Jaywing Regulatory News (JWNG)

23 Nov 2009 07:00



Date: 23 November 2009

On behalf of: Digital Marketing Group plc ("DMG", "the Company" or "the Group")

Embargoed: 0700hrs

Digital Marketing Group plc

Interim Results 2009/2010

PROFITS FLAT - PIPELINE BEST FOR 12 MONTHS 

Digital Marketing Group plc (AIM: DIGI), the UK's largest digital marketing agency today announced its interim results for the six months ended 30 September 2009.

Performance Highlights

Gross profits £17.44m (2008: £18.72m) 

EBITDA before share based payments £3.63m (2008: £3.85m) 

Profit before tax ("PBT") before amortisation and share based payment charges £2.93m (2008: £3.15m)

Like for like costs reduced by £4.24m from £20.80m to £16.56m

Net debt £6.02m; undrawn banking facilities of £4.94 million 

Adjusted basic earnings per share 3.20 pence (2008: 3.75 pence)

Commenting on the results, Stephen Davidson, Chairman of Digital Marketing Group plc, said: "Despite the economic environment, we have produced a resilient set of results and remain confident for the coming months.

"As I stated at our full year results in July 2009, we have experienced a tough trading environment along with the rest of the industry; but our extremely experienced management team and innovative product offering mean we are now in the ideal position to take advantage of the increased spend in digital marketing which we anticipate during 2010 and beyond."

Ben Langdon, Chief Executive of Digital Marketing Group plc, added: "We are seeing some exceptional performances in our businesses as well as greater momentum in our new business pipeline across the Group; many of our companies are busier now than at any time in the past 12 months. 

"Our business is stronger than ever following a large cost reduction programme and strong levels of existing client spend. Combined with our position as the UK's largest digital marketing business, we are extremely optimistic about the future, particularly as clients begin to re-invest in marketing.

"We predicted a tough six months but these results are predominantly in line with the past two years' performance and give us confidence for the rest of the year."

Enquiries: 

Digital Marketing Group plc

Ben Langdon, Chief Executive Via Redleaf Communications

Keith Sadler, Group Finance Director

Redleaf Communications

Emma Kane/ Paul Dulieu/ Kathryn Hurford 0207 566 6700

Cenkos Securities

Ivonne Cantu/ Julian Morse 0207 397 8900

Notes to Editors:

Digital Marketing Group (AIM: DIGI) listed on AIM in October 2006, employs over 550 people.

Digital Marketing Group is the UK's largest digital marketing agency (Campaign Magazine, January 2009).

At the heart of the company is Digital Brain - a process which enables the real time integration of "digital, direct and data". This helps create unique contact strategies for each individual based on their historical data and real time interactions regardless of channel.

Digital Marketing Group's development strategy consists of three key elements:

"organic growth" - driven by growth within the individual businesses and the application of a group business development programme; 

"buy and build" - through the selective acquisition of a number of well run and profitable businesses with complementary skills in digital direct marketing; and

the creation of new revenue streams from within the existing talents and resources of the group.

Publication quality photographs are available via Redleaf Communications.

INTERIM RESULTS

We have produced a resilient set of results, despite the difficult trading conditions we and our peers have been experiencing, with clients deferring spend or taking longer over their internal decision making process, which in turn has affected our revenue and trading visibility. 

The Group reported gross revenues of £24.70 million for the six months ended 30 September 2009 against £26.48 million for the equivalent period in the prior year. As a result gross profit fell from £18.72 million to £17.44 million for the six months ended 30 September 2009. 

Our digital agencies have shown strength with our e-commerce business in particular doing exceptionally well, up 34% in terms of PBT year on year.

By comparison, our data business with its strength in the financial services industry sector, has been less robust with a fall in revenue of £3.4 million. However, within this business we have made the greatest cost reduction totalling £2.3 million ensuring it has an appropriate cost base for any recovery in this sector. 

During the period we received partial settlement on a contractual obligation from a client who has gone into liquidation, amounting to £1 million, which has been disclosed within other income.

Operating expenses fell by 2.2% from £16.93 million to £16.56 million. However, on a like for like basis these costs have been reduced from £20.80 million, a reduction of £4.24 million. We have taken active measures and tough decisions to manage our cost base and streamline the business, which has primarily meant a reduction in staff numbers. We reduced our headcount by 87 people to 560 between September 2008 and September 2009, resulting in a reduction of £3.21 million in operating expenses. This concentration on cost management is already showing results for our digital agencies and will mean improved financial performance in the future.

The action we have taken and continue to take will ensure we have an appropriate cost base. Our adjusted earnings before interest, tax, depreciation, amortisation and charges for share based payments was £3.63 million compared to £3.85 million for the six months ended 30 September 2008. 

Following the strategic acquisitions of Cybercom Limited and Gasbox Limited in October 2008, our net debt increased to £9.40 million, however we have since reduced this figure by £3.38 million, hence net debt currently stands at £6.02 million (compared to reported debt at 30 Sept 2008 of £1.82 million). The cost of financing this debt has fallen, however we have not had the advantage of increased deposit rates on any short term cash available to us. Our net financing cost rose by £201,000 to £375,000 for the six months ended 30 September 2009.

Clients are showing significant interest in Digital Brain Search, a product we launched four months ago for the Pay Per Click ("PPC") market. We have won a number of assignments so far with new prospects being developed. This new product is of particular importance, due to PPC being the single biggest area for online marketing spend in the UK. Digital Brain Search is part of a portfolio of products that DMG has developed, under the Digital Brain brand banner.

Recent client wins include Berghaus, Sony Ericsson, Royal Mail, SPAR, History Channel, Yorkshire Building Society, Holiday Extras, Oval Group and SeaFrance. These wins are across all our businesses and reflect the depth and quality of the innovative services we are providing to our clients.

Outlook

Research published by the European Interactive Advertising Association stated that 94% of marketers expected to spend more online next year than in 2009 and that they had spent more online in 2009 than 2008. As the UK's largest digital marketing business, we are experiencing increased levels of new business activity which will convert into revenue for the Group. This, together with the cost reduction programme, means that our improving PBT run rate now gives us confidence for the second half. 

 

Ben Langdon

Chief Executive

20 November 2009 

Consolidated Interim Income Statement (unaudited)

		Six months ended  30 Sept 2009	Six months ended  30 Sept 2008	Year  ended  31 March 2009
	Note	£000	£000	£000
Continuing operations
Revenue	4	24,701	26,475	56,654
Direct costs		(7,260)	(7,755)	(15,101)
Gross profit		17,441	18,720	41,553
Other operating income		1,133	137	192
Amortisation		(956)	(758)	(1,863)
Operating expenses		(16,555)	(16,927)	(36,161)
Operating profit		1,063	1,172	3,721
Finance income		2	145	97
Finance costs		(377)	(319)	(704)
Net financing costs		(375)	(174)	(607)
Profit before tax		688	998	3,114
Taxation	5	(552)	(667)	(1,674)
Profit for the period attributable to shareholders		136	331	1,440
Attributable to equity holders of the company		136	331	1,440
Earnings per ordinary share	6
From continuing operations
- basic		0.20p	0.50p	2.15p
-diluted		0.18p	0.45p	1.92p

Consolidated interim statement of comprehensive income (unaudited)

		Six months ended  30 Sept 2009	Six months ended  30 Sept 2008	Year  ended  31 March 2009
		£000	£000	£000
Profit for the period		136	331	1,440
Other comprehensive income		57	40	(286)
Total comprehensive income		193	371	1,154

  

Consolidated interim balance sheet (unaudited)

		30 Sept 2009	30 Sept 2008	31 March 2009
	Note	£'000	£'000	£'000
Assets
Non-current assets
Property, plant and equipment		1,816	2,096	2,057
Goodwill		46,973	39,249	47,051
Other intangible assets		15,435	12,639	16,116
		64,224	53,984	65,224
Current assets
Inventories		154	842	196
Trade and other receivables		9,226	8,422	10,683
Cash and cash equivalents		11,421	11,499	12,227
		20,801	20,763	23,106
Total assets		85,025	74,747	88,330
Liabilities
Current liabilities
Bank overdraft	7	(9,783)	(8,976)	(8,806)
Other interest bearing loans and borrowings	7	(1,691)	(1,886)	(1,691)
Financial derivatives	8	(424)	(155)	(481)
Trade and other payables		(11,929)	(9,696)	(15,678)
Tax payable		(1,518)	(1,927)	(1,475)
Provisions		(58)	(168)	(147)
		(25,403)	(22,808)	(28,278)
Non-current liabilities
Other interest bearing loans and borrowings	7	(5,966)	(2,458)	(7,612)
Provisions		-	(64)	-
Deferred tax liabilities		(4,396)	(3,668)	(4,661)
		(10,362)	(6,190)	(12,273)
Total liabilities		(35,765)	(28,998)	(40,551)
Net assets		49,260	45,749	47,779
Equity
Capital and reserves attributable to equity holders of the company
Share capital		33,689	33,814	33,689
Share premium account		6,608	6,621	6,608
Hedging reserve		(424)	(155)	(481)
Capital redemption reserve		125	-	125
Share option reserve		5,810	-	5,810
Retained earnings		3,452	5,469	2,028
Total equity		49,260	45,749	47,779

Consolidated interim cash flow statement (unaudited)

		Six months ended  30 Sept 2009	Six months ended  30 Sept 2008	Year  ended  31 March 2009
	Note	£000	£000	£000
Cash flow from operating activities
Profit for the period		136	331	1,440
Adjustment for:
Depreciation, amortisation and impairment		1,282	1,067	2,531
Financial income		(2)	(145)	(97)
Financial expenses		377	319	704
Share based payment expense		1,288	1,389	2,814
Taxation		552	667	1,674
Decrease in trade and other receivables		1,509	1,160	1,631
Decrease/(increase) in inventories		42	(52)	594
(Decrease) in trade and other payables		(3,553)	(2,543)	(2,929)
Cash generated from operation		1,631	2,193	8,362
Interest received		2	145	97
Interest paid		(272)	(319)	(530)
Tax paid		(826)	(196)	(2,207)
Net cash flow from operating activities		535	1,823	5,722
Cash flows from investing activities
Proceeds from the sale of property, plant and equipment		3	-	6
Acquisitions of subsidiaries, net of cash acquired		7	(3,565)	(7,610)
Payment of contingent consideration for prior year acquisitions		(278)	-	(3,566)
Addition of intangible assets		(275)	-	(105)
Acquisition of property, plant and equipment		(87)	(263)	(283)
Net cash outflow from investing activities		(630)	(3,828)	(11,558)
Cash flows from financing activities
Proceeds from new loan and draw down of bank facilities		-	-	6,600
Repayment of borrowings		(1,688)	(575)	(2,268)
Payments to redeem share capital		-	-	(178)
Net cash (outflow)/inflow from financing activities		(1,688)	(575)	4,154
Net (decrease) in cash, cash equivalents and bank overdrafts		(1,783)	(2,580)	(1,682)
Cash and cash equivalents at beginning of period		3,421	5,103	5,103
Cash and cash equivalents at end of period		1,638	2,523	3,421
Cash and cash equivalents comprise:
Cash at bank and in hand		11,421	11,499	12,227
Bank overdrafts	7	(9,783)	(8,976)	(8,806)
Cash and cash equivalents at end of period		1,638	2,523	3,421

Consolidated interim statement of changes in equity (unaudited)

	Share capital	Share premium account	Hedging reserve	Shares to be issued	Capital redemption reserve	Share option reserve	Retained earnings	Total  equity
	£'000	£'000	£000	£'000	£'000	£'000	£000	£'000
Balance at 1 April 2008	32,655	5,954	(195)	536	-	-	3,749	42,699
Cash flow hedges	-	-	40	-	-	-	-	40
Profit for the period	-	-	-	-	-	-	331	331
Total comprehensive income for the period	-	-	40	-	-	-	331	371
Credit in respect of share-based payments	-	-	-	-	-	-	1,389	1,389
Issue of share capital - business combination	1,159	667	-	-	-	-	-	1,826
Release of reserve	-	-	-	(536)	-	-	-	(536)
	1,159	667	-	(536)	-	-	1,389	2,679
Balance at 30 September 2008	33,814	6,621	(155)	-	-	-	5,469	45,749
Cash flow hedges	-	-	(326)	-	-	-	-	(326)
Profit for the period	-	-	-	-	-	-	1,109	1,109
Total comprehensive income for the period	-	-	(326)	-	-	-	1,109	783
Transfer on exercise of share options	-	(13)	-	-	-	-	13	-
Credit in respect of share based payments	-	-	-	-	-	-	1,425	1,425
Transfer to share option reserve	-	-	-	-	-	5,810	(5,810)	-
Purchase of own shares	(125)	-	-	-	125	-	(178)	(178)
	(125)	(13)	-	-	125	5,810	(4,550)	1,247
Balance at 31 March 2009	33,689	6,608	(481)	-	125	5,810	2,028	47,779
Cash flow hedges	-	-	57	-	-	-	-	57
Profit for the period	-	-	-	-	-	-	136	136
Total comprehensive income for the period	-	-	57	-	-	-	136	193
Credit in respect of share based payments	-	-	-	-	-	-	1,288	1,288
	-	-	-	-	-	-	1,288	1,288
Balance at 30 September 2009	33,689	6,608	(424)	-	125	5,810	3,452	49,260

 

1. General Information

 

Digital Marketing Group plc (the "Company") is incorporated and domiciled in the United Kingdom. The Company is listed on the AIM market of the London Stock Exchange. The registered address is 30-33 Minories, Tower Hill, London, EC3N 1DD. 

 

The interim financial information was approved for issue on 20 November 2009.  

 

2. Basis of preparation

 

The consolidated interim financial statements for the six months ended 30 September 2009 have been prepared in accordance with applicable accounting standards and under the historical cost convention except for certain financial instruments that are carried at fair value.

 

The financial information for the year ended 31 March 2009 set out in this interim report does not constitute statutory accounts as defined in Section 240 of the Companies Act 1985. The Group's statutory financial statements for the year ended 31 March 2009 have been filed with the Registrar of Companies. The auditor's report on those financial statements was unmodified.

 

The consolidated interim financial information should be read in conjunction with the annual financial statements for the year ended 31 March 2009, which have been prepared in accordance with International Financial Reporting Standards (IFRSs).

3. Accounting policies

 

Except as described below, the principal accounting policies of Digital Marketing Group plc and its subsidiaries ("the Group") are consistent with those set out in the Group's 2009 annual report and financial statements.

 

Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.

 

The following new standards and amendments to standards are mandatory for the first time for the financial year beginning 1 April 2009.

 

IAS 1, "Presentation of financial statements" (revised 2007). The revised standard prohibits the presentation of items of income and expenses (that is "non-owner changes in equity") in the statement of changes in equity, requiring "non-owner changes in equity" to be presented separately from owner changes in equity. All "non-owner changes in equity" are required to be shown in a performance statement.

 

Entities can choose whether to present one performance statement (the statement of comprehensive income) or two statements (the income statement and statement of comprehensive income). 

 

The Group has elected to present two statements: an income statement and a statement of comprehensive income. The interim financial statements have been prepared under the revised disclosure requirements.

 

IFRS 8, "Operating segments". IFRS 8 replaces IAS 14, "Segment reporting". It requires a "management approach" under which segment information is presented on the same basis as that used for internal reporting purposes. The chief operating decision-maker has been identified as the Group Chief Executive. Historically, the Group reported three segments, Online marketing and media, Direct marketing services and Data services and consultancy this has now been reduced to two segments, Digital marketing and Data and data related services

 

 

4. Segment information (unaudited)

 

The chief operating decision-maker has been identified as the Group Chief Executive. The Group Chief Executive reviews the Group's internal reporting in order to assess performance and allocate resources. Management has determined the operating segments based on these reports. Digital Marketing provide full agency services for clients on digital platforms. Data and data related services provide data analytics and voice services to clients.

 

The Group Chief Executive assesses the performance of the operating segments based on gross profit and operating profit before interest and tax.

 

Total assets exclude intangible assets, cash and external borrowings which have not been allocated to business segments. 

 

No single client accounts for more than 10% of group revenue. All the group's activities are carried out within the UK.

Six months ended 30 September 2009
	Digital marketing	Data and data related services	Unallocated	Total
	£'000	£'000	£'000	£'000
Revenue	17,623	7,348	(270)	24,701
Direct costs	(6,990)	(507)	237	(7,260)
Gross profit	10,633	6,841	(33)	17,441
Other operating income	5	1,128	-	1,133
Operating expenses excluding depreciation, amortisation and charges for share based payments	(8,466)	(5,889)	(586)	(14,941)
Operating profit before depreciation, amortisation and charges for share based payments	2,172	2,080	(619)	3,633
Depreciation	(168)	(146)	(12)	(326)
Amortisation	(608)	(348)	-	(956)
Charges for share based payments	(58)	(187)	(1,043)	(1,288)
Operating profit	1,338	1,399	(1,674)	1,063
Finance income				2
Finance costs				(377)
Profit before tax				688
Taxation				(552)
Profit for the period from continuing operations				136

  

Six months ended 30 September 2008
	Digital marketing	Data and data related services	Unallocated	Total
	£'000	£'000	£'000	£'000
Revenue	17,572	9,868	(965)	26,475
Direct costs	(7,319)	(1,401)	965	(7,755)
Gross profit	10,253	8,467	-	18,720
Other operating income	137	-	-	137
Operating expenses excluding depreciation, amortisation and charges for share based payments	(7,574)	(6,681)	(753)	(15,008)
Operating profit before depreciation, amortisation and charges for share based payments	2,816	1,786	(753)	3,849
Depreciation	(188)	(120)	(1)	(309)
Amortisation	(425)	(333)	-	(758)
Charges for share based payments	(251)	(501)	(858)	(1,610)
Operating profit	1,952	832	(1,612)	1,172
Finance income				145
Finance costs				(319)
Profit before tax				998
Taxation				(667)
Profit for the period from continuing operations				331

Year ended 31 March 2009
	Digital marketing	Data and data related services	Unallocated	Total
	£'000	£'000	£'000	£'000
Revenue	37,141	21,141	(1,628)	56,654
Direct costs	(14,237)	(2,492)	1,628	(15,101)
Gross profit	22,904	18,649	-	41,553
Other operating income	192	-	-	192
Operating expenses excluding depreciation, amortisation and charges for share based payments	(16,703)	(14,180)	(1,574)	(32,457)
Operating profit before depreciation, amortisation and charges for share based payments	6,393	4,469	(1,574)	9,288
Depreciation	(360)	(286)	(22)	(668)
Amortisation	(1,197)	(666)	-	(1,863)
Charges for share based payments	(359)	(865)	(1,812)	(3,036)
Operating profit	4,477	2,652	(3,408)	3,721
Finance income				97
Finance costs				(704)
Profit before tax				3,114
Taxation				(1,674)
Profit for the period from continuing operations				1,440

Total assets	Digital marketing	Data and data related services	Unallocated	Total
	£'000	£'000	£'000	£'000
30 September 2009	10,054	7,267	67,704	85,025
31 March 2009	12,260	7,621	68,449	88,330
30 September 2008	9,456	7,668	57,623	74,747

 

5. Taxation (unaudited)

 

A reconciliation of the charge that would result from applying the standard UK corporation tax rate to profit before tax to the tax charge is given below.

		Six months ended  30 Sept 2009	Six months ended  30 Sept 2008	Year  ended  31 March 2009
		£000	£000	£000
Profit before tax		688	998	3,114
Tax charge thereon at UK corporation tax rate of 28% (2008: 28%)		193	279	872
Factors affecting tax charge:
Non-deductible expenses		240	212	572
Share based payment charges		361	390	788
Depreciation for period in excess of capital allowances		28	-	74
Other		11	-	(5)
Utilisation of tax losses		-	-	(109)
Prior year adjustment		37	-	(32)
Total current period charge		870	881	2,160
Deferred tax credit - origination and reversal of temporary timing differences		(318)	(214)	(486)
Recognised in the consolidated income statement		552	667	1,674

 

6. Earnings per share (unaudited)

		Six months ended  30 Sept 2009	Six months ended  30 Sept 2008	Year  ended  31 March 2009
		Pence per share	Pence per share	Pence per  share
From continuing operations
Basic		0.20p	0.50p	2.15p
Diluted		0.18p	0.45p	1.92p

Earnings per share have been calculated by dividing the profit attributable to shareholders by the weighted average of ordinary shares in issue during the period. The calculations of basic and diluted earnings per share are:

		Six months ended  30 Sept 2009	Six months ended  30 Sept 2008	Year  ended  31 March 2009
		£'000	£'000	£'000
Profit for the period attributable to shareholders		136	331	1,440
Weighted average number of ordinary shares in issue:		Number '000	Number '000	Number '000
Basic		67,378	66,250	66,851
Adjustment for share options, warrants and contingent shares		7,001	6,706	7,964
Diluted		74,379	72,956	74,815
Adjusted earnings per share
		Six months ended  30 Sept 2009	Six months ended  30 Sept 2008	Year  ended  31 March 2009
		Pence per share	Pence per share	Pence per  Share
From continuing operations
Basic adjusted earnings per share		3.20p	3.75p	8.76p
Diluted adjusted earnings per share		2.90p	3.41p	7.82p

Adjusted earnings per share have been calculated by dividing the profit attributable to shareholders before amortisation and charges for share based payments by the weighted average of ordinary shares in issue during the period. The numbers used in calculating the basic and diluted adjusted earnings per share is reconciled below:

		Six months ended  30 Sept 2009	Six months ended  30 Sept 2008	Year  ended  31 March 2009
		£'000	£'000	£'000
Profit before tax		688	998	3,114
Amortisation		956	758	1,863
Charges for share based payments		1,383	1,610	3,036
Adjusted profit attributable to shareholders from continuing operations		3,027	3,366	8,013
Current period tax charge		(870)	(881)	(2,160)
		2,157	2,485	5,853

 

 

7. Bank overdraft, borrowings and loans (unaudited)

		30 Sept 2009	30 Sept 2008	31 March 2009
Summary		£'000	£'000	£'000
Bank overdraft		9,783	8,976	8,806
Borrowings, undiscounted cash flows		7,657	4,344	9,303
		17,440	13,320	18,109
Borrowings are repayable as follows:
Within 1 year
Bank overdraft		9,783	8,976	8,806
Borrowings		1,848	2,131	1,984
Total due within 1 year		11,631	11,107	10,790
Less future interest		(157)	(245)	(293)
Total due within 1 year		11,474	10,862	10,497
In more than one year but not more than 2 years		1,812	1,252	1,928
In more than 2 years but not more than 3 years		4,284	1,166	6,021
In more than 3 years but not more than 4 years		-	279	-
Total due in more than 1 year		6,096	2,697	7,949
Less future interest		(130)	(239)	(337)
Total due in more than 1 year		5,966	2,458	7,612
Average interest rates at the balance sheet date were:		%	%	%
Overdraft		5.00	7.25	5.00
Mortgage   Term loan		- 1.85	7.00 7.70	7.00 2.96
Term loan		3.35	-	3.46
Revolving credit facility		2.32	-	3.46

As the loans are at variable market rates their carrying amount is equivalent to their fair value.

In 2007 the Group purchased an interest rate swap of 6.19% for the period 2007 to 2012 for £4.0 million of its borrowings.

The borrowing facilities available to the Group at 30 September 2009 was £11.13 million (2008: £11.14 million) and, taking into account cash balances within the Group, there was £4.94 million (2008: £9.27 million) of available borrowing facilities.

A composite accounting system is set up with the Group's bankers, which allows debit balances on overdraft to be offset across the Group with credit balances.

Reconciliation of net debt	Cash at bank and in hand	Overdraft	Borrowings	Net debt
	£'000	£'000	£'000	£'000
30 September 2009	11,421	(9,783)	(7,657)	(6,019)
31 March 2009	12,227	(8,806)	(9,303)	(5,882)
30 September 2008	11,499	(8,976)	(4,344)	(1,821)

8. Financial derivatives (unaudited)

		30 Sept 2009	30 Sept 2008	31 March 2009
		£'000	£'000	£'000
Interest rate swap		424	155	481

In 2007 the Group purchased an interest rate swap of 6.19% for the period 2007 to 2012 for £4.0 million of its borrowings. This swap is designated a hedge of the interest expense relating to the Group loans. The contract was marked to market at 30 September 2009 and was a net liability of £424,000 (2008: £155,000).

 

9. Provisions (unaudited)

		30 Sept 2009	30 Sept 2008	31 March 2009
		£'000	£'000	£'000
At the beginning of the period		147	518	358
Utilised during the year		(89)	(68)	(211)
At the end of the period		58	450	147

Provisions relate to leases in the Group where the commercial benefit has either ceased or will cease before the normal expiry period.

 

 

10. Share capital (unaudited)

On 4 September 2008, by way of a special resolution, the Company reorganised and enlarged its authorised share capital of £50,049,999 consisting of 100,000,000 ordinary shares of 50 pence each and 49,999 redeemable preference shares of £1.00 each into authorised share capital of £55,000,000 consisting of 200,000,000 ordinary shares of 5 pence each and 100,000,000 deferred shares of 45 pence each and cancelling 49,999 redeemable preference shares of £1.00 each.

Authorised:

 

	50p ordinary shares	£1.00 redeemable preference shares	45p deferred shares	5p ordinary shares
	£'000	£'000	£'000	£'000
Authorised share capital at 31 March 2009	50,000	50	-	-
Cancelled	-	(50)	-	-
5p Ordinary	(5,000)	-	-	5,000
45p Deferred	(45,000)	-	45,000	-
Increase in authorised share capital	-	-	-	5,000
At 30 September 2009	-	-	45,000	10,000

Allotted, issued and fully paid

	50p ordinary shares	45p deferred shares	5p ordinary shares
	Number	Number	Number	£'000
Issued share capital at 31 March 2009	67,378,520	-	-	33,689
Conversion	(67,378,520)	67,378,520	67,378,520	-
At 30 September 2009	-	67,378,520	67,378,520	33,689

The 5 pence ordinary shares have the same rights (including voting and dividend rights and rights on a return of capital) as the previous 50 pence ordinary shares. Holders of the 45 pence deferred shares do not have any right to receive notice of any general meeting of the Company or any right to attend, speak or vote at any such meeting. The deferred share holders are not entitled to receive any dividend or other distribution and shall on a return of assets in a winding up of the Company entitle the holders only to the repayment of the amounts paid up on the shares after the amount paid to the holders of the new ordinary shares exceeds £1,000,000 per new ordinary share. The deferred shares will also be incapable of transfer and no share certificates will be issued in respect of them. 

 

 

11. Related party transactions (unaudited)

There were no significant changes in the nature and size of related party transactions for the period to those disclosed in the Annual Report for the year ended 31 March 2009.

 

INDEPENDENT REVIEW REPORT TO DIGITAL MARKETING GROUP PLC

Introduction

We have been engaged by the company to review the interim financial information in the interim report for the six months ended 30 September 2009 which comprises the consolidated interim income statement, consolidated interim statement of comprehensive income, consolidated interim balance sheet, consolidated interim cash flow statement and consolidated interim statement of changes in equity and the related notes 1 to 11. We have read the other information contained in the interim financial report and considered whether it contains any apparent misstatements or material inconsistencies with the interim financial information.

This report is made solely to the company in accordance with guidance contained in ISRE (UK and Ireland) 2410, "Review of Interim Financial Information performed by the Independent Auditor of the Entity". Our review work has been undertaken so that we might state to the company those matters we are required to state to them in a review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed.

Directors' responsibilities

The interim report is the responsibility of, and has been approved by, the directors. The AIM rules of the London Stock Exchange require that the accounting policies and presentation applied to the interim figures are consistent with those which will be adopted in the annual accounts having regard to the accounting standards applicable for such accounts. The annual financial statements of the group are prepared in accordance with the basis of presentation set out in Note 2.

Our responsibility

Our responsibility is to express to the company a conclusion on the interim financial information in the interim report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Based on our review, nothing has come to our attention that causes us to believe that the financial information in the interim report for the six months ended 30 September 2009 is not prepared, in all material respects, in accordance with the basis of accounting described in Note 2.

Grant Thornton UK LLP

Chartered AccountantsSheffield

20 November 2009

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