8 May 2012 07:00
8 May 2012
Porta Communications Plc
("Porta" or the "Company")
Preliminary results for the year ended 31 December 2011
Porta Communications Plc, the AIM quoted international marketing and communications business announces preliminary results for the year ended 31 December 2011.
Highlights
·; Acquisition of Threadneedle Communications, small and mid-cap PR specialists, rebranded Newgate Threadneedle by way of reverse takeover
- In March 2012, Newgate Threadneedle won UK Stock Market award for Best Financial PR Advisor
- In May 2012, Newgate Threadneedle ranked no.1 by number of AIM companies by independent Morningstar industry rankings
·; Established Newgate Communications following key hires - already won a number of FTSE 100 and other large cap clients
·; Further recruitment of leading agency practitioners to enhance the Group's offering
·; Enhanced board composition with appointment of non-executive director Raymond McKeeve, corporate finance partner and global head of Berwin Leighton Paisner's private equity practice
·; Complementary acquisition targets identified
David Wright, Chairman and Chief Executive Officer of the Company, commented:
"We continue to focus on creating true shareholder value by building a first class international marketing and communications group in line with our original business plan. The building of the Group continues and benefits of this are now coming through strongly.
"Newgate Communications continues to recruit quality executives and major new clients are being won on a regular basis, adding value to our public relations agency.
"Newgate Threadneedle is trading ahead of budget and has recently won a number of new clients, while the media bartering division is poised to make a positive contribution to revenues. In addition, the Group has a very attractive portfolio of potential acquisitions covering a number of the areas, such as advertising, media buying and public relations, that it is our stated intention to enter. The outlook for the remainder of this year looks positive while the prospects for strong profits in 2013 look very exciting."
For further information:
Porta Communications Plcwww.portacommunications.plc.uk | ||
David Wright, Chief Executive | +44 (0) 20 7680 6500 | |
Keith Springall, Finance Director | ||
Newgate Threadneedle | Graham Herring, Managing Director | +44 (0) 20 7653 9850 |
Northland Capital Partners | Tim Metcalfe / Lauren Kettle | +44 (0) 20 7796 8800 |
CHAIRMAN'S STATEMENT
I agreed to join the Group in December 2010 with the mandate to build a global communications and marketing operation on similar lines to Incepta, my previous company.
The first stage has involved building a major agency at the upper end of the public relations (PR) market to cover financial, corporate and public affairs (Newgate Communications, formed of Newgate Public Relations and Newgate Public Affairs) and through acquisition, gaining a leading position in financial public relations for small and mid-cap companies (Newgate Threadneedle), as well as developing a foothold in the media bartering sector (Newgate Trading).
Since companies at the upper end of the financial PR market justify high premiums to other media companies, given the level of gross margin enjoyed by them, the Board took the view that it was better value for shareholders in the long term to build Newgate Communications organically rather than incur substantial dilution through the purchase of a high level of goodwill.
In order to win major corporate accounts one needs to recruit the right number of quality staff. Given the length of normal executive contracts in this sector together with the onerous restrictive covenants the period from recruitment to becoming fully operational can sometimes span nine months to a year. As a result, the benefits from this programme are only starting to be seen in 2012, the current year. However, we have already recruited 20 senior executives at Newgate Communications and a number of quality clients have already been signed. This clearly vindicates the Board policy and more importantly has generated true shareholder value.
Much the same argument could be made for Newgate Trading, the media bartering company. Currently it is poised to sign up a number of clients which should lead to a positive cash contribution. Newgate Trading will be a major beneficiary from any acquisition of an advertising agency or media independents.
Impact34, the sports and entertainment company specialising in emerging markets, was also a start up in the year has now become a solid brand in its market, with a number of high profile contract wins including: Turkish Basketball, securing rights to work with MTV on music festivals in targeted markets, and winning EuroBasket 2015 for the Ukraine.
There is a high cash burn involved with all these start-ups so we are offsetting this by acquiring a number of complementary income producing companies in the media sector. Threadneedle Communications (now called Newgate Threadneedle) was acquired in the year under review and this company is trading ahead of expectations, helped by a number of key new business wins in its core sectors. Newgate Threadneedle recently won 'Best Advisor - Financial PR' 2012 at the annual UK Stock Market Awards, having previously won the Growth Company Investors award for Financial PR Company of the Year 2011.
Litigation
On 22 November 2011, Media Square plc announced its intention to take legal action against the Group and myself in respect of alleged losses incurred in respect of alleged actions to acquire part or all of the Media Square group.
The Board absolutely denies the claims made in the legal action and intends to defend its position vigorously and is confident that it will succeed should this matter ultimately come before the Courts. Accordingly, no provision in respect of this matter has been made in the financial statements.
Future Prospects
We continue to focus on creating true shareholder value by building a first class international marketing and communications group in line with our original business plan. The building of the Group continues and benefits of this are now coming through strongly.
Newgate Communications continues to recruit quality executives and major new clients are being won on a regular basis, adding value to our public relations agency, whilst Newgate Trading is poised to make a positive contribution to revenues.
Newgate Threadneedle is trading ahead of budget and has recently won a number of new clients. Since the year end we have acquired the business of Hansard Communications with a warranted first year income of £400,000, adding to the Newgate Threadneedle small/mid-cap market portfolio. Internal growth of the business has also continued with the total number of AIM quoted clients serviced by Newgate Threadneedle reaching 80, including the Hansard Communications portfolio, at the date of this report.
In addition, the Group has a very attractive portfolio of potential acquisitions covering a number of areas, such as advertising, media buying and public relations, that it is our stated intention to enter. The outlook for the remainder of this year looks positive while the prospects for strong profits in 2013 look very exciting.
David Wright
Chief Executive and Chairman of the Board
4 May 2012
OPERATING AND FINANCIAL REVIEW
Results for year
Year ended31 December 2011 | Year ended31 December 2010 | |
£ | £ | |
Revenue | 1,025,407 | ‑ |
Operating loss | (1,575,296) | (523,142) |
Loss before taxation on continuing operations | (1,570,909) | (523,104) |
EPS on continuing operations | (3.4p) | (5.7p) |
No. | No. | |
Year end staff numbers | 37 | 2 |
On 13 April 2011 the company disposed of the TSE Consulting SA Sports Consultancy business for a cash consideration of 450,000 CHF (£306,494). This business, the only then existing business of the Group, was treated as a discontinued activity and hence no revenue is recorded in the financial statements for continuing activities in the comparative results for 2010.
Following the change of strategy, agreed by shareholders in December 2010, and the disposal of TSE Consulting, the Company has concentrated on building up an international communications and marketing group.
Acquired Business
On 19 September 2011, the Group acquired 80% of Threadneedle Communications Limited, now named Newgate Threadneedle.
Newgate Threadneedle, established in 2003, is an investor and corporate communications specialist and full service communications agency, focussed on small and mid-cap companies, with particular strength in technology, industrials, healthcare, basic materials, natural resources and consumer goods and services. In April 2012, it had over 80 AIM and Full List clients ranking it first among its peers of Financial PR advisers in terms of number of AIM quoted clients. This is a remarkable achievement, given that since 2008 the number of companies quoted on AIM has fallen substantially. As at 31 March 2012 there were 1,118 companies quoted on AIM compared to 1,694 companies on 1 January 2008.
Since the end of the financial year Newgate Threadneedle acquired the business of Hansard Communications, further adding to the skill and client basis of the business.
Newgate Threadneedle won the Growth Company award for Investor Financial PR Company of the Year 2011 and in March 2012 won UK Stock Market 2012 award for Best Financial PR Advisor.
At acquisition, Newgate Threadneedle had 60 clients and 14 staff, including a number of key account executives. Its acquisition brought into the Group strong recurring revenues and a reliable positive cashflow. The total consideration for 80% of the business was £3,800,000, paid £1,280,000 in shares and £2,520,000 in cash. Newgate Threadneedle contributed £706,411 to revenue and £164,480 to profits before tax for the four month period since acquisition and since acquisition Newgate Threadneedle has paid a £600,000 cash dividend to the parent Company.
Internally developed new business operations
Newgate Communications has recruited well since its start-up in October 2011. Led by Jonathan Clare as Executive Chairman and by Deborah Saw as a Managing Director, both formerly of Citigate Dewe Rogerson, Newgate Communications now boasts 20 PR professionals including Jason Nisse a former director of media strategy at Fishburn Hedges and Martin Greig, a senior BBC journalist.
The combined experience of the team, approaching 250 years of PR experience, includes a proven track record in the following sectors: private equity, financial services, energy and the environment, clean technology, crisis counselling, consumer and retail, support services, industrial, transport, professional services, telecommunications, media and technology, property and construction, IPOs and listings, mergers and acquisitions.
Newgate Communications has won a number of FTSE 100 and other large cap clients since its start up and provides sophisticated advice to companies and organisations facing challenging communications issues with the aim of ensuring its clients achieve their business, political and social objectives. By the year end it had also opened a subsidiary office in Brussels.
The current economic environment is challenging, but the pipeline of new clients and project work for existing clients is healthy. The business is under strong leadership and the first few months of trading for this start-up have been encouraging.
Newgate Trading, the Media Bartering business, has had a slow start and it is anticipated that sales will now start during 2012. The delay in operations has been as a result of additional start up requirements including the establishment of the business's own travel agent, Newgate Travel, which is a fully bonded member of ATOL through its membership of a travel group. Newgate Trading is the only corporate barter company with this accreditation, giving it a unique selling and servicing proposition as compared with its competitors. Travel is the largest by value category barter traded with media companies.
Impact34 is a sports and entertainment marketing company specialising in emerging markets. The company offers services in strategic planning, event bidding, international PR sponsorship activation, entertainment marketing and corporate identity consulting. Operating from their offices in Istanbul and London, Impact34 is well connected within the international sports community.
In 2011, Impact34 recruited Bettina Kuperman as CEO with experience of working internationally with major sports organisations such as National Olympic Committees and top international sports federations. Jasper Perry was also recruited as Development Director with his experience of bidding for and delivering major events such as the Solheim Cup, World Rally Championship and IRB and UEFA U19 competitions. The team has already won significant contracts with the Turkish Basketball Federation, the Ukraine basketball Federation and won the EuroBasket 2011 for Ukraine as well as securing exclusive rights to hold MTV Music events in parts of Eastern Europe.
These start-up businesses contributed £80,358 to revenue during the year, mainly in the last two months of the year. However although these businesses have yet to break even, the Board has every expectation that they will contribute positively to the results for 2012.
Results
The operating loss for the year included start-up costs of the new operations, together with £200,907 of costs relating to the acquisition of Newgate Threadneedle which was deemed to be a reverse takeover under the AIM Rules, requiring re-admission of the Group to AIM.
Overall loss for the year on continuing operations, after taking those costs into account, was £1,570,909 compared with a loss of £523,104 for 2010.
In view of the Board's expectation that the Group will move into profitability in the foreseeable future, the Group has recognised the benefit of certain tax losses which were incurred during the current year, resulting in a tax credit to the profit and loss account of £131,100 and an equivalent deferred tax asset in the balance sheet.
The loss for the year on continuing activities after taxation was therefore £1,439,809 compared with a loss of £523,104 for 2010.
The disposal of the discontinued TSE SA operations, although written down to disposal value in the balance sheet in 2010, resulted in a profit for the year. This arose since, in addition to a small loss on sale, the net foreign currency translation gains credited in past periods to the translation reserve as other comprehensive income were transferred to the profit and loss account in accordance with International Financial Reporting Standards. After this transfer, there is a net reported loss for the year on all operations of £460,257 compared to a loss for the year ended 31 December 2010, which included the write down of the discontinued operations, of £3,166,351.
Loss per share on continuing operations was 3.4p compared with a loss of 5.7p in the prior year reflecting both the smaller post tax loss and the increase in share capital during the year. After taking into account discontinued operations, including the recognition of the foreign currency gains described above, the loss per share on all operations was 1.1p per share (2010 loss 34.7p per share).
Balance sheet and cash flow
Balance sheet | 2011 | 2010 |
£ | £ | |
Non-current assets | 4,554,904 | ‑ |
Current assets, excluding cash | 778,265 | 984,351 |
Cash | 979,070 | 2,220,501 |
Current liabilities | (870,916) | (766,345) |
Equity shareholders' funds | 4,474,818 | 2,418,507 |
Cash flows | 2011 | 2010 |
£ | £ | |
Cash outflow from operating activities | (1,710,859) | (528,734) |
Acquisition of assets | (97,906) | ‑ |
Acquisition of Newgate Threadneedle | (1,655,493) | ‑ |
Sale of TSE SA | 306,494 | ‑ |
Net cash outflow before financing income | (3,153,377) | (528,696) |
Issue of shares | 1,931,253 | 2,680,200 |
Cash in hand at end of period | 979,070 | 2,200,501 |
The Group's development is reflected in a considerable restructuring of the Group's balance sheet since 2010. At the end of 2010 the continuing Group, excluding the assets and liabilities of TSE SA which were held for disposal, was essentially a cash shell with expenditure mainly relating to maintaining that shell as an AIM company.
The acquisition of Newgate Threadneedle included an attributed value of £1,017,000 for brands and customer relationships and £27,446 of operational fixed assets, with the balance of the acquisition cost (after taking into account working capital) being capitalised as goodwill of £3,349,880 representing the value we see from the staff expertise, future super-profits and synergies that will arise from the integration of Newgate Threadneedle into the developing Group.
The disposal of TSE SA reduced current assets by £838,279 and current liabilities by £580,712, providing a net cash inflow, after costs, of £257,567. This was offset in working capital terms by the acquisition of Newgate Threadneedle which brought £272,463 of current assets, £864,507 of cash and £516,103 of current liabilities onto the Group balance sheet.
Overall, the net operating cash flow during the year, comprising sales receipts less payments for administrative costs including the costs of acquiring Newgate Threadneedle, resulted in a cash outflow of £1,710,859 (2010: operating cash outflow of £528,734).
Trade debtors at the end of the year mainly relate to Newgate Threadneedle and, in accordance with standard industry practice, are billed either monthly or quarterly in advance with the income in advance included as a liability in trade and other payables.
The net cash payment for the acquisition of Newgate Threadneedle, after taking into account the cash already held by Threadneedle, amounted to £1,655,493. A further £97,906 was incurred on establishing the new subsidiaries, principally on computer equipment and office furnishings.
Taking all of the above into account, there was a net cash outflow before financing of £3,163,377 for the year (2010: £528,696). To finance the new operations and acquisition of Newgate Threadneedle, a placing for cash was undertaken on 7 November 2011, at 10p per share, raising a net £1,931,253 after issue costs.
Net cash in hand at 31 December 2011 therefore amounted to £979,070 (2010: £2,200,501).
Keith Springall
Finance Director
4 May 2012
Consolidated Statement of Comprehensive Income
Notes | Year ended31 December 2011 | Year ended31 December 2010 | |
£ | £ | ||
Continuing operations | |||
Revenue | 4 | 1,025,407 | ‑ |
Operating and administrative expenses | (2,600,703) | (523,142) | |
Operating loss | (1,575,296) | (523,142) | |
Finance income | 4,387 | 38 | |
Loss before taxation on continuing operations | 4 | (1,570,909) | (523,104) |
Tax credit | 5 | 131,100 | ‑ |
Loss for the year on continuing operations | (1,439,809) | (523,104) | |
Discontinued operations | |||
Profit/(loss) for the year from discontinued operations (all attributable to the owners of the Company) | 4 | 979,552 | (2,643,247) |
Loss for the year | (460,257) | (3,166,351) | |
Loss for the year attributable to: | |||
Owners of the Company | (182,677) | (3,166,351) | |
Non-controlling interests | (277,580) | ‑ | |
(460,257) | (3,166,351) | ||
Other comprehensive income | |||
Exchange differences arising on translating foreign operations | 13,113 | 360,037 | |
Exchange differences arising on sale of subsidiary | (982,301) | ‑ | |
Total other comprehensive income, net of tax | (969,188) | 360,037 | |
Total comprehensive income for the year | (1,429,445) | (2,806,314) | |
Total comprehensive (losses)/income for the year attributable to: | |||
Owners of the Company | (1,156,085) | (2,806,314) | |
Non-controlling interests | (273,360) | ‑ | |
(1,429,445) | (2,806,314) | ||
Earnings/(loss) per share - basic and diluted | 3 | restated | |
On continuing operations | (3.4p) | (5.7p) | |
On discontinued operations | 2.3p | (28.9p) | |
On continuing and discontinued operations | (1.1p) | (34.7p) |
Consolidated Statement of Financial Position
2011 | 2010 | ||
Notes | £ | £ | |
Non-current assets | |||
Intangible assets | 8 | 4,329,089 | ‑ |
Fixed assets | 95,508 | ‑ | |
Deferred tax asset | 5 | 130,307 | ‑ |
Total non-current assets | 4,554,904 | ‑ | |
Current assets | |||
Work in progress | 16,577 | ‑ | |
Trade and other receivables | 757,235 | 146,072 | |
Current tax assets | 4,453 | ‑ | |
Cash and cash equivalents | 979,070 | 2,200,501 | |
Assets of disposal group classified as held for sale | ‑ | 838,279 | |
Total current assets | 1,757,335 | 3,184,852 | |
Current liabilities | |||
Trade and other payables | (711,113) | (185,633) | |
Current tax liabilities | (159,803) | ‑ | |
Liabilities of disposal group classified as held for sale | ‑ | (580,712) | |
Total current liabilities | (870,916) | (766,345) | |
Net current assets | 886,419 | 2,418,507 | |
Non-current liabilities | |||
Deferred tax liabilities | 5 | (264,420) | ‑ |
Total non-current liabilities | (264,420) | ‑ | |
Net assets | 5,176,903 | 2,418,507 | |
Equity | |||
Share capital | 7,723,701 | 4,373,600 | |
Share premium | 2,742,120 | 2,742,120 | |
Retained losses | (5,998,289) | (5,677,907) | |
Translation reserve | 7,286 | 980,694 | |
Total equity shareholders' funds | 4,474,818 | 2,418,507 | |
Equity non-controlling interests | 702,085 | ‑ | |
Total equity | 5,176,903 | 2,418,507 |
Consolidated Statement of Cash Flows
2011 | 2010 | |
£ | £ | |
Cash flow from operating activities | ||
Loss before taxation on continuing activities | (1,570,909) | (523,104) |
Tax expense | (4,790) | ‑ |
Adjusted for: | ||
Loss from discontinued operations | 979,552 | (2,643,247) |
Depreciation and amortisation | 67,086 | 33,632 |
Goodwill impairment charge | ‑ | 2,277,076 |
Finance income | (4,387) | (38) |
Loss on disposal of property, plant and equipment | ‑ | 647 |
Increase in work in progress | (16,577) | ‑ |
Increase in trade and other receivables | (340,999) | (86,347) |
Increase in trade and other payables | 171,035 | 394,730 |
Share based payments | 1,143 | 8,511 |
Foreign exchange(loss)/ gain | (9,712) | 9,406 |
Foreign exchange gain previously recognised in other comprehensive income | (982,301) | ‑ |
Net cash outflow from operating activities | (1,710,859) | (528,734) |
Cash flows from investing activities | ||
Acquisition of intangible assets | (15,890) | ‑ |
Acquisition of property, plant and equipment | (82,016) | ‑ |
Acquisition of subsidiary, net of cash acquired | (1,655,493) | ‑ |
Sale of subsidiary company | 306,494 | ‑ |
Interest received | 4,387 | 38 |
Net cash (outflow)/inflow from investing activities | (1,442,518) | 38 |
Cash flows from financing activities | ||
Proceeds from the issue of ordinary shares (net of issue costs) | 1,931,253 | 2,680,200 |
Net cash generated from financing activities | 1,931,253 | 2,680,200 |
Net (decrease)/increase in cash and cash equivalents | (1,222,124) | 2,151,504 |
Cash and cash equivalents at 1 January | 2,200,501 | 48,997 |
Effect of exchange rate changes | 693 | ‑ |
Cash and cash equivalents at 31 December | 979,070 | 2,200,501 |
Consolidated Statement of Changes in Equity for the year ended 31 December 2010
Share capital | Shares to be issued reserve | Sharepremium | Retained losses | Translationreserve | Total equity shareholders' funds | Non-controlling interests | Total equity | |
£ | £ | £ | £ | £ | £ | £ | £ | |
Balance at 1 January 2010 | 1,457,600 | 136,000 | 2,791,920 | (2,520,067) | 620,657 | 2,486,110 | ‑ | 2,486,110 |
Total comprehensive income | ||||||||
Loss for the year | ‑ | ‑ | ‑ | (3,166,351) | ‑ | (3,166,351) | ‑ | (3,166,351) |
Other comprehensive income | ‑ | ‑ | ‑ | ‑ | 360,037 | 360,037 | ‑ | 360,037 |
Total comprehensive income | ‑ | ‑ | ‑ | (3,166,351) | 360,037 | (2,806,314) | ‑ | (2,806,314) |
Transactions with owners of the Company, recognised directly in equity | ||||||||
Contributions by owners: | ||||||||
Issue of ordinary shares | 2,916,000 | (136,000) | 120,000 | ‑ | ‑ | 2,900,000 | ‑ | 2,900,000 |
Issue costs | ‑ | ‑ | (169,800) | ‑ | ‑ | (169,800) | ‑ | (169,800) |
Share based payments | ‑ | ‑ | ‑ | 8,511 | ‑ | 8,511 | ‑ | 8,511 |
Total transactions recognised directly in equity | 2,916,000 | (136,000) | (49,800) | 8,511 | ‑ | 2,738,711 | ‑ | 2,738,711 |
Balance at 31 December 2010 | 4,373,600 | ‑ | 2,742,120 | (5,677,907) | 980,694 | 2,418,507 | ‑ | 2,418,507 |
Consolidated Statement of Changes in Equity for the year ended 31 December 2011
Share capital | Shares to be issued reserve | Sharepremium | Retained losses | Translationreserve | Total equity shareholders' funds | Non-controlling interests | Total equity | |
£ | £ | £ | £ | £ | £ | £ | £ | |
Balance at 1 January 2011 | 4,373,600 | ‑ | 2,742,120 | (5,677,907) | 980,694 | 2,418,507 | ‑ | 2,418,507 |
Total comprehensive income | ||||||||
Loss for the year | ‑ | ‑ | ‑ | (182,677) | ‑ | (182,677) | (277,580) | (460,257) |
Other comprehensive income | ‑ | ‑ | ‑ | ‑ | (973,408) | (973,408) | 4,220 | (969,188) |
Total comprehensive income | ‑ | ‑ | ‑ | (182,677) | (973,408) | (1,156,085) | (273,360) | (1,429,445) |
Transactions with owners of the Company, recognised directly in equity | ||||||||
Contributions by owners: | ||||||||
Issue of ordinary shares for acquisition of subsidiary | 1,030,596 | ‑ | 249,404 | ‑ | ‑ | 1,280,000 | ‑ | 1,280,000 |
Issue of other ordinary shares | 2,319,505 | ‑ | ‑ | ‑ | ‑ | 2,319,505 | ‑ | 2,319,505 |
Issue costs | ‑ | ‑ | (249,404) | (138,848) | ‑ | (388,252) | ‑ | (388,252) |
Share based payments | ‑ | ‑ | ‑ | 1,143 | ‑ | 1,143 | ‑ | 1,143 |
3,350,101 | ‑ | ‑ | (137,705) | ‑ | 3,212,396 | ‑ | 3,212,396 | |
Changes in ownership interests of subsidiaries: | ||||||||
Acquisition of subsidiary with non-controlling interests | ‑ | ‑ | ‑ | ‑ | ‑ | ‑ | 950,000 | 950,000 |
Non-controlling interests in subsidiaries established in the year | ‑ | ‑ | ‑ | ‑ | ‑ | ‑ | 25,445 | 25,445 |
Total transactions recognised directly in equity | 3,350,101 | ‑ | ‑ | (137,705) | ‑ | 3,212,396 | 975,445 | 4,187,841 |
Balance at 31 December 2011 | 7,723,701 | ‑ | 2,742,120 | (5,998,289) | 7,286 | 4,474,818 | 702,085 | 5,176,903 |
Notes to the preliminary results for the year ended 31 December 2011
1. Basis of Preparation
The financial information for the year ended 31 December 2011 together with the comparative year has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRSs) as adopted by the European Union. While the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRSs), this announcement does not itself contain sufficient information to comply with IFRSs.
The information in this preliminary announcement does not constitute the statutory accounts of the Group within the meaning of Section 435 of the Companies Act 2006 for the year ended 31 December 2011 or 2010.
The financial information for the year ended 31 December 2010 and 31 December 2011 is derived from the statutory accounts for those years, which were prepared under IFRSs. The auditors reported on those accounts, their report was unqualified and did not contain a statement under either Section 498(2) or Section 498(3) of the Companies Act 2006 and did not include references to any matters to which the auditors drew attention by way of emphasis.
The statutory accounts for the year ended 31 December 2010 have been delivered to the Registrar of Companies. The statutory accounts for the year ended 31 December 2011 will be delivered to the Registrar of Companies following the Company's annual general meeting on 11 June 2012.
2. Accounting policies
The accounting policies of the Group have been consistently applied from year to year and have been extended in order to reflect the new businesses commenced or acquired during the year. The adoption of the additional policies has no impact on the results, assets or liabilities of the Group for the prior year.
The Group has adopted the following new and amended standards which are mandatory for accounting periods on or after 1 January 2011 and which have impacted on the financial information presented:
Improvements to IFRSs 2010
Revised IAS24 "Related party disclosures".
Significant additional accounting policies adopted during the year are as follows:
Basis of Consolidation
The Consolidated Statement of Comprehensive Income and Statement of Financial Position include the financial statements of the Company and its subsidiary undertakings made up to 31 December 2011 and present comparative information for the year ended 31 December 2010. Certain subsidiaries have year ends which are not coterminous with that of the Company either as a result of their formation or acquisition during the year or where they are dormant. In each such case, the results, assets and liabilities for those companies have been included up to 31 December 2011, or the date of disposal if earlier, as appropriate.
The results of subsidiaries sold or acquired are included in the Consolidated Statement of Comprehensive Income up to, or from the date control passes. In the case of TSE Consulting SA (see note 7), the Directors have been unable to obtain information relating to the trading results or cash flows of that company between 1 January 2011 and the date of its ultimate disposal by the Group on 13 April 2011 and, accordingly, this information has not been able to be included within these financial statements. The terms of the disposal, including the sale price, were determined prior to the commencement of the financial year and were not dependent on the trading during the period to 13 April 2011. The net investment was written down to estimated net realisable value at 31 December 2010. The absence of this information accordingly has no effect on the results as presented in the Consolidated Statement of Comprehensive Income or the amount disclosed therein for the profit for the year from discontinued activities, nor on the Consolidated Statement of Financial Position at 31 December 2011 or the components thereof.
Intra-group sales and profits are eliminated fully on consolidation.
A subsidiary is an entity controlled, directly or indirectly, by Porta Communications Plc. Control is regarded as the power to govern the financial and operating policies of the entity so as to obtain the benefits from its activities.
Business Combinations
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at fair value at the date of acquisition and the amount of any non-controlling interest in the acquired entity. Non-controlling interests may be initially measured either at fair value or at the non-controlling interests' proportionate share of the recognised amounts of the acquiree's identifiable net assets. The choice of measurement basis is made on a transaction-by-transaction basis. Acquisition costs incurred are expensed and included in administrative expenses except where they relate to the issue of debt or equity instruments in connection with the acquisition.
Intangible assets
Intangible assets comprise goodwill, certain acquired separable corporate brand names, acquired customer relationships and website development costs, software and other licences.
Goodwill represents the excess of fair value attributed to investments in businesses or subsidiary undertakings over the fair value of the underlying net assets, including intangible assets, at the date of their acquisition. Goodwill on acquisition of an entity is included in intangible assets. Gains and losses on disposal of an entity include the carrying amount of goodwill relating to the entity sold.
Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of goodwill is compared to the net present value of future cash flows derived from the underlying assets using a projection period of up to five years for each cash-generating unit. After the projection period a steady growth rate representing an appropriate long-term growth rate for the industry is applied. Any impairment is recognised immediately as an expense and is not subsequently reversed.
Corporate brand names and customer relationships acquired as part of acquisitions of businesses are capitalised separately from goodwill as intangible assets if their value can be measured reliably on initial recognition and it is probable that the expected future economic benefits that are attributable to the asset will flow to the Group.
Expenditure on website development, software and licences is initially stated at cost.
Amortisation is provided at rates calculated to write off the cost less estimated residual value of each asset, other than goodwill, on a straight-line basis over the estimated life of the asset. Estimated life and estimated residual value is calculated on an asset by asset basis having regard to the nature of the asset, and the cash flows generated, or to be generated, by the asset historically and projected.
Amortisation is calculated to write down the cost of these assets to estimated residual value over their expected useful lives as follows:
Brands 10 years, straight line
Customer lists 5 years, straight line
Websites, software and licences 3 years, straight line
The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each statement of financial position date. An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing the disposal proceeds with the carrying amount and are included in the Statement of Comprehensive Income.
3. Earnings/(loss) per share
The loss per share has been calculated using the weighted average number of shares in issue during the relevant financial year. The weighted number of equity shares in issue and the loss, being the loss after tax, used in these calculations are as follows:
Year ended31 December 2011 | Year ended31 December 2010 | |
Number | Number | |
Weighted average number of shares (ordinary and dilutive) | 42,290,304 | 913,457,534 |
- 2010 as restated - see below | 9,134,575 | |
£ | £ | |
Loss on continuing activities after tax | (1,439,809) | (523,104) |
Profit/(loss) on discontinued activities after tax | 979,552 | (2,643,247) |
Loss on continuing and discontinued activities after tax | (460,257) | (3,166,351) |
The number of shares used in the calculation has been restated for the 1 for 100 share issue which occurred on 7 November 2011.
No share options or warrants outstanding at 31 December 2011 or 31 December 2010 were dilutive and all such potential ordinary shares are therefore excluded from the weighted average number of ordinary shares for the purposes of calculating diluted earnings per share.
4. Segmental information
Business segments
The Board considers that the Group has a single business segment which delivers international communications consultancy and marketing services. The revenue, expenditure and result reported in the Statement of Comprehensive Income and the assets and liabilities reported in the Statement of Financial Position all relate to this single segment. All revenue in the period arose from sales within Europe.
There are no comparative figures for revenue as there was no revenue in 2010 for the continuing operations. The assets and liabilities as shown in the Statement of Financial Position at 31 December 2010 all related either to the previous business segment delivering international sports consultancy services (in respect of those assets and liabilities shown within the disposal group) or to the continuing common infrastructure of the business.
Geographical segments
The analysis of results and assets by geographic region, based on the location of operating company, is as follows:
UK | Rest of Europe | Less inter-company trading | Total | |
Year ended 31 December 2011 | £ | £ | £ | £ |
Revenue | 771,993 | 268,746 | (15,272) | 1,025,407 |
Loss on continuing operations before tax | (1,384,035) | (186,874) | ‑ | (1,570,909) |
Profit on discontinued operations before tax | 979,552 | ‑ | ‑ | 979,552 |
Sales to customers based in the UK amounted to 62% of Group revenues. Sales to customers in Turkey represented 15% of Group revenues; no other individual country accounted for more than 10% of Group revenues.
UK | Rest of Europe | Less inter-company balances | Total | |
31 December 2011 | £ | £ | £ | £ |
Non-current assets | 4,649,349 | 7,518 | (101,963) | 4,554,904 |
Current assets | 1,710,831 | 46,504 | ‑ | 1,757,335 |
Current liabilities | (817,545) | (53,371) | ‑ | (870,916) |
Long term liabilities | (264,420) | (101,963) | 101,963 | (264,420) |
5,278,215 | (101,312) | ‑ | 5,176,903 | |
UK | Rest of Europe | Less inter-company trading | Total | |
Year ended 31 December 2010 | £ | £ | £ | £ |
Revenue | ‑ | ‑ | ‑ | ‑ |
Loss on continuing operations before tax | (523,104) | ‑ | ‑ | (523,104) |
Loss on discontinued operations before tax | ‑ | (2,643,247) | ‑ | (2,643,247) |
UK | Rest of Europe | Less inter-company balances | Total | |
31 December 2010 | £ | £ | £ | £ |
Current assets | 2,346,573 | 838,279 | ‑ | 3,184,852 |
Current liabilities | (185,633) | (580,712) | ‑ | (766,345) |
2,160,940 | 257,567 | ‑ | 2,418,507 | |
5. Taxation
The taxation credit for the year arises from the recognition of a deferred tax credit in the UK. Movements in deferred tax balances during the year were as follows:
Balance at1 January 2011 | Recognised in profit or loss | Acquired in business combinations | Balance at31 December 2011 | |
31 December 2011 | £ | £ | £ | £ |
Fixed assets | ‑ | (11,049) | (793) | (11,842) |
Intangible assets | ‑ | (283) | (264,420) | (264,703) |
Tax loss carry-forward | ‑ | 142,432 | ‑ | 142,432 |
Net tax assets | ‑ | 131,100 | (265,213) | (134,113) |
Comprising: | ||||
£ | ||||
Deferred tax assets | 130,307 | |||
Deferred tax liability | (264,420) | |||
Net tax assets | (134,113) | |||
The Group has tax losses of approximately £2,000,000 (2010: £825,000) available to be utilised against future taxable profits in the relevant companies in their countries of operation.
6. Acquisition of subsidiaries and non-controlling interests
On 19 September 2011, the Company acquired an 80% interest in the share capital of Newgate Theadneedle Limited (previously called Threadneedle Communications Limited and renamed Newgate Threadneedle Limited on 23 January 2012) and its wholly owned subsidiary, Investor Communications International Services Limited. The acquisition comprised the issue of 10,305,958 Ordinary shares in the Company together with £2,520,000 in cash. The acquisition was approved by shareholders on 7 November 2011. The results of the company have been included from the date of acquisition being the date that control passed to Porta Communications Plc on 19 September 2011.
The following table shows the result of the acquired business since acquisition:
Year ended31 December 2011 | |
£ | |
Revenue | 706,411 |
Operating costs | (542,088) |
Operating profit | 164,323 |
Finance revenue | 157 |
Profit before taxation | 164,480 |
Income taxes | (72,153) |
Profit for the period | 92,327 |
Dividend paid to parent company | (600,000) |
Loss deducted from reserves for the period | (507,673) |
Other comprehensive income | ‑ |
Total comprehensive income for the period | (507,673) |
In the Group financial statements the profit for the period and total comprehensive income for the period since acquisition is attributable as follows:
Profit for the period | Total comprehensive income | |
£ | £ | |
Equity shareholders | 73,862 | (406,138) |
Non-controlling interests | 18,465 | (101,535) |
92,327 | (507,673) | |
If the acquisition had occurred on 1 January 2011, management estimates that the Group's consolidated revenues would have been £1,900,000 and the consolidated profit on continuing activities for the year before tax would have been £470,000. In determining these amounts, it has been assumed that the fair value adjustments that arose on the date of acquisition would have been the same had the acquisition had occurred on 1 January 2011.
The cash flows of the acquired business since acquisition were as follows:
Year ended31 December 2011 | |
£ | |
Net cash from operating activities | 59,994 |
Net cash used in investing activities | (1,007) |
Net cash from financing activities | (600,000) |
Increase in cash and cash equivalents | (541,013) |
Cash and cash equivalents on acquisition | 864,507 |
Cash and cash equivalents at the end of the year | 323,494 |
The values of goodwill and other assets and liabilities relating to the acquisition of Newgate Threadneedle Limited and its subsidiary incorporated into these financial statements, using the acquisition method of accounting, are as follows:
Book value on acquisition | Fair value adjustments | Fair value | |
£ | £ | £ | |
Goodwill | ‑ | 3,349,880 | 3,349,880 |
Brands and customer relationships | ‑ | 1,017,000 | 1,017,000 |
Websites, software and licences | ‑ | 3,691 | 3,691 |
Tangible fixed assets | 22,754 | 1,021 | 23,775 |
Trade and other receivables | 272,463 | ‑ | 272,463 |
Cash and cash equivalents | 864,507 | ‑ | 864,507 |
Total assets | 1,159,724 | 4,371,592 | 5,531,316 |
Trade and other payables | (516,103) | ‑ | (516,103) |
Deferred tax liabilities | (793) | (264,420) | (265,213) |
Total liabilities | (516,896) | (264,420) | (781,316) |
Net value | 642,828 | 4,107,172 | 4,750,000 |
Less: attributable to non-controlling equity interests | ‑ | (950,000) | (950,000) |
Net value attributable to group equity shareholders | 642,828 | 3,157,172 | 3,800,000 |
Settled by:
£ | |
Payment to vendors - shares issued | 1,280,000 |
- cash paid | 2,520,000 |
Net consideration | 3,800,000 |
The fair value adjustments relate to the valuation of customer relationships, trade names, computer and other equipment mainly held by Newgate Threadneedle Limited. The residual difference between the total consideration paid and the net value of the recognised assets acquired has been capitalised as goodwill. The goodwill recognised on the acquisitions is mainly attributable to the skills and knowledge within the acquired businesses and the synergies expected to be achieved from the integration of the acquired businesses into the Group's existing and projected business. The fair value adjustments are provisional and may be subject to adjustment in the following financial year.
In addition, during the year the Company incorporated, or had transferred from company formation agents, the following subsidiary companies:
Impact 34 Limited
Impact34 Reklam ve Organizasyon Denişmanlik Hizmetleri Limited
Newgate Brussels SPRL
Newgate PR Holdings Limited
Newgate Public Affairs Limited
Newgate Public Relations Limited
Newgate Trading Europe Limited
Threadneedle Communications Limited (incorporated as Newgate Threadneedle Limited)
7. Disposal of subsidiary
On 13 April 2011, the Company sold TSE Consulting SA for 450,000 CHF pursuant to an agreement approved by shareholders on 20 December 2010. Provision was made to write down the net investment in the company to estimated net realisable value in the financial statements for the year ended 31 December 2010.
Year ended31 December 2011 | Year ended31 December 2010 | |
£ | £ | |
Profit/(loss) relating to discontinued business | ||
Revenue * | ‑ | 1,236,889 |
Expense * | (2,749) | (1,513,935) |
Loss before tax on discontinued operations | (2,749) | (277,046) |
Tax on discontinued operations | ‑ | (1,506) |
Loss after tax on discontinued operations | (2,749) | (278,552) |
Loss recognised on the re-measurement of assets of disposal group | ‑ | (2,364,695) |
Exchange gain recognised on sale | 982,301 | ‑ |
Profit/(loss) for the year on discontinued operations | 979,552 | (2,643,247) |
* No information is available relating to the detailed trading results or cash flows of TSE Consulting SA between 1 January 2011 and the date of disposal. See Basis of Consolidation for further details.
8. Intangible assets
Goodwill | Customer relation-ships | Brands | Websites, software and licences | Total | |
Cost | £ | £ | £ | £ | £ |
At 1 January 2011 | ‑ | ‑ | ‑ | ‑ | ‑ |
Additions in year - acquired with subsidiary | 3,349,880 | 650,000 | 367,000 | 3,691 | 4,370,571 |
Other additions in the year | ‑ | ‑ | ‑ | 15,890 | 15,890 |
At 31 December 2011 | 3,349,880 | 650,000 | 367,000 | 19,581 | 4,386,461 |
Amortisation | £ | £ | £ | £ | £ |
At 1 January 2011 | ‑ | ‑ | ‑ | ‑ | ‑ |
Charge for the year | ‑ | 43,333 | 12,233 | 1,806 | 57,372 |
At 31 December 2011 | ‑ | 43,333 | 12,233 | 1,806 | 57,372 |
Net book value | £ | £ | £ | £ | £ |
At 31 December 2010 | ‑ | ‑ | ‑ | ‑ | ‑ |
At 31 December 2011 | 3,349,880 | 606,667 | 354,767 | 17,775 | 4,329,089 |
On 17 September 2011, the Group acquired an 80% interest in Newgate Threadneedle Limited (then called Threadneedle Communications Limited) and its wholly owned subsidiary, Investor Communications International Services Limited (see Acquisition of subsidiaries and non-controlling interests above). The goodwill, brands and customer relationships and other fixed assets acquired as a result of that acquisition were valued by the Board on acquisition.
The value of goodwill arising on the acquisition of Newgate Threadneedle Limited has been assessed for impairment at 31 December 2011 and the Board has concluded that the recoverable amount in respect of this goodwill exceeds its book value and that therefore no impairment has arisen. For this purpose, Newgate Threadneedle Limited and its subsidiary were regarded as a single cash generating unit. The recoverable amount of the cash generating unit has been determined on a value-in-use basis. The calculations use three year forecasts approved by the Board and based on management's estimate of the business within the cash generating unit, for two years thereafter based on an average growth projection and for ten years thereafter assuming a standard rate of growth which management regard as an industry achievable expectation. The resulting cash flows have been discounted using a weighted average cost of capital of 14% per annum, being the management's estimate with respect to the time value of money and the risks specific to the unit.
9. Contingent liabilities
On 22 November 2011, Media Square plc announced its intention to take legal action against the Company and its Chief Executive and Chairman, David Wright, in respect of losses incurred in respect of alleged actions to acquire all or part of the Media Square group. The amount claimed in damages amounts to £760,000. The Company absolutely denies these claims, intends to defend its position vigorously and is confident that it will succeed should this matter ultimately come before the Courts. Accordingly no provision in respect of this matter has been made in these financial statements.
10. Notice
A copy of this preliminary announcement has been published on the Company's website athttp://www.portacommunications.plc.uk/investor_information.