TIDMDIGI
RNS Number : 6966O
Digital Marketing Group PLC
02 July 2010
Date: 2 July 2010
On behalf of: Digital Marketing Group plc ("DMG", "the Company" or "the
Group")
Embargoed: 0700hrs July 2nd 2010
Digital Marketing Group plc
Preliminary Results 2010
Digital Marketing Group plc (AIM: DIGI), the UK's largest digital marketing
specialists, today announced its preliminary results for the year ended 31 March
2010.
Performance Highlights
· Revenues GBP48.5m (2009: GBP56.7m)
· Gross profit GBP35.5m (2009: GBP41.6m)
· EBITDA (before share based payment charges) GBP8.3m (2009: GBP9.3m)
· Profit before tax, impairment, share based payment charges and
amortisation GBP7.2m (2009: GBP8.0m)
· Adjusted basic EPS 8.77p (2009:8.76p)
· Net cash flow generated from operations GBP4.8m (2009: GBP8.4m)
· Net debt GBP7.3m (2009: GBP5.9m)
· Completion of acquisition of award winning agency 20:20 London
· Recognised as the UK's biggest digital marketing agency for the second
year running (Campaign Magazine January 2010)
· Consolidated the business into two pillars, 20:20 and DMG, down from nine
separate units
· Exceptional performance from eCommerce division +52% yr/yr at GBP1.57m PBT
· Statutory loss before tax of GBP1.4m as a result of amortisation, charges
for share based payments and impairment of intangibles and goodwill (2009:
profit GBP3.1m)
Commenting on the results, Stephen Davidson, Chairman of Digital Marketing Group
plc, said: "In what continues to be the most challenging economic environment
for business and our industry in particular I am pleased to report that your
company has produced another robust performance, consistent with market
forecasts. We have consolidated the business into two pillars; 20:20 and DMG. We
are also pleased that our business is growing in areas where revenues are
visible and recurring such as Digital Technology and eCommerce. We believe that
our balanced portfolio of data, marketing and technology expertise represents
the future of our industry."
Ben Langdon, Chief Executive, added: "Coming off the back of a global economic
recession and an extremely strong year in 08/09 when the company grew EBITDA by
18% on a pro forma basis, we're very pleased with these results. Despite our
significantly undervalued stock we continue to believe that the shift in
spending in favour of online and mobile channels and away from traditional media
remains part of a favourable long term trend. Our position as the UK market
leader means we are well placed to take advantage of the upturn in spend on
consumer marketing. Our business is moving towards an increased emphasis on
eCommerce, Technology and integrated multi-channel selling. We believe that the
market should recognise this re-balancing of our company's proposition and
enable us to benefit from the valuation levels enjoyed by businesses less
digitally and technologically skilled than ours."
Enquiries:
+--------------------------------------+---------------------------------+
| Digital Marketing Group plc | www.digitalmarketinggroup.co.uk |
+--------------------------------------+---------------------------------+
| Ben Langdon, Chief Executive | via Eulogy! |
+--------------------------------------+---------------------------------+
| | |
+--------------------------------------+---------------------------------+
| Eulogy! | www.eulogy.co.uk |
+--------------------------------------+---------------------------------+
| Adrian Brady, Chief Executive | Tel: 0207 927 9999 |
+--------------------------------------+---------------------------------+
| | |
+--------------------------------------+---------------------------------+
| Cenkos Securities | |
+--------------------------------------+---------------------------------+
| Ivonne Cantu/Julian Morse | Tel: 0207 397 8900 |
+--------------------------------------+---------------------------------+
Notes to Editors:
* Digital Marketing Group (AIM: DIGI) listed on AIM in October 2006, employs
over 500 people.
* Digital Marketing Group is the UK's biggest digital marketing agency
(Campaign Magazine Jan 2010).
* At the heart of the company is Digital Brain - a process which integrates
digital marketing, technology and data.
Digital Marketing Group's future development strategy consists of three key
elements:
· Continued migration towards scalable services, with visible and recurring
revenues
· Increased emphasis on eCommerce and Technology
· Continued consolidation of the business into one fully integrated
operating unit.
Chairman's statement
In what continues to be the most challenging economic environment for business
and our industry in particular I am pleased to report that your company has
produced another robust performance, which was consistent with market forecasts.
Earnings before interest, tax, depreciation, amortisation and share based
payments was GBP8.3million for the year ended 31 March 2010 against
GBP9.3million for the previous year.The total adjustment is a charge of GBP6.0
million (2009: GBP6.2 million). The adjusted profit before tax was GBP7.2
million compared to GBP8.0 million in 2009.
A review of the carrying value of our intangible assets and goodwill was carried
out at the year end and using a conservative weighted average cost of capital of
12.9% the Board has decided to impair the carrying value by GBP3.8million.The
reported loss before tax for the year of GBP1.4 million (2009: profit GBP3.1
million) is therefore explained by share based payment charges of GBP2.9 million
(2009: GBP3.0 million), amortisation of GBP1.9 million (2009: GBP1.9 million)
and an impairment charge against the carrying value of intangibles and goodwill
of GBP3.8 million (2009: GBPnil).
We have consolidated the business into two pillars; 20:20 and DMG. This
reorganisation has been received well by the industry and clients alike and we
are benefiting from recognition as the premier player in the UK digital
marketing industry. This increase in profile has led to a corresponding increase
in the level of invitations to pitch for projects and has improved our new
business pipeline significantly year on year. The year has started well with our
business operating in line with management budgets.
We are also pleased that our business is growing in areas where revenues are
visible and recurring. Our Technology and eCommerce business had an exceptional
year with its results up 52%. We believe that our balanced portfolio of data,
marketing and technology expertise represents the future of our industry.
Our cost base continues to be controlled and we aim to ensure it is appropriate
to the revenues we are generating. During the year we have reduced our salary
bill by GBP2.5 million or 9.3%.
In December 2009 we acquired the award winning 20:20 agency based in London.
This agency has won great acclaim in the industry for its innovative use of
digital and mobile platforms in the launch of new products and engagement
programmes. We have now branded our existing digital agencies under the 20:20
banner and continue to integrate the businesses into a single unit for the
advantage of clients and employees.
As a result of this small scale acquisition we have increased our debt at year
end to GBP7.3 million. We still have GBP3.9 million of headroom in our banking
facilities of GBP11.2 million.
In a tough economic environment it is not surprising that our business has had
both highs and lows. A big part of our data services business is focused on the
financial services sector and has been severely impacted through the wider
downturn with gross profit down 46.0%. We have also disclosed GBP1.7 million as
other income which was received during the year from the administrator of a
client with whom the Group had a contractual obligation.
I would like to thank management and employees who have worked tirelessly
through the year to produce these results in what has been a very testing
environment. It is extremely frustrating that all the hard work and success
produced by all the management and employees is not reflected in the current
share price. The members of the Board are all shareholders and are concerned the
market does not rate the Company more highly and reflect the inherent value in
the business. Once positive market sentiment returns to the sector we believe
the Company will command the rating it merits.
I am extremely sad to report that Mike Ferguson, a director in our eCommerce
business, died suddenly in May 2010 at the age of 56. Mike was part of the team
at CyberDMG that transformed the business into the success it continues to be.
Our sympathies are with his wife Ann and their children.
Stephen Davidson
Chairman
1 July 2010
Chief Executive's Review
Business review
Digital Marketing Group plc achieved an EBITDA before share based payment
charges of GBP8.3m in 2009/10. The total adjustment is a charge of GBP6.0
million (2009: GBP6.2 million). Although this is a decline of GBP1m year on year
it represents an extremely robust performance given the worst economic
environment for generations and comes off the back of a very strong year in
2008/09 when the Company grew EBITDA by 18% year on year on a pro forma basis.
Unlike some of our competitors, we are a business with a broad spread of digital
marketing expertise and are not reliant on one particular discipline for our
revenues. We have , for example, been able to withstand the decline in the
financial services sector and its inevitable impact on our data services
business, precisely because we also have strong digital agencies, and an even
stronger eCommerce division.
Unsurprisingly, in 2009/10 many of our clients undertook significant budget cuts
and decision-making became painfully slow. Despite the inexorable shift of media
budgets away from traditional channels in favour of digital and mobile, some
elements of marketing spend through these channels were also hit through
recession.
Nevertheless, our digital businesses proved extremely competitive, particularly
those where our products and services helped clients become more cost effective
and efficient.
For example, our eCommerce and technology business, 20:20 Technology (formerly
CyberDMG) grew 51.7% year on year in 2009/10 to achieve PBT of GBP1.57m
(GBP1.03m 2008/9).
This business, based as it is on expert knowledge of digital technology, is
fundamentally scalable. It helps our clients lessen their reliance on 'bricks
and mortar' retail chains and enables them to sell products more cost
effectively online. This business has been relatively recession proof and is
continuing to exceed our expectations. 20:20 Technology at the gross profit
line now represents 17.9% of our total business, and we anticipate it will
become at least 25% within 2 to 3 years.
We also envisage an increased emphasis on digital technologies in our
proposition to clients and prospects. In time our business will become a better
balance of technology, marketing and data analytics skills. Our ownership and
understanding of digital technology helps us sell the multi-channel marketing
service we call Digital Brain, but perhaps more importantly it also generates
revenues that are visible and recurring.
Our commitment to digital technology as a means of helping us achieve
sustainable organic growth also extends to other areas of our business. As
consumers and businesses increasingly expect a personal and tailored service
from brands, software and analytics will increasingly fill the void left by
downsized marketing departments. In this environment, excellent, decision-based,
action-oriented analytics will drive competitive advantage. As part of our
Digital Brain platform, we launched Digital Brain:Search in July 2009. It is now
a world-class search marketing management and analytics suite using business
intelligence software. It combines a best-in-class analytics package and our
own exceptionally complex mathematical models.
There are four modules within DigitalBrain:Search:
· Reporter: turnkey, integrated automated reporting from all the major
search engines and advertising tracking providers in one intuitive web-based
dashboard. The model is easily extended to include other non-search data
sources, such as customer data and site analytics.
· Glossary: an automated keyword and match type management recommendation
engine which extends the number of keywords available to be purchased and so
cuts cost per acquisition.
· Optimiser: identifies keywords that contribute to a sale, but are not
actually clicked on. It provides automated bid price recommendations for
keywords, which drives significant cost savings or performance enhancements.
· Forecaster: 'What if' analysis using real-time search, spend, inventory
and sales data.
Digital Brain:Search is now used extensively by 20:20 Media & Analytics on all
its new clients and is being adopted by all of the Group's search marketing
clients.
Our digital agency network has also proved remarkably resilient in a difficult
economic environment. The companies previously trading as DigforFireDMG,
InboxDMG and GraphicoDMG all declined slightly year on year, but made combined
operating profit before tax and share based payments of GBP3.4 million versus
GBP3.7 million in the previous year. This underlying strength of performance
should give our shareholders real confidence for the future particularly when
client confidence and marketing spend recovers, as it inevitably will in time.
As mentioned above, the only significant area of weakness in our business
occurred in our data services business where the economic crisis had a
significant impact on its financial services clients and contributed to a
substantial fall in overall revenues. None of the major financial services
brands undertook substantial initiatives in the data services area in 2009/10
and falling applications for personal borrowing have impacted product revenues.
Marketing spend has also reduced across the board in the financial services
sector, given lower customer acquisition targets. Consolidation and
restructuring of clients in the Banking sector also reduced opportunities to
counter these factors through new business growth. Many of our clients spent the
financial year 2009/10 focused on internal reorganisation and as a consequence
data sales slumped across the industry. Our major competitors in this sector
also reported significant declines in annual revenues in the UK in 2010 citing
challenging market conditions created by restrained capital expenditure in the
financial services sector. In addition, JaywingDMG's new product developments
have taken longer to gain traction in a climate of budget reductions resulting
in delays to expected new product revenues.The effect of the economic downturn
in this sector resulted in gross profit at JaywingDMG falling by 46% down from
GBP12.9 million to GBP7.0 million.
During the year we decided to consolidate our business further and reduced our
nine operating units down to two pillars.The business unit has now been
integrated along with GasboxDMG and DigforFire into one pillar business ('DMG').
The DMG pillar will specialise in multi-channel marketing, a process we term
Digital Brain. The integration of three businesses into this pillar has enabled
us to eliminate duplicative management resource, and will improve the cross
selling of Digital Brain solutions which will in turn result in increased
success for all three businesses. This DMG pillar now represented 54% of our
total Gross Profits in 2009/10 versus 61% in 2008/09.
Our digital businesses have also been consolidated into one pillar ('20:20') and
this now represents 46% of our total gross profits, versus 39% in 2008/09.
20:20 now trades as one entity www.weare2020.com, is led out of our newly
acquired business in London, and has recently promoted and hired significant new
talent reflecting both the vibrancy of our offering and the confidence the Board
has in its future. We now have a new generation of dynamic leaders in 20:20 who
are fully committed to the future growth of the company and are working hard
within our organisation to build shareholder value.
The segmental performance of our business, now shown in two pillars (20:20 and
DMG) is shown below. The 20:20 pillar includes operating units previously known
as InboxDMG, HyperlaunchDMG, GraphicoDMG, CyberDMG, CheezeDMG, and 20:20 London.
The DMG pillar includes DigforFireDMG, JaywingDMG and GasboxDMG.
Segmental performance
+-----------------------+----------+----------+-------------+----------+
| For the year ended 31 | | | | |
| March 2010 | | | | |
+-----------------------+----------+----------+-------------+----------+
| | 20:20 | DMG | Unallocated | Total |
+-----------------------+----------+----------+-------------+----------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+-----------------------+----------+----------+-------------+----------+
| Revenue from external | 27,832 | 21,322 | (690) | 48,464 |
| customers | | | | |
+-----------------------+----------+----------+-------------+----------+
| Direct costs | (11,382) | (2,160) | 538 | (13,004) |
+-----------------------+----------+----------+-------------+----------+
| Gross profit | 16,450 | 19,162 | (152) | 35,460 |
+-----------------------+----------+----------+-------------+----------+
| Other operating | 7 | 1,702 | - | 1,709 |
| income | | | | |
+-----------------------+----------+----------+-------------+----------+
| Operating expenses | (12,572) | (15,511) | (739) | (28,822) |
| excluding | | | | |
| depreciation, | | | | |
| amortisation and | | | | |
| charges for share | | | | |
| based payments | | | | |
+-----------------------+----------+----------+-------------+----------+
| Operating profit | 3,885 | 5,353 | (891) | 8,347 |
| before depreciation, | | | | |
| amortisation and | | | | |
| charges for share | | | | |
| based payments | | | | |
+-----------------------+----------+----------+-------------+----------+
+-----------------------+----------+----------+-------------+----------+
| For the year ended 31 | | | | |
| March 2009 | | | | |
+-----------------------+----------+----------+-------------+----------+
| | 20:20 | DMG | Unallocated | Total |
+-----------------------+----------+----------+-------------+----------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+-----------------------+----------+----------+-------------+----------+
| Revenue from external | 28,229 | 30,053 | (1,628) | 56,654 |
| customers | | | | |
+-----------------------+----------+----------+-------------+----------+
| Direct costs | (12,194) | (4,535) | 1,628 | (15,101) |
+-----------------------+----------+----------+-------------+----------+
| Gross profit | 16,035 | 25,518 | - | 41,553 |
+-----------------------+----------+----------+-------------+----------+
| Other operating | 192 | - | - | 192 |
| income | | | | |
+-----------------------+----------+----------+-------------+----------+
| Operating expenses | (11,984) | (18,899) | (1,574) | (32,457) |
| excluding | | | | |
| depreciation, | | | | |
| amortisation and | | | | |
| charges for share | | | | |
| based payments | | | | |
+-----------------------+----------+----------+-------------+----------+
| Operating profit | 4,243 | 6,619 | | |
| before depreciation, | | | (1,574) | 9,288 |
| amortisation and | | | | |
| charges for share | | | | |
| based payments | | | | |
+-----------------------+----------+----------+-------------+----------+
Liquidity review
The Group has GBP11.2 million of banking facilities and at 31 March 2010 had
available GBP3.9 million of undrawn facilities. The Group's facilities mature in
October 2011 and it is the Group's intention to begin the process of renewal of
these facilities before the end of this financial year.
During the year the Group purchased 20:20 London for GBP2.0 million which was
financed out of the Group's existing facilities. Full details of the acquisition
are given in note 6. We also settled GBP600,000 of deferred consideration for
the acquisition of CyberDMG Limited.
The consolidated cash flow statement shows the Group to have generated cash from
operating activities of GBP4.8 million (2009: GBP8.4 million).
We paid GBP2.4 million in tax (2009: GBP2.2 million) which is up on the previous
year because of timing issues and certain Group companies moving to a quarterly
payment on account basis. In addition, we repaid GBP1.8 million of borrowings
(2009: GBP2.3 million).
As at 31 March 2010, the Group had net debt of GBP7.3 million.
Impairment
As required by IAS 38 we have carried out an impairment review of the carrying
value of our intangible assets and goodwill. We calculate our weighted average
cost of capital with reference to long term market costs of debt and equity and
the Company's own cost of debt and equity, adjusted for the size of the business
and risk premiums. Based on this calculation the rate of 12.9% has been derived.
This is applied to cash flows for each of the business units using growth rates
in perpetuity of 2% from 2017. As a result of these calculations the Board have
reviewed the carrying value of intangible assets and goodwill on the Group's
balance sheet and have decided to take an impairment of GBP3.8 million (2009:
GBPnil).
Contingent payments
The Group has been built through organic growth and by acquisition. The estimate
of payments to be made for past acquisitions is GBP4.2 million (2009: GBP4.4
million). GBP2.4 million for the purchase of CyberDMG has crystallised and is
due for payment in July 2012, subject to the management being in the Group's
employment at that time. GBP500,000 is due for the purchase of 20:20 London and
is subject to performance criteria being met. The balance of GBP1.3 million will
be determined at the end of July 2010, however based on management information
the Board does not anticipate that this will be payable.
Key performance indicators
At the beginning of 2009/10 the board agreed the following KPIs for the
business:
· Each business was to focus on balancing costs against lower levels of
gross profits than previously anticipated.
· Increased centralisation of non client facing functions as part of our
ongoing integration plan.
· Continued recognition as the UK's No 1 digital agency.
· Roll out the launch of Digital Brain:Search and DemographDMG.
· Creation of new routes to market through the hiring of people with
specific skills or through selective acquisition.
I am therefore pleased to be able to report the following:
· Salary costs were reduced by GBP2.5m, or 9.3% year on year.
· We have consolidated nine separate businesses into two pillars.
· We were recognised as the UK's No 1 Digital Agency for the second year in
succession.
· Sales of Digital Brain:Search proved to be slightly slower than
anticipated in 2009/10 as the lead times involved in getting clients to switch
Pay Per Click suppliers were longer than expected, however, we won a significant
contract from Swinton Insurance. The appointment of new leadership within the
business unit formerly known as CheezeDMG and its relaunch as 20:20
Media&Analytics focused on sales of Digital Brain:Search will, we believe, aid
new business and also help the unit recover from the loss of the Holiday
Cottages Group account.
· From its launch in July 2009 DemographDMG has developed a strong client
base and has an emerging reputation in the digital research sector. DemographDMG
has undertaken large scale projects for a range of blue chip clients including
HSBC and Carphone Warehouse. We now have a strong cross sector client base and
are already seeing repeat business from many clients we have worked with.
Our digital research specialism has meant that the bulk of our revenue has come
from this emerging sector and DemographDMG is developing specialisms in website
usability testing, online research, technology insight and social media
research. An aggressive new business push in these emerging markets is leading
to an accelerated growth in these areas and a healthy new business pipeline for
2010/11.
· The acquisition of 20:20 London gives us access to new clients in new
areas, particularly mobile marketing. The hiring of new management within our
Bristol office, will make our business much more successful in social media and
online PR.
In 2010/11 as we slowly emerge from recession, the KPIs will be:
· Recovery in our data services division within the DMG pillar.
· Winning of blue chip digital accounts through the new 20:20 pillar.
· Increased sales of Digital Brain: Search as well as more profitable
social media marketing assignments.
· Emergence of 20:20 Mobile as a significant revenue generator, focused on
applications, mobile content, games and commerce.
Outlook
Current market conditions appear to be improving slowly and we expect the
recovery to be modest and more pronounced in 2011/12 than in 2010/11.
Group M recently forecast a 4.2% growth in media spend in the UK in 2010.
Publicis recently forecast organic growth of 3.0% this year, whilst Aegis also
forecast UK adspend to grow at 2.9% in 2010.
We anticipate our 20:20 digital business will exceed these levels of growth, and
are expected to be similar to the 10.0% levels forecast by Aegis for digital
media.
The creation of the 20:20 pillar is already impacting on our new business
performance with wins across the digital marketing spectrum. We have recently
won significant eCommerce contracts and are looking to expand our 20:20
Technology business in London and India. We have won design and build projects
for Quinn Direct and Sealife and digital campaigns for DVLA and Defra. Our new
20:20 mobile business is already engaged on iPhone applications for brands as
diverse as Hula Hoops and Bounty. Recent 20:20 social media wins include
Airmiles, Nivea and Warburtons. We have also recently won viral campaigns/games
for William Hill and Freesat and won new work from existing blue chip clients
such as the Mountain Dew UK launch and V Water campaigns for PepsiCo.
Recovery in our DMG pillar and in particular our data services division is
however linked to the speed of recovery in the financial services sector.
Experian recently forecast 'gradual recovery' and our sentiment is the same.
Our data services business is expected to improve slowly this year following the
re-focusing of the company's lead generation effort which took place in the
second half of 2009/10. Revenues from 'marketing' propositions in our data
service division have now increased to former levels and mirror a corresponding
rise in our data services sales pipeline (adjusted 3 months). Financial Services
lending activity is slowly on the increase. There are also new entrants in the
banking sector (Virgin Money, MetroBank, Walton&Co, Tesco) coupled with interest
from Private Equity investment in the banking sector. All of this should help
our data services business recover. Strategically, the increased use of online
channels has flooded clients across all business sectors with data they find
difficult to turn into actionable insight. However, KPIs on these channels are
worsening with cost per sale figures rising quite rapidly. The key to this
problem is multi-channel optimisation to achieve optimal customer recruitment
and acquisition levels. DMG is the best placed business in the UK to handle
clients with multi-channel marketing requirements and will benefit when clients
begin to re-invest.
Long term strategic vision
· Despite our under-performing and significantly undervalued stock we
continue to believe that the shift in spending in favour of online and mobile
channels and away from traditional media remains part of a favourable long term
trend. Our position as the UK market leader means we are well placed to take
advantage of the upturn in spend on consumer marketing.
· Our focus as a business has however had to change as a result of the
recession and its impact on the financial services business, and our data
services company in particular. Our business will gradually move away from its
over dependence on the financial services sector in our data services business
and move towards an increased emphasis across the group on technology and
integrated multi-channel selling. This multi-channel message will integrate our
technology, marketing and data skills.
· Consistent with the theme of technology-driven integration, we remain
committed to further integration in our own business. We now have two pillars
where we previously had nine operating units, and we will continue to look for
ways to consolidate further and eliminate unnecessary cost or duplication.
· We believe that a re-balancing of our business towards technology-driven
solutions will also help us win more recurring revenues from clients as our
services will become more 'business critical'.
· Critically, we believe that the market should recognise this
re-balancing of our company's proposition and enable us to benefit from the
valuation levels enjoyed by businesses less robust and less digitally and
technologically skilled than ours.
Ben Langdon
Chief Executive
1 July 2010
Consolidated statement of comprehensive income
+---------------------------+------+------------+------------+----------+----------+
| For the year ended 31 | | 2010 | 2010 | 2010 | 2009 |
| March | | | | | |
+---------------------------+------+------------+------------+----------+----------+
| Continuing operations | Note | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+---------------------------+------+------------+------------+----------+----------+
| | | Before | | | Total |
| | | impairment | Impairment | | |
| | | of | of | | |
| | | goodwill | goodwill | | |
| | | and | and | Total | |
| | | intangible | intangible | | |
| | | assets | assets | | |
+---------------------------+------+------------+------------+----------+----------+
| | | | | | |
+---------------------------+------+------------+------------+----------+----------+
| Revenue | 1 | 48,464 | - | 48,464 | 56,654 |
+---------------------------+------+------------+------------+----------+----------+
| Direct costs | | (13,004) | - | (13,004) | (15,101) |
+---------------------------+------+------------+------------+----------+----------+
| Gross profit | | 35,460 | - | 35,460 | 41,553 |
+---------------------------+------+------------+------------+----------+----------+
| | | | | | |
+---------------------------+------+------------+------------+----------+----------+
| Other operating income | 2 | 1,709 | - | 1,709 | 192 |
+---------------------------+------+------------+------------+----------+----------+
| Amortisation | | (1,938) | - | (1,938) | (1,863) |
+---------------------------+------+------------+------------+----------+----------+
| Operating expenses | 3 | (32,321) | (3,787) | (36,108) | (36,161) |
+---------------------------+------+------------+------------+----------+----------+
| Operating (loss)/profit | | 2,910 | (3,787) | (877) | 3,721 |
+---------------------------+------+------------+------------+----------+----------+
| Finance income | | 2 | | 2 | 97 |
| | | | - | | |
+---------------------------+------+------------+------------+----------+----------+
| Finance costs | | (534) | | (534) | (704) |
| | | | - | | |
+---------------------------+------+------------+------------+----------+----------+
| Net financing costs | | (532) | - | (532) | (607) |
+---------------------------+------+------------+------------+----------+----------+
| (Loss)/profit before tax | | 2,378 | (3,787) | (1,409) | 3,114 |
+---------------------------+------+------------+------------+----------+----------+
| Tax expense | 4 | (576) | - | (576) | (1,674) |
+---------------------------+------+------------+------------+----------+----------+
| (Loss)/profit for the | | 1,802 | | | 1,440 |
| year attributable to | | | (3,787) | (1,985) | |
| equity holders of the | | | | | |
| parent | | | | | |
+---------------------------+------+------------+------------+----------+----------+
| | | | | | |
+---------------------------+------+------------+------------+----------+----------+
| Other comprehensive | | | | | |
| income: | | | | | |
+---------------------------+------+------------+------------+----------+----------+
| Cash flow hedging | | | | | |
+---------------------------+------+------------+------------+----------+----------+
| Current year gains | | 65 | - | 65 | (286) |
+---------------------------+------+------------+------------+----------+----------+
| Total comprehensive | | 1,867 | (3,787) | (1,920) | 1,154 |
| income for the period | | | | | |
| attributable to equity | | | | | |
| holders of the parent | | | | | |
+---------------------------+------+------------+------------+----------+----------+
| | | | | | |
+---------------------------+------+------------+------------+----------+----------+
| | | | | | |
+---------------------------+------+------------+------------+----------+----------+
| | | | | | |
+---------------------------+------+------------+------------+----------+----------+
| Earnings per share | 5 | | | | |
+---------------------------+------+------------+------------+----------+----------+
| From continuing | | | | | |
| operations | | | | | |
+---------------------------+------+------------+------------+----------+----------+
| - basic | | 2.61p | - | (2.88)p | 2.15p |
+---------------------------+------+------------+------------+----------+----------+
| - diluted | | 2.37p | - | (2.88)p | 1.92p |
+---------------------------+------+------------+------------+----------+----------+
+-----------------------------+------+---------+----------+---------+---------+
| Consolidated balance sheet | | | | | |
+-----------------------------+------+---------+----------+---------+---------+
| As at 31 March | | | 2010 | 2009 | 2008 |
+-----------------------------+------+---------+----------+---------+---------+
| | Note | | GBP'000 | GBP'000 | GBP'000 |
+-----------------------------+------+---------+----------+---------+---------+
| Non-current assets | | | | | |
+-----------------------------+------+---------+----------+---------+---------+
| Property, plant and | 7 | | 1,752 | 2,057 | 2,215 |
| equipment | | | | | |
+-----------------------------+------+---------+----------+---------+---------+
| Goodwill | 8 | | 45,653 | 47,051 | 39,449 |
+-----------------------------+------+---------+----------+---------+---------+
| Other intangible assets | 9 | | 14,272 | 16,116 | 13,324 |
+-----------------------------+------+---------+----------+---------+---------+
| | | | 61,677 | 65,224 | 54,988 |
+-----------------------------+------+---------+----------+---------+---------+
| Current assets | | | | | |
+-----------------------------+------+---------+----------+---------+---------+
| Inventories | | | 212 | 196 | 790 |
+-----------------------------+------+---------+----------+---------+---------+
| Trade and other receivables | | | 11,832 | 10,683 | 9,582 |
+-----------------------------+------+---------+----------+---------+---------+
| Cash and cash equivalents | | | 7,399 | 12,227 | 12,004 |
+-----------------------------+------+---------+----------+---------+---------+
| | | | 19,443 | 23,106 | 22,376 |
+-----------------------------+------+---------+----------+---------+---------+
| | | | | | |
+-----------------------------+------+---------+----------+---------+---------+
| Total assets | | | 81,120 | 88,330 | 77,364 |
+-----------------------------+------+---------+----------+---------+---------+
| | | | | | |
+-----------------------------+------+---------+----------+---------+---------+
| Current liabilities | | | | | |
+-----------------------------+------+---------+----------+---------+---------+
| Bank overdraft | 10 | | 6,443 | 8,806 | 6,901 |
+-----------------------------+------+---------+----------+---------+---------+
| Other interest-bearing | 10 | | 1,691 | 1,691 | 1,122 |
| loans and borrowings | | | | | |
+-----------------------------+------+---------+----------+---------+---------+
| Financial derivatives | | | 416 | 481 | 195 |
+-----------------------------+------+---------+----------+---------+---------+
| Trade and other payables | | | 12,741 | 15,678 | 17,168 |
+-----------------------------+------+---------+----------+---------+---------+
| Current tax liabilities | | | 254 | 1,475 | 1,242 |
+-----------------------------+------+---------+----------+---------+---------+
| Provisions | | | 187 | 147 | 133 |
+-----------------------------+------+---------+----------+---------+---------+
| | | | 21,732 | 28,278 | 26,761 |
+-----------------------------+------+---------+----------+---------+---------+
| Non-current liabilities | | | | | |
+-----------------------------+------+---------+----------+---------+---------+
| Other interest-bearing | 10 | | 6,522 | 7,612 | 3,797 |
| loans and borrowings | | | | | |
+-----------------------------+------+---------+----------+---------+---------+
| Provisions | | | - | - | 225 |
+-----------------------------+------+---------+----------+---------+---------+
| Deferred tax liabilities | | | 4,133 | 4,661 | 3,882 |
+-----------------------------+------+---------+----------+---------+---------+
| | | | 10,655 | 12,273 | 7,904 |
+-----------------------------+------+---------+----------+---------+---------+
| | | | | | |
+-----------------------------+------+---------+----------+---------+---------+
| Total liabilities | | | 32,387 | 40,551 | 34,665 |
+-----------------------------+------+---------+----------+---------+---------+
| | | | | | |
+-----------------------------+------+---------+----------+---------+---------+
| Net assets | | | 48,733 | 47,779 | 42,699 |
+-----------------------------+------+---------+----------+---------+---------+
| | | | | | |
+-----------------------------+------+---------+----------+---------+---------+
| Equity attributable to | | | | | |
| owners of the parent | | | | | |
+-----------------------------+------+---------+----------+---------+---------+
| Share capital | 11 | | 34,026 | 33,689 | 32,655 |
+-----------------------------+------+---------+----------+---------+---------+
| Share premium | | | 6,608 | 6,608 | 5,954 |
+-----------------------------+------+---------+----------+---------+---------+
| Hedging reserve | | | (416) | (481) | (195) |
+-----------------------------+------+---------+----------+---------+---------+
| Shares to be issued | | | - | - | 536 |
+-----------------------------+------+---------+----------+---------+---------+
| Capital redemption reserve | | | 125 | 125 | - |
+-----------------------------+------+---------+----------+---------+---------+
| Share option reserve | | | 419 | 5,810 | - |
+-----------------------------+------+---------+----------+---------+---------+
| Retained earnings | | | 7,971 | 2,028 | 3,749 |
+-----------------------------+------+---------+----------+---------+---------+
| | | | | | |
+-----------------------------+------+---------+----------+---------+---------+
| Total equity | | | 48,733 | 47,779 | 42,699 |
+-----------------------------+------+---------+----------+---------+---------+
| | | | | | |
+-----------------------------+------+---------+----------+---------+---------+
Consolidated cash flow statement
+---------------------------------------------+------+---------+----------+
| For the year ended 31 March | | 2010 | 2009 |
+---------------------------------------------+------+---------+----------+
| | Note | GBP'000 | GBP'000 |
+---------------------------------------------+------+---------+----------+
| | | | |
+---------------------------------------------+------+---------+----------+
| Cash flow from operating activities | | | |
+---------------------------------------------+------+---------+----------+
| (Loss)/profit after tax | | (1,985) | 1,440 |
+---------------------------------------------+------+---------+----------+
| Adjustments for: | | | |
+---------------------------------------------+------+---------+----------+
| Depreciation, amortisation and impairment | | 6,299 | 2,531 |
+---------------------------------------------+------+---------+----------+
| Loss on disposal of property, plant and | | 28 | - |
| equipment | | | |
+---------------------------------------------+------+---------+----------+
| Movement in provision | | 40 | - |
+---------------------------------------------+------+---------+----------+
| Financial income | | (2) | (97) |
+---------------------------------------------+------+---------+----------+
| Financial expenses | | 534 | 704 |
+---------------------------------------------+------+---------+----------+
| Share-based payment expense | | 2,874 | 2,814 |
+---------------------------------------------+------+---------+----------+
| Taxation | | 576 | 1,674 |
+---------------------------------------------+------+---------+----------+
| | | | |
+---------------------------------------------+------+---------+----------+
| Operating cash flow before changes in | | 8,364 | 9,066 |
| working capital and provisions | | | |
+---------------------------------------------+------+---------+----------+
| (Increase)/decrease in trade and other | | (1,034) | 1,631 |
| receivables | | | |
+---------------------------------------------+------+---------+----------+
| (Increase)/decrease in inventories | | (16) | 594 |
+---------------------------------------------+------+---------+----------+
| Decrease in trade and other payables | | (2,543) | (2,929) |
+---------------------------------------------+------+---------+----------+
| Cash generated from operations | | 4,771 | 8,362 |
+---------------------------------------------+------+---------+----------+
| | | | |
+---------------------------------------------+------+---------+----------+
| Interest received | | 2 | 97 |
+---------------------------------------------+------+---------+----------+
| Interest paid | | (482) | (530) |
+---------------------------------------------+------+---------+----------+
| Tax paid | | (2,355) | (2,207) |
+---------------------------------------------+------+---------+----------+
| Net cash flow from operating activities | | 1,936 | 5,722 |
+---------------------------------------------+------+---------+----------+
| | | | |
+---------------------------------------------+------+---------+----------+
| Cash flow from investing activities | | | |
+---------------------------------------------+------+---------+----------+
| Proceeds from sale of property, plant and | | 4 | 6 |
| equipment | | | |
+---------------------------------------------+------+---------+----------+
| Acquisitions of subsidiaries, net of cash | 6 | (1,632) | (7,610) |
| acquired | | | |
+---------------------------------------------+------+---------+----------+
| Payment of contingent consideration for | | (600) | (3,566) |
| prior year acquisitions | | | |
+---------------------------------------------+------+---------+----------+
| Acquisition of intangible assets | | (694) | (105) |
+---------------------------------------------+------+---------+----------+
| Acquisition of property, plant and | | (301) | (283) |
| equipment | | | |
+---------------------------------------------+------+---------+----------+
| Net cash outflow from investing activities | | (3,223) | (11,558) |
+---------------------------------------------+------+---------+----------+
| | | | |
+---------------------------------------------+------+---------+----------+
| Cash flows from financing activities | | | |
+---------------------------------------------+------+---------+----------+
| Proceeds from new loan and draw down of | | 600 | 6,600 |
| bank facilities | | | |
+---------------------------------------------+------+---------+----------+
| Repayment of borrowings | | (1,778) | (2,268) |
+---------------------------------------------+------+---------+----------+
| Payments to redeem share capital | | - | (178) |
+---------------------------------------------+------+---------+----------+
| Net cash (outflow)/inflow from financing | | (1,178) | 4,154 |
| activities | | | |
+---------------------------------------------+------+---------+----------+
| | | | |
+---------------------------------------------+------+---------+----------+
| Net decrease in cash and cash equivalents | | (2,465) | (1,682) |
+---------------------------------------------+------+---------+----------+
| Cash and cash equivalents at beginning of | | 3,421 | 5,103 |
| year | | | |
+---------------------------------------------+------+---------+----------+
| Cash and cash equivalents at end of year | 10 | 956 | 3,421 |
+---------------------------------------------+------+---------+----------+
| | | | |
+---------------------------------------------+------+---------+----------+
| Cash and cash equivalents comprise: | | | |
+---------------------------------------------+------+---------+----------+
| Cash at bank and in hand | | 7,399 | 12,227 |
+---------------------------------------------+------+---------+----------+
| Bank overdrafts | | (6,443) | (8,806) |
+---------------------------------------------+------+---------+----------+
| Cash and cash equivalents at end of year | | 956 | 3,421 |
+---------------------------------------------+------+---------+----------+
| | | | |
+---------------------------------------------+------+---------+----------+
Consolidated statement of changes in equity
+--------------------+---------+---------+---------+---------+------------+---------+----------+------------+
| | | Share | | Shares | Capital | Share | | |
| | Share | premium | Hedging | to be | redemption | option | Retained | |
| | capital | | reserve | issued | reserve | reserve | earnings | Total |
| | | | | | | | | attributed |
| | | | | | | | | to the |
| | | | | | | | | owners of |
| | | | | | | | | the parent |
+--------------------+---------+---------+---------+---------+------------+---------+----------+------------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+--------------------+---------+---------+---------+---------+------------+---------+----------+------------+
| | | | | | | | | |
+--------------------+---------+---------+---------+---------+------------+---------+----------+------------+
| At 1 April 2008 | 32,655 | 5,954 | (195) | 536 | - | - | 3,749 | 42,699 |
+--------------------+---------+---------+---------+---------+------------+---------+----------+------------+
| | | | | | | | | |
+--------------------+---------+---------+---------+---------+------------+---------+----------+------------+
| Allotment of 50p | 1,159 | 667 | - | - | - | - | - | 1,826 |
| Ordinary shares | | | | | | | | |
+--------------------+---------+---------+---------+---------+------------+---------+----------+------------+
| Transfer | - | (13) | - | - | - | - | 13 | - |
+--------------------+---------+---------+---------+---------+------------+---------+----------+------------+
| Credit in respect | | | | - | | | 2,814 | 2,814 |
| of share-based | - | - | - | | - | - | | |
| payments | | | | | | | | |
+--------------------+---------+---------+---------+---------+------------+---------+----------+------------+
| Transfer to share | - | - | - | - | - | 5,810 | (5,810) | - |
| option reserve | | | | | | | | |
+--------------------+---------+---------+---------+---------+------------+---------+----------+------------+
| Share buy back | (125) | - | - | - | - | - | (53) | (178) |
+--------------------+---------+---------+---------+---------+------------+---------+----------+------------+
| Capital redemption | - | - | - | - | 125 | - | (125) | - |
| reserve | | | | | | | | |
+--------------------+---------+---------+---------+---------+------------+---------+----------+------------+
| Release of reserve | - | - | - | (536) | - | - | - | (536) |
+--------------------+---------+---------+---------+---------+------------+---------+----------+------------+
| Transactions with | 1,034 | 654 | - | (536) | 125 | 5,810 | (3,161) | 3,926 |
| owners | | | | | | | | |
+--------------------+---------+---------+---------+---------+------------+---------+----------+------------+
| | | | | | | | | |
+--------------------+---------+---------+---------+---------+------------+---------+----------+------------+
| Profit for the | - | - | - | - | - | - | 1,440 | 1,440 |
| year | | | | | | | | |
+--------------------+---------+---------+---------+---------+------------+---------+----------+------------+
| Other | | | | | | | | |
| comprehensive | | | | | | | | |
| income: | | | | | | | | |
+--------------------+---------+---------+---------+---------+------------+---------+----------+------------+
| Cash flow hedges | - | - | (286) | - | - | - | - | (286) |
+--------------------+---------+---------+---------+---------+------------+---------+----------+------------+
| Total | - | - | (286) | - | - | - | 1,440 | 1,154 |
| comprehensive | | | | | | | | |
| income for the | | | | | | | | |
| year | | | | | | | | |
+--------------------+---------+---------+---------+---------+------------+---------+----------+------------+
| | | | | | | | | |
+--------------------+---------+---------+---------+---------+------------+---------+----------+------------+
| At 31 March 2009 | 33,689 | 6,608 | (481) | - | 125 | 5,810 | 2,028 | 47,779 |
+--------------------+---------+---------+---------+---------+------------+---------+----------+------------+
| | | | | | | | | |
+--------------------+---------+---------+---------+---------+------------+---------+----------+------------+
| Allotment of 5p | 337 | - | - | - | - | (337) | - | - |
| Ordinary shares | | | | | | | | |
+--------------------+---------+---------+---------+---------+------------+---------+----------+------------+
| Credit in respect | - | - | - | - | - | - | 2,874 | 2,874 |
| of share-based | | | | | | | | |
| payments | | | | | | | | |
+--------------------+---------+---------+---------+---------+------------+---------+----------+------------+
| Transfer to share | - | - | - | - | - | (5,054) | 5,054 | - |
| option reserve | | | | | | | | |
+--------------------+---------+---------+---------+---------+------------+---------+----------+------------+
| Transactions with | 337 | - | - | - | - | (5,391) | 7,928 | 2,874 |
| owners | | | | | | | | |
+--------------------+---------+---------+---------+---------+------------+---------+----------+------------+
| | | | | | | | | |
+--------------------+---------+---------+---------+---------+------------+---------+----------+------------+
| Loss for the year | - | - | - | - | - | - | (1,985) | (1,985) |
+--------------------+---------+---------+---------+---------+------------+---------+----------+------------+
| Other | | | | | | | | |
| comprehensive | | | | | | | | |
| income: | | | | | | | | |
+--------------------+---------+---------+---------+---------+------------+---------+----------+------------+
| Cash flow hedges | - | - | 65 | - | - | - | - | 65 |
+--------------------+---------+---------+---------+---------+------------+---------+----------+------------+
| Total | - | - | 65 | - | - | - | (1,985) | (1,920) |
| comprehensive | | | | | | | | |
| income for the | | | | | | | | |
| year | | | | | | | | |
+--------------------+---------+---------+---------+---------+------------+---------+----------+------------+
| | | | | | | | | |
+--------------------+---------+---------+---------+---------+------------+---------+----------+------------+
| At 31 March 2010 | 34,026 | 6,608 | (416) | - | 125 | 419 | 7,971 | 48,733 |
+--------------------+---------+---------+---------+---------+------------+---------+----------+------------+
| | | | | | | | | |
+--------------------+---------+---------+---------+---------+------------+---------+----------+------------+
Notes to the preliminary announcement of results
Principal accounting policies
Digital Marketing Group plc is a Company incorporated in the UK.
The financial information set out in this preliminary announcement does not
constitute statutory information as defined in section 434 of the Companies Act
2006.
The consolidated balance sheet at 31 March 2010 and the consolidated statement
of comprehensive income, consolidated cash flow statement, consolidated
statement of changes in equity and associated notes for the year then ended have
been extracted from the Group's 2010 statutory financial statements upon which
the auditor's opinion is unmodified and does not include any statement under
section 498 (2) or (3) of the Companies Act 2006.
Those financial statements have not yet been delivered to the registrar of
companies.
The consolidated financial statements consolidate those of the Company and its
subsidiaries (together referred to as the 'Group').
The consolidated financial statements have been prepared and approved by the
Directors in accordance with International Financial Reporting Standards as
adopted by the EU (Adopted IFRSs). The consolidated financial statements have
been prepared under the historical cost convention, except for certain financial
instruments that are held at fair value.
The accounting policies which remained unchanged from the previous year, unless
otherwise stated, have been applied consistently to all periods presented in
those consolidated financial statements.
Judgements made by the Directors in the application of these accounting policies
that have a significant effect on the consolidated financial statements together
with estimates with a significant risk of material adjustment in the next year
are discussed in note 13.
Changes in accounting policy
Effective in the year 31 March 2010
A revised IAS 1 'Presentation of Financial Statements' was issued in September
2007 and has been adopted in these financial statements. The revision is aimed
at improving users' ability to analyse and compare the information given in the
financial statements, and will mean a significant change to the format of the
primary statements.
IFRS 8 'Operating Segments' has been adopted during the year. This IFRS required
entities to disclose information to enable users of its financial statements to
evaluate the nature and financial effects of the business activities in which it
engages. This may result in additional disclosure for the Group but does not
materially impact the results of the Group.
The Group has adopted the amendments to IFRS 7, 'Financial Instruments' and has
categorisedfinancial instruments held at fair value into a three level fair
value hierarchy. The Group has taken advantage of the transitional provisions
and has not provided comparative information.
Going concern
The Directors have reviewed the forecasts for 2010/11 and 2011/12 which have
been adjusted to take account of the current trading environment. The Directors
consider the forecasts to be prudent and have assessed the impact of them on the
Group's cash flow, facilities and headroom within its banking covenants.
Further, the Directors have assessed the future funding requirements of the
Group and compared them with the level of available borrowing facilities. Based
on this work, the Directors are satisfied that the Group has adequate resources
to continue in operational existence for the 12 months from the date of these
accounts. For this reason they continue to adopt the going concern basis in
preparing the financial statements.
Segmental reporting
The Group reports its business activities on a two pillar basis identified as
DMG and 20:20 and is therefore organised on this basis. In previous years this
has been reported on a vertical business activity basis. The comparative
information has been amended to reflect this change of management reporting.
1. Segmental analysis
The Group reports its business activities on a two pillar basis identified as
DMG and 20:20 and is therefore organised on this basis. In previous years this
has been reported on a vertical business activity basis. The comparative
information has been amended to reflect this change of management reporting.
The entity derives its revenue from the provision of digital marketing services.
+-----------------------+----------+----------+-------------+----------+
| For the year ended 31 | | | | |
| March 2010 | | | | |
+-----------------------+----------+----------+-------------+----------+
| | 20:20 | DMG | Unallocated | Total |
+-----------------------+----------+----------+-------------+----------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+-----------------------+----------+----------+-------------+----------+
| Revenue from external | 27,832 | 21,322 | (690) | 48,464 |
| customers | | | | |
+-----------------------+----------+----------+-------------+----------+
| Direct costs | (11,382) | (2,160) | 538 | (13,004) |
+-----------------------+----------+----------+-------------+----------+
| Gross profit | 16,450 | 19,162 | (152) | 35,460 |
+-----------------------+----------+----------+-------------+----------+
| Other operating | 7 | 1,702 | - | 1,709 |
| income | | | | |
+-----------------------+----------+----------+-------------+----------+
| Operating expenses | (12,572) | (15,511) | (739) | (28,822) |
| excluding | | | | |
| depreciation, | | | | |
| amortisation and | | | | |
| charges for share | | | | |
| based payments | | | | |
+-----------------------+----------+----------+-------------+----------+
| Operating profit | 3,885 | 5,353 | (891) | 8,347 |
| before depreciation, | | | | |
| amortisation and | | | | |
| charges for share | | | | |
| based payments | | | | |
+-----------------------+----------+----------+-------------+----------+
| Depreciation | (204) | (345) | (25) | (574) |
+-----------------------+----------+----------+-------------+----------+
| Amortisation | (1,010) | (928) | - | (1,938) |
+-----------------------+----------+----------+-------------+----------+
| Impairment | (2,519) | (1,254) | (14) | (3,787) |
+-----------------------+----------+----------+-------------+----------+
| Charges for share | (22) | (1,381) | (1,522) | (2,925) |
| based payments | | | | |
+-----------------------+----------+----------+-------------+----------+
| Operating | 130 | 1,445 | (2,452) | (877) |
| profit/(loss) | | | | |
+-----------------------+----------+----------+-------------+----------+
| Finance income | | | | 2 |
+-----------------------+----------+----------+-------------+----------+
| Finance costs | | | | (534) |
+-----------------------+----------+----------+-------------+----------+
| Loss before tax | | | | (1,409) |
+-----------------------+----------+----------+-------------+----------+
| Taxation | | | | (576) |
+-----------------------+----------+----------+-------------+----------+
| Loss for the period | | | | (1,985) |
| from continuing | | | | |
| operations | | | | |
+-----------------------+----------+----------+-------------+----------+
+-----------------------+----------+----------+-------------+----------+
| For the year ended 31 | | | | |
| March 2009 | | | | |
+-----------------------+----------+----------+-------------+----------+
| | 20:20 | DMG | Unallocated | Total |
+-----------------------+----------+----------+-------------+----------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+-----------------------+----------+----------+-------------+----------+
| Revenue from external | 28,229 | 30,053 | (1,628) | 56,654 |
| customers | | | | |
+-----------------------+----------+----------+-------------+----------+
| Direct costs | (12,194) | (4,535) | 1,628 | (15,101) |
+-----------------------+----------+----------+-------------+----------+
| Gross profit | 16,035 | 25,518 | - | 41,553 |
+-----------------------+----------+----------+-------------+----------+
| Other operating | 192 | - | - | 192 |
| income | | | | |
+-----------------------+----------+----------+-------------+----------+
| Operating expenses | (11,984) | (18,899) | (1,574) | (32,457) |
| excluding | | | | |
| depreciation, | | | | |
| amortisation and | | | | |
| charges for share | | | | |
| based payments | | | | |
+-----------------------+----------+----------+-------------+----------+
| Operating profit | | | | |
| before depreciation, | | | | |
| amortisation and | 4,243 | 6,619 | (1,574) | 9,288 |
| charges for share | | | | |
| based payments | | | | |
+-----------------------+----------+----------+-------------+----------+
| Depreciation | (255) | (391) | (22) | (668) |
+-----------------------+----------+----------+-------------+----------+
| Amortisation | (990) | (873) | - | (1,863) |
+-----------------------+----------+----------+-------------+----------+
| Charges for share | (132) | (1,092) | (1,812) | (3,036) |
| based payments | | | | |
+-----------------------+----------+----------+-------------+----------+
| Operating profit | 2,866 | 4,263 | (3,408) | 3,721 |
+-----------------------+----------+----------+-------------+----------+
| Finance income | | | | 97 |
+-----------------------+----------+----------+-------------+----------+
| Finance costs | | | | (704) |
+-----------------------+----------+----------+-------------+----------+
| Profit before tax | | | | 3,114 |
+-----------------------+----------+----------+-------------+----------+
| Taxation | | | | (1,674) |
+-----------------------+----------+----------+-------------+----------+
| Profit for the period | | | | |
| from continuing | | | | 1,440 |
| operations | | | | |
+-----------------------+----------+----------+-------------+----------+
| | | | | |
+-----------------------+----------+----------+-------------+----------+
+----------------------------+----------+---------+-------------+----------+
| Year ended 31 March 2010 | | | | |
+----------------------------+----------+---------+-------------+----------+
| | | | | |
+----------------------------+----------+---------+-------------+----------+
| | 20:20 | DMG | Unallocated | Group |
| | | | | Total |
+----------------------------+----------+---------+-------------+----------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+----------------------------+----------+---------+-------------+----------+
| | | | | |
+----------------------------+----------+---------+-------------+----------+
| Assets | 35,175 | 27,707 | 18,238 | 81,120 |
+----------------------------+----------+---------+-------------+----------+
| Liabilities | (10,227) | (5,137) | (17,023) | (32,387) |
+----------------------------+----------+---------+-------------+----------+
| | | | | |
+----------------------------+----------+---------+-------------+----------+
| Capital employed | 24,948 | 22,570 | 1,215 | 48,733 |
+----------------------------+----------+---------+-------------+----------+
+----------------------------+----------+---------+-------------+----------+
| Year ended 31 March 2009 | | | | |
+----------------------------+----------+---------+-------------+----------+
| | | | | |
+----------------------------+----------+---------+-------------+----------+
| | 20:20 | DMG | Unallocated | Group |
| | | | | Total |
+----------------------------+----------+---------+-------------+----------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+----------------------------+----------+---------+-------------+----------+
| | | | | |
+----------------------------+----------+---------+-------------+----------+
| Assets | 35,768 | 31,164 | 21,399 | 88,331 |
+----------------------------+----------+---------+-------------+----------+
| Liabilities | (10,734) | (8,069) | (21,749) | (40,552) |
+----------------------------+----------+---------+-------------+----------+
| | | | | |
+----------------------------+----------+---------+-------------+----------+
| Capital employed | 25,034 | 23,095 | (350) | 47,779 |
+----------------------------+----------+---------+-------------+----------+
Unallocated assets and liabilities consist predominantly of cash, external
borrowings and deferred tax liabilities on intangible assets which have not been
allocated to the business segments.
Capital additions; Property, plant and equipment
+-----------------------------+----------+----------+-------------+----------+
| | 20:20 | DMG | | Group |
| | | | | Total |
| | | | Unallocated | |
+-----------------------------+----------+----------+-------------+----------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+-----------------------------+----------+----------+-------------+----------+
| | | | | |
+-----------------------------+----------+----------+-------------+----------+
| Year ended 31 March 2010 | 73 | 228 | - | 301 |
+-----------------------------+----------+----------+-------------+----------+
| | | | | |
+-----------------------------+----------+----------+-------------+----------+
| Year ended 31 March 2009 | 115 | 160 | 8 | 283 |
+-----------------------------+----------+----------+-------------+----------+
| | | | | |
+-----------------------------+----------+----------+-------------+----------+
2. Other operating income
+-------------------------------------------------+---------+---------+
| | 2010 | 2009 |
+-------------------------------------------------+---------+---------+
| | GBP'000 | GBP'000 |
+-------------------------------------------------+---------+---------+
| | | |
+-------------------------------------------------+---------+---------+
| Other operating income | 1,709 | 192 |
+-------------------------------------------------+---------+---------+
During the year to 31 March 2010 the Group received part settlement from the
administrator of a client for a contractual obligation to perform services on
their behalf. It is anticipated there may be further distributions in the future
but the Board is unaware of the quantum or timing of these potential receipts.
3. Other operating expenses
+-------------------------------------------------+---------+---------+
| | 2010 | 2009 |
+-------------------------------------------------+---------+---------+
| | GBP'000 | GBP'000 |
+-------------------------------------------------+---------+---------+
| | | |
+-------------------------------------------------+---------+---------+
| Wages and salaries | 21,961 | 24,310 |
+-------------------------------------------------+---------+---------+
| Share based payments | 2,925 | 3,036 |
+-------------------------------------------------+---------+---------+
| Administration | 7,435 | 8,815 |
+-------------------------------------------------+---------+---------+
| Impairment of intangible assets and goodwill | 3,787 | - |
+-------------------------------------------------+---------+---------+
| | 36,108 | 36,161 |
+-------------------------------------------------+---------+---------+
4. Tax expense
+-------------------------------------------------+---------+---------+
| | 2010 | 2009 |
+-------------------------------------------------+---------+---------+
| | GBP'000 | GBP'000 |
+-------------------------------------------------+---------+---------+
| Recognised in the consolidated statement of | | |
| comprehensive income: | | |
+-------------------------------------------------+---------+---------+
| Current year tax | 1,134 | 2,160 |
+-------------------------------------------------+---------+---------+
| Origination and reversal of temporary | (558) | (486) |
| differences | | |
+-------------------------------------------------+---------+---------+
| Total tax charge | 576 | 1,674 |
+-------------------------------------------------+---------+---------+
| | | |
+-------------------------------------------------+---------+---------+
| Reconciliation of total tax charge: | | |
+-------------------------------------------------+---------+---------+
| (Loss)/profit before tax | (1,409) | 3,114 |
+-------------------------------------------------+---------+---------+
| | | |
+-------------------------------------------------+---------+---------+
| Taxation using the UK Corporation Tax rate of | (395) | 872 |
| 28% (2009: 28%) | | |
+-------------------------------------------------+---------+---------+
| | | |
+-------------------------------------------------+---------+---------+
| Effects of: | | |
+-------------------------------------------------+---------+---------+
| Non deductible expenses | 94 | 160 |
+-------------------------------------------------+---------+---------+
| Impairment of goodwill | 892 | - |
+-------------------------------------------------+---------+---------+
| Share based payment charges | 804 | 788 |
+-------------------------------------------------+---------+---------+
| Schedule 23 deductions | (805) | - |
+-------------------------------------------------+---------+---------+
| Other | (68) | (5) |
+-------------------------------------------------+---------+---------+
| Prior year adjustment | 54 | (32) |
+-------------------------------------------------+---------+---------+
| Utilisation of tax losses | - | (109) |
+-------------------------------------------------+---------+---------+
| Total tax charge | 576 | 1,674 |
+-------------------------------------------------+---------+---------+
5. Earnings per share
+-------------------------------------------------+---------+---------+
| | 2010 | 2009 |
+-------------------------------------------------+---------+---------+
| | Pence | Pence |
| | per | per |
| | Share | Share |
+-------------------------------------------------+---------+---------+
| | | |
+-------------------------------------------------+---------+---------+
| Basic | (2.88)p | 2.15p |
+-------------------------------------------------+---------+---------+
| Diluted | (2.88)p | 1.92p |
+-------------------------------------------------+---------+---------+
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 year. As the basic earnings per share is a loss a dilution does not take
place.
The calculations of basic and diluted earnings per share are:
+-------------------------------------------------+---------+---------+
| | 2010 | 2009 |
+-------------------------------------------------+---------+---------+
| | GBP'000 | GBP'000 |
+-------------------------------------------------+---------+---------+
| | | |
+-------------------------------------------------+---------+---------+
| (Loss)/profit for the year attributable to | (1,985) | 1,440 |
| shareholders | | |
+-------------------------------------------------+---------+---------+
Weighted average number of ordinary shares in issue:
+-------------------------------------------------+------------+------------+
| | 2010 | 2009 |
+-------------------------------------------------+------------+------------+
| | Number | Number |
+-------------------------------------------------+------------+------------+
| | | |
+-------------------------------------------------+------------+------------+
| Basic | 69,009,912 | 66,851,000 |
+-------------------------------------------------+------------+------------+
| Adjustment for share options | 6,934,553 | 7,105,000 |
+-------------------------------------------------+------------+------------+
| Adjustment for warrants | - | 66,000 |
+-------------------------------------------------+------------+------------+
| Adjustment for shares to be issued | - | 168,000 |
+-------------------------------------------------+------------+------------+
| Adjustments for contingent shares | - | 625,000 |
+-------------------------------------------------+------------+------------+
| Diluted | 75,944,465 | 74,815,000 |
+-------------------------------------------------+------------+------------+
Adjusted earnings per share
+-------------------------------------------------+---------+---------+
| | 2010 | 2009 |
+-------------------------------------------------+---------+---------+
| | Pence | Pence |
| | per | per |
| | Share | Share |
+-------------------------------------------------+---------+---------+
| From continuing and discontinued operations | | |
+-------------------------------------------------+---------+---------+
| Basic adjusted earnings per share | 8.77p | 8.76p |
+-------------------------------------------------+---------+---------+
| Diluted adjusted earnings per share | 7.97p | 7.82p |
+-------------------------------------------------+---------+---------+
Adjusted earnings per share have been calculated by dividing the profit
attributable to shareholders before amortisation and charges for share options
by the weighted average number of ordinary shares in issue during the year. The
numbers used in calculating the basic and diluted adjusted earnings per share
are reconciled below:
+-------------------------------------------------+---------+---------+
| | 2010 | 2009 |
+-------------------------------------------------+---------+---------+
| | GBP'000 | GBP'000 |
+-------------------------------------------------+---------+---------+
| | | |
+-------------------------------------------------+---------+---------+
| (Loss)/profit before tax | (1,409) | 3,114 |
+-------------------------------------------------+---------+---------+
| Amortisation | 1,938 | 1,863 |
+-------------------------------------------------+---------+---------+
| Impairment of carrying value of goodwill and | 3,787 | - |
| intangibles | | |
+-------------------------------------------------+---------+---------+
| Charges for share options | 2,874 | 3,036 |
+-------------------------------------------------+---------+---------+
| Adjusted profit attributable to shareholders | 7,190 | 8,013 |
+-------------------------------------------------+---------+---------+
| Current year tax charge | (1,134) | (2,160) |
+-------------------------------------------------+---------+---------+
| | 6,056 | 5,853 |
+-------------------------------------------------+---------+---------+
6. Acquisitions
On 11 December 2009 the Company acquired the trade and assets of 20:20 London.
The net assets acquired, consideration paid, and goodwill arising on this
acquisition is detailed below:
+------------------------------+----------+------------+-------------+-------------+
| | | Acquirees' | Fair | Acquisition |
| | | book value | value | amounts |
| | | GBP'000 | adjustments | GBP'000 |
| | | | GBP'000 | |
+------------------------------+----------+------------+-------------+-------------+
| | | | | |
+------------------------------+----------+------------+-------------+-------------+
| Acquirees' net assets at the | | | | |
| acquisition date: | | | | |
+------------------------------+----------+------------+-------------+-------------+
| Trade and other receivables | | 49 | - | 49 |
+------------------------------+----------+------------+-------------+-------------+
| Net identifiable assets and | | 49 | - | 49 |
| liabilities | | | | |
+------------------------------+----------+------------+-------------+-------------+
| | | | | |
+------------------------------+----------+------------+-------------+-------------+
| Goodwill on acquisition | | | | 2,083 |
+------------------------------+----------+------------+-------------+-------------+
| | | | | 2,132 |
+------------------------------+----------+------------+-------------+-------------+
| | | | | |
+------------------------------+----------+------------+-------------+-------------+
| Cash consideration paid (including legal and | | 1,632 |
| professional fees of GBP132,000) | | |
+------------------------------------------------------+-------------+-------------+
| Contingent consideration payable in cash or cash | | 500 |
| and shares (note 12) | | |
+------------------------------------------------------+-------------+-------------+
| | | | | 2,132 |
+------------------------------+----------+------------+-------------+-------------+
| Summary of net cash outflow | | | | |
| from acquisitions: | | | | |
+------------------------------+----------+------------+-------------+-------------+
| Cash paid | | | | 1,632 |
+------------------------------+----------+------------+-------------+-------------+
| Cash acquired | | | | - |
+------------------------------+----------+------------+-------------+-------------+
| Net cash outflow from | | | | 1,632 |
| acquisitions in the year | | | | |
+------------------------------+----------+------------+-------------+-------------+
The acquired business contributed revenues of GBP402,000 and contributed net
profit, before amortisation and share based charges, of GBP75,000 to the Group
for the period from 11 December 2009 to 31 March 2010. Had the acquisition
occurred on 1 April 2009, the contribution to group revenue would have been
GBP1.0 million. This has been based on the management accounts and information
of 20:20 London operating as an unincorporated business.
7. Property, plant and equipment
+--------------------+-----------+--------------+----------+-----------+---------+
| | Freehold | Leasehold | Motor | | Total |
| | land and | improvements | vehicles | Office | |
| | buildings | | | equipment | |
+--------------------+-----------+--------------+----------+-----------+---------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+--------------------+-----------+--------------+----------+-----------+---------+
| Cost | | | | | |
+--------------------+-----------+--------------+----------+-----------+---------+
| At 1 April 2008 | 1,150 | 270 | 6 | 1,482 | 2,908 |
+--------------------+-----------+--------------+----------+-----------+---------+
| Acquisitions of | - | 39 | - | 194 | 233 |
| subsidiaries | | | | | |
+--------------------+-----------+--------------+----------+-----------+---------+
| Additions | - | - | - | 283 | 283 |
+--------------------+-----------+--------------+----------+-----------+---------+
| Disposals | - | (7) | - | (3) | (10) |
+--------------------+-----------+--------------+----------+-----------+---------+
| | | | | | |
+--------------------+-----------+--------------+----------+-----------+---------+
| At 31 March 2009 | 1,150 | 302 | 6 | 1,956 | 3,414 |
+--------------------+-----------+--------------+----------+-----------+---------+
| Additions | - | 6 | 12 | 283 | 301 |
+--------------------+-----------+--------------+----------+-----------+---------+
| Disposals | - | (80) | (6) | (291) | (377) |
+--------------------+-----------+--------------+----------+-----------+---------+
| At 31 March 2010 | 1,150 | 228 | 12 | 1,948 | 3,338 |
+--------------------+-----------+--------------+----------+-----------+---------+
| | | | | | |
+--------------------+-----------+--------------+----------+-----------+---------+
| Depreciation | | | | | |
+--------------------+-----------+--------------+----------+-----------+---------+
| At 1 April 2008 | 22 | 61 | 5 | 605 | 693 |
+--------------------+-----------+--------------+----------+-----------+---------+
| Depreciation | 29 | 62 | 1 | 576 | 668 |
| charge for the | | | | | |
| year | | | | | |
+--------------------+-----------+--------------+----------+-----------+---------+
| Depreciation on | - | (1) | - | (3) | (4) |
| disposals | | | | | |
+--------------------+-----------+--------------+----------+-----------+---------+
| At 31 March 2009 | 51 | 122 | 6 | 1,178 | 1,357 |
+--------------------+-----------+--------------+----------+-----------+---------+
| Depreciation | 29 | 54 | - | 491 | 574 |
| charge for the | | | | | |
| year | | | | | |
+--------------------+-----------+--------------+----------+-----------+---------+
| Depreciation on | - | (53) | (6) | (286) | (345) |
| disposals | | | | | |
+--------------------+-----------+--------------+----------+-----------+---------+
| At 31 March 2010 | 80 | 123 | - | 1,383 | 1,586 |
+--------------------+-----------+--------------+----------+-----------+---------+
| Net book value | | | | | |
+--------------------+-----------+--------------+----------+-----------+---------+
| At 31 March 2010 | 1,070 | 105 | 12 | 565 | 1,752 |
+--------------------+-----------+--------------+----------+-----------+---------+
| At 31 March 2009 | 1,099 | 180 | - | 778 | 2,057 |
+--------------------+-----------+--------------+----------+-----------+---------+
| At 1 April 2008 | 1,128 | 209 | 1 | 877 | 2,215 |
+--------------------+-----------+--------------+----------+-----------+---------+
The assets are covered by a fixed charge in favour of the Group's lenders.
8. Goodwill
+-------------------------------------+---------+---------+----------+
| | | | Goodwill |
+-------------------------------------+---------+---------+----------+
| | | | GBP'000 |
+-------------------------------------+---------+---------+----------+
| Cost and net book value | | | |
+-------------------------------------+---------+---------+----------+
| At 1 April 2008 | | | 39,449 |
+-------------------------------------+---------+---------+----------+
| Acquisitions through business | | | 7,602 |
| combinations | | | |
+-------------------------------------+---------+---------+----------+
| At 31 March 2009 | | | 47,051 |
+-------------------------------------+---------+---------+----------+
| Reduction in deferred contingent | | | (294) |
| consideration | | | |
+-------------------------------------+---------+---------+----------+
| Impairment | | | (3,187) |
+-------------------------------------+---------+---------+----------+
| Acquisitions through business | | | 2,083 |
| combinations | | | |
+-------------------------------------+---------+---------+----------+
| At 31 March 2010 | | | 45,653 |
+-------------------------------------+---------+---------+----------+
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
+-------------------------------------+---------+---------+----------+
9. Other intangible assets
+-------------------------------------------------+---------+---------+
| | Customer |
| | relationships, |
| | trademarks and |
| | development |
| | costs |
+-------------------------------------------------+-------------------+
| | | GBP'000 |
+-------------------------------------------------+---------+---------+
| Cost | | |
+-------------------------------------------------+---------+---------+
| At 1 April 2008 | | 15,052 |
+-------------------------------------------------+---------+---------+
| Additions during the year | | 105 |
+-------------------------------------------------+---------+---------+
| Acquisitions through business combinations | | 4,550 |
+-------------------------------------------------+---------+---------+
| At 31 March 2009 | | 19,707 |
+-------------------------------------------------+---------+---------+
| Additions during the year | | 694 |
+-------------------------------------------------+---------+---------+
| At 31 March 2010 | | 20,401 |
+-------------------------------------------------+---------+---------+
| | | |
+-------------------------------------------------+---------+---------+
| Amortisation | | |
+-------------------------------------------------+---------+---------+
| At 1 April 2008 | | 1,728 |
+-------------------------------------------------+---------+---------+
| Amortisation charge for the year | | 1,863 |
+-------------------------------------------------+---------+---------+
| At 31 March 2009 | | 3,591 |
+-------------------------------------------------+---------+---------+
| Impairment | | 600 |
+-------------------------------------------------+---------+---------+
| Amortisation charge for the year | | 1,938 |
+-------------------------------------------------+---------+---------+
| At 31 March 2010 | | 6,129 |
+-------------------------------------------------+---------+---------+
| | | |
+-------------------------------------------------+---------+---------+
| Net book amount | | |
+-------------------------------------------------+---------+---------+
| At 31 March 2010 | | 14,272 |
+-------------------------------------------------+---------+---------+
| At 1 April 2009 | | 16,116 |
+-------------------------------------------------+---------+---------+
| At 1 April 2008 | | 13,324 |
+-------------------------------------------------+---------+---------+
The cost of customer relationships was determined as at the date of acquisition
of the subsidiaries by professional valuers. The valuations used the discounted
cash flow method, assuming rates of customer attrition at 10% and sales growth
at 2% each year. The discount rate applied to the future cash flows were
specific to each subsidiary and were all in the range 14.6% to 15.5%.
Goodwill and other intangible assets have been tested for impairment. On the
basis of this review it has been decided to impair the carrying value of these
intangible assets.
10. Bank and overdraft, loans and borrowings
+--------------------------------+---------+----------+----------+----------+----------+---------+----------+
| | 2010 | 2009 | 2008 |
+------------------------------------------+---------------------+---------------------+--------------------+
| | GBP'000 | GBP'000 | GBP'000 |
+------------------------------------------+---------------------+---------------------+--------------------+
| | | | |
+------------------------------------------+---------------------+---------------------+--------------------+
| Summary | | | |
+------------------------------------------+---------------------+---------------------+--------------------+
| Bank overdraft | 6,443 | 8,806 | 6,901 |
+------------------------------------------+---------------------+---------------------+--------------------+
| Borrowings | 8,213 | 9,303 | 4,919 |
+------------------------------------------+---------------------+---------------------+--------------------+
| | 14,656 | 18,109 | 11,820 |
+------------------------------------------+---------------------+---------------------+--------------------+
| Borrowings are repayable as follows: | | | |
+------------------------------------------+---------------------+---------------------+--------------------+
| Within one year | | | |
+------------------------------------------+---------------------+---------------------+--------------------+
| Bank overdraft | 6,443 | 8,806 | 6,901 |
+------------------------------------------+---------------------+---------------------+--------------------+
| Borrowings | 1,865 | 1,984 | 1,453 |
+------------------------------------------+---------------------+---------------------+--------------------+
| Total payments due within one year | 8,308 | 10,790 | 8,354 |
+------------------------------------------+---------------------+---------------------+--------------------+
| Less future interest | (174) | (293) | (331) |
+------------------------------------------+---------------------+---------------------+--------------------+
| Total due within one year | 8,134 | 10,497 | 8,023 |
+------------------------------------------+---------------------+---------------------+--------------------+
| | | | |
+------------------------------------------+---------------------+---------------------+--------------------+
| In more than one year but not more than | 6,596 | 1,928 | 1,373 |
| two years | | | |
+------------------------------------------+---------------------+---------------------+--------------------+
| In more than two years but not more | - | 6,021 | 1,299 |
| than three years | | | |
+------------------------------------------+---------------------+---------------------+--------------------+
| In more than three years but not more | - | - | 952 |
| than four years | | | |
+------------------------------------------+---------------------+---------------------+--------------------+
| In more than four years but not more | - | - | 112 |
| than five years | | | |
+------------------------------------------+---------------------+---------------------+--------------------+
| Over five years | - | - | 645 |
+------------------------------------------+---------------------+---------------------+--------------------+
| Total payments due in more than one | 6,596 | 7,949 | 4,381 |
| year | | | |
+------------------------------------------+---------------------+---------------------+--------------------+
| Less future interest | (74) | (337) | (584) |
+------------------------------------------+---------------------+---------------------+--------------------+
| Total due in more than one year | 6,522 | 7,612 | 3,797 |
+------------------------------------------+---------------------+---------------------+--------------------+
| | GBP'000 | % | % | % | |
| | | | | | |
| | | | | | |
| Average interest rates at the | | | | | |
| balance sheet date were: | | | | | |
+--------------------------------+---------+----------+---------------------+--------------------+----------+
| | | | | | |
+--------------------------------+---------+----------+---------------------+--------------------+----------+
| Overdraft | 6,443 | 2.75 | 5.00 | 7.50 | |
+--------------------------------+---------+----------+---------------------+--------------------+----------+
| Term loan | 1,813 | 1.96 | 2.96 | 7.30 | |
+--------------------------------+---------+----------+---------------------+--------------------+----------+
| Term loan | 1,000 | 2.46 | 3.46 | - | |
+--------------------------------+---------+----------+---------------------+--------------------+----------+
| Revolver loan | 5,400 | 2.33 | 3.46 | - | |
+--------------------------------+---------+----------+---------------------+--------------------+----------+
| Mortgage | - | - | - | 7.00 | |
+--------------------------------+---------+----------+---------------------+--------------------+----------+
| | | | | | | | |
+--------------------------------+---------+----------+----------+----------+----------+---------+----------+
As the loans are at variable market rates their carrying amount is
equivalent to their fair value.
In 2007 the Group purchased an interest rate swap of 6.19% for the period 2007
to 2012 for GBP4,000,000 of its borrowings.
The borrowing facilities available to the Group at 31 March 2010 was
GBP11.24 million (2009: GBP13.02m) and, taking into account cash balances within
the Group companies, there was GBP3.99 million (2009: GBP6.92m) 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
+--------------------------+---------+---------+----------+---------+
| | 1 April | Cash | Non-cash | 31 |
| | 2009 | Flow | items | March |
| | | | | 2010 |
+--------------------------+---------+---------+----------+---------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+--------------------------+---------+---------+----------+---------+
| | | | | |
+--------------------------+---------+---------+----------+---------+
| Cash and cash | 12,227 | (4,828) | - | 7,399 |
| equivalents | | | | |
+--------------------------+---------+---------+----------+---------+
| Overdraft | (8,806) | 2,363 | - | (6,443) |
+--------------------------+---------+---------+----------+---------+
| | 3,421 | (2,465) | - | 956 |
+--------------------------+---------+---------+----------+---------+
| Borrowings | (9,303) | 1,178 | (88) | (8,213) |
+--------------------------+---------+---------+----------+---------+
| Net Debt | (5,882) | (1,287) | (88) | (7,257) |
+--------------------------+---------+---------+----------+---------+
| | | | | |
+--------------------------+---------+---------+----------+---------+
The non-cash movement relates to the pre-paid loan fees on the Group's term
loans.
11. Share capital
On 4 September 2009, by way of a special resolution, the Company reorganised and
enlarged its authorised share capital of GBP50,049,999 consisting of 100,000,000
ordinary shares of 50 pence each and 49,999 redeemable preference shares of
GBP1.00 each into authorised share capital of GBP55,000,000 consisting of
200,000,000 ordinary shares of 5 pence each and 100,000,000 deferred shares of
45 pence each and cancelling 49,999 redeemable preference shares of GBP1.00
each.
Authorised:
+-----------------------+----------+------------+----------+----------+
| | | | | |
+-----------------------+----------+------------+----------+----------+
| | 50p | GBP1.00 | 45p | 5p |
| | ordinary | redeemable | deferred | ordinary |
| | shares | preference | shares | shares |
| | | shares | | |
+-----------------------+----------+------------+----------+----------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+-----------------------+----------+------------+----------+----------+
| Authorised share | 50,000 | 50 | - | - |
| capital at 31 March | | | | |
| 2009 | | | | |
+-----------------------+----------+------------+----------+----------+
| Cancelled | - | (50) | - | - |
+-----------------------+----------+------------+----------+----------+
| 5p Ordinary | (5,000) | - | - | 5,000 |
+-----------------------+----------+------------+----------+----------+
| 45p Deferred | (45,000) | - | 45,000 | - |
+-----------------------+----------+------------+----------+----------+
| Increase in | - | - | - | 5,000 |
| authorised share | | | | |
| capital | | | | |
+-----------------------+----------+------------+----------+----------+
| At 31 March 2010 | - | - | 45,000 | 10,000 |
+-----------------------+----------+------------+----------+----------+
Allotted, issued and fully paid
+-----------------------+--------------+------------+------------+---------+-+
| | | | | | |
+-----------------------+--------------+------------+------------+---------+-+
| | 50p | 45p | 5p | |
| | ordinary | deferred | ordinary | |
| | shares | shares | shares | |
+-----------------------+--------------+------------+------------+-----------+
| | Number | Number | Number | GBP'000 | |
+-----------------------+--------------+------------+------------+---------+-+
| Issued share capital | 65,309,782 | - | - | 32,655 | |
| at 31 March 2008 | | | | | |
+-----------------------+--------------+------------+------------+---------+-+
| Issue of ordinary | 2,318,738 | - | - | 1,159 | |
| shares during the | | | | | |
| year | | | | | |
+-----------------------+--------------+------------+------------+---------+-+
| Shares repurchased | (250,000) | - | - | (125) | |
+-----------------------+--------------+------------+------------+---------+-+
| | | | | | |
+-----------------------+--------------+------------+------------+---------+-+
| Issued share capital | 67,378,520 | - | - | 33,689 | |
| at 31 March 2009 | | | | | |
+-----------------------+--------------+------------+------------+---------+-+
| | | | | | |
+-----------------------+--------------+------------+------------+---------+-+
| Conversion | (67,378,520) | 67,378,520 | 67,378,520 | - | |
+-----------------------+--------------+------------+------------+---------+-+
| Issue of ordinary | - | - | 6,742,985 | 337 | |
| shares during the | | | | | |
| year | | | | | |
+-----------------------+--------------+------------+------------+---------+-+
| At 31 March 2010 | - | 67,378,520 | 74,121,505 | 34,026 | |
+-----------------------+--------------+------------+------------+---------+-+
| | | | | | |
+-----------------------+--------------+------------+------------+---------+-+
The 5 pence ordinary shares have the same rights (including voting and dividend
rights and rights on a return of capital) as the previous 50 pence ordinary
shares. Holders of the 45 pence deferred shares do not have any right to receive
notice of any general meeting of the Company or any right to attend, speak or
vote at any such meeting. The deferred share holders are not entitled to receive
any dividend or other distribution and shall on a return of assets in a winding
up of the Company entitle the holders only to the repayment of the amounts paid
up on the shares after the amount paid to the holders of the new ordinary shares
exceeds GBP1,000,000 per new ordinary share. The deferred shares will also be
incapable of transfer and no share certificates will be issued in respect of
them.
The shares issued in the year were as a result of the exercise of share options
by employees and Directors.
12. Contingent liabilities
Some acquisitions by the Group involve an earn-out agreement whereby the
consideration payable includes a deferred element of cash or shares or both
which is contingent on the future financial performance of the acquired entity.
The maximum liability is GBP9,000,000 (2009: GBP9,100,000) and the
Directors have assessed the likely payments based on forecasts and have provided
GBP4,225,000 (2009: GBP4,425,000), leaving GBP4,775,000 (2009: GBP4,675,000) as
an unprovided liability.
The amounts provided for are payable as follows:
+--------------------------------------------+----------+----------+
| | 2010 | 2009 |
+--------------------------------------------+----------+----------+
| | GBP'000 | GBP'000 |
+--------------------------------------------+----------+----------+
| | | |
+--------------------------------------------+----------+----------+
| In one year or less | - | 600 |
+--------------------------------------------+----------+----------+
| In more than one year but less than five | 4,225 | 3,825 |
| years | | |
+--------------------------------------------+----------+----------+
| | 4,225 | 4,425 |
+--------------------------------------------+----------+----------+
The amounts provided have not been discounted.
13. Accounting estimates and judgements
Accounting estimates
Impairment of goodwill
The carrying amount of goodwill is GBP45,653,000 (2009: GBP47,051,000). The
Directors are confident that the carrying amount of goodwill is fairly stated,
and have carried out an impairment review.
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.
Share-based payment
The share based payment charge consists of two charges.
A charge for the fair value at the date of grant of the share based
remuneration calculated using the BlackScholes method, in previous years a
trinomial pricing model was adopted. In considering an appropriate charge the
Directors have used an internally generated calculation to derive an appropriate
charge. Based on these calculations a charge of GBP2,874,000 has been made. In
previous years the Directors commissioned an independent valuation from American
Appraisal UK Limited and adopted their findings, in the year ended 31 March 2009
a charge of GBP2,814,000 was made.
During the previous year the Group transferred the liability to settle the
Employer's NI from the share option holder to the Group. As a result the Group
has charged GBP51,000 (2009: GBP222,000) in the year as an additional Share
Based Payment charge. The future Employers NI liability has been discounted
over the three year period using a discount rate of 10%.
Fair values on acquisition
The Directors have assessed the fair value of assets and liabilities on the
acquisition of the subsidiary companies.
Deferred consideration
The Directors have provided an estimate of the amount payable in respect of
deferred contingent consideration. See note 12.
Accounting judgements
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.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR SSEFMFFSSELW
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