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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
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 | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 0.75 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
0 | 0 | N/A | 0 |
Interim Results 18 December 2007 MKM.L MKM GROUP PLC ("the Group" or "the Company") Interim Results for the six months to 30 September 2007 Highlights * Group substantially enlarged through the acquisitions of Leapfrog and Promodus * Management team strengthened as vendors of Leapfrog join the Board and acquire significant shareholdings in the Group * Good progress with integration - confirms validity of acquisition strategy * International expansion continues with winning of new business and opening of Singapore office * Pro-forma first half sales for the combined business were £5.58m (2006: £5.12m). These were triple the sales of the continuing business in the first half of 2006 of £1.76m * Pro-forma first half profit before tax for the combined business was £0.84m (2006: £1.38m). This was almost triple the profit of the continuing business in the first half of 2006 of £0.29m * Currently in negotiations for a number of major contracts - Board views outlook positively Commenting, Executive Chairman, Andrew Johnson said "I am delighted to announce our first set of figures since the acquisitions of the Leapfrog and Promodus businesses. These two acquisitions have totally changed the shape of the Group and I am pleased to say that the figures confirm the validity of the strategy stated at the time. Today, the Group is three times the size it was this time last year and we have a much stronger international platform on which to build. One of our key objectives is securing long-term loyalty accounts and we are currently working on a number of major bids. As always, it is difficult to predict with certainty the timing of the successful closure of such bids but we remain optimistic that we will close a number of these during the final quarter of our current financial year. The integration of the two businesses is proceeding according to plan and the Board views prospects for the enlarged Group positively. I look forward to updating shareholders at the full year." Enquiries: MKM Group plc Andrew Johnson, Executive T: 0161 Chairman 877 1112 (www.mkmgroupplc.com) Matthew Toynton, Finance Director WH Ireland Limited David Youngman T: 0161 832 2174 Biddicks Katie Tzouliadis T: 020 7448 1000 CHAIRMAN'S STATEMENT Overview I am pleased to announce interim results for the six months to 30 September 2007 and update you on the considerable progress we have made. Given the very considerable change in the shape of the Group following our acquisitions we have published a set of pro-forma results in addition to the statutory figures. It is important that you read both sets of figures in order get a good understanding of the Group as it is currently configured. In August 2007, we completed the acquisition of The Leapfrog Group ("Leapfrog"), based in Australia and New Zealand, thereby creating a substantial international loyalty and sales promotion company. Leapfrog's founders joined the Board and now have substantial shareholdings in the Group. The enlarged Board is working well on the integration of the companies and the further development of the strategy. In October 2007, we made a second acquisition, Promodus, the London based marketing and communications consultancy. The consideration for the acquisition was again a combination of cash and shares with Promodus' management electing to join the Group in order to take an active part in developing the UK business. The addition of Promodus also significantly broadens the range of services we can offer our clients. Results This statement includes both statutory and pro-forma figures for the first half of the year. The statutory figures include the figures for Leapfrog from 29 August 2007, the date of acquisition. The pro-forma figures include the results for the continuing business of MKM in the UK, Leapfrog and Promodus as though all three businesses had been owned by the Group throughout the period. a) Statutory basis On a statutory basis Group revenue for the first half was £2.54m (2006: £1.76m). This included £0.71m of Leapfrog revenue and thus on a like-for-like basis, the continuing Group business generated increased revenues of £1.83m (2006: £1.76m). On a statutory basis Group profit before tax was £318,000 (2006: £293,000). This included £122,000 of Leapfrog profit and thus on a like-for-like basis, the continuing Group business generated profit before tax of £196,000 (2006: £293,000). This fall in the profit for the continuing business mainly resulted from a reduction in the gross margin to 59% (2006: 68%). The gross margin achieved in the first half was in line with expectations and we believe will be sustained going forwards. On a statutory basis the diluted earnings per share were 0.4p (2006: 0.6p). This reduction was primarily due to a change in the Group's tax position. The previous year benefited from utilising brought forward losses. At the time of the Leapfrog acquisition in August, the Group undertook a placing to raise £0.5m before expenses. These proceeds were used to contribute towards the funding of the cash element of the consideration payable and to provide additional working capital for the enlarged Group. At the period end, net cash stood at £0.8m (2006: £1.8m). b) Pro-forma basis On a pro-forma basis Group revenue for the first half was £5.58m (2006: £5.12m). This increase of 9% was mainly driven by growth in the Leapfrog business. The pro-forma revenue of £5.58m was more than three times the revenue of £1.76m achieved by the continuing Group businesses last year. On a pro-forma basis profit before tax for the first half of the year was £840,000 (2006: £1.37m). This reduced profit mainly resulted from a fall in the gross margin from 71% last year to 57%. In addition to the fall in the UK mentioned above, the Australian gross margin was also down compared with the previous year when the business benefited from a substantial, one-off, high margin campaign. The pro-forma gross margin of 57% was in line with our expectations at the time of the acquisition and at a level that we believe is sustainable going forwards. The pro-forma profit of £840,000 was almost three times the profit of £293,000 achieved by the continuing Group business last year. Dividend No interim dividend is being proposed (2006: - £nil). Review of Business Leapfrog operates in the same sector as our existing business, MKM Concepts, providing long-term reward and loyalty programmes as well as tactical sales promotion campaigns to major branded companies in Australasia and the Asia Pacific region. We identified synergies prior to acquiring the business and I am pleased to report that , we are now seeing the anticipated benefits beginning to come through. The sales teams in Australia and the UK are working well together and are building a centralised database in order to maximise cross-selling opportunities. During the period, both management teams have placed considerable emphasis on the development of longer term client relationships with the objective of creating improved revenue visibility for the Group. One of the main benefits of the Leapfrog acquisition was the opportunity it created to expand into new international markets. Leapfrog had a proven track record of international expansion, having established a sales operation in New Zealand in 2005. International expansion is progressing well. The Group won new business with Lufthansa, the second largest airline in Europe and Lenovo, the international technology company, in Singapore and following these wins, we opened a new office in Singapore in November. Board and Management Changes Following the acquisition of Leapfrog and Promodus, the Board and senior management team have been substantially strengthened with a number of new appointments. At the end of August, Brian Smillie and Richard Tenser, the co-founders of Leapfrog, joined the Board as International Managing Director and International Development Director respectively. In early October 2007, Mark Koch, the founder of MKM, assumed the position of Deputy Chairman, taking responsibility for global business development, major client relationships and product innovation within the Group. At the same time, Simon Ward, the founder of Promodus, joined the Group's executive committee and assumed responsibility for the UK business, becoming Managing Director of MKM Concepts Limited. Outlook We are very pleased with the progress we have made during the period and since completing both our acquisitions. We have established a stronger base and are working hard to integrate our acquisitions and maximise the benefits for the enlarged Group. We are focused on securing long-term loyalty accounts and are currently working on a number of major bids. As always, it is difficult to predict with certainty the timing of the successful closure of such bids but we remain optimistic that we will close a number of these during the final quarter of our current financial year. We continue to seek further acquisitions which will assist in achieving our ambition to become a substantial and broadly based marketing services group. The Board views prospects for the enlarged Group positively and I look forward to updating shareholders at the full year. Andrew Johnson Executive Chairman MKM GROUP PLC Consolidated income statement for the six months ended 30 September 2007 Unaudited Unaudited Audited six mths ended six mths ended year ended 30 Sept 2007 30 Sept 2006 31 March £'000 £'000 2007 £'000 Revenue 2,540 1,760 3,888 Cost of sales (1,056) (568) (1,411) GROSS PROFIT 1,484 1,192 2,477 Administrative expenses (1,199) (912) (2,073) PROFIT FROM OPERATIONS 285 280 404 Finance expense (1) - (1) Finance income 34 13 53 PROFIT BEFORE TAXATION 318 293 456 Income tax (charge)/credit (95) - 124 PROFIT FOR THE PERIOD 223 293 580 Attributable to the equity 223 293 580 holders of the parent Basic earnings per share 0.5 0.7 1.3 (pence) Diluted earnings per share 0.4 0.6 1.1 (pence) MKM GROUP PLC Consolidated statement of changes in equity for the six months ended 30 September 2007 Share Share Share Shares to Option Retained capital Premium be issued Reserve earnings Total £'000 £'000 £'000 £'000 £'000 £'000 Balance as at 1 April 2007 218 2,205 - 112 (107) 2,428 Changes in equity for six months ended 30 Sept 2007 Net income recognised 10 10 directly in equity Net profit for the period 223 223 Total recognised income and - - - 10 223 233 expense for the period Issue of equity shares 133 1,942 2,075 Shares to be issued as 840 840 deferred consideration Balance as at 30 September 351 4,147 840 122 116 5,576 2007 MKM GROUP PLC Consolidated statement of changes in equity for the six months ended 30 September 2006 Shares Share Share Share to be Option Retained capital Premium issued Reserve earnings Total £'000 £'000 £'000 £'000 £'000 £'000 Balance as at 1 April 218 2,205 0 31 (687) 1,767 2006 Changes in equity for six months ended 30 Sept 2006 Net income recognised - - 15 - 15 directly in equity Net loss for the - - - - 293 293 period Total recognised income - - - 15 293 308 and expense for the period Balance as at 30 218 2,205 - 46 (394) 2,075 September 2006 MKM GROUP PLC Consolidated balance sheet at 30 September 2007 Unaudited Unaudited Audited 30 Sept 2007 30 Sept 2006 31 March 2007 £'000 £'000 £'000 NON-CURRENT ASSETS Property, plant & equipment 540 244 277 Intangibles 7,209 823 703 Deferred tax assets 339 178 8,088 1,067 1,158 CURRENT ASSETS Inventories 20 1 10 Trade and other receivables 2,354 523 796 Cash and cash equivalents 792 1,751 1,906 3,166 2,275 2,712 CURRENT LIABILITIES Trade and other payables (3,778) (1,235) (1,437) Provisions - (32) (5) Deferred Consideration (1,200) - - Loan Stock (700) - - (5,678) (1,267) (1,442) NET ASSETS 5,576 2,075 2,428 CAPITAL AND RESERVES ATTRIBUTABLE TO THE EQUITY HOLDERS OF THE COMPANY Share Capital 351 218 218 Share Premium 2,647 2,205 2,205 Merger Reserve 1,500 - - Shares to be issued 840 - - Share Option Reserve 122 45 112 Retained earnings 116 (393) (107) TOTAL EQUITY 5,576 2,075 2,428 MKM GROUP PLC Consolidated cash flow statement for the six months ended 30 September 2007 Unaudited Unaudited Unaudited Six Six Year months months ended ended ended 31 March 30 Sept 30 Sept 2007 2007 2006 £'000 £'000 £'000 CASHFLOWS FROM OPERATING ACTIVITIES Profit before taxation 318 293 456 Adjustments for Interest receivable (34) (13) (53) Depreciation 50 41 80 Interest expense 1 - 1 Share option charge 10 15 30 345 336 514 (Increase) in inventories - - (9) (Increase)/decrease in trade receivables (246) (264) (537) (Decrease)/increase in trade payables (510) (30) 278 (Decrease)/increase in provisions (5) 15 (16) (761) (279) (284) Interest paid (1) - (1) Net cash generated (used in)/from operations (417) 57 229 CASHFLOWS FROM INVESTING ACTIVITIES Purchase of non-current assets (12) (72) Acquisition of Share Capital in new companies (1,250) Costs associated with acquisition (152) Cash within acquired Company 196 Interest receivable 34 13 53 Net cash from investing activities (1,172) 1 (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 (1,114) 58 210 equivalents Cash and cash equivalents at the beginning of 1,906 1,693 1,696 the period Cash and cash equivalents at the end of the 792 1,751 1,906 period MKM GROUP PLC Notes forming Part of the Financial Statements for Six months ended 30 September 2007 1. Accounting Policies The Interim results for the six months ended 30 September 2007, which are neither audited nor reviewed pursuant to guidance issued by the Auditing Practices Board, have been prepared on the basis of accounting policies consistent with IFRS which has been adopted in the statutory financial statements for the year ended 31 March 2007 and will be used within the statutory financial statements for the year ended 31 March 2008. During the period to 30 September 2007, the company has completed the acquisition of Leisure World Pty Ltd (The Leapfrog Group). At the date of circulation of these interim results, a full evaluation of the intangible assets purchased within the acquisition has not been completed and as such no details of these assets are provided at this time. 2. Basis of preparation The comparatives for the full year ended 31 March 2007 are not the Company's full statutory accounts for that year. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditors' report on those accounts was unqualified, did not included references to any matters to which the auditors drew attention by way of emphasis without qualifying their report and did not contain a statement under section 237 (2)-(3) of the Companies Act 1985. 3. Turnover Turnover is wholly attributable to the principal activity of the group and arises in the following geographical split: Unaudited Unaudited Audited six mths ended six mths ended year ended 30 Sept 2007 30 Sept 2006 31 March 2007 £'000 £'000 £'000 United Kingdom 1,834 1,760 3,888 Australia/New Zealand 706 - - Total 2,540 1,760 3,888 4. Taxation The tax charge for the period is based on the anticipated effective rate of tax for the year ended 31 March 2008. 5. Earnings per share The basic earnings per share has been calculated using the profit after tax, divided by the weighted average number of shares in issue of 48,188,990 (31 March 2007 and 30 Sept 2006: 43,744,545). Diluted earnings per share is calculated by adjusting the earnings by adding back the charge for FRS 20 Share based payments and 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 is 8,734,848 (31 March 2007 - 7,864,881; 30 September 2006 - 6,958,281) A further adjustment has been made for the potentially dilutive effect of the deferred consideration shares to be paid to the vendors of The Leapfrog Group upon satisfaction of certain performance criteria in the year ended 31 March 2008. The weighted average number of deferred consideration shares is 1,333,333 (31 March 2007 and 30 Sept 2006: nil). 6. Acquisition Accounting On 29 August 2007 the group acquired 100% of the voting equity instruments of Leisure World Pty Ltd (The Leapfrog Group), a company whose principal activity is Loyalty and Sales Promotions based in Australia and New Zealand. £'000 £'000 Fair value of assets and liabilities acquired Property, plant and equipment 313 Deferred tax asset 219 Inventories 10 Trade and other receivables 1,312 Cash and Cash equivalents 196 Trade and Other payables (2,518) Net liabilities on acquisition (468) Consideration paid Initial cash Consideration 1,250 Initial Loan Stock 700 Initial 20 Million ordinary shares 1,600 Deferred Cash Consideration 1,200 Deferred 8 Million ordinary shares 840 Costs of acquisition 448 Total Consideration 6,038 Goodwill 6,506 The fair value of the shares issued as Initial consideration was determined by reference to their quoted market price of 8p/share at the date of acquisition. The deferred consideration payable is dependent on profits generated by Leisure World Pty Ltd over the 1 year period up to 31 March 2008. The amount included above represents the directors' current best estimate of the amount payable and the fair value of the deferred consideration shares was determined by reference to the market price of 10.5p/share as at the interim balance sheet date of 30 September 2007. Since the acquisition date, Leisure World Pty Ltd has contributed £85,000 after tax to group profit. Pro-forma financials are included that present Group profit and turnover as if the acquisition had occurred on 1 April 2007. Prior to completing a full valuation of the acquired Intangible assets this Interim statement has been drawn up on the basis that we will be recognising goodwill. The fair values of derivatives, receivables, payables and bank loan are the same as the IFRS carrying amounts immediately prior to the acquisition. The IFRS carrying amount of identifiable intangibles immediately prior to acquisition would have been zero. It is impracticable to determine the IFRS carrying amounts of the other assets and liabilities of Leisure World Pty Ltd immediately prior to acquisition as the company did not prepare its accounts in accordance with IFRS. 7. Events after the balance sheet date On 10 October 2007 the Group acquired the entire share capital of Promodus Limited, the London based marketing and communications consultancy for a total consideration of up to £650,000 consisting of a combination of cash and shares. Pro-forma financials are included that present Group profit and turnover as if the acquisition had occurred on 1 April 2007. MKM GROUP PLC Pro-forma Consolidated income statement for the six months ended 30 September 2007 Unaudited Unaudited Unaudited Pro-forma Pro-forma Pro-forma six mths ended six mths ended Year ended 30 Sept 2007 30 Sept 2006 31 March 2007 £'000 £'000 £'000 Revenue 5,577 5,118 10,393 Cost of sales (2,412) (1,495) (3,502) GROSS PROFIT 3,165 3,623 6,891 Administrative expenses (2,346) (2,293) (5,127) PROFIT FROM OPERATIONS 819 1,330 1,764 Finance expense - - (1) Finance income 21 47 67 PROFIT BEFORE TAXATION 840 1,377 1,830 Income (charge) (252) (261) (288) PROFIT FOR THE PERIOD 588 1,116 1,542 Attributable to the 588 1,116 1,542 equity holders of the parent Basic earnings per share 0.8 1.5 2.1 (pence) Diluted earnings per 0.6 1.2 1.7 share (pence) Notes to the Pro-Forma Income statement for the six months ended 30 September 2007 1. Basis of preparation The Interim results for the years ended 30 September 2007 and 2006 and the Full year ended 31 March 2007 have been presented above on a pro-forma basis that reflects the Group results as if the acquisitions completed on 29 August 2007 (The Leapfrog group) and 10 October 2007 (Promodus Ltd) had been completed prior to the 31 March 2007. This information is presented to facilitate understanding and it does not reflect the actual earnings position attributable to shareholders for the period. On 29 August 2007 the Group acquired the entire share capital of Leisure World Pty Ltd (The Leapfrog Group) for an initial consideration of £3.55m consisting of a combination of cash and shares. A further deferred consideration of up to £5m in a combination of cash or shares will be payable dependent on Leapfrog achieving certain financial performance criteria. On 10 October 2007 the Group acquired the entire share capital of Promodus Limited for an initial consideration of £400,000 consisting of a combination of cash and shares. A further deferred consideration of up to £250,000 in either cash or shares will be payable dependent on Promodus achieving certain financial performance criteria. MKM GROUP PLC Notes to Pro-forma Consolidated income statement for the six months ended 30 September 2007 2. Segmental Reporting Unaudited Unaudited Unaudited Pro-forma Pro-forma Pro-forma six mths ended six mths ended Year ended 30 Sept 2007 30 Sept 2006 31 March 2007 £'000 £'000 £'000 Revenue UK Sales Promotions 1,834 1,760 3,888 Australia Sales 3,327 2,835 5,530 Promotions Promodus 416 523 975 Total 5,577 5,118 10,393 Gross Profit UK Sales Promotions 1,090 1,192 2,477 Australia Sales 1,706 2,069 3,702 Promotions Promodus 369 362 713 Total 3,165 3,623 6,891 Profit before Tax UK Sales Promotions 368 441 764 Australia Sales 578 1,048 1,340 Promotions Promodus 65 35 35 Head Office Costs (172) (148) (308) Total 840 1,377 1,830 - ---END OF MESSAGE---
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