27th Sep 2006 07:02
Deal Group Media PLC27 September 2006 Press Release 27 September 2006 Deal Group Media plc ("Deal Group Media", "dgm" or "the Group") Unaudited Interim Results for the six months ended 30 June 2006 Deal Group Media plc, the full service online marketing group, today announcesits Interim Results for the six months ended 30 June 2006. Results Summary • Turnover increased to £12,824,000 (2005: £10,171,000) • Operating loss of £1,501,000 (2005: £48,000 profit) • EBITDA loss of £586,000 (2005: £851,000 profit) • Costs of £718,000 incurred in relation to the restructuring of the business which should not recur • Underlying growth of 45% from continuing business • Proprietary technology platform strengthened to allow product expansion • Strong performances from the Australian office and the recently opened South African office Commenting on the results, Andrew Dickson, Chief Executive, said: "Following the Chairman's review and as part of the turn around, the Group hasbeen through a period of change. During much of this period our focus has beento stabilise and then develop our proprietary technology platform. Havingachieved this, we are now seeing an increase in demand for our services andremain confident that despite competitive market conditions we can continue towin new customers with existing and innovative new products." For further information, please contact:Deal Group Media plc www.dealgroupmediaplc.comAndrew Dickson, Chief Executive + 44 (0) 20 7691 1880 Media enquiries:Abchurch CommunicationsCharlie Jack / Franziska Bohnke Tel: +44 (0) 20 7398 [email protected] www.abchurch-group.com Chairman's statement Following my review of the business, the management team, led by Andrew Dickson,has implemented and completed many of the changes required to take the Groupforward. These changes have had a cost which, as part of the turn-around,should not be recurring and are necessary to position the Group to enable it totake advantage of a growing market. Financial Performance Group turnover increased to £12,393,000 in the first half of 2006, an increaseof 19% from the second half of 2005. As we had predicted at the PreliminaryResults the gross profit margin fell from 31% in the second half of 2006 to 28%in the first half of 2006. Underlying growth from continuing business is up 45% over the first 6 months of2005, after removing the contribution made by the major customer lost in thesecond half of 2006. The cost base has increased significantly as the team has worked to improve theaffiliate platform. The cost base includes £718,000 in relation to therestructuring of the business. The majority of these costs, that are unlikelyto be incurred again, relate to the major technology infrastructure changes thatwe have implemented and costs associated with key personnel changes. Although the Group made an EBITDA (Earnings before Interest Depreciation andAmortisation) loss of £586,000 (2005: £851,000), I believe that the business hasmoved to regain its standing with the affiliate community in terms of a solidproduct offering that is backed up by robust technology. We continue our strategy of providing clients with choice about the level ofinvolvement with our systems and we have continued to develop ways of making theservices provided to clients more efficient, while not affecting the control andadvice we give to them. dgm Affiliates The first quarter's results include the last elements of some of the accountslost in 2005. Recently, as our technology and internal process have improved,the account management team have won several re-pitches. Several clients whointroduced second networks to their programmes are now reverting back to singlenetworks and I am pleased that dgm is more often than not being chosen as thatnetwork. The affiliate landscape is competitive, and at the last count, there were twentyfour affiliate networks operating in the UK. With the publicised technology issues in 2005, we had low expectations forclient wins in the first half of 2006, the results were therefore in line withour expectations and now I expect to see an improvement in the second half ofthe year. The Fuel AdNetwork Our AdNetwork business delivers 35 million impressions a month for our clientswhile representing some leading sites in the UK such as Match.com, eacademy andManchester Evening Arena. This division was subject to high staff turnover in 2005 but a new team has nowbeen formed. The business has moved to using the Helios platform and is takingfull advantage of customer targeting technology available. This positions us asa top performing Network in the UK. Webgravity The interaction of Search Engines and customers is key to all our businessunits. The Webgravity team have been selected to give advice on Natural SearchOptimisation for several new clients in 2006, and I believe their services willbe in greater demand as several new search engines, including MSN Search, launchlater this year. Technology There has been a complete overhaul of how our technology is organised. CarlDavis has been appointed Head of Technology and has recruited a new team. Theteam has released two upgrades to dgmPRO, our proprietary software thataffiliates and clients can interface with and it has received praise from bothgroups. As the internet has matured advertisers wish to be able to allocate sales tochannel on a transparent basis and dgm has developed technologies to allow theadvertiser to do this with no manual intervention. There has been a significant overhaul of the dgm hardware infrastructure leadingto cost savings in the future and a sensible backbone to take the Group forwardfor future expansion. Overseas Our Australian office has taken advantage of the expansion of broadband internetin Australia and as a result is capitalising on the growing demand for onlinemarketing services. Through perseverance it has established a strong positionin their market which now contributes significantly to the Group's profit andloss account. I am please to report that we have opened our South African office and believethat this will have recouped the start up costs by the end of the year. Wecontinue to look at avenues for international expansion. Staff The dgm team have worked extremely hard on the challenges presented to them. Ihave been very impressed by their high quality and dedication.. Our Graduate programme continues to deliver for the Group and we have maintainedthis programme in 2006. The rate of staff turnover has now returned to industrystandard. Expressions of Interest On 13 February the Group announced that it had received more than one approachwhich may or may not lead to an offer being made for the entire issued and to beissued share capital of the Group. These approaches were all of a preliminarynature, however they led to a number of further approaches. On 12 July weannounced that the Board was in ongoing preliminary discussions with severalparties which may or may not lead to a corporate transaction. We continue to evaluate these approaches, as well as other potentialpartnerships, in order to ascertain the appropriate way forward that can createshareholder value. Overall The wins that have been achieved in account management from existing clientsmust now translate into new client wins, and this will be the focus for thesecond half of the year. I believe that we have moved forward a long way in the period and I look forwardto the future developments. John Porter Chairman Independent review report To Deal Group Media Plc Introduction We have been instructed by the company to review the financial information forthe six months ended 30 June 2006, which comprises the profit and loss account,the balance sheet, the cash flow statement and notes 1 to 4. We have read theother information contained in the interim report, which comprises only thedirectors, and advisers and the chairman's statement and considered whether itcontains any apparent misstatements or material inconsistencies with thefinancial information. Our responsibilities do not extend to any otherinformation. This report is made solely to the company, in accordance with guidance containedin APB Bulletin 1999/4 "Review of Interim Financial Information". Our reviewwork has been undertaken so that we might state to the company those matters weare required to state to it in a review report and for no other purpose. To thefullest extent permitted by law, we do not accept or assume responsibility toanyone other than the company, for our review work, for this report, or for theconclusion we have formed. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by the directors. The directors areresponsible for preparing the interim report and for ensuring that theaccounting policies and presentation applied to the interim figures areconsistent with those applied in preparing the preceding annual accounts exceptwhere any changes, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4"Review of Interim Financial Information" issued by the Auditing Practices Boardfor use in the United Kingdom. A review consists principally of making enquiriesof management and applying analytical procedures to the financial informationand underlying financial data and, based thereon, assessing whether theaccounting policies and presentation have been consistently applied unlessotherwise disclosed. A review excludes audit procedures such as tests ofcontrols and verification of assets, liabilities and transactions. It issubstantially less in scope than an audit performed in accordance with UnitedKingdom auditing standards and therefore provides a lower level of assurancethan an audit. Accordingly, we do not express an audit opinion on the financialinformation. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2006. Grant Thornton UK LLPRegistered Auditors Chartered AccountantsLondon Thames Valley OfficeSlough Consolidated profit and loss accountFor the six months ended 30 June 2006 NOTES 6 months 6 months 12 months to 30 June to 30 June to 31 Dec 06 05 05 (restated) (restated) £'000 £'000 £'000 TURNOVER 12,824 10,171 20,561 COST OF SALES (9,322) (6,754) (13,876) GROSS PROFIT 3,502 3,417 6,685 ADMINISTRATIVE EXPENSES - Amortisation of goodwill (575) (575) (1,149) - Fixed assets depreciation (187) (139) (292) - Share based payments (153) (89) (181) - Other administrative expenses (4,088) (2,566) (5,593) (5,003) (3,369) (7,215) OPERATING (LOSS) / PROFIT (1,501) 48 (530) NET INTEREST 10 17 36 (LOSS) / PROFIT ON ORDINARY ACTIVITIES (1,491) 65 (494) TAXATION 2 (695) (258) - TOTAL LOSS AFTER TAXATIONFOR PERIOD (2,186) (193) (494) BASIC AND FULLY DILUTED LOSSPER SHARE 3 (0.58p) (0.05p) (0.13p) There were no other recognised gains or losses other than the profit for theperiod. All operations are continuing. The accompanying accounting policies and notes form part of these financialstatements. Consolidated balance sheetAt 30 June 2006 As at As at As at 30 June 06 30 Jun 05 31 Dec 05 (restated) (restated) £'000 £'000 £'000 FIXED ASSETSIntangible fixed assets 5,443 6,388 5,857Tangible fixed assets 531 488 647 5,974 6,876 6,504 CURRENT ASSETSDebtors 4,991 4,980 6,150Cash at bank and in hand 2,551 2,356 1,682 7,542 7,336 7,832 CURRENT LIABILITIESCreditors: - Amounts falling due within one year (5,574) (4,054) (4,317) Net Current Assets 1,968 3,282 3,515 Total assets less current liabilities 7,942 10,158 10,019 Creditors: - Amounts falling due after more than one year (7) (97) (65) 7,935 10,061 9,954 CAPITAL AND RESERVESCalled up share capital 3,800 3,771 3,798Capital redemption reserve 13,188 13,188 13,188Share based payments reserve 382 137 229Share premium account 21,471 21,384 21,458Profit and loss account (30,906) (28,419) (28,719) Shareholders' funds 7,935 10,061 9,954 The financial statements were approved by the board of directors and signed ontheir behalf on 26 September 2006. A. Dickson Director Consolidated cash flow statementFor the six months ended 30 June 2006 NOTES 6 months 6 months 12 Months to 30 to 30 Jun to 31 Dec Jun 06 05 05 (restated) (restated) £'000 £'000 £'000 Net cash inflow from operating activities 4 1,189 431 32 Return on investments and serving of financeInterest received 10 17 36 Tax credit (3) (47) (44) Capital expenditure and financial investmentsPurchase of tangible fixed assets (147) (129) (454)Sale of current asset investment 32 - -Purchase of intangible assets (162) - (44) (277) (129) (498) Net cash inflow before financing 919 272 (474) FinancingIssue of ordinary share capital 16 178 279Capital element of finance lease rentals (43) (8) (15)Repayment of loan notes (23) (23) (45) (50) 147 219 Increase in cash 869 419 (255) Notes to the financial statements for the six months to June 2006 1. BASIS OF PREPARATION The interim report should be read in conjunction with the statutory accounts forthe year ended 31 December 2005. The interim figures have been prepared on thesame basis and applying the same accounting policies as in prior periods, exceptas stated below: Share based payments With affect from 1 January 2006, the Group adopted FRS 20 which deals with sharebased payments. Share option awards are granted by Deal Group Media Plc to group employees andare satisfied by Deal Group Media Plc issuing shares to the employees onexercise. Where an award of Deal Group Media Plc Shares is made to a group employee by agroup entity, the employing entity has an obligation to issue Deal Group MediaPlc shares to the employee if the vesting conditions of the award are satisfied. The employing entity incurs a liability in respect of the share awardsrecognised at fair value, revalued at each reporting date over the vestingperiod and at the date of settlement. During the six months to 30 June 2006, £153,000 was charged to the profit andloss account in respect of equity settled transactions (2005: £89,000). Thisexpense was based on the fair value of share based payment transactions whencontracted. All of the expense arose under employee share awards made within thegroup's reward structures. Comparative figures have been restated accordingly. Fair values of share options/awards, measured at the date of the grant of theoption/award, are calculated using a binomial model methodology that is based onthe underlying assumptions of the Black-Scholes model. 2. TAXATION There are tax losses of approximately £7,364,000 to carry forward to use againstfuture profits of the same trade. These losses represent a potential deferredtax asset of approximately £2,209,000 at a corporation tax rate of 30%. Of thisamount £1,724,000 was recognised at 31 December 2004. After a review of theforecasts and the recent performance of the group, the Directors feel it isprudent to release £695,000 from the deferred tax asset. An explanation of the tax position compared to the Group's reported results isset out below: 6 months 6 months 12 months to 30 June to 30 June to 31 Dec 06 05 05 (restated) (restated) £'000 £'000 £'000 (Loss) / profit on ordinary activities before taxation (1,491) 65 (494) (Loss)/profit on ordinary activities before taxationmultiplied by corporation tax rate of 30% (447) 20 (148) Effect of:Amortisation of goodwill 173 173 345Share based payments 46 26 (359)Deferred tax charge (695)Other expenses not deductible - 39 38Surplus of depreciation compared to capital allowances 46Accumulated losses utilised in year (29)Other differences 3Losses carried forward to be offset against futuretaxable trading profit 228 - 104 Current tax charge for the period (695) 258 - 3. LOSS PER SHARE The calculation for the basic loss per share is based upon the loss attributableto ordinary shareholders divided by the weighted average number of shares onissue during the period. Reconciliation of the loss and weighted average number of shares used in thecalculations are set out below: 6 months 6 months 12 months (restated) (restated) to 30 Jun 06 to 30 Jun 05 to 31 Dec 05 Loss on ordinary activities after tax (£'000) (2,186) (193) (494) Weighted average number of shares 380,029,031 374,072,594 376,573,277 Amount of loss per share in pence (0.58) (0.05) (0.13) In view of the losses, options in issue have an antidilutive effect. 4. NET CASH FLOW FROM OPERATING ACTIVITES 6 months 6 months 12 months to 30 Jun 06 to 30 Jun 05 to 31 Dec 05 (restated) (restated) £'000 £'000 £'000 Operating (loss) / profit (1,501) 48 (530) Depreciation 187 139 292Amortisation 575 575 1,149Share based payments 153 89 181Loss on sale of fixed assets 43 - 13Decrease / (increase) in debtors 462 (486) (1,399)Increase in creditors and provisions 1,270 66 326 Net cash flow from operating activities 1,189 431 32 5. COPIES OF THE INTERIM REPORT Copies of the Interim Report are being sent to shareholders and are available tothe public from the Company's registered office at 19 Cavendish Square, London,W1A 2AW, as well as the company's business address at Unit 800 Highgate Studios,53-79 Highgate Road, London, NW5 1TL Copies can also be viewed online at www.dealgroupmediaplc.com -Ends- This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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