22nd Mar 2007 07:01
Motivcom PLC22 March 2007 22 March 2007 MOTIVCOM PLC ("THE COMPANY") PRELIMINARY ANNOUNCEMENT FOR THE YEAR ENDED 31 DECEMBER 2006 Motivcom plc ("the Company"), a leading marketing services company providingincentive and motivation services to a range of UK and international clients,announces its preliminary results for the year ended 31 December 2006. Financial Highlights - Operating profit increased by 34% to £2,660,000 (2005: £1,992,000) - Profit before tax increased by 34% to £2,704,000 (2005: £2,025,000) - Gross profit increased by 29% to £14,026,000 (2005: £10,900,000) - Basic earnings per share increased by 36% to 7.57 pence (2005: 5.57 pence) - Interim dividend of 0.35 pence paid 3 November 2006 and final dividend of 0.90 pence recommended by the Board, making a total dividend of 1.25 pence (2005: Final maiden dividend of 0.75 pence) - January 2006 acquisition of Summersault Communications, a provider of internal corporate communications for large blue chip organisations, extending involvement in the arena of employee motivation - February 2006 acquisition of the trade of The Voucher Shop, fulfilling vouchers in respect of employee flexible benefit and incentive programmes for blue chip organisations, increases range of services and client base - Equity increased by 30% to £7,828,000 (2005: £6,027,000) - Excellent platform for future growth and development For further information please contact: Motivcom plcSue Hocken, Finance Director Tel: +44 (0)1908 352007 [email protected] www.motivcom.com Grant ThorntonPhilip Secrett/Fiona Owen Tel: +44 (0)207 383 5100 [email protected]/[email protected] www.gtuk.com Media enquiries: Abchurch CommunicationsHeather Salmond/Georgina Bonham Tel: +44 (0)207 398 [email protected] www.abchurch-group.com CHAIRMAN'S STATEMENT Trading Results I am pleased to report to shareholders that the Group has made excellentprogress in 2006 and achieved record results. Group operating profit for theyear ended 31 December 2006 grew by 34% to £2,660,000 (2005: £1,992,000) aheadof market expectations on a gross profit up by 29% to £14,026,000 (2005:£10,900,000). Profit before tax increased by 34% to £2,704,000 (2005:£2,025,000) in line with market expectations and basic earnings per shareincreased by 36% to 7.57 pence (2005: 5.57 pence). These results reflect acombination of organic growth, led by our strategy of ongoing new productdevelopment, and the acquisition of Summersault Communications Limited and TheVoucher Shop. As I have set out in my previous statements, the Group uses gross profit as abetter measure of performance than sales, which contain client pass throughcosts and fluctuate depending on our clients' requirements for the financialmanagement of their programmes. Group sales were £76,752,000, an increase of65% (2005: £46,385,000). 38% of this increase, £17,784,000, was contributed bythe acquisition of The Voucher Shop, which provides its clients with high streetvouchers for incentive and flexible employee benefit programmes. In view of this performance and the cash generative nature of the Group'sbusiness the Board is pleased to recommend a final dividend of 0.90 pence,making a total dividend for the year of 1.25 pence per share (2005: Final maidendividend of 0.75 pence). Subject to shareholder approval at the Annual GeneralMeeting, the final dividend will be paid on 23 May 2007 to shareholders on theregister at close of business on 30 March 2007. As a result of Group performance the Group's balance sheet has strengthened andequity increased by 30% to £7,828,000 (2005: £6,027,000). The results for 2006 demonstrate a very pleasing 35% compound annual growth ratein operating profit in the 4 years between 2003 and 2006. Group Operations My 2005 report to shareholders set out our decision to structure the Group intothree operating divisions headed by John Sylvester, Nigel Cooper and DavidLebond. The three divisions being: • Motivation and Incentives • Incentive Travel and Live Communications • Sales Promotion and Employee Benefits. This structure has now been operating for the last 12 months deliveringexcellent results and greater efficiency and accountability for our clients andthe Group. It is our intention to continue to build each of the divisionsthrough new products and services and appropriate acquisitions. I am thereforepleased to give shareholders a review of the operations of our three divisions. Motivation and Incentives The Motivation and Incentives division has continued to build on its soundclient base of blue chip clients who have recognised the need to seek new andinnovative ways to motivate their employees. The division's growing expertisein the call centre market led to a number of important new client gains during2006 and the quality of the work was again recognised by the industry throughanother series of award wins. In mid 2006 the division launched "Spree", the first prepaid reward debit cardto operate in the UK using the Visa prepaid platform. This development has beena great success with many thousands of cards issued and seven new client cardprogrammes due to launch early in Q2 2007. A recent market report has forecastthat the European pre-paid card market will be valued at £75bn by 2010. Thedevelopment of this capability has highlighted a number of new market areas,which are expected to provide excellent future opportunities. The Voucher Shop, which was acquired in February 2006, has now been integratedfully into the division. It has provided a sustainable base of over 250 newhigh quality customers from which cross selling opportunities have already beendeveloped and further synergies have and continue to be realised. Thisacquisition made an excellent operating profit contribution of £342,000 in 2006and has won a number of new clients throughout the year, which will deliverfurther growth in 2007. Incentive Travel and Live Communications P&MM achieved a successful year in a mature market, with gross profit increasingby more than 10%. The division operated over 300 incentive travel programmesand live events from one day gala dinners and conferences through to three monthproduct launches and global adventures. The division was also successful inwinning many new clients and consolidating its market leading position. Themajority of these events require implementation throughout the world to highlyexacting client standards delivering important creative brand experiences totheir audiences. It is pleasing therefore that the division's programmes areconstantly recognised in industry awards and in the last 12 months the P&MMbrand has won more awards than any of its competitors. Archer Young Limited, acquired in 2004, has continued to perform well andexceeded our internal targets. It is now a stable and vibrant creative agencyin this market and in 2006 received significant recognition at both the Motivation Awards and International Travel &Meeting Awards for operating the "Most Successful Programme" and "BestIntegrated Solution". Sales Promotion and Employee Benefits Summersault Summersault Communications Limited, the Group's employee communications andpublishing subsidiary acquired in January 2006, continues to be recognised bythe communications industry winning a record number of awards in the year andgaining many new accounts. It enters the current year with a healthy newbusiness pipeline. It has been integrated fully into the Group and excellentcross client referencing opportunities are in prospect. Fotorama 2006 saw Fotorama firmly reinforce itself to be once again a leading player inthe fixed fee promotions market with a record year with more promotions acrossmore clients than ever before. The World Cup was an event the division targetedas a source for new business opportunities. As a result the World Cup hascreated many new client relationships, which are repeating in 2007, together,with two more major events in 2007 - the Cricket and Rugby World Cups - creatinga similar climate for client development. Travel & Leisure Promotions "Entice", the Group's Loyalty and Affinity product, was launched during theyear, with three major new clients. This retention and acquisition productenters 2007 with 1,500,000 consumers on the scheme. The Group expects this togrow many fold. "Source e" was launched during the year. This initiative formalises the Group'sworldwide sourcing capability and allows us to move into the substantialbusiness gifts and merchandise market. Cinema promotions continue to grow at a pace with the Group securing exclusiverelationships with four of the top five UK cinema chains operating over twentycinema related promotions during the year. The Group is the UK's largestprovider of cinema related promotions with ambitious plans to enhance itsoffering and presence in the future. The division's new product pipeline creates an excellent foundation for thecurrent and future years. HR Benefits Our core brand "Lifestyle" continues to set the industry standard for VoluntaryBenefits and saw further development during 2006. For example, it is the firstproduct of its type to be fully compliant with the new Disability DiscriminationAct. The product continues to attract many new clients from the public andprivate sectors. It is particularly pleasing that client retention remainsstrong at 96% with many clients extending their product suite purchase in 2007.Five Major Industry Awards were won in 2006 for our programmes. The divisionhas successfully launched a unique Childcare Voucher Service "Childcare-Plus"and rapidly gained listings with many public and private sector employers. Over800,000 employees throughout the UK now enjoy the benefits of the Group's awardwinning Lifestyle programme which is now the preferred choice for many othermajor Employee Benefit consultancies including Watson Wyatt, Gissings, PersonalGroup and Vebnet. Further new partners are expected to come on board during2007. Acquisitions We continue to seek good quality earnings enhancing acquisitions. Summary Your Group has achieved much in 2006 with acquisitions integrated, new clientsand awards won across all divisions, many new products successfully launched andrelationships established across the world. Our strategy of consolidating andinnovating, in what I have branded the B2E market (business to employee), hasmade excellent progress. By way of endorsement of this market sector we werequoted recently by one of the leading financial publications as "the onlypure-play B2E quoted company". Our multi-billion sector is now gainingrecognition in a wider community. We look forward to continuing progress forthe Group in 2007. Early indications show good visibility of foreword contractsand the Group exceeding its internal gross profit forecasts. Finally, on behalf of my fellow directors, I would like to thank our employeesfor their contribution to the Group's continuing success. Colin Lloyd Chairman 21 March 2007 CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2006 Year ended 31 Year ended 31 December 2006 December 2005 Note £000 £000 Revenue 2 76,752 46,385Cost of sales (62,726) (35,485) Gross profit 14,026 10,900Administrative expenses (11,366) (8,908) Operating profit 2 2,660 1,992Interest expense 3 (151) (193)Interest income 195 226 Profit before income tax 2,704 2,025Income tax expense 4 (802) (626) Profit for the period 1,902 1,399 Attributable to:Equity holders of the Company 1,902 1,399 Earnings per share for profit attributable to the equityholders of the Company during the year (expressed inpence)- basic 5 7.57 5.57- diluted 5 7.39 5.47 CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSEFOR THE YEAR ENDED 31 DECEMBER 2006 Year ended 31 Year ended 31 December 2006 December 2005 £000 £000 Profit for the period and total recognised income andexpense for period 1,902 1,399 CONSOLIDATED BALANCE SHEET AT 31 DECEMBER 2006 At 31 December At 31 December 2006 2005 Note £000 £000 ASSETSNon-current assetsProperty, plant and equipment 367 268Intangible assets 5,247 3,882Deferred income tax assets 286 113 5,900 4,263 Current assetsInventories 776 466Trade and other receivables 14,203 8,545Cash and cash equivalents 7,754 6,369 22,733 15,380 Total assets 28,633 19,643 EQUITYCapital and reserves attributable to the Company'sequity holdersShare capital 7 126 126Share premium account 7 2,882 2,882Other reserves 7 75 75Retained earnings 7 4,745 2,944 Total equity 7,828 6,027 LIABILITIESNon-current liabilitiesBorrowings - 393 Current liabilitiesTrade and other payables 19,973 12,476Current income tax liabilities 439 327Borrowings 393 420 20,805 13,223 Total liabilities 20,805 13,616 Total equity and liabilities 28,633 19,643 CONSOLIDATED CASH FLOW STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2006 Year ended 31 Year ended 31 December 2006 December 2005 Note £000 £000 Cash flows from operating activities Cash generated from operations 8 4,619 2,783Interest paid (51) (93)Income tax paid (859) (811) Net cash generated from operating activities 3,709 1,879 Cash flows from investing activities Acquisition of subsidiary, net of cash acquired anddividends due to former shareholders (1,271) (36)Purchases of property, plant and equipment (PPE) (221) (108)Purchase of unincorporated trade (231) -Proceeds from sale of PPE - 5Interest received 195 226 Net cash (used in)/generated from investing activities (1,528) 87 Cash flows from financing activities Payment of dividends (276) -Proceeds from issue of shares - 3Repayments of borrowings (520) (675) Net cash used in financing activities (796) (672) Net increase in cash 1,385 1,294Cash at beginning of period 6,369 5,075 Cash at end of period 7,754 6,369 NOTES TO THE PRELIMINARY ANNOUNCEMENT 1 Basis of information in the preliminary announcement The financial information in this preliminary announcement does not constitutethe Company's statutory accounts for the periods ended 31 December 2006 or 31December 2005 but is derived from those accounts. Statutory Accounts for 2005 have been delivered to the Registrar of Companiesand those for 2006 will be delivered following the Company's annual generalmeeting. The auditors have reported on those accounts; their reports were (i)unqualified, (ii) did not include a reference to any matters to which theauditors 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 CompaniesAct 1985. The preliminary announcement has been prepared on the basis of the Group'saccounting policies. These are set out in its Annual Report and Accounts forthe year ended 31 December 2005 which is available on the Group's website(www.motivcom.com). As of 1 January 2006 various new standards andinterpretations apply to financial statements prepared in accordance with IFRS.However, none apply to the Group. 2 Segment Information Primary reporting format - business segments At 31 December 2006, the Group is organised into three main business segments -(1) development and administration of third party motivation and incentiveprogrammes ("Motivation") - (2) the provision of incentive travel and livecommunications ("Events") - (3) trade and consumer sales promotions and employeebenefit products ("Promotions"). Unallocated costs represent corporateexpenses. The segment results for the year ended 31 December 2006 are as follows: Motivation Events Promotions Unallocated Group £000 £000 £000 £000 £000 Total gross segment revenue 30,936 29,393 16,423 - 76,752 Operating profit/(loss) 668 918 1,258 (184) 2,660Finance costs - net 44 Profit before income tax 2,704Income tax expense (802) Profit for the period 1,902 The segment results for the year ended 31 December 2005 are as follows: Motivation Events Promotions Unallocated Group £000 £000 £000 £000 £000 Total gross segment 14,142 22,703 9,540 - 46,385revenue Operating profit/(loss) 441 1,112 588 (149) 1,992 Finance costs - net 33Profit before income tax 2,025 Income tax expense (626) Profit for the period 1,399 Secondary reporting format - geographical segments The home-country of the Company and its subsidiaries is England. The Group's sales are mainly in countries within the UK and the eurozone and,allocated on the basis of the country in which the customer is located, are asfollows: Year ended 31 Year ended 31 December 2006 December 2005 £000 £000 UK 74,147 43,917Rest of Europe 2,445 2,201Other countries 160 267 76,752 46,385 3 Interest expense Year ended 31 Year ended 31 December 2006 £000 December 2005 £000Interest expense:- bank borrowings 51 93- debt finance costs 100 100 151 193 4 Income tax expense Year ended 31 Year ended 31 December 2006 December 2005 £000 £000 Current tax 825 649Over provision of tax for prior year (11) (1) 814 648Deferred tax - origination and reversal of temporary differences (12) (22) 802 626 The tax on the Group's profit before tax differs from the theoretical amountthat would arise using the weighted average tax rate applicable to profits ofthe consolidated companies as follows: Year ended 31 Year ended 31 December 2006 December 2005 £000 £000 Profit before tax 2,704 2,025 Tax calculated at domestic tax rates applicable toprofits in the respective countries 811 608Over provision of tax for prior year (11) (1)Expenses not deductible for tax purposes 2 19 Tax charge 802 626 The weighted average applicable tax rate was 29.7% (2005: 30.9%). 5 Earnings per share Basic Basic earnings per share is calculated by dividing the profit attributable toequity holders of the Company by the weighted average number of ordinary sharesin issue during the period. Year ended 31 Year ended 31 December 2006 December 2005 £000 £000 Profit attributable to equity holders of the Company 1,902 1,399Weighted average number of ordinary shares in issue(thousands) 25,115 25,115Basic earnings per share in pence 7.57 5.57 Diluted Diluted earnings per share is calculated by adjusting the weighted averagenumber of ordinary shares outstanding to assume conversion of all contracteddilutive potential ordinary shares. The Company has only one category ofdilutive potential ordinary shares, share options. The calculation is performed for the share options to determine the number ofshares that could have been acquired at fair value (determined as the averageannual market share price of the Company's shares) based on the monetary valueof the subscription rights attached to outstanding share options and takingaccount of the yet unexpensed share based payment charge relating to thoseoptions. The number of shares calculated as above is compared with the numberof shares that would have been issued assuming the exercise of the shareoptions. The proposed options to be issued to C T Lloyd have been excluded fromthis calculation as all the conditions attaching to the proposed options had notbeen met at 31 December 2006. Year ended 31 Year ended 31 December 2006 December 2005 £000 £000 Profit attributable to equity holders of the Company 1,902 1,399 Weighted average number of ordinary shares in issue(thousands) 25,115 25,115Adjustment for share options (thousands) 607 442 Weighted average number of ordinary shares for dilutedearnings per share (thousands) 25,722 25,557 Diluted earnings per share in pence 7.39 5.47 6 Dividends Year ended 31 Year ended 31 December 2006 December 2005 £000 £000Dividends paid- 2005 final dividend of 0.75 pence per share 188 -- 2006 interim dividend of 0.35 pence per share 88 - 276 - The proposed final dividend for the year ended 31 December 2006 of 0.90 pence(2005: 0.75 pence) is subject to approval by shareholders at the Annual GeneralMeeting and has not been included as a liability in these financial statements.The total amount payable is £226,035. 7 Statement of changes in equity Share Share Other Retained Total capital Premium Reserves earnings equity £000 £000 £000 £000 £000 At 1 January 2005 126 2,879 75 1,500 4,580Profit for the period - - - 1,399 1,399Reduction in issue costs - 3 - - 3Share based payments - - - 45 45 At 31 December 2005 126 2,882 75 2,944 6,027Profit for the period - - - 1,902 1,902Dividends paid - - - (276) (276)Share based payments - - - 14 14Deferred tax on equity share based payments - - - 161 161 At 31 December 2006 126 2,882 75 4,745 7,828 8 Cash generated from operations Year ended 31 Year ended 31 December 2006 December 2005 £000 £000 Profit for the period before tax 2,704 2,025Adjustments for:- depreciation 163 157- amortisation of intangibles 16 -- net interest (44) (33)- share based payments 14 45 Changes in working capital (excluding the effects ofacquisitions):- inventories (310) 112- trade and other receivables (5,298) 1,094- trade and other payables 7,374 (617) Cash generated from operations 4,619 2,783 - Ends - This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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