Final Results

24th Mar 2009 07:00



24 March 2009

Motivcom plc

("Motivcom", "the Company" or "the Group")

Final Results for the year ended 31 December 2008

Motivcom plc (AIM:MCM), a leading business and marketing services company providing a range of products and services to assist its major blue chip clients win and retain customers whilst incentivising and retaining employees, is pleased to announce its final results for the year ended 31 December 2008.

HIGHLIGHTS

 

Gross profit increased by 38% to £23,373,000 (2007: £16,917,000)

 

Headline operating profit* increased by 1% to £3,343,000 (2007: £3,305,000)

 

Headline profit before tax† decreased by 14% to £2,869,000 (2007: £3,350,000)

 

Headline basic earnings per share‡ decreased by 24% to 6.89 pence (2007: 9.02 pence)

 

Operating profit decreased by 21% to £2,567,000 (2007: £3,266,000)

 

Profit before tax decreased by 37% to £2,093,000 (2007: £3,311,000)

 

Basic earnings per share decreased by 44% to 5.02 pence (2007: 8.90 pence)

Interim dividend of 0.80 pence per share paid 31 October 2008 and final dividend of 1.50 pence per share proposed by the Board, making a total dividend of 2.30 pence per share (2007: total dividend of 2.00 pence per share), being an increase of 15%

Net cash balances at 31 December 2008 of £145,000. Net cash generated from operations marginally in excess of the Group's earnings before interest, depreciation and amortisation

Equity decreased by 3% to £16,235,000 (2007: £16,707,000) due to the purchase by the Company of its own shares into Treasury on 22 July 2008 for £1,217,700

The Group is the UK's largest provider of meetings, incentives, conferences and events and supplier of promotional products and services

Diverse service offering provides an excellent platform for future growth and development

* Operating profit of £2,567,000 (2007: £3,266,000) plus amortisation of intangible assets of £776,000 (2007: £39,000).

† Profit before tax of £2,093,000 (2007: £3,311,000) plus amortisation of intangible assets of £776,000 (2007: £39,000).

‡ See reconciliation in note 5

Commenting on the results, Colin Lloyd, Chairman of Motivcom plc, said:

"We are pleased that full year results at the headline operating profit level are in line with our trading update.  I am, however, disappointed that wider economic conditions have reduced the continuous compound growth that the Group has achieved since its flotation on AIM in 2004. This resulted from a number of key client contracts being delayed into 2009 or reduced as a direct effect of the deteriorating UK economy. We do, however, remain confident in the business model that we have built up for Motivcom in previous years. I am pleased that, throughout the year, the Group continued to attract new blue chip clients with only marginal client losses, which should provide a healthy platform for future growth."

For further information please contact:

Motivcom plc
Sue Hocken	Tel: +44 (0) 1908 608 000
[email protected]	www.motivcom.com
Grant Thornton UK LLP
Philip Secrett/Daniela Amihood	Tel: +44 (0)207 383 5100
[email protected]	www.gtuk.com
Media enquiries
Heather Salmond / Jack Ballantyne	Tel: +44 (0) 20 7398 7714
[email protected]	www.abchurch-group.com

CHAIRMAN'S STATEMENT

Trading Results

On 6 November 2008 the Group made a trading update regarding the impact on the Group's trading of the economic slowdown in the UK economy, anticipating that headline operating profit for the year to 31 December 2008 would be only marginally ahead of the previous year. This resulted from a number of key client contracts being delayed into 2009 or reduced as a direct effect of the deteriorating UK economy. I can now report the resulting outcome.

Headline operating profit increased by 1% to £3,343,000 (2007: £3,305,000), gross profit, by which the Company measures its performance, increased by 38% to £23,373,000 (2007: £16,917,000) and headline basic earnings per share decreased by 24% to 6.89 pence (2007: 9.02 pence). The Group had net cash balances at 31 December 2008 of £145,000. Net cash generated from operations was marginally in excess of the Group's earnings before interest, depreciation and amortisation.

In view of the cash generative nature of the Group's business, the Board is pleased to recommend a final dividend of 1.50 pence per share, making a total dividend for the year of 2.30 pence per share (2007: total dividend of 2.00 pence per share), being an increase of 15%. Subject to shareholder approval at the Annual General Meeting, the final dividend will be paid on 3 June 2009 to shareholders on the register at close of business on 3 April 2009.

Equity has decreased by 3% to £16,235,000 (2007: £16,707,000), due to the purchase by the Company of its own shares into Treasury on 22 July 2008 for £1,217,700.

Whilst the full year results at the headline operating profit level are in line with our trading update, I am disappointed that wider economic conditions have reduced the continuous compound growth that the Group has achieved since its flotation on AIM in 2004. This is a consequence of the fact that a number of the Group's key clients are in the contracting financial services and automotive sectors. I am pleased however that, throughout the year, the Group continued to attract new blue chip clients with only marginal client losses, which should provide a healthy platform for future growth. 

The Group is structured into three operating divisions:

Motivation

Events

Promotions (including Employee Benefits)

The varied range of business services provides a diversity of earnings that the Directors believe positions the Group favourably in the downturn. During 2008 the Group's business mix was:

	% of Group gross profit	% of Group gross profit
	2008	2007
Motivation	18	23
Events	52	38
Promotions (including Employee Benefits)	30	39

Following three acquisitions in 2007, 2008 has been a year of consolidation and building infrastructure for the future. Key managers have been employed in finance, internal risk management and HR. With over 700 clients across the Group a programme of cross selling has been initiated which is already bearing fruit. For example, product sold by Travel & Leisure Promotions has been adapted for a financial services client in the Events division and both divisions are working together to operate delivery. These developments will provide a valuable strengthening of the Group as the economy comes out of the downturn.

During the year the Group has continued to develop and launch new products particularly in its Motivation division and in Employee Benefits, within the Promotions division. At the same time we have recognised the cost pressures that our clients are facing themselves and have responded by focusing Group developments in areas where we can help clients reduce costs.

The Group has at the same time looked to its own cost base and made significant adjustments where we have flexibility ensuring that costs are correctly aligned with income. In the case of the Group's subsidiary, Zibrant, costs savings of £1,400,000 have been realised in 2008 and it is anticipated that further savings of £500,000 and £150,000 will flow through in 2009 and 2010 respectively.

There is no doubt that these are unprecedented times for the UK economy and to a great extent Motivcom's prospects very much reflect the economic activity and prospects of its clients. We do, however, remain confident in the business model that we have built up for Motivcom in previous years. We are fortunate to have a wide spread of clients, including 30% of companies in the FTSE100 and 15% of all Fortune 500 companies, served though a number of market leading subsidiaries with excellent management. However whilst early indications for Motivcom's trading in 2009 are encouraging, we remain cautious on the outcome for this year until there is greater visibility in the economy.

I would like to take this opportunity to thank my Board colleagues and the executives of your Group for their assured handling of the impact that the economy has had, for making the financial adjustments where necessary and at the same time delivering to our clients our market leading services.

Colin Lloyd

Chairman

23 March 2009

CONSOLIDATED INCOME STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2008

		Year ended 31	Year ended 31
		December 2008	December 2007
	Note	£000	£000
Revenue	2	110,491	85,704
Cost of sales		(87,118)	(68,787)
Gross profit		23,373	16,917
Administrative expenses		(20,030)	(13,612)
Amortisation of intangibles		(776)	(39)
Operating profit	2	2,567	3,266
Interest expense	3	(668)	(248)
Interest income		194	293
Profit before income tax		2,093	3,311
Income tax expense	4	(582)	(981)
Profit for the period	7	1,511	2,330
Attributable to:
Equity holders of the Company		1,511	2,330
Earnings per share for profit attributable to the equity holders of the Company during the year (expressed in pence)
- basic	5	5.02	8.90
- diluted	5	4.95	8.63

CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE

FOR THE YEAR ENDED 31 DECEMBER 2008

		Year ended 31	Year ended 31
		December 2008	December 2007
		£000	£000
Profit for the period		1,511	2,330
Cash flow hedge:
- Current year losses		(162)	-
- Reclassification to profit or loss		(2)	-
Total recognised income and expense for the period		1,347	2,330

CONSOLIDATED BALANCE SHEET

AT 31 DECEMBER 2008

			Restated (Note 10)
		At 31 December	At 31 December
		2008	2007
	Note	£000	£000
ASSETS
Non-current assets
Property, plant and equipment		4,379	4,430
Intangible assets		21,724	22,073
		26,103	26,503
Current assets
Inventories		670	937
Trade and other receivables		19,405	21,276
Cash and cash equivalents		8,201	7,294
		28,276	29,507
Non-current assets classified as held for sale
Property, plant and equipment		800	800
Total assets		55,179	56,810
EQUITY
Capital and reserves attributable to the Company's equity holders
Share capital	7	155	154
Share premium account	7	9,920	9,769
Own shares	7	(1,225)	-
Other reserves	7	75	75
Hedging reserve	7	(164)	-
Retained earnings	7	7,474	6,709
Total equity	7	16,235	16,707
LIABILITIES
Non-current liabilities
Borrowings		7,094	7,981
Deferred income tax liabilities		554	722
Provisions		400	-
		8,048	8,703
Current liabilities
Trade and other payables		29,662	29,901
Current income tax liabilities		184	536
Obligations under finance leases		-	10
Derivative financial instruments		164	-
Borrowings		886	953
		30,896	31,400
Total liabilities		38,944	40,103
Total equity and liabilities		55,179	56,810

CONSOLIDATED CASH FLOW STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2008

		Year ended 31  December 2008	Year ended 31 December 2007
	Note	£000	£000
Cash flows from operating activities
Cash generated from operations	8	5,812	3,088
Interest paid		(621)	(144)
Income tax paid		(1,185)	(917)
Net cash generated from operating activities		4,006	2,027
Cash flows from investing activities
Acquisition of subsidiaries, net of cash acquired		(27)	(16,303)
Purchases of property, plant and equipment (PPE)		(497)	(409)
Proceeds on disposal of PPE		12	-
Interest received		194	293
Net cash used in investing activities		(318)	(16,419)
Cash flows from financing activities
Payment of dividends		(696)	(354)
Payments to acquire own shares		(1,229)	-
Proceeds from issue of shares		156	6,190
Receipts from loans		-	8,650
Repayments of borrowings		(1,012)	(554)
Net cash (used in)/generated from financing activities		(2,781)	13,932
Net increase/(decrease) in cash and cash equivalents		907	(460)
Cash and cash equivalents at beginning of period		7,294	7,754
Cash and cash equivalents at end of period		8,201	7,294

NOTES TO THE FINANCIAL INFORMATION

1 Basis of information in this announcement

The financial information in this announcement does not constitute the Company's statutory accounts for the years ended 31 December 2008 or 31 December 2007 but is derived from those accounts.

Statutory Accounts for 2007 have been delivered to the Registrar of Companies and those for 2008 will be delivered following the Company's annual general meeting. 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.

This announcement has been prepared on the basis of the Group's accounting policies. These are set out in its Annual Report and Accounts for the year ended 31 December 2007 which is available on the Group's website (www.motivcom.com). As of 1 January 2008 various new standards and interpretations 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 2008 the Group is organised into three main business segments - (1) development and administration of third party motivation and incentive programmes ("Motivation") - (2) the provision of incentive travel, live events and venue find ("Events") - (3) trade and consumer sales promotions and employee benefit products ("Promotions"). Unallocated costs represent corporate expenses.

The segment results for the year ended 31 December 2008 are as follows:

	Motivation £000	Events £000	Promotions £000	Unallocated £000	Group £000
Total gross segment revenue	41,846	44,358	24,287	-	110,491
Operating profit/(loss)	732	970	1,118	(253)	2,567
Finance charge - net					(474)
Profit before income tax					2,093
Income tax expense					(582)
Profit for the period					1,511

The segment results for the year ended 31 December 2007 are as follows:

	Motivation £000	Events £000	Promotions £000	Unallocated £000	Group £000
Total gross segment revenue	42,339	26,051	17,314	-	85,704
Operating profit/(loss)	951	1,147	1,436	(268)	3,266
Finance income - net					45
Profit before income tax					3,311
Income tax expense					(981)
Profit for the period					2,330

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 as follows:

	Year ended 31	Year ended 31
	December 2008 £000	December 2007 £000
UK	108,937	83,040
Rest of Europe	1,074	2,377
Other countries	480	287
	110,491	85,704

3 Interest expense

	Year ended 31	Year ended 31
	December 2008 £000	December 2007 £000
Interest expense:
- bank borrowings	620	144
- debt finance costs	47	103
- obligations under finance leases	1	1
	668	248

4 Income tax expense

	Year ended 31	Year ended 31
	December 2008 £000	December 2007 £000
Current tax	853	1,019
Over provision of tax for prior year	(20)	(17)
	833	1,002
Deferred tax - origination and reversal of temporary timing differences	(251)	(31)
Change in rate of provision for deferred tax	-	10
	582	981

The tax on the Group's profit before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to profits of the consolidated companies as follows:

	Year ended 31	Year ended 31
	December 2008 £000	December 2007 £000
Profit before tax	2,093	3,311
Tax calculated at domestic tax rates applicable to profits in the United Kingdom	597	993
Over provision of tax for prior year	(20)	(17)
Expenses not deductible for tax purposes	5	5
Tax charge	582	981

The weighted average applicable tax rate was 27.8% (2007: 29.6%).

 

5 Earnings per share

Basic

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the period.

	Year ended 31	Year ended 31
	December 2008 £000	December 2007 £000
Profit attributable to equity holders of the Company	1,511	2,330
Weighted average number of ordinary shares in issue (thousands)	30,107	26,185
Basic earnings per share in pence	5.02	8.90

Diluted

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all contracted dilutive potential ordinary shares. The Company has only one category of dilutive potential ordinary shares, share options.

The calculation is performed for the share options to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the Company's shares) based on the monetary value of the subscription rights attached to outstanding share options and taking account of the yet unexpensed share based payment charge relating to those options. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the share options. Tranches two to four of the options granted to C T Lloyd have been excluded from this calculation as all the conditions attaching to the proposed options had not been met at 31 December 2008.

	Year ended 31	Year ended 31
	December 2008 £000	December 2007 £000
Profit attributable to equity holders of the Company	1,511	2,330
Weighted average number of ordinary shares in issue (thousands)	30,107	26,185
Adjustment for share options (thousands)	439	818
Weighted average number of ordinary shares for diluted earnings per share (thousands)	30,546	27,003
Diluted earnings per share in pence	4.95	8.63

Headline Basic

Headline basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company plus the amortisation of intangible assets by the weighted average number of ordinary shares in issue during the period.

	Year ended 31	Year ended 31
	December 2008 £000	December 2007 £000
Profit attributable to equity holders of the Company	1,511 564	2,330 33
Amortisation of intangibles (after deduction of tax)
Headline profit attributable to equity holders of the Company	2,075	2,363
Weighted average number of ordinary shares in issue (thousands)	30,107	26,185
Headline basic earnings per share in pence	6.89	9.02

6 Dividends

	Year ended 31	Year ended 31
	December 2008 £000	December 2007 £000
Dividends paid
- 2007 final dividend of 1.50 pence per share	463	226
- 2008 interim dividend of 0.80 pence per share	233	128
	696	354

The proposed final dividend for the year ended 31 December 2008 of 1.50 pence per share (2007: 1.50 pence per share) is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these financial statements. The total amount payable is £436,977.

7 Statement of changes in equity

	Share capital £000	Share Premium £000	Own shares £000	Other Reserves £000	Hedging Reserve £000	Retained earnings £000	Total equity £000
At 1 January 2007	126	2,882	-	75	-	4,745	7,828
Allotments in year	28	7,067	-	-	-	-	7,095
Issue costs	-	(180)	-	-	-	-	(180)
Profit for the period	-	-	-	-	-	2,330	2,330
Dividends paid	-	-	-	-	-	(354)	(354)
Share based payments	-	-	-	-	-	35	35
Deferred tax in equity share based payments	-	-	-	-	-	(39)	(39)
Change in rate for provision of deferred tax	-	-	-	-	-	(8)	(8)
At 31 December 2007	154	9,769	-	75	-	6,709	16,707
Allotments in year	1	151	-	-	-	-	152
Profit for the period	-	-	-	-	-	1,511	1,511
Dividends paid	-	-	-	-	-	(696)	(696)
Purchase of own shares	-	-	(1,230)	-	-	-	(1,230)
Disposed of on exercise of options	-	-	5	-	-	-	5
Cash flow hedge:
- current year losses	-	-	-	-	(162)	-	(162)
- reclassification to profit or loss	-	-	-	-	(2)	-	(2)
Share based payments	-	-	-	-	-	33	33
Deferred tax on property	-	-	-	-	-	2	2
Deferred tax on equity share based payments	-	-	-	-	-	(85)	(85)
At 31 December 2008	155	9,920	(1,225)	75	(164)	7,474	16,235

 

8 Cash generated from operations

	Year ended 31	Year ended 31
	December 2008 £000	December 2007 £000
Profit for the period before tax	2,093	3,311
Adjustments for:
- depreciation	534	239
- loss on disposal of property, plant and equipment	2	6
- amortisation of intangibles	776	39
- net interest	474	(45)
- share based payments	33	35
Changes in working capital (excluding the effects of acquisitions):
- inventories	267	(161)
- trade and other receivables	1,871	2,126
- trade and other payables	(238)	(2,462)
Cash generated from operations	5,812	3,088

9 Acquisitions

There were no acquisitions in 2008. £27,000 was expended in 2008 relating to the 2007 acquisition of Zibrant Limited and £400,000 deferred consideration was provided in 2008 relating to the 2007 acquisition of Motivation Travel Management Limited. This has resulted in a corresponding increase in goodwill.

Prior year acquisitions

In 2007, £920,000, £15,245,000 and £1,213,000 was expended on the acquisitions of Motivation Travel Management Limited, Zibrant Limited and Protravel Limited and Protravel TB Limited respectively. Of the amount of £920,000 expended on Motivation Travel Management Limited, £66,000 was in respect of intangible assets. Of the £15,245,000 expended on Zibrant Limited £1,857,000 was in respect of intangible assets.

10 Adjustments to provisional fair values of prior year business combination

The acquisition of Protravel TB Limited was completed on 15 November 2007 and was disclosed in the financial statements for the year to 31 December 2007. As this acquisition was completed approximately six weeks before the end of the financial year, there was insufficient time to assess fully the impact of any potential onerous contracts. The fair value of the identifiable assets and liabilities for this acquisition were, therefore, provisional. The financial statements for the year to 31 December 2007 did not, however, correctly disclose that fact.

The fair value of the identifiable assets and liabilities of Protravel TB Limited has now been adjusted to reflect the value of one onerous contract. The accounting effect of this adjustment is to recognise a provision for an onerous contract at 31 December 2007 of £467,000, create a deferred tax asset of £28,000, reduce the corporation tax liability by £12,000 and increase goodwill by £427,000. The reported profits and cash flows of the Group for the year to 31 December 2007 and the reported net assets of the Group as at 31 December 2007 remain unchanged.

The now discovered liabilities in respect of the onerous contract existed at the date of acquisition on 15 November 2007. The outcome of this contract was not in any way affected by the actions or inactions of the Group.

The adjustments have been made as at the date of the combination and the comparative amounts in the balance sheet as at 31 December 2007 have therefore been restated accordingly.

END

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