GlobalData Regulatory News (DATA)

25 February 2013

Progressive Digital Media Group Plc

Preliminary Results For The Year Ended 31 December 2012

"Record results, improved cash generation and continued investment for future growth"

Progressive Digital Media Group Plc ('the Group') produces premium business information which enables organisations to gain competitive advantage by providing unique, high quality information and services across multiple platforms.

Highlights

Key achievements in 2012

·; Significant investment in new products and delivery platforms

·; Strong revenue and earnings growth

·; Strong balance sheet with cash and bank facilities to fund future acquisitions

·; Acquisition of Kable, one of the UK's leading providers of technology expenditure intelligence on 2 July 2012

·; Normalisation of capital structure through proposed share consolidation and re-capitalisation of reserves

Financial performance

·; Group revenue increased by 6.9% to £53.9m (2011: £50.4m)

·; Adjusted EBITDA(1) increased by 25.6% to £9.1m (2011: £7.2m)

·; Adjusted EBITDA margin(1) increased to 16.9% (2011: 14.4%)

·; Reported EBITDA(2) increased by 31.8% to £7.4m (2011: £5.6m)

·; Reported profit before tax of £4.3m (2011: £1.4m) inclusive of £0.9m restructuring costs and £0.8m share based payment charge

·; Cash generated from operations increased to £6.4m (2011: £2.9m)

·; Net cash(3) of £6.2m (2011: net debt £22.5m)

Our business

·; Premium business information services covering the Consumer and Technology markets

·; A strong and scalable asset base

·; Significant contracted and visible revenue streams

·; Globally exploitable business model

·; High gross margin product

Simon Pyper, Managing Director of Progressive Digital Media Group Plc, commented:

"This is the Group's fourth consecutive year of revenue and earnings growth. We have made good progress across a broad range of our most important metrics. This past year we focused on putting in place the building blocks for future long-term growth and eliminating the distractions of our former email marketing business. We continued investing in our Business Information products, acquired a complementary business and re-engineered our balance sheet to both fund future growth and, when appropriate, to distribute dividends to our shareholders."

Note 1: Adjusted EBITDA: Earnings before interest, tax, depreciation and amortisation, impairment, share based payments, adjusted for costs associated with derivatives, acquisitions, integration and restructure of the Group. Adjusted EBITDA margin is defined as; Adjusted EBITDA as a percentage of revenue.

Note 2: EBITDA: Earnings before interest, tax, depreciation, amortisation and impairment. Includes a charge of £0.8 million for share based payment (2011: £1.2 million).

Note 3: Net cash/ (net debt): Cash less short and long-term borrowings.

Enquiries:

CHAIRMAN'S STATEMENT

It has been another year of significant progress; the Group has not only delivered a robust set of financial results but also exited from the consumer email marketing sector, completed the acquisition of Kable and raised £20 million from an over-subscribed share placement. Moreover, our results remain tempered by the significant investment in our Business Intelligence content sets and delivery platforms which form the building blocks for future growth. That so much was achieved during a period of sustained weak economic conditions is encouraging and gives us confidence in our business model, our strategy and our delivery.

Our business model

We are a content driven media company producing premium business information. We supply our customers with research, analysis and tactical intelligence across a multiple of platforms, which enables our customers to gain a competitive advantage in their markets. 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 profit growth and margin. Its key features are:

1. Premium business information services covering the Consumer and Technology markets

2. A strong and scalable asset base

3. Significant contracted and visible revenue streams including digital subscriptions

4. Globally exploitable business model

5. High gross margin product

Our strategy

Our strategy is to focus on:

1. Key, high growth global markets

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

3. Quality product and customer delivery

The strategy will be delivered by a combination of strong organic growth and selective acquisitions in our target markets.

Kable is a good example of acquiring a strategic fit business. It is a subscription based business information company providing Business Intelligence on technology expenditure. Furthermore, Kable's product set can be extended to additional geographies, developed for adjacent verticals and has, since acquisition, been able to leverage our operational infrastructure to increase both revenues and margin. Pleasingly, performance since acquisition has been in line with expectations, which has allowed us to accelerate our investment in the Kable product set.

Capital structure

The £20 million share placement (completed on 30 April 2012), coupled with the proposed share consolidation and re-capitalisation, will allow the Group to re-engineer its balance sheet to one more fitting with its needs. In doing so, the Group will have a balance sheet which will support further acquisitions and a capital structure which will, when appropriate, allow the Group to distribute dividends to our diverse investor base. Further details will be set out in a circular to be published in April.

Current trading and outlook

Whilst the economic environment remains uncertain, we are confident that we are positioned for future growth and we therefore expect to make further progress during 2013.

Mike Danson

Chairman

25 February 2013

MANAGING DIRECTOR'S REVIEW

This is the Group's fourth consecutive year of revenue and earnings growth. We have made good progress across a broad range of our most important metrics. This past year we focused on putting in place the building blocks for future long-term growth and eliminating the distractions of our former email marketing business. We continued investing in our Business Information products, acquired a complementary business and re-engineered our balance sheet to both fund future growth and, when appropriate, to distribute dividends to our shareholders.

We have a simple, clearly defined and well understood strategy; to become a leading provider of must have premium business information, focused on global verticals.

Building blocks for growth:

The Group aims to deliver its strategy by focusing on four key areas of building blocks for growth:

·; Focus on global industry verticals such as Consumer and Technology

·; Premium Content, where the intellectual property is internally generated and exploited across multiple platforms

·; Common systems and processes across the Group, driving efficiencies and margin improvement

·; Acquire complementary and strategic fit business assets or companies

Operational review

Trading conditions in our markets were broadly benign: however a lack of growth does not always equate to a lack of opportunity. In 2012, the Group achieved growth in its key verticals and geographies and that this was achieved ahead of seeing the full benefit from our investment in Business Intelligence content and delivery platforms is more than satisfactory.

The Group has also completed many internal change programmes during the year, which should put the Group in a better position to deliver both revenue and earnings growth for the medium to long term. Branding has been one such change programme, where we have aligned our principal Business Information products under the Canadean brand. The Canadean brand is well regarded in its existing verticals and we believe can be effectively leveraged across new and adjacent verticals.

A second change programme relates to our internal processes and systems; the Group now benefits from a common customer relationship management system, a common content management system and a common content delivery system. There are numerous benefits associated with having common systems and processes, not least of which are operational efficiencies and margin enhancement through improved productivity and lower running costs.

Another change programme relates to structure; during the year we aligned our management structure to better reflect our markets and product offering. Business Intelligence for example is now served by both an Account Management team and a separate Business Development team. Our expectation is that the Business Development team will secure new business for the Group whilst the Account Management team focuses on increasing renewal rates both by volume and value.

Looking ahead

There has been a significant amount of change across the Group as we put in place the building blocks for growth. Change can often cause disruption, and that so much was achieved during the year and at the same time delivering a robust financial performance is testimony to the professionalism, hard work and commitment of our staff. I would like to take this opportunity to express my thanks to all our staff and to congratulate them for an excellent performance.

The key objectives for the forthcoming year are:

·; Focus on high-quality, subscription based Business Information services and products

·; Expand our geographic footprint in high-growth consumer markets, such as China, India, Latin America and Australasia

·; Focus on long-term margin improvement

We set for ourselves both high expectations and ambitious targets, and our results for 2012 are but one step in the right direction.

Simon Pyper

Managing Director

25 February 2013

FINANCIAL REVIEW

Financially the Group has performed well with improved revenues, earnings and cash generation. The £20 million share placement (completed April 2012), coupled with the proposed share consolidation and re-capitalisation, provides the Group with a strong balance sheet to fund future growth and a capital structure which will, when appropriate, allow dividends to be distributed to shareholders.

Financial highlights

·; Increased the Group's revenue by 6.9% year on year

·; Increased Adjusted EBITDA margins by 2.5% to 16.9%

·; Increased profitability at the Adjusted EBITDA level by 25.6%

·; Funds generated from operations increased by £3.5m to £6.4m

·; Bank debt reduced by £6.8m to £6.5m (2011: £13.3m)

Note 1: EBITDA: Earnings before interest, tax, depreciation, amortisation and impairment. Includes a charge of £0.8 million for share based payments (2011: £1.2 million).

Note 2: Adjusted EBITDA: Earnings before interest, tax, depreciation and amortisation, impairment, share based payments, adjusted for costs associated with derivatives, acquisitions, integration and restructure of the Group. Adjusted EBITDA margin is defined as: Adjusted EBITDA as a percentage of revenue.

Continuing operations

The focus for 2012 was to increase earnings and margins, improve cash generation and to re-engineer our balance sheet to one more appropriate to our needs. I am pleased to report that we have made significant progress and have achieved much of what we set out to do. Furthermore, with the exit from the consumer email marketing business, the Group is now solely focused on Business Information and in particular the development, acquisition and provision of subscription based information products.

Looking ahead our focus for 2013 will be similar to that of 2012; to improve both earnings and margins and to increase cash generation.

Acquisition of Kable

We announced on 2 July 2012 that the Group had acquired the business and assets of Kable for cash consideration of £2.3 million. Kable is one of the UK's leading providers of technology expenditure intelligence. Kable provides business information, tactical intelligence, research, analysis and consultancy to a number of the UK's leading blue chip companies. For the financial year ended 31 December 2011, Kable reported revenues of approximately £1.8m. The acquisition of Kable was funded by the utilisation of £2.3 million of the funds raised as part of the share placing on 30 April 2012.

Discontinued operations

During the year the business exited from the legacy consumer email marketing sector which was both loss making and of poor strategic fit. Consequently, a loss of £1.8 million has been recorded in our Consolidated Income Statement under "Discontinued operations". In terms of cash consumption, the exit from the email marketing business utilised £1.3 million of the Group's cash resources in 2012.

Earnings per share

Basic profit per share from continuing operations was 0.99 pence per share (2011: profit of 0.41 pence per share).

Cash flow

The Group generated £9.1 million of adjusted EBITDA in 2012, which excludes £0.5 million paid in relation to onerous leases and other amounts paid in relation to costs that were provided for at the start of the year. Working capital movements reduced the cash generated from operations to an inflow of £6.4 million.

Capital expenditure was £0.5 million in 2012 (£1.1 million in 2011). This included £0.3 million on software.

During the year, the Group has generated £9.8 million from financing activities, which includes net funds of £19.1 million from the placement of shares and £8 million from the capitalisation of Group loans on 30 April 2012. The Group also repaid long-term borrowings of £17.3 million.

Currency rate risk

The Group's primary objective in managing foreign currency risk is to protect against the risk that the eventual Sterling net cash flows will be affected by changes in foreign currency exchange rates. To do this, the Group enters into foreign exchange collars that limit both the risk and benefit from movements in US dollar and Euro exchange rates with Sterling. Whilst commercially this hedges the Group's currency exposures, it does not meet the requirements for hedge accounting and accordingly any movements in the fair value of the foreign exchange collars are recognised in the income statement.

Liquidity risk and going concern

The Group's approach to managing liquidity risk is to ensure, as far as possible, that it has sufficient liquidity to meet its liabilities as they fall due with surplus facilities to cope with any unexpected variances in timing of cash flows. The Group meets its day-to-day working capital requirements from an overdraft facility of £3 million, which was not utilised as at 31 December 2012.

As part of the share placing, on 30 April 2012, £4.0 million of the term loan was repaid to The Royal Bank of Scotland, pursuant to the banking agreement and a further £1.5m was repaid to the bank in October 2012 in accordance with the original repayment terms. At 31 December 2012, £0.5 million of the term loan and £6 million of the revolving capital facility remained outstanding. £0.5 million of the term loan is due for repayment in October 2013, in accordance with the original repayment schedule; as such this has been classified as a short term liability.

Also, as part of the share placing, Mike Danson converted £8 million of his £9.8 million interest free loan into equity with the remaining £1.8 million being settled against balances owed by World Market Intelligence Ltd, a company wholly owned by Mike Danson. At 31 December 2012, the Group had no loans outstanding with Mike Danson.

Based on cash flow projections, the Group considers the existing financing facilities to be adequate to meet short-term commitments. The Directors have a reasonable expectation that there are no material uncertainties that cast significant doubt about the Group's ability to continue as a going concern. Accordingly, the Group has prepared the annual report and financial statements on a going concern basis.

Simon Pyper

Managing Director

25 February 2013

Consolidated Income Statement

1 EBITDA is defined as earnings before interest, tax, depreciation, amortisation and impairment.

2 We define Adjusted EBITDA as EBITDA adjusted for costs associated with acquisitions, integration, restructure of the Group, share based payments and impact of foreign exchange contracts. See note 4 of the preliminary 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. EBITDA and Adjusted EBITDA are not measures of financial performance under IFRS and should not be considered as an alternative to operating profit/loss or as a measure of liquidity or an alternative to loss/profit for the year 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

Consolidated Cash Flow Statement

The accompanying notes form an integral part of this financial report.

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 2012 and should be read in conjunction with the Annual Report and Accounts for the year ended 31 December 2011 that was sent to all shareholders and is available on the Company's website. 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 2012. The auditors have reported on the Group's statutory accounts for the year ended 31 December 2012 under s495 of the Companies Act 2006, which do not contain statements under s498(2) or s498(3) of the Companies Act 2006 and are unqualified. The statutory accounts for the year ended 31 December 2012 will be filed with the Registrar of companies 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, share based payments 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 sub-let 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 intangible assets separate from goodwill that consist of assessing the value of brands, software and customer relationships.

Provisions 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.

Share based payments

The Group operates a share based compensation plan under which the entity receives services from employees as consideration for equity instruments (options) of the Group. The fair value of the employee services received in exchange for the grant of the options and awards is recognised as an expense. The total amount to be expensed is determined by reference to the fair value of the options granted, excluding the impact of any non-market service and performance vesting conditions (for example, profitability, sales growth targets and remaining an employee of the entity over a specified time period). Non-market vesting conditions are included in assumptions about the number of options and awards that are expected to vest. The total amount expensed is recognised over the vesting period, which is the period over which all of the specified existing conditions are to be satisfied. At each reporting date, the entity revises its estimates of the number of options and awards that are expected to vest based on the non-market vesting conditions. It recognises the impact of the revision to original estimates, if any, in the Income Statement, with a corresponding adjustment to the share option reserve within equity.

Carrying value of goodwill and other intangibles

The carrying value of goodwill and other indefinite life 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 revenues, 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. Management consider that the most sensitive of these assumptions is the future maintainable earnings of the cash generated units.

At 31 December 2012 the Group had £26.4 million of goodwill and other intangibles assets (2011: £25.1 million).

Going concern

The Group meets its day-to-day working capital requirements from an overdraft facility of £3.0 million, which was not utilised as at 31 December 2012.

Based on cash flow projections, the Group considers the existing financing facilities to be adequate to meet short-term commitments. The Directors have a reasonable expectation that there are no material uncertainties that cast significant doubt about the Group's ability to continue as a going concern. Accordingly, the Group has prepared the annual report and financial statements on a going concern basis.

2. Accounting policies

This report has been prepared based on the accounting policies detailed in the Group's financial statements for the year ended 31 December 2012.

3. Segmental analysis

Segmental results

Following the discontinuation of the B2C email marketing business on 1 April 2012, the Group now considers the business as a single operating segment.

The group profit or loss 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.

Reconciliation of segment contribution to profit before tax

Central overheads consists of corporate, HR, finance, IT and facilities expenses.

Geographical analysis

From continuing operations

4. Other expenses

- Redundancy costs relate to redundancies made during the year that were announced prior to 31 December 2012.

- Property related provisions relate to the consolidated income statement impact on the provision made for onerous properties and dilapidations.

- Exceptional property costs relate to additional costs incurred on properties that are not occupied and are provided for within the onerous lease provision.

- Deal costs represent costs incurred in respect of the loans issued by the Royal Bank of Scotland in 2011.

- The revaluation of currency collar relates to movement in the fair value of the short and long term derivatives.

- The share option expense relates to the share option plan.

- The M&A costs relate to the acquisition of Kable. See note 9.

5. Earnings per share

The calculation of the basic earnings per share is normally based on the earnings attributable to ordinary shareholders of the parent company divided by the weighted average number of shares in issue during the period.

The Group has a share options scheme in place and therefore the Group has calculated the dilutive effect of these options. The below table shows earnings per share for both continuing and discontinued operations:

6. Borrowings

Outstanding loans consist of two facilities provided by the Royal Bank of Scotland, which were issued in 2011. Of the Royal Bank of Scotland loans, £0.5million is due for repayment within the year.

Current

The Group currently has a £3.0 million overdraft facility, which was not drawn down upon at 31 December 2012. Interest is charged on the overdraft at 2.5% over the London Interbank Offered Rate.

There is £0.5 million outstanding on the £6 million term loan issued by The Royal Bank of Scotland, all of which is due within one year.

Non-current

£12 million loan provided by The Royal Bank of Scotland

In October 2011, the Group refinanced its debt position. A £6.0 million term loan and a £6.0 million revolving capital facility were issued by The Royal Bank of Scotland.

As part of the Placing (discussed further in note 7) £4.0 million of the term loan was repaid to The Royal Bank of Scotland, pursuant to the banking agreement. A further £1.5 million was repaid on 15 October 2012 in accordance with the original repayment terms. No penalties were incurred on the £4.0 million early repayment.

As at 31 December 2012, £0.5 million of the term loan and £6.0 million of the revolving capital facility were outstanding. £0.5million of the term loan is due for repayment in October 2013 and as such has been classified as a short-term liability. Interest is charged on the outstanding loans at a rate of 2.75% over the London Interbank Offered Rate.

Also, as part of the Placing (discussed in note 7) Mike Danson converted £8.0 million of his £9.8 million interest free loan into equity. The remaining £1.8 million was used to settle an amount owed by World Market Intelligence, a company wholly owned by Mike Danson.

Non-current borrowings can be reconciled as follows:

7. Equity

Share capital

Authorised share capital:

Allotted, called up and fully paid:

Capital management

The Group's capital management objectives are:

·; to ensure the Group's ability to continue as a going concern

·; to fund future growth and provide an adequate return to shareholders and, when appropriate distribute dividends

The £20 million share placement (completed on 30 April 2012) coupled with the proposed share consolidation and re-capitalisation will allow the Group to re-engineer its balance sheet to one more fitting with its needs. In doing so, the Group will have a balance sheet which will support further acquisitions and a capital structure which will, when appropriate, allow the Group to distribute dividends to our diverse investor base. Further details will be set out in a circular to be published in April.

As mentioned above, during the year the Group issued 155,555,555 ordinary shares with a nominal value of £15,556 which were subscribed for at a price of 18 pence per share. The gross consideration for this subscription was £28.0 million.

The issue of 111,111,111 shares was a result of the placing of Ordinary shares by Singer Capital Markets (the "Placing"), which raised gross funds of £20million. The Directors intend that the net proceeds will be used to fund growth opportunities and in particular to finance complementary acquisitions in the Business Information market. As part of the banking agreement with The Royal Bank of Scotland, £4million of the funds were used to repay borrowings.

Simultaneously with the Placing, the Chairman Mike Danson, entered into a capitalisation agreement to convert £8.0 million of a non-interest bearing loan of £9,768,871 into 44,444,444 ordinary shares at the Placing price of 18 pence per share.

Following the Placing and the Capitalisation, Mike Danson's shareholding in the Group is 67.72% (31 December 2011: 83.89%).

The amount recognised within share premium as a result of the Placing and Capitalisation was £27.1million, which is analysed as follows;

8. Discontinued operations

On 1 April 2012 the Group made the decision to close the TMN email marketing business unit, including the TMN, EDR and TAPPS businesses. The TMN email marketing division formed part of the Group's B2C Digital Marketing division. Therefore, pursuant to the provisions of IFRS 5 the operation has been classified as discontinued.

a) The results of the discontinued operation are as follows:

b). Loss before tax

c). Cash flows from discontinued operations

9. Acquisitions

Kable

On 2 July 2012 the Group acquired the business and assets of Kable for cash consideration of £2,300,000. Kable is one of the UK's leading providers of technology expenditure intelligence. Kable provides business information, tactical intelligence, research, analysis and consultancy to a number of the UK's leading blue chip companies. Kable is a good strategic fit business. It is a subscription based business information company providing Business Intelligence on technology expenditure. Furthermore, Kable's product set can be extended to additional geographies, developed for adjacent verticals and has, since acquisition, been able to leverage our operational infrastructure to increase both revenues and margin.

The Group incurred legal costs of £17,000 in relation to the acquisition, which were recognised in other expenses (note 4).

The amounts recognised for each class of assets and liabilities at the acquisition date were as follows:

Since acquisition on 2 July 2012, Kable has contributed revenues of £907,233 and a loss of £414,163. If the acquisition had occurred on 1 January 2012, the Group revenue for 2012 would have been £54.6 million and the profit before tax for continuing operations would have been £4.6 million.

The goodwill that arose on the combination can be attributed to revenue and cost synergies expected to arise upon integration of Kable into Progressive Digital Media Group.