Interim Results

RNS Number : 3088Q

Progressive Digital Media Group PLC

02 August 2010

 

 

2 August 2010

 

Progressive Digital Media Group Plc

Unaudited Interim Report For The Six Months Ended 30 June 2010

 

Progressive Digital Media Group Plc (the "Business" or the "Group") is a content based, digital media business providing specialised, integrated digital solutions to a range of business and professional communities.

 

 

Highlights

 

Key achievements in the six months

·; Group now focused on Business Information, Web and Digital Revenues

·; Ongoing investment in our sales headcount, content and delivery platforms

·; TMN fundamentally re-organised with annualised savings expected of £0.6m.

 

Financial performance

·; The underlying business is now profitable and recording good growth across a number of revenue streams

·; Group revenues £24.8m (2009: £16.9m)

·; EBITDA(1) £2.4m (2009: £2.0m)

·; Adjusted EBITDA(2) £2.7m (2009: £2.1m)

·; Re-organisation of TMN has led to a £2.8m non-cash write-off of acquired intangible assets which has led to a reported loss before tax of £2.1m (2009: profit £0.9m)

 

Our business

·; Is focused on high growth digital media sectors

·; Is focused on providing high-value digital content

·; Is becoming global in coverage and delivery

·; Is in the investment phase of its growth strategy

·; Has clear growth opportunities and an experienced management team

 

Simon Pyper, CEO of Progressive Digital Media Group plc, commented:

 

"With the integration now complete, the Group is focused on delivering long-term growth which will be driven by our investment in our sales, content and product delivery platforms. These results, whilst showing progress do not yet reflect fully the expected benefits from either the investments we have made or from the efficiencies and cost savings we have achieved through integration and the introduction of common processes and systems. Moreover, we anticipate that the full year results for both this year and next will continue to reflect the fact that we are in the investment stage of our growth strategy."

 

Note 1 EBITDA: Earnings before interest, tax, depreciation and amortisation

 

Note 2: Adjusted EBITDA: Earnings before interest, tax, depreciation and amortisation, adjusted for costs associated with acquisitions, integration and restructure of the Group.

 

Note 3: The Group was formed from the businesses of Progressive Digital Media Limited ("PDM") and the acquisition, via reverse takeover, of TMN plc ("TMN") in June 2009. Under the appropriate accounting standards PDM is treated as the acquiring entity following the reverse takeover of TMN and accordingly the interim results for the six months ended 30 June 2010 are the results for the enlarged Group. However, the prior year comparatives (results for the six months ended 30 June 2009) exclude the results for TMN.

 

 

Enquires:

 

Progressive Digital Media Group plc 020 7936 6400

Simon Pyper, CEO

Rob Marcus, Finance Director

 

Investec Investment Banking, NOMAD and Broker 020 7597 4000

Erik Anderson / David Flin

 

Hudson Sandler 020 7796 4133

Nick Lyon / Charlie Jack

 

 

Progressive Digital Media Group plc

We are pleased to announce our results for the six months to 30 June 2010. The Group was formed in June 2009 via a reverse takeover of TMN Plc ("TMN") by Progressive Digital Media Limited ("PDM"). Since formation, the Board has focused on the integration and restructuring of the new Group. Both of these activities are now complete and the business is now well placed to deliver on its strategy to profitably grow revenues.

 

Whilst much has been done, there remains much to do and though there are further challenges, our focus will remain on improving our existing service offering, leveraging our content and developing new information rich content which can be sold across multiple sales channels and platforms.

 

The Board believes significant progress has been made to date and is confident of the long-term profitable prospects of the Group.

 

CEO's statement

With the integration now complete, the Group is focused on delivering long-term growth which will be driven by our investment in our sales, content and product delivery platforms. These results, whilst showing progress do not yet reflect fully the expected benefits from either the investments we have made or from the efficiencies and cost savings we have achieved through integration and the introduction of common processes and systems. Moreover, we anticipate that the full year results for both this year and next will continue to reflect the fact that we are in the investment stage of our growth strategy

 

Despite a somewhat testing economic environment, our results reflect double digit revenue growth across a number of revenue streams.

 

With regards to TMN, we have fundamentally re-organised the business to focus on high growth market segments. As a result of this re-organisation, it is now more difficult to identify the individual carrying values of acquired intangible assets associated with TMN; we have recognised this in a reduction in the carrying value of acquired intangible assets by £2.8m. Following this reorganisation, I believe that TMN is now better placed to deliver both revenue and earnings growth and is now structured in such a way as to better serve its customer base.

 

Group performance

Strong growth was achieved across a number of revenue streams and Group revenues increased by 47% to £24.8m (2009: £16.9m). Excluding revenues associated with TMN (not reported in the 2009 results) underlying growth in the Progressive business was 13.5%.

 

Adjusted EBITDA grew 33.0% to £2.7m (2009: £2.1m), however Adjusted EBITDA margin fell by 1% to 11.1% (2009: 12.2%) reflecting the impact of the integration of TMN and our investment in both content production and content delivery platforms where costs are expensed as incurred rather than capitalised. Over the longer term and as our investment reduces to more normalised levels, we would expect our margins to improve.

 

The reported loss before tax was £2.1m (2009: Profit £0.9m), which is stated after the £2.8m charge in relation to TMN outlined above.

		6 months to	6 months to	Movement
Continuing operations		30 June 2010	30 June 2009
		£000s	£000s
Revenue		24,800	16,875	+47%
EBITDA 1		2,412	1,970	+22%
EBITDA adjusted 2		2,742	2,062	+33%
(Loss)/profit before tax		(2,080)	895	-332%
1	Earnings before interest, tax, depreciation and amortisation
2	Earnings before interest, tax, depreciation and amortisation, adjusted for costs associated with acquisitions, integration and restructure of the Group. See note 3 of the interim financial statements for details.

Financial Review of Operations

 

Progressive

Progressive is predominately focused on the B2B space, providing content rich web based information products.

 

·; Revenues for the six month period were £19.2 million (2009: £16.9 million), which represents growth of 13.5%

·; Direct Contribution of £7.7m (2009: £5.6m)

 

TMN

TMN is one of the UK's leading online digital marketing organisations.

 

·; Revenues for the six month period were £5.6 million (2009: Nil)

·; Direct Contribution of £1.1m (2009: £Nil)

 

Note:Direct Contribution is adjusted EBITDA before Central Overheads. See note 3 for a reconciliation to profit / (loss) before tax.

 

Financial review

The Group's statement of its financial position at 30 June 2010 details our short-term borrowings, which consist of the Group's overdraft. The Group had £9.8 million (2009: £9.8 million) of long-term borrowings that consist of a subordinated interest free loan provided by Michael Danson, which is repayable by 2019 and is not expected to be repaid in the next twelve months. In addition to the existing facility, Mr Danson provided the Group with a £2.0 million working capital loan at the time of the reverse acquisition. This loan has not yet been drawn upon.

 

The Group has prepared the accounts on a going concern basis and based on current forecasts the Group will meet its day-to-day working capital requirements from operating cash flows and existing banking facilities.

 

Outlook and prospects

We have had a good first half with revenue growth ahead of both our budget and prior year comparatives. Whilst we recognise that the economic climate remains uncertain, we are confident that we will continue to benefit from our investment in our people, our products and our delivery platforms.

 

 

Simon Pyper

Chief Executive

August 2010

2. Auditor's Report

 

Independent review report to Progressive Digital Media Group plc

Introduction

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2010 which comprises the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of financial position, the consolidated statement of changes in equity, the consolidated statement of cash flows and the related explanatory notes. We have read the other information contained in the half yearly 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 guidance contained in ISRE (UK and Ireland) 2410, 'Review of Interim Financial Information performed by the Independent Auditor of the Entity'. Our review work has been undertaken so that we might state to the company those matters we are required to state to them in a 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 conclusion we have formed.

 

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors.

 

As disclosed in Note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly 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 half-yearly 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 half-yearly financial report for the six months ended 30 June 2010 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union.

 

 

GRANT THORNTON UK LLP AUDITOR

London

2 August 2010

 3. Interim Financial Statements

 

Consolidated income statement (unaudited)

	Notes	6 months to 30 June 2010	6 months to 30 June 2009	Year to 31 December 2009
		£000s	£000s	£000s
Continuing operations
Revenue	3	24,800	16,875	37,084
Cost of sales		(12,585)	(8,566)	(19,687)
Gross profit		12,215	8,309	17,397
Distribution costs		(530)	(543)	(1,023)
Administrative costs		(9,705)	(5,992)	(15,713)
Other expenses	4	(4,264)	(881)	(3,287)
Operating profit/(loss)		(2,284)	893	(2,626)
Other income		319	2	-
Finance costs		(115)	-	(331)
(Loss)/profit before tax		(2,080)	895	(2,957)
Income tax credit/(charge)		438	(178)	865
(Loss)/profit for the period from continuing operations		(1,642)	717	(2,092)
Profit for the period from discontinued operations	10	-	4,678	4,678
(Loss)/profit for the period		(1,642)	5,395	2,586
Attributable to:
Equity holders of the parent		(1,665)	5,374	2,544
Minority interest		23	21	42
Basic (loss)/earnings per share attributable to equity holders:
Continuing operations (pence)	6	(0.45)	0.24	(0.64)
Discontinued operations (pence)	6	-	1.58	1.41
Basic earnings/(loss) per share (pence)	6	(0.45)	1.82	0.77

 

 

Reconciliation of Operating profit/ (loss) to Adjusted EBITDA

 

Operating profit/(loss)		(2,284)	893	(2,626)
Redundancy		330	72	634
Impairment of TMN related acquired intangible assets		2,820	-	-
Deal costs		-	20	20
Property related provisions		-	-	76
Amortisation		1,589	946	2,795
Depreciation		287	131	436
Adjusted EBITDA	3	2,742	2,062	1,335

 

 

The accompanying notes form an integral part of this financial report.

 

EBITDA is defined as operating profit plus depreciation, amortisation and impairment of assets. We define Adjusted EBITDA as EBITDA adjusted for costs associated with acquisitions, integration and restructure of the Group. See note 3 of the interim financial statements for details. We present Adjusted EBITDA as additional information because we understand that it is a measures used by certain investors and because it is used as the measure of segment profit or loss. However, other companies may present Adjusted EBITDA differently than we do. EBITDA and Adjusted EBITDA are not measures of financial performance under IFRS and should not be considered as an alternative to operating profit or as a measure of liquidity or an alternative to net income as indicators of our operating performance or any other measure of performance derived in accordance with IFRS.

 

Consolidated statement of comprehensive income (unaudited)

 

	6 months to 30 June 2010	6 months to 30 June 2009	Year to 31 December 2009
	£000s	£000s	£000s
(Loss)/profit for the period	(1,642)	5,395	2,586
Other comprehensive income
Available-for-sale financial assets
Current year gains	-	217	217
Reclassification to profit or loss	-	398	398
Actuarial gains on defined benefit pension plans	-	66	66
Deferred tax relating to components of other comprehensive income	-	154	154
Other comprehensive income, net of tax	-	835	835
Total comprehensive income/(loss) for the period	(1,642)	6,230	3,421
Attributable to
Equity holders of the parent	(1,665)	6,209	3,379
Minority interest	23	21	42

 

The accompanying notes form an integral part of this financial report.

Consolidated statement of financial position (unaudited)

 

	Notes	30 June 2010	30 June 2009	December 2009
		£000s	£000s	£000s
Non-current assets
Property, plant and equipment		1,569	879	1,199
Intangible assets	5	23,124	28,969	27,279
Deferred tax assets		1,348	1,112	1,851
		26,041	30,960	30,329
Current assets
Inventories		129	352	12
Current tax receivable		4	537	499
Trade and other receivables		15,612	11,920	15,938
Cash and cash equivalents		310	969	863
		16,055	13,778	17,312
Total assets		42,096	44,738	47,641
Current liabilities
Trade and other payables		(21,912)	(19,629)	(24,308)
Short-term borrowings		(6,025)	(3,848)	(5,886)
Current tax payable		(50)	(97)	(50)
Short-term provisions		(1,953)	(3,094)	(2,610)
		(29,940)	(26,668)	(32,854)
Non-current liabilities
Long-term borrowings	7	(9,769)	(9,769)	(9,769)
Long-term provisions		(1,899)	(2,117)	(1,932)
Deferred tax liabilities		-	(1,228)	(939)
		(11,668)	(13,114)	(12,640)
Total liabilities		(41,608)	(39,782)	(45,494)
Net assets		488	4,956	2,147
Equity
Share capital		137	137	137
Share premium account		11,819	11,819	11,819
Other reserves		(8,197)	(8,197)	(8,197)
Retained (loss)/earnings		(3,331)	1,164	(1,666)
Equity attributable to equity holders of the parent		428	4,923	2,093
Minority interest		60	33	54
Total equity		488	4,956	2,147

 

The accompanying notes form an integral part of this financial report.

Consolidated statement of changes in equity (unaudited)

 

	Share capital	Share premium account	Merger reserve	Revaluation reserve	Profit and loss account	Total	Minority interest	Total equity
	£000s	£000s	£000s	£000s	£000s	£000s	£000s	£000s
Balance at 31 December 2008	-	-	-	(443)	(4,258)	(4,701)	44	(4,657)
Profit for the period	-	-	-	-	5,374	5,374	21	5,395
Other comprehensive income:
Actuarial gains on defined benefit pension plans	-	-	-	-	66	66	-	66
Revaluation of available for sale financial assets	-	-	-	217	-	217	-	217
Reclassification to income statement	-	-	-	398	-	398	-	398
Deferred tax	-	-	-	(172)	(18)	(190)	-	(190)
Total comprehensive income for the period	-	-	-	443	5,422	5,865	21	5,886
Dividends	-	-	-	-	-	-	(32)	(32)
Reverse acquisition	137	11,843	(8,197)	-	-	3,783	-	3,783
Revaluation of treasury shares	-	(24)	-	-	-	(24)	-	(24)
Balance at 30 June 2009	137	11,819	(8,197)	-	1,164	4,923	33	4,956
(Loss)/profit for the period	-	-	-	-	(2,830)	(2,830)	21	(2,809)
Total comprehensive (loss)/ income for the period	-	-	-	-	(2,830)	(2,830)	21	(2,809)
Balance at 31 December 2009	137	11,819	(8,197)	-	(1,666)	2,093	54	2,147
(Loss)/profit for the period	-	-	-	-	(1,665)	(1,665)	23	(1,642)
Total comprehensive income/(loss) for the period	-	-	-	-	(1,665)	(1,665)	23	(1,642)
Dividends	-	-	-	-	-	-	(17)	(17)
Balance at 30 June 2010	137	11,819	(8,197)	-	(3,331)	428	60	488

 

 

The accompanying notes form an integral part of this financial report.

Consolidated statement of cash flows (unaudited)

 

	6 months to 30 June 2010	6 months to 30 June 2009	Year to 31 December 2009
	£000s	£000s	£000s
Cash flows from operating activities
(Loss)/profit after taxation	(1,642)	5,395	2,586
Adjustments for:
Depreciation	287	131	461
Amortisation	4,410	946	2,953
Finance expense	115	(22)	311
Taxation expense recognised in profit or loss	(438)	183	(860)
Decrease/(increase) in trade and other receivables	252	1,402	(1,268)
(Increase)/decrease in inventories	(117)	(106)	234
(Decrease)/Increase in trade payables	(2,745)	(3,237)	292
Gain on disposal	-	(4,684)	(4,684)
Provision and other non-cash items	(690)	119	(550)
Cash generated from operations	(568)	127	(525)
Interest paid	(115)	22	(311)
Other income	-	-	-
Income taxes (paid)/received	497	92	(17)
Net cash from operating activities	(186)	241	(853)
Cash flows from investing activities
Acquisition of TMN net of cash acquired	-	(2,287)	(2,287)
Sale of discontinued operation	-	10,794	10,794
Purchase of property, plant and equipment	(251)	(131)	(781)
Purchase of intangible assets	(255)	(34)	(434)
Net cash (used)/generated in investing activities	(506)	8,342	7,292
Cash flows from financing activities
Repayment for short term borrowings	-	-	(2,500)
Repayment of long-term borrowings	-	(10,794)	(10,794)
Net cash used in financing activities	-	(10,794)	(13,294)
Net decrease in cash and cash equivalents	(692)	(2,211)	(6,855)
Cash and cash equivalents at beginning of period	(5,023)	1,832	1,832
Cash and cash equivalents at end of period	(5,715)	(379)	(5,023)

 

 

The accompanying notes form an integral part of this financial report.

 

Notes to the consolidated financial statements

 

1. General information

 

Nature of operations

Progressive Digital Media Group Plc and its subsidiaries (together 'the Group') principal activities are the provision of specialised integrated digital marketing solutions. Refer to note 3 for further information about the Group's operating segments.

 

Progressive Digital Media Group Plc ('the Company') is a company incorporated in the United Kingdom and listed on the Alternative Investment Market. The registered office of the Company is John Carpenter House, John Carpenter Street, London, EC4Y 0AN. The registered number of the Company is 3925319.

 

The consolidated interim financial statements are presented in Pounds Sterling (£), which is also the functional currency of the parent company. These consolidated interim financial statements have been approved for issue by the board of directors.

 

The financial information for the year ended 31 December 2009 set out in this interim report does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The Group's statutory financial statements for the year ended 31 December 2009 have been filed with the Registrar of Companies. The auditor's report on those financial statements was unqualified and did not contain statements under Section 498(2) or Section 498(3) of the Companies Act 2006.

 

Basis of preparation

The Company issued new shares in June 2009 to acquire the share capital of Progressive Digital Media Limited (see note 8). After the acquisition Mike Danson, the owner of Progressive Digital Media Limited, owned the majority of the Company. Under IFRS the transaction is deemed to be a reverse acquisition. The assets and liabilities of Progressive Digital Media Limited have been recognised and measured at their pre-combination carrying values and the comparative results are those of Progressive Digital Media Limited and therefore the retained earnings and other reserves brought forward are those of Progressive Digital Media Limited. The cost of the acquisition was measured at the fair value of the ordinary shares that were issued to effect the reverse acquisition. The assets and liabilities of TMN Group plc have been recognised at the fair value at the acquisition date. The premium arising on the acquisition has been allocated firstly to those intangible assets identified on acquisition that are controlled by the entity and are capable of being measured reliably, and any remaining premium that cannot be allocated to separately identified intangible assets, has been allocated to goodwill. The share capital and share premium at the period end are those of the parent company. The movement in the share capital and share premium from Progressive Digital Media Limited to Progressive Digital Media Group Plc is recognised in a merger reserve.

 

These interim consolidated financial statements are for the six months ended 30 June 2010. They have been prepared in accordance with IAS 34, Interim Financial Reporting. They do not include all of the information required for full annual financial statements, and should be read in conjunction with Progressive Digital Media Group plc's consolidated financial statements for the year ended 31 December 2009.

 

These financial statements have been prepared under the historical cost convention, except for the revaluation of certain financial instruments. These consolidated interim financial statements have been prepared in accordance with the accounting policies detailed in the Group's financial statements for the year ended 31 December 2009. The accounting policies have been applied consistently throughout the Group for the purposes of preparation of these consolidated interim financial statements.

Notes to the consolidated financial statements (continued)

 

Critical accounting estimates and judgements

The Group makes estimates and assumptions regarding the future. Estimates and judgements are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

 

In the future, actual experience may deviate from these estimates and assumptions. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year relate to property provisions, valuation of acquired intangible assets, provisions for bad debt and other credit balances in the statement of financial position.

 

Going concern

The Group meets its day-to-day working capital requirements from an overdraft facility of £7.0 million of which £6.0 million was utilised as at 30 June 2010. Based on cash flow projections the Group considers the existing financing facilities to be adequate to meet short-term commitments. In addition to the existing facility Mr Danson provided the Group with a £2 million working capital loan at the time of the reverse acquisition. This loan has not yet been drawn upon. There are no covenants associated with the overdraft and no restrictions on the long-term borrowing. Borrowings of £9.8 million consist of a subordinated interest free loan provided by Michael Danson, which is repayable by 2019 and is not expected to be repaid in the next twelve months.

 

The Group's overdraft facility is due for renewal in November 2010. The Group has prepared the accounts on a going concern basis on the assumption that this facility is renewed or, that in the event of the overdraft facility not being renewed, that the Group can obtain suitable financing.

 

2. Accounting policies

 

This interim report has been prepared based on the accounting policies detailed in the Group's financial statements reports for the year ended 31 December 2009.

 

(a) Basis of consolidation

The consolidated financial statements include the accounts of the company and all of its subsidiary undertakings.

 

As noted above the Group applied reverse acquisition accounting in the comparative periods to reflect the acquisition of Progressive Digital Media Limited by the parent company.

 

·;	Subsidiaries are those entities controlled by the Group. Control exists when the Group has the power to govern the financial and operating policies of an enterprise taking into account any potential voting rights. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.
·;	Intra-group transactions, balances and unrealised gains on transactions between Group companies are eliminated; unrealised losses are also eliminated unless costs cannot be recovered. Where necessary, accounting policies of subsidiaries have been changed to ensure consistency with the Group's accounting policies.
·;	The results and cash flows relating to a business are included in the consolidated income statement and the consolidated cash flow statement from the date of acquisition or the date of disposal as appropriate.

 

Notes to the consolidated financial statements (continued)

 

(b) Revenue recognition

Revenue comprises amounts derived from services performed or advertisements published by the Group during the year. Print media revenue is recognised on publication, event revenue in the period in which the event is held and internet revenues on a straight-line basis over the contractual term (typically twelve months). Revenue derived from barter transactions is valued on an arms length basis. Revenue from email advertising, lead generation sources and website publishing is recognised on completion of the relevant campaign or transaction after all performance criteria have been fulfilled. Revenue arises from pay for performance actions such as clicks, leads or sales generated resulting from advertising of a merchant's products or services on customers' websites. On completion of performance criteria and any defined cancellation period, the relevant amount of commission is recognised. Revenue from the provision of online research and fieldwork services is recognised by reference to stage of completion. Stage of completion is measured by reference to the extent of services completed on a project by project basis. Revenue from hosting is recognised on a straight line basis over the term of the contract.

 

3. Segment analysis

 

The Group operates in two divisions; Progressive and TMN. The comparative results to the date of acquisition consist solely of Progressive. The results for the comparative periods include TMN from the date of acquisition, 25 June 2009. Segment profit or loss is reported to the Board on a monthly basis and consists of earnings before interest, tax, depreciation and amortisation before central overheads and cost associated.

 

6 months to 30 June 2010	Progressive	TMN	Total
	£000s	£000s	£000s
Revenue from external customers	19,151	5,649	24,800
Segment profit	7,736	1,092	8,828
6 months to 30 June 2009	Progressive	TMN	Total
	£000s	£000s	£000s
Revenue from external customers	16,875	-	16,875
Segment profit	5,607	-	5,607
12 months to 31 December 2009	Progressive	TMN	Total
	£000s	£000s	£000s
Revenue from external customers	31,047	6,037	37,084
Segment profit	8,207	1,409	9,616

 

Reconciliation of segment result to (loss)/profit before tax

	6 months to 30 June 2010	6 months to 30 June 2009	Year to 31 December 2009
	£000s	£000s	£000s
Segment result	8,828	5,607	9,616
Central overheads	(6,087)	(3,545)	(8,280)
Adjusting items (note 4)	(330)	(92)	(730)
Depreciation	(287)	(131)	(437)
Amortisation and impairment	(4,409)	(946)	(2,795)
Other income	319	-	-
Finance costs	(115)	2	(331)
(Loss)/profit before tax	(2,080)	895	(2,957)

 

The segmental results for discontinued operations are in note 10 and consist of a single segment that was sold in June 2009.

Notes to the consolidated financial statements (continued)

 

4. Other expenses

 

	6 months to 30 June 2010	6 months to 30 June 2009	Year to 31 December 2009
	£000s	£000s	£000s
Redundancy	330	72	634
Property related provisions	-	-	76
Deal costs	-	20	20
Amortisation of acquired intangibles	1,114	789	2,557
Impairment	2,820	-	-
	4,264	881	3,287

 

5. Intangible assets

 

The following table shows the significant additions and disposals to intangible assets.

 

	Software	Customer relationships	IP rights	Goodwill	Total intangibles
	£000s	£000s	£000s	£000s	£000s
Net book value at 1 January 2009	242	4,123	8,022	10,091	22,478
Additions	34	-	-	-	34
Amortisation	(69)	(789)	(88)	-	(946)
Disposal of discontinued operation	(85)	(165)	(1,954)	(1,247)	(3,451)
Acquisition of TMN Media	250	3,588	-	7,016	10,854
Net book value at 30 June 2009	372	6,757	5,980	15,860	28,969
Additions	400	-	-	-	400
Amortisation	(170)	(1,089)	(748)	-	(2,007)
Disposals	(83)	-	-	-	(83)
Net book value at 31 December 2009	519	5,668	5,232	15,860	27,279
Additions	254	-	-	-	254
Amortisation	(106)	(1,114)	(369)	-	(1,589)
Impairment	-	(2,820)	-	-	(2,820)
Net book value at 30 June 2010	667	1,734	4,863	15,860	23,124

 

Notes to the consolidated financial statements (continued)

 

6. Earnings per share

 

The calculation of the basic earnings per share is normally based on the earnings attributable to ordinary shareholders divided by the weighted average number of shares in issue during the period. As a result of the reverse acquisition the weighted average number of shares up until the reverse acquisition is deemed to be the number of shares that were issued by TMN Group plc for the reverse acquisition.

 

Reconciliations of the earnings and weighted average number of shares used in the calculations are set out below.

 

	6 months to 30 June 2010	6 months to 30 June 2009	Year to 31 December 2009
Continuing operations
Profit/(loss) for the period attributable to ordinary shareholders	(1,665)	696	(2,134)
Weighted average number of shares	369,548	295,865	332,127
Basic earnings per share (pence)	(0.45)	0.24	(0.64)
Discontinued operations
Profit for the period attributable to ordinary shareholders	-	4,678	4,678
Weighted average number of shares	369,548	295,865	332,127
Basic earnings per share (pence)	-	1.58	1.41
Total operations
Profit/(loss) for the period attributable to ordinary shareholders	(1,665)	5,374	2,544
Weighted average number of shares	369,548	295,865	332,127
Basic earnings per share (pence)	(0.45)	1.82	0.77

 

There were no dilutive instruments during the periods presented, therefore diluted earnings per share is the same as basic earnings per share.

 

7. Financing

 

As at 30 June 2010 the Group had net debt of £15.5 million. The principle source of financing for working capital requirements is an overdraft facility of £7.0 million of which £6.0 million was utilised as at 30 June 2010. Long-term borrowings of £9.8 million consist of a loan provided by Mike Danson that is repayable in 2019.

 

 

Notes to the consolidated financial statements (continued)

 

8. Business combinations

 

TMN Group

On 25 June 2009, Progressive completed a reverse acquisition of TMN Group plc, a company based in the UK. The reverse acquisition was achieved through the issue of new shares to Michael Danson. The amounts recognised for each class of assets, liabilities and contingent liabilities recognised at the acquisition date were as follows:

 

	Carrying value	Fair value adjustments	Fair value
	£000s	£000s	£000s
Property, plant and equipment	464	-	464
Intangible assets	-	3,838	3,838
Corporation tax	489	-	489
Trade and other receivables	4,702	(369)	4,333
Total assets	5,655	3,469	9,124
Overdraft	(1,352)	-	(1,352)
Short-term loan	(2,500)	-	(2,500)
Trade and other payables	(5,894)	(391)	(6,285)
Deferred tax liabilities	-	(240)	(240)
Long-term provisions	(1,045)	-	(1,045)
Total liabilities	(10,791)	(631)	(11,422)
Net (liabilities)/assets	(5,136)	2,838	(2,298)
Purchase consideration			3,783
Costs			935
			4,718
Add net liabilities acquired			2,298
Goodwill			7,016

 

The goodwill that arose on the combination were attributed to revenue and cost synergies expected to arise upon the integration of TMN Group into the Group.

 

9. Related party transactions

 

Michael Danson, Progressive Digital Media Group's Chairman, owns 85.47% of the Company's ordinary shares as at 30 June 2010. Mr Danson owns a number of businesses that interact with Progressive Digital Media Group. The principal transactions are as follows:

 

Notes to the consolidated financial statements (continued)

 

Accommodation

Progressive Digital Media Group entered into leases with Estel Property Investments for a period of 25 years. The buildings are also occupied by other businesses that are owned by Mr Danson. The Group recharges rental expenses to these companies based on the proportional occupancy of the buildings. The total rental expense in relation to the buildings owned by Estel Property Investments for six months to 30 June 2010 was £994,563 net of a recharge of £148,304 to the other companies occupying the buildings.

 

Corporate support services

Corporate support services are provided to the other companies owned by Mr Danson, principally finance, human resources, IT and facilities management. These are recharged to companies that consume these services based on specific drivers of costs, such as proportional occupancy of buildings for facilities management, headcount for human resources services, revenue or gross profit for finance services and headcount for IT services. The recharge made from Progressive Digital Media Group to these companies for the six months to 30 June 2010 was £1,208,880.

 

Loans and guarantees

Mr Danson has provided loans that form the long-term borrowings of the Group during the periods presented. The loans do not carry any interest and are repayable in 2019.

 

10. Discontinued operation

 

Prior to the reverse acquisition Progressive Digital Media Limited disposed of Estel Investments and its construction and design titles to companies controlled by Mike Danson for £10,794,000. Estel Investments held the Group's investment in Huveaux Plc and a loan that was provided by Mike Danson to fund the investment. The assets and liabilities associated with the construction and design titles were also disposed of. The trading results of the construction and design titles were reported separately to management and have been treated as a discontinued operation for all periods reported in the income statement.

 

	6 months to 30 June 2009	Year to 31 December 2009
	£000s	£000s
Discontinued operations
Revenue	3,172	3,172
Cost of sales	(2,015)	(2,015)
Gross profit	1,157	1,157
Distribution costs	(204)	(204)
Administrative costs	(816)	(816)
Other expenses	(158)	(158)
Operating loss	(21)	(21)
Finance expense	20	20
Loss before tax	(1)	(1)
Income tax expense	(5)	(5)
Loss after tax	(6)	(6)
Gain on disposal	4,684	4,684
Profit for the period from discontinued operations	4,678	4,678
Earnings per share:
Basic earnings per share from discontinued operations	1.58	1.41

 

Notes to the consolidated financial statements (continued)

 

Balance sheet as at 5 June 2009 (date of disposal)

 

	£000s
Property, plant and equipment	150
Intangible assets	6,333
Deferred tax assets	69
Investments	3,252
Inventories	253
Trade and other receivables	4,555
Cash and cash equivalents	153
Total assets	14,765
Trade and other payables	(4,283)
Long-term provisions	(553)
Long-term borrowings	(3,742)
Retirement benefit liabilities	(77)
Total liabilities	(8,655)
Net assets	6,110
Consideration received	10,794
Less net assets disposed of	(6,110)
Gain on sale of discontinued operations	4,684

 

11. Details and Advisors

 

Company Secretary

Rob Marcus

 

Head Office and Registered Office

John Carpenter House

John Carpenter Street

London EC4Y 0AN

Tel: + 44 (0) 20 7936 6400

 

Nominated Adviser and Broker

Investec Bank plc

2 Gresham Street

London EC2V 7QP

 

Solicitors

Foot Anstey

Salt Quay House

Sutton Harbour

Plymouth PL4 0BN

 

Auditors

Grant Thornton UK LLP

Grant Thornton House

Melton Street

London NW1 2EP

 

Registrars

Capita Registrars Limited

Northern House

Woodsome Park

Fenay Bridge

Huddersfield

West Yorkshire HD8 0GA

 

Bankers

Lloyds TSB Bank plc

25 Gresham Street

London EC2V 7HN

 

Registered number

Company No. 3925319

This information is provided by RNS

The company news service from the London Stock Exchange