Embargoed Release: 07:00hrs 27 September 2004
MKM Group plc
(`MKM' or the `Group')
Preliminary Results for the Year Ended 31 March 2004
Highlights
* Successful admission to AIM and fund raising of �1.4m
* Blue Chip Contract wins including HSBC, Sainsbury's, Tesco, Daily Express,
First Direct, and the AA
Mark Koch, CEO, commented:
"It is with great pleasure that we report on what has been a period of
substantial growth for the company. We have continued to win key contracts with
some of the UK's most notable blue chip companies and have had significant
interest in the ongoing development of our loyalty programme due to be launched
in 2005.
After the year-end MKM was admitted to the Alternative Investment Market of the
London Stock Exchange and raised �1.4m. I believe this key step in the
company's development will enable us to further grow the business as we develop
new products to leverage our reputation for excellence and reliability through
our numerous matured commercial relationships.
This has been a defining period for the company and I very much look forward to
our future successes."
For Further Information:
Mark Koch MKM Group plc 0161 877 1112
CEO 07733 007008
Andrew Tan Hansard Communications 020 7245 1100
Account Director 07957 203 685
Chairman's Statement
It is with pleasure that I am able to report on a successful year for the
Group. During the year the core business continued to grow strongly and new
products that complement our existing portfolio have been under development. In
addition, in April 2003, Hidden Retreats Limited was acquired.
GROUP COMPANIES
The Group has three trading companies:
MKM Marketing and Promotions Limited - the Group's principal trading company,
which designs the promotional campaigns which revolve around offers that
include flights, hotel accommodation, holidays, theatre, dining out, cinema and
days out.
Hidden Retreats Limited- a luxury tour operator with ATOL and IATA licences,
which has a division, called Rise Travel that sources flights and accommodation
for the Group's travel based promotions.
Travel Design Limited - an ABTA bonded travel agency which provides the
facility to redeem MKM Marketing & Promotions holiday vouchers as well as
generating commission from tour operators.
FINANCIAL REVIEW
Group turnover of �6.45m for the year ended 31 March 2004 compared with �3.20m
in the prior year, represents an increase of �3.25m; of which �2.64m is as a
result of the acquisition of Hidden Retreats. The remaining increase of �0.61m
from continuing operations represents an increase of 19% when compared to prior
year results. This growth in turnover on continuing operations is accounted for
by an increase in both the number and value of promotions undertaken.
Profit before tax was �0.67m (2003 - �0.76m). This is the first year that the
accounts have been prepared in accordance with the provisions of FRS 5
Application Note G on Income Recognition, which was introduced in November
2003.
This Financial Reporting Standard requires organisations to recognise revenue
as they fulfil their obligations under contract. Where a contract requires the
provision of more than one good or service, organisations must apportion
revenue in a way which recognises the fair value of each good or service.
Historically, in accordance with Financial Reporting Standards current at the
time, it was the Group's policy to recognise revenue from the initial promotion
fees when invoiced and to provide for any net direct costs as they arose.
Revenues and profits from redemptions and related companion sales were
subsequently recognised as they arose over the following months.
This policy led to the Group recognising profits on the initial fee immediately
as the promotion commenced and typically led to the Group breaking even on the
subsequent redemption process.
The impact of this standard has been to necessitate an adjustment to the
previously reported profits for prior years. The effect of this adjustment has
been to increase the Group operating profit in the prior year by �0.12m and to
reduce the Group operating profit in the year ended 31 March 2004 by �0.08m.
The management of MKM Group plc has always maintained and will continue to
maintain a prudent approach in profit recognition on all of its promotions.
During the year the Group has invested heavily in staff in order to develop its
ability to source and handle larger transactions, particularly the free flights
promotions, which will deliver benefits in future years. As a result of this
staff numbers have risen from an average of 39 staff in the year ended 31st
March 2003 to 71 in the year ended 31st March 2004. The resulting increase in
salaries has had a temporary impact on the profitability of continuing
operations at both the gross margin and the operating profit level as salary
costs are split between administrative overheads and cost of sales as
appropriate.
As can be seen from the gross margin percentage on acquisitions, Hidden
Retreats whilst profitable is a lower margin business than MKM Marketing &
Promotions Limited.
TRADING
The Group has continued to build on an impressive blue chip client base and has
continued its track record of developing its product and service portfolio.
Thus providing their customers with new and exciting campaigns within the
lifestyle promotions market.
In June 2004 Yippee!, a product which provides a range of aspirational
experiences supplied by third parties was launched. Management consider that
Yippee! fits well with the Group's existing client base and infrastructure.
MANAGEMENT AND STAFF
The success of the group in achieving its objectives is possible only through
the MKM people. The group has recruited and developed talented and experienced
people who are focussed in delivering positive results. I would like to thank
them all for their commitment and dedication.
Immediately prior to the group's floatation in June 2004, I was delighted that
John McGuire accepted an invitation to join the Board as a non executive
director. Unfortunately since that date John has been suffering with some
health problems but I am delighted to say that he is now well on the road to
recovery. I look forward to his speedy return and continued involvement in the
company.
PROSPECTS
Our admission to AIM in June 2004 has put the Group in a position to invest in
the development of new concepts and promotions which, it is hoped, will lead to
continued growth in the future. The Group aims to capitalise on its market
position and to strengthen its product base.
The Group maintains a strong pipeline of orders and the Board looks forward
with confidence to the remainder of the current financial year.
Clive R Garston
Chairman
24 September 2004
Annual General Meeting
The company's Annual General Meeting will be held on Friday 22nd October at
10am at the offices of Halliwells LLP. St James's Court, Brown Street,
Manchester, M2 2JF.
Consolidated Profit And Loss Account For The Year Ended 31 March 2004
Continuing Operations
Existing Acquisitions 2004 2003
� � � As restated
�
Turnover 3,812,571 2,639,032 6,451,603 3,201,778
Cost of sales 1,768,902 2,309,265 4,078,167 1,194,901
Gross Profit ________ ________ ________ ________
Administrative 2,043,669 329,767 2,373,436 2,006,877
expenses
1,437,140 264,615 1,701,755 1,243,799
Operating Profit
________ ________ ________ ________
Interest receivable
606,529 65,152 671,681 763,078
and similar income
19,027 14,718
Interest payable and
(24,719) (21,336)
similar charges
________ _________
Profit on Ordinary
665,989 756,460
Activities Before
Taxation (188,616) (233,007)
Tax charge on profit ________ _________
on ordinary
activities 477,373 523,453
Dividends - (127,800)
Retained Profit For _________ _________
The Year
477,373 395,653
Earnings Per Share
(�) _________ _________
Basic and diluted 4,773.73 5,234.53
_________ _________
Consolidated Balance Sheet At 31 March 2004
2004 2003
� � � �
Fixed Assets As restated As restated
Intangible assets 873,970 877,137
Tangible assets 143,925 73,166
________ ________
1,017,789 950,303
Current Assets
Stocks 1,164 1,164
Debtors 1,152,827 860,909
Cash at bank and in 1,373,441 776,338
hand
_________ _________
2,527,432 1,638,411
Creditors: Amounts 2,117,732 1,920,218 Falling
Due Within
One year
_________ _________
Net Current Assets/ 409,700 (281,807)
(Liabilities) _________ _________
Total Assets Less 1,427,595 668,496
Current Liabilities
Creditors: Amounts
Falling Due After 526,781 245,055
More Than One Year
Provision For 4,440 4,440
Liabilities And _________ _________
Charges
Deferred taxation 531,221 249,495
_________ _________
896,374 419,001
_________ _________
Capital And
Reserves Called up 100 100
share capital
Profit and loss 896,274 418,901
account _________ _________
Equity 896,374 419,001
Shareholders' _________ _________
Funds
Consolidated Statement of Total Recognised Gains and Losses For The Year Ended
31 March 2004
2004 2003
� �
As restated
Profit for the Year 477,373 395,653
Prior Year Adjustment (as explained 179,698
in note 2)
_______
Total Gains and Losses since Last
Annual Report 657,071
_______
Consolidated Cash Flow Statement For The Year Ended 31 March 2004
Note 2004 2003
� �
As restated
Net Cash Inflow From Operating 3 618,339 899,977
Activities
4 (5,692) (6,618)
Returns On Investments And Servicing
Of Finance 4 (147,551) (12,906)
Taxation 4 (67,572) (22,420)
Capital Expenditure And Financial 4 (168,114) (714,000)
Investment
5 - (127,800)
Acquisitions
5 _______ _______
Equity Dividends Paid
229,410 16,233
Net Cash Inflow Before Financing
327,562 (26,950)
Financing
_______ ________
Increase/(Decrease) In Cash In The
Year 4 556,972 (10,717)
Reconciliation Of Net Cash Flow To _______ ________
Movement In Net Debt
Increase/(decrease) in cash in the 556,972 (10,717)
year
Cash (inflow)/outflow from financing (327,562) 26,950
_________ _________
Change in net funds resulting from
cash flows 5 229,410 16,233
New finance leases (4,876) (15,000)
_________ _________
224,534 1,233
Movement in net funds in the year
Net funds at the start of the year 668,768 667,535
________ ________
Net funds at the end of the year 5 893,302 668,768
________ ________
Notes:
1 Preliminary announcement
The financial information set out above does not constitute the company's
statutory accounts for the year ended 31 March 2004, but is derived from those
accounts to that date which received an unqualified auditors' report and did
not contain statements under the Companies Act 1985, s237(2) or (3) and will be
filed with the Registrar of Companies.
The financial information for the year ended 31 March 2003 is extracted from
the Group's financial statements to that date which received an unqualified
auditors' report and did not contain statements under the Companies Act 1985,
s237(2) or (3) and have been filed with the Registrar of Companies. However,
these have been restated to reflect prior year adjustments including a change
in an accounting policy as noted below.
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 2004 which include a change in accounting policy for turnover following
the introduction of FRS 5, Application note G "Revenue Recognition":
Turnover - Change in accounting policy
The Group has changed its revenue recognition policy during the year.
Previously, the Group recognised promotions income when promotions fees on
contracts were invoiced or ancillary bookings made and to recognise net direct
costs attributable to the promotions as they arose.
With the introduction of FRS5, Application note G "Revenue Recognition", the
group now recognises income from setting up and handling promotions contracts
to the extent that the Group has fulfilled its obligations under each contract.
Sales of vouchers redeemable against holidays and flights sourced by the Group
are recognised at the point of sale and measured at the fair value of the
consideration received less the fair value of the voucher. The fair value of
the voucher is treated as deferred income in the balance sheet and released to
turnover to the extent that the group has fulfilled its redemption obligations
under each contract.
Details of the effect the change in this accounting policy has had on the
current year and comparative results are given in note 2.
Turnover from the Group's activities as a tour operator and travel agent is
recognised when the Group has fulfilled its contractual obligations connected
with the sale.
There has been no change to the turnover recognition policy on travel agency
and tour operator income.
All other accounting policies as shown in the Group's financial statements for
the year to 31 March 2003 remain the same
2 Prior year adjustments
As detailed in note 1, during the year the Group changed its accounting policy
on recognition of promotions income.
The effect of the change in accounting policy on the comparatives was to
decrease sales by �146,186 in 2004 and by �122,157 in 2003. Operating profit
reduced by �77,322 in 2004 and increased by �117,039 in 2003. The effect on
brought forward reserves is an increase of �62,659.
An adjustment was also made to goodwill in respect of additional consideration
that had been incorrectly treated in the prior year. The amount of �116,871 has
now been added to goodwill in 2003.
A prior year adjustment has been made to the company's balance sheet to
correctly reflect the investment value. Previously deferred consideration had
not been correctly shown in the value of investments and creditors. An
adjustment of �240,000 has been made to increase the value of fixed asset
investments and creditors in 2003 to reflect this. An adjustment has also been
made to the cash flow statement for �594,000 to reflect a payment relating to
the original investment in subsidiary undertakings.
3. Reconciliation of operating profit to net cash inflow from operating
2004 2003
As restated
� �
Operating profit 671,681 763,078
Depreciation 37,728 17,863
Amortisation 51,210 39,000
Decrease/(increase) in debtors 4,549 (99,432)
(Decrease)/increase in creditors (146,829) 173,157
Loss on disposal of fixed assets - 6,311
Net cash inflow from operating 618,339 899,977
activities
4. Analysis of cash flow
2004 2003
As restated
� �
Returns on investments and
servicing finance
Interest received 19,027 14,718
Interest paid (21,860) (18,990)
Interest elements of finance (2,859) (2,346)
rentals payment
(5,692) (6,618)
Capital expenditure
Payments to acquire tangible (67,572) (28,995)
fixed assets
Proceeds from disposal of - 6,575
tangible fixed assets
(67,572) (22,420)
Acquisition and disposals
Payments to acquire subsidiary (164,147) (714,000)
undertakings
Bank overdrafts acquired with (3,967) -
subsidiaries
(168,114) (714,000)
Financing
Other loan advance 403,000 -
Bank loan advance - 577,362
Capital element of hire purchase (5,041) (14,709)
repayments
Repayments of other loans (70,397) (589,603)
327,562 (26,950)
5. Analysis of net debt
At beginning Cash flow Other At year end
of year non-cash
changes
� � � �
Cash at bank and in hand 776,338 597,103 - 1,373,441
Overdrafts (24,586) (40,131) - (64,717)
751,752 556,972 - 1,308,724
Debt due within one year (70,397) 70,397 - -
Debt due after one year - (403,000) - (403,000)
Finance leases and hire (12,587) 5,041 (4,876) (12,422)
purchase contracts
Total 668,768 229,410 (4,876) 893,302
END
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