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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
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Mkm Group | LSE:MKM | London | Ordinary Share | GB00B013MJ08 | ORD 0.5P |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
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0.00 | 0.00% | 0.75 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
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0 | 0 | N/A | 0 |
30 September 2008 AIM: MKM MKM GROUP PLC ("the Group" or "the Company") Final Results for the year ended 31 March 2008 Key Points * Group considerably enlarged by two acquisitions, Leapfrog in August 2007 and Promodus in October 2007: - more than doubles the size of the Group - broadens Group's geographic reach - strengthens Group's market offering * Integration of acquisitions substantially completed including: - rebranding of existing loyalty and sales promotion business under 'Leapfrog' name - integrated IT platforms now in place - shared product development resources * Strategic shift of business towards longer term, contracted marketing programmes * Pro forma revenue of the combined business was £10.3m* (2007 statutory revenue of £3.9m) * Pro forma operating profit of the combined business was £686,000*, after taking into account pre-acquisition one-off charges not expected to re-occur * The audited results show revenue of £6,970,000 (2007 £3,888,000) and a loss from operations of £222,000 (2007 profit £404,000). These include 7 months contribution from the Leapfrog business and 6 months contribution from Promodus, being the results generated since acquisition * Post year end, launch of flagship product, 'Airport Angel' - supports strategy to build long term loyalty contracts * Major new contracts signed post year end * Board views prospects positively despite the difficult economic environment *Assumes that the acquisition of both the Leapfrog and Promodus businesses had been completed on the first day of the financial year, derived from management information. Andrew Johnson, Executive Chairman, commented, "The acquisitions of the Leapfrog business in Australia in August 2007, and the Promodus business in London in October 2007, more than doubled the Group's size and have broadened our geographic reach and strengthened our market offering. We now have a larger and broader business base upon which we can build. Whilst it has taken longer to achieve our targets than we had hoped at the time of the acquisitions, we now have a good platform upon which to grow, with an emphasis on recurring revenues. Traditionally, in a tough economic climate, the market focuses more on exploiting sales promotion and direct marketing tools which have measurable results. Thus whilst the economic slow down has increased the time taken to close large contracts, we believe that we will be able to build our business through providing clients with innovative and cost effective campaigns with measurable results. We view prospects for the Group positively despite the difficult economic environment." Enquiries: MKM Group Plc (www.mkmgroupplc.com) T: 0161 877 1112 Andrew Johnson, Executive Chairman Matthew Toynton, Finance Director WH Ireland T: 0161 832 2174 David Youngman Biddicks T: 020 7448 1000 Katie Tzouliadis Sophie Lane CHAIRMAN'S STATEMENT OVERVIEW The financial year to 31 March 2008 was a transformational one for the MKM Group. The acquisitions of the Leapfrog business in Australia in August 2007, and the Promodus business in London in October 2007, more than doubled the Group's size and have broadened our geographic reach and strengthened our market offering. We now employ approximately 100 people in offices in the UK, Australia and New Zealand. The integration of both our acquisitions is now substantially complete. In the final quarter of the financial year, we adopted the Leapfrog name across our existing loyalty and sales promotion business, formerly MKM Concepts, and all our businesses now share common IT platforms and product development resources. These developments allow us to focus our development resources on core products such as StARS thus improving the competitiveness of our client offer. Following the acquisition of Leapfrog, some 60% of annual Group revenues are now generated in the Asia Pacific region, a growth region for our services. Additionally our management focus has shifted substantially towards the delivery of longer term, multi-year loyalty and Customer Relationship Management ("CRM") programmes as opposed to shorter, tactical marketing campaigns. These longer term programmes allow us to build productive relationships with clients and provide greater visibility of earnings. Whilst this strategic shift has been very positive for the business the market environment deteriorated, and in the second half of the financial year, sales across the business were below our expectations. Since the financial year end, we have continued to implement the strategy announced at the time of the Leapfrog acquisition and have begun to see the sales position improve. An important development in the first quarter of the new financial year was the launch of a new flagship product, 'Airport Angel', which has strengthened our offering to customers. The launch was well received and I am pleased to report that we have secured some major contracts with large financial institutions. FINANCIAL REVIEW The full year results of the combined business on a pro forma basis assuming that the acquisition of both the Leapfrog and Promodus businesses had been completed on the first day of the financial year show sales of £10.3m and an operating profit of £686,000. The pro forma operating profit is struck after taking into account one-off charges in the businesses acquired that are not expected to re- occur. The pro forma sales of £10.3m are approximately 260% of the prior year statutory sales of £3.9m illustrating the impact of the acquisitions on the size of the Group. The audited results show sales of £6,970,000 (2007 £3,888,000) and include 7 months contribution from the Leapfrog business and 6 months contribution from Promodus, being the results generated since acquisition. The loss from operations of £222,000 (2007 profit £404,000) was primarily associated with poor performance from the Leapfrog Australia business during the second half of the financial year resulting from the loss of a major client and a reduction in the volume of promotional sales. We ended the year with a total cash deficit of £208,000 (2007 surplus of £1,906,000). The cash reduction is primarily associated with the financing of the two acquisitions. OPERATIONS The focus during the year has been on the completion of the two acquisitions and their subsequent integration into the Group. As part of this process, we have rebranded the UK business, previously MKM Concepts, as Leapfrog and also sought to simplify the structure of our Asia-Pacific operations. We continue to push ahead to fully integrate our businesses and exploit the benefits of their respective relationships with blue chip multi-national clients. These initiatives allow us to significantly improve the solutions we build for our clients and maximise the benefits we gain from our key staff. StARS Last year, the Group made a major investment in the development of StARS, its web-based database programme. The StARS programme allows us to hold comprehensive details of promotional offers on one database and readily supports the activity of multiple clients. StARS also enables our clients' consumers to access promotional offers easily and provides clients with enhanced management information on the results of marketing campaigns. The launch of StARS represented a major step forward in the fulfilment of campaigns for clients and helped Leapfrog UK to win a number of accounts during the year. StARS is now being utilised to support all of our major clients in the UK and creates significant operational efficiencies. Leapfrog Australia is now using StARS to support a number of significant new business pitches. We have continued to enhance StARS to meet the demands of new clients and the programme provides us with some significant advantages which allow us to differentiate ourselves from competitors. Loyalty Schemes The acquisition of Leapfrog strengthened our capability in the management of point collection loyalty schemes. Following the year end we signed a major three year contract in New Zealand with Genesis, the government owned utility, to run its consumer loyalty programme, servicing 550,000 households. Airport Angel After the year end, in May 2008 we launched Airport Angel. Airport Angel membership allows consumers to access airport lounges across the world and to receive a number of other support services aimed at enhancing their travel experience. The product includes an innovative text service which enables consumers to receive information on their mobile phones about their plane arrival and departure times. We have ambitious plans for the development of Airport Angel and over the next 12 months will be developing the product and launching it to international markets. At present, sales of the product are primarily focused on the retail banking and financial services sector. In these sectors, the product becomes an integral part of our clients' offer to their consumer. This in turn helps to support our strategy of increasing the proportion of our revenues derived from long term contracts. Airport Angel has been well received by the market and, since the financial year end, we have signed major contracts with UK based banks and are in discussions with a number of other major potential clients. Promodus The Promodus business, which provides a full range of marketing services specialising in servicing clients in the financial services, B2B and technology sectors, finished the year on a very positive note hitting the targets agreed at the time of the acquisition. As a result of this we paid a deferred consideration of £125,000. Since the year end the Promodus business has been adversely affected by the economic slowdown. Their major financial service clients have cut budgets and in general are being more cautious with their expenditure. BUSINESS DEVELOPMENT In February we reported that short term sales were disappointing but that the longer term pipeline remained strong. I am pleased to say that in the UK we have closed a number of the long term contracts that we were negotiating at that time and, since the financial year end, Leapfrog Australia has won a number of tactical marketing campaigns. Since the financial year end, the UK tactical business, which was under-performing, has been brought under the control of Brian Smillie who is now managing the sales force internationally. THE BOARD The composition of the Board has changed with our acquisitions. In August 2007, we were pleased to welcome co-founders of the Leapfrog business, Brian Smillie and Richard Tenser, to the Board. Brian assumed the role of International Managing Director. In January 2008, Victor Koch stepped down from the Board and I would formally like to thank him on behalf of all the Directors for his contribution to the Group over many years. STRATEGY In my statement last year I explained that the acquisition of Leapfrog Group gave us the opportunity to build a first rate and robust loyalty and sales promotion business with substantial potential for growth. We remain focused on this objective. Our recent contract wins and the successful launch of Airport Angel have confirmed the validity of this strategy. We continue to focus on securing long term loyalty and CRM contracts which provide greater visibility of future earnings and a more solid platform upon which to build. Last year I also stated that we would continue to search for an acquisition that would enable us to build a second leg for the Group. However, given the current market and economic environment our primary focus will be on organic growth. Whilst there are acquisition opportunities we will focus on those that strengthen our existing offer. CURRENT TRADING & PROSPECTS The Company entered the current financial year with a larger and broader business base and greater critical mass in key areas such as information technology and product development. Whilst it has taken longer to achieve our targets than we had hoped at the time of the acquisitions, we now have a good platform upon which to build. Traditionally, in a tough economic climate, the market focuses more on exploiting sales promotion and direct marketing tools which have measurable results. Thus whilst the economic slow down has increased the time taken to close large contracts, we believe that we will be able to build our business through providing clients with innovative and cost effective campaigns with measurable results. We view prospects for the Group positively despite the difficult economic environment. ANDREW JOHNSON CHAIRMAN 29 September 2008 MKM Group Plc Consolidated Income Statement for the year ended 31 March 2008 2008 2007 £'000 £'000 Revenue 6,970 3,888 Cost of sales (2,601) (1,411) ---------- -------- GROSS PROFIT 4,369 2,477 Administrative expenses (4,591) (2,073) ---------- -------- (LOSS)/PROFIT FROM OPERATIONS (222) 404 Finance expense (68) (1) Finance income 41 53 ---------- -------- (LOSS)/PROFIT BEFORE TAXATION (249) 456 Income tax credit 45 124 ---------- -------- (LOSS)/PROFIT FOR THE YEAR (204) 580 ---------- -------- ---------- -------- ---------- -------- Attributable to the equity holders of the parent (204) 580 ---------- -------- ---------- -------- Basic (loss)/earnings per share (pence) (0.3) 1.3 Diluted (loss)/earnings per share (pence) (0.3) 1.1 MKM Group Plc Consolidated Statement of Changes in Equity for the year ended 31 March 2008 Share Deferred Share Share Option Merger Translation share Retained capital premium Reserve Reserve Reserve capital earnings Total consideration £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Balance as at 1 April 2007 218 2,205 112 - - - (107) 2,428 -------------------------------------------------------------------------------------- Changes in equity for year ended 31 March 2008 Net loss for the - - - - - - (204) (204) period -------------------------------------------------------------------------------------- Total recognised income and expense for the period - - - - - - (204) (204) Equity credit in respect of share based payments - - 25 - - - - 25 Deferred tax asset relating to share options - - (51) - - - - (51) Issue of Equity Shares 147 442 - 1,767 - 671 - 3,027 Exchange rate loss on translation of overseas - - - - (84) - - (84) operations -------------------------------------------------------------------------------------- Balance as at 31 March 2008 365 2,647 86 1,767 (84) 671 (311) 5,141 -------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------- Consolidated Statement of Changes in Equity for the year ended 31 March 2007 Share Deferred Share Share Option Merger Translation share Retained capital premium Reserve Reserve Reserve capital earnings Total consideration £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Balance as at 1 April 2006 218 2,205 31 - - - (687) 1,767 ----------------------------------------------------------------------------------- Changes in equity for year ended 31 March 2007 Net profit for the - - - - - - 580 580 period ----------------------------------------------------------------------------------- Total recognised income and expense for the period - - - - - - 580 580 Equity credit in respect of share based payments - - 30 - - - - 30 Deferred tax asset relating to share options - - 51 - - - - 51 ----------------------------------------------------------------------------------- Balance as at 31 March 2007 218 2,205 112 - - - (107) 2,428 ----------------------------------------------------------------------------------- ----------------------------------------------------------------------------------- MKM Group Plc Consolidated Balance Sheet as at 31 March 2008 31 March 2008 31 March 2007 £'000 £'000 NON-CURRENT ASSETS Property, plant & equipment 691 277 Intangibles 6,597 703 Deferred tax asset 185 178 -------------- -------------- 7,473 1,158 CURRENT ASSETS Trade and other receivables 2,635 806 Cash and cash equivalents 134 1,906 ------------- -------------- 2,769 2,712 ------------- -------------- TOTAL ASSETS 10,242 3,870 CURRENT LIABILITIES Trade and other payables (4,068) (1,437) Borrowings (342) - Loan stock (450) - Provisions (159) (5) ------------ ------------- (5,019) (1,442) NON-CURRENT LIABILITIES Borrowings (82) - ------------ ------------- TOTAL LIABILITIES (5,101) (1,442) ------------ ------------- NET ASSETS 5,141 2,428 ------------ ------------- ------------ ------------- CAPITAL AND RESERVES ATTRIBUTABLE TO THE EQUITY HOLDERS OF THE COMPANY Share capital 365 218 Share premium 2,647 2,205 Share option reserve 86 112 Deferred share capital consideration 671 - Merger reserve 1,767 - Translation reserve (84) - Retained earnings (311) (107) ------------ ------------- TOTAL EQUITY 5,141 2,428 ------------ ------------- ------------ ------------- MKM Group Plc Consolidated Cash Flow Statement for the year ended 31 March 2008 Year ended Year ended 31 March 2008 31 March 2007 £'000 £'000 £'000 £'000 CASHFLOWS FROM OPERATING ACTIVITIES (Loss)/profit before taxation (249) 456 Adjustments for Interest receivable (41) (53) Depreciation 174 80 Gain on deferred consideration (97) - Interest expense 68 1 Share option charge 25 30 -------- ------- Operating cashflow before movement in working capital (120) 514 Increase in receivables (596) (546) Increase in payables 212 278 Increase/(decrease) in provisions 154 (16) Effect of foreign exchange rate changes (71) - -------- ------- Movement in working capital (301) (284) Interest paid (68) (1) --------- ------- Net cash (used in)/generated from operations (489) 229 --------- ------- CASHFLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment (378) (72) Purchase of intangible assets (247) - --------- Acquisition of share capital in new companies (1,366) - Costs associated with acquisition (422) - Cash within acquired Company 272 - --------- Acquisition of subsidiary (1,516) - Interest received 41 53 ------- ------ Net cash outflow from investing activities (2,100) (19) -------- ------ CASHFLOWS FROM FINANCING ACTIVITIES Issue of ordinary share capital 475 - ------- ------ Net cash generated from financing activities 475 - ------- ------ Net (decrease)/increase in cash and cash equivalents (2,114) 210 Cash and cash equivalents at the beginning of the period 1,906 1,696 ------- ------ Cash and cash equivalents at the end of the period (208) 1,906 ------- ------ ------- ------ MKM Group Plc Notes forming part of the financial statements for the year ended 31 March 2008 ------------------------------------------------------------------------------- 1. Preliminary announcement The financial information set out in this document does not constitute the company's statutory accounts for the year ended 31 March 2008, but is derived from those audited accounts to that date which received an unqualified auditors' report and will be filed with the Registrar of Companies. The information in this preliminary announcement has been computed in accordance with International Financial Reporting Standards (IFRS), but does not contain sufficient information to comply with IFRS. The company has today published full financial statements that comply with IFRS. The preliminary announcement has been prepared on the basis of the accounting policies set out in the statutory financial statements for the year ended 31 March 2008. The annual accounts for the year ended 31 March 2008 have been posted to shareholders and will be available from the Company's website on www.mkmgroupplc.com. 2. Earnings per share 2008 2007 £'000 £'000 Numerator (Loss)/profit for the year (204) 580 ----------- ------------ ----------- ------------ (Loss)/earnings used in basic EPS (204) 580 ----------- ------------ ----------- ------------ (Loss)/earnings used in diluted EPS (204) 580 ----------- ------------ ----------- ------------ Denominator Weighted average number of shares used in basic EPS 60,630,267 43,744,545 ----------- ------------ ----------- ------------ Effects of: - employee share options 7,864,881 ----------- ------------ Weighted average number of shares used in diluted EPS 51,609,426 ------------ ------------ Basic (loss)/earnings per share (pence) (0.3) 1.3 ----------- ------------ ----------- ------------ Diluted (loss)/earnings per share (pence) (0.3) 1.1 ----------- ------------ ----------- ------------ The basic earnings per share has been calculated using the profit after tax, divided by the weighted average number of shares in issue of 60,630,267 (2007: 43,744,545). As a result of the loss in the year to 31 March 2008, the diluted earnings per share is the same as the basic earnings per share as the employee share options of 2,845,481 and deferred consideration shares of 20,216,216 are antidilutive. MKM Group Plc - Group Financial Statements Notes forming part of the financial statements for the year ended 31 March 2008 ------------------------------------------------------------------------------- 2. Earnings per share (continued) In the year to 31 March 2007, diluted earnings per share is calculated by adjusting the weighted average number of shares in issue on the assumption of conversion of all the potentially dilutive ordinary shares which are share options granted where the exercise price is less than the average price of the Company's ordinary shares during the period. The weighted average number of potentially dilutive share options at 31 March 2007 was 7,864,881. 3. Acquisition of subsidiary Leisure World On 29 August 2007, the group acquired 100% of the issued share capital of Leisure World Pty Ltd (trading as the Leapfrog Group in Australia) for cash consideration of £1,250,000. Leisure World Pty Ltd is the parent company of a group of companies involved in Loyalty and Sales promotion activity across Asia Pacific. This transaction has been accounted for by the purchase method of accounting. Book value and fair value £'000 £'000 Fair value of assets and liabilities acquired Property, plant and equipment 163 Deferred tax asset 36 Intangible assets 141 Trade and other receivables 1,121 Cash and cash equivalents 191 Trade and other payables (1,881) Current tax liabilities (226) ---------- Net liabilities on acquisition (455) Consideration paid Initial cash consideration 1,250 Initial 20 million ordinary shares 1,600 Loan stock 450 Deferred consideration 708 Costs of acquisition 481 ---------- Total consideration 4,489 -------- Goodwill 4,944 -------- -------- The goodwill arising on the acquisition of Leisure World Pty Ltd is attributable to the anticipated future profitability that will be achieved as a result of distributing the Group's products into new markets and the anticipated future synergies that will be achieved throughout the Group as a result of bringing the businesses together. MKM Group Plc - Group Financial Statements Notes forming part of the financial statements for the year ended 31 March 2008 ------------------------------------------------------------------------------- 3. Acquisition of subsidiary (continued) Leisure World (continued) The fair value of the shares issued as initial consideration was determined by reference to their published market price of 8p/share at the date of acquisition. The deferred consideration shares have not yet been issued and the original settlement terms are being renegotiated. The value above is based upon the number of shares that would have been issued under the original agreement terms but reflect a decrease in the fair value of the shares. Management has estimated the fair value by reference to the signed sale and purchase agreement between the parties, which in turn references the published price for the 30 days up to 30 June 2008. The renegotiation is also expected to deliver a gain of £97,000 through the award of a reduced number of shares (20,216,216) to settle this same value and this gain has been recognised within the income statement. The net cash outflow on acquisition was £1,540,000 being the net of cash consideration and costs above partially offset by £191,000 cash within the acquired company. At the balance sheet date £74,000 of the costs of acquisition had not yet been settled. Leisure World Pty Ltd contributed £3,162,000 revenue and a loss of £247,000 to the Group's profit before tax for the period between the date of acquisition and the balance sheet date. If the acquisition of Leisure World Pty Ltd had been completed on the first day of the financial year, the revenue it would have contributed to group revenues for the period would have been £6,135,000 and group profit attributable to equity holders of the parent would have been £645,000. The interim results to 30 September 2007 included provisional accounting for the deferred consideration of the acquisition. At this time a higher level of deferred consideration was expected to be awarded and the share price on 30 September 2007 was used to value the deferred consideration shares and as such the total goodwill was recorded as £6,506,000. MKM Group Plc - Group Financial Statements Notes forming part of the financial statements for the year ended 31 March 2008 ------------------------------------------------------------------------------- 3. Acquisition of subsidiary (continued) Promodus On 9 October 2007, the group acquired 100% of the issued share capital of Promodus Ltd for cash consideration of £116,000. Promodus Ltd is the parent company of a group of companies involved in marketing consultancy. This transaction has been accounted for by the purchase method of accounting. Book value and fair value £'000 £'000 Fair value of assets and liabilities acquired Property, plant and equipment 12 Deferred tax asset - Inventories 5 Trade and other receivables 121 Cash and cash equivalents 81 Trade and other payables (113) -------- Net assets on acquisition 106 Consideration paid Initial cash consideration 116 Initial 2.6 million ordinary shares 280 First deferred cash consideration 125 Second deferred share consideration 125 Costs of acquisition 15 -------- Total Consideration 661 ------- Goodwill 555 ------- ------- The goodwill arising on the acquisition of Promodus Ltd is attributable to the anticipated profitability of the distribution of the Group's products in the new markets. The fair value of the shares issued as Initial consideration was determined by reference to their published market price of 10.53p/share at the date of acquisition. The deferred consideration is defined as an amount to be paid in either cash or shares at the discretion of the company. The level of consideration is dependent on profits generated by Promodus Ltd over the 1 year period up to 31 December 2008. The amount included above represents the directors' current best estimate of the amount payable. The net cash outflow on acquisition was £50,000 being the net of cash consideration and costs above partially offset by £81,000 cash within the acquired company. Promodus Ltd contributed £464,000 revenue and £48,000 to the Group's profit before tax for the period between the date of acquisition and the balance sheet date. If the acquisition of Promodus Ltd had been completed on the first day of the financial year, the revenue it would have contributed to group revenues for the period would have been £882,000 and group profit attributable to equity holders of the parent would have been £136,000. MKM Group Plc - Group Financial Statements Notes forming part of the financial statements for the year ended 31 March 2008 ------------------------------------------------------------------------------- 4. Notes to the cash flow statement Cash and cash equivalents comprise: 2008 2007 £'000 £'000 Cash available on demand 134 1,906 Short term borrowings (342) - ------- -------- Total Cash Position (208) 1,906 ------- -------- ------- -------- Net (decrease)/increase in cash and cash equivalents (2,114) 210 Cash and cash equivalents at beginning of year 1,906 1,696 ------- -------- Cash and cash equivalents at end of year (208) 1,906 ------- -------- ------- -------- The cash and cash equivalents shown above include £45,000 that is classified as restricted cash as it is held for travel bonding purposes. MKM Group plc
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