19 Jul 2010 07:00
19 July 2010
MBL GROUP PLC
("MBL" or "THE GROUP")
Preliminary Results For The Year Ended 31 March 2010
The Board of MBL, the UK distributor of home entertainment products, is pleased to announce itspreliminary audited results for the year ended 31 March 2010.
Highlights:
·; Revenue increased 35.7% to £194.9 million (2009: £143.6 million);
·; PBT increased 22.2% to £9.9 million (2009: £8.1 million);
·; Debt free with cash balances of £5.8 million at 31 March 2010 (2009: £2.6 million);
·; EPS increased by 17.5% to 40.3 pence per share (2009: 34.3 pence); and
·; Proposed final dividend of 7.5 pence per share (2009: 6.0 pence per share)
Commenting on these results, Peter Cowgill, Non-Executive Chairman of MBL, said:
"The Group has experienced an encouraging year during a period of significant change. The substantial increase in volumes has in part been driven by the successful integration of the combined business segments along with an increase in chart sales over the past eighteen months. Furthermore, a strategic and operational review has been performed during the year which is expected to deliver more diverse revenue streams and internal efficiencies over the medium term.
"The Directors remain committed to delivering value back to shareholders and are proposing to pay a final dividend of 7.5 pence per share in 2011, representing a 25% increase on the 2010 dividend.
"The economic climate is presenting opportunities for the Group to grow and we are confident that we will be able to deliver a solid platform for the future sustainability of the business."
Enquiries:
MBL Group plc Tel: 0161 767 1620
Peter Cowgill, Non-Executive Chairman
Bishopsgate Communications Ltd. Tel: 020 7562 3350
Gemma O'Hara
Siobhra Murphy
Brewin Dolphin Tel: 0845 213 4729
Mark Brady
Sean Wyndham-Quin CHAIRMAN'S STATEMENT
The Group has experienced an encouraging year during a period of significant change. The substantial increase in volumes has in part been driven by the successful integration of the combined business segments along with an increase in chart sales over the past eighteen months. Furthermore, a strategic and operational review has been performed during the year which is expected to deliver more diverse revenue streams and internal efficiencies over the medium term.
Summary of results
|
| 31/03/2010 | 31/03/2009 |
|
| £ million | £ million |
|
|
|
|
| Revenue | 194.9 | 143.6 |
|
|
|
|
| Operating profit | 9.9 | 8.0 |
|
|
|
|
| Net interest | - | 0.1 |
|
|
|
|
| Profit before tax | 9.9 | 8.1 |
|
|
|
|
| Basic EPS (pence) | 40.3p | 34.3p |
Sustained performance
The Group's record of growth has continued in the past twelve months with revenue increasing by £51.3 million in the year, representing a 35.7% increase to £194.9 million. The Group continued to operate within its existing facilities and to be able to satisfy the increase in volumes as well as being able to fund the acquisition of Global Media Vault, a home entertainment digital distribution business.
Profit before tax increased by £1.8 million to £9.9 million. Basic earnings per share rose 17.5% to 40.3 pence per share. The business remained debt free and with cash balances of £5.8 million at the year end.
Strategic review
The Board has undertaken a strategic review during the year in response to the risks surrounding the long term decline of physical products within the home entertainment market and the increased concentration of revenue with one key customer. Following the strategic review, the Group's strategy for the development of the business is to identify complementary areas to diversify the operations and to secure new customers.
I am pleased that the Group has announced two key contracts with WH Smith and Best Buy during the year and successfully acquired Global Media Vault. The Board continues to look for opportunities to strengthen the revenue stream as the economy recovers and, as a result, MBL acquired a 15% stake in U-Xplore for £2 million on 24 June 2010. U-Xplore is an online based careers resource facility.
The operations of the distribution business are being strengthened with a significant investment in improved and scalable information technology systems. Additionally, we have planned to consolidate the Leyland operations into a single, purpose built distribution facility during 2011. One of the recognised competencies of the Group has been its ability to deliver a comprehensive service to its customers and our sustained investment in technology and facilities will further strengthen this capability.
Cash generation and dividends
The Group continues to generate strong cash flows and has remained without any long term borrowings. The demand for cash to support working capital levels continues to be a matter for the Group to manage at peak trading times, particularly given the investment that has been committed to improving internal facilities and supporting new subsidiaries during their growth stage. The Directors have taken this into consideration when reviewing the final dividend for the year.
The Directors remain committed to delivering value back to shareholders and are proposing to pay a dividend of 7.5 pence per share in 2011, representing a 25% increase to the 2010 dividend.
Employees
The Group recognises that its employees are its most important resource and the Board is grateful for the dedicated support of its team.
Current trading and outlook
The Board recognises the challenging economic and specific market conditions which prevail. It further acknowledges the current concentration of the business on its major customer, which is presently contracted to September 2011. However, the economic climate is presenting opportunities for the Group and we are confident to be able to deliver a solid platform for the future sustainability of the business.
Peter Cowgill
Non-Executive Chairman
19 July 2010 OPERATING REVIEW
The Group has reported a pleasing set of results and profitability during the year.
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.
Music Box Leisure has secured two key new accounts during the year, WH Smiths and Best Buy, and continues to explore opportunities to increase its customer base. By circumstance, the dramatic reduction in competitors and changes within the home entertainment market in the last eighteen months has increased the concentration of revenue with one key customer. The Board recognises the risk that this presents to the Group and we are continuing to identify and review opportunities to diversify the business.
External revenue at Music Box Leisure grew by 33.5% from £136.3 million to £182.0 million. The growth continues to be in the supply of 'chart' products which are sold at much lower margins but higher volumes. This has contributed to the gross margin for the Group falling slightly to 11.1% compared to 12.0% in 2009. Overheads have increased due to investment in employees and facilities,
Music Box Leisure has experienced increased confidence from suppliers and the credit insurance industry which has improved working capital flows, although there remains a general lack of confidence in the sector.
Wholesale
ESD Wholesale ("ESD")
ESD is a wholesaler primarily to independent and internet retailers. The independent retail sector has experienced difficult times.
External revenue in ESD increased from £7.0 million to £8.0 million, although it continued to grapple with intensified competition and the management of credit risk with its customers. ESD operates within a highly price competitive market.
Windsong International Limited ("WI")
Windsong International is well known throughout the industry as an exporter of specialist and rare title CDs and DVDs.
WI experienced a good year and has succeeded in winning customers it had previously supplied when it traded as Windsong Holdings. Revenue in the year reached £4.7 million (2009: nil).
eCommerce and Digital
Global Media Vault ('GMV')
In November 2009, the Group finalised the acquisition of Global Media Vault, a digital distributor of home entertainment titles. GMV was acquired within the early stages of its development and brings with it a talented team with experience of eCommerce and the digital arena.
Post year end, GMV has secured a number of key contracts for the sale of digital product as a 'white label' service, particularly in Middle Eastern territories.
The team has been instrumental in defining the Group's eCommerce strategy and developing an online sales capability. This facilitates the sale of both physical product and digital formats to offer to the customer base of the Distribution business.
Strategy and Risks
The Group has undertaken a strategic and operational review during the year to refocus its efforts towards delivering a sustainable business model for its shareholders.
The Group continues to make significant investment in improving its operational processes and facilities to manage the increased volumes and to gain the capacity to deliver to new customers.
In addition, the Board continues to review opportunities to grow the business through acquisition and new markets.
Trevor Allan
Chief Executive
19 July 2010 FINANCIAL REVIEW
Financial highlights
The strong trading has delivered improved results over the period with total Group revenue increasing 35.7% to £194.9 million (2009: £143.6 million).
'Chart' sales continue to be a significant component of revenue, which amounted to £136.1 million(2009: £71.3 million). Operating profit increased 23.8% to £9.9 million (2009: £8.0 million), profit before tax increased 22.2% to £9.9 million (2009: £8.1 million) and earnings per share increased 17.5% to 40.3 pence per share (2009: 34.3 pence per share).
The cash position continues to remain strong. Net cash generated from operating activities was £6.8 million (2009: £1.7 million) as working capital levels have stabilised following last year's dramatic increase in revenue. The cash reserves have supported the Board's diversification strategy with new business development, acquisitions and capital investment being delivered without incurring debt.
The ability to generate cash has supported the Board's proposal to distribute a dividend to shareholders of 7.5 pence per share (2009: 6.0 pence per share).
Trading results
A summary of the sales and operating profit of the Group is shown in the table below:
|
| 31-Mar | 31-Mar |
| 31-Mar | 31-Mar |
|
|
| 2010 | 2009 |
| 2010 | 2009 |
|
|
| Revenue | Revenue |
| Operating profit/(loss) | Operating profit/ (loss) |
|
| Activity | £million | £ million | Change | £ million | £ million | Change |
|
|
|
|
|
|
|
|
| Distribution | 182.0 | 136.3 | 33.5% | 10.0 | 7.6 | 31.6% |
| Wholesale - ESD | 8.0 | 7.0 | 14.3% | 0.3 | (0.1) | 400.0% |
| Wholesale - Windsong | 4.7 | - | - | (0.1) | - | - |
| eCommerce and Digital | 0.1 | - | - | (0.2) | - | - |
| Other | 0.1 | 0.3 | (66.7)% | 0.4 | 0.7 | (42.9)% |
| Central costs | - | - | - | (0.5) | (0.2) | (150.0)% |
|
| 194.9 | 143.6 | 35.7% | 9.9 | 8.0 | 23.8% |
Cash flow, working capital and borrowing facilities
The Group generated £11.2 million cash from operating activities before movements in working capital (2009: £8.3 million). Working capital increased by £1.7 million, reflecting higher inventory balances to support the increase in revenue. The Group has pleasingly experienced increases in supplier credit limits which have improved working capital management.
The distribution business reviewed its sales finance facility in November 2009 and concluded that an increased facility was not required. The Board reviews the terms of the facility regularly and the next renewal is due in October 2011.
Taxation
The Group's effective tax rate was 29.8% compared to 27.2% in 2009.
Summary
We are satisfied by the performance of the Group during the year, particularly given the challenges presented by the increase in demand through existing operations and the uncertain 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 solid performance.
Lisa Clarke
Financial Director
19 July 2010
Consolidated Statement of Comprehensive Income
for year ended 31 March 2010
|
| 2010 | 2009 |
|
| £000 | £000 |
|
|
|
|
| Revenue | 194,868 | 143,627 |
| Cost of sales | (173,209) | (126,393) |
|
| _____ | _____ |
| Gross profit | 21,659 | 17,234 |
| Distribution expenses | (2,100) | (1,796) |
| Administrative expenses | (9,650) | (7,424) |
|
| _____ | _____ |
| Results from operating activities | 9,909 | 8,014 |
|
|
|
|
| Financial income | 19 | 106 |
| Financial expenses | (53) | (19) |
|
| _____ | _____ |
| Net financing (expense)/income | (34) | 87 |
|
| _____ | _____ |
| Profit before income tax | 9,875 | 8,101 |
|
|
|
|
| Income tax expense | (2,940) | (2,206) |
|
| _____ | _____ |
|
Total comprehensive income for the period |
6,935 |
5,895 |
|
| _____ | _____ |
| Basic and diluted earnings per share | 40.3p | 34.3p |
Consolidated Statement of Financial Position
| at 31 March 2010 |
|
| |
|
|
2010 |
2009 | |
|
| £000 | £000 | |
| Assets |
|
| |
| Non-current assets |
|
| |
| Property, plant and equipment | 2,430 | 1,156 | |
| Intangible assets | 17,822 | 17,000 | |
| Deferred tax assets | 334 | 242 | |
|
| _____ | _____ | |
| Total non-current assets | 20,586 | 18,398 | |
|
| _ | _ | |
| Current assets |
|
| |
| Inventories | 19,812 | 17,106 | |
| Trade and other receivables | 9,774 | 11,088 | |
| Cash and cash equivalents | 5,801 | 2,636 | |
|
| _ | _ | |
| Total current assets | 35,387 | 30,830 | |
|
| _ | _ | |
| Total assets | 55,973 | 49,228 | |
|
| _ | _ | |
| Liabilities |
|
| |
| Non-current liabilities |
|
| |
| Obligations under finance leases | (1) | (75) | |
|
| _ |
| |
| Total non-current liabilities | (1) | (75) | |
|
| _ |
| |
| Current liabilities |
|
| |
| Obligations under finance leases | (74) | (24) | |
| Trade and other payables | (18,506) | (18,241) | |
| Current tax payable | (1,505) | (1,084) | |
|
|
|
| |
| Total current liabilities | (20,085) | (19,349) | |
|
|
|
| |
| Total liabilities | (20,086) | (19,424) | |
|
|
|
| |
| Equity attributable to equity holders of the parent |
|
| |
| Share capital | (12,972) | (12,872) | |
| Share premium | (21,531) | (21,454) | |
| Reserves | 2,800 | 2,800 | |
| Retained earnings | (4,184) | 1,722 | |
|
|
|
| |
| Total equity | (35,887) | (29,804) | |
|
|
|
| |
| Total equity and liabilities | (55,973) | (49,228) | |
|
| _ | __ | |
Consolidated Statement of Changes in Equity
for year ended 31 March 2010
|
| Share capital | Share premium | Merger reserve | Retained earnings | Total |
|
| £000 | £000 | £000 | £000 | £000 |
|
|
|
|
|
|
|
| At 1 April 2008 | 12,872 | 21,454 | (2,800) | (7,611) | 23,915 |
|
|
|
|
|
|
|
| Profit for the year | - | - | - | 5,895 | 5,895 |
|
|
|
|
|
|
|
| Total income and expense for the year | - | - | - | 5,895 | 5,895 |
| Share based payment | - | - | - | (6) | (6) |
|
|
|
|
|
|
|
| At 31 March 2009 | 12,872 | 21,454 | (2,800) | (1,722) | 29,804 |
|
|
|
|
|
|
|
| Profit for the year | - | - | - | 6,935 | 6,935 |
|
|
|
|
|
|
|
| Total income and expense for the year | - | - | - | 6,935 | 6,935 |
| Share options exercised | 40 | 1 | - | - | 41 |
| Shares issued | 60 | 76 | - | - | 136 |
| Share based payment | - | - | - | 9 | 9 |
| Equity dividends | - | - | - | (1,038) | (1,038) |
|
|
|
|
|
|
|
| At 31 March 2010 | 12,972 | 21,531 | (2,800) | 4,184 | 35,887 |
|
|
|
|
|
|
|
Shares issued
80,000 ordinary shares of £0.75 were issued to the shareholders of Global Media Vault Limited as part of the consideration on acquisition. The shares were valued at the market price of £1.70 per share.
Consolidated Statement of Cashflows
for year ended 31 March 2010
|
|
2010 |
2009 |
|
| £000 | £000 |
| Operating activities |
|
|
| Profit for the period | 6,935 | 5,895 |
|
|
|
|
| Adjustments to reconcile Group net profit to net cash flows: |
|
|
| Depreciation | 1,160 | 310 |
| Amortisation | 83 | - |
| Net finance expense/(income) | 34 | (87) |
| Income tax charge | 2,940 | 2,206 |
| Changes in trade and other receivables | 1,478 | (5,332) |
| Changes in inventories | (2,706) | (7,787) |
| Changes in trade and other payables | (511) | 9,014 |
| Changes in deferred tax asset | (95) | - |
| Share option charge | 9 | (6) |
| Loss on sale of property, plant and equipment | 1 | 4 |
| Income tax paid | (2,519) | (2,514) |
|
|
|
|
| Net cash flow from operating activities | 6,809 | 1,703 |
|
|
|
|
|
Investing activities |
|
|
| Interest received | 19 | 106 |
| Acquisition of property, plant and equipment | (2,188) | (1,020) |
| Proceeds from sale of property, plant and equipment | 3 | 52 |
| Acquisition of subsidiary undertaking | (665) | - |
| Cash acquired with acquisition | 252 | - |
|
|
|
|
| Net cash from investing activities | (2,579) | (862) |
|
|
|
|
| Financing activities |
|
|
| Interest paid | (43) | (19) |
| Repayment of finance lease liabilities | (33) | (26) |
| Inception of new finance lease liabilities | 8 | 121 |
| Dividends paid | (1,038) | - |
| New shares issued | 41 | - |
|
|
|
|
| Net cash from financing activities | (1,065) | 76 |
|
|
|
|
| Net increase in cash and cash equivalents | 3,165 | 917 |
|
|
|
|
| Cash and cash equivalents at 1 April | 2,636 | 1,719 |
|
| _ |
|
| Cash and cash equivalents | 5,801 | 2,636 |
|
|
|
|
Notes to the Financial Statements
for the year ended 31 March 2010
1. Source of Information
The preliminary financial statements for the financial year ended 31 March 2010 were approved by the Board of Directors on 19 July 2010. The financial information set out above does not constitute the statutory accounts for the periods ended 31 March 2010 or 31 March 2009. Statutory accounts for the period ended 31 March 2009 have been delivered to the Registrar of Companies, and those for the period ended 31 March 2010 will be delivered following the Company's Annual General Meeting. The auditors, KPMG Audit Plc, have reported on those accounts; their reports were unqualified and did not contain statements under section 498(2) or (3) of the Companies Act 2006 or equivalent preceding legislation.
2. Segmental analysis
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| |||||||
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| Distribution | Wholesale | eCommerce and Digital | Other | Total | ||||||
|
| 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | |
|
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Revenue from external customers | 181,989 | 136,308 | 12,659 | 6,976 | 77 | - | 143 | 343 | 194,868 | 143,627 | |
| Inter-segment revenue | 7,485 | 6,020 | 350 | - | 350 | - | 203 | 797 | 8,388 | 6,817 | |
| Total revenue | 189,474 | 142,328 | 13,009 | 6,976 | 427 | - | 346 | 1,140 | 203,256 | 150,444 | |
|
|
|
|
|
|
|
|
|
|
|
| |
| Segment profit | 10,059 | 7,634 | 166 | (92) | (211) | - | 401 | 728 | 10,415 | 8,270 | |
|
|
|
|
|
|
|
|
|
|
|
| |
| Central costs |
|
|
|
|
|
|
|
| (506) | (256) | |
| Operating profit |
|
|
|
|
|
|
|
| 9,909 | 8,014 | |
|
|
|
|
|
|
|
|
|
|
|
| |
| Net financing (costs)/income |
|
|
|
|
|
|
|
| (34) | 87 | |
| Taxation |
|
|
|
|
|
|
|
| (2,940) | (2,206) | |
| Profit for the period |
|
|
|
|
|
|
|
| 6,935 | 5,895 | |
|
|
|
|
|
|
|
|
|
|
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| |
|
|
|
|
|
|
|
|
|
|
|
| |
| Segment assets | 34,247 | 30,805 | 2,577 | 1,151 | 692 | - | 1,296 | 272 | 38,812 | 32,228 | |
| Goodwill | 17,000 | 17,000 | - | - | 161 | - | - | - | 17,161 | 17,000 | |
| Total assets | 51,247 | 47,805 | 2,577 | 1,151 | 853 | - | 1,296 | 272 | 55,973 | 49,228 | |
|
|
|
|
|
|
|
|
|
|
|
| |
| Segment liabilities | 18,703 | 18,446 | 458 | 178 | 343 | - | 582 | 800 | 20,086 | 19,424 | |
| Total liabilities | 18,703 | 18,446 | 458 | 178 | 343 | - | 582 | 800 | 20,086 | 19,424 | |
|
|
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|
|
|
|
|
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|
| |
| Depreciation charge | 1,109 | 304 | 43 | 6 | 7 | - | 1 | - | 1,160 | 310 | |
3. Acquisitions
MBL Group plc acquired 100% of the issued ordinary share capital of Global Media Vault Limited on 20 November 2009. The consideration paid was satisfied by £665,000 cash, the issue of 80,000 ordinary shares at £136,000 market value, together with associated fees of £4,000. The acquisition agreement also provided for the issue of 22,400 ordinary shares in MBL Group plc as deferred consideration, payable on specified performance targets. The deferred consideration has been included in the financial statements as at 31 March 2010.
Global Media Vault Limited is a digital distributor of home entertainment titles at an early stage of its development. The directors consider there to be growth opportunities from the business.
The consolidated results include revenue of £76,000 and a loss of £211,000 in respect of the acquired company since the date of acquisition. The loss of the company for the fifteen month period to 31 March 2010 is £726,000.
A fair value adjustment has been recognised in respect of intellectual property owned by the company. The carrying value of the intangible assets will continue to be reviewed in accordance with accounting standards.
The table below shows the provisional goodwill calculation:
| Acquiree's net assets at acquisition date: | Book value | Fair value | Net assets at acquisition |
|
| £000 | £000 | £000 |
|
|
|
|
|
| Intangible assets | - | 744 | 744 |
| Property, plant and equipment | 250 |
| 250 |
| Trade and other receivables | 165 |
| 165 |
| Cash and cash equivalents | 252 |
| 252 |
| Trade payables | (360) |
| (360) |
| Other payables | (369) |
| (369) |
|
|
|
|
|
| Net assets |
|
| 682 |
|
|
|
|
|
| Consideration: |
|
|
|
| Cash |
|
| 665 |
| Issue of 80,000 ordinary shares |
|
| 136 |
| Deferred consideration - issue of 22,400 ordinary shares |
|
| 38 |
| Associated fees |
|
| 4 |
|
|
|
|
|
| Total consideration |
|
| 843 |
|
|
|
|
|
| Goodwill |
|
| 161 |
|
|
|
|
|
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 (2009: 17.2 million shares).
5. Dividends
It is anticipated that, on shareholder approval at the forthcoming general meeting of the company, the Company will pay a dividend of 7.5 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.