13th Sep 2007 07:00
Motivcom PLC13 September 2007 13 September 2007 MOTIVCOM PLC PRELIMINARY ANNOUNCEMENT FOR THE SIX MONTHS TO 30 JUNE 2007 Motivcom PLC (the "Company" or the "Group"), a leading marketing servicescompany providing incentive and motivation services to a range of UK andinternational clients, announces its unaudited interim results for the periodended 30 June 2007. Financial Highlights • Gross profit increased by 11% to £7,014,000 (2006 £6,311,000)• Operating profit increased by 26% to £1,173,000 (2006 £932,000)• Profit before tax increased by 31% to £1,233,000 (2006 £939,000)• Basic earnings per share increased by 35% to 3.49 pence (2006 2.58 pence)• Interim dividend increased by 43% to 0.50 pence (2006 0.35 pence)• Continuing successful new product development• Positive outlook Commenting on the results, Colin Lloyd, Chairman of Motivcom plc, said: "These strong results not only reflect a high level of activity across all ofthe Group's divisions but provide the basis of sustained future growth. Weremain dedicated to growing the business both organically and throughacquisition. In the period, we have expanded the Group's client basesignificantly, whilst continuing to maintain excellent client retention levels.We are also delighted to have completed the successful acquisition of MotivationTravel Management Limited ("MTM"), which will further enhance the Group'spresence as a provider of incentive travel and conference facilities. We will continue to review a number of opportunities in this highly fragmentedmarket, and are confident of our ability to further strengthen the Group throughfurther strategic and earnings enhancing acquisitions. This is an exciting timefor Motivcom and we remain positive on our ability to deliver on our focusedgrowth strategy". For further information please contact: Motivcom plcSue Hocken, Finance Director Tel: +44 (0)1908 [email protected] www.motivcom.com Grant ThorntonPhilip Secrett/Fiona Owen Tel: +44 (0)207 383 [email protected]/[email protected] www.gtuk.com Media enquiries: Abchurch CommunicationsHeather Salmond/Georgina Bonham Tel: +44 (0)207 398 [email protected] www.abchurch-group.com Notes to Editors The Group is one of the leading performance improvement and motivation servicesbusinesses in the UK with over 17 years' experience in delivering incentive andmotivation programmes to clients. These programmes, which focus on rewardingemployees, distributors and customers, are designed by Motivcom to driveperformance of both direct and third party employees. The Group has threeoperating divisions: Motivation and Incentives, Incentive Travel and LiveEvents, and Sales Promotion and Employee Benefits. CHAIRMAN'S STATEMENT I am pleased to report that that the interim results for Motivcom plc for thesix-month period to June 2007 are ahead of market expectations. The resultsreflect a combination of organic growth and consolidation which currentlycharacterise the sector, together with the development of new products. Trading update The results for the six month period show that operating profits have increasedby 26% to £1,173,000 (2006 £ 932,000) on gross profit that has increased by 11%to £7,014,000 (2006 £6,311,000). Profits before tax increased by 31% to£1,233,000 (2006 £939,000) and basic earnings per share increased by 35% to3.49p (2006 2.58 pence). Net assets increased to £8,848,000 from £7,829,000 at31 December 2006, providing the Group with continued scope to make appropriateinvestments to further its development. Your Board has approved an interim dividend of 0.50 pence, an increase of 43%(2006 0.35 pence). This will be paid on 19 October 2007 to all shareholders onthe register at close of business on 21 September 2007. Motivation and Incentives Division The investment made in sales and product development during 2006 has providedthe basis for a number of new client wins, with five new Spree Card programmeslaunching in the first half of 2007. Further development has been driven by theintroduction of Euro and USD versions of the Spree card, which delivers a globalreach for clients looking for international solutions. Existing products(rewardbanking.com, rewardvouchers.com & recogniseme.com) have also continued toperform well for clients seeking either on-line or voucher based reward,recognition and long service solutions. The Voucher Shop has continued toperform well, contributing to a 50% growth in retail voucher turnover comparedwith the first half of 2006. Prospects for the Division are encouraging, with ahigh level of revenue visibility for the rest of 2007 and into 2008. Incentive Travel and Live Events Division The travel and live events Division has continued to demonstrate stable profitgrowth in 2007, Significant contract retention has been achieved with all majorclients confirming business into 2008 and our largest client renewing theircontract until 2010. There has been substantial work undertaken to developcarbon measurement, reduction and offset facilities, which have beensuccessfully trialled and deployed with a strategic client and this will beoffered to all clients during the next 6 months. Live communications andconference production facilities have been enhanced, resulting in new clientsdelivering increased conference and event production work in 2007, as well asconfirmation of further work for 2008. Subsidiary Archer Young, a creativeagency specialising in motivation programmes and culture alignment, acquired inFebruary 2005, has successfully continued to perform well against budget and hasagain met management expectations for 2007. On 24 August we announced the acquisition of incentive travel company MTM Ltdwhich will be merged with Archer Young to create a larger subsidiary to becalled AYMTM. Both companies will be relocated to new offices in Amersham inOctober 2007. We are confident that the strong synergies between MTM and ArcherYoung will lead to a significantly enhanced offering of our provision ofincentive travel and conference facilities. Sales Promotion and Employee Benefits Division The Division's fixed fee promotions business, Fotorama, has achieved significantwins in the period, whilst continuing to strengthen relations with its majorclients. Football Euro 2008 is creating a number of new client opportunitiesfor 2008 and the subsidiary has benefited from senior management appointments.The Travel and Leisure Promotions business has experienced an excellent firsthalf, experiencing double-digit growth, and is trading ahead of expectation.This has been achieved by improved client retention of larger clients andthrough our customer loyalty/affinity product 'Entice', which is provingextremely popular across many industry sectors. Business activity across thisarea has remained high following the launch of several low cost, high-perceivedvalue products for the sales promotion sector. Filmology, the Group's newproduct offering in the cinema sector was launched successfully in February2007securing good press coverage and a high degree of industry acceptance. Ourcinema partners have noted improvements in service and availability. ODEON inparticular have experienced improved results and we have had encouragingfeedback from clients. Filmology has won a number of high profile clients,which further enhances our position and gives a confident outlook in this newarea for the second half of 2007 and beyond. The group's Employee Benefitsproducts continue to gain new clients and are also achieving high clientretention rates. More recently the Division launched its 'Green' Traveloffering, a first in the UK HR benefits sector, which achieved national presscoverage generating substantial new client interest. Given the pressure on wageincreases in the UK, the outlook for the Division remains healthy asorganisations look to increase benefits in preference to wage rises.Summersault, the Division's employee communication subsidiary, has appointed anew Managing Director with an excellent track record, and is enjoying newbusiness wins and client retention with a future focus developing an integrateddigital offering. Acquisitions On 24 August 2007, Motivcom announced that it completed the acquisition ofMotivation Travel Management Limited ("MTM"). MTM is an agency whichspecialises in the provision of incentive travel and conference facilities inthe United Kingdom and overseas to corporate clients. It is the intention of Motivcom to merge MTM with its subsidiary Archer Young by31 December 2007. Archer Young is also a provider of incentive travel andconference facilities, as well as a provider of motivation and performanceimprovement services. The newly formed company will be re-branded AYMTM Limitedand will report into Motivcom's P&MM Incentive Travel Conferences & EventsDivision. It is anticipated that the merger of MTM and Archer Young will createcost savings and synergy benefits that will flow into the merged AYMTM businessfrom as early as 1 January 2008. Motivcom has paid an initial cash consideration of £860,000 for the entireissued share capital of MTM. An additional deferred cash consideration of up to£640,000 is payable subject to AYMTM achieving specified levels of earningsbefore interest and tax in the years ending 31 December 2008 and 2009. Thevendors will remain with the merged business. MTM had net liabilities ofapproximately £85,000 and a profit before tax of approximately £74,000 for theyear ended 31 December 2006. It is anticipated that MTM will enhance Motivcom'searnings for the year ending 31 December 2008. This acquisition demonstrates our commitment to rapidly growing the value ofMotivcom and identifying selective opportunities for consolidation in afragmented market. We will continue to review a number of opportunities in thisfragmented market and are confident of our ability to further strengthen theGroup through further strategic and earnings enhancing acquisitions. Outlook The market areas in which the Group's divisions operate are enjoying healthyincreases in overall market expenditure. The latest quarterly Bellwether Reportonline research on the advertising and marketing services industry indicates apositive trend with UK overall sector percentage growth at its highest for sometime. Since my report for the last financial year, the Group has welcomed many newclients across its divisions and has launched a number of exciting new products,which have proven to be fast gaining market acceptance. The Group has also madeconsiderable investments in the digital enhancement of its products to ensurethat it remains at the forefront of technological development. The Group'scurrent trading, combined with the market climate, gives rise to a positiveoutlook. Colin LloydChairman CONSOLIDATED INTERIM INCOME STATEMENT (UNAUDITED)FOR THE PERIOD ENDED 30 JUNE 2007 6 months ended 6 months ended 12 months ended 30 June 2007 30 June 2006 31 December 2006 Note £000 £000 £000 Sales 3 38,721 32,161 76,752Cost of sales (31,707) (25,850) (62,726)Gross profit 7,014 6,311 14,026 Administrative expenses (5,841) (5,379) (11,366)Operating profit 3 1,173 932 2,660Finance costs - net 60 7 44Profit before income tax 1,233 939 2,704Income tax expense 4 (349) (292) (802)Profit for the period 7 884 647 1,902 Attributable to:Equity holders of the Company 884 647 1,902 Earnings per share for profit attributable to theequity holders of the Company during the year(expressed in pence)- basic 5 3.49 2.58 7.57- diluted 5 3.39 2.51 7.39 There are no gains and losses other than the profit for the period. The accompanying accounting policies and notes form part of these financialstatements. CONSOLIDATED INTERIM BALANCE SHEET (UNAUDITED)AT 30 JUNE 2007 At 30 June At 30 June At 31 December Note 2007 2006 2006 £000 £000 £000 ASSETSNon-current assetsProperty, plant and equipment 405 349 367Intangible assets 5,238 5,524 5,247Deferred income tax assets 388 121 286 6,031 5,994 5,900 Current assetsInventories 730 644 776Trade and other receivables 12,229 9,301 14,203Cash and cash equivalents 5,052 3,312 7,754 18,011 13,257 22,733 Total assets 24,042 19,251 28,633 EQUITYCapital and reserves attributable to the Company'sequity holdersShare capital 128 126 126Share premium account 3,152 2,882 2,882Other reserves 75 75 75Retained earnings 5,493 3,404 4,745 Total equity 7 8,848 6,487 7,828 LIABILITIESNon-current liabilitiesBorrowings - 183 -Deferred income tax liabilities - 12 -Deferred consideration - 300 - - 495 - Current liabilitiesTrade and other payables 14,626 11,397 19,973Current income tax liabilities 385 452 439Borrowings 183 420 393 15,194 12,269 20,805 Total liabilities 15,194 12,764 20,805 Total equity and liabilities 24,042 19,251 28,633 The accompanying accounting policies and notes form part of these financialstatements. CONSOLIDATED INTERIM CASHFLOW STATEMENT (UNAUDITED)FOR THE PERIOD ENDED 30 JUNE 2007 6 months ended 6 months ended 12 months ended 30 June 2007 30 June 2006 31 December 2006 £000 £000 £000 Cash flows from operating activitiesCash (used in)/generated from operations (2,040) (829) 4,619Interest paid (15) (29) (51)Income tax paid (432) (328) (859)Net cash (used in)/generated from operating activities (2,487) (1,186) 3,709 Cash flows from investing activitiesAcquisition of subsidiary, net of cash acquired anddividends due to former shareholders - (1,271) (1,271)Purchases of property, plant and equipment (PPE) (126) (77) (221)Purchase of unincorporated trade - (161) (231)Proceeds from sale of PPE - - -Interest received 125 86 195Net cash used in from investing activities (1) (1,423) (1,528) Cash flows from financing activitiesProceeds from issue of shares 272 - -Repayments of borrowings (260) (260) (520)Dividends paid (226) (188) (276)Net cash used in from financing activities (214) (448) (796) Net (decrease)/increase in cash (2,702) (3,057) 1,385Cash at beginning of period 7,754 6,369 6,369Cash at end of period 5,052 3,312 7,754 Cash generated from operations 6 months ended 6 months ended 12 months ended 30 June 2007 30 June 2006 31 December 2006 £000 £000 £000 Profit for the period 1,233 939 2,704Adjustments for:- depreciation 88 77 163- net interest (60) (7) (44)- share based payments 17 1 14- amortisation of intangibles 9 8 16Changes in working capital (excluding the effects ofacquisition and exchange differences onconsolidation):- inventories 46 (119) (310)- trade and other receivables 1,974 (455) (5,298)- trade and other payables (5,347) (1,273) 7,374Cash (used in)/generated from operations (2,040) (829) 4,619 The accompanying accounting policies and notes form part of these financialstatements. NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTSFOR THE PERIOD ENDED 30 JUNE 2007 1 General information Motivcom plc ("the Company") and its subsidiaries (together "Motivcom plc" or"the Group") are involved in (1) the development and administration of thirdparty motivation and incentive programmes (2) the provision of incentive traveland live events and (3) the provision of trade and consumer sales promotions andemployee benefits products. The Company is a limited liability company incorporated and domiciled inEngland. The address of its registered office is Rockingham Drive, LinfordWood, Milton Keynes MK14 6LY. The Company has its primary listing on the AIM market of London Stock Exchangeplc. These consolidated interim financial statements have been approved for issue bythe Board of Directors on 11 September 2007. 2 Basis of preparation These condensed consolidated interim financial statements of Motivcom plc arefor the six months ended 30 June 2007. They have been prepared under thehistorical cost basis and in accordance with International Accounting Standard34 Interim Financial Reporting. The above financial information does notconstitute statutory accounts within the meaning of Section 240, Companies Act1985 and should be read in conjunction with the consolidated financialstatements of the Group as at and for the year ended 31 December 2006. These interim consolidated financial statements have been prepared on the basisof the Group's accounting policies. These are set out in its Annual Report andAccounts for the year ended 31 December 2006 which is available on the Group'swebsite (www.motivcom.com). As of 1 January 2007 various new standards andinterpretations apply to financial statements prepared in accordance with IFRS.However, none apply to the Group. 3 Segment Information At 30 June 2007, the Group is organised into three main business segments - (1)development and administration of third party motivation and incentiveprogrammes ("Motivation") - (2) the provision of incentive travel and liveevents ("Events") - (3) trade and consumer sales promotions and employee benefitproducts ("Promotions"). Unallocated costs represent corporate expenses. The segment results for the six months ended 30 June 2007 are as follows: Motivation Events Promotions Unallocated Group £000 £000 £000 £000 £000 Total gross segment sales 19,164 11,689 7,868 - 38,721 Operating profit/(loss) 277 810 267 (181) 1,173Finance costs - net 60Profit before income tax 1,233Income tax expense (349)Profit for the period 884 The segment results for the six months ended 30 June 2006 are as follows: Motivation Events Promotions Unallocated Group £000 £000 £000 £000 £000 Total gross segment sales 12,582 12,921 6,658 - 32,161 Operating profit/(loss) 72 818 129 (87) 932Finance costs - net 7Profit before income tax 939Income tax expense (292)Profit for the period 647 The segment results for the year ended 31 December 2006 are as follows: Motivation Events Promotions Unallocated Group £000 £000 £000 £000 £000 Total gross segment sales 30,936 29,393 16,423 - 76,752 Operating profit/(loss) 668 918 1,258 (184) 2,660Finance costs - net 44Profit before income tax 2,704Income tax expense (802)Profit for the period 1,902 4 Income tax expenses 6 months ended 6 months ended 12 months ended 30 June 2007 30 June 2006 31 December 2006 £000 £000 £000 Current tax 394 312 825Overprovision of tax for prior year (17) (11) (11)Deferred tax (28) (9) (12) 349 292 802 5 Earnings per share and dividends Basic Basic earnings per share is calculated by dividing the profit attributable toequity holders of the Company by the weighted average number of ordinary sharesin issue during the period. 6 months ended 6 months ended 12 months ended 30 June 2007 30 June 2006 31 December 2006 £000 £000 £000 Profit attributable to equity holders of the Company 884 647 1,902Weighted average number of ordinary shares in issue (thousands) 25,312 25,115 25,115Basic earnings per share in pence 3.49 2.58 7.57 Diluted Diluted earnings per share is calculated adjusting the weighted average numberof ordinary shares outstanding to assume conversion of all contracted dilutivepotential ordinary shares. The Company has only one category of dilutivepotential ordinary shares, share options. The calculation is performed for the share options to determine the number ofshares that could have been acquired at fair value (determined as the averageannual market share price of the Company's shares) based on the monetary valueof the subscription rights attached to outstanding share options and takingaccount of the yet unexpensed share based payment charge relating to thoseoptions. The number of shares calculated as above is compared with the numberof shares that would have been issued assuming the exercise of the shareoptions. Tranches two to four of the options granted to C T Lloyd have beenexcluded from this calculation as all the conditions attaching to the proposedoptions had not been met at 30 June 2007. 6 months ended 6 months ended 12 months ended 30 June 2007 30 June 2006 31 December 2006 £000 £000 £000 Profit attributable to equity holders of the Company 884 647 1,902Weighted average number of ordinary shares in issue (thousands) 25,312 25,115 21,115Adjustment for share options (thousands) 754 626 607Weighted average number of ordinary shares for diluted earningsper share (thousands) 26,066 25,741 25,722Diluted earnings per share in pence 3.39 2.51 7.39 Dividends During the first six months of 2007, Motivcom plc paid a final dividend of£226,000 to its equity shareholders (2006: £188,000). This represents a paymentof £0.90 pence per share (2006: £0.75 pence). 6 Share-based payments The Group has six contracted share option schemes. The EMI Option Schemes andthe Sharesave Schemes disclosed in the Group's most recent financial statements,a Sharesave Scheme introduced on 4 June 2007 and the options granted to C TLloyd by reference to the growth in market capitalisation of the Company on 20June 2007. The following options have been valued in accordance with theprovisions of IFRS 2. Date ofScheme original Number of Option price Vesting Life of Fair Value grant options conditions option 2 years fromEMI Option Scheme 29/03/2004 150,000 £0.04285 25/08/2004 10 Years £0.01 Sharesave Scheme 1 28/04/2005 415,075 £0.64 3 Years 3 Years £0.08 EMI Option Scheme 21/11/2005 111,111 £0.945 3 Years 10 Years £0.11 Sharesave Scheme 2 07/06/2006 91,303 £0.815 3 Years 3 Years £0.10 Sharesave Scheme 3 04/06/2007 40,488 £1.125 3 Years 3 Years £0.23 Each 20% growth inC T Lloyd Option Scheme 20/06/2007 768,588 £0.005 market value 10 Years £0.12 The fair value of services received in return for share options granted toemployees is measured by reference to the fair value of share options granted.The estimate of fair value of the services received is measured based on abinomial lattice model for the EMI and Sharesave Schemes and a Monte Carlo modelfor the C T Lloyd Option Scheme. The vesting period is used as an input tothose models. The following additional assumptions were used for all schemesexcept Sharesave Scheme 3: - Expected volatility of 24% based on the average volatility of the Company since flotation in August 2004- A dividend yield of 1.20%- Risk free interest rate of 5.31% The following additional assumptions were used for Sharesave Scheme 3: - Expected volatility of 22% based on the average volatility of the Company since flotation in August 2004- A dividend yield of 1%- Risk free interest rate of 5.50% The C T Lloyd Option Scheme was agreed in outline prior to flotation. However,it was not contractually formalised until 20 June 2007 (see comments in 2004,2005 and 2006 Annual Report and Accounts). 7 Statement of changes in equity Share capital Share Other Retained Total Premium Reserves earnings equity £000 £000 £000 £000 £000 Balance at 1 January 2006 126 2,882 75 2,944 6,027Profit for the period - - - 647 647Dividends paid - - - (188) (188)Share based payments - - - 1 1 Balance at 30 June 2006 126 2,882 75 3,404 6,487Profit for the period - - - 1,255 1,255Dividends paid - - - (88) (88)Share based payments - - - 13 13 Deferred tax on equity based - - - 161 161share payments Balance at 31 December 2006 126 2,882 75 4,745 7,828Issue of shares 2 270 - - 272Profit for the period - - - 884 884Dividends paid - - - (226) (226)Share based payments - - - 17 17 Deferred tax on equity based - - - 73 73share payments Balance at 30 June 2007 128 3,152 75 5,493 8,848 8 Post balance sheet events On 23 August 2007 the Company acquired Motivation Travel Management Limited ("MTM"), an agency which specialises in the provision of incentive travel andconference facilities in the United Kingdom and overseas to corporate clients.It is the intention of the Company, by 31 December 2007, to merge MTM with itssubsidiary Archer Young Limited, which will be renamed ATMTM Limited. Aninitial cash consideration of £860,000 was paid for the entire issued sharecapital of MTM. Additional deferred cash consideration of up to £640,000 ispayable subject to AYMTM achieving specified levels of earnings before interestand tax in the years ending 31 December 2008 and 2009. MTM had net liabilitiesof approximately £85,000 and a profit before tax of approximately £74,000 forthe year ended 31 December 2006. As yet the Company has not had the opportunity to evaluate the fair value ofassets. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
MCM.L