Primorus Inv. Regulatory News (PRIM)

31 Mar 2009 14:03



CSS Stellar plc

("CSS" or the "Group")

Preliminary Results

for the year ended 31 December 2008

CSS Stellar plc, the sports and entertainment management and marketing group, today announces its audited preliminary results for the year ended 31 December 2008.

Highlights:

Operating loss prior to impairment of goodwill of £1.3 million (2007: loss  of £1.3 million)

Significant savings in corporate overheads in the second half of the year

Disposal of Icon Display and freehold property for £4.3 million in cash

Disposal of PFD for up to £4 million in cash

Disposal of GEM Minneapolis, Inc. for $1.8 million in cash

All debt repaid during the year

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CSS STELLAR PLC

CHAIRMAN'S STATEMENT

Overview 

The CSS Stellar Group is now a very different entity to that which began 2008. As we announced in our 2007 Annual Report and our 2008 Interim Results, the Group has sold a number of businesses, and repaid its bank borrowings in full from the proceeds of these sales. As a result, the Group is now debt free for the first time in its history, and can move forward into 2009 both as a much leaner business, but importantly, on a significantly more stable footing.

Financial Results

Revenue from continuing operations for the Group of £5.1 million was 11% lower than the prior year (2007: £5.8 million) due principally to a lower level of expenses incurred and then billed on to customers in our North American Sports business. Group operating loss, adjusted for impairment of goodwill of £1.2 million, was £1.3 million, in line with 2007 (loss of £1.3 million prior to impairment of goodwill of £1.2 million).

Disposals

During the year, the Group effected the disposal of three significant operating subsidiaries. In January 2008, we disposed of our 75% interest in GEM Minneapolis, Inc., a US based creative design and photography business, for $1.8 million in cash, with $1.1 million received on completion, and $0.7 million due over the next three years by way of a promissory note.

In June we disposed of our 100% subsidiary, The Peters Fraser & Dunlop Group Limited, for £4 million in cash, of which £3.75 million was paid on completion, with £0.25 million becoming payable in 2011 dependent on PFD's earnings over a three year period.

As we announced with our 2008 Interim results, in October we completed the disposal of our wholly owned subsidiary, Icon Display Limited, for a total of £4.3 million in cash, with £0.3 million deferred and payable within twelve months. These disposals are described in more detail in the Operating and Financial Review and the related notes.

Board changes

As we announced in our 2007 Annual Results, I took over as Chairman from David Buchler in July 2008. At the same time, Caroline Michel and Sir Jeremy Hanley retired from the Board.

John Webber, the former Chairman of the Group, rejoined the Board as an executive director in July. Simon Rhodes also rejoined the Board in October as a non-executive director.

Corporate overheads

Following my appointment as Chairman, the Group has radically reduced the level of corporate overheads, from an annualised rate of £1.6 million to an annualised £0.3 million, through a significant reduction in the level of professional fees incurred by the group, and the savings in property costs achieved following the relocation of our head office in October.

Investing company and future strategy

The Board intends to focus its strategy in two areas. Firstly, we intend to grow the existing businesses which form our core areas of expertise. Secondly, the Board continues to research and evaluate potential investment opportunities. As we announced in October, the Board will seek to develop its strategy of focusing on investing in the Company's core business of sport and sport media by considering only those investments which demonstrate considerable potential for growth and which will optimise shareholder value. The Board will update shareholders in due course once CSS is in a position to develop those opportunities.

Following the last of the disposals made in the year, CSS became an investing company, as defined in the AIM Rules for Companies. Its investing strategy was set out in the circular sent to shareholders on 3 October 2008, and was approved at a General Meeting on 24 October 2008. CSS is now required to complete an acquisition or acquisitions which constitute a reverse takeover, or otherwise implement its investing strategy within twelve months of becoming an investing company.

In the current challenging economic environment, the fact that the Group is now debt-free, coupled with a significantly leaner structure, leave CSS in a solid and stable position from which to develop. 

I should like to thank all of our employees for all of their efforts and support during the unwanted turbulence of the last two years.

Julian Jakobi

Chairman

31 March 2009

CSS STELLAR PLC

OPERATING AND FINANCIAL REVIEW

Group Review of 2009

Revenue from continuing operations for the Group in the year ended 31 December 2008 was £5.1 million, an 11% reduction on 2007 (£5.8 million). 2007 results have been re-presented to show the results of discontinued operations separately. The reduction was due to reduced gross revenue from one of our US contracts, due to a reduction in expenses incurred and then billed on.

Group operating loss, adjusted for impairment of goodwill of £1.2 million, was £1.3 million, in line with 2007 (loss of £1.3 million prior to impairment of goodwill of £1.2 million).

Review of continuing operations

Talent Management

The Talent Management division now consists of CSS Stellar Sports, Hambric Stellar Golf and CSS Presenters. The division made an operating loss prior to impairment of goodwill of £0.1 million (2007: profit of £0.3 million) on revenue of £3.6 million (2007: £4.3 million), due largely to restructuring costs incurred during the year. The division is now focused primarily in the core areas of Motorsports and Golf.

Our clients once again achieved many sporting successes throughout the year. In Motorsports, Allan McNish won the prestigious Le Mans 24 Hours for the second time, becoming the first Briton to be victorious in a diesel powered sports car. Andrea Dovizioso performed superbly during his first season in Moto GP, having stepped up from 250cc. He achieved a highly respectable fifth place in the Championship, reaching the podium in third place in the penultimate race of the season. Dario Franchitti returns to IndyCar to race for Ganassi in 2009, with an impressive pedigree in the sport having won the Indianapolis 500 and the Indy Racing League in 2007.

In Golf, our clients achieved many successes on tour. Oliver Wilson was a member of the European Ryder Cup team in Kentucky, having qualified for the team for this prestigious event following a highly successful season, finishing eleventh on the European Order of Merit, having had four runner up finishes in the 2008 season. Gonzalo Fernandez-Castano captured the fourth title of his career in the British Masters at the Belfry, and Francesco Molinari had his best season to date on the European Tour.

In other sports, Andy Hodge, the stroke of the Great Britain coxless four, powered the team to the gold medal at the Olympics in Beijing in August. In February, round-the-world yachtsman Alex Thomson finished second in the Barcelona World Race, and in doing so broke the 24 hour distance record for a 60 foot monohull yacht. 

Marketing

The Group's Marketing division is represented by the GEM Group, a promotional marketing business based in New York, which provides marketing solutions to a range of blue chip clients including GE and NBC.

Revenue in 2008 was £1.5m (2007: £1.5m), in line with 2007. Adjusting for goodwill impairment, the division broke even in the year, compared to a small profit of £0.1 million in 2007.

During the year GEM worked with GE's Lighting division on a number of marketing campaigns, including a full advertising campaign to highlight how customers can save energy, and the creation of an online promotional campaign for GE's Olympic Marketing Program.

GEM also worked with NBC Universal to deliver an interactive micro-site platforming the 2008 Beijing Olympic Games' sports content and marketing tools provided by NBC Universal.

Discontinued Operations

As discussed in the Chairman's Statement, the group disposed of a number of businesses during the year.

GEM Minneapolis, Inc., our US based creative design and photography business, was sold for $1.8 million in cash in January 2008, with $1.1 million in cash received on completion, and a further $0.7 million due over the next three years by way of a promissory note. The disposal generated a profit of £0.2 million prior to write off of goodwill of £0.7 million.

In June 2008, we sold The Peters Fraser & Dunlop Group Limited ("PFD"), the literary and talent agency, for £4 million, with £3.75 million payable in cash on completion, and £0.25 million becoming payable in 2011 dependent on PFD's earnings over a three year period. The disposal realised a profit of £2.5 million prior to a write off of goodwill of £3.2 million.

Icon Display, our Events branding and signage business, was sold in October 2008 for £4.3 million in cash, with £0.3 million becoming due within twelve months. This sale contributed a profit of £0.1 million prior to a write off of goodwill of £2.2 million.

Finally, the group disposed of two smaller operations, Talent Financial Limited, a wholly owned subsidiary, in January, and our investment in Michael Storrs Music Limited in December, together generating a profit of £0.1 million for the Group.

Central costs

Central costs in 2008 were £1.1 million, a 31% reduction on 2007 (£1.7 million). Significant savings were made in the second half of the year, with both the Board and the head office function reduced in size. The second half of 2008 also saw a significant reduction in professional fees following the disposal of PFD. The move to new premises in October 2008 will generate further savings in 2009.

Interest Payable

The net interest payable by the Group in 2007 was £208,000 (2007: £469,000). All of the Group's borrowings were repaid in October 2008, leading to the significant reduction in interest paid.

Goodwill

In accordance with IAS 36, the Board reviewed the carrying value of goodwill held in the Balance Sheet for impairment. As a result of the review, the Board concluded that a write down of £1.2 million is required, of which £0.8 million relates to CSS Stellar Sports, and £0.4 million to The GEM Group.

Taxation

The Group's tax charge was £0.1 million (2007: credit of £0.2 million), which relates entirely to the UK operations.

Loss per Share 

Loss per share on continuing operations on a basic and fully diluted basis shows a loss of 9.28p per share (2007: loss of 8.93p). Basic unadjusted and fully diluted earnings per share on discontinued operations were a loss of 8.22p (2007: loss of 34.29p).  The losses are due to the impact of the disposals and the impairment write down booked in the year.

Foreign Exchange

The Group's earnings are exposed to the Sterling / US Dollar exchange rate. The average US Dollar rate in 2008 was $1.86 to the Pound (2007: $2.00), with the rate at 31 December 2008 $1.45 to the Pound (2007: $2.00), as sterling weakened significantly in the latter part of the year.

Bank Debt

The Group's gross bank debt of £3.1 million at 31 December 2007 was repaid in full following the disposal of Icon. The Group is now debt free for the first time since its inception in 1999.

Net Assets

As a consequence of the disposals during the year and the impairment of goodwill, Net Assets at 31 December 2008 are £2.9 million (2007: £7.4 million). Net asset value per share at 31 December 2008 was 10p (2007: 26p).

Cash Flow

The cashflow statement shows an increase in cash of £1.2 million (2007: decrease of £0.2 million) as a consequence of the disposals in the year and the repayment of borrowings.

Julian Jakobi

Chairman

31 March 2009

5. Net result from discontinued operations

The Group has disposed of a number of businesses during the year. In January, the Group sold its 75% interest in GEM Minneapolis, Inc. ("GEM"), a brand design and packaging business based in Minnesota, USA. As part of its strategy to focus on core businesses, the board decided that the nature of the business of GEM Minneapolis, Inc., in addition to its geographical location, meant that it was no longer central to the Group's future strategy.

In July 2008, the Group disposed of The Peters Fraser & Dunlop Group Limited ("PFD"), as announced in our 2007 Annual Results. The decision to dispose of PFD followed an operational review by the board, in which it became clear that there are no real links between the activities of PFD and any other Group company. In these circumstances the Directors concluded that it is in the best interests of shareholders to effect a disposal of PFD.

In October 2008, the Group sold its 100% interest in Icon Display Limited ("Icon"), its events signage business. Following the review of the business announced with our 2007 Annual Results, the Board decided it is in the best interests of shareholders to focus on the core business of sports and sports media.

Others 

In addition, in January 2008, the Group sold its interest in Talent Financial Limited, a provider of financial advice and services.

As a consequence of the above disposals, revenue and expenses, gains and losses relating to these disposals have been eliminated from the Group's continuing results and presented as a single line item on the face of the income statement (see "net result from discontinued operations"). The comparative income statement has been represented to show the discontinued operations separately from continuing operations. The operating results for each of these businesses until the change of control can be summarised as follows:

GEM Minneapolis, Inc. was sold on 8 January 2008 for a total of $1.8 million (£0.9 million), representing cash paid on completion of $1.1 million (£0.55 million), in addition to a further $700,000 (£0.35 million) payable by way of a promissory note payable in three annual instalments between January 2009 and January 2011. This has been recognised at fair value in the financial statements.

PFD was sold on 7 July 2008 for £4 million in cash, of which £3.75 million was payable on completion, with £0.25 million becoming payable in 2011 dependent on PFD's earnings over a three year period. This has been recognised at fair value in the financial statements.

Icon Display was sold on 24 October 2008 for £4.3 million in cash, of which £4 million was paid in cash on completion. This includes a payment of £0.8 million in respect of a freehold property occupied by Icon, the assumption of £0.3 million of third party debt owed by Icon which Icon agreed to discharge, and the settlement of £1.1 million of inter-company debt owed by Icon to the Company. The balance of £0.3 million is deferred consideration payable in cash and is due on or before the first anniversary of the date of completion. Under the terms of the Sale and Purchase Agreement, the purchaser of Icon Display Ltd will be liable for payment of any tax suffered by the company in the period up to the date of disposal. This has been recognised at fair value in the financial statements.

Cashflows generated by each disposal for the reporting periods under review can be summarised as follows:

6. Basis of preparation

CSS Stellar plc is a company incorporated in the United Kingdom. The Group financial statements are for the year ended 31 December 2008 and have been prepared under the historical cost convention, except for revaluation of certain properties and financial instruments.

Following the disposals effected during the year, the Group has repaid all its borrowings and remains debt free. The Group had cash balances at 31 December 2008 of £0.5 million. The directors have prepared cashflow forecasts and budgets that show that, for a period of at least twelve months from the date of these financial statements, the group has sufficient resources to continue in business for the foreseeable future. Accordingly, the directors believe that it is appropriate to prepare the financial statements on a going concern basis.

These consolidated financial statements (the financial statements) have been prepared and approved by the directors in accordance with International Financial Reporting Standards as adopted by the EU ("adopted IFRS").

The principal accounting policies of the Group are set out in the Group's 2007 Annual Report and Financial Statements. These policies have remained unchanged.

7. Financial Information

The financial information relating to the year ended 31 December 2008 set out in this preliminary announcement does not constitute Statutory Accounts as defined in Section 240 of the Companies Act 1985, but has been extracted from the statutory accounts, which received an unqualified auditors' report and which have not yet been filed with the Registrar of Companies. The financial information relating to the period ended 31 December 2007 is extracted from the statutory accounts, which incorporated an unqualified audit report and which has been filed with the Registrar of Companies.