Jaywing Regulatory News (JWNG)

10 Dec 2007 07:00

Digital Marketing Group PLC10 December 2007 Date: 10 December 2007 On behalf of: Digital Marketing Group plc ("the Company") Embargoed until: 0700hrs Digital Marketing Group plc Interim Results for the six months ended 30 September 2007 Digital Marketing Group plc (AIM: DIGI), the digital direct marketingspecialists, today announced its interim results for the six months ended 30September 2007. Financial Highlights • Revenues: £22.14m • Gross Profit: £14.77m • EBITDA: £3.06m (before charges for share options of £1.01m) • Profit before tax: £2.49m (before charges for share options and amortisation) • Basic EBITDA per share: 5.44p (before charges for share options) Operational Highlights • Completion of the acquisitions of Graphico New Media and Hyperlaunch New Media in June 2007 following the £10m equity raise in May 2007 • Awarded 'Digital Direct Marketing Services Supplier of the Year' Pro forma Highlights • Gross Profit up 20% to £16.70m (2006: £13.96m) • EBITDA up 39% to £3.86m (2006: £2.78m) before central costs and charges for share options of £1.01m • EBITDA after central costs before charges for share options up 47% to £3.48m (2006: £2.36m) • Profit before tax (before charges for share options and amortisation up 52% to £2.89m (2006: £1.90m) Commenting on these results, Stephen Davidson, Chairman of Digital MarketingGroup plc, said: "It is a pleasure to report an excellent set of interim results which re-confirmthe competitiveness of Digital Marketing Group's strategy. Importantly, theseresults fulfil our financial goals for the period and we remain highly confidentof delivering the levels of profitability for the full year which meet marketexpectations. We also remain confident that we will sustain high levels ofgrowth into the future." Ben Langdon, Chief Executive, added: "Our single minded focus on digital direct marketing has helped us to attractnew blue-chip clients and to generate incremental business from our existingclient base. We continue to benefit from growth in expenditure through digitalchannels and are already recognised as leaders in this specialist sector. Wehave achieved a lot in a short space of time, and we will continue to achieve alot in the future." Enquiries: Digital Marketing Group plc www.digitalmarketinggroup.co.uk Ben Langdon, Chief Executive Officer 01491 615 306 Sarah Guest, Chief Financial Officer 01491 615 306 Cenkos Securities Adrian Hargrave 0207 397 8900 Redleaf Communications Emma Kane/ Sanna Lehtinen/Tom Newman 0207 822 0200 CHAIRMAN'S STATEMENT It is a pleasure to report an excellent set of interim results which re-confirmthe competitiveness of Digital Marketing Group's strategy. These results represent the performance of the business in the six months to 30September 2007, a period during which the Company was awarded 'Direct DigitalMarketing Services Supplier of the Year'. The results include a full six monthsfor HSM Limited (incorporating both HSM Telemarketing and Inbox Digital), ScopeCreative Marketing (trading as Dig for Fire), Cheeze Limited (Cheeze) andAlphanumeric Group (trading as Jaywing). The results include only three monthsfor Graphico New Media (Graphico) and Hyperlaunch New Media (Hyperlaunch) asthese companies were acquired at the end of June 2007. The recent acquisitions of Graphico and Hyperlaunch add important digital skillsto our group. Graphico has strong credentials in web design & build and mobilemarketing. Hyperlaunch has significant online PR and 'buzz marketing' expertisegained through their specialisation in the music and entertainment industry.These two businesses are being successfully integrated into our group and areexceeding expectations in terms of their financial performance. Financials We posted revenue of £22.14m, and gross profit (revenue less direct cost ofsales) of £14.77m. EBITDA was £3.06m before charges for share options of £1.01m.Profit before tax was £2.49m before charges for share options of £1.01m andamortisation of £0.65m. Basic EBITDA per share (before charges for shareoptions) was 5.44p. When looked at on a pro forma basis (an explanation of which is given in thechief executive's review) for the six months ended 30 September 2007, theresults for Digital Marketing Group plc would have been: • Gross Profit up 20% to £16.70m (2006: £13.96m) • EBITDA up 39% to £3.86m before central costs and before charges for share options (2006: £2.78m) • EBITDA of £3.48m after central costs up 47% (2006: £2.36m). • Profit before tax (before charges for share options and amortisation) up 52% to £2.89m (2006: £1.90m) We are in a strong position financially. In May 2007, we completed a £10m equityraise. Our net debt at £4.33m is 45% below our net debt at year end and gearing(gross debt as % of total equity) decreased to 25% at 30 September 2007 from 47%at the year end. At present the Group has £6.74m of undrawn borrowingfacilities. People On 4th September, we were delighted to welcome Sarah Guest as the Group's newFinance Director and Company Secretary succeeding Robert Millington. The Boardis grateful for the valued contribution Bob made through the AIM flotationprocess and the first phase of the Group's development and wish him everysuccess with his future endeavours. Current trading & Outlook Current trading is strong and our companies have secured significant newbusiness wins and organic growth. Expenditure on digital marketing remainsbuoyant and these results fulfil our financial goals for the period. We remainhighly confident of delivering the levels of profitability for the full yearwhich meet market expectations. We also remain confident that we will sustainhigh levels of growth into the future. Stephen Davidson Chairman 10 December 2007 CHIEF EXECUTIVE'S REVIEW Digital Marketing Group was formed in October 2006. Our business is in very goodshape and performing strongly. We have a clear and competitive proposition withan integrated platform that generates incremental success over and above thegood levels of organic growth delivered by our businesses. Our Product and Philosophy Digital Marketing Group believes that the boundaries between digital and directmarketing are now blurred. Good digital marketing is good direct marketing. We are a digital communications group that uses the principles of directmarketing to inform everything that we do. What makes us different? We are not a marketing services group. We don't make investments in traditionalmarketing services businesses. We specialise in digital communications through the online marketing and onlinemedia skills of four of our businesses: - Inbox Digital, Graphico, Hyperlaunchand Cheeze. We call this our 'online marketing and media' segment. We underpin our digital communications expertise with some of the best directmarketing and data professionals in the UK. HSM and Dig for Fire are our directmarketing businesses. Jaywing is our data business. Integration At the heart of our company is 'Digital Brain', a process which enables the realtime integration of digital, direct marketing and data. This helps us createunique contact strategies for each individual consumer based on their historicaldata and real-time interactions regardless of channel. We call this 'real-time marketing using real-time channels'. Processes such as Digital Brain bring the integrated proposition of DigitalMarketing Group to life as clients can easily realise the benefits to be derivedfrom the real-time coordination of digital, direct marketing and data. Digital Brain also allows us to market the Group aggressively and we haverecently appointed a Group Marketing Director to focus on maximisingopportunities from marketing to clients who do not currently work with any ofthe companies in our group. Our recent success in winning the prestigious 'Digital Direct Marketing ServicesSupplier of the Year' award not only confirms the quality of our product but itwill inevitably benefit the Group's marketing efforts. Financial Review The Group was formed in October 2006 with the acquisitions of HSM and Dig forFire. In January 2007 we acquired Cheeze and Jaywing and, in June 2007, weacquired Graphico and Hyperlaunch. In June 2007 we posted our maiden set of results. We have now delivered our interim results for the six months to 30 September2007. The results represent a full six months for HSM, Dig for Fire, Cheeze andJaywing and three months' post acquisition results for Graphico and Hyperlaunch.On this basis the Group achieved: • £14.77m Gross Profit (revenue less direct cost of sales) • £3.06m EBITDA before charges for share options • £2.49m Profit before tax (before charges for share options of £1.01m and amortisation of £0.65m) • 5.44p basic EBITDA per share (before charges for share options) • 0.95p basic earnings per share Pro forma Basis As the group was only formed after 30 September 2006 there is no publishedcomparative financial information available. Therefore throughout the remainderof this report certain information is provided on a pro forma basis forillustrative purposes only. This basis attempts to illustrate the group as itwould have been if it had existed previously. The information is based on theunaudited management accounts of the individual entities prepared under UK GAAP,time apportioned where appropriate. The information has been adjusted for itemswhich, in the judgement of the directors, are non recurring, for example excessmanagement remuneration, and excludes charges in respect of share options. Theinformation is not necessarily fully consistent in all respects with therespective statutory accounts and its reliability is accordingly limitedthereby. When looked at on a pro forma basis the Group's results for the six monthsending 30 September 2007 would have been: • Gross Profit up 20% to £16.70m (2006: £13.96m) • EBITDA up 39% to £3.86m before central costs of £0.38m and before charges for share options of £1.01m (2006: £2.78m) • EBITDA after central costs but before charges for share options up 47% to £3.48m (2006: £2.36m) • Profit before tax (before charges for share options and amortisation) up 52% to £2.89m (2006: £1.90m) The following table shows an analysis of the results for the six months togetherwith comparative pro forma information for illustrative purposes on the basisset out in the segmental performance section. 6mths Sep 6mths Sep 6mths Sep Yr/Yr 07 07 Pro 06 Pro Growth forma forma £m £m £mRevenue 22.14 24.30 20.94 16%Direct Costs 7.37 7.60 6.98 9%Gross Profit 14.77 16.70 13.96 20%Operating expenses, 11.33 12.83 11.18 15%excluding central costs,charges for share options,depreciation, andamortisation.EBITDA before central 3.44 3.87 2.78 39%costs and charges forshare optionsCentral costs 0.38 0.38 0.42 (9)%EBITDA before charges for 3.06 3.49 2.36 48%share optionsDepreciation 0.25 0.28 0.24 16%EBITA before charges for 2.81 3.21 2.12 51%share optionsNet interest expense 0.32 0.32 0.22 45%Profit before tax before 2.49 2.89 1.90 52%charges for share optionsand amortisation Net debt at 30 September 2007 stood at £4.33m, a 45% reduction compared to theyear end net debt of £7.91m. Net cash flow from operating activities in sixmonths was £1.69m with cash and cash equivalents increasing to £5.77m as at 30September 2007. These interim results for the Group are consistent with expectations for theperiod and we are also highly confident that we will deliver against marketexpectations for the full year. Acquisitions of Graphico and Hyperlaunch GRAPHICO History Graphico was founded in 1990 and had its origins in digital production work forthe music industry. Using its understanding of digital technology Graphico evolved into web designand build work for clients. It then broadened its service offer even further andnow offers clients a wide range of strategic and creative services all focusedin the digital space. Graphico is now best described as a full service creative digital marketingagency. The company employs over 70 people in its offices in Newbury, Berkshire. Over the past 5 years the company has enjoyed rapid growth and achieved industryrecognition for the quality of its product. This year they were voted the UKssixth most respected digital agency in New Media Age (NMA) magazine's 'Top100 Interactive Agencies 2007' report. Graphico has an enviable reputation for achieving international awardnominations for the work that it produces for its clients. In 2007 to date alonethe Company has won six accolades. Product Graphico's core product remains large scale web design and build work for itsclients. Graphico's range of products and services is of course much broader than thisand encompasses the creation of digital advertising campaigns, strategicplanning and consultancy in the area of digital strategy and the creation ofdigital businesses for clients like slicethepie.com. In addition Graphico have developed a particular expertise in mobile marketingthrough its 'Momentum' product which enables clients to create and runSMS campaigns as well as manage and develop WAP campaigns through one interface. It has a range of international and blue-chip clients including Pepsi, TheLondon Eye, Walkers, Universal, Bacardi-Martini, BBC, Chivas Regal and FirstGreat Western. Financial Performance The following table shows the financial contribution of Graphico to the Group'sresults, representing 3 months post acquisition trading, together with anindicative summary of what the contribution would have been on a pro forma basisto September 2007 and previous year. GRAPHICO 3mths 6mths Sep 6mths Sep 06 Yr/Yr 07 Growth Sept 07 Pro forma Pro forma Post Acquisition £m £m £mRevenue 1.42 3.12 2.09 49%Direct Costs 0.20 0.41 0.24 71%Gross Profit 1.22 2.71 1.85 46%Operating expenses, 1.00 2.21 1.68 32%excluding charges forshare options,depreciation andamortisation.EBITDA 0.22 0.50 0.17 194%Depreciation 0.02 0.04 0.03 33%Operating profit before 0.20 0.46 0.14 229%charges for shareoptions andamortisation Note 1 2 2 1. The post acquisition column shows the financial contribution of Graphico tothe Group's results to 30 September 2007 before amortisation of intangible assets which, in this period amounted to £0.08m. 2. The pro forma Sep 07 and Sep 06 columns are shown for illustrative purposesonly. The information is based on the unaudited management accounts of Graphicoand has been adjusted for items which, in the judgement of the directors, areconsidered to be non recurring, for example, excess management remuneration andexcludes charges in respect of group share options. HYPERLAUNCH History Hyperlaunch, began trading in August 2001. The Company's first client wasColumbia Tristar Home Entertainment, a division of Sony. Since its launch Hyperlaunch has focused on entertainment orientated clientsdeveloping an industry specialism and has won a number of awards particularlyfor its work in the music industry. The Company has serviced most of the top three companies in each of the film,music, games and publishing sectors resulting in a very high quality clientportfolio. Recently Hyperlaunch has successfully developed re-usable software libraries andcontent management tools, which, when coupled with contracted hosting services,enables a prompt response to client needs. Product The aim of the Company is to generate online product awareness and create a'buzz'. Clients are presented with a marketing and creative implementationstrategy to ensure that products receive extensive online PR coverage and areturn on investment, above and beyond that which could be achieved throughtraditional media. Hyperlaunch has extensive entertainment product release experience and has anenviable reputation, particularly within the music industry where it currentlyhandles around 35% of music chart product releases at any given time. Opportunities have arisen to build close relationships with clients in thesesectors and the company is therefore often viewed as a trusted partner.Consequently client retention has been excellent. Hyperlaunch's reputation as an entertainment specialist has led to brand relatedprojects for companies including Sony, Philips and Samsung. Often this isbecause of experience with 'cutting edge' digital campaigns or because ofcapabilities to reach the youth demographic. With its reputation and the fact that digital marketing is being viewed as anintegral part of the marketing mix, Hyperlaunch is well positioned in the marketplace to exploit future opportunities and achieve its ambitions for growth. Its client base includes blue-chip brands such as Universal Music, AtlanticRecords, Samsung and Warner Bros. Financial performance The following table shows the financial contribution of Hyperlaunch to theGroup's results, representing 3 months post acquisition trading, together withan indicative summary of what the contribution would have been on a pro formabasis to September 2007 and previous year. HYPERLAUNCH 3mths 6mths Sep 6mths Sep Yr/Yr Growth 07 Pro 06 Pro Sept 07 forma forma Post Acquisition £m £m £mRevenue 0.44 0.90 0.77 17%Direct Costs 0.01 0.03 0.05 (60)%Gross Profit 0.43 0.87 0.72 21%Operating expenses, 0.35 0.65 0.59 10%excluding charges forshare options,depreciation andamortisation.EBITDA 0.08 0.22 0.13 69%Depreciation 0.01 0.01 0.00 0%Operating profit before 0.07 0.21 0.13 62%charges for shareoptions andamortisationNote 1 2 2 1. •The post acquisition column shows the financial contribution of Hyperlaunch to the Group's results to 30 September 2007 before amortisation of intangible assets which, in this period amounted to £0.03m. 2. •The pro forma Sep 07 and Sep 06 columns are shown for illustrative purposes only. The information is based on the unaudited management accounts of Hyperlaunch and has been adjusted for items which, in the judgement of the directors, are considered to be non recurring, for example, excess management remuneration and excludes charges in respect of group share options. Segmental performance In order to aid shareholders in reviewing our business, we intend to use thefollowing three segments on an ongoing basis: 1. •'Online marketing and media' (Inbox Digital, Graphico, Hyperlaunch, Cheeze) 2. •'Direct Marketing' (HSM, Dig for Fire) 3. •'Data Services & Consultancy' (Jaywing) 6mths Sep 07 6mths Sep 07 6mths Sep 06 % Growth Pro forma Pro forma Gross Profit EBITDA Gross EBITDA Gross EBITDA Gross EBITDA * Profit * Profit * Profit yr/yr% yr/yr% £m £m £m £m £m £mOnline Marketing & Media 4.02 1.14 5.95 1.56 4.66 0.95 28% 65%Direct Marketing 5.52 1.19 5.52 1.19 4.50 0.95 23% 25%Data Services & 5.23 1.11 5.23 1.11 4.80 0.88 9% 27%Consultancy 14.77 3.44 16.70 3.86 13.96 2.78 20% 39%Central costs - (0.38) - (0.38) - (0.42) - 9% 14.77 3.06 16.70 3.48 13.96 2.36 20% 47% * EBITDA before charges for share options The pro forma Sep 07 and Sep 06 columns are shown for illustrative purposesonly. The information in the Sep 07 column represents the information includedin the interim financial information for the group adjusted to include the fullsix months activity of Graphico and Hyperlaunch extracted from unauditedmanagement accounts. The information in the Sep 06 column is based on theunaudited management accounts of: •HSM •Dig For Fire •Cheeze •Jaywing •Graphico •Hyperlaunch Both columns have been adjusted for items which, in the judgement of thedirectors, are considered to be non-recurring, for example, excess managementremuneration, and exclude charges in respect of group share options. Online marketing and media In the six months to 30 September 2007 this segment achieved on a pro formabasis Gross Profits of £5.95m and EBITDA (before charges for share options) of£1.56m. This represents growth in Gross Profits of 28% year on year, and growth inEBITDA of 65% year on year. ONLINE MARKETING AND MEDIA 6mths Sep 6mths Sep 07 6mths Sep 06 % Growth 07 Pro forma Pro forma £m £m £mRevenue 8.80 10.97 9.25 19%Direct Costs 4.78 5.02 4.59 9%Gross Profit 4.02 5.95 4.66 28%Operating expenses, excluding 2.88 4.39 3.71 18%charges for share options,depreciation and amortisation.EBITDA before charges for 1.14 1.56 0.95 65%share optionsDepreciation 0.08 0.11 0.07 57%Operating profit before 1.06 1.45 0.88 65%charges for share options andamortisation Direct marketing In the six months to 30 September 2007 this segment achieved on a pro formabasis Gross Profits of £5.52m and EBITDA (before charges for share options) of£1.19m This represents growth in Gross Profits of 23% year on year, and growth inEBITDA of 25% year on year. DIRECT MARKETING 6mths Sep 6mths Sep 06 % Growth 07 Pro forma £m £mRevenue 7.28 5.39 35%Direct Costs 1.76 0.89 98%Gross Profit 5.52 4.50 23%Operating expenses, excluding 4.33 3.55 22%charges for share options,depreciation andamortisation.EBITDA before charges for 1.19 0.95 25%share optionsDepreciation 0.10 0.09 11%Operating profit before 1.09 0.86 27%charges for share options andamortisation Data services and consultancy In the six months to September this segment achieved on a pro forma basis GrossProfits of £5.23m and EBITDA (before charges for share options) of £1.11m. This represents growth in Gross Profits of 9% year on year, and growth in EBITDAof 27% year on year. DATA SERVICES AND CONSULTANCY 6mths Sep 07 6mths Sep 06 Growth Pro forma Pro forma £m £mRevenue 6.98 6.31 11%Direct Costs 1.75 1.51 16%Gross Profit 5.23 4.80 9%Operating expenses, excluding 4.12 3.92 5%charges for share options,depreciation andamortisation.EBITDA before charges for 1.11 0.88 27%share optionsDepreciation 0.07 0.07 0%Operating profit before 1.04 0.81 29%charges for share options andamortisation Summary & Outlook Our strategy remains focused on integrating product and process in order toachieve continuing new business success. We also have identified some areaswhere the group could achieve some rationalisation of its cost base. We have already achieved significant success in generating new business fromexisting clients using the integrated proposition of the group. We are also ontrack to meet market expectations in terms of the level of gross profitsachieved through cross-referrals from existing Group clients. Our single minded focus on digital direct marketing has helped us to attract newblue-chip clients to the Group, and to generate incremental business from ourexisting client base. We continue to benefit from growth in expenditure throughdigital channels and are already recognised as leaders in this specialistsector. We have achieved a lot in a short space of time, and we will continue toachieve a lot in the future. In summary, we are pleased that we are comprehensively delivering against ourobjectives. We have: • Acquired six market leading businesses in digital direct marketing • Met the financial promises and commitments we have made • Built an integrated platform to deliver digital direct marketing to our clients • Gained industry wide recognition for the quality of our product and services • Secured new accounts and generated incremental revenue for the Group • Given ourselves sufficient financial flexibility to exploit suitable acquisition opportunities that may arise in the digital market space As I stated in our maiden set of accounts, 'much achieved, much opportunity'. Ben Langdon Chief Executive 10 December 2007 Consolidated Income Statement Unaudited Unaudited Audited Note Six Six Year months months ended ended 30 ended 30 31 September September March 2006 2007 2007 Total Total Total £000 £000 £000Continuing operations Revenue 2 22,138 - 13,057Direct costs (7,370) - (4,668) Gross profit 14,768 - 8,389Other operating income 16 - 16Amortisation (648) - (321)Operating expenses (12,982) - (6,904) Operating profit 2 1,154 - 1,180 Financial income 64 - 99Financial expenses (380) - (205) Net financing costs (316) - (106) Profit before tax 838 - 1,074Taxation 3 (301) - (537) Profit for year from continuing 537 - 537operationsDiscontinued operationsProfit/(loss) for period on - (640) (640)discontinued operations Profit/(loss) for the year 537 (640) (103)attributable to shareholders Earnings per share 4From continuing and discontinuedoperations- basic 0.95p (9.95)p (0.55)p- diluted 0.78p (9.95)p (0.51)p From continuing operations- basic 0.95p - 2.87p- diluted 0.78p - 2.62p Consolidated Balance Sheet Unaudited Unaudited Audited Note 30 30 31 March September September 2007 2007 2006 £000 £000 £000Non-current assetsProperty, plant and equipment 2,128 3 714Goodwill 38,712 - 30,734Other intangible assets 14,083 - 10,215 54,923 3 41,663Current assetsInventories 562 - 165Trade and other receivables 8,539 11 6,102Cash and cash equivalents 5,765 2,867 5,569 14,866 2,878 11,836 Total assets 69,789 2,881 53,499 Current liabilitiesBank overdraft 6 4,603 - 2,664Other interest-bearing loans and 6 1,130 - 1,474borrowingsTrade and other payables 10,277 181 6,980Contingent consideration 3,100 - -Tax payable 1,021 - 611 20,131 181 11,729 Non-current liabilitiesOther interest-bearing loans and 6 4,362 - 9,339borrowingsProvisions 450 - 518Deferred tax liabilities 3,938 - 3,073 8,750 - 12,930 Total liabilities 28,881 181 24,659 Net assets 40,908 2,700 28,840 Equity attributable toshareholdersShare capital 32,206 3,217 25,063Share premium account 5,306 - 2,986Shares to be issued 1,562 - 500Retained earnings 1,834 (517) 291 Total equity 40,908 2,700 28,840 Consolidated Cash Flow Statement Unaudited Unaudited Audited Six months Six months Year ended ended 30 ended 30 31 March September September 2007 2007 2006 £000 £000 £000Cash flows from operating activitiesProfit/(Loss) for the period 537 (640) (103)Adjustments for:Depreciation, amortisation and 902 3 487impairmentFinancial income (64) - (99)Financial expense 380 222 205Share-based payment expense 1,006 - 271Taxation 301 - 537 Operating profit/(loss) before changes 3,062 (415) 1,298in working capital and provisions(Increase)/decrease in trade and other (629) 1 1receivablesIncrease in inventories (106) - (11)Increase/(decrease) in trade and other 121 (9) (349)payables Cash generated from the operations 2,448 (423) 939Interest paid (380) - (205)Interest received 64 65 99Tax paid (438) - (288) Net cash inflow/(outflow) from 1,694 (358) 545operating activities Cash flows from investing activitiesProceeds from sale of property, plant - - 1,306and equipmentAcquisitions of subsidiaries, net of (6,378) - (20,662)cash acquiredAcquisition of property, plant and (333) - (143)equipment Net cash outflow from investing (6,711) - (19,499)activities Cash flows from financing activitiesProceeds from new loan - - 10,813Proceeds from the issue of share 9,463 (50) 7,532capitalRepayment of borrowings (6,189) - -Payments to redeem share capital - - (50) Net cash inflow/(outflow) from 3,274 (50) 18,295financing activities Net decrease in cash and cash (1,743) (408) (659)equivalentsCash and cash equivalents at beginning 2,905 3,564 3,564of periodEffect of exchange rate fluctuations on - (289) -cash held Cash and cash equivalents at end of 1,162 2,867 2,905period Cash and cash equivalents comprise:Cash at bank and in hand 5,765 2,867 5,569Bank overdrafts (4,603) - (2,664) Cash and cash equivalents at end of 1,162 2,867 2,905period Consolidated Statement of Changes in Equity Share Share Shares to Retained Total capital premium be issued earnings £000 £000 account £000 £000 £000 At 31 March 2006 3,267 - - 123 3,390Redemption of Convertible A (50) - - - (50)sharesRetained earnings - - - (640) (640) At 30 September 2006 3,217 - - (517) 2,700Allotment of 50p Ordinary 21,846 2,986 - - 24,832sharesRetained earnings - - - 537 537Credit in respect of share - - - 271 271based paymentsShares to be issued - - 500 - 500 At 31 March 2007 25,063 2,986 500 291 28,840 Allotment of 50p Ordinary 7,143 2,320 - - 9,463sharesRetained earnings - - - 537 537Credit in respect of share - - - 1,006 1,006based paymentsShares to be issued - - 1,062 - 1,062 At 30 September 2007 32,206 5,306 1,562 1,834 40,908 1 Basis of Preparation The interim financial statements have been prepared in accordance withapplicable accounting standards and under the historical cost convention. Theinterim financial statements do not constitute statutory financial statements inaccordance with section 435 of the Companies Act 2006. The full year figures inthis report are derived from the statutory accounts on which the auditors gavean unmodified report. The group's statutory financial statements prepared underInternational Financial Reporting Standards (IFRS) have been filed with theRegistrar of Companies. The principal accounting policies of the group have remained unchanged fromthose set out in the group's 2007 annual report and financial statements. The interim financial statements have been reviewed by the company's auditor. Acopy of the auditor's review report is attached to this interim report. The interim financials statements were approved by the board of directors on 10December 2007. 2 Segmental reporting The Group's primary reporting segments are the following business segments: Continuing operations Six Months Ended 30 September 2007 Online Direct Data Unallocated Group Marketing Marketing Services total and Media Services and Consultancy £000 £000 £000 £000 £000 Revenue 8,799 7,286 6,978 (925) 22,138 Direct costs (4,783) (1,764) (1,748) 925 (7,370) Gross profit 4,016 5,522 5,230 - 14,768Other operating income - - 16 - 16 Operating expenses (2,978) (4,466) (4,341) (943) (12,728)excluding depreciation and amortisation EBITDA 1,038 1,056 905 (943) 2,056 Depreciation (83) (97) (73) (1) (254) Operating profit 955 959 832 (944) 1,802 before amortisation charge Amortisation charge (217) (162) (269) - (648) Operating profit 738 797 563 (944) 1,154 Finance income 64 Finance costs (380) Profit before tax 838 Taxation (301) Profit for year from 537continuing operations The primary reporting segments have changed to reflect the key reporting line ofthe group and following the online marketing acquisitions of Graphico New Mediaand Hyperlaunch New Media. There were no results in the comparative period relating to continuingoperations. Geographical segments All turnover is derived from and all assets and liabilities are located in, theUnited Kingdom. 3 Taxation Recognised in the income statement Period ended Period ended Year ended 30 September 30 September 31 March 2007 2006 2007 £'000 £'000 £'000 Current tax expense Current year 691 - 707 Deferred tax credit Origination and reversal of temporary (390) - (170) differences Total tax in income statement 301 - 537 Reconciliation of total tax charge Period ended Period ended Year ended 30 September 30 September 31 March 2007 2006 2007 £'000 £'000 £'000 Profit before tax 838 - 1,074 Tax using the UK corporation tax rate of 251 - 322 30% Non-deductible expenses 50 - 222 Deductions allowable for tax - - (19) Unused tax losses carried forward - - 76 Utilisation of tax losses - - (40) Other - - (24) Total tax in income statement 301 - 537 4 Earnings per share From continuing and discontinued operations: Period Period Year ended ended ended 31 March 30 30 2007 September September 2007 2006 pence per pence per pence per share share share Basic 0.95p (9.95)p (0.55)p Diluted 0.78p (9.95)p (0.51)p Earnings per share has been calculated by dividing the profit attributable toshareholders by the weighted average number of ordinary shares in issue duringthe year. The numbers used in calculating basic and diluted earnings per shareare reconciled below: Period ended Period ended Year ended 30 September 30 September 31 March 2007 2006 2007 £000 £000 £000 Profit/(loss) for year attributable to 537 (640) (103) shareholders Weighted average number of shares in Number Number Number issue: 000's 000's 000's Basic 56,271 6,433 18,686 Adjustment for share options, warrants 12,764 - 1,788 and contingent shares Diluted 69,035 6,433 20,474 EBITDA per share before charges for share options, from continuing operations: Period Period Year ended ended ended 31 March 30 30 2007 September September 2007 2006 pence per pence per pence per share share share Basic 5.44p -p 10.37p Diluted 4.44p -p 9.47p EBITDA per share before charges for share options has been calculated bydividing the EBITDA before charges for share options by the weighted averagenumber of ordinary shares in issue during the year. The numbers used incalculating basic and diluted EBITDA per share before charges for share optionsare reconciled below: Period ended Period ended Year ended 30 September 30 September 31 March 2007 2006 2007 £000 £000 £000 Profit for year attributable to 537 - 537 shareholders Taxation 301 - 537 Interest 316 - 106 Amortisation 648 - 321 Depreciation 254 - 166 Charges for share options 1,006 - 271 EBITDA before charges for share options 3,062 - 1,938 5 Acquisitions of subsidiaries During the period the Group made two acquisitions of subsidiary undertakings.The net assets acquired, consideration paid, and goodwill arising uponacquisition of these subsidiary undertakings are detailed in the following note.A summary of these amounts is shown below: Summary of the two acquisitions Acquirees' Fair value Notes Acquisition book values amounts adjustments £000 £000 £000Acquirees' net assets at the acquisition date: Other intangible assets - 4,516 1 4,516 Property, plant and equipment 1,355 - 1,355 Inventories 291 - 291 Trade and other receivables 1,808 - 1,808 Cash and cash equivalents 196 - 196 Bank overdraft (376) - (376) Trade and other payables (885) - (885) Other long term loans (868) - (868) Tax payable (157) - (157) Deferred tax (11) (1,265) 2 (1,276) Net identifiable assets and liabilities 1,353 3,251 4,604 Goodwill on acquisition 7,819 12,423 Satisfied by:Cash consideration paid (Including legal 6,038 and professional fees of £502,000)Contingent consideration payable in cash 4,548 Contingent consideration payable in 1,257 shares Issue of 466,238 ordinary shares at 580 £1.244 per share 12,423 Summary of net cash outflows from acquisitions Cash paid 6,038 Cash acquired (196) Bank overdraft acquired 376 Net cash outflow 6,218 Fair value adjustments comprise: 1 Valuation of customer relationships. 2 Deferred tax effect of valuation of customer relationships. All fair values are provisional and will be reviewed within the 12 months fromthe date of acquisition. Graphico New Media Limited On 29 June 2007 the Group acquired all of the ordinary shares in Graphico NewMedia Limited for £9,108,000, satisfied in cash and shares. In the period sinceacquisition, the subsidiary contributed net profit of £126,000 to theconsolidated net profit for the six months ended 30 September 2007. The net assets and liabilities of Graphico New Media Limited acquired were asfollows: Acquiree's Fair value Acquisition book values amounts adjustments £000 £000 £000Acquiree's net assets at the acquisition date: Other intangible assets - 3,357 3,357 Property, plant and equipment 1,314 - 1,314 Inventories 290 - 290 Trade and other receivables 1,378 - 1,378 Cash and cash equivalents 1 - 1 Bank overdraft (376) - (376) Trade and other payables (780) - (780) Other long term loans (868) - (868) Tax payable (84) - (84) Deferred tax (8) (940) (948) Net identifiable assets and liabilities 867 2,417 3,284 Goodwill on acquisition 5,824 9,108 Satisfied by:Cash consideration paid (Including legal 4,508 and professional fees of £270,000)Contingent consideration payable in cash 3,825 Contingent consideration payable in 775 shares 9,108 Cash paid 4,508 Cash acquired (1) Bank overdraft acquired 376 Net cash outflow 4,883 Hyperlaunch New Media Limited On 29 June 2007 the Group acquired all of the ordinary shares in Hyperlaunch NewMedia Limited for £3,315,000, satisfied in cash and shares. In the period sinceacquisition, the subsidiary contributed net profit of £54,000 to theconsolidated net profit for the six months ended 30 September 2007. The net assets and liabilities of Hyperlaunch New Media Limited acquired were asfollows: Acquiree's Fair value Acquisition book values amounts adjustments £000 £000 £000Acquiree's net assets at the acquisition date: Other intangible assets - 1,159 1,159 Property, plant and equipment 41 - 41 Inventories 1 - 1 Trade and other receivables 430 - 430 Cash and cash equivalents 195 - 195 Trade and other payables (105) - (105) Tax payable (73) - (73) Deferred tax (3) (325) (328) Net identifiable assets and liabilities 486 834 1,320 Goodwill on acquisition 1,995 3,315 Satisfied by:Cash consideration paid (Including legal 1,530 and professional fees of £232,000)Contingent consideration payable in cash 723 Contingent consideration payable in 482 shares Issue of 466,238 ordinary shares at 580 £1.244 per share 3,315 Cash paid 1,530 Cash acquired (195) Net cash outflow 1,335 6 Borrowings 30 September 30 September 31 March 2007 2006 2007 £000 £000 £000 Overdraft 4,603 - 2,664 Bank borrowings 5,492 - 10,813 10,095 - 13,477 Borrowings are repayable as follows: Within 1 year 5,733 - 4,138 In more than 1 year but not more 1,116 - 4,917 than 2 years In more than 2 years but not more 1,123 - 1,474 than 3 years In more than 3 years but not more 1,134 - 1,474 than 4 years In more than 4 years but not more 328 - 1,474 than 5 years More than 5 years 661 - - Due in more than 1 year 4,362 - 9,339 Average interest rates at the balance sheet date were: 30 September 30 September 31 March 2007 2006 2007 % % % Overdraft 7.75 - 7.5 Term loan 8.6 - 8 Revolver loan - - 7.9 The borrowing facilities available to the Group amounted to £11.07m and at thebalance sheet date, taking account of credit cash balances across the Group,there were £6.74m of undrawn borrowing facilities. A Composite Accounting System allows debit balances on overdraft to off setacross the Group with credit balance. No hedging facility was in place at theperiod end. 7 Contingencies The Group has a liability to pay deferred consideration if certain performancetargets are met. The maximum liability is £6,805,000 and the directors haveprovided £6,305,000, leaving £500,000 as an unprovided liability. 8 Accounting estimates and judgements Impairment of goodwill The carrying amount of goodwill is £38,712,000. The directors are confident thatthe carrying amount of goodwill is fairly stated but have not carried out animpairment review of this amount during the period. Other intangible assets The valuation of customer lists is based on key assumptions which the directorshave assessed, and are satisfied that the carrying value of these assets isfairly stated. Deferred consideration The directors have provided an estimate of the amount payable in respect ofdeferred contingent consideration. See note 7. Recognition of revenue as principal or agent The Directors consider that they act as a principal in transactions where theGroup assumes the credit risk. Where this is via an agency arrangement and theGroup assumes the credit risk for all billings it therefore recognises grossbillings as revenue. REPORT ON REVIEW OF INTERIM FINANCIAL INFORMATION Introduction We have been instructed by the company to review the interim financialinformation for the six months ended 30 September 2007 which comprises theconsolidated interim income statement, consolidated interim balance sheet,consolidated interim statement of changes in equity and the consolidated interimcash flow statement and the related notes 1 to 8. We have read the otherinformation contained in the interim report which comprises the chairman'sstatement and chief executive's review and considered whether it contains anyapparent misstatements or material inconsistencies with the financialinformation. Our responsibilities do not extend to any other information. This report is made solely to the company in accordance with guidance containedin International Standard on Review Engagements (UK and Ireland) 2410, ''Reviewof Interim Financial Information Performed by the Independent Auditor of theEntity'' issued by the Auditing Practices Board for use in the United Kingdom.Our review work has been undertaken so that we might state to the company thosematters we are required to state to them in a review report and for no otherpurpose. To the fullest extent permitted by law, we do not accept or assumeresponsibility to anyone other than the company for our review work, for thisreport, or for the conclusion we have formed. Directors' responsibilities The interim report, including the financial information therein, is theresponsibility of, and has been approved by the directors. The AIM Rules of theLondon Stock Exchange require that the accounting policies and presentationapplied to the interim figures are consistent with those which will be adoptedin the annual accounts having regard to the accounting standards applicable tosuch accounts. Review work performed We conducted our review in accordance with guidance contained in InternationalStandard on Review Engagements (UK and Ireland) 2410, ''Review of InterimFinancial Information Performed by the Independent Auditor of the Entity''issued by the Auditing Practices Board for use in the United Kingdom. A reviewconsists principally of making enquiries of management and applying analyticalprocedures to the financial information and underlying financial data and, basedthereon, assessing whether the disclosed accounting policies and presentationhave been consistently applied unless otherwise disclosed. A review excludesaudit procedures such as tests of control and verification of assets,liabilities and transactions. It is substantially less in scope than an auditperformed in accordance with International Standards of Auditing (UK andIreland) and therefore provides a lower level of assurance than an audit.Accordingly, we do not express an audit opinion on the financial information. Review conclusion On 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 30 September 2007. GRANT THORNTON UK LLP REGISTERED AUDITOR CHARTERED ACCOUNTANTSSHEFFIELD 10 December 2007 This information is provided by RNS The company news service from the London Stock Exchange