Final Results for the year ended 31 December 2009

RNS Number : 4180J

Motivcom PLC

31 March 2010

 

 

Press Release

31 March 2010

 

Motivcom plc

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

 

Final Results for the year ended 31 December 2009

 

Motivcom plc (AIM:MCM), a leading UK business services group offering marketing communications, events and incentive expertise to blue-chip corporate clients, is pleased to announce its final results for the year ended 31 December 2009.

 

HIGHLIGHTS

 

·; Headline operating profit* increased by 15% to £3,830,000 (2008: £3,343,000)

 

·; Headline profit before tax† increased by 22% to £3,503,000 (2008: £2,869,000)

 

·; Headline basic earnings per share‡ increased by 27% to 8.75 pence (2008: 6.89 pence)

 

·; Gross profit decreased by 3% to £22,775,000 (2008: £23,373,000)

 

·; Operating profit increased by 32% to £3,391,000 (2008: £2,567,000)

 

·; Profit before tax increased by 46% to £3,064,000 (2008: £2,093,000)

 

·; Basic earnings per share increased by 52% to 7.65 pence (2008: 5.02 pence)

 

·; First interim dividend of 0.8 pence per share paid 6 November 2009 and second interim dividend of 1.7 pence per share to be paid on 31 March 2010, making a total dividend of 2.5 pence per share (2008: total dividend of 2.3 pence per share), an increase of 9%

 

·; Net cash balances at 31 December 2009 of £1,834,000 (2008: £145,000)

 

·; Equity increased by 11% to £18,061,000 (2008: £16,235,000)

 

·; 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 £3,391,000 (2008: £2,567,000) plus amortisation of intangible assets of £439,000 (2008: £776,000).

† Profit before tax of £3,064,000 (2008: £2,093,000) plus amortisation of intangible assets of £439,000 (2008: £776,000).

‡ 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 market expectations. We continue to experience unprecedented times for the UK economy. The breadth and scope of the Group's 700 clients means that our success is very much a reflection of our clients' activities and the economy at large. We are seeing encouraging signs and increased client activity in many of the areas in which the Group operates, particularly underlined with recent large business wins."

 

- Ends -

 

For further information:

Motivcom
Sue Hocken	Tel: +44 (0) 1908 608 000
[email protected]	www.motivcom.com

 

Grant Thornton Corporate Finance
Philip Secrett / Daniela Amihood	Tel: +44 (0)207 383 5100
[email protected]	www.gtuk.com

 

Media enquiries:

Abchurch
Heather Salmond / Joanne Shears	Tel: +44 (0) 20 7398 7700
[email protected]	www.abchurch-group.com

 

CHAIRMAN'S STATEMENT

 

I am pleased to report the results for Motivcom plc for the year to 31 December 2009, which are in line with market expectations. In my last statement to shareholders, when the Group's interim figures were announced, I said that we were seeing positive indications of increased activity and intent amongst our clients. This increased client activity is continuing and we have seen these trends across the Group's trading businesses, and reflected in the outturn for the year.

 

Operational update

 

The continuing downturn in the broader economic environment has placed pressures across the industry sectors that we serve. Whilst the Group has not been immune to these pressures, the breadth and scope of our business offerings, combined with the flexibility in our cost base, has allowed the Group to maintain its competitive advantage. We are also seeing that many of the Group's competitor activities have been materially affected or curtailed, which places Motivcom in a strong market position particularly when the prospective upturn occurs. Our market status has recently been highlighted by one of the sector's leading trade publications in its annual rankings survey placing Motivcom at No.1. This market leading position is a reflection of the strategy that your board set: to be in the top three of any sector that we enter. Indeed, in many of our sectors, we are already the largest company and we continue to build on this.

 

The Group continues to win new business and renew client contracts at sometimes much enhanced levels. We have also seen significant new client wins in the public sector. Our market position, financial strength and status as the only quoted company in our sector places us in strong position to win business as more and more supplier due diligence is undertaken by clients before awarding major contracts.

 

Financial update

 

Headline operating profit increased by 15% to £3,830,000 (2008: £3,343,000) on a gross profit that decreased by 3% to £22,775,000 (2008: £23,373,000). Headline profit before tax increased by 22% to £3,503,000 (2008: £2,869,000). Headline basic earnings per share increased by 27% to 8.75 pence (2008: 6.89 pence).

 

I am also pleased to report that the Group's disciplines in cash management have resulted in net cash balances at 31 December 2009 of £1,834,000 (2008: £145,000), underlining the positive cash flow fundamentals of the Group.

 

Dividends

 

In view of the cash generative nature of the Group's business, a second interim dividend for 2009 of 1.7 pence per share will be paid in place of a final dividend for 2009. This makes a total dividend per share of 2.5 pence for 2009 (2008: total dividend of 2.3 pence), an increase of 9%. This second interim dividend will be paid on 31 March 2010 to shareholders on the register at close of business on 26 March 2010.

 

The Board intends to grow the dividend in real terms whilst aiming for earnings cover of two times over the medium term.

 

Divisional Reports

 

Motivation

 

The pressure on client budgets in 2009 resulted in lower spend levels from existing clients and the 'new normal' has now become established. By contrast the Motivation division had one of its most successful years for new client acquisition which leaves it well positioned to benefit as the economic environment improves. During the year the emphasis moved from sales incentive activity towards employee and customer retention initiatives. The voucher business held up well and ended the year just 5% down on the previous year despite existing client spend reductions of over 25%. This area benefited from significant consolidation: Motivcom's size, listed company status and financial stability proved attractive to corporate clients. The Spree Card (a prepaid debit card) performed exceptionally well, ending the year with an eight fold increase in loaded value over 2008 and continuing to show signs of strong growth.

 

Events

 

2009 was a difficult year for many event management, hospitality and leisure businesses but I am delighted to report that Motivcom's event businesses achieved their operating profit budgets. This success was achieved through a combination of excellent client relationships, a good pipeline of new business and strong internal management. Turnover on events did fall, inline with the sector, but overall net profitability was maintained through maximising supply chain and Group synergies. The outlook for 2010 is significantly more positive than the outlook 12 months ago, perhaps reflecting a more settled environment where clients do not anticipate further reductions in marketing budgets.

 

Promotions

 

Within both the Sales Promotion and Employee Benefits sectors 2009 brought very different challenges. The consumer's appetite to redeem promotions will, we believe, result in a decade of 'professional' shoppers who understand value when they see it. The Government's attitude to employee's salary sacrifice programmes was highlighted last year when they announced the phase out of child care vouchers. Thankfully, as widely publicised, this decision was reversed. Unfortunately the revised interpretations for Green Travel 2 Work will make its long term future uncertain as a credible salary sacrifice product.

 

Both sectors have gained a wider spread of clients which is positive for the future. We also continued our introduction of new products and ProTravel Auction Rewards and the Independent Cinema Tickets have all shown signs of adding a valuable contribution to the business long term. The business has not been immune to margin pressure, but I am pleased to report that the whole division has exited 2009 in good shape.

 

The Promotions division has started 2010 with an encouraging level of new business wins, with a healthy pipeline and the impending World Cup driven promotional activity. The new product development work we commissioned last year to enhance our two key web based products, Entice and Lifestyle, is being very well received by existing and new clients alike. With the removal of doubt over child care vouchers our revamped offering has resulted in an increase in business wins and we believe it will prove to be best in class. In addition, we have invested heavily in frontline staff to ensure that when the upturn does materialise we will be best suited to take advantage of the situation.

 

Outlook

 

We have been through, and are still going through, unprecedented times for the UK economy. As I have stated previously the breadth and scope of the Group's 700 clients means that our success is very much a reflection of our clients' activities and the economy at large. We are seeing encouraging signs in many of areas of the Group's activities particularly underlined with recent large business wins and I look forward to updating shareholders more fully as the year progresses.

 

Directors and Employees

 

I would like to finish by thanking my Board colleagues, our senior management and the hundreds of professionals that the Group employs for their resilience, talent and skills in achieving the outturn in a difficult 2009 for everyone.

 

 

 

Colin Lloyd

Chairman

 

30 March 2010

 

CONSOLIDATED INCOME STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2009

 

		Year ended 31	Year ended 31
		December 2009	December 2008
	Note	£000	£000
Revenue	2	102,391	110,491
Cost of sales		(79,616)	(87,118)
Gross profit		22,775	23,373
Administrative expenses		(18,945)	(20,030)
Amortisation of intangibles		(439)	(776)
Operating profit	2	3,391	2,567
Interest expense	3	(369)	(668)
Interest income		42	194
Profit before income tax		3,064	2,093
Income tax expense	4	(835)	(582)
Profit for the period		2,229	1,511
Attributable to:
Equity holders of the Company		2,229	1,511
Earnings per share for profit attributable to the equity holders of the Company during the year (expressed in pence)
- basic	5	7.65	5.02
- diluted	5	7.48	4.95

 

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2009

 

 

		Year ended 31	Year ended 31
		December 2009	December 2008
		£000	£000
Profit for the period		2,229	1,511
Other comprehensive income:
Cash flow hedge:
- Current year gains/(losses)		178	(162)
- Reclassification to profit or loss		(14)	(2)
Other comprehensive income, net of tax		164	(164)
Total comprehensive income for the period		2,393	1,347
Attributable to:
Equity holders of the Company		2,393	1,347

 

CONSOLIDATED BALANCE SHEET

AT 31 DECEMBER 2009

 

		At 31 December	At 31 December
		2009	2008
	Note	£000	£000
ASSETS
Non-current assets
Property, plant and equipment		5,006	4,379
Intangible assets		21,405	21,724
		26,411	26,103
Current assets
Inventories		494	670
Trade and other receivables		18,855	19,405
Cash and cash equivalents		8,984	8,201
		28,333	28,276
Non-current assets classified as held for sale
Property, plant and equipment	7	-	800
Total assets		54,744	55,179
EQUITY
Capital and reserves attributable to the Company's equity holders
Share capital		155	155
Share premium account		9,920	9,920
Own shares		(1,225)	(1,225)
Other reserves		75	75
Hedging reserve		-	(164)
Retained earnings		9,136	7,474
Total equity		18,061	16,235
LIABILITIES
Non-current liabilities
Borrowings		6,314	7,094
Deferred income tax liabilities		350	554
Provisions		-	400
		6,664	8,048
Current liabilities
Trade and other payables		28,196	29,662
Current income tax liabilities		523	184
Derivative financial instruments		-	164
Borrowings		780	886
Provisions		520	-
		30,019	30,896
Total liabilities		36,683	38,944
Total equity and liabilities		54,744	55,179

 

CONSOLIDATED CASH FLOW STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2009

 

		Year ended 31	Year ended 31
		December 2009	December 2008
	Note	£000	£000
Cash flows from operating activities
Cash generated from operations	8	3,635	5,812
Interest paid		(349)	(621)
Income tax paid		(630)	(1,185)
Net cash generated from operating activities		2,656	4,006
Cash flows from investing activities
Acquisition of subsidiaries, net of cash acquired		-	(27)
Purchases of property, plant and equipment (PPE)		(356)	(497)
Proceeds on disposal of PPE		17	12
Interest received		42	194
Net cash used in investing activities		(297)	(318)
Cash flows from financing activities
Payment of dividends		(670)	(696)
Payments to acquire own shares		-	(1,229)
Proceeds from issue of shares		-	156
Repayments of borrowings		(906)	(1,012)
Net cash used in financing activities		(1,576)	(2,781)
Net increase in cash and cash equivalents		783	907
Cash and cash equivalents at beginning of period		8,201	7,294
Cash and cash equivalents at end of period		8,984	8,201

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2009

 

	Share capital £000	Share premium £000	Own shares £000	Other reserves £000	Hedging reserve £000	Retained earnings £000	Total equity £000
Balance at 1 January 2008	154	9,769	-	75	-	6,709	16,707
Dividends paid	-	-	-	-	-	(696)	(696)
Share based payments	-	-	-	-	-	33	33
Deferred tax on equity share based payments	-	-	-	-	-	(85)	(85)
Deferred tax on property	-	-	-	-	-	2	2
Issue of shares	1	151	-	-	-	-	152
Purchase of own shares	-	-	(1,230)	-	-	-	(1,230)
Disposed of on exercise of options	-	-	5	-	-	-	5
Transactions with owners	1	151	(1,225)	-	-	(746)	(1,819)
Profit for the period	-	-	-	-	-	1,511	1,511
Other comprehensive income:
Cash flow hedge:
- - current year losses	-	-	-	-	(162)	-	(162)
- - reclassification to profit or loss	-	-	-	-	(2)	-	(2)
Total comprehensive income for the period	-	-	-	-	(164)	1,511	1,347
Balance at 31 December 2008	155	9,920	(1,225)	75	(164)	7,474	16,235
Dividends paid	-	-	-	-	-	(670)	(670)
Share based payments	-	-	-	-	-	34	34
Deferred tax on equity share based payments	-	-	-	-	-	65	65
Deferred tax on property	-	-	-	-	-	4	4
Transactions with owners	-	-	-	-	-	(567)	(567)
Profit for the period	-	-	-	-	-	2,229	2,229
Other comprehensive income:
Cash flow hedge:
- current year gains	-	-	-	-	178	-	178
- reclassification to profit or loss	-	-	-	-	(14)	-	(14)
Total comprehensive income for the period	-	-	-	-	164	2,229	2,393
At 31 December 2009	155	9,920	(1,225)	75	-	9,136	18,061

 

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 2009 or 31 December 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 following the Company's annual general meeting. The auditor has reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006 or 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 2008 which is available on the Group's website (www.motivcom.com). As of 1 January 2009 various new standards and interpretations apply to financial statements prepared in accordance with IFRS:

 

(a) IAS 1 Presentation of Financial Statements (Revised 2007);

(b) Amendment to IFRS 2 Share-based Payment - Vesting Conditions and Cancellations; and

(c) IFRS 8 Operating Segments.

 

This financial information is presented in accordance with IAS 1 Presentation of Financial Statements (Revised 2007). The Group has elected to present the "Statement of Comprehensive Income" in two statements: the "Income Statement" and a "Statement of Comprehensive Income". The "Statement of Changes in Equity" is presented as a primary statement. IAS1 Presentation of Financial Statements (Revised 2007) requires presentation of a comparative balance sheet at the beginning of the first comparative period in some circumstances. Management considers that this is not necessary this year because the 2007 balance sheet is the same as previously published.

 

The Group adopted the amendment to IFRS 2 Share-based Payment - Vesting Conditions and Cancellations in 2009. The amendment clarified that vesting conditions are service conditions and performance conditions only and that other features of a share-based payment are not vesting conditions. It also specified that all cancellations, whether by the entity or by other parties, should receive the same accounting treatment. The adoption of this amendment has not had any material impact on the Group financial statements.

 

IFRS 8 Operating Segments has been implemented during the year, which has resulted in changes to the format of the disclosures. The operating segments remain the same as the previously disclosed business segments.

 

2 Segment information

 

At 31 December 2009 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, employee benefit products and communications ("Promotions"). Unallocated costs represent corporate and share-based payment expenses.

 

The segment results for the year ended 31 December 2009 are as follows:

 

	Motivation £000	Events £000	Promotions £000	Unallocated £000	Group £000
Revenue from external clients	33,947	41,795	26,649	-	102,391
Inter-segment revenues	5,661	-	181	(5,842)	-
Gross profit	4,268	11,153	7,354	-	22,775
Administrative expenses	(3,453)	(9,398)	(5,854)	(240)	(18,945)
Headline operating profit	815	1,755	1,500	(240)	3,830
Amortisation of intangibles					(439)
Operating profit					3,391
Net interest expense					(327)
Profit before tax					3,064

 

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

 

	Motivation £000	Events £000	Promotions £000	Unallocated £000	Group £000
Revenue from external clients	41,846	44,358	24,287	-	110,491
Inter-segment revenues	7,260	1	87	(7,348)	-
Gross profit	4,263	12,016	7,094	-	23,373
Administrative expenses	(3,531)	(10,288)	(5,958)	(253)	(20,030)
Headline operating profit	732	1,728	1,136	(253)	3,343
Amortisation of intangibles					(776)
Operating profit					2,567
Net interest expense					(474)
Profit before tax					2,093

 

IFRS 8 requires that an entity reports a measure of liabilities for each reportable segment only if such an amount is regularly provided to the Chief Operating Decision Maker. As no such amounts are regularly provided to the Chief Operating Decision Maker, segment liabilities are not disclosed.

 

In the 2009 'Improvement to IFRSs', an amendment to IFRS 8 has been made, whereby a measure of segment assets should only be disclosed where such information is regularly provided to the Chief Operating Decision Maker. This amendment is effective from accounting periods beginning on or after 1 January 2010, but may be adopted early as the Group has done. As no such amounts are regularly provided to the Chief Operating Decision Maker, segment assets are not disclosed.

 

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 2009 £000	December 2008 £000
UK	94,123	108,937
Rest of Europe	7,803	1,074
Other countries	465	480
	102,391	110,491

 

No client represented greater than 10% of Group revenue in either 2009 or 2008.

 

3 Interest expense

 

	Year ended 31	Year ended 31
	December 2009 £000	December 2008 £000
Interest expense:
- bank borrowings	349	620
- debt finance costs	20	47
- obligations under finance leases	-	1
	369	668

 

There are no gains or losses in respect of the hedged bank loans.

 

4 Income tax expense

 

	Year ended 31	Year ended 31
	December 2009 £000	December 2008 £000
Current tax	886	853
Over provision of tax for prior year	(35)	(20)
	851	833
Deferred tax - origination and reversal of timing differences	(16)	(251)
	835	582

 

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 2009 £000	December 2008 £000
Profit before tax	3,064	2,093
Tax calculated at domestic tax rates applicable to profits in the United Kingdom	858	597
Over provision of tax for prior year	(35)	(20)
Expenses not deductible for tax purposes	37	5
Utilisation of unprovided brought forward losses	(25)	-
Tax charge	835	582

 

The weighted average applicable tax rate was 27.3% (2008: 27.8%).

 

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 2009 £000	December 2008 £000
Profit attributable to equity holders of the Company	2,229	1,511
Weighted average number of ordinary shares in issue (thousands)	29,132	30,107
Basic earnings per share in pence	7.65	5.02

 

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 2009.

 

	Year ended 31	Year ended 31
	December 2009 £000	December 2008 £000
Profit attributable to equity holders of the Company	2,229	1,511
Weighted average number of ordinary shares in issue (thousands)	29,132	30,107
Adjustment for share options (thousands)	660	439
Weighted average number of ordinary shares for diluted earnings per share (thousands)	29,792	30,546
Diluted earnings per share in pence	7.48	4.95

 

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 2009 £000	December 2008 £000
Profit attributable to equity holders of the Company	2,229 321	1,511 564
Amortisation of intangibles (after deduction of tax)
Headline profit attributable to equity holders of the Company	2,550	2,075
Weighted average number of ordinary shares in issue (thousands)	29,132	30,107
Headline basic earnings per share in pence	8.75	6.89

 

6 Dividends

 

	Year ended 31	Year ended 31
	December 2009 £000	December 2008 £000
Dividends paid
- 2008 final dividend of 1.5 pence per share	437	463
- 2009 first interim dividend of 0.8 pence per share	233	233
	670	696

 

A second interim dividend of 1.7 pence per share, amounting to £495,241 in total, will be paid to shareholders on 31 March 2010. No further dividends are proposed in respect of 2009. The next dividend payment will comprise the interim dividend for 2010 which will be payable in October/November 2010.

 

7 Property, plant and equipment classified as held for sale

 

The property owned by the Group previously classified as held for sale within current assets, is now shown in property, plant and equipment within non-current assets following a review by the Group of its ongoing requirements for this property. This reclassification has not resulted in any changes to reported operating profits for prior periods and has had no material effect on 2009 operating profit.

 

8 Cash generated from operations

 

	Year ended 31	Year ended 31
	December 2009 £000	December 2008 £000
Profit for the period before tax	3,064	2,093
Adjustments for:
- depreciation	501	534
- loss on disposal of property, plant and equipment	11	2
- amortisation of intangibles	439	776
- net interest	327	474
- share based payments	34	33
Changes in working capital (excluding the effects of acquisitions):
- inventories	176	267
- trade and other receivables	550	1,871
- trade and other payables	(1,467)	(238)
Cash generated from operations	3,635	5,812

 

9 Acquisitions

 

There were no acquisitions in 2009. £120,000 of additional deferred consideration was provided in 2009 relating to the 2007 acquisition of Motivation Travel Management Limited. This has resulted in a corresponding increase in goodwill.

 

In 2008 £27,000 was expended 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 resulted in a corresponding increase in goodwill.

This information is provided by RNS

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