12 Sep 2011 07:00
12 September 2011
Murgitroyd Group PLC ("Murgitroyd" or "the Group")
Preliminary Results for the year ended 31 May 2011
Murgitroyd (AIM:MUR), the European Patent and Trade Mark Attorney, is pleased to announce its audited results for the year ended 31 May 2011.
Highlights
·; Tenth consecutive year of sales and earnings growth
·; Turnover increased by 13% to £33.2m (2010: £29.4m)
·; Operating profit (before impact of property revaluations) increased by 7.2% to £4.13m (2010: £3.85m)
·; Profit before income tax (before impact of property revaluations) increased by 8.7% to £4.0m (2010: £3.7m)
·; Basic earnings per share (before impact of property revaluations) of 30.5p (2010: 30.0p)
·; Basic earnings per share of 31.1p (2010: 31.8p)
·; Proposed final dividend of 7.25p per share, giving a total dividend for the year of 10.75p (2010: 10p), an increase of 7.5% year on year
·; New offices opened in Tokyo and San Francisco, German operations consolidated and expanded in Munich
Ian Murgitroyd, Chairman of Murgitroyd Group PLC said:
"I am pleased to report that Murgitroyd has performed ahead of expectations in an ever challenging economic climate. We have delivered on our objectives of generating significant increases in turnover and profitability whilst continuing to invest in the business. During the period, we opened two new business development offices in Tokyo and San Francisco and expanded our Munich office. Although the market environment remains volatile we are confident we can continue to generate value for shareholders both organically and, if we can identify suitable opportunities, by acquisition. We believe that Murgitroyd remains well positioned to take advantage of current and future opportunities in the market."
For further information, please contact:
Keith Young, Murgitroyd T: 0141 307 8400
Sandy Fraser, Brewin Dolphin Limited (NOMAD) T: 0845 213 2072
Nadja Vetter/Sophie Leigh-Pemberton, Cardew Group T: 0207 930 0777
Notes to Editors:
Murgitroyd Group PLC, the holding company of Murgitroyd & Company Limited ("Murgitroyd & Company"), a European Patent and Trade Mark Attorney practice, was floated on AIM on 30 November 2001.
The practice has European offices in Aberdeen, Belfast, Dublin, Edinburgh, Glasgow, Helsinki, London, Milan, Munich, Newcastle, Nice and York, and offices in Raleigh-Durham, San Francisco and Tokyo.
Murgitroyd Group PLC specialises in the provision of Intellectual Property services, including filing, prosecuting, litigating, licensing, assigning and renewing Patents, Trade Marks and Designs, advising on Copyright and generally assisting clients with the management of their Intellectual Property. Patent services span the major sectors of the global economy including engineering, electronics, chemistry and biotechnology with clients ranging from large multi-national corporations to individual inventors and both in-house and external Patent Attorneys. The practice services major Trade Mark clients from the personal care, clothing, food and drinks, tobacco, pharmaceuticals, chemicals and oil industries together with service sector, sport and entertainment and retail industry clients. Trade Mark services are also provided to other private practice Trade Mark Attorneys.
Murgitroyd Group PLC
Chairman's Statement
Financial review
The Group has continued to show strong organic growth, with performance ahead of expectations in spite of the continued challenging economic environment. For the year ended 31 May 2011, Group turnover increased by 13% to £33.2m (2010: £29.4m) reflecting increased business development activity and improved service offerings including, but not limited to, IP Portal.
Operating profit rose by 5% to £4.2m (2010: £4.0m). Gross profit increased by 9% to £19.9m (2010: £18.3m). The margin percentage decreased as anticipated year-on-year, from 62.3% in 2010 to 59.9% in 2011 reflecting the change in the market for the purchase of Patent and Trade Mark Attorney services, as well as the Group's changed sales mix.
Earnings per share of 31.1p (2010: 31.8p) were affected by differential corporate tax rates between the UK and overseas territories, as well as property valuation surpluses in the last two years. Stripping out the effect of the revaluations, earnings per share increased to 30.5p (2010: 30.0p) despite the higher tax charges. The majority of the additional tax charge arises in the US where the Group now generates a meaningful part of its sales and where corporate tax is 6% higher than in the UK. The differential will increase further over the next few years as UK rates fall towards 24%.
Murgitroyd's head office, Scotland House, is owned by the Group and is revalued annually as at the financial year end date. The annual revaluation of the head office building resulted in a property revaluation credit of £55,000 as compared to a credit of £156,000 in the previous year. Excluding the impact of property revaluations (both years), profit before income tax increased by 8.7% to £4.0 million (2010: £3.7 million).
The Group successfully renewed its facilities with Clydesdale Bank during the year and net debt as at 31 May 2011 had reduced to £4.6m (31 May 2010: £5.8m). We continue to trade comfortably within our trading and cash flow banking covenants, and the Board believes the Group's banking facilities are competitively priced and are sufficient for our current purposes.
The Group continued to benefit from low interest rates during the financial year, financial expense falling to £145,000 (2010: £187,000).
Capital expenditure was higher year-on-year (£375,000 compared to £86,000) reflecting the previously announced investment in the Group's IT infrastructure. This investment is important to ensure the Group operates with the kind of scalable IT infrastructure that underpins much of its service delivery to clients.
Operating review
The Group operated from sixteen offices in nine countries during the year, and the growth and development of Murgitroyd's offices and network continues.
The Group's third new business development office, on the West Coast of the United States, opened in May 2011 in San Francisco. This follows the opening of the Japanese business development office in Tokyo in June 2010, which has been operational for most of the financial year. Its operations will continue to be reviewed on an ongoing basis to assess the return on the Group's investment in the Japanese market.
We also consolidated and expanded our German operations in Munich. As previously reported, Murgitroyd & Company's "Director, Professional Practice", an experienced opposition practitioner at the European Patent Office ("EPO"), will relocate to Munich in October 2011 to develop an EPO opposition and appeal hub. The team in the Munich office was also strengthened with the recruitment of an additional German Patent and Trade Mark Attorney since the year end.
Our Newcastle office in the North-East of England also recruited a new Attorney and operations relocated to new, larger, premises.
People
The total number of employees as at 31 May 2011 had increased to 230. In addition to the recruitment of two new Attorneys to the Munich and Newcastle offices, the Group successfully recruited one trainee to its London office and one Attorney to the York office since the year end.
Murgitroyd has purposely recruited a larger number of specialist formalities and business development staff in order to, respectively, reduce the overhead cost base attached to work being carried out and continue its successful sales growth. The cost base of specialist formalities and paralegal staff enables the reduction of headline pricing (reflected in reduced margin percentage), reduced margin percentage being recovered at operating profit level.
I would like to take this opportunity to thank all our staff for their continued hard work. I would like to thank in particular Deputy Chairman David Castle, who retired at the AGM in October 2010, for his considerable efforts and commitment since he joined us in 2005 and wish him well for the future.
The market
There have been no new markets statistics since the EPO released its 2010 numbers which reported that, pleasingly, there had been a 10% increase in European Patent filings in 2010, with 26% and 18% of filings coming from the US and Japan respectively.
Statistics from the European Community Trade Mark Office, based in Alicante, also demonstrate good growth, both year-on-year, and since the beginning of the 2011 calendar year.
The Group has been actively involved in developing the UK IP profession's response to the Legal Services Act - in particular recognition and regulation of practices considered Alternative Business Structures - one of its Attorneys sitting on the UK Chartered Institute of Patent Attorneys' ("CIPA") "Working Party on ABS" and another being elected to CIPA's Council.
Murgitroyd is also watching developments with the UK Government's "Patent Box" initiative closely, considering how best it can capitalise on this.
Share price
During the period, the middle market price of the Company's shares fluctuated between 230p and 355.5p. The current middle market price is 317.5p.
Dividend
An interim dividend of 3.5p per share was paid during the year, reflecting the Board's confidence in the continued performance of the Group. A final dividend of 7.25p per share is being proposed, giving a total dividend for the year of 10.75p (2010: 10p), an increase of 7.5% year on year.
Subject to approval at the Annual General Meeting, the final dividend will be paid on 3 November 2011 to shareholders on the register on 14 October 2011. The ex-dividend date is 12 October 2011.
Outlook
Against a volatile and uncertain economic climate Murgitroyd continues to maintain a solid performance as sales and profits continue to rise. While we continue to pursue organic growth - investing in people, new offices, IT infrastructure and systems, and business development and marketing - we also remain committed to identifying suitable acquisition opportunities. In line with the careful cost controls implemented across the Group any acquisition opportunity must fit our strict criteria. As we have stated previously, we will only acquire assets that are complementary to our existing offering and only where deal terms are value accretive.
Given the Group's prudent management and robust performance in difficult markets, the Board believes that Murgitroyd is well positioned to take advantage of current and future opportunities within the market. We remain confident of our ability to generate long-term growth and value for shareholders, as we continue to invest in business development activities, such as the recent opening of our San Francisco office, and expand internationally.
Ian G Murgitroyd
Chairman
9 September 2011
This preliminary announcement was approved by the Board of Directors on 9 September 2011.Consolidated income statement
for the year ended 31 May 2011
Note | Year ended 31 May 2011 £'000 | Year ended 31 May 2010 £'000 | |
Revenue | 33,218 | 29,429 | |
Cost of sales | (13,307) | (11,095) | |
Gross profit | 19,911 | 18,334 | |
Administrative expenses (including property revaluation uplift of £55,000; 2010: £156,000) |
(15,727) |
(14,326) | |
Operating profit before property revaluation uplift |
4,129 |
3,852 | |
Property revaluation uplift | 55 | 156 | |
Operating profit | 4,184 | 4,008 | |
Financial income | 3 | 4 | |
Financial expense | (145) | (187) | |
Profit before income tax | 4,042 | 3,825 | |
Income tax | (1,389) | (1,123) | |
Profit for the year attributable to equity holders of the parent |
2,653 |
2,702 | |
Earnings per share | 2 | ||
Basic | 31.12p | 31.83p | |
Diluted | 30.41p | 31.23p | |
Consolidated balance sheet
at 31 May 2011
31 May2011 £'000 | 31 May2010 £'000 | ||||
Assets | |||||
Non-current assets | |||||
Property, plant and equipment | 2,155 | 1,941 | |||
Intangible assets | 14,829 | 14,820 | |||
Deferred tax asset | 67 | - | |||
Total non-current assets | 17,051 | 16,761 | |||
Current assets | |||||
Work in progress | 745 | 618 | |||
Trade and other receivables | 12,572 | 10,780 | |||
Cash and cash equivalents | 1,252 | 2,012 | |||
Total current assets | 14,569 | 13,410 | |||
Total assets | 31,620 | 30,171 | |||
Current liabilities | |||||
Bank overdraft | (521) | (1,096) | |||
Other interest-bearing loans and borrowings |
(1,190) |
(1,768) | |||
Trade and other payables | (6,420) | (5,585) | |||
Taxation payable | (370) | (141) | |||
Total current liabilities | (8,501) | (8,590) | |||
Non-current liabilities | |||||
Other interest-bearing loans and borrowings |
(4,098) |
(4,977) | |||
Other payables | - | - | |||
Provisions for liabilities | (65) | (52) | |||
Deferred tax liabilities | - | (9) | |||
Total non-current liabilities | (4,163) | (5,038) | |||
Total liabilities | (12,664) | (13,628) | |||
Net assets | 18,956 | 16,543 | |||
Equity | |||||
Share capital | 854 | 850 | |||
Share premium | 2,646 | 2,582 | |||
Merger reserve | 6,436 | 6,436 | |||
Revaluation reserve | - | - | |||
Retained earnings | 9,020 | 6,675 | |||
Total equity attributable to equity holders of the parent | 18,956 | 16,543 | |||
Consolidated statement of cash flows
for the year ended 31 May 2011
| Year ended 31 May2011 £'000 | Year ended 31 May2010 £'000 | ||
Cash flows from operating activities | ||||
Profit for the year | 2,653 | 2,702 | ||
Adjustments for: | ||||
Depreciation | 216 | 222 | ||
Amortisation | - | - | ||
Gain on disposal of property, plant and equipment | - | - | ||
Provision for "Onerous Lease" | (7) | (38) | ||
Provision for leasehold property dilapidations | 20 | 45 | ||
Property revaluation surplus | (55) | (156) | ||
Financing costs | 142 | 183 | ||
Equity settled share-based payment expense | 81 | 63 | ||
Income tax expense | 1,389 | 1,123 | ||
4,439 | 4,144 | |||
Increase in trade and other receivables | (1,792) | (624) | ||
Increase in work in progress | (127) | (139) | ||
Increase in trade and other payables | 840 | 411 | ||
3,360 | 3,792 | |||
Interest paid | (138) | (164) | ||
Interest received | 3 | 4 | ||
Income tax paid | (1,156) | (1,130) | ||
Net cash from operating activities | 2,069 | 2,502 | ||
Cash flows from investing activities | ||||
Acquisition of property, plant and equipment | (379) | (86) | ||
Proceeds from disposal of property, plant and equipment | - | - | ||
Acquisition of subsidiaries, net of cash acquired | (656) | (314) | ||
Net cash used in investing activities | (1,035) | (400) | ||
Cash flows from financing activities | ||||
Proceeds from exercise of share options | 68 | 27 | ||
Loans received | 300 | 300 | ||
Repayment of borrowings | (1,118) | (1,038) | ||
Payment of finance lease liabilities | - | - | ||
Dividends paid | (469) | (1,232) | ||
Net cash used in financing activities | (1,219) | (1,943) | ||
Net (decrease)/increase in cash and cash equivalents | (185) | 159 | ||
Cash and cash equivalents at start of year | 916 | 757 | ||
Cash and cash equivalents at year end | 731 | 916 | ||
Notes to the announcement:
1. Basis of preparation
The financial statements are prepared on the historical cost basis except that freehold property is stated at fair value. The preparation of the financial statements requires the Directors to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. These consolidated financial statements are presented in Pounds which is the parent company's functional currency. All financial information presented in Pounds has been rounded to the nearest thousand.
The financial information set out in this announcement does not constitute the statutory accounts for the years ended 31 May 2011 or 2010 but is derived from those accounts. Statutory accounts for 2010 have been delivered to the Registrar of Companies, and those for 2011 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 498 (2) or (3) of the Companies Act 2006.
2. Earnings per share
Earnings per 10p ordinary share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year. For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all potential dilutive shares.
Profit for the year
£'000 |
Weighted average number of shares Number | 2011 Earnings per share
p |
Profit for the year
£'000 |
Weighted average number of shares Number | 2010 Earnings per share
p | |
Basic earnings per share | 2,653 | 8,524,337 | 31.12p | 2,702 | 8,489,485 | 31.83p |
Dilutive share options | - | 199,794 | (0.71p) | - | 163,916 | (0.60p) |
Diluted earnings per share | 2,653 | 8,724,131 | 30.41p | 2,702 | 8,653,401 | 31.23p |
Property revaluation uplift | (55) | - | (0.63p) | (156) | - | (1.80p) |
Adjusted, diluted earnings per share | 2,598 | 8,724,131 | 29.78p | 2,546 | 8,653,401 | 29.43p |
Adjusted, basic earnings per share | 2,598 | 8,524,337 | 30.48p | 2,546 | 8,489,485 | 29.99p |
3. Annual General Meeting
The Annual General Meeting of the company will be held at Scotland House, 165-169 Scotland Street, Glasgow G5 8PL at 11am on 27 October 2011.
4. Further copies
Further copies of the Directors' report and financial statements will be available, free of charge, for a period of one month following posting to shareholders from the company's Nominated Adviser and Broker, Brewin Dolphin Limited, 12 Smithfield Street, London EC1A 9BD, telephone: 0845 213 2000. Copies of the full financial statements will be posted to shareholders as soon as practicable. A copy of this announcement will be made available on the company's website: www.murgitroyd.com