R4E.L Regulatory News (R4E)

RNS Number : 2312M

First Artist Corporation PLC

20 May 2010

 

Date: 20 May 2010

On behalf of: First Artist Corporation plc

 

For immediate release

 

 

First Artist Corporation plc

"First Artist" or "the Company" or "the Group"

 

Preliminary Results for the 15 months ended 30 November 2009

 

First Artist Corporation plc (AIM: FAN), the media, events and entertainment management group, today announces its full unaudited results for the 15 months ended 30 November 2009.

 

The Group's performance of the continuing operations has been satisfactory with adjusted EBITDA* of £3.51m (12 months ended 31 August 2008: £2.25m).

 

Highlights from the last 15 month period include:

 

·; Turnover up to £90.6m (12 months ended 31 August 2008: £44.5m)

·; Adjusted EBITDA* of £3.51m (12 months ended 31 August 2008: £2.25m)

·; Operating profit of £1.05m (12 months ended 31 August 2008: £0.90m)

·; Net cash generated from operating activities £7.01m (12 months ended 31 August 2008: £1.98m)

 

* Earnings before interest, tax, depreciation and amortisation (EBITDA) is stated before exceptional administrative expenses.

 

The results for the period of the continuing operations include Spot & Company of Manhattan, Inc. which was acquired with effect from 1 October 2008.

 

As already announced to the market on 12 February 2010 the Group is implementing its strategic objective in disposing of its non-core businesses which include Optimal Wealth Management, First Artist Management and the Sports Division to allow the Group to focus on its Media and Events Divisions.

 

The effect of this strategy has been to crystallise a total pre-tax loss on the re-measurement of assets held for sale of £5.2m at the balance sheet date.

 

The trading results of the non-core businesses are disclosed within discontinued operations - profit before tax of £0.56m (12 months ended 31 August 2008: £1.04m).

 

The Group continues to be focussed on debt reduction.

 

 

Post Period End Activity:

 

·; The disposal of Optimal Wealth Management Limited on 2 February 2010 for a total consideration of £1.5m, to be satisfied wholly in cash.

 

·; The disposal of First Artist Management Limited on 12 February 2010 for a total consideration of £200,000, less a post completion working capital adjustment of up to £25,000.

 

 

For further information:

 

 

First Artist Corporation plc Jon Smith, Chief Executive Julianne Coutts, Director & Company Secretary	tel: 020 7993 0000 www.firstartist.com
Seymour Pierce Limited, Nominated Adviser and Broker Mark Percy Tom Sheldon	tel: 020 7107 8000 www.seymourpierce.com

  Chairman's Statement

 

 

I am pleased to report the results of the First Artist Group ("the Group") for the 15-month financial period ended 30 November 2009.  Shareholders will be aware that the accounting period was extended in connection with the ongoing review of strategic options.

 

The period on which we now report has coincided with the height of the global recession, and inevitably presented significant challenges for the Group. In addition, the Group has undergone major change through acquisition and divestment activity. As a consequence, the financial statements contain a complex series of disclosures which I will comment on further below.

 

Adjusted EBITDA (EBITDA pre exceptional administrative expenses), for the 15 month period from continuing operations, was £3.507m compared with £2.251m for the 12 months ended 31 August 2008. These results were satisfactory considering the difficult economic circumstances. Profit before tax from discontinued operations amounted to £0.564m for the period, (12 months ended 31 August 2008: £1.042m).

 

The acquisition of Spot and Company of Manhattan, Inc. ("SpotCo"), which was completed in October 2008, (contributing £2.29m EBITDA for the period) is a natural strategic fit with Dewynters, and has given the Group a prominent position in live entertainment advertising in the world's two most important markets - London's West End and New York's Broadway. The successful integration of SpotCo and the shaping of the enlarged Group has been a key activity throughout the period.

 

In a difficult market for M&A activity, in February 2010 we completed the disposals of Optimal Wealth Management ("OWM") and First Artist Management ("FAM"). As these transactions completed after the period end, the results of OWM and FAM for the period are included within discontinued operations. In addition, the results of the Sport division, which has been treated as an asset held for sale, are also included in discontinued operations.

 

The disposals of OWM and FAM have given rise to losses on re-measurement of the assets of the operations being divested of £1.98m and £0.628m respectively, and the re-classification of the Sport division as an asset held for sale has given rise to a pre-tax loss of £2.605m.

 

Following these disposals, the Group is in negotiations with its bankers concerning the recalibration of the bank covenants and the restructure of Group debt.

 

The Media division, which generated adjusted EBITDA of £5.749m for the period (12 months ended 31 August 2008: £2.783m) is made up of the Dewynters Group, (Dewynters Limited, Dewynters Advertising Inc., and Newman Displays ), SpotCo and First Rights Limited.

 

On a like for like basis, the Dewynters Group revenue and EBITDA for the period were slightly down on the previous financial year. However, West End audiences showed remarkable resilience to the global recession, with theatres enjoying record attendances during 2009. Productions supported by Dewynters included the musicals Mamma Mia!, Wicked, Priscilla Queen of the Desert, La Cage Aux Folles and Spring Awakening, and plays such as Calendar Girls, Cat on a Hot Tin Roof and Breakfast at Tiffany's. Productions at the O2 Arena included Ben Hur and Star Wars: A Musical Journey. Clients within the subsidised sector include the English National Opera, the Royal Shakespeare Company and the National Portrait Gallery.

 

Newman Displays continued to trade well, undertaking many front of house displays including signage for the West End musicals Sister Act and Hairspray. Numerous film events included the premieres of Sex and the City, Nine, Bruno, Harry Potter and the Half-Blood Prince and the late Michael Jackson's This is It, as well as galas throughout the London Film Festival and the Cannes Film Festival.

 

As previously reported, SpotCo has delivered a very satisfactory performance since its acquisition. The agency's work spans a broad base of categories from theatre and live entertainment, to cultural institutions, museums, film, television, publishing and music. In the 2009 awards season, productions supported by the agency received 72 Tony Award nominations and won numerous awards, ten of which went to the London hit Billy Eliot which was later staged on Broadway. Highlights in the period included All My Sons, A Steady Rain, West Side Story, Reasons to be Pretty, Hair, 9 to 5, Shrek, Ragtime and Memphis.

 

First Rights, our small rights business, whilst yet to demonstrate its full potential, achieved a breakthrough into theatre sponsorship in the period. By developing a successful sponsorship model for West End theatre productions, the company negotiated a first ever presenting sponsorship in the West End, with Chambord sponsoring Breakfast at Tiffanys. Following this success, First Rights are now working with a number of other producers and theatre owners in implementing their commercial sponsorship programme.

 

Turning to our event management division, the events industry was hit hard by the recession, with many established companies being forced out of the market, and The Finishing Touch inevitably had a difficult period in 2008-2009. However, it was also a period of consolidation and investment into key parts of the business, in particular VenuesFirst, the company's venue finding service, which has enjoyed commercial success since its inception in 2008. With its strong reputation and range of innovative products, we are confident that the company will return to growth this year.

 

During the period the Sport division was instrumental in a number of significant deals, including manager Harry Redknapp's £5 million transfer from Portsmouth to Tottenham Hotspur, one of the highest in premier league history; Russian star Andrey Arshavin's transfer to Arsenal from Zenit St Petersburg for a club record fee of £16.5 million; and Emmanuel Adebayor's transfer from Arsenal to Manchester City for £25 million, culminating in a record summer trading window. However, as previously reported the January 2010 window was very disappointing and will affect the current year's results.

 

In the current economic climate we remain focused on tight cash management and in addition are now undertaking a further detailed review of costs and processes across the Group to eradicate unnecessary operating expenses and identify further integration opportunities.

 

 

 

 

 

Robert Baldock

Chairman

 

 

 

 

Chief Executive's Statement

 

In my statement in the 2008 Annual Report, I said that we were in uncertain times which was a bit of an understatement! But whilst trading continues to be precarious across all markets, I am confident that the reshaping of this group as illustrated in this announcement will result in a group of companies that are leaner, more competitive and well groomed to meet the challenges that face us all.

 

We have spent a lot of time, effort and resource this last few months focusing on integrating and systemising our two major marketing service agencies Dewynters and SpotCo. The success we have had is evident from a dramatic rise of SpotCo's profitability and the sustaining of Dewynters income stream through the worst economic climate this country has witnessed for many years.

 

Notwithstanding, this group was predicated on a delivery of sport to entertainment, with the exception of our wealth management business which primarily focused on being able to cater for the needs of our high net worth individuals in the sport and entertainment division. It became evident some time ago that if we were to pursue the acquisition of SpotCo in New York that our ownership of Optimal Wealth Management could become defocused.

 

The shape of the new group was, by necessity in these markets, becoming narrow focused - that, and our continual desire to reduce debt were the reasons for the sale of Optimal and First Artist Management.

 

From my own perspective and on behalf of the Board, I would like again to thank each and every member of staff for the contribution they have made. The talent, energy, hard work, professionalism and commitment that have been demonstrated through these difficult times have been an enormous credit to them and are greatly appreciated.

 

The material strength of the component parts of this group going forward, I believe, will enable us to steer First Artist to a consolidated position in our market place.

 

 

 

 

Jon Smith

Chief Executive

 

 

 

 

 

 

 

Operating and Financial Review

 

 

	15 months to			Year ended
	30 November			31 August				Variance
	2009			2008
				(restated)
	£'000			£'000				£'000
Continuing Operations
Turnover	90,635			44,455				46,180
Gross Profit	22,671			13,180				9,491
Gross profit %	25.01%			29.65%
Adjusted EBITDA	3,507			2,251				1,256
Exceptional items	(493)			(456)				(37)
Depreciation	(831)			(535)				(296)
Amortisation and impairment	(1,135)			(364)				(771)
Operating Profit	1,048			896				152
Finance costs	(2,439)			(1,549)				(890)
Loss before tax	(1,391)			(653)				(738)
Taxation	(225)			(71)				(154)
Loss after tax	(1,616)			(724)				(892)
Discontinued operations	(4,701)			720				(5,421)
Loss for the period/year	(6,317)			(4)				(6,313)
EPS
Basic (loss)/earnings per share - pence
From continuing operations	(8.43)			(5.38)
From discontinuing operations	(24.52)			5.35
Total operations	(32.95)			(0.03)
EPS
Adjusted basic earnings per share before exceptionals, depreciation,  amortisation and deemed interest on deferred consideration - pence
From continuing operations	18.3			16.7

Outline of the continuing operations

 

The media division, comprising the Dewynters group, Spotco (since its acquisition with effect from 1 October 2008) and First Rights Limited, continued to trade successfully providing an adjusted EBITDA of £5.75 million (12 months ending 31 August 2008: £2.78 million). The majority of the increase of the adjusted EBITDA of the media division arose from the inclusion of Spotco's EBITDA of £2.29 million (2008: £Nil) for the financial period.

 

The EBITDA for the Dewynters group for the 15 months to November 2009 was £3.30 million; restated on a 12 month basis for comparison purposes the EBITDA was £2.64 million, (12 months ending 31 August 2008: EBITDA of £2.87 million).

 

First Rights has yet to demonstrate its full potential by achieving a break through into the theatre sponsorship industry. EBITDA for the 15 months to November 2009 was a loss of £103k (12 months ending 31 August 2008: loss of £14k). The company continues to believe that being able to offer this service is very valuable to our clients.

 

The Events Division comprising Finishing Touch experienced a difficult financial period due to the client companies cutting back heavily on corporate activity in reaction to the economic downturn.

 

The turnover and gross profit for the 15 months to November 2009 are £3.1 million and £1.1 million respectively ( 12 months ending 31 August 2008: turnover of £8.1million and gross profit of £2.4 million). Restated on a 12 month basis for comparison purposes, the turnover and gross profit are £2.5 million and £0.88 million, which are down against the prior year by 69% and 63% respectively.

 

The Finishing Touch is already seeing signs of increased turnover and activity. This activity coupled with the action which has already been taken to reduce its overheads through redundancies and the closure of the Manchester office means that the company should revert to being profitable in the forthcoming year.

 

Turnover

 

The group turnover for the 15 months to November 2009 was £90.64 million. Restated on a 12 month basis the turnover is £72.5 million, which is a 63% increase on the prior year turnover of £44.5 million. This increase in turnover is principally due to the acquisition of Spotco with effect from 1st October 2008.

 

Gross profit

 

The Group gross profit margin decreased from 29.65% to 25.01% - which is mainly as a result of acquiring Spotco which operates on lower gross profit margins of 20% due to the higher levels of bought in services.

 

Gross profit for the 15 months to 30 November 2009 was £22.67 million (12 months ended 31 August 2008; £13.18 million), restated on a 12 month basis the gross profit was £18.136 million which is a 37.6% increase compared to the previous year. The administrative expenses, excluding amortisation, depreciation and exceptional charges for the 15 months were £21.62 million (12 months ending 31 August 2008: £12.3 million). Restated on a 12 month basis the administrative costs are £17.3 million which are an increase of 41% compared with the previous year as a result of the acquisition of Spotco.

 

 

 

Adjusted EBITDA

 

The EBITDA for the Group, before exceptional administrative expenses, for the 15 months to 30 November 2009 was £3.51 million (12 months ending 31 August 2008: £2.25 million). The EBITDA restated on a 12 month basis is £2.81 million, which is a 24.9% increase on the previous year.

 

Foreign Exchange

 

Foreign exchange loss amounted to £52k (12 months ended 31 August 2008: gain of £0.281 million), mainly due to the devaluation of sterling against the US dollar and the euro.

 

 

Amortisation and exceptionals

 

The charge for the 15 months to November 2009 was £0.99 million compared with the previous year of £0.36 million. This increase is due to the amortisation of intangibles of £0.65 million arising from the acquisition of Spotco.

 

Exceptional costs incurred during the 15 month period resulted largely from acquisition related payments, restructuring costs and redundancy costs totalling £0.49 million (12 months ending 31 August 2008: £0.45million).

 

Interest payable, funding and liquidity

 

Net interest payable was £2.439 million (12 months ending 31 August 2008: £1.549 million). A total of £0.88 million (12 months ending 31 August 2008: £0.32 million) relates directly to the unwinding of the discounted deferred consideration. This charge is a non-cash adjustment and relates to the provision of a net present valuation on deferred consideration .

 

Taxation

 

The tax charge was £0.225 million (12 months ending 31 August 2008: £0.07 million), which fully utilises the Company's taxable losses for the period across the whole Group. The effective tax charge of 16.1% on a pre tax loss (12 months ending 31 August 2008: 10.9 %) is higher than the prior year due to the unwinding of discounted deferred consideration of £0.878 million (12 months ending 31 August 2008: 0.315 million) and the amortisation of intangible assets of £0.985m (12 months ending 31 August 2008: £0.364 million).

 

The deferred tax credit of £0.073 million (12 months ending 31 August 2008: £0.086 million) arises primarily from the amortisation of the intangibles.

 

Earnings per share from continuing operations

 

Basic loss per share was 8.43p (12 months ending 31 August 2008: 5.38p; whilst earnings per share before exceptional administrative items, deemed interest on deferred consideration, depreciation and amortisation was 18.3p (12 months ending 31 August 2008: 16.7p).

 

 

 

 

Divisional Key Performance Indicators (KPI)

 

A number of percentage-based KPIs are used for internal reporting purposes, relating to gross profit, operating profit and personnel costs. KPIs are also calculated on staff numbers to give gross profit, operating profit and gross profit per head.

 

The media division showed increasing operating profit per head and gross profit per head, indicating the productivity of individuals has improved. The whole of the staff of Dewynters Limited undertook a salary sacrifice of 10% for the period 1 March to 30th November 2009, which generated a cost saving of £0.32m. The EBITDA of the media division as a % of gross salaries increased to 49% (2008: 38%).

 

The KPI in respect of gross profit and EBITDA for Spotco were considered to be satisfactory and ahead of target whilst the Events Division showed a loss emphasising the need to increase turnover and gross profit and to reduce the costs appropriately.

 

 

 

 

 

 

 

Discontinued Operations

 

The discontinued operations comprise the Entertainment/Sports Division, Wealth Management and Sponsorship Consulting Limited:

 

	15 months ended		12 months ended
	30 Nov		31-Aug
	2009		2008
	£'000		£'000
Revenue	8,186		9,429
Expenses	(7,622)		(8,387)
Profit before tax	564		1,042
Tax	(103)		(322)
Profit after tax	461		720
Pre-tax loss on re-measurement of assets of disposal group	(5,213)		-
Tax	51		-
(Loss)/profit for the period/year	(4,701)		720

 

 

 

 

Sport Division

 

The Sport Division is made up of First Artist Sport Limited, First Artist Scandinavia A/S and Promosport Srl.

 

The revenue for the Sports Division for the 15 months to 30 November 2009 was generated from two football transfer trading windows whilst there were 15 months of operating expenses which has resulted in additional costs on a pro rata basis compared to income.

 

The revenue for the 15 months was £4.94 million, which was £1.1 million behind the revenue generated during the 12 months in 2008. The decrease in revenue was partly due to a significant number of football transfer deals being subject to future conditions which required the relevant income to be deferred to future periods.

 

Inorder to comply with the change in Italian football regulations the corporate structure of Promosport would have to be substantially changed. The Board decided to wind up Promosport with effect from the period end which has resulted in a £1.1million restructuring charge in respect of accrued income being written off.

 

The group recognised an impairment charge in respect of its goodwill in First Artist Scandinavia of £1.2 million.

 

Optimal Wealth Management (OWM)

 

The EBITDA for OWM for the 15 months to November 2009 was £0.51 million, restated on a 12 month basis for comparison purposes was £0.41 million which is £250,000 behind the EBITDA for the year ended 31 August 2008.

 

The group recognised an impairment charge of £1.9 million in respect of its goodwill in OWM.

 

 

First Artist Management (FAM)

 

The EBITDA for FAM for the 15 months to November 2009 of £45k (restated on a 12 month basis for comparison purposes was £36k) is £39k behind the EBITDA for the year ended 31 August 2008 on a like for like basis.

 

The group recognised an impairment charge of £0.628m in respect of goodwill in FAM.

 

Sponsorship Consulting Limited (SCL)

 

SCL ceased trading during the period and showed a loss of £22k within discontinued operations.

 

The group recognised an impairment charge of £0.253m in respect of its goodwill in SCL

 

 

 

 

 

 

 

 

Review of Operations

 

 

Shareholders' funds

 

Shareholders' funds have decreased by £4.82 million from £7.90 million (restated) to £3.08 million. This decrease includes the £5.21 million loss on the re-measurements of the assets of the operations being held for sale.

 

Cash Flow

The company generated £6.21 million of cash from operating activities (2008: £1.53 million).

 

During the period new Banking Facilities were made available under the banking facility agreement dated 28 August 2008 between the Company (as the borrower) and Allied Irish Bank GB ("AIB") following the successful completion of the Spotco acquisition:

Loan Type	Repayment	Interest	Loan
	Details	Margin	Value
Senior Term Loan A	In full within 5 years	LIBOR + 2.25%	7,200,000
Senior Term Loan B	Bullet payment after 5 years	LIBOR + 2.75%	5,000,000
Mezzanine Facility	Bullet payment after 2 years	LIBOR + 10.00%	3,728,000
Short Term Mezzanine Loan	Bullet payment after 1 year	LIBOR + 10.00%	500,000
			16,428,000
The repayment for the Senior Term Loan A is as follows:
		Year
		1	-
		2	750,000
		3	1,000,000
		4	1,200,000
		5	4,250,000
			7,200,000

 

A total of 4% per annum of the margin is payable quarterly and 6% per annum of the margin is capitalised at the end of each consecutive period of 3 months and added to the principal amount of the Loans.

 

A working capital facility in the sum of £1,000,000 was made available as part of the new banking facility agreement, with an interest rate of 2.50% above AIB's base rate being applied. This interest rate in respect of this facility was increased to 4.00% over AIB's base rate with effect from 30 November 2009.

 

The Group repaid the Short Term Mezzanine debt of £500,000 on 31st August 2009.

 

 

 

 

Bank Net Debt		30-Nov	31-Aug	31-Aug
		2009	2008	2007
		£'000	£'000	£'000
One year Bank Loan		(4,888)	(5,039)	(1,968)
Two Year Bank Loan		(960)	(1,536)	(4,321)
Five Year Bank Loan		(10,724)	(6,107)	(4,607)
Seven Year Bank Loan			(774)	(2,310)
Other group net debts
Cash in hand and bank overdrafts		3,177	464	3,551
		(13,395)	(12,992)	(9,655)

 

The level of gearing has increased to 81% (2008: 62%). The level of net debt has increased from £13.0 million to £13.39 million. The disposal proceeds arising from the sale of the companies after the balance sheet date are being used to reduce debt.

 

Deferred Consideration

 

		30 November		31 August		31 August
Deferred Consideration		2009		2008		2007
		£'000		£'000		£'000
Due within 1 year		(4,042)		(2,205)		(3,397)
Between one and two years		(2,772)		(1,451)		(1,463)
Between two and five years		(2,123)		(1,195)		(2,712)
		(8,937)		(4,851)		(7,572)

 

On the acquisition of Spotco the group recognised a net present value of the deferred consideration of £7.6 million in respect of the total gross deferred consideration of $15.8 million payable over 5 years.

 

Dewynters achieved the third and final year performance targets detailed under the terms of the acquisition agreement dated 29th November 2006. As a result the consideration of £1,971,272 is payable to the Vendors of Dewynters. A loan note for £1,500,000 was issued for payment on 30th June 2010 and a loan note for £471,272 was issued for payment in January 2011.

 

Spotco achieved the first year performance targets detailed under the terms of the acquisition agreement dated 8 August 2008. As a result the consideration of $2,500,000 is payable to the Vendors of Spotco.

 

 

 

 

 

 

Risks Associated with the Group

 

The Group is subject to a number of macro economic factors, as with other businesses, such as interest rate and foreign exchange rate fluctuations, which are outside the Group's control.

 

On a more specific basis the Group's bank borrowings are subject to various financial covenants based upon EBITDA-based interest cover, the ratio between total borrowings and adjusted EBITDA and the ratio between cash flow and total borrowings. As a result of the disposal of Optimal and the business of FAM and the intended disposal of the Sports Division the existing terms of the bank borrowings are currently being renegotiated with the lender being Allied Irish Bank.

 

The Group is not currently subject to any material legal or economic restrictions on the ability of its subsidiaries to transfer funds to the Company in the form of dividends, loans of advances.

 

The theatrical entertainment sectors of the West End in London and Broadway in New York are important to the success of the Group. Both sectors continue to thrive with wide range of musical productions, high audience figures within the sector and several productions waiting to open later this year and next year.

 

Jon Smith

Chief Executive

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unaudited Consolidated Income Statement for the 15 months to November 2009

Continuing operations	Note	15 months ended 30 November 2009 £000		Restated 12 months ended 31 August 2008 £000
REVENUE	2	90,635		44,455
Cost of sales		(67,964)		(31,275)
GROSS PROFIT		22,671		13,180
Administrative expenses		(21,623)		(12,284)
EBITDA before exceptional administrative expenses		3,507		2,251
Exceptional administrative expenses		(493)		(456)
Depreciation		(831)		(535)
Amortisation of intangible assets		(985)		(364)
Impairment of goodwill and available-for-sale investments		(150)		-
OPERATING PROFIT		1,048		896
Finance income		61		59
Finance costs		(2,500)		(1,608)
LOSS BEFORE TAXATION		(1,391)		(653)
Taxation	4	(225)		(71)
LOSS FOR THE PERIOD/YEAR FROM CONTINUING OPERATIONS		(1,616)		(724)
Discontinued operations
(Loss)/profit for the period from discontinued operations	6	(4,701)		720
LOSS FOR THE PERIOD/YEAR		(6,317)		(4)
The loss is attributable to the owners of the parent
(Loss)/earnings per share (pence)
Basic (loss)/earnings per share
From continuing operations		(8.43)		(5.38)
From discontinued operations		(24.52)		5.35
Total operations	5	(32.95)		(0.03)
Diluted (loss)/earnings per share
From continuing operations		(8.43)		(5.38)
From discontinued operations		(24.52)		5.22
Total operations	5	(32.95)		(0.03)

 

 

 

 

 

Unaudited Consolidated Balance Sheet as at 30 November 2009

	Note	30 November 2009 £000		Restated 31 August 2008 £000
NON-CURRENT ASSETS
Goodwill and intangible assets		25,170		23,294
Property, plant and equipment		1,822		1,961
Available-for-sale investments		58		142
Trade and other receivables		-		602
		27,050		25,999
CURRENT ASSETS
Inventories		1,122		534
Trade and other receivables		9,695		11,369
Cash and cash equivalents		4,116		1,212
		14,933		13,115
Assets of disposal group classified as held-for-sale	6	5,707		-
		20,640		13,115
TOTAL ASSETS		47,690		39,114
CURRENT LIABILITIES
Trade and other payables		(13,544)		(9,854)
Current taxation liabilities		(439)		(1,242)
Obligations under finance leases		-		(7)
Borrowings	7	(5,827)		(5,787)
Provisions		(4,042)		(2,205)
		(23,852)		(19,095)
Liabilities of disposal group classified as held-for-sale	6	(2,001)		-
		(25,853)		(19,095)
NET CURRENT LIABILITIES		(5,213)		(5,980)
NON-CURRENT LIABILITIES
Trade and other payables		-		(81)
Deferred taxation		(2,178)		(974)
Borrowings	7	(11,684)		(8,417)
Provisions		(4,895)		(2,646)
		(18,757)		(12,118)
TOTAL LIABILITIES		(44,610)		(31,213)
NET ASSETS		3,080		7,901
EQUITY
Called up share capital		748		347
Share premium		7,768		6,598
Capital redemption reserve		15		15
Share option reserve		246		285
Retained earnings		(5,480)		816
Own shares held		(259)		(259)
Foreign exchange reserve		42		99
TOTAL EQUITY ATTRIBUTABLE TO THE OWNERS OF THE PARENT		3,080		7,901

 

 

 

 

 

 

 

Unaudited Consolidated Cash Flow Statement for the 15 months to 30 November 2009

 

		15 months ended  30 November 2009 £000		Restated 12 months ended  31 August 2008 £000
Cash generated from operating activities		7,013		1,976
Income taxes paid		(800)		(441)
Net cash inflow from operating activities		6,213		1,535
Investing activities
Finance income		61		59
Purchases of property, plant and equipment		(331)		(461)
Acquisition of subsidiaries (net of cash acquired)		(3,418)		-
Payment of deferred consideration		(2,849)		(2,030)
Additions to available-for-sale investments		-		(24)
Net cash used in investing activities		(6,537)		(2,456)
Financing activities
Repayments of borrowings		(523)		(1,571)
Repayments of obligations under finance leases		(7)		(45)
New bank loans raised		4,076		1,500
Repayment of loan notes		(594)		(445)
Purchase of own shares		-		(259)
Net cash proceeds from issue of shares		1,333		-
Interest paid		(1,243)		(1,355)
Net cash generated by/(used in) financing activities		3,042		(2,175)
Net increase/(decrease) in cash and cash equivalents		2,718		(3,096)
Cash and cash equivalents at the beginning of the period/year		464		3,551
Effect of foreign exchange rate changes		(5)		9
Cash and cash equivalents and bank overdrafts at the end of the period/year		3,177		464
Cash and cash equivalents		4,116		1,212
Bank overdrafts		(939)		(748)
		3,177		464

Unaudited Statement of Changes in Equity

 

		Share capital £000	Share premium £000	Capital redemption reserve £000	Share option reserve £000	Retained earnings £000	Own shares held £000	Foreign exchange reserve £000	Total Equity £000
ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT
At 1 September 2007 as previously reported		328	10,011	15	210	(3,048)	-	90	7,606
Prior year adjustment		-	-	-	-	(119)	-	-	(119)
At 1 September 2007 as restated		328	10,011	15	210	(3,167)	-	90	7,487
Deferred taxation on share options		-	-	-	-	(60)	-	-	(60)
Currency translation differences		-	-	-	-	-	-	9	9
(Expense)/income recognised directly in equity		-	-	-	-	(60)	-	9	(51)
Loss for the year (restated)		-	-	-	-	(4)	-	-	(4)
Total recognised income and expense for the year		-	-	-	-	(64)	-	9	(55)
Transfer from share premium to retained earnings		-	(4,047)	-	-	4,047	-	-	-
Payment to acquire own shares		-	-	-	-	-	(259)	-	(259)
Shares issued to vendors as deferred consideration		19	634	-	-	-	-	-	653
Share-based payment charge		-	-	-	75	-	-	-	75
Total change in equity		19	(3,413)	-	75	4,047	(259)	-	469
At 1 September 2008 (as restated)		347	6,598	15	285	816	(259)	99	7,901
Deferred taxation on share options		-	-	-	-	(63)	-	-	(63)
Currency translation differences		-	-	-	-	-	-	(57)	(57)
(Expense)/income recognised directly in equity		-	-	-	-	(63)	-	(57)	(120)
Loss for the period		-	-	-	-	(6,317)	-	-	(6,317)
Total recognised income and expense for the period		-	-	-	-	(6,380)	-	(57)	(6,437)
Transfer from share option reserve to retained earnings		-	-	-	(84)	84	-	-	-
Proceeds of share issues (net of costs)		343	990	-	-	-	-	-	1,333
Shares issued to vendors as deferred consideration		27	86	-	-	-	-	-	113
Shares issued to redeem loan notes		31	94	-	-	-	-	-	125
Share-based payment charge		-	-	-	45	-	-	-	45
Total change in equity		401	1,170	-	(39)	84	-	-	1,616
At 30 November 2009		748	7,768	15	246	(5,480)	(259)	42	3,080

Notes to the Accounts

 

1. BASIS OF PRESENTATION

The financial information has not been audited and does not constitute statutory financial statements as defined by section 435 of the Companies Act 2006 for the period ended 30 November 2009 and for the year ended 31 August 2008.

The statutory financial statements for the 15 months to 30 November 2009 will be finalised and signed on the basis of the financial information presented by the directors in this preliminary announcement and will be delivered to the Registrar of Companies following the Company's Annual General Meeting.

The financial information for the year ended 31 August 2008 is derived from the statutory accounts for that year. The auditor reported on those statutory accounts which have been delivered to the Registrar of Companies. The audit report was unqualified, did not include references to matters to which the auditors drew attention by way of emphasis without qualifying their report and did not contain a statement under section 237(2) or (3) of the Companies Act 1985.

 

This announcement is prepared applying International Financial Reporting Standards and IFRIC Interpretations ('IFRS') as adopted by the European Union, with those parts of the Companies Act 2006 applicable to companies reporting under IFRS and using accounting policies that are consistent with those as stated in the previous year's financial statements.

 

This preliminary announcement was approved by the Board of Directors on 19 May 2010.

 

GOING CONCERN

 

The company's financial position, its cash flows, liquidity position and borrowing facilities, together with the factors likely to affect its future development, performance and position are set out in the Operating and Financial Review and in Note 7.

 

The company is currently in breach of its current banking covenants governing the terms of the loans owing to Allied Irish Bank (GB) as detailed in Note 7. The covenant breaches occurred following the disposal of certain subsidiary undertakings and consequently the company has entered preliminary discussions with the bank with a view to renegotiating its covenants and its banking facilities in respect of its Mezzanine debt of £3.728 million together with rolled up interest of £347,000 which falls due for payment on 31 August 2010. The Mezzanine debt repayment has partially been satisfied by the proceeds arising from the disposal of Optimal Wealth Management Limited and the business of First Artist Management Limited. The Vendors of Dewynters are due to receive payment on 30th June 2010 in respect of a loan note of £1,500,000 and the Vendors of SpotCo are due to receive payment in respect of the deferred consideration of $2,500.000 due in October 2010. The company is currently in negotiations with the vendors to restructure the payment schedule of loan note and deferred considerations. Based on negotiations conducted to date, the directors have a reasonable expectation that the financial obligations will be restructured satisfactorily.

The company has received a further overdraft facility from Allied Irish Bank to provide additional working capital to compensate for the cash shortfall arising from the poor January 2010 football trading window and general trading conditions.

Whilst the directors believe the going concern basis is appropriate, the combination of these circumstances represents a material uncertainty which may cast significant doubt upon the company's ability to continue as a going concern and that, therefore, the company may be unable to realise its assets and discharge its liabilities in the normal course of business. Nevertheless, after making enquiries and considering the uncertainties described above, the directors have a reasonable expectation that the company has adequate resources to continue operating for the foreseeable future. For these reasons, they continue to adopt the going concern basis of accounting in preparing the annual financial statements.

It is anticipated that the audit opinion on the final financial statements will include an emphasis of matter in regard to this issue.

 

PRIOR YEAR ADJUSTMENT

 

Following a review of the application of the Group's revenue recognition policy to the Sport division, a prior year adjustment has been made to correct errors highlighted in previous periods. The adjustment has resulted in a reduction in revenue and accrued income in 2008 of £218k (2007: £165k) and a reduction in profit and retained earnings in 2008 totalling £151k (2007: £119k).

 

Total earnings per share in 2008 was restated from 1.09p basic and 1.07p diluted to a loss per share of 0.03p (basic and diluted).

 

Opening retained earnings as at 1 September 2008 have been restated from £1,086k to £816k.

 

 

 

2 BUSINESS AND GEOGRAPHICAL SEGMENTS

 

Business segments

For management purposes, the Group is currently organised into two operating divisions - Media and Events. These divisions are the basis on which the Group reports its primary segment information. During the period the Entertainment/Sport division was discontinued and has been presented as held-for-sale.

 

Principal continuing activities are as follows:

Media - marketing, design, advertising, promotions, digital media services, publishing and merchandising and sponsorship.

Events - full event planning and management services, venue finding.

 

Segment information for continuing operations of the Group for the period ended 30 November 2009 is presented below:

 

				Media   £000	Events   £000	Unallocated   £000		Group   £000
	Revenue
	Revenue revenue			87,537	3,098	-		90,635
	Result
	Adjusted EBITDA			5,749	(56)	(2,186)		3,507
	Exceptional administrative expenses			(216)	-	(277)		(493)
	Depreciation			(742)	(16)	(73)		(831)
	Amortisation and impairment			(1,075)	-	(60)		(1,135)
	Operating profit/(loss)			3,716	(72)	(2,596)		1,048
	Finance income			-	-	61		61
	Finance costs			-	-	(2,500)		(2,500)
	Profit/(loss) before tax and discontinued operations			3,716	(72)	(5,035)		(1,391)

 

	Unallocated (expenses)/income above include all Head Office costs (such as directors remuneration, wages and salaries, office rentals and other corporate administrative overheads).

 

 

								Media   £000			Events   £000		Discontinued operations £000			Unallocated   £000						Group   £000
	Capital additions:
	Intangible assets							10,502			-		-			-						10,502
	Property, plant and equipment							277			11		-			43						331
	Balance sheet:
	Segment assets							37,004			3,992		5,707			987						47,690
	Total assets							37,004			3,992		5,707			987						47,690
	Segment liabilities							15,261			1,155		2,001			26,193						44,610
	Total liabilities							15,261			1,155		2,001			26,193						44,610
				Restated segment information for the year ended 31 August 2008 is presented below:
										Media   £000				Events   £000			Unallocated   £000						Group   £000
		Revenue								37,776				6,679			-						44,455
		Result
		Adjusted EBITDA								2,783				775			(1,307)						2,251
		Exceptional administrative expenses								-				(164)			(292)						(456)
		Depreciation								(412)				(6)			(117)						(535)
		Amortisation								(364)				-			-						(364)
		Operating profit/(loss)								2,007				605			(1,716)						896
		Finance income								-				-			59						59
		Finance costs								-				-			(1,608)						(1,608)
		Profit/(loss) before tax and discontinued operations								2,007				605			(3,265)						(653)

 

 

 

	Unallocated corporate (expenses)/income above include all Head Office costs (such as directors remuneration, wages and salaries, office rentals and other corporate administrative overheads).
			Media   £000	Events   £000	Entertainment /Sport £000	Unallocated   £000	Group   £000
	Capital additions
	Property, plant and equipment		201	1	77	182	461
	Balance sheet
	Segment assets		22,098	4,017	10,851	2,148	39,114
	Total assets		22,098	4,017	10,851	2,148	39,114
	Segment liabilities		6,583	465	3,209	20,956	31,213
	Total liabilities		6,583	465	3,209	20,956	31,213

 

Geographical segments

The Group's operations are located in the UK and the USA.

The following table provides an analysis of the Group's sales by geographic market:

						Revenue by geographical market
						15 months ended 30 November 2009 £000	Restated 12 months ended 31 August  2008 £000
	United Kingdom					42,312	39,262
	USA					48,323	5,193
						90,635	44,455

 

	The following is an analysis of the carrying amount of segment net assets/(liabilities), and additions to property, plant and equipment and intangible assets analysed by the geographical area in which the assets/(liabilities) are located:
				Carrying amount of segment net assets/(liabilities)		Capital additions
				30 November 2009 £000	31 August  2008 £000	15 months ended 30 November 2009 £000	12 months ended 31 August  2008 £000
-	United Kingdom			(6,982)	7,367	110	366
	Rest of Europe			-	439	-	55
	USA			10,062	95	10,723	40
				3,080	7,901	10,833	461

 

 

 

 

Included within USA segment net assets is goodwill totalling £6,552k and intangibles totalling £3,052k in respect of the acquisition of Spot and Company of Manhattan Inc. Deferred consideration and borrowings for this acquisition are deemed to be liabilities of the United Kingdom segment.

 

 

3		EXCEPTIONAL ADMINISTRATIVE EXPENSES	15 months ended 30 November 2009 £000				12 months ended 31August  2008 £000
		Acquisition related costs and bonuses	283				273
		Restructuring costs	97				-
		Redundancy costs	90				147
		Relocation costs	23				36
			493				456
		Included within redundancy costs are £90,000 (2008: £120,000) payable as compensation for loss of office.

 

4 TAXATION

		15 months  ended 30 November 2009 £000		Restated 12 months ended 31 August  2008 £000
	Current tax:
	UK corporation tax on losses of the period/year	181		90
	Overseas tax on losses of the period/year	117		67
	Total current tax	298		157
	Deferred tax:
	Deferred tax credit for the period/year	(73)		(86)
	Total deferred tax	(73)		(86)
	Tax on loss of ordinary activities	225		71

 

 

 

 

 

 

 

	Factors affecting the tax charge for the period/year:	15 months  ended 30 November 2009 £000		12 months ended 31 August  2008 £000
	The tax assessed for the year is higher than the standard average rate of corporation tax in the UK 28% (29.17%). The differences are explained below:
	Loss on ordinary activities before tax	(1,391)		(653)
	Loss on ordinary activities multiplied by standard average rate of corporation tax in the UK 28% (2008: 29.17%)	(389)		(190)
	Effects of:
	Expenses not deductible for tax purposes	283		109
	Depreciation on non-qualifying assets	62		33
	Unwinding of discount on deferred consideration	246		92
	Difference in tax rates on overseas earnings	19		9
	Share-based payments	13		19
	Other movements	(9)		(1)
	Total tax charge for the period/year	225		71

 

Taxation is calculated at the rates prevailing in the respective jurisdictions. The standard tax rates in each jurisdiction are 40% in the United States, 28% in the United Kingdom, 28% in Denmark and 35% in Italy.

 

 

5 EARNINGS PER SHARE

 

 The calculations of (loss)/earnings per share are based on the following (losses)/profits and number of shares:

 

	(Loss/)/earnings attributable to equity holders of the company	15 months  ended 30 November 2009 £000		Restated 12 months ended 31 August  2008 £000
	For basic and diluted loss per share
	(Loss)/profit from discontinued operations	(4,701)		720
	Loss from continuing operations	(1,616)		(724)
	Loss for the financial period/year	(6,317)		(4)

 

 

	Number of shares	15 months ended 30 November 2009 Number		12 months ended 31 August 2008 Number
	Weighted average number of ordinary shares for the purposes of basic earnings per share	19,172,788		13,454,959
	Dilutive effect of share options	-		327,329
	Weighted average number of ordinary shares for the purposes of diluted earnings per share	19,172,788		13,782,288

 

The dilutive effect of share options in 2008 does not impact loss per share. In the event of the Group becoming profitable, the share options in issue would have a dilutive effect for those options 'above water'.

 

6 DISPOSAL GROUP CLASSIFIED AS HELD-FOR-SALE AND DISCONTINUED OPERATIONS

 

The assets and liabilities related to First Artist Sport Limited, Promosport Limited, First Artist Scandinavia A/S, Sponsorship Consulting Limited, Optimal Wealth Limited and First Artist Management Limited have been presented as held for sale following the approval by the Group's management and shareholders to sell the companies (or in the case of Sponsorship Consulting Limited, liquidate). Optimal Wealth Limited and First Artist Management Limited were sold in February 2010. Sponsorship Consulting Limited is in the process of being liquidated and the completion date for the disposal of the remaining three companies is expected before 30 November 2010.

 

The Sport division consists of First Artist Sport Limited, Promosport Srl, First Artist Scandinavia A/S and Sponsorship Consulting Limited.

 

 

	15 months ended 30 November 2009	Sports division   £000	Optimal Wealth Limited £000	First Artist Management Limited £000	Total   £000
	Operating cash flows	103	85	63	251
	Investing cash flows	(3)	-	-	(3)
		100	85	63	248

 

	Year ended 31 August 2008	Sports division   £000	Optimal Wealth Limited £000	First Artist Management Limited £000	Total   £000
	Operating cash flows	(358)	(48)	(317)	(723)
	Investing cash flows	(8)	(44)	35	(17)
		(366)	(92)	(282)	(740)

 

 

 

 

a) Assets of disposal group classified as held-for-sale

 

		Sports division   £000	Optimal Wealth Limited £000	First Artist Management Limited £000	Total   £000
	Property, plant and equipment	93	17	8	118
	Available for sale investment	-	24	-	24
	Intangible assets - goodwill	937	1,066	129	2,132
	Other current assets	2,757	288	388	3,433
		3,787	1,395	525	5,707

 

b) Liabilities of disposal group classified as held-for-sale

 

 

 

		Sports division   £000	Optimal Wealth Limited £000	First Artist Management Limited £000	Total   £000
	Trade and other payables	1,243	92	366	1,701
	Other current liabilities (including tax)	79	207	14	300
		1,322	299	380	2,001

 

Analysis of the result of discontinued operations, and the result on the re-measurement of assets of disposal group, is as follows:

 

	15 months ended 30 November 2009	Sports division   £000	Optimal Wealth Limited £000	First Artist Management Limited £000	Total   £000
	Revenue	4,944	2,652	590	8,186
	Expenses	(4,950)	(2,125)	(547)	(7,622)
	(Loss)/profit before tax of discontinued operations	(6)	527	43	564
	Tax	-	(103)	-	(103)
	(Loss)/profit after tax of discontinued operations	(6)	424	43	461
	Pre-tax loss recognised on re-measurement of assets of disposal group	(2,605)	(1,980)	(628)	(5,213)
	Tax	51	-	-	51
	Loss for the period from discontinued operations	(2,560)	(1,556)	(585)	(4,701)

 

 

 

 

	Year ended 31 August 2008	Sports division   £000	Optimal Wealth Limited £000	First Artist Management Limited £000	Total   £000
	Revenue	6,042	2,662	725	9,429
	Expenses	(5,402)	(2,336)	(649)	(8,387)
	Profit before tax of discontinued operations	640	326	76	1,042
	Tax	(157)	(153)	(12)	(322)
	Profit for the year from discontinued operations	483	173	64	720

 

7 BORROWINGS

		30 November 2009 £000		31 August 2008 £000
Current:
Bank overdrafts		939		748
Term loans		-		719
Bank loans		4,888		4,320
		5,827		5,787
Non-current:
Bank loans		11,684		8,417
Analysis of due dates for borrowings:
On demand or within one year
Bank overdrafts		939		748
Term loans		-		719
Bank loan - senior variable rate loan		1,000		1,535
Mezzanine loan		3,888		2,785
		5,827		5,787
In the second year
Bank loan - senior variable rate loan		960		215
Bank loan - senior fixed rate loan		-		1,321
		960		1,536
In the third to fifth years inclusive
Bank loan - senior variable rate loan		5,200		-
Bank loan - senior fixed rate loan		-		4,607
Bank loan - senior term loan B		5,524		1,500
		10,724		6,107
After five years
Bank loan - senior fixed rate loan		-		774
Amounts due for settlement		17,511		14,204
Less amounts due within one year		(5,827)		(5,787)
Amounts due for settlement after one year		11,684		8,417

 

 

 

	Analysis of borrowings by currency
			Sterling £000	USD £000			Total £000
	2009
	Bank overdrafts		939	-		939
	Bank loans		13,220	3,352		16,572
			14,159	3,352		17,511

 

			Sterling £000	Euros £000	Total £000
	2008
	Bank overdrafts		679	69	748
	Term loans		719	-	719
	Bank loans		12,737	-	12,737
			14,135	69	14,204
	The term loans were unsecured and related to loan notes payable to the principals of The Finishing Touch (Corporate Events) Limited. Loan notes of £nil (2008: £400,000) bear interest at the rate of the UK bank base rate. Loan notes of £nil (2008: £319,000) bear no interest.   The bank loans and overdraft are secured against the assets of the Group. The overdraft limit is £1m (temporarily extended to £1.7m post period end) and interest is payable at 2.5% above the lender's base rate. The facility is reviewed annually.   The senior variable rate loan is repayable over five years as disclosed above. Interest is payable at 2.25% above LIBOR.   The mezzanine facility is repayable by August 2010 and interest is payable at 10% above LIBOR.   The senior term loan B is repayable within five years and interest is payable at 10% above LIBOR.   Under the terms of the bank loans the Group is tested quarterly on five loan covenants:   Interest Cover: 12 month rolling adjusted EBITDA, Leverage: Debt as a ratio of 12 month adjusted EBITDA, Debt Service: 12 month rolling adjusted EBITDA to 30 November 2009 as a ratio of debt service Cash Flow to Cash Interest: 12 month rolling cashflow as a ratio of cash interest, Cash Flow to Cash Debt Service: 12 month rolling cashflow as a ratio of cash debt service.

 

 

8 BUSINESS COMBINATIONS

 

On 1 October 2008 the group acquired 100% of the share capital of Spot and Company of Manhattan Inc ("SpotCo") and obtained the control of the company, a leading US-based live entertainment advertising agency. The acquired business contributed revenues of £42,547k and net profit before tax of £2,087k to the Group for the period from 1 October 2008 to 30 November 2009.

 

If the acquisition had occurred on 1 September 2008, group revenue would have been £92,708k, and loss before tax and discontinued operations would have been £1,058k.

 

 

 

Details of net assets acquired and goodwill are as follows:

 

	Purchase consideration:		£000
	- Cash paid		2,982
	- Direct costs relating to the acquisition		710
	- Deferred consideration - cash		7,451
	- Deferred consideration - equity		100
	Total purchase consideration		11,243

 

The number of shares to be issued to settle the equity deferred consideration is calculated by reference to the share price at the date that the liability falls due.

 

 

 

The assets and liabilities as of 1 October 2008 arising from the acquisition are as follows:

 

 

	Book value	Fair value adjustments	Fair value
	£'000	£'000	£'000
Brand	-	1,819	1,819
Customer relationships	-	2,074	2,074
Property, plant and equipment	587	-	587
Trade and other receivables	2,515	-	2,515
Cash and cash equivalents	274	-	274
Trade and other payables	(1,421)	-	(1,421)
Deferred tax liabilities	(114)	(1,557)	(1,671)
Deferred tax asset	-	457	457
Fair value of net assets	1,841	2,793	4,634
Goodwill			6,609
Total purchase consideration			11,243
Purchase consideration settled in cash			3,692
Cash and cash equivalents in subsidiary acquired			(274)
Cash outflow on acquisition			3,418

 

 

Deferred consideration has been discounted at 9.5%.

 

Deferred consideration is payable on 12 months figures for the various Group companies, with estimates based on Company budgets. Although these estimates are based on management's best knowledge of the amount, actual results may ultimately differ from these estimates.

 

 

The following table indicates the decreases to deferred consideration on previous acquisitions:

 

	Dewynters Limited   £000	Yell Communications Limited £000	Sponsorship Consulting Limited  £000	Total  £000
Deferred consideration - cash	945	22	285	1,252

 

 

9 POST BALANCE SHEET EVENTS

Disposal of subsidiaries

 

On 2 February 2010 the Company completed the sale of the company of Optimal Wealth Management Limited to Conforto Financial Management Limited for a total consideration of £1.5 million to be satisfied wholly in cash. £1.3 million of the consideration was paid on completion, with two further payments of £100,000. The first £100,000 payment was paid in April and the second £100,000 payment is due in July 2010.

 

On 12 February 2010 the Company announced the completion of the sale of business of First Artist Management Limited to James Grant Media for a total cash consideration of £200,000, less a post completion working capital adjustment of up to £25,000.

 

Banking facilities

 

Subsequent to the period end the Group entered into discussions with its main lender, Allied Irish Bank (GB), concerning banking covenants. Details have been described in full in the going concern section within note 1.

 

- ends -