TNG.L Regulatory News (TNG)

16 May 2006 07:00

Tangent Communications PLC16 May 2006 TANGENT COMMUNICATIONS PLCRESULTS FOR THE YEAR ENDED 28 FEBRUARY 2006 16 May 2006 Tangent Communications plc, the one-to-one marketing group, today announces itsresults for the year ended 28 February 2006. Highlights Financial: •Ongoing turnover up 24% to £6.61m (2005: £5.32m) •EBITDA* up 390% to £896,000 •Operating profit* increased to £626,000 (2005: £32,000 loss) •Earnings per share* 0.82p (2005: loss 0.18p) •Net profit before tax increased to £131,000 (2005: £20,000) •Administrative expenses* down 15% •Net cash of £801,000 (2005: net debt £24,000) *before goodwill and exceptional items Operating: •Successful integration of acquisition, leading to increased revenues from existing clients •Strengthened client base with new wins, including National School of Government and Union Pub Company •Development of new proprietary web engine for enhanced delivery of email and web messages Nicholas Green, Joint Chief Executive, said: "There is a revolution sweeping though the marketing industry. Traditionalscattergun ways of communicating with customers are giving way to tailor-mademessaging. We have been creating a business that is well placed to enable companies to sendpersonalised messages to each and every customer, whether by print, email ormobile. The quality of our clients demonstrates our strength in this fastgrowing market." Further enquiries: Tangent Communications plc 020 7553 6600Nicholas Green (Joint CEO)Graeme Harris (Finance director) Brunswick Group LLPAndrew Garfield, Mark Antelme 020 7404 5959 CHAIRMAN'S STATEMENT Tangent has had a good year combining sales growth with greater efficiency,enhanced by integrating the acquisition of London Digital. There are excellent opportunities to continue to grow the business but all ouremployees will be the vital part in fulfilling the potential. I feel sure that old and new shareholders appreciate the achievements in thelast year and I look forward to the future with confidence. Piers Caldecote 16 May 2006 CHIEF EXECUTIVES' REVIEW In the year ended 28 February 2006 Tangent increased operating profit, profitbefore tax and earnings per share. We invested in our business and as digitalmarketing continues to dominate growth within the advertising sector, Tangent iswell positioned to benefit from this growing trend. Results Turnover from ongoing operations increased by 24% to £6.61m (2005: £5.32m) andprofit before tax increased to £131,000 (2005: £21,000). Headline earnings pershare increased by 167% to 0.16 pence (2005: 0.06 pence) and net cash increasedto £801,000 (2005: net debt £24,000). It has been an eventful year for Tangent which saw the acquisition of LondonDigital in July and with this the integration of a new team and range ofservices. We would like to thank everyone for their hard work during this timeand commitment to achieving our goals. Revenue from existing customers hasincreased and our new business wins position the company strongly for our newfinancial year. Using technology New technologies are bringing opportunities for growth. In 2006 we invested inand increased the capabilities of our proprietary web engine, ToolKit, and addednew functionality which has helped our commercial team successfully increaserevenue from existing clients such as Greene King and new business from clientssuch as the National School of Government. Digital technology continues to growand play a significant role in today's marketing environment and Tangent iscommitted to widen its delivery platforms. In 2007 we will broaden our offeringto include a mobile channel which will provide our clients with exciting newcommercial opportunities to communicate with their customers through Tangent. Moving ahead Tangent benefits from a dedicated and committed team focussed on maintaining ourmarket leading role. Our position in new digital technologies was confirmed inMarch when Tangent won the Hewlett Packard award at Ipex 2006 after topping theEuropean league tables with digital growth of 150% during the measured period.In the citation, Paul Randall, UK marketing manager for HP said 'this awardsignifies the market leading approach adapted by Tangent'. Tangent is profitable, cash positive and is generating cash from its operations.This places our business in a strong position in front of both existing clientsand potential acquisition targets and we are confident that Tangent willcontinue to grow in 2007. We would like to thank everyone for their support and we look forward to 2007 asa year in which Tangent will further build on its solid foundations. Nicholas Green and Timothy Green 16 May 2006 FINANCIAL REVIEW Overview In July 2005 Tangent expanded by the acquisition of London Digital. Thesubsequent business integration and reorganisation has resulted in substantialimprovements in profitability and cash generation. Ongoing trading profits Ongoing turnover grew by 24% to £6.61m (2005: £5.32m) and corresponding grossmargins increased to 43.7% (2005: 39.4%). Operational efficiencies were achieved over the year and the full year operatingprofit margin excluding goodwill amortisation and exceptional items improved to9.5% (2005: 0.6% loss). In the second half of the year, when most of the ongoingbenefits of the acquisition synergies were obtained, operating margins werehigher at 11.0%. Goodwill amortisation and exceptional items Goodwill amortisation of £0.18m relates principally to the goodwill arising onacquisition of the London Digital business. The operating exceptional item is a £0.13m charge for the intrinsic value ofshare options granted during the year. There is no underlying cash flow orfinancial liability associated with the charge and it does not reduceshareholders' funds. The exceptional cost of restructuring following the London Digital acquisitionwas £0.18m, being compensation payments to former directors and employees. Taxation The tax charge for the year of £0.02m (2005: £nil) represents 5.1% of profitbefore tax and amortisation, significantly lower than the standard rate of 30%because the group has the benefit of past tax losses. A low tax rate should bemaintained in the short term because at the year end the group had £1.89m of taxlosses available to offset against future profits. Earnings per share Basic earnings per share before goodwill amortisation and exceptionals increasedto 0.82 pence (2005: loss per share 0.18 pence). After goodwill amortisation andexceptionals, basic earnings per share increased to 0.16 pence (2005: 0.06pence). For fully diluted calculations, dilutive options lower the earnings pershare by 7%. Cash flow and net debt Overall cash generation was strong at £0.86m (2005: £0.02m). The main componentwas an operating cash inflow of £0.54m (2005: £0.22m), while the London Digitalacquisition added £0.31m cash net of deal costs and a further £0.15m inflow camefrom the exercise of share options. Additional debt was offset by a similar level of repayments. At the year end netfunds were £0.80m (2005: net debt £0.02m). Balance sheet The biggest change to the group balance sheet is the goodwill arising from theacquisition of London Digital and the additional share capital issued asconsideration. The deemed price of the 55 million shares issued was 10.435 penceper share, being the average mid price for the two business days precedingcompletion and this resulted in additional goodwill of £5.18m. Treasury and funding The group finances its operations through shareholders' funds, bank and financelease borrowings and working capital management. Regular reports on cashbalances and borrowings are provided to the board. Surplus cash is placed withHSBC on short term money market deposit. Graeme Harris Finance director 16 May 2006 CONSOLIDATED PROFIT AND LOSS ACCOUNTfor the year ended 28 February 2006 2006 2005 Notes £000 £000Turnover------------------------- ------ ----------- ----------Continuing operations 5,237 5,317 Acquisitions 1,371 - Discontinued operations - 1,283------------------------- ------ ----------- ---------- 6,608 6,600Cost of sales 1 (3,723) (3,978) ----------- ---------- Gross profit 2,885 2,622 Administrative expenses excludingGoodwill amortisation and exceptional items 1 (2,259) (2,654) Operating profit/(loss) before goodwillAmortisation and exceptional items------------------------- ------ ----------- ----------Continuing operations 430 (83) Acquisitions 196 - Discontinued operations - 51------------------------- ------ ----------- ---------- 626 (32) Amortisation of goodwill (181) (16) Operating exceptional items 2 (132) (70)------------------------- ------ ----------- ----------Total administrative expenses 1 2,572 2,740------------------------- ------ ----------- ---------- Operating profit/(loss)------------------------- ------ ----------- ----------Continuing operations 282 (117) Acquisitions 31 - Discontinued operations - (1)------------------------- ------ ----------- ---------- 313 (118) Non-operating exceptional items 2 (176) 168 ----------- ---------- Profit on ordinary activities before interest 137 50 ----------- ---------- Net interest payable (6) (29) ----------- ---------- Profit on ordinary activities before tax 131 21 Taxation (16) - ----------- ---------- Profit for the financial year 115 21 =========== ========== CONSOLIDATED PROFIT AND LOSS ACCOUNT (continued)for the year ended 28 February 2006 Notes 2006 2005 Basic earnings/(loss) per share 3 Continuing operations 0.16p (0.42)pDiscontinued operations - 0.48p ----------- ---------- Total operations 0.16p 0.06p =========== ========== Excluding goodwill amortisation and exceptional items 0.82p (0.18)p ============ =========== Fully diluted earnings/(loss) per share 3Continuing operations 0.15p (0.42)pDiscontinued operations - 0.48p ------------- ------------ Total operations 0.15p 0.06p ============= ============ Excluding goodwill amortisation andexceptional items 0.77p (0.18)p ============== ============= There are no recognised gains and losses other than those included in the profitand loss account. CONSOLIDATED BALANCE SHEETAt 28 February 2006 2006 2005 Notes £000 £000Fixed AssetsIntangible assets 5,051 48Tangible assets 516 277Investments - - ----------- ---------- 5,567 325 ----------- ---------- Current AssetsStocks 98 82Debtors 1,656 1,154Cash at bank 922 62 ----------- ---------- 2,676 1,298Creditors: amounts falling due within one year (1,472) (906) ----------- ---------- Net current assets 1,204 392 ----------- ---------- Total assets less current liabilities 6,771 717 Creditors: amounts falling due after more thanone year (13) (35) Provisions for liabilities and charges (32) (94) ----------- ---------- 6,726 588 =========== ========== Capital and ReservesCalled up share capital 951 401Share premium account 7,860 7,860Merger reserve 5,189 -ESOP reserve (4) (12)Other reserve 1,294 1,162Profit and loss account (8,564) (8,823) ------------ ----------- Shareholders' funds - equity interests 6,726 588 ============ =========== These financial statements were approved by the board of directors on 16 May2006 and were signed on its behalf by: Nicholas Green Graeme HarrisDirector Director CONSOLIDATED CASH FLOW STATEMENTfor the year ended 28 February 2006 2006 2005 Notes £000 £000 Net cash inflow from operating activities 6 535 215 ----------- ---------- Returns on investments and servicing of financeNet interest paid (6) (29) ----------- ---------- Taxation (15) - Capital expenditure Purchase of tangible fixed assets (54) (163)Receipts from sale of tangible fixed assets 10 35Receipts from sale of investments - 37 ----------- ---------- Net cash outflow on capital expenditure (44) (91) ----------- ---------- Acquisitions and disposalsCash acquired and subsidiary undertaking 542 -Costs of acquisition (229) -Proceeds from sale of trading division - 367 ----------- ---------- Net cash inflow from acquisitions and disposals 313 367 ----------- ---------- Net cash inflow before financing 783 462 ----------- ---------- FinancingFinance lease capital repayments (66) (10)Bank loan repaid (9) (8)Exercise of share options 152 -Invoice discounting facility repaid - (421) ----------- ---------- Net cash inflow/(outflow) from financing 77 (439) ----------- ---------- Increase in cash 5 860 23 =========== ========== 1. COST OF SALES AND ADMINISTRATIVE EXPENSES Continuing Acquisitions Total Year ended 28 February 2006 £000 £000 £000 Cost of sales 2,966 757 3,723 ========= ========= ========= Administrative expenses - normal 1,841 418 2,259 - goodwill 16 165 181 - exceptional 132 - 132 --------- --------- --------- Total administrative expenses 1,989 583 2,572 ========= ========= ========= Continuing Acquisitions Total Year ended 28 February 2006 £000 £000 £000 Cost of sales 2,966 757 3,723 ========= ========= ========= Administrative expenses - normal 2,179 475 2,654 - goodwill 16 - 16 - exceptional 18 52 70 --------- --------- --------- Total administrative expenses 2,213 527 2,740 ========= ========= ========= 2. EXCEPTIONAL ITEMS 2006 2005 £000 £000 Share option charge in accordance with UITF 17 (132) - Redundancy costs - (70) ========= ========= Restructuring and integration costs following theacquisition of Tangent Communications Limited and its subsidiaries, including London DigitalPrinting Group Limited (176) - ========= ========= Profit on sale of Bury St Edmunds operation - 168 ========= ========= 3. EARNINGS/(LOSS) PER SHARE Earnings/(loss) per share has been calculated by dividing the earnings/(loss)available to ordinary shareholders by the weighted average number of shares inissue during the period after excluding the shares owned by the employee shareownership trust. Diluted earnings/(loss) per share are calculated taking intoaccount the potentially dilutive effect of share options. 2006 2005 £000 £000 Earnings/(loss) excluding goodwill amortisation andexceptional items 590 (61) Exceptional items net of tax (292) 98 Goodwill amortisation (181) (16) Basic and diluted earnings/(loss) 115 21 ========= ========= Number Number 000 000 Weighted average number of ordinary shares in issue 71,561 34,660 Effect of dilutive options 5,211 141 --------- --------- Diluted weighted average number of shares in issue 76,772 34,801 ========= ========= There were no discontinued operations in the year. In the prior year the netprofit from discontinued operations was £167,000, which amounted to a basic andfully diluted earnings per share of 0.48 pence. 4. ACQUISTIONS On 11 July 2005 the company acquired the entire issued share capital of TangentCommunications Limited and its subsidiaries including London Digital PrintingGroup Limited. Details of the acquisition are as follows: Net assets acquired £000 Tangible fixed assets 462 Stock 23Debtors 885Cash at bank 542Finance lease liabilities (110)Other creditors (1,018) --------- Book and fair value of net assets 784 Goodwill 5,184 --------- Fair value of net assets 784 --------- Goodwill 5,968 Satisfied by: Issue of shares at market value (10,435p) 5,739 Cost of acquisition 229 --------- 5,968 ========= One adjustment was required to restate the book values of assets acquired tofair value, being a £52,000 increase in net assets attributable to deferred tax. 5. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS 2006 2005 £000 £000 Profit for the year 115 21Shares issued for acquisition 550 -Merger reserve arising from share issue 5,189 -Release of funds on distribution of shares 152 -Share option charge (UTIF 17) 132 - --------- --------- Net increase in shareholders' funds 6,138 21 Opening shareholders' funds 588 567 --------- --------- Closing shareholders' funds 6,726 588 ========= ========= 6. RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING ACTIVITIES 2006 2005 £000 £000 Operating profit/(loss) 313 (118)Share option charge (UTIF 17) 132 -Non-operating exceptional items (176) -Amortisation of goodwill 181 16Depreciation charge 270 215Profit on disposal of fixed assets (3) (5)Profit on disposal of investments - (7)Decrease in stock 7 20Decrease in debtors 383 669Decrease in creditors and provisions (572) (575) --------- --------- Net cash inflow from operating activities 535 215 ========= ========= 7. ANALYSIS OF NET FUNDS/(DEBT) At 1 Cash flows Net funds Finance At 28 March excluding acquired with lease Feb 2005 acquisitions subsidiary inception 2006 £000 £000 £000 £000 £000 -------- --------- --------- -------- ------- Cash at bank 62 318 542 - 922 -------- --------- --------- -------- ------- Bank loan (9) 9 - - - Finance leases (77) 86 (110) (20) (121) (86) 95 (110) (20) (121) -------- --------- --------- -------- ------- Net funds/(debt) (24) 413 432 (20) 801 ======== ========= ========= ======== ======= This information is provided by RNS The company news service from the London Stock Exchange