RNS Number:2012J
Media Square PLC
26 March 2003
Media Square plc
26 March 2003
Preliminary results for the year ended 31 October 2002
Media Square plc, the integrated marketing communications
and marketing services group, today announces its
audited preliminary results for the year ended 31 October 2002
- Sales increased during the year by 114 per cent to #4.9 million and revenue
increased by 107 per cent to #3.1 million
- Operating loss before goodwill amortisation and exceptional restructuring
costs reduced from #376,708 in the previous year to #49,634 in the year
under review
- The group, its people and resources have been re-focused and reorganised
into a distinct, accountable and customer facing structure
- Successful acquisition and integration of Equanim Group Limited provided a
significant boost to operating profits
- Post year end acquisitions of FI Direct, FI System, e-principals plc and
Fourninety, double the size of group
- Closure, in March 2003, of the group's loss-making printing business ends
our exposure to a commodity market
Commenting on the results, Kevin Steeds, chairman, said:
"Despite the most challenging business climate in which we find ourselves, I am
very pleased to be able to report solid progress across most aspects of our
group during the last 12 months. Many of the problems which the business has
faced during the course of the last year have now been resolved satisfactorily
and we have a strong management team in place to help move the group forward.
"Our recent acquisitions have increased the size and improved the quality of our
business, bringing with them many good people and clients. Our challenge for the
current year will be to continue this record of growth and to develop a business
of which all our shareholders and employees can be rightly proud."
For further information please contact:
Jeremy Middleton - operations director
m: 07889 206 155
e: jeremy.middleton@mediasquare.co.uk
Philip Johnson - Brown Shipley, Manchester
t: 0161 214 6540
e: philip.johnson@brownshipley.co.uk
CHAIRMAN'S STATEMENT
At the time of writing this, my first report to shareholders, Media Square plc
is a very different business to the one which reported its maiden full year
results in December 2001. During the year, the business has more than doubled
its size and geographical spread and, during the first three months of the new
financial year, we have doubled our size yet again.
This rapid pace of change, coupled with the urgent need to put the business on a
more sound footing, meant that many difficult decisions had to be taken during
the course of last year and in the early part of the current year. The business
remains wholly committed to its strategy of developing an integrated marketing
communications group, but the management team recognises that the pace of growth
must be quicker if we are to build a sustainable business for the future benefit
of employees, customers and shareholders alike.
Financial results
The operating loss before goodwill amortisation and exceptional costs for the
year to 31 October 2002 was #49,634.The loss before taxation for the year was
#922,529 after provision for the loss arising on the closure of a subsidiary
undertaking.
While these results are still not as good as we had hoped for, they show real
progress year-on-year. The loss before taxation for the previous year to 31
October 2001 was #2,452,287 and the equivalent operating loss was #376,708.
The major proportion of the losses incurred during the year under review relate
to redundancy, restructuring, write off of goodwill and fixed asset write downs,
all of which had to be undertaken to ensure that the group was correctly
positioned to meet the needs of its customers and to provide a secure platform
for growth.
Consistent with statements at the time of its initial admission to AIM, whilst
the group is in its early stages of development, the board is not proposing to
pay a dividend for the foreseeable future.
Financing
The group has a range of financing facilities in place in order to finance the
business. These include a mixture of bank overdraft, medium term bank loans,
finance lease and hire purchase contracts. The group's banking facilities were
successfully renegotiated and increased during January 2003.
The previous year's cash outflow of some #1.4 million has been reduced to an
outflow of #211,411. However, the group is reliant on future trading to ensure
its development. As a result it is likely that the group will seek to raise new
funds for specific developments during the next few months.
Acquisitions
On 18 June 2002 the group completed the acquisition of Equanim Group Limited and
its subsidiary companies. This acquisition proved both timely and of real value
to the business as a whole. Although we have only benefited from five months
trading from Equanim, the business contributed an operating profit of #159,687.
More importantly, the Equanim management team has made a significant positive
impact on the group as whole, employing their industry expertise and market
knowledge to great effect on our behalf.
Reorganisation
In order to facilitate the expansion of the group, a major reorganisation of the
business was undertaken during the last quarter of the year. The reorganisation
involved the closure of some loss making activities, a number of redundancies
and several board changes.
Shortly before the publication of our results, your board took the decision to
close e.plan Limited, the groups loss-making printing business. The UK printing
sector is now fully commoditised and has significant over-capacity and, despite
everyone's best efforts, it was not possible for us to stem the losses being
incurred.
The group's continuing business is now organised in three distinct, customer
focused operating divisions, each of which is led by a strong operational
management team.
Marketing communications - which trades under the Equanim brand and has offices
in London, Sheffield, Leeds, Manchester, Chester and Birmingham.
Marketing services - which incorporates the group's interests in commercial and
advertising photography, retail and mail order marketing, people marketing and
fulfilment services.
e-business - which is focused on the exploitation of 'e' channels for marketing
communication and business efficiency.
The result of these changes, and the acquisitions completed in January 2003, is
that the group is now much more focused on higher margin service and
consultancy.
Management team
Everyone involved with the management and development of the group has worked
incredibly hard during the last 12 months and I would like to record our thanks
to all our employees and business partners for their commitment and loyalty to
the business.
At board level we made a number of changes in line with the reorganisation of
the business. This resulted in the departure of Christopher Swan, John Butcher
and Mark Cupitt during October and November. In addition, Ian Watson stepped
down as chief executive.
I joined the board shortly before the year end on 16 October 2002 as your
independent non executive chairman. John Nixon, who is group finance director
with Pertemps Group Limited, accepted the post of non executive director and
joined the board on 19 November 2002.
Your executive directors, Jeremy Middleton and Graeme Burns, both joined the
board on 18 June 2002 following the acquisition of Equanim Group Limited.
Jeremy and Graeme are both shareholders in the group and are committed to its
long term success.
Post balance sheet acquisitions
On 6 January 2003 the group announced three further acquisitions which will have
a material impact on the size and scale of the our business. We acquired the
business, assets and employees of FI Direct (a specialist direct marketing
business) and FI System (an e-business solutions provider), e-principals plc and
its subsidiary Fourninety Limited.
Historically, these business have combined annual sales of more than #5 million
and revenues in excess of #3 million. This compares to sales of #4.9 million and
revenues of #3.1 million for our group during the whole of last year.
Both Pertemps Group Limited, a major shareholder in Media Square plc, and Jeremy
Middleton, group operations director, extended loans of #125,000 to the group so
that we could effect these acquisitions. I would like to record our appreciation
to them and to the employees of our new businesses for their support and
commitment to the success of the group.
Future plans
The market in which the group operates is at its lowest point for more than a
decade. There is little, if any, visibility and most leading market commentators
believe that there will be no major improvements until the middle part of 2004.
While these circumstances make it difficult for the group to predict its
earnings for the full year with any degree of certainty, it is encouraging to
report that the group has traded both profitably and ahead of budget in the
first four months of the current financial year.
As previously stated, the group is committed to the rapid expansion of its
business. The difficult economic climate means that the capital cost of future
acquisitions will remain low for the next year or so. We fully intend to take
advantage of this situation to build a larger and more robust business that is
capable of delivering substantial and sustainable shareholder value.
Finally, we have just launched a new web site for the group, which gives full
details of our business, clients and people. If, as a shareholder, you would
like to receive regular news about our progress, please take the time to visit
the web site, www.mediasquare.co.uk, and register for our e-news bulletins.
Kevin Steeds
Chairman
25 March 2003
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 OCTOBER 2002
Note 2002 2002 2001
Audited Audited Audited
# # #
Turnover
- continuing operations 2,833,634 -
- acquisitions 1,886,621 2,206,058
4,720,255 2,206,058
- discontinued operations 165,395 81,509
4,885,650 2,287,567
Material cost of sales (1,815,372) (801,344)
Revenue 3,070,278 1,486,223
Direct payroll costs (1,723,772) (997,143)
Gross profit/(loss)
- continuing operations 866,431 -
- acquisitions 506,053 636,722
1,372,484 636,722
- discontinued operations (25,978) (147,642)
1,346,506 489,080
Administrative expenses 1,477,813 900,533
Administrative expenses - exceptional items 2 244,616 1,969,408
1,722,429 2,869,941
Operating profit/(loss)
- continuing operations - pre exceptional items (251,906) (206,550)
- continuing operations - exceptional items (244,616) (1,929,615)
(496,522) (2,136,165)
- acquisitions - pre exceptional items 159,687 (4,574)
- acquisitions - exceptional items - (39,793)
(336,835) (2,180,532)
- discontinued operations (39,088) (200,329)
(375,923) (2,380,861)
Loss arising in respect of closure of subsidiary 3
undertaking (445,792) -
Interest payable and other charges (102,556) (101,928)
Interest receivable 1,742 30,502
Loss on ordinary activities before taxation (922,529) (2,452,287)
Tax on loss on ordinary activities - -
Loss on ordinary activities after taxation (922,529) (2,452,287)
Dividends - -
Loss transferred from reserves (922,529) (2,452,287)
Basic loss per share 4 (4.51p) (20.51p)
There were no recognised gains or losses other than the loss for the financial
year.
CONSOLIDATED BALANCE SHEET
AT 31 OCTOBER 2002
Note 2002 2001
Audited Audited
# #
Fixed assets
Intangible assets 1,508,555 1,165,000
Tangible assets 846,922 1,222,029
2,355,477 2,387,029
Current assets
Stocks and work in progress 112,131 58,955
Debtors 1,346,439 876,288
Cash at bank and in hand 76 169,354
1,458,646 1,104,597
Creditors: amounts falling due within one year (2,141,214) (1,930,558)
Net current liabilities (682,568) (825,961)
Total assets less current liabilities 1,672,909 1,561,068
Creditors: amounts falling due after one year (907,097) (1,120,478)
Net assets 765,812 440,590
Capital and reserves
Called up share capital 1,592,357 693,666
Share premium account 2,648,379 2,299,319
Profit and loss account (3,474,924) (2,552,395)
Equity shareholders' funds 5 765,812 440,590
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 OCTOBER 2002
Note 2002 2001
Audited Audited
# #
Net cash inflow/(outflow) from operating activities 6 499,930 (195,019)
Returns on investments and servicing of finance
Interest received 1,742 30,502
Interest paid (37,346) (50,563)
Hire purchase interest paid (65,210) (51,365)
Net cash outflow from returns on investments
and servicing of finance (100,814) (71,426)
Taxation
UK corporation tax received/(paid) 22,000 (22,000)
Capital expenditure and financial investment
Purchase of tangible fixed assets (64,988) (132,187)
Net cash outflow from capital expenditure and
financial investment (64,988) (132,187)
Acquisitions and disposals
Purchase of subsidiary undertakings (442,425) (690,358)
Net cash outflow from acquisitions and disposals (442,425) (690,358)
Financing
Issue of ordinary share capital 475,657 -
Share issue costs (106,949) (231,034)
Repayment of borrowings (22,129)
Repayment of loan notes (335,437) (80,338)
Capital element of hire purchase agreements (136,256) (32,776)
Net cash outflow from financing (125,114) (344,148)
Decrease in cash 7 (211,411) (1,455,138)
NOTES TO THE PRELIMINARY ANNOUNCEMENT
FOR THE YEAR ENDED 31 OCTOBER 2002
1. BASIS OF PREPARATION
The financial statements have been prepared under the historical cost
convention, in accordance with applicable accounting standards. The financial
statements have been prepared on the going concern basis, except that the
accounts of a subsidiary undertaking, e.plan Limited, have been incorporated on
a break up basis on the grounds that on 25 March 2003 the company withdrew
financial support from the subsidiary which subsequently passed resolutions to
commence winding up proceedings (refer to note 3 to for further information).
The principal accounting policies of the group are set out in the group's 2001
annual report and financial statements. The policies have remained unchanged
from the previous annual report.
2. EXCEPTIONAL ITEMS Exceptional items in 2002 relate to a business restructure
following the acquisition of Equanim Group Limited and its subsidiaries. The
associated consolidation of divisions and restructuring program resulted in
redundancy and related costs and write down of specific fixed assets relating
primarily to the consolidation of office
Exceptional items in 2001 relate to restructuring and relocation costs arising
as a result of an internal review undertaken and the costs incurred in
restructuring the core business. The directors also reassessed the value of the
acquisition of e.plan Limited in light of trading and economic events and wrote
down the goodwill arising on consolidation to its value based on projected
future discounted cashflows.
3. LOSS ARISING IN RESPECT OF CLOSURE OF SUBSIDIARY UNDERTAKING
On 25 March 2003, the company withdrew financial support to one of its
subsidiary undertakings, e.plan Limited and as a result the subsidiary ceased
trading.
The loss in respect of this closure was as follows:
#
Goodwill impairment (975,338)
Net liabilities of subsidiary undertaking written back 747,418
Liabilities to be met by Media Square plc (24,192)
Inter company balances written off (193,680)
(445,792)
Whereas at 25 March 2003 the group effectively ceased its reproduction and
printing activities, the trade relating to this activity is included in
continuing operations in the profit and loss account, in accordance with
Financial Reporting Standard 3, as this event occurred more than three months
after the period end.
4. LOSS PER SHARE
The calculation of the basic loss per share is based on the loss on ordinary
activities after tax and on the weighted average number of ordinary shares in
issue during the period.
The losses and weighted average number of shares used in the calculations are
set out below:
2002 2001
Loss Weighted Loss Loss Weighted Loss
average average
number of per share number of per share
shares shares
# pence # pence
Basic loss per share
Earnings attributable to
ordinary shareholders (922,529) 20,471,941 (4.51) (2,452,287) 11,955,527 (20.51)
Diluted loss per share calculations have not been disclosed as no instruments
currently in issue are considered to be dilutive.
5. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
2002 2001
Audited Audited
# #
Loss for the financial year (922,529) (2,452,287)
Issue of ordinary share capital 1,247,751 1,898,133
Net increase/(decrease) in shareholders' funds 352,222 (554,154)
Shareholders' funds at 1 November 2001 440,590 994,744
Shareholders' funds at 31 October 2002 765,812 440,590
6. NET CASH INFLOW/(OUTFLOW) FROM OPERATING ACTIVITIES
2002 2001
Audited Audited
# #
Operating loss (375,923) (2,380,861)
Depreciation 381,069 128,456
Goodwill amortisation and impairment 81,673 1,921,570
(Increase) in stocks and work in progress (36,222) (7,234)
Decrease/(increase) in debtors 462,266 (100,709)
(Decrease)/increase in creditors (12,933) 243,759
Net cash inflow/(outflow) from operating activities 499,930 (195,019)
7. RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
2002 2001
Audited Audited
# #
Decrease in cash in the year (211,411) (1,455,138)
Repayment of borrowings 22,129 -
Repayment of debt 335,437 80,338
Cash outflow from finance leases 136,256 32,776
Change in net debt resulting from cash flows 282,411 (1,342,024)
Inception of finance leases (13,941) (946,885)
Net debt acquired (219,245) (331,780)
On closure of subsidiary undertaking 485,972 -
Loan notes advanced on acquisition (150,000) (470,000)
Movement in net debt in the year 385,197 (3,090,689)
Net (debt)/funds at 1 November 2001 (2,012,945) 1,077,744
Net debt at 31 October 2002 (1,627,748) (2,012,945)
8. PUBLICATION OF NON-STATUTORY ACCOUNTS
The financial information set out in this preliminary announcement does not
constitute statutory accounts as defined in section 240 of the Companies Act
1985.
The summarised balance sheet at 31 October 2002 and the summarised profit and
loss account, cash flow statement and associated notes for the year then ended
have been extracted from the group's financial statements. Those financial
statements have not yet been delivered to the Registrar.
9. REPORT AND ACCOUNTS
The Report and Accounts will be posted to shareholders shortly. Further copies
will be available on request from the Company's Registered Office : Corbar Hall,
Corbar Road, Buxton, Derbyshire, SK17 6TF.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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