RNS Number:0587B
Internet Business Group
30 July 2007
Internet Business Group plc
("IBG", the "Company" or the "Group")
INTERIM RESULTS FOR THE
SIX MONTH PERIOD ENDED 30 APRIL 2007
Internet Business Group plc, the AIM listed performance advertising and
e-commerce company, is pleased to announce unaudited interim results for the six
months ended 30 April 2007.
Highlights:
* Turnover increased by 40% to #7,961,855 (2006: #5,701,798)
* EBITDA increased by 25% to #589,078 (2006: #473,124)
* Net assets increased by 102% to #4,080,000 (2006: #2,018,000)
* Profitable growth in IBG Media division
* Good progress in International divisions
* Conclusion of strategic review
* Early adoption of International Financial Reporting Standards ("IFRS")
in the financial year ending 31 October 2007
Maziar Darvish, Chairman of IBG, commented: "IBG remains a growing, profitable
business with strong prospects. The Board is resolute in its belief that the
continued pursuit of our strategic objectives is the most effective method of
delivering shareholder value in the medium term."
"To this effect, our focus will continue to be on growing our network based
advertising operations both in the UK and international markets, whilst
exploiting higher margin growth opportunities available to our media division.
The broadening of IBG's revenue mix, in geographic, product and service terms
remains a key objective."
On outlook, he added: "The Board believes that IBG has the potential to evolve
into a significantly larger business with broad revenue streams within the
online advertising industry. Furthermore, current trading remains strong and the
Board is confident that IBG has an exciting future as an independent operator."
For further information please contact:
Internet Business Group plc Powerscourt
Maziar Darvish, Chairman Matt Ridsdale
020 7927 8102 / 07967 039 693 07872 601 433
Strand Partners Limited St Helen's Capital plc
James Harris Ruari McGirr
020 7409 3494 020 7628 5582
CHAIRMAN'S STATEMENT
Introduction
I am pleased to announce IBG's interim results for the six month period ended 30
April 2007. During the first half of the 2007 financial year, the Board
commenced a strategic review of the business, including a possible sale. The
outcome of this process, announced on 21 June 2007 confirmed the Board's belief
that shareholder value will be maximised in the medium term by IBG remaining
independent and by primarily pursuing an organic growth strategy.
As a result, this statement provides additional information and analysis as well
as outlining the Board's strategy for delivering shareholder value in the medium
term.
Financial Review
Turnover for the period increased by 40% to #7.96m (2006: #5.70m) with a
corresponding increase of 42% in gross profit to #1.913m (2006: #1.350m). This
resulted in an increase of 26.4% in profit before tax and investments to #0.536m
(2006: #0.424m). During the period under review IBG's net asset value increased
to #4.080m (2006: #2.018m). An overview of the financial performance of the
Group is provided below.
Six months Six months Year
ended ended Ended
30 April 2007 30 April 2006 31 October 2006
(Unaudited) (Unaudited) (audited)
#'000 #'000 #'000
Turnover 7,962 5,702 13,404
Profit before interest, 589 473 1,208
tax, depreciation and
amortisation
Normalised Profit1 587 471 1,186
Share based payments2 (50) (5) (25)
Impairment - (42) (83)
Investments3 10 99 110
Profit before tax 547 523 1,188
1 Normalised profit excludes IFRS share based charges, movements in the
Company's investments and any impairment of assets.
2 These figures represent the IFRS share based payment charges to the profit &
loss account
3 These figures represent the movement in the value of the Company's investments
during a given period. These investments comprise of a small holding in Ten Alps
plc (value as at 30th April 2007 of #66,676) as well as the historic loan to the
Company's employee benefit trust, which holds 750,000 ordinary shares of
Internet Business Group plc.
Tax
Due to the utilisation of carried forward tax losses, IBG's tax liability for
the financial year to 31 October 2006 was #13,236. IBG has recently received
advice that its tax liability for the current financial year is likely to be
substantially lower than previously anticipated, due to tax allowances on
previously exercised share options.
A segmental breakdown of the Group's financial performance is provided below:
Divisional Breakdown
Advertising E-Commerce Media Hosting Central Inter Total
& Overheads Company
Services
# '000 # '000 # '000 # '000 # '000 # '000 # '000
Turnover 6,928 817 285 115 - (183) 7,962
Percentage of
total turnover 87% 10% 4% 1% - (2%) 100%
Earnings before 1,035 25 142 41 (654) - 589
interest, tax,
depreciation,
amortisation and
central overheads
Profit/(loss) before 1,038 19 125 37 (672) - 547
taxation
Analysis of Financial Performance by Division
Advertising 6 months ended 6 months ended % change
30 April 2007 30 April 2006
# '000 # '000
Turnover (including 6,928 4,377 58%
inter-company sales)
Gross profit margin 21% 21%
Earnings before interest, tax, 1,035 633 64%
depreciation and amortisation
and central overheads
Divisional profit before 1,038 643 61%
central overheads
Media 6 months ended 6 months ended % change
30 April 2007 30 April 2006
# '000 # '000
Turnover (including 285 151 89%
inter-company sales)
Gross profit margin 76% 30%
Earnings before interest, tax, 142 31 358%
depreciation, amortisation &
central overheads
Divisional profit before 125 31 303%
central overheads
E-commerce 6 months ended 6 months ended % change
30 April 2007 30 April 2006
# '000 # '000
Turnover 817 1,206 (32%)
Gross profit margin 23% 25%
Earnings before interest, tax, 25 122 (80%)
depreciation and amortisation
and central overheads
Divisional profit before 19 113 (83%)
central overheads
As the nature of the Company's business evolves, with an increasing focus on
media operations, two new accounting policies have been introduced to reflect
this change.
The first of these relate to the capitalisation of self generated assets. An
example of this would include the capitalisation and depreciation over a 2 year
period, of staff costs relating to the development of new web systems, in line
with the treatment of third party purchased software.
The second policy relates to the capitalisation and depreciation, over 2 years,
of costs related to acquiring consumer database records.
Analysis of Financial Performance by Region
A segmental breakdown of the trading performance for the 6 months ended 30 April
2007 geographically is given below:
UK Americas Europe Inter Total
company
# '000 # '000 # '000 # '000 # '000
Turnover 7,734 365 46 (183) 7,962
Percentage of
total turnover 97% 5% 0% (2%) 100%
Profit before 605 3 (19) 589
interest,
tax, depreciation
and amortisation
Profit/(loss) 564 2 (19) 547
before taxation
Comparative geographical segmental breakdown for the six months ended 30 April
2006:
UK Americas Europe Inter Total
company
# '000 # '000 # '000 # '000 # '000
Turnover 5,721 138 53 (210) 5,702
Percentage of
total turnover 101% 2% 1% (4%) 100%
Profit before 512 (51) 12 473
interest,
tax, depreciation
and amortisation
Profit/(loss) 563 (52) 12 523
before taxation
Business Review
Performance Advertising - AffiliateFuture (http://www.AffiliateFuture.com)
Sales in AffiliateFuture grew at a faster rate than its quoted peers, up 58% to
#6.928m (2006: #4.377m). Importantly, gross margin was maintained at 21%,
resulting in an increase of 61% in divisional profits before central overheads
of #1.038m (2006: #0.643m).
As announced in the statement relating to the conclusion of the strategic review
on 21 June 2007, the launch of certain new elements of the AffiliateFuture
service has been delayed. These services relate primarily to advanced
distribution of travel focused inventory. The first of these travel-related
affiliate services was successfully launched and deployed during the course of
the period under review and early signs are promising.
The introduction of these services represents an important point of difference
for AffiliateFuture and the Board believes that this type of differentiation is
likely to become increasingly key to maintaining gross profit margins as the
provision of vanilla tracking services becomes a commodity.
In keeping with its tradition of innovation, AffiliateFuture is currently at the
planning stages of developing additional value-added services in relation to
other industry verticals in order to further strengthen its offering to clients,
and looks forward to updating shareholders in due course.
A key benefit of the Group's relocation in February 2007 has been to enable
AffiliateFuture to establish a small video studio, offering merchants the
facility to record video podcasts promoting their affiliate programme to our
network of publishers. This facility is one example of several initiatives
undertaken by AffiliateFuture to consistently improve client service, something
underpinned by steady recruitment of new talent to this division.
IBG Media
IBG Media made significant, positive progress during the period. Following the
successful re-launch of websites acquired from Cheapflights Limited at the end
of the last financial year, development has continued and the Group's media
inventory is growing in value. The addition of Group owned media properties to
our existing media arbitrage business, has resulted in a substantial improvement
in divisional gross profit margins.
Several other additions were made to the Group's media portfolio during the
period. In January, the portfolio was enhanced through the acquisition of the
Net Free Stuff website. This acquisition represents the first non-travel related
consumer website to be added to the Group's portfolio.
In addition, IBG Media's first consumer e-mail database was built as part of
Henoo.com's "Handpicked" offering, comprising of some quarter of a million UK
consumers.
Work is underway on the development of the division's first international
offerings and further additions to the portfolio are expected over the coming
months. The Board believes that IBG Media will become an integral part of the
Group and a key driver for growth over the coming years.
E-commerce
As reported in the Group's 2006 preliminary results statement, contribution from
e-commerce was expected to fall as resources were redirected towards our core
activities.
A key objective for the e-commerce division during the period was the
recruitment of additional management capacity and the introduction of new
operational processes. I am pleased to report that in February 2007 a new
commercial director was appointed to the division. Furthermore, new processes
have been implemented, enabling the Board to commit more time to the Group's
core advertising and media activities. A showroom in central London was
successfully opened in April 2007 and this will serve to raise the profile of
our e-commerce sites with our partners.
It is particularly pleasing that these objectives have been met whilst ensuring
that the division remains profitable.
International
Our international expansion objectives for the first half have been met and the
opportunity to develop our business in new markets remains exciting.
AffiliateFuture Inc, based in New York, is a profitable, growing affiliate
network providing IBG with a foothold in the all-important US market. Whilst IBG
Media's arbitrage activities in the US have, to date, been on a small-scale, it
is the Boards intention to increase the scale of these operations with new
websites expected to launch in the second half of the current financial year.
In 2006, our Spanish subsidiary successfully recruited a team that has since
been instrumental in working with IBG Media in the UK to achieve profitable
growth. The database assets built and maintained by our team in Spain also form
a key element of a number of new AffiliateFuture services, the first of which
has been launched to good effect. In the second half of the current financial
year, the Board intends to place a greater emphasis on generating revenues
through our Spanish operation as well the continued efforts of its team in
support of our UK operations.
Market Overview
The underlying growth in Internet advertising is driven by a marked gap between
the proportion of corporate advertising budgets dedicated to online media and
the proportion that online represents of the average customers' media
consumption.
Affiliate marketing represents just one of several channels currently available
to corporate advertisers in order to reach their target audiences. It is engaged
as part of a balanced mix of online marketing activities by an increasing number
of advertisers and their agencies.
Over the past few years, a significant transformation has been taking place in
the way in which end-users interact with information on the web. This
transformation has been labelled "Web 2.0" and its development is leading to new
online advertising channels and methodologies to supplement the current online
marketing mix. These new channels are expected to grow to become a mainstay of
corporate advertising budgets over the coming years. The Board believes that the
growth of this phenomenon presents a number of exciting commercial opportunities
for IBG.
Strategy
As announced on 23 April 2007, the Board entered into a strategic review to
evaluate the most effective method of maximising shareholder value, including a
possible sale of the Company. In that regard the Board concluded that the
valuations indicated by prospective trade buyers did not fully reflect the
potential of the Group and the opportunities available to it, in a market with
strong medium term prospects.
The Board believes that the market knowledge, skills and intellectual property
built up within the Group over the past decade place IBG in a strong position to
capitalise on advertising opportunities in markets that are already core to IBG
as well as new media prospects presented by the growth of Web 2.0. As an
independent operator, IBG can operate with both agility and a sharp focus.
IBG remains a growing, profitable business with strong prospects. The Board is
resolute in its belief that the continued pursuit of the Group's stated strategy
is the most effective method of delivering shareholder value in the medium term.
To this effect, our focus will continue to be on growing our network based
advertising operations both in the UK and international markets, whilst
exploiting higher margin growth opportunities available to our media division,
both organically and through selective acquisitions. The broadening of IBG's
revenue mix, in geographic, product and service terms remains a key objective.
It is the Board's intention to accelerate investment in infrastructure and in
the promotion of existing and new operational assets to build a stronger Group
operating on a larger scale.
On an ongoing basis, the Board evaluates and reviews potential acquisitions,
primarily of online media assets. Purchases will be made in situations where the
Board feel that growth can be best achieved via a bolt on acquisition carrying
limited execution risk of integration.
Share buyback
Following the conclusion of its strategic review the Board advised shareholders
of its intention to explore the feasibility of a share buyback programme. On 27
July 2007 the Company announced the appointment of Strand Partners Limited as
Nominated Adviser and St Helen's Capital plc as Broker to the Company. In
conjunction with IBG's new advisers, the Board continues to explore the
desirability and feasibility of undertaking this programme and intends to update
shareholders shortly.
Outlook
The Board believes that IBG has the potential to evolve into a significantly
larger business with broad revenue streams within the online advertising
industry. Furthermore, current trading remains strong and the Board is confident
that IBG has an exciting future as an independent operator.
I would like to thank all of the Group's staff who continue to work tirelessly
in pursuit of our goals.
Maziar Darvish
Chairman
30 July 2007
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Six months Six months Year
ended ended Ended 31
October 2006
30 April 2007 30 April 2006 (Restatement of
audited
accounts)
(Unaudited) (Unaudited)
#'000 #'000 #'000
Turnover 7,962 5,702 13,404
Cost of sales (6,049) (4,352) (10,355)
Gross profit 1,913 1,350 3,049
Distribution costs
Administration expenses (1,384) (844) (1,897)
Operating profit 529 506 1,152
Interest receivable (net) 18 17 36
Profit on ordinary activities 547 523 1,188
before taxation
Taxation (11) - (13)
Profit on ordinary activities 536 523 1,175
after taxation
Retained profit for the period 536 523 1,175
=== ==== =====
Basic profit per share 0.71p 0.73p 1.62p
Fully diluted profit per 0.70p 0.71p 1.60p
share
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Capital Other Retained Total
Reserves Earnings Equity
#'000 #'000 #'000 #'000
Balance at 1 5,318 81 (3,909) 1,490
November 2005
Profit for the 6 - - 523 523
months ended 30
April 2006
Share based payments - 5 - 5
Balance at 30 April 5,318 86 (3,386) 2,018
2006 ===== ==== ======== =====
Profit for the 6 - - 652 652
months ended 31
October 2006
Shares issued 812 - - 812
Transfer of - (75) 75 -
revaluation reserve
Share based payments - 20 - 20
Foreign currency - 2 - 2
reserve
Balance at 31 6,130 33 (2,659) 3,504
October 2006 ===== == ======= =====
Profit for the 6 - - 536 536
months ended 30
April 2007
Share issued 9 - - 9
Share based payments - 49 - 49
Foreign currency - (18) - (18)
reserve
Balance at 30 April 6,139 64 (2,123) 4,080
2007 ====== === ======== =====
CONSOLIDATED BALANCE SHEET
Six months Six months Year
ended ended ended
30 April 2007 30 April 2006 31 October 2006
(Unaudited) (Unaudited) (Restatement of
audited
accounts)
#'000 #'000 #'000
Fixed assets
Intangible assets 591 84 415
Tangible assets 1,460 338 1,275
Investments 372 324 350
2,423 746 2,040
Current assets
Stock 503 443 506
Debtors 2,163 1,372 1,588
Cash at bank 1,037 1,276 1,375
3,703 3,091 3,469
Creditors: amounts falling due (2,046) (1,819) (2,005)
within one year
Net current assets 1,657 1,272 1,464
Net assets 4,080 2,018 3,504
Share capital and reserves
Called up share capital 770 721 767
Share premium account 5,369 4,596 5,363
Other reserves 64 86 33
Profit and loss account (2,123) (3,385) (2,659)
Equity shareholders' funds 4,080 2,018 3,504
4,080 2,018 3,504
CONSOLIDATED CASHFLOW STATEMENT
Six months Six months Year
ended ended ended
30 April 2007 30 April 2006 31 October 2006
(Unaudited) (Unaudited) (Restatement of
audited
accounts)
#'000 #'000 #'000
Cash generated from operations 78 300 930
Cash flow from investing
activities
Interest received 18 17 36
Purchase of assets and (443) (118) (1,481)
investments
Cash flows from financing
activities
Shares issued 9 - 813
Net decrease/increase in cash (338) 199 298
and cash equivalents
Cash and cash equivalents at 1,375 1,077 1,077
the beginning of the period
Cash and cash equivalents at 1,037 1,276 1,375
the end of the period
Reconciliation of operating profit to net cash Inflow from operating activities
Six months Six months Year
ended ended ended
30 April 2007 30 April 2006 31 October 2006
(Unaudited) (Unaudited) (Restatement of
audited
accounts)
#'000 #'000 #'000
Profit before taxation 547 523 1,188
Depreciation charge 70 20 59
Impairment of intangible - 41 83
assets
Loss/(profit) on sale of - 1 -
fixed assets
Share scheme charges 49 5 26
Write back of impairment of (10) (99) (110)
investment
Net finance income (18) (17) (36)
Operating cash flow before 638 474 1,210
changes in working capital
Increase in debtors (575) (641) (153)
Increase in stock 3 (90) (857)
Increase in creditors 30 557 729
Other reserves (18) - 1
Cash generated from 78 300 930
operations
NOTES TO THE INTERIM ACCOUNTS
FOR THE PERIOD ENDED 30 APRIL 2007
1. Board approval
The interim condensed accounts were approved by the board of directors on 27
July 2007.
2. Earnings per share
Basic profit per share is calculated based on the profit on ordinary activities
after tax and minority interests divided by the weighted average number of
shares in issue being 75,962,347 (2006: 71,363,780).
The calculation of diluted profit per share is based on a weighted average
number of shares in issue of 76,483,571 (2006: 73,510,869) . This is comprised
of 521,224 shares (2006: 2,147,089 shares) to factor in the dilutive effect
arising from the potential exercise of options under the Company's executive
share option scheme.
3. Gains and losses
The Company had no recognised gains or losses in either the current or preceding
periods other than the profit for the period.
4. Issue of shares
During the period employees exercised 300,000 1p ordinary shares at an exercise
price of 2.875p. At 30 April 2007 the issued shares in the Company was
76,990,800.
5. Segmental reporting
The Group's primary segmental breakdown is according to divisions and is set out
in the chairman's statement under the heading divisional breakdown.
6. Basis of preparation: IFRS
The interim financial information for the six months ended 30 April 2007 is
unaudited and does not constitute statutory accounts. The adoption of IFRS did
not result in substantial changes to the Group's accounting policies under UK
GAAP and as set out in the Group's financial statements for the year ended 31
October 2006. In summary:
* The adoption of IFRS 2 'Share based payment' has resulted in a
change in accounting policy for share based payment. Under UK GAAP the provision
of share based payments to employees did not result in a charge to the income
statement. Under IFRS, the Group charges the cost of share based payments to the
Income statement over the vesting period.
* The adoption of IFRS 3 'Business Combinations' and IAS36 'Impairment
of Assets' have resulted in a change in the accounting policy for goodwill.
Under UK GAAP, the Group had a policy of amortising goodwill on a straight line
basis over a period of 5 years coupled with a review for possible impairment at
each balance sheet date. In accordance with the provisions of IFRS 3, the Group
ceased amortisation of goodwill from 1 November 2005, but continues to conduct
annual impairment reviews.
This interim financial information has been prepared according to IFRS and for
comparative purposes the financial information for the 6 months ended 30 April
2006 and the year ended 31 October 2006 have been restated (the restatement of
prior periods have not been audited).
This restatement to IFRS had the effect of reducing retained earnings as of 31st
of October 2005 by #6,216, as a result of share based payments for periods
before 1 November 2005. For the six months ended 30 April 2006, restated profits
were reduced by #5,071 due to share based payments with the reduction in the
full year to 31 October 2006 being #24,663.
Additionally, amortisation of #2,121 was written back to profits in the six
months to 30 April 2006 with #97,086 being written back for the full year to 31
October 2006.
As per the Chairman's statement the accounting policy changes regarding
capitalisation of self generated assets and the acquisitions of consumer
database records equated to the capitalisation of #80,144 of salaries as well as
#37,744 relating to acquisitions of database in the six months ended 30 April
2007.
The reconciliation of the restatement of comparable figures from UK GAAP to IFRS
is provided below.
Reconciliation of Profit
As at end of 30 As at end of 31 October 2006
April 2006
(comparable interim period (end of last period presented
under UK GAAP) under UK GAAP)
UK GAAP Transition Under UK GAAP Transition Under
to IFRS IFRS to IFRS IFRS
#'000 #'000 #'000 #'000 #'000 #'000
Turnover 5,702 5,702 13,405 13,405
Cost of Sales (4,352) (4,352) (10,355) (10,355)
Gross profit 1,350 1,350 3,050 3,050
Administration (841) (3) (844) (1,970) 72 (1,898)
Expenses
Operating Profit 509 (3) 506 1,080 1,152
Net Finance 17 17 36 36
income
Profit before 526 (3) 523 1,116 1,188
taxation
Taxation 0 0 (13) (13)
Profit for the 526 (3) 523 1,103 1,175
period
EPS 0.73p 0.73p 1.52p 0.10p 1.62p
Diluted EPS 0.71p 0.71p 1.50p 0.10p 1.60p
Profit UK GAAP 526 1,103
Goodwill not amortised after 2 97
date of transition
Share based (5) (25)
payments
Profit IFRS 523 1175
Reconciliation of Equity
At 1 November At 30 April At 31 October
2005 2006 2006
Date of Comparable End of last
Transition interim period period
under UK GAAP presented under
UK GAAP
Effect Opening Effect Opening Effect Opening
IFRS IFRS IFRS
UK GAAP of Balance UK GAAP of Balance UK GAAP of Balance
IFRS sheet IFRS sheet IFRS sheet
#'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000
Fixed
Assets
Tangible 333 333 338 338 414 414
Assets
Intangible 83 83 82 2 84 1,178 97 1,275
Assets
Investments 175 175 324 324 351 351
591 0 591 744 746 1,943 2,040
Current
Assets
Stock 353 353 443 443 506 506
Debtors 731 731 1,372 1,372 1,588 1,588
Cash at 1,077 1,077 1,276 1,276 1,375 1,375
bank
2,161 0 2,161 3,091 3,091 3,469 3,469
Current (1,262) 0 (1,262) (1,819) (1,819) (2,005) (2,005)
Liabilities
Net Assets 1,490 0 1,490 2,016 2,018 3,407 3,504
Share 721 721 721 721 767 767
Capital
Share 4,597 4,597 4,597 4,597 5,363 5,363
premium
Other 75 6 81 75 11 86 2 31 33
Reserves
Retained (3,903) (6) (3,909) (3,377) (9) (3,386) (2,725) 66 (2,659)
earnings
Equity 1,490 0 1,490 2,016 2,018 3,407 3,504
Total 1,490 2,016 3,407
equity UK
GAAP
Goodwill 0 2 97
not
amortised
after date
of
transition
Total 1490 2018 3504
equity IFRS
This information is provided by RNS
The company news service from the London Stock Exchange
END
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