costs (4,783) (1,764) (1,748) 925 (7,370)
Gross profit 4,016 5,522 5,230 - 14,768
Other operating income - - 16 - 16
Operating expenses (2,978) (4,466) (4,341) (943) (12,728)
excluding depreciation
and amortisation
EBITDA 1,038 1,056 905 (943) 2,056
Depreciation (83) (97) (73) (1) (254)
Operating profit 955 959 832 (944) 1,802
before amortisation
charge
Amortisation charge (217) (162) (269) - (648)
Operating profit 738 797 563 (944) 1,154
Finance income 64
Finance costs (380)
Profit before tax 838
Taxation (301)
Profit for year from 537
continuing operations
The primary reporting segments have changed to reflect the key reporting line of
the group and following the online marketing acquisitions of Graphico New Media
and Hyperlaunch New Media.
There were no results in the comparative period relating to continuing
operations.
Geographical segments
All turnover is derived from and all assets and liabilities are located in, the
United Kingdom.
3 Taxation
Recognised in the income statement
Period ended Period ended Year ended
30 September 30 September 31 March
2007 2006 2007
£'000 £'000 £'000
Current tax expense
Current year 691 - 707
Deferred tax credit
Origination and reversal of temporary (390) - (170)
differences
Total tax in income statement 301 - 537
Reconciliation of total tax charge
Period ended Period ended Year ended
30 September 30 September 31 March
2007 2006
2007
£'000 £'000 £'000
Profit before tax 838 - 1,074
Tax using the UK corporation tax rate of 251 - 322
30%
Non-deductible expenses 50 - 222
Deductions allowable for tax - - (19)
Unused tax losses carried forward - - 76
Utilisation of tax losses - - (40)
Other - - (24)
Total tax in income statement 301 - 537
4 Earnings per share
From continuing and discontinued operations:
Period Period Year ended
ended ended 31 March
30 30 2007
September September
2007 2006
pence per pence per pence per
share share share
Basic 0.95p (9.95)p (0.55)p
Diluted 0.78p (9.95)p (0.51)p
Earnings per share has been calculated by dividing the profit attributable to
shareholders by the weighted average number of ordinary shares in issue during
the year. The numbers used in calculating basic and diluted earnings per share
are reconciled below:
Period ended Period ended Year ended
30 September 30 September 31 March
2007 2006 2007
£000 £000 £000
Profit/(loss) for year attributable to 537 (640) (103)
shareholders
Weighted average number of shares in Number Number Number
issue:
000's 000's 000's
Basic 56,271 6,433 18,686
Adjustment for share options, warrants 12,764 - 1,788
and contingent shares
Diluted 69,035 6,433 20,474
EBITDA per share before charges for share options, from continuing operations:
Period Period Year ended
ended ended 31 March
30 30 2007
September September
2007 2006
pence per pence per pence per
share share share
Basic 5.44p -p 10.37p
Diluted 4.44p -p 9.47p
EBITDA per share before charges for share options has been calculated by
dividing the EBITDA before charges for share options by the weighted average
number of ordinary shares in issue during the year. The numbers used in
calculating basic and diluted EBITDA per share before charges for share options
are reconciled below:
Period ended Period ended Year ended
30 September 30 September 31 March
2007 2006 2007
£000 £000 £000
Profit for year attributable to 537 - 537
shareholders
Taxation 301 - 537
Interest 316 - 106
Amortisation 648 - 321
Depreciation 254 - 166
Charges for share options 1,006 - 271
EBITDA before charges for share options 3,062 - 1,938
5 Acquisitions of subsidiaries
During the period the Group made two acquisitions of subsidiary undertakings.
The net assets acquired, consideration paid, and goodwill arising upon
acquisition of these subsidiary undertakings are detailed in the following note.
A summary of these amounts is shown below:
Summary of the two acquisitions
Acquirees' Fair value Notes Acquisition
book values amounts
adjustments
£000 £000 £000
Acquirees' net assets at the acquisition
date:
Other intangible assets - 4,516 1 4,516
Property, plant and equipment 1,355 - 1,355
Inventories 291 - 291
Trade and other receivables 1,808 - 1,808
Cash and cash equivalents 196 - 196
Bank overdraft (376) - (376)
Trade and other payables (885) - (885)
Other long term loans (868) - (868)
Tax payable (157) - (157)
Deferred tax (11) (1,265) 2 (1,276)
Net identifiable assets and liabilities 1,353 3,251 4,604
Goodwill on acquisition 7,819
12,423
Satisfied by:
Cash consideration paid (Including legal 6,038
and professional fees of £502,000)
Contingent consideration payable in cash 4,548
Contingent consideration payable in 1,257
shares
Issue of 466,238 ordinary shares at 580
£1.244 per share
12,423
Summary of net cash outflows from
acquisitions
Cash paid 6,038
Cash acquired (196)
Bank overdraft acquired 376
Net cash outflow 6,218
Fair value adjustments comprise:
1 Valuation of customer relationships.
2 Deferred tax effect of valuation of customer relationships.
All fair values are provisional and will be reviewed within the 12 months from
the date of acquisition.
Graphico New Media Limited
On 29 June 2007 the Group acquired all of the ordinary shares in Graphico New
Media Limited for £9,108,000, satisfied in cash and shares. In the period since
acquisition, the subsidiary contributed net profit of £126,000 to the
consolidated net profit for the six months ended 30 September 2007.
The net assets and liabilities of Graphico New Media Limited acquired were as
follows:
Acquiree's Fair value Acquisition
book values amounts
adjustments
£000 £000 £000
Acquiree's net assets at the acquisition
date:
Other intangible assets - 3,357 3,357
Property, plant and equipment 1,314 - 1,314
Inventories 290 - 290
Trade and other receivables 1,378 - 1,378
Cash and cash equivalents 1 - 1
Bank overdraft (376) - (376)
Trade and other payables (780) - (780)
Other long term loans (868) - (868)
Tax payable (84) - (84)
Deferred tax (8) (940) (948)
Net identifiable assets and liabilities 867 2,417 3,284
Goodwill on acquisition 5,824
9,108
Satisfied by:
Cash consideration paid (Including legal 4,508
and professional fees of £270,000)
Contingent consideration payable in cash 3,825
Contingent consideration payable in 775
shares
9,108
Cash paid 4,508
Cash acquired (1)
Bank overdraft acquired 376
Net cash outflow 4,883
Hyperlaunch New Media Limited
On 29 June 2007 the Group acquired all of the ordinary shares in Hyperlaunch New
Media Limited for £3,315,000, satisfied in cash and shares. In the period since
acquisition, the subsidiary contributed net profit of £54,000 to the
consolidated net profit for the six months ended 30 September 2007.
The net assets and liabilities of Hyperlaunch New Media Limited acquired were as
follows:
Acquiree's Fair value Acquisition
book values amounts
adjustments
£000 £000 £000
Acquiree's net assets at the acquisition
date:
Other intangible assets - 1,159 1,159
Property, plant and equipment 41 - 41
Inventories 1 - 1
Trade and other receivables 430 - 430
Cash and cash equivalents 195 - 195
Trade and other payables (105) - (105)
Tax payable (73) - (73)
Deferred tax (3) (325) (328)
Net identifiable assets and liabilities 486 834 1,320
Goodwill on acquisition 1,995
3,315
Satisfied by:
Cash consideration paid (Including legal 1,530
and professional fees of £232,000)
Contingent consideration payable in cash 723
Contingent consideration payable in 482
shares
Issue of 466,238 ordinary shares at 580
£1.244 per share
3,315
Cash paid 1,530
Cash acquired (195)
Net cash outflow 1,335
6 Borrowings
30 September 30 September 31 March
2007 2006 2007
£000 £000 £000
Overdraft 4,603 - 2,664
Bank borrowings 5,492 - 10,813
10,095 - 13,477
Borrowings are repayable as follows:
Within 1 year 5,733 - 4,138
In more than 1 year but not more 1,116 - 4,917
than 2 years
In more than 2 years but not more 1,123 - 1,474
than 3 years
In more than 3 years but not more 1,134 - 1,474
than 4 years
In more than 4 years but not more 328 - 1,474
than 5 years
More than 5 years 661 - -
Due in more than 1 year 4,362 - 9,339
Average interest rates at the balance sheet date were:
30 September 30 September 31 March
2007 2006 2007
% % %
Overdraft 7.75 - 7.5
Term loan 8.6 - 8
Revolver loan - - 7.9
The borrowing facilities available to the Group amounted to £11.07m and at the
balance sheet date, taking account of credit cash balances across the Group,
there were £6.74m of undrawn borrowing facilities.
A Composite Accounting System allows debit balances on overdraft to off set
across the Group with credit balance. No hedging facility was in place at the
period end.
7 Contingencies
The Group has a liability to pay deferred consideration if certain performance
targets are met. The maximum liability is £6,805,000 and the directors have
provided £6,305,000, leaving £500,000 as an unprovided liability.
8 Accounting estimates and judgements
Impairment of goodwill
The carrying amount of goodwill is £38,712,000. The directors are confident that
the carrying amount of goodwill is fairly stated but have not carried out an
impairment review of this amount during the period.
Other intangible assets
The valuation of customer lists is based on key assumptions which the directors
have assessed, and are satisfied that the carrying value of these assets is
fairly stated.
Deferred consideration
The directors have provided an estimate of the amount payable in respect of
deferred contingent consideration. See note 7.
Recognition of revenue as principal or agent
The Directors consider that they act as a principal in transactions where the
Group assumes the credit risk. Where this is via an agency arrangement and the
Group assumes the credit risk for all billings it therefore recognises gross
billings as revenue.
REPORT ON REVIEW OF INTERIM FINANCIAL INFORMATION
Introduction
We have been instructed by the company to review the interim financial
information for the six months ended 30 September 2007 which comprises the
consolidated interim income statement, consolidated interim balance sheet,
consolidated interim statement of changes in equity and the consolidated interim
cash flow statement and the related notes 1 to 8. We have read the other
information contained in the interim report which comprises the chairman's
statement and chief executive's review 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 in accordance with guidance contained
in 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.
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, including the financial information therein, 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 figures are consistent with those which will be adopted
in the annual accounts having regard to the accounting standards applicable to
such accounts.
Review work performed
We conducted our review in accordance with guidance contained in 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
consists principally of making enquiries of management and applying analytical
procedures to the financial information and underlying financial data and, based
thereon, assessing whether the disclosed accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review excludes
audit procedures such as tests of control and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with International Standards of Auditing (UK and
Ireland) 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 September 2007.
GRANT THORNTON UK LLP
REGISTERED AUDITOR
CHARTERED ACCOUNTANTS
SHEFFIELD
10 December 2007
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