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RNS Number:4387Q
First Artist Corporation PLC
02 October 2003
Immediate Release
First Artist Corporation Plc
("First Artist" or "the Company")
Interim Results for the year ended 30 June 2003
First Artist Corporation is a leading European management and representation
company looking after the commercial interests of footballers and other high
profile personalities in the football and television market.
Summary
Interim results for the year ended 30 June 2003
* Financial and regulatory constraints within the football sector have had a
major impact on sales during the reporting period.
* Sales in the Group declined from #6.7 million in the prior year to #2.5
million. Continental Europe represented over two-thirds of this reduction.
* Annualised fixed overhead savings of #1.6 million were achieved.
* Operating loss before goodwill amortisation and restructuring costs of
#2.7 million (profit of #2.0 million to June 2002).
* Goodwill arising from the acquisition of FIMO Sport Promotion AG written
down by an additional #9.7 million.
Current trading
* Evidence of improvement going forward, particularly in the UK following
the completion of the media deal between the Premier League and BSkyB.
* Over #2.0 million of new business was written in the last two months of
the summer trading window (June-August), from over 30 deals, of which over
75% was written in the UK.
* Ahead of similar media rights deals in Continental Europe, the market
outside the UK remains stagnant and is therefore likely to contribute to an
overall loss beyond current market expectations going forward.
* The loss for the sixteen months ended 31 October 2003 will be impacted by
one-off restructuring charges of #0.4 million.
Business diversification
* Talks which would have resulted in a reversal of the Outside Organisation
into First Artist (as announced on 17 July 2003) have ended. As a result,
trading of the Company's shares will resume immediately.
* Business development ongoing:
* Media division more than doubles revenue in the last six months
* Snooker management and academy launched and proceeding well
* First Artist Wealth Management accessed by 90 players
* US representational office established
Business review
* In light of these changing circumstances the Board of First Artist will be
conducting an overall business review of its options going forward in order
to maximise shareholder value. This may or may not result in a
restructuring, merger, acquisition or an offer being made for the Company.
Chief Executive's Review
As we announced last year, we have changed the year end to 31 October in order
to incorporate the entire summer trading window in one accounting period. This
second set of interim results therefore represent a 12 month reporting period
for the year to 30 June 2003. I have no hesitation in saying that this has been
an incredibly difficult period for everybody involved in the industry. The
combination of the trading restrictions imposed by FIFA (which have effectively
limited us to only four months of deal activity being reported in this period)
and the general economic downturn in the football sector has impacted our
football management business.
There is continued financial uncertainty in continental Europe, particularly in
Italy. As with the UK, the Board believes that with the implementation of
better financial management at clubs and with the likelihood of similar TV
rights deals to that signed with BSkyB, the continental European market should
return to stability, and our restructured European operation to profitability.
However, as anticipated, we are pleased that through the strength of our
relationships with clubs and through the quality of our client list, deal
activity since 30 June 2003 has increased year on year in the UK market, helped
by the signing of a new television rights deal between the Premier League and
BSkyB. In the two months to 31 August 2003 the Group wrote over #2.0 million of
business, from over 30 deals, of which over 75% was written in the UK.
Football is and always will be the biggest entertainment platform in the world
and we believe that over the next three years the signing of new rights deals
coupled with a more prudent, financially responsible culture should result in
the sector returning to prosperity.
In the meantime, we have continued with our programme to reduce our fixed cost
base, achieving annualised cost savings of around #1.6 million. This has been
achieved through a restructuring programme, which has seen a number of offices
in "non-core" locations close, and a number of employees leave the Group. By
replacing fixed cost service agreements with flexible collaboration arrangements
and a higher proportion of performance related pay we are able to better match
the cost base to deal activity, and emerge a leaner more competitive Group going
forward.
We continue, through our diversification strategy, to seek new ways in which to
reduce reliance on traditional deal based revenue and can report that existing
"services" business areas are progressing well.
Our media division, which was formed in September 2001, now has 36 personalities
including Andy Gray, Ruud Gullit, Andy Townsend, Alan Parry and Ron Atkinson.
The media division now generates nearly 10% of the Group's gross profit having
more than doubled its revenue in the last half of the year and has been involved
in a number of lucrative book deals on behalf of its clients since 30 June.
It is pleasing to note that around 90 players from our UK client list have been
introduced to our wealth management partner Woolhouse Douglas through our
financial services division, First Artist Wealth Management.
We are also constantly reviewing opportunities within sports other than
football. In August we launched the First Artist Snooker Academy in
Wellingborough, Northants. The academy, which is endorsed by the World Snooker
Federation, has already received 25 players from around the world to be coached
by UK professionals. In addition, shortly after the period end in July 2003, we
announced the opening of a US representative office, at low cost, to exploit
both the Major League Soccer market as well as seek opportunities within other
North American sports.
As announced in July 2003, we were also seeking expansion into "non-footballing"
areas through acquisition, specifically the Outside Organisation. I am
disappointed, however, that at this time we have not been able to conclude or
agree terms with the Outside Organisation on a basis that would be satisfactory
to the shareholders of First Artist. As a result our shares have been restored
to trading. In light of these changing circumstances the Board of First Artist
will be conducting an overall business review of its options going forward in
order to maximise shareholder value. This may or may not result in a
restructuring, merger, acquisition or an offer being made for the Company.
Headline numbers Year ended 30 Year ended 30 Six months
June 2003 June 2002 ended 31
December 2002
(Unaudited) (Audited) (Unaudited)
#m #m #m
Sales 2.5 6.7 1.4
Operating (loss)/profit* (2.7) 2.0 (1.5)
(Loss)/profit before tax* (2.7) 2.0 (1.5)
Loss/earnings per share (pence)* (3.87)p 3.45 (2.14)p
Fully diluted earnings per share* (3.87)p 3.39 (2.14)p
* Stated before goodwill amortisation and impairment of #11.5 million (June
2002: #1.4m; Dec 2002 #0.7m) and restructuring of #0.3 million (June 2002: #nil;
Dec 2002 #0.15m).
For further information please contact:
First Artist Corporation plc 020 8900 1818
Jon Smith, Chief Executive
Jonathan Lees, Finance Director
WMC Communications 020 7591 3999
Scott Learmouth / Jo Livingston
Chairman's Statement
For the twelve months ended 30 June 2003
In my last interim report for the six-month period to 31 December 2002, I
reported that the continental European marketplace had declined significantly.
This was due to premier clubs dramatically reducing their expenditure to shore
up their financial defences following the TV rights problems across Europe and
the introduction of FIFA imposed trading windows. This decline has continued
through the six months to 30 June 2003, which saw very little transfer activity
in Europe. I regard this as a constraint of trade, which is detrimental to
football as a whole.
Sales in the Group declined to #2.5 million from #6.7 million last year. The
decline in Europe contributed over two-thirds of this reduction in sales, down
from #4.0 million to #1.3 million. There were only 32 significant deals in the
year compared to 83 last year.
During the period to 31 December 2002, we initiated a major rationalisation
programme which resulted in our unprofitable units taking an exceptional charge
of #141,000. During the second half of the year we further rationalised by
closing offices in the UK and Switzerland resulting in a 40% reduction in
headcount. Directors and staff took voluntary pay cuts of up to 25%. The
annualised savings are around #1.6 million, the benefits from which we expect to
see in future accounting periods. Costs involved were #0.3 million.
We incurred an operating loss before exceptional restructuring costs, goodwill
amortisation and impairment of #2.7 million versus an operating profit of #2.0
million last year. This loss was exacerbated by #0.2 million of foreign
exchange losses, mostly unrealised, and #0.3 million of additional debtor
provisions. These debtor provisions primarily emanate from our Italian client
base, which has continued to extend payment terms.
We are encouraged by the impact that the BSkyB television rights deal has had on
the UK market in the period immediately following the reporting period. This
resulted in a busy summer period for the London office. Although European deal
activity is still stagnant, a similar upturn may occur following the signing of
similar media rights deals throughout the continent. Until then, the lack of
European revenue is likely to result in a Group loss beyond market expectation
for the period to 31 October 2003.
The Board has reviewed its valuation of acquired goodwill. In the light of
current market conditions and in accordance with Financial Reporting Standards
Nos. 10 and 11, the Board has carried out a review of the balance sheet values
of goodwill arising from football acquisitions. As at 30 June 2003, additional
provisions totalling #9.7 million have been made to reduce the carrying value of
goodwill to its recoverable amount. The Board has also assessed the estimated
useful life of goodwill arising from football acquisitions and, in the light of
trading restrictions being imposed by the football authorities, believe that it
is appropriate for the remaining unamortised goodwill to be written off in full
over the remaining term of the Company's current accounting period to 31 October
2003. Although the Board believes that the marketplace will recover next
summer, it feels that general uncertainty and the less predictable earnings
visibility demands this prudent approach.
During the year the Board changed its accounting treatment of fixed asset
investments to comply with Section 131 of the Companies Act. The only effect of
this change on the Group financial statements is to reduce the share premium
account by #8.3 million and to create a merger reserve of a similar amount. This
merger reserve has subsequently been released to the profit and loss account
following the impairment of the related goodwill.
The Board will be seeking approval from its shareholders and confirmation by the
High Court to restructure its balance sheet to remove the deficit on the profit
and loss account by the cancellation of the share premium account.
Outlook and current operations:
Deal activity since 30 June 2003 has increased year on year in the UK but has
remained disappointing in Europe. This poor European performance has been
largely due to the continuing financial uncertainty and lack of cash in the
Italian market. The Group has written over #2.0 million of business, from over
30 deals in the last two months of the summer trading window of which over 75%
was written in the UK. However, ahead of any new media rights deals being
completed in Europe, the market outside the UK remains stagnant and is therefore
likely to contribute to an overall loss beyond current market expectations going
forward. This loss will also be impacted by the one-off restructuring charges.
Whilst the Board remains optimistic about the level of business available to be
written during the 2004 winter and summer transfer windows with the uncertainty
in the market, earnings are difficult to forecast.
Our business diversification strategy leveraging core skills into non-football
related sectors continues to be a priority. Although our efforts to grow this
element of the business organically are progressing well, we are disappointed
that at this time we have not been able to conclude or agree terms with the
Outside Organisation on a basis that would be satisfactory to the shareholders
of First Artist.
In light of these changing circumstances the Board of First Artist will be
conducting an overall business review of its options going forward in order to
maximise shareholder value. This may or may not result in a restructuring,
merger, acquisition or an offer being made for the Company.
Group and Financial Review
Sales
The Group generated sales of #2.5 million in the year, down 63% from #6.7
million last year. There were 32 deals in the period versus 83 deals last year.
Operating profit before goodwill amortisation and restructuring
The operating loss of #2.7 million before goodwill amortisation and impairment
and one-off restructuring costs (2002:profit of #2.0 million) is stated after
deducting fees payable to third-parties of #0.9 million (2002:#1.2 million), and
operating expenses of #4.2 million (2002:#3.5 million). The operating expenses
include an unrealised foreign exchange loss of #0.2 million incurred as a result
of the strengthening Swiss franc versus the primary trading currencies and bad
debt provisions of #0.3 million resulting primarily from the extended delay in
the receipt of monies owed by Italian clubs.
Operating loss after goodwill amortisation and restructuring
The operating loss of #14.5 million is stated after #0.3 million of
restructuring costs and #11.5 million of goodwill amortisation and impairment.
The restructuring costs include the costs of office closure, one-off employee
settlements and associated legal costs. The charge for goodwill amortisation and
impairment includes a one-off impairment charge of #9.7 million primarily in
respect of the acquisition of FIMO Sport Promotion AG.
Liquidity and capital resources
At 30 June 2003 the net borrowings of the Group was #0.2 million, down from a
cash balance of #1.5 million as at 30 June 2002. #0.6 million was paid as
deferred consideration and #0.1 million was spent on investments, acquisitions
and capex. There was also a #1.0 million operating cash outflow, including #0.3
million of one-off restructuring costs, derived from the Group operating losses
before amortisation and depreciation of #2.7 million. A reduction in the
non-cash working capital of #1.7 million is also reported. Net current assets
include #2.0 million of receivables net of provisions and trade creditors. Debt
at 30 June 2003 was down from #1.1 million at 30 June 2002 to #1.0 million,
comprising #0.6 million of deferred consideration, #0.1 million of finance
leases and #0.3 million of bank debt.
I would like to pay tribute to the efforts of all management and staff who have
worked so hard to achieve these results in such a volatile and changed
environment.
Chairman
Brian Baldock
2 October 2003
Consolidated Profit and Loss Account
For the year ended 30 June 2003
Notes Year ended 30 Year ended 30 Six months
June 2003 June 2002 ended 31
December 2002
(Unaudited) #000's (Audited) (Unaudited)
#000's #000's
Sales 2,463 6,700 1,420
Cost of sales (900) (1,246) (537)
Gross profit 1,563 5,454 883
Operating expenses (4,136) (3,445) (2,301)
Restructuring charge (300) - (141)
Operating (loss)/profit
before goodwill (2,873) 2,009 (1,559)
Goodwill impairment and (11,525) (1,376) (732)
amortisation
Group operating (loss)/
profit (14,398) 633 (2,291)
Share of operating loss
of associates (97) (45) (87)
Total operating (loss)/
profit (14,495) 588 (2,378)
Loss on disposal of (26) - -
investment
(14,521) 588 (2,378)
Investment income 9 82 9
(14,512) 670 (2,369)
Interest payable (29) (28) (12)
(Loss)/profit on ordinary
activities before
taxation (14,541) 642 (2,381)
Taxation 2 603 (321) 355
(Loss)/profit on ordinary
activities after taxation (13,938) 321 (2,026)
Dividends - - -
Retained (loss)/profit
for the period (13,938) 321 (2,026)
Adjusted (loss)/earnings
per share 3 (3.87) pence 3.45 pence (2.14) pence
Adjusted fully diluted
(loss)/earnings per share 3 (3.87) pence 3.39 pence (2.14) pence
Basic (loss)/earnings per
share 3 (25.86) pence 0.65 pence (3.77) pence
Diluted (loss)/earnings
per share 3 (25.86) pence 0.64 pence (3.77) pence
Consolidated Balance Sheet
As at 30 June 2003
Notes As at As at As at
30 June 2003 30 June 2002 31 December 2002
(Unaudited) (Audited) (Unaudited)
#000's #000's #000's
(as restated) (as restated)
FIXED ASSETS
Intangible assets 366 12,062 11,124
Tangible assets 807 957 962
Investments - 75 45
1,173 13,094 12,131
CURRENT ASSETS
Debtors 4,009 6,832 5,422
Cash at bank and in hand 166 1,480 553
4,175 8,312 5,975
CREDITORS: Amounts falling due
within one year (3,049) (4,668) (3,841)
NET CURRENT ASSETS 1,126 3,644 2,134
TOTAL ASSETS LESS CURRENT
LIABILITIES 2,299 16,738 14,265
CREDITORS: Amounts falling due
in greater than one year (158) (672) (176)
Provision for liabilities and
charges - (7) -
NET ASSETS 2,141 16,059 14,089
CAPITAL AND RESERVES
Called up share capital 135 134 135
Shares to be issued - 150 50
Share premium account 6,217 6,118 6,217
Merger reserve - 8,283 8,283
Profit and loss account (4,211) 1,374 (596)
5 2,141 16,059 14,089
Consolidated Cash Flow Statement
For the year ended 30 June 2003
Notes Year ended Year ended Six months ended
30 June 2003 30 June 2002 31 December 2002
(Unaudited) (Audited) (Unaudited)
#000's #000's #000's
Cash (outflow)/inflow from
operating activities 4 (961) 131 (689)
Returns on investments and
servicing of finance (20) 54 (3)
Taxation - (934) -
Capital expenditure 57 (671) (12)
Acquisitions and investments (121) (3,074) (54)
Cash (outflow)/inflow before
financing (1,045) (4,494) (758)
FINANCING:-
Issue of shares (net of costs) - 4,176 -
Payments of deferred cash
consideration (580) (1,628) (530)
Repayment of directors loans - 1,043 -
Capital element of finance lease
rental payments (48) (8) (22)
(628) 3,583 (552)
(Decrease)/increase in cash in
the period (1,673) (911) (1,310)
Cash used to decrease debt
financing.... 552 1,636 552
New finance leases (67) (74) (67)
Deferred consideration 1,249 (4,107) 905
Movement in net (debt)/funds 61 (3,456) 80
Net (debt)/funds at the
beginning of the period (1,065) 2,391 (1,065)
Net (debt)/funds at the end of
the period (1,004) (1,065) (985)
Statement of Total Recognised Gains and Losses
For the year ended 30 June 2003
Year ended Year ended Six months ended
30 June 2003 30 June 2002 31 December 2002
(Unaudited) (Audited) (Unaudited)
#000's #000's #000's
(Loss)/profit for the financial
period (13,938) 321 (2,026)
Exchange adjustments 70 120 56
Total recognised gains and
losses (13,868) 441 (1,970)
Notes to the Interim Accounts:
For the year ended 30 June 2003
1. Basis of preparation
The financial information contained in this interim report does not constitute
statutory accounts within the meaning of Section 240 of the Companies Act 1985.
During the year the Board changed its accounting treatment of fixed asset
investments to comply with Section 131 of the Companies Act. The only effect of
this change on the group financial statements is to reduce the share premium
account by #8.3 million and to create a merger reserve of a similar amount. This
merger reserve has subsequently been released to the profit and loss account
following the impairment of the related goodwill. Prior year figures have been
restated accordingly. Except for this the interim financial information has been
prepared on the basis of the accounting policies set out in the Group's
statutory accounts for the year ended 30 June 2002.
The figures for the year ended 30 June 2003 and the six months ended 31 December
2002 are unaudited. The figures for the year ended 30 June 2002 have been
extracted from the statutory accounts filed with the Registrar of Companies
which contained an unqualified audit report and no adverse statement under
Section 237(2) or (3) of the Companies Act 1985.
2. Tax credit
The tax credit is based on the estimated effective rate for the year as a whole.
Year ended Year ended Six months
30 June 30 June ended
2003 2002 31 December
2002
(Unaudited) (Audited) (Unaudited)
#000's #000's #000's
UK corporation tax credit/(charge) 459 (130) 332
Adjustments in respect of prior periods (43) (8) (43)
Foreign taxes 187 (187) 66
603 (325) 355
Origination and reversal of timing differences - 4
-
Tax on ordinary activities 603 (321) 355
3.Earnings per share
The calculations of earnings per share are based on the following profits and
numbers of shares:
The adjusted earnings per share is based on profit after tax before the goodwill
amortisation charge.
Year ended Year ended Six months
30 June 30 June ended
2003 2002 31 December
2002
(Unaudited) (Audited) (Unaudited)
Number Number Number
Weighted average number of 0.25 pence ordinary
shares in issue during the period
For basic earnings per share 53,890,339 49,241,709 53,776,769
Exercise of share options - 860,254 -
For diluted earnings per share 53,890,339 50,101,963 53,776,769
(Loss)/profit for the financial period #000's #000's #000's
(Loss)/profit for adjusted earnings per share (2,087) 1,697 (1,153)
Adjustment for goodwill amortisation (11,525) (1,376) (732)
Adjustment for restructuring (300) - -
Adjustment for loss on disposal of investment (26) - (141)
(Loss)/profit for earnings per share (13,938) 321 (2,026)
4. Reconciliation of operating profit to net operating cash flow
Year ended Year ended Six months
30 June 30 June ended
2003 2002 31 December
2002
(Unaudited) (Audited) (Unaudited)
#000's #000's #000's
Operating (loss)/profit (14,495) 588 (2,378)
Depreciation 123 89 64
Amortisation of goodwill 11,525 1,376 732
Loss/(profit) on disposal of fixed assets 38 3 (5)
Decrease/(increase) in debtors 2,225 (3,010) 992
(Decrease)/increase in creditors (544) 920 (237)
Share of operating loss of associates 97 45 87
Exchange
70 120 56
Net cash (outflow)/inflow from operating activities (961) 131 (689)
5. Reconciliation of movement in shareholders' funds
Year ended Year ended Six months
30 June 30 June ended
2003 2002 31 December
2002
(Unaudited) (Audited) (Unaudited)
#000's #000's #000's
(Loss)/profit for the financial period (13,938) 321 (2,026)
Foreign exchange adjustment 70 120 56
(13,868) 441 (1,970)
New share capital subscribed net of costs (50) 12,651 -
(Decrease)/increase in shareholders' funds (13,918) 13,092 (1,970)
Opening shareholders' funds 16,059 2,967 16,059
Closing shareholders' funds 2,141 16,059 14,089
Shareholders' funds are entirely attributable to equity interests.
6. Interim Report
Copies of this interim report are being sent to all shareholders and are
available to the public at the Company's registered office, First Artist House,
87 Wembley Hill Road, Wembley, Middlesex HA9 8BU.
INDEPENDENT REVIEW REPORT TO FIRST ARTIST CORPORATION PLC
Introduction
We have been instructed by the company to review the financial information set
out on pages 5 to 13 and we have read the other information contained in the
interim report and considered whether it contains any apparent misstatements or
material inconsistencies with the financial information.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by the directors. It is best
practice that the accounting policies and presentation applied to the interim
figures should be consistent with those applied in preparing the preceding
annual accounts except where any changes, and the reasons for them, are
disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board as if that Bulletin applied. A review
consists principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying financial data
and based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review excludes
audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with Auditing Standards and therefore provides a lower
level of assurance than an audit. Accordingly we do not express an audit
opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the year ended 30
June 2003.
Baker Tilly
Chartered Accountants
2 Bloomsbury Street
London WC1B 3ST
Date 2 October 2003
This information is provided by RNS
The company news service from the London Stock Exchange
END
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