Interim Results
CSS Stellar PLC
18 September 2002
CSS Stellar plc
('CSS Stellar' or 'the Group')
2002 Interim Results &
Investment in North American golf businesses and acquisition of JR Financial
Services
CSS Stellar, the AIM listed sports and entertainment management and marketing
group, today announces interim results for the six months ended 30 June 2002, an
investment in North American golf businesses and the acquisition of JR Financial
Services Ltd.
HIGHLIGHTS
* Considerable further progress in establishing CSS Stellar as a global
player in the sports and entertainment management and marketing business
* Now representing over 1,000 talent clients including Ewan Macgregor, Anne
Robinson and Juan Pablo Montoya, as well as providing marketing consultancy
to over 40 blue-chip corporations including Vodafone, Starbucks
and UPS
* Turnover increased to £17.8m (2001: £6.7m), despite difficult trading
environment
* Growth in adjusted EBITDA to £2.37m (2001: £1.2m)
* Pre-tax profit reduced to £143,000 due to non-recurring items and goodwill
amortisation (2001: £700,000)
* EPS, before non-recurring items and goodwill amortisation, increased to
5.50p (2001: 4.29p)
* Successful Placing and Open Offer in April, raising £9.3m
* During the first half CSS acquired Vertical Mix, Craigie Taylor and
Backporch and after the period end acquired Echo Group - a leading Canadian
entertainment marketing business with clients including Labatt
Breweries, Microsoft, U2 and The Rolling Stones
* Further strategic investments announced today
Chairman, John Webber, today said: 'The first half of 2002 has undoubtedly been
the most challenging market we have had to face in our relatively short life as
a public company. Nonetheless, the majority of our businesses performed
admirably in the circumstances.
'The decision to broaden the base of the Group has been vindicated. I feel
confident that the Group has the quality of staff, mix of businesses and
infrastructure to prosper.'
- Ends -
Enquiries:
CSS Stellar plc 020 7078 1400
Julian Jakobi, Chief Executive
Sean Kelly, Finance Director and Deputy Chief Executive
Weber Shandwick Square Mile 020 7950 2800
Ben Padovan or Sally Lewis
CSS Stellar plc
('CSS Stellar' or 'the Group')
Interim Results for the six months ended 30 June 2002.
CHAIRMAN'S STATEMENT
Overview
Since flotation the Company has made considerable progress in establishing
itself as a global player in the sports and entertainment management and
marketing business. In less than two years, the Group has grown from being
primarily UK based, employing some 100 people, to a far broader based entity
employing over 600 people, roughly split between the UK and North America. The
Group now has a critical mass on both sides of the Atlantic, capable of managing
top talent such as Formula 1 driver, Juan Pablo Montoya, actor Ewan McGregor and
presenter Anne Robinson, as well as providing marketing consultancy for major
consumer brands such as Vodafone, Starbucks and UPS.
Placing and Open Offer
In April 2002, we raised £9.3m net of expenses by way of an underwritten 2 for 9
Open Offer. The reasons for the fund raising included expanding GEM into Europe,
growing our golf and TV operations and developing our entertainment marketing
capabilities in North America. We are grateful to our shareholders for the
flexibility the additional funds have provided. We have now achieved most of
these objectives through the acquisitions as described below. The cash position
net of bank loans and overdrafts at 30 June 2002 was £5.9m.
Results
As with last year, the first six months is the quieter half of our financial
year. Over the period, we generated a turnover of £17.8m and achieved EBITDA of
£2.37m prior to non-recurring items, which are disclosed below. Last year we
made EBITDA of approximately £1.2m, on turnover of £6.7m.
Operating profits prior to amortisation were £1.14m (2001: £969,000). The effect
of these non-recurring items of £485,000 and amortisation of goodwill of
£869,000 (£224,000 last year) produced pre-tax profit of £143,000 against
£700,000 in the corresponding period last year.
Basic and fully diluted earnings per share were 0.01p over the period, against
3.04p and 2.46p respectively in 2001. However, adjusted earnings per share,
adding back amortisation costs and exceptional administrative expenses (net of
taxation) were 5.50p (undiluted) and 4.62p (fully diluted) against comparatives
of 4.29p and 3.47p on a similar basis last year.
In the period to 30 June 2002, other administrative costs rose significantly to
£13.5m (2001: £3.2m). The margin has fallen because of the increase in
consultancy related income and the drop-off in the proportion of sponsorship
revenue.
There were some non-recurring dilapidation and moving costs associated with our
move from Great Portland Street which have been separately itemised in our
statement, however there have been considerable benefits in combining the two
London offices of PFD and CSS Stellar Management.
Operating Review
The growth in the business has been primarily in the client side with the effect
of the acquisitions in 2001 being included for the first time in the first six
months earnings.
Overall, the background economic conditions have proved challenging in varying
degrees for our businesses. The half-year has been satisfactory for our talent
management division and our marketing consultancy division (augmented by the
addition of Craigie Taylor from the beginning of May) is making steady progress.
Against this, as we told the market a couple of months ago, we have experienced
difficulties in sponsorship sales, both in Europe and North America.
Clients
The PFD and GEM acquisitions have been largely responsible for the growth in
client revenues to £13.2m from £2.8m in 2001 and the addition of clients like
Montoya and Michael Ball have increased organic revenues. The client base has
expanded with over 1,000 individual talent clients and 40 blue chip corporations
now serviced by this division. On 29 April 2002, GEM's business expanded with
the acquisition of Craigie Taylor International Limited (now renamed GEM Europe)
which will contribute fully in the second half of the year.
Profits prior to amortisation of goodwill rose to £1,020,000 (2001: £770,000), a
growth of 32.5%.
The client division has also absorbed one-off costs relating to the move from
Great Portland Street to PFD's offices in Covent Garden and the closing of GEM's
office in Chicago. Provision has been made for these costs and for losses in
the sponsorship motor sport area totalling £485,000. If this cost is ignored,
profits have grown 95%.
Events
Operating profits in the period from our two events businesses were £118,000
(2001: £199,000). Icon, which provides signage for sports and entertainment
events, performed well over the period, benefiting from its major clients,
including UEFA, The Royal and Ancient, BBC, The PGA European Tour and Wimbledon.
ARB, was fully acquired in June 2001, having made a loss of £164,000 in the
first five months of 2001 (the Group's share being £82,000) as an associate when
it felt the full impact of foot and mouth. However, the company has continued to
struggle, giving an overall result in the first half of 2002 which shows a flat
trading performance. Steps have already been taken to re-structure ARB and
early results in July and August are encouraging.
Acquisitions
Our recent acquisitions have been focused on the entertainment industry,
beginning with the purchase of PFD last November, followed by Vertical Mix in
January of this year and The Echo Group at the end of July.
The reason for this has been primarily an unwillingness to expand the sports
side of the business at values prevailing a year ago. This has already proved a
sensible policy.
I am pleased to say that the entertainment business now represents over 40% of
the Group's revenues and that earnings in this area have so far been largely
unaffected by the well publicised issues surrounding the media sector.
In sport, we have continued to focus on motor sport, football and golf. Each of
the sports has its own macro-economic influences and we continue to believe
these sports still maintain their global appeal and that they offer the best
prospects for profit growth in the client and event divisions.
In the first six months of 2002, the Company has made the following
acquisitions, spending a total of £3.84m, comprising £2.27m in shares at an
average price of 252p and £1.57m in cash:
* Vertical Mix Marketing Inc.('VMM') was acquired in January 2002 for an
initial consideration of £278,550 ($400,000), half satisfied in cash and
half by an issue of 46,894 CSS Stellar shares. VMM's business is
sales promotion for cable TV networks and their programmes. The company's
major clients are NBC, AOL, Oxygen and The Weather Channel. Deferred
share consideration of up to US $5.6m may become payable, based on
a multiple of 6 times profits before tax for 2002. The minimum price at
which shares may be issued is 297p per share. VMM is now part of the GEM
Group and operates out of New York.
* Craigie Taylor International Limited (now GEM Europe) was acquired in
April 2002. This is a UK based sports and leisure marketing consultancy
whose major clients include Vodafone, TXU and UGC Cinemas. GEM Europe
was bought for an initial consideration of £3.45m, consisting of 840,000
shares at 250p per share (£2.1m) and £1.35m in cash. Deferred
consideration payable of up to £6.55m, is subject to the company
achieving profits before interest and taxation ('PBIT') of at least
£1.065m and gross profits of £4.95m over the two years ending 31 December
2003. Any consideration due will be paid in CSS Stellar shares on a
multiple of between seven and ten times PBIT and is subject to a cap and
collar arrangement of 320p and 180p respectively.
* Backporch Limited, a small UK based event services business renting
audio-visual materials purchased in May for £0.1m, was immediately
integrated into Icon/ARB. Major clients include The Royal and Ancient and
Twickenham.
* The Group committed £50,000 in June to acquire 20% of Sportsunite (Asia)
Limited. This sports management business operates in Monaco and Beijing,
China and the Group has an option to purchase the remainder of the
business at the end of 2005.
Since 30 June 2002, the Company has made the following acquisitions:
* The Echo Group was acquired in July. Toronto based Echo gives the Group a
substantial, credible independent, full-service provider of marketing and
advertising services. Echo's entertainment marketing business in North
America, as one of Canada's largest, initially served the film, theatre and
music industries but now provides a far broader-based range of businesses
to clients in many sectors.
Echo's blue chip client base includes Labatt Breweries, film distributor
Alliance Atlantis, Starbucks, Microsoft and the Toronto International Film
Festival. Echo also arranges the promotional advertising for the tours of
rock bands such as U2 and The Rolling Stones.
Echo has retained many of its entertainment industry links: for Alliance
Atlantis, a client of over 15 years, Echo is currently working on the
Canadian promotion of the movie, 'Austin Powers in Goldmember' and
part two of the 'Lord of the Rings' trilogy. In addition, the Toronto
International Film Festival has grown to be the largest consumer film
festival in the world.
The Company paid an initial consideration of Cdn $10.125m (£4.13m)
comprising Cdn $6m in cash (£2.45m) with Cdn $4.125m (£1.68m) payable by a
future issue of 701,526 ordinary shares at 240p per share. Further cash
consideration of Cdn $0.625m (£0.25m) becomes payable in February 2004.
The aggregate maximum consideration which may become payable for the
acquisition is Cdn $25m (£10m), dependent on performance at multiples of
between 5 and 7 times EBITDA.
* We have today announced the purchase of a strategic holding in Dallas-based
Rocky Hambric's golf management business, Hambric Sports Management Inc.
This will provide the Group an important US base for golf client
management and a group of clients, which include Justin Leonard, Steve
Flesch and Bob Tway. Further details of this are set out in a separate
announcement accompanying these results.
* We are also today announcing the expansion of our financial services
division, with the acquisition of JR Financial Services Limited (to be
renamed Stellar Financial Services). This follows the successful
acquisition of PFMA last year. Further details on this acquisition are
also set out in a separate announcement.
The Group is continuing to review a number of other potential acquisitions
although the pace of these is expected to be somewhat slower going forward.
Implementation of Strategy
The Group has made considerable steps to pursue the strategy outlined at
flotation, which was to become a significant company in the sports and
entertainment management and marketing sector, through both acquisition and
organic growth.
Since flotation, we have raised £15.7m in cash (net of expenses) and, excluding
today's announcements, made acquisitions totalling £27.9m, comprising £16m in
shares and £11.9m in cash. Any future payments of deferred consideration are
largely in shares and are not only based on performance, but are subject to cap
and collar arrangements, limiting dilution. The minimum price at which shares
will be issued ranges from 180p to 297p.
The acquisitions made since the fund raising in April mean we have now achieved
most of our goals stated at that time and as originally stated at flotation. The
focus of senior management will now be on achieving better operating synergies
and generating revenue from the significant database we have now built up. We
will, of course, also seek to take advantage of opportunities arising from the
current depressed market conditions.
We now have a substantial North American presence employing approximately 300
people and our Deputy CEO, Sean Kelly, will be moving to New York with effect
from 1 October, as President of our North American operations.
Current Trading and Outlook
The Board anticipates little macroeconomic change in the short term and
consequently we will focus on increasing our market share as well as improving
our operating efficiencies. In July 2002, the Board stated that there had been a
deterioration in the motor sport sponsorship division, which, whilst being
small, would have an adverse effect on profits. The outlook for 2002 remains
uncertain and, accordingly, we reduced our expectations from this area for both
2002 and 2003, especially in so far as it relates to Formula One.
The Board feels that the adjustment made to market expectations at the time was
sufficient, provided there is no shortfall from business already contracted. As
we now enter the final quarter of the year, the Board believes no further
modification for 2002 is necessary.
However, the decision to broaden the base of the Group has been vindicated as
sponsorship sales is now a relatively small part of our overall business. This
said, we believe we are well positioned to generate further sponsorship deals
once there is a change in the economic environment.
As your Chairman, I feel confident that the Group has the quality of staff, mix
of businesses and infrastructure to prosper. The outlook for 2003 is being
carefully assessed and growth is expected from all parts of the Group.
John Webber
Chairman
18 September 2002
- Ends -
Enquiries:
CSS Stellar plc 020 7078 1400
Julian Jakobi, Chief Executive
Sean Kelly, Finance Director and Deputy Chief Executive
Weber Shandwick Square Mile 020 7950 2800
Ben Padovan or Sally Lewis
CSS Stellar plc
Consolidated Profit and Loss Account
For the six months ended 30 June 2002
6 Months 6 Months Year
to to to
30.6.2002 30.6.2001 31.12.2001
Notes £000 £000 £000
Turnover - Continuing operations and share of joint
venture 16,498 7,219 23,542
- Acquisitions 1,333 - -
- Less : Share of joint venture - (540) (540)
------------- ------------- -------------
17,831 6,679 23,002
Cost of sales 2 (2,660) (2,502) (6,841)
------------- ------------- -------------
Gross profit 15,171 4,177 16,161
Exceptional administrative expenses (485) - -
Amortisation of goodwill (869) (224) (780)
Other administrative expenses (13,548) (3,208) (12,947)
Administrative expenses - Total (14,902) (3,432) (13,727)
Operating profit 2
Continuing operations 219 745 2,434
Acquisitions 50 - -
269 745 2,434
Share of operating loss of joint venture - (82) (82)
Exceptional items 3 - 42 42
------------- ------------- -------------
269 705 2,394
Interest receivable 93 91 170
Interest payable (219) (96) (234)
------------- ------------- -------------
Profit on ordinary activities before taxation 143 700 2,330
Tax on profit on ordinary activities (141) (253) (842)
------------- ------------- -------------
Profit on ordinary activities after taxation 2 447 1,488
Equity minority interest - 25 29
------------- ------------- -------------
Profit retained 2 472 1,517
============= ============= =============
Adjusted Earnings per Ordinary share (pence) 4 p. p. p.
Basic 5.50 4.29 13.45
Diluted 4.62 3.47 10.75
------------- ------------- -------------
Earnings per Ordinary share (pence) 4 p. p. p.
Basic 0.01 3.04 9.00
Diluted 0.01 2.46 7.19
------------- ------------- -------------
£000 £000 £000
Statement of total recognised gains and losses
Profit for the financial year 2 472 1,517
Currency translation differences in foreign currency net (2) -
investment
------------- ------------- -------------
Total gains and losses recognised since last annual report - 472 1,517
============= ============= =============
CSS Stellar plc
Consolidated Balance Sheet
As at 30 June 2002
30.6.2002 30.6.2001 31.12.2001
£000 £000 £000 £000 £000 £000
FIXED ASSETS
Intangible Assets 32,671 7,408 29,225
Tangible Assets 4,410 2,411 3,507
Investments - Other 66 115 66
----------- ----------- -----------
37,147 9,934 32,798
CURRENT ASSETS
Stocks and work in progress 353 311 266
Debtors 11,132 6,806 10,580
Cash at bank and in hand 9,512 2,639 1,896
----------- ----------- -----------
20,997 9,756 12,742
----------- ----------- -----------
CREDITORS: AMOUNTS FALLING
DUE WITHIN ONE YEAR (12,816) (5,322) (12,209)
----------- ----------- -----------
Net Current Assets 8,181 4,434 533
----------- ----------- -----------
Total Assets less Current
Liabilities 45,328 14,368 33,331
CREDITORS: AMOUNTS FALLING DUE
AFTER MORE THAN ONE YEAR (5,495) (1,125) (5,214)
----------- ----------- -----------
39,833 13,243 28,117
=========== =========== ===========
CAPITAL AND RESERVES
Called up share capital 12,628 7,857 9,913
Share premium 22,374 4,335 13,176
Shares to be issued 2,735 - 2,932
Revaluation reserve 171 171 171
Profit and loss account 1,925 880 1,925
----------- ----------- -----------
Equity shareholders' funds 39,833 13,243 28,117
=========== =========== ===========
CSS Stellar plc
Consolidated Cash Flow Statement
For the six months ended 30 June 2002
6 Months 6 Months Year
to to to
30.6.2002 30.6.2001 31.12.2001
£000 £000 £000 £000 £000 £000
Cash inflow / (outflow) from
operating activities 1,724 (257) 2,564
Returns on investments and
servicing of finance
Interest paid (219) (66) (204)
Interest received 93 91 170
---------- ---------- ----------
Net cash (outflow) / inflow
from returns on investments
and servicing of finance (126) 25 (34)
Taxation (467) (122) (534)
Capital expenditure and
financial investment
Purchase of tangible fixed
assets (449) (51) (482)
Sale/ (purchase ) of intangible
fixed assets - 24 -
Sale of tangible fixed assets 42 - 64
---------- ---------- ----------
Net cash outflow from capital
expenditure and financial
investment (407) (27) (418)
Acquisitions and disposals
Purchase of subsidiaries (1,958) (10) (6,471)
Net overdraft from purchase of
subsidiary - - (613)
Sale of minority interest in
subsidiary - 42 -
Sale /(purchase) of investment - (19) 81
- other
---------- ---------- ----------
Net cash outflow from (1,958) 13 (7,003)
acquisitions and disposals
Management of Liquid Resources
Sale of short-term bank - 3,500 3,500
deposits
---------- ---------- ----------
Net cash outflow before (1,234) 3,132 (1,925)
financing
Financing
New shares issued for cash 9,937 30 2,028
Less associated costs (580) - (98)
Receipt from borrowings - - 3,205
Repayment of borrowings (1,350) (382) (1,809)
Capital element of finance (418) (102) (363)
lease rentals
---------- ---------- ----------
Net cash inflow from financing 7,589 (454) 2,963
---------- ---------- ----------
Increase in cash 6,355 2,678 1,038
========== ========== ==========
CSS Stellar plc
Notes
For the six months ended 30 June 2002
1. Reconciliation of Operating Profit to Net Cash Inflow
from Operating Activities
6 Months 6 Months Year
to to to
30.6.2002 30.6.2001 31.12.2001
£000 £000 £000
Operating profit 269 745 2,434
Dividend paid to minority interest - (26) (22)
Depreciation charge 806 237 796
Amortisation of intangibles 869 224 812
(Increase)/Decrease in stocks (87) (36) 9
Decrease/(Increase) in debtors 977 (1,578) (784)
(Decrease)/Increase in creditors (1,110) 177 (681)
------------- ------------- -------------
Cash inflow from operating activities 1,724 (257) 2,564
============= ============= =============
2. Analysis of Trading by Class of Business
Divisions Turnover Profit before Taxation
6 Months 6 Months Year 6 Months 6 Months Year
to to to to to to
30.6.2002 30.6.2001 31.12.2001 30.6.2002 30.6.2001 31.12.2001
£000 £000 £000 £000 £000 £000
Client 13,170 2,790 12,407 1,020 770 2,619
Representation
Events 4,661 3,889 10,595 118 199 595
-------------- -------------- -------------- --------------- --------------- ---------------
- - -
17,831 6,679 23,002 1,138 969 3,214
============== ========= ==============
Goodwill amortisation (869) (224) (780)
--------------- --------------- ---------------
Operating profit 269 745 2,434
Share of operating profit
of Joint
Venture/Associates - (82) (82)
--------------- --------------- ---------------
Net interest 269 663 2,352
(126) (5) (64)
Exceptional items - 42 42
--------------- --------------- ---------------
Group profit before taxation 143 700 2,330
=============== =============== ===============
Included in turnover is £6,252,000 relating to North American operations. Profit
before taxation for these operations amounted to £16,000.
CSS Stellar plc
Notes
For the six months ended 30th June 2002
3. Exceptional items
6 Months 6 Months Year
to to to
30.6.2002 30.6.2001 31.12.2001
£000 £000 £000
Profit on sale of minority interest - 42 42
------------- ------------- -------------
- 42 42
============= ============= =============
4. Earnings Per Share
Weighted Per share Adjusted
average no. amount per share
£000 of shares (pence) amount
(pence)
6 Months ended 30 June 2002
Earnings 2
=======
Adjusted Earnings 1,211
=======
Basic Earnings per share
Earnings attributable to ordinary shareholders 21,997,860 0.01 5.51
======= =======
Dilutive effect of securities - options and warrants 4,230,618
-------------
Diluted Earnings per share 26,228,478 0.01 4.62
============= ======= =======
6 Months ended 30 June 2001
Earnings 472
=======
Adjusted Earnings 667
=======
Basic Earnings per share
Earnings attributable to ordinary shareholders 15,529,496 3.04 4.30
======= =======
Dilutive effect of securities - options and warrants 3,666,404
----------------
Diluted Earnings per share 19,195,900 2.46 3.47
================ ======= =======
Year ended 31 December 2001
Earnings 1,517
=======
Adjusted Earnings 2,268
=======
Basic Earnings per share
Earnings attributable to ordinary shareholders 16,858,049 9.00 13.45
======= =======
Dilutive effect of securities 4,243,238
----------------
Diluted Earnings per share 21,101,287 7.19 10.75
================ ======= ========
The Adjusted earnings per share calculations 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%.
CSS Stellar plc
Notes
For the six months ended 30th June 2002
5. Placing and Open Offer
On 19 April the company raised £9,937,000 from the issue of 4,416,316 ordinary
shares of 50p at £2.25 per share. The open offer was made on the basis of two
issue shares for every nine existing ordinary shares held. The cost of the
placing amounted to £540,000 and the net proceeds are to be used for strategic
acquisitions and the repayment of bank debt.
6. Acquisitions
During the period
Vertical Mix Marketing Inc.(VMM) was acquired in January for initial
consideration of £278,550 satisfied equally by cash and by the issue of 46,894
ordinary shares. VMM's business is sales promotion for Cable TV networks and
their programmes. Deferred share consideration of up to $5.6 million may become
payable based on a multiple of 6 times profits for 2002.
Craigie Taylor International Ltd.(CTI) was acquired in April for an initial
consideration of £3.45 million consisting of 840,000 shares at £2.50 and £1.35
million cash. CTI is a UK based sports and leisure marketing consultancy and
has been re-named The GEM Group (Europe) Ltd. Deferred consideration may be
payable up to £6.55 million based on achievements of profits over the two years
ending 31 December 2003.
Backporch Ltd. was acquired in April at a cost of £100,000. Backporch Ltd. is a
UK based events services business and has been integrated into our Events
Services Division. The Group committed £50,000 in June to acquire 20% of
Sportsunite (Asia) Ltd.
After the period
Echo Group was acquired in July for an initial consideration of £4.38 million
comprising £2.70 million in cash and £1.68 million by the future issue of
701,526 ordinary shares at £2.40 per share. Echo is one of Canada's largest
independent full-service providers of marketing and advertising services.
Further consideration may become payable up to a maximum of Cdn $25 million
based on achievement of EBITDA targets for the three years to 31st December
2004.
7. 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 2001 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.
8. 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 financial statements other than the policy relating to deferred tax.
Deferred tax is recognised on all timing differences where the transactions or
events that give the Group an obligation to pay more tax in the future, or right
to pay less tax in the future, have occurred by the balance sheet date.
Deferred tax assets are recognised when it is more likely than not that they
will be recovered. Deferred tax is measured using rates that have been enacted
or substantively enacted by the balance sheet date. The effect on the financial
statements is not significant.
This information is provided by RNS
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