9th Jul 2009 07:00
9 July 2009
MBL GROUP PLC
("MBL" or "THE GROUP")
Preliminary Results For The Year Ended 31 March 2009
The Board of MBL, the UK distributor of home entertainment products, is pleased to announce its preliminary audited results for the year ended 31 March 2009.
Highlights:
Revenue increased 77.5% to £143.6 million (2008: £80.9 million);
PBT increased 42.1% to £8.1 million (2008: pre exceptionals £5.7 million);
Debt free with cash balances of £2.6 million at 31 March 2009;
EPS increased to 34.3 pence per share (2008: pre exceptionals 24.9 pence); and
Proposed dividend of 6.0 pence per share (2008: nil)
Commenting on these results, Peter Cowgill, Non-Executive Chairman of MBL, said:
"Following the demise of one of our key competitors in late November 2008, we have been able to significantly grow both our revenue and underlying profitability. This has included a strong ability to generate cash and has enabled the Board to propose a maiden dividend of 6.0 pence per share.
"We recently signed an exclusive three year contract with Morrisons plc, further strengthening our market position and providing us with the security to plan for the future. Whilst remaining cautious in the current economic climate, I am optimistic that we will be able to report positive results for the interim period."
Enquiries:
MBL Group plc Tel: 0161 767 1620
Peter Cowgill, Non-Executive Chairman
Bishopsgate Communications Ltd. Tel: 020 7562 3350
Maxine Barnes
Will Tindall
Siobhra Murphy
Seymour Pierce Limited Tel: 020 7107 8000
Mark Percy CHAIRMAN'S STATEMENT
I am delighted to report a set of results that demonstrate a year of significant achievement by the Group. Since restructuring the Board and refocusing our strategy this is the third consecutive year of growth in revenue and underlying profitability.
Summary of results
|
|
31/03/2009 |
31/03/2008 |
|
|
£ million |
£ million |
|
|
|
|
|
Turnover |
143.6 |
80.9 |
|
|
|
|
|
Reported operating profit/(loss) |
8.0 |
(6.5) |
|
|
|
|
|
Adjustments: |
|
|
|
Goodwill impairment charge |
- |
12.4 |
|
|
|
|
|
Adjusted operating profit |
8.0 |
5.9 |
|
|
|
|
|
Net interest |
0.1 |
(0.2) |
|
|
|
|
|
Reported profit/ (loss) before tax |
8.1 |
(6.7) |
|
Adjusted profit before tax |
8.1 |
5.7 |
|
|
|
|
|
Basic EPS (pence) |
34.3p |
(47.5)p |
|
Exceptional and non-recurring charges (pence) |
- |
72.4p |
|
Adjusted basic EPS (pence) |
34.3p |
24.9p |
Significant growth
I am pleased to report that the Group's record of growth has continued in the past twelve months.
Revenue increased substantially by £62.7 million in the year, representing a 77.5% increase to £143.6 million. The dramatic changes within the home entertainment distribution industry, and in particular the collapse of our key competitor in late November 2008, created a unique opportunity and associated challenges to the management team. Nevertheless, the Group effectively managed its operations, facilities and cash flow to satisfy this sudden and significant increase in demand.
Profit before tax increased by £2.4 million to £8.1 million, when compared to last year's profit adjusted for the exceptional goodwill impairment charge. Basic earnings per share rose 37.8% to 34.3 pence per share on the same basis.
Strategy
The Board's strategy for the development of the business has been to simplify the Group's operations for the distribution and wholesale of home entertainment products. This has delivered increasing sales and profitability.
The strategy continues to be the development of our core business into complementary areas and to continue to have a strong presence within our industry. The management team has recently been strengthened by the appointment of experienced industry personnel and I am confident that the Group's success will continue.
Cash generation and dividends
The Group has maintained its position of being able to generate strong cash flows and remained without any long term borrowings. The demand for cash to support working capital levels in our peak pre Christmas period has significantly risen with the Group's increase in business. In October 2008 the Group entered into a new three year banking agreement for its invoice financing facility.
The Directors remain committed to delivering value back to shareholders and are proposing to pay a dividend of 6.0 pence per share in 2009. A series of intercompany loan waivers have placed the Group in a position to pay this dividend out of reserves, without the restructuring of its share premium account.
Employees
I referred to the challenges the Group successfully met earlier in my statement and I would like to thank the employees of the Group for their hard work and commitment in delivering this set of results.
Current trading and outlook
The Group has made a positive start to the new financial year with the announcement on 22 June 2009 that it has signed a three year exclusive supply agreement with Morrisons plc for the supply of its entire home entertainment category.
The economic climate continues to create uncertainty, but we are optimistic that we will be in a position to report a positive result for the interim period and have created a solid platform for the future growth of the business.
Peter CowgillNon-Executive Chairman
9 July 2009 OPERATING REVIEW
The Group has reported an excellent set of results and delivered substantial growth in revenue during the year. I am proud of the achievement that has been made in delivering and securing this increase in business.
Distribution
Music Box Leisure
Music Box Leisure is central to the Group and its customers are exclusively in the "non traditional" sector, for example supermarkets, discount retailers and motorway service stations, rather than conventional high street CD and DVD shops. In November 2008, its main competitor EUK was suddenly placed into administration leaving several key supermarkets and retailers without supply. Music Box Leisure picked up the emergency supply of 'chart' products to a number of these retailers, moving its operations into a 24 hour service. Sales to new customers in Music Box Leisure totalled £34.4 million (2008: £8.3 million).
Music Box Leisure has succeeded in signing a three year exclusive contract with a major supermarket and continues to supply new customers on short term agreements. The collapse of EUK was the catalyst for a radical change within the industry with some of the former EUK customers choosing to take their medium term supply direct from suppliers rather than through a distributor such as Music Box Leisure.
External sales at Music Box Leisure grew by 88.3% from £72.4 million to £136.3 million. Almost all of this growth is in the supply of 'chart' products which are sold at much lower margins but higher volumes. As a consequence gross margins for the Group fell to 12.0% compared to 18.1% in 2008. Overheads have continued to be managed tightly.
Music Box Leisure continues to be affected by the credit insurance industry's lack of confidence in the sector. Credit limits from our suppliers continue to be significantly below optimum levels, a situation exacerbated by the substantial increase in revenue. We have secured product supply through discretionary uninsured trading limits, substantial advance payments on account and use of the invoice financing facility.
Wholesale
ESD Wholesale ("ESD")
ESD is a wholesaler primarily to independent and internet retailers. The independent retail sector continues to experience a difficult time.
Overall sales in our wholesale business declined from £8.2 million to £7.0 million, the majority of the decline attributed to a fall in demand and the management of credit risk with its customers. There is a small but very experienced team running ESD and it remains a low overhead operation.
Windsong International Limited ("WI")
The Group purchased the trade name of Windsong International in January 2009 from the administrators of Windsong Holdings. The name is well known throughout the industry as an exporter of specialist and more obscure titles of CDs. The Group considered that there was an opportunity to complement the trade of ESD. At the year end, the operations to support this business were being set up and recruitment of experienced staff had commenced. The Group does not consider that the trade of WI will be material to the overall Group revenue.
Strategy and Risks
The Group continues to emphasise the added value we provide to customers in the "non traditional" retail sector as our key point of difference. The changes to our business during the last year have changed our product mix towards the lower margin 'chart' product, resulting in pressure on margins.
Our buying strategy requires us to maintain a high stock level, although this is both spread across a broad range of titles and for 'chart' titles can be on a very short term basis whilst stock is stored for new release. The buying department works hard to ensure that the risk of obsolescence is managed and that supplier terms mitigate the risk of excess stock.
The securing of a three year contract with Morrisons plc has assisted with our strategy plans and the Group is planning to invest substantially in its systems and sites over the next year.
Trevor AllanChief Executive
9 July 2009 FINANCIAL REVIEW
Financial highlights
The strong trading has delivered impressive results over the period with total Group sales increasing 77.5% to £143.6 million (2008: £80.9 million).
The conversion of the increase in revenue into profit has been affected by the concentration of 'chart' sales within the increased revenue, which amounted to £71.3 million. The gross margins are less than the Group's 'back catalogue' sales but generate significant volumes. As a result, operating profit before tax increased 35.6% to £8.0 million (2008: pre exceptionals £5.9 million), profit before tax increased 42.1% to £8.1 million (2008: pre exceptionals £5.7 million) and earnings per share increased 37.8% to 34.3 pence per share (2008: pre exceptionals 24.9 pence per share).
The cash position continues to remain strong. Net cash generated from operations was £1.7 million (2008: £2.3 million) despite the overall increase in working capital requirements within the Group, demonstrating the cash generation within the business. The ability to generate cash has supported the Board's proposal to distribute a dividend to shareholders of 6.0 pence per share (2008: nil).
Trading results
A summary of the sales and operating profit of the Group is shown in the table below. Adjusted operating profit excludes the exceptional and non-recurring charge totalling £12.4 million in 2008:
|
31-Mar |
31-Mar |
|
31-Mar |
31-Mar |
31-Mar |
|
|
|
2009 |
2008 |
|
2009 |
2008 |
2008 |
2009 |
|
|
Sales |
Sales |
|
Operating profit |
Operating profit/(loss) |
Operating profit |
Versus 2008 |
|
|
|
|
|
reported |
reported |
adjusted |
adjusted |
|
|
Activity |
£ million |
£ million |
Change |
£ million |
£ million |
£ million |
Change |
|
|
|
|
|||||
|
Distribution |
136.3 |
72.4 |
88.3% |
7.6 |
6.0 |
6.0 |
27.7% |
|
Wholesale |
7.0 |
8.2 |
(14.6)% |
(0.1) |
0.4 |
0.4 |
(120.0)% |
|
Other |
0.3 |
0.3 |
- |
0.7 |
0.1 |
0.1 |
736.8% |
|
Central costs |
- |
- |
- |
(0.2) |
(13.0) |
(0.6) |
(60.0)% |
|
143.6 |
80.9 |
77.5% |
8.0 |
(6.5) |
5.9 |
36.1% |
The net financing income for the year reflected the cash balances within the Group to manage working capital peaks which can be significantly affected by new chart releases and low supplier credit limits.
Cash flow, working capital and borrowing facilities
The Group generated £8.3 million cash from operations before movements in working capital (2008: £6.0 million). Working capital increased by £4.1 million, largely reflecting higher inventory and trade debtor balances and higher trade and related payables. The increase in revenue has presented some clear credit insurance problems and the distribution business continues to work closely with the principal credit insurers. However our suppliers are largely unable to obtain adequate credit insurance cover, particularly in light of several of our competitors going into administration during the year.
The distribution business renewed its sales finance facility in October 2008 and continues to monitor the adequacy of this facility to support its requirements during forecast peak periods. The Board has reviewed the forecasts for the next year and is satisfied that the business can operate within its facility.
Taxation
The Group's effective tax rate was 27.2% compared to 25.4% in 2008. The 2008 tax charge benefitted from the adjustments in respect of prior years, following the resolution of several outstanding matters. Under existing tax legislation it is anticipated that the Group's effective tax rate will be marginally above the main UK Corporation Tax rate in future years.
Summary
We are very pleased by the performance of the Group during the year, particularly given the challenges presented by the sudden increase in demand and the difficult economic environment. The Group has continued to invest in its systems and resources to develop the business and we are confident that the business will continue to deliver a good performance.
Lisa ClarkeFinancial Director
9 July 2009
Consolidated Income Statement
for year ended 31 March 2009
|
2009 |
2009 |
2008 |
2008 |
|
|
£000 |
£000 |
£000 |
£000 |
|
|
Revenue |
143,627 |
80,853 |
||
|
Cost of sales |
(126,393) |
(66,188) |
||
|
________ |
________ |
|||
|
Gross profit |
17,234 |
14,665 |
||
|
Distribution expenses |
(1,796) |
(1,371) |
||
|
Administrative expenses - normal |
(7,424) |
(7,405) |
||
|
Administrative expenses - exceptional: goodwill impairment |
- |
(12,423) |
||
|
________ |
________ |
|||
|
Administrative expenses |
(7,424) |
(19,828) |
||
|
________ |
________ |
|||
|
Operating profit/(loss) |
8,014 |
(6,534) |
||
|
Operating profit before exceptional items |
8,014 |
5,889 |
||
|
Exceptional items |
- |
(12,423) |
||
|
8,014 |
(6,534) |
|||
|
Financial income |
106 |
86 |
||
|
Financial expenses |
(19) |
(252) |
||
|
________ |
________ |
|||
|
Net financing income/(costs) |
87 |
(166) |
||
|
________ |
________ |
|||
|
Profit/(loss) before tax |
8,101 |
(6,700) |
||
|
Profit before tax before exceptional items |
8,101 |
5,723 |
||
|
Exceptional items |
- |
(12,423) |
||
|
8,101 |
(6,700) |
|||
|
Taxation |
(2,206) |
(1,454) |
||
|
________ |
________ |
|||
|
Profit/(loss) for the year attributable to equity holders of the parent |
5,895 |
(8,154) |
||
|
________ |
________ |
|||
|
Basic and diluted profit/(loss) per share |
34.3p |
(47.5)p |
Consolidated Balance Sheet
at 31 March 2009
|
2009 |
2008 |
|
|
£000 |
£000 |
|
|
Non-current assets |
||
|
Property, plant and equipment |
1,156 |
502 |
|
Intangible assets |
17,000 |
17,000 |
|
Deferred tax assets |
242 |
435 |
|
_____ |
_____ |
|
|
18,398 |
17,937 |
|
|
_____ |
_____ |
|
|
Current assets |
||
|
Stocks |
17,106 |
9,319 |
|
Trade and other receivables |
11,088 |
5,563 |
|
Cash and cash equivalents |
2,636 |
1,731 |
|
_____ |
_____ |
|
|
30,830 |
16,613 |
|
|
_____ |
_____ |
|
|
Total assets |
49,228 |
34,550 |
|
________ |
________ |
|
|
Current liabilities |
||
|
Bank overdraft |
- |
12 |
|
Interest-bearing loans and borrowings |
24 |
1 |
|
Trade and other payables |
18,241 |
9,227 |
|
Tax payable |
1,084 |
1,392 |
|
_____ |
_____ |
|
|
19,349 |
10,632 |
|
|
_____ |
_____ |
|
|
Non-current liabilities |
||
|
Interest-bearing loans and borrowings |
75 |
3 |
|
_____ |
_____ |
|
|
Total liabilities |
19,424 |
10,635 |
|
________ |
________ |
|
|
Net assets |
29,804 |
23,915 |
|
________ |
________ |
|
|
Equity attributable to equity holders of the parent |
||
|
Share capital |
12,872 |
12,872 |
|
Share premium |
21,454 |
21,454 |
|
Reserves |
(2,800) |
(2,800) |
|
Retained earnings |
(1,722) |
(7,611) |
|
_____ |
_____ |
|
|
Total equity |
29,804 |
23,915 |
|
________ |
________ |
Consolidated Cash Flow Statements
for year ended 31 March 2009
|
2009 |
2008 |
|
|
£000 |
£000 |
|
|
Cash flows from operating activities |
||
|
Profit/(loss) for the year |
5,895 |
(8,154) |
|
Adjustments for: |
||
|
Depreciation |
310 |
167 |
|
Impairment of goodwill |
- |
12,423 |
|
Foreign exchange (gains) |
- |
(29) |
|
Financial income |
(106) |
(88) |
|
Financial expense |
19 |
252 |
|
Loss on sale of property, plant and equipment |
4 |
- |
|
Share option charge |
(6) |
- |
|
Taxation |
2,206 |
1,454 |
|
_ |
_ |
|
|
8,322 |
6,025 |
|
|
(Increase)/decrease in trade and other receivables |
(5,332) |
1,399 |
|
(Increase)/decrease in stock |
(7,787) |
(2,668) |
|
Increase/(decrease) in trade and other payables |
9,014 |
(1,075) |
|
_ |
_ |
|
|
4,217 |
3,681 |
|
|
Tax paid |
(2,514) |
(1,386) |
|
_ |
_ |
|
|
Net cash from operating activities |
1,703 |
2,295 |
|
_ |
_ |
|
|
Cash flows from investing activities |
||
|
Proceeds from sale of property, plant and equipment |
52 |
- |
|
Proceeds from sale of subsidiary |
- |
72 |
|
Interest received |
106 |
89 |
|
Cash and cash equivalents disposed of with subsidiary |
- |
(146) |
|
Acquisition of property, plant and equipment |
(1,020) |
(340) |
|
_ |
_ |
|
|
Net cash from investing activities |
(862) |
(325) |
|
_ |
_ |
|
|
Cash flows from financing activities |
||
|
Interest paid |
(19) |
(252) |
|
Repayment of borrowings |
- |
(2,860) |
|
Payment of finance lease liabilities |
(26) |
(1) |
|
Inception of new lease liabilities |
121 |
- |
|
_ |
_ |
|
|
Net cash from financing activities |
76 |
(3,113) |
|
_ |
_ |
|
|
Net increase/(decrease) in cash and cash equivalents |
917 |
(1,143) |
|
Cash and cash equivalents at 1 April |
1,719 |
2,862 |
|
_ |
_ |
|
|
Cash and cash equivalents at 31 March |
2,636 |
1,719 |
|
_ |
_ |
Notes to the Financial Statements
for the year ended 31 March 2009
1. Source of Information
The preliminary financial statements for the financial year ended 31 March 2009 were approved by the Board of Directors on 9 July 2009. The financial information set out above does not constitute the company's statutory accounts for the years ended 31 March 2009 or 2008 but is derived from those accounts. Statutory accounts for 2008 have been delivered to the registrar of companies, and those for 2009 will be delivered in due course. The auditors have reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 237(2) or (3) of the Companies Act 1985.
2. Segmental analysis
|
Income Statement |
Total |
|||||||
|
Distribution |
Wholesale |
Other |
||||||
|
2009 |
2008 |
2009 |
2008 |
2009 |
2008 |
2009 |
2008 |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Revenue from external customers |
136,308 |
72,364 |
6,976 |
8,201 |
343 |
288 |
143,627 |
80,853 |
|
Inter-segment revenue |
6,020 |
7,140 |
- |
488 |
797 |
989 |
6,817 |
8,617 |
|
Total revenue |
142,328 |
79,504 |
6,976 |
8,689 |
1,140 |
1,277 |
150,444 |
89,470 |
|
Segment result |
7,634 |
5,976 |
(92) |
459 |
728 |
87 |
8,270 |
6,522 |
|
Impairment of goodwill |
(12,423) |
- |
(12,423) |
|||||
|
Central costs |
(256) |
(633) |
||||||
|
Operating (loss)/ profit |
8,014 |
(6,534) |
||||||
|
Net financing income/(costs) |
87 |
(166) |
||||||
|
Taxation |
(2,206) |
(1,454) |
||||||
|
Loss for the period |
5,895 |
(8,154) |
||||||
|
Segment assets |
30,805 |
16,120 |
1,151 |
1,317 |
272 |
113 |
32,228 |
17,550 |
|
Goodwill |
17,000 |
17,000 |
- |
- |
- |
- |
17,000 |
17,000 |
|
Total assets |
47,805 |
33,120 |
1,151 |
1,317 |
272 |
113 |
49,228 |
34,550 |
|
Segment liabilities |
18,446 |
9,285 |
178 |
961 |
800 |
389 |
19,424 |
10,635 |
|
Total liabilities |
18,446 |
9,285 |
178 |
961 |
800 |
389 |
19,424 |
10,635 |
|
Depreciation charge |
304 |
156 |
6 |
9 |
- |
2 |
310 |
167 |
3. Exceptional item
An exceptional item of £12.4m was charged to the profit and loss account in the prior year relating to an impairment of goodwill. A review of goodwill at 31 March 2009 did not necessitate any further impairment.
4. Earnings Per Share
Basic earnings per share are based on profit attributable to shareholders and on the weighted average number of ordinary shares in issue during the year of 17.2 million shares (2008: 17.2 million shares).
The prior year adjusted earnings per share was calculated using the profits after tax for the financial year having added back the exceptional item of goodwill impairment over the weighted average number of shares in issue during the year.
5. Dividends
It is anticipated that, on shareholder approval at the forthcoming general meeting of the company, the Company will pay a maiden dividend of 6.0 pence per share. The Company will notify shareholders in due course the dividend payment date and record date.
6. Annual report
The Annual Report will be posted to shareholders in late August. Copies of the Annual Report will be available from the MBL Group plc, Unit 9 Enterprise Court, Lancashire Enterprise Business Park, Centurion Way, Leyland, PR26 6TZ and can be downloaded from the Company's website at www.mblgroup.co.uk.
Related Shares:
MUBL.L