FRM.L Regulatory News (FRM)

28 Apr 2005 07:00

Formation Group PLC28 April 2005 FORMATION GROUP PLC Interim Results Statement for the six months ended 28 February 2005 Formation Group PLC ("Formation" or the "Group"), a leading integrated sportsmanagement and marketing business, is pleased to announce its interim resultsfor the period ended 28 February 2005. HIGHLIGHTS Financial > Turnover increased by 25% to £6.9 million (2004: £5.5 million). > Profit before taxation and goodwill amortisation increased by 97% to £414,000 (2004: £210,000).* > Operating profit before central costs and goodwill by operating division is: Sports Marketing Division £616,000 (2004: £563,000), Wealth Management Division £269,000 (2004: £272,000), and Representation Division £135,000 (2004: loss of £105,000). > Net cash inflow from operating activities of £487,000 (2004: £576,000). > Committed future gross profits of £4.0 million (2004: £2.8 million) - an increase of 43%. > Underlying IIMR earnings per share increased by 92% to 0.25p (2004: 0.13p). Basic loss per share 0.15p (2004: loss per share 0.27p). Operational > Acquisition of Capital Sports Solutions adds substance to the Legal & Professional Services Division. > All Divisions performing in line with management's expectations. * Goodwill amortisation of £455,000 (2004: £442,000). John Lawrence, Chairman of Formation, commented: "Formation Group has made significant progress during the period. All Divisionscontinue to contribute to the Group's performance and development, in line withour expectations at the commencement of the period. Our integrated serviceproposition is now in place and the Board remains optimistic of the Group'sprospects in the short, medium and long term." Enquiries: Formation Group PLC Contact DetailsNeil Rodford, Chief Executive Tel: +44 (0) 1625 539 832Mark Page, Finance Director www.formationgroupplc.com Press Relations Contact DetailsICIS Limited Tel: +44 (0)20 7651 8688Archie Berens archie@icisnet.comCaroline Evans Jones caroline@icisnet.com CHAIRMAN'S STATEMENT It gives me great pleasure to present the Group's interim results for the sixmonths ended 28 February 2005, and I am delighted with the progress made by theGroup. All Divisions have traded either in line with or slightly ahead of theBoard's expectations during the period. We remain focused on developing theorganisation into the leading European sports marketing and management business. The strategy of creating a diverse Divisional structure is now in place andproducing tangible results. Each Division has delivered a positive contributionto the Group and has an increasing degree of visibility. The strategic reviewoutlined in 2004 and its recommendations have been implemented and completed.The challenge for the Group is to continue to add scale via organic growth andselective acquisitions. We believe that there are many opportunities to achievethis objective and expect the next twelve months to be another challenging butrewarding period for all our stakeholders. Results Turnover for the period increased by 25%.to £6.9 million (2004: £5.5 million)and the profit before taxation and goodwill amortisation increased by 97% to£414,000 (2004: £210,000). Goodwill amortisation of £455,000 (2004: £442,000)created a loss before taxation of £41,000 (2004: loss of £232,000). IIMRheadline earnings per share were 0.25p (2004: 0.13p). The Group had committed future gross profit of £4.0 million (2004: £2.8 million)at 28 February 2005 of which £1.8 million (2004: £1.7 million) will berecognised in this financial year ending 31 August 2005. This is furtherevidence of the growing visibility and security of the Group's revenue base. As at the 28 February 2005, the Group had net borrowings of £966,000 (2004: cashbalance of £880,000), having generated cash of £487,000 from operations duringthe period (2004: £576,000). At 28 February 2005, the Group had paid allconsideration in respect of its acquisitions, apart from £129,000 being providedfor the Sponsormatic acquisition. At the period end, Sponsormatic is the onlycompany in the Group with potential additional deferred consideration. Theamount provided is to be paid in cash and therefore has no dilution effect onthe Group's shareholders. The Directors are not recommending the payment of aninterim dividend in respect of the financial period. Trading Formation Group has four operating Divisions trading as individual profitcentres. The Divisions of the Group now consist of: • Sports Marketing, trading as Fox Advertising, Active Sports Marketing Limited and Sponsormatic A/S; • Wealth Management, trading as Kingsbridge Asset Management Limited; • Legal & Professional Services, trading as Capital Sports Solutions Limited • Representation, trading as Proactive Sports Management Limited, Proactive Scandinavia A/S and Proactive USA. We are pleased with the trading performance and contribution of each of theabove Divisions. All companies traded in line with our expectations for thehalf-year and we remain confident of the prospects of the business for theremainder of the year. The sports sector continues to grow and develop withBrands and Professional Athletes recognising the need for expert advice in theirselected arenas. Sports Marketing Trading as Fox Advertising, Active Sports Marketing Limited and Sponsormatic A/S Turnover for the period increased by 21% to £3.45 million (2004: £2.86 million)and the contribution for the Division was £616,000 (2004: £563,000). TheDivisional contribution is up by £53,000 or 9% year on year, and is performingin line with our expectations with an increasing amount of visibility comingfrom underlying contracts. We continue to act for a large number of Europe's leading brands in a variety ofcapacities ranging from consultancy, media buying, through to short term focusedproject work. Medium term objectives are to add scale via a combination ofincreasing our head count in this area and adding complementary businesses asand when the appropriate opportunities arise. Wealth Management Trading under the name Kingsbridge Asset Management Limited Turnover for the period was £1.73 million (2004: £1.39 million) and thecontribution for the Division was £269,000 (2004: £272,000). During the period the Group has made significant investment in Kingsbridge,which accounts for the Divisional contribution being slightly down year on year.This investment includes the creation of two specialised teams concentrating onfinancial planning and customer care. We have also added depth to our salesoperation and IT Infrastructure, along with additional head count in our supportdepartments. We remain focused on developing this Division via a combination oforganic growth and selective acquisition. Legal & Professional Services Trading under the name Capital Sports Solutions Limited The acquisition of the trading assets of Capital Sports Solutions on 21 March2005 was our first material investment in this Division and its development. Theprevious preferred supplier status of our selected lawyers and accountantsremains in place. The Board believes that the acquisition of Capital Sports Solutions adds furtherscale to this Division and increases the range of services it can offer to ourclients. Based out of our head office in Wilmslow, the Board believes that abrokerage finance business focused in and around the sporting arena to be ofgreat potential to the Group and its clients in the medium term. Representation Trading under the name Proactive Sports Management Limited, ProactiveScandinavia A/S and Proactive USA Inc The Division currently acts for 189 players throughout the world of whom 121have represented their country at international level. 84 players are based inthe UK, 88 in Europe and 17 in the rest of the world. The Division's turnover was £1.76 million (2004: £1.28 million) and acontribution of £135,000 (2004: loss of £105,000). We completed 29 transfers orcontract renewals in the period. Having 13 licensed agents based out of 5locations we remain committed to developing our proposition and committed to itslong term potential. Organic growth will be the main driver of this Division'sdevelopment through the appointment of selective personnel. Employees The Group currently has 91 employees in five countries throughout the world. Weare increasingly able to attract the very best talent in their respective fieldsand have developed a number of outstanding individuals. Michael Kennedy and Jim Foxcroft have joined the main Board during the period.Michael has a tremendous track record as an experienced sports lawyer who hasacted for numerous elite sports men and women in the UK spanning a career ofsome 30 years. Jim has worked in the commercial sporting arena for some 28years, advising some of the UK's largest brands on their commercial dealingswithin the world of sport. Jim's appointment underlines the importance of theSports Marketing Division to the Group. The Board would like to take this opportunity to extend its thanks andappreciation to all of the Group's employees for their commitment andcontribution to the Group's success during the period. Outlook All Divisions are trading profitably and the prospects for the Group remainoptimistic. We have completed the model which we set out to achieve at flotationand will now concentrate on adding scale and depth wherever possible. Trading inthe second half of the year is expected to be in line with management forecasts,providing a positive outlook for the short, medium and long term. John LawrenceNon-Executive Chairman28 April 2005 Consolidated profit and loss accountFor the six months ended 28 February 2005 6 months 6 months 6 months Year ended ended ended ended 28 Feb. 28 Feb. 29 Feb. 31 Aug. 2005 2005 2004 2004 Before goodwill Goodwill Total Note (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Audited) £'000 £'000 £'000 £'000 £'000TurnoverContinuingoperations 6,936 - 6,936 5,535 12,609Discontinued - - - - -operations --------- --------- --------- --------- ------- 3 6,936 - 6,936 5,535 12,609 Cost of sales (2,492) - (2,492) (2,043) (3,786) --------- --------- --------- --------- ------- Gross profit 4,444 - 4,444 3,492 8,823 Otheradministrativeexpenses (3,946) - (3,946) (3,223) (7,166)Amortisationof goodwill - (455) (455) (442) (907)Depreciationand otheramortisation (86) - (86) (59) (151) --------- --------- --------- --------- ------- Totaladministrativeexpenses (4,032) (455) (4,487) (3,724) (8,224) --------- --------- --------- --------- ------- Operatingprofit/(loss) Continuingoperations 412 (455) (43) (157) 792Discontinuedoperations - - - (75) (193) --------- --------- --------- --------- -------Operatingprofit/(loss) 3 412 (455) (43) (232) 599 --------- --------- Finance income(net) 2 - 1 --------- --------- ------- (Loss)/profiton ordinaryactivitiesbefore tax (41) (232) 600 Tax on(loss)/profiton ordinaryactivities 4 (130) (65) (432) --------- --------- ------- (Loss)/profiton ordinaryactivitiesafter taxation (171) (297) 168 Dividends - (10) (108) --------- --------- ------- (Loss)/profitfor thefinancialperiod (171) (307) 60 --------- --------- ------- (Loss)/earningsper share Basic 5 (0.15)p (0.27)p 0.15p Diluted 5 (0.15)p (0.27)p 0.15p IIMR 5 0.25p 0.13p 0.95pheadline --------- --------- ------- Consolidated statement of total recognised gains and lossesFor the six months ended 28 February 2005 6 months 6 months Year ended ended ended 28 Feb. 2005 29 Feb. 2004 31 Aug. 2004 (Unaudited) (Unaudited) (Audited) £'000 £'000 £'000 (Loss)/profit for the financialperiod (171) (297) 168Gain/(loss) on foreign currencytranslation 9 (6) (9) ----------- ----------- ----------Total recognised gains and losses (162) (303) 159relating to the period ----------- ----------- ---------- Consolidated balance sheetAs at 28 February 2005 28 Feb. 2005 29 Feb. 2004 31 Aug. 2004 (Unaudited) (Unaudited) (Audited) £'000 £'000 £'000 Fixed assetsTrademarks and other rights 57 59 60Goodwill 15,692 16,967 16,336 ---------- ----------- ---------- Intangible assets 15,749 17,026 16,396 Tangible assets 502 404 504 ---------- ----------- ---------- 16,251 17,430 16,900 ---------- ----------- ---------- Current assets Debtors 4,559 3,800 6,258 Cash at bank and in hand 96 923 1,829 --------- ----------- ---------- 4,655 4,723 8,087 Creditors: amountsfalling due within oneyear (6,137) (6,511) (9,151) ---------- ----------- ---------- Net current liabilities (1,482) (1,788) (1,064) ---------- ----------- ---------- Total assets lesscurrent liabilities 14,769 15,642 15,836 Creditors: amountsfalling due after morethan one year (1,320) (2,396) (2,225) ---------- ----------- ---------- Net assets 13,449 13,246 13,611 ---------- ----------- ---------- Capital and reservesCalled-up share capital 1,149 1,149 1,149Share premium account 18 18 18Capital redemptionreserve 61 61 61Special reserve - 6,558 -Merger reserve 3,689 3,689 3,689Profit and loss account 8,532 1,771 8,694 ---------- ----------- ----------Equity shareholders'funds 13,449 13,246 13,611 ---------- ----------- ---------- Consolidated cash flow statementFor the six months ended 28 February 2005 6 months 6 months Year ended ended ended 28 Feb. 2005 29 Feb. 2004 31 Aug.2004 Note (Unaudited) (Unaudited) (Audited) £'000 £'000 £'000 Net cash inflow fromoperating activities 6 487 576 2,366 Returns on investment andservicing of finance 2 - 1 Taxation 26 (275) (310) Capital expenditure andfinancial investment (90) 103 (20) Acquisitions anddisposals (3,056) (2,137) (2,854) Dividends (98) (74) (74) --------- ---------- ---------- Cash outflow beforemanagement of liquidresources and financing (2,729) (1,807) (891)Management of liquidresources - 373 373 Financing 993 - (10) --------- ---------- ---------- Decrease in cash in theperiod (1,736) (1,434) (528) --------- ---------- ---------- Reconcilation of net cash flow to movements in net(debt)/funds: Decrease in cash in theperiod (1,736) (1,434) (528) Cash (inflow)/outflowfrom change in debt andlease financing (993) - 10 Cash inflow from decreasein liquid resources - (373) (373) --------- ---------- ---------- Change in net fundsresulting from cash flows (2,729) (1,807) (891) New finance leases - (43) (76) --------- ---------- ---------- Movement in net(debt)/funds during theperiod (2,729) (1,850) (967) Net funds at the start ofthe period 1,763 2,730 2,730 --------- ---------- ---------- Net (debt)/funds at theend of the period (966) 880 1,763 --------- ---------- ---------- Notes to the Interim InformationFor the six months ended 28 February 2005 1. The interim financial statements have been prepared using accounting policies stated in the Annual Report and Financial Statements for the year ended 31 August 2004 and are unaudited. 2. The comparative figures are an abridged version of the Group's full financial statements and, together with other financial information contained in these interim results, do not constitute statutory financial statements of the Group within the meaning of section 240 of the Companies Act 1985. Statutory financial statements 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 273(2) or (3) of the Companies Act 1985. 3. Segment information 6 months 6 months Year ended ended ended 28 Feb. 2005 29 Feb. 2004 31 Aug.2004 (Unaudited) (Unaudited) (Audited) Turnover Operating Turnover Operating Turnover Operating profit profit profit £'000 £'000 £'000 £'000 £'000 £'000By class ofbusiness:Sportsmarketing 3,449 616 2,857 563 5,456 1,202Wealthmanagement 1,732 269 1,389 272 3,100 642Representation 1,755 135 1,282 (105) 4,034 923Legal & professional - - 7 (8) 19 (26) ------- ---------- ------- --------- ------- --------- 6,936 1,020 5,535 722 12,609 2,741 ------- ------- -------Common costs (608) (512) (1,235) ---------- --------- --------- Profit beforegoodwillamortisation* 412 210 1,506 ---------- --------- --------- * The goodwill amortisation charge of £455k (6 months to 29 February 2004 -£442k, Year ended 31 August 2004 - £907k) relates to the Sports MarketingDivision £60k (6 months to 29 February 2004 - £56k, Year ended 31 August 2004 -£125k), the Wealth Management Division £128k (6 months to 29 February 2004 -£117k, Year ended 31 August 2004 - £245k) and the Representation Division £267k(6 months to 29 February 2004 - £269k, Year ended 31 August 2004 - £537k). The figures for the trading segments for the 6 months ended 29 February 2004have been restated. This restatement has been undertaken as the directors are ofthe opinion that this gives a clearer indication of the trading of each segment. 4. The taxation charge at 31.5% of profit, before goodwill amortisation, is based on the estimated effective rate of tax for the full year ending 31 August 2005. 5. (Loss)/earnings per share are based on the following profits and numbers of shares: 6 months ended 6 months ended Year ended 28 Feb. 2005 29 Feb. 2004 31 Aug. 2004 (Unaudited) (Unaudited) (Audited) £'000 £'000 £'000 (Loss)/profit for the financialperiod - basic and dilutedearnings per share (171) (297) 168 Adjustment for goodwillamortisation 455 442 907 ----------- ----------- ---------- Profit for the financial period- IIMR earnings per share 284 145 1,075 ----------- ----------- ---------- Number of Number of Number of shares shares shares '000 '000 '000 Weighted average numberof shares:Basic and IIMR 114,874 110,612 112,761 ----------- ----------- ---------- Diluted 114,874 110,933 112,919 ----------- ----------- ---------- 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. An additional measure of earnings per share has been recommended by theInstitute of Investment Management and Research ("IIMR") which requires theadjustment of earnings to eliminate certain items, adjusted for their taxeffect. The IIMR earnings per share has been presented as the directors considerthat this gives a better understanding of the Group's earnings. 6. Reconciliation of operating (loss)/profit to operating cash flows 6 months ended 6 months ended Year ended 28 Feb. 2005 29 Feb. 2004 31 Aug. 2004 (Unaudited) (Unaudited) (Audited) £'000 £'000 £'000 Operating (loss)/profit (43) (232) 599Depreciation and amortisation 541 501 1,058Profit on sale of fixed assets (13) (1) (2)Decrease/(increase) in debtors 1,703 796 (1,538)(Decrease)/increase in creditors (1,704) (482) 2,258Other 3 (6) (9) ----------- ----------- ---------- 487 576 2,366 ----------- ----------- ---------- INDEPENDENT REVIEW REPORT TO FORMATION GROUP PLC Introduction We have been instructed by the Company to review the financial information forthe six months ended 28 February 2005 which comprises the consolidated profitand loss account, the consolidated statement of total recognised gains andlosses, the consolidated balance sheet, the consolidated cash flow statement andrelated notes 1 to 6. We have read the other information contained in theinterim report and considered whether it contains any apparent misstatements ormaterial inconsistencies with the financial information. This report is made solely to the Company, in accordance with Bulletin 1999/4issued by the Auditing Practices Board. Our work has been undertaken so that wemight state to the Company those matters we are required to state to them in anindependent review report and for no other purpose. To the fullest extentpermitted by law, we do not accept or assume responsibility to anyone other thanthe Company, for our review work, for this report, or for the conclusions wehave formed. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare also responsible for ensuring that the accounting polices and presentationapplied to the interim figures are consistent with those applied in preparingthe preceding annual accounts except where any changes, and the reasons forthem, are disclosed. Review work performed We conducted our review in accordance with the guidance contained in Bulletin1999/4 issued by the Auditing Practices Board for use in the United Kingdom. Areview consists principally of making enquiries of group management and applyinganalytical procedures to the financial information and underlying financial dataand, based thereon, assessing whether the accounting policies and presentationhave been consistently applied unless otherwise disclosed. A review excludesaudit procedures such as tests of controls and verification of assets,liabilities and transactions. It is substantially less in scope than an auditperformed in accordance with United Kingdom auditing standards and thereforeprovides a lower level of assurance than an audit. Accordingly, we do notexpress an audit opinion on the financial information. Review conclusionOn the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 28 February 2005. Deloitte & Touche LLPChartered Accountants Manchester28 April 2005 This information is provided by RNS The company news service from the London Stock Exchange