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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Essentially Grp | LSE:ESN | London | Ordinary Share | GB0032118878 | ORD 0.1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 9.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
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TIDMESN
ESSENTIALLY GROUP LIMITED
("Essentially" or "the Company")
29 June 2009
Final results for the twelve months ended 31 December 2008
Re-negotiation of Deferred Consideration Liability
Sale of Accelerate SA
Essentially Group is pleased to announce its final results for the
year ended 31 December 2008. The Company is also pleased to announce
the renegotiation of deferred consideration liability and sale of
Accelerate South Africa.
Financial Highlights
* Earnings before interest* up 20 % to GBP2.64m (GBP2.20m in 2007) and
up 22% on a proforma** basis;
* Profit after tax* down 8% to GBP1.45m (GBP1.58m in 2007) and static
on a proforma** basis;
* Earnings per share* down 50% to 0.87 pence (1.74 pence 2007);
* GBP6.0m of new equity raised in May 2008;
* Cash on the balance sheet GBP3.56m and a net debt position of
GBP4.58m.
*excluding amortisation, exceptional items, loss on disposal and
notional interest on deferred consideration
** proforma basis includes Sportseen as if it had been within the
Group for the 12 months to 31 December 2008.
Operational Highlights
* Commercial programmes for British & Irish Lions tour 2009, the
Ashes and Rugby World Cup ("RWC") 7's successfully sold out;
* Key contract wins including exclusive agency to the British
Olympic Association, European Rugby Cup ("ERC") and Heineken Cup,
New Zealand Rugby Union ("NZRU") and All Blacks as rights holders
increasingly contract external expertise;
* Second Indian Premier League ("IPL") auction, with Essentially
Group maintaining its representation of over 50% of all foreign
players in the IPL;
* Key hires in cricket (UK) and rugby (South Africa) and continued
organic growth have resulted in the athlete management roster
growing by over 10% in the period;
* Sportseen move into London office of Essentially Group in the
second half of 2008, bringing all UK businesses into one office
enhancing integration;
* Review of costs completed with reduction programme in place,
benefits expected in H2 2009 and 2010;
* A strong second half contribution from Sportseen reflects
increased strength of the Group's media sales presence in rugby
and cricket;
* Essentially Group acquire in-stadia rights for England's cricket
tour of the West Indies in the first quarter of 2009.
Post Balance Sheet Events
* Renegotiation and collapse of the deferred consideration, fixing
total deferred consideration at GBP4.8m (GBP3.1m cash and GBP1.7m
shares) with the shares being issued at 6p - significant
reduction from a maximum liability of GBP10.7m and directors
estimate of GBP6.3m (before IFRS adjustments) reflected in the
financial statements;
* Sale of Accelerate South Africa back to the management team;
* Net debt position as of 31 May 2009 stood at GBP4.9 million
(excluding client accounts).
Commenting on the results, John Byfield, Chairman of Essentially,
said:
"This has been a significant year for Essentially with the
acquisition of Sportseen providing a balance to our existing sports
marketing activity in cricket. The establishment of the UK group
within a single location has brought significant benefits which are
coming through in 2009. While economic changes in the last quarter of
2008 impacted upon our results, we have a strong working capital base
and look forward to 2009 with confidence."
Enquiries:
Bart Campbell, Chief Executive, Essentially Group Limited 020 7820
7000
Tim Berg, Chief Financial Officer, Essentially Group Limited 020 7820
7000
Ivonne Cantu/Beth McKiernan, Cenkos Securities Limited 020 7397 8900
Chairman's Statement
I am pleased to report the results for the year ending 31 December
2008 and also to comment on the positive start that the Group has
made to 2009 across all divisions.
The last quarter of 2008 saw the economy face some turbulent times
and this inevitably had an impact on the Group. The period from
October to December saw a significant gap appear between the value
expectations of rights holders and the expectations of brands which
they were looking to attract. In particular, the financial services
sector, seen by many as a key player within sports marketing, was
under significant pressure. This led to key sales contracts not being
concluded in the fourth quarter of 2008 as forecast as decisions on
spending were delayed. We announced in December the impact this was
likely to have on our 2008 results and we took a more cautious view
in respect of our forecasts for 2009.
Acquisitions
In April 2008 we concluded the acquisition of Sportseen Limited, a
leading media rights sales business focussing on perimeter board and
related rights, and we transferred that whole business into our
central London operation prior to Christmas. This has provided us
with an important balance to our existing activities in this area
such that we now have excellent representation in cricket (through
the exclusive representation of all test match grounds for all
international cricket in the UK), rugby (Twickenham, Murrayfield and
Millennium Stadium for all internationals), the premier league and
international football. This not only enhanced our rights bank, but
also our skills and database across all rights sales - the impact of
which is now flowing through our revenues.
In addition we have built our athlete management teams through the
introduction of Arundel Promotions Limited (founded and run by Alec
Stewart and Alan Smith), a high profile business within the English
cricket establishment, and two new sports lawyers/agents in South
Africa who bring with them over 40 talented South African rugby
players.
Results
The underlying results for the year from our continuing operations
can be summarised as follows:
Unaudited Audited
12 months 12 months
Dec 2008 Dec 2007
GBP000's GBP000's
Revenues 16,245 9,209
Contribution before
central costs 3,304 2,869
Central costs (661) (665)
Earnings before interest,
tax and amortisation
of intangibles 2,643 2,204
Interest (488) (153)
Profit before tax and
amortisation of intangibles 2,155 2,051
Tax (705) (475)
Profit after tax and before
amortisation, exceptional items,
notional interest and discontinued
operations 1,450 1,576
Underlying earnings per share 0.87 1.74
Overall we have seen growth in revenue and in contribution,
substantially through the acquisition of Sportseen Limited at the end
of April. This has also changed the nature of our sales /
contribution relationship since Sportseen act as principal while
other parts of our Sports Marketing business operate on a commission
basis.
The fall in earnings per share is from a combination of a full year's
borrowing costs, together with increased borrowing to part finance
the acquisition of Sportseen whose results are included from 1 May
2008, the issue of shares in May 2008, and a shortfall in the last
quarter of last year as a result of a number of anticipated revenues,
many in the final stages of negotiation, being deferred to 2009.
To arrive at our reported results there are a number of non-recurring
and significant non-cash adjustments made as follows:
Unaudited Audited
12 months 12 months
Dec 2008 Dec 2007
GBP000's GBP000's
Profit after tax and before
amortisation
and notional interest and
discontinued
operations 1,450 1,576
Exceptional items (157) -
Amortisation of intangible assets (1,536) (763)
Notional interest for deferred
consideration
under IFRS (697) (964)
Fair value of derivative
instrument, net of tax impact (150)
Loss on disposal of operation - (2)
Loss on discontinued operation - (305)
Deferred tax on amortisation of
intangible
assets 466 229
(Loss) after tax (624) (229)
Basic EPS (0.37) (0.25)
Weighted average number of shares 166,074,158 90,329,844
During 2008 we incurred a number of non-recurring costs, including
the professional fees involved in the implementation of International
Accounting Standards, loss on the debtor relating to the Dubai
property investment referred to in the 2008 financial statements, and
costs relating to aborted transactions. These have been treated as
exceptional items.
The remaining adjustments in 2008 are all non-cash items and relate
to the following:
* On acquisitions a proportion of the purchase price is attributed
to customer contracts and other identifiable intangible assets
which are then amortised over their average life;
* The notional (non-cash) interest arises from the requirement to
recognise the time value of money on the deferred consideration
for businesses acquired. Following the renegotiation of the earn
outs this is expected to reduce to approximately GBP360,000 for
2009 and GBP40,000 in 2010;
* The company locked its cost of capital for the period to November
2011 at 6.18% by using a derivative instrument. The loss arising
when marking it to market at 31 December 2008 is required to be
taken through the profit and loss account at 31 December 2008.
The contract was entered into in order to fix our cost of
borrowing for the medium term in the interests of financial
stability and the directors do not anticipate any further
material loss to arise from this;
* The amortisation of the intangible assets referred to above has a
deferred taxation impact, equivalent to the charge at the
effective rate of tax.
Further information on these accounting adjustments is contained in
the section on accounting polices and in the annual financial
statements being published shortly.
Progress
The early signs for 2009 are positive. We have been able to announce
exclusive commercial contract wins with the European Rugby Cup and
Heineken Cup, the New Zealand Rugby Union and All Blacks as well as
the British Olympic Association together with a number of sponsorship
deals including Magners continued support for the Celtic League,
Investec as headline sponsors for the Tri-Nations series in New
Zealand, and Pilsner Urquell as the official beer of the Open Golf
Championship. This is a strong sign that rights owners and brands are
realigned and commercial spending in sport is continuing.
Sportseen continues to expand its activities, having just concluded a
successful sales campaign for the perimeter in-stadia advertising for
the recent cricket tour of the West Indies by England supplementing
their core activities in premiership football and 6 Nations rugby at
Twickenham, Millennium Stadium and Murrayfield where media values
have been maintained.
Our offerings in athlete management both in cricket and rugby
continue to grow. We had a highly successful IPL auction in early
2009 placing over 50% of new foreign players into the competition.
Our team in South Africa have added organically 25 new clients under
exclusive representation since joining Essentially in November 2008.
All of these achievements leave us well placed to continue to build
the business.
Post Balance Sheet Events
Re-negotiation of Deferred Consideration Liability
We also announce today that the Group has re-negotiated its deferred
consideration liabilities with the former shareholders of our
acquired businesses, 90% of whom are now senior operational managers
within the Group. The settlement of the earn-outs will be for GBP4.8m,
of which GBP3.1m is in cash (50% payable now and the balance payable
in March 2010) and GBP1.7m in equity at 6p per share. This reduces the
liability by GBP1.6m making the collapse strongly earnings enhancing
for all shareholders.
This re-negotiation is significant for the Group for a number of
reasons:
* Eliminating the final hurdles to full integration across the
Group;
* Improvement of our working capital position through reduction in
the forecast earn out cash payments due in 2009 and 2010;
* Full agreement of all key members of senior management, including
their buy-in to the Group's strategic plans over the medium term;
* A significantly strengthened and more transparent balance sheet,
reducing long term creditors by a maximum of GBP5.1m to GBP1.5m.
Application will be made for the 28,583,334 Ordinary shares of 0.1p
each to be admitted to trading on AIM which is expected to commence
on 2 July 2009.
Bart Campbell, Matt Vandrau, and Tim Berg will all receive shares in
the Company as part of the re-negotiation of the earn outs. The
independent directors of Essentially Group Limited, being those
directors who will not receive shares as part of the re-negotiation
of the deferred consideration liability consider, having consulted
with Cenkos Securities plc, the Company's nominated adviser, that the
terms of the transaction are fair and reasonable insofar as the
shareholders are concerned.
Sale of Accelerate South Africa
In addition the Group announces that it has completed the sale of
Accelerate South Africa ("ASA") to its management team. ASA was
acquired as part of the acquisition of Accelerate Sport and Music
Limited in September 2006 and deals exclusively with sports marketing
in South Africa. The UK and NZ businesses of Accelerate have been
retained. In the year ended 31 December 2008 ASA made Earnings before
interest and tax of GBP207,000, (2007: GBP170,000) and had net assets of
GBP220,000 (2007: GBP120,000).
Essentially has sold back its shares in ASA to the management team at
par and the management team have agreed to waive all earn out
consideration, including GBP1m (50% cash, 50% shares) due in 2009 in
respect of the 2008 results. The saving of the deferred consideration
will provide GBP500,000 of additional working capital to the Group for
organic growth. The Directors consider, having consulted with Cenkos
Securities plc, its nominated adviser, that the terms of the
transaction are fair and reasonable insofar as its shareholders are
concerned.
Outlook
I expect the Group to deliver on market expectations for 2009; a
significant part of our anticipated trading has already been achieved
(Ashes, 6 Nations, British & Irish Lions, RWC 7's and player
contracts). In addition we represent must-have properties in their
respective fields - be they rights for blue chip events/properties,
players or brands - and we remain financially strong. The group's
strategy of securing long-term contracted revenues within its key
markets continues to underpin our sustainability.
The Board and I believe the Group is well positioned to deliver value
to its shareholders and I would like to express my thanks to all of
our staff, not only for their efforts to date but also for their
clear commitment to the group going forward.
John Byfield
Chairman
June 2009
Chief Executive's Review
Operational Highlights
* Acquisition of Sportseen strengthening our media sales in rugby
and cricket, as well as football;
* Building our cricket activities with the acquisition of Arundel;
* Broadening our rugby activity with new agents in South Africa
with significant player representation;
* Gaining key new long term contracts including Heineken Cup, All
Blacks, and British Olympic Association;
* Completion of integration of UK businesses into one location.
Overview
The year has seen the Group build on its ownership of quality rights
and our ability to monetise those for the benefit of our clients and
our shareholders. As John has discussed, the economic situation has
caused a realignment of the market expectation on the value of those
rights in the short-term however I am pleased to say that there
remains a healthy demand across all of our divisions. Revenue
expectations were reduced last year but we remain confident as to the
value of the rights we hold in the medium and long term.
We continue to build Essentially Group into one of the leading
independent sports marketing and athlete management businesses within
our chosen areas. This we achieve through:
* Acquisition of quality commercial rights both within and outside
sport;
* Appropriate incentivisation of our core teams;
* The delivery of quality service to all of our clients and rights
holders across the entire range of our activities;
* Strengthening of our team adding key hires as opportunities
arise.
Operating Review
We have assembled a strategic portfolio of companies, with distinct
areas of market leadership, strong areas of synergy, a good degree of
visibility of earnings and we have completed the integration of them
into three operating divisions under the Essentially brand: Sports
Marketing, Athlete Management and Professional Services.
Sports Marketing
The Sports Marketing division (comprising rights sales, consulting
and events) contributed 44.7% of contribution before central costs in
2008 (GBP1.48 million) and 53.6% assuming a full year contribution from
Sportseen. The division primarily operates out of the United Kingdom
however it has increased its activities in New Zealand, India, and
Japan, and is also providing services into the Middle East and
Europe.
As reported last year the acquisition of Sportseen has added
significant contracts in rugby to the existing portfolio of rights
within cricket such that within these two sports we are established
market leaders with exclusive contracts to all international venues
in the UK.
The impact of economic events at the end of last year had a
significant impact on three specific sales properties as brands
became more cautious with their spending. I am happy to report that
revenues within the cricket and rugby in-stadia advertising have
maintained their value and that the rapid realignment of rights
holders values and brand expectations has led to a significant amount
of sponsorship sales activity in the first quarter of 2009. This
includes our appointment as commercial agents to the Heineken Cup and
to the All Blacks, our successful negotiation for the extension of
Magners' involvement in the Celtic League, Investec as title sponsor
of the Tri-Nations in New Zealand and the closure of the final key
partnership deal with the British & Irish Lions for the 2009 tour.
The Motorsport division has now been integrated into the Sports
Marketing division.
Athlete Management
This division operates in the United Kingdom, New Zealand, Japan,
Australia, India and South Africa and is the leading rugby union and
cricket management agency in the world. It represented 44.4% of
contribution to central overheads post full year of Sportseen.
Rugby athlete management continues to grow with the addition of a
new management team in South Africa in November 2008 which, together
with the continued organic growth in player numbers elsewhere means
we have added over 10% to players under management since the start of
2008. The continued growth in French domestic rugby is providing a
number of opportunities for players from around the world, including
Dan Carter's move to USAP (Perpignan) and is a market we are keen to
develop.
Cricket, driven by the continued explosion of Twenty 20 and the
emergence of India as a world economic power, achieved significant
organic growth in what has been a turbulent year. The relocation of
the IPL in the face of adverse conditions in the Indian subcontinent
reflects the commitment of the tournament organisers to this new form
of the game - and the level of investment that it involves.
Furthermore South Africa's commitment to host the series at short
notice confirms the world of cricket's support to the IPL and the
20/20 format. A significant part of this investment flows into
players. We were not exposed to the Stanford situation in English
cricket and while there will be some short term implications for the
English game we remain confident on the long term future. The arrival
of Alec Stewart and Alan Smith has strengthened our credentials in
the English player market and provide a further significant network
in cricket and football generally.
Professional Services
Our Professional Services division, contributing 2.0% of contribution
post full year of Sportseen before central costs, continues to
provide an important service to our players and to the clubs we work
with. In providing both players and clubs good accounting, tax, and
image rights advice and administration, the Professional Services
team is able to remove significant administration to enable players
and clubs to deliver where it matters.
Group costs
Group costs for the year were GBP0.7 million reflecting the continued
investment made in the Board and in the relocation to a single
location referred to in last year's report. I am happy to say that
both have brought real benefits to the Group as a whole.
Dividend
The Board believes that at this early stage in the Group's
development it should be re-investing its resources into the growth
of the business. Accordingly, no dividend has been declared.
Outlook
The transformation of the economy has had a significant effect on
global business activity. It was against this backdrop that we
published our trading update in December 2008 and it remains our
belief that we will be in line with those expectations for 2009.
Our focus on securing long term arrangements in relation to quality
assets remains at the core of our business. Our unique position in
rugby and cricket, both in terms of rights and players under
representation, gives us an ability to protect our revenues. We
remain confident of our ability to continue to successfully develop
these assets for the benefit of both our clients and our
shareholders.
2009 brings together a number of key rights with the British & Irish
Lions tour to South Africa, the Ashes series this summer, as well as
the IRB Rugby World Cup 7's and the Twenty 20 World Cup. Beyond 2009
we have the benefit of new contracts with Heineken Cup and the All
Blacks, increased activity towards the 2011 Rugby World Cup in New
Zealand and the Olympics in 2012, continued expansion within cricket
as Twenty 20 increases its presence, not only in India but with new
tournaments in Australia and the UK, and the visit of the Indian test
team in 2011.
Essentially remains well placed to benefit and we look forward to the
future with confidence.
Bart Campbell
Chief Executive
June 2009
Consolidated Income Statement
Unaudited Audited
31 December 31 December
2008 2007
Note GBP'000 GBP'000
Revenue 16,245 9,209
Cost of sales (6,821) (3,629)
-------------- --------------
Gross profit 9,424 5,580
Operating Expenses (6,626) (3,319)
Depreciation (155) (57)
Earnings before interest, tax, amortisation, and exceptional items 2,643 2,204
Exceptional Items (157) -
Amortisation of Intangible assets (1,536) (762)
Total Administrative costs (8,474) (4,138)
Operating Profit 950 1,442
Interest charged (1,523) (1,186)
Interest Received 129 68
-------------- --------------
(Loss) Profit beforetax from continuing operations (444) 324
Income tax expense (180) (247)
Loss on discontinued operation - (2)
Loss on disposal of discontinued operation - (304)
-------------- --------------
Loss for the period attributable (624) (229)
to the equity holders of the parent
========= ==========
Earnings / (Loss) per share:
Basic and fully diluted earnings per share from continuing
operations 4 (0.28) 0.09
========== ==========
Basic and fully diluted earnings per share (0.37) (0.25)
========== ==========
Consolidated Balance Sheet
Audited
31 December
Unaudited 2007
31 December (Restated See
2008 Note 5)
GBP'000 GBP'000
ASSETS
Non-current assets
Fixtures, fittings and equipment 463 422
Goodwill 23,644 20,762
Other intangible assets 6,497 2,225
Investments 117 -
-------------- --------------
30,721 23,409
-------------- --------------
Current assets
Inventories 114 137
Trade and other receivables 8,523 5,937
Cash and cash equivalents 3,564 2,002
------------- -------------
12,201 8,076
------------- -------------
Total assets 42,922 31,485
=============== ==============
LIABILITIES
Current liabilities
Trade and other payables 5,827 3,830
Short-term borrowings 1,417 1,256
Current portion of long-term earn out 2,147 1,406
creditor
Current tax payable 1,577 1,195
------------- -------------
10,968 7,687
------------- -------------
Non-current liabilities
Long-term earn out creditor 3,462 6,077
Long term borrowings 6,732 4,945
Other long term creditor - 2
Deferred tax liabilities 1,718 616
------------- -------------
Total non-current liabilities 11,912 11,640
------------- -------------
Total liabilities 22,880 19,327
------------- -------------
Net assets 20,042 12,158
============== ==============
EQUITY
Equity attributable to equity holders
of the parent
Share capital 197 120
Share premium account 17,318 10,612
Merger reserve 3,294 1,743
Shares held (433) (433)
Foreign exchange reserve 529 355
Profit and loss account (863) (239)
------------- -------------
Total equity 20,042 12,158
=============== ==============
Consolidated Cash Flow Statement
Unaudited Audited
Year to 31 Year to 31
December December
2008 2007
GBP'000 GBP'000
Cash flows from operating activities
Loss after taxation (624) (229)
Adjustments for:
Depreciation 145 57
Amortisation of intangibles 1,536 762
Loss on disposal of fixtures, fittings 14 59
and equipment
Loss on disposal of subsidiary company - 305
Foreign exchange loss 69 -
Investment income (129) (69)
Fair value loss on derivative financial 209
instrument
Interest expense 1,314 1,186
Taxation expense recognised in profit and 180 247
loss
Decrease (Increase) in inventories 23 (74)
Increase in trade and other receivables (1,172) (1,498)
Decrease in trade payables (189) (2,471)
------------- -------------
Cash generated from (absorbed by) 1,376 (1,725)
operations
Interest paid (617) (222)
Income taxes paid (322) (187)
------------- -------------
Net cash generated from (absorbed by) 437 (2,134)
operating activities
------------- -------------
Cash flows from investing activities
Acquisition of subsidiaries net of cash (3,441) (3,820)
acquired
Transaction costs in relation to (827) (1,289)
acquisition of subsidiaries
Payment of long term earn-out creditor (2,087) (2,277)
Purchase of equipment (155) (344)
Interest received 129 69
Purchase of intangible assets - (178)
Purchase of investments (117) -
------------- -------------
Net cash absorbed by investing activities (6,498) (7,839)
------------- -------------
Cash flows from financing activities
Proceeds from issue of share capital 5,677 5,733
Proceeds from long-term borrowings 3,000 6,314
Payment of finance lease liabilities - (15)
Repayment of long-term borrowings (1,054) (214)
------------- -------------
Net cash generated by financing 7,623 11,818
activities
------------- -------------
Net increase in cash and cash equivalents 1,562 1,845
Cash and cash equivalents at beginning of 2,002 157
period
------------- -------------
Cash and cash equivalents at end of 3,564 2,002
period
============= =============
Consolidated Statement of Changes in Equity (Unaudited)
Foreign
exchange
Share on Profit Total
and
Share premium Merger Shares acquired loss Parent Minority Total
capital account reserve held business account Equity interest equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 63 2,745 1,143 - (137) (2) 3,812 5 3,817
1 January
2007
Prior year
adjustment
re
foreign
exchange
movement
(see Note - - - - 274 - 274 - 274
5)
Restated
balance at
1
January 63 2,745 1,143 - 137 (2) 4,086 5 4,091
2007
Changes in
equity for
2007
Exchange
difference
on
translation
of foreign
operations
(Restated -
see
Note 5) - - - - 218 - 218 - 218
Net income
recognised
directly in - - - - 218 - 218 - 218
equity
(Loss) for - - - - - (229) (229) - (229)
the period
Total
recognised
income
and expense
for the
period - - - - 218 (229) (11) - (11)
Issue of
share 57 7,867 600 - - - 8,524 - 8,524
capital
Elimination
of minority
interest - - - - - (8) (8) (5) (13)
Purchase of - - - (433) - - (433) - (433)
shares held
Balance at
1 January
2008
(Restated
See Note
5) 120 10,612 1,743 (433) 355 (239) 12,158 - 12,158
Changes in
equity for
2008
Exchange
difference
on
translation
of foreign
operation - - - - 174 - 174 - 174
Net income
recognised
directly in - - - - 174 - 174 - 174
equity
(Loss) for - - - - - (624) (624) - (624)
the period
Total
recognised
income
and expense
for the
period - - - - 174 (624) (450) - (450)
Issue of
share 77 6,706 1,551 - - - 8,334 - 8,334
capital
Balance at
31 December
2008 197 17,318 3,294 (433) 529 (863) 20,042 - 20,042
1 Nature of operations and general information
Essentially Group Ltd is the Group's ultimate parent company. It is
incorporated and domiciled in Jersey. Essentially Group Ltd's shares
are listed on the Alternative Investment Market of the London Stock
Exchange.
Essentially Group's consolidated financial statements are presented
in Pounds Sterling (GBP), which is also the functional currency of the
parent company.
2 Basis of preparation
These consolidated financial statements have been prepared in
accordance International Financial Reporting Standards as adopted by
the EU.
The financial statements have been prepared using the measurement
bases specified by IFRS for each type of asset, liability, income and
expense. The measurement bases are more fully described in the
accounting policies below and are in accordance with Companies
(Jersey) Law 1991 and applicable International Financial Reporting
Standards.
These consolidated financial statements have been prepared in
accordance with the accounting policies set out below which are based
on the recognition and measurement principles of IFRS in issue as
adopted by the European Union (EU) and are effective at
31 December 2008.
New standards and interpretations currently in issue but not
effective for accounting periods commencing on 1 January 2008 are:
* IAS 1 Presentation of Financial Statements (revised 2007)
(effective 1 January 2009)
* IAS 23 Borrowing Costs (revised 2007) (effective 1 January 2009)
* IAS 27 Consolidated and Separate Financial Statements (Revised
2008) (effective 1 July 2009)
* Amendment to IFRS 2 Share-based Payment - Vesting Conditions and
Cancellations (effective 1 January 2009)
* Amendments to IFRS 1 First-time Adoption of International
Financial Reporting Standards and IAS 27 Consolidated and
Separate Financial Statements - Costs of Investment in a
Subsidiary, Jointly Controlled Entity or Associate (effective 1
January 2009)
* Amendment to IAS 39 Financial Instruments: Recognition and
Measurement - Eligible Hedged Items (effective 1 July 2009)
* Improvements to IFRSs (effective 1 January 2009 other than
certain amendments effective 1 July 2009)
* IFRS 3 Business Combinations (Revised 2008) (effective 1 July
2009)
* IFRS 8 Operating Segments (effective 1 January 2009)
* IFRIC 13 Customer Loyalty Programmes (IASB effective date 1 July
2008)
* IFRIC 15 Agreements for the Construction of Real Estate
(effective 1 January 2009)
* IFRIC 16 Hedges of a Net Investment in a Foreign Operation
(effective 1 October 2008)
* IFRIC 17 Distributions of Non-cash Assets to Owners (effective 1
July 2009)
* IFRIC 18 Transfers of Assets from Customers (effective
prospectively for transfers on or after 1 July 2009)
The directors anticipated that the adoption of these Standards and
Interpretations in future periods will have no material impact on the
consolidated financial statements except for additional disclosures.
The accounting policies have been applied consistently throughout the
Group for the purposes of preparation of these consolidated financial
statements.
The financial statements for the company that accompany this annual
report have been prepared under UK Generally Accepted Accounting
Principles and have been separately reported on by the auditors.
3 Summary of significant accounting policies
Basis of consolidation
The group financial statements consolidate those of the company and
all of its subsidiary undertakings drawn up to 31 December 2008.
Subsidiaries are entities over which the group has the power to
control the financial and operating policies so as to obtain benefits
from its activities. The group obtains and exercises control through
voting rights.
Unrealised gains on transactions between the group and its
subsidiaries are eliminated. Unrealised losses are also eliminated
unless the transaction provides evidence of an impairment of the
asset transferred. Amounts reported in the financial statements of
subsidiaries have been adjusted where necessary to ensure consistency
with the accounting policies adopted by the group.
Acquisitions of subsidiaries are dealt with by the purchase method.
The purchase method involves the recognition at fair value of all
identifiable assets and liabilities, including contingent liabilities
of the subsidiary, at the acquisition date, regardless of whether or
not they were recorded in the financial statements of the subsidiary
prior to acquisition. On initial recognition, the assets and
liabilities of the subsidiary are included in the consolidated
balance sheet at their fair values, which are also used as the bases
for subsequent measurement in accordance with the group accounting
policies. Goodwill is stated after separating out identifiable
intangible assets. Goodwill represents the excess of acquisition
cost over the fair value of the group's share of the identifiable net
assets of the acquired subsidiary at the date of acquisition.
Discontinued operations
A discontinued operation is a cash generating unit, or a group of
cash-generating units, that either has been disposed of, or is
classified as held for sale, and:
* Represents a separate major line of business or geographic area
of operations
* Is part of a single co-ordinated plan to dispose of a separate
major line of business or geographical area of operations;
* Is a subsidiary acquired exclusively with a view for resale.
The net income or expenditure of a discontinued operation is excluded
from the profit before tax from continuing operations and the net
result of the discontinued operations is included as a separate item
within the Consolidated Income Statement. The difference between the
proceeds arising to the Group on disposal and the net assets of the
discontinued operation is accounted for as a profit or loss on
disposal within the Consolidated Income Statement.
Business combinations completed prior to date of transition to IFRS
The group has elected not to apply IFRS 3 Business Combinations
retrospectively to business combinations prior to 1 January 2007.
Accordingly the classification of the combination (acquisition,
reverse acquisition or merger) remains unchanged from that used under
UK GAAP. Assets and liabilities are recognised at date of transition
if they would be recognised under IFRS, and are measured using their
UK GAAP carrying amount immediately post-acquisition as deemed cost
under IFRS, unless IFRS requires fair value measurement. Deferred
tax and minority interest are adjusted for the impact of any
consequential adjustments after taking advantage of the transitional
provisions.
The transitional provisions used for past business combinations apply
equally to past acquisitions of interests in associates and joint
ventures.
Goodwill
Goodwill representing the excess of the cost of acquisition over the
fair value of the group's share of the identifiable net assets
acquired, is capitalised and reviewed annually for impairment.
Goodwill is carried at cost less accumulated impairment losses.
The cost of the acquisition is the maximum consideration payable
under the sale and purchase agreement. Where this includes an element
that is based on future performance the cost is assessed at the time
of acquisition based on the Directors' expectations as to the future
performance of that business and the estimated deferred consideration
is included in creditors. The performance of the underlying
subsidiaries is monitored against expectations and where the
Directors believe that there will be a material difference between
the expected deferred consideration payable and the estimate made at
the time of acquisition, then the creditor and goodwill valuation is
amended to reflect this.
Goodwill written off to reserves prior to date of transition to IFRS
remains in reserves. There is no re-instatement of goodwill that was
amortised prior to transition to IFRS. Goodwill previously written
off to reserves is not written back to profit or loss on subsequent
disposal.
Accounting estimates and judgements
The preparation of the financial statements requires the Group to
make estimates, judgements, and assumptions that affect the reported
amounts of assets, liabilities, revenues and expenses and related
disclosure of contingent assets and liabilities. The Directors base
their estimates on historic experience and various other assumptions
that they believe are reasonable under the circumstances, the results
of which form the basis of making judgements about the carrying value
of assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates under
different assumptions or conditions.
The Directors consider that the most significant areas of accounting
estimate are as follows:
* The Weighted Average Cost of Capital used in evaluating the value
of the intangible assets, and also as the estimated discount
factor to apply for deferred consideration, is 10.6%. This has
been estimated based on the Group's current cost of debt capital
and the level of equity return that a shareholder would require
based on enterprise value;
* The deferred consideration arising on acquisitions, where such
consideration is dependent upon current and forecast performance,
has been estimated based on management accounts and forecasts,
discussions with the management teams of the relevant businesses
and the Directors' own assessment of likely trading performance
over the relevant period for the purposes of the deferred
consideration.
The Directors believe that the most significant areas where
judgements are made are:
* Intangible assets acquired, where the Directors have considered
the value of contracts and other similar assets acquired, where
separately identifiable, and their attributable value;
* Exceptional items, considering the nature of the item of income
or expenditure, whether it would reasonably be considered to be
outside of the normal business operations of the Group and
whether it was of a non-recurring nature;
* Trade receivables, where customers have not settled in accordance
with standard terms and conditions the Directors have evaluated
each balance receivable and made provision for doubtful debts
where appropriate in accordance with their experience of the
normal basis on which such balances are settled;
* Consideration of the going concern basis of preparation of the
financial statements including evaluation of:
* trading forecasts for the period to 31 December 2010,
including the impact of the settlement of deferred
consideration and obligations to the Group's bankers;
* the current banking facilities and the ability of the Group to
operate within the prescribed covenants that form part of that
facility;
* the current economic conditions and their impact on the
Group's chosen markets and services;
* the Group's trading in the latter part of 2008 and in the
period to the date of this report.
Revenue
Revenue is measured as the fair value of the consideration received
or receivable and comprises the gross amounts billed to clients in
respect of fees earned, expenses recharged, and commission based
income and is stated exclusive of VAT and other sales taxes. Revenue
is recognised within each of the business segments as follows:
Sports Marketing revenue is recognised when the services are
performed in accordance with the contractual arrangements. Where
revenue is generated under retainer arrangements then revenue is
recognised over the retention period. Revenue from events is
recognised on performance of services in accordance with contractual
arrangements. Commission for the sale of media space is recognised
when the media space is delivered to the client.
Athletes Management represents commission and other income recognised
in line with the provision of relevant services under the terms of
the contract.
Professional Services revenue is earned as the work is undertaken
during the period. This includes an estimate of the value of work
completed prior to the balance sheet date not yet invoiced.
Exceptional items
Items of significant income or expenditure which are one-off
transactions are classed as exceptional on the face of the income
statement, to show more accurately the underlying performance of the
Group.
Intangible Assets
Assets acquired as part of a business combination
10. In accordance with IFRS 3 Business Combinations, an intangible
asset acquired in a business combination is deemed to have a cost to
the group of its fair value at the acquisition date. The fair value
of the intangible asset reflects market expectations about the
probability that the future economic benefits embodied in the asset
will flow to the group. Where an intangible asset might be
separable, but only together with a related tangible or intangible
asset, the group of assets is recognised as a single asset separately
from goodwill where the individual fair values of the assets in the
group are not reliably measurable. Where the individual fair value
of the complimentary assets are reliably measurable, the group
recognises them as a single asset provided the individual assets have
similar useful lives.
Customer Contracts
Customer contracts are valued by discounting the expected cash
generated (after deducting associated costs) over the life of the
contracts. The resultant value is then amortised over the life of
the contract, generally up to six years. Amortisation on customer
contracts is included in administrative expenditure.
Other intangible assets
Other intangible assets, which comprises intellectual property
created by the Group which is capable of exploitation over a series
of future events, is amortised over those anticipated events - such
period of amortisation not to exceed five years. The expenditure
included needs to be separately identifiable and the Directors
evaluate the anticipated value on the basis of event schedules,
expressions of interest, and current negotiations. As part of this
evaluation the Directors will take into account future revenues and
expenses in evaluating the likely long term economic benefits to the
Group.
Impairment testing of goodwill, other intangible assets and fixtures,
fittings and equipment
For the purposes of assessing impairment, assets are grouped at the
lowest levels for which there are separately identifiable cash
flows (cash-generating units). As a result, some assets are tested
individually for impairment and some are tested at cash-generating
unit level. Goodwill is allocated to those cash-generating units
that are expected to benefit from synergies of the related business
combination and represent the lowest level within the group at which
management monitors the related cash flows.
Goodwill, other individual assets or cash-generating units that
include goodwill, other intangible assets with an indefinite useful
life, and those intangible assets not yet available for use are
tested for impairment at least annually.
All other individual assets or cash-generating units are tested for
impairment whenever events or changes in circumstances indicate that
the carrying amount may not be recoverable.
An impairment loss is recognised for the amount by which the asset's
or cash-generating unit's carrying amount exceeds its recoverable
amount. The recoverable amount is the higher of fair value,
reflecting market conditions less costs to sell, and value in use
based on an internal discounted cash flow evaluation. Impairment
losses recognised for cash-generating units, to which goodwill has
been allocated, are credited initially to the carrying amount of
goodwill. Any remaining impairment loss is charged pro rata to the
other assets in the cash generating unit. With the exception of
goodwill, all assets are subsequently reassessed for indications that
an impairment loss previously recognised may no longer exist.
Investments
Investments have been recorded at cost on the basis that they have
recently commenced to trade. The directors consider whether the long
term cash flow that each investment is forecasting and, on the basis
of that, consider whether any provision for impairment is required.
Tangible Assets
Fixtures, fittings and equipment
Fixtures, fittings and equipment is stated at cost, net of
depreciation and any provision for impairment.
Depreciation
Depreciation is calculated to write down the cost less estimated
residual value of plant and equipment by equal annual instalments
over their estimated useful economic lives. The rates generally
applicable are:
Computer Equipment 25%
Furniture, Fittings & Equipment 25%
Motor Vehicles 25%
Operating lease agreements
Leases where substantially all of the risks and rewards of ownership
are not transferred to the Group are treated as operating leases.
Rentals under operating leases are charged against profits on a
straight-line basis over the period of the lease.
Operating lease incentives are recognised, on a straight line basis,
as a reduction of the lease expense over the length of the lease, or
the period from inception to the first review of cost under the lease
if shorter.
Inventories
Inventories, which consists of work in progress is recognised at the
lower of cost and net realisable value. The cost of work in progress
includes overheads appropriate to the stage of completion. Net
realisable value is based upon estimated selling price less further
costs expected to be incurred to completion.
Taxation
Current tax is the tax currently payable based on taxable profit for
the year.
Deferred income taxes are calculated using the liability method on
temporary differences. Deferred tax is generally provided on the
difference between the carrying amounts of assets and liabilities and
their tax bases. However, deferred tax is not provided on the
initial recognition of goodwill, nor on the initial recognition of an
asset or liability unless the related transaction is a business
combination or affects tax or accounting profit. Deferred tax on
temporary differences associated with shares in subsidiaries and
joint ventures is not provided if reversal of these temporary
differences can be controlled by the group and it is probable that
reversal will not occur in the foreseeable future. In addition, tax
losses available to be carried forward as well as other income tax
credits to the group are assessed for recognition as deferred tax
assets.
Deferred tax liabilities are provided in full, with no discounting.
Deferred tax assets are recognised to the extent that it is probable
that the underlying deductible temporary differences will be able to
be offset against future taxable income.
Current and deferred tax assets and liabilities are calculated at tax
rates that are expected to apply to their respective period of
realisation, provided they are enacted or substantively enacted at
the balance sheet date.
Changes in deferred tax assets or liabilities are recognised as a
component of tax expense in the income statement, except where they
relate to items that are charged or credited directly to equity (such
as the revaluation of land) in which case the related deferred tax is
also charged or credited directly to equity.
Financial Assets
Loans and receivables
Loans and receivables are accounted for at fair value at the date of
initial recognition, net of transaction costs and thereafter at
amortised cost.
Financial liabilities
Financial liabilities are obligations to pay cash or other financial
assets and are recognised when the group becomes a party to the
contractual provisions of the instrument. Financial liabilities
categorised as at fair value through profit or loss are recorded
initially at fair value, all transaction costs are recognised
immediately in the income statement. All other financial liabilities
are recorded initially at fair value, net of direct issue costs.
Financial liabilities categorised as at fair value through profit or
loss are re-measured at each reporting date at fair value, with
changes in fair value being recognised in the income statement. All
other financial liabilities are recorded at amortised cost using the
effective interest method, with interest-related charges recognised
as an expense in finance cost in the income statement. Finance
charges, including premiums payable on settlement or redemption and
direct issue costs, are charged to the income statement on an
accruals basis using the effective interest method and are added to
the carrying amount of the instrument to the extent that they are not
settled in the period in which they arise.
A financial liability is derecognised only when the obligation is
extinguished, that is, when the obligation is discharged or cancelled
or expires.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits,
together with other short-term, highly liquid investments that are
readily convertible into known amounts of cash and which are subject
to an insignificant risk of changes in value.
Equity
Equity comprises the following:
* "Share capital" represents the nominal value of equity shares.
* "Share premium/Merger Reserve" represents the excess over nominal
value of the fair value of consideration received for equity
shares, net of expenses of the share issue.
* "Profit and loss reserve" represents retained profits.
Foreign currencies
Transactions in foreign currencies are translated at the exchange
rate ruling at the date of the transaction. Monetary assets and
liabilities in foreign currencies are translated at the rates of
exchange ruling at the balance sheet date. Non-monetary items that
are measured at historical cost in a foreign currency are translated
at the exchange rate at the date of the transaction.
The results of overseas operations are translated at the average
rates of exchange during the year and their balance sheets at the
rates ruling at the balance sheet date.
The exchange differences arising from the retranslation of the
opening net investment in subsidiaries are taken directly to equity.
On disposal of a foreign operation the cumulative translation
differences (including, if applicable, gains and losses on related
hedges) are transferred to the income statement as part of the gain
or loss on disposal.
The Group has elected not to apply IAS 21: The Effects of Changes in
Foreign Exchange Rates on foreign operations acquired prior to the
date of transition to IFRS. The cumulative translation differences
for all foreign operations are deemed to be zero at the date of
transition to IFRS.
Share-based payments
The financial statements are prepared in accordance with IFRS2 "Share
Based Payments" which requires the recognition of equity-settled
share based payments at fair value at the date of the grant and the
recognition of liabilities of cash-settled share based payments at
the current fair value at each balance sheet date.
All equity-settled share-based payments are ultimately recognised as
an expense in the income statement with a corresponding credit to
"other reserve".
Upon exercise of share options the proceeds received net of
attributable transaction costs are credited to share capital, and
where appropriate share premium.
The fair value is expensed over the on a straight line basis over the
vesting period, based on the Group's estimate of shares that will
eventually vest and adjusted for the effect of non market-based
vesting conditions. Estimates are subsequently revised if there is an
indication that the number of share options expected to vest differs
from previous estimates. Any cumulative adjustment prior to vesting
is recognised in the current period. No adjustment is made to any
expense recognised in prior periods if share options ultimately
exercised are different to that estimated on vesting.
The Group has elected not to apply IFRS 2: Share Based Payments to
equity instruments that were granted prior to the date of transition
to IFRS.
Employee benefit trust
The assets and liabilities of the Employee Benefit Trust (EBT) have
been included in the group accounts. Any assets held by the EBT
cease to be recognised on the group balance sheet when the assets
vest unconditionally in identified beneficiaries.
The costs of purchasing the shares held by the EBT are shown as a
deduction against shareholders' funds. The proceeds from the sale of
the shares held increase shareholders' funds. Neither the purchase
nor sale of the shares leads to a gain or loss being recognised in
the group profit and loss account.
4. Earnings per share
The calculation of the basic earnings per share is based on the
earnings attributable to ordinary shareholders divided by the
weighted average number of shares in issue during the year
The calculation of diluted earnings per share is based on the basic
earnings per share, adjusted to allow for the issue of shares and the
post tax effect of dividends and/or interest, on the assumed
conversion of all dilutive options and other dilutive potential
ordinary shares.
Reconciliations of the earnings and weighted average number of shares
used in the calculations are set out below
2008 2007
GBP'000 GBP'000
Earnings before interest, tax, amortisation,
and discontinued operations 2,643 2,204
Interest (488) (153)
Profit before Tax, amortisation and notional
interest 2,155 2,051
Tax (705) (475)
Profit After Tax and before amortisation,
notional interest and discontinued ops 1,450 1,576
Deferred Tax on intangible amortisation 466 229
Notional interest for deferred consideration
under IFRS (697) (964)
Fair value of derivative financial
instrument, net of tax impact (150) -
Amortisation of Intangibles (1,536) (763)
(Loss) Profit After Tax on Continuing
Operations (467) 78
Exceptional items / Discounted operations (157) (307)
(Loss)/ Profit After Tax (624) (229)
Weighted Average no shares 166,074,158 90,329,844
Earnings per share on continuing operations 0.87 1.74
before exceptional items, amortisation of
Intangibles and notional interest (pence)
Earning per share on continuing operations
(pence) (0.28) 0.09
Basic and fully diluted earning per share
(pence) (0.37) (0.25)
Share options currently in issue are anti-dilutive and therefore do
not impact EPS.
5 Prior Period Adjustment
Balance sheet at 31 December 2007
The balance sheet at 31 December 2007 has been restated to reflect
the following:
* Correction to the calculation of the discount applied to earn out
consideration primarily on acquisitions made in 2007;
* Reductions to the discount to be applied to earn out
consideration as at 31 December 2007 arising from repayments made
in that year;
* Amendments to the calculation of the foreign exchange movements
on the acquisition of overseas subsidiaries.
The effect on the opening balance sheet is as follows:
* An increase in the value of intangible assets of GBP2,355,000
* An increase in the creditor for deferred consideration of
GBP1,655,000
* An increase in opening reserve for foreign exchange movement on
overseas subsidiaries of GBP698,000.
6 Publication of non-statutory accounts
The financial information set out in this preliminary announcement
does not constitute statutory accounts as defined in the Companies
(Jersey) Law 1991.
The summarised consolidated balance sheet at 31 December 2008 and the
summarised consolidated income statement, summarised consolidated
cash flow statement and associated notes for the year then ended have
been extracted from the Group's 2008 financial statements. Those
financial statements have not yet been delivered to shareholders, nor
have the auditors reported on them.
=--END OF MESSAGE---
This announcement was originally distributed by Hugin. The issuer is
solely responsible for the content of this announcement.
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