Half Yearly Report

RNS Number : 5068R

First Artist Corporation PLC

24 August 2010

 

FIRST ARTIST CORPORATION PLC

 

("First Artist") or (the "Group")

 

Unaudited interim results for the six months ended 31 May 2010

 

 

First Artist Corporation plc (AIM:FAN), the media, events and entertainment management group, today announces its unaudited interim results for the six months ended 31 May 2010.

 

CHAIRMAN'S STATEMENT

 

I hereby present our results for the 6 months ended 31 May 2010. Shareholders should note that these results are reported alongside the restated prior year results for the first 6 months ended 28 February 2009 which was the period of the published interim results for the first 6 months of the extended 15 month financial period ended 30 November 2009.

 

In line with the strategic restructuring of Group operations, which is currently underway, and consistent with the treatment contained in the 2009 Annual Report & Accounts, the results for the group activities are reported across continuing operations - incorporating the Media and Events Management divisions; and discontinued operations - comprising Entertainment, Wealth Management and Sport.

 

Summary of results by Division - Continuing Operations
	Unaudited 6 months ended 31 May 2010		(Restated) Unaudited 6 months ended 28 February 2009		Audited 15 months ended 30 November 2009
	£'000		£'000		£'000
Revenue by Division
Media	35,259		32,804		87,537
Events	1,257		2,344		3,098
Total Revenue	36,516		35,148		90,635
Adjusted EBITDA*
Media	1,272		1,758		5,749
Events	(148)		339		(56)
Group costs	(840)		(987)		(2,186)
Total Adjusted EBITDA*	284		1,110		3,507

 

The continuing challenges of the global recession, have shown a continued impact on the Media and Events businesses, which together with Group costs generated EBITDA of £0.284m (restated 6 months ended 28 February 2009 £1.110m) from revenues of £36.516m (restated 6 months ended 28 February 2009 £35.148m).

 

*Adjusted Earnings before Interest, taxation, depreciation and amortisation ("EBITDA") is stated before exceptional items.

Media

 

The Media division, which comprises the Dewynters Group, SpotCo and First Rights, accounted for 96.5% of revenue in the period.

 

Dewynters Ltd continues to enjoy a solid client base. This list includes The Lion King, Mamma Mia (London), We Will Rock You, Wicked, and the recently opened Love Never Dies. Several new shows are planned to open in spring 2011 which will be supported by Dewynters. The pre-opening campaigns for these shows are planned to commence in the autumn of 2010.

 

During the period Newman Displays (a wholly owned subsidiary of Dewynters) continued to provide support for many high profile events including Cannes Film Festival, Sex and the City, Hair and Prince of Persia. Unfortunately the cancellation of several shows which was beyond the control of the Group had an adverse impact.

 

Dewynters Advertising Inc. in the US has also faced a downturn in trade arising largely due to the recession and touring productions showing in smaller venues.

 

SpotCo achieved revenue in line with the same period last year. The mix of revenues has changed due to a shift away from traditional media and towards interactive, as the number of clients in the interactive stream doubled from the prior year.

 

First Rights has found it difficult to gain traction in competitive markets and as has not performed as expected. This business is subject to restructuring and will be integrated into other divisions.

 

Events

 

Results of the events management business, The Finishing Touch, continue to reflect the impact of the economic turmoil faced in its market. As a consequence of the ongoing difficulties in this market a review of the estimates and forecasts underpinning the value of goodwill of the Finishing Touch was carried out. An impairment charge totalling £1m has been charged in the 6 months ended 31 May 2010.

 

Activity within the event management business is starting to show signs of recovery. Throughout the interim period, The Finishing Touch has been awarded several contracts with new and existing clients across key areas of the business; a substantial level of activity has been contracted, and other substantial existing and new clients of The Finishing Touch are forecast to grow steadily.

 

Discontinuing Operations

 

The Sport Division is made up of First Artist Sport Limited, First Artist Scandinavia A/S and Promosport Srl. A restructuring programme within the football division has been ongoing for the past 18 months.

 

Promosport is being held in run-off whilst all outstanding debtors and accrued income are recouped.

 

First Artist Scandinavia has been sold to the local Scandinavian management team; effective from 1 July 2010.

 

Optimal Wealth Management and First Artist Management were disposed of in February 2010.

 

First Artist Sport Limited will continue to trade within the Group, although it is the Directors' intention to divest this business as they believe it is not a natural fit with its media-focused strategy for the future.

 

Risks associated with the Group

 

In the Annual Report and Accounts for the 15 months ended 30 November 2009, the Group reported that as a result of the disposal of Optimal Wealth Management, the sale of the business of First Artist Management and the possible disposal of the Sports Division, that the existing terms of the bank borrowings were being renegotiated with the Group's lender, Allied Irish Bank (GB). Due to challenging economic conditions and the subsequent effect on the Group's financial performance, the Group is in breach of its banking covenants. As a consequence, the Group's total bank borrowings have been classified as a current liability.

 

The Group requires a recalibration of its existing bank covenants along with a restructuring of the Group debt. The Group remains in close negotiations with its bankers and enjoys its continued support. The mezzanine loan repayment which was due on 31 August 2010 has been extended to 28 October 2010. An impairment charge totalling £1m has been charged against the Events Business, The Finish Touch. A write-down in respect of amounts deemed unrecoverable of £0.5m was made during the period to the Receivables balances within the Sport Division. The effect of this impairment charge and write-down has been to show net liabilities on the Group's Balance Sheet for the 6 months ended 31 May 2010.

 

 

The Board continues to review the Group's ability to continue as a going concern in light of the difficult trading conditions and the ongoing negotiations with the Group's bankers. The directors are exploring numerous avenues to improve the position of the Group, including the debt restructuring programme mentioned above, closely monitoring divisional performances and completing the previously announced intentions to divest the Sport Division. The directors believe that it is appropriate to continue to adopt the going concern basis of accounting. The ongoing restructuring within the Group is focused on bringing back profitability. It is expected that the concentration on profitability will bring with it added and positive cashflow.

 

 

The Group successfully negotiated a discounted early settlement of the loan notes relating to the deferred consideration payable to the vendors of Dewynters. The settlement amount was £1.5 million, which represents a £0.499m discount. As this transaction occurred in June 2010, the effects are not reflected in these financial statements, but will be included in the results for the year to 30 November 2010.

 

 

People

 

There have been some significant changes in the senior staff throughout the course of the interim period of 2010. In response to William Fitzpatrick's resignation as Group Finance Director Shirley Stapleton has been appointed as the interim Financial Director Designate for the foreseeable future. Julianne Coutts, who had been a member of the Board since March 2009, has resigned her position.

 

The corporate team continues to work conscientiously towards evaluating and improving the Group, which, given the current climate in the economy has proven difficult to sustain any level of growth. The directors of the subsidiary companies have worked industriously towards building future success for the Group through sensible management and shared vision.

 

Last but not least, thank you to all those directors and employees who have striven diligently in the face of adverse market conditions, and for their commitment to the Group objectives.

 

 

First Artist Corporation plc Jon Smith, Chief Executive	tel: 020 7993 0000 www.firstartist.com
Seymour Pierce, Nominated Adviser and Broker Stewart Dickson/Tom Sheldon	tel: 020 7107 8000

 

INDEPENDENT REVIEW REPORT TO FIRST ARTIST CORPORATION PLC

 

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the interim financial report for the six months ended 31 May 2010 which comprises the Condensed Consolidated Statement of Comprehensive Income, the Condensed Consolidated Balance Sheet, the Condensed Consolidated Statement of Changes in Equity, the Condensed Consolidated Statement of Cash Flows and the related notes. We have read the other information contained in the interim financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

 

This report is made solely to the Company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "'Review of Interim Financial Information performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. Our review work has been undertaken so that we might state to the Company those matters we are required to state to them in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed.

 

Directors' Responsibilities

The interim financial report, is the responsibility of, and has been approved by the directors. The directors are responsible for preparing and presenting the interim financial report in accordance with the AIM Rules of the London Stock Exchange and the requirements of the UK Listing Authority ('UKLA').

 

As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards and International Financial Reporting Interpretations Committee pronouncements as adopted by the European Union. The condensed set of financial statements included in this interim financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting" as adopted by the European Union.

 

Our Responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the interim financial report based on our review.

 

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

 

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the interim financial report for the six months ended 31 May 2010 is not prepared, in all material respects, in accordance with International Accounting Standard 34 "Interim Financial Reporting" as adopted by the European Union, the AIM Rules of the London Stock Exchange and the requirements of the UK Listing Authority ('UKLA').

 

Emphasis of matter paragraph

Without qualifying our review conclusion above, we draw attention to note 1 of this interim announcement which indicates that the company was in breach of certain of its banking covenants at the period end. The Group remains in negotiations with its bankers and the Group will need to renegotiate the existing bank covenants along with restructuring of the Group debt or find alternative funding arrangements. The company is confident these negotiations will be successfully resolved. These conditions indicate the existence of a material uncertainty which may cast significant doubt about the Company's ability to continue as a going concern

 

Baker Tilly UK Audit LLP

Chartered Accountants

2 Bloomsbury Street

London

WC1B 3ST

24 August 2010

 

Unaudited Condensed Consolidated Statement of Comprehensive Income

For the six months ended 31 May 2010

 

		6 months ended 31 May 2010 (Unaudited) £000's		Restated 6 months ended 28 February 2009 (Unaudited) £000's		15 months ended 30 November 2009 (Audited) £000's
Continuing Operations
Revenue		36,516		35,148		90,635
Cost of sales		(28,032)		(26,239)		(67,964)
Gross profit		8,484		8,909		22,671
Administrative expenses		(10,095)		(8,346)		(21,623)
EBITDA before exceptional administrative expenses		284		1,110		3,507
Exceptional administrative (expenses)/income		(168)		249		(493)
Depreciation		(299)		(383)		(831)
Impairment of goodwill	6	(1,000)		(100)		(150)
Amortisation of intangibles		(428)		(313)		(985)
Operating (loss) / profit		(1,611)		563		1,048
Finance income		1		134		61
Finance costs	3	(1,703)		(2,339)		(2,500)
Loss on ordinary activities before taxation		(3,313)		(1,642)		(1,391)
Taxation	4	157		(6)		(225)
Loss for the period from continuing operations		(3,156)		(1,648)		(1,616)
Discontinued operations
Loss for the period from discontinued operations	9	(1,952)		(906)		(4,701)
Loss for the period		(5,108)		(2,554)		(6,317)
Other comprehensive income:
Currency translation differences		671		1,208		(57)
Deferred taxation on share options		-		-		(63)
Other comprehensive income (net of tax) for the period		671		1,208		(120)
Total comprehensive income for the period attributable to owners of the parent		(4,437)		(1,346)		(6,437)
Basic and diluted loss per share (pence)	5
From continuing operations		(10.54)		(6.52)		(8.43)
From discontinued operations		(6.52)		(11.85)		(24.52)
Total operations		(17.06)		(18.37)		(32.95)

 

 

Unaudited Condensed Consolidated Balance Sheet

As at 31 May 2010

 

			6 months ended 31 May 2010 (Unaudited) £000's		Restated 6 months ended 28 February 2009 (Unaudited) £000's		15 months ended 30 November  2009 (Audited) £000's
Non-current assets
Goodwill		6	15,980		26,319		18,621
Intangible assets			6,495		7,609		6,549
Property, plant and equipment			1,730		2,385		1,822
Available-for-sale investments			58		45		58
			24,263		36,358		27,050
Current assets
Inventories			900		308		1,122
Trade and other receivables			8,862		12,399		9,695
Cash and cash equivalents			2,773		2,558		4,116
			12,535		15,265		14,933
Assets of disposal group classified as held-for-sale		9	2,807		-		5,707
			15,342		15,265		20,640
Total assets			39,605		51,623		47,690
Current liabilities
Trade and other payables			(11,280)		(11,081)		(13,544)
Current taxation liabilities			(358)		(526)		(439)
Borrowings		8	(20,402)		(2,520)		(5,827)
Provisions		7	(2,830)		(4,070)		(4,042)
			(34,870)		(18,197)		(23,852)
Liabilities of disposal group classified as held-for-sale		9	(1,407)		-		(2,001)
			(36,277)		(18,197)		(25,853)
Non-current liabilities
Deferred taxation			(2,186)		(2,825)		(2,178)
Borrowings			-		(16,704)		(11,684)
Provisions		7	(2,482)		(7,248)		(4,895)
			(4,668)		(26,777)		(18,757)
Total liabilities			(40,945)		(44,974)		(44,610)
Net (liabilities)/assets			(1,340)		6,649		3,080
Equity
Share capital			749		349		748
Share premium			7,774		6,609		7,768
Capital redemption reserve			15		15		15
Share option reserve			256		366		246
Retained earnings			(10,588)		(1,738)		(5,480)
Own shares held			(259)		(259)		(259)
Foreign exchange reserve			713		1,307		42
Total equity attributable to owners of the parent			(1,340)		6,649		3,080

 

 

Unaudited Condensed Consolidated Statement of Changes in Equity

For the six months ended 31 May 2010

 

ATTRIBUTABLE TO OWNERS OF THE PARENT		Share capital £000	Share premium £000	Capital redemption reserve £000	Share option reserve £000	Retained earnings £000	Own shares held £000	Foreign exchange reserve £000	Total Equity £000
At 1 September 2008		347	6,598	15	285	816	(259)	99	7,901
Other comprehensive income:
Currency translation differences		-	-	-	-	-	-	1,208	1,208
Total other comprehensive income		-	-	-	-	-	-	1,208	1,208
Loss for the period (as restated)		-	-	-	-	(2,554)	-	-	(2,554)
Total comprehensive income for the period		-	-	-	-	(2,554)	-	1,208	(1,346)
Transactions with owners
Shares issued to vendors as deferred consideration		2	11	-	-	-	-	-	13
Share-based payment charge		-	-	-	81	-	-	-	81
Total transactions with owners		2	11	-	81	-	-	-	94
At 28 February 2009		349	6,609	15	366	(1,738)	(259)	1,307	6,649
At 1 September 2008		347	6,598	15	285	816	(259)	99	7,901
Other comprehensive income:
Deferred taxation on share options		-	-	-	-	(63)	-	-	(63)
Currency translation differences		-	-	-	-	-	-	(57)	(57)
Total other comprehensive income		-	-	-	-	(63)	-	(57)	(120)
Loss for the period		-	-	-	-	(6,317)	-	-	(6,317)
Total comprehensive income for the period		-	-	-	-	(6,380)	-	(57)	(6,437)
Transactions with owners
Transfer from share option reserve to retained earnings		-	-	-	(84)	84	-	-	-
Proceeds of share issues (net of costs)		343	990	-	-	-	-	-	1,333
Shares issued to vendors as deferred consideration		27	86	-	-	-	-	-	113
Shares issued to redeem loan notes		31	94	-	-	-	-	-	125
Share-based payment charge		-	-	-	45	-	-	-	45
Total transactions with owners		401	1,170	-	(39)	84	-	-	1,616
At 30 November 2009		748	7,768	15	246	(5,480)	(259)	42	3,080

 

 

 

 

Unaudited Condensed Consolidated Changes in Equity

For the six months ended 31 May 2010

 

ATTRIBUTABLE TO OWNERS OF THE PARENT		Share capital £000	Share premium £000	Capital redemption reserve £000	Share option reserve £000	Retained earnings £000	Own shares held £000	Foreign exchange reserve £000	Total Equity £000
At 1 December 2009		748	7,768	15	246	(5,480)	(259)	42	3,080
Other comprehensive income:
Currency translation differences		-	-	-	-	-	-	671	671
Total other comprehensive income		-	-	-	-	-	-	671	671
Loss for the period		-	-	-	-	(5,108)	-	-	(5,108)
Total comprehensive income for the period		-	-	-	-	(5,108)	-	671	(4,437)
Transactions with owners
Shares issued to vendors as deferred consideration		1	6	-	-	-	-	-	7
Share-based payment charge		-	-	-	10	-	-	-	10
Transactions with owners		1	6	-	10	-	-	-	17
At 31 May 2010		749	7,774	15	256	(10,588)	(259)	713	(1,340)

 

 

Unaudited Condensed Consolidated Statement Of Cash Flows

For the six months ended 31 May 2010

 

		6 months ended 31 May 2010 (Unaudited) £000's		6 months ended 28 February 2009 (Unaudited) £000's		15 months ended 30 November  2009 (Audited) £000's
Cash (used in)/generated from operating activities	10	(2,218)		2,338		7,013
Income taxes paid		(287)		(772)		(800)
Net cash (outflow)/inflow from operating activities		(2,505)		1,566		6,213
Investing activities
Finance income		1		137		61
Purchase of property, plant and equipment		(108)		(262)		(331)
Acquisition of subsidiaries (net of cash)		-		(1,158)		(3,418)
Proceeds from disposal of subsidiary (net)		1,311		-		-
Payment of deferred consideration		(92)		(1,566)		(2,849)
Net cash used in investing activities		1,112		(2,849)		(6,537)
Financing activities
Repayments of borrowings		(563)		(13,177)		(523)
Repayments of obligations under finance leases		-		(7)		(7)
New bank loans raised		-		17,546		4,076
Repayment of loan notes		-		-		(594)
Net cash proceeds from issue of shares		-		-		1,333
Interest paid		(368)		(1,090)		(1,243)
Net cash (used)/generated by financing activities		(931)		3,272		3,042
Net (decrease) / increase in cash and cash equivalents		(2,324)		1,989		2,718
Cash and cash equivalents at the beginning of the period		3,177		464		464
Effect of foreign exchange rate changes		114		105		(5)
Cash and cash equivalents at end of the period		967		2,558		3,177
Cash and cash equivalents (excluding overdrafts)		2,773		2,558		4,116
Overdraft		(1,806)		-		(939)
Cash and cash equivalents		967		2,558		3,117

 

 

Unaudited notes to the Interim Financial Statements

For the six months ended 31 May 2010

 

1. Basis of Preparation

 

These unaudited interim financial statements are for the six months ended 31 May 2010. They have been prepared in accordance with recognition and measurement principles of International Financial Reporting Standards (IFRS) as endorsed by the European Union and implemented in the UK. This report should be read in conjunction with the annual financial statements for the 15 months ended 30 November 2009, which have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and International Financial Reporting Interpretations Committee ('IFRIC') Interpretations and the Companies Act 2006, as applicable to companies reporting under IFRS.

 

The financial information in this interim announcement has been prepared in accordance with IAS 34 'Interim Financial Reporting'. It does not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. The unaudited interim financial statements were approved by the Board on 24 August 2010.

 

The comparative financial information for the 15 months ended 30 November 2009 does not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. The statutory accounts of First Artist Corporation plc for the 15 months ended 30 November 2009 have been reported on by the Company's auditor, Baker Tilly UK Audit LLP and have been delivered to the Registrar of Companies. The report of the auditor was unqualified but contained an emphasis of matter statement with regard to going concern. The auditor's report did not contain statements under Section 498(2) or 498(3) of the Companies Act 2006.

 

The financial information for the six months ended 31 May 2010 is unaudited but has been reviewed by the auditors in accordance with the International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom.

 

Comparative Information

 

The Group extended its year end in 2009 to the 15 months ended 30 November 2009. Accordingly the 6 months comparatives were drawn up to 28 February 2009 and the current period has been drawn up to the 6 months ended 31 May 2010. The Board have considered that stating the results for the 6 months ended 31 May 2009 is not required as the structure of the Group is significantly different. Consequently, presenting results for the 6 months ended 31 May 2009 would not provide increased understanding of the Group to the reader of the financial information.

 

The results for the 6 months ended 28 February 2009 have been restated to show the impact of the disposal groups as detailed in note 9 and include the effected prior period adjustments taken to account in the reported results for the period ended 30 November 2009.

 

Accounting Policies

 

The accounting policies adopted in the preparation of the interim consolidated financial statements are consistent with those followed in the preparation of the Group's annual financial statements for the 15 months ended 30 November 2009. In the current period, the Group has adopted IAS 1 'Presentation of Financial Statements' (Revised) and IFRS 8 'Operating Segments'.

 

1. Basis of Preparation (continued)

 

Although the adoption of these standards has had no impact on the financial position and performance of the Group, additional disclosures have been provided to comply with the revised standards. Changes have also been made with regards to the presentation of the key financial statement components and segmental information

 

On adoption of IAS 1 (Revised) the consolidated Income Statement and Consolidated Statement of Recognised Income and Expense have been re-presented as a single statement of Consolidated Comprehensive Income and the Consolidated Cash Flow Statement has been re-named the Consolidated Statement of Cash Flows'.

 

IFRS 8 requires disclosure of information about the Group's operating segments and replaces the requirement to determine primary (business) and secondary (geographical) reporting segments of the Group. It requires a management approach under which segment information is presented on the same basis as that used for internal reporting purposes to the Chief Operating Decision Maker.

 

Going Concern

 

These interim financial statements have been prepared on a going concern basis. Given the continued economic uncertainty and the fact that the Group's banking facilities are repayable on demand following breaches of certain covenants (as described in note 8), there are material uncertainties that may cast significant doubt upon the Group's ability to continue as a going concern.

 

The Group remains in close negotiations with its bankers and the Group will need to renegotiate the existing bank covenants along with restructuring of the Group debt or find alternative funding arrangements. The mezzanine loan repayment of £3.7 million together with rolled up interest of £347k which was due on 31 August 2010 has been extended to 28 October 2010 whilst negotiations continue. The company is confident these negotiations will be successfully resolved. Consequently the directors have a reasonable expectation that the Group has adequate resources to continue trading for the foreseeable future. It is therefore appropriate to prepare the interim financial statements on a going concern basis. The interim financial statements do not include the adjustments that would result if the Group was unable to continue as a going concern.

2. Segmental Reporting

 

The Group has adopted IFRS 8 Operating Segments with effect from 1 December 2009. IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision maker in order to allocate resources to the segments and to assess their performance. Internally the Group reports within two identified segments, Media and Events.

 

The Group's continuing operations are wholly based in the United Kingdom and the USA. Information regarding the Group's two continuing operating segments is provided below:

 

6 months ended 31 May 2010

 

			Media £000	Events £000	Unallocated £000		Group £000
Total revenue			35,259	1,257	-		36,516
Adjusted EBITDA			1,272	(148)	(840)		284
Exceptional administrative expenses			-	-	(168)		(168)
Depreciation			(262)	-	(37)		(299)
Amortisation and impairment			(428)	(1,000)	-		(1,428)
Operating profit/(loss)			582	(1,148)	(1,045)		(1,611)
Finance income			-	-	1		1
Finance costs			-	-	(1,703)		(1,703)
Profit/(loss) before tax and discontinued operations
			582	(1,148)	(2,747)		(3,313)

 

6 months ended 28 February 2009

 

			Media £000	Events £000	Unallocated £000		Group £000
Revenue
Total revenue			32,804	2,344	-		35,148
Adjusted EBITDA			1,758	339	(987)		1,110
Exceptional administrative expenses			(709)	(200)	1,158		249
Depreciation			(341)	-	(42)		(383)
Amortisation			(410)	(3)	-		(413)
Operating profit			298	136	129		563
Finance income			134	-	-		134
Finance costs			-	-	(2,339)		(2,339)
Profit/(loss) before tax and discontinued operations
			432	136	(2,210)		(1,642)

 

2. Segmental Reporting (continued)

 

Segment assets and liabilities are as follows:

 

31 May 2010

 

		Media   £000	Events   £000	Discontinued operations £000	Unallocated   £000		Group   £000
Assets
Segment assets		33,255	2,574	2,807	969		39,605
Total assets		33,255	2,574	2,807	969		39,605
Liabilities
Segment liabilities		13,008	839	1,407	25,691		40,945
Total liabilities		13,008	839	1,407	25,691		40,945

 

28 February 2009

 

		Media   £000	Events   £000	Discontinued operations £000	Unallocated   £000		Group   £000
Assets
Segment assets		37,933	3,592	9,779	319		51,623
Total assets		37,933	3,592	9,779	319		51,623
Liabilities
Segment liabilities		9,152	188	2,357	33,277		44,974
Total liabilities		9,152	188	2,357	33,277		44,974

 

Seasonality and cyclicality

 

The group's principal activities from continuing operations are Media and Events. The holiday and climatic seasons therefore have a material impact on revenues.

 

In regards to the Media businesses, historically, Spring and Autumn are the busiest seasons due to the launch of new musicals, shows and films in the lead up to the Christmas season and summer holidays.

 

In relation to the Events business conferences and parties follow a similar trend to that of the Media businesses. Sales are not recognised until the event takes place; expenses are deferred accordingly to match sales revenue.

 

The impact of the above seasonality patterns has relatively little impact on these interim financial statements as historically there have been two periods of high activity which fall separately in to the first and second reporting periods.

3. Finance Costs

 

	6 months ended 31 May 2010 (Unaudited) £000's		(Restated) 6 months ended 28 February 2009 (Unaudited) £000's		15 months ended 30 November  2009 (Audited) £000's
Bank interest	8		22		28
Interest on bank loans	403		728		1,415
Other interest	28		121		26
Amortisation of issue costs of bank loan	36		210		311
Unwinding of discounting on deferred consideration	46		308		878
Foreign exchange loss/(gain) on borrowings	1,182		950		(158)
	1,703		2,339		2,500

 

The foreign exchange charge of £1,182k is an unrealised loss in relation to the revaluation of borrowings and deferred consideration denominated in US$. Subsequent to the period end the weakening of the US$ has resulted in an unrealised gain on these balances totalling £650k up to the date of the approval of these interim statements by the Board.

 

4. Tax

 

Due to the uncertainty of the timing of the recovery of deferred tax assets relating to taxable losses, the Directors are of the opinion that it is not appropriate to recognise any such assets in respect of any future utilisation of such amounts.

 

The taxation credit within the statement of comprehensive income represents the partial release of the deferred tax liability arising on the acquisition of intangible assets to match the amortisation of those assets.

5. Loss per share

 

The calculations of loss per share are based on the following losses and numbers of shares.

 

	6 months ended 31 May 2010 (Unaudited)   Number		(Restated) 6 months ended 28 February 2009 (Unaudited)   Number		15 months ended 30 November  2009 (Audited)   Number
Weighted average number of 2.5 pence ordinary shares in issue during the period
For basic loss per share	29,940,170		13,901,700		19,172,788
For diluted loss per share	29,940,170		13,901,700		19,172,788
	£000's		£000's		£000's
Loss from discontinued operations	(1,952)		(1,648)		(4,701)
Loss from continuing operations	(3,156)		(906)		(1,616)
Loss for the period	(5,108)		(2,554)		(6,317)

 

Due to losses made during the period there is no dilutive effect as at 31 May 2010, 30 November 2009 and 28 February 2009. In the event of the group becoming profitable, the share options in issue would have a dilutive effect for those options 'above water'.

 

 

 

 

6. Goodwill

 

		Total £000
Cost
1 September 2008		19,625
Additions		6,609
Foreign exchange differences		85
28 February 2009		26,319
1 September 2008		19,625
Additions		6,609
Adjustment to consideration		(1,252)
Transfer to disposal group held-for-sale		(5,960)
Foreign exchange differences		(57)
Disposal on termination of business		(253)
30 November 2009		18,712
Adjustment to consideration		(2,349)
Foreign exchange differences		708
31 May 2010		17,071
Impairment
1 September 2008 and 28 February 2009		-
Impairment charge		4,172
Transfer to disposal group held-for-sale		(3,828)
Disposal on termination of business		(253)
30 November 2009		91
Impairment charge		1,000
31 May 2010		1,091
Net book value
31 May 2010		15,980
28 February 2009		26,319
30 November 2009		18,621

 

Following a review of the estimates and forecasts underpinning the value of goodwill for The Finishing Touch (Corporate Events) Limited an impairment totalling £1,000k has been charged in the 6 month period ended 31 May 2010. 7. Provisions - deferred consideration

 

 

The provisions for liabilities relate to deferred contingent consideration. Deferred contingent consideration represents the estimated amounts payable, although the final amounts payable are dependent upon the results of the acquired businesses, these being Spot and Company of Manhattan Inc, Dewynters Limited (only in respect of periods ended on 28 February 2009 and 30 November 2009) and Yell Communications Limited. These amounts can be paid either by cash, loan notes or shares, according to each individual transaction.

 

Deferred contingent consideration is payable as follows:

 

		31 May 2010 £000		28 February 2009 £000		30 November 2009 £000
Within one year		2,830		4,070		4,042
Between one and two years		2,232		4,003		2,772
Between two and five years		250		3,245		2,123
		5,312		11,318		8,937

 

 

 

			31 May 2010 £000		28 February 2009 £000		30 November 2009 £000
At start of period			8,937		4,851		4,851
Deferred consideration on acquisitions			-		7,280		7,551
Adjustments to existing deferred consideration			(2,349)		(245)		(1,252)
Unwinding of discounting on deferred consideration			46		308		878
Payments of deferred consideration cash			(92)		(1,566)		(2,849)
Payments of deferred consideration loan notes			(1,971)		-		-
Payments of deferred consideration equity			(7)		(13)		(113)
Foreign exchange differences			748		703		(129)
			5,312		11,318		8,937

 

 

8. Borrowings

 

	31 May 2010 £000		28 February 2009 £000		30 November 2009 £000
Current:
Bank overdrafts	1,806		-		939
Loan notes	1,999		1,825		-
Bank loans	16,597		695		4,888
	20,402		2,520		5,827
Non-current:
Bank loans	-		16,704		11,684
Analysis of due dates for borrowings:
On demand or within one year
Bank overdrafts	1,806		-		939
Loan notes	1,999		1,825		-
Bank loan - senior variable rate loan	7,160		188		1,000
Bank loan - senior term loan B	5,524		-		-
Mezzanine loan	3,913		507		3,888
	20,402		2,520		5,827
In the second year
Bank loan - senior variable rate loan	-		565		960
Mezzanine loan	-		3,784		-
	-		4,349		960
In the third to fifth years inclusive
Bank loan - senior variable rate loan	-		7,355		5,200
Bank loan - senior term loan B	-		5,000		5,524
	-		12,355		10,724
Amounts due for settlement	20,402		19,224		17,511
Less amounts due within one year	(20,402)		(2,520)		(5,827)
Amounts due for settlement after one year	-		16,704		11,684

 

The loan notes were unsecured and related to loan notes payable to the principals of Dewynters Limited and The Finishing Touch (Corporate Events) Limited.

 

Covenant breach 

 

The company is in breach of its current banking covenants governing the terms of the loans owing to Allied Irish Bank (GB). The covenant breaches occurred following the disposal of certain subsidiary undertakings and consequently the company has entered preliminary discussions with the bank with a view to renegotiation of its covenants and its banking facilities. The mezzanine debt of £3.728 million together with rolled up interest of £347,366 which falls due for payment on 31 August 2010 had been extended to 31 October 2010 whilst negotiations continue.

 

Borrowings have treated as due within one year as the facilities are repayable on demand following the covenant breaches.

9. Disposal Group classified as held-for-sale and discontinued operations

 

 

The assets and liabilities related to First Artist Sport Limited, Promosport Limited and First Artist Scandinavia A/S ("the Sports Division"), have been presented as held for sale following the approval by the Group's management to sell the companies.

 

Optimal Wealth Limited and First Artist Management Limited were sold in February 2010 and have been presented as discontinued operations along with the Sports division.

 

Details of disposal groups and discontinued operations as at 30 November 2009 can be found in note 18 of the Group financial statements for that period.

 

Assets of disposal group classified as held-for-sale

		Sports division Total £000
Property, plant and equipment		86
Available for sale investment		22
Intangible assets - goodwill		690
Other current assets		2,009
		2,807

Liabilities of disposal group classified as held-for-sale

		Sports division Total £000
Trade and other payables		1,309
Other current liabilities (including tax)		98
		1,407

 

Analysis of the result of discontinued operations, and the result on the re-measurement of assets of disposal group, is as follows:

 

6 months ended 31 May 2010	Sports division   £000	Optimal Wealth Limited £000	First Artist Management Limited £000	Total   £000
Revenue	406	276	101	783
Expenses	(1,630)	(333)	(91)	(2,054)
(Loss)/profit before tax of discontinued operations	(1,224)	(57)	10	(1,271)
Tax	-	16	-	16
(Loss)/profit after tax of discontinued operations	(1,224)	(41)	10	(1,255)
Pre-tax (loss)/profit recognised on re-measurement of assets of disposal group and profit on disposal	(782)	80	5	(697)
(Loss)/profit for the period from discontinued operations	(2,006)	39	15	(1,952)

9.Disposal Group classified as held-for-sale and discontinued operations (continued)

 

Profit on disposal of subsidiaries	Optimal Wealth Limited £000	First Artist Management Limited £000	Total   £000
Consideration on sale	1,500	175	1,675
Costs of disposal	(232)	(34)	(266)
Net assets on disposal	(122)	(7)	(129)
Goodwill on disposal	(1,066)	(129)	(1,195)
	80	5	85

 

 

6 months ended 28 February 2009	Sports division   £000	Optimal Wealth Limited £000	First Artist Management Limited £000	Total   £000
Revenue	1,181	1,107	326	2,614
Expenses	(2,255)	(915)	(350)	(3,520)
(Loss)/profit before tax of discontinued operations	(1,074)	192	(24)	(906)
Tax	57	(57)	-	-
(Loss)/profit after tax of discontinued operations	(1,017)	135	(24)	(906)

 

 

 

10.Cash generated from operations

 

Reconciliation of net cash flows from operating activities		6 months ended 31 May 2010 (Unaudited) £000's		(Restated) 6 months ended 28 February 2009 (Unaudited) £000's		15 months ended 30 November  2009 (Audited) £000's
Loss before taxation (including discontinued)		(5,281)		(2,548)		(6,040)
Finance costs		1,703		2,339		2,500
Finance income		(1)		(134)		(61)
Depreciation		311		435		939
Impairment of goodwill		1,247		-		4,172
Impairment of available-for-sale investment		-		100		60
Amortisation of intangibles		428		313		985
Profit on disposal of property, plant and equipment		-		(5)		-
Profit on disposal of subsidiary		(85)		-		-
Share options charge		10		81		45
Operating cash flows before movements in working capital		(1,668)		581		2,600
Decrease / (increase) in inventories		222		348		(588)
Decrease in trade and other receivables		2,258		1,509		1,306
(Decrease)/increase in trade and other payables		(3,030)		(100)		3,695
Cash (used in)/generated from operating activities		(2,218)		2,338		7,013

 

The cash flows of the discontinued operations were as follows:

 

6 months ended 31 May 2010	Sports division   £000	Optimal Wealth Limited £000	First Artist Management Limited £000	Total   £000
Operating cash flows	(320)	(110)	(217)	(647)
Investing cash flows	-	-	142	142
	(320)	(110)	(75)	(505)

 

6 months ended 28 February 2009	Sports division   £000	Optimal Wealth Limited £000	First Artist Management Limited £000	Total   £000
Operating cash flows	(108)	101	28	21
Investing cash flows	-	-	-	-
	(108)	101	28	21

 

 

11. Events after the reporting date

 

Disposal of subsidiaries

 

On 1 July 2010 the Group completed the sale of First Artist Scandinavia A/S, a company incorporated in Denmark, for £600,000 and contingent deferred consideration of £37,500.

 

Discounted settlement of loan notes

 

On 18 June 2010, the Group made a payment of £1.5 million as full and final settlement of loan note liabilities totalling £1.99 million.

 

Offer period

 

On 10 August 2010 the Board confirmed that it is in talks which may or may not lead to an offer being made for the Group. The Board emphasizes that discussions are at an early stage and that there can be no assurance that an offer will be forthcoming. The Group remains in an Offer Period, as defined in the Takeover Code, as at the date of this document.

 

12. Related Parties

 

During the 6 month interim reporting period to May 2010, the Group procured event management consultancy services totalling £14,763 (6 months ended 28 February 2009: £12,642; 15 months ended 30 November 2009: £31,605) from Splash Events Limited, a company 50% owned by Janine Smith, wife of Jon Smith (Chief Executive). Janine Smith also has the use of a company car worth up to £8,100 (6 months ended February 2009: £6,000; 15 months ended 30 November 2009: £6,000). £4,228 was outstanding at May 2010 from Splash Events Limited (28 February 2009: Nil; 30 November 2009: Nil). This amount was settled in June 2010.

 

During the 6 month interim reporting period, the Group procured event management and administrative services totalling £15,250 (6 months ended February 2009: £15,250; 15 months ended 30 November 2009: £38,125) from Sara Smith, wife of Phil Smith (Chief Operating Officer). Sara Smith also has the use of a company car, worth up to £6,000 (6 months ended February 2009: £6,000; 15 months ended 30 November 2009: £6,000). No balances were outstanding at May 2010 (February 2009: Nil; 30 November 2009: Nil).

 

During the 6 month interim reporting period, the Group procured equity consultancy services totalling £16,359 (6 months ended February 2009: Nil; 15 months ended 30 November 2009: Nil) from QV Partners Limited, a company part owned by David Noble (Non-executive Director). £11,324 was outstanding at May 2010 from QV Partners Limited (February 2009: Nil; 30 November 2009: Nil). This amount was settled in June 2010.

 

13. Interim Report

 

This document is available on the Company's website at www.firstartist.com.

 

ENDS