8th Mar 2005 07:02
Chime Communications PLC08 March 2005 CHIME COMMUNICATIONS PLC ("Chime" or "the Group") AUDITED PRELIMINARY RESULTS FOR THE YEAR ENDED 31ST DECEMBER 2004 2004 2003* Operating Income Headline £53.6 million £52.1 million +3% Statutory £53.9 million £53.9 million -* Operating Profit /(Loss) Headline £7.2 million £6.9 million +5% Statutory £7.2 million (£0.7 million) -* Profit/(Loss) on ordinary activities before tax Headline £7.1 million £5.3 million +33% Statutory £7.0 million (£11.2 million) -* Earnings/(Loss) per share Headline 2.5p 2.4p +4% Statutory 2.5p (8.0p) -* Dividend reinstated - dividend per share 0.30p - -* Headline Operating Profit Margin 13.5% 13.2%* Net Debt £6.3 million £29.3 million * No exceptional costs or goodwill impairment charges in 2004. Note: 2003 headline figures are shown prior to exceptional costs, goodwillamortisation and impairment charges, acquisitions and discontinued operations.2004 headline figures are shown prior to goodwill amortisation charges,acquisitions and discontinued operations. These numbers are shown in note 9.There are no exceptional costs or goodwill impairment charges in 2004. Commenting on the results Lord Bell, Chairman of Chime Communications, said: "2004 has been a good year for Chime. The strong fourth quarter of 2004 has continued into the first quarter of 2005.After two months we are already ahead of this time last year and ahead ofbudget." For further information please contact: Lord Bell, Chairman 020 7861 8515Chime Communications plc Robin Tozer 020 7861 3232Bell Pottinger Corporate and Financial CHAIRMAN'S STATEMENT SUMMARY OF 2004 2004 was a much better year after several quite difficult years. The first halfwas good, the third quarter less good and the fourth quarter was very strong.This strength has continued into the first quarter of 2005. The markets in which we operate grew in 2004 but only by a small amount. Themarket forecasts suggest that going forward we may have several years of growth. In 2004 operating income on continuing operations increased by 3% from £52.1million to £53.6 million. This compared to a decline of 10% in 2003. Operatingprofit on continuing operations (prior to exceptional items and goodwillimpairment and amortisation - there were no exceptional costs or goodwillimpairment costs in 2004) increased by 5% from £6.9 million to £7.2 million.This compared to a decline of 9% in 2003. In statutory terms our operating profit for 2004 was also £7.2 million comparedto a loss of £0.7 million in 2003. We have continued to carefully control costs although some of our businesseshave required investment in new people. Our headline operating profit marginrose from 13.2% in 2003 to 13.5% in 2004. There have been no exceptional costsor goodwill impairment charges in 2004. The Board is proposing a final dividend of 0.30p per share. This is the firstdividend payment since 2002. Our net debt position at 31st December 2004 was £6.3 million compared to £29.3million at 31st December 2003. We continue to operate well within the facilityagreed with the Royal Bank of Scotland. REVIEW OF OPERATIONS (All operating profit and operating income items referred to in this section areshown prior to exceptional costs, goodwill amortisation and impairment anddiscontinued operations - there were no exceptional costs or goodwill impairmentcharges in 2004). Our business continues to operate in three divisions, Public Relations whichrepresented 66% of our operating income in 2004 (2003 - 65%), IntegratedMarketing Services 28% (30%) and Research 6% (5%). In terms of operating profits in 2004 these divisions contributed 73% (71% in2003), 18% (22%) and 9% (7%). Public Relations Our Public Relations business continued to perform very strongly through animproving marketplace, continued gains in market share and careful cost control.Operating income increased by 6% to £35.7 million and operating profit increasedby 9% to £5.3 million. Operating profit margin increased from 14.4% to 14.9%. Bell Pottinger Sans Frontieres was the best performing business and BellPottinger Public Affairs, QBO Bell Pottinger, Good Relations, Resonate, Harvard(UK and Germany) and Insight all improved compared to 2003. New business wins in 2004 included Bridgestone, The Commonwealth Institute,ebay, Entertainment Rights, Fortnum and Mason, Imperial Tobacco, Megabowl,Ofcom, Rockstar Games, Sportingbet, Toshiba and Zygos. Integrated Marketing Services We restructured our Integrated Marketing Services Division during 2003 but thebenefits of this have not come through as quickly as we had hoped. Operating income decreased by 5% to £14.9 million and operating profit decreasedby 13% to £1.3 million. Operating profit margin reduced from 9.4% to 8.7%. Gasoline (Sales Promotion), TTA (Property Marketing), Teamspirit (FinancialServices Marketing) and Heresy (Advertising and Direct Marketing) all improvedcompared to 2003. New business wins in 2004 included Dubai Sports City, London 2012, SABMiller-Pilsner Urquell, Sesame and Thresher. Research We have made some investments in this division during 2004 to ensure itcontinues to grow in future years. Despite these investments this division hasstill had operating income and operating profit growth in 2004. Operating income increased by 27% to £3.3 million and operating profit increasedby 23% to £0.6 million. Operating profit margin reduced slightly from 20.6% to19.9%. New business wins in 2004 included Britannia, Capita, Macmillan Cancer Relief,Standard Chartered and the London Stock Exchange. BUSINESS ACTIVITY The Group acted for 1,012 clients in 2004 compared to 980 in 2003. 83 of theseclients were shared across at least two of our divisions (88 in 2003). 116 clients paid us over £100,000 compared to 117 in 2003. Our top 30 clientsrepresented 34% of total operating income (2003 - 31%) and our largest clientrepresented 3.1% of total operating income (2003 - 2.7%). In 2004 the top four industry sectors we operated in were : % of Total Income 2004 2003Technology, Media and Telecoms 17 20Financial Services 12 13Government and Political 12 8Property 10 9 Average fee per client was £53,000 in both 2004 and 2003. 24% of our operating income in 2004 came from international work compared to 16%in 2003 Operating income per head was £91,000 in 2004 compared to £90,000 in 2003. Some of the high profile activities we were involved in during 2004 included: * International media campaign for Yushchenko* The promotion of democratic elections in Iraq for the Coalition Provisional Authority* Ladbrokes advertising campaign for Euro 2004* Greg Rusedski's successful defence against taking banned substances* Nelson Mandela's lifetime achievement award from St. John Ambulance* Launch of Honda's advanced humanoid robot, ASIMO, in the UK* Launch of Castrol's new high mileage oil* The launch of the world's first over-the-counter heart drug, Zocor* The national campaign in the United States to highlight the work of the American Academy of Neurology* The benchmark reputation audit for the London Stock Exchange* The Government's White Paper on public health* The launch of Vodafone's 3G network in the UK BANKING ARRANGEMENTS Following the placing and open offer in March 2004 which raised £18.4 million(net of expenses) the Group agreed a revised banking facility with the RoyalBank of Scotland, the principal terms of which are as follows : * Total facility of £20 million reducing to £12 million in March 2006.* Interest rate of 1% over LIBOR.* Principal covenants of : - EBITA interest cover of at least 4.5 times for 2005 (3.5 times for 2004) and - Net debt to EBITDA of no more than 1.5 times for 2005 (2.0 times for 2004). The Group is operating comfortably within these covenants with EBITA interestcover in 2004 of 8 times and net debt to EBITDA at 31st December 2004 of 0.7times. The Royal Bank of Scotland holds warrants over 8,279,791 shares at an exerciseprice of 24p. These can be exercised at any time up to 30th September 2006. Net debt at 31st December 2004 was £6.3 million compared to £29.3 million at31st December 2003. There was an unusually high level of client income receivedin advance at 31st December 2004 which reduced the level of borrowings by about£1.4 million more than had been expected. The real net debt position wouldtherefore have been about £7.7 million. The Group has maximum total deferred considerations of £3.8 million of which£2.4 million is payable in cash and £1.4 million is payable in shares. Deferred considerations payable in 2005 total £0.7 million of which £0.3 millionis payable in cash and £0.4 million in shares. CORPORATE ACTIVITIES In December 2004 the Group completed the acquisition of Traffic Werbeagentur, athrough the line marketing services business, based in Munich. The totalconsideration was £453,191 which was paid £100,000 in shares and £353,191 incash (£53,191 is contingent on the 2005 profit performance and £150,000 is notpayable until July 2005). Traffic has worked very closely with our subsidiaryHarvard for many years and their management and operations are being merged withHarvard's business in Munich. This acquisition further improves our position asthe leading technology based public relations business in Germany. The Group will continue to take a cautious approach to acquisitions and it isprobable that there will be some activity in 2005. The Group has made somelimited investments in developing or new marketing services businesses. Twoinvestments were made in the last quarter of 2004 and one in the first quarterof 2005. The combined considerations for these were about £200,000. EXCEPTIONAL COSTS AND GOODWILL IMPAIRMENT The Group had no exceptional costs or goodwill impairment charges in 2004. The Group provided in 2003 for the expected cost of its empty property and thecost of properties that had been sub-let or assigned at rents below the rentsthe Group was paying. The provisions remaining at 31st December 2004 were£753,000 which is considered to be sufficient to cover the difference betweenthe future costs and the anticipated income. DIVIDEND The Board is proposing the restoration of the dividend with a final dividend of0.30p per share (2003 - nil). The Board has decided on a dividend policy of 5 times cover with two thirds ofthe value being paid as a final dividend and one third as an interim dividend. The Board, subject to trading conditions at the time, expects to continue to paydividends in the future in line with this policy. TAXATION The headline rate for the Group has reduced to 31% from 33.5% in 2003. OUTLOOK In the announcement of our 2003 results we said that we anticipated that 2004should be the beginning of the return to growth and this has proved to be thecase. We expect that growth to continue in 2005. The marketplace in which we operate continues to improve and we are well placedto take advantage of that improvement. Our businesses still have some sparecapacity and we expect to see further improvement in margins. There has been an increase in new business opportunities in 2005 and whilstclients continue to be very demanding on both price and levels of service, thereare some signs that client budgets are increasing. It does however, remain avery competitive marketplace. We expect both our public relations and research businesses to grow strongly in2005 and our marketing services division to return to growth. We will continue to look at both acquisitions and investment opportunities inorder to improve the growth prospects for our Group. Our new business success has continued in to 2005 and new clients won haveincluded Dyson, the Embassy of Japan, The Association of Chartered CertifiedAccountants, Silverscreen, Lloyds TSB, Co-operative Group, BMW, Citizens Advice,Alton Towers, English Partnerships, Bovis Retirement Homes and Crest Nicholson. Lord BellChairman8 March 2005 Consolidated Profit & Loss AccountYear ended 31 December 2004 2004 2003 £'000 £'000 Continuing operations 94,800 91,286Acquisitions 814 - ----------- ----------- 95,614 91,286Discontinued operations 87 2,531 ----------- -----------TURNOVER 95,701 93,817 ----------- ----------- Continuing operations 53,625 52,063Acquisitions 247 - ----------- ----------- 53,872 52,063Discontinued operations 62 1,839 ----------- -----------GROSS PROFIT/OPERATINGINCOME 53,934 53,902 ----------- -----------Continuing operations 7,195 (65)Acquisitions 20 - ----------- ----------- 7,215 (65)Discontinued operations (18) (586) ----------- -----------GROUP OPERATING PROFIT/(LOSS) 7,197 (651)Share of operating profit in associatedundertakings and joint venturesContinuing operations 628 42 ----------- -----------TOTAL OPERATING PROFIT/(LOSS) 7,825 (609) Loss on disposal of discontinued operations - (8,948)Profit on disposal of fixed asset investment 164 - ----------- -----------PROFIT/(LOSS) ON ORDINARY ACTIVITIESBEFORE INTEREST AND TAXATION 7,989 (9,557) Net interest payable (956) (1,602) ----------- -----------PROFIT/(LOSS) ON ORDINARY ACTIVITIESBEFORE TAXATION 7,033 (11,159) Tax on profit/(loss) on ordinary activities (2,193) (887) ----------- -----------PROFIT/(LOSS) ON ORDINARY ACTIVITIESAFTER TAXATION 4,840 (12,046) Equity minority interest (177) (109) ----------- -----------PROFIT/(LOSS) FOR THE FINANCIAL YEAR 4,663 (12,155)Equity dividends (603) -TRANSFER TO/(FROM) RESERVES 4,060 (12,155) =========== ===========EARNINGS/(LOSS) PER ORDINARY SHARE 2.5p (8.0p) DILUTED EARNINGS/(LOSS) PERORDINARY SHARE 2.4p (8.0p)DIVIDEND PER ORDINARY SHARE 0.30p - Consolidated Balance SheetAs at 31 December 2004 2004 2003 £'000 £'000 Fixed AssetsIntangible assets 45,110 44,985Tangible assets 2,343 2,830Investments 825 426Investments in joint venture 15 - ----------- ----------- 48,293 48,241 ----------- -----------Current AssetsWork in progress 426 535Debtors 19,498 18,474Short term investments 1,748 3,064Cash at bank and in hand 4,308 - ----------- ----------- 25,980 22,073 ----------- ----------- Creditors : amounts fallingdue within one year (28,537) (34,312) ----------- -----------Net Current Liabilities (2,557) (12,239) ----------- -----------Total Assets less Current Liabilities 45,736 36,002Creditors : amounts falling dueafter more than one year (10,394) (21,428)Provisions for Liabilities and Charges (760) (2,362) ----------- -----------Net Assets 34,582 12,212 =========== =========== Capital and ReservesCalled up share capital 10,312 7,980Share premium account 16,548 173Shares to be issued 848 1,359Capital reduction reserve 32,385 32,385ESOP Reserve (6,969) (6,984)Profit and loss account (18,801) (22,839) ----------- -----------Equity Shareholders' Funds 34,323 12,074Equity minority interest 259 138 ----------- ----------- 34,582 12,212 =========== =========== Consolidated Cash Flow StatementYear ended 31 December 2004 2004 2003 £'000 £'000 Net cash inflow from operating activities (note 10) 8,978 6,077 ----------- ----------- Returns on investments and servicing of financeInterest received 353 186Interest paid (1,444) (1,795)Interest element of finance leases (11) (1)Dividends from associates 5 38Dividends paid to minority interests (56) - ----------- -----------Net cash outflow from returns on investmentand servicing of finance (1,153) (1,572) ----------- ----------- TaxationCorporation tax paid (1,407) (1,202)Corporation tax refund 24 843 ----------- -----------Tax paid (1,383) (359) ----------- ----------- Capital expenditure and financial investmentPayments to acquire tangible fixed assets (721) (302)Receipts from sale of tangible fixed assets 188 472Purchase of current asset investments - (686)Loans granted to associates (5) (379)Loans granted to joint ventures (69) - ----------- -----------Net cash outflow from capital expenditureand financial investment (607) (895) ----------- ----------- Acquisitions and disposalsPurchase of subsidiary undertaking and investments inassociated undertakings (999) (2,895)Net cash acquired with subsidiaries 39 295Disposal of subsidiary undertaking - 2,759Purchase of investment (30) - ----------- -----------Net cash (outflow)/inflow from acquisitionsand disposals (990) 159 ----------- ----------- Equity dividends paid - - ----------- -----------Net cash inflow before financing 4,845 3,410 ----------- ----------- FinancingCapital element of finance leases (83) (15)Issue of ordinary share capital 18,375 -Sale/(Purchase) of own shares 2 (150)Expenses of capital reduction (90) (27) ----------- -----------Net cash inflow/(outflow) from financing 18,204 (192) ----------- -----------Increase in cash in the year (note 10) 23,049 3,218 =========== =========== Consolidated Statement of Total Recognised Gains and LossesYear ended 31 December 2004 2004 2003 £'000 £'000 Profit/(Loss) for the financial year 4,663 (12,155) Currency translation differences on foreign (19) (21)Currency net investments ---------- -----------Total recognised gains and losses relating to the year 4,644 (12,176) ---------- ----------- Reconciliation of Movements in equity Shareholders' FundsYear ended 31 December 2004 2004 2003 £'000 £'000 Profit/(Loss) for the financial year 4,663 (12,155) Dividends (603) - ----------- ----------- 4,060 (12,155)Currency translation differences on foreignCurrency net investments (19) (21)Issue of shares 18,707 205Value of shares to be issued as considerationfor acquisitions (511) 812Goodwill transferred to profit and loss accountin respect of the disposal of a business - 12,455Disposal/(purchase) of own equity shares held intreasury 12 (148)Expenses of capital reduction - (118) ----------- -----------Net increase/(decrease) in equity shareholders' funds 22,249 1,030 Opening equity shareholders' funds 12,074 11,044 ----------- -----------Closing equity shareholders' funds 34,323 12,074 =========== =========== Notes 1. Analysis of turnover, operating income, operating profit/(loss) and operating margin Year ended 31 December 2004 Turnover Operating Income 2004 2003 2004 2003 £'000 £'000 £'000 £'000 Class of business Public RelationsContinuing operations 53,378 41,857 35,404 33,769Acquisitions 814 - 247 - --------- --------- -------- -------- 54,192 41,857 35,651 33,769Discontinued operations - 183 - 147 --------- --------- -------- -------- 54,192 42,040 35,651 33,916 Integrated Marketing ServicesContinuing operations 37,091 45,896 14,901 15,680Discontinued operations 87 2,348 62 1,692 --------- --------- -------- -------- 37,178 48,244 14,963 17,372ResearchContinuing operations 4,331 3,533 3,320 2,614 --------- --------- -------- -------- 95,701 93,817 53,934 53,902 ========= ========= ======== ======== Geographical United KingdomContinuing operations 90,489 87,632 50,129 49,041Discontinued operations 87 2,531 62 1,839 --------- --------- -------- -------- 90,576 90,163 50,191 50,880EuropeContinuing operations 3,781 3,182 2,984 2,583Acquisitions 814 - 247 - --------- --------- -------- -------- 4,595 3,182 3,231 2,583USAContinuing operations 530 472 512 439 --------- --------- -------- -------- 95,701 93,817 53,934 53,902 ========= ========= ======== ======== Analysis of turnover, operating income, operating profit/(loss) and operating marginYear ended 31 December 2004 (cont.) Operating Profit/ Operating Margin (loss) (before (before exceptional exceptional items items and goodwill Operating Profit/ and amortisation amortisation (loss) & impairment) & impairment) 2004 2003 2004 2003 2004 2003 £'000 £'000 £'000 £'000 % % Class of business Public RelationsContinuingoperations 5,240 (1,137) 5,282 4,846 14.9% 14.4%Acquisitions 20 - 20 - 8.1% - --------- -------- --------- --------- --------- --------- 5,260 (1,137) 5,302 4,846 14.9% 14.4%Discontinuedoperations - (34) - (34) - -23.1% --------- -------- --------- --------- --------- --------- 5,260 (1,171) 5,302 4,812 14.9% 14.2% Integrated Marketing ServicesContinuingoperations 1,293 537 1,293 1,478 8.7% 9.4%Discontinuedoperations (18) (552) (18) 305 -29.0% 18.0% --------- -------- --------- --------- --------- --------- 1,275 (15) 1,275 1,783 8.5% 10.3%ResearchContinuingoperations 662 535 662 539 19.9% 20.6% --------- -------- --------- --------- --------- --------- 7,197 (651) 7,239 7,134 13.4% 13.2% ========= ======== ========= ========= ========= ========= Geographical United KingdomContinuingoperations 6,894 (338) 6,936 6,580 13.8% 13.4%Discontinuedoperations (18) (586) (18) 271 -29.0% 14.7% --------- -------- --------- --------- --------- --------- 6,876 (924) 6,918 6,851 13.8% 13.5%EuropeContinuingoperations 297 236 297 246 10.0% 9.5%Acquisitions 20 - 20 - 8.1% - --------- -------- --------- --------- --------- --------- 317 236 317 246 9.8% 9.5%USAContinuingoperations 4 37 4 37 0.8% 8.4% --------- -------- --------- --------- --------- --------- 7,197 (651) 7,239 7,134 13.4% 13.2% ========= ======== ========= ========= ========= ========= 1. The Consolidated Profit and Loss Account, Balance Sheet and Cash Flow Statement have been prepared on a basis consistent with the Financial Statements for the year ended 31 December 2003. 2. This financial information does not constitute statutory accounts for the years ended 31 December 2004 and 2003 but is derived from those accounts. Statutory accounts for 2003 have been delivered to the Registrar of Companies.Copies of the full accounts for 2004 will be circulated to shareholders and after approval at the Annual General Meeting will be delivered to the Registrarof Companies. The auditors have reported on the accounts to 31 December 2004 and 31 December 2003; their reports were unqualified and did not contain statements under section 237(2) or (3) of the Companies Act 1985. 3. Earnings per share is calculated on the basis of profits of £4,663,000 (2003 loss £12,155,000) and on a weighted average of 189,947,802 (2003 - 152,152,672) shares in issue during the year. Diluted earnings per share is calculated on the basis of profits of £4,663,000 (2003 loss £12,155,000)and a weighted average of 194,886,102 (2003 - 152,152,672) shares in issue during the year. 4. The directors recommend the payment of a final dividend of £603,000 (2003: Nil) 5. As required by SSAP 25 "Segmental Reporting" the directors have reviewed the classification of business activities within the group and the comparative figures have been restated where appropriate. 6. No charge for exceptional items has been made during the year. In 2003 Operating profit was arrived at after charging exceptional items principally in respect of redundancy and the costs of disposing of empty properties. These totalled £2.9million. 7. During the year Goodwill amortisation and impairment amounted to 42,000 (2003: £4,860,000) 8. Reconciliation of headline to statutory results Analysis of Group operating income Year ended Year ended 2004 2003 £'000 £'000 Continuing operations 53,625 52,063Acquisitions 247 - ----------- ---------- 53,872 52,063Discontinued operations 62 1,839 ----------- ----------Gross Profit/Operating Income 53,934 53,902 ----------- ---------- Analysis of Group operating profit/(loss) before exceptional items and goodwillamortisation and impairment £'000 £'000 Continuing operations 7,237 6,863Acquisitions 20 -Discontinued operations (18) 271 ----------- ---------- 7,239 7,134Exceptional items - (2,925)Goodwill amortisation and impairment (42) (4,860) ----------- ----------Group operating profit/(loss) 7,197 (651) ----------- ---------- Analysis of Group Profit and loss on ordinary activities before tax £'000 £'000 Continuing operations 7,237 6,863Share of operating profit in associatedundertakings and joint ventures 628 42Profit on disposal of fixed assetinvestment 164 -Net interest payable (956) (1,602) ----------- ----------Headline profit/(loss) on ordinaryactivities before tax 7,073 5,303 ----------- ---------- Analysis of EPS £'000 £'000 Profit/(loss) for the financial year 4,663 (12,155)Exceptional items - 2,925Goodwill amortisation and impairment 42 4,860Loss on disposal of discontinuedoperations - 8,948Tax on exceptional items - (980) ----------- ----------Profit for the financial year 4,705 3,598 ----------- ----------Average weighted number of shares 189,947,802 152,152,672Headline Earnings/(loss) per share 2.5p 2.4pStatutory Earnings/(loss) per share 2.5p (8.0)p 10. Notes to the Consolidated Cash Flow Statement Reconciliation of operating profit/(loss) to net cash inflow from operatingactivities 2004 2003 £'000 £'000 Operating profit/(loss) 7,197 (651)Depreciation 1,271 1,946Amortisation of goodwill 42 4,860(Profit)/Loss on sale of tangible fixed assets (63) 17Decrease in work in progress 109 36Increase in debtors (1,195) (15)Increase in creditors 2,462 429Decrease in provisions (845) (545) ------------ ------------Net cash inflow from operating activities 8,978 6,077 ============ ============ Reconciliation of Net Cash Flow to Movement in Net Debt 2004 2003 £'000 £'000 Increase in cash in year 23,049 3,218Decrease in loan note cash deposits (1,239) (4,282)Cash outflow from decrease in lease financing 83 15 ------------ ------------Change in net debt resulting from cash flows 21,893 (1,049) Redemption of loan notes 1,239 4,282New finance leases (193) (133) ------------ ------------Movement in net debt in the year 22,939 3,100 Net debt at 1 January (29,263) (32,363) ------------ ------------Net debt at 31 December (6,324) (29,263) ============ ============ Analysis of Net Debt As at Other As at 1 January non-cash 31 December 2004 Cashflow Movements 2004 £'000 £'000 £'000 £'000 Cash at bank and in hand/bank overdraft (9,330) 13,638 - 4,308Short term bank loan - (1,500) - (1,500)Bank loans - due in more than oneyear but less than two years (19,806) 10,911 - (8,895)Loan note cash deposits 2,987 (1,239) - 1,748Loan notes - due within one year (2,987) 1,239 - (1,748)Obligations under finance leases (127) 83 (193) (237) ---------- --------- ---------- ----------- (29,263) 23,132 (193) (6,324) ========== ========= ========== =========== This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
CHW.L