30th Apr 2007 07:02
First Artist Corporation PLC30 April 2007 First Artist Corporation plc ("the Group") Interim Results for the six months ended 28 February 2007 First Artist Corporation plc, the integrated marketing, sport and entertainmentmanagement group, today announces its Interim Results for the six months ended28 February 2007. Financial Highlights • Turnover rose 309% to £18,480,000 (2006: £4,513,000) • Earnings Before Interest Tax and Amortisation (EBITA)* up 854% to £687,000 (2006: £72,000) • Retained profit increased £104,000 to £76,000 from a loss of £28,000 in the first half of 2006 • Earnings Per Share (EPS) increased 0.95p to 0.64p from a loss per share of 0.31p in the first half of 2006 (before tax, amortisation of goodwill and exceptional costs) • Consolidated assets up 90% to £6,383,000 (2006: £3,356,000) Operational Highlights • Successful integration of all acquisitions, transforming the Group's business portfolio • Acquisitions in the period include: - Dewynters - the leader in entertainment and theatre marketing in the UK. - Newman Displays - The UK's leading front of house and facia display manufacturing and design company • Group now consists of five balanced business areas; Marketing, Sport, Wealth Management, Events and Entertainment *Before exceptional items associated with the acquisition programme Jon Smith, Chief Executive, said: "The significant improvement in the Group's figures and in the performance ofseveral of the Group's divisions is a clear illustration of the success of ourstated strategy of developing an integrated marketing and sport, entertainmentmanagement group. This holistic approach is resulting in an increasing number ofcross referrals between the divisions and we look forward to this momentumcontinuing throughout the year and beyond." -ends- Enquiries First Artist Management plcJon Smith, Chief ExecutiveRichard Hughes, Group Managing Director Tel: +44(0)208 900 1818 Bell Pottinger Corporate & FinancialPeter Otero / Rosanne Perry Tel: +44(0)207 861 3232 First Artist Corporation Plc ("FAC")Interim Report for the Six months ended 28 February 2007 CHAIRMAN'S STATEMENT It gives me great pleasure to introduce our results for the six months ended 28February 2007. They report an interim profit after tax of £76,000 and anoperating profit (before exceptional administration expenses), of £687,000,which is in line with our expectations. Exceptional items in the period of£312,000 reflect costs associated with the acquisition programme. The Group continues to be second half weighted although to a lesser extent. TheSport division, due to the football trading windows, essentially only trades forone complete month during the period and for this year Dewynters was includedfor only part of the period. The significant improvement in the Group's figures and in the performance ofseveral of the Group's divisions is a clear illustration of the success of ourstated strategy of developing an integrated marketing and sport, entertainmentmanagement group. This holistic approach is resulting in an increasing number ofcross referrals between the divisions and we look forward to this momentumcontinuing throughout the year and beyond. The acquisitions made last summer have now been fully integrated and arecontributing to the strong performance of the Group. In particular theacquisition of Dewynters and its sister companies Dewynters Advertising Inc. andNewman Displays has significantly broadened the Group's business base. Dewyntersis an iconic brand in its own right, holding a dominant position in the UKtheatre and entertainment industry. Its US merchandising operation currentlyworks on three Broadway shows, a number in Las Vegas and additional supportingtouring shows. With at least three new US show agreements soon to be announcedthe future of this operation is extremely bright. The Dewynters acquisition has not only greatly increased the size of the Group,but also significantly enhanced visibility of earnings and profitability. Thisprovides a solid platform from which to build on the Group's organic growth, inaddition to developing the acquisition programme based upon strong financialcontrols and reporting systems. The financial highlights of the Group compared with the 6-month period to 30April 2006: •Earnings Before Interest Tax and Amortisation (EBITA)* up 854% to £687,000 •Retained profit increased £104,000 to £76,000 •Turnover rose 309% to £18,480,000 (2006: £4,513,000) •Group Headcount has increased from 20 to 239 staff within 2 years •Earnings per Share (EPS) increased 4.97p to 5.77p (before taxation and exceptional costs) •Consolidated net assets up 90% to £6,383,000 •Successful integration of all acquisitions *EBITA is stated before exceptional administrative expenses OUTLOOK The Group has grown considerably over the last two years and will continue to doso following the successful integration of the acquired businesses. This levelof growth has been supported by a significant investment in strong financial andoperating reporting systems, controls and corporate governance. The Group strongly believes in the investment in development and incentivisationof its staff. We will continue to follow these principles into the future withthe new Sharesave scheme, which will be launched in the UK soon. We will alsocontinue to invest in improved IT and communications networks, which willdeliver enhanced quality assurance and client support whilst maintainingflexibility in our fast moving environment. We have a committed strategy to grow a broad based group around the fivedistinct divisions of Marketing, Sport, Wealth, Events, and Entertainment and weactively seek appropriate acquisitions and joint venture opportunities withinthese sectors, and in particular; •Event management businesses: to further expand our corporate business and develop own venues to market and manage. •Public relations: to enable us to promote our representation and corporate clients. •Wealth management: to increase our client base and geographical positioning either through acquisitions or by joint ventures with other professional service companies. •Ancillary support service businesses, such as publishing, which would work across the full spectrum of Group companies. The first half of the year has clearly demonstrated the success of our growthstrategy, all acquisitions having been fully integrated within the period. TheGroup is trading in line with expectations and the Board remains optimisticabout the Group's continued growth for the remainder of the year and beyond. Inparticular, the Sport division should benefit from the knock on effect of thesignificantly increased TV rights monies, which commence this summer and theEvents division from the strong recovery of the corporate sector and termextension to its Public Sector contract. We will continue with the strategy of strengthening our position in the UK andEurope through targeted organic and acquisitive growth. This will be firmlyunderpinned by a solid business operating strong financial and operationalsystems. We look forward to the future with confidence. Jarvis AstaireChairman30th April 2007 OPERATING AND FINANCIAL REVIEW This Review covers the activities of First Artist Corporation during the sixmonths to 28 February 2007. Due to the change in the Group's year-end to 31August, the first half comparatives are against the six month period ended 30April 2006. SUMMARY RESULTS FOR THE PERIOD Unaudited Unaudited Audited 6 months 6 months 10 months ended ended ended 28 February 30 April Variance 31 August 2007 2006 2006 (Restated) (Restated) £'000s £'000s £'000s £'000s Turnover 18,480 4,513 13,967 9,508 --------------------------------------------------------------- Adjusted Operating Profit* 687 72 615 1,620 Exceptional items (312) (5) (307) (170) --------------------------------------------------------------- Operating Profit 375 67 308 1,450 Net interest (422) (54) (368) (283) --------------------------------------------------------------- (Loss)/profit before tax (47) 13 (60) 1,167 Taxation 123 (41) 164 (502) Retained Profit/ (Loss) 76 (28) 104 665 =============================================================== EPS** 0.64 pence (0.31) pence 0.95 pence 7.18 pence(Basic earnings/(loss) per share) Adjusted EPS** 5.77 pence 0.80 pence 4.97 pence 17.48 pence(Basics earnings pershare before exceptionalitems) *Adjusted Operating Profit is stated before exceptional administrative expenses **Earnings per share for comparative periods has been restated to reflect the share consolidation on 27 December 2006 TURNOVER Turnover for the period has increased 309% compared to the six month periodended 30 April 2006, largely due to inclusion of revenue contribution from theacquisitions of Dewynters Group, First Artist Scandinavia A/S, NCI ManagementLimited and Sponsorship Consulting Limited. ADJUSTED OPERATING PROFIT The operating profit for the Group, before exceptional administrative expenses,was £687,000 an increase of £615,000 compared to the six month period ended 30April 2006. DIVISIONAL RESULTS Unaudited Unaudited Audited 6 months 6 months 10 months ended ended ended 28 February 30 April 31 August 2007 2006 2006 (Restated) (Restated) £'000s £'000s £'000s Marketing 12,556 - 49Sport 1,471 949 4,162Wealth 1,164 1,060 1,873Events 2,902 2,362 3,093Entertainment 387 142 331 ------------------------------------------------- Turnover 18,480 4,513 9,508 ================================================= Marketing 836 - -Sport (415) (303) 1,092Wealth 289 452 801Events 339 176 218Entertainment 73 63 132Group Costs (435) (316) (623) ------------------------------------------------- Adjusted Operating Profit* 687 72 1,620 ================================================= *Adjusted Operating Profit is stated before exceptionaladministrative expenses N.B. A more detailed composition of the results by division can be seen in thebusiness reviews. EXCEPTIONALS Exceptional costs in the period resulted from various acquisition costs, as wellas closure costs associated with FIMO Sport Promotion AG and First Artistinternational Limited. First Artist International has been dissolved. FIMO is due to be dissolvedbefore the financial year-end. INTEREST PAYABLE, FUNDING AND LIQUIDITY At 28 February 2007 the cash balance of the Group was £2,471,000, up £1,780,000compared to the six months ended 30 April 2006. Net interest payable was £422,000, of which £135,000 relates directly to theunwinding of the discounted deferred consideration, in accordance with FRS7,'Fair value in acquisition accounting'. This FRS7 charge is a non-cashadjustment and relates to the provision of a net present valuation on deferredconsideration required under this standard. During the period the Group secured a new seven-year loan facility of£11,000,000 and a new two-year mezzanine banking loan facility of £2,785,000,both with Allied Irish Bank. These were used to provide working capital and toprimarily facilitate the acquisition of Dewynters. All previous loans, also withAllied Irish Bank, were paid off on the acquisition of Dewynters. The Board believes that the resultant level of net gearing, at around 177% as at28 February, will be acceptable given the cash generative nature of thesignificantly enlarged Group. Interest cover, at 28 February was 6.88 times andthe Board envisages that the current Group borrowing requirement will steadilyreduce whilst retaining sufficient financial flexibility for the continuedinvestment in the Group. Net debt of £11.14 million (2006: £3.80 million) at the period end was comprisedof 28 February 30 April 31st August 2007 2006 2006 £millions £millions £millionsTwo year mezzanine bank loan (2.78) - -Seven year bank loan (10.76) - -Other bank loans - (1.41) (3.78)Other group net debts (0.07) (0.36) (0.90)Cash in hand and bank overdrafts 2.47 0.29 0.88 -------------------------------------------- Group net debt (11.14) (1.48) (3.80) -------------------------------------------- TAXATION The tax credit of £123,000 includes a £50,000 rebate in the Wealth Division froma previous tax year. EARNINGS PER SHARE* Earnings per share before exceptional items increased from a profit of 0.80p to5.77p. This is directly due to the increased profitability of the enlarged Groupand the earnings enhancing means of financing the acquisitions. Basic earningsper share on a like for like basis increased from a loss of (0.31)p to a profitof 0.64p. *Earnings per share for comparative periods has been restated to reflect theshare consolidation on 27 December 2006 SHAREHOLDERS' FUNDS Shareholders funds increased from £5.09 million to £6.38 million over the last 6months, resulting in a movement in basic net assets per share from 54.9p(restated) to 53.6p. ACQUISITIONS On 30 November the Group acquired, Dewynters Limited, an established UKEntertainment Management company for a total maximum consideration payable of£15.5 million. Initial consideration of £9 million cash and 1 million shares waspaid. Dewynters Limited has two wholly owned subsidiaries; Dewynters AdvertisingInc. and Newman Displays Limited. Richard HughesGroup Managing Director30 April 2007 BUSINESS REVIEWS MARKETING We are very pleased to announce that the newly created Marketing division,formed through the acquisitions of Sponsorship Consulting and Dewynters and itssister business Newman Displays, has been successfully integrated into theGroup. All the businesses are performing in line with expectations and arealready demonstrating the significant opportunities available through crossreferral of business within the Group. We are also pleased to report the launch of First Rights, which will act onbehalf of sponsorship rights owners. This is a major area for potential growthand one that will benefit greatly from being part of the enlarged and expandinggroup. Turnover 6 6 10 months ended months ended months ended 28 February 2007 30 April 2006 31 August 2006 £000's £000's £000's UK 11,162 - 49USA 1,394 - - ----------------------------------------------- 12,556 - 49 ----------------------------------------------- Operating Profit* 836 - - ----------------------------------------------- *Prior to intergroup management fees Overview Dewynters has defined entertainment and theatre industry marketing in the UKwith iconic campaigns for productions ranging from Cats and The Phantom of theOpera to Les Miserables and The Royal Opera House. Recent West End successesinclude Equus, staring Daniel Radcliffe, The Lord of the Rings, which is due toopen in June and The Sound of Music. Its US merchandising operation currentlyworks on three Broadway shows, on others in Las Vegas and supporting touringshows, with at least three new US show agreements soon to be announced. Newman Displays, the leading front of house and fascia display manufacturing anddesign company, produces displays for all major theatre productions, which haverecently included Spamalot and Mamma Mia as well as working with the leadingWest End cinemas on films such as The Queen, Casino Royale, Dreamgirls and theSpartan blockbuster 300. Sponsorship Consulting is one of the UK's most respected sponsorship strategyand corporate responsibility consultancies, advising clients such as Unilever,Siemens, Corus, and Shell on their sponsorship activity and implementation,particularly in the spectra of sports, arts, community, environment andeducation. Siemens' sponsorship, in conjunction with The Science Museum,recently won the Corporate Sponsorship category at the Hollis awards. Opportunities General trading continues to be in line with expectations, benefiting inparticular from a buoyant West End market. Real benefits however will be derivedfrom the significant opportunities available through cross referral of businesswithin the Group and by the expansion of these businesses into other areas,where their core skills can be used to best effect. The launch of First Rightswill offer sponsors opportunities across the broad spectrum of sport,entertainment and theatre, which would not otherwise be so readily availableoutside of such a broad based group. SPORT Following last year's successful acquisition of our Scandinavian footballagency, First Artist Sport is now a truly pan-European business. We are based inall the major football trading regions and work closely with our associates inEurope, US and the rest of the World. Turnover 6 months 6 months 10 months ended ended ended 28 February 2007 30 April 2006 31 August 2006 £000's £000's £000's UK 475 557 2,073Europe 996 392 2,089 ---------------------------------------------- 1,471 949 4,162 ---------------------------------------------- Operating (Loss) / Profit* (415) (303) 1,092 ---------------------------------------------- *Prior to intergroup management fees Overview The January 2007 transfer window proved undoubtedly our most successful to datewith the division being involved in over 30 transfer deals with activity spreadevenly across our offices in London, Milan, Portugal and Copenhagen. This strongperformance included the UK window's largest football transfer of the window,Ashley Young, who moved from Watford to Aston Villa for £9.65m and theappointment of Alan Curbishley as West Ham manager and resulted in a 55%increase in turnover over the corresponding trading period. Due to the football trading windows, the division essentially only traded forone complete month during the period, whilst operating expenses reflect theenlarged operation including our Scandinavian agency acquired last summer. Recruitment of new players together with communication and systems enhancementsbetween Group offices is all contributing to the strong development of thedivision under the stewardship of Vincenzo Morabito in his new role as Head ofFootball,. The contracted income pipeline is now growing rapidly and generatingincreased forward visibility of earnings. First Artist is a strong believer in advancement through regulation and isworking closely with the newly formed Agents Association and respectiveauthorities and associations to ensure that the correct framework is developedto afford increased transparency and adherence to regulation within the marketwhilst allowing freedom of trade. Opportunities The increased UK Premier League TV rights deal comes into effect this summer andwe are confident this will have a positive impact on the transfer market. Inaddition, now that the Italian market has settled, following last year's Italianmatch-fixing scandal, we also anticipate this region will recover. Our positionas a respected truly global agency and our strong relationships with all leadingclubs and associations puts us firmly at the heart of this strengthening market. WEALTH Optimal Wealth Management is an FSA regulated, independent financial servicesbusiness, offering in-depth, personally tailored consultancy for high-net worthindividuals with backgrounds in music, entertainment, media, sports and otherindustries. The business recently established a joint venture with leadingfinancial services and audit group H.W.Fishers. Turnover 6 months 6 months 10 months ended ended ended 28 30 31 February 2007 April 2006 August 2006 £000's £000's £000's New Investments 867 864 1,533Renewals 297 196 340 ----------------------------------------- 1,164 1,060 1,873 ----------------------------------------- Operating Profit* 289 452 801 ----------------------------------------- *Prior to intergroup management fees Overview Optimal continues to trade strongly and in line with expectations. Despite the positive, but inflationary, effects of the 'A' Day pension rules amendments increasing 2006 figures, the division's strong year on year profit performance continued with turnover increasing 10% over the previous period's first six months. In particular, the businesses strategy to invest in long-term relationships has resulted in significant year on year growth in renewal/trail income and bodes well for the future. During the period the business has invested in the management team in order to continue the expansion of the core business, whilst putting in place a team to develop the H.W.Fisher joint venture, Fisher Family Office LLP. We expect the fruits of this investment to come through over the next twelve months and beyond. The business continues to expand its client portfolio across the Group and alongwith the Sport division is now working closely with the enlarged entertainmentbusiness. Opportunities The continued growth of the Group, underpinned by our investment in themanagement and support team will enable the business to further expand itsclient base, whilst allowing us to seek further joint ventures and/oracquisition opportunities. EVENTS The Finishing Touch is a full-service events management business, organisingconferences, Christmas and Summer parties, family fun and corporate days, teambuilding programmes and other specialist and bespoke events for the private,corporate and public sectors. Turnover 6 months 6 months 10 months ended ended ended 28 30 31 February 2007 April 2006 August 2006 £000's £000's £000's Corporate 1,878 1,210 1,700Public Sector 1,024 1,152 1,393 ------------------------------------------- 2,902 2,362 3,093 ------------------------------------------- Operating Profit* 339 176 218 ------------------------------------------- *Prior to intergroup management fees Overview The strong growth in the corporate sector was underlined by yet another recordChristmas period. There is a robust future bookings pipeline and cross referralopportunities within the Group are developing with Events likely to be one ofthe main beneficiaries from the enlarged group. As previously reported the company has been involved in a tender process withPublic Sector bodies regarding an extension and expansion to their currentcontract. This process has yet to be finalised, however, current projects arecontinuing as planned. The business has developed and installed new finance and operational managementsoftware to significantly enhance its internal reporting systems and clientquality control procedures. We are also investing resources to expand our eventmanagement and business development teams to manage the increasing number ofclient projects being handled and new business generated. Opportunities The business is currently pursuing options to create joint ventures toexclusively market and manage individual venues, which would allow FinishingTouch to develop its own product tailored to specific client requirements,helping to improve margins and further raise quality thresholds. ENTERTAINMENT First Artist Entertainment is a 'total management' celebrity and media agencyrepresenting various well-known actors, actresses, sport and TV presenters andother media personalities for TV, film and media, with a particularly strongtrack record of talent development. Turnover 6 months 6 months 10 months ended ended ended 28 30 31 February 2006 April 2006 August 2006 £000's £000's £'000's Entertainment 387 142 331 ------------------------------------------- Operating Profit* 73 63 132 ------------------------------------------- *Prior to intergroup management fees Overview Following the acquisition of NCI Management in July 2006 and subsequentintegration into First Artist's own entertainment business, we have renamed theenlarged company First Artist Entertainment. To name but a few clients, Ruud Gullit, Lisa Scott Lee, Suzanne Shaw, GillianMcKeith, Amanda Lamb, Andy Townsend and Peter Schmiechel have had an activefirst half of the year with a significant number of further opportunities due tocrystallise in the second half. The corporate speaking division performed well with several events resultingfrom the cross referral of business, particularly from the events division. The financial performance of the business was slightly lower than anticipated,although the second half of the year should see the business fall back in lineas several major contracts, delayed from the first half, are confirmed. Opportunities First Artist Entertainment continues to expand organically, with new clientsconsistently being added to its roster. Opportunities to develop own format andcontent programming are being developed which will lead to longer-term incomestreams. The launch of First Rights will enable the Group to further developprogramming concepts. Consolidated Profit and Loss AccountFor the six months ended 28 February 2007 Notes Continuing operations Acquisitions Total 6 months 6 months 6 months 6 months 10 months ended ended ended ended ended 28 February 28 February 28 February 30 April 31 August 2007 2007 2007 2006 2006 (Unaudited) (Audited) (Unaudited) (Unaudited) (Unaudited) (Restated) (Restated) £000's £000's £000's £000's £000's TURNOVER 6,259 12,221 18,480 4,513 9,508Cost of sales (2,807) (8,545) (11,352) (2,039) (3,168) -------------------------------------------------------------- GROSS PROFIT 3,452 3,676 7,128 2,474 6,340Administrative expenses (3,428) (3,325) (6,753) (2,407) (4,890) EBITA beforeexceptionaladministrative expenses 336 351 687 72 1,620Exceptional administrative expenses 2 (312) - (312) (5) (170) -------------------------------------------------------------- OPERATING PROFIT 24 351 375 67 1,450 ========================== Interest receivable 66 19 21Interest payable andsimilar charges (488) (73) (304) ------------------------------- (LOSS) / PROFIT ONORDINARY ACTIVITIESBEFORE TAXATION (47) 13 1,167Taxation 3 123 (41) (502) ------------------------------- RETAINED PROFIT /(LOSS) FOR THE PERIOD 76 (28) 665 =============================== EARNINGS / (LOSS) PER SHARE 4 Basic earnings / (loss)per share (pence) 0.64 (0.31) 7.18 =============================== Fully diluted earnings/ (loss) per share(pence) 0.52 (0.31) 5.74 =============================== Consolidated Balance SheetAs at 28 February 2007 As at As at As at 28 February 30 April 31 August Notes 2007 2006 2006 (Unaudited) (Unaudited) (Audited) (Restated) (Restated) £000's £000's £000'sFIXED ASSETSIntangible assets 22,143 5,952 9,517Tangible assets 2,012 739 835Investments 123 100 118 --------------------------------------------- 24,278 6,791 10,470 --------------------------------------------- CURRENT ASSETSStock 1,133 - -Debtors 9,659 4,003 6,895Cash at bank and in hand 2,471 691 1,108 --------------------------------------------- 13,263 4,694 8,003 CREDITORS: Amounts fallingdue within one year (11,293) (3,705) (7,709) ---------------------------------------------- NET CURRENT ASSETS 1,970 989 294 ---------------------------------------------- TOTAL ASSETS LESS CURRENT LIABILITIES 26,248 7,780 10,764CREDITORS: Amounts fallingdue after more than one year (11,984) (1,172) (2,252) PROVISIONS for liabilities 5 (7,881) (3,252) (3,423) --------------------------------------------- NET ASSETS 6,383 3,356 5,089 ============================================= SHARE CAPITAL AND RESERVESCalled up share capital 326 224 270Share premium account 9,945 7,902 8,849Capital redemption reserve 15 15 15Shares to be issued - - 5Share option reserve 175 87 133Profit and loss account (4,078) (4,872) (4,183) --------------------------------------------- TOTAL SHAREHOLDERS' FUNDS 9 6,383 3,356 5,089 ============================================= Consolidated Statement of Total Recognised Gains and LossesFor the six months ended 28 February 2007 6 months 6 months 10 months ended ended ended 28 February 30 April 31 August 2007 2006 2006 (Unaudited) (Unaudited) (Audited) (Restated) (Restated) £000's £000's £000'sProfit / (loss) for the financial period 76 (28) 665 Currency translation differences onnet foreign currency investments 28 10 6 ------------------------------------------ Total recognised gains and lossesrelating to the period 104 (18) 671 =========================== Prior year adjustment (note 11) (133) ---------Total recognised gains and lossessince last financial statements (29) ========= Consolidated Cash Flow StatementFor the six months ended 28 February 2007 Notes 6 months 6 months 10 months ended ended ended to 28 February 30 April 31 August 2007 2006 2006 (Unaudited) (Unaudited) (Audited) (Restated) (Restated) £000's £000's £000's Cash inflow / (outflow) fromoperating activities 6 219 (340) 80 Returns on investments andservicing of finance (195) (54) (102) Taxation (247) (261) (450) Capital expenditure and financial investment (438) (42) (241) Acquisitions and disposals 7 (8,298) (129) (2,749) --------------------------------------------- Cash outflow before financing (8,959) (826) (3,462) --------------------------------------------- FINANCING:Issue of share capital 1,000 14 1,013Costs of issue of shares (263) - (120)New bank loans 13,541 - 2,500Repayment of bank loans (3,631) (131) (260)Directors' loans (35) - 34Other loans (50) (28) (85)Capital element of finance lease rental payments (9) (5) (11) --------------------------------------------- 10,553 (150) 3,071 ---------------------------------------------Increase / (decrease) incash in the period 1,594 (976) (391) ============================================= RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT Increase / (decrease) incash in the period 1,594 (976) (391) Cash flow from (increase) /decrease debt financing (8,750) 164 (2,173) New finance leases (1) (15) 34Other non cash changes (178) - (623) -------------------------------------------- (7,335) (827) (3,153) Net debt at the beginning ofthe period 8 (3,801) (648) (648) -------------------------------------------- Net debt at the end of the period 8 (11,136) (1,475) (3,801) ============================================ Notes to the Interim Accounts:For the six months ended 28 February 2007 1. Basis of preparation The financial information contained within this interim report does notconstitute statutory accounts within the meaning of Section 240 of the CompaniesAct 1985. The interim financial information has been prepared on the basis ofthe accounting policies set out in the Group's statutory accounts for the periodended 31 August 2006. The figures for the six months ended 28 February 2007 and 30 April 2006 areunaudited. The figures for the period ended 31 August 2006 have been extractedfrom the statutory accounts which have been filed with the Registrar ofCompanies and did not contain a statement under Section 237 (2) or (3) of theCompanies Act 1985. 2. Exceptional administrative expenses 6 months 6 months 10 months ended ended ended 28 February 30 April 31 August 2007 2006 2006 (Unaudited) (Unaudited) (Audited) £000's £000's £000's Acquisition related costs 297 - 141Redundancies and other restructuring costs 15 5 29 ------------------------------------------- 312 5 170 =========================================== 3. Tax (credit) / charge The tax (credit) / charge for the period as set out below: 6 months 6 months 10 months ended ended ended 28 February 30 April 31 August 2007 2006 2006 (Unaudited) (Unaudited) (Audited) £000's £000's £000'sUK corporation tax charge 286 70 351Adjustments in respect of prior periods (50) - 175Foreign taxes (142) 51 (24) -----------------------------------------Current tax charge for the period 94 121 502 Deferred Taxation:Origination and reversal of timing differences (217) (80) - -----------------------------------------Tax (credit) / charge on ordinary activities (123) 41 502 ========================================= 4. Earnings / (loss) per share The calculations of earnings / (loss) per share are based on the followingprofits / (losses) and numbers of shares. 6 months 6 months 10 months ended ended ended 28 February 30 April 31 August 2007 2006 2006 (Unaudited) (Unaudited) (Audited) (Restated) (Restated) Weighted average number of 2.5 penceordinary shares in issue during theperiod For basic earnings / (loss) per share 11,898,661 8,952,373 9,266,472Exercise of share options 2,626,273 2,319,611 2,320,735 ---------------------------------------------For diluted earnings / (loss) per share 14,524,934 11,271,984 11,587,207 £000's £000's £000'sProfit / (loss) on ordinaryactivities after taxation 76 (28) 665 ============================================= 5. Provisions for liabilities The provisions for liabilities relate to deferred consideration. Deferred consideration represents the estimated amounts payable, although thefinal amounts payable are dependent upon the results of the acquired businesses. 28 February 30 April 31 August 2007 2006 2006 (Unaudited) (Unaudited) (Audited) £000's £000's £000's Deferred consideration due within one year 3,037 1,231 1,903Deferred consideration due after one year 4,844 2,021 1,520 ------------------------------------------Total deferred consideration 7,881 3,252 3,423 ========================================== 6. Reconciliation of operating profit to net operating cash flow 6 months 6 months 10 months ended ended ended 28 February 30 April 31 August 2007 2006 2006 (Unaudited) (Unaudited) (Audited) (Restated) (Restated) £000's £000's £000's Operating profit 375 67 1,450Depreciation 166 40 73Profit on disposal of fixed assets - (2) (9)Share options charge 25 54 100(Increase) in stock (232) - -Decrease / (increase) in debtors 2,422 743 (1,389)Decrease in creditors (2,565) (1,252) (151)Foreign exchange 28 10 6 --------------------------------------------Net cash inflow / (outflow) fromoperating activities 219 (340) 80 ============================================ 7. Acquisitions and disposals 6 months 6 months 10 months ended ended ended 28 February 30 April 31 August 2007 2006 2006 (Unaudited) (Unaudited) (Audited) £000's £000's £000's Consideration on acquisition of subsidiary undertakings and otherinvestments (10,424) (107) (3,398)Cash held by acquired subsidiary undertakings 3,255 - 671Payment of deferred consideration (1,129) (22) (22) --------------------------------------------Net cash outflow (8,298) (129) (2,749) ============================================ 8. Analysis of changes in net debt At 1 At 28 September Non-Cash February 2006 Cash flow changes 2007 £'000s £'000s £'000s £'000s Cash at bank and in hand 1,108 1,363 - 2,471Bank overdrafts (231) 231 - - ---------------------------------------------------- 877 1,594 - 2,471 ---------------------------------------------------- Finance leases (48) 9 (1) (40)Debt due within one year (2,411) 992 (178) (1,597)Debt due after more than one year (2,219) (9,751) - (11,970) ---------------------------------------------------- (4,678) (8,750) (179) (13,607) ----------------------------------------------------Total (3,801) (7,156) (179) (11,136) ==================================================== 9. Reconciliation of movement in shareholders' funds 28 February 30 April 31 August 2007 2006 2006 (Unaudited) (Audited) (Unaudited) (Restated) (Restated) £000's £000's £000's Profit / (loss) for the financial period 76 (28) 665Shares issued to acquire subsidiary undertakings 411 - 1,112Shares issued 1,000 14 15Share options charge 42 54 100Shares yet to be issued - - 5Issue costs (263) - (120)Foreign exchange adjustment 28 10 6 -----------------------------------------Increase/(decrease) in shareholders' funds 1,294 50 1,783 Opening shareholders' funds 5,089 3,306 3,306 ----------------------------------------- Closing shareholders' funds 6,383 3,356 5,089 ========================================= Shareholders' funds are entirely attributable to equity interests. 10. Net cash flow effect of acquisitions The cash flow statement of the Group includes the following cash flow in respectof subsidiary undertakings acquired during the period: £000's Net cash outflow from operating activities (1,214)Returns on investments and servicing of finance 55Taxation (7)Capital expenditure and financial investment (327) ---------Net cash outflow (1,493) ========= 11. Restatement of prior period figures The prior period figures have been adjusted for share based payments inaccordance with Financial Reporting Standard 20 (FRS 20). The effects on theretained profit and share option reserve are as follows: 30 April 2006 31 August (Unaudited) 2006 (Audited) £000's £000'sRetained profit as previously stated 26 765Prior year adjustment (54) (100) ---------------------------Retained profit as restated (28) 665 =========================== 31 October 30 April 31 August 2005 2006 2006 (Audited) (Unaudited) (Audited) £000's £000's £000'sShare option reserve as previously stated - - -Prior year adjustment 33 87 133 -----------------------------------------Share option reserve as restated 33 87 133 ========================================= The impact on the Profit and Loss Reserves has been to reduce the balance by anamount equal to the value of the Share Option Reserve. 12. Interim Report Copies of this interim report are being sent to all shareholders and areavailable to the public at the Company's registered office, First Artist House,87 Wembley Hill Road, Wembley, Middlesex HA9 8BU. 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