RNS Number:1917J
Local Radio Company PLC (The)
05 December 2007
5 December 2007
THE LOCAL RADIO COMPANY PLC
PRELIMINARY RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2007
Highlights
* Like for like revenue* in second half of the year up by 7% to #8.98million
(H2 06 # 8.41m)
* Full year adjusted operating profit of #153,000** (Yr to 30 Sept 06 loss
of #1.8 million)
* Audiences continue to grow across the Local Radio Company's 27 stations.
* First Radio Sales generated record commission revenues of over #2 million.
* Cost reduction programme reduced overheads by 5%
* Local radio station website offering proving successful with listeners and
advertisers.
* Cash injection of #2.8 million complete
* Significant opportunities for acquisitive growth
*From continuing operations
**Excluding depreciation, amortisation and impairment, provision for share based
payments and exceptional items but including share of Joint Venture and sale of
subsidiary undertakings. See reconciliation later in statement.
Richard Wheatly, Executive Chairman of The Local Radio Company Plc, said:
"This year has marked a significant change in performance across the Group as a
result of actions taken to underpin our strategy in a changing landscape for
radio in the UK. Audiences, sales commission and revenues are all up and costs
are down which has resulted in our first full year operating profit. This
excellent result gives us renewed confidence in the potential for the local
radio market.
"We are pleased that our revenue and bottom line performance for October and
November are ahead of last year and December is tracking ahead. Whilst the
outlook remains uncertain, we are confident and determined that the improvement
in our performance will continue.
"There are a number of opportunities in the UK local radio market for
consolidation and the Company's resilient performance in the recent challenging
market conditions has underlined our ability to integrate stations under the
Local Radio Company's umbrella, enabling them to benefit from operating
synergies. The Board is aware of a number of ongoing market developments and is
committed to its strategy to grow revenues through acquisitions which
demonstrate clear value."
Enquiries
Richard Wheatly/Alistair Mackenzie Tel: +44 (0) 1494 688205
The Local Radio Company Plc
www.thelocalradiocompany.com
John Craven/Simon Robinson Tel: +44 (0) 20 7426 9000
Landsbanki Securities (UK) Limited
Michael Oke/Andy Mills Aura Financial Tel: +44 (0) 20 7321 0000
www.aura-financial.com
OPERATIONAL AND FINANCIAL REVIEW
2007 2006
(Unaudited)
#'000 #'000
Group turnover (inc. share of joint venture) 19,128 20,147
Gross profit margin 75% 70%
Adjusted operating profit/(loss)** 153 (1,834)
Net increase/(decrease) in cash 2,889 (1,549)
**Excluding depreciation, amortisation and impairment, provision for share based
payments and exceptional items but including share of Joint Venture and sale of
subsidiary undertakings. See reconciliation later in statement.
This year has marked a significant positive change in performance across the
Group as a result of actions taken to underpin our strategy in a changing
landscape for radio in the UK:
* Revenues have increased during the second half on a like for like (from
continuing operations) basis by 7% and the business became cash positive for
the period May to September.
* Our cost reduction programme reduced overheads by 5%.
* Local station radio brands have been extended into a new local website
offering which is proving successful with listeners and advertisers.
* The First Radio Sales business has launched a web sales division.
* A successful cash injection of #2.8 million has positioned the group to
benefit from market opportunities.
* First Radio Sales generated record commission revenues of over #2 million.
* Audiences continue to grow across the Local Radio Company's stations.
Audiences, sales commission and revenues are all up and costs are down which has
resulted in an adjusted operating profit and renewed confidence in the outlook
for the Company.
Market improvement
The much noted market decline in advertising revenues that had continued during
the first half of the year have relented and revenues for the UK radio industry
were up by 3% for the second half. Throughout the period the Local Radio
Company has outperformed the rest of the radio sector and we believe that the
unique appeal of local radio brands, as opposed to our regional and national
brand peers, has enabled the Company to track a more robust course in tough
markets.
Revenue increase
Revenue at five of our radio stations exceeded #1 million and six others
achieved between #750,000 and #1 million. One of our larger stations, Sun FM,
achieved its best ever performance with #1.2 million in revenue and one of our
newer stations, Durham FM, achieved sales of #628,000 in its first full year. In
June 2007 we launched Northallerton FM, a small station which joins our North
East and Yorkshire clusters.
Audience growth
The strong run of audience growth continues across our stations and RAJAR
results for Quarter 3 2007 confirm that we now reach a total audience of 920,000
weekly listeners who listen for 7.5 million hours across our 27 stations. A
year ago the Company had 900,000 weekly listeners listening for 7 million hours.
Cost reduction
We have continued with the programme to reduce our cost base and develop the
business for the future. On 31 October 2006 the Company sold the entire share
capital of Merseyside's The Rocket Limited for #100,000, #40,000 of which was
deferred. We also discontinued our loss making Enterprises operation at the end
of the last financial year. Our total overheads, excluding provision for share
based payments, fell by #727,000 against the previous year, a reduction of 5%.
New Revenue Streams
Given the strong loyalty of local radio audiences we are benefiting from
technological developments and the many options now available to audiences to
listen to our medium. We have made solid progress during the period in
leveraging the Company's 920,000 listener base. We have made a significant
investment in our online strategy, extending our strong local brands and have
started to generate new, non-traditional, revenue streams.
In the second half new websites have been launched across the Group, encouraging
interactivity, with online streaming of our radio stations and providing
opportunities for our advertisers to market their products or services across
both platforms through the Company's Microsite Development Offering for
advertisers. This approach marries online and radio advertising and reflects
growing listenership via the websites across each of our 27 stations. Many of
the Company's advertisers are local enterprises without the scale to develop
their own online marketing platform.
During the period we completed a transaction which has created another exciting
new model for the business by linking two dynamic media platforms. At the end of
the financial year we entered into a commercial arrangement with Portsmouth
Football Club (PFC). The Company transferred the entire issued share capital of
The Quay, Isle of Wight Radio and Spirit FM to a new company, Quadrant Media
Limited, and PFC purchased a 26% stake for #1 million. PFC will have the right
to increase their shareholding to 50% during the period to 28 Sept 2008 on the
payment of a further cash sum of #950,000.
First Radio Sales
The Company has a 50% shareholding in First Radio Sales Limited which sells
airtime for 134 local radio stations across the UK to national media buying
agencies and their clients. This is an extremely successful business that has
grown since its formation and this year generated record commission revenues of
over #2 million. First Radio Sales has launched a new digital sales operation,
FRSD, which offers advertisers the opportunity to buy space on many of the
websites of the 134 radio stations in its portfolio.
Corporate developments
In November 2006 the Company raised #2.8 million net of expenses and welcomed
Hallwood Investments Limited on to the share register and Tony Gumbiner and Rhys
Davies onto the Board. I would like to thank Graham Parrott, who stood down
from Board in May, for his support and guidance.
As outlined in a recent EGM circular it is the Board's view that the current
market valuation of The Local Radio Company represents a significant discount to
the value at which other radio assets have been recently acquired. In October
2007 shareholders authorised the Board to purchase in the market up to 14.99% of
the issued Ordinary Shares of the Company. This will have the effect of
reducing the Company's equity base thereby increasing cash flow and asset value
on a per share basis. The High Court has subsequently authorised the company to
reduce its share premium account, creating distributable reserves that will be
used for the share purchase.
Future of Radio
On 22 November 2007, OFCOM published the document: The Future of Radio; the next
phase. This statement and consultation had three main themes- localness,
ownership rules and digital - and was broadly positive for The Local Radio
Company.
We are pleased that OFCOM's statement validates our view of the importance of
localness to commercial radio audiences and the acknowledgement by OFCOM that
local radio is the default medium for delivering key local information. We also
welcome OFCOM's approach on co-location. Most of our stations are below the
250,000 adult listener threshold proposed for co-location giving us the
opportunity to realise additional operational synergies in future. We also
welcome the proposed simplification of ownership rules. However, while
simplification will allow further consolidation, we do not to expect to see any
significant changes in the short term as primary legislation is required to
introduce the proposed reforms.
On the third theme of digital, a working group is being set up by OFCOM and the
Department of Culture, Media and Sport to assess the conditions needed for
digital platforms to become the predominant means of delivering radio in the UK.
While we have no sunk investments in digital radio, we intend to play a
central role in shaping this process in order to reduce the considerable
uncertainty about the timing, technologies and implementation of any future
digital switchover.
Market opportunities
There are a number of opportunities in the UK local radio market for
consolidation and the Company's resilient performance in the recent challenging
market conditions has underlined our ability to integrate stations under the
Local Radio Company's umbrella, enabling them to benefit from operating
synergies.
In particular, the economies of scale associated with the local radio sector can
radically improve efficiencies within many back office functions and we believe
that some independent stations would benefit from exploiting these advantages.
In addition, their local advertisers could benefit from our integrated marketing
approach. The Board is aware of a number of ongoing market developments and is
committed to its strategy to grow revenues through acquisitions which
demonstrate clear value.
Financial Review
Group turnover
Total Group turnover was #19.13 million for the year, a 5% decrease against
2006. However, discontinued operations contributed #1.46 million to turnover in
2006; and taking this into consideration Group turnover from continuing
operations actually increased by #0.44 million, an increase of 2.2%.
Gross profit
Gross profit for the year increased to #13.58 million, a 2% increase year on
year, and the gross profit margin increased to 75%.
Group operating profit/(loss)
The Group's reported operating loss for 2007 was #10.1 million, after goodwill
impairment of #8.5 million (2006: #18.5 million). We have continued to apply
strict criteria to our valuations, which are based on discounted future cash
flows on a station by station basis rather than being by reference to the market
values, which reflect more closely turnover multiples which relate to licence
holding. UK GAAP does not reflect the licence values in balance sheets. This is
an area which we will review for IFRS adoption purposes.
Our overall performance has improved significantly; The result before interest,
tax, depreciation, amortisation and impairment, provision for share based
payments and exceptional items but including share of Joint Venture and sales of
subsidiary undertakings for this financial year is a profit of #0.15 million
compared to a loss of #1.81 million in the last financial year.
2007 2006
(Unaudited) (As restated)
#000 #000
Group operating loss (10,101) (21,084)
Share of operating profit in JV 282 277
Profit/(loss) on sale of sub 795 (280)
_______ _______
Loss before interest (9,024) (21,087)
Depreciation 555 617
Amortisation and Impairment 8,524 18,512
Provision for share based payments 98 35
Exceptional items - 89
______ _______
Adjusted operating profit/(loss) 153 (1,834)
Cash
There was a net cash increase of #2.89 million during the year. This was as a
result of the cash raised through the share placing in November 2006 and also
the more recent arrangement with Portsmouth Football Club. The Group has
substantial cash balances and expects to generate cash during the new financial
year. As outlined in this report the Company will consider utilising some of
this cash to make market purchases of its own shares if the Board determines
that this will be in the best interests of shareholders.
Strategy and Future Outlook
In addition to pursuing an acquisition strategy in local radio the Board will
continue with its successful strategy of developing the business through organic
growth, improving our operational performance, optimising our portfolio of radio
station assets and developing new revenue streams through the online extension
of our local brands. We are pleased that our revenue and bottom line
performance for October and November are ahead of last year. Whilst the outlook
remains uncertain, we are confident and determined that the improvement in our
performance will continue.
Finally, the Board would like to extend a sincere thank you to all our talented,
creative and dedicated staff who have worked hard to enable the Company to make
excellent progress.
Unaudited consolidated profit and loss account for the year ended 30 September 2007
2007 2006
As
restated
(see
note 1)
Continuing Discontinued Total Continuing Discontinued Total
#000 #000 #000 #000 #000 #000
TURNOVER: Group and share of
joint ventures 19,108 20 19,128 18,686 1,461 20,147
Less: share of joint
ventures turnover (1,062) - (1,062) (1,044) - (1,044)
________ ________ ________ ________ ________ ________
GROUP TURNOVER 18,046 20 18,066 17,642 1,461 19,103
Cost of sales (4,480) (1) (4,481) (4,486) (1,274) (5,760)
________ ________ ________ ________ ________ ________
GROSS PROFIT 13,566 19 13,585 13,156 187 13,343
________________________________________________________________________________________________________
Administrative expenses
excluding amortisation and
exceptional items (15,150) (12) (15,162) (14,941) (885) (15,826)
Amortisation and exceptional
items (8,524) - (8,524) (17,964) (637) (18,601)
________________________________________________________________________________________________________
Administrative expenses (23,674) (12) (23,686) (32,905) (1,522) (34,427)
________ ________ ________ ________ ________ ________
GROUP OPERATING LOSS (10,108) 7 (10,101) (19,749) (1,335) (21,084)
Share of operating profit in
Joint Venture 282 277
Profit/(Loss) on sale of
subsidiary undertaking 795 (280)
________ ________
LOSS BEFORE INTEREST (9,024) (21,087)
Interest receivable - Group 62 20
- Joint Venture 18 11
Interest payable (9) (31)
________ ________
LOSS ON ORDINARY ACTIVITIES
BEFORE TAXATION (8,953) (21,087)
Tax on loss on ordinary
activities - -
________ ________
LOSS ON ORDINARY ACTIVITIES
AFTER TAXATION (8,953) (21,087)
Minority interests 39 37
________ ________
RETAINED LOSS FOR THE PERIOD (8,914) (21,050)
________ ________
Loss per share in pence
Basic and diluted (12.85)p (37.55)p
________ ________
Unaudited consolidated balance sheet as at 30 September 2007
At 30 September 2007 At 30 September 2006
As restated
(see note 1)
FIXED ASSETS #000 #000 #000 #000
Intangible assets 10,457 19,086
Tangible assets 1,713 1,817
Investment in joint venture
- share of gross assets 2,818 2,802
- share of gross liabilities (250) (134)
2,568 2,668
Other fixed asset investments 278 221
Total investments 2,846 2,889
________ ________
15,016 23,792
CURRENT ASSETS
Debtors 3,151 3,314
Cash at bank and in hand 2,479 -
________ ________
5,630 3,314
CREDITORS:
Amounts falling due within one year (3,779) (4,189)
________ ________
NET CURRENT ASSETS/(LIABILITIES) 1,851 (875)
________ ________
TOTAL ASSETS LESS CURRENT
LIABILITIES 16,867 22,917
CREDITORS:
Amounts falling due after more than one year - (30)
________ ________
NET ASSETS 16,867 22,887
________ ________
CAPITAL AND RESERVES
Called up share capital 2,880 2,248
Share premium account 47,676 45,501
Other reserves 450 352
Profit and loss account (34,152) (25,238)
________ ________
SHAREHOLDERS' FUNDS 16,854 22,863
Minority interests 13 24
________ ________
16,867 22,887
________ ________
Unaudited consolidated cash flow statement for the year ended 30 September 2007
Year ended Year ended
30 September 2007 30 September 2006
(As restated)
#000 #000 #000 #000
NET CASH (OUTFLOW)
FROM OPERATING ACTIVITIES (882) (1,193)
RETURNS ON INVESTMENTS AND SERVICING OF
FINANCE
Capital redistribution 250
Share of operating profit in joint venture 150
Interest and other investment income received 62 20
Interest paid (8) (30)
Interest element of finance lease rentals (1) (1)
________ ________
NET CASH INFLOW /(OUTFLOW) FROM RETURNS ON
INVESTMENTS AND SERVICING OF FINANCE 453 (11)
CAPITAL EXPENDITURE AND FINANCIAL
INVESTMENT
Purchase of tangible fixed assets (474) (597)
Purchase of unlisted investments (57) (123)
Sale of tangible fixed assets - 23
________ ________
NET CASH OUTFLOW FROM CAPITAL EXPENDITURE (531) (697)
ACQUISITIONS AND DISPOSALS
Purchase of subsidiary undertakings - (5)
Disposal of subsidiary undertaking 60 400
Sale of shares in subsidiary undertaking 1,000 -
________ ________
NET CASH INFLOW FROM ACQUISITIONS AND
DISPOSALS 1,060 395
________ ________
CASH INFLOW/(OUTFLOW) BEFORE FINANCING
FINANCING 100 (1,506)
Issue of ordinary share capital 3,002 -
Issue Costs (195) -
Repayment of loans (18) (43)
________ ________
NET CASH INFLOW/(OUTFLOW) FROM FINANCING 2,789 (43)
________ ________
INCREASE/(DECREASE) IN CASH 2,889 (1,549)
________ ________
1. Basis of preparation
The preliminary announcement covers the year to 30 September 2007. The financial
information contained herein does not constitute full accounts within the
meaning of section 240 Companies Act 1985. Statutory accounts for the year ended
30 September 2006 have been delivered to the Registrar of Companies, and those
for the year ended 30 September 2007 will be so delivered following the
Company's annual general meeting. The auditors have reported on the accounts for
the year ended 309 September 2006: their report was unqualified and did not
contain a statement under the Companies Act 1985 s237(2) or (3). Copies of the
financial statements for the year ended 30 September 2007 will be sent to all
shareholders and delivered to the Registrar of Companies in due course.
The accounting policies adopted in this preliminary announcement are consistent
with those adopted in the Company's financial statements. The prior year figures
have been restated to reflect the adoption of FRS 20 (Share based payment)
leading to prior period charges and charges in the current year as follows:
2007 2006
(Unaudited)
#000 #000
Charge for the period 98 35
Prior period adjustment 30
2. Loss on ordinary activities before taxation
The adjusted profit/loss before interest, tax, depreciation, amortisation and
impairment, provision for share based payments and exceptional items for the
year was #153,000 (2006 - loss #1,834,000). This includes a profit on sale of
subsidiary of #795,000.
The loss on ordinary activities before taxation was #8,953,000 (2006 -
#21,087,000).
The loss after taxation and minority interests was #8,914,000 (2006 -
#21,050,000).
The directors do not recommend the payment of a dividend (2006 - nil).
3. Tax on loss on ordinary activities
There is no tax payable due to losses during the year,
4. Loss per share
2007 2006
(Unaudited) (As restated)
Total Total
Loss for the year (#000) (8,914) (21,050)
Weighted average number of shares (Basic) 69,361,040 56,052,142
Basic loss per share (12.85)p (37.55)p
Basic and diluted loss per share are the same, as the effect of all potential
ordinary shares is not dilutive.
5. Unaudited reconciliation of movements in shareholders' funds
Group Group Company Company
2007 2006 2007 2006
(As restated) (As restated)
#000 #000 #000 #000
Loss for the period (8,914) (21,050) (8,925) (24,161)
Reserve arising on provision for share based
payments 98 35 98 35
Issues of ordinary shares 632 16 632 16
Reserve arising on issue of ordinary shares 2,175 154 2,175 154
Deferred consideration to be settled by the issue
of ordinary shares - (225) - (225)
_______ _______ _______ _______
Net (reduction)/increase in shareholders' funds (6,009) (21,070) (6,020) (24,181)
Opening shareholders' funds 22,863 43,933 22,887 47,068
_______ _______ _______ _______
Closing shareholders' funds 16,854 22,863 16,867 22,887
_______ _______ _______ _______
6. Unaudited analysis of net (debt)/ funds
At At
1 October 2006 Other 30 September
(As restated) Cash flow movements 2007
#000 #000 #000 #000
Cash at bank and in hand/
bank overdrafts (410) 2,889 - 2,479
Debt due after one year (9) - 9 -
Debt due within one year (19) 8 - (11)
Finance leases (2) 1 - (1)
_______ _______ _______ _______
(440) 2,898 9 2,467
_______ _______ _______ _______
7. Post balance sheet events
On 2 October 2007 the Company held an EGM at which three resolutions were
considered and approved. These were:
- to approve the Rule 9 waiver granted by the Panel on Takeovers and Mergers
- to authorise the Company to make market purchases of its own shares and
- to approve the cancellation of the share premium account.
A copy of the circular outlining the details of the EGM is available from the
Company Secretary at the registered office or on line at http://
www.thelocalradiocompany.com/
The High Court subsequently approved the cancellation of the share premium
account on 24th October 2007. The Board will now consider the acquisition of
its own shares as outlined in the shareholder circular up to the maximum
aggregate number of Ordinary Shares authorised to be purchased of 10,793,038
(representing approximately 14.99% of the Company's issued share capital).
This information is provided by RNS
The company news service from the London Stock Exchange
END
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