RNS Number:7574Z
SPG Media Group Plc
15 June 2004
SPG MEDIA GROUP PLC ("SPG")
PRELIMINARY RESULTS FOR THE YEAR ENDED 31 MARCH 2004
SPG announces its results for the year ended 31st March 2004:
* Group turnover of #24.0m (2003: #24.7m)
* Adjusted(1) operating profit of #0.07m (2003: loss #0.2m)
* Operating loss of #1.4m (2003: #0.9m) after exceptional costs of #1.5m.
* Net debt reduced to #0.3m (2003: #1.9m) as a result of positive cash flow.
* Fundamental review of operations completed
* New management team in place
* Removal of duplicate products, costs reduced and trading improving
* Strong growth in event and Internet operations.
(1) Adjusted operating profit is defined as operating profit before
exceptional items (see note 3 to the financial information accompanying this
press release.)
Steve Nicholson, Executive Chairman, comments:
"The last six months have been critical in reshaping the business. The company
has been fundamentally restructured, aligned to specific markets and integrated
into one trading vehicle, SPG Media. Products have been rationalised and costs
reduced with a strategy to reduce our dependence on advertising revenues.
We plan to build an international market leading media business skilled and
competent at providing customers with solutions and services that deliver
tangible and measurable commercial results.
I am now confident we have the right strategy, structure and focus to ensure the
Group returns to sustained profitability."
For further information please contact:
Steve Nicholson SPG 020 7915 9637
Barrie Newton Rowan Dartington 0117 933 0011
Lawrence Dore / Ryszard Bublik Mantra PR 020 7907 7800
Chairman's Statement
This is my first opportunity to formally communicate with all of our
shareholders and to confirm the company made substantial progress in 2003 and
that I am now confident we have the right strategy, structure and focus to
ensure the group returns to sustained profitability.
We undertook a fundamental review of the Group's operations in the third quarter
of 2003 concluding that the underlying assets of the business provided
significant scope for growth and development, albeit the operational
infrastructure required investment to realise this potential.
The company has been refocused, aligned to specific markets and integrated into
one trading entity, SPG Media.
Operating costs have been substantially reduced returning the company to an
adjusted operating profit.
New management has been recruited to invigorate and drive the development and
performance of the core operations.
Duplicate products have been removed and investments made to develop brand-based
products targeted at specific international audiences.
We have rapidly transitioned the ethos of the company from being product to
market based with clear signs that the initiatives are well received by our
customers.
Whilst our ability to impact the 2003/4 results were limited and much has still
to be achieved I believe we are laying the foundations for a prosperous and
profitable future.
Despite challenging market conditions in 2003, I am pleased to report that the
Group made an adjusted operating profit before exceptional items of #0.07m
(2003: loss #0.22m) on reduced turnover of #24.0m (2003: #24.7m). Restructuring
and non-recurring costs of #1.0m have been absorbed into the 2003/4 results
together with an impairment charge of #0.5m after a review of the carried value
of our intangibles.
In print, average revenues per publication were marginally down, though I am
pleased to confirm that the Group maintained its page yield premium. Our
Internet offer continues to grow with the benefit of higher than anticipated
repeat rates from our advertisers. The events business has experienced strong
growth, which has been reinforced by a full year contribution following our
acquisition of Vision in Business.
The board of directors believes it prudent not to propose a dividend for 2003/4
but does intend to return to pay dividends when it is considered appropriate.
Operational Review
Print:
The publishing interests of the Group historically traded under three competing
publishing brands, Sterling, Cornhill and Quasar. These operations have been
fully integrated into one core print publishing business with the benefit of
reduced administration costs, clear market focus and stronger industry
relationships.
The restructuring of these businesses creates a strong foundation for profitable
growth and the development of new revenue streams and channels to market.
SPG Media distributed 60 publications (2003:71) to over 650,000 key decision
makers worldwide.
Business to business advertising remained challenging throughout 2003 with
average revenues per publication marginally down on 2002.
The Group maintained its page yield premium comparative to the industry average
whilst holding its print and distribution costs.
Internet:
The company undertook a fundamental review of its Internet operations starting
the process of redesigning the core functionality, look, feel and service
deliverables, all of which will start to benefit the business in 2004/5.
The business showed strong underlying growth with our established web sites
benefiting from higher than anticipated repeat advertisers.
The company has 22 Internet portals aimed primarily at project engineers. The
sites provide accurate and relevant information about industry developments,
manufacturers and suppliers.
We have strengthened the Internet management team appointing the ex R&D director
of Alta Vista to drive the development of our technical expertise and levels of
service.
In addition we opened offices in Hyderabad, India, in September 2003, to build
offshore capabilities that reduce operational overheads whilst providing a
conduit to servicing local Asian markets. The business is building Internet
competencies, is already cash generative and successfully selling Internet based
services in Asia.
Events:
The company successfully expanded its executive management forums from three
events in 2002/03 to eight events in 2003/04 contributing #2.1m revenues.
The management and operational team was strengthened to facilitate the rapid
integration of Vision in Business, a specialist conferencing and events business
acquired in March 2003.
The combined operations delivered in excess of #4 million revenues in 2003/4
with plans to further extend services across the Group's core markets creating
substantial organic growth opportunities in 2004/5 and beyond.
Financial Review
Accounting Policies
The Group accounts include the consolidated results of SPG Media Group plc and
its subsidiaries. Accounting policies have been applied consistently, year on
year, across all companies in the Group.
Profit and Loss Account
Group turnover declined 3% year on year with the reduction in print advertising
revenues largely offset by increased Internet and event sales.
Gross margins for the year were 45.8% (2003: 46.8%) reflecting the changing
business mix and investments in product development.
We reported an adjusted operating profit before exceptional items of #72,000
against a loss last year of #(221,000).
Exceptional items comprised redundancy payments of #667,000 (which included
compensation for loss of office to directors of #479,000), an additional
provision against non-operational properties of #340,000 and an impairment
charge in respect of Debrett's of #500,000. In the prior year exceptional items
of #682,000 related solely to a provision against non-operational properties.
After exceptional items we reported an operating loss of #1,445,000 (2003: loss
of #903,000).
Bank interest payable was #44,000 (2003: #89,000) as a result of reduced
borrowings.
Acquisitions
We negotiated an early settlement of the Vision in Business acquisition in
December 2003 resulting in a final purchase cost reduced by #525,000 to
#557,000. With the constraints of the earn-out removed we were able to integrate
the conference and executive management forums activities.
Cash Flow and Funding
The growth of the events business, which is cash positive, had a beneficial
effect on working capital, as debtors were further reduced year on year. The
year saw capital expenditure of #0.5m compared to the charge for depreciation of
#1.1m.
The reduction in debtors was less dramatic than last year and as a result
operating cash flow was #2.2m (2003: #3.1m) with net debt at the year-end
reduced to #0.3m from #1.9m.
Future Developments
Market Conditions:
Predicting market condition and their outlook is not for the faint hearted, as
more informed and distinguished analysts will confirm!
USA economic and commercial confidence feeds the world and that confidence seems
to be returning. Asia is buoyant, albeit partially eclipsed by the strong growth
in India and China. Europe, however, remains challenging with both Germany &
France wrestling with domestic issues and the enlarged EU changing the overall
economic landscape.
The industry has just witnessed one of the most challenging commercial
environments of the past twenty years with numerous marketing, media and
publishing organisations struggling to survive or ceasing to trade.
Business to business marketing expenditure is typically cyclical and reflective
of market sentiment and economic confidence, but there are clear signs that
commercial confidence is returning with general industry inventories and order
books stronger on a comparative year-by-year basis.
We do however have a far more discerning marketeer intent on ensuring every
marketing dollar delivers a tangible return.
Some of the many challenges facing the media industry are to recognise changing
market conditions, to understand and embrace customer requirements, build market
expertise and industry relationships innovatively responding to customer and
market demand.
There is a general swing away from above to below the line marketing, which
predominantly seeks to communicate with targeted individuals as opposed to broad
demographic based audiences.
I am delighted to confirm SPG Media is ideally placed to respond quickly and
effectively to these changes in market sentiment.
Strategy & Developments:
The focus and orientation of SPG is structured around building an international
market leading media business skilled and competent at providing our customers
with solutions and services that deliver tangible and measurable commercial
results.
This will be achieved through building on our extensive publishing, electronic
and Internet communication skills plus professionally exploiting the industry
relationships being formed through our conferences and executive management
forums.
SPG Media is actively investing in building:
* Data assets detailing the interests and requirements of the key 500,000
decision makers in our identified markets.
* A differentiated and customer centric industry search engine service
planned for launch in 2005.
* Centres of commercial excellence revered for their customer service,
market intelligence and service expertise.
* Dedicated lines of business designed to build and leverage established
industry relationships.
* Internationally located operations dedicated to servicing local
geographic communities.
Outlook:
The company has stabilised margins, building a strong platform to develop a
world-class media business over the next 3 to 5 years. The business will
capitalise on current opportunities, will strengthen its offer with the launch
of new products and be a key participant in industry consolidation.
SPG is financially sound and increasingly cash generative due to the growth in
our conferences and executive management operations.
The investments recently made in restructuring and building competency creates
the foundation for strong growth and profitability.
The medium term outlook is favourable based on current market conditions, but
due to the volatility of the market in recent years the board feels it would be
prudent to resist forecasting anticipated performance in the short term.
Trading from January through to March 2004 suggests the Group is on track to
achieve its financial targets and market conditions continue to look
satisfactory.
The board is confident that the Group has an exciting future and opportunity for
sustained growth.
S P Nicholson
Executive Chairman
15th June 2004
Consolidated Profit and Loss Account
for the year ended 31 March 2004
Notes 2004 2003
#'000 #'000
Turnover 2 23,951 24,709
Cost of sales (12,992) (13,134)*
Gross profit 10,959 11,575
Distribution costs (926) (947)
Administrative expenses (11,478) (11,531)*
Operating profit/(loss) before exceptional items 72 (221)
Exceptional items 3 (1,517) (682)
Operating loss (1,445) (903)
Finance charges - net 4 (37) (263)
Loss on ordinary activities before taxation (1,482) (1,166)
Tax on loss on ordinary activities 5 - (607)
Loss on ordinary activities after taxation for the financial year (1,482) (1,773)
Dividends - non-equity 6 - (10)
Loss attributable to equity shareholders transferred from reserves (1,482) (1,783)
Basic loss per share - net basis 7 (1.76)p (2.16)p
Diluted loss per share - net basis 7 (1.76)p (2.16)p
Both years' results derive from continuing operations.
There are no recognised gains or losses other than those recorded in the profit
and loss account.
* Certain disclosures have been reclassified to be consistent with the
current year treatment - see note 2.
Consolidated Balance Sheet
as at 31 March 2004
Notes 2004 2003
#'000 #'000
Fixed assets
Intangible assets
Goodwill 1,684 2,342
Other 3,432 3,932
Tangible assets 3,038 3,553
Investments in own shares 145 86
8,299 9,913
Current assets
Stocks and work-in-progress 4,496 4,149
Debtors 5,940 7,002
Cash at bank and in hand 103 255
10,539 11,406
Creditors - amounts falling due within one year (8,611) (9,088)
Net current assets 1,928 2,318
Total assets less current liabilities 10,227 12,231
Creditors - amounts falling due after more than one year - (307)
Provisions for liabilities and charges (1,179) (1,088)
9,048 10,836
Capital and reserves
Called up share capital 4,293 4,223
Shares to be issued - 407
Share premium account 8 7,262 7,231
Capital redemption reserve 8 7,874 7,874
Other reserves 8 733 733
Profit and loss account 8 (11,114) (9,632)
Shareholders' funds 9,048 10,836
Consolidated Cash Flow Statement
for the year ended 31 March 2004
Notes 2004 2003
#'000 #'000
Net cash inflow from operating activities 9 2,199 3,080
Returns on investments and servicing of finance
Interest received 8 17
Interest paid (44) (89)
Dividends paid - non-equity - (30)
Interest element of finance lease payments (9) (38)
Taxation
Corporation tax recovered - 336
Capital expenditure and financial investment
Payments to acquire tangible fixed assets (549) (1,224)
Acquisitions and disposals
Payment to acquire subsidiary undertaking (87) (316)
Cash acquired with subsidiary undertaking - 65
Equity dividends paid - (83)
Cash inflow before financing 1,518 1,718
Financing
Capital element of finance lease payments (152) (203)
Redemption of preference shares - (717)
Decrease in net debt in the year 10 1,366 798
Reconciliation of net cash flow to movement in net debt
Decrease in net debt in the year 1,366 798
Cash outflow from lease financing 152 203
Change in net debt resulting from cash flow 1,518 1,001
Opening net debt (1,859) (2,860)
Closing net debt 10 (341) (1,859)
NOTES:
1. Financial statements
This preliminary statement was approved by a duly appointed and authorised
committee of the board of directors on 15 June 2004. This statement does not
comprise the statutory accounts of the Company.
The financial information for the year ended 31 March 2004 has been prepared on
the same basis of accounting as for the year ended 31 March 2003. The
comparative information for the year ended 31 March 2003 does not constitute the
Company's statutory accounts for that year but is derived from those accounts.
Certain disclosures have been reclassified to be consistent with the current
year treatment.
The statutory accounts of the Company for the year ended 31 March 2003 have been
delivered to the Registrar of Companies and those for the year ended 31 March
2004 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:
2004 2003
#'000 #'000
UK 5,329 5,284
USA 5,773 5,766
Europe (other than UK) 10,625 11,795
Other 2,224 1,864
23,951 24,709
The comparative figures have been restated following a review of the
classification of the underlying data.
The prior year cost of sales has been increased, and the administrative costs
deceased, by #719,000 as a result of the reclassification of certain cost
headings. There is no impact on the retained loss for the year.
3. Exceptional Items
The following exceptional items are included in administrative expenses:
2004 2003
#'000 #'000
Property provision 340 682
Redundancy costs 677 -
Impairment of intangible fixed asset 500 -
1,517 682
The property provision represents the additional charge required in respect of
non-operational properties held by the Group. Redundancy costs were incurred
during the year as part of a restructuring of the management team. The
impairment charge is in respect of the carrying value of the Debrett's brand.
4. Finance charges - net
2004 2003
#'000 #'000
Interest on bank loans and overdrafts repayable within five years 44 89
Interest on finance leases 9 38
Unwinding of discount on provisions 51 54
Amounts written off investments in own shares - 99
104 280
Interest receivable and other income 8 17
Credit arising in respect of investments in own shares 59 -
67 17
37 263
5. Tax on Loss on Ordinary Activities
2004 2003
#'000 #'000
United Kingdom corporation tax at 30% (2003: 30%) - -
Deferred taxation - 607
- 607
The current year tax can be reconciled to tax at the standard rate of 30% as
follows:
2004 2003
#'000 #'000
Loss on ordinary activities before taxation (1,482) (1,166)
Corporation tax at 30% (2003: 30%) (445) (350)
Effects of:
Expenses not deductible for tax purposes 74 12
Depreciation of eligible assets in excess of capital allowances 11 46
Losses carried forward 207 271
Provision against own shares (18) 30
General bad debt provisions (19) (30)
Amortisation of goodwill 40 21
Write down of intangible fixed assets 150 -
Adjustments to prior years 40
Current tax charge for the year - -
6. Dividends
2004 2003
#'000 #'000
Non-equity
8.25% convertible cumulative redeemable second preference shares 2003 - 10
7. Earnings per Share
The loss per share of 1.76p (2003: loss 2.16p) and the diluted loss per share of
1.76p (2003: loss 2.16p) have been calculated based on the attributable loss to
shareholders for the financial year of # 1,482,000 (2003: loss # 1,773,000) plus
preference dividends of # nil (2003: #10,000).
The weighted average number of shares in issue during the year, excluding those
held by the SPG Media Group employee benefit trust, were:
2004 2003
'000 '000
Basic 84,096 82,570
Share option adjustment 21 -
Shares to be issued - 69
Diluted 84,117 82,639
FRS14 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. Where a company is reporting a net loss and there are
outstanding share options the net loss per share could only be increased by the
exercise of out-of-the-money options. Since it is inappropriate to assume that
option holders would act irrationally no adjustment has been made to the diluted
loss per share for out-of-the-money options.
8. Reserves
Capital Share Other Profit and
redemption
reserve premium reserves loss account
#'000 #'000 #'000 #'000
As at 1 April 2003 7,874 7,231 733 (9,632)
Recognised loss for the year - - - (1,482)
Shares issued - 31 - -
As at 31 March 2004 7,874 7,262 733 (11,114)
The amount of the profit /(loss) for the financial year dealt with in the
accounts of SPG Media Group PLC is #81,000 (2003: loss #(127,000)).
9. 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.
2004 2003
#'000 #'000
Operating loss (1,445) (903)
Amortisation of goodwill 133 69
Impairment of intangible fixed assets 500 -
Depreciation of tangible fixed assets 1,064 1,008
Stocks and work-in-progress (347) 752
Debtors 1,062 2,915
Creditors 1,192 (1,049)
Provisions for liabilities and charges 40 288
Net cash inflow from operating activities 2,199 3,080
The exceptional items resulted in a net cash outflow of #677,000 (2003: #nil)
10. Analysis of Net Debt
1 April 2003 Cash Flow 31 March 2004
#'000 #'000 #'000
Cash in hand and at bank (255) 152 (103)
Overdraft 1,962 (1,518) 444
1,707 (1,366) 341
Finance lease obligations 152 (152) -
Net debt 1,859 (1,518) 341
This information is provided by RNS
The company news service from the London Stock Exchange
END
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