9th Apr 2008 07:00
Motivcom PLC09 April 2008 MOTIVCOM PLC ("THE COMPANY" or "THE GROUP") 9 APRIL 2008 PRELIMINARY ANNOUNCEMENT FOR THE YEAR ENDED 31 DECEMBER 2007 Motivcom plc (AIM:MCM), a leading business and marketing services companyproviding a range of products and services to assist its major blue chip clientsimprove both employee performance and motivation and win and retain customers,is pleased to announce its preliminary results for the year ended 31 December2007. FINANCIAL HIGHLIGHTS • Operating profit increased by 23% to £3,266,000 (2006: £2,660,000) • Profit before tax increased by 22% to £3,311,000 (2006: £2,704,000) • Gross profit increased by 21% to £16,917,000 (2006: £14,026,000) • Basic earnings per share increased by 18% to 8.90 pence (2006: 7.57 pence) • Interim dividend of 0.50 pence paid 19 October 2007 and final dividend of 1.50 pence proposed by the Board, making a total dividend of 2.00 pence (2006: total dividend of 1.25 pence) • August 2007 acquisition of Motivation Travel Management, a provider of incentive travel and conference facilities, enhancing the Group offering of these services • November 2007 acquisition of Zibrant and its subsidiaries, providing venue finding, event management and motivation services for large blue chip corporate clients, increasing the Group's range of services and client base • November 2007 acquisition of Protravel and Protravel TB, providing travel and entertainment related promotional solutions to leading promotional marketing agencies and FMCG brands, enhancing the offering of these Group services • Equity increased by 113% to £16,707,000 (2006: £7,828,000) • Group now both the UK's largest provider of meetings, incentives, conferences and events and supplier of promotional products and services • Diverse service offering provides substantial resilience to economic cycles as well as an excellent platform for future growth and development Commenting on the results, Colin Lloyd, Chairman of Motivcom plc, said: "We are pleased to have delivered these strong results that show a significantmargin expansion at both the gross and operating profit levels. The Group'soperating profit has been growing at 31% compound year on year for the past fiveyears now and we believe that further earnings enhancement will be achieved inthe coming year. Our robust and varied business models provide a great deal oftrading protection, and indeed may benefit, from any market downturn." For further information please contact: Motivcom plcSue Hocken Tel: +44 (0) 1908 608 [email protected] www.motivcom.com Grant Thornton Corporate FinancePhilip Secrett Tel: +44 (0)207 383 [email protected] www.gtuk.com Media enquiriesHeather Salmond / Gareth Mead Tel: +44 (0) 20 7398 [email protected] www.abchurch-group.com CHAIRMAN'S STATEMENT Trading Results I am pleased to report that 2007 was a record year for Motivcom with the resultsshowing excellent operating performance at all levels and exceeding marketexpectations. Profit before tax increased by 22% to £3,311,000 (2006:£2,704,000), gross profit, by which the Company measures its performance,increased by 21% to £16,917,000 (2006: £14,026,000) and basic earnings per shareincreased by 18% to 8.90 pence (2006: 7.57 pence). Two thirds of the growth inoperating profit was organic and one third derived from acquisitions. In view of this performance and the cash generative nature of the Group'sbusiness, the Board is pleased to recommend a final dividend of 1.50 pence,making a total dividend for the year of 2.00 pence per share (2006: totaldividend of 1.25 pence). Subject to shareholder approval at the Annual GeneralMeeting, the final dividend will be paid on 11 June 2008 to shareholders on theregister at close of business on 18 April 2008. The Group's balance sheet has strengthened and equity increased by 113% to£16,707,000 (2006: £7,828,000), primarily due to the issue of new shares inconnection with the acquisition of Zibrant The results for 2007 demonstrate a very pleasing 31% compound annual growth ratein operating profit in the five years between 2003 and 2007. Group Operations 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 theDirectors believe positions the Group favourably for future growth. During 2007the Group's business mix was: Gross profit % Gross profit % 2007 2006 Motivation 23 23Events 38 37Promotions (including Employee Benefits) 39 40 Acquisitions The Group made three strategic acquisitions during the year. MTM On 23 August 2007 Motivcom announced that it had completed the acquisition ofMotivation Travel Management Limited ("MTM") which specialises in the provisionof corporate incentive travel and conference facilities. Within six weeks MTMwas successfully merged and integrated with the Group's subsidiary Archer YoungLimited to form AYMTM Limited. The new business is performing as planned fromnew premises in Amersham, Buckinghamshire, and financial and operationalsynergies are expected from the combined business during 2008. Zibrant On 12 November 2007 Motivcom announced the acquisition of the Zibrant group ofcompanies. Voted deal of the month by Business XL magazine and short-listed forDeal of the Year at The Quoted Companies Awards 2008, the £15 millionacquisition was funded by a combination of debt, vendor share purchase and ashare placing. This acquisition of Zibrant has delivered a substantial footholdin the venue find arena and further diversification into this business servicesarea as well as adding strength in motivation, incentive travel, eventmanagement and live communications. The venue management technology developedby Zibrant provides a significant competitive advantage and has resulted in anumber of new client wins since it became part of the Group. The addition of ablue chip client list and a skilled management team provides furtheropportunities for cross selling across the Group. The combination of Zibrant, P&MM and AYMTM has created the UK's largestMeetings, Incentive, Conferences and Events group. ProTravel On 15 November 2007 Motivcom announced the acquisition of Protravel Limited andProtravel TB Limited, which specialise in providing travel and entertainmentrelated promotional solutions to leading promotional marketing agencies and FMCGbrands. These businesses were fully integrated into the Group's Sales Promotiondivision prior to Christmas 2007 and planned synergies are now delivering into2008. New Product Development During the year the Group introduced a number of new product initiatives. Spree & SpreeFlex pre-paid cards These pre-paid cards operate on both Visa and MasterCard platforms in magneticstrip and Chip & PIN formats. Spree delivers a reward media for the incentivemarket while SpreeFlex provides employers with a corporate branded card thatencourages employee loyalty by delivering savings when shopping at a wide rangeof leading high street retailers. Twenty new card programmes have been launchedbringing sixteen new corporate clients to the Group. Evidence globally suggeststhat the market for pre-paid cards is substantial and growing. In view of theGroup's twenty years' experience in the motivation sector it is well placed toattract significant market share from this sector in the future. Entice Benefits The Group's Sales Promotion division announced in November 2006 the introductionof Entice, delivering a new on-line concept in customer incentive, loyalty andaffinity programmes with over 150 incentive benefits covering all age ranges,demographics and lifestyles. The Entice technology allows businesses to launchtheir own bespoke retention and acquisition programmes quickly and at low cost. During 2007 Entice has exceeded its initial internal targets and has securedfour major blue chip clients with a combined membership of two million newconsumers. Entice has a high client retention rate with new benefits anddevelopments in technology, making the product a positive tool as part ofoverall customer relationship management. The pipeline for 2008 is encouraging,with more clients reacting to the economic climate by seeking to secure theirexisting customer base through the implementation of new schemes during thecourse of the year as they realise the benefits of retaining and adding value totheir existing customer proposition at low cost. Filmology In March 2007 the Sales Promotion division also announced the launch ofFilmology, a new dedicated cinema marketing and promotions vehicle. In theremainder of 2007 exclusive agreements with four of the largest five UK cinemapartners were secured and new supply partners were established to allowexpansion into web and SMS based cinema promotions. Gross revenues from cinemapromotions have doubled year on year, and the effectiveness and consumerpopularity of such campaigns is illustrated by repeat custom from blue chipbrands. Bulk sales of cinema ticket increased by over 50% and the Group hasmade initial moves into a new market by conducting its first licensed promotion,utilising specific movie titles. Greentravel2workTM In early August 2007 the Group's Employee Benefits division introduced a uniquetax-free bus travel product through its Greentravel2workTM scheme designed toappeal to the 2.8 million commuters who travel to work daily on the bus. Thissolution has proven to be of great interest to the wide range of UK businessesand local authorities seeking to provide additional substance to their CSR(Corporate Social Responsibility) programmes. During 2007 three schemes were launched in Nottingham, Portsmouth and Leicesterand the Group has tax approval for a scheme in Derby. It is a popular greeninitiative with private and public sector clients and ten further schemes willbe launched in 2008 to over 100,000 employees. Motivcom has identified afurther 50 target schemes to be launched during 2008. These clients arepredominantly new additions to Motivcom's client base. Motivcom remains thesole provider of an end-to-end employer/employee solution for this product inthe UK. Board Appointments On 13 November 2007 we announced the appointment of Christopher Stibbs, GroupFinance Director of The Economist Group, as Non-Executive Director.Christopher's experience has already proved invaluable in providing a highdegree of corporate governance advice. He is also helping in offeringobjectivity and experience in the planning of the Group's future strategy tomaximise the opportunities that we now enjoy with the B2E sector. Since our 31 December 2007 year end we also announced the appointment of SusanFarr, Executive Director of Chime Communications Limited and Trustee of theHistoric Royal Palaces, as Non-Executive Director. On 13 March 2008 Susanjoined us to further provide senior level management expertise as well as awealth of knowledge in corporate marketing and communications. We welcome them both to the Board. Overview During its time as a public company Motivcom has developed and invested in awide range of businesses and marketing services and now has over 600 corporateclients, including 30% of companies in the FTSE100 and 15% of all Fortune 500companies. Two of the Group's divisions operate in what we have defined as thebusiness-to-employee (B2E) sector. Whilst, as a result of events in thefinancial services sector there has been some rationalisation, the overall UKemployment position remains strong with employment rising by 166,000 andunemployment dropping by 32,000 in the first quarter of 2008. Thus on the onehand there is a greater pool of employees for Motivcom's services and on theother, if there is a decline, companies will want to ensure that those employeesthat remain are motivated and retained effectively. Our research shows it costsa company in excess of £8,000 on average to replace a single staff member.National statistics reveal that around 18% of the UK workforce move jobs eachyear, which equates to a cost to British companies of around £39 billion in2008. We also estimate that absenteeism in the public and private sector willcost companies and government departments in the UK a further £15 billion in2008. It is for these fundamental reasons that we believe we will continue tosee a growth in demand for our services. Having spent much of my career in the promotional marketing business myexperience suggests that marketing budgets are more favorably allocated topromotional activity at the expense of above-the-line activity in a downturn ascompanies seek greater shorter-term accountability. Indeed, consumer responsesto sales promotion activity also increase as consumers seek out special offers,such as Filmology's cinema tickets offers. Across the broader media sector inthe last quarter of 2007, promotional marketing and online were the only areasto see in increase in expenditure. As the UK's largest provider of travel andleisure promotion solutions your Group is well placed to take advantage of thistrend if history repeats itself. Against this background your Group believes that its robust business modelsprovide a great deal of protection from any market downturn and indeed maybenefit - your Board will however constantly monitor the economic climate inwhich it operates. Having a flexible cost base complemented by its costefficient e-commerce and digital capability, creates opportunities for financialadjustment if circumstances require. In view of our market position and the apparent change in economic climate, weare already seeing many corporate development opportunities for Motivcom todevelop further with a more realistic attitude to the pricing of assets. Webelieve that further earnings enhancement can be achieved in the coming yearthrough further selective consolidation. Finally, on behalf of my fellow directors, I would like to thank our employeesfor their contribution to the Group's continuing success. Colin Lloyd Chairman 8 April 2008 CONSOLIDATED INCOME STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2007 Year ended 31 Year ended 31 December 2007 December 2006 Note £000 £000 Revenue 2 85,704 76,752Cost of sales (68,787) (62,726)Gross profit 16,917 14,026 Administrative expenses (13,651) (11,366)Operating profit 2 3,266 2,660Interest expense 3 (248) (151)Interest income 293 195Profit before income tax 3,311 2,704Income tax expense 4 (981) (802)Profit for the period 7 2,330 1,902 Attributable to:Equity holders of the Company 2,330 1,902 Earnings per share for profit attributable to theequity holders of the Company during the year(expressed in pence)- basic 5 8.90 7.57- diluted 5 8.63 7.39 CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSEFOR THE YEAR ENDED 31 DECEMBER 2007 Year ended 31 Year ended 31 December 2007 December 2006 £000 £000Profit for the period and total recognised income andexpense for period 2,330 1,902 CONSOLIDATED BALANCE SHEETAT 31 DECEMBER 2007 At 31 December At 31 December 2007 2006 Note £000 £000 ASSETSNon-current assetsProperty, plant and equipment 4,430 367Intangible assets 21,646 5,247Deferred income tax assets - 286 26,076 5,900 Current assetsInventories 937 776Trade and other receivables 21,276 14,203Cash and cash equivalents 7,294 7,754 29,507 22,773 Non-current assets classified as held for saleProperty, plant and equipment 800 - Total assets 56,383 28,633 EQUITYCapital and reserves attributable to the Company'sequity holdersShare capital 7 154 126Share premium account 7 9,769 2,882Other reserves 7 75 75Retained earnings 7 6,709 4,745Total equity 7 16,707 7,828 LIABILITIESNon-current liabilitiesBorrowings 7,981 -Deferred income tax liabilities 750 - 8,731 - Current liabilitiesTrade and other payables 29,434 19,973Current income tax liabilities 548 439Obligations under finance leases 10 -Borrowings 953 393 30,945 20,805 Total liabilities 39,676 20,805 Total equity and liabilities 56,383 28,633 CONSOLIDATED CASH FLOW STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2007 Year ended 31 Year ended 31 December 2007 December 2006 Note £000 £000 Cash flows from operating activities Cash generated from operations 8 3,088 4,619Interest paid (144) (51)Income tax paid (917) (859)Net cash generated from operating activities 2,027 3,709 Cash flows from investing activities Acquisition of subsidiaries, net of cash acquired (16,303) (1,271)Purchases of property, plant and equipment (PPE) (409) (221)Purchase of unincorporated trade - (231)Interest received 293 195Net cash used in investing activities (16,419) (1,528) Cash flows from financing activities Payment of dividends (354) (276)Proceeds from issue of shares 6,190 -Receipts from loans 8,650 -Repayments of borrowings (554) (520)Net cash generated from/(used in) financing activities 13,932 (796) Net (decrease)/ increase in cash (460) 1,385Cash at beginning of period 7,754 6,369Cash at end of period 7,294 7,754 NOTES TO THE PRELIMINARY ANNOUNCEMENT 1 Basis of information in the preliminary announcement The financial information in this preliminary announcement does not constitutethe Company's statutory accounts for the years ended 31 December 2007 or 31December 2006 but is derived from those accounts. Statutory Accounts for 2006 have been delivered to the Registrar of Companiesand those for 2007 will be delivered following the Company's annual generalmeeting. The auditors have reported on those accounts; their reports were (i)unqualified, (ii) did not include a reference to any matters to which theauditors drew attention by way of emphasis without qualifying their report and(iii) did not contain a statement under section 237 (2) or (3) of the CompaniesAct 1985. The preliminary announcement has been prepared on the basis of the Group'saccounting policies. These are set out in its Annual Report and Accounts forthe year ended 31 December 2006 which is available on the Group's website(www.motivcom.com). As of 1 January 2007 various new standards andinterpretations apply to financial statements prepared in accordance with IFRS.However, none apply to the Group. 2 Segment Information Primary reporting format - business segments At 31 December 2007, the Group is organised into three main business segments -(1) development and administration of third party motivation and incentiveprogrammes ("Motivation") - (2) the provision of incentive travel and livecommunications ("Events") - (3) trade and consumer sales promotions and employeebenefit products ("Promotions"). Unallocated costs represent corporateexpenses. The segment results for the year ended 31 December 2007 are as follows: Motivation Events Promotions Unallocated Group £000 £000 £000 £000 £000 Total gross segment revenue 42,339 26,051 17,314 - 85,704 Operating profit/(loss) 951 1,147 1,436 (268) 3,266Finance income - net 45Profit before income tax 3,311Income tax expense (981)Profit for the period 2,330 The segment results for the year ended 31 December 2006 are as follows: Motivation Events Promotions Unallocated Group £000 £000 £000 £000 £000 Total gross segment revenue 30,936 29,393 16,423 - 76,752 Operating profit/(loss) 668 918 1,258 (184) 2,660Finance income - net 44Profit before income tax 2,704Income tax expense (802)Profit for the period 1,902 Secondary reporting format - geographical segments The home-country of the Company and its subsidiaries is England. The Group's sales are mainly in countries within the UK and the Eurozone and,allocated on the basis of the country in which the customer is located, are asfollows: Year ended 31 Year ended 31 December 2007 December 2006 £000 £000 UK 83,040 74,147Rest of Europe 2,377 2,445Other countries 287 160 85,704 76,752 3 Interest expense Year ended 31 Year ended 31 December 2007 December 2006 £000 £000Interest expense:- bank borrowings 144 51- debt finance costs 103 100- obligations under finance leases 1 - 248 151 4 Income tax expense Year ended 31 Year ended 31 December 2007 December 2006 £000 £000 Current tax 1,019 825Over provision of tax for prior year (17) (11) 1,002 814Deferred tax - origination and reversal of temporary timing (12)differences (31)Change in rate of provision for deferred tax 10 - 981 802 The tax on the Group's profit before tax differs from the theoretical amountthat would arise using the weighted average tax rate applicable to profits ofthe consolidated companies as follows: Year ended 31 Year ended 31 December 2007 December 2006 £000 £000 Profit before tax 3,311 2,704 Tax calculated at domestic tax rates applicable to profits in therespective countries 993 811Over provision of tax for prior year (17) (11)Expenses not deductible for tax purposes 5 2Tax charge 981 802 The weighted average applicable tax rate was 29.6% (2006: 29.7%). 5 Earnings per share Basic Basic earnings per share is calculated by dividing the profit attributable toequity holders of the Company by the weighted average number of ordinary sharesin issue during the period. Year ended 31 Year ended 31 December 2007 December 2006 £000 £000 Profit attributable to equity holders of the Company 2,330 1,902Weighted average number of ordinary shares in issue (thousands) 26,185 25,115Basic earnings per share in pence 8.90 7.57 Diluted Diluted earnings per share is calculated by adjusting the weighted averagenumber of ordinary shares outstanding to assume conversion of all contracteddilutive potential ordinary shares. The Company has only one category ofdilutive potential ordinary shares, share options. The calculation is performed for the share options to determine the number ofshares that could have been acquired at fair value (determined as the averageannual market share price of the Company's shares) based on the monetary valueof the subscription rights attached to outstanding share options and takingaccount of the yet unexpensed share based payment charge relating to thoseoptions. The number of shares calculated as above is compared with the numberof shares that would have been issued assuming the exercise of the shareoptions. Tranches two to four of the options granted to C T Lloyd have beenexcluded from this calculation as all the conditions attaching to the proposedoptions had not been met at 31 December 2007. Year ended 31 Year ended 31 December 2007 December 2006 £000 £000 Profit attributable to equity holders of the Company 2,330 1,902Weighted average number of ordinary shares in issue (thousands) 26,185 25,115Adjustment for share options (thousands) 818 607Weighted average number of ordinary shares for diluted earningsper share (thousands) 27,003 25,722Diluted earnings per share in pence 8.63 7.39 6 Dividends Year ended 31 Year ended 31 December 2007 December 2006 £000 £000Dividends paid- 2006 final dividend of 0.90 pence per share 226 188- 2007 interim dividend of 0.50 pence per share 128 88 354 276 The proposed final dividend for the year ended 31 December 2007 of 1.50 pence(2006: 0.90 pence) is subject to approval by shareholders at the Annual GeneralMeeting and has not been included as a liability in these financial statements.The total amount payable is £463,009. 7 Statement of changes in equity Share Share Other Retained Total capital Premium Reserves earnings equity £000 £000 £000 £000 £000 At 1 January 2006 126 2,882 75 2,944 6,027Profit for the period - - - 1,902 1,902Dividends paid - - - (276) (276)Share based payments - - - 14 14Deferred tax on equity share based - - 161 161payments -At 31 December 2006 126 2,882 75 4,745 7,828Allotments in year 28 7,067 - - 7,095Issue costs - (180) - - (180)Profit for the period - - - 2,330 2,330Dividends paid - - - (354) (354)Share based payments - - - 35 35Deferred tax on equity share based - - (39) (39)payments -Change in rate for provision of - - (8) (8)deferred tax -At 31 December 2007 154 9,769 75 6,709 16,707 8 Cash generated from operations Year ended 31 Year ended 31 December 2007 December 2006 £000 £000 Profit for the period before tax 3,311 2,704Adjustments for:- depreciation 239 163- loss on disposal of fixed assets 6 -- amortisation of intangibles 39 16- net interest (45) (44)- share based payments 35 14Changes in working capital (excluding the effects ofacquisitions):- inventories (161) (310)- trade and other receivables 2,126 (5,298)- trade and other payables (2,462) 7,374Cash generated from operations 3,088 4,619 9 Acquisitions The Company acquired four companies in 2007 - Motivation Travel ManagementLimited ("MTM") on 23 August 2007, Zibrant Limited ("Zibrant") on 12 November2007 and Protravel Limited ("Protravel") and Protravel TB Limited ("TB") on 15November 2007. Set out below is a summary of the consideration payable,together with cash acquired. Acquisition of subsidiaries £000Cash consideration payable, including costs MTM 920Zibrant (excluding £725,000 of shares issued as part of consideration) 14,520Protravel and TB 1,213 16,653Net cash acquired MTM (347)Zibrant 1,014Protravel and TB (1,017) Consideration payable, including costs 16,303 END This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
MCM.L