GlobalData Regulatory News (DATA)

3 March 2011

Progressive Digital Media Group plc

Preliminary Results For The Year Ended 31 December 2010

Progressive Digital Media Group Plc ("Progressive", the "Business" or the "Group") produces premium business information, research services and marketing solutions for senior level decision makers.

Highlights

Key achievements in 2010

·; Focused Group on Business Intelligence and B2B digital revenues

·; Ongoing investment in our sales headcount, content and delivery platforms

·; Group is now well placed to deliver both revenue growth and improved margins

Financial performance

·; Group is profitable and recording good growth across a broad base of revenue streams

·; Group revenue increased by 29.4% to £48.0m (2009: £37.1m)

·; Adjusted EBITDA(1) increased by 186.4% to £3.8m (2009: £1.3m)

·; EBITDA(2) increased by 287.8% to £2.3m (2009: £0.6m)

·; Amortisation and other adjusting items have led to a reported loss before tax of £4.6m (2009: loss before tax of £3.0m)

Our business

·; Focused on high growth digital media sectors

·; Focused on providing high-value digital content

·; Has clear growth opportunities and a proven and experienced management team

Simon Pyper, CEO of Progressive Digital Media Group plc, commented:

"A pleasing set of results delivered not only during a period of both change and investment for the Group, but also in an environment of protracted economic somnolence. Furthermore, our results do not as yet fully reflect the expected benefits from either the significant investments we have made or from the efficiencies we have achieved through the introduction and integration of common processes and systems. We anticipate that the full year results for both 2011 and 2012 will reflect that we are continuing to invest across the Group to facilitate accelerated future growth.

The Board believes this has been a year of significant progress and is confident of the long-term profitable prospects of the Group."

Note 1: Adjusted EBITDA: EBITDA adjusted for costs associated with derivatives, acquisitions, integration and restructure of the Group.

Note 2: EBITDA: Earnings before interest, tax, depreciation, amortisation and impairment.

Enquiries:

CHAIRMAN'S STATEMENT

Over the last two years we have overcome significant challenges and implemented major change programmes as we brought together the various companies in the Group and refocused them on our key markets. With the final integration and reorganisation of our Digital Marketing business now behind us and the introduction of common processes and systems complete, the Group now has the solid base in place which will allow us to accelerate our growth.

Our Business Model

We have a simple business model which is designed to generate revenues off a relatively fixed operating cost base allowing for operational gearing to drive growth and margin. Its key features are:

1. A strong and scalable asset base

2. Annualised and digital revenue streams

3. Global coverage and positioned at the premium end of the market

4. Clear growth opportunities, both organic and through acquisition

Our Strategy

Our strategy is to focus on:

1. Key, high growth B2B markets

2. Digital subscription based content which can be leveraged across multiple platforms

3. Quality product and customer delivery

4. Controlling costs and improving productivity

The strategy will be delivered by a combination of strong organic growth and selective acquisitions in our target markets. Consistent with this, in September of 2010 the Group acquired Canadean which is a leading provider of business and market intelligence to the global consumer products market. The business has performed well since acquisition and in line with our expectations.

Board Changes

Canadean's former Chairman, Kelsey van Musschenbroek, joined the Board of Progressive as a Non-Executive Director on 1 September 2010. 

Outlook

We expect to make further progress in 2011. Whilst the economic climate remains unpredictable, we are confident that we are well placed to not only benefit from any cyclical upturn, but more importantly, also from the investment we have made in our people, our products and our delivery platforms.

I am committed to the long-term development of this company and am confident that the investments we have made and plan to make in our business model will allow the Group to deliver on its strategy.

Mike Danson

Chairman

3 March 2011

CHIEF EXECUTIVE'S BUSINESS AND FINANCIAL REVIEW

A pleasing set of results delivered not only during a period of both change and investment for the Group, but also in an environment of protracted economic somnolence. Furthermore, our results do not as yet fully reflect the expected benefits from either the significant investments we have made or from the efficiencies we have achieved through the introduction and integration of common processes and systems. We anticipate that the full year results for both 2011 and 2012 will reflect that we are continuing to invest across the Group to facilitate accelerated future growth.

Key achievements delivered in 2010 have been:-

1. The acquisition and successful integration of Canadean, a leading provider of business and market intelligence to the global consumer products market.

2. The opening of new offices in San Francisco and Sydney, the benefits of which have yet to be seen in this year's financial performance.

3. The delivery of new content and web platforms in late summer of 2010 which are now being rolled out across the Group. This will enable content to be leveraged across multiple formats and distributed globally.

4. Digital Marketing re-structured and re-focused on B2B market.

5. Back office rationalised with employees relocated to head office.

This represents a major re-engineering of the whole Group and has been done to not only be more efficient in what we do but also to create the capacity for significant future growth.

Group Performance

Financially, the Group has performed well and is profitable at the EBITDA1 and Adjusted EBITDA2 level. We have increased revenues and improved EBITDA margins. Loss before tax was £4.6 million (2009: loss £3.0m), which includes redundancy costs of £1.1 million (2009: £0.6 million), an amortisation charge of £3.4 million (2009: £2.8 million) and an impairment charge of £2.8 million (2009: Nil).

Note 1: EBITDA: Earnings before interest, tax, depreciation, amortisation and impairment.

Note 2: Adjusted EBITDA: EBITDA adjusted for costs associated with derivatives, acquisitions, integration and restructure of the Group.

Despite the reported loss for the period, the underlying business is profitable with good opportunities for long-term profitable growth in terms of further growth in sales and improvement in margins.

Divisional performance:

Business Information

Business Information is predominately focused on the B2B space, providing content rich web based information products. Business Information's results include four months contribution from Canadean which was acquired in September 2010.

Revenues for the year are £39.5 million (2009: £33.4 million) generating a contribution of £13.1 million.

Digital Marketing

Digital Marketing now focused on B2B market and providing innovative, online digital marketing, research and panel solutions.

Revenues for the year are £8.5 million (2009: £3.6 million) generating a contribution of £2.3 million.

Financial Review

Adjusted Earnings Before Interest, Taxation, Depreciation and Amortisation (EBITDA), adjusted for the costs associated with derivatives, acquisitions, integration and restructuring of the Group, improved to £3.8 million for the year (2009: £1.3 million). Reported EBITDA increased to £2.3 million for 2010 from £0.6 million for 2009.

Capital Expenditure

Capital expenditure was £2.5 million for 2010. This included £1.0 million on a one-off investment relating to Progressive's new Content and Web Platforms. £1.2 million related to fit out of Progressive's new offices in London, San Francisco and Sydney and the associated IT equipment.

Financing

As at 31 December 2010, the Group had net debt of £24.5 million (2009: £14.8 million). The principal source of financing for working capital requirements is an overdraft facility of £7.0m of which £6.5 million was utilised at 31 December 2010. Borrowings of £18.4 million consist of shareholder loans provided by Michael Danson. Of this, £8.5 million is in relation to the acquisition of Canadean.

The Group is reviewing its financing options and looking to move towards a more traditional debt to equity model.

Outlook

The Board believes this has been a year of significant progress and is confident of the long-term profitable prospects of the Group

Simon Pyper

Chief Executive

3 March 2011

Consolidated Income Statement

1 EBITDA is defined as operating profit plus depreciation, amortisation and impairment of assets. We define Adjusted EBITDA as EBITDA adjusted for costs associated with acquisitions, integration, impact of foreign exchange contracts and restructure of the Group. See note 3 of the financial statements for details. We present Adjusted EBITDA as additional information because we understand that it is a measure used by certain investors. However, other companies may present Adjusted EBITDA differently than we do. EBITDA and Adjusted EBITDA are not measures of financial performance under IFRS and should not be considered as an alternative to operating profit or as a measure of liquidity or an alternative to net income as indicators of our operating performance or any other measure of performance derived in accordance with IFRS.

Consolidated Statement of Comprehensive Income

Consolidated Statement of Financial Position

Consolidated Statement of Changes in Equity

Restated

Consolidated Cash Flow Statement

Notes to the Consolidated Financial Statements

1. General information

Basis of preparation

These condensed consolidated financial statements have been prepared in accordance with the Listing Rules of the Financial Services Authority and in accordance with International Financial Reporting Standards (IFRS) and International Financial Reporting Interpretations Committee (IFRIC) interpretations as adopted by the European Union (EU). In respect of accounting standards applicable to the Group there is no difference between EU-adopted IFRS and International Accounting Standards Board (IASB)-adopted IFRS.

The financial statements have been prepared under the historical cost convention as modified by the revaluation of derivative financial instruments. These condensed financial statements are for the year ended 31 December 2010 and should be read in conjunction with the Annual Report and Accounts for the year ended 31 December 2009 that was sent to all shareholders and is available on the Company's website. The accounting policies detailed in the Financial Statements for the year ended 31 December 2009 have been applied consistently throughout the Group, with changes detailed in Note 2 below. These financial statements are presented in Pounds Sterling (£), which is also the functional currency of the Company.

This preliminary announcement does not constitute the Group's full financial statements for the year ended 31 December 2010. The auditors have reported on the Group's statutory accounts for the year ended 31 December 2010 under s495 of the Companies Act 2006, which does not contain statements under s498(2) or s498(3) of the Companies Act 2006 and is unqualified. The statutory accounts for the year ended 31 December 2010 will be filed with the Registrar in due course.

Critical accounting estimates and judgements

The Group makes estimates and assumptions regarding the future. Estimates and judgements are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

In the future, actual experience may deviate from these estimates and assumptions. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year relate to property provisions, valuation of acquired intangible assets, provisions for bad debt, and the carrying value of goodwill and other intangibles in the statement of financial position.

Property provisions

The onerous lease and dilapidations property provisions require an estimate to be made of the net present value of the future costs of vacant and sublet properties. The calculation includes estimates of future cost involved, including management's estimates of the long-term letting potential of the properties, future rental income, market rents, periods of vacancy and the level of incentives required to sub-let vacant properties.

Valuation of acquired intangibles

Management identified and valued acquired intangibles on acquisitions that were made during the periods disclosed in the financial statements. Management has applied judgements in identifying and valuing intangibles assets separate from goodwill that consist of assessing the value of brands, software and customer relationships.

Provision for bad debt

The Group is required to judge when there is sufficient objective evidence to require the impairment of individual trade receivables. It does this on the basis of the age of the relevant receivables, external evidence of the credit status of the debtor entity and the status of any disputed amounts. The provision for bad debts and the ageing of overdue debtors are included in note 16 to the financial statements.

Carrying value of goodwill and other intangibles

The carrying value of goodwill and other intangibles is assessed at least annually to ensure that there is no need for impairment. Performing this assessment requires management to estimate future cash flows to be generated by the related cash generating unit, which entails making judgements including the expected rate of growth of sales, margins expected to be achieved, the level of future capital expenditure required to support these outcomes and the appropriate discount rate to apply when valuing future cash flows. An impairment of the goodwill allocated to Digital Marketing would occur if the anticipated increase in sales is reduced to a decline in sales of 3.3% or by increasing the discount rate to 15.85%.

At 31 December 2010 the Group had £37.0 million of goodwill and other intangibles assets (2009: £29.6 million).

Going concern

The Group meets its day-to-day working capital requirements from an overdraft facility of £7.0 million of which £6.5 million was utilised as at 31 December 2010. Based on cash flow projections the Group considers the existing financing facilities to be adequate to meet short-term commitments. There are no covenants associated with the overdraft and no restrictions on the long-term borrowing.

The Group has two loans from the Chairman and majority shareholder, Mr Danson. An interest free loan of £9.8 million is repayable by 2019. The company has received a written undertaking that Mr Danson would not demand repayment of this loan for a period of 12 months from the date of approval of the financial statements.

The £9 million loan to fund the acquisition of Canadean has £8.5 million outstanding as at 31 December 2010. Repayments on the loan will only be made to the extent that the Group has sufficient forecast working capital to meet all of its liabilities.

In addition to the existing facility Mr Danson provided the Group with a £2.0 million working capital facility at the time of the reverse acquisition. This facility has not yet been drawn upon and is not forecast to be drawn upon.

The Group's financing facility is an on demand basis. The Group has prepared the accounts on a going concern basis on the assumption that this facility is available. In the event of the overdraft facility not being available, the Group is confident that it can obtain suitable short-term financing.

Restatement of comparatives

Certain comparatives have been restated due to errors in the treatment of the fair value of the cost of the business combination with TMN Group plc (TMN) and the premium arising on the reverse acquisition of the Company on 25 June 2009.

The cost of the combination had been disclosed as being calculated based on the fair value of TMN before the combination, using the TMN share price before suspension from AIM in February 2009. However, IFRS 3 requires the fair value of the cost of the combination to be calculated based on the fair value of the legal subsidiary on the date of the exchange. The revised cost of the combination is £6,127,000 giving rise to an increase in the value of goodwill attributed to the TMN acquisition of £2,344,000 and an associated adjustment to other reserves.

Share premium had been calculated using the number of shares of TMN before the consideration issue and the pre-suspension share price. The calculation should have used the number of shares issued valued at the share price on the date of exchange. Management have recalculated the share premium based on the share price on the date of the exchange which leads to an increase in the share premium of £31,275,000 with a corresponding decrease in the value of the other reserve that arises upon the reserve acquisition.

The impact of this restatement is shown below:

The opening balance sheet for the comparative period remains unaffected by this restatement.

Based on the value in use as at 31 December 2009, the recoverable amount exceeds the restated carrying amount of goodwill for TMN by £14.5 million. Management has performed sensitivity analysis on the value in use calculation. An impairment of the goodwill would occur if the anticipated increase in sales is reduced to a decline in sales of 20.6% or by increasing the discount rate to 18.4%.2. Accounting policies

a) Change to accounting policies

The Group has adopted the following revisions and amendments to IFRS issued by the International Accounting Standards Board, which are relevant to and effective for the Group's financial statements for the annual period beginning 1 January 2010:

·; IFRS 3 Business Combinations (Revised 2008)

·; IAS 27 Consolidated and Separate Financial Statements (Revised 2008)

·; Improvements to IFRSs 2009

Adoption of IFRS 3 Business Combinations (Revised 2008)

IFRS 3R has been applied prospectively to business combinations for which the acquisition date is on or after 1 January 2010. For the year ended 31 December 2010, the adoption of IFRS 3R has affected the accounting for the Group's acquisition of Canadean Limited by increasing the administrative expenses related to acquisition-related costs by £161,000. Basic and diluted earnings per share for the current period have decreased by 0.04 pence.

Business combinations for which the acquisition date is before 1 January 2010 have not been restated.

3. Segmental analysis

Segment contribution is reported to the Board (which is considered to be the Group's chief operating decision maker) on a monthly basis and consists of earnings before interest, tax, depreciation, amortisation, central overheads and other adjusting items.

The Group considers the business from a divisional (Business Information and Digital Marketing) and a geographic perspective. Canadean, which was acquired during the year, was integrated into Business Information after the acquisition.

Changes in segments during the year

During 2010 the research business of TMN Group was restructured and combined with the Progressive business unit to form the segment Business Information. The remaining business of TMN Group now forms a new division called Digital Marketing. Segmental results for 2009 have been restated accordingly.

Business Information

Business Information delivers integrated digital marketing solutions to its clients through print, web and events.

Digital Marketing

Digital Marketing provides online marketing and lead generation.

Year to 31 December 2010

Year to 31 December 2009 - Restated

Reconciliation of segment operating loss to loss before tax

Unallocated central overheads consists of corporate, HR, finance, IT and facilities expenses. They have increased from £8.0 million in 2009 to £11.6 million in 2010 due to the full year inclusion of TMN Group and four months of Canadean central overheads.

Geographical analysis

4. Other expenses

·; Redundancy costs relate to redundancies made during the year that were announced prior to 31 December 2010. Redundancies have occurred as central functions are combined from the acquisitions that the group has made.

·; Property related provisions relate to the movement in the provision made for onerous properties and dilapidations.

·; Deal costs are mainly acquisition related costs such as stamp duty, legal and professional fees. Legal and professional fees relating to the acquisition of Canadean amounted to £161,000.

·; The impairment and amortisation relate to acquired intangible assets.

5. Other income

A VAT refund, relating to VAT that was expensed on rights issues in prior periods, was received during the year.

6. Earnings per share

The calculation of the basic earnings per share is normally based on the earnings attributable to ordinary shareholders divided by the weighted average number of shares in issue during the period. As a result of the reverse acquisition in the prior period the weighted average number of shares up until the reverse acquisition was deemed to be the number of shares that were issued by the Company for the reverse acquisition.

The Group doesn't have any diluted shares; therefore the calculation of the basic earnings per diluted shares is the same that the calculation of the basic earnings per share.

Reconciliations of the earnings and weighted average number of shares used in the calculations are set out below.

7. Borrowings

The Group currently has a £7m overdraft facility. The bank overdraft is subject to a Group set-off arrangement. Interest is charged on the overdraft at 2.75% over the bank's base rate. Loans consist of two loans provided by Michael Danson.

Interest free loan repayable by 2019

A £9.8 million loan provided by Michael Danson. The loan note allows Michael Danson to require redemption at par on demand or for the company to redeem at par at any time. As such the loan is considered to be an on demand liability. As at 31 December 2010 the loan is classified as repayable after more than one year having received an undertaking from Michael Danson that he would not demand repayment for a period of 12 months from the balance sheet date. This undertaking was reconfirmed upon signing the financial statements to ensure that the directors could prepare the accounts on a going concern basis, whilst not deemed to have constituted a material modification of the terms of the loan. The loan is repayable by 2019.

£9 million loan to fund acquisition of Canadean

A £9 million loan was provided by Michael Danson to fund the acquisition of Canadean. The loan is repayable by 2013 and has an interest rate of 275 basis points over the 3-month London Interbank Offered Rate, in line with the rates that were available from third-party lenders at the time of the acquisition negotiations.

The loan is repayable in instalments of £1,500,000, payable every three months, commencing from 30 September 2010. Instalments are payable subject to there being sufficient working capital to fund the Group in the foreseeable future. As such, only one instalment of £500,000 was paid in the year ended 31 December 2010. Where instalments are not paid they are payable on demand.

8. Acquisitions

Canadean

On 1 September 2010, Progressive acquired 100% of the issued share capital of Canadean, a company based in the UK for a total consideration of £9 million in cash and the issue of 6,944,445 shares. Canadean has established an enviable position in the market place, providing high quality business critical information for many of the world's largest beverage companies, both soft drinks and beer, as well as key suppliers to the industry across packaging, raw materials and ingredients. The acquisition provides Progressive with a strong brand in the business information market with mature customer relationships. The amounts recognised for each class of assets, liabilities and contingent liabilities recognised at the acquisition date were as follows:

The goodwill that arose on the combination can be attributed to revenue and cost synergies expected to arise upon integration of Canadean into Progressive. The trade and other receivables had a contractual value of £1,539,000 and a fair value of £1,479,000 based on the best estimate of cash flows that will be collected. The goodwill and fair value adjustments are not expected to be tax deductible.

Canadean contributed a profit of £320,000 from the date of acquisition to 31 December 2010. Had the acquisition occurred on 1 January 2010 the revenue of the Group for the year to 31 December 2010 would have been £52,449,000 and the loss for the year would have been £4,027,000.