FRM.L Regulatory News (FRM)

27 Oct 2005 07:00

Formation Group PLC27 October 2005 27th October 2005 FORMATION GROUP PLC PRELIMINARY RESULTS STATEMENT FOR YEAR ENDED 31 AUGUST 2005 Formation Group PLC ("Formation" or the "Group"), a leading integrated sportsmarketing and management business, is pleased to announce its preliminaryresults for the year ended 31 August 2005. HIGHLIGHTS Financial - Turnover increased by 18% to £14.9 million (2004: £12.6 million). - Profit before taxation and goodwill amortisation increased by 11% to £1.7 million (2004: £1.5 million).* - Operating profit before central costs and goodwill amortisation by operating division is: Sports Marketing Division £1.3 million (2004: £1.2 million), Wealth Management Division £0.5 million (2004: £0.6 million), Representation £1.3 million (2004: £0.9 million) with Legal & Professional Services £0.04 million (2004: loss of £0.03 million). - Net cash inflow from operating activities of £2.2 million (2004: £2.4 million). - Net funds position at 31 August 2005 of £0.5 million (2004:£1.8 million) after outgoings of £3.2 million in consideration for acquisitions(2004: £2.9 million) and taxation of £0.1 million (2004: £0.3 million). - Committed future gross profits of £5.2 million (2004: £4.3 million) - an increase of 22%. - Underlying IIMR earnings per share of 1.01p (2004: 0.95p). Basic earnings per share 0.20p (2004: 0.15p). - Dividend proposed of 0.095p per share (2004: 0.085p) - an increase of 12%. Operational - Acquisition of Capital Sports Solutions and RC & A Sports Management Limited during the year, both of which have been successfully integrated. - All Divisions performing well, with the Representation Division performing ahead of management expectations. * Goodwill amortisation of £0.9 million (2004: £0.9 million). John Lawrence, Chairman of Formation, commented: "Formation Group PLC has continued to make significant progress during the year.All four Divisions are contributing to the Group's performance and development,in line with the Board's expectations at the commencement of the year. TheSports Marketing Division continues to cement its position and theRepresentation Division has had an especially strong year. Our integratedservice proposition is firmly in place and the Board remains optimistic of theGroup's future prospects." Enquiries: Formation Group PLC Contact DetailsNeil Rodford, Chief Executive Tel: +44 (0) 1625 539832Mark Page, Finance Director www.formationgroupplc.com Press Relations Contact DetailsICIS Limited Tel: +44 (0)20 7651 8688Archie Berens archie@icisnet.com Chairman's Statement It gives me great pleasure to present the Group's results for the year ended 31August 2005. We have enjoyed another successful year, with all divisions tradingprofitably and meeting or exceeding our expectations. The Group is now firmlyestablished as an integrated sports business with a focused service proposition. We believe that the Group's long term prospects remain extremely positive inwhat we consider to be a robust market place. The Group continues to operatefour separate divisions. These four divisions serve two distinct customergroups. The first consists of corporate brands which are provided with expertadvice on how their commercial interests can best be served in the arena ofsport. The second customer group is made up of individual athletes requiringadvice and management services in their career progression both on and off thepitch. Each individual division has its own objectives, culture, brand identity andarea of expertise, with all divisions trading under the holding company ofFormation Group PLC. All divisions will continue to be run and managed asseparate profit centres. We believe that the Group has considerableopportunities for further growth via a combination of organic growth, increasedsynergy and cross-selling opportunities between the divisions and acquisition. ResultsTurnover for the year increased by 18 per cent. to £14.9 million (2004: £12.6million) and the profit before taxation and goodwill amortisation was £1.7million (2004: £1.5 million). Profit before taxation was £0.7 million (2004:£0.6 million). Basic earnings per share were 0.20p (2004: 0.15p) and IIMRheadline earnings per share were 1.01p (2004: 0.95p). The Group's committedfuture gross profit increased by 22% to £5.2 million (2004: £4.3 million) at 31August 2005 of which £3.3 million will be recognised in the financial yearending 31 August 2006. This provides the Group with a strong platform from whichto grow the business in the current financial year. At 31 August 2005, the Group had net funds of £0.5 million, having generatedcash of £2.2 million from operations during the year (2004: £2.4 million) andafter outgoings of £3.2 million in acquisition consideration (2004: £2.9million). The Directors are recommending a dividend payment in respect of thefinancial year of 0.095p (2004: 0.085p). Subject to shareholder approval at theAnnual General Meeting on 14 December 2005, the final dividend will be paid on21 December 2005 to shareholders on the register at the close of business on 4November 2005. TradingFormation Group PLC has four operating divisions as outlined below: - Sports Marketing, trading through Fox Advertising, RC & A Sports Management, Sponsormatic and Active Sports Marketing. Fox Advertising, RC & A Sports Management and Sponsormatic provide outdoor advertising and media to corporate brands with Active Sports Marketing providing marketing services to the same target audience; - Wealth Management, trading as Kingsbridge Asset Management, providing financial advice and services to sporting athletes and associations; - Representation, trading as Proactive Sports Management, providing representation and management services to professional footballers; - Legal and Professional Services, trading as Capital Sports Solutions providing brokerage financial services to sporting organisations and clubs. Sports MarketingThe Division has delivered another strong performance, in line with ourexpectations at the start of the year. Turnover for the year increased to £6.7million (2004: £5.5 million) and the contribution (profit before common costs)for the Division was £1.3 million (2004: £1.2 million). Outdoor Advertising and MediaWe advise a large number of UK, and international brands on their outdooradvertising requirements through Fox Advertising based in Durham, RC & A SportsManagement based in Preston, which was acquired at the end of the financial yearand Sponsormatic based in Copenhagen, Denmark. The Division advises on andprocures, on behalf of corporate brands, signage and ambient marketingprogrammes at a large number of domestic and European sporting events. Wecontinue to fulfil the Premier League and Coca Cola Football League contract, aswell as the LDV Vans Trophy and Nationwide Conference. During the year we actedfor a large number of blue chip brands such as Northern Rock in their ambientmarketing requirements. This Division has established itself as a highly professional and respectedoperator in the outdoor signage and project management market place and is oneof the UK's leading outdoor marketing agencies. It has built its reputation overmany years by delivering solutions in a timely, cost effective format and offersa set of skills not available from the more traditional full service agencies.Perimeter advertising and signage management is a key feature of every majorsporting event throughout the world, and we continue to see this area as anopportunity for growth both domestically and internationally. The outlook for the Division remains positive and we will continue to develop itvia organic growth and acquisition. Marketing ServicesThe Division continues to cement its position in the Brand Marketing arena.Historically, this Division undertook brand endorsement agreements for theRepresentation Division's clients on and off the field of play. These weretraditionally confined to apparel deals with kit manufacturers and alsocommercial appearances in a variety of broadcasting and other capacities.However, the Division has grown independently of the Representation Division andhas broadened its market offering to encompass sports marketing services tocorporate brands exploiting the Division's specialist sports and, in particular,football knowledge. Active Sports Marketing is now well placed as one of theleading independent agencies within the UK to advise Brands on their positioningwithin the sporting landscape. The service proposition includes Sales Promotion, Brand Consultancy, Sports PRand Event Management. This Division is aimed at brands wishing to promotethemselves through the world of sport. The FIFA appointment (world governingbody of football) to oversee the delivery of its newest competition, the FIFAInteractive World Cup, sponsored by EA Sports and Xbox, is testimony to theDivision's progress in this market. This year's event is taking place in ninedifferent countries across six continents. It started in mid October and willfinish in London in December 2005. Microsoft Xbox has also appointed Activeduring the year to provide consultancy advice on their long term footballrelated endorsement program. Wealth ManagementThis Division offers financial advice and management to individual athletes anda number of sporting organisations via Kingsbridge Asset Management Limited.Turnover for the year was £3.2 million (2004: £3.1 million) and the contributionfor the Division was £0.5 million (2004: £0.6 million). We have invested in theinfrastructure during the year and also added depth to our management team hencethe reduction in our contribution. Part of this investment was the Division'sfirst dedicated Managing Director, with responsibility for the strategicdevelopment of the Division. The Division acts for approximately 1,000 clients, predominantly professionalfootball players and coaches based in the UK, including approximately 15% ofPremier League's players. Kingsbridge provides advice to its clients in allareas of wealth management, including tax planning, investments, and insurance.Given the specialised nature of the Division's client base, our products areoften bespoke and tailored to meet the needs of our clients unlike a moretraditional independent financial advisor. Future opportunities consist ofincreasing our market share in our chosen segments and adding complementarybusinesses. RepresentationWe have three operating companies under the Proactive Sports Management brandname based in the UK, Scandinavia and USA. Turnover was £4.9 million (2004: £4.0million) and contribution of £1.3 million (2004: £0.9 million). TheRepresentation Division currently acts for 200 players throughout the world, ofwhom 118 have represented their country at international level. 81 players arebased in the UK, 97 in Europe and 22 in the rest of the world. The Divisioncompleted 102 transfers or contract renewals in the year, a 34 per cent increaseyear on year. Turnover has increased in the year as a result of the increasedinvestment we have made in our headcount and our increasing ability to attractthe very best talent in the world to our stable. We have 38 employees working for the division, of which 13 are based outside theUK. We remain committed to this Division and are becoming more and moreconfident about its medium term prospects after a significant period ofinstability and uncertainty in the market. The Division operates in fivecountries and has players playing in 16 leagues throughout the world. Itcontinues to aim to attract and sign the best young football talent in the game.The importance of our overseas offices in this Division cannot be underestimatedwith over 50 per cent. of Premier League players starting their careers outsideof the UK and circa 40 per cent. of our Representation income coming fromoutside of the UK via our regional headquarters of Copenhagen in Northern Europeand Washington in the USA. As at 31 August 2005, the Division had committed future gross profit of £4.1million (2004: £3.1 million) of which £2.2 million will be recognised in theyear ending 31 August 2006. Legal & Professional ServicesThis Division provides financial brokerage services to sporting associations andclubs via Capital Sports Solutions Limited based in Wilmslow. The Board isdelighted with the progress that the Division has made to date, bearing in mindits infancy as a business within the Group. Turnover for the year was £106,000(2004: £19,000) with a contribution of £41,000 (2004: loss of £26,000). Capital Sports Solutions specialises in advising sporting organisations on theirfinancial needs using future and existing guaranteed revenue streams. Theseclients generally have good visibility ranging from commercial sponsorshipagreements to broadcasting income. Capital Sports Solutions aims to utilisethese income streams to optimise the clients' cash flow requirements. EmployeesThe Group currently has 98 employees in five countries throughout the world andcontinues to add depth at the middle management level in all Divisions, thebenefits of which will be seen in years to come. The Board believes that theGroup must attract ambitious and experienced employees in their respectivefields as it continues with its strategy. The Group Profit Share Scheme remainsat the forefront of the Board's thinking on how to retain and reward itsemployees. The share option scheme for senior employees and the Profit ShareScheme ensure that all personnel share in the Group's successes. The success of the Group is dependent on the skill and dedication of its staffand I would once again like to thank all of our employees for their contributionand efforts in the year. Their hard work is very much recognised and valued bythe Board. OutlookThe Group has made significant progress once again in the last twelve monthswith its strategy of providing customers, with an integrated complementary rangeof services focused in the sporting arena. The trading prospects for the Group remain good, and we expect to increasefurther our range of services offered to our customer base via organic growthand acquisition in the current financial year. The outlook remains positive andthe Board remains confident of the future prospects of the Group. John LawrenceNon-Executive Chairman27 October 2005 Consolidated profit and loss accountFor the year ended 31st August 2005 Before 2005 Before 2004 Notes Goodwill Goodwill Total goodwill Goodwill TotalTurnover £'000 £'000 £'000 £'000 £'000 £'000Continuingoperations 14,774 - 14,774 12,609 - 12,609Acquisitions 129 - 129 - - - __________ __________ __________ __________ __________ __________ 1 14,903 - 14,903 12,609 - 12,609Cost of (4,794) - (4,794) (3,786) - (3,786)sales __________ __________ __________ __________ __________ __________Gross profit 10,109 - 10,109 8,823 - 8,823Otheradministrativeexpenses (8,200) - (8,200) (7,166) - (7,166)Amortisationof goodwill - (925) (925) - (907) (907)Depreciationand otheramortisation (197) - (197) (151) - (151) __________ __________ __________ __________ __________ __________Administrativeexpenses (8,397) (925) (9,322) (7,317) (907) (8,224) __________ __________ __________ __________ __________ __________OperatingprofitContinuingoperations 1,664 (922) 742 1,699 (907) 792Acquisitions 48 (3) 45 - - -Discontinuedoperations - - - (193) - (193) __________ __________ __________ __________ __________ __________Operatingprofit 1 1,712 (925) 787 1,506 (907) 599 __________ __________ __________ __________Finance(charge)/income(net) (44) 1 __________ __________Profit onordinaryactivitiesbeforetaxation 743 600Tax on profiton ordinaryactivities (508) (432) __________ __________Profit onordinaryactivitiesafter taxation 235 168Dividends (109) (108) __________ __________Profit for thefinancial year 126 60 __________ __________Earnings pershareBasic 2 0.20p 0.15pDiluted 2 0.20p 0.15pIIMR 2 1.01p 0.95pheadline __________ __________ Consolidated statement of total recognised gains and lossesFor the year ended 31st August 2005 2005 2004 £'000 £'000Profit for the financial year 235 168Gain/(loss) on foreign currency translation 8 (9) ___________ ___________Total recognised gains and losses relating to theyear 243 159 ___________ ___________ Consolidated balance sheetAs at 31st August 2005 2005 2004 £'000 £'000Fixed assetsTrademarks and other rights 51 60Goodwill 16,350 16,336 __________ __________Intangible assets 16,401 16,396Tangible assets 459 504 __________ __________ 16,860 16,900 __________ __________Current assetsDebtors 9,412 6,258Cash at bank and in hand 1,674 1,829 __________ __________ 11,086 8,087Creditors: Amounts falling due within one year (12,503) (9,151) __________ __________Net current liabilities (1,417) (1,064) __________ __________Total assets less current liabilities 15,443 15,836Creditors: Amounts falling due after more than oneyear (1,662) (2,225)Provisions for liabilities and charges (36) - __________ __________Net assets 13,745 13,611 __________ __________Capital and reservesCalled-up share capital 1,149 1,149Share premium account 18 18Capital redemption reserve 61 61Merger reserve 3,689 3,689Profit and loss account 8,828 8,694 __________ __________Equity shareholders' funds 13,745 13,611 __________ __________ Consolidated cash flow statementFor the year ended 31st August 2005 Notes 2005 2004 £'000 £'000Net cash inflow from operating activities 3 2,221 2,366Returns on investments and servicing of finance (44) 1Taxation (129) (310)Capital expenditure and financial investment (136) (20)Acquisitions and disposals (3,157) (2,854)Equity dividends paid (98) (74) _______ _______Cash outflow before management of liquid resourcesand financing (1,343) (891)Management of liquid resources - 373Financing (12) (10) _______ _______Decrease in cash in the year (1,355) (528) _______ _______Decrease in cash in the year (1,355) (528)Cash outflow from decrease in lease financing 12 10Cash inflow from change in liquid resources - (373) _______ _______Change in net funds resulting from cash flows (1,343) (891)New finance leases - (76) _______ _______Movement in net funds in year (1,343) (967)Net funds at 1 September 2004 1,763 2,730 _______ _______Net funds at 31 August 2005 420 1,763 _______ _______ Notes to the Preliminary InformationFor the year ended 31st August 2005 1. Segment information Classes of business: Sports Wealth Re- Legal & Marketing Management presentation Professional Group 2005 2005 2005 2005 2005 £'000 £'000 £'000 £'000 £'000Turnover 6,734 3,153 4,910 106 14,903 __________ __________ __________ __________ __________Segment 1,295 485 1,338 41 3,159profit __________ __________ __________ __________Common (1,447)costs __________Operatingprofitbeforegoodwill 1,712amortisation * __________ Sports Wealth Re- Legal & Marketing Management presentation Professional Group 2004 2004 2004 2004 2004 £'000 £'000 £'000 £'000 £'000Turnover 5,456 3,100 4,034 19 12,609 __________ __________ __________ __________ __________Segmentprofit/ 1,202 642 923 (26) 2,741(loss) __________ __________ __________ __________Common (1,235)costs __________Operatingprofitbeforegoodwill 1,506amortisation* __________ * The goodwill amortisation charge of £925,000 (2004 - £907,000) relates to theSports Marketing division £126,000 (2004 - £125,000), the Wealth Managementdivision £256,000 (2004 - £245,000), the Representation division £540,000 (2004- £537,000) and the Legal & Professional Services division £3,000 (2004 - Nil). 2. Earnings per share The calculations of earnings per share are based on the following profits andnumbers of shares: 2005 2004 £'000 £'000Profit for the financial year 235 168Adjustment for goodwill amortisation 925 907 __________ __________Profit for the financial year - IIMR earnings 1,160 1,075 __________ __________ 2005 2004 '000 '000Weighted average number of shares:For basic and IIMR earnings per share 114,874 112,761Diluted earnings per share 114,874 112,919 __________ __________ Earnings per share is calculated by dividing the profit for the financial yearby the weighted average number of shares in issue during the year. An additionalmeasure of earnings per share has been recommended by the Institute ofInvestment Management and Research ("IIMR") which requires the adjustment ofearnings to eliminate certain items adjusted for any tax effect. Any difference between the weighted average number of shares and diluted numberof shares is due to the potential dilutive effect of the shares to be issued.The Directors consider that headline IIMR earnings per share gives a betterunderstanding of the Group's earnings. 3. Reconciliation of operating profit to operating cash flows 2005 2004 £'000 £'000Operating profit 787 599Depreciation and amortisation charges 1,122 1,058Profit on sale of tangible fixed assets (17) (2)Increase in debtors (2,003) (1,538)Increase in creditors 2,321 2,258Other 11 (9) __________ __________Net cash inflow from operating activities 2,221 2,366 __________ __________ 4. The comparative figures are for the financial year ended 31 August 2004. The comparative figures are an abridged version of the Group's full accounts and, together with other financial information contained in these results, do not constitute statutory accounts of the Group within the meaning of section 240 of the Companies Act 1985. Statutory accounts for the year ended 31 August 2004 have been filed with the Registrar of Companies for England and Wales and have been reported on by the Group's auditors. The report of the auditors was not qualified and did not contain a statement under section 237 of the Companies Act 1985. The results for the year ended 31 August 2005 are extracts from the 2005 Group accounts which, if adopted by members in General Meeting on 14 December 2005 will be filed with the Registrar of Companies. The report of the auditors was not qualified and did not contain a statement under section 237 of the Companies Act 1985. This information is provided by RNS The company news service from the London Stock Exchange