MUBL.L Regulatory News (MUBL)

9 Jul 2009 07:00



9 July 2009  

MBL GROUP PLC

("MBL" or "THE GROUP")

Preliminary Results For The Year Ended 31 March 2009 

The Board of MBL, the UK distributor of home entertainment products, is pleased to announce its preliminary audited results for the year ended 31 March 2009.  

Highlights:

Revenue increased 77.5% to £143.6 million (2008: £80.9 million);

PBT increased 42.1% to £8.1 million (2008: pre exceptionals £5.7 million);

Debt free with cash balances of £2.6 million at 31 March 2009;

EPS increased to 34.3 pence per share (2008: pre exceptionals 24.9 pence); and

Proposed dividend of 6.0 pence per share (2008: nil)

Commenting on these results, Peter Cowgill, Non-Executive Chairman of MBL, said: 

"Following the demise of one of our key competitors in late November 2008, we have been able to significantly grow both our revenue and underlying profitability. This has included a strong ability to generate cash and has enabled the Board to propose a maiden dividend of 6.0 pence per share.

"We recently signed an exclusive three year contract with Morrisons plc, further strengthening our market position and providing us with the security to plan for the future. Whilst remaining cautious in the current economic climate, I am optimistic that we will be able to report positive results for the interim period."

Enquiries:

MBL Group plc  Tel: 0161 767 1620

Peter Cowgill, Non-Executive Chairman

Bishopsgate Communications Ltd. Tel: 020 7562 3350

Maxine Barnes

Will Tindall

Siobhra Murphy

Seymour Pierce Limited Tel: 020 7107 8000

Mark Percy   CHAIRMAN'S STATEMENT 

I am delighted to report a set of results that demonstrate a year of significant achievement by the Group. Since restructuring the Board and refocusing our strategy this is the third consecutive year of growth in revenue and underlying profitability.

Summary of results

	31/03/2009	31/03/2008
	£ million	£ million
Turnover	143.6	80.9
Reported operating profit/(loss)	8.0	(6.5)
Adjustments:
Goodwill impairment charge	-	12.4
Adjusted operating profit	8.0	5.9
Net interest	0.1	(0.2)
Reported profit/ (loss) before tax	8.1	(6.7)
Adjusted profit before tax	8.1	5.7
Basic EPS (pence)	34.3p	(47.5)p
Exceptional and non-recurring charges (pence)	-	72.4p
Adjusted basic EPS (pence)	34.3p	24.9p

Significant growth

I am pleased to report that the Group's record of growth has continued in the past twelve months.

Revenue increased substantially by £62.7 million in the year, representing a 77.5% increase to £143.6 million. The dramatic changes within the home entertainment distribution industry, and in particular the collapse of our key competitor in late November 2008, created a unique opportunity and associated challenges to the management team.  Nevertheless, the Group effectively managed its operations, facilities and cash flow to satisfy this sudden and significant increase in demand.

Profit before tax increased by £2.4 million to £8.1 million, when compared to last year's profit adjusted for the exceptional goodwill impairment charge. Basic earnings per share rose 37.8% to 34.3 pence per share on the same basis.

Strategy

The Board's strategy for the development of the business has been to simplify the Group's operations for the distribution and wholesale of home entertainment products. This has delivered increasing sales and profitability.

The strategy continues to be the development of our core business into complementary areas and to continue to have a strong presence within our industry. The management team has recently been strengthened by the appointment of experienced industry personnel and I am confident that the Group's success will continue.

Cash generation and dividends

The Group has maintained its position of being able to generate strong cash flows and remained without any long term borrowings. The demand for cash to support working capital levels in our peak pre Christmas period has significantly risen with the Group's increase in business.  In October 2008 the Group entered into a new three year banking agreement for its invoice financing facility.

The Directors remain committed to delivering value back to shareholders and are proposing to pay a dividend of 6.0 pence per share in 2009. A series of intercompany loan waivers have placed the Group in a position to pay this dividend out of reserves, without the restructuring of its share premium account.

Employees

I referred to the challenges the Group successfully met earlier in my statement and I would like to thank the employees of the Group for their hard work and commitment in delivering this set of results.

Current trading and outlook

The Group has made a positive start to the new financial year with the announcement on 22 June 2009 that it has signed a three year exclusive supply agreement with Morrisons plc for the supply of its entire home entertainment category. 

The economic climate continues to create uncertainty, but we are optimistic that we will be in a position to report a positive result for the interim period and have created a solid platform for the future growth of the business.

 

Peter CowgillNon-Executive Chairman 

9 July 2009  OPERATING REVIEW

The Group has reported an excellent set of results and delivered substantial growth in revenue during the year. I am proud of the achievement that has been made in delivering and securing this increase in business.

Distribution

Music Box Leisure 

Music Box Leisure is central to the Group and its customers are exclusively in the "non traditional" sector, for example supermarkets, discount retailers and motorway service stations, rather than conventional high street CD and DVD shops. In November 2008, its main competitor EUK was suddenly placed into administration leaving several key supermarkets and retailers without supply. Music Box Leisure picked up the emergency supply of 'chart' products to a number of these retailers, moving its operations into a 24 hour service. Sales to new customers in Music Box Leisure totalled £34.4 million (2008: £8.3 million).

Music Box Leisure has succeeded in signing a three year exclusive contract with a major supermarket and continues to supply new customers on short term agreements.  The collapse of EUK was the catalyst for a radical change within the industry with some of the former EUK customers choosing to take their medium term supply direct from suppliers rather than through a distributor such as Music Box Leisure.

External sales at Music Box Leisure grew by 88.3% from £72.4 million to £136.3 million. Almost all of this growth is in the supply of 'chart' products which are sold at much lower margins but higher volumes. As a consequence gross margins for the Group fell to 12.0% compared to 18.1% in 2008. Overheads have continued to be managed tightly.

Music Box Leisure continues to be affected by the credit insurance industry's lack of confidence in the sector. Credit limits from our suppliers continue to be significantly below optimum levels, a situation exacerbated by the substantial increase in revenue. We have secured product supply through discretionary uninsured trading limits, substantial advance payments on account and use of the invoice financing facility.

Wholesale

ESD Wholesale ("ESD")

ESD is a wholesaler primarily to independent and internet retailers. The independent retail sector continues to experience a difficult time.

Overall sales in our wholesale business declined from £8.2 million to £7.0 million, the majority of the decline attributed to a fall in demand and the management of credit risk with its customers. There is a small but very experienced team running ESD and it remains a low overhead operation.

Windsong International Limited ("WI")

The Group purchased the trade name of Windsong International in January 2009 from the administrators of Windsong Holdings. The name is well known throughout the industry as an exporter of specialist and more obscure titles of CDs. The Group considered that there was an opportunity to complement the trade of ESD. At the year end, the operations to support this business were being set up and recruitment of experienced staff had commenced. The Group does not consider that the trade of WI will be material to the overall Group revenue. 

Strategy and Risks

The Group continues to emphasise the added value we provide to customers in the "non traditional" retail sector as our key point of difference. The changes to our business during the last year have changed our product mix towards the lower margin 'chart' product, resulting in pressure on margins.

Our buying strategy requires us to maintain a high stock level, although this is both spread across a broad range of titles and for 'chart' titles can be on a very short term basis whilst stock is stored for new release. The buying department works hard to ensure that the risk of obsolescence is managed and that supplier terms mitigate the risk of excess stock.

The securing of a three year contract with Morrisons plc has assisted with our strategy plans and the Group is planning to invest substantially in its systems and sites over the next year.

 

Trevor AllanChief Executive

9 July 2009  FINANCIAL REVIEW

Financial highlights

The strong trading has delivered impressive results over the period with total Group sales increasing 77.5% to £143.6 million (2008: £80.9 million).

The conversion of the increase in revenue into profit has been affected by the concentration of 'chart' sales within the increased revenue, which amounted to £71.3 million. The gross margins are less than the Group's 'back catalogue' sales but generate significant volumes. As a result, operating profit before tax increased 35.6% to £8.0 million (2008: pre exceptionals £5.9 million), profit before tax increased 42.1% to £8.1 million (2008: pre exceptionals £5.7 million) and earnings per share increased 37.8% to 34.3 pence per share (2008: pre exceptionals 24.9 pence per share).

The cash position continues to remain strong. Net cash generated from operations was £1.7 million (2008: £2.3 million) despite the overall increase in working capital requirements within the Group, demonstrating the cash generation within the business. The ability to generate cash has supported the Board's proposal to distribute a dividend to shareholders of 6.0 pence per share (2008: nil). 

Trading results 

A summary of the sales and operating profit of the Group is shown in the table below. Adjusted operating profit excludes the exceptional and non-recurring charge totalling £12.4 million in 2008:

	31-Mar	31-Mar		31-Mar	31-Mar	31-Mar
	2009	2008		2009	2008	2008	2009
	Sales	Sales		Operating profit	Operating profit/(loss)	Operating profit	Versus 2008
				reported	reported	adjusted	adjusted
Activity	£ million	£ million	Change	£ million	£ million	£ million	Change
Distribution	136.3	72.4	88.3%	7.6	6.0	6.0	27.7%
Wholesale	7.0	8.2	(14.6)%	(0.1)	0.4	0.4	(120.0)%
Other	0.3	0.3	-	0.7	0.1	0.1	736.8%
Central costs	-	-	-	(0.2)	(13.0)	(0.6)	(60.0)%
	143.6	80.9	77.5%	8.0	(6.5)	5.9	36.1%

The net financing income for the year reflected the cash balances within the Group to manage working capital peaks which can be significantly affected by new chart releases and low supplier credit limits.

Cash flow, working capital and borrowing facilities

The Group generated £8.3 million cash from operations before movements in working capital (2008: £6.0 million). Working capital increased by £4.1 million, largely reflecting higher inventory and trade debtor balances and higher trade and related payables.  The increase in revenue has presented some clear credit insurance problems and the distribution business continues to work closely with the principal credit insurers. However our suppliers are largely unable to obtain adequate credit insurance cover, particularly in light of several of our competitors going into administration during the year.

The distribution business renewed its sales finance facility in October 2008 and continues to monitor the adequacy of this facility to support its requirements during forecast peak periods. The Board has reviewed the forecasts for the next year and is satisfied that the business can operate within its facility.

Taxation

The Group's effective tax rate was 27.2% compared to 25.4% in 2008. The 2008 tax charge benefitted from the adjustments in respect of prior years, following the resolution of several outstanding matters. Under existing tax legislation it is anticipated that the Group's effective tax rate will be marginally above the main UK Corporation Tax rate in future years.

Summary

We are very pleased by the performance of the Group during the year, particularly given the challenges presented by the sudden increase in demand and the difficult economic environment. The Group has continued to invest in its systems and resources to develop the business and we are confident that the business will continue to deliver a good performance.

Lisa ClarkeFinancial Director 

9 July 2009

  

Consolidated Income Statement

for year ended 31 March 2009

	2009	2009	2008	2008
	£000	£000	£000	£000
Revenue		143,627		80,853
Cost of sales		(126,393)		(66,188)
		________		________
Gross profit		17,234		14,665
Distribution expenses		(1,796)		(1,371)
Administrative expenses - normal	(7,424)		(7,405)
Administrative expenses - exceptional: goodwill impairment	-		(12,423)
	________		________
Administrative expenses		(7,424)		(19,828)
		________		________
Operating profit/(loss)		8,014		(6,534)
Operating profit before exceptional items		8,014		5,889
Exceptional items		-		(12,423)
		8,014		(6,534)
Financial income		106		86
Financial expenses		(19)		(252)
		________		________
Net financing income/(costs)		87		(166)
		________		________
Profit/(loss) before tax		8,101		(6,700)
Profit before tax before exceptional items		8,101		5,723
Exceptional items		-		(12,423)
		8,101		(6,700)
Taxation		(2,206)		(1,454)
		________		________
Profit/(loss) for the year attributable to equity holders of the parent		5,895		(8,154)
		________		________
Basic and diluted profit/(loss) per share		34.3p		(47.5)p

  

Consolidated Balance Sheet

at 31 March 2009

	2009	2008
	£000	£000
Non-current assets
Property, plant and equipment	1,156	502
Intangible assets	17,000	17,000
Deferred tax assets	242	435
	_____	_____
	18,398	17,937
	_____	_____
Current assets
Stocks	17,106	9,319
Trade and other receivables	11,088	5,563
Cash and cash equivalents	2,636	1,731
	_____	_____
	30,830	16,613
	_____	_____
Total assets	49,228	34,550
	________	________
Current liabilities
Bank overdraft	-	12
Interest-bearing loans and borrowings	24	1
Trade and other payables	18,241	9,227
Tax payable	1,084	1,392
	_____	_____
	19,349	10,632
	_____	_____
Non-current liabilities
Interest-bearing loans and borrowings	75	3
	_____	_____
Total liabilities	19,424	10,635
	________	________
Net assets	29,804	23,915
	________	________
Equity attributable to equity holders of the parent
Share capital	12,872	12,872
Share premium	21,454	21,454
Reserves	(2,800)	(2,800)
Retained earnings	(1,722)	(7,611)
	_____	_____
Total equity	29,804	23,915
	________	________

  Consolidated Cash Flow Statements 

for year ended 31 March 2009

	2009	2008
	£000	£000
Cash flows from operating activities
Profit/(loss) for the year	5,895	(8,154)
Adjustments for:
Depreciation	310	167
Impairment of goodwill	-	12,423
Foreign exchange (gains)	-	(29)
Financial income	(106)	(88)
Financial expense	19	252
Loss on sale of property, plant and equipment	4	-
Share option charge	(6)	-
Taxation	2,206	1,454
	_	_
	8,322	6,025
(Increase)/decrease in trade and other receivables	(5,332)	1,399
(Increase)/decrease in stock	(7,787)	(2,668)
Increase/(decrease) in trade and other payables	9,014	(1,075)
	_	_
	4,217	3,681
Tax paid	(2,514)	(1,386)
	_	_
Net cash from operating activities	1,703	2,295
	_	_
Cash flows from investing activities
Proceeds from sale of property, plant and equipment	52	-
Proceeds from sale of subsidiary	-	72
Interest received	106	89
Cash and cash equivalents disposed of with subsidiary	-	(146)
Acquisition of property, plant and equipment	(1,020)	(340)
	_	_
Net cash from investing activities	(862)	(325)
	_	_
Cash flows from financing activities
Interest paid	(19)	(252)
Repayment of borrowings	-	(2,860)
Payment of finance lease liabilities	(26)	(1)
Inception of new lease liabilities	121	-
	_	_
Net cash from financing activities	76	(3,113)
	_	_
Net increase/(decrease) in cash and cash equivalents	917	(1,143)
Cash and cash equivalents at 1 April	1,719	2,862
	_	_
Cash and cash equivalents at 31 March	2,636	1,719
	_	_

  

Notes to the Financial Statements

for the year ended 31 March 2009

1. Source of Information

The preliminary financial statements for the financial year ended 31 March 2009 were approved by the Board of Directors on 9 July 2009. The financial information set out above does not constitute the company's statutory accounts for the years ended 31 March 2009 or 2008 but is derived from those accounts.  Statutory accounts for 2008 have been delivered to the registrar of companies, and those for 2009 will be delivered in due course.  The auditors have reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 237(2) or (3) of the Companies Act 1985.

2. Segmental analysis

Income Statement							Total
	Distribution		Wholesale		Other
	2009	2008	2009	2008	2009	2008	2009	2008
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Revenue from external customers	136,308	72,364	6,976	8,201	343	288	143,627	80,853
Inter-segment revenue	6,020	7,140	-	488	797	989	6,817	8,617
Total revenue	142,328	79,504	6,976	8,689	1,140	1,277	150,444	89,470
Segment result	7,634	5,976	(92)	459	728	87	8,270	6,522
Impairment of goodwill		(12,423)					-	(12,423)
Central costs							(256)	(633)
Operating (loss)/ profit							8,014	(6,534)
Net financing income/(costs)							87	(166)
Taxation							(2,206)	(1,454)
Loss for the period							5,895	(8,154)
Segment assets	30,805	16,120	1,151	1,317	272	113	32,228	17,550
Goodwill	17,000	17,000	-	-	-	-	17,000	17,000
Total assets	47,805	33,120	1,151	1,317	272	113	49,228	34,550
Segment liabilities	18,446	9,285	178	961	800	389	19,424	10,635
Total liabilities	18,446	9,285	178	961	800	389	19,424	10,635
Depreciation charge	304	156	6	9	-	2	310	167

  

3. Exceptional item

An exceptional item of £12.4m was charged to the profit and loss account in the prior year relating to an impairment of goodwill. A review of goodwill at 31 March 2009 did not necessitate any further impairment.

4. Earnings Per Share

Basic earnings per share are based on profit attributable to shareholders and on the weighted average number of ordinary shares in issue during the year of 17.2 million shares (2008: 17.2 million shares).

The prior year adjusted earnings per share was calculated using the profits after tax for the financial year having added back the exceptional item of goodwill impairment over the weighted average number of shares in issue during the year.

5. Dividends

It is anticipated that, on shareholder approval at the forthcoming general meeting of the company, the Company will pay a maiden dividend of 6.0 pence per share. The Company will notify shareholders in due course the dividend payment date and record date.

6. Annual report

The Annual Report will be posted to shareholders in late August. Copies of the Annual Report will be available from the MBL Group plc, Unit 9 Enterprise Court, Lancashire Enterprise Business Park, Centurion Way, Leyland, PR26 6TZ and can be downloaded from the Company's website at www.mblgroup.co.uk.

ENDFR BLGDRLXGGGCI