RNS Number:9347N
SPG Media Group Plc
23 June 2005
ANNUAL REPORT AND ACCOUNTS
TRADING STATEMENT
23rd June 2005
SPG MEDIA GROUP PLC ("SPG")
PRELIMINARY RESULTS FOR THE YEAR ENDED 31ST MARCH 2005
SPG announces its results for year ended 31st March 2005:
* Group turnover (including joint ventures) of #18.86m (2004: #23.95m)
* Operating loss before exceptional items of #0.52m (2004: #0.07m
profit)
* Exceptional items of #2.86 m (2004:#1.52m) include #2.44m increase
in provision for non-operational properties and #0.42m of
restructuring costs
* Operating loss of #3.38m (2004: #1.45m)
* Profit on disposal of Debrett's #0.40m
* Loss on ordinary activities of #3.04 m (2004: #1.54m)
* Stephen Davidson appointed Chairman
* Comprehensive product rationalisation
* Strong Online & Events organic growth
* Rapid expansion of Indian operations
* Substantial operational investments
* Launch of Emedia joint venture
* Debt free, cash generative
Stephen Davidson, Chairman:
"It has been a difficult, but productive year for SPG. The company's focus and
cost structure have improved significantly, but we operate in highly competitive
sectors and now in a weakening advertising market. This will be another
challenging year."
Steve Nicholson, Chief Executive Comments:
"The business of today is fundamentally different to the one I agreed to join in
December 2003, in terms of its strategy, structure, cost base, business model
and aspiration.
We defined the strategic plan for the business in June 2004 and I can confirm we
are progressing towards the delivery of that plan presenting an exciting
opportunity for the Group, its employees and importantly our shareholders.
The scale and speed of change has been rapid and unquestionably these necessary
developments impacted our short term trading performance, however, the outlook
for the business is favourable given the positive financial position of the
group, the extent and range of investments in product development and the clear
signs of growth in our Events, Internet and Indian businesses.
We are confident that the strategy will lead to sustained growth and
profitability and optimistic that the Group will return to profitability in 2005
/6.
For Further Information Please Contact:
S. Nicholson, Chief Executive: 0207 915 9600
Barrie Newton, Rowan Dartington
Lawrence Dore, Mantra Public Relations 0207 907 7801
Chief Executive Statement
The Group has made positive progress throughout 2004, aggressively pursuing its
strategy to build a world-class business to business international media company
founded on outstanding products and services.
Over a relatively short period of time the company has recruited a strong and
knowledgeable board of directors, strengthened its management team and driven
through the majority of planned operational changes to reduce costs, streamline
processes and align the business to targeted markets.
The implementation of this strategy necessitated a substantial amount of
structural change and product rationalisation. This has taken longer than we
envisaged and has directly impacted our short-term performance.
At the heart of our strategy is a broad acceptance that the needs of our
customers, the world's leading executives, are rapidly changing and that our
traditional print products will not deliver sustainable value to this group of
people.
In recognition of these facts the Group is focused on building a market based
technology enabled business founded on rich data and content assets. This
strategy will lead to the group delivering our customers, global industry
decision makers, outstanding publishing and Internet services supported by
memorable business conferences and industry summit events.
We visualise that the transition of the business away from advertising led
products to the multi-channel customer centric international media company will
take a further 18 to 24 months, as the major structural changes are completed
and that significant levels of investment in product development have commenced.
In 2004, the Group absorbed operational investments exceeding #500,000 focusing
on building our Indian operations, developing our underlying technology
platforms and importantly starting the process of building world class media
products that are planned for launch from September 2005.
We also entered a joint venture with Emedia to strengthen our Internet
proposition and start the process of providing our customers with response based
electronic bulletins, applying the highly successful Emedia business model
internationally, #65,000 being invested to launch the business.
From a financial perspective the trading position did not match our
expectations, principally due to a very poor fourth quarter in the print
business with sales failing to achieve forecast.
Debrett's was successfully sold for #1.1.million, as part of the rationalisation
program, providing a net gain of #429,000.
The business is currently debt free, cash positive and increasingly cash
generative, performing broadly in line with our expectations
The board made significant provisions for non-operational properties reflective
of our plans to develop an international media business not necessarily wholly
based in London.
Offices have been opened in Hyderabad, India, where we currently have c125
people and in Nottingham where all future UK expansion will arise, we currently
have c25 people in these offices. We have no further plans for geographic
expansion in the immediate future.
I believe the outlook for the business to be very exciting as we are at the
early stages of a turnaround program designed to fundamentally change the
commercial orientation of the business.
The planned transfer to AIM from the official list of the London Stock Exchange
will take place on the 25th July 2005.
In view of the company's size and market capitalisation, it makes more sense to
trade on AIM where the Group will incur less administrative overhead and
potentially attract greater investment interest given the advantageous taxation
benefits for many investors.
Our immediate challenge is to balance the required levels of investment with the
need to return the business to profitability whilst not losing sight of the fact
that we are determined to create sustainable and growing shareholder value.
The Board will not be recommending the payment of a dividend, though the Board
remains hopeful that dividends will be payable as soon as practicable.
OPERATIONAL REVIEW:
Management:
The Group continues to strengthen its executive management team with the planned
appointments of an experienced Publishing Managing Director and a Group
Financial Director in August 2005.
The strengthening of the board and the executive team are fundamental to the
attainment of the strategy with the planned appointments delivering the
experience and commercial balance to execute the communicated strategy.
Internet:
There is a broad recognition that marketing spend is generally moving from print
based media to the Internet as businesses embrace the ability of the Internet to
fulfill many of their research and information requirements.
The Group currently operates 22 industry reference sites principally providing
engineers with information on industry projects, manufacturers and suppliers.
In the year ending March 2005 the Internet business's revenue grew organically
by c10% to #6 million with an average of over 100,000 daily user sessions
indicating that we are reaching a bigger and broader audience.
Further rationalisation of our current Internet products is planned with various
web sites being transferred to India where a lower cost base will provide
improved return.
The Group is making a substantial investment in product development improving
basic functionality through to launching new industry portals planned from
September 2005.
Significant investments are being made to develop the functionality of the
Internet sites with the objective of introducing new services from September
2005.
In addition we are advancing our search engine developments announced around 12
months ago: the underlying technology is fully functional; the user interface is
being developed; and the database developed out of India.
This business, Qmina, will not launch until late 2006 or early 2007 albeit we
envisage using the underlying technology and data assets in conjunction with our
current sites from September 2005.
The outlook for this business is favourable with a strong and commercially
competent team aggressively pursuing the implementation of the new three-year
business plan.
Emedia International Ltd:
SPG Media entered a 50:50 joint venture with Emedia Ltd to launch an
international version of their highly successful 'E' bulletin response business.
The business was launched in January 2005 with modest expectations for the first
year as the business recruits the management team and develops the international
products and proposition.
SPG Media has the first rights of refusal to acquire the business and sees this
business as providing a valuable additional service to the core Internet
business.
Publishing:
The majority of our challenges remain in the historic advertising led controlled
circulation print publishing business that has been in decline since 2001.
Investments in building our circulation assets, improving product design and
editorial content are all ongoing and to mitigate future risk the group has
further rationalised the print publishing business in recognition of the broad
swing away from traditional Business to Business (B2B) print advertising to
online media, direct marketing and lead generation services.
The Group discontinued a number of duplicate, weak or non-core publishing
products during 2004 which contributed approximately #4.5m of annual revenue.
This does include the sale of the Debrett's International Collection titles sold
as part of the Debrett's business.
In 2005, after much reorganisation, the business will have around 12
publications serving our most profitable sectors and whilst some further
rationalisation may be necessary, I am increasingly confident that we have the
right strategy in place to begin improving the performance of this division in
the medium term.
The Group has consciously limited its exposure to any further market downturn by
reducing the number of markets serviced and, consequently, the number of
publications distributed.
The Board remains cautious about its outlook for the print publishing business
noting the recent recruitment of an outstanding and proven managing director
with an extensive background in B2B publishing and the general improvements in
product quality and circulation.
Events:
The Group's Events business performed well with growth of 20% on an annualised
basis.
The Group currently has two events businesses that will be merged into one
business during 2005.
The conferences business acquired in 2003 was fully integrated into the group in
early 2004 with significant rationalisation coupled to the recruitment of new
management.
The executive forums business progressed well with strong incremental year on
year revenue growth of 39% .
The integration of these businesses and resultant synergies presents a
significant organic growth opportunity for the Group in addition to cost saving
benefits.
The general outlook for the Events business is favourable with the Board
confident that the business has a strong management team with a substantial
organic growth opportunity.
India:
The Indian business is developing rapidly growing from 10 to over 120 people,
between January 2004 and January 2005, with significant investments in premises
and technology to provide the group with its core market intelligence functions.
A significant proportion of the Group's data and circulation developments are
now executed out of India and we are in the process of creating a market
intelligence function that will provide the group with the research materials
and market knowledge to launch outstanding products and services.
A variety of Internet products, historically sold from the UK, have been
transferred to India who have a sales team of around 45 selling worldwide on
these products.
In addition we will hold our first event run out of India, in June 2005, with
plans for a further event in March 2006.
We recently started the process of building our publishing expertise in India
and have launch our first magazine, Pharma Asia.
Revenues continue to grow with current order intake indicating further rapid
growth in 2005.
The outlook for India is very positive based on a strong order book and the
quantum of organic growth opportunities in a fast developing economy.
Nottingham:
In February 2005 we opened a satellite office in Nottingham to reduce our
dependence on London given the historic challenges of recruiting and retaining
sales people and the general higher costs of operating in London compared with a
regional location, such as Nottingham.
All future UK expansion is planned to come in Nottingham, where we currently
have approximately 25 people.
Debrett's:
Debrett's was successfully sold to private investors in November 2004 for #1.1
million. generating a profit on disposal of #0.4m
FINANCIAL REVIEW:
Accounting Policies:
The Group accounts include the consolidated results of SPG Media Group plc and
its subsidiaries and joint venture. Accounting policies have been applied
consistently, year on year. The Financial Statements have been prepared under
the historical cost convention and in accordance with applicable United Kingdom
law and accounting standards on a basis consistent with the previous year
(except for restatement concerning ownership of own shares necessitated by a new
accounting standard 'UITF 38') across all companies in the Group.
Trading Result:
Group turnover declined 21% year on year principally due to the rationalisation
of the print business where a 40% reduction in print advertising revenues
reflected the quantum of change in the business and the declining interest of
advertisers in standalone controlled circulation propositions.
Gross margins for the year were 44% (2004: 46%) reflecting the changing business
mix, reflecting the level of investments in product development of #0.35
million.
The adjusted operating loss before exceptional items is #523,000 against a
profit last year of #72,000.
Exceptional Items:
Exceptional items comprise redundancy payments of #416,000 (which included
compensation for loss of office to a director of #203,000) and an additional
provision against non-operational properties of # 2,445,000.
After exceptional items the operating loss was #3,384,000 (2004: loss of
#1,445,000).
A profit on disposal of Debrett's of # 429,000 was also realised.
Net finance costs were # 75,000 (2004: #96,000).
Cash flow & Funding:
The cash inflow from operating activities was #666,000 and after capital
expenditure of #569,000 and the proceeds from the sale of Debrett's the overall
cash flow of #574,000 results in positive net funds of #178,000 (2004: net debt
#341,000).
FUTURE DEVELOPMENTS:
Strategy & Market Developments:
We envisage market conditions remaining unpredictable noting an expectation of
the trend to continue away from traditional print based advertising to online
media and response based services.
We are starting to see a clear trend evolve where our customers are focused on
securing a direct return from their marketing investments - increasingly
interested in response based services that deliver genuine sales opportunities
providing the ability to quantify return on investment.
The use of the Internet as a legitimate business tool is rapidly extending
beyond financial, travel, community and e commerce sectors into a broader range
of markets where information has traditionally been provided through print
media.
Our market analysis would imply that business users are increasingly frustrated
by the array of Internet information options and are seeking definitive points
of reference to book mark, search and frequently use.
The conferences and events market remains strong noting that over supply and the
diversity of service providers offering weak or poor events will naturally
polarize the market as businesses seek the safety of established brands and
reputations.
SPG anticipates changes in the marketing services arena as businesses
increasingly focus on marketing campaigns that deliver precision as opposed to
blanket market coverage.
The use of outbound call centres coupled to the increased use of intrusive
direct mail will inevitably make access to senior executives and decision makers
increasingly challenging, hence the strategy SPG are engaged in implementing.
The focus and orientation of the group is structured around building an
international market leading media business skilled and competent at providing
customers with solutions and services that deliver tangible and measurable
marketing results.
Our objective is to ensure that SPG is a name synonymous with quality as opposed
to quantity and professionalism as opposed to mediocrity
Our structural, technological and research related investments are significant
for a company the size of SPG.
We believe that our investments in building extensive data and content assets
will lead to the development of a portfolio of outstanding products and services
that in time will provide tangible differential and the basis for long term and
sustained growth.
Consolidated Profit and Loss Account for the year ended 31 March 2005
Total Restated
Notes 2005 2004*
#'000 #'000
Turnover 2 18,861 23,951
Less share of joint venture turnover (21) -
Group turnover 18,840 23,951
Cost of sales (10,485) (12,992)
Gross profit 8,355 10,959
Distribution costs (366) (926)
Administrative expenses (before exceptional (8,512) (9,961)
items)
Exceptional items 3 (2,861) (1,517)
Total administrative expenses (11,373) (11,478)
Operating loss (3,384) (1,445)
Share of joint venture operating loss (10) -
Profit on disposal of business 3 429 -
Finance charges - net 4 (75) (96)
Loss on ordinary activities before taxation (3,040) (1,541)
Tax on loss on ordinary activities 5 (6) -
Loss on ordinary activities after taxation and (3,046) (1,541)
retained loss for the financial year
Basic loss per share* 6 (3.60)p (1.83)p
Diluted loss per share* 6 (3.60)p (1.83)p
All results derive from continuing operations and in both years results of the
disposed Debrett's business are not presented as a discontinued operation as in
the opinion of the Directors the results were not material to the Group.
*During the year the Group adopted UITF 38 which necessitated the restatement of
the comparative year. See Note 1 for details.
Consolidated Statement of Total Recognised Gains & Losses:
2005 2004
Restated
#'000 #'000
Loss for the financial year
Group (3,036) (1,541)
Joint venture (10) -
(3,046) (1,541)
Currency translation difference on foreign currency (5) -
net investments
Total recognised gains & losses for the year (3,051) (1,541)
Prior year adjustment (145) -
Release of negative goodwill (225) -
Total recognised gains & losses since the last (3,421) (1,541)
annual report
Reconciliation of Movements in Shareholders' Funds
Group Company
2005 2004 2005 2004
#'000 #'000 #'000 #'000
Loss for the Financial Year (2004 restated) (3,046) (1,541) (12,266) 22
Other recognised gains and losses relating to the (5) - - -
year (net)
(3,051) (1,541) (12,266) 22
Ordinary shares issued - 101 - 101
Ordinary shares to be issued - (407) - (407)
Negative Goodwill previously written-off included (225) - - -
in retained profit for the year
Net change in shareholders' funds (3,276) (1,847) (12,266) (284)
Opening shareholders' funds restated 8,903 10,750 27,405 27,689
Closing shareholders' funds 5,627 8,903 15,139 27,405
Consolidated Balance Sheet as at 31 March 2005
Notes 2005 2004*
Restated
#'000 #'000
Fixed assets
Intangible assets
Goodwill 1,575 1,684
Other 2,832 3,432
Tangible assets 2,580 3,038
Investment in joint venture
- Goodwill 65 -
- Share of gross assets 75 -
- Share of gross liabilities (85) -
55 -
7,042 8,154
Current assets
Stocks and work-in-progress 4,517 4,496
Debtors 4,390 5,940
Cash at bank and in hand 233 103
9,140 10,539
Creditors - amounts falling due within one year (7,160) (8,611)
Net current assets 1,980 1,928
Total assets less current liabilities 9,022 10,082
Creditors - amounts falling due after one year (48) -
Provisions for liabilities and charges (3,347) (1,179)
Net assets 5,627 8,903
Capital and reserves
Called up share capital 4,293 4,293
Share premium account 7,262 7,262
Own Shares (86) (86)
Capital redemption reserve 7,874 7,874
Other reserves 733 733
Profit and loss account (14,449) (11,173)
Equity Shareholders' funds 7 5,627 8,903
*During the year the Group adopted UITF 38 which necessitated the restatement of
the comparative year. See Note 1 for details.
Consolidated Cash Flow Statement for the year ended 31 March 2005
Notes 2005 2004
#'000 #'000
Net cash inflow from operating activities 8 666 2,199
Returns on investments and servicing of finance
Interest received 8 8
Interest paid (27) (44)
Interest element of finance lease payments (2) (9)
Taxation
Overseas corporation tax paid (6) -
Capital expenditure and financial investment
Payments to acquire tangible fixed assets (569) (549)
Investment in joint venture (65) -
Acquisitions and disposals
Payment to acquire subsidiary undertaking - (87)
Net cash inflow from sale of trading assets 569 -
Cash inflow before financing 574 1,518
Financing
Capital element of finance lease payments (3) (152)
Decrease in net debt in the year 9 571 1,366
Reconciliation of net cash flow to movement in net debt
Decrease in net debt in the year 574 1,366
Cash outflow from lease financing 3 152
Change in net debt resulting from cash flow 577 1,518
New finance lease obligations (58) -
Movement in net funds/(debt) for the year 519 1,518
Opening net debt 9 (341) (1,859)
Closing net funds/(debt) 9 178 (341)
NOTES:
1. Financial statements
This preliminary statement was approved by the board of directors on 21 June
2005. This statement does not comprise the statutory accounts of the Company.
The financial information for the year ended 31 March 2005 has been prepared on
the same basis of accounting as for the year ended 31 March 2004 except for
restatement concerning ownership of own shares. The comparative information for
the year ended 31 March 2004 does not constitute the Company's statutory
accounts for that year but is derived from those accounts.
The statutory accounts of the Company for the year ended 31 March 2004 have been
delivered to the Registrar of Companies and those for the year ended 31 March
2005 will be delivered following the Company's Annual General Meeting. The
auditors have reported on those accounts; their reports were unqualified and did
not contain statements under section 237(2) or (3) of the Companies Act 1985.
2. Segmental Information
Geographical analysis of turnover by destination:
2005 2004
#'000 #'000
UK 5,328 5,329
USA 3,308 5,773
Europe (other than UK) 8,570 10,625
Other 1,655 2,224
18,861 23,951
Analysis of turnover by channel:
2005 2004
#'000 #'000
Print 7,919 13,737
Internet 5,947 5,477
Events 4,801 4,112
Other 194 625
18,861 23,951
In the opinion of the Directors, the Group operates in on segment, namely
business to business communication. As a result, turnover by channel is provided
for information purposes only.
3. Exceptional items
The following exceptional items are included in administrative expenses:
2005 2004
Operating exceptionals: #'000 #'000
Property provision (2,445) (340)
Redundancy costs (416) (677)
Impairment of intangible fixed asset - (500)
(2,861) (1,517)
Included below operating profit:
Profit on disposal of Debrett's 429 -
429 -
The property provision represents the additional charge required in respect of
the non-operational properties of the Group. Redundancy costs were incurred
during the year as part of a restructuring of the management team.
4. Finance charges - net
2005 2004
#'000 #'000
Interest payable:
Interest on bank loans and overdrafts repayable within five years 27 44
Interest on finance leases 2 9
Unwinding of discount on provisions 54 51
83 104
Interest receivable and other income 8 8
8 8
75 96
5. Tax on loss on ordinary Activities
2005 2004
#'000 #'000
United Kingdom corporation tax at 30% (2004: 30%) - -
Foreign Taxation 6 -
Deferred taxation - -
6 -
The current year tax can be reconciled to tax at the standard rate of 30% as
follows:
2005 2004
#'000 #'000
Loss on ordinary activities before taxation (3,040) (1,541)
Corporation tax at 30% (2004: 30%) (912) (462)
Effects of:
Capital gains reliefs utilised (173) -
Expenses not deductible for tax purposes 143 74
Excess of capital allowances over depreciation of eligible assets (12) 11
Reduction in rate due to foreign tax reliefs (11) -
Losses carried forward 915 224
Provision against own shares - (18)
General bad debt provisions 17 (19)
Amortisation of goodwill 39 40
Write down of intangible fixed assets - 150
Current tax charge for the year 6 -
6. Earnings per Share
The loss per share of 3.60p (2004: loss 1.83p) and the diluted loss per share of
3.60p (2004: loss 1.83p) have been calculated based on the attributable loss to
shareholders for the financial year of #3,046,000 (2004: loss #1,541,000).
The weighted average number of shares in issue during the year, excluding those
held by the SPG Media Group employee benefit trust, were:
2005 2004
'000 '000
Basic 84,643 84,096
Share option adjustment - 21
Shares to be issued - -
Diluted 84,643 84,117
Financial Reporting Standard 14 requires the presentation of diluted earnings
per share when a company could be called upon to issue shares that would
decrease net profit or increase net loss per share.
7. Reserves
Group Capital
redemption Share Own Other Profit and
reserve premium shares reserves loss account
#'000 #'000 #'000 #'000 #'000
At 31 March 2004 as previously 7,874 7,262 - 733 (11,114)
stated
Prior year adjustment - - (86) - (59)
As at 1 April 2004 as restated 7,874 7,262 733 (11,173)
(86)
Currency translation difference - - - - (5)
on foreign currency net
investments
Retained loss for the year - - - (3,046)
-
Shares issued - - - - -
Negative Goodwill previously (225)
written off
As at 31 March 2005 7,874 7,262 (86) 733 (14,449)
8. Reconciliation of operating loss to net cash inflow from operating
activities
In the table below positive amounts represent generation of cash and negative
amounts cash utilisation.
2005 2004
#'000 #'000
Operating loss:
- Group (3,384) (1,445)
- Joint Venture (10) -
Amortisation of goodwill 109 133
Impairment of intangible assets - 500
Depreciation of tangible fixed assets 1,000 1,064
Movement in stocks and work-in-progress (21) (347)
Movement in debtors 1,731 1,062
Loan to joint venture (65) -
Movement in creditors (808) 1,192
Provisions for liabilities and charges 2,114 40
Net cash inflow from operating activities 666 2,199
The exceptional items resulted in a net cash inflow of #388,000 (2004: #677,000
outflow)
9. Analysis of Net Funds/(Debt)
1 April 2004 Cash Flow Other Non Cash 31 March 2005
Movements
#'000 #'000 #'000 #'000
Cash in hand and at bank 103 130 - 233
Overdraft (444) 444 - -
(341) 574 - 233
Finance lease obligations - 3 (58) (55)
Net funds/(debt) (341) 577 (58) 178
--------------------------
This information is provided by RNS
The company news service from the London Stock Exchange
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