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| Name | Symbol | Market | Type |
|---|---|---|---|
| Diginfraconacc | LSE:DIGI | London | Exchange Traded Fund |
| Price Change | % Change | Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| -0.203 | -1.97% | 10.081 | 10.056 | 10.096 | 0 | 16:35:27 |
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RNS Number : 7304I
Digital Marketing Group PLC
24 November 2008
Date: 24 November 2008
On behalf of: Digital Marketing Group plc ("DMG", "the Company" or "the Group")
Embargoed: 0700hrs
Digital Marketing Group plc
Interim Results 2008/9
Digital Marketing Group plc (AIM: DIGI), the digital direct marketing specialists, today announced its interim results for the six
months ended 30 September 2008.
Performance Highlights
* Gross profits up 27% to £18.72m (2007: £14.77m). Organic gross profit growth 12%
* EBITDA before charges for share options up 26% to £3.85m (2007: £3.06m). Organic EBITDA before charges for share options growth 10%
* PBT before charges for share options and amortisation up 35% to £3.37m (2007: £2.49m). Organic PBT before charges for share options
and amortisation growth 17%
* Net debt reduced by 58% to £1.82m from £4.33m
* All earnout liabilities relating to prior year acquisitions have been settled
* £9.27m of undrawn borrowing facilities taking into account credit cash balances as at 30 September 2008 (2007: £6.74m)
* Adjusted basic EPS (profit before tax, amortisation and charges for share options less current tax charge) up 17% to 3.75p (2007:
3.20p)
Commenting on the results, Stephen Davidson, Chairman of Digital Marketing Group plc, said: "In the worst economic conditions for
decades this is a truly excellent set of results. The combination of a single minded focus on digital direct marketing and our strong and
experienced management team continues to deliver for our shareholders. The financial health of the company is also very strong with net debt
of £1.82m (2007: £4.33m). The Group has settled all its earnout liabilities and gearing decreased to 4% at 30 September 2008 (2007: 11%). As
at 30 September the Group had £9.27m of undrawn borrowing facilities taking into account credit cash balances (2007: £6.74m). With good
revenue visibility we are approaching the second half of the year in a spirit of cautious optimism."
Ben Langdon, Chief Executive, added: "Digital Marketing Group is now the third largest digital marketing agency in the UK. This alone is
a significant achievement. Our strong financial performance is an endorsement of our strategic decision to focus on digital and data and
evidence of the continuing shift in spend away from traditional media. We will continue to benefit from this trend through recession as
clients recognise the value in measurable media that delivers ROI. Finally, our success at leveraging our strong client base is evidence of
the effective integration that has taken place over the last two years at DMG. We are well placed financially to benefit from any
consolidation that may take place in this industry."
Enquiries:
Digital Marketing Group plc www.digitalmarketinggroup.co.uk
Ben Langdon, Chief Executive via Redleaf Communications
Redleaf Communications DMG@Redleafpr.com
Emma Kane/Paul Dulieu/Kathryn Hurford Tel: 0207 566 6700
Cenkos Securities
Ivonne Cantu/Julian Morse Tel: 0207 397 8900
Notes to Editors:
* Digital Marketing Group (AIM: DIGI) listed on AIM in October 2006, employs over 650 people and has a market capitalisation of circa
£50m.
* Digital Marketing Group is a digital communications group that uses the principles of direct marketing to inform everything that it
does. Its philosophy is that "Good digital marketing is good direct marketing".
* Digital Marketing Group is the 3rd biggest digital marketing agency in the UK (NMA Magazine Sep 2008)
* Digital Marketing Group is not a marketing services group. It is a specialist in digital communications and underpins its expertise
with some of the best direct and data marketing people in the UK.
* At the heart of the company is Digital Brain - a process which enables the real time integration of "digital, direct and data". This
helps create unique contact strategies for each individual based on their historical data and real time interactions regardless of channel.
Digital Marketing Group's development strategy consists of three key elements:
* "organic growth" - driven by the inherent growth within the acquired businesses and the application of a group business development
programme;
* "buy and build" - through the acquisition of a number of well run and profitable businesses with complementary skills in digital
direct marketing; and
* the creation of new revenue streams from within the existing talents and resources of the group.
Digital Marketing Group operates three business segments:
1. Online Marketing and Media
* The online marketing and media segment is the company's largest segment and employs over 200 staff in offices across the UK.
* The segment offers clients an integrated package of online marketing and media services including PPC, SEO, Web design and build,
E-commerce, Online PR, Social Media, Online Brand Consultancy, CRM, E-CRM, Viral Marketing, Online advertising, Online media planning and
buying, and Mobile marketing. These services are integrated with the other services in the group through Digital Brain.
2. Data Services
* Data services and consulting are provided by Jaywing, employing over 100 consultants in online and offline data and information
services, delivered and integrated with other services in the group via Digital Brain.
3. Direct Marketing
* The direct marketing segment develops and executes direct marketing campaigns through voice channels as well as offline and online
media. These campaigns are based on highly targeted customer information and dynamic data management and are integrated through the use of
Digital Brain. The direct marketing segment employs over 300 people.
Publication quality photographs are available via Redleaf Communications.
INTERIM RESULTS
The Group reported revenues of £26.48m which is up 20% year on year (2007: £22.14m).
Gross profit, which represents revenue less direct costs of sales, is an important measure in our industry and I am also pleased to
report a gross profit of £18.72m which is up 27% year on year (2007: £14.77m). Like for like gross profit growth is 12%.
EBITDA before charges for share options of £3.85m is up 26% year on year (2007: £3.06m) and on a like for like basis growth is 10%.
Profit before tax, amortisation and charges for share options of £3.37m is up 35% year on year (2007: £2.49m). On a like for like basis,
excluding the impact of acquisitions in 2007, profit before tax, amortisation and charges for share options growth is 17%. Reported profit
before tax of £1.00m is up 19% year on year (2007: £0.84m).
The adjusted EPS (profit before tax, amortisation and charges for share options less current tax charge) is up 17% to 3.75p (2007:
3.20p).
ACQUISITIONS AND FINANCING
The Group's financial position remains strong with net debt of £1.82m (2007: £4.33m). The net debt figure reflects £2.65m spent on earn
out payments during the last six months in relation to the previous acquisitions of Cheeze Limited and Graphico Limited. As at 30 September
2008, the Group had settled all its earn out liabilities.
Gearing (net debt as % of total equity) decreased to 4% at 30 September 2008 (2007: 11%). As at 30 September the Group had £9.27m of
undrawn borrowing facilities taking into account credit cash balances (2007: £6.74m).
In October 2008 the Group secured £4m of additional banking facilities through a £2m increase in the existing revolving credit facility
and an additional £2m term loan repayable over three years.
In October 2008 the Group completed the acquisitions of Cybercom Group UK Limited, Gasbox Limited and Prodant Limited. Total upfront
cash payments relating to these acquisitions were £7.2m, with further deferred consideration of up to £12.6m, payable in cash or shares,
subject to the acquisitions achieving certain performance criteria for the periods to 31 March 2009 and 31 March 2010.
Following the refinancing and acquisitions in October, the net debt position was £9.4m and the Group's financial position remains strong
with a committed headroom of over £5m.
NEW BUSINESS
In the six months to September 2008, the Group has won new business from Investors In People, Gatecrasher, Regus Group, Mothercare,
Thomas Cook Financial Services, St Andrews Healthcare, and Danone.
The Group continues to benefit from cross referrals between Group companies which have generated over 13% of the six months' gross
profit compared to 7% for the previous twelve months.
In September 2008 the Group was ranked the 3rd largest digital marketing agency in the UK by NMA Magazine.
FINANCIAL REVIEW
The following information shows an analysis of the results for the six months to September 2008 and reported results for the six months
to September 2007. This information is based on the unaudited management accounts of the individual entities prepared under UK GAAP.
At the end of June 2007 Graphico and Hyperlaunch joined the Group and our prior year reported results therefore represent post
acquisition figures and comprise three months for both these businesses and six months for the other five.
For illustrative purposes only, additional pro forma information has been provided to include the full six months trading for all the
Group's businesses for the six month period to September 2007. These pro forma figures have been adjusted for items which, in the judgement
of the directors, are considered to be non-recurring, for example, excess management remuneration.
The table below shows the performance of the Group with comparatives for the previous year.
6mths 6mths HY/HY Growth 6mths
HY/HY
Sep 08 Sep 07 Sep 07 Pro
forma Growth
Pro forma
£million £million % £million
%
Revenue 26.48 22.14 20% 24.30
9%
Direct costs (7.76) (7.37) 5% (7.60)
2%
Gross profit 18.72 14.77 27% 16.70
12%
Operating expenses, excluding central costs,
interest, depreciation, amortisation and charges for (14.12) (11.33) 25% (12.83)
10%
share option
EBITDA before central costs and charges for share
options 4.60 3.44 34% 3.87
19%
Central costs (0.75) (0.38) 97% (0.38)
97%
EBITDA before charges for share options 3.85 3.06 26% 3.49
10%
Depreciation (0.31) (0.25) 24% (0.28)
11%
EBITA before charges for share options 3.54 2.81 26% 3.21
10%
Net interest expense (0.17) (0.32) (47%) (0.32)
(47%)
Profit before tax, amortisation and charges for
share options 3.37 2.49 35% 2.89
17%
As noted above, the pro forma September 2007 column is shown for illustrative purposes only. These figures have been adjusted for items
which, in the judgement of the directors, are considered to be non-recurring, for example, excess management remuneration.
Segmental financial performance 2008/09
In order to aid shareholders in reviewing our business we now use the following three segments:
1. Online Marketing and Media (Cheeze, Inbox Digital, Graphico, Hyperlaunch)
2. Direct Marketing (Dig For Fire, HSM)
3. Data Services and Consultancy (Jaywing)
6 mths Sep 2008 6 mths Sep 2007 HY/HY Growth
Gross Profit EBITDA* Gross Profit EBITDA* Gross Profit EBITDA*
£million £million £million £million % %
Online Marketing & Media 6.88 1.86 4.02 1.14 71% 63%
Direct Marketing 5.35 0.97 5.52 1.19 (3%) (18%)
Data Services & Consultancy 6.49 1.77 5.23 1.11 24% 59%
18.72 4.60 14.77 3.44 27% 34%
Central costs - (0.75) - (0.38) - 97%
Total 18.72 3.85 14.77 3.06 27% 26%
* EBITDA before charges for share options
On a pro forma basis, the equivalent growth by segment would have been:
6 mths Sep 2008 6 mths Pro forma Sep 2007 HY/HY Pro forma
Growth
Gross Profit EBITDA* Gross Profit EBITDA* Gross Profit EBITDA*
£million £million £million £million % %
Online Marketing & Media 6.88 1.86 5.95 1.56 16% 19%
Direct Marketing 5.35 0.97 5.52 1.19 (3%) (18%)
Data Services & Consultancy 6.49 1.77 5.23 1.11 24% 59%
18.72 4.60 16.70 3.86 12% 19%
Central costs - (0.75) - (0.38) - 97%
Total 18.72 3.85 16.70 3.48 12% 10%
* EBITDA before charges for share options
The online marketing and media segment includes Graphico and Hyperlaunch which joined the Group in June 2007. On the pro forma basis, as
explained above, the online marketing and media segment gross profit grew year on year by 16% and EBITDA (before charges for share options)
grew by 19%.
The direct marketing segment has performed poorly due entirely to the underperformance of HSM. However, actions taken by management have
resulted in a number of new client wins which will generate additional annualised gross profits of over £0.5m in 2009/10.
By comparison Dig for Fire continues to perform extremely well within the direct marketing segment and delivered 15% growth in gross
profits and 19% growth in EBITDA (before charges for share options).
As shown above the data services and consulting segment continues to perform well. This is in part a function of investment in the first
half of 2007/08 which adversely affected profit in a successful effort to increase sales. As a consequence the EBITDA year on year growth is
significantly higher in the first six months of the year than it is anticipated to be on a full year basis.
OUTLOOK
The outlook for online advertising remains positive despite the current economic environment. Many of our clients have increased their
spend through digital channels whilst reducing their overall media and marketing spends. Digital media channels deliver better ROI relative
to traditional media and this is becoming increasingly attractive for clients in an economic downturn. Indeed it appears that digital
channels appear to be thriving as a direct result of recession:
* The credit crunch has in part fuelled an increase in the popularity of certain websites as a growing number of people search online
for information.
* A study by comScore (November 10 2008) revealed that eight million people in the UK accessed financial news and research sites in
September, an increase of 10% relative to August.
* A recent poll by online search engine Twenga found that nearly 50% of all Britons are planning to use the internet in order to
economise on their Christmas spending.
The market context for digital media still remains encouraging:
* Online advertising spend in H1 2008 reached £1,682.5m
* Spending on internet advertising grew by 21% on a like for like basis when compared to H1 2007
* Online's share of total advertising spend has grown to 18.7% from 14.7% in H1 2007
Source: IAB/PwC Online Ad Spend Study H1 2008
* Future industry forecasts also remain very positive. Latest findings (October 29 2008) from market research firm 'Research and
Marketing' predict that internet advertising spend is set to rise by more than 30% in the next year
In the current environment, we remain cautious in our approach to managing our business. Three of our companies have been affected by
Kaupthing Singer & Friedlander going into administration both through the loss of expected gross profit in 2008 and pre administration bad
debts. However, we forecast conservatively and we remain very confident in our business and the digital media market place. We are now the
UKs third largest digital agency (NMA Magazine) and this enables us to pitch for and win significant new accounts.
The outlook for the second half of the year and the full year forecast remain in line with market expectations reflecting both our
strong position in the sector and the integrity and conservative approach of our budgeting process.
Ben Langdon
Chief Executive
24 November 2008 INDEPENDENT REVIEW REPORT TO DIGITAL MARKETING GROUP PLC
Introduction
We have been engaged by the company to review the interim financial information in the interim report for the six months ended 30
September 2008 which comprises the consolidated interim income statement, consolidated interim balance sheet, consolidated interim cash flow
statement and consolidated interim statement of changes in equity and the related notes 1 to 9. We have read the other information contained
in the interim financial report and considered whether it contains any apparent misstatements or material inconsistencies with the interim
financial information.
This report is made solely to the company in accordance with guidance contained in ISRE (UK and Ireland) 2410, 'Review of Interim
Financial Information performed by the Independent Auditor of the Entity'. Our review work has been undertaken so that we might state to the
company those matters we are required to state to them in a review report and for no other purpose. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusion we
have formed.
Directors' responsibilities
The interim report is the responsibility of, and has been approved by, the directors. The AIM rules of the London Stock Exchange require
that the accounting policies and presentation applied to the interim figures are consistent with those which will be adopted in the annual
accounts having regard to the accounting standards applicable for such accounts. The annual financial statements of the group are prepared
in accordance with the basis of preparation set out in Note 1.
Our responsibility
Our responsibility is to express to the company a conclusion on the interim financial information in the interim report based on our
review.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim
Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United
Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the financial information in the interim report
for the six months ended 30 September 2008 is not prepared, in all material respects, in accordance with the basis of accounting described
in Note 1.
GRANT THORNTON UK LLP
REGISTERED AUDITOR
CHARTERED ACCOUNTANTS
SHEFFIELD
24 November 2008
Consolidated Interim Income Statement
Note Unaudited Unaudited Audited
Six months Six months Year ended
ended 30 ended 30 31 March
Sept 2008 Sept 2007 2008
£'000 £'000 £'000
Continuing operations
Revenue 2 26,475 22,138 50,971
Direct costs (7,755) (7,370) (17,892)
Gross profit 18,720 14,768 33,079
Other operating income 137 16 212
Amortisation (758) (648) (1,407)
Operating expenses (16,927) (12,982) (29,204)
Operating profit 1,172 1,154 2,680
Finance income 145 64 252
Finance costs (319) (380) (783)
Net financing costs (174) (316) (531)
Profit before tax 998 838 2,149
Taxation 3 (667) (301) (1,013)
Profit for the period attributable 331 537 1,136
to shareholders
Earnings per share 4
From continuing operations
- basic 0.50p 0.95p 1.79p
- diluted 0.40p 0.78p 1.44p
Consolidated Interim Balance Sheet
Note Unaudited Unaudited Audited
30 Sept 30 Sept 31 March
2008 2007 2008
£'000 £'000 £'000
Non-current assets
Property, plant and equipment 2,096 2,128 2,215
Goodwill 39,249 38,712 39,449
Other intangible assets 12,639 14,083 13,324
53,984 54,923 54,988
Current assets
Inventories 842 562 790
Trade and other receivables 8,422 8,539 9,582
Cash and cash equivalents 11,499 5,765 12,004
20,763 14,866 22,376
Total assets 74,747 69,789 77,364
Current liabilities
Bank overdraft 5 8,976 4,603 6,901
Other interest-bearing loans and 5 1,886 1,130 1,122
borrowings
Financial derivatives 6 155 - 195
Trade and other payables 9,696 13,377 17,168
Tax payable 1,927 1,021 1,242
Provisions 168 - 133
22,808 20,131 26,761
Non-current liabilities
Other interest-bearing loans and 5 2,458 4,362 3,797
borrowings
Provisions 64 450 225
Deferred tax liabilities 3,668 3,938 3,882
6,190 8,750 7,904
Total liabilities 28,998 28,881 34,665
Net assets 45,749 40,908 42,699
Equity attributable to shareholders
Share capital 33,814 32,206 32,655
Share premium account 6,621 5,306 5,954
Hedging reserve (155) - (195)
Shares to be issued - 1,562 536
Retained earnings 5,469 1,834 3,749
Total equity 45,749 40,908 42,699
Consolidated Interim Cash Flow Statement
Note Unaudited Unaudited Audited
Six months Six months Year ended
ended 30 ended 30 31 March
Sept 2008 Sept 2007 2008
£'000 £'000 £'000
Cash flow from operating
activities
Profit for the period 331 537 1,136
Adjustments for:
Depreciation, amortisation and 1,067 902 1,994
impairment
Financial income (145) (64) (252)
Financial expenses 319 380 783
Share-based payment expense 1,389 1,006 2,357
Taxation 667 301 1,013
Operating cash flow before 3,628 3,062 7,031
changes in working capital and
provisions
Decrease/(increase) in trade 1,160 (629) (1,672)
and other receivables
Increase in inventories (52) (106) (334)
(Decrease)/increase in trade (2,543) 121 4,021
and other payables
Cash generated from the 2,193 2,448 9,046
operation
Interest received 145 64 252
Interest paid (319) (380) (717)
Tax paid (196) (438) (1,194)
Net cash flow from operating 1,823 1,694 7,387
activities
Cash flows from investing
activities
Proceeds from sale of property, plant and equipment - - 10
Acquisitions of subsidiaries, (3,565) (6,378) (8,021)
net of cash acquired
Acquisition of property, plant (263) (333) (747)
and equipment
Net cash outflow from (3,828) (6,711) (8,758)
investing activities
Cash flows from financing
activities
Proceeds from the issue of new - 9,463 9,463
share capital
Repayment of borrowings (575) (6,189) (5,894)
Net cash (outflow)/inflow from (575) 3,274 3,569
financing activities
Net (decrease)/increase in cash and cash (2,580) (1,743) 2,198
equivalents
Cash and cash equivalents at 5,103 2,905 2,905
beginning of period
Cash and cash equivalents at 2,523 1,162 5,103
end of period
Cash and cash equivalents
comprise:
Cash at bank and in hand 11,499 5,765 12,004
Bank overdrafts 5 (8,976) (4,603) (6,901)
Cash and cash equivalents at 2,523 1,162 5,103
end of period
Consolidated Interim Statement of Changes in Equity
Share capital Share premium Hedging reserve Shares to be issued Retained earnings
Total
account
£'000 £'000 £'000 £'000 £'000
£'000
At 1 April 2007 25,063 2,986 - 500 291
28,840
Allotment of 50p Ordinary 7,143 2,320 - - -
9,463
shares
Retained earnings - - - - 537
537
Credit in respect of - - - - 1,006
1,006
share-based payments
Shares to be issued - - - 1,062 -
1,062
At 30 September 2007 32,206 5,306 - 1,562 1,834
40,908
Allotment of 50p Ordinary 449 648 - - -
1,097
shares
Retained earnings - - - - 599
599
Cash flow hedges - - (195) - -
(195)
Credit in respect of - - - - 1,316
1,316
share-based payments
Shares to be issued - - - (1,026) -
(1,026)
At 31 March 2008 32,655 5,954 (195) 536 3,749
42,699
Allotment of 50p Ordinary 1,159 667 - (536) -
1,290
shares
Retained earnings - - - - 331
331
Cash flow hedges - - 40 - -
40
Credit in respect of - - - 1,389
1,389
share-based payments
At 30 September 2008 33,814 6,621 (155) - 5,469
45,749
1 Basis of Preparation
The interim financial statements have been prepared in accordance with applicable accounting standards (IFRS) and under the historical
cost convention. The interim financial statements do not constitute statutory financial statements in accordance with section 240 of the
Companies Act 1985. The full year figures in this report are derived from the statutory accounts on which the auditors gave an unmodified
report. The group's statutory financial statements prepared under International Financial Reporting standards (IFRS) have been filed with
the Registrar of Companies.
The principal accounting policies of the group remained unchanged from those set out in the group's 2008 annual report and financial
statements.
The interim financial statements have been reviewed by the company's auditor. A copy of the auditor's review report is attached to this
interim report.
The interim financial statements were approved by the board of directors on 24 November 2008.
2 Segmental reporting
The Group's primary reporting format is business segments and its secondary format is geographical segments.
The reporting segments are as follows:
1. 'Online Marketing and Media' (Graphico New Media Limited, Hyperlaunch New Media Limited, Inbox Digital (part of HSM Limited), Cheeze
Limited)
2. 'Direct Marketing' (HSM Telemarketing (part of HSM Limited), Scope Creative Marketing Limited (trading as Dig For Fire))
3. 'Data Services and Consultancy' (Alphanumeric Holdings Limited, trading as Jaywing)
Conntinuing operations Six Months ended 30 September 2008
Online marketing & media Direct marketing services Data services & consultancy
Unallocated Group Total
£'000 £'000 £'000
£'000 £'000
Revenue 12,901 6,733 7,806
(965) 26,475
Direct costs (6,022) (1,380) (1,318)
965 (7,755)
Gross profit 6,879 5,353 6,488
- 18,720
Other operating income 137 - -
- 137
Operating expenses excluding depreciation, (5,151) (4,384) (4,720)
(753) (15,008)
amortisation and charges for share options
Operating profit before depreciation, amortisation 1,865 969 1,768
(753) 3,849
and charges for share options
Depreciation (135) (116) (57)
(1) (309)
Operating profit before amortisation and charges for 1,730 853 1,711
(754) 3,540
share options
Amortisation (322) (167) (269)
- (758)
Charges for share options (see (154) (133) (465)
(858) (1,610)
note 9)
Operating profit 1,254 553 977
(1,612) 1,172
Finance income
145
Finance costs
(319)
Profit before tax
998
Taxation
(667)
Profit for period from continuing operations
331
2 Segmental reporting (continued)
Continuing operations Six Months ended 30 September 2007
Online marketing & media Direct marketing services Data services & consultancy
Unallocated Group Total
£'000 £'000 £'000 £'000
£'000
Revenue 8,799 7,286 6,978
(925) 22,138
Direct costs (4,783) (1,764) (1,748) 925
(7,370)
Gross profit 4,016 5,522 5,230 -
14,768
Other operating income - - 16 -
16
Operating expenses excluding depreciation, (2,875) (4,334) (4,132)
(380) (11,721)
amortisation and
charges for share options
Operating profit before depreciation, amortisation 1,141 1,188 1,114
(380) 3,063
and charges for share options
Depreciation (83) (97) (73)
(1) (254)
Operating profit before amortisation 1,058 1,091 1,041
(381) 2,809
and charges for share options
Amortisation (217) (162) (269) -
(648)
Charges for share options (103) (132) (209)
(563) (1,007)
Operating profit 738 797 563
(944) 1,154
Finance income
64
Finance costs
(380)
Profit before tax
838
Taxation
(301)
Profit for period from continuing operations
537
3 Taxation
Period ended Period ended Year ended
30 Sept 2008 30 Sept 2007 31 March 2008
£'000 £'000 £'000
Recognised in the consolidated
income statement:
Current period tax 881 691 1,670
Deferred tax credit
Origination and reversal of temporary timing (214) (390) (657)
differences
Total tax charge 667 301 1,013
Reconciliation of current
period tax charge:
Profit before tax 998 838 2,149
Taxation using the UK Corporation Tax rate of 28% 279 251 645
(2007 30%)
Effects of:
Non-deductible expenses 212 138 434
Share based payment charges 390 302 580
Timing differences - - 54
Prior year adjustment - - (43)
Total current period tax 881 691 1,670
charge
4 Earnings per share
Period ended Period ended
Year ended
30 Sept 2008 30 Sept 2007
31 March 2008
From continuing operations pence per share pence per share
pence per share
Basic 0.50p 0.95p
1.79p
Diluted 0.40p 0.78p
1.44p
Earnings per share have been calculated by dividing the profit attributable to shareholders by the weighted average of ordinary shares in
issue during the
period. The calculations of basic and diluted earnings per share are:
Period ended Period ended
Year ended
30 Sept 2008 30 Sept 2007
31 March 2008
£'000 £'000
£'000
Profit for the period 331 537
1,136
attributable to shareholders
Weighted average number of Number '000 Number '000
Number '000
ordinary shares in issue:
Basic 66,250 56,271
63,653
Adjustment for share options, warrants and 15,807 12,764
15,222
contingent shares
Diluted 82,057 69,035
78,875
Adjusted earnings per share
Period ended Period ended
Year ended
30 Sept 2008 30 Sept 2007
31 March 2008
From continuing operations pence per share pence per share
pence per share
Basic adjusted earnings per 3.75p 3.20p
7.30p
share
Diluted adjusted earnings per 3.03p 2.61p
5.89p
share
Adjusted earnings per share have been calculated by dividing the profit attributable to shareholders before amortisation and charges for
share options by the
weighted average of ordinary shares in issue during the period. The numbers used in calculating the basic and diluted adjusted earnings per
share are
reconciled below:
Period ended Period ended
Year ended
30 Sept 2008 30 Sept 2007
31 March 2008
£'000 £'000
£'000
Profit before tax 998 838
2,149
Amortisation 758 648
1,407
Charges for share options 1,610 1,006
2,758
Adjusted profit attributable to shareholders from 3,366 2,492
6,314
continuing operations
Current period tax charge (881) (691)
(1,670)
2,485 1,801
4,644
5 Bank overdraft, loans and
borrowings
30 Sept 2008 30 Sept 2007 31 March 2008
£'000 £'000 £'000
Summary
Bank overdraft 8,976 4,603 6,901
Borrowings, undiscounted cash 4,828 6,727 5,834
flows
13,804 11,330 12,735
Borrowings are repayable as
follows:
Within 1 year
Bank overdraft 8,976 4,603 6,901
Borrowings 2,131 1,560 1,453
Total due within 1 year 11,107 6,163 8,354
less future interest (245) (430) (331)
Total due within 1 year 10,862 5,733 8,023
In more than 1 year but not 1,252 1,448 1,373
more than 2 years
In more than 2 years but not 1,166 1,358 1,299
more than 3 years
In more than 3 years but not 279 1,271 952
more than 4 years
In more than 4 years but not - 383 112
more than 5 years
Over 5 years - 707 645
Total due in more than 1 year 2,697 5,167 4,381
less future interest (239) (805) (584)
Total due in more than 1 year 2,458 4,362 3,797
Average interest rates at the balance sheet date % % %
were:
Overdraft 7.25 7.75 7.50
Term loan 7.70 8.60 7.30
Mortgage 7.00 7.00 7.00
The borrowing facilities available to the Group at 30 September 2008 was £11.14 million (2007 £11.07m) and,
taking into account cash balances within the Group companies, there were £9.27 million (2007 £6.74m) of
available borrowing
facilities.
A Composite Accounting System is set up with the Group's bankers, which allows debit balances on overdraft to
be offset across the Group
with credit balances.
6 Financial derivatives
30 Sept 2008 30 Sept 2007 31 March 2008
£'000 £'000 £'000
Interest rate cap 155 - 195
In 2007 the Group purchased an interest rate cap of 6.19% for the period 2007 to 2012 for £4,000,000 of its
borrowings. This cap is designated a hedge of the interest expense relating to the Group loans. The contract
was marked to market at 30 September 2008 and there was a net liability of £155,000.
7 Contingent liabilities
Acquisitions made by the Group involved earn out agreements whereby the consideration payable included a deferred element of cash or
shares or both which was contingent on the future financial performance of the acquired entity. As at 30 September 2008 all earn out
liabilities have been settled.
The maximum liability payable:
30 Sept 2008 30 Sept 2007 31 March 2008
£'000 £'000 £'000
In one year or less - - 1,600
8 Subsequent events
On 2 October 2008 the Group secured additional banking facilities of £4,000,000 through an increase in the existing revolving credit
facility and an additional £2,000,000 term loan repayable over three years.
On 2 October 2008 the Group acquired all of the ordinary shares in Cybercom Group UK Limited for £6,000,000 cash. Deferred
consideration of up to £3,000,000 is payable in cash and shares subject to Cybercom achieving certain performance criteria for the periods
to 31 March 2009 and 31 March 2010. The provisional fair value of the net assets acquired is £1,042,300 and based upon the directors' best
estimates the goodwill is expected to be £8,409,900.
On 2 October 2008 the Group acquired all of the ordinary shares in Gasbox Limited for £1,000,000 cash. Deferred consideration of up to
£9,000,000 is payable in cash, options and shares subject to Gasbox achieving certain performance criteria for the periods to 31 March 2009
and 31 March 2010. The provisional fair value of the net assets acquired is £478,800 and based upon the directors' best estimates the
goodwill is expected to be £853,500.
On 7 October 2008 the Group's subsidiary Alphanumeric Limited acquired all of the ordinary shares in Prodant Limited for £165,000 cash.
Deferred consideration of up to £585,000 is payable in cash subject to Prodant achieving certain performance criteria for the periods to 31
March 2009 and 31 March 2010. The provisional fair value of the net assets acquired is £54,000 and based upon the directors' best estimates
the goodwill is expected to be £407,300.
9 Accounting estimates and judgements
Impairment of goodwill
The carrying amount of goodwill is £39,249,000 (2007 £38,712,000). The directors are confident that the carrying amount of goodwill is
fairly stated, and have carried out an impairment review within the last 12 months.
Other intangible assets
The valuation of customer lists is based on key assumptions which the directors have assessed, and are satisfied that the carrying value
of these assets is fairly stated.
Share-based payment
The share based payment charge consists of two charges.
A charge for the fair value at the date of grant of the share base remuneration calculated using a trinomial pricing model and various
assumptions. In considering an appropriate charge, the directors commissioned an independent valuation from American Appraisal UK Limited
and have fully adopted their findings and accordingly a charge of £1,389,000 has been made in the year (2007: £1,006,000).
The Group transferred the liability to settle the Employer's NI from the share option holder to the Group. As a result the Group has
charged £221,000 in the period (2007: £nil) as an additional Share Based Payment charge. The future Employer's NI liability has been
estimated and discounted over the 3 year period using a discount rate of 10%.
Recognition of revenue as principal or agent
The Directors consider that they act as a principal in transactions where the Group assumes the credit risk. Where this is via an agency
arrangement and the Group assumes the credit risk for all billings it therefore recognises gross billings as revenue.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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