INC.L Regulatory News (INC)

19 Sep 2005 07:01

Avanti Screenmedia Group PLC19 September 2005 For release 7:00am 19 September 2005 Avanti Screenmedia Group Plc ("Avanti" or "the Company") Preliminary Results for the year ended 30 June 2005 Avanti, the market leading provider of screenmedia services to high streetretail, shopping malls and the pub and bar market clients, announces itspreliminary results for the year ended 30 June 2005. Avanti's clients use screenmedia to entertain customers, build brand, promoteproducts and generate new advertising revenue. Avanti has a complete in-housecompetence to deliver screenmedia services. It builds satellite or terrestrialdistribution screen networks, creates channel strategies, makes video contentand sells advertising. Avanti also has a consultancy and R&D division whichcreates new communications technologies and services. Commenting on the results, John Brackenbury, CBE, Chairman said: "I am extremely pleased and proud to report that our dynamic young managementteam have again delivered a set of results which are ahead of target. Avantioperates in an emerging market, but despite this the company, unlike its peers,is delivering consistently improving profits. It has moved beyond critical massin the pub and bar market, which was the primary objective at flotation. It hasentered the shopping mall market and within just six months has become theleader in the sector. Although development in the major retailer sector hasbeen more complex and slower than initially hoped the company is now working onpilot projects with three large retailers and expects to announce furthertransactions in the sector soon. Revenues and profits have shown a considerableincrease, exceeding market expectations. The Company ended the period with ahealthy cash balance of £3.4m. The Consultancy business has developed its second core technology product, asdescribed in the INSPIRE press release in March 2005. This product providesbroadband Internet and multimedia services by satellite to businesses and homesand already has its first order for 600 installations. Following this success,the Company was awarded, on the 1st September, by OFCOM a license to launch andoperate a satellite. The Company now has rights to use a very large amount ofradio spectrum in perpetuity and, whereas in the past other commercial companieshave paid millions or billions of pounds for such resources, Avanti has beenrequired to pay almost nothing. Very few companies in the world have ever beengranted satellite operator rights and most of those companies are very large. Iam therefore proud that our management team has been able to create suchexceptional value for shareholders, as well as focussing on the core services.The Company is in the process of investigating the best corporate structure inwhich to develop this exciting new business to maximises the return toshareholders." Financial Highlights • Turnover of £8.440m (2004: £4.620m), up 183%; • Operating profit for continuing businesses (excluding acquisitions) of £1,960k (2004: Profit £179k); • Net profit increased by 122% to £1,983k (2004: Profit £892k); • Net Cash at the year end of £2,052k (2004: Net Debt £947k); and • EPS of 18.25p (2004: 12.90p). Operating Highlights • Avanti's channels now reach twelve million consumers per week, reaching 37% of the highly desired 18-34 year old national audience with the bar channels and 68% of all adults with its Mall channels. We believe this now makes Avanti's channels a truly large scale advertising medium, which is reflected by accelerating activity with advertising agencies. • Avanti is now contracted with over 1100 bars and pubs. Avanti launched a new product called Genie, which is a Video DJ service for bars. This carries a higher price and gross margin than other products and is likely to be a major driver of profitability. In addition Avanti has reverted to its standard terms for charging for the service following the success of its promotional special offer in reaching critical mass in bars and pubs. • Avanti won a 3 year contract, to provide screenmedia to The Mall Corporation worth in the region of £6m. It now has contracts for long term services with 33 shopping malls, offering advertisers access to an estimated seven million customers per week. Having only entered this market in January 2005, the Company has already achieved a clear market leadership. • Avanti commenced several pilots with major retailers. • The advertising market has shown significant signs of increased acceptance of Avanti's offerings. • Avanti's consultancy division was awarded the Inspire contract from ESA (£3m) leading to an increase in revenues in the year. Current Trading and Prospects David Williams, Chief Executive said "We are now, as promised, translatingAvanti's market leadership into profitability across all sectors. Theadvertising market is becoming increasingly receptive to our offering and wehave recently noticed greater stability in media trading and an improved abilityto forecast accurately advertising revenues. However we remain keen to balancerisk and reward and are also actively pursuing business which does not relyentirely upon advertising for profitability. Our market leadership is alsoincreasingly recognised abroad, and as a result we are beginning to look at lowrisk opportunities for international business, about which I hope to reportduring the current financial year. I am further pleased to report that we have completed the establishment of afine management team which has significant strength in depth. The skill anddedication of our entire workforce continues to impress me and delight ourclients, and as a result I believe we have built a business which is preparedfor considerable growth. We are delighted that we have achieved the scale we set out to when we floatedin July 2004. However we remain cautious because in our opinion, our emergingadvertising medium is perhaps only three years in to what will probably be a tenyear development cycle to maturity. Avanti plans to lead that development on aninternational scale. We do note that in the USA and the Far East, companies ofa similar size like PRN and Focus Media have commanded far greater valuationsthan Avanti, suggesting that international investors are waking up to the futurevalue of our medium. The new financial year has started well for us with very positive signs in theretail market and an increase in advertising sales. We have increased ourprices and margins on products for the pub and mall markets, having achievedcritical mass, and these markets for us are now about maturing profitability,not the land grab of the previous year. I am pleased to report that havingrebuilt our advertising team this year with higher quality professionals theresults are showing through. The technology consulting business which created our screenmedia technology hashad by far its biggest success to date with our new broadband technology. Nodoubt you will be aware from our releases concerning OFCOM, that we are in theprocess of creating a business of truly large scale to exploit a new satelliteoperator license. This is an opportunistic development which is relatively newto shareholders, but represents the culmination of ten years of quiet butdiligent work. It is difficult for me to overstate the excitement we feel atthis new development, since it offers a rare and unparalleled opportunity toeventually generate significant returns for our investors." Enquiries: Avanti Screenmedia Group plc www.avanti-screenmedia.comDavid Williams, Chief ExecutiveGary Truman, Group Financial Director 0207 749 1600 Binns & Co PR 0207 786 9600Peter Binns 07768 392 582Paul McManus 07980 541 893 Seymour Pierce Limited Dru Edmonstone 0207 107 8011John Depasquale 0207 107 8010 PRELIMINARY RESULTS Introduction "I am delighted to present our results for the year ended 30 June 2005 and to beable to report continued progress in the development of Avanti's business. On 24th January 2005 Avanti acquired Freelance Media Limited (t/a ScreenNetwork) for approximately £1.9m which was satisfied by a cash payment of£541,728 and the issue of 690,441 new ordinary shares in the Company("Consideration Shares") at a price of 200p per share. It was subsequentlydiscovered that Freelance had additional liabilities of £165k which led to theacquisition price reducing to £1.7m and the 96,054 shares that this representedwere placed with an institutional investor. Freelance Media specialises indeveloping shopping mall screeenmedia opportunities. Avanti has exploited thesynergies from the acquisition to enhance long term profitability and to makeits overall offer more attractive to advertisers." F E J G Brackenbury, CBEChairman Summary of Avanti's business Avanti is the market leader (by clients and sites installed) in the UK for theprovision of screenmedia services, whereby it builds satellite or terrestrialcontent distribution and screen networks, creates channel strategies, makesvideo content and sells media space. Clients use this service to entertaincustomers, build brand, promote products and sell advertising at or close to thepoint of sale. Avanti is the only supplier in the UK market with a complete turnkey competencein-house, from engineering and network maintenance to video production and mediasales. Competitors often claim the same, but in fact outsource most keyfunctions creating higher risk and cost for clients. Avanti's market research has shown that the presence of screenmedia advertisingcan increase the amount of time customers spend in-store and generatesignificant sales uplift of advertised brands. Whilst Avanti is not dependent onmedia revenues, it benefits from significant upside as this market (and Avanti'sshare of it) grows. The marginal cost of generating additional advertisingrevenues is low. Product portfolio and development Avanti offers two categories of screenmedia channel. Branded Channels Avanti operates several Avanti branded channels: Magnetic, MVN, MVN Gym and MVNMall which are programmed entirely at Avanti's discretion and cost so that smallindependent operators can use screenmedia without incurring the cost of bespokeprogramming. The channels offer a variety of music and entertainment content.Through the creative use of technology, these operators can however customisetheir channels to make them appear bespoke by using local messaging servicesresident on their media players which automatically slot into the programmingschedules. Avanti then sells advertising across these estates. Avanti also hasa more complex product in pub and bar called MVN Genie which enables customersto operate the media player as a Video DJ deck. These channels are typicallyoffered on a fully maintained and service basis with a combination of feespayable and media revenues shared. Bespoke Retail Channels Avanti creates bespoke channels for retail operators. Employing retailstrategists and media creative directors, Avanti is able to interpret clients'retail strategies and create sophisticated marketing campaigns using the largeand complex screen networks it installs and maintains for these clients. The bespoke retail channel solves a customer problem with its "one-stop shop"approach to a customer's needs which avoids the problems of managing a consortium and thereby reduces costs and risks. Consultancy Avanti also operates a consultancy division specialising in multimediatechnology development. It provides consultancy to a variety of operators andgovernment agencies. The business creates technologies which Avanti thencommercialises. Its second major success has been the creation of a newsatellite broadband data product called INSPIRE. Avanti is now building thefinal piece in the product chain by looking to finance and launch its ownsatellite following the award of a radio license from OFCOM. We shallcommunicate with shareholders shortly regarding the precise nature of this largescale development. New contracts won Avanti signed a three year agreement valued at approximately £6 million with TheMall Limited Partnership ("The Mall"), Britain's leading owner and operator ofshopping centres, for the provision of a total solution screenmedia service to22 of The Mall's nationwide shopping centres, from Aberdeen to Bristol. Itshould be noted when reading the P&L that this contract relied upon expertiseacquired from Screen Networks but the business was conducted within anothergroup subsidiary company. It is the largest single contract secured by Avanti to date and breaks newground. Mall TV has an audience of circa 5 million visitors per week making itthe largest fully-commercial, single-client screenmedia network in Europe, andearly advertising sales have been encouraging. Avanti also has 11 other shoppingcentres on its MVN Mall network. The company is engaged in several pilots with retailers which it expects to turnto commercial roll-outs. MVN is now contracted with over 1,100 bars, delivering an advertising audienceof 4.5 million customers per week. Whilst there are some 60,000 pubs in the UK,most being small community, food led or family pubs, Avanti targets an urbanyouth audience and, of the 3,000 high street venues in the UK, the Group now hasa 33 per cent share of its target market. Avanti's consultancy division was awarded a €4.3m (£3m) contract, over 30months, by the European Space Agency. The project, called INSPIRE, involves theinstallation of a new mode of satellite and wireless broadband internet accesstechnology in 600 communities around the UK and Europe. Management team Avanti made three executive appointments during the year Stuart Chambers asRetail Screenmedia Sales Director, Oliver Wilson as On Trade Sales Director andMatthew O'Connor as Managing Director of the Broadband division. Stuart Chambers brings considerable experience to Avanti in New BusinessDevelopment and Consulting in the area of digital merchandising. He worked onthe successful initiation of five digital media networks with UK market leaderssuch as Tesco TV, Sainsbury's Future Store, Sainsbury's Bank, Marks & Spencerand Philip Morris Worldwide Duty Free (Marlboro). Oliver Wilson also brings significant expertise to his role as On Trade SalesDirector. He joins from BskyB where he was National Sales Manager serving theleisure and hospitality sector. Matthew O'Connor joined as Managing Director of the Broadband business Matthewhas worked in the telecommunications industry for 20 years initially for BT andthen Telewest in 1996 as a Director of its Business Division where he wasinstrumental in growing the business from £30m to £300m revenues and inlaunching the broadband proposition. He has also consulted widely across theindustry for a range of clients including Vodaphone, Ericsson and the DTI. Current trading and future prospects The Company has made a strong start to the new financial year, experiencing ahigh level of interest in its services, especially in the retail sector. Thelaunch of the video DJ product in the leisure sector has also been well receivedand there are early signs that advertising demand for the shopping mall offeringis strong. The creation of a new satellite multimedia business is expected todeliver exceptional and unexpected rewards to shareholders. D J WilliamsChief Executive PRELIMINARY RESULTS GROUP PROFIT AND LOSS ACCOUNTFor the year ended 30th June 2005 Notes From Continuing Unaudited Audited Operations Year 15 months Excluding From ended to Acquisitions Acquisitions 30/06/05 30/06/04 £'000 £'000 £'000 £'000 Turnover 8,426 14 8,440 4,620Cost of sales (3,239) (38) (3,277) (1,621) Gross Profit /(Loss) 5,187 (24) 5,163 2,999 Administration expenses (3,227) (6) (3,233) (2,241) 1,960 (30) 1,930 758 Other operating income - - - 76 Operating Profit/(Loss) 1,960 (30) 1,930 834 Interest receivable 80 10Interest payable (110) (50) Profit on Ordinary Activities before Taxation 1,900 794 Tax on profit on ordinary activities 83 98 Retained Profit for Year 1,983 892 Earnings per Share Basic earnings per share 3 18.25p 12.90p Diluted earnings per share 3 16.34p 12.58p There are no recognised gains or losses other than the profit for the financial year PRELIMINARY RESULTS GROUP BALANCE SHEETAt 30th June 2005 Note Unaudited Audited At 30/06/05 At 30/06/04 £'000 £'000 £'000 £'000Fixed AssetsTangible Assets 3,538 1.657Intangible Assets - Goodwill 2,015 29 -Negative Goodwill 2 (441) (923) 5,112 763 Current AssetsStocks 109 152Debtors 5,367 2,031Cash at Bank and in Hand 4,292 363 9,768 2,546Creditors: Amounts falling due within one year (3,754) (1,723) Net Current Assets 6,014 823 11,126 1,586 Creditors: Amounts falling due after (835) (173) one year Net Assets 10,291 1,413 Capital and ReservesCalled up Share Capital 123 76Share Premium Account 7,491 643Profit and Loss Account 2,677 694 Shareholders' Funds 10,291 1,413 PRELIMINARY RESULTS GROUP CASH FLOW STATEMENTFor the year ended 30th June 2005 Unaudited Audited 2005 June 2004 £'000 £'000 Net cash (outflow) from operating activities (757) (812)Returns on investments and servicing of finance (31) (40)Taxation 83 98Capital expenditure and financial investment (1,234) (464)Investment in subsidiary undertaking (542) - Net cash (outflow) before financing (2,481) (1,218)Financing 6,410 952 Increase/ (decrease) in cash 3,929 (266) Reconciliation of Operating Profit to Net Cash (Outflow) from Operating Activities Operating profit 1,930 834Depreciation 839 473Amortisation of goodwill (444) (522)Decrease / (Increase) in stocks 44 (113)(Increase) in debtors (4,072) (1,760)Increase in creditors 946 276 (757) (812) Reconciliation of Movement of (Net Debt) (Net Debt) at start of year (947) (279)Increase / (Decrease) in cash 3,929 (266)Cash (inflow) from increase in loans (129) (369)Cash inflow from increase in finance lease obligations (801) (33) Net Cash/ (Debt) at close of year 2,052 (947) Analysis of Funds / (Net Debt) Cash at bank and in hand 4,292 363Bank overdrafts (845) (594) 3,447 (231)Bank loans due within one year (222) (522)Bank loans due within one year (341) (164)Finance leases and hire purchase agreements (832) (30) Net Cash / (debt) at close of year 2,052 (947) Notes 1. Presentation of results This Preliminary Statement was approved by the directors on 19 September 2005. The results have been prepared using accounting policies and practicesconsistent with those adopted in the 2005 Report and Accounts but have not beenaudited. The audited results of Avanti Communications Limited (the former holdingcompany) for the fifteen months ended 30th June 2004 have been filed with theRegistrar of the Companies and on which the auditors gave an unqualified auditopinion. The financial information contained in this Preliminary Statement does notconstitute statutory accounts as defined by Section 240 of the Companies Act1985. 2. Negative Goodwill written back Negative Goodwill arising on the acquisition of Translucis Holdings Limited isbeing amortised over a period of 36 months from 1st June 2003 and is beingmatched to the depreciation of the revalued assets from which it arose. 3. Basic and diluted earnings per share The calculation of the basic and diluted earnings per share is based on theearnings attributable to ordinary shareholders, divided by the weighted averagenumber of shares in issue during the year. Earnings per share of 18.25p (2004: earnings per share of 12.90p) is calculatedon the profit attributable to ordinary shares of £1,983,201 (2004: £892,070)divided by the weighted number of ordinary shares in issue during the year. 2005 2004 Computation of basic earnings per share: Net profit 1,983,201 892,070Weighted average number of shares outstanding 10,867,501 6,916,168Basic earnings per share 18.25p 12.90p Computation of diluted earnings per share: Net profit 1,983,201 892,070Weighted average number of shares outstanding 12,138,947 7,092,291Basic earnings per share 16.34p 12.58p ------------- ENDS ------------------ This information is provided by RNS The company news service from the London Stock Exchange