Last checked at 5 Sep 2008 07:00
RNS Number : 8046C
TMN Group PLC
05 September 2008
5 September 2008
TMN Group PLC
Final Results
TMN Group plc (AIM: TMN, the “Group” or the "Company"), UK’s premier digital marketing group, has published its final results for the year to 30 April 2008.
Highlights
·; Group revenues up 40% to £22.5m (2007: £16.1m), with organic growth up 10% excluding the year’s two acquisitions
o Email Marketing revenues up 24%
o Affiliate Marketing revenues jump to £4.1m (2007: £1.7m)
·; Adjusted* profit before tax increased by 10% to £3.6m (2007: £3.3m)
·; Adjusted* basic earnings per share were 4.9p (2007: 5.5p)
·; Cash generated from operations of £2.7m (2007: £1.6m)
·; Maintained organic growth despite slow down in some key vertical markets
·; Significant jump in scale in the UK and internationally following integration of two acquisitions
·; Now focussed on five business channels – Affiliate Marketing, Email Marketing, Publishing, Lead Generation and Online Research
Mark Smith, TMN Chief Executive, commented,
“The 2008 financial year was a year of evolution, with the Group starting to build on the scale that we consider essential to our vision of becoming Europe’s most influential digital marketing group. Following the acquisitions of IBG and TAPPS, we now have exposure in a number of European countries, as well as the US, offering multi-service online advertising and research solutions to thousands of clients. Overall we now have a much more robust position in the online sector.
“Despite the distractions of the offer period, the integration of the acquisitions and the slowdown in some key vertical markets, the Group has demonstrated its underlying strengths by growing revenues organically by some 10% and generating cash.
“The Group has started the current financial year well with the first quarter figures in line with the Board’s expectations.”
Enquiries:
| TMN Group plc www.Tmnplc.com | 020 7440 9310 |
| Peter Harkness, Chairman | |
| Mark Smith, CEO | |
| Craig Dixon, CFO | |
| | |
| Investec Investment Banking, NOMAD and broker to TMN | 020 7597 4000 |
| Erik Anderson / Ben Poynter | |
| | |
| College Hill | 020 7457 2815 |
| Adrian Duffield/Rozi Morris | |
* Adjusted profits before tax excludes £27,000 of share-based payment charges, £898,000 amortisation of acquisition related intangible assets and £225,000 exceptional costs associated with the offers received for the Group earlier in the year
Chairman’s Statement
Overview
The financial year ended 30 April 2008 was a period of substantial and positive change and development for the Group. By the end of April we had almost doubled in size, following two key acquisitions and taken an important first step into continental Europe.
For several months either side of the year end, the Group was in an offer period after an unsolicited approach. Despite the distraction of the approach, we made excellent progress in integrating the newly acquired businesses and have also restructured the Group along market sector lines to provide additional focus and to eliminate internal overlap. The Group is now well positioned with diverse product offerings despite the difficult market conditions faced in selected verticals.
Financial performance
Revenues for the year were £22.5m (2007: £16.1m). Excluding the impact of the two acquisitions, revenues increased by 10%, a credible result given the decline in demand from financial services clients highlighted in our April trading statement. Adjusted profit before tax increased to £3.6m (2007: £3.3m), excluding the impact of share-based payment charges, amortisation of acquisition related intangible assets and exceptional costs associated with the offers received for the Group earlier in the year.
Offer period
The Board and the executive team were inevitably distracted and their achievements overshadowed from February for five months by an unsolicited proposal which the Board viewed as unacceptable. However, the initial approach triggered interest from the private equity sector. The Board decided to allow the Group’s two principal executives, Mark Smith and Craig Dixon, to co-operate with one private equity house to see if an acceptable MBO offer could be put together. That process fell victim to the severe contraction in the debt market.
We all believe the Group has a strong and exciting future and shareholders can be assured that the entire Board and management are working closely together to realise the Company’s potential.
Acquisitions
We welcomed to the Group two exciting new businesses, Internet Business Group plc (IBG) in February 2008 and TAPPS B.V. (TAPPS) one month earlier. In very different ways they offer exciting opportunities for the future.
IBG made us a major player in the UK’s affiliate marketing sector through AffiliateFuture. This substantially enlarged the Group’s portfolio, bringing new customers plus further advantages for our existing clients.
The significance of TAPPS, a business more closely allied to existing Group activities, is geographical and takes us firmly into continental Europe where we will be applying much of our future focus.
The result of our organic growth coupled with these acquisitions is that the Group’s revenue run-rate at the end of the financial year is roughly double what it was at the start. I believe it is interesting to note if we compare all the UK’s thousand or more AIM listed companies by annual sales, we have lifted the Group well into the top 20%.
People
There were changes on the Board during the year. This is my first Chairman’s Statement since replacing Warren Tayler in December. Warren played an important part in the Group’s development, guiding the company from a relatively modest start, through the initial acquisitions which laid the foundations of today’s successful Group. I would like to express thanks on behalf of myself and his former colleagues to Warren and also long-serving non-executive director Harold Gittelmon who also retired from the Board.
We have welcomed some excellent new managers and staff during the year, particularly via the acquisitions. We have an impressive and dedicated team and I would like to thank our staff, executives, Board colleagues, advisers and shareholders for their support and contribution in the past year.
Peter Harkness
Chairman
Chief Executive’s Review
Product and Service Range
The Group is split into seven divisions, primarily active in online advertising and online market research. We have two offices in London, as well as offices in Holland (TAPPS) and Spain and the US (AffiliateFuture), with some 200 staff across our 5 locations.
Our various divisions give the levels of scale and quality which the largest clients are seeking online. We believe in the synergies between our businesses, with encouraging signs that once our clients are utilising one area of the Group, they are quick to utilise further divisions, giving us a true “multi-service, single-source” offering.
Affiliate Marketing
AffiliateFuture, which brings together more than 800 advertisers with over 100,000 website publishers, generated in excess of £130 million of sales for retailers in 2007, often pushing up to 5 million visitors to advertisers in peak months. With our clients under contract and our reputation with the website publishers strong, our strength was recognised when we were recently highly commended for services to affiliates through the A4U industry awards. We have a good sense of visibility over potential revenues. Following the IBG acquisition, we also launched our new tracking technology, Veracitag TM which sits alongside the more traditional “cookie” tracking, which resulted in an increase of more than 7% in the number of sales being tracked. Such service and competitive edge through technology gives us a great foundation from which to build. We also appointed Tom Morgan as Managing Director from his role as MD at EDR where his business building skills have driven the agency forward.
Our agency division, EDR, now under the management of Kevin Rice, is also active in the affiliate marketing space, with over 40 clients utilising its affiliate marketing management services.
Email Marketing
Our list owner/manager divisions, TMN Media in the UK and TAPPS in Holland now manage over 20 million email records across some of the most prestigious email databases from MTV to RTL, Handbag to thetrainline.com.
The key to successful email marketing continues to be strength of delivery platforms combined with relationships with the world’s largest ISPs such as AOL and Hotmail. The relevance of the advertising and the recognition of the brand resulted in over 15 million visitors to our advertisers last year. Despite the challenges of the financial sector, EDR continues to make an impact as the UK’s largest email marketing agency, booking in excess of two hundred million email sends last year. Our knowledge of the market combined with a focus on using the strongest, most acceptable email lists, many of which sit within our media divisions, has resulted in good retention of clients, along with some key wins.
Website Publishing
Following the acquisition of IBG, we placed all of our websites within one division, TMN Publishing, led by Mark Ash, formerly of DoubleClick. These websites include MutualPoints, one of the largest online rewarded shopping portals in the UK and Plum-Prizes, a fast growing and recently relaunched competition portal which has seen record revenues month on month. This division also manages our travel sites, notably Henoo.com and CheapHolidayDeals.com, and a number of new opportunities, including Freequotes.co.uk and SurveyCentral, the latter being the UK version of a Dutch product, PBS (Premium Brands Survey). Our websites are attracting over 8 million users each year.
Lead Generation
Early in 2007, with our knowledge of data management we launched Pure Lead, our data cleansing and management tool. Over one million leads were managed by the product in the financial year for a number of clients and its run-rate entering this year suggests that we will increase this figure significantly.
TAPPS also have their own lead generation product in the Netherlands, Premium Brands Survey. Again, we are seeing strong growth in the number of leads it is generating and have moved it to a six weekly cycle, from a quarterly cycle, to deal with demand.
Research
Our dual approach to online market research has yielded encouraging results and continued growth, despite the expansion and number of new players in the market. The iD Factor, having over 25 specialist panels in the UK and a global reach through partnerships, generated nearly one million responses to surveys last year. With our growth in Europe and the US, we are now in a strong position to build our own panels in these territories. ICD Research grew strongly throughout the financial year, resulting in long-term deals with a number of media and banking clients which act as a foundation for its revenue expectations for the year.
In all, the Group generated over 75 million visitors for its clients last year, which is the sort of scale and breadth which gives us a sound platform going into the end of the decade.
Outlook
Recent figures from the IAB suggest that UK online ad spend grew to £2.85 billion in 2007, and predicts £3.5bn spend in 2008, followed by £4 billion spend by 2009. Some verticals have been hit by global economic events, notably financial and automotive. Although we have felt some of this impact throughout our divisions, we believe our increase in scale puts us in a stronger position to handle the more demanding economic environment and continue to grow the overall business.
We have no doubt that the market is changing around us, and how we adapt will dictate our ability to grow. We have promoted from within to take up senior roles in EDR, AffiliateFuture and TMN Publishing. Our MDs in TAPPS, Research and TMN Media have continued their successful growth and I believe we have the management to meet these challenges and continue on our journey towards our vision of becoming a powerful digital marketing player throughout Europe and beyond.
Mark Smith
Chief Executive Officer
Operating and Financial Review
Revenue
For the year ended 30 April 2008 revenues were £22.5m, an increase of 40% compared to 2007 revenues of £16.1m. Excluding the impact of the two acquisitions made in the year, revenues increased by 10%. TAPPS acquired in January 2008 and IBG acquired in February 2008 made a contribution to full year revenues of £4.9m.
The enlarged Group now segments performance according to five product categories. Revenue split by product and regionally was as follows:
| 2008 | 2007 | |
| £ million | £ million | |
| Email marketing | 13.1 | 10.6 |
| Affiliate marketing | 4.1 | 1.7 |
| Research | 2.7 | 1.9 |
| Publishing | 2.1 | 1.9 |
| E-commerce | 0.5 | - |
| Total | 22.5 | 16.1 |
| United Kingdom | 20.9 | 16.1 |
| Netherlands | 1.6 | - |
| Total | 22.5 | 16.1 |
Gross Margin
Gross profit increased to £11.7m (2007: £9.1m), an increase of 29%. The gross profit margin declined to 52% from 56% in 2007. Excluding the effect of acquisitions gross margin was broadly in line with 2007. The decrease in gross margin for the enlarged Group reflects the combined impact of a higher margin for TAPPS (where the cost of sale comprises of delivery costs and revenue share paid to data owners) and a lower margin for IBG, primarily affiliate marketing which as a commission based business operates at gross margins of less than 30%.
Adjusted results and prior year adjustments
To assist the understanding of the underlying performance of the Group in the year, operating profit, profit before tax and earnings per share are disclosed prior to the impact of share-based payment charges, amortisation of acquisition related intangible assets and exceptional costs.
Exceptional costs represent charges to the Income Statement of £0.2m comprising of legal and advisory costs incurred as a result of the indicative offers received for the Company.
During the current year a review was carried out of the accounting for transition to International Financial Reporting Standards (IFRS) as reported in the Group’s first full IFRS financial statements for the year ended 30 April 2007. Two issues arose as a result of the review and consequently prior year comparative numbers have been restated. The nature and effect of these issues are disclosed in note 2 to the Consolidated Financial Statements.
Operating profit and margin
Adjusted operating profit increased to £3.6m (2007: £3.3m). The adjusted operating margin declined to 16% (2007: 20%) as a result of an increased investment in headcount and infrastructure as well as the dilutive effect on margin of the IBG acquisition offset in part by the post acquisition contribution from TAPPS.
Depreciation increased from £0.1m in 2007 to £0.2m in 2008. Amortisation of non-acquisition related intangible assets increased to £0.7m (2007: £0.4m) in part reflecting the capitalisation of internally developed software costs which are amortised over two years.
The reported operating profit decreased to £2.5m from £2.9m in 2007.
Profit before tax
Adjusted profit before tax increased to £3.6m (2007: £3.3m). A small net finance cost was incurred compared to net finance income in 2007 reflecting the costs associated with the acquisition of TAPPS. Reported profit before tax was £2.5m.
Taxation
The reported tax charge for the year was £0.6m representing an effective tax rate of 26% (2007: 15%). The increase in the charge reflects a higher level of non deductible expenses as well as the impact of share options exercised in 2007.
Earnings per share
Adjusted basic earnings per share were 4.9p (2007: 5.5p) and adjusted diluted earnings per share were 4.6p (2007: 5.2p). The basic earnings per share were 3.3p (2007: 5.0p).
Cash flow and acquisitions
Net cash generated from operating activities was £2.7m (2007: £1.6m). Capital expenditure relating to computer hardware was £0.4m (2007: £0.2m). Purchases of intangible assets, primarily database investment and internally developed software, were £1.6m (2007: £0.5m). This reflects the Group’s continued investment in proprietary products, websites and technology. The Consolidated Cash Flow Statement includes £2.5m in cash outflows relating to the acquisition of subsidiaries.
In January 2008, the Group acquired TAPPS for an initial consideration of £5.6m including costs associated with the acquisition of £0.2m. Total consideration comprising of the initial consideration, satisfied by a combination of cash and shares, and deferred consideration contingent on performance is estimated at £7.4m. TAPPS’s net assets have been provisionally fair valued at £4.0m including adjustments to reflect the recognition of separable intangible assets, adoption of an appropriate revenue recognition policy and an increase in the bad debt provision. Resultant goodwill of £3.3m is included in the Consolidated Balance Sheet.
In February 2008, the Group acquired IBG for total consideration of £7.6m comprising of £7.2m representing the fair value of shares issued and £0.4m of costs associated with the acquisition settled in cash. IBG’s net assets have been provisionally fair valued at £5.9m including adjustments to reflect the recognition of separable intangible assets, impairment of investments and inventories and an increase in the bad debt provision.
Treasury, funding and risk
Net debt was £0.3m at the year end compared to net cash of £1.6m at 30 April 2007. The net decrease in cash is primarily attributable to the cash impact of acquisitions including the cash element of the purchase consideration for TAPPS, expenses associated with the acquisitions net of cash acquired with subsidiaries.
The cash consideration arising on the acquisition of TAPPS was primarily funded by a new £4.0m overdraft facility. At 30 April 2008 the drawn amount of the facility was £3.0m.
The Group has increased its exposure to financial risk as a result of the acquisitions of TAPPS and IBG. As a result of consequent exposure to foreign currency and interest rate risk, the Group will be reviewing the need for more formal treasury policies including the use of financial instruments to hedge potential risks. Currently the Group’s exposure to foreign currency risk is not considered significant and relates to short term loans made to, or received from subsidiaries located outside of the UK. The Group’s current t level of gearing, the relatively short term nature of its borrowings and a proposed composite accounting arrangement, result in the Group not having a significant exposure to interest rate fluctuations on its borrowings.
Key performance indicators (KPIs)
The Group uses a number of KPIs to monitor the performance of divisions as well as individual product categories within those divisions. These include but are not limited to, the following:
·; Investment in and quality of, databases in terms of activity levels, responsiveness, email deliverability, size and coverage.
·; Organic revenue growth compared to market and peer group growth rates.
·; Gross and operating profit margins as well as cash contribution to the Group’s central cost base.
·; Working capital and cash management in terms of adherence to forecast, borrowing headroom and levels of trade receivables and payables.
Craig Dixon
Chief Financial Officer
Consolidated Income Statement
| | | | Restated |
| | | 2008 | 2007 |
| | Note | £’000 | £’000 |
| | | | |
| Revenue | | 22,534 | 16,095 |
| | | | |
| Cost of sales | | (10,804) | (7,015) |
| | | | |
| Gross profit | | 11,730 | 9,080 |
| | | | |
| Administrative expenses Other administrative expenses - amortisation of intangibles - exceptional costs | | (7,489) (1,530) (225) | (5,409) (764) - |
| | | | |
| Operating profit | | 2,486 | 2,907 |
| | | | |
| Finance income | | 42 | 18 |
| Finance costs | | (51) | (7) |
| | | | |
| Profit from continuing operations before taxation | | 2,477 | 2,918 |
| | | | |
| Taxation on profit | | (635) | (449) |
| | | | |
| Profit after taxation | | 1,842 | 2,469 |
| | | | |
| | | | |
| Profit attributable to the equity holders of the parent | | 1,842 | 2,469 |
| | | | |
| Earnings per share | | | |
| | | | |
| Basic (pence) | 5 | 3.3p | 5.0p |
| | | | |
| Diluted (pence) | 5 | 3.1p | 4.7p |
| | | | |
Consolidated Statement of Changes in Equity
| | Called up share capital £’000 | Share premium account £’000 | Merger reserve £’000 | Equity shares to be issued £’000 | Share option reserve £’000 | Trans-lation reserve £’000 | Retained earnings £’000 | Total £’000 |
| | | | | | | | | |
| At 1 May 2006 as reported | 105 | 4,702 | - | - | 41 | 121 | 841 | 5,810 |
| Prior year restatement | | | | | | | | |
| - deferred share consideration - reclassified as equity | - | - | - | 2,419 | 356 | - | - | 2,775 |
| - amortisation of intangibles | - | - | - | - | - | - | (105) | (105) |
| | | | | | | | | |
| At 1 May 2006 restated | 105 | 4,702 | - | 2,419 | 397 | 121 | 736 | 8,480 |
| Net income recognised directly in equity | - | - | - | - | - | - | 763 | 763 |
| Profit for the financial year (restated) | - | - | - | - | - | - | 2,469 | 2,469 |
| | | | | | | | | |
| Total recognised expense in the year | - | - | - | - | - | - | 3,232 | 3,232 |
| Issue of shares | - | 968 | - | (968) | - | - | - | - |
| Share options exercised | - | 139 | - | - | - | - | - | 139 |
| Reduction to deferred share consideration | - | - | - | (764) | - | - | - | (764) |
| Purchase of own shares | - | - | - | - | - | - | (1,350) | (1,350) |
| Share-based payment | - | - | - | - | 29 | - | - | 29 |
| | | | | | | | | |
| At 1 May 2007 restated | 105 | 5,809 | - | 687 | 426 | 121 | 2,618 | 9,766 |
| Net expenses recognised directly in equity | - | - | - | - | - | 25 | - | 25 |
| Profit for the financial year | - | - | - | - | - | - | 1,842 | 1,842 |
| | | | | | | | | |
| Total recognised expense in the year | - | - | - | - | - | 25 | 1,842 | 1,867 |
| Issue of shares | 3 | 1,864 | 7,174 | (331) | - | - | - | 8,710 |
| Purchase of own shares | - | - | - | - | - | - | (109) | (109) |
| Share options exercised | - | 75 | - | - | - | - | - | 75 |
| Share options cancelled | - | - | - | - | (10) | - | 10 | - |
| Deferred tax on share options | - | - | - | - | - | - | 165 | 165 |
| Share-based payments | - | - | - | - | 27 | - | - | 27 |
| | | | | | | | | |
| At 30 April 2008 | 108 | 7,748 | 7,174 | 356 | 443 | 146 | 4,526 | 20,501 |
| | | | | | | | | |
Consolidated Balance Sheet
| | | | Restated |
| | | 2008 | 2007 |
| | | £’000 | £’000 |
| | | | |
| Non-current assets | | | |
| Goodwill | | 11,370 | 6,359 |
| Other intangible assets | | 11,280 | 1,289 |
| Property, plant and equipment | | 948 | 147 |
| Investments | | 108 | - |
| | | 23,706 | 7,795 |
| | | | |
| Current assets | | | |
| Inventories | | 277 | - |
| Trade and other receivables | | 9,450 | 4,533 |
| Cash and cash equivalents | | 2,702 | 1,551 |
| | | 12,429 | 6,084 |
| | | | |
| Total assets | | 36,135 | 13,879 |
| | | | |
| Current liabilities | | | |
| Financial liabilities – bank overdraft Trade and other payables | | 3,032 7,438 | - 2,663 |
| Current tax liabilities | | 924 | 381 |
| Provisions for liabilities | | 1,408 | 447 |
| | | 12,802 | 3,491 |
| | | | |
| Non-current liabilities | | | |
| Provisions for liabilities | | 786 | 400 |
| Deferred tax liabilities | | 2,046 | 222 |
| | | | |
| | | 2,832 | 622 |
| | | | |
| | | | |
| Total liabilities | | 15,634 | 4,113 |
| | | | |
| | | | |
| Net assets | | 20,501 | 9,766 |
| | | | |
| | | | |
| SHAREHOLDERS’ FUNDS | | | |
| | | | |
| Share capital | | 108 | 105 |
| Share premium account | | 7,748 | 5,809 |
| Merger reserve | | 7,174 | - |
| Equity shares to be issued | | 356 | 687 |
| Share option reserve | | 443 | 426 |
| Translation reserve | | 146 | 121 |
| Retained earnings | | 4,526 | 2,618 |
| | | | |
| Total equity | | 20,501 | 9,766 |
| | | | |
Consolidated Cash Flow Statement
| | | | Restated |
| | | 2008 | 2007 |
| | | £’000 | £’000 |
| | | | |
| Cash flows from operating activities | | | |
| | | | |
| Operating profit | | 2,486 | 2,907 |
| | | | |
| Adjustments for: | | | |
| | | | |
| Depreciation | | 182 | 102 |
| Amortisation | | 1,530 | 764 |
| Share based payments expense | | 27 | 29 |
| Loss on investments | | 9 | - |
| Foreign exchange | | 25 | - |
| Increase in inventories | | 32 | - |
| (Increase) in receivables | | (2,395) | (1,191) |
| Increase / (decrease) in payables | | 1,405 | (133) |
| Decrease in provisions | | (105) | (149) |
| | | | |
| Cash generated from operations | | 3,196 | 2,329 |
| | | | |
| Interest paid | | (51) | (7) |
| Income tax paid | | (444) | (735) |
| | | | |
| | | | |
| Net cash generated from operating activities | | 2,701 | 1,587 |
| | | | |
| | | | |
| Investing activities | | | |
| | | | |
| Interest received | | 42 | 18 |
| Purchases of plant, property and equipment | | (384) | (152) |
| Purchases of intangible assets | | (1,567) | (477) |
| Acquisition of subsidiaries | | (2,539) | - |
| | | | |
| Net cash used in investing activities | | | |
| | | (4,448) | (809) |
| | | | |
| Financing activities | | | |
| | | | |
| Proceeds on issue of shares | | 75 | 139 |
| Purchase of own shares | | (109) | (1,350) |
| Loan note repaid | | (100) | - |
| Proceeds on sale of fractional rights | | - | 763 |
| | | | |
| Net cash used in financing activities | | (134) | (448) |
| | | | |
| | | | |
| Net (decrease)/increase in cash and cash equivalents | | (1,881) | 330 |
| | | | |
| Cash and cash equivalents at the beginning of the period | | 1,551 | 1,221 |
| | | | |
| Cash and cash equivalents at the end of the period | | (330) | 1,551 |
| | | | |
Notes to the Preliminary Announcement
1. GENERAL INFORMATION
TMN Group plc is incorporated and domiciled in the United Kingdom.
The principal activities of the group are the provision of online marketing, market research services and e-commerce.
The financial statements for the year ended 30 April 2008 (including the comparatives for the year ended 30 April 2007) were approved by the Board of Directors on 4th September 2008. Amendments to the financial statements are not permitted after they have been approved.
2. ACCOUNTING POLICIES
Basis of preparation
The Group’s financial statements have been prepared in accordance with applicable International Financial Reporting Standards (IFRS) as adopted by the European Union and IFRS as issued by the International Accounting Standards Board. The accounting policies adopted are consistent with the previous year with the exception of the matters referred to in the prior year adjustment note below.
Prior year adjustments
The Board have undertaken a review of the accounting for transition to IFRS as reported in the Group's first full IFRS financial statements for the year ended 30 April 2007 and two issues have arisen which require restatement as follows:
Classification of share based deferred consideration
During the year ended 30 April 2006 the Group undertook the acquisition of Electronic Direct Response Limited, for which a part of the consideration was deferred and payable in shares or under share options. The number of shares to be issued at future dates were fixed and should therefore have been classified as equity rather than debt.
Intangible assets on acquisition
On acquisition of Electronic Direct Response Limited in November 2005 goodwill on consolidation amounting to £5.78 million was acquired. In the Group's first IFRS accounts for the year ended 30 April 2006 the assessment of the intangible fixed assets acquired in this business combination was omitted. The Group estimates that goodwill was therefore overstated by £941,000, being the net of the acquired intangibles of £1.35 million and the related deferred tax liability of £403,000. The intangible assets acquired were databases, customer related intangibles and proprietary software. An amortisation charge has also been accounted for from the date of acquisition of these intangible assets.
The effect of prior year restatements on the consolidated position for the year ended 30 April 2007 was as follows:
| Consolidated balance sheet: | As originally | Effect of | |
| stated | restatement | As restated | |
| £'000 | £'000 | £'000 | |
| Non-current assets | | | |
| Goodwill | 7,300 | (941) | 6,359 |
| Other intangible assets | 461 | 828 | 1,289 |
| Current assets | | | |
| Deferred tax asset | 26 | (26) | - |
| Current liabilities | | | |
| Provisions for liabilities | (956) | 509 | (447) |
| Non-current liabilities | | | |
| Deferred tax | - | (222) | (222) |
| Provisions | (934) | 534 | (400) |
| Equity | | | |
| Share option reserve | 70 | 356 | 426 |
| Equity shares to be issued | - | 687 | 687 |
| Profit and loss reserves | 2,979 | (361) | 2,618 |
| Total equity | 9,084 | 682 | 9,766 |
| | | | |
| Consolidated income statement | | | |
| Administrative expenses | (5,808) | (365) | (6,173) |
| Tax | (558) | 109 | (449) |
| Profit after tax | 2,725 | (256) | 2,469 |
| | | | |
| Earnings per share | | | |
| Basic | 5.5p | (0.5p) | 5.0p |
| Diluted | 5.2p | (0.5p) | 4.7p |
The effect of prior year restatement on the Company position for the year ended 30 April 2007 was as follows:
| Consolidated balance sheet: | As originally | Effect of | |
| | stated | restatement | As restated |
| | £'000 | £'000 | £'000 |
| Current liabilities | | | |
| Provisions for liabilities | (709) | 509 | (200) |
| Non-current liabilities | | | |
| Provisions | (934) | 534 | (400) |
| Equity | | | |
| Share option reserve | 70 | 356 | 426 |
| Equity shares to be issued | - | 687 | 687 |
| Profit and loss reserves | 3,501 | - | 3,501 |
| Total equity | 9,485 | 1,043 | 10,528 |
There was no impact on the Company's income statement regarding the prior year restatement.
3. Segmental Analysis
| Year ended 30 April 2008 | Email marketing | Affiliate marketing | Research | Publishing & hosting | Ecommerce | Central/ unallocated | Total |
| | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| | | | | | | | |
| Segment revenues | 13,175 | 4,087 | 2,690 | 2,052 | 530 | - | 22,534 |
| | | | | | | | |
| Operating profit before exceptional costs | 2,452 | 807 | 532 | 413 | 37 | (1,530) | 2,711 |
| Exceptional costs | - | - | - | - | - | (225) | (225) |
| | | | | | | | |
| Operating profit after exceptional costs | 2,452 | 807 | 532 | 413 | 37 | (1,755) | 2,486 |
| | | | | | | | |
| Net finance costs | | | | | | | (9) |
| | | | | | | | |
| Profit before tax | | | | | | | 2,477 |
| Taxation | | | | | | | (635) |
| | | | | | | | |
| Profit after tax | | | | | | | 1,842 |
| | | | | | | | |
| | | | | | | | |
| Other segment information | | | | | | | |
| Capital expenditure | - | - | - | - | - | 384 | 384 |
| Depreciation & amortisation | 178 | - | 91 | 352 | - | 1,091 | 1,712 |
| Share based payment | - | - | - | - | - | 27 | 27 |
3. Segmental Analysis (cont’d)
| Year ended 30 April 2007 | Email marketing | Affiliate marketing | Research | Publishing & hosting | Ecommerce | Central/ unallocated | Total |
| | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| | | | | | | | |
| Segment revenues | 10,515 | 1,728 | 1,910 | 1,942 | - | - | 16,095 |
| | | | | | | | |
| Operating profit before exceptional costs | 2,138 | 351 | 388 | 395 | - | (365) | 2,907 |
| Exceptional costs | - | - | - | - | - | - | - |
| | | | | | | | |
| Operating profit after exceptional costs | 2,138 | 351 | 388 | 395 | - | (365) | 2,907 |
| | | | | | | | |
| Net finance costs | | | | | | | 11 |
| Profit before tax | | | | | | | 2,918 |
| Taxation | | | | | | | (449) |
| | | | | | | | |
| Profit after tax | | | | | | | 2,649 |
| | | | | | | | |
| | | | | | | | |
| Capital expenditure | 3 | - | 18 | - | - | 131 | 152 |
| Depreciation & amortisation | 51 | - | 51 | 336 | - | 428 | 866 |
| Share based payment | - | - | - | - | - | 29 | 29 |
As these business streams are integrated with each other it is not possible to separately identify the segmental assets and liabilities held individually.
The Group's revenue from external customers and its geographic allocation of net assets may be summarised as follows:
| | Year ended 30 April 2008 | | Year ended 30 April 2007 | |
| | Revenue | Assets | Revenue | Assets |
| | £'000 | £'000 | £'000 | £'000 |
| United Kingdom | 20,915 | 19,899 | 16,095 | 9,766 |
| Netherlands | 1,619 | 602 | - | - |
| | 22,534 | 20,501 | 16,095 | 9,766 |
| | Acquisition of property, plant and equipment | Acquisition of intangibles | Acquisition of property, plant and equipment | Acquisition of intangibles |
| United Kingdom | 384 | 1,567 | 152 | 477 |
| Netherlands | - | - | - | - |
| | 384 | 1,567 | 152 | 477 |
4. Dividends
No dividend has been recommended for the year (2007: £nil).
5. Earnings per share
The calculation of the basic earnings per share is based on the net profit for the year of £1,842,000 (2007: £2,469,000) divided by the weighted average number of shares in issue during the year of 56,111,000 (2007 : 49,646,000). The diluted earnings per share for 2008 is based on the net profit for the year divided by the weighted average number of shares in issue on a fully diluted basis of 59,071,000 (2007 : 52,724,000).
An adjusted earnings per share has also been calculated based on the profit for the year before amortisation of acquisition related intangible assets, share based payments and exceptional costs amounting to a total of £880,000 (2007 : £284,000). The adjusted earnings per share is therefore based on the adjusted net profit for the year of £2,722,000 (2007: £2,753,000) divided by the weighted average number of shares in issue during the year of 56,111,000 (2007: 49,646,000) which results is an adjusted earnings per share of 4.9 pence (2007 : 5.5 pence). The diluted profit per share is based on a weighted average number of shares in issue on a fully diluted basis after adjusting for the dilutive impact of the share options and the deferred consideration to be settled in shares which results in an adjusted diluted earnings per share of 4.6 pence (2007: 5.2 pence).
The calculation of earnings per share is based on the following profits and number of shares:
| | 2008 | 2007 | ||||
| | | Number of shares | | | Number of shares | |
| | Profit | ‘000 | Pence per share | Profit | ‘000 | Pence per share |
| | £’000 | | | £’000 | | |
| | | | | | | |
| | | | | | | |
| Basic earnings per share | 1,842 | 56,111 | 3.3 | 2,469 | 49,646 | 5.0 |
| | | | | | | |
| Dilutive effect of securities: | | | | | | |
| Share options | | 1,789 | | | 2,144 | |
| Deferred consideration to be | | | | | | |
| settled in shares | | 1,176 | | | 934 | |
| | | | | | | |
| Diluted earnings per share | 1,842 | 59,071 | 3.1 | 2,469 | 52,724 | 4.7 |
| | | | | | | |
6. Acquisitions
Acquisition of TAPPS B.V. (TAPPS)
On 4th January 2008 TMN Group plc acquired the entire share capital of TAPPS, a private company based in Amsterdam, Netherlands. The principal activity of TAPPS is digital direct marketing.
The estimated total consideration of £7.3m consists of an initial payment at completion of £5.6 million satisfied by a combination of cash and shares as shown below, plus additional deferred consideration, contingent on performance.
The book values under IFRS and the fair values of the assets and liabilities acquired as at the date of acquisition were as follows:
| | Book value before | | |
| | Acquisition | | |
| | Under IFRS | Fair value | Fair value to TMN Group Plc |
| | | adjustments | |
| | | | |
| | £’000 | £’000 | £’000 |
| Non-current assets | | | |
| Property, plant & equipment | 68 | - | 68 |
| Intangible assets | - | 4,917 | 4,917 |
| | | | |
| | 68 | 4,917 | 4,985 |
| Current assets | | | |
| Trade and other receivables | 1,422 | (498) | 924 |
| Cash | 280 | - | 280 |
| | 1,702 | (498) | 1,204 |
| | | | |
| Total assets | 1,770 | 4,419 | 6,189 |
| | | | |
| Current liabilities | | | |
| Trade and other payables | 1,159 | (254) | 905 |
| | | | |
| Non current liabilities | | | |
| Deferred tax liability | - | 1,253 | 1,253 |
| Total liabilities | 1,159 | 999 | 2,158 |
| | | | |
| Net assets | 611 | 3,420 | 4,031 |
| Goodwill arising on acquisition | | | 3,342 |
| | | | |
| Consideration | | | 7,373 |
| | | | |
| Consideration | | |
| Discharged by: | | |
| | | £’000 |
| Initial consideration | | |
| Fair value of shares issued (3,788,326 shares at 40.5p, being | | 1,534 |
| the market value of the shares at | | 3,917 |
| the date of acquisition) | | 169 |
| Cash | | |
| Cost associated with the acquisition, | | 5,620 |
| settled in cash | | |
| | | |
| | | 454 |
| Contingent consideration | | 513 |
| Payable 2009 – cash | | 344 |
| Payable 2009 – shares | | 442 |
| Payable 2010 – cash | | |
| Payable 2010 – shares | | 1,753 |
| | | |
| Total contingent consideration | | 7,373 |
| | | |
| Total consideration | | |
An estimate of the total consideration payable in respect of the two years ending 30 April 2009 and 2010 has been made for the purposes of preparing this statement. It has been assumed that the consideration will be payable equally in cash and shares. Contingent consideration to be settled in shares is structured as a variable number of shares to deliver on a fixed value consideration and has therefore been classified as debt.
The fair value adjustments represent the following:
·; recognition of separable intangible assets
·; adoption of appropriate revenue recognition policy, together with associated impact ton cost of sales
·; increase in the bad debt provision
·; the combined taxation impact of the above adjustments
From the date of acquisition to 30 April 2008, TAPPS contributed £384,000 to the profit before tax to the Group.
Internet Business Group plc (IBG)
On 13 February 2008 TMN Group plc acquired the entire issued share capital of IBG, a public company based in London, England. The principal activity of IBG is online advertising. The estimated total consideration of £7.6m.
The book values under IFRS and the final fair values of the assets, liabilities and contingent liabilities as at the date of acquisition were as follows:
| | Book value before acquisition under IFRS | | Fair value adjustments | | Fair value to TMN Group Plc |
| | | | | | |
| | £’000 | | £’000 | | £’000 |
| Non-current assets | | | | | |
| Property, plant and equipment | 568 | | (37) | | 531 |
| Investment | 182 | | (65) | | 117 |
| Intangible assets | 1,217 | | 3,820 | | 5,037 |
| Deferred tax asset | - | | 164 | | 164 |
| | | | | | |
| | 1,967 | | 3,882 | | 5,849 |
| Current assets | | | | | |
| Stock | 372 | | (63) | | 309 |
| Trade and other receivables | 2,090 | | (492) | | 1,598 |
| Cash | 1,903 | | - | | 1,903 |
| | 4,365 | | (555) | | 3,810 |
| | | | | | |
| Total assets | 6,332 | | 3,327 | | 9,659 |
| | | | | | |
| Current liabilities | | | | | |
| Trade and other payables | 2,364 | | 206 | | 2,570 |
| | | | | | |
| Non-current liabilities | | | | | |
| Deferred tax liability | - | | 1,147 | | 1,147 |
| | | | | | |
| Total liabilities | 2,364 | | 1,353 | | 3,717 |
| Net assets | 3,968 | | 1,974 | | 5,942 |
| | | | | | |
| Goodwill arising on acquisition | | | | | 1,669 |
| | | | | | |
| Consideration | | | | | 7,611 |
| | | | | | |
| Discharged by: | | | | | |
| | | | | | £’000 |
| Consideration | | | | | |
| Fair value of shares issued | | | | | 7,176 |
| (20,502,082 shares at 35p, | | | | | |
| being the market value of the | | | | | |
| shares at the date of acquisition) | | | | | |
| Cost associated with the acquisition, settled in cash | | | | | 435 |
| | | | | | |
| Total consideration | | | | | 7,611 |
| | | | | | |
| | | | | | |
The fair value adjustments represent the following:
·; recognition of separable intangible assets
·; impairment of debtors, investments and stock
·; reinstatement of creditors
·; the combined taxation impact of the above adjustments
From the date of acquisition to 30 April 2008, IBG contributed £362,000 to the profit before tax to the Group.
With regard to both acquisitions, the directors have made estimates of the future consideration payable in connection with the acquisition and will continue to do so until the final cost of the acquisition has been determined. On this basis the estimate of goodwill arising on consolidation is considered provisional. The goodwill that arose on the combinations can be attributed to the synergies expected to be derived from the combination and the value of the workforce which cannot be recognised as an intangible asset under IAS 38 "Intangible Assets".
7. 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 group income statement, group statement of changes in equity, the group balance sheet, the group cash flow statement and the 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.
8. Report and Accounts
The Group's annual report and financial statements will be posted to shareholders shortly. Further copies will be available on request from the Company's Registered Office: 2nd Floor, 69-73 Theobalds Road, London WC1X 8TA.
This information is provided by RNS
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