MUBL.L Regulatory News (MUBL)

12 Dec 2005 07:01

Air Music & Media Group PLC12 December 2005 12 DECEMBER 2005 AIR MUSIC & MEDIA GROUP PLC ("AIR GROUP" or "THE COMPANY") INTERIM RESULTS FOR THE SIX MONTH PERIOD ENDED 30 SEPTEMBER 2005 The Board of Air Group, the UK distributor of home entertainment products, ispleased to announce its Interim Results for the six months ended 30 September2005. HIGHLIGHTS: • 280% increase in turnover for the period compared with the same period last year; • 41% increase in profit before taxation, goodwill amortisation and exceptional charges; • Exit from loss-making Hollywood DVD subsidiary; • Streamlined and rationalised Head Office that will result in reduced overheads and increased efficiency; and • Core business is now well-placed to enhance profitability. John French, Chairman of Air Group said: "The core business is now well-placedto enhance profitability by expanding its customer base and product offering. Inaddition, the Board will continue to evaluate strategic acquisitionopportunities as they arise." Enquiries: Air Music & Media Group plcAlex Sorrell, Finance Director Tel: 01772 455 000 Bishopsgate Communications Ltd. Tel: 020 7430 1600Maxine Barnes Mobile: 07860 489 571Nick Rome Mobile: 07748 325 236 CHAIRMAN'S STATEMENT I am pleased to announce the interim results for the six months to 30 September2005. ResultsTurnover for the period grew by 280% to £29.8 million, with operating profitbefore goodwill amortisation of £863,000 and exceptional items of £1,364,000increasing by 76% to £1,300,000. Interest payable during the period was £314,000resulting in a loss before tax of £1,241,000. Profit before taxation, goodwillamortisation and exceptional charges was 41% higher at £986,000. Basic loss pershare for the period was 0.30p whilst normalised earnings per share (afteradjusting for goodwill amortisation and exceptional charges) was 0.14p. This trading period incorporates the costs associated with the strategic review,announced in July 2005, which has seen a number of changes for the Air Group.The following is a summary of the key areas: • The Air Group exited its loss making Hollywood DVD subsidiary and placed the company in the hands of administrators. • During the past six months the Board has also been rationalised with a number of Board changes resulting in a smaller but clearly focused Executive Board, and • The corporate, distribution, IT and finance functions that were historically attached to the Head Office in Berkhamsted have been incorporated into the distribution business in Leyland, creating centralised functions servicing all the UK businesses within the Air Group. There are overhead savings created by the centralisation of the distribution and finance functions that will benefit the Air Group during the next full financial year. Current TradingThe Air Group's current operations fall into two clear areas; distribution andpublishing. Our distribution business, predominantly Music Box Leisure ("MBL"),has performed to our expectations since acquisition. Our publishing division hasbeen under pressure in the UK, with CD publishing sales showing a decline of 12%and DVD publishing sales falling 76%. However, Legacy, our North Americanbusiness, has shown sales growth of 3%. It is the Board's intention to focus its efforts on the proven distributionmodel of the MBL business, with the publishing division providing proprietarygoods for MBL and seeking to develop the DVD publishing operation concentratingon more profitable niche market areas. In September 2005 the Air Group acquiredMaximum Entertainment, which licenses a portfolio of children's DVD titlesincluding Transformers, Care Bears and Action Man. OutlookFollowing the strategic review, the core business is now well-placed to enhanceprofitability by expanding its customer base and product offering. In addition,the Board will continue to evaluate strategic acquisition opportunities as theyarise. We are currently in our most critical period of the year, with theChristmas trading quarter anticipated to account for almost 30% of annual sales.Even in early December it still remains difficult to assess how successfulretail activity will be this Christmas and the Board retains a cautious view onChristmas trading. Continuing with the rationalisation of the Board, Nick Fisher, currently anon-executive director, has elected to step down from the Board with immediateeffect. Jan Beer, currently an executive director, has also announced herintention to step down from the Board to focus on the further development ofMBL. I have been Non-Executive Chairman of the Group since 2001, helping the Companymove from a private concern to the OFEX market and then to the AIM market in2002. However, due to an increased workload with my other companies I feel thatthis is an appropriate time for me to announce my intention to step down asNon-Executive Chairman. I will stay in place until the Board identifies asuitable replacement. I have enjoyed working with the team at Air Group and wishthem well for the future. John FrenchChairman09 December 2005 CONSOLIDATED PROFIT AND LOSS ACCOUNT (UNAUDITED)FOR THE PERIOD ENDED 30 SEPTEMBER 2005 as restated 6 months to 6 months to Year ended 30.09.2005 30.09.2004 31.03.2005 Unaudited Unaudited Audited Note £'000 £'000 £'000 Turnover 29,845 7,860 49,827 Cost of sales (24,444) (5,735) (39,113) --------- --------- ----------Gross Profit 5,401 2,125 10,714 Distribution costs (765) (118) (1,148) Administrative expenses -recurring (4,199) (1,410) (6,205) Administrative expenses -exceptional items 3 (1,364) - (2,130) --------- --------- ----------Administrative expenses -total 4 (5,563) (1,410) (8,335) --------- --------- ----------Group Operating(Loss)/profit (927) 597 1,231 Interest (net) (314) (37) (430) --------- --------- ----------(Loss)/profit on Ordinary Activitiesbefore Taxation (1,241) 560 801 Taxation 5 (76) (197) (1,328) --------- --------- ---------- Retained (Loss)/profiton Ordinary Activitiesafter Taxation andAttributable to the Group (1,317) 363 (527) ========= ========= ==========Basic earningsper share 6 (0.30)p 0.18p (0.19)p ========= ========= ==========Diluted earnings pershare 6 (0.30)p 0.17p (0.15)p ========= ========= ========== There were no recognised gains or losses for the periods other than the loss shown above. CONSOLIDATED BALANCE SHEET (UNAUDITED)FOR THE PERIOD ENDED 30 SEPTEMBER 2005 as restated As at As at As at 30.09.2005 30.09.2004 31.03.2005 Unaudited Unaudited Audited £'000 £'000 £'000Fixed AssetsIntangible assets 34,963 7,963 36,204Tangible assets 419 257 608 --------- ---------- --------- 35,382 8,220 36,812 ========= ========== =========Current AssetsStock and work in progress 8,828 2,065 7,983Debtors 10,790 6,477 11,283Cash at bank and in hand 2,334 1,461 3,584 --------- ---------- --------- 21,952 10,003 22,850 Creditors due within one year (22,032) (8,482) (22,581) --------- ---------- ---------Net Current (Liabilities)/assets (80) 1,521 269 --------- ---------- --------- Total Assets less CurrentLiabilities 35,302 9,741 37,081 Creditors due after morethan one year (3,084) (1,036) (4,137) --------- ---------- ---------Net Assets 32,218 8,705 32,944 ========= ========== ========= Capital and Reserves Called up share capital- equity interests 12,672 5,146 9,248Shares to be issued - - 10,000Share Premium 21,447 3,319 14,343Profit and Loss Account 899 3,040 2,153Merger Reserve (2,800) (2,800) (2,800) --------- ---------- ---------Shareholder's Funds 32,218 8,705 32,944 ========= ========== ========= CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)FOR THE PERIOD ENDED 30 SEPTEMBER 2005 6 months to 6 months to Year ended 30.09.2005 30.09.2004 31.03.2005 Unaudited Unaudited Audited £'000 £'000 £'000 £'000 £'000 £'000Net cash (outflow)/inflowfrom operating (466) (105) 4,293activities (Note 1) Returns on investments andservicing of finance Interest received 42 8 66Interest paid (356) (45) (413) ------ ------ ------Net cash outflow from returnson investments and servicingof finance (314) (37) (347) Taxation ------ ------ ------Corporation tax paid (1,722) (9) (771) ------ ------ ------Tax paid (1,722) (9) (771) Capital expenditure andfinancial investment Payments to acquire tangiblefixed assets (66) (144) (261)Receipts from sale oftangible fixed assets 75 - 3 Payments to acquireintangible fixed assets (46) (300) (303) Receipts from sale ofintangible fixed assets - - 3 ------ ------ ------Net cash outflow from capitalexpenditure and financialinvestment (37) (444) (558) Acquisitions and disposals Purchase of subsidiaryundertakings (81) - (16,687)Net cash acquired withsubsidiary undertakings - - 3,273Disposal of subsidiary 1 - -Deferred consideration paidfor subsidiary (403) (372) (372) ------ ------ ------Net cash outflow fromacquisitions and disposals (483) (372) (13,786) ------- ------ ------Cash outflow before financing (3,022) (967) (11,169) FinancingIssuing of ordinary sharecapital - - 5,126Repayments of short term debt - (13) -Repayments of long term debt (998) (54) (739)Hire purchase repayments (63) (7) (15)New secured loan - - 5,475New short-term borrowings - - 3,000 ------ ------ ------ (1,061) (74) 12,847 ------- ------ ------(Decrease)/increase in cashin the period (4,083) (1,041) 1,678 ======= ====== ====== NOTES TO CONSOLIDATED CASHFLOW STATEMENT (UNAUDITED)FOR THE PERIOD ENDED 30 SEPTEMBER 2005 1. Reconciliation of operating profit to net cash inflow from operating activities 30.09.2005 30.09.2004 31.03.2005 Unaudited Unaudited Audited £'000 £'000 £'000 Operating (loss)/profit (927) 597 1,231Depreciation charges 136 43 209Amortisation of intangible assets 1,082 337 1,475(Profit) on disposal of tangible assets (21) - (2)Exceptional items - non cash charges 680 - 2,130(Increase) in stock (1,303) (515) (51)Decrease/(increase) in debtors 50 (422) 853(Decrease) in creditors within one year (167) (133) (1,555)Net effect of foreign exchangedifferences 4 (12) 3 --------- --------- ---------Net cash (outflow)/inflow fromoperating activities (466) (105) 4,293 ========= ========= ========= 2. Analysis of net debt Cash Other At 1.04.2005 Movement Movements At 30.9.2005 £'000 £'000 £'000 £'000 Cash in hand, at bank 3,584 (1,250) - 2,334Overdraft (631) (2,833) - (3,464) ---------- --------- --------- ---------- 2,953 (4,083) - (1,130) Debt due within one year (6,514) (5) - (6,519)Debt due after one year (4,087) 1,003 - (3,084)Obligations under (64) 63 - (1)hire purchase agreements ---------- --------- --------- ---------- (10,665) 1,061 - (9,604) ---------- --------- --------- ---------- Total (7,712) (3,022) - (10,734) ========== ========= ========= ========== 3. Reconciliation of cash flow to movement in net debt 30.09.2005 30.09.2004 31.03.2005 Unaudited Unaudited Audited £'000 £'000 £'000(Decrease)/increase in cash in theperiod (4,083) (1,041) 1,678Change in net debt resulting fromcash flows 1,061 74 (7,720)Change in net debt resulting fromother changes - - (1,578)Net debt at beginning of the period (7,712) (92) (92) --------- --------- ---------Net debt at the end of the period (10,734) (1,059) (7,712) ========= ========= ========= NOTES TO THE UNAUDITED INTERIM FINANCIAL STATEMENTSFOR THE PERIOD ENDED 30 SEPTEMBER 2005 1. Accounting policies The interim financial statements have been prepared on the basis of theaccounting policies set out in the Annual Report and Accounts for the year ended31 March 2005 with the exception of the adoption of Financial Reporting Standard21 Events After The Balance Sheet Date (FRS 21) and Financial Reporting Standard22 Earnings per Share (FRS 22). The adoption of FRS 21 has resulted in the Air Group restating its closing netassets for the prior periods to exclude dividends proposed but not yet declaredat the balance sheet date. This exclusion of proposed dividends previouslyreported within current liabilities has increased closing net assets at 31 March2005 by £44,000. The adoption of FRS 22 has not led to any adjustments to thepreviously reported figures for basic and diluted earnings per share. 2. Financial information The financial information contained in this document is unaudited and does notconstitute statutory accounts within the meaning of section 240 of the CompaniesAct 1985. The figures for the financial year ended 31 March 2005 are derived from theconsolidated financial statements of Air Music & Media Group Plc on which anunqualified report has been issued and which have been filed with the Registrarof Companies. 3. Exceptional items In July, the Board announced that it was undertaking a strategic review of theAir Group's operations. This has involved the administration of Hollywood DVD,the rationalization of the Board structure and the centralisation and relocationof corporate, finance, IT and distribution functions to Leyland. In addition,during the period the Air Group was involved in litigation with former vendorsof Hollywood DVD in relation to the acquisition of that subsidiary. The exceptional charges represent the majority of total costs to be reflected inthe full year results and are analysed below: £'000Strategic reviewSettlements with former directors 326Write-off of intercompany balances 329on administration of Hollywood DVD LimitedWrite-off of unamortized DVD rights and associated artwork 165Write-off of IT licenses, development costs 173and other related costs previously capitalisedAssociated legal and professional fees 53Other assets written off 13 ------------- 1,059Litigation with former vendors ofHollywood DVD LimitedSettlement costs 75Associated legal costs 230 ------------- 305 ------------- -------------Total exceptional items 1,364 ============= The estimated effect of the exceptional items on the taxation charge for thefull year is to reduce the tax charge by £310,000. 4. Administrative expenses The administrative expenses of £5,563,000 (30.09.2004: £1,410,000) includeamortisation of goodwill of £863,000 (30.09.2004: £141,000). 5. Taxation The taxation charge has been estimated by the Company based on previous taxationadjustments and future rates. 6. Earnings per share The earnings per share has been calculated on the loss on ordinary activitiesafter taxation of £1,317,000, and the weighted average number of ordinary sharesin issue during the period of 434,493,736 (six months average) in accordancewith FRS 22. The earnings per share has been fully diluted to take into account the deferredconsideration on the purchase of The Original Record Company Limited and MaximumEntertainment Limited and also potentially dilutive shares held under the shareoption agreements. This increased the weighted average number of shares used inthe basic EPS calculation from 434,493,736 to 443,058,966 used in the fullydiluted EPS calculation. Normalised earnings per share as disclosed below are calculated using the (loss)/profit after tax for the financial year, having added back exceptional items(after adjusting for the effect of tax) and goodwill amortisation charge overthe basic weighted average shares in issue during the six months. 6 months to 6 months to Year ended 30.09.2005 30.09.2004 31.03.2005 Unaudited Unaudited Audited £'000 £'000 £'000(Loss)/ profit after taxation (1,317) 363 (527)Exceptional items 1,364 - 2,130Goodwill amortisation 863 141 925Taxation on exceptional items (310) - - --------- --------- -----------Profit for normalised calculation 600 504 2,528 ========= ========= =========== Basic earnings per share (0.30)p 0.18p (0.19)p ========= ========= ===========Basic normalised earnings per share 0.14p 0.25p 0.90p ========= ========= =========== Diluted earnings per share (0.30)p 0.17p (0.15)p ========= ========= ===========Diluted normalisedearnings per share 0.14p 0.23p 0.72p ========= ========= =========== 7. Dividends The directors do not recommend the payment of an interim dividend. 8. Comparative figures The Company has adopted a policy of presenting distribution costs separately inthe profit and loss account and have amended the comparatives accordingly. Theeffect has been to reduce cost of sales for the equivalent period in the prioryear by £118,000 and disclose distribution costs of the same amount. 9. Other information The interim statement was approved by the directors of the Company on 9 December2005. A copy of the interim statement will be posted on the Air Groups website,www.airmusicandmedia.com. This information is provided by RNS The company news service from the London Stock Exchange