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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
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Real Affinity | LSE:RAF | London | Ordinary Share | GB0030285596 | ORD 0.1P |
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% | 0.01 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
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0 | 0 | N/A | 0 |
Final Results Real Affinity plc Preliminary Results for the period ended 31 March 2007 Significant increase in turnover; restructuring completed Real Affinity plc ("Real Affinity" or "the Company"), the AIM quoted marketing services group, announces its Preliminary Results for the period ended 31 March 2007. Highlights * Turnover increased to £19.58m (2006: £9.91m) * Loss before tax £4.12 m post exceptional items of £2.88m (2006 Loss: £1.22m) * Group gross profit increased marginally * Continuing businesses turnover fell slightly but gross margin improved * Venues Unlimited acquisition performed well; sales up 16%; net profit 98% * Corporate Hospitality Services acquired December 2006 * Significant new client wins Post period events * Restructuring into two operating divisions (Real Affinity Agency and Real Affinity Events) completed * Board restructured John Ross, Executive Chairman, Real Affinity plc commented: "Whilst it is disappointing to report a year of continuing losses, I am able to confirm that progress is being made on both restructuring and re-focussing the Group and, most importantly, resolving its underlying problems. During February we started the process of simplifying the structure of our operating businesses into two business streams. It is pleasing to note that since completion of the reorganisation, the two new divisions Real Affinity Agency and Real Affinity Events are sharing information and working together on many more client assignments. "The strategy for the business is to grow through a combination of organic growth and acquisition. However, the significant restructuring means that the changes need to bed down and for them to show real delivery before the Group commits further resource to acquisitions. "First quarter trading to 30th June 2007 has been encouraging with operating performance above budget in both divisions. "Whilst it is too early to predict the outcome for the year we are confident that the continuing businesses are in better shape, the primary loss-making businesses have been discontinued and the restructuring has been completed". 27 September 2007 ENQUIRIES: Real Affinity plc 0113 290 8730 John Ross, Chairman Brent Fitzpatrick, Non-executive Director HB Corporate 0207 510 8600 Edward Hutton Bankside Consultants 0207 367 8888 Michael Padley / Susan Scott CHAIRMAN'S STATEMENT AND OPERATING REVIEW This is my first statement to shareholders since I became chairman in October last year. Whilst it is disappointing to report a year of continuing losses, I am able to report that progress is being made on both restructuring and re-focussing the Group and, most importantly, resolving its underlying problems. During the year, we have acquired a profitable and cash generative events and conference business and this has continued to perform well since acquisition. We have also consolidated the various group subsidiaries into two main divisions and Real Affinity now operates as the two distinct brands: Real Affinity Agency and Real Affinity Events. It is also pleasing to note that since completion of the reorganisation, the two divisions are sharing information and working together on many more client assignments. The new structure took effect from June 2007. The Group continues to employ loyal and hardworking staff looking after our equally loyal blue chip clients, most of whom appreciate the highly professional service we provide. I wish to place on record my thanks to our people at all levels and for their continued belief in what we are trying to achieve. With the changes made this year, I expect to report a much improved result next year. Thereafter, a return to a more solid financial basis will enable the Board to develop a strategy aligned to long term sustainable growth and an improved share price performance. Financial Review An equity placing was completed on 29th June 2006, to raise funds for the initial cash consideration and costs of acquiring Venues Unlimited, which was completed simultaneously, (the trading style of Conferaccom Ltd), an event management and venue sourcing business. £1.01m gross was raised at 0.13p per ordinary share. Venues Unlimited has performed well during the year and successfully achieved its earn out target for the period to 31 March 2007. There is a second earn-out year and progress to date suggests that targets will be met. The Group also acquired Corporate Hospitality Services Limited in December 2006, which brought both PR expertise and further events management experience into the Group. The acquisition also added a number of new high quality clients, including KPMG. Evolve Sport Ltd was sold on 30th March 2007 and Navigator:The Sports Business Limited has been closed down post the year end. The addition of Venues Unlimited to the Group gave rise to significant changes in the analysis of financial performance for the period. Gross sales and gross profit percentage are of a different scale to the previous operating companies of the Group. In addition to this change, the discontinuation of the Group's sports marketing businesses makes comparison from year to year difficult. Total turnover was £19,575,531 including £580,829 from discontinued businesses and £10,898,421 from the acquisitions (Venues Unlimited was included for 9 months) compared to £9,905,033 in 2006. Due to the losses experienced in the discontinued businesses, gross profit increased only marginally to £5,459,208 from £5,372,188 in 2006. The continuing businesses, RP&F Ltd, Onstate Ltd, Holly Benson Communications Ltd and Quadrant Exhibitions Ltd suffered a reduction of 9.8% in sales but improved the gross profit margin from 50.4% in the year ended 31 March 2006 to 55.4% in the year ended 31 March 2007. Venues Unlimited improved sales in the period to 31 March 2007 by 16.0% and net profit before tax by 98.2%, compared to the same period in 2006. Overhead costs rose by 3.0% in the year on a like for like basis. Nonetheless, the combined continuing businesses recorded a small trading profit in the year and this was further augmented by the trading profit from Venues Unlimited. Goodwill is amortised on a straight line basis after the consideration of the overall issue of impairment. In the current year all goodwill relating to the sports businesses has been written off and a charge of £251,160 has been made for the amortisation of goodwill on continuing businesses and acquisitions. Total exceptional items are £2,879,905, and the exceptional items in the continuing businesses are related to the write down of the value of the goodwill associated to sports marketing businesses and provisions for redundancies. Interest payable was £204,243, against £152,687 in 2006 and this overall performance has resulted in a loss before tax of £4,118,171. In a full year the staff reductions already effected will create a saving in excess of £300,000 in the overhead costs of the continuing businesses. The acquisition of Venues Unlimited brought significant cash balances into the Group and whilst the borrowings in the other Group companies increased, these balances broadly match the Group's bank indebtedness. Operating Performance Review RP&F Ltd traded in the year under two brands, Ladders and David, delivering our direct marketing and creative services respectively. RP&F has performed well and profitably overall, with Ladders in particular showing real growth and sustained profitability. David has had a more challenging year. Quadrant Exhibitions Ltd produced record results delivering a commendable performance and this excellent trading performance has continued into the current year. Onstate Ltd, our digital and internet marketing business had a challenging year. The business was significantly affected by staff changes and its small scale. As part of the Real Affinity Agency division the current year is showing more promising signs. Digital and internet marketing is a key area of growth, with clients investing more and more in on-line activities and we are equally clear about the need to be effectively structured and committed to this sector. After many years of consistent profit delivery, Holly Benson Communications Ltd, our marketing communications subsidiary, had a difficult year. Sales declined and as part of the re-structuring, the business was split in two, its marketing services arm being integrated into Real Affinity Agency, and its conference and events division being merged into Real Affinity Events. This restructuring should deliver more focus and return these activities to profit. Both Evolve Sport Ltd and Navigator: The Sports Business Ltd made continuing losses during the period and the Board decided to exit from this sector of the Group's business. This decision has necessitated substantial write-offs of goodwill, inter-company balances and other items and the financial effects have been fully reflected in these financial statements. Restructuring Programme During February we started the process of simplifying the structure of our operating businesses into two business streams. This has now been successfully completed. The Board decided to integrate the direct marketing, digital and internet marketing, creative, advertising and design services under a new brand, 'Real Affinity Agency', and our events management, venue identification and event services businesses under the new 'Real Affinity Events' brand. It was also decided that the individual brand names of the previous businesses would no longer be used post year-end, and the individual limited companies would cease to trade. This change has allowed the Board to reduce the number of management teams from eight to two, with one management team appointed for each business stream, reporting directly to the main Board. This provides for a more streamlined, focused and accountable management structure, as well as a much simpler brand positioning and sales approach to clients and potential clients. Jean Gambold, who has a strong track record in the management of direct marketing businesses, has been appointed Head of Real Affinity Agency. Anita Lowe has been appointed as Head of Real Affinity Events. Anita came into the Group as Chief Executive and Founder of Venues Unlimited and has a wealth of experience and connections in the sector. The other key decision taken was to end the losses made in the sports marketing businesses in the Group, which were undercutting the more promising performance elsewhere. It was decided to dispose of Evolve Sport Ltd and to close down Navigator: The Sports Business Ltd. The Group is therefore no longer involved in sports management or sponsorship. Strategic Review The strategy for the business is to grow through a combination of organic growth and acquisition. However, the significant restructuring means that the changes need to bed down and for them to show real delivery before the Group commits further resource to acquisitions. The simplification and integration of the operating businesses, and the clearer positioning, means that we can pursue incremental business from our existing client base and new business from new clients, more effectively. It is this aspect of growth that we will concentrate on in the immediate future. The business has invested further during the year in better quality sales and client management staff to support this approach and the Group sales effort is now managed through a new Group Sales Director, Simon Webster. Post Year-end Events Since the year end, and following the restructuring, Gerard Corcoran our Group Chief Executive resigned from the Group to pursue other business interests and I shall assume the role of interim Executive Chairman. Gerard was in office during a difficult time for the Group and we wish him well in his new pursuits. Paul Thompson, our Finance Director has also agreed to step down from the Group role after the Annual General Meeting to assume the role as Finance Director of the Real Affinity Agency division. Paul has worked closely with Gerard during this transitional period and his expertise will be especially valuable in that division. The Board are actively seeking to appoint a new Group Finance Director. Geoff Hedges also retired from the Board on 30th April 2007. Geoff had been Managing Director of Holly Benson Communications Ltd for many years and stepped down from this post during the year. I would like to express my thanks to Geoff for his support and contribution. Those staff affected by the overall reduction in staff numbers mostly left the business during the March to May period. A review of business locations has resulted in plans to vacate two sites as quickly as possible. Finally, the Head Office and northern based staff relocated from Bradford to Leeds in June. Leeds is a leading marketing and media centre and a city with a vibrant business and corporate ethos and provides us with the opportunity to accelerate our sales efforts and also gives us with more visibility within the business community. Current Trading and Prospects First quarter trading to 30th June 2007 has been encouraging with operating performance above budget in both divisions. Cash remains a concern as the costs of restructuring have been borne largely from our working capital resources and we continue to examine ways of releasing extra working capital from our assets. It is too early to predict the outcome for the year but we are confident that the continuing businesses are in better shape, the primary loss-making businesses have been discontinued and the restructuring has been completed. John S Ross Executive Chairman 27 September 2007 Real Affinity plc CONSOLIDATED PROFIT AND LOSS ACCOUNT for the year ended 31 March 2007 Notes 2007 2006 £ £ TURNOVER: - - continuing 8,096,281 8,980,736 - - discontinued 580,829 924,297 - - acquisitions 10,898,421 - 19,575,531 9,905,033 Cost of sales (14,116,323) (4,532,845) GROSS PROFIT 5,459,208 5,372,188 Other operating expenses (net) (6,548,131) (5,843,365) Exceptional administration costs (2,879,905) (750,082) OPERATING (LOSS): - - continuing (1,259,459) (1,051,277) - - discontinued (2,964,217) (169,982) - - acquisitions 254,848 - (3,968,828) (1,221,259) Interest receivable 54,910 2,741 Interest payable (204,243) (152,687) LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION (4,118,161) (1,371,205) Taxation 2 (50,707) 8,208 LOSS FOR THE FINANCIAL YEAR (4,168,868) (1,362,997) BASIC AND DILUTED LOSS PER ORDINARY SHARE 2 (0.15)p (0.20)p No separate Statement of Total Recognised Gains and Losses has been presented as all such gains and losses have been dealt with in the profit and loss account. Real Affinity plc CONSOLIDATED BALANCE SHEET 31 March 2007 Notes 2007 2006 £ £ FIXED ASSETS Intangible assets 4,529,871 3,374,522 Tangible assets 594,351 310,553 5,124,222 3,685,075 CURRENT ASSETS Stocks 250,763 642,942 Debtors due within one year 4,376,817 2,010,461 Cash at bank and in hand 2,104,358 220,267 6,731,938 2,873,670 CREDITORS: Amounts falling due within one year (9,836,514) (3,402,109) NET CURRENT LIABILITIES (3,104,576) (528,439) TOTAL ASSETS LESS CURRENT LIABILITIES 2,019,646 3,156,636 CREDITORS: Amounts falling due after more than one year (351,686) (430,965) PROVISIONS FOR LIABILITIES AND CHARGES (32,788) - NET ASSETS 1,635,172 2,725,671 CAPITAL AND RESERVES Called up share capital 3,249,188 1,621,853 Shares to be issued 1,400,000 462,500 Share premium account 5,979,087 5,465,553 Merger reserve 426,992 426,992 Profit and loss account (9,420,095) (5,251,227) EQUITY SHAREHOLDERS' FUNDS 1,635,172 2,725,671 The financial statements on pages 16 to 46 were approved by the board of directors and authorised for issue on 27 September 2007 and are signed on its behalf by: J S Ross Executive Chairman N B Fitzpatrick Director Real Affinity plc CONSOLIDATED CASH FLOW STATEMENT for the year ended 31 March 2007 2007 2006 Notes £ £ Net cash outflow from operating activities 3 (699,445) (646,376) Returns on investments and servicing of finance (149,333) (149,946) Taxation (5,163) 8,208 Capital expenditure and financial investment (93,298) (13,244) Acquisitions and disposals 388,303 (22,985) CASH (OUTFLOW) BEFORE MANAGEMENT OF LIQUID RESOURCES AND FINANCING (558,936) (824,343) Financing 832,136 1,182,876 INCREASE IN CASH IN THE PERIOD 273,200 358,533 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN DEBT 2007 2006 Notes £ £ Increase in cash in the year 3 273,200 358,533 Cash inflow/(outflow) from increase in debt and leasefinancing 73,049 (79,976) Change in net debt resulting from cash flows 346,249 278,557 New finance leases (15,528) (36,642) Deferred consideration loans (133,410) - MOVEMENT IN NET DEBT IN THE YEAR 197,311 241,915 NET (DEBT) AT 1 APRIL 2006 (999,825) (1,241,740) NET (DEBT) AT 31 MARCH 2007 (802,514) (999,825) Notes to the financial statements 1. Basis of Preparation The financial statements have been prepared under the historical cost convention and in accordance with applicable accounting standards. As a result of the post balance sheet events, the directors consider it appropriate to prepare the accounts on a going concern basis. The consolidated financial statements incorporate those of Real Affinity plc and all of its subsidiary undertakings for the year. Subsidiaries acquired during the year are consolidated using the acquisition method. Their results are incorporated from the date that control passes. The difference between the cost of acquisition of shares in subsidiaries and the fair value of the separable net assets acquired is capitalised as goodwill. The value of these assets is subject to an annual review. In the year ended 31 March 2004 the acquisition of Navigator: The Sports Business Limited was accounted for as a merger in accordance with FRS 6. 2. Earnings per Ordinary Share The calculation of basic loss per ordinary share is based on a loss of (£4,168,868) (2006: (£1,362,997)) and is based on 2,717,790,934 (2006: 673,595,470) Ordinary shares, being the weighted average number of ordinary shares in issue during the year. The calculation of loss per ordinary share for discontinued businesses takes into account the loss in the discontinued statutory companies only. Losses arising from the write off of investments in the discontinued companies which are held in continuing companies are included in the calculation of the loss per ordinary share for continuing companies. Share options and deferred consideration have not been taken into account in calculating the number of shares for diluted loss per share as this would reduce the reported loss per share. 2007 2006 Earnings per share: Before exceptional items (0.05)p (0.09)p Exceptional items less attributable tax (0.10)p (0.11)p (0.15)p (0.20)p 3. Cash Flows +-------------------------------------------------------------------+ | | 2007 | 2006 | |---------------------------------+------------------+--------------| | | £ | £ | |---------------------------------+------------------+--------------| | Reconciliation of losses to net | | | | cash flow from | | | | activities | | | |---------------------------------+------------------+--------------| | Operating activities | | | |---------------------------------+------------------+--------------| | Operating loss on ordinary | (3,968,828) | (1,221,259) | | activities before | | | | interest | | | |---------------------------------+------------------+--------------| | Impairment review | 1,553,368 | 49,598 | |---------------------------------+------------------+--------------| | Fixed asset write off | - | 17,314 | |---------------------------------+------------------+--------------| | Depreciation of tangible fixed | 184,143 | 116,348 | | assets | | | |---------------------------------+------------------+--------------| | Amortisation of intangible | 253,494 | 20,423 | | assets | | | |---------------------------------+------------------+--------------| | Loss on disposal of intangibles | 49,621 | - | |---------------------------------+------------------+--------------| | Loss on sale of fixed assets | 29,842 | 3,204 | |---------------------------------+------------------+--------------| | (Increase)/decrease in stocks | 392,179 | (84,207) | |---------------------------------+------------------+--------------| | (Increase)/decrease in debtors | (1,449,026) | 856,520 | |---------------------------------+------------------+--------------| | Increase/(decrease) in | 2,255,762 | (404,317) | | creditors | | | |---------------------------------+------------------+--------------| | Net cash flow from operating | (699,445) | (646,376) | | activities | | | +-------------------------------------------------------------------+ - ---END OF MESSAGE---
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