8 Dec 2008 07:00
8 DECEMBER 2008
MBL GROUP PLC
(the "Group")
Unaudited Interim Financial Statements for the Six Months Ended 30 September 2008
The Board of MBL Group plc, formerly Air Music and Media Group plc, the UK distributor of home entertainment products, is pleased to announce its unaudited interim results for the six months ended 30 September 2008.
Key Points
Commenting, Peter Cowgill, Chairman of MBL, said: "The results for the first half of the year are positive and have been achieved against the backdrop of an uncertain economic climate. The Group serviced new customers that had been acquired in the second half of the last financial year and, despite the challenging trading conditions, experienced a satisfying 20% growth in sales to £34.9m and a 16% increase in operating profit to £2.2m.
"The Group is currently in the most important trading period of the year. Whilst the Board continues to recognise the challenging market conditions they remain confident that a solid platform has been developed from which to take advantage of market opportunities."
--ENDS--
Enquiries:
MBL GROUP PLC Tel: 0161 767 1620
Peter Cowgill (Chairman)
BISHOPSGATE COMMUNICATIONS LIMITED Tel: 020 7562 3350
Maxine Barnes
SEYMOUR PIERCE LIMITED Tel: 020 7107 8032
Mark Percy
Chairman's Statement
I am pleased to announce the interim results for the six months to 30 September 2008. During the period, the Group serviced new customers that had been acquired in the second half of the last financial year and, despite the challenging trading conditions, experienced a satisfying 20% growth in sales to £34.9m and a 16% increase in operating profit to £2.2m.
Financials
Sales for the period were £34.9m (2007: £29.0m). Operating profit was £2.2m (2007: £1.9m). Net financing income was £78,000 (2007: expense £66,000). Profit before tax was £2.3m (2007: £1.9m). Earnings per share for the period was 8.9p (2007: 7.4p).
A summary of the performance of the Group is shown in the table below:
| 30 September | 30 September |
| 30 September | 30 September |
| |
| 2008 | 2007 |
| 2008 | 2007 |
| |
| Sales | Sales |
| Operating | Operating |
| |
|
|
| profit | profit |
| ||
| Segment | £ m | £ m | Change | £ m | £ m | Change |
|
|
|
| ||||
| Distribution (MBL) | 31.9 | 25.3 | 26% | 2.1 | 2.0 | 5% |
| Wholesale (ESD) | 2.8 | 3.6 | -22% | 0.1 | 0.2 | -50% |
| Other | 0.2 | 0.1 | 100% | 0.2 | 0.0 | n/a |
| Central costs | 0.0 | 0.0 | - | -0.2 | -0.3 | -33% |
| 34.9 | 29.0 | 20% | 2.2 | 1.9 | 16% |
OPERATIONAL UPDATE
Distribution
Sales at Music Box Leisure ("MBL"), the core of the Group, have performed well during the period with sales to customers that it had successfully obtained in the previous financial year totalling £5.9m. MBL strengthened its buying expertise during the period and increased its sales of CDs to 17% (10% in 2007). Games have also continued to be a growth area and accounted for 13% of sales (10% in 2007) and DVDs represented approximately 68% of sales at MBL (80% in 2007). The remaining sales comprised of home entertainment accessories and accounted for 2% (0% in 2007).
Gross profit margins continued to be under pressure and fell by 1.3% to 15.9% compared to the period to 30 September 2007. MBL has been supplying a limited quantity of chart products to its newer customers which, along with the change in product mix, has been responsible for this pressure on margins. The increase in volumes and customers has led to a related increase in distribution and administrative costs.
Wholesale
ESD, which only accounts for 8% of Group sales and 5% of operating profit, has continued to see a decline in sales. ESD sells to independent retailers and those which remain continue to be adversely affected by competition from the supermarkets and the internet. As with retail in general, the sector has been seriously affected by reductions and the removal of cover by credit insurers. The sales mix in ESD has remained similar with CDs comprising 43% and DVDs 56% (prior year 43% and 55% respectively).
Funding position
The Group continued its strong management of cash and at 30 September 2008 had a positive balance of £3.7m (March 2008 £1.7m), reflecting the positive cash flows which continue to be generated by the business. The pessimistic outlook of UK credit insurers has resulted in MBL continuing to pay in advance of terms when necessary to maintain continuity of supply. Despite this, MBL did not have any requirement to renew its sales finance facility during the period. Subsequent to the Balance Sheet date the facility has been renewed in order that the Group is in a position to take advantage of any potential opportunities.
Dividends
The Group is progressing with the restructuring of its reserves and share premium account to create distributable reserves to facilitate a payment of dividends to shareholders. The intention is to have this complete by the end of the current financial year.
Current trading and outlook
The results for the first half of the year are positive and have been achieved against the backdrop of an uncertain economic climate.
The Group is currently in the most important trading period of the year. Whilst the Board continues to recognise the challenging market conditions they remain confident that a solid platform has been developed from which to take advantage of market opportunities.
I look forward to issuing a trading update on the headline performance through to December at the end of January 2009.
Peter Cowgill
Chairman
8 December 2008
Consolidated Income Statement
for the six months ended 30 September 2008
| Unaudited | Unaudited | Audited | ||
| Six months to 30 September 2008 | Six months to 30 September 2007 | Year ended 31 March 2008 | ||
| £'000 | £'000 | £'000 | ||
| Revenue | 34,861 | 28,979 | 80,853 | |
| Cost of sales | (29,294) | (24,005) | (66,188) | |
| Gross profit | 5,567 | 4,974 | 14,665 | |
| Distribution expenses | (674) | (573) | (1,371) | |
| Administrative expenses - normal | (2,686) | (2,470) | (7,405) | |
| Administrative expenses - exceptional | - | - | (12,423) | |
| Operating profit/ (loss) | 2 | 2,207 | 1,931 | (6,534) |
| Financial income | 78 | 38 | 86 | |
| Financial expenses | - | (104) | (252) | |
| Net financing income/ (costs) | 78 | (66) | (166) | |
| Profit/(loss) before tax | 2,285 | 1,865 | (6,700) | |
| Taxation | 3 | (754) | (592) | (1,454) |
| Profit/ (loss) for the period attributable to equity holders of the parent | 1,531 | 1,273 | (8,154) | |
| Basic and diluted earnings per share | 4 | 8.9p | 7.4p | (47.5)p |
Consolidated Balance Sheet
at 30 September 2008
| Unaudited | Unaudited | Audited | ||
| Six months to 30 September 2008 | Six months to 30 September 2007 | Year ended 31 March 2008 | ||
| £'000 | £'000 | £'000 | ||
| Non-current assets | ||||
| Intangible assets | 17,000 | 29,423 | 17,000 | |
| Property, plant and equipment | 732 | 348 | 502 | |
| Deferred tax asset | 427 | 192 | 435 | |
| Total non-current assets | 18,159 | 29,963 | 17,937 | |
| Current assets | ||||
| Inventories | 7,895 | 6,664 | 9,319 | |
| Trade and other receivables | 5 | 8,222 | 14,427 | 5,563 |
| Cash and cash equivalents | 3,704 | - | 1,731 | |
| 19,821 | 21,091 | 16,613 | ||
| Total assets | 37,980 | 51,054 | 34,550 | |
| Current liabilities | ||||
| Bank overdraft | - | - | (12) | |
| Interest-bearing loans and borrowings | - | (8,244) | (1) | |
| Trade and other payables | (10,978) | (8,340) | (9,227) | |
| Current tax payable | (1,556) | (1,038) | (1,392) | |
| Total current liabilities | (12,534) | (17,622) | (10,632) | |
| Non-current liabilities | ||||
| Interest-bearing loans and borrowings | - | (90) | (3) | |
| Total non-current liabilities | - | (90) | (3) | |
| Total liabilities | (12,534) | (17,712) | (10,635) | |
| Net assets | 25,446 | 33,342 | 23,915 | |
| Equity | ||||
| Share capital | 12,872 | 12,872 | 12,872 | |
| Share premium | 21,454 | 21,454 | 21,454 | |
| Other reserves | (2,800) | (2,800) | (2,800) | |
| Retained earnings | (6,080) | 1,816 | (7,611) | |
| Total equity | 25,446 | 33,342 | 23,915 |
Consolidated Cash Flow Statement
for the six months ended 30 September 2008
| Unaudited | Unaudited | Audited | |
| Six months to 30 September 2008 | Six months to 30 September 2007 | Year ended 31 March 2008 | |
| £'000 | £'000 | £'000 | |
| Cash flows from operating activities | |||
| Profit/ (loss) for the period/ year | 1,531 | 1,273 | (8,154) |
| Adjustments for: | |||
| Depreciation | 119 | 77 | 167 |
| Impairment of goodwill | - | - | 12,423 |
| Financial income | (78) | (42) | (88) |
| Financial expense | - | 104 | 252 |
| Foreign exchange losses/ (income) | 1 | (27) | (29) |
| Taxation | 754 | 592 | 1,454 |
| 2,327 | 1,977 | 6,025 | |
| (Increase)/ decrease in trade and other receivables | (2,661) | (7,467) | 1,399 |
| Decrease/ (increase) in inventories | 1,423 | (13) | (2,668) |
| Increase/ (decrease) in trade and other payables | 1,748 | (349) | (1,075) |
| 2,837 | (5,852) | 3,681 | |
| Tax paid | (582) | (635) | (1,386) |
| Net cash inflow/ (outflow) from operating activities | 2,255 | (6,487) | 2,295 |
| Cash flows from investing activities | |||
| Interest received | 78 | 42 | 89 |
| Acquisition of property, plant and equipment | (348) | (95) | (340) |
| Proceeds from sale of subsidiary | - | 72 | 72 |
| Cash and cash equivalents disposed of with subsidiary | - | (146) | (146) |
| Net cash outflow from investing activities | (270) | (127) | (325) |
| Cash flows from financing activities | |||
| Interest paid | - | (105) | (252) |
| Proceeds from new borrowings | - | 2,500 | - |
| Repayment of borrowings | - | (1,801) | (2,860) |
| Capital element of finance lease liabilities | - | (1) | (1) |
| Net cash inflow/ (outflow) from financing activities | - | 593 | (3,113) |
| Net increase/ (decrease) in cash and cash equivalents | 1,985 | (6,021) | (1,143) |
| Opening cash and cash equivalents | 1,719 | 2,862 | 2,862 |
| Closing cash and cash equivalents | 3,704 | (3,159) | 1,719 |
Consolidated Statement of Recognised Income and Expense
| Unaudited | Unaudited | Audited | |
| Six months to 30 September 2008 | Six months to 30 September 2007 | Year ended 31 March 2008 | |
| £'000 | £'000 | £'000 | |
| Foreign exchange adjustments | - | - | (36) |
| Net expense recognised directly in equity | - | - | (36) |
| Profit/ (loss) for the period | 1,531 | 1,273 | (8,154) |
| Total recognised income and expense for the period | 1,531 | 1,273 | (8,190) |
Notes
(forming part of the interim financial statements)
Basis of preparation
The consolidated interim financial statements of the Group for the period ended 30 September 2008 are unaudited and do not comprise statutory accounts within the meaning of Section 240 of the Companies Act 1985.
Operating profit
Operating profit for continuing operations is stated after charging the following exceptional items:
| Unaudited | Unaudited | Audited | |
| Six months to 30 September 2008 | Six months to 30 September 2007 | Year ended 31 March 2008 | |
| £'000 | £'000 | £'000 | |
| Impairment of goodwill | - | - | 12,423 |
| - | - | 12,423 |
Taxation
The taxation charge has been estimated by the Company based on adjustments to tax payable in respect of previous years and the tax rate for the year ending 31 March 2009.
Earnings per share
The calculation of the basic earnings per share is based on the profit after taxation divided by the weighted average number of shares in issue, being 17,162,735 (period ended 30 September 2007: 17,162,735; year ended 31 March 2008: 17,162,735).
The diluted earnings per share takes the weighted average number of ordinary shares in issue during the period and adjusts this for dilutive share options existing at the period end. The diluted weighted average number of shares in the period ended 30 September 2008 was 17,162,735 (period ended 30 September 2007: 17,162,735; year ended 31 March 2008: 17,162,735).
Adjusted earnings per share, as disclosed below, are calculated using the profit after tax for the period, having added back the goodwill impairment charge over the basic and diluted weighted average number of shares in issue during the six month period.
| Unaudited | Unaudited | Audited | |
| Six months to 30 September 2008 | Six months to 30 September 2007 | Year ended 31 March 2008 | |
| £'000 | £'000 | £'000 | |
| Profit/(loss) after taxation | 1,531 | 1,273 | (8,154) |
| Impairment of goodwill | - | - | 12,423 |
| Adjusted profit attributable from continuing operations | 1,531 | 1,273 | 4,269 |
| Basic and diluted earnings/ (loss) per share | 8.9p | 7.4p | (47.5p) |
| Basic and diluted adjusted earnings/ (loss) per share | 8.9p | 7.4p | 24.9p |
Trade and other receivables
As a consequence of 30 September 2007 falling on a weekend, cash receipts from customers totalling almost £5.3m that would normally have been received and accounted for at the period end were received and accounted for on 1 October 2007.
6 Segment reporting
A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and rewards that are different from those of other business segments. The primary format is based upon the Group's management and internal reporting structure which reflects the statutory subsidiaries of the Group.
Segment results constitute items directly attributable to the business. Unallocated items comprise mainly central costs and net interest expense
The Group comprises the following main business segments:
Distribution. The full service, merchandising and sale of home entertainment products (primarily pre-recorded films, music and computer and console games) to general retailers for whom these products are not the primary focus of the retailer.
Wholesale. The sale of home entertainment products to specialist independent and internet retailers.
Other. Dormant companies and holding companies.
Segmental Analysis
| Profit and Loss Account | Continuing Operations | Total | ||||||||||
| Distribution | Wholesale | Other | ||||||||||
| 6 months ended 30.09.08 | 6 months ended 30.09.07 | Year ended 31.03.08 | 6 months ended 30.09.08 | 6 months ended 30.09.07 | Year ended 31.03.08 | 6 months ended 30.09.08 | 6 months ended 30.09.07 | Year ended 31.03.08 | 6 months ended 30.09.08 | 6 months ended 30.09.07 | Year ended 31.03.08 | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Revenue from external customers | 31,925 | 25,310 | 72,364 | 2,818 | 3,595 | 8,201 | 118 | 74 | 288 | 34,861 | 28,979 | 80,853 |
| Inter-segment revenue | 2,413 | 3,181 | 7,140 | - | 454 | 488 | 370 | 301 | 989 | 2,783 | 3,936 | 8,617 |
| Total revenue | 34,338 | 28,491 | 79,504 | 2,818 | 4,049 | 8,689 | 488 | 375 | 1,277 | 37,644 | 32,915 | 89,470 |
| Segment result | 2,121 | 1,994 | 5,976 | 74 | 178 | 459 | 194 | 33 | 87 | 2,389 | 2,205 | 6,522 |
| Impairment of goodwill | (12,423) | - | - | (12,423) | ||||||||
| Central costs | (182) | (274) | (633) | |||||||||
| Operating profit/ (loss) | 2,207 | 1,931 | (6,534) | |||||||||
| Net financing costs | 78 | (66) | (166) | |||||||||
| Taxation | (754) | (592) | (1,454) | |||||||||
| Profit/ (loss) for the period | 1,531 | 1,273 | (8,154) | |||||||||