19 May 2014 07:00
Tangent Communications PLC ("Tangent" or the "Company)
Results for the year ended 28 February 2014
FINANCIAL HIGHLIGHTS
· Revenues increased by 11.3% to £27.03m (2013: £24.29m)
· Underlying operating profit increased by 53.3% to £2.48m (2013: £1.62m) and 20.4% on a like for like basis
· Profit before tax increased by 171.7% to £2.33m (2013: £0.86m)
· Revenues from our retail websites increased to 34.4% of group total (2013: 21.2%)
· Underlying earnings per share¹ increased by 10.7% to 0.62p (2013: 0.56p)
· Net cash² increased by £0.64m to £2.81m (2013: £2.17m)
· 20% increase in proposed final dividend to 0.24 pence per share (2013: 0.20 pence per share)
Commenting on the year, Tangent's Chief Executive, Timothy Green, said:
"2013-14 was a strong year for Tangent, with profits beating market expectations, our cash balance looking healthy and dividends generated.
We have the ambition to become a major player in the online retail print market, and this year the Company took strides towards that goal, with the proportion of revenues generated online increasing to 34%. This trend is expected to continue.
Our investment in a state-of-the-art print facility is allowing us to accelerate the online side of the business; we are poised to sell more of our existing product lines to an increasing customer base and launch new websites; and the goodprint acquisition gives us a foundation from which to expand into new consumer markets.
Tangent is in a solid financial position at the end of 2013/14. As the cash generation capability of our business continues to grow, we are proposing a 20% increase in our dividend."
For further information, please contact:
Tangent Communications PLCTimothy Green - Chief Executive: 020 7462 6101Seema Paterson - Corporate Development: 020 7462 6101
Canaccord Genuity Limited - Nominated adviser and broker
Bruce Garrow/Emma Gabriel: 020 7523 8350
MHP CommunicationsAndrew Leach / Christian Pickel: 020 3128 8208
¹ Underlying earnings per share is before non-recurring expenses net of tax and on a fully diluted basis² Net cash is cash and cash equivalents less all borrowings
CHAIRMAN'S STATEMENT
2013 was a strong year for Tangent: our growth was impressive; our financial performance exceeded expectations; our profits were up by 53 per cent; our brands earned well- deserved awards; and we are proposing a 20 per cent increase in dividends.
In a fiercely competitive field, such success is far from guaranteed - it is won through diversity, creativity and teamwork.
Diversity is key. We offer something for everyone - from the one-man-band business who gets their business cards from goodprint, to the national estate agents who go to Ravensworth for impeccable marketing materials.
Creativity is our lifeblood. The word "Tangent" means 'a completely different line of thought or action', and that sums up our approach. printed.com has thought creatively with its Reward Programme, partnering up with brands such as M&S and British Airways to attract new customers. T/OD continues to entice new clients by thinking beyond conventional printing. Meanwhile our creative agency, Tangent Snowball, is broadening its services.
Above all, we rise through teamwork. From those working in our facility in Newcastle, to our employees in London, to those on our board, we are a team. This year we strengthened that team with a share incentive scheme for our staff: buy one share, get one free. The aim is to give our people a real stake in Tangent's success, and the take-up is encouraging.
We are constantly looking to extend our reach and expand our range. Following the acquisition of goodprint last year, we have a presence in 17 European markets and in the coming year, we are looking to consolidate that footprint. Our free cash flow continues to grow and we remain agile and up for spending it wisely. At every meeting, with every decision, in every quarter, our priority is to remain at the leading edge of e-commerce - and to bring realistic returns to the investors who believe in us.
I am proud of the success of Tangent in 2013 - and look forward to seeing the story continue.
Michael P. Green
Chairman
STRATEGIC REPORT
Consolidated Results
Sales increased by 11.3% to £27.03m (2013: £24.29m) after acquired revenues were added. Gross profit after direct cost of sales rose to £16.29m (2013: £13.98m) representing a 60.3% gross margin, up from the prior year's 57.6%. This reflects the impact of higher margin products and services being sold following the acquisition.
People costs increased by 5.6% to £10.40m (2013: £9.85m) and continued to represent the largest single cost for Tangent. The ratio of wages to sales reduced from 40.6% to 38.5% as our scalable online print businesses required proportionately less staff to generate additional revenues as a result of the infrastructure we already have.
Underlying operating profits grew by 53.3% to £2.48m (2013: £1.62m) a 20.4% increase on a like for like basis. Underlying operating margin improved to 9.2% (2013: 6.6%).
Profit before tax was 171.7% higher at £2.33m (2013: £0.86m). The tax charge of £0.63m (2013: £0.24m) represented an effective rate of 27% (standard rate 23%).
Underlying earnings per share for the year were 10.7% higher at 0.62p per share (2013: 0.56p per share).
Tangent continues to be cash generative, £2.93m of operating cash flow was generated during the year and net cash at 28 February 2014 was £2.81m (2013: £2.17m), an increase of £0.64m.
Our Businesses
printed.com, goodprint and smileprint
Tangent operates the following websites: printed.com, goodprint and smileprint. Sales are derived from a multitude of products; wedding invites, business cards, leaflets, brochures, stickers and posters, all processed online and delivered directly to our customers. We hold no finished goods stock as all products are created on the website and personalised to each recipient.
During the year we used key performance indicators to highlight some of the performance levels of our retail websites. Going forward we feel it is informative to focus on the two most significant indicators; sales and customer numbers. During the year we achieved £9.3m sales from 118,804 customers. In the forthcoming period we will report again on these two key indicators.
printed.com
Sales grew 53.7% to £6.07m (2013: £3.95m), both through attracting a significant number of new customers, and encouraging existing customers to spend with greater regularity. The trend in repeat orders was strong and well ahead of expectations.
This success is built on a great user experience, a highly personalised service and real rewards for customers.
The unique printed.com Reward Programme, in which customers earn points on every pound spent, has been a huge success. High quality brands such as M&S, Amazon and BA Executive Club have joined as partners.
For small businesses and sole traders the printed.com offer is strong, with a dedicated part of the website tailored to particular groups, from wedding stationers to photographers.
In addition, in 2013/14 new partnerships were made with online market places such as notonthehighstreet.com and Etsy, forging new connections between printed.com and the small businesses that work through these sites.
goodprint
goodprint's sales, which are generated from 17 international markets, were £3.24m (2013: £4.05m on a pro-forma full year). The site continued to attract a comparable number of visitors to the prior year, but the conversion of these visits into sales slowed.
Our primary product, the business card remains in high demand and the range of design and price combinations varied. We must match customers with the most appropriate offer or discount to maximise sales. This represents a new sales model compared to that of our printed.com brand and as such, from November we began to recruit a new team with the ecommerce experience to improve our proposition.
The first impact from the new team was to rationalise the existing advertising budget. Sales from new customers have now begun to climb as we find more effective areas to advertise.
Our proposition must also evolve. Our latest initiative launched on March 1st offers online, design and delivery of business cards in four hours. This has put goodprint ahead of all its current competitors in the lucrative London market.
Ravensworth
Ravensworth is the number 1 provider of design and printed materials to the estate agency market, and as such has benefitted from the up-turn in the property market - with sales increasing to £6.63m.
In a fast-moving and competitive field there can be no complacency, so Ravensworth is continually looking to adapt and innovate. This year a fully transactional website will be launched with a new online photo-editing service - which we expect to generate significant new revenue streams.
Tangent Snowball
Tangent Snowball is a top 20 digital marketing agency offering a unique blend of technology and creative insight to global brands such as Carlsberg, PepsiCo, SAP and the Wolseley Group.
This year the team was strengthened with the appointment of a new chief executive from Omnicom. During the year, the business focused on a smaller number of higher value contracts resulting in lower revenues but higher gross margins at 89.0% (2013: 77.0%). Operating profit grew by 5.8% to £0.91m (2013: £0.86m). New client wins included Papa Johns, Agatha Christie and Evoshave.
Tangent Snowball identified an opportunity to sell great value-add services to its long standing client base. It has hired new talent to enhance the range of services it can offer to its clients, and we expect that investment to yield additional profits in due course. There may be a deferral in profits in the short term while new services are marketed to our customers, but we expect that effect to be reversed once sales of the new services start to take effect.
Non-recurring expenses associated with the disposal of Tangent Snowball's Australian business
Following an extensive review of its operations the Board decided to dispose of 81% of the holding in its Australian business, Tangent Snowball PTY Limited. Non-recurring expenses of £0.13m, relating to the disposal, were incurred during the year, these costs do not form part of the normal operating expenses of Tangent and have therefore been excluded from underlying operating profit.
T/OD
T/OD is an innovative print supplier, based in central London, with a focus on producing design-inspired print to fashion retailers and advertising agencies.
Sales grew by 6.2% to £2.38m (2013: £2.24m) as T/OD concentrated on selling displays to high-end retailers such as Laura Ashley, Ugg and Chanel. Gross margin in the year maintained the higher levels reached in 2013 and steadied at the 70% mark. Investment was made for new hires to support product development and sales growth.
Cash Flows
Tangent's cash and cash equivalents at 28 February 2014 amounted to £3.09m (2013: £2.64m), net cash, after deducting all outstanding debt, amounted to £2.81m (2013: £2.17m), an increase of £0.64m over the year.
We continue to be cash generative with £2.93m of cash generated from operations representing 118.5% of underlying operating profit (2013: 94.2%) and 126.1% of profit before tax (2013: 177.7%).
Capital Expenditure
Tangent invests in print and finishing equipment and software platforms to drive revenues across the business.
During the year, we invested £0.53m (2013: £0.81m) in print and finishing equipment and £0.56m (2013: £0.76m) in software. This level of investment is expected to continue at similar levels in the year to 28 February 2015 as Tangent continues to grow its online print business and expand into new online markets.
Balance Sheet
Tangent's balance sheet remained strong, net assets increased by £1.36m to £32.12m (2013: £30.76m).
Goodwill of £24.80m (2013: £24.80m) was the largest asset on Tangent's balance sheet. The carrying value of goodwill is tested at least annually for impairment. At 28 February 2014 there was significant headroom and as such no impairment was present, full details of the test undertaken are included in note 6.
Trade receivables were £5.31m (2013: £5.20m), in line with 2013 despite a significant increase in revenues reflecting the high proportion of our online customers who pay up front with credit and debit cards.
Trade and other payables were £0.42m lower at £3.59m (2013: £4.01m), the majority of this movement related to the settlement of closure costs in respect of the goodprint Thetford site included at 28 February 2013.
Dividend Declaration
The Board believes that paying a dividend forms an important part of providing returns to shareholders. To that end the Board is proposing a 20% increase to its final dividend for the year to 28 February 2014, to 0.24p per share, at the 2014 Annual General Meeting.
If approved, the final dividend will be paid on 4 August 2014 to shareholders on the register on 18 July 2014, the shares will become ex-dividend on 16 July 2014.
Share Buyback Programme
Tangent continues to be cash generative and we have a strong balance sheet.
We have authority to buy back up to 10% of our issued share capital. Whilst no shares have yet been purchased pursuant to this authority the Board will continue to keep this under review as part of our long term strategy to create value for shareholders.
Share Incentive Plan ("SIP")
We launched an all employee share incentive plan during the year to encourage employees to buy shares in Tangent. The SIP is an all-employee trust arrangement approved by HM Revenue and Customs under which employees are able to buy ordinary shares in Tangent ("Partnership Shares") using monthly deductions from salary and to receive allocations of free matching Tangent shares on a one-for-one basis ("Matching Shares"). Further shares may be awarded to qualifying employees under the SIP conditional upon performance targets being met (in accordance with Part 5 of Schedule 5 of ITEPA 2003).
The uptake has been very positive with approximately 15% of employees signing up since the launch.
Key performance indicators
Financial KPI's
The key financial performance indicators that are noted and commented upon individually in the strategic report are as follows:-
KPIs | 2014 | 2013 |
Revenue | £27.03m | £24.29m |
Revenue growth | 11.3% | 11.8% |
Improvement in gross margin | 2.7% | 3.1% |
Employment costs as a percentage of sales | 38.5% | 40.6% |
Underlying operating margin | 9.2% | 6.6% |
Fully diluted underlying earnings per share | 0.62 pence | 0.56 pence |
Cash conversion - % of underlying operating profit turned into operating cash flow | 118.5% | 94.2% |
Non-financial KPIs
Waste management and recycling
Tangent is committed to mitigating the impact on the environment of its operations and to measuring the amount of waste sent to landfill. Our aim at the start of this year was to ensure that no waste created in our print facility would be sent to land fill and to take measures to reduce carbon emissions related to waste recycling.
We have continued with our commitment to the Forestry Stewardship Council by maintaining our FSC registration and thereby ensuring that all paper stocks used conform to FSC's chain of custody requirements.
Tangent is accredited under ISO 14001, Environmental Management, and that continues to form the key part of our recycling and waste management policy. We actively manage our waste and during the year invested in increased bailing capacity resulting in fewer waste collections from our print site and thereby reducing directly related carbon emissions.
We are pleased to report that again this year no waste produced in our print facility was sent to landfill (2013: none).
Staff retention
Tangent recognises that staff retention is an important issue for both profitability and business continuity.
To help retain and develop staff Tangent offers competitive salary and benefit packages and deploys staff appraisal systems to identify training needs.
Tangent reviews staff turnover on a monthly basis with a view to assessing trends in staff retention and develop corrective plans should any adverse trend be seen.
During the year to 28 February 2014 average monthly staff turnover was 2.1% (2013: 1.1%). The focus of Tangent Snowball has developed and changed over the last twelve months and especially since the appointment of its new chief executive. As a result higher than average staff turnover was seen in the first 9 months of this financial year, this has however now reduced and is now in line with that seen across 2013.
Operational risks and uncertainties
The principal risks and uncertainties faced by Tangent are detailed below. Some risks remain beyond the control of Tangent and we cannot therefore provide absolute assurance that all risks are managed to an acceptable level.
Risk area | Impact on Tangent | Mitigation of risk |
Loss or a significant reduction in revenue from a major client | Whilst no client represents more than 10% of group revenue, Tangent Snowball has some significant client relationships. Loss or a significant reduction from one or more of these clients may impact on Tangent's operating profit and financial performance. | Tangent has a proven track record of both winning new business and organically growing long term client relationships. Strategic account managers are appointed to preserve these relationships, monitor service levels and expand services to clients. |
Shortage or loss of key personnel and skills | The inability to attract or retain key staff with the required level of competency and technical knowledge may impact our ability to maximise opportunity, deliver our business strategy and objectives. | Tangent seeks to engage, motivate and retain staff by offering remuneration packages that include competitive basic salaries, annual bonus awards and benefits packages. Comprehensive annual staff reviews are undertaken to identify skills gaps. |
Deterioration in the general economic environment | Tangent is a provider of marketing services and print to businesses and consumers. There is a risk that general economic issues may impact Tangent's clients and reduce their spending power. This may impact on revenue and the profitability of Tangent. | Trends, both general and market specific, are monitored and factored into business planning and forecasting. In addition Tangent builds strong working relationships with its significant clients maintaining an on-going dialogue to provide visibility on potential future revenue. |
Loss of service in both website and print/delivery infrastructure. | Tangent will not be able to fulfil client orders and as such financial performance may be impacted in both the short and longer term as customers may move to alternative suppliers.
| Tangent invests in significant IT hosting infrastructure to ensure that up time is maximised and disaster recovery procedures are resilient and robust. Tangent has service contracts in respect of all its key items of plant with contracted service levels to mitigate downtime. In addition Tangent invests in vendor lead training programmes to further reduce machinery failure.
|
Technological obsolescence | Tangent's equipment/products may become obsolete potentially impacting productivity and margin. | Tangent continues to invest in digital platforms to improve our competitive edge and broaden the product offering. Development of strong relationships with suppliers and dedicated procurement resources within the group ensures that Tangent is able to react quickly to changes in technology. |
Consolidated statement of comprehensive incomefor the year ended 28 February 2014
2014 | 2013 | ||
Notes | £000 | £000 | |
Revenue | 27,032 | 24,289 | |
Cost of sales | (10,738) | (10,306) | |
Gross profit | 16,294 | 13,983 | |
Operating expenses | (13,636) | (12,258) | |
Share-based payment charge | (183) | (110) | |
Underlying operating profit | 2,475 | 1,615 | |
Non-recurring expenses | 2 | (131) | (734) |
Operating profit | 2,344 | 881 | |
Finance costs | (18) | (25) | |
Profit before tax | 2,326 | 856 | |
Tax | (628) | (236) | |
Profit for the year | 1,698 | 620 | |
Other comprehensive income | |||
Exchange differences on translating foreign operations | (42) | _ | |
Total comprehensive income for the year | 1,656 | 620 | |
Earnings per share (pence) | 4 | ||
Basic | 0.61 | 0.30 | |
Diluted | 0.59 | 0.29 | |
The results shown above relate entirely to continuing operations and are attributable to equity shareholders of the company.
Consolidated statement of changes in equityfor the year ended 28 February 2014
Share | Share | Other | Retained | Total | ||
capital | premium | reserves | earnings | equity | ||
Notes | £000 | £000 | £000 | £000 | £000 | |
At 29 February 2012 | 1,766 | 101 | 3,895 | 15,214 | 20,976 | |
Comprehensive income: | ||||||
Profit for the year | - | - | - | 620 | 620 | |
Total comprehensive income | - | - | - | 620 | 620 | |
Transactions with owners: | ||||||
Dividend | 5 | - | - | - | (350) | (350) |
Credit to equity for equity-settled | ||||||
share-based payments | - | - | 110 | -- | 110 | |
Issue of shares | 1,024 | 9,121 | (107) | - | 10,038 | |
Expenses of issue of equity | - | (638) | - | - | (638) | |
Total transactions with owners | 1,024 | 8,483 | 3 | (350) | 9,160 | |
At 28 February 2013 | 2,790 | 8,584 | 3,898 | 15,484 | 30,756 | |
Comprehensive income: | ||||||
Profit for the year | - | - | - | 1,698 | 1,698 | |
Other comprehensive income | - | - | - | (42) | (42) | |
Total comprehensive income | - | - | - | 1,656 | 1,656 | |
Transactions with owners: | ||||||
Dividend | 5 | - | - | - | (558) | (558) |
Credit to equity for equity-settled | ||||||
share-based payments | - | - | 243 | - | 243 | |
Transfer on exercise of options | - | - | (116) | 116 | - | |
Issue of shares | 15 | 3 | - | - | 18 | |
Total transactions with owners | 15 | 3 | 127 | (442) | (297) | |
At 28 February 2014 | 2,805 | 8,587 | 4,025 | 16,698 | 32,115 |
Consolidated balance sheetAt 28 February 2014
2014 | 2013 | ||
Notes | £000 | £000 | |
Assets | |||
Non-current assets | |||
Intangible assets | 6 | 25,939 | 25,578 |
Property, plant and equipment | 1,950 | 2,188 | |
Deferred tax asset | 230 | 233 | |
28,119 | 27,999 | ||
Current assets | |||
Inventories | 236 | 227 | |
Trade and other receivables | 5,311 | 5,198 | |
Cash and cash equivalents | 3,094 | 2,642 | |
8,641 | 8,067 | ||
Total assets | 36,760 | 36,066 | |
Liabilities | |||
Current liabilities | |||
Borrowings | (194) | (186) | |
Trade and other payables | (3,590) | (4,012) | |
Current tax liabilities | (637) | (647) | |
Provisions for liabilities | (34) | (46) | |
(4,455) | (4,891) | ||
Non-current liabilities | |||
Borrowings | (91) | (285) | |
Provisions for liabilities | (99) | (134) | |
(190) | (419) | ||
Total liabilities | (4,645) | (5,310) | |
Net assets | 32,115 | 30,756 | |
Equity | |||
Share capital | 7 | 2,805 | 2,790 |
Share premium | 8,587 | 8,584 | |
Other reserves | 4,025 | 3,898 | |
Retained earnings | 16,698 | 15,484 | |
Total equity attributable to equity shareholders of the company | 32,115 | 30,756 |
Consolidated statement of cash flowsfor the year ended 28 February 2014
2014 | 2013 | ||
Notes | £000 | £000 | |
Cash from operations | |||
Cash generated from operations | 8 | 2,932 | 1,521 |
Interest paid | (18) | (25) | |
Tax paid | (633) | (600) | |
Net cash inflow from operating activities | 2,281 | 896 | |
Investing activities | |||
Payment of contingent consideration | - | (484) | |
Acquisition of subsidiary (net of cash acquired) | - | (6,878) | |
Development of software | (563) | (759) | |
Purchase of property, plant and equipment | (527) | (813) | |
Sale of property, plant and equipment | 29 | 26 | |
Net cash used in investing activities | (1,061) | (8,908) | |
Financing activities | |||
Dividends paid | (558) | (350) | |
Repayment of borrowings | (186) | (177) | |
Proceeds on issue of shares (net of costs) | 18 | 9,362 | |
Net cash (outflow)/inflow from financing activities | (726) | 8,835 | |
Increase in cash and cash equivalents | 494 | 823 | |
Cash and cash equivalents at beginning of year | 2,642 | 1,819 | |
Effect of foreign exchange rate changes | (42) | - | |
Cash and cash equivalents at end of year | 3,094 | 2,642 |
1. Basis of preparation
Tangent Communications plc is quoted on the AIM market of the London Stock Exchange. It has the TIDM code TNG and is incorporated in England.
The Group's consolidated financial statements for the year ended 28 February 2014, from which this financial information has been extracted, and for the comparative year ended 29 February 2013 are prepared on a going concern basis and in accordance with IFRS as adopted by the EU ("IFRS"), and in accordance with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.
The financial information set out in this preliminary announcement does not constitute statutory accounts as defined in section 434 of the Companies Act 2006 but it is derived from those accounts. The financial information for the year ended 28 February 2013 is derived from the statutory accounts for that year which have been delivered to the Registrar of Companies. The auditors reported on those accounts; their report was unqualified and did not contain a statement under s498(2) or s498(3) of the Companies Act 2006. The consolidated statement of financial position at 28 February 2014, the consolidated statement of comprehensive income, the consolidated statement of changes in equity, the consolidated statement of cash flows and the related notes for the year then ended have been extracted from the Group's 2014 statutory financial statements upon which the auditor's opinion is unqualified and does not include any statement under s498(2) or s498(3) of the Companies Act 2006.
The announcement has been agreed with the company's auditor for release.
2. Non-recurring expenses
In order to provide a clear view on operating performance, Tangent shows separately on the face of the statement of comprehensive income those items that are both significant and non-recurring in nature.
During the year Tangent began the process of disposing of the majority share in Tangent Snowball PTY Limited. The costs incurred to February 2014 have been included in non-recurring expenses as they do not form part of the normal activities of Tangent and were as follows:-
£000 | ||
Redundancy and restructuring costs | 91 | |
Fees and expenses | 40 | |
131 | ||
This process was completed in the year to February 2015 and it is expected that an additional charge of £120,000 will be borne in that year.
3. Segment Information
Management has determined the operating segments based on the reports reviewed by the Board of Directors that are used to make strategic decisions, which reviews revenues and operating profits by segment but assets at a consolidated level.
The group had two reportable segments. Unallocated corporate expenses are shown below under PLC.
At the start of the year the Services segment was re-named Agency, there was no change in the business units included therein and no change in any previously reported performance.
Online - Comprises Ravensworth, printed.com and goodprint.
Agency (Formerly Services) -Comprises Tangent Snowball and T/OD (Tangent on Demand).
PLC - PLC costs relate to the cost of non-executive directors, maintenance of Tangent's stock market listing, general professional advice together with the share-based payment charge. Executive directors' costs are allocated to the Online and Agency business segments.
The segment results for the year ended 28th February 2014 were as follows:
Agency | Online | PLC | Total | ||||
£000 | £000 | £000 | £000 | ||||
Revenue | 11,315 | 16,488 | - | 27,803 | |||
Less inter segment sales | (223) | (548) | - | (771) | |||
Revenues from external customers | 11,092 | 15,940 | - | 27,032 | |||
Results | |||||||
Underlying operating profit | 1,184 | 1,801 | (510) | 2,475 | |||
Non-recurring costs | (131) | - | (131) | ||||
Profit from operations | 1,053 | 1,801 | (510) | 2,344 | |||
Net finance costs | (18) | ||||||
Profit before tax | 2,326 | ||||||
Income tax expense | (628) | ||||||
Profit for the year | 1,698 | ||||||
Other segment information | |||||||
Agency | Online | PLC | Total | ||||
£000 | £000 | £000 | £000 | ||||
Depreciation | 217 | 534 | - | 751 | |||
Amortisation | 54 | 148 | - | 202 | |||
Major customers
During the year Tangent had no customer that represented more than 10% of revenues.
Online had no customer that represented more than 10% of that segment's revenues.
Agency customers representing more than 10% of that segments revenue for the year were as follows:
Customer one 15%
Customer two 11%
The segment results for the year ended 28th February 2013 were as follows:
Agency | Online | PLC | Total | |||
£000 | £000 | £000 | £000 | |||
Revenue | 13,120 | 12,985 | - | 26,105 | ||
Less inter segment sales | (228) | (1,588) | - | (1,816) | ||
Revenues from external customers | 12,892 | 11,397 | - | 24,289 | ||
Results | ||||||
Underlying operating profit | 1,171 | 816 | (372) | 1,615 | ||
Restructuring costs | (119) | (541) | (74) | (734) | ||
Profit from operations | 1,052 | 275 | (446) | 881 | ||
Net finance costs | (25) | |||||
Profit before tax | 856 | |||||
Income tax expense | (236) | |||||
Profit for the year | 620 | |||||
Agency | Online | PLC | Total | |||
£000 | £000 | £000 | £000 | |||
Other segment information | ||||||
Depreciation | 201 | 546 | 1 | 748 | ||
Amortisation | - | 3 | - | 3 | ||
Major customers
During the year Tangent had no customer that represented more than 10% of revenues.
Online had no customer that represented more than 10% of that segment's revenues.
Agency had one customer that represented 13% of that segment's revenues.
Geographical information | 2014 | 2013 | |
£000 | £000 | ||
Revenues from external customers | |||
United Kingdom | 23,226 | 21,028 | |
Europe | 3,151 | 2,253 | |
Australia | 529 | 652 | |
Other countries | 126 | 356 | |
27,032 | 24,289 | ||
Non-current assets | |||
United Kingdom | 28,114 | 27,990 | |
Australia | 5 | 9 | |
28,119 | 27,999 | ||
Non-current assets for this purpose consist of property, plant and equipment, intangible assets and deferred tax assets.
4. Earnings per share
The calculation of the basic and diluted earnings per share is based on the following:
2014 | 2013 | |
£000 | £000 | |
Profit attributable to shareholders | 1,698 | 620 |
2014 | 2013 | |
Number | Number | |
000 | 000 | |
Weighted average number of shares: | ||
For basic earnings per share | 278,341 | 205,019 |
Adjustment for options outstanding | 8,902 | 6,255 |
For diluted earnings per share | 287,243 | 211,274 |
Pence per | Pence per | |
Share | Share | |
Earnings per share: | ||
Basic | 0.61 | 0.30 |
Diluted | 0.59 | 0.29 |
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares.
A calculation is performed for the share options to determine the number of shares that could have been acquired at fair value based on the monetary value of the subscription rights attached to the outstanding share options. The number of shares from this calculation is compared with the number of shares that would have been issued assuming the exercise of the options and the difference is deemed to be the number of dilutive shares attributable to share options.
5. Dividends
2014 | 2013 | |
£000 | £000 | |
Recommended final dividend for the year of 0.24p (2013: 0.2p) per share | 671 | 555 |
The recommended final dividend is subject to approval by shareholders at the 2014 annual general meeting and has not been included as a liability in these financial statements.
The Tangent employee share ownership trust, which holds a total of 1,428,340 ordinary shares, has agreed to waive all dividends so the directors estimate that the dividend will be payable on approximately 279m ordinary shares.
2014 | 2013 | |
£000 | £000 | |
Final dividend paid for the year of 0.2p (2012: 0.2p) per share | 558 | 350 |
6. Intangible assets
Goodwill | Software assets | Other intangible assets | Total | ||
Group | £000 | £000 | £000 | £000 | |
Cost | |||||
At 1 March 2012 | 16,865 | - | 117 | 16,982 | |
Acquired with subsidiary | - | 51 | - | 51 | |
Additions | 7,936 | 759 | - | 8,695 | |
At 28 February 2013 | 24,801 | 810 | 117 | 25,728 | |
Additions | - | 563 | - | 563 | |
At 28 February 2014 | 24,801 | 1,373 | 117 | 26,291 | |
Amortisation and impairment | |||||
At 1 March 2012 | - | - | 115 | 115 | |
Acquired with subsidiary | - | 32 | - | 32 | |
Amortisation during the year | - | 1 | 2 | 3 | |
At 28 February 2013 | - | 33 | 117 | 150 | |
Amortisation during the year | - | 202 | - | 202 | |
At 28 February 2014 | - | 235 | 117 | 352 | |
Net book value | |||||
At 28 February 2014 | 24,801 | 1,138 | - | 25,939 | |
At 28 February 2013 | 24,801 | 777 | - | 25,578 |
The addition to software assets represents the acquisition and development of software platforms for the group. These assets are being amortised over their expected useful life, estimated to be 5 years.
Impairment of goodwill
Goodwill acquired in a business combination is allocated for impairment testing to the cash-generating units (CGUs) that are expected to benefit from that business combination.
Tangent has the following business segments:-
OnlineThis business segment includes printed.com, goodprint (including smileprint) and Ravensworth; and
Agency (Formerly Services)This business segment includes Tangent Snowball and T/OD (Tangent on Demand).
The above represents the lowest level within Tangent at which goodwill is reviewed for impairment.
Tangent tests goodwill annually for impairment, or more frequently if there are indications that goodwill might be impaired.
The recoverable amounts of the CGU's are determined from value-in-use calculations. The key assumptions for the value-in-use calculations are those regarding the discount rates, growth rates and expected changes to forecast profitability. These assumptions have been revised in the year to take account of the current economic environment. Management estimates discount rates using pre-tax rates that reflect the current market assessments of the time value of money and the risks specific to each CGU.
Future cash flows are derived from the most recent financial budget approved by management for the next five years, beyond that period cash flows are extrapolated using a growth rate of 3% (2013: 3%).
The rate used to discount forecast future cash flows for both business segments is 10% (2013: 10%).
In 2014 no impairment charge has been made against goodwill for either CGU (2013: £nil). Headroom in the Online CGU is £18.57 million and £17.76 million in the Agency CGU.
Tangent has conducted a sensitivity analysis on the impairment test of each CGU's carrying value with the following results:
· The discount rate would need to increase to 19.6% to remove the headroom in the Online CGU and to 20.6% to remove the headroom in the Agency CGU.
· Reducing the long term growth rate to 0% does not create an impairment charge in either CGU.
· Cash flows over the next five years would need to reduce by 58.3% to remove the headroom in the Online CGU and by 60.7% to remove the headroom in the Agency CGU.
7. Share capital
Number of ordinary 1p shares | Nominal value | |||
2014 | 2013 | 2014 | 2013 | |
000 | 000 | £000 | £000 | |
Allotted and fully paid | ||||
At 1 March | 278,813 | 176,445 | 2,790 | 1,766 |
Issued in the year | 1,500 | 102,368 | 15 | 1,024 |
At 28 February | 280,313 | 278,813 | 2,805 | 2,790 |
The company has one class of ordinary share which carries no right to fixed income, each share carries the right to one vote at general meetings of the company.At 28 February 2014 the number of shares in issue was 280,312,981 and at the date of this report 280,889,648 were in issue.
8. Cash generated from operations
2014 | 2013 | |
Group | £000 | £000 |
Profit before tax for the year | 2,326 | 856 |
Depreciation and amortisation of non-current assets | 953 | 751 |
(Profit)/loss on sale of plant and equipment | (17) | 6 |
Net interest charge | 18 | 25 |
Share-based payment charge | 183 | 110 |
3,463 | 1,748 | |
Movements in working capital: | ||
Increase in inventories | (9) | (56) |
Increase in receivables | (113) | (206) |
(Decrease)/increase in payables and provisions | (409) | 35 |
Cash generated from operations | 2,932 | 1,521 |