27th Nov 2007 07:00
MEDIA CORPORATION PLC ('Media Corp' or 'the Group') Preliminary audited results for the year ended 30 September 2007 Financial Highlights -- Pre-tax profit increased 20% to £3.0m (2006: £2.5m) -- Exceptional gain of £2.5m on the sale of www.casino.co.uk -- Cash balances at the year end £6.3m (2006: £5.3m) -- Consolidated net assets of £19.5m (2006: £17.1m) -- Earnings per share of 0.97p (2006: 0.88p) Other Highlights -- Successful re-positioning of the Group to focus on two main divisions: Internet Publishing and Advertising Sales network. -- Strengthened senior management team with significant industry experience during the second half of the financial year Publishing Highlights -- Acquisition of Result Online Limited, the owner of www.creditcardexpert.co.uk -- Acquisition of Flight Comparison Limited, the owner of www.flightcomparison.com -- Successful re-launch of market leading websites www.onthebox.com and www.gambling.com Advertising Network Highlights -- Expansion of advertising network business Eyeconomy with new Manchester office and significantly expanded sales team -- Acquisition after the financial year end of Nash Digital, a profitable digital advertising business Justin Drummond, Chief Executive of Media Corp, said: "I am pleased to announce Media Corp's preliminary results showing anexceptional outcome after a challenging year. "Profit before tax has increased to £3 million during the year and the Group nowhas in excess of £6 million of cash to invest in growth and furtheracquisitions. Our publishing and advertising businesses have performed verystrongly during 2007 and the Board believes there is significant value in excessof the Group's market capitalisation in these Internet assets. The Group is wellplaced to deliver significant shareholder value as we pursue our growth strategyin the forthcoming year." \* TFor further information please contact: Media Corporation plcJustin Drummond, Chief Executive+44 (0)20 7618 9000 Buchanan CommunicationsCharles Ryland/Suzanne Brocks/Susanna Gale+44 (0)20 7466 5000 Canaccord Adams LimitedMark Ashurst, Managing Director+44 (0)20 7050 6500\* T Notes to editors: Listed on the AIM market of the London Stock Exchange, Media Corp is a leadinginternet media and advertising group focused on website publishing and onlineadvertising. The Group has two principal divisions: Website Publishing - Media Corp has a diverse publishing division specializingin online media. Our impressive portfolio of websites includes a number ofmarket leading sites including www.gambling.com, www.creditcardexpert.co.uk,www.onthebox.com and www.flightcomparison.co.uk. Online Advertising - Formed in 1996, Eyeconomy specialises in mass reachcampaigns to over 30 Million unique consumers per month via its own proprietaryad-serving and tracking technology for clients including AOL, Dell andAmericanExpress. www.eyeconomy.co.uk www.mediacorpplc.com Chairman's Statement I am pleased to report significant progress for Media Corporation during the2007 financial year. Following a challenging start to the financial year, the Board acted quickly todiversify the business and to reduce the Group's reliance on advertising revenuefrom the online gaming industry. This goal was achieved in a number of ways. Inthe Internet Publishing division we acquired two businesses at the beginning ofthe financial year, the first in the personal finance sector(www.creditcardexpert.co.uk) and the second in the travel market(www.flightcomparison.com). In August 2007, we successfully completed the saleof www.casino.co.uk to Cryptologic for a cash consideration of up to £3.625million. During the second half of the financial year, the Board rapidly expanded theGroup's advertising network business with a new Manchester office and throughthe recruitment of senior management and sales people. In addition, thisdivision has been enhanced by the acquisition of Nash Digital after the yearend. The acquisition brings further managerial and sales experience to theGroup. As the Group has in excess of £6m cash, the Board is seeking to invest in theGroup's existing publishing assets as well as proactively sourcing strategic,value-enhancing opportunities to develop the media businesses further. The value of the Group's publishing assets was highlighted by the sale ofwww.casino.co.uk. In the view of the Board, the publishing assets have asignificantly higher value than the Group's current market capitalisation. Toaddress this gap in value, the Group will be seeking shareholder approval at theAnnual General Meeting (AGM) to authorise a share buyback which will commencefollowing the AGM if approval is granted. The Group is well positioned to expand its online media businesses, and theBoard is optimistic of generating further strong growth in the coming financialyear. Consequently, we continue to view the future with confidence. \* TJason DrummondChairman\* T Business Review Media Corporation has made excellent progress during 2007 whilst formulating andconsolidating its ongoing strategy. The Group has undergone a transformationduring the financial year and has reduced its reliance on advertising revenuefrom the online gaming sector. The Group has two principal divisions, Internet Publishing and AdvertisingNetwork: Internet Publishing Media Corporation has a diverse publishing division specialising in premiumdestinations and portals. Our impressive portfolio of websites includes a number of market-leading sitesincluding www.gambling.com (a comprehensive gambling and sports portal providingindustry news, tips and strategies), www.creditcardexpert.co.uk (a credit cardcomparison website), www.onthebox.com (the UK's definitive TV listings andentertainment guide) and www.flightcomparison.co.uk (a leading flight bookingportal). The Group has in depth expertise in developing and monetising online brands andhas significant value in its publishing division. This was clearly illustratedin the value achieved by the sale of www.casino.co.uk in August 2007. Highlights -- Significant investment in senior management, technical infrastructure and internet publishing assets completed during the second half of the 2007 financial year -- Recruitment of a team of highly experienced internet publishing specialists during the second half in Technical, Search Engine Optimisation and Copywriters/Content writers -- Successful re-launch of market leading web-sites: www.onthebox.com and www.gambling.com during the second half of 2007 -- Ongoing premium domain name acquisitions and new websites under development Advertising Network The Advertising Network business Eyeconomy was established in 1996 and is aseparate operating division of Media Corporation. Eyeconomy specialises inonline media planning as well as buying and managing online media campaigns forclients including AOL, Dell and American Express. The business currently specialises in: -- producing dynamic and engaging online advertising solutions including exit traffic (Subsites), rich-media floating toolbar (SubLines) and has recently launched a new online advertising division -- offering a total reach of 30 million unique users every month, from over 750 quality host sites in all major channels including Finance, Travel, Motors, Sport, Male/Female, Student/Youth, Property, Entertainment, Film, Music and TV, Mobile/Gadget and Recruitment -- producing in-house creative media -- a wealth of new products on traditional display advertising following acquisition of Nash Digital -- transition from TV budgets to online, driven by penetration of internet access to a majority of the UK population as more time is spent online than watching TV in many homes Eyeconomy: -- provides very large scale media spaces with reach comparable to TV but traceable and online, and currently reaches over 30 million people in the UK each month -- is working with American Express, Sky, AOL, World Wildlife Fund and Dating Direct, and there are major new client pitches underway -- is working on a high proportion of long term (over three month) campaigns -- is expanding - the sales team has more than doubled in size during the second half of the financial year -- is securing rights to broad traffic sites, representing over 750 websites -- is working on geographical expansion -- is seeing return value on significant presence at trade shows and in trade PR Financial Overview The audited results for the year ended 30 September 2007 show significant profitgrowth despite turnover having decreased by 30% to £8.3m (2006: £11.9m). Profitbefore interest and tax increased by 22% to £2.8m (2006: £2.3m). These resultshighlight the continuing shift of the Group towards high margin AdvertisingNetwork and Internet Publishing businesses and away from its gaming operations.At the end of the period, consolidated net assets were £19.4 million (2006:£17.1million) and the net cash balance was £6.3 million (2006: £5.3 million). Segmental Analyses \* T Turnover Turnover Profit Profit before tax (loss) and before tax interest and interest 2007 2006 2007 2006 £000 £000 £000 £000 Advertising Network 1,752 1,529 89 15Internet Publishing 6,557 10,372 2,714 2,285 8,309 11,901 2,803 2,300\* T Key Policies Dividend policy No dividend has been declared for the year. It is the opinion of the Board thatshareholders will be best served by utilising the Group's cash to fund growth,both organic and by acquisition. Goodwill and other intangibles Goodwill and other intangibles on all acquisitions since incorporation iscapitalised and, under UK GAAP, is subject to annual reviews to test impairment. Treasury, foreign exchange and financial instruments The aim of Treasury is to ensure a robust and prudent financial profile whiledriving value throughout the Group to attain the businesses' full potential. The Group partially hedges against foreign currency exposure by matching, wherepossible, costs in the same currency as its foreign denominated revenues. Inaddition, the Board considers the implications of foreign currency exchangemovements and determines the costs against the benefits of buying financialhedging instruments. See notes 1 and 18 to the financial statements. Furthermore, the Board is proactively seeking acquisition targets valued in thecurrency of its foreign income. Taxation The fundamental tenets of Media Corporation's approach to taxation are toenhance the Group's competitive position while engaging with tax authorities ona basis of full disclosure, full co-operation and full legal compliance. TheBoard considers and approves the management of the Group's tax affairs in thecontext of the Group's commercial objectives. The Board seeks to bring about timely agreement of tax affairs and to removeuncertainty on business transactions. The Group's taxation strategy is to mitigate the burden of taxation in aresponsible manner for competitive advantage, and so enhance long-termshareholder value. Financial controls The Board understands the need for robust financial controls and a high quality,but effective, internal control environment. Corporate Responsibility General The Group Chief Executive has direct responsibility at Board level for leadingthe Group's initiatives on all corporate responsibility related matters, withthe relevant senior managers reporting to him. Environmental Notwithstanding its low overall environmental impact, Media Corporationrecognises the need to manage the impact of its activities on the environment insuch areas as internal processes, recycling, energy use and encouraging itssuppliers to act responsibly regarding environmental impacts and risk. Employees and equal rights Media Corporation is committed to achieving equality of opportunity for all itsemployees and recognises the legal requirements under relevant Acts and Codes ofPractice. The Group aims to ensure that all actual or potential employees aretreated equally regardless of age, disability, family responsibility, maritalstatus, race, colour, ethnicity, nationality, religion or belief, gender, sexualorientation, social class, trade union activity and unrelated criminalconviction. The Group's employment policies are designed to attract, retain, train andmotivate the very best people, recognising that this can be achieved onlythrough offering equal opportunities. To ensure employees can share in our success, the Group offers competitive paypackages and, wherever possible, links rewards to individual and teamperformance. The Group is committed to providing an environment that encouragesthe continuous development of all its employees Risk management In most of the areas commonly associated with corporate responsibility, otherthan the Group's role as an employer and in its non-core business as an onlineand mobile gaming operator, the Board considers that the social impact of theGroup's activities is relatively low. Nonetheless, as part of the Group'sgeneral risk management review processes, the significant risks to the Group'sshort and long term value arising from social, environmental and ethicalmatters, and the opportunities to enhance value from an appropriate response,are incorporated as a specific consideration. This review has identified nospecific risks in this area other than a low probability of incidence or lowpotential financial impact on the Group, and with respect to gaming, MediaCorporation Plc is committed to encouraging responsible gaming. Current trading and prospects incorporating principal risks and uncertainties The Board is aiming for continued growth during 2008 as we seek to maximise thepotential of the Group's internet publishing assets and media businesses. TheGroup clearly owns very valuable internet assets, as was demonstrated by therecent sale of the Casino.co.uk business for up to £3.625 million. This businessonly accounted for a small proportion of the Group's existing Internet assetportfolio. With an existing significant web site portfolio still owned by the Group, theBoard will continue to develop rapidly and enhance the value of its coreInternet assets, and maximise their value for the benefit of shareholders. Board changes Nilesh Jagatia was appointed as Group Finance Director during the year. PaulTuson stepped down from the Board, and the Directors would like to thank him forhis significant contribution to the Group. In addition, Michael Hawkes was appointed as a Non-executive Director of theGroup on 20th November 2006. \* TJustin Drummond Nilesh JagatiaChief Executive Group Finance Director\* T Group Profit and Loss Account For the year ended 30 September 2007 \* T Notes Total Total 2007 2006 £000 £000 Turnover 2 8,309 11,901Cost of sales (5,799) (7,140) Gross profit 2,510 4,761Selling and distribution costs (281) (467)Administrative expenses: (1,941) (1,994) Group operating profit before exceptional items 288 2,300 Exceptional one-off gain on asset disposal 2,513 - Group operating profit after exceptional items 2,801 2,300 Interest receivable and similar income 213 154 Profit on ordinary activities before taxation 3,014 2,454 Taxation 3 (184) - Profit on ordinary activities for the year 2,830 2,454 Minority interest (3) (3) Profit for the year attributable to members of the parent company 2,827 2,451 Earnings per share - basic 4 0.97p 0.88pEarnings per share - diluted 4 0.91p 0.87p\* T Statement of total recognised gains and losses \* T 2007 2006 £000 £000Profit for financial year 2,827 2,451Prior year adjustment - (154)Currency translation differences (471) (311)Total recognised gains 2,356 1,986\* T Balance sheets As at 30 September 2007 \* T Consolidated Consolidated Company Company Notes 2007 2006 2007 2006 £000 £000 £000 £000 Fixed assetsIntangible assets 12,467 11,422 0 235Tangible assets 806 381 409 59Investments - - 15,268 12,769 13,273 11,803 15,677 13,063 Current assetsDebtors 955 808 1,056 2,355Cash at bank and in hand 6,253 5,253 4,202 867 7,208 6,061 5,257 3,222Creditors: amountsfalling due withinone year (997) (752) (2,474) (355) Net current assets 6,211 5,309 2,783 2,867 Net assets 19,484 17,112 18,460 15,930 Capital and reservesCalled up share capital 5 4,764 4,764 4,764 4,764Share premium account 5 12,917 12,917 12,917 12,917Other reserve 6 1,422 1,422 1,422 1,422Profit and loss account 6 377 (1,992) (643) (3,173) Shareholders' funds 19,480 17,111 18,460 15,930 Minority interests 4 1 - - 19,484 17,112 18,462 15,930\* T The financial statements were approved by the board of directors on 26 November2007 and signed on his behalf by: \* TJ Drummond (Chief Executive) N Jagatia (Finance Director)\* T Consolidated statement of cash flows For the year ended 30 September 2007 \* T Notes 2007 2006 £000 £000 Net cash (outflow)/inflow from operating activities 7 (227) 2,214 Returns on investments and servicingof financeInterest received 213 154 TaxationCorporation tax - - Capital expenditurePayments to acquire tangible fixed assets (647) (246)Proceeds from disposal of intangible fixed assets 2,748 - 2,101 (246) Acquisitions and disposalsAcquisition of subsidiary undertakings (net of cash acquired) (1,087) (6) Net cash inflow before management of liquid resources and financing (1000) 2,116 Management of liquid resourcesBank deposits 4,000 - FinancingIssue of ordinary share capital - 328 (Decrease)/increase in cash (3,000) 2,444\* T Consolidated statement of cash flows For the year ended 30 September 2007 Reconciliation of net cash flow to movement in net funds \* T 2007 2006 £000 £000 (Decrease)/increase in cash (3,000) 2,444Movement in liquid resources 4,000 -Movement in net funds 1,000 2,444Net funds at 1 October 2006 5,253 2,809Net funds at 30 September 2007 6,253 5,253\* T Notes to the accounts As at 30 September 2007 1. Accounting policies Fundamental accounting concept - going concern The accounts have been prepared on the assumption that the group is a goingconcern. The accounts of the group for the year ended 30 September 2007 show aprofit for the year of £2,830 million. At the date of these financial statementsthe Group's ability to continue as a going concern reflects the net fundsavailable to the Group at the year end and the forecasts for the Group for thecurrent financial year. On this basis, in the opinion of the Directors, theaccounts have been properly prepared on the assumption that the group is a goingconcern. Basis of preparation The financial information has been prepared under the historical cost conventionand in accordance with applicable United Kingdom accounting standards. Basis of consolidation The group accounts consolidate the results of Media Corporation plc and itssubsidiary undertakings from their respective dates of acquisition. No profit and loss account is presented for Media Corporation plc as permittedby section 230 of the Companies Act 1985. Goodwill The directors have undertaken an impairment review of goodwill at 30 September2007 in accordance with the provisions of Financial Reporting Standard ('FRS')10, which shows that the capitalised value of the cash flows derived from futureincome streams is greater than the carrying value shown in the Group'sconsolidated balance sheet at 30 September 2007. Impairment reviews willcontinue to be carried out at the end of each reporting period. Other intangible fixed assets Amortisation is provided on the following intangible fixed assets at ratescalculated to write off the cost or valuation, less estimated residual valuebased on prices prevailing at the date of acquisition or revaluation, of eachasset evenly over its expected useful life as follows: \* TTrademarks 10% per annumDomain names 0% per annum\* T The carrying values of intangible fixed assets are reviewed for impairment inyears if events or changes in circumstances indicate the carrying value may notbe recoverable. Depreciation on tangible fixed assets Depreciation is provided on the following tangible fixed assets at ratescalculated to write off the cost or valuation, less estimated residual valuebased on prices prevailing at the date of acquisition or revaluation, of eachasset evenly over its expected useful life as follows: \* TFixtures and fittings 25% reducing balanceOffice equipment 25% reducing balanceComputer equipment 33.3% per annumWebsites 33.3% per annumSoftware licence 20% per annumSoftware development 33.3% per annum\* T The carrying values of tangible fixed assets are reviewed for impairment inperiods if events or changes in circumstances indicate the carrying value maynot be recoverable. Fixed asset investments Fixed asset investments are carried at cost. The carrying values of fixed asset investments are reviewed for impairment inperiods if events or changes in circumstances indicate the carrying value maynot be recoverable. Deferred taxation Deferred tax is provided in full in respect of taxation deferred by timingdifferences between the treatment of certain items for taxation and accountingpurposes. Deferred tax assets are only recognised when they are regarded asrecoverable. The Group has not adopted a policy of discounting deferred taxassets and liabilities. Foreign currencies The trading results of overseas subsidiary undertakings are translated intosterling using average rates of exchange ruling during the relevant financialperiod. The balance sheets of overseas subsidiary undertakings are translated intosterling at the rates of exchange ruling at 30 September. Exchange differencesarising between the translation into sterling of the net assets of thesesubsidiary undertakings at rates ruling at the beginning and end of the year aredealt with through reserves as are exchange differences on foreign currencyborrowings raised to finance overseas assets. Exchange differences on financial instruments entered into for foreign currencynet assets hedging purposes are dealt with through reserves. The cost of the Group's investments in overseas subsidiary undertakings istranslated into sterling at the rate ruling at the date of investment. All other foreign currency assets and liabilities of the Group and its UnitedKingdom subsidiary undertakings are translated into sterling at the rate rulingat 30 September except if forward cover has been arranged, in which case thisforward rate is used. Foreign currency transactions during the year are translated into sterling atthe rate of exchange ruling on the date of the transaction except when forwardexchange contracts are in place, when the forward contract rate is used. Anyexchange differences are dealt with through the profit and loss account. Leasing Rentals payable under operating leases are charged in the profit and lossaccount on a straight-line basis over the lease term. Capital instruments Shares are included in shareholders' funds. Other instruments are classified asliabilities if they contain an obligation to transfer economic benefit and ifnot they are included in shareholders' funds. 2. Turnover The Group accounts for revenue as goods and services are delivered. Cashreceived for services yet to be delivered are classified as deferred income andcredited to the profit and loss account in the year in which delivery takesplace. \* T 2007 2006---------------------------------------------------------------------------------------------- Turnover Operating Net Assets Turnover Operating Net Assets Results Results---------------------------------------------------------------------------------------------- £000 £000 £000 £000 £000 £000----------------------------------------------------------------------------------------------Continuing operations----------------------------------------------------------------------------------------------Advertising Network 1,752 127 673 1,529 32 181----------------------------------------------------------------------------------------------Internet Publishing 2,193 166 18,798 4,188 2,228 16,908---------------------------------------------------------------------------------------------- 3,945 293 19,471 5,717 2,288 17,089---------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------Discontinued operations 4,364 (5) 13 6,184 12---------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------- 8,309 19,484 11,901 17,112---------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------Operating profit before exceptional items 288 2,300---------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------Exceptional gain on sale of intangible asset 2,513---------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------Interest Receivable 213 154---------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------Profit before taxation 3,014 2,454----------------------------------------------------------------------------------------------\* T 3. Taxation The taxation charge for the year comprises: \* T Group Group 2007 2006 £000 £000Corporation tax 14 -Deferred tax charge 170 -Total tax charge 184 -\* T Factors affecting the tax charge for the year: The tax assessed for the year is lower (2006: lower) than the standard rate ofcorporation tax in the UK of 30% (2006:30%). The differences are explainedbelow: Reconciliation of tax charge (credit) \* T Group Group 2007 2006 £000 £000Profit on ordinary activities before taxation 3,009 2,454Tax charge on profit on ordinary activities before taxation at standard rate of 28% (2006:30%) 844 736Factors affecting tax charge:Expenses not deductible for tax purposes 14 6Depreciation of tangible assets 64 18Exercise of warrants - (406)Capital allowances (70) (15)Tax losses carried forward - 354Utilisation of tax losses (129) (51)Rollover relief (632)Profits not taxable in year (77) (642)Current tax charge 14 - Factors that may affect future tax charges Group Group 2007 2006 £000 £000Deferred tax assets provided for:Losses carried forward 78 217Depreciation over capital allowances (25) 10Share based payments 4 - 57 227Deferred tax assets not provided for:Losses carried forward 660 660Depreciation over capital allowances 3 4 663 664Movement in deferred tax balances:Brought forward 227 227Charge to the profit and loss account (170) -Carried forward 57 227\* T 4. Earnings per share \* T 2007 2006 £000 £000Profit attributable to shareholders 2,827 2,451 Weighted average number of shares in issue 291,027,298 280,054,421 Dilution effects of share warrants 20,400,000 1,900,000Diluted weighted average number of shares in issue 311,427,298 281,954,541 Basic earnings per share 0.97 0.88Diluted earnings per share 0.91 0.87\* T Basic earnings per share are calculated on the results attributable to ordinaryshares divided by the weighted average number of shares in issue during theyear. Diluted earnings per share calculations adjust the weighted average number ofordinary shares in issue to include all dilutive potential ordinary shares.These consist of warrants currently granted at an exercise price lower than theaverage market price of Media Corporation's shares during the year. 5 Consolidated Reserves \* TGroup Share Other Profit and premium reserve loss account account £000 £000 £000At 1 October 2006 12,917 1,422 (1,992)Retained profit for the period - - 2,827Share based payment - - 13Currency fluctuations - - (471)At 30 September 2007 12,917 1,422 377\* T 6 Reconciliation of movements in shareholders' funds \* T Group Group 2007 2006 £000 £000Profit for the financial year 2,830 2,454Other recognised gains and losses (471) (311) 2,359 2,143Proceeds from issue of shares - 328Share based payment 13 -Net Addition to shareholders' funds 2,372 2,471Opening shareholders' funds 17,112 14,641At 30 September 2007 19,484 17,112\* T 7. Notes to the statement of cash flows Reconciliation of operating profit to net cash (outflow) inflow from operatingactivities \* T 2007 2006 £000 £000Operating profit 2,801 2,300Depreciation 228 118Share based payment 13 -Profit on disposal of intangible assets (2,513) -(Increase)/ decrease in debtors (198) 193(Decrease) in creditors (288) (227)Net exchange currency differences (270) (170) (227) 2,214\* T Analysis of changes in net funds \* T 1 October Cash flow 30 September 2006 2007 £000 £000 £000Net cash - Cash at bank and in hand 5,253 (3,000) 2,253Liquid resources - bank deposits - 4,000 4,000Net funds 5,253 1,000 6,253\* T Ends Copyright Business Wire 2007Related Shares:
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